Field & Anor v Network Rail Infrastructure Ltd & Anor

A challenge to an arbitral award for serious irregularity under section 68 of the Arbitration Act 1996 requires an irregularity within the statutory categories which has caused, or will cause, substantial injustice. Section 68 is a high-threshold safeguard, not a means of correcting an alleged error of law or fact.

An agreed valuation clause does not itself prescribe the arbitral procedure. An arbitrator conducting an adversarial process may use professional knowledge and experience to evaluate evidence. A direction requiring notice before taking the initiative in ascertaining facts is not engaged where the arbitrator relies on evidence put forward by the parties.

The claimants, business tenants of licensed premises, challenged a rent-review arbitral award made by the second defendant’s appointed arbitrator. They relied on sections 68(2)(b) and (c) of the Arbitration Act 1996, alleging that the arbitrator had failed to follow the agreed procedure, failed to give them a reasonable opportunity to comment on his proposed findings, and exceeded his powers by fixing figures not advanced by either expert.

The central issues were whether the valuation provisions of the lease constituted an agreed procedure, whether the arbitrator had taken the initiative in ascertaining facts, whether he had exceeded his powers, and whether any irregularity caused substantial injustice.

1. The claim was dismissed. The alleged irregularities were not established. In any event, they did not cause substantial injustice.
2. Section 68 of the Arbitration Act 1996 is a high-threshold, long-stop jurisdiction. A challenge requires a serious irregularity falling within the closed statutory list and causing, or likely to cause, substantial injustice. It does not permit the court to correct an alleged error of law or fact, or to substitute its own view of the valuation.
3. The lease’s clause 3.4 prescribed the basis on which rent was to be valued. It did not prescribe the agreed procedure for conducting the arbitration. Any failure to construe or apply that clause would therefore be an alleged legal error, not a breach of the agreed procedure for the purposes of section 68(2)(c).
4. The arbitrator conducted an adversarial process. He evaluated the expert evidence supplied by the parties and used his professional knowledge and experience in doing so. He did not take the initiative in ascertaining facts within the meaning of paragraph 17 of his directions. That paragraph required advance notice only if he took such an initiative. It did not require advance disclosure of his provisional valuation methodology or calculations.
5. Section 68(2)(b) was not engaged. The arbitrator had jurisdiction to determine the open-market rent and was not limited to choosing between the precise figures advanced by the experts. Fixing a figure within the range of the evidence did not amount to exceeding his powers.
6. A substantial increase in rent, without more, did not establish substantial injustice. The relevant question was how the claimants would have conducted their case had the alleged procedural irregularity occurred. The claimants also bore responsibility for the evidential risk created by withholding their accounting records.

The court reserved consequential directions and costs.

This was a first-instance claim challenging an arbitral award. No earlier court decision is stated in the judgment.