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In Martin & Ors v Harris [2019] EWHC 1962 (Ch) the English High Court (Chancery Division) set aside an arbitral award pursuant to s 69 of the Arbitration Act 1996 (the “1996 Act”). In reaching its decision, Mr Michael Green QC, sitting as a Deputy Judge of the Chancery Division, held that a s 69 appeal on a point of law may succeed where a tribunal correctly states the law, but does not then apply those legal principles correctly.
The Respondent, Mr Harris, was a partner of Coban 2017 LLP (the Third Appellant, previously Strutt & Parker LLP (“S&P”)). The First and Second Appellants were also partners of S&P. Following the Respondent’s retirement from the partnership, an arbitration was commenced to determine (among other things) (i) whether the Respondent was entitled to an indemnity from the Appellants pursuant to an agreement made upon his retirement in respect of the Capital Gains Tax on an amount of compensation he was paid (the “CGT”), and (ii) whether such an indemnity, if found to exist, included any penalties that may be charged by HMRC in respect of that CGT liability.
On 23 May 2018, the Arbitrator delivered a Final Award which declared that the Appellants were to indemnify the Respondent for the CGT, together with any interest and penalties if so determined by HMRC.
The Appellants appealed the Final Award pursuant to s 69 of the 1996 Act which allows a party to arbitral proceedings seated in England to appeal to the court on a question of (English) law arising out of an award made in the proceedings. Section 69 of the 1996 Act is not mandatory and parties often contract out of it (many of the main institutional rules, for example, contain provisions to that effect). However, in this case, the parties had expressly agreed that a s 69 appeal would be available, so not only was that section available for use, but permission to appeal was also not required.
The Appellants argued that the case raised three questions of law regarding the formation and construction of the relevant agreement on which the Arbitrator had erred. On these points, the judge ultimately found for the Appellants, ordering that the Final Award be set aside and that it would be inappropriate to remit the matters in question to the Arbitrator for reconsideration.
In reaching this conclusion, the judge considered certain submissions made by counsel for the Respondent concerning the operation of s 69 appeals. In particular, counsel referred to a number of authorities to support the position that, provided the tribunal has set out the relevant legal principles correctly, the application of those principles should not be subject to challenge. However, the judge disagreed finding that that, if a tribunal correctly states the law but then does not apply those legal principles correctly, that could be an indication that the tribunal did not properly understand the legal principles that it had stated. Therefore, the mere fact of accurately setting out the broad legal principles that are applicable cannot make the decision immune from challenge under s 69 of the 1996 Act.
19 September 2019
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