Ms Clare Ambrose, sitting as a Deputy High Court Judge, gave judgment earlier in the summer in H v W  EWHC 1897 (Fam), a case concerning arbitration in financial remedies. The judgment focuses on the limits on an arbitrator amending an award under section 57 of the Arbitration Act 1996, and how parties can challenge such an amendment. In recent years, alternative dispute resolution, including arbitration, has become increasingly popular as a mechanism for settling financial remedies claims, and this case, in which the parties appeared to fundamentally misunderstand some aspects of the arbitration process, sounds a cautionary note. It underlines that it is vital that parties understand exactly what they are signing up to before committing to arbitration. Similarly, for financial remedies practitioners who are diversifying their work into arbitration, this judgment may serve as a warning concerning the duties and limits on the power of the arbitrator.
H and W married in 1988, before separating in 2014. There were two children of the marriage, who by the time of the parties’ separation were independent adults. The parties were apparently keen to resolve their financial claims as far as possible without the assistance of lawyers, and agreed to sell the former matrimonial home in November 2015, dividing the proceeds of sale equally and rehousing separately in broadly equivalent properties (W’s worth some £30,000 more than H’s.) The parties’ adult daughter stayed with H from time to time and paid H for her board and lodging, while W took two lodgers who paid her rent. W benefitted from a partial tax break for this income under the Rent a Room scheme.
While the parties were able to agree the division of the FMH, they were unable to agree the appropriate division of other assets including pensions, shares and a redundancy payment. They were also unable to agree whether any spousal maintenance should be paid, and if so, the quantum and term. Rather than commencing a financial remedies claim on Form A, the parties opted to arbitrate their dispute, and 3 years after separation the parties signed an arbitration application form on the ARB1 FS form agreeing on arbitration under the Family Law Arbitration Financial Scheme. The form contained a notice stating: ‘Parties should be aware that: arbitration is a process whose outcome is generally final. There are very limited bases for raising a challenge or appeal, and it is only in exceptional circumstances that a court will exercise its own discretion in substitution for the award.’
The parties had an initial hearing in February 2018 before a final hearing in October 2018. Both parties represented themselves throughout, although each were assisted with legal advice or representation from time to time. The arbitrator, ‘Mr A’, made his final award the following month, on 26 November 2018. His main conclusions were that there should be no further capital provision for either party except for an equal division of the BAE shares, there should be a pension sharing order in W's favour in relation to 78.3% of H's defined benefit pension, and H should pay W spousal periodical payments at the rate of £500 per month for a three year period.
In reaching his award, Mr A gave careful consideration both to the income that W derived from taking in lodgers, and the occasions that the parties’ daughter stayed with H, concluding: ‘The husband receives payment from [the parties’ daughter] while she stays with him but I do not find it appropriate that any order I make should effectively force the husband to have to rent out rooms in his house. That is not to say that in coming to the conclusions that I have I am in any way "forcing" the wife to rent out rooms in her house. I have already commented that she has historically done this voluntarily rather than out of necessity, and as such I cannot disregard any income, she receives from this. Presumably if she had not wanted to do so then she would have sought to purchase a smaller, cheaper property to reduce the amount she would have then needed to secure by way of mortgage.’ He then went on to exclude W’s income from lodgers when considering her income.
In the months following the award, there were a series of emails between the parties and the arbitrator. On 13 December 2018 H made a formal application to the arbitrator under s57 of the Arbitration Act 1996 (the provisions on correction of an award), stating that Mr A had made a clerical error in excluding the income that W derived from her lodgers when considering her income, and submitting new material he had found online regarding tax-deductible costs when taking lodgers. H requested that Mr A recalculate W’s monthly net income, arguing that in omitting a large part of it (that derived from taking lodgers), the overall award that Mr A had reached was incorrect. He requested that the error and the consequences of it be corrected.
Mr A responded that Mr A’s complaint was not a clerical mistake or error arising from an accidental slip or omissions within s57, but rather suggested that there was a fundamental miscalculation which affected the overall fairness of the award. He was no longer in a position to hear submissions on evidence on issues which should have been explored during the hearing, and therefore declined to amend the award.
H revised his request under s57 within the 28-day time limit, sending a formal application to Mr A on the grounds of accidental omissions. He alleged that Mr A had erroneously and accidentally omitted any rental income from W’s predicted income and also from her historical income, which resulted in a material understatement of both her income and her earnings capacity.
W’s position throughout this time was that she lacked the funds to take detailed legal advice and so she reserved her right to make full submissions, unless and until Mr A was considering making a considerable change to the award. She was clear however that in her view, potential lodger income streams should not be taken into account for either party.
On 3 February 2019, Mr A wrote to the parties responding to H’s request for correction. He stated that he had been asked to ‘look afresh’ at the award, and substituted a different figure for W’s income, which took into account income she received from her lodgers. However, he also substituted a different figure for W’s income needs, stating that ‘if I am invited to reconsider this issue to deal with any "errors" concerning income, I consider that it is also open to me to deal with any "errors" concerning expenditure. I am therefore of the opinion that W's reasonable expenses are more in the region of £2,750 (than the £2,500 to which I referred in my Award).’ Bringing these threads together, his ultimate conclusion was that the award should stand in all respects save that the amount of maintenance to be paid to W should be £300 per month, rather than the £500 he had initially awarded.
Both parties sent their responses to Mr A, and in particular, W raised her concerns as to how the matter had been conducted and suggested that there should be a further hearing to address this matter as well as other potential errors in the award. However, on 15 February 2019, Mr A wrote to the parties stating that he had no intention to amend the award any further (after his initial amendment), and would decline any subsequent requests to do so.
H then commenced an application seeking an order to set aside the part of the award relating to spousal maintenance, so that there be a clean break between the parties. W responded by filing a notice to show cause why the original arbitration award (of 26 November 2018) should not be made into an order of the court pursuant to DB v DLJ  EWHC 324; or in the alternative, to show cause why the amended arbitration award (of 3 February 2019) should not be made into an order.
Before Ms Clare Ambrose, sitting as a Deputy High Court Judge, H made a range of submissions, including that he should be able to appeal Mr A’s award under s69 of the Arbitration Act 1996 – an appeal on a point of law - since the award of spousal maintenance was obviously wrong, and under s68 – challenging the award on the basis of serious irregularity - alleging bias on the part of the arbitrator. He also submitted that there had been serious irregularities in the way that Mr A had amended his original award: he had exceeded his powers by having an inadmissible ‘second thought’; had failed to deal with the issues; had taken the wrong matters into account, and had unfairly failed to give H the opportunity to address him on W’s needs before revisiting them.
In contrast, W submitted that the November 2018 award had been determined after a full hearing with evidence and submissions from both parties. The award was intended to be final, and that had been the intention of the parties when they agreed to arbitration. H’s application was effectively an attempt to revisit the award. Mr A had erred by amending his award without allowing W to make representations. W conceded however that she had not made any application to challenge Mr A’s revised award of February 2019, and so accepted, as a pragmatic approach, that the February 2018 award should be made into a final order.
In her judgment, the judge quickly dispatched with H’s submissions on s69 of the Arbitration Act, holding that the section concerned appeals for errors of law, and there was no question of law or suggestion that Mr A had misapplied the law that would have justified granting permission to appeal under s69.
In relation to s68 of the Arbitration Act, concerning serious irregularity, the judge began by recapping the law on arbitration awards, in particular emphasising that the threshold for intervention under s68 of the Arbitration Act 1996 is a high one, and in order to pass it, it was necessary to show that something had gone seriously wrong, stating at  that ‘it must be shown that what happened is so far removed from what could reasonably be expected of the arbitral process that the court must take action.’ The judge also noted that under s68, the court only had power to remit or set aside an arbitration award, not to vary the award or substitute one of its own.
The judge then considered s57 of the Arbitration Act. It was clear that this section is extremely narrowly drawn and is intended only to correct accidental slips or omissions: it does not permit an arbitrator to give effect to second thoughts, or to revisit their decision in order to correct a mistaken assessment of fact or law. While it may sometimes be difficult to determine whether an issue falls under s57 or not, it is clear that ‘finality is valued more than meticulous accuracy’  in the Arbitration Act, and accordingly an arbitrator’s powers under s57 should not be construed broadly.
The judge noted that where an arbitrator is entitled to correct an error under s57, this may necessitate amending other parts of the award in order to reflect the initial correction. It is permissible for the arbitrator to do so without allowing any further submissions, given that these further amendments are merely corrections flowing from the initial correction.
The judge then took each of H’s allegations under s68 in turn. There was no suggestion that Mr A was biased (indeed, H did not press this point at the hearing) or that he had failed to deal with the issues. He had not made an error in his initial award that could be corrected through s57: a potential failure to properly take into account W’s lodger income, or to incorrectly assess W’s income needs on the basis of her evidence, or even to inconsistently take account of W’s rental income at one stage of the reasoning but not at another, would all fall outside of the scope of s57.
As such, Mr A’s initial refusal to consider H’s first s57 application had been correct. He had erred by later reversing his position, and agreeing to look at the matters afresh. By presenting his figures in a different way and providing two new pages of reasons for his award, he had gone much further than simply correcting a slip or omission, as he was limited to do by s57.
Mr A had been correct however to refuse permission to the parties to make further submissions before making his amended award. In circumstances in which the parties had already been given the opportunity at the earlier hearing to make submissions and put forward evidence, it was not appropriate for them to put forward further evidence after the making of the original award. The judge also found that Mr A had not acted incorrectly regarding W’s position that she would not be making further submissions unless Mr A planned to significantly alter his award: it was not the arbitrator’s role to offer either party legal advice or to advise them to take legal advice; nor was there an obligation for him to inform the parties of his likely decision before making it.
Had the amendment that Mr A made fallen within s57, which the court had found it did not, then the parties should have been given an opportunity to comment. However, in this particular case, there was no evidence that Mr A would have reached a significantly different outcome had further submissions been permitted. In considering W’s rental expenses, Mr A had relied on evidence that the parties had introduced at the hearing, not new evidence.
H’s application under s68 was dismissed. W’s application to show case was justified. The judge ordered that the amended award of February 2019 was made an order of the court, so that £300 was substituted for £500 in spousal maintenance. H had asked that each party bear their own costs in order to limit costs, but given that the usual rule in this type of application was that costs follow the event, the judge found that W was entitled to the costs of the applications, to be summarily assessed.