Sir
James Munby, President of the
Family
Division :
- I have before me an application, transferred to me from the Guildford County Court at my direction, for the approval of a consent order which has been lodged with the court following, and intended to give effect to, an arbitral award made by Mr Gavin
Smith
in an arbitration conducted under the IFLA (Institute of
Family
Law Arbitrators)
Scheme.
- There is no doubt that in this case the court
should
approve the consent order, as I do. But it
seemed
to me appropriate to give
some
guidance about the proper approach of the court to
such
applications.
The IFLA
Scheme
- The IFLA
Scheme
is described by
Sir
Peter
Singer
in 'Arbitration in
Family
Financial Proceedings: the IFLA
Scheme:
Part 1', [2012]
Fam
Law 1353, and 'Part 2' [2012]
Fam
Law 1496. Up-to-date details about the
Scheme
and arbitrators accredited under it can be found on IFLA'
s
website, ifla.org.uk.
- For present purposes all I need
say
is that:
i) IFLA is a not for profit organisation, created by the Chartered Institute of Arbitrators (CIArb), the
Family
Law Bar Association, and the
family
lawyers' group Resolution, in association with the Centre for Child and
Family
Law Reform;
ii) IFLA arbitrations are conducted in accordance with the Arbitration Act 1996 and IFLA'
s
Arbitration Rules (the Rules);
iii) IFLA arbitrators are all Members of the CIArb, that is, MCIArb;
iv) The IFLA
Scheme
covers financial and property disputes arising from relationship breakdown (Article 2 of the Rules);
v)
The Rules contain a mandatory requirement (Articles 1.3(c) and 3) that the arbitrator will decide the
substance
of the dispute only in accordance with the law of England and Wales.
This last point is
significant.
The facts
- I can take the relevant facts
very
briefly. The parties were married in 1986 and
separated
in 2012. Their only child is now 19. A decree nisi on the wife'
s
petition was granted early in 2013. In June 2013 the parties
signed
IFLA'
s
Form ARB1, agreeing to arbitration in accordance with the Rules by Mr
Smith
in relation to their claims for ancillary relief and thereby binding themselves to accept his award. The arbitrator'
s
Final Award is dated
7
November 2013. On 9 December 2013 the parties applied to the Guildford County Court
seeking
approval of the consent order. In addition to the draft consent order they lodged the Form ARB1, the Final Award, a Joint
Statement
of Information in Form D81 and, marked for dismissal purposes only, their Forms A.
- The facts relevant to the
subject
matter of the arbitration are
set
out, clearly and comprehensively, in the Final Award. They concern only the parties,
so
I
say
nothing more about them except to note that the Form D81
shows
the matrimonial assets to be worth in excess of £1.5 but less than £2 million.
The legal context
- The
strong
policy argument in favour of the court giving effect to an agreement that the parties have come to themselves for the resolution of their financial affairs following divorce has been recognised for a long time:
see
the discussion in X
v
X (Y and Z Intervening) [2002] 1 FLR 508 of the line of authorities of which Dean
v
Dean [1978]
Fam
161, Edgar
v
Edgar [1980] 1 WLR 1410, Camm
v
Camm (1983) 4 FLR 577 and Xydhias
v
Xydhias [1999] 1 FLR 683 were the most prominent.
- Thus by the turn of the Millennium it was well established that the court would not lightly permit parties who had made an agreement between themselves to depart from it. Indeed, as a matter of general policy what the parties had themselves agreed would be upheld by the courts unless contrary to public policy or
subject
to
some
vitiating
feature
such
as undue pressure or the exploitation of a dominant position to
secure
an unreasonable advantage.
- In X
v
X, para 103, I
said
that a formal agreement, properly and fairly arrived at with competent legal advice,
should
be upheld by the court unless there were "good and
substantial
grounds" for concluding that an "injustice" would be done by holding the parties to it. In propounding that formulation I adopted the language used by Ormrod LJ in Edgar
v
Edgar in preference to that of Thorpe J in
Smith
v
McInerney [1994] 2 FLR 1077. I
said
that Thorpe J'
s
references to "the most exceptional circumstances" and "overwhelmingly
strong
considerations"
seemed
to me, with respect, to put the matter perhaps a little too high. With the benefit of hindsight I was too questioning of what Thorpe J had
said.
Not for the first time he had
seen,
more clearly and presciently than others, the way in which the law was moving and, indeed, had to move.
- There have of course been many
significant
developments in this area of the law
since
it was first
set
on its course by Ormrod LJ. Many have helpfully been identified by Baker J in AI
v
MT [2013]
EWHC
100 (
Fam),
paras 20-21, 30-31. For present purposes three developments demand particular notice.
- First, there was the identification and
subsequent
elaboration by Thorpe LJ of the concept of the 'magnetic factor' – the feature(
s)
or factor(
s)
which in the particular case are of "magnetic importance" in influencing or even determining the outcome:
see,
for example, White
v
White [1999]
Fam
304, 314 (affirmed, [2001] 1 AC 596) and Crossley
v
Crossley [2007] EWCA Civ 1491, [2008] 1 FLR 1467, para 15. We
see
this approach, though not the label, carried forward in the fundamentally important
statement
of principle by the
Supreme
Court in Radmacher (formerly Granatino)
v
Granatino [2010] UKSC 42, [2011] 1 AC 534, para
75:
"The court
should
give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement."
Secondly,
mediation and
subsequently
other forms of alternative dispute resolution have become well established as a means of resolving financial disputes on divorce. As Thorpe LJ observed in Al Khatib
v
Masry [2004] EWCA Civ 1353 [2005] 1 FLR 381, para 17, "there is no case, however conflicted, which is not potentially open to
successful
mediation". By 2008 use of the collaborative law approach was being encouraged by the court:
see
the observations of Coleridge J in
S
v
P (
Settlement
by Collaborative Law Process) [2008] 2 FLR 2040. The
same
year, writing extra-judicially in '
Statutory
Arbitration and Ancillary Relief', [2008]
Fam
Law 26, Thorpe LJ
ventured
the
view
that "to extend the Arbitration Acts to reach all financial issues created by the breakdown on relationships is
surely
safe
territory." Indeed, there is nothing in the Arbitration Act 1996 which on the face of it would preclude arbitration as a permissible process for the resolution of disputes rooted in
family
life or relationship breakdown. The
Family
Procedure Rules 2010 now encourage resort to alternative dispute resolution procedures in this as in other areas of
family
law:
see
FPR rule 1.4(e) and FPR Part 3. It was against this background that the IFLA
Scheme
was introduced in February 2012.
- Thirdly, the court has adapted and abbreviated its processes to facilitate the appropriately
simple
and
speedy
judicial approval of
such
agreements. Where the parties are agreed on the terms of the consent order the court has available to it the process adopted by the parties in the present case. But in the context of collaborative law, Coleridge J, with the
support
of
Sir
Mark Potter P, was willing to adopt an even more
streamlined
process in
S
v
P (
Settlement
by Collaborative Law Process) [2008] 2 FLR 2040.
- Where, in contrast, one of the parties
seeks
to resile, the court has long
sanctioned
use of the abbreviated 'notice to
show
cause' procedure utilised in Dean
v
Dean [1978]
Fam
161, Xydhias
v
Xydhias [1999] 1 FLR 683, X and X (Y and Z Intervening) [2002] 1 FLR 508 and
S
v
S
(Ancillary Relief) [2008]
EWHC
2038 (
Fam),
[2009] 1 FLR 254. The approach here was well captured by Thorpe LJ in Xydhias
v
Xydhias [1999] 1 FLR 683, 692:
"If there is a dispute as to whether the negotiations led to an accord that the process
should
be abbreviated, the court has a discretion in determining whether an accord was reached. In exercising that discretion the court
should
be astute to discern the antics of a litigant who, having consistently pressed for abbreviation, is
seeking
to resile and to justify his
shift
by reliance on
some
point of detail that was open for determination by the court at its abbreviated hearing."
Moreover, in
such
a case the court, if need be of its own motion, can always, by the appropriately robust use of its case management powers, limit the ambit of the issues to be considered at the hearing; for example, as was done in both Crossley
v
Crossley [2007] EWCA Civ 1491, [2008] 1 FLR 1467, and
S
v
S
(Ancillary Relief) [2008]
EWHC
2038 (
Fam),
[2009] 1 FLR 254, by focusing the hearing exclusively on those issues relevant to the magnetic factor(
s).
- Back of all this there is the increasing emphasis on autonomy exemplified by cases
such
as MacLeod
v
MacLeod [2008] UKPC 64, [2010] 1 AC 298, and Radmacher (formerly Granatino)
v
Granatino [2010] UKSC 42, [2011] 1 AC 534. As Lord Phillips PSC
said
in Radmacher, para
78:
"The reason why the court
should
give weight to a nuptial agreement is that there
should
be respect for individual autonomy. The court
should
accord respect to the decision of a married couple as to the manner in which their financial affairs
should
be regulated. It would be paternalistic and patronising to override their agreement
simply
on the basis that the court knows best. This is particularly true where the parties' agreement addresses existing circumstances and not merely the contingencies of an uncertain future."
I draw attention in the present context to the last
sentence.
I would accordingly respectfully endorse what was
said
by Charles J in
V
v
V
(Prenuptial Agreement) [2011]
EWHC
3230 (
Fam),
[2012] 1 FLR 1315, para 36:
"[Radmacher] necessitates a
significant
change to the approach to be adopted, on a proper application of the discretion conferred by the MCA, to the impact of agreements between the parties in respect of their finances. At the heart of that
significant
change, is the need to recognise the weight that
should
now be given to autonomy, and thus to the choices made by the parties to a marriage … The new respect to be given to individual autonomy means that the fact of an agreement can alter what is a fair result and
so
found a different award to the one that would otherwise have been made".
The future
- What, then,
should
be the approach in cases where there has been an arbitration award under the IFLA
Scheme
or
something
similar?
- Two
situations
need to be considered: one where the parties come before the court
seeking
a consent order; the other where one or other party is
seeking
to resile from the arbitrator'
s
award. In the present case I am,
strictly
speaking,
concerned only with the first, but
some
provisional comments on the other may be helpful and not out of place.
- The
starting
point in every case, as it
seems
to me, is that identified in characteristically arresting language by
Sir
Peter
Singer
in 'Arbitration in
Family
Financial Proceedings: the IFLA
Scheme:
Part 2' [2012]
Fam
Law 1496, 1503:
"I
suggest
that the 'magnetic factor' perspective provides an appropriate analogy, and illuminates how applications (whether or not by consent) for orders to reflect an IFLA award
should
be
viewed
by the court: through the wrong end of a telescope rather than through a wide-angle lens.
Such
an approach respects the court'
s
jurisdiction, but gives full force and effect to party autonomy by treating the parties' agreement to be bound by the award as the magnetic factor which
should
lead to a reflective order. Thus an arbitral award founded on the parties' clear agreement in their Form ARB1 to be bound by the award
should
be treated as a lodestone (more then than just a yardstick) pointing the path to court approval".
- While respectfully questioning whether it can ever be appropriate for a judge to look through the wrong end of a telescope, I agree with that approach. Where the parties have bound themselves, as by
signing
a Form ARB1, to accept an arbitral award of the kind provided for by the IFLA
Scheme,
this generates, as it
seems
to me, a
single
magnetic factor of determinative importance. As
Sir
Peter
Singer
said
([2012]
Fam
Law 1496, 1503):
"The autonomous decision of the parties to
submit
to arbitration
should
be
seen
as a 'magnetic factor' akin to the pre-nuptial agreement in Crossley
v
Crossley".
I agree. This, after all, reflects the approach
spelt
out by the
Supreme
Court in Radmacher in the passages I have already quoted. In the absence of
some
very
compelling countervailing factor(
s),
the arbitral award
should
be determinative of the order the court makes.
Sir
Peter had earlier
suggested
(1502) that:
"The
scope
for backsliding, resiling and indeed any
space
for repentance
should
… be just as narrowly confined [as it was in L
v
L [2006]
EWHC
956 (
Fam),
[2008] 1 FLR 26] where what is in question is an attempt to wriggle out of the binding effect of an arbitral award."
Again, I agree. There is no conceptual difference between the parties making an agreement and agreeing to give an arbitrator the power to make the decision for them. Indeed, an arbitral award is
surely
of its nature even
stronger
than a
simple
agreement between the parties.
- It is worth remembering what the function of the judge is when invited to make a consent order in a financial remedy case. It is a topic I considered at
some
length in L
v
L [2006]
EWHC
956 (
Fam),
[2008] 1 FLR 26. I concluded (para
73)
that:
"the judge is not a rubber
stamp.
He is entitled but is not obliged to play the detective. He is a watchdog, but he is not a bloodhound or a ferret."
- Where the consent order which the judge is being asked to approve is founded on an arbitral award under the IFLA
Scheme
or
something
similar
(and the judge will, of course, need to check that the order does indeed give effect to the arbitral award and is workable) the judge'
s
role will be
simple.
The judge will not need to play the detective unless
something
leaps off the page to indicate that
something
has gone
so
seriously
wrong in the arbitral process as fundamentally to
vitiate
the arbitral award. Although recognising that the judge is not a rubber
stamp,
the combination of (a) the fact that the parties have agreed to be bound by the arbitral award, (b) the fact of the arbitral award (which the judge will of course be able to
study)
and (c) the fact that the parties are putting the matter before the court by consent, means that it can only be in the rarest of cases that it will be appropriate for the judge to do other than approve the order. With a process as
sophisticated
as that embodied in the IFLA
Scheme
it is difficult to contemplate
such
a case.
- These are the principles that I have applied in the present case in deciding whether or not to approve the consent order. I do not propose to go into the details – why, after all, in a case like this
should
litigants who have chosen the private process of arbitration have their affairs exposed in a public judgment?
Suffice
it to
say
that I have no hesitation in approving the consent order in the form in which it has been put before me.
- I
should
add that I can
see
no reason why the
streamlined
process applied by Coleridge J in
S
v
P (
Settlement
by Collaborative Law Process) [2008] 2 FLR 2040 in the context of a consent order which was the product of the collaborative law process
should
not be made
similarly
available in cases where the consent order is the product of an arbitral award under the IFLA
Scheme
or
something
similar.
From now on, if they wish, parties
should
be able to avail themselves of that process[1] whether the consent order is the product of the collaborative law process or an arbitral award under the IFLA
Scheme
or
something
similar.
- I add two points in relation to procedure. The first is that in every case the parties
should,
as they did here, lodge with the court both the agreed
submission
to arbitration (in the case of an arbitration in accordance with the IFLA
Scheme,
the completed Form ARB1) and the arbitrator'
s
award.
Second,
the order
should
contain recitals to the following effect,
suitably
adapted to meet the circumstances:
"The documents lodged in relation to this application include the parties' arbitration agreement (Form ARB1), their Form(
s)
D81, a copy of the arbitrator'
s
award, and a draft of the order which the court is requested to make.
By their Form ARB1 the parties agreed to refer to arbitration the issues described in it which encompass
some
or all of the financial remedies for which applications are pending in this court; and the parties have invited the court to make an order in agreed terms which reflects the arbitrator'
s
award."
- Where a party
seeks
to resile from the arbitral award, the other party'
s
remedy is to apply to the court using the 'notice to
show
cause' procedure. The court will no doubt adopt an appropriately robust approach, both to the procedure it adopts in dealing with
such
a challenge and to the test it applies in deciding the outcome. In accordance with the reasoning in cases
such
as Xydhias
v
Xydhias, the parties will almost invariably forfeit the right to anything other than a most abbreviated hearing; only in highly exceptional circumstances is the court likely to permit anything more than a
very
abbreviated hearing.
- Where the attempt to resile is plainly lacking in merit the court may take the
view
that the appropriate remedy is to proceed without more ado
summarily
to make an order reflecting the award and, if needs be, providing for its enforcement. Even if there is a need for a
somewhat
more elaborate hearing, the court will be appropriately robust in defining the issues which are properly in dispute and confining the parties to a hearing which is
short
and focused. In most
such
cases the focus is likely to be on whether the party
seeking
to resile is able to make good one of the limited grounds of challenge or appeal permitted by the Arbitration Act 1996. If they can, then
so
be it. If on the other hand they can not, then it may well be that the court will again feel able to proceed without more to make an order reflecting the award and, if needs be, providing for its enforcement.
Concluding observations
- I have already drawn attention to the fact that the IFLA
Scheme
requires the arbitrator to decide the dispute in accordance with the law of England and Wales. In this context it is important to remember the fundamental principles expounded by the House of Lords in White
v
White [2001] 1 AC 596, 604-605, that in arriving at any financial order the objective must be to achieve a fair outcome and that, in
seeking
to achieve a fair outcome, there is no place for discrimination between husband and wife. My observations in this judgment are confined to an arbitral process
such
as we have in the IFLA
Scheme.
Different considerations may apply where an arbitral process is based on a different
system
of law or, in particular, where there is reason to believe that, whatever
system
of law is purportedly being applied, there may have been gender-based discrimination. The proper approach in that
situation
will have to be considered when
such
a case arises.
- There is one final matter I must mention. New and emerging forms of alternative dispute resolution highlight the need for the court'
s
processes to keep pace with the needs of litigants and their advisers, nowhere perhaps more
so
than where, as in this context, the mechanism for resolving a
family
financial dispute is arbitration conducted in accordance with the Arbitration Act 1996. For example, and no doubt there are other
such
matters, we need appropriate procedures to enable the
Family
Court, not the Commercial Court, to deal expeditiously (and if appropriate without the need for an oral hearing) with:
i) applications for a
stay
of financial remedy proceedings pending the outcome of arbitration;
ii) applications
seeking
any relief or remedy under the Arbitration Act 1996,
such
as, for instance, under
section
42 to enforce an arbitrator'
s
peremptory order, or under
section
43 to
secure
the attendance of witnesses.
- Drafts of templates for
such
orders have been produced for consultation as part of the
Family
Orders Project being managed by Mostyn J. But alongside these innovations the need for procedural adaptation is becoming increasingly pressing. Whether
such
topics are most appropriately dealt with by rule changes (for example to the
Family
Procedure Rules 2010 and/or the Civil Procedure Rules 1998) or by the issue of Practice Directions or Practice Guidance is a matter for consideration. Initially, however, I would invite the
Family
Procedure Rules Committee to consider this as a matter of urgency.