Arbitration Revisited – BC v BG [2019] EWFC 7.

I have previously written an article on Arbitration.   That article focussed on the case of DB v DLJ [2016] EWHC 324 (Fam) in which Mostyn J confirmed that there are very limited ways in which an arbitral award can be challenged under ss 67, 68 and 69, Arbitration Act 1996; i.e. correction, challenge or appeal on a question of law.   He said in family law potential challenges are slightly extended given the family court’s overriding discretion (see s 33A of the Matrimonial Causes Act 1973), These may include a challenge on the basis of a supervening event that invalidates the basis of the award (Barder v Barder (Caluori intervening) [1987] 2 FLR 480, paras [14]-[27]).   A court may, on the grounds of mistake or supervening event  refuse to incorporate the arbitral award in its order and instead, make a different order reflecting the new evidence. Other than the heads of correction, challenge or appeal within the 1996 Act an assertion that the award was “wrong” or “unjust” will almost never get off the ground’ (my emphasis).

The recent case of BC v BG [2019] EWFC 7 has implications for the arbitration scheme. The case was heard by Ms Clare Ambrose sitting as a Deputy High Court Judge in January this year. The facts taken from the judgment were that the wife (W) was aged 56 and the husband (H) was 61. They started cohabiting in 1998, had two children in 2000 and 2001 and married in 2006. They separated in 2016 and the children lived with W although spent time with H. One child was on a gap year, the other was in the sixth form. H was a senior professor. W had a senior business role and was the principal earner in the family prior to leaving that job when she had the children. She completed professional re-qualification in 2010 and has worked in a self-employed practice. The most substantial assets under consideration were the family home and H’s pensions (valued by W at around £670,000 and £506,025 respectively, the largest pension being a civil service pension valued at £292,615). W’s position statement for the arbitration put the total assets including pensions at around £1,096,542, and liquid assets at around £497,287. The parties’ incomes were not large. W’s position at the arbitration hearing was that H’s salary and bonus was around £63,384 net plus a pension contribution of £7,464. At the time of the hearing in July 2018 she estimated her gross earnings at £6,500 per year. There were substantial further disputes relating to non-matrimonial contributions and as to whether some contributions from family had been gifts or loans.

The parties had initially engaged in proceedings within the court sphere. Proceedings were slow with the application being made in November 2016 and it not being until February 2018 that a 3 day final hearing was listed. Sadly, this was ineffective because the case could not be accommodated by the court. That hearing was re- fixed for July 2018. The July 2018 hearing was ineffective because the judge was unavailable due to sickness. The parties understandably felt let down by the court service and were reluctant to wait several months for a fresh date. Consequently, the parties signed an arbitration application form on the ARB1 FS form agreeing on arbitration under the Family Law Arbitration Financial Scheme. The parties agreed to appoint Mr Gavin Smith who is a very experienced and respected family arbitrator. Matters were dealt with impressively quickly with the parties signing the agreement to arbitrate on 11th July 2018, the arbitration took place the same day and Mr Smith gave his award with reasons on the 2nd August. W then made an application to “appeal” the award and the matter was listed for directions and Mostyn J then listed the matter for a hearing, for the court to decide whether or not the award should be made into an order (per DB and DLJ) Judgment was handed down on 28th January 2019. The court process was slow both before and after the Arbitration.

In her judgment the Deputy High Court Judge described Mr Smith’s Award as “ clearly reasoned with full and balanced explanation of his approach to the parties’ disputes.” In the award Mr Smith departed from equality, awarding W 60% of the net assets as the parties had unequal mortgage capacities and the Award allowed each of them to rehouse to a similar standard. He awarded W spousal maintenance with stepped reductions and made a pension sharing order in her favour. The wife was not content with the Award and attempted to get the arbitrator to reconsider it on four separate grounds.  The arbitrator, rightly, refused to reconsider the Award, as H did not agree to such reconsideration.

W’s complaints were distilled into an agreed list of issues for the court to determine in deciding whether or not the Award should be converted into an Order, specifically:

  1. Does W’s assertion that she has no mortgage capacity amount to a supervening event?
  2. Does H’s alleged non-disclosure that his pension contributions are voluntary, and not obligatory provide a further reason not to convert the Award into an order?
  3. Did the arbitrator fall into error in his application of the law by failing to attach proper weight to the express declaration of trust relating to the family home dated 12 September 2001?
  4. Did the arbitrator fall into error by failing to take into account the excessive spending and debts incurred by H, as alleged by W?

In the judgment the court determined that W failed on all counts.    The court referred to the guidance given by Munby P, as he then was, in S v S (Arbitral Award) (Practice Note) [2014] EWHC 7 (Fam) and also referred to DB v DLJ.  I have set out the ratios of those 2 cases in my previous article so will not repeat them here.

In the hearing broad questions were raised as to the interface between arbitration and the court’s power and the court’s view is summarised as follows.

  • Finality is an agreed priority for parties using the ILFA Financial Scheme and this agreement will be respected.
  • It is clear from S v S and DB v DLJ that financial disputes are arbitrable and the 1996 Act applies to arbitration under the ILFA Financial Scheme and Awards produced under that scheme.
  • In principle an ILFA Financial Scheme arbitration Award is effective and binding as between the parties without further court order. An order of the court is not a pre-condition for the binding effect of an Award on the parties.
  • However, in the context of financial disputes it will usually be appropriate for the parties to ask the original family court in which the proceedings were started to incorporate the Award into a consent order. This will ordinarily be more convenient than enforcing an Award under s66 of the 1996 Act but that procedure is also available. Obtaining an order is 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) does not oust the court’s jurisdiction under Part II of the MCA 1973 to make an order, and does not exclude its duty to investigate the parties’ circumstances. However, the exercise of the court’s discretion must 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.
  • For the reasons set out in DB v DLJ it would be exceptional for a court to refuse to approve a consent order containing an Award.
  • As laid down in DB v DLJ, the court can refuse to make an order giving effect to an Award where there are supervening circumstances within the principles laid down in Barder v Barder [1988] AC 20. These have always been regarded as exceptional cases and the bar is set high. The emergence of fundamental new circumstances justifies re-opening the case because it gives rise to a new dispute upon which there are no findings, and which is not covered by the arbitration agreement, and accordingly the parties are not precluded from asking the court to deal with it.
  • The ground of mistake justifying a re-opening of facts in DB v DLJ is narrowly defined in that case. It will only exceptionally justify an Award not being upheld. Again, the emergence of new evidence only triggers relief if it gives rise to a new and materially different dispute.
  • To allow an application that the Award is not made an order under DB v DLJ would run directly counter to the 1996 Act and the parties’ intentions in agreeing to arbitrate. The Judge was not satisfied that the wording of ARB1FS supports such wide powers to vary the effect of an Award.”

It is clear from the judgment that the parties were unclear as to the procedure to be used when challenging an arbitral award and the Judge made the following points to explain how objections to an award can be made.

“59         Any application to resile from an arbitration award should be unusual. Applications using the “notice to show cause” procedure or an application for no order to be made (as adopted in this case) should be exceptional for the reasons given in S v S and DB v DLJ.

60           As explained, an award is binding on the parties without need for a court order. Where a party who has taken part in the arbitration wishes to challenge an award under the ILFA scheme the onus lies on that party to seek an order varying the award, setting it aside, remitting it or declaring it has no effect. The primary remedies are laid down in the 1996 Act. The 28 day time limit under the 1996 Act requires a party to act quickly in challenging an arbitration award. The notice to show cause procedure (or an application that the award not be made an order of the court under DB v DLJ) does not enable a party to avoid or circumvent the 1996 Act. The 28 day time limit means that any attempt to resile from an arbitration award should ordinarily first be made in an arbitration claim. The court deciding that application may be asked to decide any separate point (for instance supervening circumstances) and the proceedings will result in a court order, typically confirming the award, varying it, remitting it back to the arbitrator or setting it aside. The arbitration claim will be transferred to the Family Division of the High Court (not the Family Court) and the court will take full account of the matters set out in s25 of the MCA 1973.

61           I realise that the previous guidance may be read as suggesting that the “notice to show cause” procedure would be the primary method used for resiling from family arbitration awards. However, Sir James Munby P recognised the availability of arbitration claims under Part 62 of the Civil Procedure Rules. To regard the “notice to show cause” procedure as the primary means of challenging an award runs counter to this. It also runs counter to the purpose of the 1996 Act as a comprehensive code. It risks giving inadequate effect to the statutory rights and mandatory safeguards applying under the 1996 Act. In practice, any challenge of an award will be unusual and the notice to show cause procedure would be an even more unusual means to challenge findings in an award.

62.          Quite apart from the mandatory statutory application of the 1996 Act there are good practical reasons why powers under the 1996 Act should be the primary means for challenging an arbitration award. The procedure adopted here for an application under DB v DLJ has entailed a directions hearing plus a full day’s hearing in the High Court. Even though W had the benefit of very experienced counsel (and solicitors’ assisting her in part) there was confusion as to what regime applied and what rules she needed to comply with. She had to obtain an allocation within the Family Court to High Court Judge level and tailored directions were required. The process cannot be regarded as an easier or more efficient alternative to an arbitration claim. The procedures applicable to arbitration claims under the 1996 Act were not drawn up solely for dealing with civil and commercial claims. Arbitration is used in much wider fields including employment, partnership and consumer claims. The rules are not designed solely for high value commercial claims since many arbitration claims concern relatively small amounts and the procedures are aimed at resolving applications efficiently, often without need for an oral hearing.

63.          The procedure used here for challenging an award also fails to give the certainty and safeguards that the 1996 Act confers. For example, under the Arbitration Act the arbitrator is given notice of any challenge so there is an opportunity to answer allegations of misconduct, irregularity or mistake. In addition, challenge under the 1996 Act confers a right of re-hearing in disputes as to whether the tribunal has jurisdiction under section 67. This statutory right to challenge the award confers a firmer and more predictable framework than the ad hoc and abbreviated “notice to show cause” procedure applicable in this case. The 1996 Act enables challenges based on irregularities in the procedure (e.g. bias and unfair procedures) to be dealt with before an award is made as well as afterwards. Family Court procedures do not appear to provide effective safeguards to remedy such irregularities until an award is made. A further point is that the 1996 Act enables the court to order that the matter be immediately remitted back to the arbitrator. The “notice to show cause” procedure means that if W’s case had merit the parties would be faced with going back to an unknown judge in the Family Court and losing much of the benefit of having their chosen arbitrator who had investigated their case fully and acted promptly throughout. In addition, the “notice to show cause” procedure does not entail the variation of an award or it being set aside (since such orders are governed by the 1996 Act) so it leaves uncertainty as to the status of an award.


The case is particularly helpful in setting out the procedure to be followed if an award is challenged although the clear expectation of the High Court Bench in the three cases referred to is that Awards will be very difficult to overturn.   People entering into arbitration should do so in the expectation that the Award will be binding and will be very difficult indeed to go behind.   That certainty, coupled with the fact that Arbitration offers a speedier route and therefore generally a cheaper route to resolution makes arbitration a really effective and attractive alternative to the court process.  Costs in this case were in excess of £170,000.   If the costs had been limited to just the arbitration they would clearly have been very significantly less.

Anecdotal evidence from local practitioners suggests that that private law children cases and finances cases are regularly taken out of the list to accommodate public law children case.   It is unquestionable that delay is detrimental to the welfare of children.  Arbitration has been available in private law children matters for 3 years now and in finance matters for 7 years.   It is becoming increasingly clear that Arbitration should rightly take its place as a real choice in family dispute resolution.   Singer J stated in an article as long ago as 2012 that disputes can be dealt with as swiftly, cheaply, privately and with as little acrimony as is possible.