Fulham Broadway Trustees v Telefonica UK

An application under section 68 of the Arbitration Act 1996 requires a serious irregularity that has caused, or will cause, substantial injustice. The statutory ground concerning failure to deal with an issue applies to an essential issue placed before the tribunal, not to every argument or to an alleged failure to give detailed reasons. Arbitration is intended to be expeditious and cost-effective. An award should be read as a commercial document, with reasonable latitude allowed to the arbitrator. The court should intervene only where necessary to protect the integrity of the arbitral process.

The claimant landlord applied under section 68 of the Arbitration Act 1996 to remit or set aside an arbitrator’s rent-review award concerning premises occupied by the defendant tenant. The claimant alleged that the arbitrator had failed to comply with section 33 and had failed to deal with issues concerning the evidential value of a comparable letting. The claimant argued that the letting had been accepted as an open market letting and that the arbitrator should not have reduced its weight because it had not been openly marketed. The central questions were whether there had been a serious irregularity and whether it had caused substantial injustice.

1. The application was dismissed. The arbitrator had given the landlord a reasonable opportunity to address the tenant’s case. The tenant’s reports and Points of Reply squarely raised the circumstances in which the comparable letting had been brought about and its consequent evidential weight. The landlord responded by argument and chose not to adduce further evidence. That tactical choice did not amount to a procedural failure by the arbitrator.

2. The alleged “killer point”, namely that the agreed description of the transaction as an open market letting prevented any challenge to its value as a comparable, was not properly advanced before the arbitrator and was not an issue which section 68(2)(d) required him to determine.

3. Section 68(2)(d) concerns an important or fundamental issue put to the tribunal. It does not require an arbitrator to set out every step in the reasoning or to deal expressly with every point made by a party. A complaint about the adequacy of reasons is distinct from a failure to deal with an issue.

4. The arbitrator had in fact dealt with the evidential value of the letting. He accepted that its circumstances justified treating it with caution. The complaint was therefore substantially a criticism of his reasoning, rather than a failure to determine an issue.

5. In any event, the landlord failed to establish substantial injustice. The applicant bears the burden of showing a real risk of unfairness or prejudice, beyond the existence of an irregularity. The suggested further evidence and submissions were insufficiently particularised, and there was no satisfactory basis for concluding that the award would materially have differed.