It’s time to consider arbitration in family law matters

17 February 2021

As the Family Courts face overwhelming demand, judges are encouraging parties to turn to arbitration. As practitioners, we should be promoting this as a way for parties to fast track their disputes and gain greater control over their matters. By Debra Foulkes and Khloe Saw

Snapshot:

• Arbitration has rarely been utilised by family law practitioners.
• With the creation of the National Arbitration List, judges are promoting arbitration as a means to resolve family law property disputes.
• Whilst not suitable for all matters, there are notable advantages of using arbitration in family law disputes, including choice of arbitrator and timely decision making.

Arbitration has been available to parties engaged in property disputes in family law for almost 30 years.1 Despite its widespread use in commercial matters, arbitration has not proved attractive to family law practitioners. This is despite an amendment to the Family Law Rules 2004 (Rules) which came into effect in April 2016 to close the gaps in effectively dealing with matters by means of arbitration. In particular, it expands the court’s role in overseeing arbitration by introducing rules for making financial disclosure (a fundamental tenet of family law)2 and issuing subpoenas to compel third parties to produce documents and/or give evidence.3

In an article published in the NSW Law Society Journal in April 2016, Professor Patrick Parkinson noted that, other than in a scheme run by Legal Aid Queensland, arbitration had not been taken up elsewhere prior to the 2015 amendments to the Rules. He considered that the amendments addressed the “lacunae in the regulatory framework” and that there are good reasons for arbitration to be considered.4 That was four years ago and not a great deal has changed in Victoria.5 Despite the huge backlog of cases faced by the Family Courts there have still been few arbitrations.6

However, in the wake of COVID-19, the focus has again turned to arbitration. In April 2020, the Family Courts announced the formation of the National Arbitration List to be headed by Justice Wilson in the Family Court and Judge Harman in the Federal Circuit Court. Justice Strickland manages appeals arising from arbitration. Justice Wilson and Judge Harman preside over the list each Friday in their respective courts. As Justice Wilson explains in an information session released by the Courts, this ensures that matters referred to arbitration are case managed as, he notes, litigants appreciate judicial overview.7

The formation of the National Arbitration List came about, in part, to address complaints of practitioners, particularly where a party objected to the registration of the arbitral award (as they are entitled to do within 28 days of the award being made).8 Importantly, prior to the establishment of the National Arbitration List, the objection would have been heard by the court and was therefore subject to the usual lengthy delays. This severely negated the efficiency of the arbitration process. However, with National Arbitration List judges sitting each Friday, these incidental matters can now be resolved speedily. Once a matter is referred to arbitration, it is not taken out of the court list completely, but rather it is allocated a court date several months into the future. If the matter resolves and an arbitral award is registered, then the award takes effect9 and this date is vacated. In the meantime, the parties have recourse to issue interlocutory applications.

As the National Arbitration List is now operational and starting to be utilised, judges are specifically asking practitioners if they have considered whether arbitration is suitable for their property matter. Judge Harman signals that practitioners have an obligation to provide their clients with advice regarding arbitration. Section 12A of the Family Law Act (Act) requires that legal practitioners inform their clients of ways to resolve disputes other than through court orders and s12B imposes a specific obligation to ensure that clients are aware of arbitration.10

Arbitration can occur in two ways – by court order or private agreement.11 The courts cannot compel parties to arbitrate – it requires the parties’ consent. However, by requiring parties and practitioners to explain why their matter is not suitable for arbitration, judges can encourage them to pursue this option. Arbitration is limited to property matters – it is not available in children’s or child support matters.

Advantages of arbitration

There are some compelling reasons to arbitrate. First, parties choose their decision-maker. Arbitrators must be experienced family law practitioners who have completed the necessary training, hold the relevant accreditations and be registered with the Australian Institute of Family Law Arbitrators and Mediators (AIFLAM). The list of arbitrators comprises some extremely well regarded family law practitioners, including former judges. As well as choosing the decision maker, the parties have the opportunity to have their matter heard in a timely fashion, when it suits them. It also means that they receive a decision shortly after the hearing. These three major advantages over the court system may well outweigh any other considerations for many parties, especially with backlogs  worsening due to adjournments caused by COVID-19.12

The arbitration agreement, which parties enter into, specifies the number of days which the arbitrator has to produce a decision (28 days in a standard agreement).13 In fact, the arbitrator is not entitled to be paid in full until such time as a written decision is provided. This is important because anecdotal evidence suggests that the times taken by judges to hand down decisions has increased significantly. It is difficult to explain to clients that even when they receive a hearing date, it will not necessarily be the end of the matter because they may have to wait months for a judgment, or that a matter being listed for hearing on a particular day does not guarantee that the matter will actually be heard on that day, because matters of higher priority may arise. Children’s matters, appropriately, are always given priority. The client’s matter might then be adjourned for several months, meaning that valuations may be out of date and additional work required to prepare the case for hearing. This can be avoided through arbitration.

Arbitration can be conducted on a single issue or sticking point for the parties (such as the valuation of property or treatment of an inheritance, as noted on AIFLAM’s website). Such issues could be decided “on the papers”, without the parties having to give evidence. A judge can refer one issue in the matter to arbitration and the balance can be heard by the court. This includes the potential to bifurcate children’s matters and property matters. As Justice Wilson noted, attending arbitration for a property matter may have the benefit of opening up discussions and procuring a settlement of the children’s matter.14

Another important advantage of arbitration is that the decision is completely confidential. An arbitral award is not reportable and therefore cannot be accessed by the public. Other advantages include a lack of formality and greater control of the process.

Disadvantages of arbitration

The main objection to arbitration is the extra cost – the parties must bear the cost of the decision maker which is approximately $3500 to $5000 per day depending on the seniority of the arbitrator. AIFLAM contends that, because arbitration is designed to be less protracted then court hearings, there are savings to be made. This may well be the case, however, there is an initial outlay which is borne by the parties. Inevitably, whether arbitration is cost-efficient will depend on individual cases. Depending on the facilities available, parties may have to pay for the venue in addition to the arbitrator’s fees. The Court may be able to assist by offering the use of empty courtrooms. Holding arbitrations in courtrooms can assist to give the proceedings a judicial flavour.

A further disadvantage is that there is limited right to appeal or review an award once it is made. Section 13J of the Act provides that decisions can be reviewed on points of law. Although, Professor Parkinson believes that the omission of the word “only” – that is, the fact that s13J gives the judge hearing the appeal the right to determine all questions of law arising in relation to the arbitration and to make such decrees as the judge thinks appropriate15 – means that the judge has a broad discretion even if they determine that there is no error of law. There are other grounds for setting aside an award, for example, if it is obtained by fraud, including non-disclosure of a material matter. In reality, because litigation is so expensive, there are relatively few appeals.

A recent case demonstrates the limitations of arbitration.16 It involved allegations of serious violence perpetrated against the wife by the husband. The wife became so distressed about being in the same building as the husband during arbitration that she was subsequently admitted to hospital. The parties agreed that the matter should be transferred back to court. Judge Harman, while sympathetic to the wife, ruled that the arbitration should proceed with the wife not being required to be in the same room or even the same premises as the husband (which could be achieved by using video technology). Although we have had to make do with remote hearings in the midst of COVID-19, they can be unsatisfactory in many instances. It may be that more formal court processes, together with the personal safety measures which are available to litigants, are far better for victims of family violence. In other words, the informality of arbitration may not always be suitable.

Process of arbitration

While the parties are largely able to determine the conduct of the arbitration, the court still has a role to play. This includes ordering arbitration with the parties’ consent, defining the portion of the proceedings to be arbitrated and making ancillary orders to facilitate and direct the arbitration.17 Its role also includes registering the award and determining any objections, undertaking any review of the award by determining questions of law18 and enforcing the award.

Conclusion

Arbitration is not suitable for all matters and clients. However, the three major advantages – choice of decision maker, timing of the proceeding and a short turn around in the decision – make it a very attractive option for some. While parties should not be pressured to use arbitration in lieu of court proceedings, they should be given the opportunity to do so. As legal practitioners, we should be encouraging our clients to pursue this option having first ensured that they are aware of the benefits and drawbacks and are able to make informed decisions. Arbitration has worked well in commercial areas and is available to families in most common law jurisdictions. For some of our clients, avoiding delay is the most important consideration.

Debra Foulkes is special counsel at Meerkin & Apel and an LIV accredited specialist in family law.

Khloe Saw is a lawyer in the family law team at Meerkin & Apel.

(This article was first published in the Jan/Feb 2021 Law Institute Journal)

1. See Family Law Act 1975 (Cth), s10L.
2. See Family Law Rules 2004 (Cth), r26B.1. Rule 26B.01 lists the documents required to be disclosed and is identical to the requirements of r13.04 which applies to all parties to a financial case under the Act.
3. Note 2 above, Part 26B.2 applies to subpoenas.
4. Parkinson Patrick AM, “Arbitration in Family Property Proceedings: Exploring the Potential,” Law Society Journal, April 2016 78.
5. Although the uptake was greater in NSW, Queensland and Western Australia.
6. See, for example, Family Court Media Release dated 10 February 2020 stating that the Family Courts had launched a campaign in Melbourne to address the backlog of cases. It identified that up to 2000 cases had been in the court system for more than 18 months, with some four years old, http://www.familycourt.gov.au/wps/wcm/connect/fcoaweb/reports-and-publications/media-releases/2020/mr100210.
7. See National Arbitration List – Recorded Information Session published on 22 May 2020 http://www.familycourt.gov.au/wps/wcm/connect/fcoaweb/about/news/arbitration-info-video.
8. Family Law Regulations 1984 (Cth), reg67Q(3).
9. Note 1 above, s13H(2).
10. Harman, Joe J, “Family law: Arbitration Explained,” LIJ, September 2019.
11. See note 1 above, s13E.
12. Judges now have to assess whether a matter can be heard remotely, resulting in matters being adjourned.
13. See the Arbitration Agreement in the Arbitration Kit on the AIFLAM website, https://www.aiflam.org.au/content/Arbitration/Arbitration_Kit_-_FINAL.23.08.2016.pdf.
14. Note 7 above.
15. Note 1 above, s13J. Note 4 above.
16. Palgrove & Palgrove [2020] FCCA 846 (27 March 2020).
17. Note 8 above, reg 67E, Note 2 above, r26B.
18. Note 1 above, s13G.