Lawbite: Start as you mean to go on: challenging an arbitrator’s draft award

The Scottish Court of Session recently considered whether a tenant could raise new arguments to support its case when appealing an Arbitrator’s draft award.

The tenant had appealed an Arbitrator’s draft award made following a dispute about the landlord’s dilapidations claim. The Court considered whether the tenant could introduce – during the appeal – arguments that had not been put to the arbitrator. In particular, the tenant wanted to raise an interesting point about the landlord ability to  enforce the repairing obligation in its lease where  the landlord was itself in breach of its lease obligations.

The tenant claimed that the landlord had failed to hand the property to it in the condition required by the lease when the lease began. Because the property was not in the condition it was required to be in at the outset of the lease, the tenant said that the landlord should not be able to enforce the repairing obligation when the lease ended.

This relied on the doctrine of mutuality of contract which provides that a contract can only be enforced by a party which has performed its own obligations.

The decision will be of interest to landlord and tenants of Scottish commercial property.

Challenging an arbitration award

An arbitration award can only be appealed in limited circumstances. Relying on the Scottish Arbitration Rules, the tenant tried to argue that there had been a “serious irregularity” in the conduct of the arbitration. It said  that the arbitrator had failed to consider its arguments on “mutuality of contract” and how the landlord’s own breaches affected the landlord’s entitlement to enforce repairing obligations at lease expiry.

The Court’s conclusion

The Court considered the arguments which had been put to the arbitrator and concluded that the appeal involved new arguments which had not previously been made either before, during the arbitration hearing, or in further submissions lodged afterwards.

While the tenant had raised points about the obligations to “keep” and “put” in repair during the arbitration, it had not argued the  specific point that the repairing obligation could only be enforced if the landlord had ensured the property was in the appropriate state at the start of the lease.

The Court agreed with the landlord that this new argument had come too late in the day. Allowing new material at that stage would frustrate the object of arbitration of resolving disputes fairly, impartially and without unnecessary delay or expense. Substantial delay and expense could be incurred if the landlord wanted to respond to the new argument and a hearing could be required. The arbitrator had already reached her decision – albeit in draft – when the new argument was first made. On that basis, there was no “serious irregularity” in the arbitration award and the tenant’s challenge was dismissed.

Takeaways

• in any contentious process a party must ensure that any argument it wants to make is raised at the correct stage - before the decision or judgment is issued – even in draft. Failing this, the ability to raise the argument will very likely be lost
• the particularly argument which the tenant sought to rely on raises interesting questions about the landlord’s right to enforce dilapidations claims if the property is not in the correct condition , and it is one that may well be raised in a dilapidations dispute in the future
• it is not clear why the tenant hadn’t raised the landlord’s apparent breach at an earlier stage of the dispute
• it’s worth remembering that Scottish dilapidations claims aren’t subject to the same cap on recoverability of damages as applies in England and Wales as a result of s18 of the Landlord and Tenant Act 1927