An Agricultural Holdings Act arbitration award can be unclear; but not unjust

In May, the case of Compton Beauchamp Estates Ltd v Spence (2013) considered whether an arbitrator had provided adequate reasons for his award in the context of a challenge under section 68 of the Arbitration Act 1996, relating to a claim pursuant to the Agricultural Holdings Act 1986.

This was an arbitration claim arising out of an award determining the rent payable in relation to an agricultural holding, pursuant to the Agricultural Holdings Act 1986. The claimant, the landlord, sought an order under section 68 of the Arbitration Act 1996 (“the Act”) to set aside the award, or to seek reconsideration of the matter.

The Act provides for challenges to arbitration awards on the grounds of serious irregularity that causes substantial injustice. The central question in this case was whether an arbitrator had provided adequate reasons for his award.

The case affirmed that an arbitrator should explain how the essential issues were decided. An award that doesn’t contain such reasoning wouldn’t comply with section 52 of the Act. That gives rise to an irregularity within section 68 of the Act. Morgan J commented that there will only be a “serious irregularity” if the failure of reasoning has caused or will cause “substantial injustice” to a party.

This case came to the view that it would not be right to assume that, wherever reasons were inadequate, substantial injustice was automatically established under section 68 of the Act. This was contrary to the view of Coulson J in Benaim (UK) Ltd v. Davies Middleton (2005) 102 Cons LR 1.

An analogy was made to section 288 of the Town and Country Planning Act 1990, which enables a planning inspector’s decision to be challenged where the applicant’s interests are substantially prejudiced by inadequate reasons. A challenge only succeeds if the aggrieved party satisfies the court that they have genuinely been substantially prejudiced by the failure to provide an adequately reasoned decision, rather than there being an automatic presumption of substantial prejudice.

In contrast to planning cases Morgan J considered the two central issues separately. Firstly asking whether the arbitrator explained why he decided the essential issues the way he did and secondly asking if failure of reasoning caused substantial injustice to the Claimants.

The claimants referred to a number of procedural matters that had arisen during the arbitration. One challenge was in relation to the “independent” evidence given by, in particular, one of the defendant’s expert witnesses. The arbitrator commented that he took the comparables the experts gave as “backing for … professional opinion”. He considered all experts (including the claimant’s experts) to be partisan in the evidence given.

Morgan J explained that if the issue of an expert being an unreliable witness had been central to the arbitrator’s conclusions then he wouldn’t have considered that the arbitrator had given adequate reasons for his conclusion. This demonstrates that although the reasons given were inadequate, because the expert was not a central witness no substantial injustice arose.

The case provides a timely reminder that section 68 of the Act was designed as a long stop and only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice requires it to be corrected. It is not a quick route to challenge a rent awarded.