Family Law Arbitration – Conversation at the Richmond

This is an edited version of a conversation about family law arbitration which I was involved in at the Richmond Hotel in Lismore, northern New South Wales. There have been a number of other conversations since, covering diverse family law topics such as preparation for parenting trials, mediation of both property and parenting disputes, preparation for property trials and comparative ADR. This conversation has been edited to exclude matters not relevant to the topic. Readers will be aware of the strong likelihood of other subjects being raised and anecdotes related at any venue offering the fine ales and good food readily available at the Richmond.

What’s Family Law Arbitration all about?
In family law arbitration, a financial dispute is referred by the disputing parties to a private arbitrator to determine and to make any award necessary to bring an end to the dispute. The arbitrator’s decision is made in accordance with the Family Law Act and the award, once registered, has the same binding and enforceable effect as an order made by a court.

An award can only be registered if the arbitrator meets the requirements of Family Law Regulation 67B. Under that regulation an arbitrator must be an experienced family lawyer who has completed specialist arbitration training and is included on an authorised list of arbitrators.

The arbitrator, like a Judge, is responsible for the conduct of the arbitration. The arbitrator must ensure that procedural fairness is afforded to all parties involved.

Parties have the right to appear, to be heard, either personally or through a legal representative and to produce evidence which may be tested through cross-examination. The rules of evidence may apply or be dispensed with if the parties agree.

The arbitrator is required to produce a written decision after the conclusion of the hearing within the period of days specified in the arbitration agreement.

The award made by the arbitrator finally determines financial issues between the parties.

What is an award?
An ‘award’ in arbitration is the same as an ‘order’ in litigation.

What disputes may be arbitrated?
Generally, applications for property settlement and maintenance and related relief can be referred to arbitration and an arbitrator has, largely, the same powers and responsibilities as a Judge exercising jurisdiction in relation to such matters under the relevant sections of the Family Law Act. The arbitrator is able to deal with related issues such as, for example, the transfer of property, the payment of debt, the splitting of superannuation and the like.

What are the advantages of Arbitration?

• Privacy and Confidentiality – Arbitration is a confidential dispute resolution process agreed privately between the parties, their legal representatives and the arbitrator. The arbitrator, the parties and their legal representatives are bound by obligations of strict confidentiality. Documents do not have to be filed and stored in public institutions. They are normally returned to the party who produces them. Hearings are conducted in private and are not open to the public.
• Timeliness – Litigation in the Family Law Courts may take many months, sometimes years, to run its full course. Private arbitrations can usually be completed in weeks, depending on the readiness of the matter for determination.
• Convenience – An arbitration may take place at any agreed location and at times to suit the parties and their legal representatives. This may be of great assistance to parties who live in regional areas away from court locations and because travel and accommodation costs may be avoided could reduce the cost of determining a dispute significantly.
• Choice of Arbitrator –In arbitration, unlike court litigation, parties with the assistance of their legal representatives are given the opportunity to choose the arbitrator they believe is best suited to the case and best able to determine the matter in a reliable and timely fashion. If parties can’t agree on an arbitrator then they can ask a qualified third party to select one for them.
• A Say in the process – Parties and their legal representatives have substantial control over the timing of the process and the degree of formality and informality involved in the process.
• Prompt decision – The arbitrator is required to produce an award and the reasons for the decision within an agreed period after the completion of the hearing part of the process. Arbitrators are not entitled to be paid in full until the award and reasons are delivered. Unfortunately, in litigation, the release of decisions can take many months after the final hearing is completed.

If we decide to arbitrate, what happens?

Step 1 – Choose the arbitrator
This is usually done by the parties and their legal advisors. The arbitrator must be qualified as a family law arbitrator under the regulations if parties want the arbitrator’s award to be enforceable.

Parties and their legal advisers should also consider the potential arbitrator’s experience, availability and fee scale.

In my experience lawyers usually ask a potential arbitrator for an estimate of fees early in the selection process and when and where they are available to conduct the arbitration.

Parties usually rely on their legal advisers for advice about a proposed arbitrator’s experience and knowledge.

Step 2 – The preliminary meeting.
Once an arbitrator is chosen a date should be set for a preliminary meeting to:

• Settle the terms of the mediation agreement;
• Identify the areas of dispute;
• Decide whether the dispute is one that can be arbitrated pursuant to the Act;
• Decide the timetable for preparation and for the hearing;
• Decide where the hearing is to take place.
• Decide on the process that is appropriate based on the complexity and nature of the issues requiring determination;
• Decide on the appropriate time period for the arbitrator to write a decision; and finally
• Agree the fees and payment arrangements for both the arbitrator’s fees and other costs associated with the conduct of the agreed process such as payment for hire of hearing rooms.
• Arrange for signing of the arbitration agreement.
• Make any required interlocutory awards to facilitate preparation for the hearing. These are usually expressed to commence once the mediation agreement is signed by all parties and the arbitrator.

The arbitration commences once the arbitration agreement is signed. Consequently, the arbitrator’s right to payment for the preliminary meeting needs to be either specifically dealt with in the arbitration agreement or be the subject of an agreement to pay the fee charged for the preliminary meeting after conclusion of that meeting regardless of whether or not the parties agree to formalise the arbitration.

One of the major differences between court-based litigation and private arbitration is the use of the arbitration agreement. Arbitration is essentially a private agreement and the arbitrator’s power is based on that agreement as opposed to an Act of Parliament. The arbitrator and parties must agree their own rules for the conduct of the arbitration and cannot, for instance, rely on Court Rules. As a result, the Arbitration Agreement is vital to the success of the process.

Step 3 Preparation for the hearing
In theory, the agreement and the interlocutory awards made at the preliminary meeting should ensure preparation proceeds smoothly and the hearing will take place as planned.

In practice, I have seen cases where with the greatest goodwill, something out of the hands of the parties occurs to delay preparation, a valuer may become ill or an important witness unavailable for a lengthy period or a piece of real estate is adversely or beneficially affected by a surprise change in zoning.

In those cases where the preparation is adversely affected then it may be necessary to call a further meeting to review the situation and make a new or amended plan.

Step 4. The hearing
The hearing process is agreed at the preliminary meeting. As arbitration is a contractual process there is a capacity to vary the agreed process during the preparation.

The hearing process may be simply the arbitrator reading the documents presented by each side and making the award ‘on the papers‘.

The process may, on the other hand, be similar to the court process we are all accustomed to. There can be oral evidence with cross-examination and submissions accompanied by tendering of documents.

Or the process can be something in between. The important element is that parties agree the process or accept the arbitrator’s determination as to what is both appropriate and proportional to the complexity of the issues in dispute and thereby costs both of the arbitration and preparation may be contained.

Step 5. After the hearing
The focus changes from the parties to the arbitrator who must make a decision based on the evidence presented and in accord with the Act.

The reasons for the decision must be in writing and accompanied by the award. The award and reasons are given to the parties and that is normally the end of the arbitrator’s engagement. The parties must decide what happens next.

They may simply comply with the award or they or one of them may elect to register the award in order to enforce it.

What is arbitration likely to cost?
Private arbitration is designed to be less protracted than court-based litigation. The process leading to the hearing should be less onerous, formal and costly. Importantly, access to an early determination through arbitration, should alleviate the need for multiple interim hearings, continual refreshing of evidence and the substantial costs to parties of needing to engaging with legal representatives over extended periods, sometimes measured in years.

In a private arbitration, the parties must meet the costs and fees of the arbitrator in addition to their own legal costs. In my experience the costs of arbitration are usually calculated at the preliminary meeting. Costs must be specified in the arbitration agreement with the result that parties know the arbitration costs from the start.

Arbitration provides a cost-efficient way to resolve simple cases or single issue matters. Simple matters may be determined without the need to convene a formal hearing. Parties rely on documents placed with the arbitrator which identify the relevant issues and history. The arbitrator makes the necessary determination and award based on the information in the papers.

Similarly, if parties have a single issue such as, for example, valuation of property or treatment of an inheritance, that single issue can be referred to the arbitrator either on the papers or with limited evidence and the arbitrator can make a determination that enables the parties to implement their agreement

Personal savings
What can only be measured by the parties, is the value to them, financially and otherwise, of having their family and financial issues addressed and resolved in a private, timely and less formal manner. The delays, costs and challenges of litigation can be personally and financially debilitating. The value of having important issues addressed, uncertainty removed with the result that they are able to make personal and financial decisions and get on with their life in the short term rather than waiting in a sort of financial limbo for many months or even years, is an assessment which can only be made individually by the parties involved in the dispute.

What Appeal rights are there if I think the arbitrator has got it wrong?
There is a right to apply to a court to review an arbitrator’s decision on a question of law. This is not strictly speaking a right of appeal since the arbitrator is outside the court system but it protects a party’s position if the arbitrator fails to apply the law correctly and if the review request is successful the court may set aside the award and make such decree as it thinks appropriate.

What happens if a party changes their mind about arbitrating?
There is power under the Act for the arbitrator or a party to seek the assistance of a Court to force production of documents and issue subpoenas. The arbitrator in extreme cases may make an award based only on the evidence presented by one party if the other fails to attend or take part. The arbitration agreement is a contract and should make provision for consequences in the event of a breach by one of the parties.

It is also possible to ask a court to order an arbitration if the parties consent to such an order and if a party then fails to take part in the arbitration he or she will be in breach of the court order.

How do I get more detailed information?
This paper provides very general information. Parties contemplating a reference to arbitration should seek specific advice from their lawyer. In my experience qualified family law arbitrators are pleased to provide information to help clients decide whether arbitration is an appropriate path in their particular circumstances.

Philip Theobald
Family Law Arbitrator
Derwent and Tamar Chambers