Company “D” made loans to company “P” under a written agreement which contained a ‘no oral modification clause’. In the arbitration, D claimed that P was obliged to repay the loans under the agreement. P defended the case on the basis that its principal (Mr E) and D’s principal (Mr D) had a meeting in 2015 where they agreed orally to extend the date of repayment of the loan, which was subsequently confirmed orally in another meeting in 2016. P argued that there was an agreement or estoppel to this effect, and that the loan was therefore not due. D’s case was that no extension was ever agreed between Mr D and Mr E.
The Arbitrators found that, notwithstanding the ‘no oral modification’ clause, there was an estoppel by which D was precluded from demanding the payment of any loans due to it before January 2018, but that there was neither an agreement nor an estoppel, as P contended, extending the repayment date to January 2020.
Application under s. 68 of the Arbitration Act
P issued an application upon s68(2)(a) of the Act contending that the Arbitrators acted in breach of their duty under s33 of the Act to "act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent". One of the grounds for the application was that, in relation to the 2015 meeting, there was no cross-examination of Mr E by counsel for D notwithstanding Mr E had given a witness statement which appeared to be inconsistent with contemporaneous documentation relating to the 2015 meeting.
In finding for the applicant, Sir Michael Burton, sitting as judge of the High Court, made it clear that success under s. 68 does not only require the establishment of serious irregularity by reference to s68(2)(a), but also that the Court considers that such serious irregularity has "caused or will cause substantial injustice to the applicant". On the facts of the case, in considering whether substantial injustice had been caused, the Judge stated that: “Mr E's evidence had potential flaws which were calling out for cross-examination both as to its "proper analysis" and otherwise”. The Judge said Mr E’s case was, on the face of it, inconsistent with the contemporaneous documentation, a fact that had particularly impressed the Arbitrators notwithstanding he had been given no opportunity to defend his credibility in cross-examination.
Burton J summarised his position by saying: “I cannot possibly say that if [P’s witness] had been properly cross-examined and given the opportunity to deal with what were in the event seen as weaknesses by the Arbitrators in his case and/or to deal with the alternative case which [D’s counsel] did not run, there might not have been a different outcome”.
The Court’s decision serves as a reminder to arbitrators of the importance of endorsing principles of fairness by ensuring that witnesses are given a proper opportunity to address possible weaknesses in their evidence, particularly in circumstances where such evidence is not accepted by the Tribunal.