Omnibridge Consulting Ltd v Clearsprings (Management) Ltd

An arbitral tribunal commits a serious irregularity under Arbitration Act 1996, section 68, where it decides a material issue contrary to the parties’ agreed position without giving them notice or an opportunity to address it, and the omission causes substantial injustice. Section 68 is not a general appeal on fact or law. A party must first exhaust an available correction procedure under section 57. In construing a commercial contract, an arbitrator must ascertain the parties’ intention from the contractual language, read in its textual and factual context. Commercial common sense may assist interpretation, but the tribunal has no discretion to impose a commercially sensible solution or rewrite the bargain.

Two applications concerned an interim arbitration award arising from a consultancy agreement. Omnibridge challenged the arbitrator’s conclusion that its contractual bonus entitlement was limited to the period from 3 April 2000 to 31 January 2001. It alleged that the arbitrator had decided that issue without notice, although the parties had proceeded on the common basis that bonus might accrue for later financial years.

Clearsprings challenged both the bonus award and the calculation of sums awarded on its counterclaim. It alleged failures to comply with the tribunal’s general duty and sought remission or setting aside under section 68 of the Arbitration Act 1996. The central issues were whether serious irregularity and substantial injustice were established, whether section 69 relief was appropriate, and whether Clearsprings had exhausted the available correction procedure.

1. Omnibridge’s section 68 challenge succeeded. The arbitrator failed to comply with section 33 of the Arbitration Act 1996 by deciding that bonus could accrue only until 31 January 2001, contrary to the parties’ common position, without warning them or giving them an opportunity to make submissions. That was an irregularity within section 68(2)(a).

2. The failure caused substantial injustice. There was at least a serious possibility that, had the point been raised, the arbitrator would have awarded the larger bonus claimed for later financial years.

3. The proper remedy was partial remission under section 68, not an appeal under section 69. The relevant parts of the award and reasons were remitted for reconsideration in light of the parties’ common position that bonus was potentially payable for financial years up to and including the year ending 31 January 2006.

4. Contractual meaning must be determined from the language used, construed in its textual context and against the factual background. Business common sense may assist where the language would otherwise produce an irrational result, but the tribunal has no judicial discretion to select a commercially sensible outcome and may not rewrite the contract.

5. Clearsprings’ challenge to the bonus award failed. Complaints about the arbitrator’s treatment of evidence, factual findings and contractual construction were indirect attacks on the merits. Section 68 does not provide a general supervisory jurisdiction or a route for correcting errors of fact or law.

6. Clearsprings’ counterclaim challenge was barred by section 70(2). The alleged calculation errors were accidental slips or omissions capable of correction under section 57(3)(a), and Clearsprings had failed to exhaust that available recourse. Its section 68 application was dismissed.

First-instance decision on two applications challenging an interim arbitral award. The award was partially remitted to the arbitrator, and Clearsprings’ challenge to the counterclaim calculation was dismissed.