English Court Refuses To Set Aside Due to Tribunal’s Refusal to Admit Expert Report

In K v S [2019] EWHC 2386 (Comm), the English Commercial Court dealt with a dispute arising out of the termination of an EPC sub-contract in the Middle East, where the Tribunal refused to allow the respondent K to rely on an expert report on the basis that it had not been pleaded, or adequately pleaded, and it would not be just to allow it to be relied on at a hearing due to take place shortly thereafter out of fairness to the other party. K applied for an order that the relevant paragraphs of the procedural order be set aside and remitted to the Tribunal for reconsideration; the Court refused the application to set aside an award and remit it back to the Tribunal.

The Court framed the main issue as: whether the decision made is one with which this court can interfere in accordance with the terms of s.68 [30]. In relation to s.68, the court stated [35]:

“Time and again this court has stated that applications under section 68 are not the place for appeals on points of law or fact, nor is there any room for appeals against procedural or case management decisions where there has been no procedural unfairness in reaching those decisions. Nor is there any scope for a challenge under the section to anything other than an award. The grounds set out in section 68 represent a closed list of what constitutes “serious irregularity”. The only ground relied on here is that to which I have referred in section 68(2)(a), namely, “failure by the Tribunal to comply with section 33” and the general duties imposed thereby on the Tribunal.”

Finding that K’s case “falls at each hurdle presented by section 68”, the Court stated as follows [39]:

“The decision in Procedural Order 5 was a decision on procedural matters which fell within section 34 of the Act. It ruled out expert evidence produced in support of the case which had not been pleaded sufficiently to put the other side on proper notice of it in the eyes of the Tribunal. The Tribunal decided, in much more gentle language that I would probably have used, that facts were asserted in support of new claims where the facts relied on had not featured in the pleadings or witness statements previously produced. I might add that to the extent that this court is permitted, which in my judgment it is not, to examine the matter, no amount of dressing up of the points asserted as facts in the expert report could bring them within the compass of what was pleaded in the statement of defence and counterclaim or the schedule of loss. That appears clearly from the way in which the Tribunal expressed its view.”

“K was given every opportunity to put its case as to why it should be allowed to adduce this evidence. It made submissions in writing and it made submissions at an oral hearing. Those submissions were rejected. There was no failure in due process in the Tribunal reaching its decision to exclude the evidence and no complaint is made that there was.”

“There is no exception to the rule that section 68 is concerned only with due process and the court cannot take it upon itself to assess whether the Tribunal reached a correct decision in the exercise of its arbitral functions, whether in assessing factual evidence, in assessing expert evidence, or making procedural decisions provided that due process was followed in reaching those decisions. The decision was taken to exclude a new case and new evidence shortly before the hearing and this constitutes a paradigm example of a case management procedural decision of the kind that no court of appeal would interfere with, if made by a court of first instance in this jurisdiction.”

“It is clear that the exclusion of evidence is within the arbitrator’s case management powers and that the decision reached was one reached with due process and was a rational determination. It is hard to see, therefore, how any question of serious irregularity could possibly arise. The suggestion that the court can overrule a decision by a Tribunal in the exercise of its procedural powers if it has followed due process in reaching that decision, would, in my judgment, run counter to the whole regime and tenor of the 1996 Act. There is no room under the Act for a review of a decision made under section 34(2)(f) or section 34(3) without a failure in due process.”

“Procedural Order 5 was not a decision which determined any matter of substance against K. It was open to K on the exclusion of the evidence from the hearing to apply to amend its case, if necessary to seek an adjournment of the hearing, and to seek orders allowing for S to be given the opportunity to respond to the new case and to put in evidence contrary to that in the forensic accountancy report. It could have sought any number of possible procedural orders, whether consequential upon that or otherwise, but whether or not the Tribunal would have been unlikely to grant such an application is neither here nor there. What is clear is that the decision was a procedural one, just as would have been the case if an application to amend had been made and adjournment sought on the basis of the new case put.”

“Procedural Order 5 was not an award within the meaning of the Act which is capable of challenge under section 68. It will be recalled that section 68 provides only for a challenge to an award on the ground of serious irregularity. The parties agreed that the judgment of Cockerill J in ZCCM Investments Holdings Plc v Kansanshi Holdings PLC and Kansanshi Mining PLC [2019] EWHC 1285 (Comm) at [39] to [40] sets out the relevant principles to be garnered from earlier authorities as to what is and what is not an award. Of the factors listed there, in my judgment, the factor to be accorded the most weight in accordance with earlier authority, is whether or not there was a final determination on the merits of a substantive point in the arbitration. Here, there was no finding on the recoverability of the “moral damages” at all. Those were capable of being pursued on the existing factual evidence to the extent that it referred to them at all, which it does not appear to have done, or indeed I suppose at a further stage in the arbitration if an adjournment had been sought in respect of that part of the case. There was no final determination of that element nor were the arbitrators functus in respect of it.”

The Court concluded [40]:

“In the circumstances, it cannot, in my judgment, be said that there has been any irregularity let alone a serious irregularity. It cannot be said that this is an extreme case where what has happened is so far removed from what could reasonably be expected of the arbitral process that the court will take action. To the contrary, the Tribunal, conscious of the need for each party to have the reasonable opportunity to put its case and to be able to deal with that of the opponent and to provide a fair means of resolution of the dispute, made a decision which, on its face, seems eminently fair and sensible when making its procedural ruling. It is a decision which any court could have reached had it been charged with such a decision. Nor can it, in my judgment, be said that that substantial injustice has or will result, not only because there was no final decision on the merits of that element of the claim but because in the light of the history as recorded in this judgment as well as the Tribunal’s decision, K was given every opportunity to make submissions on the exclusion of the evidence.”

See the review of this case by Clyde & Co, who conclude:

“The judgment confirms, in no uncertain terms, that the list of grounds for “serious irregularity” in section 68 of the Act is “exhaustive” and that there is no exception to the rule that section 68 is concerned only with due process. It is not for the Court to take it upon itself to assess whether a correct decision was reached by a tribunal. Far too often section 68 challenges are brought by parties who are simply dissatisfied with a tribunal’s decision, but this judgment provides yet another clear warning to all potential applicants in such arbitration claims that “applications under section 68 are not the place for appeals on points of law or fact, nor is there any room for appeals against procedural or case management decisions where there has been no procedural unfairness in reaching those decisions. Nor is there any scope for a challenge under the section to anything other than an award.” Applicants should think carefully before bringing an arbitration claim under section 68, or they are likely to risk finding themselves in indemnity costs territory.”

See also the review by Herbert Smith Freehills, who comment:

“This case provides further guidance on bringing a s68 challenge and illustrates that successful challenges remain rare. It highlights that whether there has been a failure of due process is most important to a challenge based on serious irregularity and the old law which preceded the Act is of limited relevance to such a challenge. Authorities relating to the old law should, therefore, be relied upon with caution as they are likely to be of equally limited relevance. Also of interest is the Court’s clarification on how to determine if something is an award capable of challenge under s68. The Court considered the most important characteristic of an award to be a final determination on the merits of a substantive point in an arbitration. If there is doubt over whether a decision constitutes an award, it is advisable to explore other courses of action for responding to a decision before bringing a challenge under s68. For example, as advised by the Court in this case, where the relevant decision is procedural, seeking a further procedural order would be most appropriate. Bringing a challenge under s68 should be a last resort, and the case confirms once again that the bar is set very high to challenge an award successfully under s68.”

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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