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All in a good 'show cause'

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Sir Peter Singer comments on the recent case of DB v DLJ [2016] EWHC 324 (Fam), the only known financial arbitration 'show cause' contest to be decided in the family courts.


  • Sir Peter Singer, 1 Hare Court

    DB v DLJ [2016] EWHC 324 (Fam) (24 February 2016) is (so far as is known) the only financial arbitration 'show cause' contest as yet decided in the family courts. The attempt by the arbitrant wife to set aside the award of the arbitrator, Gavin Smith, failed on both asserted bases, mistake or a Barder event; the husband's 'show cause' application was successful; and the award was confirmed and financial remedy orders were made accordingly.

    In his judgment Mostyn J comprehensively reviews the principles underlying Barder v Barder [1988] AC 20, [1987] 2 All ER 440, [1987] 2 WLR 1350, [1987] 2 FLR 480, HL and suggests that a more stringent adherence to the requirement of unforeseeability should prevail than has always hitherto been adopted. There has already been significant commentary on his decision, but this note is designed to highlight the points of importance in relation to the arbitral process which are contained in the judgment, and to draw attention to a facilitative filing practice which it helpfully suggests.

    Mostyn J examines the differences that apply, or should apply, to a family award, as contrasted with one made in a commercial arbitration governed exclusively by the 1996 Act. 

    He explains how, in financial remedy proceedings, the traditional grounds for challenging a decision (other than by way of appeal) are on the grounds of mistake, fraud, non-disclosure and supervening event, but makes the point [at 14 et seq.] that in fact innocent non-disclosure is a species of mistake and deliberate non-disclosure is a species of fraud: so that there are in reality but three grounds of challenge in family proceedings namely mistake, fraud and supervening event. [As to fraud, see further below.]

    The judge helpfully [at 11 to 13] considers in some detail and describes the established commercial court approach to the three 'very circumscribed' grounds of challenge available under the Arbitration Act 1996, namely:

    • challenging an award of the arbitral tribunal as to its 'substantive jurisdiction' under s67 of the 1996 Act; or
    • challenging an award on the ground of 'serious irregularity' under s68 of the 1996 Act; or
    • an appeal to the Court on a 'question of law' arising out of an award made in the proceedings under s69 of the 1996 Act.

    He records [at 10] that, by virtue of s70, an applicant must first have exhausted all available arbitral processes of appeal and review; and, further, that any application or appeal must be brought within 28 days of the award. 

    He comments in passing [at 7] on the facility under section 57 for the parties to invite the arbitrator to correct his award:

    'It is noteworthy that by virtue of section 57(1) the parties are free to agree on the powers of the tribunal to correct an award or make an additional award. As will be seen, in this case the parties agreed that certain matters could and should be corrected and clarified by the Tribunal. In the absence of agreement then by virtue of section 57(3) and (4) a party may apply to the arbitrator within 28 days of the award either (a) to 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) to 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…'

    … but, after reviewing recent authorities drawn from commercial arbitration cases, comments that this corrective jurisdiction 'is very limited.'

    Although, strictly, the parties to an IFLA arbitration sign up to very limited rights of challenge under the 1996 Act which do not extend to a challenge based on a mistake in the production of evidence or as a result of a supervening event, because of certain important differences between the family and civil processes the door to wider relief is not closed [16, 17].

    In the case of an award which includes a financial remedy (and in contrast to the position in the majority of commercial arbitrations), however [at 20]:

    '… in most family arbitration cases the parties will want an incorporating order. For example, the arbitrator may have awarded a clean break – that can only be achieved conclusively with a court order. The arbitrator may have awarded a pension share – again, that can only be achieved by a court order. It is trite law that where such an order is sought the court exercises an independent inquisitorial discretion. It is no rubber stamp: see Jenkins v Livesey [1985] AC 424.' 

    Moreover, the terms of the Form ARB1 (2015 edition) which the parties will have signed include these important provisions:

    6.4 We understand and agree that any award of the arbitrator appointed to determine this dispute will be final and binding on us, subject to the following:

    (a) any challenge to the award by any available arbitral process of appeal or review or in accordance with the provisions of Part 1 of the [1996] Act;

    (b) insofar as the subject matter of the award requires it to be embodied in a court order (see 6.5 below), any changes which the court making that order may require; …

    6.5 If and so far as the subject matter of the award makes it necessary, we will apply to an appropriate court for an order in the same or similar terms as the award or the relevant part of the award. ... We understand that the court has a discretion as to whether, and in what terms, to make an order and we will take all reasonably necessary steps to see that such an order is made.

    From this Mostyn J concludes [at 22] that:

    'It can therefore be seen that the parties have agreed in writing that challenges to an arbitral award would not be confined only to those available under the 1996 Act. In addition they specifically agreed that the court would retain an overriding discretion, and inferentially the parties agreed that they would each be enabled to argue that the court should not exercise its discretion to incorporate the award for reasons outwith those stated in the 1996 Act. In so doing they were agreeing, pursuant to section 58(1), an exception to the award being final and binding. In making such an agreement the parties were of course, doing no more than recognising what the general law already provided.'

    After considering passages from 'two important emanations' from the President (S v S (Arbitral Award: Approval) (Practice Note) [2014] EWHC 7 Fam, [2014] 1 WLR 2299, and the Practice Guidance (Family Court: Interface with Arbitration) [2016] 1 WLR 59), the judge concludes that in family cases it would be going too far to suggest that the court could only refuse to make an order if a challenge or appeal under the 1996 Act could be made out, and therefore that a challenge on the ground of a vitiating mistake or a supervening event is not ruled out. It would 'in my judgment be a plainly wrong exercise of discretion for the court to incorporate an award nonetheless.' 

    Nevertheless [at 27]:

    '… when exercising its discretion following an arbitral award the court should adopt an approach of great stringency, even more so than it would in an agreement case. In opting for arbitration the parties have agreed a specific form of alternative dispute resolution and it is important that they understand that in the overwhelming majority of cases the dispute will end with the arbitral award. It would be the worst of all worlds if parties thought that the arbitral process was to be no more than a dry run and that a rehearing in court was readily available.'  

    In conclusion [at 28] Mostyn J stated:

    '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. An assertion that the award was "wrong" or "unjust" will almost never get off the ground: in such a case the error must be so blatant and extreme that it leaps off the page.'

    and suggested that Form ARB1 should be modified to make this clear. 

    As to the distinct vitiating factor of deliberate non-disclosure / fraud, at an earlier stage in the development of his thesis Mostyn J had remarked [at 11 and 15] that fraud (which as we all now know unravels all) is already separately and specifically catered for as one of the grounds of challenge under s68(2)(g) of the 1996 Act. 

    Some may think that this restrictive approach to challenging arbitral awards encroaches unacceptably upon the ability of the parties to have an adequate review mechanism. As against that, the reality is that in-court appeals from every judicial decision-making level require permission, which will only be granted if the court considers that the appeal would have a real prospect of success, or there is some other compelling reason why the appeal should be heard (FPR rule 30.3(7). So that it is nowadays far from the case that any universal or indeed even general 'right of appeal' is in fact available. 

    Moreover, the theoretical potential (subject to permission being granted) to appeal is in the overwhelming majority of small and medium (and even lower range big) money cases subject to the practical consideration that to pursue an appeal may well be disproportionate in terms of the costs incurred and the uncertainty of outcome. There are many cases where a judge's decision is regarded by one or other (and sometimes both) of the parties as unjust, but where the practical reality is that a determination of their dispute has one way or the other been reached with which both parties must resign themselves to live.

    On the evidence in this case [set out extensively at 58 et seq.] the wife's attempts to set the award aside (or rather, to resist the husband's claim for what the judge aptly termed 'an incorporating order') on the basis of an invalidating supervening (Barder) event or mistake both failed.

    The judgment by way of postscript at [90] makes an important practical and procedural point which again underlines the court's support of the arbitration process. For a sequence of reasons the hearing of the husband's application, issued in the Central Family Court on 7 October 2015, had been subject to delay. 'It is important for the promotion of the arbitration system that litigants should know that if a challenge to an arbitration award is raised it will be heard by a High Court judge at the soonest opportunity' and so:

    'In the future any notice to show cause why an arbitration award should not be made an order of the court must, for London and the South Eastern Circuit, be issued in the Royal Courts of Justice and immediately placed before [the Judge of the Family Division in charge of the money list: currently Mostyn J] for allocation to a High Court judge for speedy determination. If the application is issued outside London or the South Eastern Circuit then it must be immediately placed before the Family Division Liaison Judge who will arrange for it to be heard speedily by him or her or another High Court judge (including a section 9 judge).'

    It has furthermore been suggested by the Clerk of the Rules that any 'show cause' application made in an arbitration case should be lodged in the Queen's Building at the RCJ and should be prominently marked ARBITRATION CASE on its face. 

    There would seem to be much to be said for adopting the same in the case of any other arbitration-related applications, whether issued there or in any Family Court. These would include applications for the forms of court order in support of arbitration for which revised drafts are to be found in the Appendix to the President's Practice Guidance (but not those comparatively rare 'arbitration claims' which under current arrangements must be issued in the Commercial Court marked FAMILY BUSINESS: DIRECTION SOUGHT FOR TRANSFER TO THE FAMILY DIVISION OF THE HIGH COURT: as to which see ibid. para 19 et seq.) 

    Sir Peter Singer is a Family Dispute Resolution Facilitator and Arbitrator (MCIArb), 1 Hare Court. He is also co-Editor of At A Glance & @eGlance and a contributor to FamilyArbitrator.com


Published: 29/02/2016

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