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A recent court case pseudonymised as Olsen & Rich explored the subject of family law arbitration and dealt with “an important issue with far-reaching ramifications”, being what happens if a party initially agrees to arbitration but then changes their mind once it has begun?

In this matter, a husband and wife initially agreed to resolve their property settlement dispute using arbitration. With the wife’s consent, an order was made in the family courts to refer the proceedings for arbitration.  However, the wife then revoked her consent to proceed with the arbitration.  The husband now sought orders that would hold the wife to her initial agreement to arbitrate.  He argued since she had agreed to the initial Family Court order referring the matter to arbitration, she should not be permitted to resile from it by not executing the arbitration agreement and continuing with the arbitration process.  To remedy the situation, the husband wanted a family court registrar to execute an arbitration agreement in lieu of the wife.  However, his application was dismissed. Let’s take a look at why.

After the wife’s initial consent to the family courts referring her matter to arbitration, she never executed an arbitration agreement and repeatedly stated she had withdrawn her consent to arbitrate.  The wife’s consent to arbitrate was therefore said to be “extremely limited”.

The husband’s solicitors argued that the time that a party is regarded as providing consent to arbitration should be the time the proceeding was referred to arbitration.  However, the court held that “arbitration must be a consensual process” and that parties’ agreement to arbitrate is an “ongoing phenomenon”.

And although arbitration has been described as a “binding adjudicatory process”, a party simply consenting to a matter being referred to arbitration was not enough to cause the parties to be bound to the entire process.The court found that if the initial consent is “rescinded or repudiated, the authority of the arbitrator evaporates and the referral under s13E of the Family Law Act [to arbitration] comes to an end”.

Ending arbitration process if arbitration agreement was executed

Arbitration agreements must follow certain mandates about their form and content, as per the Family Law Regulations 1984.  One of the things that the arbitration agreement must contain is information about how the arbitration is to be conducted and the circumstances in which an arbitration can be suspended or terminated. But in this case:

Here, no arbitration agreement was executed. The furthest it can be taken that the wife assented to arbitration was her consent to orders made by his Honour Judge Monahan [in the family court]. That does not amount to some irrevocable submission to arbitration. Since then, the wife no longer consents to arbitration. 

The court dismissed the husband’s application for a family court registrar to execute an arbitration agreement.  Under our family law, that can only happen if a court order had been made for a party to execute a deed or instrument and the party refused to do so.  In such a case, an officer of the court can be appointed to execute the relevant deed or instrument. But here, no order had been made that required the wife to execute an arbitration agreement and as such, the husband’s application failed.

The Family Law Act 1975 doesn’t actually contain provisions that confer power on the court to make an order halting an arbitration in circumstances where a party had first consented to a referral order but after that consented to nothing further.  There are provisions that operate to confer power to make orders to facilitate the arbitration, but not to end the referral to arbitration.

However, “the court possesses inherent power to make orders to prevent its process from abuse”.  The court took the view that there was “a corresponding inherent power, in the control of its own process, to make an order terminating the reference to arbitration. In my view the making of such an order is appropriate in the circumstances of this case.”

The court therefore terminated the referral to arbitration and removed the matter from the National Arbitration List.  Instead, the matter was referred back to the family courts for allocation to the next available judge as a matter of urgency.

Note that the wife may still be ordered to pay the husband’s costs of the application, as he has had to expend extra legal fees due to the situation, and has been left at “considerable disadvantage in terms of the speedy, or even timely, progress of this proceeding which was issued in 2018”.

Key takeaways?

  • If consent is initially given to arbitration but is withdrawn early enough – before the execution of an arbitration agreement – then the process of arbitration is not binding upon the parties.
  • If a party has executed an arbitration agreement, however, they will be bound by its terms, which include details of how the arbitration can be suspended or ended.

Would you like to know whether family law arbitration may be a suitable Alternative Dispute Resolution process for your property settlement?  Please contact Canberra family lawyer Cristina Huesch or one of our other experienced solicitors here at Alliance Family Law on (02) 6223 2400.

Please note our blogs are not legal advice.  For information on how to obtain the correct legal advice, please contact Alliance Family Law.

You might also like to read our blog on how to vary an arbitral award.

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