Since 2012 parties to financial remedy proceedings have had the option of having the dispute dealt with in arbitration, rather than by the court (arbitration was subsequently extended to include dealing with children disputes). There are a number of reasons why they may choose arbitration, for example that it is quicker than having the court deal with the matter, as we will see in a moment. However, arbitration does, of course, rely on the critical fact that the parties agree to be bound by the arbitrator’s award, as obviously arbitration would be a pointless exercise if the award was not binding. To ensure that the award can be enforced, it is usually made into a court order.
But what if one of the parties is not happy with the arbitrator’s award?
This was the situation in the recent case BC v BG, in which the wife was seeking an order that an arbitral award not be made into a court order.
I don’t need to go into much detail regarding the background facts in BC v BG. Briefly, the parties started cohabiting in 1998, had two children in 2000 and 2001 and married in 2006. They separated in 2016 and the children live with the wife. Divorce proceedings were issued, and the husband made a financial remedies application in November 2016. The application was listed for hearing in February 2018, but the hearing was ineffective because the case could not be accommodated by the court. It was re-listed for the 10th to the 12th of July, but that hearing was also ineffective, because the judge was unavailable due to sickness. Not wanting to wait several more months for a new hearing date, the parties agreed to go to arbitration.
The arbitration took place on the 11th and 12th of July, and the arbitrator made his final arbitration award on the 2nd of August. He divided the net capital 60:40 in the wife’s favour (in part because the parties, who both needed to rehouse themselves, had unequal mortgage capacities), awarded maintenance to the wife, and made a pension sharing order (which was in the terms agreed by the parties).
The wife was not happy with the award, and so didn’t want it to be made into a court order. She put forward four arguments in support of her case:
- That the maintenance award, which was for the maintenance to be reduced over time, meant that she would not be able to raise a mortgage. This was not accepted by the judge – the parties knew that such an award was possible, and in any event it did not necessarily mean that the wife would be unable to raise a mortgage.
- That the husband had failed to disclose that his pension contributions were voluntary, not obligatory. In relation to this, the judge found that even if the husband had made this disclosure, it was unlikely that the overall outcome would have been materially different.
- That the arbitrator fell into error in his application of the law, by failing to attach proper weight to a declaration of trust that the parties had entered into prior to the marriage, stating that the former matrimonial home was owned as to 58% by the wife, and 42% by the husband. Without going into the technical detail of this, the judge found that the arbitrator had not fallen into error, as the declaration of trust, which had been entered into five years prior to the marriage, was not a pre-nuptial agreement purporting to deal with the division of the parties’ capital upon the breakdown of their marriage.
- That the arbitrator fell into error by failing to take into account excessive spending and debts incurred by the husband, as alleged by the wife. The judge did not agree, accepting the arbitrator’s view that these debts did not represent wanton and reckless dissipation of assets by the husband.
In the circumstances the judge held that the wife had failed to satisfy the court that it should not make an order giving effect to the award. The husband was entitled to an order giving effect to the award.
Further to this, and acting as a warning to anyone considering not accepting an arbitral award, the judge made an order that the wife pay the husband’s costs of her application, in addition to her own costs, which amounted to some £21,000.
You can read the full judgment here, and if you require further information regarding arbitration in family cases, see here.
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Author: John Bolch