Fulham Broadway Trustees No 1 Ltd v Telefonica UK Ltd

Rent review – Arbitration – Substantial injustice – Parties referring dispute to arbitration – Claimant landlord challenging arbitrator’s award – Whether arbitrator complying with duties – Whether arbitrator’s decision containing irregularity – Whether alleged irregularity causing substantial injustice – Application dismissed The claimant was the landlord and the defendant was the tenant of shop premises in Fulham Broadway Retail Centre, London SW6. The lease was for a term of 15 years from 29 September 2002 and contained a rent review clause providing for a rent review in 2012. The parties failed to agree on the reviewed rent and the matter was remitted to arbitration. The arbitration was conducted on the basis of written submissions without a hearing. The claimant subsequently issued proceedings under section 68 of the Arbitration Act 1996 challenging the arbitrator’s award The claimant contended that: (i) the arbitrator had failed to comply with his general duties under section 33 of the 1996 Act by allegedly failing to give the claimant a reasonable opportunity to put forward submissions and evidence on an issue, which had been an irregularity under section 68(1)(a) of the 1996 Act, and (ii) the arbitrator had failed to deal with all the issues put to him, which was an irregularity under section 68(1)(d). The claimant argued that each alleged irregularity had caused substantial injustice to it within the meaning of section 68(2) of the 1996 Act because the outcome of the arbitration might have been different if it had not been for those irregularities. Held: The application was dismissed.(1) In a case such as the present, arbitration was intended to be quick and cost effective. Consequently, the process might be relatively robust and the parties should not be unduly sensitive if there was some roughness in the process. Furthermore, the court had to approach an arbitrator’s award as a commercial document, not to be parsed in excessive detail or subject to elaborate textual analysis; and the court should allow an arbitrator a reasonable margin of appreciation. The court should not be quick to intervene to upset the arbitral process. Its function was to support and protect the integrity of the process, intervening in the process where necessary to discharge that function: Bandwidth Shipping Corporation v Intaari [2007] EWCA Civ 998 considered.On the evidence, within the language of section 33 of the 1996 Act, the arbitrator had given the claimant a reasonable opportunity of dealing with the case of its opponent. The claimant’s expert had chosen not to adduce evidence in relation to a comparable letting because he had judged that, tactically, the claimant’s case was better served by argument than by evidence as to the process that had brought about the transaction. However, whatever might have been the expert’s state of mind when he chose not to adduce further evidence, any mistaken belief that he might have had was not the fault of the arbitrator or the result of any procedural failure by the arbitrator in the conduct of the arbitration.(2) It was clear that the arbitrator had dealt with the question surrounding the evidential value of the comparable letting. Essentially, therefore, the objection was not that the arbitrator had failed to deal with the issue but that he had failed to give reasons for the way he dealt with it. That was not a ground of objection under section 68(2)(d) of the 1996 Act. The issue referred to in section 68(2)(d) had to be an important or fundamental issue put to the tribunal. Only a failure to deal with such an issue was capable of causing substantial injustice. Section 68(2)(d) did not require a tribunal to set out each step by which they reached their conclusion or deal with each point made in an arbitration. Any failure by the arbitrator in that respect was not a failure to deal with an issue that was put to it. It might, at most, amount to a criticism of the reasoning. In the present case, the issue in question was simply an argument concerning the way in which the arbitrator should approach the question of the weight to be given to a comparable letting whereas section 68(2)(d) was confined in its application to essential issues as distinct from the reasons for determining them: World Trade Corporation v Czarnikow Sugar Ltd [2005] 1 Lloyd’s Rep 422, Fidelity Management SA v Myriad International Holdings BP [2005] 2 Lloyd’s Rep 508 and Hussman (Europe) Ltd v Al Ameen Development & Trade Co [2007] 2 Lloyd’s Rep 83 considered.(3) The claimant had failed to show that the matters complained of, even if made out, would have reached the threshold required to establish substantial injustice. When a party alleged that an irregularity of a type set out in section 68(2) had given rise, or would give rise, to a substantial injustice within the meaning of the section, the onus lay on that party to explain the injustice and to satisfy the court of it. The injustice to be shown was more than the fact of an irregularity: there had to be something resulting from the irregularity, that was a real risk of unfairness or prejudice to the party concerned. In the present case, the court was not satisfied that the argument presented by the claimant’s expert, had he been afforded an opportunity to submit a further report along the lines indicated in his witness statement, would have been so different as to justify the conclusion that the lack of that opportunity in itself caused a substantial injustice, regardless of what the outcome of the arbitration would have been; nor was it satisfied that the outcome in that event have been materially different. There was no evidence or inference that the supposed irregularity had any effect at all: Warborough Investments Ltd v S Robinson & Sons (Holdings) Ltd [2003] EWCA Civ 751, [2003] 2 EGLR 149 and Lesotho Highlands Development Authority v Impregilo SpA [2006] 1 AC 221 considered. Jonathan Seitler QC (instructed by Teacher Stern Solicitors) appeared for the claimant; Edward Peters (instructed by Shoosmiths) appeared for the defendant. Eileen O’Grady, barrister