H v W
| Jurisdiction | England & Wales |
| Judge | CLARE AMBROSE (SITTING AS A DEPUTY HIGH COURT JUDGE) |
| Judgment Date | 17 July 2019 |
| Neutral Citation | [2019] EWHC 1897 (Fam) |
| Court | Family Division |
Financial remedies – Arbitration – Challenge to final award – Permitted challenges – s 57 of Arbitration Act 1996 – Costs.
The couple married in 1988 and had two children (now adult). Decree nisi was pronounced in October 2016. The husband and wife divided the proceeds of sale of the family home equally and purchased their own properties with mortgages; the wife’s property was worth about £30,000 more than the husband’s. The husband received some money from one of the children whenever she was staying with him; the wife had two lodgers who paid rent.
Neither made an application to court for financial relief, instead, in September 2017, they both signed the ARB1 FS form, agreeing on arbitration under the Family Law Arbitration Financial Scheme. The outstanding issues were: the division of pensions; what maintenance, if any, should be paid; and the division of the remaining assets, including shares and a redundancy payment. An initial hearing took place on 22 February 2018 and a final oral hearing on 31 October 2018. The arbitrator’s award provided that: other than equal division of the shares, there should be no further capital provision for either party; there should be a pension sharing order in the wife’s favour in relation to 78.3 per cent of one of the husband’s pensions; and the husband should pay the wife spousal periodical payments of £500 pm for a 3-year period. In the arbitrator’s view, the wife’s combined income from her business and rental income, as evidenced by 5 years of tax returns, was an average of about £24,800 pa; the wife was predicting that her income in the current year would be about £21,403. The arbitrator assessed the wife’s income/earning capacity as £21,000 to £25,000. The arbitrator took the view that the money the husband received from the adult child was not to be taken into account as income. He also approached the expenses on the basis that each of them was looking after themselves only, and did not take into account any reported expenses associated with anyone else, including the wife’s lodgers.
On 13 December, the husband made a formal application to the arbitrator under s 57 of the Arbitration Act 1996, suggesting that the arbitrator had made a clerical error in excluding the rental income from the wife’s lodgers when considering forecast income. The arbitrator responded that no clerical mistake or error had been identified. On 24 December, the husband issued a revised application, this time alleging that the arbitrator had accidentally omitted any rental income from the wife’s predicted income, in particular pointing to the ‘rent a room’ tax exempt allowance. Following an exchange of emailed comments by both the husband and the wife, the arbitrator revised his breakdown of the wife’s income, attributing to her an averaged net income of £29,505. However, having reconsidered identified ‘errors’ concerning income, he also dealt with ‘errors’ concerning expenditure, and increased the wife’s reasonable expenses from £2,500 pm to £2,750 pm by taking into account the evidence she had previously submitted of reasonable expenses of £230 pm relating to the lodgers. In conclusion, he reduced the maintenance to be paid to the wife to £300 pm but otherwise left the award unchanged.
On 12 February 2019 the husband submitted a third formal application to the arbitrator, strongly suggesting that the revised award should be a clean break. The wife’s response suggested that there were other errors in the award and that another hearing was required. The arbitrator responded that he was not prepared to reconsider the award, which was now final, and that his role in the arbitration was at an end. On 8 March the husband applied in the Luton County Court to set aside the part of the award relating to spousal maintenance, naming the arbitrator as a party, as required under s 68(1) and s 69(1) of the 1996 Act. On 14 March 2019, the wife applied in the Family Court in Southampton for a notice to show cause why the original arbitration award should not be made into an order of the court, pursuant to DB v DLJ[2016] EWHC 324 (Fam), or, in the alternative to show cause why the amended arbitration award should not be made into an order. The husband’s claim was initially transferred to the Commercial Court, and both proceedings then transferred to the Family Division.
Held – (1) Section 69 of the Arbitration Act 1996 concerned appeal for error of law, whereas the husband’s complaints concerned the arbitrator’s conduct of the arbitration and his assessment of income and needs. There was no question of law that would have justified granting permission to appeal under s 69. There was no basis for suggesting that the arbitrator’s application of law was obviously wrong or that it raised a legal question of general public importance (see [55], below).
(2) Section 68 of the 1996 Act provided a closed list of grounds of intervention. Complaints regarding the merits of the arbitrator’s assessment of fact did not fall within s 68. Not only were the grounds of challenge very circumscribed indeed (see DB v DLJ[2016] EWHC 324 (Fam)) but intervention was not justified merely because something had happened which fell within one of the grounds. It was necessary also to show that the irregularity had caused or would cause substantial injustice to the applicant. Substantial injustice was not established merely by showing that the outcome would have been different in a material way if there had been no irregularity. The test of substantial injustice would be met only in extreme cases, where the tribunal had gone so wrong in its conduct of the arbitration that justice called out for it to be corrected. It must be shown that what had happened was so far removed from what could reasonably be expected of the arbitral process that the court must take action. In addition, under s 68 a court had power only to remit or set aside an award, it could not vary the award. In practice, this meant that, even if successful, any application under s 68 would result in the award being remitted back to the arbitrator rather than in a variation by the court. The ARB1FS was signed by parties on the express basis that challenge to court was limited and that a variation would only be justified in an exceptional case. Parties did not agree that an arbitrator should resolve their disputes in an award on the basis that this would be a precursor to further rounds of extended submissions on possible errors, followed by a set of court proceedings before the matter was remitted back to the arbitrator for further submissions and perhaps a further hearing (see [57]–[59], [67], below).
(3) The starting point was that a published arbitration award was final and binding (s 58 of the 1996 Act). Once an arbitrator had made a final award, he had discharged his duty and no longer had power to make decisions in respect of matters decided. Section 57 of the 1996 Act provided an exception to this, in conferring limited powers to correct an award (or make an additional award for the same purpose). Section 57 did not allow an arbitrator to give effect to second thoughts (applying Ases Havacilik v Delkor[2012] EWHC 3518 (Comm)): it did not allow an arbitrator to improve or revisit his decision or correct a mistaken assessment of the facts or the law. Also, if an arbitrator ‘assesses the evidence wrongly or misappreciates the law’ this error did not come within s 57. Whether an error came within s 57 was an objective matter, it was not simply a matter of the arbitrator’s discretion under what was often termed the slip rule. If an arbitrator admitted there was an error in an award there were usually only three ways to correct it: by the parties’ agreement; by a correction, if it fell under s 57; or by an order of the court under s 68(2)(i) for an admitted error. There might sometimes be a fine distinction between an accidental slip or omission (correctable under s 57) and an error or gap in the reasoning or a mistaken assessment of the facts (outside s 57). Section 57 was not intended to allow parties ‘another bite of the cherry’ and should not be construed broadly so as to permit costly and time-consuming attempts to re-open the arguments or the evidence. Also, s 57 did not allow for the introduction of fresh evidence for the purpose of identifying or correcting errors (see [61]–[65], below).
(4) Where an arbitrator was entitled to correct an error under s 57, he was then entitled to make changes to other parts of the award in order to reflect that correction. Such corrections could be made after 28 days and could be made without having to go back to allow further representations, since this was merely the necessary consequence of the original error (see [69], below).
(5) In fact, there had been no error arising out of an accidental omission in the arbitrator’s original assessment of the wife’s income and needs. If the arbitrator had incorrectly failed to give proper account to income received from lodgers and the tax status of such income (or had even ignored it) then he had made a mistaken assessment of the evidence (whether by his own error or because the evidence was not clearly presented). If his award was inconsistent in saying at one point that he would take into account rental income but then at another stage not taking full account of that income, then that was also a fault or gap in reasoning. Similarly, if the arbitrator had incorrectly or inaccurately assessed the wife’s needs, then this was a mistaken assessment of the evidence rather than an accidental omission or slip. Even if the arbitrator had not properly considered future income in making his amendment, this would not constitute a failure to deal with all the issues: at its highest it would be an incorrect assessment of the facts, which, again, did not fall within s 68 (see [67], [70], below).
(6) The arbitrator had decided to allow an application under s 57 to address what he had perceived as a...
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