House of Fraser Ltd v Scottish Widows Plc

Permission to appeal an arbitral award under Arbitration Act 1996, section 69, requires a genuine question of law which was fairly and squarely before the arbitrator. The statutory test is deliberately restrictive. A party cannot recast disagreement with the admission, weight or evaluation of evidence, or with factual findings, as an error of law. The court must proceed on the arbitrator’s findings of fact. Permission also requires the statutory conditions concerning substantial effect on the parties’ rights, the tribunal having been asked to determine the question, obvious error or serious doubt on a question of general public importance, and justice and propriety. A rent review arbitrator’s assessment of hypothetical tenants, market evidence and comparable properties is ordinarily factual.

House of Fraser Ltd applied for permission under section 69 of the Arbitration Act 1996 to appeal an award determining the open-market rent of its Leeds department store at the second review date. The arbitrator assessed the rent at £1,550,000.

House of Fraser also had a pending application under section 68 alleging serious irregularity. The court considered whether four criticisms of the award raised appealable questions of law: the use of post-review-date evidence, assumptions concerning the hypothetical tenant, findings about House of Fraser’s position, and evidence concerning Next plc. The central issue was whether those complaints were legal questions within section 69 or challenges to factual assessment.

1. Permission refused. The court held that section 69 of the Arbitration Act 1996 imposes a higher and deliberately restrictive threshold than the former statutory regime. The point of law must have been fairly and squarely before the arbitrator. It is insufficient that the parties could later formulate a legal argument which was neither articulated nor addressed in the reference ([25]-[28]).
2. The court preferred the reasoning in Demco Investments & Commercial SA v SE Banken Forsakring Holding Aktiebolag and London Underground Ltd v Citylink Telecommunications Ltd. Under the 1996 Act, factual challenges cannot be disguised as legal submissions. The court must accept the arbitrator’s factual findings and cannot review the admission, exclusion, weight or sufficiency of evidence as though hearing an appeal on the facts ([23]-[26], [35]-[36]).
3. Each of the four proposed grounds concerned factual evaluation. The arbitrator was entitled to assess the competing valuation reports, the likely willingness and bidding position of House of Fraser and Next, and the relevance of market evidence. Those matters did not disclose questions of law which the arbitrator had been asked to determine ([31]-[52]).
4. In any event, House of Fraser failed to satisfy the further statutory requirements. The proposed points were not shown to substantially affect the parties’ rights, the award was not shown to be obviously wrong on the findings of fact, and it was not just and proper for the court to determine the issues instead of the agreed arbitrator ([39]-[40], [46], [49], [52]).
5. The arbitrator’s accepted comparables and adjustments demonstrated a factual valuation exercise. He rejected the claimant’s department-store-in-a-precinct evidence, but also discounted the defendant’s higher valuation to reflect rental compression and the valuation date ([53]-[57]). Permission to appeal was refused. The court reserved submissions on the consequential order ([58]-[59]).

First-instance application for permission to appeal an arbitral award under section 69 of the Arbitration Act 1996. No appellate history is stated in the judgment.