Arbitration in England & Wales is a statutory, private form of alternative dispute resolution, governed by the Arbitration Act 1996 (Act). There exists a right to appeal a decision of an arbitrator, pursuant to section 69 of the Act. The Court of Appeal recently had cause to consider (Osler v Osler) when the appeal process under the Act may be utilised and whether, in fact, it had the necessary power to allow itself to consider an appeal.
Background
The underlying dispute related to the interpretation of a partnership agreement that was entered into by two brothers, A and B. After A's death, B sought to acquire A's share of the partnership. The question was one of valuation – should A's share of the partnership be valued based on a historical cost or a market value basis? The arbitrator found in favour of A's estate that the value of the partnership share should be based on the higher market value basis. B sought to appeal the arbitrator's decision to the High Court under section 69 of the Act.
When can a party appeal an arbitration award?
A party can lodge an appeal on a point of law, if (among other criteria), the decision of the arbitrator was "obviously wrong"; or, if the question being determined "is one of general importance and the decision of the tribunal is at least open to serious doubt."
The appeals to the High Court
On first appeal, it was decided that none of these criteria were met and the appeal was dismissed on the papers alone (i.e. without a hearing). Curiously, the judgment provided permission for the parties to apply to have the judgment set aside or varied – standard wording used when a court determines a case without a hearing, but here it appeared that no consideration had been given as to whether this wording complied with the Act.
B seized on this opportunity and applied to have the order set aside. This second application was unsuccessful with the judge deciding that the standard "set aside" wording had been included in error and which could be amended under the "slip rule". Accordingly, the court had no power to reconsider the appeal application at an oral rehearing, because a reasoned decision had already been reached.
The appeal to the Court of Appeal
Not to be deterred, B applied to the Court of Appeal seeking permission to appeal against the second decision. The Court of Appeal unanimously dismissed B's appeal for the following reasons:
- The Court of Appeal is not a "court" – On its face, B's application was to appeal the second decision of the High Court to set aside the first decision denying B permission to appeal the arbitrator's award. In reality, B was seeking to set aside the first decision and obtain permission to appeal the arbitrator's order. This latter objective triggered section 96 of the Act. Under section 96(6) of the Act, B needed permission from "the court" in order to appeal the second decision. "The court" was defined in the Act as the High Court or the county court – not the Court of Appeal. B only had permission from the Court of Appeal to lodge his appeal, but the Court of Appeal had no jurisdiction to give that permission. Effectively, B had not obtained legitimate permission to appeal anything!
- There was no reason to allow the appeal - The Court of Appeal was not convinced that the arbitrator's decision raised any issues of public importance or that it was "obviously wrong." There exists an array of case law considering the question of whether partnership shares should be valued on a market value or historical costs' basis, with case authorities in support of both positions. Given the complexity of the question, the arbitrator's decision could not be regarded as "obviously wrong".
- An error will not bind the court - The inclusion of wording granting permission to set aside the first High Court decision was an obvious error, which itself could be set aside under the slip rule. In the second application, the High Court was therefore entitled to dismiss B's application to have the first decision set aside.
The law surrounding arbitration and the appeals process is complex and littered with potential pitfalls for the unwary. If you are considering arbitration or appealing an arbitration ruling, or if you have any concerns about how this issue may affect you or your business, please do not hesitate to get in touch with our Real Estate Disputes Team, our Commercial Disputes Team or, your usual Brodies contact.
