Summary of the Legislative Framework

Section 10L of the Family Law Act 1975 (Cth) provides:

(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.

(2) Arbitration may be either:

(a) section 13E arbitration --which is arbitration of Part VIII proceedings, or Part VIIIAB proceedings (other than proceedings relating to a Part VIIIAB financial agreement), carried out as a result of an order made under section 13E; or

(b) relevant property or financial arbitration --which is arbitration (other than section 13E arbitration) of:

(i) Part VIII proceedings, Part VIIIA proceedings, Part VIIIAB proceedings, Part VIIIB proceedings or section 106A proceedings; or
(ii) any part of such proceedings; or
(iii) any matter arising in such proceedings; or
(iv) a dispute about a matter with respect to which such proceedings could be instituted.

(a) Court-referred arbitration

Court-referred arbitration is only in relation to matters under Part VIII and Part VIIIAB (financial disputes on the breakdown of a de facto relationship). Section 13E provides:

13E Court may refer Part VIII proceedings or Part VIIIAB proceedings to arbitration

(1) With the consent of all of the parties to the proceedings, a court exercising jurisdiction in:

(a) Part VIII proceedings; or
(b) Part VIIIAB proceedings (other than proceedings relating to a Part VIIIAB financial agreement);
may make an order referring the proceedings, or any part of them, or any matter arising in them, to an arbitrator for arbitration.
(2) If the court makes an order under subsection (1), it may, if necessary, adjourn the proceedings and may make any additional orders as it thinks appropriate to facilitate the effective conduct of the arbitration.

An application for an order under section 13E must be made jointly by all parties to the proceeding (Reg 67D).

(b) Party-agreed arbitration

It is possible for parties to agree to arbitration without commencing court proceedings. The legislation calls this “relevant property or financial arbitration” (s.13E).

Party-agreed arbitration is possible in a wider range of disputes - PartVIII proceedings, Part VIIIA proceedings (arguments about binding financial agreements), Part VIIIAB proceedings (disputes between former factos), Part VIIIB proceedings (issues about superannuation) or section 106A proceedings (execution of instruments by order of the Court.)

Party-agreed arbitration gives plenty of scope to tailor the arbitration to the needs of the parties; but court-referred arbitration may also be useful in circumstances where the judge, with cooperation from the parties, wants to case-manage a particular aspect of the case using arbitration.

Whether or not the arbitration is court-referred, the Court can make orders to facilitate the arbitration. This is so under s.13E(2) in relation to court-referred arbitration and s.13F in relation to party-initiated arbitration.

Such an application may be made by any party to the application or by the parties jointly (Reg 67E).

Who can be an arbitrator?

According to the Family Law Regulations, the arbitrator must be an Australian legal practitioner who satisfies the minimum requirements (specialist accreditation or five years in practice, including at least 25% in family law) and who has done an arbitration course. Even retired judges must have completed an arbitration course in order to be qualified under the Act.

AIFLAM (the Australian Institute of Family Law Arbitrators and Mediators) maintains a list of trained arbitrators on behalf of the Law Council of Australia.

What must an arbitration agreement contain?

Reg 67F specifies that an arbitration agreement must be in writing, and give details of the arrangements agreed by the parties in relation to the payment of the costs of the arbitration. Various other matters must be detailed in the agreement (see Reg 67F(3)). The TAC agreement addresses all these matters.

There are various mandatory provisions if the parties do not have an arbitration agreement (Regs 67G and 67H).

Full disclosure

Each party has a duty to the arbitrator and each other party to give timely full and frank disclosure of relevant information including financial information (Rule 26B.01(1)). The requirements about what must be disclosed in an arbitration (26B.01(2)) mirror Rule 13.04 with respect to court proceedings. There are also similar rules concerning the disclosure of documents and the use to which they are put (compare Rules 26B.02 and 26B.03 with Rules 13.07 and 13.07A).

Rule 26B.04 provides for the production of documents, equivalent to Rule 13.08:

(1) A party to an arbitration may, by written notice, require another party to the arbitration to provide a copy of, or produce for inspection, a document referred to:

(a) in a document provided by a party to the arbitration to another party to the arbitration; or (b) in correspondence prepared and sent by or to another party to the arbitration.

Again, mirroring the general rules, there are provisions dealing with claims of privilege and objections (Rules 26B.05 and 26B.06) and making provision for inspections (Rule 26B.08). A party may also give the other party a list of documents which either need to be produced or an explanation given if they are not under that party’s control ((Rule 26B.07).

Rule 26B.09 provides that either a party to the arbitration, or the arbitrator, may apply to the court to enforce disclosure requirements. Rule 26B.10 allows the court to order a party requiring disclosure to pay the costs of so doing, to contribute to those costs or to give security for costs, as long as compliance with the duty of disclosure would be oppressive.

The conduct of the arbitration

There is a limited amount of prescription in the legislation. Reg 67I provides that an arbitrator must determine the issues in accordance with the Act and must conduct an arbitration with procedural fairness (for example, giving each party to the arbitration a reasonable opportunity to be heard and to respond to anything raised by another party).

The arbitrator must also inform each party in writing of anything that could lead to direct or indirect bias in favour of or against any party.

Confidentiality

Arbitration is a confidential process. Arbitrators must take an oath to preserve confidentiality (Reg 67J). The terms of that oath also set out the exceptions to confidentiality.

Rules of evidence

If the parties consent to this, an 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 (Reg 67O). TAC’s standard agreement provides that the arbitrator is not bound by the rules of evidence.

Legal representation

Regulation 67M provides:

In an arbitration, a party may appear in person, or be represented by a legal practitioner.

It is of course up to the parties whether they want legal representation in the arbitration hearing. In some cases, it may be enough for the lawyers to make written submissions.

The powers of the arbitrator

There are provisions which address the situation where a party does not comply with the arbitrator's directions (s.67K) or the arbitrator considers that the person lacks capacity (s.67L).

The Regulations give to the arbitrator the power to compel witnesses or the production of evidence. Reg 67N provides:

Attendance of persons to give evidence

(1) An arbitrator conducting an arbitration may require a person (whether a party to the arbitration or not):

(a) to attend the arbitration to give evidence; or
(b) to produce documents; or
(c) to attend the arbitration to give evidence and produce documents.

(2) A party to an arbitration may apply to the court for the issue of a subpoena requiring a person (whether a party to the arbitration or not):

(a) to attend the arbitration to give evidence; or
(b) to produce documents; or
(c) to attend the arbitration to give evidence and produce documents.

(3) An application under subregulation (2) must be made in accordance with the applicable Rules of Court.

The relevant provision in the Rules is Rule 26B.14 which provides:

The court may, on application, issue a subpoena requiring a person:

(a) to attend an arbitration to give evidence; or
(b) to produce documents to the court in relation to an arbitration; or
(c) to produce documents to the court in relation to an arbitration and attend the arbitration to give evidence.

The Rules cover:

  •   The process for issuing a subpoena in an arbitration.
  •   The requirements for service of a subpoena.
  •   The obligation to pay conduct money.
  •   When compliance is not required and
  •   How long a subpoena lasts.
  •   The process of objection when orders that a subpoena be wholly or partly setaside or other relief are sought.
CGT rollover and stamp duty relief

CGT rollover applies to arbitral awards in the same way as court orders or binding financial agreements. See Income Tax Assessment Act 1997 s.126.5(1)(e). The position in relation to exemption from stamp duty for interspousal transfers is more complex. The exemption may not apply to arbitration. Section 68 of the Stamp Duties Act 1991 (NSW), for example, exempts transfers pursuant to binding financial agreements, court orders and other agreements between the parties following relationship breakdown, but does not refer to arbitral awards. The position may vary from state to state.

If stamp duty is an issue, it can be dealt with either in the arbitration agreement, or the arbitral award, or both. The TAC agreement specifies that in the event that an issue of stamp duty arises, the parties will agree to enter into a Binding Financial Agreement or Consent Orders to give effect to the arbitral award. If a person fails to do so, he or she would be liable to pay the relevant duty or tax payable under the arbitral award. The award could be in similar terms.