HHJ Evans-Gordon. Substantive hearing following the father challenging an application by the mother to convert an arbitral award into an order of the court. See earlier decision in LT v ZU [2022] EWFC 206. The award made pursuant to Schedule 1 of the Children Act 1989 (‘Schedule 1’) required the father to purchase a property for the mother and children during their minority with a housing fund of £1,100,000 or £1,130,000. This required the father to enter a joint mortgage with the mother in the sum of £870,500. In the arbitration, the father was agreeable to entering the mortgage to purchase a large property, but at a lower borrowing level than that determined by the arbitrator.

The challenge was on two general bases. The first (ground 1) was that the arbitrator did not have the 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. The second (grounds 2–12) concerned whether the award was wrong/unfair in that it failed to take into account the father’s own needs and his ability to pay. Further, he argued that there had been a significant change in circumstances, namely, a continued fall in his net income and substantial increase in mortgage interest rates which were unforeseen at the time the award was made, which would make it wrong for the award to be made an order of the court. The mother’s position was that the court could order a lump sum for housing, and there is no statutory restriction on a lump sum payment limiting it to property in possession or reversion.

Law

See paragraphs 12 to 17 on the law regarding the nature and scope of the application following an arbitral award, including Haley v Haley [2020] EWCA Civ 1369, which is the starting point. Where a party refuses to agree to the conversion of an arbitral award into a consent order, the court should ‘triage’ the case, with the reluctant party having to show cause on paper, why the order should not be made in the terms of the arbitral award. If the judge is of the view that there is a real prospect of the objecting party showing that the award is wrong, then the matter should be set down for a hearing. Such hearing will be a review and not a rehearing.

Decision

Application was dismissed for the following reasons:

Ground 1, allowed. Having surveyed the authorities, the judge concluded that none of them suggested or indeed implied that the court had power to order that a parent borrow money for the purposes of a settlement (or transfer) in circumstances where the parent was not already entitled to property in the required sum. It would be a misuse of the court’s powers to use the power to award a lump sum to circumvent the restriction on a settlement to property to which the paying parent is already entitled. The judge noted that:

‘it does not seem right to order a parent to borrow money when whether or not anyone will lend money is not in that parent’s control. An unidentified mortgagee cannot, in my view, be compared to a Thomas resource such as an existing trust fund or generous family member.’ [34]

The fact that the father offered to borrow money to purchase a property for the mother and children did not make a difference. Such an agreement would have to be reflected in an order as a recital as an agreement or an undertaking. In the absence of a voluntary agreement or undertaking, the court did not have the power to compel the father to give an undertaking or force him into an agreement to borrow money to enable him to purchase a property for the benefit of the children, or order that he do so given the reasons above.

Grounds 2 to 12, allowed. The award was unaffordable for the father as it exceeded his income and resources. The unaffordability meant that the whole exercise would have to be conducted afresh. In regard to the change of circumstances, the judge determined that the very significant increase in borrowing interest rates were sufficient to render an order in the terms of the award wrong. The father’s net income had declined. While the father could find employment that would pay him more, it was unclear what income he was likely to achieve in the current climate. In any event, the award was unaffordable for him even if he reached the earning capacity determined by the arbitrator.