Lidl GmbH v Just Fitness Ltd

In an arbitration, the terms of reference identify the dispute and the issues submitted for determination. Where an issue falls within those terms, a party may be estopped from raising it in a later arbitration, even if the arbitrator did not make an award on that issue. The parties may agree to limit the issues decided or reserve an issue for later determination, but such an agreement must be established by the evidence. Party autonomy remains fundamental in arbitration, subject to the agreed reference. A court need not determine alleged abuse of process or equitable relief where the claimant relies solely on common-law res judicata.

Lidl GmbH, landlord of commercial premises, applied under section 32 of the Arbitration Act 1996 concerning the jurisdiction of a second arbitrator. The tenant, Just Fitness Ltd, had referred to arbitration both whether Lidl unreasonably withheld consent to an assignment and whether Lidl responded within a reasonable time. The first arbitrator decided only the reasonableness of the refusal and stated that he had not decided the timing issue. Just Fitness then sought to refer the timing issue to a second arbitrator. The central issue was whether that issue had formed part of the first arbitration’s terms of reference and was therefore barred from being arbitrated again.

1. Terms of reference. The letter initiating the arbitration expressly identified two limbs of the dispute: whether consent had been unreasonably withheld and whether Lidl had failed to give its decision within a reasonable time. Both issues therefore fell within the first arbitrator’s terms of reference.
2. Scope of the parties’ agreement. The parties subsequently agreed that the first arbitrator should decide only whether consent had been unreasonably withheld. That agreement did not reserve the delay issue for later determination. An express agreement would have been required to preserve Just Fitness’s right to pursue that issue after the award. The parties’ acquiescence in the arbitrator’s directions established only the limited issue he was to decide.
3. Res judicata in arbitration. Applying the reasoning in Purser and Co (Hillingdon) Limited v Jackson and another [1971] 1 QB 166, the fact that an issue within the terms of reference was not actually determined did not permit it to be raised in a subsequent arbitration. The appropriate remedy would have been to challenge the award through the available procedures. Just Fitness was accordingly estopped per rem judicatam from pursuing the delay issue.
4. Equitable relief. Lidl relied solely on common-law res judicata and did not seek equitable relief. It was therefore unnecessary to determine whether a second arbitration would constitute an abuse of process or to consider the factors relevant to that question.
5. Mr Cartwright had no jurisdiction to determine the dispute referred to him.