The Institute of Family Law Arbitrators explain that “Arbitration is a form of dispute resolution which takes place outside a formal court room. The parties enter into an agreement under which they appoint a suitably qualified person (an arbitrator) to adjudicate a dispute concerning finances or children. They agree to be bound by the reasoned written decision of the arbitrator. The arbitrator’s decision is called an Award (finances) or a Determination (children)”.
The case of H v W [2019] EWHC 1897 (Fam) centered on the arbitration that had taken place, both parties having signed up to the same. The issues that, in advance, it was said needed determining were:
1) pension division;
2) spousal maintenance; and
3) division of assets pertaining to shares and a redundancy.
The Award of the arbitration provided for an equal division of BAE shares, a pension sharing order in the wife’s favour and a spousal maintenance order (periodical payments) to be paid by the husband to the wife at a rate of £500 per month, for a period of 3 years.
As mentioned above, one of the issues within the arbitrator’s determination was that of spousal maintenance.
Spousal maintenance is looked at on a needs basis. For example, by looking at one party’s income and earning capacity and looking at their reasonable outgoings/reasonable income needs. There may be a surplus income. Then, looking at the other party’s income and earning capacity and their reasonable needs and looking at their reasonable outgoings/reasonable income needs. They may have a shortfall. Spousal maintenance can then be paid by one party to the other, in essence to “plug” the gap in respect of the shortfall.
Then when looking at the term /duration of spousal maintenance, it needs to be considered when it can stop without causing undue hardship to the receiving party (if applicable).
In the above case, it was said that the arbitrator had considered each party’s income and earning capacity, as well as the parties’ respective rental income from lodgers or the adult daughter.
The final Award made by the arbitrator, referred to above, was made on 26 November 2018. Between that date and 15 February, the following year, there was an exchange of several emails between the arbitrator and the parties.
During the above timeframe, on 13 December 2018, the husband made an application (via email) to the arbitrator. The application was made under section 53 of the Arbitration Act 1996 (AA96) which provides that the arbitrator may (unless the parties have agreed otherwise):
“(a) correct the final award so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award”.
Therefore, it is clear from the above wording in the Act, that unless the parties agree otherwise, there is a limitation on the arbitrator’s power to revisit a final Award, following it being delivered to the parties.
The husband challenged the Award on the basis that he said that the arbitrator had made a “clerical error” when calculating the wife’s income and said that “the omission of a large part of the wife’s income impacts the whole direction and consideration of the award”. He also submitted further evidence. The husband therefore wanted the calculation corrected (as well as the resulting award made).
The following day, on 17 December 2018 , the arbitrator responded to the husband “[H]’s complaint is, as I read it, more fundamental than that and suggests that I have miscalculated [W]’s income which is then said to affect the overall fairness of the Award. With respect I do not think that I am therefore being asked to merely correct a clerical mistake. In reaching my award I had to consider all the evidence I heard and read, and I had to exercise my discretion in determining what I considered to be a fair award in light of the totality of that evidence. I am afraid that I am not now in a position to hear submissions or evidence on issues which should have been explored during the hearing. In the circumstances I decline to amend the award”.
The arbitrator did not believe that what he was being asked to do, fell within the remit of section 57, namely that a final Award can be corrected (unless the parties agree otherwise) so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the Award.
Subsequently, the husband replied to the arbitrator indicating that it was also the resulting Award that he was seeking an amendment to (not just the calculation itself). The husband then made a formal application under section 57 (within the 28 day prescribed time limit).
The wife’s position to the arbitrator was that “Unless you are likely to consider making a substantial change to the award, I do not wish to take detailed legal advice because I simply do not have the funds. However, if a large change is likely, please would you let me know as I may need to consider preparing a more detailed response.” She did however provide some comments, also pointing to the fact that the husband could also rent out his property.
On 3 February 2019, an amendment to the Award was made with the arbitrator reducing the maintenance quantum to £300 per month (from £500 per month), he having considered the husband’s submissions in respect of the wife’s income but also having reviewed the wife’s outgoings – but leaving the rest of his Award the same as previously determined.
This led to the husband making another challenged under section 57 but this was rejected by the arbitrator .
Therefore, the husband, not happy with the arbitrator’s response made an application to the Court to set aside the arbitrator’s decision so that it would no longer apply and seeking a clean break – meaning that no spousal maintenance would be paid by him to the wife.
The husband’s application was based on a challenge to the arbitrator’s decision based on:
• Serious irregularity causing substantial injustice (section 68 AA96);
• An appeal on a point of law (section 69 AA); and
• That in the husband’s opinion, section 57 (3)(a) was not limited to the correction of a “clerical mistake or error arising from an accidental slip or omission”.
These are dealt with in turn below:
Serious irregularity causing substantial injustice (section 68 AA96)
The Judgment of this case confirms that the husband ” Under section 68 he argued that the arbitrator had failed to comply with his duty under s33 of the Arbitration Act 1996. His application contained several grounds of alleged bias, including the arbitrator having second thoughts in favour of the wife, averaging the wife’s income on a biased range, failing to control the wife’s submissions and refusing an adjournment to the husband, despite excessive submissions by the wife”.
The husband was unsuccessful on this ground.
The Court declared that “ It was common ground that the threshold for intervention under s68 is a high one requiring that something really serious has gone wrong. In entering arbitration the parties 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 is exceptional is because the parties have chosen to use arbitration in order to bring an end to their dispute in a fair and efficient manner. Parties do 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 is remitted back to the arbitrator for further submissions and perhaps a further hearing. This must be the last outcome the parties would intend and the court would not allow it unless the high statutory threshold is clearly met”.
It was said that this would only be proven in extreme cases whereby it would need to be corrected in the interest of justice, where something had gone so, so wrong – this was not such a case here.
An appeal on a point of law (section 69 AA)
The Court declared that ” There was no question of law that would have justified granting permission to appeal under section 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”.
So again, the husband was unsuccessful on this point.
In the husband’s opinion, section 57 (3)(a) was not limited to the correction of a “clerical mistake or error arising from an accidental slip or omission”
Section 57 reads as follows:
“57 Correction of award or additional award.
(1) The parties are free to agree on the powers of the tribunal to correct an award or make an additional award.
(2) If or to the extent there is no such agreement, the following provisions apply.
(3) The tribunal may on its own initiative or on the application of a party—
(a) correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award, or
(b) make an additional award in respect of any claim (including a claim for interest or costs) which was presented to the tribunal but was not dealt with in the award.
These powers shall not be exercised without first affording the other parties a reasonable opportunity to make representations to the tribunal.
(4) Any application for the exercise of those powers must be made within 28 days of the date of the award or such longer period as the parties may agree.
(5) Any correction of an award shall be made within 28 days of the date the application was received by the tribunal or, where the correction is made by the tribunal on its own initiative, within 28 days of the date of the award or, in either case, such longer period as the parties may agree.
(6) Any additional award shall be made within 56 days of the date of the original award or such longer period as the parties may agree.
(7) Any correction of an award shall form part of the award.”
The Court confirmed that:
• “Section 57 does not allow an arbitrator to give effect to second thoughts;
• Section 57 does 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 does not come within section 57;
• Whether an error comes within section 57 is an objective matter, it is not simply a matter of the arbitrator’s discretion under what is often termed the slip rule;
• If an arbitrator admits there is an error in an award there are usually only three ways to correct it: by the parties’ agreement, by a correction if it falls under s57 or by an order of the court under s68(2)(i) for an admitted error;
• There may sometimes be a fine distinction between an accidental slip or omission (correctable under s57) and an error or gap in the reasoning or a mistaken assessment of the facts (outside section 57). The arbitrator’s powers under section 57 should not be construed broadly for this purpose;
• Section 1 of the 1996 Act makes clear that its provisions are founded on the object of achieving a fair resolution without undue delay or expense. This is also the parties’ intended priority in agreeing to the FLAS scheme;
• Section 57 is 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; and
• Section 57 does not allow for the introduction of fresh evidence for the purpose of identifying or correcting errors”.
The husband therefore was unsuccessful and instead the Court granted the wife’s application for notice to show cause (whereby the agreement had been reached between the parties to use arbitration and be bound by that and the arbitrator had made an award and the husband was attempting to resile from it, so she asked the Court to make such an Order). The Court made the Order pursuant to the amended award and the wife was also awarded her costs from the husband.
This case serves as a reminder that whereby parties sign up to arbitration, they will be held to the outcome and the Award can only be challenged in limited circumstances.