30 January 2014

Make way for Family Arbitration

Suzanne Kingston spearheaded (along with Jonathan Tecks) training for the family arbitration scheme under the Institute of Family Law Arbitrators (*‘IFLA*') ** and is herself a qualified IFLA arbitrator, looks here at exciting recent developments in this field. Arbitration in Family Law can be used to resolve all financial and property issues, but it is the bespoke, streamlined, quick and cost-effective nature of this alternative to court that makes it the most innovative and increasingly popular dispute resolution option within the family law arena.  In a nutshell, arbitration can achieve an outcome for separating couples for a fraction of the cost and a fraction of the time that it would take to pursue court proceedings. One of the most ringing endorsements of family arbitration must be the very recent judgment of S v S [2014] EWHC 7. This provides the strongest judicial support for the use of family arbitration seen to date and paves the way for it to take centre stage in resolving relationship breakdowns. From here on, in the absence of very compelling countervailing factors, arbitral awards will be capable of being the ‘single magnetic factor of determinative importance'. It will only be in the rarest of cases that it will be appropriate for family judges to do other than to approve the arbitral award. Moreover, to quote the President of the Family Division, Munby J, ‘with a process as sophisticated as that embodied in the IFLA Scheme it is difficult to contemplate such a case'.

  1. Background to the case

One of the many attractive features of arbitration is its confidential nature.  This case is no exception but the judgment does give us enough basic background information to put the facts in context. The parties were married in 1986 and separated in 2012.  There was one child who, at the date of the judgment, was 18.  The couples' assets were valued between £1.5m and £2m and they chose Gavin Smith (a senior barrister with over 20 years' experience and one of the first practitioners and former judges to qualify under the family arbitration scheme) as their family arbitrator.  The case was transferred from the Guildford County Court at the President's request so as to ensure that the judgment would receive due attention from the profession, the press and the public. The following points are worthy of note: 1.1               The arbitration itself took only eight weeks from the couple signing the Form ARB 1 (Agreement to Arbitrate) to the arbitral award being made. Furthermore, once the final award was submitted as a draft consent order to the court, it was given judicial approval within a matter of weeks. This is a record time when compared to the court process and given the issues which required determination, but is standard with arbitration.  In fact the court process is to be reformed to make the family arbitration route even more streamlined.** 1.2               The issues determined by the arbitrator were sufficiently complex to have necessitated significant high level judicial adjudication, had the matter proceeded through court in the usual way. However, the bespoke nature of family arbitration and the high qualification requirements set by the IFLA scheme provided the couple the expertise and skill required to provide a swift solution to their dispute.** 1.3               There was only one face-to-face meeting; the rest of the case was conducted through conference calls.** 1.4               The final cost to the couple was a fraction of what the legal fees would have been had the matter proceeded along the traditional route of contested court proceedings.** 1.5               Family arbitration compliments dispute resolution in other areas. For the couple involved in this case, the process has encouraged dialogue and it is understood that they have been able to maintain a good relationship, resolving other issues flowing from the breakdown of their relationship in a constructive and amicable way.

  1. What factors did the court take into account regarding the arbitral award?

2.1               One of the most striking elements of the judgment is the extent to which the court promoted and endorsed the IFLA scheme. The President went to some length in his judgment to describe the scheme and to direct clients and practitioners where to find out more about it. This is obviously very important for the IFLA and Suzanne Kingston, having trained the first 100 family arbitrators, expects to see an increase in the number of those applying to qualify. 2.2               The court took significant account of the autonomy of individuals to reach agreement and examined the line of authorities dating as far back as 1980 in which parties have been held to agreements they have reached, be it in the family court arena, separation proceedings or in the drafting of prenuptial agreements.   2.3               The court also took into account previous judicial commentary about family arbitration, including that of Baker J in the case of AI v MT [2003] EWHC 100.

  1. What guidance did Munby J give on such cases in the future?

In essence, the President has sought to deal with all procedural and legal concerns raised by practitioners up until now, in relation to the potential challenges to, and enforceability of, family arbitral awards. 3.1               Three developments were identified as demanding particular notice; (a)                 The magnetic factor: If parties have bound themselves to accept the arbitral award (under the IFLA scheme or similar) then this generates a single magnetic factor of determinative importance. In the absence of some very compelling countervailing factor, the arbitral award will be ratified by the court and there will be no wriggling out of it, save in the most exceptional of circumstances. (b)                Mediation, collaborative law and family arbitration and all other forms of dispute resolution are now firmly established as a means of resolving financial and property disputes on relationship breakdown. ©                 Procedurally, the court endorsed the approach in S v P [2001] 2 FLR 2010 (a case in which Suzanne Todd, another partner in the Withers LLP family team, acted), which provides for a speedy streamlined process to acquire judicial approval of arbitral awards and other dispute resolution agreements. 3.2               The routes to enforce or to challenge an arbitral award are now crystal clear: (a)                 Where parties to family arbitration seek a consent order, there is a new streamlined procedure to cater specifically for this but, in the meantime, the collaborative law process is to be used: the arbitrator's award; draft consent order, Form ARB1, and D81 (statement of means) should be lodged in the urgent without notice list to shortcut the normal court process, listed for a ten minute hearing. (b)                Where one party seeks to resile from the arbitral award, the other party is to use the ‘notice to show cause' procedure; there will be an abbreviated hearing.  If the matter lacks merit, then the court may summarily make an immediate order reflecting for the award and providing for its enforcement (following the precedent set in Crossley v Crossley [2007] __ EWCA Civ 149 in which Mark Harper, also a partner at Withers LLP, acted). Grounds of appeal are limited to those permitted by the Arbitration Act 1996.

4.                   What are the advantages of Family Arbitration? To summarise:

  • Speed of resolution
  • Significantly reduced legal fees
  • Confidentiality for clients
  • A bespoke service, with easy access to the parties' chosen arbitrator
  • Informality of process, which encourages ongoing dialogue and supports constructive resolution of other issues
  1. Will the decision in S v S change the approach to Family Arbitration in the future?

Yes. This signifies a huge change in approach.  It should give confidence to both the public and practitioners regarding the arbitration scheme.  The President has given ultimate judicial encouragement for people to embrace arbitration and endorsed this process. It is, without doubt, a ground breaking and important decision. Suzanne Kingston, Partner, Withers LLP Natalie O'Shea, PSL, Withers LLP

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