Cobb J. A root and branch assault leads to the conclusion that the court is not limited to the ‘four corners’ of Schedule 1 and can make orders that require a party to borrow.

Background

M’s appeal of HHJ Evans-Gordon’s decision to decline to convert an arbitral award made by Duncan Brooks KC in financial remedy proceedings brought by M under Schedule 1 of CA 1989. That judgment is reported as LT v ZU [2023] EWFC 179.

Cobb J’s attention was bought to SP v QR but stated it provided no material assistance to him. The borrowing in that case already existed on the property; that might be the point of distinction.

The arbitral award was predicated on the sale of a property (Thames House) where M and C lived and the parties purchasing a new property in London, which met M and C’s housing needs (determined to be c.£1.1m–£1.3m). The new property was to be settled for the benefit of C for the remainder of their minority; enabling that purchase would require the funds from the sale of Thames House and the parties’ combined mortgage capacity.

The core challenge to the award mounted by F was that that there is no power under Schedule 1 to order him to borrow money which he did not have in order to satisfy the award. HHJ Evans-Gordon agreed. Her essential view was that paragraph 1(2)(d) does not give the court a power to order a parent to borrow money when the realisation of that borrowing is beyond that parent’s control; the lender may refuse.

The appeal

The centre of this appeal remained whether the court did, or did not, have power under Schedule 1 to require a parent to borrow money, by way of mortgage or otherwise, to settle property on behalf of the subject child. By this appeal M sought an order upholding the arbitral award, with any adjustments that the court saw necessary.

In a ‘root and branch assault’ on HHJ Evans-Gordon’s judgment, M argued that only one of the judge’s conclusions could be sustained: that setting aside the award was the worst of all possible outcomes for both parties.

The court noted that:

• There is no express power within Schedule 1 to order a sale; nor is there express power to direct a new property to be purchased on trust.
• However, this is how housing provision under the Act is routinely interpreted and carried out. The power under the statute is phrased as ‘requiring a settlement to be made … to the satisfaction of the court’.
• Some cases pursued under Schedule 1 involve a paying parent that has extraordinary wealth, making outright settlements of unencumbered property possible.
• Most cases involve parties of more limited financial means.
• The court observed that, in those cases, it is likely that the parties will need to borrow funds by way of mortgage in order to help them acquire and/or settle property.

The court found that the judge was incorrect to limit her evaluation to the ‘four corners’ of Schedule 1 and, as a result, (i) ignored its essential purpose; and (ii) the steps that may be taken to give effect to an order made under its provisions.

The court emphasised the broad interpretation that should be given to terms like ‘settlement’ and ‘property.’ Borrowing capacity was clearly a ‘resource’ and the court was assessing not just existing resources but the likelihood of a party acquiring such resources. Property is settled ‘subject to mortgage borrowing’.

Disposal

The appeal was allowed.

Although not determinative of the outcome, the court (i) expressed its concern that the judge substituted her own findings on F’s capacity to afford the arbitral award for the findings made at the arbitration after hearing oral evidence; and (ii) concluded that the judge was wrong to find that F losing his job after the award was made was a material change in circumstance that justified overturning the award.

The appropriate course was to remit for rehearing the parties’ cross-applications: F’s challenge to the arbitral award dated 2 September 2022 and M’s application for notice to show cause why an order should not be made in the terms of the award.