A and B (Schedule 1: Arbitral Award: Appeal), Re

Mortgage capacity is a financial resource for the purposes of Schedule 1 to the Children Act 1989. A settlement of property for a child may therefore be funded partly by mortgage borrowing, including borrowing connected with a future replacement property. The statutory reference to property to which a parent is entitled in possession or reversion does not require absolute, unencumbered ownership.

The court may take ancillary steps needed to give effect to a property adjustment order, including regulating mortgage payments and related obligations. A staged process involving provision of funds, acquisition of property and settlement on trust does not necessarily constitute more than one prohibited settlement. On an appeal from an arbitral award, the court reviews rather than rehears the case and should be slow to interfere with factual findings made by the arbitrator.

The mother applied under Schedule 1 to the Children Act 1989 for housing provision for the parties’ two children. The parties agreed to arbitration. The arbitrator made an award requiring a jointly purchased replacement property, funded by capital and a substantial mortgage, with the father responsible for the mortgage instalments.

The father challenged the award. Her Honour Judge Evans-Gordon allowed the challenge, holding that the court lacked power to require mortgage borrowing for a settlement of property and further finding the award unaffordable. The mother appealed. The central issues were the scope of the Schedule 1 settlement jurisdiction, the proper appellate approach to an arbitral award, and the relevance of alleged changes in the father’s circumstances.

1. Appeal allowed. The judge below had wrongly held that Schedule 1 lacked power to support a property settlement funded partly by mortgage borrowing. The cross-applications were remitted for rehearing; the arbitral award was not substituted immediately.
2. Mortgage capacity is a likely financial resource within Schedule 1 paragraph 4. The court must assess both existing resources and resources likely to become available in the foreseeable future. A jointly instructed expert’s mortgage-capacity report was relevant evidence.
3. “Property” and “settlement” have sufficiently broad meanings to include beneficial or proprietary interests in mortgaged property and a future replacement property. The words “in possession or reversion” do not require an existing, absolute and unencumbered property.
4. A settlement may be made subject to mortgage borrowing. The Family Court has ancillary powers to give effect to its substantive order, including regulating mortgage payments, indemnities and the execution of documents. A staged arrangement involving a lump sum, acquisition of property and settlement on trust concerns one substantive settlement and does not infringe Schedule 1 paragraph 1(5)(b).
5. The father’s earlier proposals to fund mortgaged housing were not a binding agreement or undertaking. They were relevant only as part of the general circumstances and as possible evidence of his assessment of his resources.
6. Under Haley v Haley, the court’s review of an arbitral award is an appeal rather than a rehearing. Arbitrators are masters of the facts, and the reviewing judge should not substitute factual conclusions without a clear and rationally supportable basis.
7. A significant or material change of circumstances may justify variation or refusal to implement an award, but predicted income reductions were not yet established facts and ordinary mortgage interest-rate rises were not, on these facts, something out of the ordinary.

• High Court (Family Division): appeal from the Central Family Court allowed. The order of HHJ Evans-Gordon dated 6 October 2023, reported at [2023] EWFC 179, was set aside and the cross-applications were remitted for rehearing.
• Central Family Court: the father’s challenge to the arbitral award was allowed and the mother’s application to confirm the award was refused.