Punch Partnerships (PTL) Ltd & Anor v Jonalt Ltd

An arbitral tribunal must give each party a reasonable opportunity to address a point likely to affect the decision. If it proposes departing from the usual burden of proof, it must invite submissions before deciding the issue. A failure to do so may constitute serious irregularity under Arbitration Act 1996, s 68, where substantial injustice is shown. An arbitrator determining whether an MRO tenancy is compliant may not require a pub-owning business to offer a specific revised commercial term unless the Small Business, Enterprise and Employment Act 2015 or the Pubs Code clearly confers that power. A contractual waiver of recourse cannot exclude the mandatory operation of s 68.

The claimants challenged an arbitration award concerning a proposed market-rent-only tenancy for a tied public house. The arbitrator found a 60% keg stocking requirement unreasonable and ordered the pub-owning business to offer a revised tenancy containing a 20% requirement.

The challenge alleged serious irregularity under s 68 of the Arbitration Act 1996. First, the arbitrator had effectively placed the burden on the pub-owning business to prove reasonableness without inviting submissions. Secondly, the arbitrator had exceeded his powers by prescribing the 20% term. The issues were whether either irregularity caused substantial injustice and what remedy should follow.

1. The court had jurisdiction to entertain the challenge under s 68 of the Arbitration Act 1996. Section 68 is a mandatory provision listed in Schedule 1, so the waiver in article 34(2) of the CIArb Rules could not exclude it.
2. The arbitrator’s reasoning showed that he had treated the pub-owning business as bearing the burden of proving the reasonableness of the 60% stocking requirement. The ordinary rule is that the burden lies on the party asserting the affirmative of an issue. The tenant had initiated the arbitration by alleging that the proposed term was unreasonable and therefore bore the burden under the relevant statutory scheme.
3. If the arbitrator considered that the ordinary burden should be reversed, fairness under s 33 required him to put that point to the parties and allow submissions. His failure to do so was a serious irregularity under s 68(2)(a). There was substantial injustice because, had the ordinary rule been applied, the tenant’s unsupported allegation might have failed.
4. The arbitrator also exceeded his powers by ordering the pub-owning business to offer a tenancy containing a 20% stocking requirement. Applying the reasoning in Punch Partnerships and Star Pubs v The Highwayman Hotel [2020] EWHC 714 (Ch), neither the 2015 Act nor the Pubs Code contained sufficiently clear language authorising interference with the parties’ commercial negotiations or the imposition of a specific term. This was a serious irregularity under s 68(2)(b), and substantial injustice was established.
5. The requirement to offer the 20% term was set aside. The findings that the 60% requirement was unreasonable, together with the related parts of the award, were remitted to the arbitrator for reconsideration in light of the judgment, the existing material and any submissions invited on the burden of proof.

First-instance arbitration challenge. No appellate history is stated in the judgment.