H v W [2019] EWHC 1897 (Fam) Family Division, 17 July 2019, Clare Ambrose (sitting as a deputy High Court judge)

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The couple married in 1988 and had two children (now adult). They separated in October 2014 and sold the former matrimonial home in November 2015. Decree nisi was pronounced in October 2016. The husband and wife divided the proceeds of sale equally and purchased their own properties with mortgages; the wife’s was worth around £30,000 more than the husband’s property. The husband received some money from one of the children whenever she was staying with him; the wife had two lodgers

Neither made an application to court for financial relief, instead, on 27 September 2017, they both signed the ARB 1 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 other assets, including shares and a redundancy payment. An initial hearing took place on 22 February 2018 and a final oral hearing took place on 31 October 2018.

The final award provided that there should be no further capital provision for either party, except for an equal division of certain shares; there should be a pension sharing order in the wife’s favour in relation to 78.3% of one of the husband’s pensions; and the husband was to pay the wife spousal periodical payments at the rate of £500 pm for a 3 year period. The arbitrator paid particular attention to the arrangements for income received from the lodgers and the adult child. In the arbitrator’s view, the wife’s combined income from her business and rental income, as evidenced by five 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 therefore considered that the wife had an income/earning capacity of £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 of each on the basis that they were looking after themselves only, and did not take into account the expenses associated with anyone else, including the lodgers.

On 13 December, the husband made a formal application to the arbitrator under s 57 of the Arbitration Act 1996, in which he suggested 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 sent the arbitrator a revised formal application, this time alleging accidental omissions. He included a detailed analysis of the annual income figures for the wife, 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 £29,505.82. However, having reconsidered ‘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, taking into account reasonable expenses of £230 pm relating to her 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 with no further spousal periodical payments to either party. The wife indicated that there were other errors in the award and suggested another hearing. The arbitrator responded that he was not prepared to reconsider the award, which was now final, and that his role in the arbitration was now 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 Arbitration Act 1996. 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, 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 then to the Family Division.

The Deputy High Court judge dismissed the husband’s appeal against the arbitration and made the amended award into a court order.

Section 69 of the Arbitration Act 1996 was about appeal for error of law, whereas the husband’s complaints were about the arbitrator’s conduct of the arbitration and his assessment of the 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.

Section 68 provided a closed list of grounds of intervention. The grounds of challenge were very circumscribed indeed (see DB v DLJ [2016] EWHC 324, paragraph 7). 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. It had long been held that the test of substantial injustice would only be met 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, a court only had power to remit or set aside an award under s 68, it was not empowered to 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 the court varying it.

It was common ground that the threshold for intervention under s 68 was a high one, requiring something really serious to have gone wrong. In entering arbitration the parties had signed the ARBF1S on the express basis that challenge to court was limited and a variation would only be justified in an exceptional case. The reason why intervention was exceptional was because the parties had chosen to use arbitration in order to bring an end to their dispute in a fair and efficient manner. Parties did not agree for an arbitrator to resolve their disputes in an award in order for this to be a precursor to further rounds of extended submissions on possible errors and then a set of court proceedings before the matter was remitted back to the arbitrator for further submissions and perhaps a further hearing. That must be the last outcome the parties would intend and the court would not allow it unless the high statutory threshold was clearly met.

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 (he was functus officio) and no longer had power to make decisions in respect of matters decided. Section 57 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 (also applying Ases Havacilik v Delkor [2012] EWHC 3518 (Comm)). Section 57 did not allow an arbitrator to improve or revisit his decision or correct a mistaken assessment of the facts or the law. 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). The arbitrator’s powers under s 57 should not be construed broadly for this purpose. Section 1 of the 1996 Act made it clear that its provisions were founded on the object of achieving a fair resolution without undue delay or expense. This was also the parties’ intended priority in agreeing to the FLAS scheme. Section 57 was not intended to allow parties “another bite of the cherry” and it should not be construed broadly so as to permit costly and time-consuming attempts to re-open the arguments or the evidence. Section 57 did not allow for the introduction of fresh evidence for the purpose of identifying or correcting errors.

The court rejected the husband’s complaint based on the arbitrator failing to deal with all the issues. This allegation had been made on the basis that the arbitrator had not properly considered future income in his amendment. However, even if correct, this was not a failure to deal with the issue. At highest it was an incorrect assessment of the facts. Complaints regarding the merits of the arbitrator’s assessment of fact did not fall within s 68.

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 the correction. The 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 error. Indeed, it had been the husband’s own case in requesting the amendment that the arbitrator should recalculate his figures as a necessary consequence of the alleged error.

More importantly, there had been no error arising out of an accidental omission in the arbitrator’s original assessment of the wife’s income and needs. His original award had involved exercising his discretion to draw conclusions from a broad range of information. If the arbitrator had incorrectly failed to give proper account to income received from lodgers and the tax status of such income (or 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 incorrectly or inaccurately assessed the wife’s needs then this was a mistaken assessment of the evidence rather than an accidental omission or slip. The husband was wrong to suggest that any error in assessing income must be corrected in his favour under s 57, whereas any error in assessing needs could not be corrected as this would be an impermissible “second thought”.

The arbitrator had been placed in a difficult position. He had been dealing with two litigants in person, in circumstances where an award had been made and ordinarily his work would be complete. The informality of the exchanges had suited the parties but might have led them to believe that submissions could continue as if there had been no award. The arbitrator had decided to allow an application under s 57 to address what he had perceived as a shortcoming in his original award, which should be corrected. This was understandable. However, attempts by parties or a tribunal to perfect, correct or improve an award (except for the narrow powers under s 57) were not allowed under the 1996 Act, in which finality was valued more than meticulous accuracy. The arbitrator had initially been correct on 17 December 2018 in considering that the husband’s request went beyond the scope of s 57. In the court’s view the errors he had later sought to correct had not fallen within s 57.

In any event, the husband’s application to challenge the amended award on grounds of the arbitrator exceeding his powers under s 68 failed for want of substantial injustice. This would apply equally to the wife’s complaints. The arbitrator had decided that a correction was required to give better allowance for income and costs due to lodgers. The parties had agreed that he should decide their financial dispute. Justice did not require the court either to undo his decision or send it back to him for reconsideration. To the contrary, his decision reflected a fair and careful assessment of the parties’ needs. The 1996 Act also made provision for an arbitrator to admit an error falling outside s 57, such that the parties could either agree for the award to be corrected or one party could apply to court for remission under s 68(2)(i) of the 1996 Act. This was intended for extreme cases but showed that a court could give effect to an arbitrator’s admission of an error.

The court did not accept that the arbitrator had acted unfairly in making his decision on 3 February 2019 without calling for further representations. The husband had made two very full sets of submissions regarding the corrections he was seeking on assessment of income and spousal maintenance. The parties had already been given a full opportunity to serve submissions and evidence regarding income and needs at the hearing. The arbitrator had correctly concluded that no new evidence should be allowed following the award. The wife had served detailed comments regarding the husband’s application for a correction. It was not the arbitrator’s role to advise her whether she needed to get further legal advice, or to tell her what he was likely to decide before he decided. He would have been open to criticism if he had done this. Given that he had concluded that there had been an error falling within s 57, the arbitrator could have returned to the parties raising the point that the costs of keeping lodgers had also not properly been accounted for. It was true that where an arbitrator made a correction of his own initiative he should give both parties an opportunity to comment and another round of submissions could have been invited. However, lengthy submissions should not be required on a s 57 application. Another round of submissions would have increased costs and delay, and could have spawned further unnecessary and unmeritorious attempts to re-open the decision or seek further corrections. Neither party could show that a significantly different outcome might well have been reached if there had been further submissions. It was clear that neither party would have been entitled to put in fresh evidence and the arbitrator could not be criticised for relying on the existing evidence in making an allowance for the costs of keeping lodgers. The husband’s complaints going to the arbitrator’s assessment of the facts were not procedural shortcomings justifying court intervention under s 68. The arbitrator’s conduct in making a decision on 3 February 2019 without allowing further submissions fell far short of making this an extreme case requiring court intervention under section 68.

The costs of these applications should follow the event. The wife was therefore entitled to an order for her costs of the applications, to be assessed summarily (if not already agreed). The wife’s application to show cause was justified because an order would not have automatically been made following the end of the appeal process: it would have still been necessary for the parties to seek the court’s approval of an agreed draft order or for one party to make an application for an order, typically using an application to show cause. Accordingly, in this case the amended award should be made into an order of the court.