JD Wetherspoon Plc v Jay Mar Estates

An application under section 68 of the Arbitration Act 1996 is a longstop remedy. It cannot be used to appeal an arbitrator’s factual assessment or to investigate the manner in which the award was reached. An arbitrator may use ordinary professional expertise to evaluate evidence and reach a valuation different from the parties’ submissions, provided the issue has been placed in the arena and the parties have had a reasonable opportunity to address it. A serious irregularity requires substantial injustice. The applicant must show that the irregularity made, or was likely to make, a real difference to the result. The application was dismissed because the arbitrator’s valuation was based on issues raised by the valuers and, alternatively, any irregularity had no material effect on the rent.

JD Wetherspoon Plc, tenant of licensed premises, applied under section 68 of the Arbitration Act 1996 to remit a rent review arbitration award for reconsideration. The arbitrator had assessed the rental adjustment for a fitted-out comparable property using a £150,000 starting figure derived from his valuation expertise. The tenant argued that the figure and methodology had not been put to the parties before the award and that this breached the arbitrator’s duty to give each party a reasonable opportunity to present its case.

The central issues were whether the arbitrator’s approach constituted a serious irregularity under section 68 and, if so, whether it caused substantial injustice.

1. The application was dismissed. The court held that there was no serious irregularity and, in any event, no substantial injustice.

2. Section 68 is not an appeal on fact and cannot be used for a detailed examination of the arbitrator’s reasoning. The issue is whether the statutory requirements for serious irregularity and substantial injustice are established.

3. An arbitrator may use expertise of the kind reasonably expected of a professional arbitrator to evaluate evidence. The arbitrator must not introduce new evidence, rely on undisclosed special facts, or decide on a basis which the parties had no opportunity to address. The distinction is between using expertise to assess material in the evidential arena and using it to introduce a new case.

4. Here, the value of the fittings and furnishings was expressly in issue. Both valuers had proposed methods of quantifying it. The arbitrator accepted parts of each approach and rejected other parts, then reached his own valuation between the figures advanced. His £150,000 starting point was an application of his expertise to the submissions already made, rather than a new issue requiring further submissions.

5. Assuming, contrary to that conclusion, that there had been an irregularity, the tenant had not shown substantial injustice. The allegedly affected comparable was expressly found to be less suitable than Barracuda, which supplied the rental rate ultimately used. The tenant had already adduced evidence on fitting-out costs and depreciation, and had not identified further evidence likely to have changed the result. The statutory test therefore failed independently on the substantial-injustice limb.