St George's Investment Company v Gemini Consulting Ltd

An arbitrator may use expert knowledge and deploy evidence in a different way from the parties’ experts, provided the approach remains within the matters placed in the arena and the parties have had a fair opportunity to address it.

Section 68 of the Arbitration Act 1996 is a long-stop remedy. The court does not review the correctness of the award or substitute its own valuation. It intervenes only where a serious irregularity has caused substantial injustice, applying a generous margin of appreciation to the arbitral process.

The claimant sought remission of a rent review arbitration award under section 68 of the Arbitration Act 1996. The arbitrator had determined the reviewed rent for office premises under an underlease.

The parties’ valuers had principally used a method based on applying a discount to the rent previously determined for an upper floor in the same building. The arbitrator used that method but also made further discounts for onerous lease terms. The claimant contended that those further discounts introduced a methodology which had not been argued and caused substantial injustice.

1. Application granted; award remitted. The arbitrator’s award was remitted in whole for reconsideration under section 68(3) of the Arbitration Act 1996.
2. Under sections 68(1) and 68(2)(a), the court may intervene where a serious irregularity, including failure to comply with the tribunal’s general duty under section 33, has caused or will cause substantial injustice. The question is not whether the arbitrator reached the correct valuation.
3. An arbitrator may use expert knowledge of the kind and range reasonably expected of the arbitrator, but must use it to evaluate evidence placed before the tribunal rather than introduce new evidence. The arbitrator may deploy evidence materially differently from the parties’ valuers where the issue has been placed in the arena and the parties have had an opportunity to deal with it.
4. The court must assess substantial injustice by considering how the aggrieved party would have conducted its case had the irregularity not occurred. It should not speculate about the valuation the arbitrator would ultimately have reached. Section 68 is a long-stop supporting the arbitral process, not an alternative appeal on the merits, and arbitrators receive a reasonably generous margin of appreciation.
5. In a paper arbitration, particular care is required before introducing a basis of decision which has not been addressed by the parties. The additional discounts were not in the arena. They arose from a different comparable-evidence methodology and, when combined with the upper-floor discount method, risked double counting. The claimant would have been able to make a material submission on that issue, including that the discounts had already been reflected in the starting rent.
6. The irregularity therefore caused substantial injustice. The appropriate remedy was remission of the whole award for reconsideration.