Stonegate Farmers Limited v Joey Heavey

Under section 68(2)(a) of the Arbitration Act 1996, a tribunal may develop its reasoning beyond the parties’ arguments where the conclusion remains within the issues raised and the parties had a reasonable opportunity to address its essential considerations. A distinct legal issue, such as implying a contractual term, may require a separate opportunity to make submissions if it was not sufficiently in play.

Substantial injustice turns on whether, absent the irregularity, a tribunal acting reasonably and fairly might realistically have reached a different outcome. Where a closely related remitted award may illuminate that question but is itself under challenge, the court may adjourn its decision until that challenge is resolved.

Stonegate Farmers Limited, an egg packer, challenged under section 68 of the Arbitration Act 1996 an award in favour of Joey Heavey, an egg farmer. The arbitrator found an implied term requiring Stonegate to release Heavey’s Lion Code after their exclusive supply contract ended, and awarded damages for its non-release. The contract’s termination date had been decided in an earlier award, which was not challenged.

Stonegate argued that the implied term had not been raised and that it had no reasonable opportunity to address it. Permission to appeal on the implied term under section 69 had previously been refused by HHJ Pelling KC. A related arbitration involving another farm produced a remitted award on the same implied-term issue, but Stonegate had brought a further challenge to that award. The questions were whether the arbitrator’s procedure was seriously irregular and, if so, whether it caused substantial injustice.

1. Serious irregularity established. The arbitrator decided that the contract contained an implied term requiring release of the Lion Code, although no party had advanced that case. The issue was not sufficiently in play for Stonegate to have a reasonable opportunity to address it. The parties had debated breach of express terms, but implication is a distinct process, involving different considerations such as necessity and obviousness. The arbitrator should have raised the potential implied term and invited submissions. His reliance on reasoning from the related Chucks Farm arbitration, without identifying the point for argument, reinforced the unfairness. The error was serious because it left the central issue on breach unaddressed. Marks & Spencer v BNP Paribas [2015] UKSC 72 confirmed the distinction between implication and construction.

2. Fairness and opportunity. A tribunal need not put every analytical step to the parties. It may develop reasoning where its conclusion remains within the issues raised and is sufficiently grounded in material and arguments the parties could address. Whether a point was in play is a fact-sensitive question. Here, the legal category and relevant tests had not been sufficiently exposed by the arguments on express terms. The court also rejected the contention that the arbitrator’s conclusion that there had been admissions prevented the court from assessing fairness. A finding about the legal effect of procedural steps did not prevent the court from considering whether the procedure as a whole was objectively unfair.

3. Substantial injustice unresolved. The relevant question is whether, without the irregularity, the arbitrator, assumed to act reasonably and fairly on the law and evidence, might realistically have reached a significantly different outcome. The court should not conduct a mini-trial or decide the underlying issue where the arbitrator might have reached another view. A finding that a contrary case is reasonably arguable may be a strong indicator, but is not invariably sufficient by itself. The remitted award in Stonegate Farmers Limited v Chucks Farm [2026] EWHC 742 (Comm), if it remained unchallenged, would strongly indicate that the same arbitrator would have reached the same result here. But the further challenge to that award might undermine the inference. The court therefore adjourned its decision on substantial injustice pending that challenge.

4. Other rulings and order. HHJ Pelling KC’s refusal of permission to appeal did not create an issue estoppel: it was a procedural threshold decision, and the section 69 questions were not the same as substantial injustice under section 68. The court did not finally determine the section 68 challenge. Further consideration was adjourned pending determination or withdrawal of the further challenge in Chucks Farm, with liberty to restore.

This was a first-instance challenge to an arbitral award. HHJ Pelling KC had earlier refused permission to appeal the implied-term decision under section 69 of the Arbitration Act 1996. The present court found a serious irregularity under section 68 but adjourned the remaining issue of substantial injustice.