O'Donoghue v Enterprise Inns Plc

A challenge under section 68 of the Arbitration Act 1996 requires a serious irregularity falling within the statutory categories and causing, or likely to cause, substantial injustice. Section 68 is not an indirect appeal on fact or law.

Whether to receive oral evidence or submissions is ordinarily a procedural matter for the arbitrator. A reasoned decision to proceed without an oral hearing will not amount to serious irregularity where the parties had a reasonable opportunity to present and answer the case. A party aware of an alleged procedural irregularity must object promptly; continued participation may lead to loss of the right to object under section 73.

The claimant sought to set aside an interim final rent-review award made by an arbitrator under a long lease of a public house. The challenge alleged failure to hold an oral hearing and to permit cross-examination of the landlord’s expert. The claimant also sought to amend the claim to criticise the arbitrator’s valuation of wet sales, overheads and historic trading accounts.

The landlord relied on the arbitrator’s procedural discretion, the absence of substantial injustice and waiver under section 73 of the Arbitration Act 1996. The central issues were whether the procedure constituted serious irregularity and whether the claimant had lost the right to object.

1. The application was dismissed. The claimant failed to establish serious irregularity under section 68 of the Arbitration Act 1996.
2. Section 68 imposes a high threshold. The applicant must show an irregularity within the closed statutory categories which has caused, or will cause, substantial injustice. It cannot be used as an indirect appeal against findings of fact or law.
3. Section 34(2)(h) leaves to the arbitrator whether, and to what extent, oral evidence or submissions should be received. The arbitrator was entitled to reconsider an initially proposed oral hearing after receiving further written material and inspecting the premises. He gave the parties an opportunity to make representations and gave reasons for proceeding without a hearing.
4. The arbitrator’s figures were based on the evidence submitted. Differences between his figures and the parties’ submissions did not establish unfairness or show that he had gone outside the evidence. The possibility that an oral hearing might have produced a different result did not amount to substantial injustice.
5. The claimant also lost the right to object under section 73. He knew of the decision not to hold an oral hearing, allowed the arbitrator to deliberate and publish the award, and objected only afterwards. The court expressed no view on the separate section 70/section 57 point.

First-instance decision. No prior appellate decision is stated in the judgment.