Demco Investments & Commercial SA & Ors v SE Banken Forsakring Holding Aktiebolag

Permission to appeal an arbitration award under Arbitration Act 1996, section 69, requires a genuine question of law. A party cannot recast disagreement with an arbitral tribunal’s assessment of evidence, inferences or factual findings as a question of law. The court must accept the award’s findings of fact and cannot entertain challenges based on insufficient evidence, the absence of a particular form of evidence, or the weight assigned to evidence. The ultimate burden of proof remains unchanged, although the evidential burden may shift as facts are evaluated. Contractual construction issues justify permission only where the statutory threshold is met. The application failed because the proposed challenges either concerned fact or involved constructions which were not obviously wrong.

The claimants sought permission under section 69 of the Arbitration Act 1996 to appeal an award concerning alleged pension mis-selling by Interlife, a company sold to the defendant. The arbitration involved 222 sample cases and potential losses of approximately £40 million. The proposed appeals concerned mis-selling, gross negligence, evidential sufficiency, contractual indemnities, notification requirements, disclosure, and the meaning of voluntary transactions.

The defendant also challenged the court’s jurisdiction on the basis that the arbitration agreement excluded appeals, but that issue was left undecided because the application failed on other grounds. The central questions were whether the proposed grounds raised questions of law and, if so, whether the statutory conditions for permission were satisfied.

1. Application dismissed. The claimants’ proposed grounds did not satisfy section 69. The application was dismissed with costs.
2. The complaints that the arbitrators required direct evidence from investors, applied the wrong burden of proof, failed to draw particular inferences, or failed to give sufficient weight to particular documents were challenges to factual assessment. The arbitrators were entitled to rely on direct and circumstantial evidence and to draw proper inferences from the material available. No particular form of evidence was legally required.
3. The ultimate burden remained on the buyer to establish breach of duty. The arbitrators’ evaluation of evidence concerning whether an investor was likely to remain in occupational pension scheme employment did not reverse that burden. Any evidential shift resulted from factual findings.
4. The arbitrators’ treatment of gross negligence as a factual issue, applying the jury test referred to in The Hellespont Ardent [1997] 2 Lloyds Report 547, disclosed no arguable question of law. Section 69 of the 1996 Act did not permit an appeal based on insufficient evidence supporting factual findings. The court distinguished the earlier approach associated with Edwards v Bairstow [1956] AC 14 and declined to follow contrary first-instance views in Guardcliffe Properties Limited v City & St. James [2003] 2 EGLR 16 and Fence Gate Ltd v NEL Construction Ltd [2001] 82 Con LR 41.
5. On construction, the arbitrators were plainly right that the LAUTRO Rules constituted Regulations for the purposes of the indemnity. The notice provisions distinguished notices required to defend third-party claims from notices required to preserve liability. The arbitrators were entitled to treat the buyer’s notices as sufficient, including a single claim arising from a consistent course of conduct.
6. The disclosure provisions did not clearly exclude liability for all mis-selling revealed by the LAUTRO proceedings. They were construed narrowly as exemption provisions. Interlife’s application for membership of the PIA was not a voluntary transaction within the relevant exclusion clause.