Michael Wilson & Partners Ltd v Emmott

Challenges under sections 68 and 69 of the Arbitration Act 1996 are subject to strict limits. Section 68 is a long-stop remedy for extreme procedural failures and requires both a prescribed serious irregularity and substantial injustice. The court assesses whether the irregularity deprived the applicant of a fair opportunity to present its case; it does not rehear the arbitration or speculate about the result on a different basis. Under section 69, leave requires an identified question of law, substantial effect on the parties’ rights, and, absent general public importance, an obviously wrong decision. A tribunal may determine the nature of relief at a liability hearing where that issue was not deferred. It is not confined by the precise legal analysis advanced by the parties, provided the issue was fairly before it.

Michael Wilson & Partners Ltd applied under sections 68 and 69 of the Arbitration Act 1996 to challenge a second interim award and its clarification. The arbitration concerned claims arising from John Emmott’s departure from the claimant’s law and consultancy business, including alleged breaches of contract and fiduciary duty, secret profits, diversion of business, misuse of confidential information and a counterclaim concerning a shareholding.

The claimant alleged serious procedural irregularities and errors of law concerning remedies, the Max Petroleum shares and payment, Temujin-related income, disclosure duties and the construction of the parties’ agreement. The central issues were whether the tribunal had exceeded the scope of a liability hearing, failed to deal with pleaded issues, caused substantial injustice, or made decisions that were obviously wrong in law.

1. Applications refused. The claimant failed to establish any serious irregularity under section 68 or any qualifying question of law under section 69.
2. Section 68 is an exceptional, long-stop remedy. The applicant must establish a prescribed irregularity and substantial injustice. The court does not retry the underlying issue or determine what the tribunal would have decided without the irregularity. The relevant inquiry is whether the applicant’s fair hearing was denied and whether the outcome or presentation of its case might have been materially different.
3. The tribunal’s procedural direction deferred quantum and the taking of accounts, but not the nature of the remedy or whether loss had been established sufficiently to justify an inquiry. It was therefore entitled to determine the appropriate form of relief, including a monetary account and an adjustment to the defendant’s entitlement to remuneration or profits.
4. The tribunal was entitled to analyse the beneficial ownership of the Max shares by reference to the issue actually before it: whether the defendant had acquired a valuable interest or control amounting to a secret profit. It was not confined by the precise legal submissions made by the parties. Its findings concerning a third party’s beneficial interest did not determine rights in proceedings to which that third party was not a party.
5. The defendant’s entitlement to the one-third interest under the agreement vested when the agreement was made, although transfer or issue of shares was subject to payment securing the claimant’s rights. The entitlement was proprietary and held in trust. Later breaches did not forfeit property already vested. The principles in Alghussein Establishment v Eton College and Tesco Stores v Pook therefore did not assist the claimant.
6. The claimant could not obtain relief for claims or factual bases that were not pleaded, including an asserted partnership in Temujin. The applications did not identify properly formulated questions of law and, in any event, the tribunal’s conclusions were not obviously wrong.