Judge refuses leave to appeal against arbitrator’s award as decision was not ‘obviously wrong’

A party to an arbitration which was seeking to challenge an arbitrator’s award on the basis of an alleged “legal error” has had an application for leave to appeal against the decision refused.

A judge in the Court of Session refused the application after ruling that the test set out in rule 70 of the Scottish Arbitration Rules had not been met as there was nothing “obviously wrong” with the decision.

‘Obviously wrong’

Lord Bannatyne heard that in and about October and November 2015 the claimant by itself or acting through agents purported to serve a notice pursuant to clause 3 of a minute of agreement to exercise an option, but did so by serving the notice upon Mr A alone and not on both Mr A and Mrs A.

The arbitrator was not concerned with the validity of any purported notice, but whether “management” of the first party’s interest included a particular named person being the appropriate and sole recipient of any formal notice concerning the first party’s property interest in the subjects.

In terms of Rule 69 of the Rules the petitioner was seeking leave to appeal an alleged legal error by the arbitrator in reaching the decision.

The petitioner argued that the arbitrator’s part award was “obviously wrong”, in terms of Rule 70 of the Rules, and lodged six proposed grounds of appeal.

Leave to appeal was opposed by the respondents, who argued that there was nothing “obviously wrong” identified in the terms of the petition.

In considering the issue, what the court is searching for is a conclusion which is so obviously wrong as to preclude even the possibility that the arbitrator was right.

‘High hurdle’

Refusing leave, the judge observed that this was a “high hurdle” to overcome.

In a written note, Lord Bannatyne said: “I consider that it is clear from the well-established line of authority I earlier set out that the test of ‘obviously wrong’ creates a very high hurdle for the petitioner to surmount. Thus, I may consider that the arbitrator is on balance wrong.

“However, that is not sufficient to hold that he is ‘obviously wrong’ and to grant leave. It is necessary for the court to seek to find on the part of the arbitrator ‘a major intellectual aberration’.

“The decision of the arbitrator turned on questions of contractual interpretation… It is clear that when considering the construction of provisions in a contract two decision makers may often arrive at different conclusions and can do so where there is no ‘major intellectual aberration’ on the part of either of the decision makers.

“It appears to me that the arguments advanced on behalf of the petitioner in their proposed grounds of appeal fail to reach the level of a manifest legal error which could cause the court to apprehend there is anything ‘obviously wrong’ in the approach and reasoning of the arbitrator and in the decision he has reached.

“There is nothing in the arbitrator’s approach, reasoning and decision which is so ‘wrong as to preclude the possibility that he might be right’ or which amounts to ‘a major intellectual aberration’.”

The judge concluded: “In the whole circumstances and for the foregoing reasons I find that the test provided for by Rule 70 has not been met. There is nothing ‘obviously wrong’.”