JurisdictionEngland & Wales
Judgment Date28 January 2019
CourtFamily Court

Financial remedies – Arbitration – Application for award not to be made an order of the court – Status of arbitration award – Relevance of Arbitration Act 1996 – Interaction with court’s jurisdiction under Matrimonial Causes Act 1973 – Fundamental new circumstances or mistake – Approach to be taken if alleging error of law, mistaken assessment of facts or new evidence – Priority to be given to finality – Procedure for challenging award – Costs.

The couple began to cohabit in 1998, had two children together and then married in 2006. The husband was a senior professor; the wife’s business role had made her the main earner until she had the children, after which she left her job. She subsequently re-qualified and set herself up in a self-employed role. After the separation in 2016, the children lived with the wife and spent time with the husband.

The husband applied for financial relief in November 2016. Decree nisi was granted in April 2017. The court granted permission for instruction of a single joint expert to report on mortgage capacity. A three-day hearing listed for February 2018 could not be accommodated and the case was relisted for July 2018. However, this listing was also ineffective, because of the judge’s sickness. Reluctant to re-list the case again, the parties signed an arbitration application form on ARB1 FS, agreeing on arbitration under the Family Law Arbitration Financial Scheme.

There were just over £1 million in total assets; the most substantial assets were the family home and the husband’s pensions. In 2001, prior to the marriage, the parties had entered into an express declaration of trust relating to their ownership of specific shares of the family home, reflecting their financial contribution (58/42 per cent in the wife’s favour). The wife’s estimate of her own gross earnings was £6,500 pa; the husband’s salary plus bonus was about £63,384 net pa, plus a pension contribution of £7,464. The husband had significant post-separation debts of about £100,000, essentially his legal costs; the wife had already paid her legal costs, of similar magnitude, from her own assets.

Following a two-day hearing, a final arbitration award was made. The arbitrator treated the husband’s debts as matrimonial. The family home was to be sold and the proceeds divided 54.42 per cent to the wife and 45.58 per cent to the husband; overall this was expected to mean that the liquid capital was divided £315,000 to the wife and £213,988 to the husband. Taking into account their unequal mortgage capacities, the award was expected to enable them both to rehouse in broadly similar accommodation, with the wife expected to have a home worth about £375,000, because the children had their main home with her, and the husband a home worth about £350,000. The award also gave effect to the parties’ agreement that there should be a pension sharing order in the wife’s favour in relation to 76 per cent of the husband’s civil service pension (valued at £292,615) with the husband retaining the other, smaller, pension. Finally, the award required the husband to pay the wife global maintenance, starting at £1,600 pm, reducing to £1,050 pm in July 2019 and then to £650 pm in 2022, when the wife would be able to draw from the civil service pension. All payments were to terminate on the husband’s retirement. The award referred to the couple’s unequal non-matrimonial capital contributions and the fact that the husband had the ability to generate further pension provision in future years.

The wife contacted the arbitrator, raising a number of issues, in particular the fact that the single joint expert had advised her that, because her maintenance award was on a reducing scale, she would be unable to obtain a mortgage. The arbitrator responded that any further involvement would require the joint instruction of both parties. The husband declined to return to the arbitrator.

In October 2018 the wife issued ‘A Letter to the Court and Judge at the High Court’, providing among other things her grounds for appeal out of time, a request for transfer to the High Court and an annotated copy of the award raising her objections. Directions were given for the application to ‘be treated as an application that the award is not made an order of the court pursuant to DB v DLJ[2016] EWHC 324 (Fam)’.

The wife provided four main grounds for resisting the award: (a) that there had been a supervening event, in the form of her inability to obtain a mortgage; (b) that the husband had failed to disclose the fact that his pension contributions were voluntary, not mandatory; (c) that the arbitrator had failed to attach proper weight to the express declaration of trust relating to the family home; and (d) that the arbitrator had failed to take into account the husband’s excessive debts. The application did not contain any dispute as to the arbitrator’s findings on the wife’s future earning capacity; there was no allegation that the arbitrator was biased or that the wife had not validly agreed to arbitrate.

The wife was arguing for a relatively small adjustment to the award, asking that her share of the capital assets be increased by 3.58 per cent and for increased maintenance of £1,750 pm until the husband reached 67 or started retirement, if later.

The wife’s position was that her application should not fail by reason of the Arbitration Act 1996, relying on DB v DLJ. The husband submitted that DB v DLJ did not justify the wife’s application but he did not take points based on the 1996 Act.

Held – (1) S v S [2014] 1 EWHC 7 (Fam) and DB v DLJ[2016] EWHC 324 (Fam) made it clear that financial disputes were arbitrable and that the Arbitration Act 1996 applied to arbitration under the ILFA Financial Scheme and awards produced under that scheme, respecting finality as an agreed priority. In principle an ILFA Financial Scheme arbitration award was effective and binding as between the parties without further court order; an order of the court was not a pre-condition for the binding effect of an award on the parties. However, in the context of financial disputes it would usually be appropriate for the parties to ask the family court to incorporate the award into a consent order; this would ordinarily be more convenient than enforcing an award under s 66 of the 1996 Act but that procedure was also available. Obtaining an order was necessary for the award to be relied upon against third parties (such as pension providers) and for achieving a clean break. The making of an arbitration agreement (or an award) did not oust the court’s jurisdiction to make an order under the Matrimonial Causes Act 1973, and did not exclude its duty to investigate the parties’ circumstances. However, the exercise of the court’s discretion had to take account of the award, the agreement to arbitrate, and the scope of the court’s grounds for setting aside, varying or declaring an award to be of no effect under the 1996 Act. Applying DB v DLJ it would be exceptional for a court to refuse to approve a consent order containing an award but the court could refuse to make an order giving effect to an award where there were supervening circumstances within the principles laid down in Barder v Barder [1988] AC 20. The emergence of fundamental new circumstances justified re-opening the case because it gave rise to a new dispute upon which there were no findings, and which was not covered by the arbitration agreement, and accordingly the parties were not precluded from asking the court to deal with it. DB v DLJ had narrowly defined the ground of mistake justifying a re-opening of facts; this would only exceptionally justify an award not being upheld. Again, the emergence of new evidence triggered relief only if it gave rise to a new and materially different dispute. To confer a broader jurisdiction to re-open findings in an award, for example because the arbitrator had made an error of law falling outside s 69 of the 1996 Act or a mistaken evaluation of the facts, or a party had a new argument or some useful new evidence had emerged, would run directly counter to the 1996 Act and the parties’ intentions in agreeing to arbitrate (see [53], below).

(2) DB v DLJ did not create an open-ended discretion for re-opening an award without regard to the restrictions and safeguards imposed by the 1996 Act. An application under DB v DLJ did not enable a party to circumvent or avoid the statutory requirements (and safeguards) of the 1996 Act. An order refusing to give effect to an award pursuant to DB v DLJ would usually only be granted where the parties had failed to agree on a consent order and the complaint fell outside the scope of the 1996 Act (for example supervening circumstances). In these circumstances the substantive and procedural requirements of the 1996 Act would not apply to an application under DB v DLJ. If the court refused to give effect to the award, it could direct that the matter in question be reconsidered, usually by the Family Court (unless the parties agreed to remit the matter back to the arbitrator), and the court order would preclude enforcement of the award in the English courts (see [54], below).

(3) Overall the terms of ARB 1FS and the ILFA Financial Scheme were not sufficiently clear to suggest that parties were contracting out of the 1996 Act, including the safeguards laid down under that Act. In any event, the parties could not contract out of mandatory provisions such as s 68 (see [57], below).

(4) Any application to resile from an arbitration award should be unusual. The primary remedies were laid down in the 1996 Act. Applications using the ‘notice to show cause’ procedure or an application for no order to be made (used in this case) should be exceptional for the reasons given in S v S and DB v DLJ, and did not enable a party to avoid or circumvent the 1996 Act. Where a party who had taken part in the arbitration wished to challenge an award under the ILFA scheme, the onus lay on that...

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