THE DOS AND SOME DON’TS OF ARBITRATION
Accredited Family Law Specialist
About the Presenter ….
Chris Dimock MA, Solicitor
Chris Dimock is an Accredited Family Law Specialist.
He first practised as a Solicitor in the United Kingdom before moving to Australia in 1983. He has since been practising exclusively in the Family Law area in this country.
In 1983 he joined Sly & Russell, as it then was, assuming responsibility for all their family law matters. He joined Cutler Hughes & Harris in 1989, where he became a Partner and headed up their Family Law Department. He became an Accredited Specialist in Family Law when the Law Society of New South Wales introduced its Accreditation Scheme in 1993.
Chris became a sole practitioner in November 2002, when he established the firm of Dimocks Family Lawyers.
Chris is a member of the Family Law Section of the Law Council of Australia and is a former Convenor of the Family Law Committee of the City of Sydney Law Society.
TABLE OF CONTENTS
1. INTRODUCTION 2
1.1 Background 2
1.2 Arbitration is voluntary 2
2. WHAT IS ARBITRATION? 3
3. TWO TYPES OF ARBITRATION 4
4. WHAT CAN BE ARBITRATED? 4
5. PRELIMINARIES 5
6. COSTS OF ARBITRATION 6
7. POWERS AND DUTIES OF AN ARBITRATOR 6
8. DISCLOSURE AND SUBPOENAS 7
9. CONDUCT OF THE ARBITRATION 9
10. ARBITRAL AWARDS 9
11. REGISTERING AN AWARD 9
12. CHALLENGING AN ARBITRAL AWARD 10
12.1 Right of Review 10
12.2 Setting aside an Award 11
12.3 Objecting to registration 12
12.4 Braddon & Braddon  12
13. STAMP DUTY AND CGT 13
14. THE FUTURE OF ARBITRATION 14
15. ADVANTAGES AND DISADVANTGES OF ARBITRATION 14
16. SUMMARY 15
1. WHAT IS ARBITRATION?
Section 10L(1) of the Act defines arbitration in the following terms:
“10L(1) Arbitration is a process (other than the judicial process) in which parties to a dispute present arguments and evidence to an arbitrator, who makes a determination to resolve the dispute”.
By Section 10M of the Act, an “Arbitrator” is someone who meets the criteria set out in Regulation 67B. Specifically, an Arbitrator must be:
2.1 a legal practitioner; and
2.2 someone who is either accredited as a Family Law Specialist by their State or Territory legal professional body, or he/she has practised as a legal practitioner for at least five (5) years, and at least twenty five percent (25%) of the work done in that time was in relation to family law matters; and
2.3 the person has completed “specialist arbitration training conducted by a tertiary institution or a professional association of arbitrators”; and
2.4 the person’s name can be found in a list kept by AIFLAM.
2. TWO TYPES OF ARBITRATION
Section 10L(2) of the Act provides that there are two types of Arbitration:
3.1 Court-ordered, which is subject to the consent of all parties to the proceedings (“Section 13E Arbitration”); and
3.2 private arbitration, which is referred to in the Act as “relevant property or financial arbitration”, dealing with proceedings for property settlement and/or spousal maintenance, financial agreements, and proceedings under Section 106A of the Act (“Execution of Instruments by Order of Court”).
3. WHAT CAN BE ARBITRATED?
By Section 13E, the proceedings in which the Court can, with the consent of all parties, refer to the parties to arbitration consist of:
- property settlement proceedings;
- proceedings for maintenance;
- proceedings declaring the interests of the parties in property; and
- proceedings to set aside Orders,
both in relation to married and de facto couples.
It follows that the Court, even with the consent of the parties, cannot refer a parenting matter, or any part of a parenting matter, to arbitration. It also cannot refer to arbitration:
4.1 enforcement proceedings; or
4.2 proceedings with respect to a financial agreement,
although private arbitration is still an option for those types of matters.
For practical purposes, an Order for arbitration will be made by consent at a judicial call-over or at a directions hearing. However, there is a Court form (Form 6) Application for Arbitration which can be used, whereby one party can apply for an order referring the matter to arbitration. All that is required in support is a Financial Statement. A party to voluntary arbitration can also use a Form 7 to seek orders for the effective conduct of the arbitration.
Having selected your Arbitrator, the likelihood is that he or she will send out an Arbitration Agreement for the parties to sign. The Arbitrator will most likely also convene a meeting of the parties’ legal representatives, at which the Arbitrator can be expected to:
- fix a date and nominate a venue for the Arbitration;
- make procedural directions, for example for the delivery or exchange of financial documents; and
- direct the delivery or exchange of a summary of argument.
It is at this stage, for example, that the parties could agree that the Arbitrator should determine the matter on the papers.
5. COSTS OF ARBITRATION
By Regulation 67H, the costs of an Arbitration are to be shared equally between the parties, unless otherwise agreed in writing. It is likely that the same will apply to the costs of venue hire and costs of a transcriber, if one is required.
As with choice of Counsel or any single expert, the Arbitrator’s costs can vary significantly, but at least with arbitration, the parties can better manage the costs of the process and feel that unlike the judicial process, they have some influence over the costs and timing of the process.
The following table gives some indication as to the costs likely to be borne by the parties to arbitration as to 50% each (plus GST):
$500 per hour
$500 per hour
Transcriber – $750
Room hire – $500 – $1,000
6. POWERS AND DUTIES OF AN ARBITRATOR
Regulation 67I requires that an Arbitrator must:
7.1 determine the issues in dispute between the parties, in accordance with the Act;
7.2 conduct the Arbitration with procedural fairness; and
7.3 inform each party in writing if, during the Arbitration, the Arbitrator becomes aware of anything that could lead to direct or indirect bias in favour of, or against, one of the parties.
As matters stand, the arbitration process probably requires an element of goodwill on both sides, for it to be successful. Some Arbitrators may also prove to be better than others in managing the process, for example, in ensuring that procedural directions are complied with by the due date. If they are not, the Arbitrator’s powers are limited to suspending the Arbitration. And for Court-ordered Arbitration, if the default exceeds 28 days, then the Arbitrator has an obligation to refer to the matter back to the Court that ordered the Arbitration in the first place.
Note that an Arbitrator has no power to make costs orders.
The Arbitrator can however require a person (whether a party or not) to attend the Arbitration to give evidence and/or to produce documents. If proceedings are on foot, a party to the Arbitration can also apply to the Court for the issue of a Subpoena, including a Subpoena requiring a person to give evidence at the Arbitration.
7. DISCLOSURE AND SUBPOENAS
It has been enshrined in the Act since 2006 that people should be encouraged to use arbitration “in appropriate circumstances ….. to resolve matters in which a Court Order might otherwise be made …”
However, it was not until legislation was passed in 2016 that the Rules were beefed up in order to make Arbitration more attractive. According to the Explanatory Statement accompanying the new Rules:
“…to facilitate effective and timely arbitration between people who wish to arbitrate rather than litigate their financial disputes, the Judges have exercised their rule making powers to address certain gaps, in particular in relation to disclosure and Subpoenas, which were seen as impediments to efficacious arbitration.”
The amendments can be found at Chapter 26B – Arbitration. Effectively, the Chapter extends to Arbitration the same requirements for disclosure, and the same power to issue Subpoenas, that can be found in matters proceeding through the Court system. Thus:
8.1 by Rule 26B.01(1), each party to an Arbitration has a duty to the Arbitrator and the other parties “to give full and frank disclosure of all information relevant to the Arbitration, in a timely manner”.
8.2 there is an obligation on each party to disclose their financial circumstances, as appears in Rule 13.04 with respect to Court proceedings.
8.3 Rule 26B.09 provides that both a party to the Arbitration and the Arbitrator can apply to the Court to enforce disclosure requirements.
The second Part of the new Rule 26B.2 enables a Court to issue Subpoenas and mirrors the provisions for the issue of Subpoenas in Court proceedings.
8. CONDUCT OF THE ARBITRATION
Provided that all parties to the Arbitration consent, the Arbitrator is not bound by the rules of evidence, but may inform himself or herself on any matter in any way that he or she considers appropriate.
9. ARBITRAL AWARDS
At the conclusion of the Arbitration, and whether it is Court-ordered or private, the Arbitrator will, and is required to, make an Award. Whilst there are no time limits for the Arbitrator to produce an Award, the expectation is that it will be issued no later than twenty-eight (28) days of the date of the Arbitration and the Arbitration Agreement may well specify how long the Arbitrator expects or agrees to hand down an Award.
By Regulation 67P, an Arbitrator is required to include in his or her Award a concise statement setting out the reasons for making the Award, the Arbitrator’s findings of fact and the evidence on which the findings are based.
10. REGISTERING AN AWARD
The parties to the Arbitration must then decide what to do with the Award, and whether or not to:
- register the Award; or
- arrange for the Award to be incorporated in Orders, for example if real estate is to be transferred pursuant to an Award and the transferee wishes to obtain a stamp duty exemption.
There is no time limit on registering an Award and no requirement that an Award should be registered: however, an Arbitral Award only takes effect once it has been registered. Further, by Section 13J(2) of the Act, once an Arbitral Award has been registered, it has effect as if it were a decree made by the Court.
The process of registering an Award is simple. There is a specific Form (Form 8), to which a copy of the Award is attached. The Applicant then serves a copy of the Form 8 on the other parties to the Award, who have twenty-eight (28) days within which to bring to the attention of the Court any reason why the Award should not be registered. If nothing is brought to the Court’s attention within that time, then by Regulation 67Q(4), the Court has to register the Award.
Once the Award is registered, then either party may apply for the enforcement of the Award, as if it were an Order of the Court (Regulation 67S).
11. CHALLENGING AN ARBITRAL AWARD
11.1 Right of Review
There is a right of review, but only on questions of law, and the review does not operate as a hearing de novo. Section 13J(1) of the Act provides that, whether the Arbitration is Court-ordered or voluntary:
“(1) a party …. may apply for review of the award, on questions of law, by:
(a) a single Judge of the Family Court; or
(b) a single Judge of the Family Court of a State; or
(c) The Federal Circuit Court of Australia.
(2) On a review of an award under this section the judge, or Federal Circuit Court of Australia may:
(a) determine all questions of law arising in relation to the arbitration; and
(b) make such decrees as the judge or Federal Circuit Court of Australia thinks appropriate, including a decree affirming, reversing or varying the award”.
11.2. Setting aside an Award
An application may also be made to set aside a registered Award by virtue of Section 13K(2), but only if the Court is satisfied that:
“(a) the award or agreement was obtained by fraud (including non-disclosure of a material matter); or
(b) the award or agreement is void, voidable or unenforceable; or
(c) in the circumstances that have arisen since the award or agreement was made it is impracticable for some or all of it to be carried out; or
(d) the arbitration was affected by bias, or there was a lack of procedural fairness in the way in which the arbitration process, as agreed between the parties and the Arbitrator, was conducted.”
These grounds are similar, but not identical, to the grounds that can be relied upon pursuant to Section 79A of the Act. It is possibly a concern that “lack of procedural fairness” could form the basis of an application to set aside an Arbitral Award. Furthermore, Section 79A requires that even if fraud is established, there must still be a “miscarriage of justice”, before the Court can vary or set aside an Order. However, whether these distinctions are so significant as to deter a practitioner from recommending arbitration to a client, is frankly debatable.
11.3. Objecting to registration
A third possible ground for challenging an Arbitral Award arises by virtue of Regulation 67Q, which provides that after a Form 8 is served by one party on the other party to the arbitration, that other party has twenty-eight (28) days within which to advise the Court as to why the Award should not be registered. Regulation 67Q(5) then provides as follows:
“(5) If a party brings a matter to the Court’s attention under sub-regulation (3), the Court must, after giving all parties a reasonable opportunity to be heard in relation to the matter, determine whether to register the Award”.’
11.4. Braddon & Braddon 
The Regulations provide no guidance as to the grounds on which a party could object to the registration of an Award. Because the Act contained a right of review on questions of law (Section 13J) and Section 13K(1) sets out the grounds for setting aside a registered Award, Regulation 67Q was interpreted as addressing procedural issues, examples being that the objecting party did not consent to the Arbitration or that the Arbitrator was not qualified.
The recent Federal Circuit Court decision of Braddon & Braddon  FCCA 1845 is the first reported case in which a Court has considered the various grounds for challenging an arbitral award. In that case, a husband, unhappy with the Award, opposed registration, even though registration had already occurred. The husband argued that if a party to the arbitration raised with the Court any reason as to why an award should not be registered, the Court was bound to review all the evidence and in effect rehear the case. Judge Harmer rejected the husband’s submission, and found that the grounds for opposing registration under Regulation 67Q were the same as the grounds for reviewing, or seeking to set aside a registered Award pursuant to Sections 13J and 13K. However, in addition to the reasons for setting aside or reviewing a registered Award as set out in those Sections, Harmer J listed the following additional grounds for opposing registration pursuant to Regulation 67Q:
12.4.1 the Arbitrator was not qualified in accordance with Section 10M;
12.4.2 the lack of notice of an application to register;
12.4.3 a breach of the Arbitrator’s duties;
12.4.4 lack of capacity on the part of a party (Regulation 67L);
12.4.5 failure to apply the rules of evidence; and/or
12.4.6 a failure to give reasons, or adequate reasons.
Harmer J. effectively determined the husband’s Application as if it were an Application for a Review of the Arbitral Award, before duly dismissing the husband’s Application.
12. STAMP DUTY AND CGT
Capital Gains Tax is not a concern in deciding whether or not to go down the path of arbitration, because roll-over relief applies to Arbitral Awards, as it does to Court Orders and binding Financial Agreements.
The position with respect to stamp duty was clarified on 28 February 2019, when Revenue NSW issued a Commissioners Practice Note. According to that Practice Note:
- 12.1 for married couples, the stamp duty exemption on transfers of property will apply equally to transfers pursuant to an Arbitral Award, as applies to Court Orders; and
- 12.2 for de facto and same sex couples, the exemption will only apply if the Arbitral Award is registered.
Until an amendment to the Stamp Duties Act 1991 is made, proceeding to arbitration may therefore be a disincentive for de facto couples. Of course, this will not be a consideration for de facto or same sex couples, where there is no likelihood that an arbitration will result in the transfer of real estate.
13. THE FUTURE OF ARBITRATION
It will be interesting to see if the long-awaited report by the Australian Law Reform Commission proposes legislative change, in order to make arbitration more attractive. One of the Questions, to which the Commission was directed, was to enquire as to whether there was scope to increase the use of arbitration in family disputes. Both AIFLAM and the Family Law Section of the Law Council have proposed that reviews of Arbitral Awards should not be limited to questions of law, but incorporate the same grounds as appeals to the Full Court.
14. ADVANTAGES AND DISADVANTAGES OF ARBITRATION
1 As with mediation, the parties control the process, and this is especially significant if there is a modicum of goodwill between them and their Solicitors. Thus, the parties can choose the decision-maker and venue, and may also elect for arbitration to take place, based on the papers only.
- Arbitration can be used to determine a discrete issue, for example the value of a business.
- Arbitration is confidential.
- Arbitration is likely to be less expensive.
- Arbitration is quicker.
1 Cannot be used for parenting proceedings.
2 Until or unless the Stamp Duties Act (NSW) is amended, arbitration may not be a practical option for de facto or same sex couples, if it is likely that the arbitration will require property to be transferred from one party to the other.
3 Arbitration may also be inappropriate where a superannuation split is sought by one or other of the parties.
4 The decision in Braddon probably raises more questions than it answers, in relation to the circumstances in which one party can object to the registration of an Award.
Until further legislative changes are made that address in particular the uncertainty surrounding superannuation splits and stamp duty on transfers pursuant to an award, it is suggested that, whilst attractive in many cases, arbitration does not represent a “one hat fits all” solution to determining all types of financial matters.