English High Court Sets Aside Award For Failure To Properly Cross-Examine A Witness On A Core Issue And Basing Its Decision On Matters Not Properly Argued By The Parties

In P v D [2019] EWHC 1277 (Comm), the English High Court set aside an arbitral award on the basis that the tribunal had reached a finding of fact on a core issue that had not properly been put to a witness in cross-examination and that the tribunal had based its decision on a case not properly argued by the parties. Under s68 of the Arbitration Act 1996 (the "Act"), the court has the power to set aside an award on grounds of serious irregularity. It is rare for the court to exercise this power - although that does not deter aggrieved parties from submitting applications to set aside. The judgment gives important guidance on the court's approach on this important procedural issue, and addresses considerations of fairness to witnesses in cross-examination, and to the parties putting those witnesses forward.

Background

A company, "D", made loans to another company, "P", under a written agreement which had 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 where they agreed orally to extend the day of repayment of the loan by two years from 1 January 2018 to 1 January 2020, which was subsequently confirmed orally in another meeting between Mr E, Mr D and others. P argued that there was an agreement or estoppel to this effect, and that the loan was therefore not due. D argued that no extension was ever agreed between Mr D and Mr E.

Mr E and Mr D submitted witness statements in the arbitration and were both cross-examined at the hearing. P alleged that D's counsel did not cross-examine Mr E on the subject of the meetings at which the agreement was alleged to have been reached.

The award

The tribunal considered the evidence of Mr D and Mr E and held that P had succeeded in showing there was an estoppel, but only until 1 January 2018. P had failed to show that the parties had agreed to an extension from 1 January 2018 to 1 January 2020 or that D was estopped from demanding repayment of the loan after 1 January 2018.

P made a request for clarification on this aspect of the tribunal's award. The tribunal's clarification noted that, in its view, there was a shared assumption between the parties that the extension would be agreed into a "wider package", but until all the elements of the wider package were agreed, that shared understanding would have no legal consequences and would not...