Shaw & Anor v MFP Foundations and Pilings Ltd

A challenge under section 68(2)(d) of the Arbitration Act 1996 requires proof that the tribunal failed to deal with an issue put to it and that the failure caused, or will cause, substantial injustice. An erroneous conclusion on an issue actually addressed is not a serious irregularity. Following accepted repudiation, contractual liquidated damages remain relevant to culpable delay before termination, but post-termination loss is governed by ordinary damages principles. Permission to appeal under section 69 requires the statutory conditions to be satisfied, including that determination of the question will substantially affect the parties’ rights.

The claimants sought an extension of time, permission to appeal an arbitrator’s second award under section 69 of the Arbitration Act 1996, and to challenge it under section 68(2)(d). The arbitration arose from the termination of a building contract after the defendant’s repudiatory breach. The arbitrator awarded the defendant a balance of £47,509.97 including interest.

The claimants alleged that the arbitrator had failed to determine several issues concerning completion costs, liquidated damages, prolongation, defects and valuation. They also argued that his approach involved an obvious error of law. The central issues were whether the arbitrator had failed to deal with issues put to him and whether any proposed appeal would substantially affect the parties’ rights.

1. Section 68 challenge. The claim under section 68(2)(d) failed. The arbitrator had dealt with all the matters raised, apart from one omitted item. A tribunal’s conclusion may be wrong without constituting a failure to deal with an issue. The omission caused no material prejudice because the arbitrator later indicated the amount he would have allowed and the defendant accepted the corrected figures.
2. Liquidated damages. Applying the principle stated by Lord Diplock in Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, acceptance of repudiation discharged future primary obligations. Liquidated damages remained applicable to culpable delay before termination. After termination, the contractor’s obligation to complete ceased, and the employer’s remedy was ordinary damages for loss caused by the breach, including further delay caused by completion by another contractor. The arbitrator had addressed the issue, so any error was not a section 68 irregularity.
3. Section 69 permission. Permission was refused. Even if the arbitrator had adopted an obviously wrong approach to the reasonableness of completion costs, the potentially affected items were too small to substantially affect either party’s rights. The statutory requirement was therefore not met.
4. Extension of time. The court’s discretion to extend the statutory time limit was considered in light of party autonomy and finality in arbitration, including the strength of the proposed challenge. Since the section 68 challenge was misconceived and there was no basis for permission under section 69, an extension would serve no useful purpose and was refused.
5. The claim and all applications were dismissed with costs.