LT v ZU [2022] EWFC 20628 December 2022

Published: 12/11/2023 13:52

Application by the father challenging an arbitral award concerning provision for the parties’ two children pursuant to Schedule 1 of the Children Act 1989. The challenge was on two general grounds: (1) the arbitrator had no power to require the father to borrow monies for the purpose of making a settlement of property under para 1(2)(d) of Schedule 1; and (2) the award was wrong and unfair in that it failed, to consider the father’s own needs, reducing income, and his ability to meet the award.

To challenge the award, the father sought permission to adduce further evidence, showing a change of circumstances, which was that since the award was made his net income had fallen. Also, that the sharp increase in mortgage interest rates, would make it unfair to make the award an order of the court. The application was opposed by the mother on the basis that the further evidence was not truly ‘fresh’ evidence, as the parties made submissions on this point.

At the time of the arbitration, the funds under management in the hedge fund had reduced from $851m to $394m and was now at its lowest since 2017. The arbitrator was informed of a further withdrawal of $44m prior to the date of the award. However, he decided not to take this into account and determined that it was likely that the fund would recover based on the fund weathering previous financial storms in earlier years. The arbitrator set the father’s earning capacity at £410k pa gross (£223k net), with his gross income being £273k (£150k net). Management fees of £152k gross and £89k net would be paid in the following year that they were earned. The father’s income had since reduced to £66k pa net, as the fund had fallen below break-even level of $290m, so no management fees were payable to him.

A very significant change of circumstances may render it unfair or unjust to make an arbitral award an order of the court. Additional evidence will be neither necessary or useful if it does not establish a relevant, significant change of circumstances, which is likely to be long lasting and is likely to have an effect on the award. ‘A small, short-term blip in a party’s finances is unlikely to be sufficient’; [5-8].

Held, the additional evidence should be admitted as, contrary to the arbitrator’s expectations, the hedge fund dropped significantly below its break-even level. The arbitrator’s expectations were also wrong as the fund was considering winding itself up. Had the arbitrator been aware of that, there was a real prospect that the award would have very different. In respect of the mortgage interest rates, the sharp increase in the rates were largely, if not entirely, unforeseeable at the time of the award, which would render the proposed new mortgage unaffordable and possibly unachievable. Due to proportionality and to avoid excessive delay, the fairness of the award in light of the additional evidence and the appeal was directed to be considered at the same hearing with a reduced time estimate; [13]–[15].

©2023 Class Legal
Class Legal


Share this

    Most read