Secretary of State for Defence v Turner Estate Solutions Ltd

A challenge under section 68 of the Arbitration Act 1996 is a limited longstop remedy. The court does not review whether an arbitral tribunal reached the correct decision. It intervenes only for a serious irregularity within the statutory categories which has caused, or will cause, substantial injustice.

Where a claim is pleaded in the alternative, the tribunal generally retains discretion whether to determine the alternative case after deciding the primary case. An agreement that the tribunal ought to address an alternative issue does not necessarily remove that discretion, particularly where circumstances have changed. A party agreement as to the issues is distinct from an agreement as to arbitral procedure. The application therefore failed.

The Secretary of State challenged under section 68 of the Arbitration Act 1996 a second part award made in an arbitration concerning interim payments and change proposals under a maximum-price target-cost construction contract.

The tribunal had found that the parties had agreed that it ought to deal with the change proposals, but held that the agreement did not prevent it from first deciding whether those matters were relevant to the pleaded interim-payment dispute. The claimant alleged failures to comply with the tribunal’s general duty, an agreed procedure and the obligation to deal with all issues submitted. The central question was whether that approach constituted a serious irregularity causing substantial injustice.

1. Application dismissed. The second part award contained no serious irregularity within section 68(2)(a), (c) or (d) of the Arbitration Act 1996.
2. Section 68 is intended to minimise court intervention in arbitration. It is a high-threshold, longstop remedy concerned with serious procedural failure and substantial injustice, not with correcting errors of fact or law. This approach was consistent with Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd [1985] 2 EGLR 14, Petroships Pte Ltd of Singapore v Petec Trading and Investment Corporation of Vietnam (The Petro Ranger) [2001] 2 Lloyd’s Rep 348 and Lesotho Highlands Development Authority v Impreglio SpA [2006] 1 AC 221.
3. The tribunal’s finding that the parties agreed it ought to deal with the change proposals, and its further finding as to the effect of that agreement, were findings referred to and determined by the tribunal. They could not be reopened through the section 68 application.
4. On the pleaded case, the change proposals required determination only if relevant to the alternative case concerning adjustment of the maximum price. A tribunal generally has discretion whether to determine an alternative case after deciding the primary case. The parties’ agreement did not bind the tribunal to determine liability and quantum for all change proposals irrespective of relevance or changed circumstances.
5. The agreement concerned the issues which the parties wished the tribunal to address, rather than a procedural agreement in the strict sense. In any event, the contractual provision giving the tribunal power to decide procedural and evidential matters meant that the tribunal retained control over procedure. Sections 33 and 34 did not require a different result.
6. The tribunal was entitled to consider whether determining the change proposals would be necessary or would merely create further wasted cost. Its approach did not breach the general duty to adopt procedures suitable to the circumstances and avoid unnecessary delay or expense.
7. Applying the approach in Vee Networks Ltd v Econet Wireless International Ltd [2005] 1 LLR 192, substantial injustice would have been established if a serious irregularity had limited an otherwise unfettered right to determination. But no serious irregularity had occurred.

Not stated in the judgment. The proceedings concerned a section 68 challenge to an arbitral second part award dated 29 July 2013.