In Merthyr (South Wales) Ltd v Cwmbargoed Estates Ltd and another  EWHC 704 (Ch) the English High Court rejected an application for leave to appeal against an arbitral award on a point of law under s.69 of the Arbitration Act 1996 (“the Act”). In his judgment, HHJ Paul Matthews discussed the mechanics of obtaining such leave, particularly the requirement under s.69(3)(c)(i) of the Act that the decision of the arbitrator to make the award being challenged be “obviously wrong”.
The dispute arose out of the proper construction of a lease; specifically, the proper calculation of an additional type of rent reserved by the lease.
Pursuant to the lease, an arbitrator was appointed to decide the dispute. The arbitrator (a chartered surveyor, experienced in dealing with minerals and mineral extraction) made an award in favour of the defendants.
The claimant subsequently issued a claim form seeking: (i) leave to appeal the award on a point of law, under s.69 of the Act (required because the defendants had not consented to the appeal); and (ii) the award be set aside and / or the dispute be remitted to the arbitrator on the basis of an alleged serious irregularity, under s.68 of the Act.
In denying the claimant’s application for leave to appeal, the Judge discussed how s.69 applications should be determined.
First, he dealt with the procedural question of whether the application for leave to appeal should be dealt with on the papers, separately from the claim under s.68 of the Act, or whether both issues should be considered in a “rolled-up” hearing. Referring to Bulfracht (Cyprus) Ltd v Boneset Shipping Co Ltd, “The MV Pamphilos”  EWHC 2292 (Comm), the Judge noted that whilst s.69 applications are ordinarily dealt with on the papers (per s.69(5) of the Act), in the case of joint claims under both ss.68 and 69 of the Act it may be more sensible and cost-efficient to deal with them together in a “rolled-up” hearing if the underlying facts and legal submissions relevant to both applications were sufficiently related. Here the Judge determined that, on the facts of this particular case, the only commonality was that both applications arose in the same dispute out of the same lease, and that this was insufficient to warrant a “rolled-up” hearing. He therefore decided to deal with the s.69 application on the papers.
Second, the Judge noted that an application for leave to appeal under s.69 of the Act may only be made on a question of law (which, for the purposes of a s.69 application before the English courts, is also limited to questions of English law, see s.82(1) of the Act). This was shortly dealt with as the construction of the lease clearly did so.
Finally, the Judge considered whether, under s.69(3)(c)(i) of the Act, the arbitrator’s decision to make the award was “obviously wrong”. He observed that this is a higher standard than the test for giving permission to appeal in ordinary litigation, which only requires that the appeal has a real prospect of success. This may be rationalised on the basis that the parties chose arbitration as their dispute resolution mechanism, with the award intended to be final and binding, such that recourse to appeal should be more limited.
In considering the meaning of “obviously wrong”, the Judge observed that it seemed that “the kind of situation envisaged is one where the judge looks at the award and thinks ‘Something must have gone seriously wrong; that just cannot be right’”.
In concluding that the arbitrator’s decision was not “obviously wrong”, the Judge pointed out that when looking at such applications, in contrast to standard litigation where parties often adduce large volumes of evidence, or submit complex written arguments, in s.69 applications the Court has regard to very limited material. The role of the Court was not to engage in detailed arguments submitted by the parties and to work out on paper the true construction of the lease. Rather, it was to stand back, consider the award and the relevant terms of the lease, and ask itself whether it thought the arbitrator’s decision was “obviously wrong”. In considering this, the Judge characterised the claimant’s argument that the arbitrator not being a lawyer made his decision “obviously wrong” was misplaced. He emphasised that the parties were entitled to select anybody, qualified lawyer or not, to carry out the arbitration and that there was “simply no reason to suppose that [the arbitrator] misconstrued the lease merely because he is not a lawyer”. The Judge concluded that it could not be said that the arbitrator’s decision was “obviously wrong”.
This judgment highlights the relative reluctance of the English court to involve itself in overriding the parties’ decision to arbitrate. Parties who arbitrate have chosen to do so, and courts should only interfere with awards in rare circumstances. In circumstances where s.69 is available in respect of an English seated arbitration (it should be noted that parties may contract out of its application, and many provisions of institutional rules contain wording to that effect), the decision is also an illustration that applicants should present any s.69 application as succinctly as possible. Submitting extensive supporting documentation may be counterproductive as it may indicate to the Court that perhaps the award is not as “obviously wrong” as the applicant asserts.
Click here for the judgment.
Airlie Goodman would like to thank Neha Zamvar for her assistance in the preparation of this article.