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Home > Judgments > 2016 archive

DB v DLJ [2016] EWHC 324 (Fam)

Mostyn J ruling that courts can interfere with arbitral awards in cases of fraud, mistake or supervening event, but finding that it should not do so in this instance.

This was a husband's application for a wife to show cause as to why an arbitral award should not be made an order of court. The wife contended (a) that the award was vitiated by mistake in relation to the true value of a property, and (b) in the alternative, that events had occurred since the making of the award that invalidated the finding of the arbiter about the value of the property. The court considered that it did have a discretion to refuse to incorporate an arbitral award in a court order or to set it aside and instead make a different order, if the facts were such that it would have the grounds to do so in relation to a court order (including, in this Division, mistake and supervening event). Its primary conclusion was that it should not do so because the terms of the arbitral award afforded the wife a 'safety net' for her needs to be met now and in the future. But, if that were wrong, the court secondarily reached the conclusion that the wife's two arguments failed on their merits and that the court should not therefore interfere with the arbitral award.

Court's jurisdiction in relation to arbitral award
The court noted that under section 58(1) of the Arbitration Act 1996 parties can agree that an award may not be final and binding. These parties had signed an ARB1 arbitration agreement in which they agreed that the finality of an award would be subject to (inter alia) '(b) insofar as the subject matter of the award requires it to be embodied in a court order … any changes which the court making the order may require [...] [and] [w]e understand that the court has a discretion as to whether, and it what terms to make an order and we will take all reasonably necessary steps to see that such an order is made'.  The court was of the view that the parties had therefore "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 an award for reasons outwith the those [limited circumstances] stated in the 1996 Act". In doing so, the court suggested, the parties had simply recognised what the law already provided.

After considering the relevant authorities (S v S (Arbitral Award: Approval) (Practice Note) [2014] 1 WLR 2299, and the Practice Guidance (Family Court: Interface with Arbitration) [2016] 1 WLR 59) the court expressed the view that, "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."

Needs
In examining the detail of the arbitral award, the court noted that the arbitrator had provided for the wife to be entitled to make an application to extend her periodical payments, envisaging circumstances where a payment that the husband was to make to the wife in the future - a sale of shares whose value may fluctuate - might fall short of what was required to meet her needs. Mostyn J's view was that "the existence of [this] safety net inevitably leads me to refuse to interfere with the arbitrator's award, even if the threshold requirements for proof of mistake or supervening event are demonstrated", but that he would deal with the wife's primary case "as it may be that others disagree with [the court's] view."

Supervening event and mistakes
The court distinguished between a 'mistake' case and a case properly within the Barder v Barder (Caluori intervening) [1988] AC 20 line of authorities: in mistake cases, the relevant facts will exist at the time of the order, but will be unknown; while in the latter, the relevant facts will arise after the order. The court surveyed some key authorities on mistake (Thompson v Thompson [1991] 2 FLR 530, Cornick v Cornick [1994] 2 FLR 530, Judge v Judge [2008] EWCA Civ 1458 [2009] 1 FLR 1287, Richardson v Richardson [2011] EWCA 79 and formulated the applicable principles as follows:

i)     The court may set aside an order on the ground that the true facts on which it based its disposition were not known by either the parties or the court at the time the order was made.
ii)     The claimant must show that the true facts would have led the court to have made a materially different order from the one it in fact made.
iii)     The absence of the true facts must not have been the fault of the claimant.
iv)     The claimant must show, on the balance of probabilities, that he could not with due diligence have established the true facts at the time the order was made.
v)     The application to set aside should be made reasonably promptly in the circumstances of the case.
vi)     The claimant must show that he cannot obtain alternative mainstream relief which has the effect of broadly remedying the injustice caused by the absence of the true facts.
vii)     The application if granted should not prejudice third parties who have, in good faith and for valuable consideration, acquired interests in property which is the subject matter of the relevant order.

On the facts, the mistake that the wife claimed - that the property in question would not be granted a license for its sale, contrary to the parties' expectation - was one that she could have averted by her own due diligence about the progress of the application for a licence. This claim therefore failed on the merits.

The court examined the issue of foreseeability to establish the merits of the wife's Barder case. It considered civil authorities on the subject (Wagon Mound (No. 2) [1967] 1 A.C. 617, C. Czarnikow Ltd. v. Koufos (The Heron II) [1969] 1 A.C. 350, Parsons (H) (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] QB 791) and key Family Division cases applying it to Barder applications (Smith v Smith [1991] 2 FLR 432, Reid v Reid [2004] 1 FLR 736, Critchell v Critchell [2015] EWCA Civ 436, A v Executors of the Estate of HA & Ors [2015] EWHC 2233 (Fam). The relevant test was whether an unforeseeable event had occurred after the making of the award which would invalidate the assumptions on which it had been made. In this case, the fact that the property would not be granted the relevant licence, though unwelcome, was "eminently foreseeable". And, even if it were not, the effect on the overall figures of the case (notwithstanding the 'safety net') was to reduce the wife's share of the assets from 45% to 40%, which was not of such a scale that it could be said to invalidate the arbitrator's award.

Procedure
Finally, the court ruled that in 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 Mostyn J for allocation to a High Court judge for speedy determination. Outside of the South Eastern Circuit, 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). Obiter, the court clarified that a Barder application could be made to the original court that had made the order (noting that this question had been left open in CS v ACS [2015] EWHC 1005 (Fam)).

Summary by Marlene Cayoun, barrister, 1 Garden Court Family Law Chambers

______________________________

Neutral Citation Number: [2016] EWHC 324 (Fam)
Case No: FD13D05331

IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION


Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 24/02/2016

Before:

MR JUSTICE MOSTYN

- - - - - - - - - - - - - - - - - - - - -

Between :

DB
 Applicant
- and - 
DLJ Respondent
- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Martin Pointer QC and Jeni Kavanagh (instructed by Kidd Rapinet LLP) for the applicant
Patrick Chamberlayne QC
and Jacqueline Marks (instructed by Blake Morgan LLP) for the respondent

Hearing date: 12 February 2016
- - - - - - - - - - - - - - - - - - - - -

Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
.............................

MR JUSTICE MOSTYN
This judgment was delivered in private.   The judge has given leave for this version of the judgment to be published on condition that (irrespective of what is contained in the judgment) in any published version of the judgment the anonymity of the children and members of their family must be strictly preserved.   All persons, including representatives of the media, must ensure that this condition is strictly complied with.   Failure to do so will be a contempt of court.
 

Mr Justice Mostyn:
 
1. In this judgment I shall refer to the applicant as "the husband" and to the respondent as "the wife".

2. This is my judgment on the husband's application dated 7 October 2015 that the wife do show cause why an arbitral award (as supplemented) made by Mr Gavin Smith dated 2 July 2015 should not be made an order of the court. The wife resists the application. She says that the award is vitiated by a mistake about the true value of the property in Portugal allocated to her. Alternatively, she says that events have occurred since the award which invalidate the finding made by the arbitrator as to the value of that property.


Family arbitration

3. The arbitration procedure for family financial dispute resolution was launched by the Institute of Family Law Arbitrators in February 2012. A useful short guide (written by Gavin Smith and Sir Peter Singer) is to be found in Table 29 of At A Glance. It is described more fully by Sir Peter in "Arbitration in Family Financial Proceedings: the IFLA Scheme" Part 1 [2012] Fam Law 1353 and Part 2 [2012] Fam Law 1496. A recent article explaining its undoubted merits and advantages written by Duncan Brooks appears in Resolution's "The Review", Issue 180 at 32.

4. The scheme was intended to align the new family finance arbitration procedure as closely as possible with commercial arbitrations governed by the Arbitration Act 1996. Now divorcing couples were to be afforded the same advantages as had been made available to commercial people for over a century. Therefore, when parties agree to enter into arbitration they sign a document – ARB1 – which states that: 

"We, the parties to this application, whose details are set out below, apply to the Institute of Family Law Arbitrators Ltd for the nomination and appointment of a sole arbitrator from the Family Arbitration Panel to resolve the dispute referred to in paragraph 2 below by arbitration in accordance with the Arbitration Act 1996 ('the Act') and the rules of the Family Law Arbitration Scheme ('the scheme')"

5. Before I examine the differences, if any, that apply, or should apply, to a family arbitration I shall set out shortly the scope for challenging a commercial award governed exclusively by the 1996 Act.  

6. In his excellent paper "Challenges to Arbitral Awards at the Seat" given to the Mauritius International Arbitration Conference on 15 December 2014 1 Sir Bernard Eder explains at [6] that:

"…the general approach of the Court is one which strongly supports the arbitral process. By way of anecdote, it is perhaps interesting to recall what I was once told many years ago by Michael Kerr, a former judge in the Court of Appeal and one of the leading figures in the recent development of the law of arbitration in England, when I was complaining about an arbitration that I had just lost and the difficulties in the way of challenging the award. I told him that the award was wrong and unjust. He looked baffled and said: "Remember, when parties agree arbitration they buy the right to get the wrong answer". So, the mere fact that an award is "wrong" or even "unjust" does not, of itself, provide any basis for challenging the award or intervention by the Court. Any challenge or appeal must bring itself under one or more of the three heads which I have identified."

7. The grounds or heads of challenge are very circumscribed indeed.  In addition to the three heads mentioned by Sir Bernard (to which I will turn below) there is the facility under section 57 to ask 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.

8. This power is very limited. In Ases Havacilik Servis Ve Destek Hizmetleri AS v Delkor UK Ltd [2012] EWHC 3518 (Comm) Hamblen J (as he then was) stated at [21]:

"Whilst the decision in Craske v Norfolk CC [1991] JPL 760 indicates that the power of the arbitrator under the slip rule contained in what is now s.57 of the 1996 Act (formerly s.17 of the Arbitration Act 1950) to correct errors in the award applies to errors which were attributable to the parties, as well as errors attributable to the tribunal, it also makes it clear that it does not extend to oversights or errors in production of evidence or argument before the Arbitrator – see White Book 2012, Vol. 2, Note 2E-226 at page 648.  S.57 does not apply to second thoughts, still less to second thoughts based on fresh evidence."

9. An example of an arbitrator correcting an accidental slip or mistake is Union Marine Classification Services LLC v The Government of the Union of Comoros [2015] EWHC 508 (Comm) where the arbitrator had, surprisingly, completely failed to deal with the Government of Comoros's counter-claim. The corrected award dealt with that and the challenge to such amended award was dismissed by Eder J. An application for leave to appeal against that decision was, I understand, recently dismissed by the Court of Appeal.

10. Aside from this limited corrective jurisdiction the only ways of contesting an award are by:

i) challenging an award of the arbitral tribunal as to its "substantive jurisdiction" under s67 of the 1996 Act; or

ii) challenging an award on the ground of "serious irregularity" under s68 of the 1996 Act; or

iii) 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.

By s70, an applicant must first have exhausted all available arbitral processes of appeal and review. Further, any application or appeal must be brought within 28 days of the award.

11. There is a great deal of jurisprudence about these three heads and these are fully explained in Sir Bernard's paper. Challenges as to the tribunal's substantive jurisdiction go to the matters mentioned in section 30(1)(a) – (c) namely whether there is a valid arbitration agreement; or whether the tribunal is properly constituted; or what matters have been submitted to arbitration in accordance with the arbitration agreement. Serious irregularity is specified in nine sub-sections viz:

(a)  failure by the tribunal to comply with section 33 (general duty of tribunal to act fairly);

(b)  the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67);

(c)  failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;

(d)  failure by the tribunal to deal with all the issues that were put to it;

(e)  any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;

(f)  uncertainty or ambiguity as to the effect of the award;

(g)  the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;

(h)  failure to comply with the requirements as to the form of the award; or

(i)  any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award.

I draw attention to (g) where, unsurprisingly, fraud is mentioned as a ground of serious irregularity entitling the court to set-aside an award.

12. An appeal on a question of law needs the leave of the court. Section 69(3) states that:

Leave to appeal shall be given only if the court is satisfied–

(a) that the determination of the question will substantially affect the rights of one or more of the parties,

(b) that the question is one which the tribunal was asked to determine,

(c) that, on the basis of the findings of fact in the award– (i) the decision of the tribunal on the question is obviously wrong, or (ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and

(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.

This is a stringent test indeed. 

13. What amounts to "a question of law" is, of course, capable of an expansive interpretation and might sweep up mixed questions of law and fact. However, in Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724 leave to appeal was granted on the ground that an issue of frustration was a question of law. The decision of Goff J on the substantive appeal reversing the decision of the arbitrator that the charterparty in that case had been frustrated was set aside by the Court of Appeal, a decision upheld in the House of Lords, Lord Diplock proclaiming that leave to appeal ought never to have been granted and that the tide had turned in favour of finality as against "meticulous legal accuracy". Therefore, according to Sir Bernard (at [40]) "the result is that the Court will not generally give leave to appeal or substitute its own decision for that of the tribunal on points which might be said to involve a question of law (e.g., whether on the particular facts a party had wrongfully repudiated or renounced a contract) unless the Court decides that the arbitral tribunal had or might have misdirected itself in point of law".

14. The traditional grounds for challenging a financial remedy award in family proceedings are mistake, fraud, non-disclosure and supervening event. Non-disclosure can be deliberate or innocent (see the recent decision of the Supreme Court in Sharland v Sharland [2015] UKSC 60, [2015] 3 WLR 1070 at [30] – [32]). Deliberate non-disclosure is a species of fraud. Innocent non-disclosure is a species of mistake (see below). Therefore, in essence, there are but three grounds of challenge in family proceedings namely mistake, fraud and supervening event.

15. Fraud, of course, is a ground of challenge under section 68(2)(g), as has been seen. An alleged mistake can only be raised if it falls within section 57, and then will not extend to an error in production of evidence. The mistake alleged here would be impossible to raise in commercial arbitration proceedings. And a supervening event is completely impossible as a ground of challenge. In The Nema itself the arbitrator held that the award had been frustrated by the strike in Canada. He held that it would continue indefinitely. In fact it was settled a short time after the award but no-one suggested that that unexpected development could amount to a ground of appeal.

16. It can therefore be seen that when parties sign up to arbitration under the 1996 Act they "buy" very limited rights of challenge. These rights do not extend to a challenge based on a mistake in the production of evidence or as a result of a supervening event. Mr Chamberlayne QC sought to argue that the wife could seek to argue a point of law under section 69 namely that the award had been frustrated by the later events, but this is impossible because (a) whether frustration has happened is in fact an un-appealable question of fact – see The Nema, and (b) the issue of law must relate to the facts as found by the tribunal – see section 69(3)(c).

17. However, I do not conclude that the door to relief is closed to the wife. This is because of certain important differences between the family and civil processes.

18. Following a civil arbitration the award is final and binding, unless the parties otherwise agree – see section 58(1) of the 1996 Act. It will amount to res judicata between the parties. One imagines that in the vast generality of cases no incorporating order will be sought from the court; rather, the parties will be content for their rights and obligations to speak from the award.

19. If a party does not comply with the award then it is open for the other party to apply under section 66 for enforcement by the court. Section 66(1) provides that "an award made by the tribunal pursuant to an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect." It might be thought that leave could be refused if the court thought that the award was wrong or unjust; but that would be a mistake. In Middlemiss & Could v Hartlepool Corporation [1972] 1 WLR 1643 Lord Denning MR stated at 1647:

"I would say that it is to be used in nearly all cases. Leave should be given to enforce the award as a judgment unless there is real ground for doubting the validity of the award."

20. In contrast it is to be expected that 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.

21. In this case the terms of the form ARB1 signed by the parties stated:

"5.4 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 (sic, recto 5.5)), any changes which the court making that order may require; …

5.5 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 all 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."

22. 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.


S v S and the Practice Guidance

23. I now need to refer to two important emanations from the President namely S v S (Arbitral Award: Approval) (Practice Note)   [2014] 1 WLR 2299, and the Practice Guidance (Family Court: Interface with Arbitration) [2016] 1 WLR 59.

24. In S v S the President endorsed the "notice to show cause" procedure, commonly used where a party is seeking to resile from an agreement, as the appropriate procedure where a party is seeking to resile from an arbitral award: see [25], and the Practice Guidance at [15]. 

25. The analogy with agreement cases was not merely procedural but was substantive. Thus he stated at [21]:

"Where the consent order which the judge is being asked to approve is founded on an arbitral award under the IFLA Scheme or something similar (and the judge will, of course, need to check that the order does indeed give effect to the arbitral award and is workable) the judge's role will be simple. The judge will not need to play the detective unless something leaps off the page to indicate that something has gone so seriously wrong in the arbitral process as fundamentally to vitiate the arbitral award. Although recognising that the judge is not a rubber stamp, the combination of (a) the fact that the parties have agreed to be bound by the arbitral award, (b) the fact of the arbitral award (which the judge will of course be able to study) and (c) the fact that the parties are putting the matter before the court by consent, means that it can only be in the rarest of cases that it will be appropriate for the judge to do other than approve the order. With a process as sophisticated as that embodied in the IFLA Scheme it is difficult to contemplate such a case."

26. In fact his observations appear to suggest that it will be even more difficult for a party to resile from an arbitral award than from a negotiated agreement. At [26] he said:

"Where the attempt to resile is plainly lacking in merit the court may take the view that the appropriate remedy is to proceed without more ado summarily to make an order reflecting the award and, if needs be, providing for its enforcement. Even if there is a need for a somewhat more elaborate hearing, the court will be appropriately robust in defining the issues which are properly in dispute and confining the parties to a hearing which is short and focused. In most such cases the focus is likely to be on whether the party seeking to resile is able to make good one of the limited grounds of challenge or appeal permitted by the Arbitration Act 1996. If they can, then so be it. If on the other hand they cannot, then it may well be that the court will again feel able to proceed without more to make an order reflecting the award and, if needs be, providing for its enforcement."

27. This would appear to suggest that the Family Court could only refuse to make the order if a challenge or appeal under the 1996 Act could be made out. I would not go that far, as this would appear to rule out a challenge on the ground of a vitiating mistake or a supervening event. If a challenge were to be made out on one or other such ground it would in my judgment be a plainly wrong exercise of discretion for the court to incorporate an award nonetheless. I agree with Mr Chamberlayne QC in this regard.  However I do agree with Mr Pointer QC that 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.  Thus in the Practice Guidance at [12] the President stated:

"Attention is drawn to my observations in S v S (Arbitral Award: Approval) (Practice Note)   [2014] 1 WLR 2299, para 21 about the attitude likely to be adopted by the court in such cases: '[where] the parties are putting the matter before the court by consent … it can only be in the rarest of cases that it will be appropriate for the judge to do other than approve the order.'"

In Fage UK Ltd & Anor v Chobani UK Ltd & Anor [2014] EWCA Civ 5, in the context of an appeal against a finding of fact, Lewison LJ stated at [114(ii)] "the trial is not a dress rehearsal. It is the first and last night of the show." Even more so, in my opinion, where the first instance decision is an arbitral award.

28. My conclusion is this. 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.

29. In my opinion ARB1 should be modified to make this clear.

30. I now turn to consider the law relating to invalidating supervening events and mistake in financial remedy proceedings.


Barder: supervening events
31. In Barder v Barder (Caluori intervening) [1988] AC 20, the House of Lords stipulated the test that must be met before a set-aside could be granted. It has four conditions:

i) New events have occurred since the making of the order invalidating the basis, or fundamental assumption, upon which the order was made.

ii) The new events should have occurred within a relatively short time of the order having been made. It is extremely unlikely that could be as much as a year, and in most cases it will be no more than a few months.

iii) The application to set aside should be made reasonably promptly in the circumstances of the case.

iv) The application if granted should not prejudice third parties who have, in good faith and for valuable consideration, acquired interests in property which is the subject matter of the relevant order.

32. In Cornick v Cornick [1994] 2 FLR 530 at 537 Hale J explained that "for the Barder principle to apply, it is a sine qua non that the event was unforeseen and unforeseeable." Obviously, if the parties had actually foreseen a later event then it would not be unforeseeable. So, the question is usually confined to an analysis of (un)foreseeability. I agree with Hale J that the new or later event must have been unforeseeable. If relief were granted on the basis of  the  arrival of a foreseeable event then that would amount to exercising a disguised power of variation on proof of a mere change of circumstances, where Parliament has specifically declined to enact such a power.

33. In Richardson v Richardson [2011] EWCA 79 [2011] 2 FLR 244 Thorpe LJ emphasised that the jurisdiction is highly exceptional. At [86] he stated "cases in which a Barder event … can be successfully argued are extremely rare, should be regarded by the specialist profession as exceedingly rare, and should not be thought to be extendable by ingenuity or the lowering of the judicially created bar." Earlier in Walkden v Walkden [2010] 1 FLR 174 Elias LJ had stated at [80]: "given the importance attached to finality in settlements of this nature, the circumstances must be truly exceptional before a capital settlement can be re-opened."

34. Even where the four conditions have been met it lies within the discretion of the court whether to grant the set-aside. A set-aside would be unlikely to be granted if alternative mainstream relief could be granted which broadly remedied the unfairness caused by the later event.

35. The test for Barder relief, as propounded by the House of Lords, is a question of law. Whether it is satisfied is a question of fact. A finding that a later event was, or was not, foreseeable is an inference drawn from primary facts.  Hitherto, every case where Barder relief has been granted is an appellate decision. Lord Brandon's speech is cast in the language and procedure of an appeal. So it is important to remember that every decision made by the Court of Appeal in the field since that seminal decision is a fact-finding decision. Certainly, the legal test has been explained in the appellate decisions, but none has sought to alter it. But occasionally the fact-finding exercise seems to have been driven more by considerations of the underlying merits than a faithful application of the question of law. The old cases of Barber v Barber [1993] 1 FLR 476 and Heard v Heard [1995] 1 FLR 970 and the recent case of Critchell v Critchell [2015] EWCA Civ 436 may be examples of this.


Unforeseeable

36. I turn to the question of (un)foreseeability. Before I consider the Barder cases on this topic I allow myself a short excursion into this area as it arises in the civil sphere. Whether an event was reasonably foreseeable is a key question in deciding whether damages are recoverable in an action for negligence for breach of contract, negligence or nuisance, or whether they are too remote and therefore irrecoverable. The question is not whether a future event is literally incapable of being imagined. The capacity of homo sapiens to imagine fictive things is vast. The question is posed by the court standing retrospectively in the shoes of the actors and asking itself whether the then future, but by now past, event could reasonably have been predicted. The answer is generally given by linguistic tropes rather than by numeric assessments of future probability. The use of language rather than numbers led Lord Denning MR to say that he was swimming in a sea of semantics. In  Parsons (H) (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] QB 791 he stated at 801-802:

"Remoteness of damage is beyond doubt a question of law. In C. Czarnikow Ltd. v. Koufos (The Heron II) [1969] 1 A.C. 350 the House of Lords said that, in remoteness of damage, there is a difference between contract and tort. In the case of a breach of contract, the court has to consider whether the consequences were of such a kind that a reasonable man, at the time of making the contract, would contemplate them as being of a very substantial degree of probability. (In the House of Lords various expressions were used to describe this degree of probability, such as, not merely "on the cards" because that may be too low: but as being "not unlikely to occur" (see pp. 383 and 388); or "likely to result or at least not unlikely to result" (see p. 406); or "liable to result" (see p. 410); or that there was a "real danger" or "serious possibility" of them occurring (see p. 415).)


In the case of a tort, the court has to consider whether the consequences were of such a kind that a reasonable man, at the time of the tort committed, would foresee them as being of a much lower degree of probability. (In the House of Lords various expressions were used to describe this, such as, it is sufficient if the consequences are "liable to happen in the most unusual case" (see p. 385); or in a "very improbable" case (see p. 389); or that "they may happen as a result of the breach, however unlikely it may be, unless it can be brushed aside as far-fetched" (see p. 422).)

I find it difficult to apply those principles universally to all cases of contract or to all cases of tort: and to draw a distinction between what a man "contemplates" and what he "foresees." I soon begin to get out of my depth. I cannot swim in this sea of semantic exercises - to say nothing of the different degrees of probability - especially when the cause of action can be laid either in contract or in tort. I am swept under by the conflicting currents. … "

37. I too found myself drowning when reading the old authorities. However, in The Heron II Lord Reid did set out what is to my mind a most helpful odds-based analysis. At 390 he stated:

"It has never been held to be sufficient in contract that the loss was foreseeable as "a serious possibility" or "a real danger" or as being "on the cards." It is on the cards that one can win £100,000 or more for a stake of a few pence – several people have done that. And anyone who backs a hundred to one chance regards a win as a serious possibility – many people have won on such a chance. And the Wagon Mound (No. 2) could not have been decided as it was unless the extremely unlikely fire should have been foreseen by the ship's officer as a real danger. It appears to me that in the ordinary use of language there is a wide gulf between saying that some event is not unlikely or quite likely to happen and saying merely that it is a serious possibility, a real danger, or on the cards. Suppose one takes a well-shuffled pack of cards, it is quite likely or not unlikely that the top card will prove to be a diamond: the odds are only 3 to 1 against. But most people would not say that it is quite likely to be the nine of diamonds for the odds are then 51 to 1 against. On the other hand I think that most people would say that there is a serious possibility or a real danger of its being turned up first and of course it is on the cards."

38. Lord Reid is in effect saying here that in his opinion a probability of P = 0.25 would satisfy the test of reasonable foreseeability but a probability of P = 0.02 would not, although I acknowledge that he had earlier stated at 388 that "it is hardly ever possible in this matter to assess probabilities with any degree of mathematical accuracy." Thus, the test is now linguistically expressed as saying that a wrongdoer is responsible for damage which should have been foreseen by a reasonable person as being something of which there was a real risk, even though the risk would actually occur only in rare circumstances, unless the risk was so small that the reasonable person would feel justified in neglecting it or brushing it aside as far-fetched.

39. Although the numeric approach is generally eschewed one can confidently say that for damage to be held to be unforeseeable and therefore too remote the probability of it eventuating must be very low indeed (probably P < 0.05, I would guess). It is worth reflecting on the Wagon Mound (No. 2) [1967] 1 A.C. 617.  The findings of Walsh J about the bunkering oil spilled from the Wagon Mound into Sydney harbour were:

"(1)     Reasonable people in the position of the officers of the Wagon Mound would regard the furnace oil as very difficult to ignite upon water. (2) Their personal experience would probably have been that this had very rarely happened. (3) If they had given attention to the risk of fire from the spillage, they would have regarded it as a possibility, but one which could become an actuality only in very exceptional circumstances. (4) They would have considered the chances of the required exceptional circumstances happening whilst the oil remained spread on the harbour waters as being remote. (5) I find that the occurrence of damage to the plaintiff's property as a result of the spillage was not reasonably foreseeable by those for whose acts the defendant would be responsible."

40. The Privy Council overturned finding No. 5. The risk may have been very small indeed but it was not such that a reasonable man would brush it aside as far-fetched. This points up just how unlikely a future event must be before it can be classed as "unforeseeable".

41. These civil cases are very important. In Richardson v Richardson at [53], Munby LJ stated that "the Family Division is part of the High Court. It is not some legal Alsatia where the common law and equity do not apply." Similarly, in Prest v Petrodel Resources Ltd & Ors [2013] UKSC 34 [2013] 2 AC 415 Lord Sumption at [37] said that "Courts exercising family jurisdiction do not occupy a desert island in which general legal concepts are suspended or mean something different." In my opinion "unforeseeable" cannot mean one thing in the Queen's Bench Division and another in the Family Division.

42. And so I turn to some of the Barder cases and their treatment of the question of the (un)foreseeability of the later event. The first group of cases concern the death of an actor shortly after the order was made. Barder itself was just such a case. Shortly after the order the wife murdered the children and killed herself. Although the press reports a handful of such tragic cases each year the probability of such a thing happening must have been tiny. In terms of probability this was far more remote than drawing the nine of diamonds.

43. In Barber v Barber [1993] 1 FLR 476 the wife, aged 41, suffered from severe liver disease. The evidence was to the effect that there was a "reasonable hope" that she would live for at least five years. In fact, she died within three months. The report of the judgment of Glidewell LJ does not show that he considered the question of the (un)foreseeability of a death of that ill woman within 3 months rather than five years. A similar criticism can be made of the factual findings in Smith v Smith [1991] 2 FLR 432 where the husband aged 62 committed suicide shortly after the order. Nothing was said about the likelihood or otherwise of this later event, although inferentially the Court of Appeal appeared to accept that it came out of a clear blue sky. An even more surprising decision is Critchell v Critchell [2015] EWCA Civ 436 where the later event was the death of the husband's father shortly after the order and the consequential inheritance by the husband of a sum of money of around £100,000. The report does not state the age of the father, but the inference is that he was elderly. The finding of the circuit judge was that the death of the father was "completely unforeseen"; that may have been so, but nothing was said about the requirement that it must have been unforeseeable. That crucial requirement is not mentioned in the judgment of Black LJ. It is very hard to see how this later event could have been found to be unforeseeable. Benjamin Franklin famously said that in this world nothing can be said to be certain, except death and taxes. The death of an elderly man surely cannot be regarded as anything other than foreseeable and unremarkable. 

44. In contrast is the recent decision of Moor J in WA v Executors of the Estate of HA & Ors [2015] EWHC 2233 (Fam). There the husband committed suicide 22 days after the order which secured for him a substantial award. Moor J very carefully considered the available evidence concerning the husband's psychological condition but reached the clear conclusion that the death was not foreseeable. It is true that he did not have the civil authorities put before him, and one can speculate whether he may have reached a different decision had they been, but what cannot be disputed is that the court made a thorough examination, on the available evidence, of the central question of whether the death was foreseeable or not.  

45. In that case Moor J followed Reid v Reid [2004] 1 FLR 736 where the wife was aged 74 and had disclosed that she was registered blind, had high blood pressure, high cholesterol and was diabetic. She died two months after the date of the order. Wilson J found that her death was not foreseeable. At [20] he held that "notwithstanding the possibility of death at any time, there was no material which should have placed the wife's death 2 months later into the minds of the parties as being a significant, i.e. more than a theoretical, possibility." Again, I find myself in difficulty in squaring this decision with the civil authorities to which I have referred.

46. In contrast are a number of cases where a death was not found to be a Barder event. I need only cite Richardson v Richardson where the wife, then aged 70, died 3 months after the order. Munby LJ held that this was not a Barder event as the death did not invalidate the order. The wife had earned her share; her award was not based on needs. Although Munby LJ referred to the death as being "unexpected" he did not discuss whether it was technically "unforeseeable".  

47. The next group of cases concern those where at the time of the order a thing is known and assumed but in fact later eventuates to an extent that was not expected. These are the "known unknown" cases, to use the celebrated language of Secretary Rumsfeld. Plainly it is very difficult to satisfy the test of unforeseeability in such a case.

48. In Walkden v Walkden the wife sought to plead as a Barder event the fact that certain shares had subsequently been sold by the husband at a substantially higher value than, she said, had been anticipated. At [53] Thorpe LJ held that "it could not possibly be said that the sale of the husband's shares was either unforeseen or unforeseeable". At [89] Elias LJ held that "it was plainly foreseeable that an asset of this nature might fluctuate dramatically."

49. The cases were all analysed in Richardson by Munby LJ. In that case there was a pending negligence action against the parties' partnership; the parties assumed that it was covered by insurance. It later transpired that the claim could be for £3m whereas cover was only for £2m. Moreover, the insurers had, after the order, avoided the policy. The former development was not a Barder event; neither was the latter, but it was a vitiating mistake. The avoidance of the policy was not foreseeable. The extent of the claim and the limit of the cover (before avoidance) was not even a later foreseeable event. It was a known unknown, and the husband with due diligence could have established the true facts. At  [37] Munby LJ stated:

"The reality is that the husband, to adopt Sir Stephen Brown's words, knew 'the essential facts' and by the exercise of due diligence could – would – have discovered the limit of the insurance cover. He has only himself to blame for the fact that he did not take these obvious steps. Faced with a known unknown he chose to proceed without further inquiry or investigation. He cannot now be heard to say that he was mistaken. There was no vitiating mistake he can rely upon. And just as in Walkden v Walkden, he cannot be heard to say that his discovery of the true position in relation to the limit of cover amounted to a new or Barder event. It quite plainly was not. In this case as in that the reasons which deny him relief under the one head serve equally to deny him relief under the other. But the reality is that this was simply not, and never could have been, a Barder event. The 'problem' – the limit of the indemnity under the policy – had been there all along. Its belated discovery by the husband was not a new event; it reflected no more than his failure at the proper time to ask obvious questions about the existing state of affairs. In this case, as in both Judge v Judge and Walkden v Walkden, the husband either succeeds in mistake or not at all. For the reasons I have given he has no claim based on mistake; and that is the end of it."


Mistake
50. The practice of framing what is in fact a case of mistake as a Barder event can be traced back to Thompson v Thompson [1991] 2 FLR 530. In Cornick v Cornick [1994] 2 FLR 530 Hale J, when setting out her famous categorisation at 535E, described the situation where:

"(2) A wrong value was put upon that asset at the hearing, which had it been known about at the time would have led to a different order. Provided that it is not the fault of the person alleging the mistake, it is open to the court to give leave for the matter to be reopened. Although falling within the Barder principle it is more akin to the misrepresentation or non-disclosure cases than to Barder itself. "

51. In Judge v Judge [2008] EWCA Civ 1458 [2009] 1 FLR 1287 Wilson LJ at [3] explained that a case of a vitiating mistake (i.e. Hale J's category No. 2) does not fall within the Barder principles. In that case, five years after the order, the wife discovered that a tax debt which had been assumed in the proceedings to amount to about £14m had in fact eventuated at a mere £600,000. She sought to set the order aside on the ground of a vitiating mistake, alternatively on the ground of non-disclosure. Both grounds failed. As to mistake Wilson LJ at [43]  stated:

"A judge's compilation of a balance sheet, usually necessary in order to enable him to address what is now the principle of equality, often requires him to confer a spurious specificity on the value of assets, or on the size of liabilities, in relation to which, on the evidence before him, he can reach no confident conclusion: his balance sheet demands figures so he inserts into it the figures which he considers to be the most probable or, more accurately, the least improbable. There is no evidence which enables us to override the judge's conclusion that he made no mistake in 2001 in that a liability of £600,000 fell within the spectrum of recognised outcomes. In his judgment in 2001 he expressly referred to the need to gaze into a crystal ball."

52. In Walkden Elias LJ said this about the mistake ground at [83]:

"The second category of case arises where the settlement is reached on the basis of a false evaluation. That may be as a result of a mistake, or some misrepresentation or non-disclosure, innocent or fraudulent. The parties (and/or the judge) reaches a view on the value of the asset in the course of agreeing or fixing an appropriate settlement, or confirming a settlement, which would have been different had the full facts been known at the material time. In this category of case it is contended that the order reflecting the settlement should be set aside because it was not correct when made. The applicable legal principles are very different to those in the Barder case. For misrepresentation they are the principles enunciated by the House of Lords in Jenkins v Livesey (Formerly Jenkins) [1985] AC 424, [1985] 2 WLR 47, [1985] FLR 813. This second category involves no supervening event at all. The settlement is reopened because it was not sound when made; had the judge been in possession of the material facts he would have made an order for a different settlement. In Cornick Hale J placed mistake cases (but not misrepresentation or non-disclosure) into the first category. However, as Wilson LJ pointed out in Judge v Judge [2008] EWCA Civ 1458, [2009] 1 FLR 1287 para [3], it does not properly fit into that category. That is because it does not rely upon new or supervening events at all."

53. In Richardson the court classed the avoidance of the policy as a vitiating mistake. At the time that judgment was given in that case the insurers were considering whether to avoid the policy but had not reached a decision, let alone announced it. At [80] – [83] Rimer LJ stated:

"80.   Munby LJ explains, and I agree, why down to the delivery by His Honour Judge Raynor QC of his judgment on 25 September 2009 neither the husband nor the wife had actual or other relevant knowledge that there was a risk that the insurers might avoid the policy. That risk was, therefore, not something to which either could or should have disclosed to the court. What instead happened was that the trial proceeded down to judgment on the tacit assumption of both parties that the policy was an asset in the nature of an unflawed chose in action that would, if necessary, give the parties the benefit of an indemnity against any liability in the child's damages claim up to the limit of the cover.

81.   In fact, the policy was not an unflawed chose in action, because at the time of the trial the insurers were already considering whether to avoid it. Had the parties known that, they would or should have disclosed it to the court and it is probable that His Honour Judge Raynor's order would have been adjusted (perhaps by the inclusion of some contingent provision) to cater for the risk that the policy would be successfully avoided.

82.   In the event, and following His Honour Judge Raynor's order, the insurers have claimed to avoid the policy. That event has falsified the tacit assumption upon which the parties proceeded before His Honour Judge Raynor. In my view, it is analogous to the type of event that Hale J (as she then was) identified in Cornick v Cornick  [1994] 2 FLR 530, at 536F, example (2), and which, in Judge v Judge [2008] EWCA Civ 1458, [2009] 1 FLR 1287, at para [3], Wilson LJ explained would nowadays be regarded not as a Barder event but as 'vitiating mistake'."

54. As I see it, the crucial distinction between a mistake case and a true Barder case is that in the former the relevant facts will exist at the time of the order, but will be unknown; while in the latter, the relevant facts will arise after the order. One might think that in Richardson the relevant fact was the announcement on 18 December 2009, after the order, by the insurer that the policy would be avoided, so that the case was in true Barder territory. But, according to Rimer LJ (and somewhat to my surprise) the true relevant and unknown fact was that at the time of the judgment on 25 September 2009 the insurers were considering avoiding the policy even if they had not by then decided to do so, let alone announced a decision.  That was an "unknown unknown".

55. Where a case of mistake, as opposed to supervening event, is being advanced the question of the ability of the claimant by exercising due diligence to have discovered the true facts is critically important. In this regard the burden will be on him to show that he could not have discovered the true state of affairs.

56. The recasting of  Hale J's second category of case as a case of mistake rather than one falling within the Barder principles is relatively novel. I take it that the third and fourth Barder conditions will continue to apply. The first will not apply because there will not be any new event at all. The second is more problematic although I observe that in Judge no-one suggested that the five year passage of time of itself defeated the claim. Questions of foreseeability just do not arise.

57. Therefore I think that applicable principles in relation to the mistake ground can be formulated as follows:

i) The court may set aside an order on the ground that the true facts on which it based its disposition were not known by either the parties or the court at the time the order was made.

ii) The claimant must show that the true facts would have led the court to have made a materially different order from the one it in fact made.

iii) The absence of the true facts must not have been the fault of the claimant.

iv) The claimant must show, on the balance of probabilities, that he could not with due diligence have established the true facts at the time the order was made.

v) The application to set aside should be made reasonably promptly in the circumstances of the case.

vi) The claimant must show that he cannot obtain alternative mainstream relief which has the effect of broadly remedying the injustice caused by the absence of the true facts.

vii) The application if granted should not prejudice third parties who have, in good faith and for valuable consideration, acquired interests in property which is the subject matter of the relevant order.


This case
58. This was a second marriage for each of the parties. Both parties have children by their first marriages; they are now adult. The parties were married on 24 July 1999. They have a daughter who was born on 26 January 2005. They separated in November 2013.  Both parties and their daughter are based in Portugal. The wife commenced divorce proceedings on 31 October 2013. Decree Nisi was pronounced on 16 April 2014; it has not yet been made absolute. (I am asked to grant the husband permission to make the decree absolute.) The wife commenced her claim for financial remedies on 10 January 2014. The parties signed ARB1 on 16 January 2015. The financial remedy proceedings were stayed to allow the arbitration to proceed.

59. Gavin Smith heard evidence on 27, 28 and 29 April 2015. Final submissions were made on 15 May 2015. Mr Smith circulated his award in draft on 2 June 2015. He invited submissions as to corrections and clarifications.  These were duly supplied and on 2 July 2015 he promulgated his award and a supplemental award. I shall refer to the two awards collectively as "the award".

60. The award was a thorough, conscientious and clear piece of work. Its quality is a testament to the merit of opting for arbitration. Mr Smith decided that the parties' property and cash should be shared equally. In order to achieve equality this required the husband to pay a lump sum of £158,142. This has been paid. Mr Smith decided that the pensions should be shared equally. This would require a court order. He decided that the husband's business (in which he was a 70% shareholder) should be shared 60:40 to reflect the fact that it was well established at the time that the parties commenced their relationship. The wife would receive her 40% share on the sale by the husband of his shareholding in the business. No end date was provided for that, so the wife might have to wait a long time before she received that further payment, and of course the actual amount could only be speculated about. Pending payment the wife was to receive periodical payments of £36,000 a year. Those would end when she received her payment from the business. The periodical payments were specifically made extendable, as the arbitrator could not foresee whether at the point of payment of her share of the business the wife could adjust without undue hardship to termination. Therefore, it was open to the wife to apply for an extension if she perceived that her payment from the business would not represent an adequate replacement for her loss of periodical payments. In fact, she has already applied for just such an extension.
61. The effect of the arbitrator's award was as follows:

 

Husband

Wife

Property and cash

409,866

409,866

Pensions

274,709

274,709

Business

741,420

494,280

 

1,425,995

1,178,855

 

55%

45%


The business valuation was, of course, the present value. The property and cash figures were after the payment of the lump sum. Within the wife's figure for property and cash was the value of her home in Portugal. The arbitrator referred to that property as QP, and I shall do likewise. The net figure for QP taken by the arbitrator was £375,797. The wife says that the correct figure at the time of the award was in fact £152,306, a fall of £223,491. Therefore there is a vitiating mistake.  Alternatively, she says that by virtue of later events the value has fallen to £152,306, and this fall invalidates the basis of the award. Mr Chamberlayne QC says that the fall of £223,491 has "devastated" and "decimated" her financial position.

62. If the wife's new figure for the value of QP is right, and if the award is not disturbed by me, then the effect is as follows:

 

Husband

Wife

Property and cash

409,866

186,375

Pensions

274,709

274,709

Business

741,420

494,280

 

1,425,995

955,364

 

60%

40%


If the award is modified by me so that the new value of QP is used, but the arbitrator's technique otherwise maintained, then the figures become:

 

Husband

Wife

Property and cash

298,121

298,121

Pensions

274,709

274,709

Business

741,420

494,280

 

1,314,250

1,067,110

 

55%

45%


Thus, based on her new figures, the wife seeks an additional lump sum award of £111,746 (£298,121 - £186,375). It is worth reflecting, in the context of the overarching requirement of exceptionality, that the wife's ambition is to recover a further £111,746 out of a total pool of assets (on her new figures) of £2,381,360.

63. I have seen a transcript of the wife's evidence to Mr Smith. Under cross-examination she stated she wished to keep QP and to will it to her children eventually. She stated:

"…it belonged to me in my previous marriage and my first husband and the children have spent a great deal of time there. They are very attached to it, and it's my wish that they should inherit it. And it's also my first husband's wish. He agreed to the settlement, hoping that they would inherit it."

Earlier she had stated:

"I don't know what my future plans are, other than to return to the UK for [our daughter's] education. In that case, if there was funds to put (sic) just a small property here so she could be educated in England, I may let it, to help maintain it but I can't do that until I have the legalisation, the habitation certificate, and a tourism licence is now required."

64. In his award Mr Smith made the following findings. At para 47(b) he dealt with its value as follows:

"For the purpose of these proceedings [QP] has an agreed value of €660,000. This value assumes that the house will have the benefit of a 'habitation licence' which the wife has been in course of applying for some years. It is her case that without it the property cannot be sold. Costs of sale are agreed at 5%. There is an issue as to the CGT, if any, which should be set against the net equity, and as to the building and other costs which the wife will or should reasonably incur in obtaining the habitation licence. I deal with these issues below. Ignoring CGT, there is a net equity of £445,000."

Later in his award, and in the attached schedule of assets, Mr Smith dealt with the deductions and arrived at the net figure of £375,797.

65. Mr Smith dealt with the wife's future housing needs as follows:

"97. The wife's future is at present uncertain and it is thus difficult for her to quantify her housing need. She wishes to return to the UK with [the daughter] and to buy a home in Oxfordshire, and for [the daughter] to attend school there, probably at [school named]. That is a school which she and the husband had previously identified as one which [the daughter] might in the future attend. The wife has produced estate agents' details of 3 bedroomed houses costing in the bracket £500,000-£650,000. However, she is not in a position at the moment to relocate with [the daughter], as she requires either the permission of the husband, which is not currently forthcoming, or the permission of the Portuguese court. She has not yet issued her application and has been advised not to do so until next year. The husband's Portuguese lawyer has said that if an application were issued now it would not be heard until after June 2016.

98.  I cannot predict or second-guess the order that may be made by the Portuguese court. I cannot assume that the wife will receive permission to relocate.

99.  What is clear in my judgment is that her housing need are currently met at QP and would be if she remains in Portugal. If she is successful in obtaining leave to remove, she may well have to lower her sights in terms of accommodation in England and/or use some of the pension funds with which to rehouse herself.

100.  She is very attached to QP and wishes to retain it if at all possible. However, it is not in my view realistic for the wife to envisage retaining QP while at the same time buying a property in England that would be suitable for her and [the daughter] if she obtained leave to remove, but that of course is a matter for her."

66. At para 132(h) Mr Smith determined that the wife should receive periodical payments of £36,000 annually, and he concluded that she could adjust without undue hardship to termination of those payments once she receives her interest in the business on final disposal. However at para 132(f) he had held:

"On the sale of [the husband's] shares the wife should receive a lump sum equal to 40% of the proceeds after tax and the husband the balance and at that point there should be a clean break. I shall not order a s28(1A) direction. This will be to provide a safety net in case the wife's share is substantially less than the current value would suggest and does not meet her needs."

67. It follows that the safety net is available if the wife's capital is not sufficient to meet all her needs, whether for housing or income, at the point of the sale of the business. If the value of one element of her estate has fallen, whether it be the value of QP or her share in the business, then the safety net is there to ensure that her needs in the long-term are met.

68. In my judgment, the existence of the safety net inevitably leads me to refuse to interfere with the arbitrator's award, even if the threshold requirements for proof of mistake or supervening event are demonstrated. If the notional loss of £223,491 in the value of QP - which the wife is presently not in fact intending to sell, and which she wishes to leave to her children - in fact eventuates in hard money terms then the court will have the facility to bring into operation the safety net both in relation to quantum and duration of periodical payments. I have mentioned that the wife has already applied for an extension of the term of periodical payments. The husband has applied, in effect, for a capitalisation of the periodical payments in that following receipt of the draft award he has tendered to her the sum of £494,280, which is the present value taken by the arbitrator of the wife's 40% share in the business. In his supplemental award Mr Smith rightly refused to deal with the husband's de facto capitalisation application. This would have to be heard as a fresh application either by means of arbitration or in court. At all events, there are now pending cross-applications for variation of the wife's award of periodical payments. In those proceedings the wife's assertions as to the fall in value of QP will fall to be adjudicated. If those assertions are found proved then I imagine that the arbitrator or court will wish to reconsider whether the periodical payments should terminate on receipt by the wife of her share of the business when it is sold.

69. However, I will deal with the wife's primary case as it may be that others disagree with my view that the existence of the safety net inevitably means that the discretion to set aside the award should not be exercised.

70. I take the facts largely from Mr Chamberlayne's skeleton argument. These are not seriously disputed.

71. In 1992 the wife acquired QP, a Portuguese farmhouse sited on agricultural land. The original house was built prior to 1951 and does not require legalisation (planning consent). In the 1970s its previous owners constructed a separate annex (bedroom kitchenette and swimming pool) and in the late 1980s they extended the main house. Planning consent was not granted for either additional construction. The total area of building construction is now 401.65 m2.

72. In 2007 the parties jointly engaged the services of an architect, Jaime Coutinho, to secure the necessary planning consent to legalise the property and to obtain a habitation licence. A habitation licence is required in order to be able to sell the property to a third party. A notary will not sign a deed of transfer of title without there being such a licence in existence.

73. Two applications for planning have been submitted. The first application had been refused by the council on 4 October 2011 because "the main building and pool were in conditions to be legalised but not the annex, for the main reason that [it] was located at a distance less than 5m from the boundary" and "the annex is separated from the main building".

74. In 2012 or 2013 the parties acquired a strip of land from a neighbour to overcome the issue regarding the distance from the boundary. The second application for planning had been submitted by the architect on 27 November 2014 but had not been determined at the time of the arbitration. The wife had obtained quotations from two builders for the construction of a physical link – a "pergola" – between the main building and the annex. The amounts involved were relatively small – £11,000.

75. A SJE chartered surveyor, Ian Rostrum, was instructed to provide the market value of the property. He provided an initial valuation in his report dated 31 August 2014 and an updated valuation in a letter dated 2 April 2015 to take account of an increase in property prices. His evidence, which included his consideration about the issue of the likely legalisation of the property, was unchallenged.

76. In summary Mr Rostrum's opinion was that once the property obtained a habitation licence it would be worth €660,000. Without the legalisation licence, but on the assumption that planning would be granted in due course, he valued the property at €630,000. The small difference in effect reflected the 'hassle factor' of having to obtain the licence, because, of course, the property could not be sold without it. He reports that based upon his discussion with the architect, all that was required by the council to grant a licence was a physical link between the main property and the annex. He stated:

"The local authority has so far raised two conditions that need to be addressed before they will consider approval. One was that the detached annex was within 5m of the original southern boundary and the other was that a physical connection by way of a pergola was needed between the detached annex and the main house. They are applying the conditions set out on the Plano Director Municipal (PDM) the master plan that deals with planning regulations.

A strip of land has already been purchased from the neighbouring property ensuring that the structure is five metres from the boundary and the construction of a pergola is simple and relatively inexpensive.

Arq. Jaime Coutinho has advised that he is convinced that when these two conditions have been met that no more conditions will be applied by the local authority. However he has qualified this advice by adding that no one can be 100% sure that it will be approved. As a result two valuation figures have been provided for this property."

77. The evidence, accepted by all, was that the habitation licence would in all likelihood be forthcoming, subject only to the construction of a structure deemed suitable by the council to connect the main house to the annex. The precise characteristics required by the council of the structure were all that was awaited according to emails from Mr Coutinho that formed part of the evidence at the hearing.

78. As stated above at [64] Mr Smith therefore attributed to the property the full value of €660,000 but deducted as a liability the building costs and fees that the wife would have to incur in obtaining the necessary planning consent. After deduction of other expenses this resulted in a net value to the wife of £375,797.

79. The award was promulgated on 2 July 2015. On 20 July 2015 the council determined the planning application by refusing it. The decision states that the permitted planning parameters for the built area are 300 m2 and that the existing and proposed built area exceeds this limitation (401.65 m2).

80. On 17 August 2015 the architect Mr Coutinho sent an email to the wife clarifying the decision.  He stated that the main house together with the extension was already bigger than the permitted area (324.20 m2), let alone the annex. Mr Coutinho stated "this means that now even the main villa may not be totally approved due to excess of area". On 16 October 2015 Marta Lopes from Mr Coutinho's office advised that "the only way to continue the process to obtain a habitation licence is to reformulate the process and proceed with the demolition of the annex and the excess area of the villa to accommodate the PDM requirement."

81. In the light of these developments the wife obtained new expert evidence from Peter Densham MRICS. She has adduced his evidence in these proceedings without having obtained the court's permission under FPR 25.4(2) although no strong objection was raised by Mr Pointer QC to my being referred to it. Obviously the status of the evidence is no more than indicative. It cannot be taken to be conclusive in circumstances where the rules have not been complied with. Further, if fresh valuation evidence was to have been relied on in any definitive way then it ought to have derived from a single joint expert: see PD25D para 2.1, which provides that "wherever possible, expert evidence should be obtained from a single joint expert instructed by both or all the parties".

82. In his letter dated 23 October 2015 Mr Densham has valued the property without planning consent at €225,000 but states that "the probability of achieving a sale at all is doubtful". The value of the property with a habitation licence with it reconstructed and with reduced size will be €400,000, in his opinion.

83. The cost of reducing the property in size, digging up the pool and making good the works is set out in a table in the statement of the wife's case. This calculates the current net residual value as £152,306.

84. It is not accepted by the husband that any of these gloomy predictions will come to pass. He asserts that this issue has been "rumbling on" for nearly 10 years and that there is no firm or reliable evidence either way as to its eventual outcome.

85. I deal first with the contention that the decision of the council on 20 July 2015 was an unforeseeable later event which invalidated the decision of the arbitrator. I cannot agree that it was. The application was pending and although everyone was confident that it would be granted it must have been recognised that it might be refused. To my mind the decision, albeit unwelcome, was eminently foreseeable in the sense described by the House of Lords and the Privy Council in the cases to which I have referred. Even if the decision was unforeseeable I do not agree that it "invalidated" the arbitrator's decision in circumstances where the scale of the loss, assuming that Mr Densham's evidence is correct, would reduce the wife's overall share of the capital from 45% to 40%. A 40% overall award was well within Mr Smith's discretion and to my mind invalidation is only demonstrated where it can be shown that the consequence plainly falls outside the discretionary band. A claim for a further lump sum of £111,746 out of a total pool of assets of £2,381,359 does not come close to meeting the requirement of exceptionality.

86. The wife's case on mistake is stronger and has similarities to the case of Richardson. It would certainly seem to be undeniable that on 2 July 2015 the council were considering refusing the application, just as in Richardson on 25 September 2009 the insurers were considering avoiding the policy. However, I am not satisfied on the evidence that the wife with due diligence could not have discovered that the council might well adopt a much harder line about unauthorised building developments. I have been given no evidence of any efforts made by her to find out what the council were actually contemplating. There seems to have just been a blithe assumption that all would be well. The possibility of rejection was specifically referred to by her architect and it is surprising in those circumstances that she was content to allow the arbitrator to proceed to judgment without nailing down the point one way or another.

87. I therefore reject the wife's case on mistake.

88. But either way, the wife's claim fails because there is available to her alternative mainstream relief which can broadly remedy any injustice caused to her by a fall in value in QP, if that actually eventuates.

89. The husband's application is therefore granted and the order as drafted by Mr Smith will be made by me. I further allow the husband to make absolute the Decree Nisi so that the order can take immediate effect.


Two procedural points

90. In this case the husband's notice to show cause was issued in the Central Family Court and came before Recorder Campbell on 27 October 2015. She transferred the matter to be heard by a High Court judge, but it has taken some time for this hearing to be listed. 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 me 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 is important for the promotion of the arbitration system that litigants should know that if a challenge to an arbitration award is raised that it will be heard by a High Court judge at the soonest opportunity.

91. Finally, I wish to deal with a procedural point which is in fact not material to this case and therefore what I say is strictly speaking obiter. In CS v ACS [2015] EWHC 1005 (Fam) the President decided that an application to set aside an order on the basis of non-disclosure (or fraud or mistake) could, pursuant to FPR 4.1(6) and section 31F(6) Matrimonial and Family Proceedings Act 1984, be made to the original court and did not have to be made by way of appeal. He left open the question whether a Barder application could be made to the original court or whether it had to be by way of appeal. In my judgment, for the reasons set out in Financial Remedies Practice 2016 (Class Publishing) at paragraphs 4.12 to 4.20, a Barder application can be made to the original court.

1 https://www.judiciary.gov.uk/announcements/challenges-to-arbitral-awards-at-the-seat-december-2014/