A recent family court judgment serves as a reminder that the duty of full and frank disclosure in financial remedy proceedings continues until a final order is sealed, even where an arbitration award has been made.

Mollie Mann, senior paralegal in the Divorce and Family team, examines the decision in ON v ON [2024], in which the court considered:

• whether there had been fraudulent non-disclosure by the husband in an arbitration process,
• whether this non-disclosure was material to the award made by the arbitrator, and
• what adjustments should be made to the final order to reflect the non-disclosure.

Case Background – O v C [2024] 

His Honour Judge Booth’s judgment followed the wife applying to set aside an award handed down in arbitration two years earlier. Having failed to reach an agreement at a private financial dispute resolution (FDR) hearing in November 2021, the parties agreed to arbitration, which followed in May 2022. Nicholas Allen KC, who heard the arbitration, circulated a draft award shortly after the arbitration hearing. The parties agreed under the terms of the Institute of Family Law Arbitrators (IFLA) scheme to apply together for a court order to be made in the same or similar terms as the arbitrator’s award.

Unfortunately, there were a number of delays in the court order being finalised. Upon the distribution of the draft award, both parties raised points of clarification and asked for other issues to be decided. It was not until January 2023 that the arbitrator was able to decide these points as an addendum to his award. By June 2023, it was clear that an impasse had been reached in agreeing the terms of the draft order, and the wife subsequently applied for a directions hearing listing the dispute for determination.

The duty of full and frank disclosure

Before the application for determination could be heard, the wife concluded that the husband had failed to provide full and frank disclosure in relation to his business assets. As a result, she applied to set aside the original arbitration award.

While the husband argued that the duty of full and frank disclosure ended at the arbitration hearing or with the judgment (and that the award itself should be treated as judgment), the wife’s case was that the duty continued to be owed to each other and the court until the final order was sealed.

His Honour Judge Booth asserted that there is no dispute that parties are under a duty to provide full and frank disclosure. Reviewing prior case law (N v N [2014] and Rose v Rose [2002]), the judge considered that this duty commences the moment Form E (the financial document both parties are required to complete) is due and continues until the proceedings conclude. Typically, this would be when the judgment is pronounced, but at the latest, it is when the final order is sealed.

His Honour Judge Booth’s view was that although an arbitration award is, in principle, binding between the parties, it is not a court order, and, to become enforceable, the award must be turned into an order by a judge. Further, the judge highlighted that, in this case, the award was delivered more than six months after the arbitration hearing. The judge highlighted that had there been a six-month delay before the production of an order following a court judgment as opposed to an arbitration award being made, the duty of disclosure would have continued.

He concluded that the duty of full, frank and clear disclosure continues until the court has sealed a final financial order, even when proceedings have taken place outside the court (for example, in arbitration).

Adjustment to the award

Upon reviewing the new disclosure produced by the husband, the single joint expert in the case concluded that the updated figures would have increased the net value of his businesses by £2.3m. The judge’s view was that this figure was likely to have transformed the arbitral award and that the failure to provide this full disclosure was deliberate.

When considering how to correct the award, the judge disregarded the possibility of the parties relitigating the proceedings from the start because of the significant costs that would be incurred. Instead, he concluded that an adjustment to the award was the most appropriate form of resolution. The judge concluded that the wife should receive an additional £1.16m to the original arbitral award plus £200,000 in respect of her additional costs.

Senior associate Ellie Hampson-Jones says: “The judgment in ON v ON serves as a reminder to practitioners to advise clients of their continuing duty of disclosure, even following the issue of an arbitration award. Further, we are reminded that despite the time and cost-saving benefits of arbitration, procedural compliance is still required at all stages of the process. This is particularly important as we are seeing an increasing shift towards non-court dispute resolution such as arbitration in light of the new Family Procedure Rules.”