RAV Bahamas Ltd and another v Therapy Beach Club Incorporated (Bahamas)

A serious-irregularity challenge under section 90 of the Arbitration Act 2009 requires both a listed irregularity and substantial injustice. The threshold is high and concerns due process, rather than whether the arbitrator reached the correct decision.

An applicant and the judge should address substantial injustice expressly and separately. That is good practice, but not a statutory requirement. It is sufficient that substantial injustice is established and found as a matter of substance. It may be inferred where the nature of the irregularity makes injustice inherently likely.

An arbitrator fails to deal with an issue where an essential matter was sufficiently put to the tribunal but was left undecided. Fairness also requires the parties to have an opportunity to address a specific basis of decision which was not already in play.

RAV Bahamas Ltd and another v Therapy Beach Club Incorporated (Bahamas) concerned an arbitral award arising from the demolition of a beach club and the eviction of its operator. The arbitrator awarded $9.67m, including $6.8m for lost profits calculated over the original lease term and a possible three-year renewal period.

RAV challenged the award under section 90 of the Arbitration Act 2009. Winder J, in BS 2018 SC 7, found serious irregularities because the arbitrator had not decided whether losses could be recovered during the renewal period and had adopted an uncanvassed method of adjusting the damages. He remitted the relevant matters to the arbitrator.

The Court of Appeal, by a majority, allowed Therapy’s appeal in SCCivApp No 23 of 2018, also reported as BS 2018 CA 117. It held, among other things, that RAV and Winder J had not expressly and separately established substantial injustice. The issues before the Board were whether that formality was mandatory, whether the two alleged procedural failures constituted serious irregularities, and whether the Board had jurisdiction to hear the appeal.

1. Appeal allowed and award remitted in part. The Board advised that RAV’s appeal should be allowed. The lease-renewal issue and the one-third damages deduction were to be remitted substantially on the terms ordered by Winder J. The remittal did not extend to the separate 15% deduction based on weaknesses in the expert’s recollection.

2. The Board had jurisdiction. Section 23 of the Court of Appeal Act did not prevent a further appeal to the Privy Council merely because it might be characterised as a third appeal on a point of law. In addition, a challenge under sections 89–90 of the Arbitration Act 2009 involved an original statutory jurisdiction and was not an appeal or revision within section 21(1) of the Court of Appeal Act.

3. Section 90 imposed a high threshold. The applicant had to establish a listed irregularity and resulting substantial injustice. Although the application and judgment should ordinarily address those matters expressly and separately, that was good practice rather than a mandatory requirement. Substance prevailed over form. Substantial injustice could be inferred where it followed inherently from the nature and importance of the irregularity.

4. The arbitrator’s failure to decide the lease-renewal issue was an irregularity under section 90(2)(d). An issue need not have been pleaded if the proceedings as a whole sufficiently drew it to the tribunal’s attention as a matter requiring determination. The renewal point was essential because its acceptance might have more than halved a substantial lost-profits award. Its omission made substantial injustice inherently likely, and Winder J’s finding of a “serious irregularity” substantively included the necessary finding of substantial injustice. The challenge concerned the absence of any decision on an arguable point of law, not an appeal against an erroneous legal decision under section 91.

5. The uncanvassed one-third deduction was procedurally unfair under sections 44(1)(a) and 90(2)(a). Neither party had separated the profits attributable to the beach club from those attributable to the rejected restaurant claim. The deduction was therefore outside the arena of the parties’ cases, and RAV first learnt of it in the award. By contrast, the weaknesses in the expert’s unsupported recollection were already in play. The arbitrator could make an impressionistic 15% deduction without inviting further submissions. The appeal on that part of the challenge was dismissed.

1. Privy Council: In RAV Bahamas Ltd and another v Therapy Beach Club Incorporated (Bahamas) [2021] UKPC 8 , the Board allowed RAV’s appeal and restored a remittal substantially on the terms ordered by Winder J, except in relation to the 15% deduction.
2. Court of Appeal of the Bahamas: By a majority in SCCivApp No 23 of 2018, also reported as BS 2018 CA 117, the court allowed Therapy’s appeal, set aside Winder J’s remittal orders and upheld the arbitral award.
3. Supreme Court of the Bahamas: Winder J, in BS 2018 SC 7, upheld RAV’s section 90 challenge on the lease-renewal issue and the uncanvassed damages adjustments. He remitted those matters to the arbitrator for reconsideration.