29th Feb 2016

Wife seeks to challenge an arbitral award

Associate Carla Ditz reviews the recent case of DB v DLJ [2016] EWHC 324 (Fam)

In a decision handed down by Mr Justice Mostyn on 24 February 2016, a husband has been successful in his notice to show cause application as to why an award made in arbitration should be made an order of the court.


In brief, the facts of the case are as follows: An arbitral award was made on 2 July 2015. The wife then sought to challenge the award on the basis that

  1. The award was vitiated by a mistake as to the true value of the Portuguese property which she had been awarded under the settlement. (‘Mistake‘) Alternatively,
  2. Events had occurred since the making of the award which invalidated the finding made by the arbitrator as to the value of that property (‘Supervening event‘)

The facts surrounding the property in Portugal are somewhat unfortunate.  A joint expert was instructed and his evidence accepted by the parties as to the value of the property. However, certain planning consents were ultimately not granted together with a habitation licence (to enable a sale to a third party) potentially resulting in a diminution in the value of the property.

Separately, the wife was awarded periodical payments until such time as she were to receive a share in the proceeds of the sale of the husband’s business. No s28(1A) bar or ‘end date’ was placed on the duration of the maintenance payments so as to allow the wife to apply for an extension of the term should the sum received from her share of the sale proceeds of the business fall foul of meeting her needs. This was seen as a safety net for her.

The law

The case provides an interesting examination of the rights to challenge a decision in both commercial arbitration cases and orders made in the family court, in particular, a consideration of the circumstances in which an order may be set aside (Barder v Barder (Caluori intervening) [1988] AC 20), colloquially referred to as a ‘Barder event’.

As it stands, the Arbitration Act 1996 provides for only very ‘limited rights of challenge’. Mostyn J, in his judgement, goes on to fully endorse the arbitration process as a means of resolving disputes highlighting the importance of finality. He states, ‘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.’

Mostyn J is clear that there will be a very high threshold when seeking to challenge any award made in arbitration and goes on to say that ‘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.’

In so far as an award being ‘vitiated by a mistake’ is concerned (as advanced by the wife), the judge considered that there is a real obligation on the claimant to exercise due diligence and firmly places the burden on the claimant to establish that he/she ‘could not have discovered the true state of affairs’. Mostyn J did not consider that the wife had gone far enough to ascertain that the planning council might in fact take a much harder line. He held, ‘there seems to be a blithe assumption that all would be well.’

‘Supervening events’ are somewhat more difficult to determine with an examination as to whether an event is truly unforeseeable. In this case, Mostyn J held that it could not be said to be unforeseeable that the planning application (which was pending at the time of the arbitration) might be refused. Even if the event was foreseeable, Mostyn J considered that it was still not sufficient to invalidate the arbitrator’s award given that the wife’s overall award still remains within the ‘discretionary band.’

The judge ruled in favour of the husband and granted an order in the terms as drafted by the arbitrator.

Procedural points

  • Mostyn J ruled that any notice to show cause application as to why an arbitration award should not be made an order of the court must, for London and South Eastern Circuit, be issued in the Royal Courts of Justice for placing before Mr Justice Mostyn for allocation to a high court judge. Applications issued elsewhere must be placed before a Family Division Liaison Judge who will arrange for the case to be heard by himself/herself or another High Court judge.
  • Obiter, an application to set aside an order on the basis of a Barder event can be made to the original court rather than by way of appeal.

This case is testament to the support which arbitration now receives from the judiciary and sends a message to clients who choose to arbitrate that, unless circumstances are exceptional, an arbitrator will have the final word.

FLiP has been involved in ten arbitrations each of which have seen matters brought to an appropriate and successful conclusion, which should give growing confidence in an efficient model, likely to be the preferred route forward for those who are unable to agree solutions to their situation or aspects of their situation.  More information is available here at https://flip.co.uk/processoption/arbitration/