SETTING ASIDE A MATRIMONIAL FINANCE ARBITRAL AWARD

‘Limited corrective jurisdiction’ of the High Court

 

In DB v DLJ [2016] EWHC 324 (Fam) (http://www.bailii.org/ew/cases/EWHC/Fam/2016/324.html), Mostyn J considers the powers of the family courts’ to set aside a matrimonial financial arbitral award; and in doing so he reviews the powers of the court to make an order in the terms of the award.

 

The husband had applied to the court for the wife to show cause why an award should not be made a final order (S v S [2014] EWHC 7 (Fam), Sir James Munby P. The wife asked the court to set aside the award because of what she asked Mostyn J to find was a mistake or unforeseen event – namely that a Portuguese property which she retained as part of the award was likely to be worth much less (on her case) than it was thought to have been when the arbitrator’s award was made.

 

The issue raised by the wife related to whether the court could set aside an arbitral award. Application had not been made by her for appeal or setting aside under Arbitration Act 1996. She applied in response to the husband’s application. However, in preparation for disposing of the set aside issue, Mostyn J sets out a summary of the ‘limited corrective jurisdiction’ of the court in relation to arbitral awards (§§4-21); and he concludes that in his view any application to set aside should be before a High Court judge (§90).

 

Of the jurisdiction of the family courts to set aside awards: Mostyn J aligns arbitral awards firmly with court orders when it comes to applications to set aside:

 

[28] … If following an arbitral award evidence emerges which would, if the award had been in an order of the court entitle the court to set aside its order on the grounds of mistake or supervening event, then the court is entitled to refuse to incorporate the arbitral award in its order and instead to make a different order reflecting the new evidence. Outside the heads of correction, challenge or appeal within the 1996 Act these are, in my judgment, the only realistically available grounds of resistance to an incorporating order…

 

Mostyn J summarises the grounds for set aside and Barder supervening events as follows:

 

[14] The traditional grounds for challenging a financial remedy award in family proceedings are mistake, fraud, non-disclosure and supervening event. Non-disclosure can be deliberate or innocent (see the recent decision of the Supreme Court in Sharland v Sharland [2015] UKSC 60 at [30] – [32]). Deliberate non-disclosure is a species of fraud. Innocent non-disclosure is a species of mistake. Therefore, in essence, there are but three grounds of challenge in family proceedings namely mistake, fraud and supervening event.

 

Set aside jurisdiction of the family courts

 

He goes on to explain fully the set aside and Barder jurisdiction bases for setting aside and for granting leave to appeal, respectively (§§31-57). He concludes on the two jurisdictions:

 

[54] … the crucial distinction between a mistake case and a true Barder case is that in the former the relevant facts will exist at the time of the order, but will be unknown; while in the latter, the relevant facts will arise after the order

 

The Barder jurisdiction has been developed since 1988, but the first part of this definition accords with the classic explanation (per Wallington J (sitting with Lord Merriman P in the Probate, Divorce and Admiralty Divisional Court) in Peek v Peek [1948] P 46) of the distinction between an appeal and an application to set aside:

 

… if a party to a motion comes to this court and, either expressly or by necessary implication, alleges that the judge who heard the case to which the motion relates made such a mistake or error as resulted in a wrong conclusion, then the matter is not one for this court but is one that must go to the Court of Appeal in the ordinary way. On the other hand, in a case where the applicant on the motion comes to this court and says, in effect, e.g., “There was no error on the part of the court below in dealing with the material then before it, or any other error of the court, but [information was not seen by the judge which was available and] very material — indeed vital — … affecting the real case between the parties, it seems to me to be plain that this court has both the jurisdiction and the duty to deal with it.

 

Ball ‘bounced the wrong way’

 

The problem for the wife in DB v DLJ was that an award had been made on the assumption that Portuguese property she was to keep was worth £375,797; but because of planning difficulties which arose very soon after the award the property – she said – was worth only £152,306. In Judge v Judge [2008] EWCA Civ 1458, [2009] 1 FLR 1287 (considered by Mostyn J at §51) a state of affairs developed since the date of the award (analogous for present purposes with a court order in set aside proceedings). The figures were much more substantial in Judge, but in both cases they related to known, but unquantified, assets (or liabilities in the case of Judge).

 

In Judge there was a possibility of the husband having to discharge a £14.5M tax liability. The judge’s award was intended to insulate her from any liability and the court’s ward constructed accordingly. The liability turned out five years after to be £600,000. Mrs Judge applied to Coleridge J to set aside his order. Under the heading ‘Section F: Mistake’ Wilson LJ in the Court of Appeal summarised the position before the judge as follows:

 

[42]   The crux of the reasoning of Coleridge J for rejecting the assertion that his award to the wife had been vitiated by a substantial mistake is set out in the following paragraphs of his judgment under appeal:

‘57 The court (and the parties) were, in the circumstances, especially anxious to ensure that the wife’s position was as bomb-proof from later attack as possible hence the broadly drawn indemnity backed up by the indemnity fund (opposed by the husband). The whole risk arising from the liability was entirely to be assumed by the husband and the quid pro quo for that was that the husband might indeed do significantly better than the court predicted. Protecting the wife was my especial pre-occupation and concern.…

63 In this case the ball has bounced the wrong way for this wife … It might just as easily have bounced the wrong way for the husband in which event it would have had a catastrophic effect on his finances. She was completely secure, he was most insecure. That is precisely how I intended it to be.’

 

In DB v DLJ the wife sought to introduce fresh valuation evidence (for which, as Mostyn J explained, she did not have permission (§81)). Essentially Mostyn J was unpersuaded that the wife ‘with due diligence’ could not have produced evidence of the planning problems to the arbitrator. She had accepted a state of affairs which later events proved wrong. For her – like for Mrs Judge – the ball (this time on valuation) bounced the wrong way. Her case on mistake was not made out (§§86-87).

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