Factual and Procedural Background
The issues in this appeal arise from an arbitral award made on 23 October 2019 by an appointed arbitrator under the Family Law Arbitration Financial Scheme (IFLA Scheme). The underlying dispute concerned financial remedy applications in the Family Court at Chelmsford between the parties referred to as the Wife and the Husband. The Husband challenged the arbitral award as unfair and applied to the High Court either to appeal the award or to have the court exercise its discretion afresh under the Matrimonial Causes Act 1973 (MCA 1973) rather than make an order in the terms of the award.
On 27 February 2020, a Deputy High Court Judge dismissed the appeal and refused to interfere with the award, making an order in accordance with the arbitral award. The Husband now appeals against that order, with permission granted on an important point of principle regarding the approach a family court should take to arbitral awards when making financial remedy orders.
Legal Issues Presented
- Whether the judge applied the correct test in deciding whether to refuse to make an order under the MCA 1973 in the terms of the arbitral award, specifically if the test was wrongly aligned with the Arbitration Act 1996 (AA 1996) challenges.
- If the AA 1996 test was incorrect, whether the correct test is the appeals test applicable under the MCA 1973.
- If the appeals test applies, whether there is a real prospect that the court would conclude the arbitral award was wrong.
- Whether the matter should be remitted to the first instance court or whether the appellate court can substitute its own order.
Arguments of the Parties
Appellant's Arguments
- There is conflicting authority and confusion regarding the proper approach to challenging arbitral awards in family cases.
- The Husband submits he did not receive a fair determination of the Wife's claims.
- By reason of the overall unfairness of the award and its failure to properly meet the Husband’s needs and contributions, the award is not one the court could properly approve under its statutory duty in s25 MCA 1973.
- The judge erred by applying a higher test akin to the AA 1996 challenge tests rather than the appeals test under the MCA 1973.
Respondent's Arguments
- The judge correctly applied the law, using a test synonymous with the AA 1996 provisions (ss68 and 69).
- Even if the judge erred and the appeals test under the MCA 1973 applies, the arbitral award was not open to a realistic challenge.
- The Family Court’s discretion to decline an order in the terms of an arbitral award is limited and should be exercised only in very narrow circumstances, such as vitiating mistake or supervening event.
- The parties’ agreement to arbitration is centrally relevant to the court's exercise of discretion.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| The Northern Pioneer [2003] 1 Lloyd's Rep 212 |
Limits Court of Appeal jurisdiction to grant permission to appeal against refusal under s69 AA 1996. |
Confirmed no further appeal from refusal of permission under s69 AA 1996. |
| Sonatrach v Statoil [2014] 2 Lloyd's Rep 242 |
Serious irregularity under s68 AA 1996 is a long-stop for extreme cases where justice requires correction. |
Emphasised that s68 is process-focused and does not address correctness of outcome. |
| J v B [2016] EWHC 324 (Fam) |
Stringent approach to challenges to arbitral awards; parties "buy the right to get the wrong answer". |
Supported the high threshold for interfering with arbitral awards in family arbitration. |
| Geogas S.A v Trammo Gas Ltd [1993] 1 Lloyds Rep 215 |
Limits appeal on questions of law to the arbitrator's findings of fact; courts must accept arbitrator’s fact-finding. |
Reinforced that courts must not re-evaluate facts or treat obvious factual mistakes as misconduct. |
| Demco Investments v SE Banken Forsakring Holding [2005] 2 Lloyd's Rep 650 |
Clarified the "obviously wrong" test under s69 AA 1996. |
Applied the test confirming leave to appeal only if the arbitrator’s decision on law was obviously wrong. |
| L v L [2006] EWHC 956 (Fam) |
Role of the court in approving consent orders is not a mere rubber stamp but limited detective work. |
Guided the court’s approach to consent orders based on arbitration awards. |
| Sharland v Sharland [2015] UKSC 60 |
Court’s independent assessment required despite agreements; jurisdiction cannot be ousted. |
Confirmed that fairness and statutory criteria under s25 MCA 1973 govern financial remedy orders. |
| Radmacher v Granatino [2010] UKSC 42 |
Effect of nuptial agreements subject to fairness; court may depart if enforcement would be unfair. |
Supported the principle that agreements, including arbitration agreements, do not oust court’s discretion. |
| Edgar v Edgar [1980] 1 WLR 1410 |
Weight to be given to prior agreements in financial remedy cases depends on fairness and circumstances. |
Outlined factors relevant to setting aside or enforcing agreements in family law. |
| CR v SR [2013] EWHC 1155 (Fam) |
Permission to appeal requires a real prospect of success. |
Confirmed the threshold for granting permission to appeal in financial remedy cases. |
| Re B (A Child) [2013] UKSC 33 |
Standard of review on appeal is whether the decision is wrong, not plainly wrong. |
Clarified appellate approach to findings of fact and discretion. |
| Prescott v Potamianos [2019] EWCA Civ 932 |
Confirmed approach to appeals in family law as per Re B. |
Applied the "wrong" standard on appeal. |
| Piglowska v Piglowski [1999] 1 WLR 1360 |
Appellate caution required in reversing trial judge’s evaluation of facts. |
Emphasised deference to trial judge’s factual assessments. |
| Hyman v Hyman [1929] AC 601 |
Public policy prevents ousting court’s jurisdiction in financial remedy cases. |
Supported the principle that court retains jurisdiction despite agreements. |
| de Lasala v de Lasala [1980] AC 546 |
Consent orders in family law derive authority from the court, not the parties’ contract. |
Distinguished family consent orders from civil consent orders. |
| Purcell v FC Trigell Ltd [1971] 1 QB 358 |
Consent orders in civil cases derive authority from contract. |
Contrasted with family law consent orders. |
| Xydhias v Xydhias [1999] 2 All ER 386 |
Court’s independent assessment required in financial remedy proceedings. |
Confirmed statutory duty to consider s25 MCA 1973 criteria. |
| Biogen Inc v Medeva plc [1997] RPC 1 |
Appellate caution in reviewing trial judge’s evaluation of facts. |
Referenced in appellate approach to factual findings. |
Court's Reasoning and Analysis
The court began by distinguishing the limited grounds for challenging arbitral awards under the Arbitration Act 1996—lack of jurisdiction, serious irregularity, or errors of law—from the broader statutory discretion the Family Court holds under the Matrimonial Causes Act 1973 to make financial remedy orders. It noted that arbitration in family cases is relatively recent and is governed by the IFLA Scheme, which is underpinned by the AA 1996 but ultimately requires court approval to convert arbitral awards into enforceable orders.
The court analysed the arbitration agreement, which acknowledged the court's discretion to make orders and that arbitral awards are generally final and binding subject to limited exceptions. It reviewed the stringent tests for challenging awards under the AA 1996, emphasizing that courts do not re-examine factual findings and that fairness is not a ground for challenge under the AA 1996.
By contrast, the court explained that the MCA 1973 requires the court to exercise a broader discretion focused on fairness and statutory criteria when making financial remedy orders, including where the parties have agreed terms or where an arbitral award is to be made into a court order.
The court critically evaluated prior authority, including obiter comments suggesting that the court should rarely interfere with arbitral awards except in exceptional circumstances such as mistake or supervening event. The court disagreed with the view that the agreement to arbitrate carries greater weight than an agreement between parties on terms, noting that arbitration involves a third party determining terms and that the court retains ultimate discretion.
It held that the test applied by the lower court—akin to the AA 1996 challenge test requiring errors to "leap off the page"—was too restrictive. Instead, the correct test is the appeals test under the MCA 1973, which requires determining whether there is a real prospect that the award is wrong, allowing a party to show cause why the court should not make an order in the terms of the award. This approach allows the court to exercise its inquisitorial jurisdiction effectively while respecting the finality of arbitration.
The court found that the lower court judge had applied the wrong test but agreed that on the facts the arbitral award was not wrong within the appellate standard. However, the appellate court concluded that there was a real prospect of success in challenging the award on appeal and therefore remitted the matter for a case management hearing before a specialist circuit judge to determine the appropriate next steps.
The court underscored the importance of fairness as the lodestar in family financial remedy proceedings and rejected the notion that parties "buy the right to get the wrong answer" in family arbitration. It emphasized that the court's discretion under the MCA 1973 cannot be ousted by arbitration agreements and that parties dissatisfied with awards have a procedural route to challenge them through the court's appeals process.
Holding and Implications
The court held that the lower court applied the wrong legal test by aligning its discretion too closely with the stringent challenge provisions of the Arbitration Act 1996 rather than the appeals test under the Matrimonial Causes Act 1973. The proper test requires the court to determine whether there is a real prospect that the arbitral award is wrong, allowing for a fuller consideration of fairness and statutory criteria.
The appeal is ALLOWED and the matter is REMITTED to a circuit judge for a case management hearing to determine the scope and form of the further proceedings required to consider the challenge to the arbitral award.
The direct effect of this decision is to permit a more accessible route for dissatisfied parties in family arbitration cases to challenge awards on grounds broader than those strictly permitted under the Arbitration Act 1996. However, the court emphasized that arbitration remains a valuable and generally final dispute resolution mechanism and that challenges will be appropriate only where there is a real prospect of the award being wrong. No new precedent was established beyond clarifying the appropriate test for court discretion in family arbitration enforcement under the MCA 1973.