It is a well known proposition that the Courts are reluctant to interfere with Arbitrators’ Awards. However, a Court will be prepared to look closely where it appears that an Arbitrator has failed in his duty to give reasons in accordance with section 52(4) of the Arbitration Act 1996.
A recent case in the High Court sought to challenge an Arbitrator’s Award on the grounds of serious irregularity, citing a number of failings. The case arose out of a rent review of a tenancy protected by the Agricultural Holdings Act 1986 AND the Court looked carefully at the adequacy of the reasons given in the Award. To succeed, the Claimant had to show there had been a “serious irregularity” leading to “substantial injustice”. Citing the earlier case of Benaim (UK) Limited v Davies Middleton (2005) the Claimant sought to persuade the Court to follow the earlier reasoning of HHJ Coulson QC who stated “the obligation to provide reasons is an important part of the Arbitrator’s function …. It is strongly arguable that unless a party knows the reason for an Award there is automatically substantial injustice to him” . . . . “this is indeed the very rationale of the requirement that Arbitrators are to give reasons”.
The presiding Judge in the High Court, Mr Justice Morgan was not prepared to go that far. In particular, he was not prepared to accept that the failure to give reasons would lead, automatically, to substantial injustice to one of the parties. He held that an Award which did not contain adequate reasons would give rise to an irregularity but whether that was a serious irregularity depended on whether the failure of reasoning had caused substantial injustice to one of the parties. The standard to be applied in whether the reasons were adequate was that the decision had to be read taking into account that it was addressed to the parties who were well aware of the issues involved and the arguments advanced.
Mr Justice Morgan looked at each criticism of the reasoning of the Award in turn and then stood back and considered the position overall. He was unimpressed that the Arbitrator had failed to give detailed reasons when asked to do so by the parties. His overall conclusion was that the reasoning was poor and as a consequence the Arbitrator had placed a considerable burden on the Court in having to inform itself (by reference to the evidence and the parties submissions) of what the parties were taken to know about the issues in the case. Having put himself in that position, the judge’s conclusion was that the reasoning of the Award, although unimpressive was just enough to explain the conclusions that had been reached.
An Arbitrator should “explain why he has decided the essential issues in the way in which he has”. However, an Arbitrator is entitled to assume that it is being addressed to parties who are well aware of the issues involved and the arguments advanced. The very fact that the reasons are inadequate will not automatically lead to substantial injustice for the purposes of s.68 of the Arbitration Act 1996.
Compton Beauchamp Estates Limited v James Spence [2013] EWHC1101.
For further information contact Vivienne Williams on 01392 688688 or email vivienne.williams@michelmores.com
