Compton Beauchamp Estates Ltd v Spence

This is an arbitration claim arising out of an arbitration award which determined the rent payable in relation to an agricultural holding pursuant to the provisions of the Agricultural Holdings Act 1986 (“the 1986 Act”). In the arbitration, the Claimant was the landlord and the Defendant was the tenant of the relevant holding. In the present claim, the Claimant seeks an order under section 68 of the Arbitration Act 1996 (“the 1996 Act”) setting aside the arbitration award in its entirety, or alternatively remitting the matter to the same arbitrator for reconsideration by him whether in whole or in part. At the hearing before me, Mr Peters appeared on behalf of the Claimant. He had not appeared at any hearing which had taken place before the arbitrator. The Defendant did not appear at the hearing before me. However, I was provided with detailed written submissions prepared by counsel, Mr Batstone, who had appeared at the substantive hearing before the arbitrator.

The Claimant is the freehold owner of an agricultural holding known as Kingstone Farm, Ashbury, Kingstone Winslow, Berkshire. The holding extends to some 605 acres and includes a farmhouse and farm buildings. The Defendant is the tenant from year to year of the holding and his tenancy is within the 1986 Act. The Defendant became tenant of the holding pursuant to the succession provisions of that Act. On 15^th January 2009, an Agricultural Land Tribunal made a direction, by consent, in favour of the Defendant pursuant to section 53(7) of the 1986 Act. The effect of that direction was that the Defendant became tenant of the holding with effect from 25^th March 2009.

The rent payable under the tenancy which preceded the Defendant’s tenancy of the holding was £28,500 per annum, with effect from a date in 1999. The Claimant gave the Defendant a notice under section 48(3) of the 1986 Act (read together with section 56(3) thereof) requiring an arbitration as to the amount of the rent payable under the Defendant’s tenancy of the holding, with effect from 25^th March 2009. In due course, the President of the Royal Institution of Chartered Surveyors appointed an arbitrator, Mr Roderick Mackay, FRICS, FCIArb, to determine the amount of the rent payable for the holding with effect from 25^th March 2009.

The 1986 Act prescribes the basis for the determination of the rent in this case. Section 48(7) read together with section 56(3) provides that the arbitrator is to determine what rent should be properly payable from the relevant date, in this case 25^th March 2009. The “rent properly payable” is elaborated by section 48(9) which provides:

Paragraph 1 of schedule 2 to the 1986 Act provides:

On 12^th April 2010, following a preliminary hearing (by telephone), the arbitrator gave directions for the conduct of the arbitration. He directed sequential Statements of Case so that the Claimant was to serve its Statement of Case first, to be followed by the Defendant’s Statement of Case. He also directed that there be sequential exchange of expert evidence with the Claimant to serve its expert evidence first, to be followed by the expert evidence on behalf of the Defendant. The arbitrator also stated in his directions that he would in due course make a reasoned award. The parties then served sequential Statements of Case; the Claimant contended that the rent properly payable was £46,000 per annum and the Defendant contended for a rent of £28,500.

Thereafter, the Claimant served two expert’s reports. The first was from a Mr Hollis, who principally dealt with the productive capacity and the related earning capacity of the holding. The second report was from a Mrs Martin, MRICS FAAV, who expressed her opinion as to rental value in accordance with the statutory formula in the 1986 Act. In her opinion, the rent properly payable was £47,000. In relation to the productive capacity and the related earning capacity of the holding, Mrs Martin relied upon the report of Mr Hollis.

Following his receipt of the expert evidence on behalf of the Claimant, the Defendant served two expert’s reports. The first was from a Mr Green who principally dealt with the productive capacity and the related earning capacity of the holding. The second report was from a Mr Horton, MRICS FAAV, who expressed his opinion as to rental value in accordance with the statutory formula in the 1986 Act. In his opinion, the rent properly payable was £28,500 (ignoring a separate dispute about a possible disregard of certain works, to which I refer in the next paragraph). In relation to the productive capacity and the related earning capacity of the holding, Mr Horton relied upon the report of Mr Green.

There was an issue between the parties as to the correct treatment of certain building works and other works which were said to have been carried out under the tenancy which preceded the Defendant’s tenancy. The Defendant contended that the effect on rent of these works was to be disregarded when determining rental value under the statutory formula. The Claimant disagreed. That issue generated a considerable number of written submissions. Eventually, the arbitrator referred the issue to counsel, acting as a legal assessor, and counsel advised that the effect on rent of these works was not to be disregarded. In due course, in his award, the arbitrator followed the advice of counsel in this respect.

Prior to the substantive hearing of the dispute there was a further hearing (by telephone) for directions at which a question as to the applicable rules of evidence was debated. The arbitrator then gave directions as to the rules of evidence which would apply although that matter was revisited at the later substantive hearing.

The substantive hearing took place on 10^th and 11^th May 2011. The Claimant’s advocate at that hearing was a surveyor (who did not give any expert evidence) and the Defendant was represented by Mr Batstone. The four experts to whom I have referred gave evidence and were cross-examined. Following the hearing, the arbitrator carried out an unaccompanied inspection of the holding.

I have been provided with the written opening submissions which were supplied by the advocates to the arbitrator. In his written opening submissions, the advocate for the Claimant referred to the conflicting evidence as to the productive capacity and the related earning capacity of the holding. He apparently provided the arbitrator with two tables setting out the rival figures. Those tables were not supplied to the court on the present application. In his written opening submissions, the advocate for the Defendant discussed in detail (between paragraphs 18 and 55) the rival positions as to the productive capacity and related earning capacity of the holding.

Although the oral hearing concluded on 11^th May 2011, it was not until July 2011 that the advocates provided written closing submissions to the arbitrator. The Defendant’s submissions are dated 4^th July 2011 and extended to 31 pages. Those submissions did not discuss in much detail the question of productive capacity and related earning capacity but referred to the treatment of that subject in the Defendant’s opening submissions. The Claimant’s closing submissions in response are dated 11^th July 2011 and extended to 25 pages. The Claimant referred to a number of procedural matters which had arisen in the course of the arbitration. The Claimant referred to the various rulings which the arbitrator had given in relation to the rules of evidence and as to the taking of supplemental oral evidence from the Defendant’s witnesses. The Claimant asked the arbitrator to give detailed reasons for his decisions in relation to these matters. Later in that written submission, the Claimant referred to the arbitrator’s preliminary ruling that there be sequential disclosure of expert’s reports. The written submission did not expressly ask the arbitrator to give reasons for that preliminary ruling. The Claimant’s written closing submissions then invited the arbitrator to reject the evidence of Mr Horton on the ground that he was a partisan witness and therefore not a reliable independent expert. It was further submitted that the evidence of Mr Green was unreliable and should not be accepted. The Claimant then submitted that the evidence as to allegedly comparable rents was not reliable so that the arbitrator should give greater importance to the budgetary evidence which was then discussed in considerable detail.

The arbitrator’s award is dated 12^th November 2011 and it stated that it was delivered to the parties on 18^th November 2011. The arbitrator first referred to formal matters as to his appointment and the procedure followed: paragraphs 1 and 2. He then made his award to the effect that the rent properly payable from 25^th March 2009 was £34,800 and that the various works referred to by the Defendant were not to be disregarded; he reserved questions as to costs: paragraph 3. The section of the award beginning at paragraph 4 was headed: “Reasons”. Paragraph 4.1 then set out some facts which were not in dispute. Paragraph 4.2 (extending to about 1/2 of a page) set out a summary of the Claimant’s case and paragraph 5 (extending to about 1/3 of a page) set out a summary of the Defendant’s case.

Paragraphs 6 and 7 of the award were in these terms:

Paragraph 8 of the award dealt with the issue as to the claim by the Defendant that the effect on rent of certain works should be disregarded. That part of the award ran to a little over 2 pages. The arbitrator attached to his award the opinion of the legal assessor and he accepted the advice contained in that opinion. The award then concluded in paragraphs 9 and 10 in these terms:

Following the award, both parties asked the arbitrator to give further reasons for the award. They both sought to rely on section 57(3) of the 1996 Act. The Claimant raised a large number of points and, in particular, it:

asked for reasons for the arbitrator’s various decisions on the rules of evidence and on the admission of supplemental evidence;

asked for reasons for the arbitrator’s decision to direct sequential disclosure of expert’s reports; it was said that this request had been made “at the hearing”;

pointed out the discrepancy between the figures of £64,700 and £32,350 in one place and £64,650 and £32,325 in a later place in the award;

asked for clarification of the arbitrator’s decision in relation to the farmhouse;

asked for clarification as to the comment in paragraph 6.2 of the award that the comparables were backing for Mr Horton’s professional opinion;

asked for the arbitrator’s reasons for his decision in relation to marriage value;

asked various questions in relation to productive capacity and related earning capacity; these included a question as to Mr Green’s evidence, a question about the problem with the soil, a question about Mr Hollis’ livestock system and a request for the calculation which led to the figure of £64,700;

asked a large number of questions as to the arbitrator’s assessment of each of the expert’s witnesses in view, in particular, of the Claimant’s contention that Mr Horton and Mr Green were said to be biased.

In his request to the arbitrator for reasons for his award, the Defendant’s counsel referred to a number of authorities on the duty of an arbitrator or a court to give reasons for a decision. The Defendant then agreed with the Claimant that the arbitrator should give reasons for the award by explaining how he reached the figure of £156,700 for total gross margin and the figure of £92,100 for fixed costs (and so produced a resulting figure of £64,650) and the figure of £2,475 for the farmhouse. In addition, the Defendant sought clarification of the discrepancy in the figures which had been referred to by the Claimant. Further, the Defendant joined with the Claimant in seeking clarification of the reference to the comparables being backing for the professional opinion of Mr Horton. Apart from these matters, the Defendant submitted that the Claimant’s request for reasons went beyond what was permitted by section 57(3) of the 1996 Act. The Defendant then added a further request for clarification of a part of the award dealing with the claim to disregard the effect on rent of certain works.

Before it received the arbitrator’s responses to the requests under section 57 of the 1996 Act, the Claimant brought the present proceedings. It appears that it did so for the avoidance of doubt and to prevent it being said that it would be out of time to challenge the award, if it waited for the arbitrator’s response to the section 57 request. This meant that the grounds of challenge put forward in the present proceedings did not take account of the arbitrator’s response which came later on 28^th December 2011. Further, the present claim has not been amended following that response.

The claim was made under both section 68 and 69 of the 1996 Act. In reliance on section 68, it was said that the award should be set aside in its entirety or, alternatively, that it be remitted in whole or in part to the same arbitrator for reconsideration. It was said that there were a number of irregularities affecting the proceedings or the award which had caused substantial injustice to the Claimant. In reliance on section 69, the Claimant sought permission to appeal from the award and, if permission were granted, the Claimant sought an order that the award be set aside in its entirety or, alternatively, that it be remitted in whole or in part to the same arbitrator for reconsideration.

On 28^th December 2011, the arbitrator replied in writing to the applications which had been made to him in reliance on section 57 of the 1996 Act. The reply contained the following:

The Claimant’s application for leave to appeal pursuant to section 69 of the 1996 Act was considered, on the papers, by Newey J. In a written decision made on 12^th March 2012, Newey J refused leave to appeal. He considered that the proposed appeal raised three specific issues, as follows:

whether the arbitrator was wrong in law to reject the evidence of Mrs Martin as to the rent properly payable in respect of the farm house on the basis that her valuation figure was “not a figure in accordance with the Agricultural Holdings Act 1986”;

whether the arbitrator was wrong in law to rely on the “comparables” referred to in Mr Horton’s evidence when determining the rent properly payable for the holding; and

whether the arbitrator was wrong in law to hold that the rent properly payable in respect of the holding should not reflect any element of marriage value.

As to the first of these issues, Newey J held that the arbitrator’s view was not obviously wrong and that no question of general public importance was raised. He held that the position was similar in relation to the second issue. As to the third issue, he held that the point was not sufficiently important to warrant the grant of leave to appeal as it did not substantially affect the rights of one or more of the parties, given that the amount at stake on that issue was £1,700 a year.

The grounds on which the claim under section 68 of the 1996 Act is advanced are set out in detail in an attachment to the Claim Form, are then further elaborated in a lengthy witness statement (of some 36 pages) and are then advanced in Mr Peters’ skeleton argument. In summary, the Claimant contends that:

the arbitrator failed to comply with the general duties of an arbitrator under section 33 of the 1996 Act;

he failed to conduct the proceedings in accordance with the procedure agreed by the parties;

he failed to deal with the issues that were put to him;

there is uncertainty and ambiguity as to the effect of the award;

the arbitrator failed to comply with the requirements as to the form of the award, in particular, because the reasons for the award were inadequate.

It is convenient at this point to set out a number of provisions of the 1996 Act which may bear on the claim made in this case.

Sections 33 and 34 provide:

By section 52(4), in the circumstances of this case, the award was required to contain the reasons for the award.

Section 57 provides:

Section 68 provides:

Section 69 allows a party to seek to appeal to the court on a question of law arising out of an award. An appellant needs to obtain from the court leave to bring such an appeal. By section 69(3), leave to appeal is only to be given in specified circumstances. In the present case, the Claimant sought leave to appeal pursuant to section 69 and leave to appeal was refused.

Section 70(1) to (5) provide:

Section 73(1) of the 1996 Act identifies certain circumstances in which a party to an arbitration may lose the right to object to an irregularity which has occurred. In the circumstances of this case, it is not necessary to consider that section.

By section 94, the above provisions apply to an arbitration under the 1986 Act. In particular, by section 95(1), those provisions apply to such an arbitration as if the arbitration were pursuant to an arbitration agreement and as if the 1986 Act were that agreement and as if the parties to the arbitration were parties to that arbitration agreement.

A party may challenge an arbitration award on the grounds of “serious irregularity”. For this purpose it must be shown that there is an irregularity within one of the paragraphs of section 68(2) and that the irregularity has caused or will cause “substantial injustice” to the party relying on section 68.

The requirement that the party relying on section 68 shows “substantial injustice” was discussed in the report, dated February 1996, on the Arbitration Bill, which became the 1996 Act, of the Departmental Advisory Committee on Arbitration Law (“the DAC report”) in the following terms:

The courts have consistently followed the lead given in that paragraph of the DAC report. It was approved by the House of Lords in Lesotho Development v Impregilo SpA [2006] 1 AC 221 at [27]. Lord Steyn in that case at [35] further stressed the requirement that the applicant show that the irregularity caused substantial injustice. The approach identified in the DAC report was also applied by Morison J in Fidelity Management SA v Myriad International Holdings BV [2005] 2 Lloyd’s Rep 508. That case considered section 68 generally and, in particular, section 68(2)(d). As to section 68(2)(d), the judge followed earlier authority in holding that there was no failure “to deal with an issue” just because an arbitrator did not set out each step by which he reached his conclusion or did not deal with every point made by the parties. There is a difference between a failure to deal with an essential issue, which is an irregularity within section 68(2)(d), and some other failure of reasoning, which is not. A failure of reasoning might in some cases allow a party to seek clarification under section 57(3) or might allow a party to seek an order from the court under section 70(4). Further, a failure of reasoning may give rise to an irregularity within section 68(2)(f) or may mean that the form of the award does not comply with section 52(4), thereby enabling a party to contend that there is an irregularity within section 68(2)(h). I will, later in this judgment, consider in detail the scope of the duty of an arbitrator to give reasons for his award.

The reasoning in the relevant passage of the DAC report and in the above cases was influenced by the fact that the usual model of arbitration which is governed by the 1996 Act is a consensual arbitration. However, I consider that it is clear that where (as in the present case) the arbitration is governed by the 1996 Act by reason of the operation of sections 94 and 95 of the 1996 Act, then the 1996 Act applies to such an arbitration in the same way as it applies to a consensual arbitration: see Peel v Coln Park LLP [2010] EWCA Civ 1602 at [23] and [25].

In the course of Mr Peters’ oral submissions on this application, he identified a number of alleged irregularities in relation to the proceedings and/or the award. However, it became more and more clear to me as the argument developed that his case involved to a large extent multiple criticisms of the adequacy of the arbitrator’s reasons for his award. Indeed, the possibility emerged that if the Claimant were not able to succeed in its challenge to the adequacy of the arbitrator’s reasons, then it might be difficult for the Claimant to succeed on other grounds. Conversely, if the Claimant’s criticisms of the arbitrator’s reasons resulted in the matter being remitted to the arbitrator for further reasons, then the giving of those further reasons might be highly relevant to the other grounds of challenge which should only be finally determined in the light of any further reasons provided by the arbitrator.

Mr Peters did not refer in his skeleton argument to any authorities as to the standard which an arbitrator should be expected to achieve in relation to giving reasons for an award. Mr Batstone’s written submissions in opposition to this claim did not refer to any such authorities either, although he had referred to some relevant authorities as to the need to give reasons when seeking further reasons pursuant to section 57 of the 1996 Act. At the end of the hearing, I asked Mr Peters to provide me with the principal authorities on the subject of adequacy of reasons and, in particular, authorities dealing with reasons in awards or other decisions determining disputes as to valuation or involving expert evidence. After the hearing, Mr Peters promptly provided me with copies of a number of authorities which have indeed been very helpful to me in the course of considering this judgment. Those acting for the Defendant were informed of the further authorities which Mr Peters provided to me.

In the light of the way the case developed at the hearing, I consider that I ought to deal next with the issues arising as to the adequacy of the reasons given by the arbitrator, before considering the other grounds of challenge which are put forward. For this purpose, I will begin by considering the legal position as to an arbitrator’s duty to give reasons for his award.

Section 52(4) of the 1996 Act states that an award shall contain the reasons for the award unless it is an agreed award or the parties have agreed to dispense with reasons. The DAC report referred to the obligation to give reasons in these terms:

There is no shortage of reported cases which discuss the issue as to what reasons ought to be provided for a judicial decision. These cases can be grouped as follows: (1) reasons to be given by a court (particularly in cases involving disputes between experts) (Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377 and English v Emery Reimbold Strick Ltd [2002] 1 WLR 2409); (2) reasons by arbitrators (Re Poyser & Mills’ Arbitration [1964] 2 QB 467 and Bremer Handelgessellschaft v Westzucker (No. 2) [1981] 2 Lloyd’s Rep 130); (3) reasons by statutory tribunals (Mountview Court Properties Ltd v Devlin (1970) 21 P&CR 689 and Curtis v London Rent Assessment Committee [1997] 4 All ER 842); and (4) reasons for planning decisions (Save Britain’s Heritage v Number 1 Poultry Ltd [1991] 1 WLR 153 and South Bucks DC v Porter (No. 2) [2004] 1 WLR 1953). It is also relevant to single out cases which discuss the giving of reasons in relation to valuation disputes: see Mountview and Curtis. As many of these cases cross-refer to each other, it is convenient to refer to them in chronological order.

Given that the present case concerns an agricultural arbitration, and given the significance the following decision subsequently had, it is fitting to begin with Re Poyser & Mills’ Arbitration, which concerned an arbitration under the Agricultural Holdings Act 1948. Section 12(1) of the Tribunals and Inquiries Act 1958 required the arbitrator in such a case to give “a statement, either written or oral, of the reasons for the decision if requested”. Megaw J described the purpose of the requirement for reasons and the standard to be achieved by such reasons as follows:

This passage in Re Poyser & Mills’ Arbitration was adopted by the Divisional Court when considering the reasons to be given by a rent assessment committee determining the amount of a fair rent under the Rent Acts: Mountview Court Properties Ltd v Devlin.

In Bremer Handelgessellschaft v Westzucker (No. 2), at pages 132-133, Donaldson LJ described what was required for a reasoned award in the context of the Arbitration Act 1979, in these terms:

In Save Britain’s Heritage v Number 1 Poultry Ltd, the House of Lords considered the standard to be achieved by reasons given by the Secretary of State for a planning decision. The standard described in Re Poyser & Mills’ Arbitration was again adopted. I will refer to this decision again below as to the approach to be adopted to the question, which arises in the planning context, whether a party is “substantially prejudiced” by a deficiency in the reasons given.

In Curtis v London Rent Assessment Committee, the Court of Appeal (the judgment was given by Auld LJ with whom Butler-Sloss and Hirst LJJ agreed) discussed in detail the standard for reasons to be given by a rent assessment committee determining a fair rent under the Rent Acts: see at 865f – 868a. The standard described in Re Poyser & Mills’ Arbitration was again adopted. It was said that the reasons given must condescend to the principal important controversial issues; the committee’s explanation will require some “working through”; it will require some use of figures to demonstrate the committee’s workings towards, or calculation of, the final fair rent figure. Conversely, it was said that “rent assessment committees, like other tribunals, are not required to articulate their reasons to the exacting standards and with the accuracy and precision required of a court” (see at 867a).

Flannery v Halifax Estate Agencies Ltd concerned the standard of reasons to be given by a court, particularly in a case where the decision involved the assessment of evidence given by rival experts. The issue in that case was the cause of cracks in a property which was alleged to have been negligently surveyed. The experts put forward rival theories as to the cause of the cracks. The judge merely stated that he preferred one expert to the other. In the judgment of the Court of Appeal (delivered by Henry LJ) it was held that this reasoning was inadequate. The court quoted an earlier comment by Bingham LJ in Eckersley v. Binnie (1988) 18 Con.L.R. 1, 77–78 which stated: “a coherent reasoned opinion expressed by a suitably qualified expert should be the subject of a coherent reasoned rebuttal, unless it can be discounted for other good reasons”. The court then made these general comments:

Following the decision in Flannery, there were many appeals to the Court of Appeal where the appellant challenged the adequacy of the reasons in the decision under appeal. In English v Emery Reimbold Strick Ltd, the Court of Appeal considered three such appeals, two of which concerned the trial judge’s assessment of competing expert evidence. The court was principally concerned with the difficulty of an appeal court hearing an appeal from a judgment which arguably contained inadequate reasoning. However, the judgment of the court (given by Lord Phillips of Worth Matravers MR) contains passages of general application. It was said at [17] and [19]:

It was said in Curtis that the duty on the tribunal in that case to give reasons for its decision was less onerous than the duty on a court to give reasons for its decision. The same is sometimes said about the duty of an arbitrator to give reasons. Whatever the precise difference between the duties, I consider that the duty on an arbitrator to provide a reasoned award under section 52(4) of the 1996 Act is not less than the duty as described in the above cases dealing, in broadly similar ways, with arbitrators, tribunals and planning inspectors. The two cases which I have cited dealing with reasons to be given for court decisions (Flannery and English) involved the need to give reasons in relation to disputes as to expert evidence. In a case like the present, where the arbitrator is chosen for his experience in the relevant expert discipline, I do not see any particular reason why the duty on such an arbitrator to explain why he has preferred one expert to another should be fundamentally different from the duty on a court in such a case.

It is clear from the above citations that an arbitrator should explain why he has decided the essential issues in the way in which he has. An award which did not contain such reasoning would not comply with section 52(4) of the 1996 Act and that would give rise to an irregularity within section 68(2)(h) of the 1996 Act. However, there will only be a “serious irregularity” if the failure of reasoning has caused or will cause substantial injustice to a party. Some guidance as to when inadequate reasons might cause substantial injustice to a party can be derived from the cases which have considered the adequacy of reasons in the context of the Town and Country Planning Act 1990, section 288. A planning inspector is obliged to give reasons for his decision but section 288(5)(b) provides that an aggrieved person may only challenge the decision on the ground that the reasons are inadequate where the applicant shows that its interests have been “substantially prejudiced” by the failure to give proper reasons. The right approach to “substantial prejudice” was considered by the House of Lords in Save Britain’s Heritage and that decision was then further discussed by the House of Lords in South Bucks DC v Porter (No. 2). In South Bucks, the only opinion in the House of Lords was given by Lord Brown, with whom the other members of the House agreed. Lord Brown reviewed the case law as to the adequacy of reasons, starting with Re Poyser & Mills’ Arbitration. He then quoted the earlier remarks of Lord Bridge in Save Britain’s Heritage as follows:

Lord Brown in South Bucks then summarised the position as follows:

It should be noted that this summary of the law dealt with the requirement that the reasons explain why the decision was reached and also with the requirement (imposed by section 288 of the Town and Country Planning Act 1990) that an aggrieved person shows that his interests have been substantially prejudiced by the failure to give adequate reasons.

In relation to the requirement in section 68 that there be “substantial injustice”, Mr Peters drew my attention to Benaim (UK) Ltd v Davies Middleton (2005) 102 Cons LR 1 (a decision of HH Judge Coulson QC, as Coulson J then was) which considered the question of whether and when, for the purposes of section 68 of the 1996 Act, a failure by an arbitrator to give adequate reasons would cause substantial injustice to a party. Judge Coulson said at [95]:

Professor Merkin’s book still contains the same comment as was cited by Judge Coulson and, not surprisingly, the book now refers to the decision in Benaim. I can accept that in many cases there will be substantial injustice where a party does not know the reasons for an award but I would not be prepared to hold that every failure of reasoning which amounts to an irregularity for the purposes of section 68(2)(h) will automatically give rise to substantial injustice. An obvious example is where the point in relation to which the reasoning is inadequate is a point of very little substance, even though it is relevant to the outcome. That might give rise to a case of some injustice but not substantial injustice. Further, in Lesotho Development at [35], Lord Steyn explained that the burden is squarely on an applicant relying on section 68 to secure (if he can) findings of fact which can establish the precondition of substantial injustice.

I consider that the way in which the House of Lords approached the question of “substantial prejudice” in relation to section 288 of the Town and Country Planning Act 1990 is likely to be helpful when considering the question of substantial injustice for the purpose of section 68 of the 1996 Act. That approach did not involve asking whether the reasons were adequate and then concluding that this automatically meant that there was substantial prejudice. Lord Bridge in Save Britain’s Heritage at page 168 stated that a failure to explain how an issue of fact was decided “may” suffice, not that it automatically would suffice. Lord Brown in South Bucks at paragraph [36] emphasised that a reasons challenge would only succeed if the party aggrieved could satisfy the court that he has genuinely been substantially prejudiced by the failure to provide an adequately reasoned decision (so that such a failure did not automatically establish substantial prejudice). Further, I consider that the approach in the planning cases is fully consistent with the importance of the requirement in section 68 that there be substantial injustice, as emphasised in paragraph 280 of the DAC report and in Lesotho Development.

I now need to apply the above principles to the facts of this case. Mr Peters submitted to me that the arbitrator’s reasons in his award were “thoroughly unsatisfactory”. I consider that the standard of reasoning in this award was poor. It was in no sense a model for an award of this kind. The arbitrator could easily have given much fuller reasons and it is not obvious why he did not do so. It is not obvious why he was not prepared to be more helpful when he was specifically requested by the parties, after his initial award, to give further reasons. The arbitrator was no doubt appointed because he had expertise in carrying out rental valuations of agricultural land. The dispute before him involved his assessment of expert evidence on that subject. To reach his conclusions, he had to think through all of the points made by the rival experts. There should not have been any difficulty in him explaining more fully his reasoning on the important points in dispute. His approach has generated unnecessary suspicion and distrust on the Claimant’s part. However, before the Claimant can obtain a remission of the matter under section 68 of the 1996 Act, it has to show that the reasoning in the award was sufficiently deficient to amount to an irregularity and that the irregularity caused or will cause substantial injustice to the Claimant.

In the planning cases, it was suggested that the question whether the reasons were adequate and whether a party was substantially prejudiced by inadequate reasons were not two separate questions but essentially raised a single question. However, in view of the multiple challenges to the reasoning of the arbitrator in this case, I have found it useful to consider the two matters separately, first asking whether the arbitrator explained why he decided the essential issues the way he did and then, secondly, asking whether any failure of reasoning caused substantial injustice to the Claimant.

In summarising the law in paragraph 36 of his speech in South Bucks, Lord Brown pointed out that the relevant decision must be read taking into account that it is addressed to parties who were well aware of the issues involved and the arguments which have been advanced. In this case, in order to consider the adequacy of the reasons, I considered that I needed to familiarise myself with the evidence which was given and the submissions which had been made to the arbitrator. This was a time consuming task. If the arbitrator had provided fuller reasons in his award, it might not have been necessary. I was provided with a full set of the expert’s reports and the written submissions of the advocates and I have read all of that material. However, I was not provided with any note of the cross-examination of the witnesses nor of any oral submissions which were made. Nonetheless, it seemed to me that the material I had was sufficient to inform me of what the parties were to be taken to know, namely, what were the issues involved and what evidence and arguments had been advanced.

I will first consider the way in which the arbitrator dealt with the issue as to the reliability of the expert evidence. In its submissions, the Claimant made a very forceful sustained attack on the reliability of the expert witnesses for the Defendant and Mr Horton in particular. In paragraphs 4.6 and 4.7 of his award, the arbitrator referred briefly to the point being made by the Claimant. He referred, also briefly, to the Defendant’s case that the evidence of Mr Horton and of Mr Green should be preferred to the evidence from the Claimant: see paragraphs 5.1 and 5.2. The arbitrator also referred to the Claimant’s criticism of Mr Horton’s use of comparables. In view of that criticism, the arbitrator said that he would only take the so-called comparables as “backing for his professional opinion”. Later the arbitrator said that he did not find the evidence of Mr Horton and Mr Green to be biased. Instead, he thought that all four of the expert witnesses were partisan in the evidence which they had given.

As regards the Claimant’s case that Mr Horton was an unreliable witness, if that issue had been central to the arbitrator’s conclusions, then I would not have considered that the arbitrator had given adequate reasons for his conclusion about Mr Horton. The arbitrator expressed the conclusion that Mr Horton was not biased but that he was partisan (like the other three expert witnesses). The arbitrator did not adequately explain the distinction he was trying to make. Even if the arbitrator’s conclusion as to Mr Horton were held to be clear, the arbitrator did not say why he reached that conclusion. In other words, the conclusion is unreasoned. However, with the exception of Mr Horton’s evidence as to the value of the farmhouse, Mr Horton’s evidence did not in the end affect the outcome of the arbitration. The arbitrator assessed the rental value of the holding by reference to the productive capacity and the related earning capacity of the holding and not by reference to comparables. Mr Horton did give evidence that the income from the holding should be split 50/50 between the landlord and the tenant but there was no dispute about that point. So, with the exception of the farmhouse, it did not matter what evidence Mr Horton gave. So, with that exception, it did not matter whether Mr Horton was unreliable for the reasons put forward by the Claimant. So, with that exception, it did not matter what reasons the arbitrator had for reaching whatever conclusion he did reach about Mr Horton. As a result, with the exception of the evidence as to the farmhouse, it was not strictly necessary for the arbitrator to explain why he reached his conclusions about the reliability of Mr Horton. I will deal with the arbitrator’s reasons in relation to the farmhouse later in this judgment. If I am wrong in holding that the issue as to Mr Horton’s reliability was not an essential issue, then I would not be persuaded that the arbitrator’s failure to give reasons for his conclusion on that issue caused any substantial injustice to the Claimant. I consider that it would have been open to the arbitrator to reach his overall conclusion as to rental value and to say that he did not have to decide the very contentious issue as to the reliability of Mr Horton’s evidence.

The Claimant’s attack on Mr Green’s reliability was nothing like as severe as its attack on Mr Horton. As to Mr Green, the arbitrator said that he was somewhat partisan, like the other experts. The arbitrator marginally preferred Mr Green’s system of cropping etc to the system put forward by Mr Hollis. The arbitrator considered that Mr Green was overcautious. I conclude that in relation to his conclusion that he should adopt Mr Green’s evidence subject to removing the element of over-caution, the arbitrator had just done enough to give reasons for his readiness to accept Mr Green as a broadly reliable witness.

I turn next to consider whether the arbitrator gave adequate reasons for his conclusions as to the productive capacity and related earning capacity of the holding. For this purpose, I must take account of the original award and the further reasons provided under section 57 of the 1996 Act. I also have to read the award on the basis that it is addressed to parties who are familiar with the issues involved and the arguments raised. I will deal first with the question of crop gross margins. It is useful to set out the rival cases and the arbitrator’s conclusions. The arbitrator did not set out these matters in his award but the parties would have known the matters which I now set out.

Apart from the figures determined by the arbitrator, his reasons for his conclusions are contained in paragraphs 7.1.2 to 7.1.5 of the award. What I understand the arbitrator to be saying is this: “I have two budgets. They are prepared on different bases. I prefer Mr Green’s approach to Mr Hollis’ approach. However, the arguments (in particular the arguments as to the heavy land and as to grain storage) for and against their approaches means that my preference is by a narrow margin. I do not adopt Mr Green’s figures in their entirety. I think that his figures are too low in that he is too cautious. I will therefore increase his figures. The amount of the increase can be seen if one compares my figures with those of Mr Green.”

I consider that the arbitrator’s reasoning in this respect, when read by a party who knew the issues and the relevant arguments, was just enough to tell the parties why he reached the conclusions which he did reach in these respects.

I will next consider the arbitrator’s reasons as to his conclusions in relation to livestock. Both Mr Hollis and Mr Green had added into their budgets income from livestock on the holding.

In his evidence, Mr Hollis stated that some 90 acres could be used for grazing sheep by a grazier and that would produce an income of £24 per acre for the hypothetical tenant of the farm. He therefore added £2,160 to his budget on this account. In his evidence, Mr Green also allowed for an income for grazing sheep on the same 90 acres. He referred to an income of 20 pence per sheep per week for 26 weeks in each year producing an income of £1,560.

Mr Hollis also considered the possibility of income from a livestock enterprise of some kind. He identified three such enterprises. He referred to contract calf rearing, pig fattening and production of rose veal. He then showed figures for a contract calf rearing enterprise. The resulting gross margin figure for this enterprise would be £12,000. He stated that he thought that the alternative livestock enterprises would produce a similar gross margin figure.

Mr Green also considered the possibility of an income from livestock (apart from sheep) on the farm. He referred to what actually occurred which was that dairy heifers were housed in certain of the buildings in return for the value of the manure they produced, to which he ascribed a value of £4,374. He then referred to the possibility of a pig rearing operation but he considered that the resulting net margin of £5,000 was not significantly greater than the above-mentioned value of the manure. Further, the hypothetical tenant would not have had the time to run such an enterprise. He then considered a contract calf rearing enterprise. He calculated that such an enterprise would produce a net margin of £1,600. Accordingly, he included the figure of £4,374 in his budget.

The arbitrator concluded that the right figure for livestock was £6,550. He dealt with his approach to the question of livestock at paragraph 7.1.3. He preferred Mr Green’s system to that of Mr Hollis. He considered that Mr Hollis’ system was unlikely to be possible in the hands of a competent tenant. I consider that, with one exception, the arbitrator’s reasoning in this respect, when read by a party who knew the issues and the relevant arguments, was just enough to cross the borderline as to adequacy of reasoning. The exception relates to the precise calculation of the figure of £6,550. Mr Batstone in his written submissions to me suggests that the arbitrator took the figure of £2,160 from Mr Hollis and the figure of £4,374 from Mr Green and added them together to get £6,534 which he then rounded up to £6,550. If that had been the arbitrator’s approach, then he should have said so but he did not. It is possible that the arbitrator started with both of Mr Green’s figures, £1,560 and £4,374, and then increased one of them or even both of them because he thought Mr Green was over-cautious. If that had been the arbitrator’s approach, then he ought to have said so but he did not. I therefore must consider whether this failure to explain his conclusion has caused substantial injustice to the Claimant. I am not able to hold that this failure to explain the calculation caused substantial injustice to the Claimant. The difference between the two possible explanations of the calculation is a minor matter only.

I will next consider the question of fixed costs. It is useful to set out the rival positions in relation to fixed costs and the arbitrator’s conclusions in that respect in the following table. The arbitrator did not set out these matters in his award but the parties would have known the matters which I now set out.

The arbitrator pointed out in paragraph 7.1.2 of his award that the rival figures were on different bases. I consider that this remark particularly applied to the question of fixed costs. The parties did not use the same system and provide rival costs for that single system; their costs were for different farming systems. The arbitrator then referred to the subject of fixed costs in paragraph 7.1.6 of the award. In general, the arbitrator appears to have adopted Mr Green’s figures or reduced his figure for costs, in the latter case in favour of the Claimant. It appears from my table that the arbitrator allowed costs of £500 for bank charges when that sum had not been claimed by the Defendant. I have wondered whether that involved a step by the arbitrator which he ought to have raised with the parties before he made his award, giving them the opportunity to deal with that point. However, although it is clear from the award that the arbitrator did allow a cost of £500 for bank charges, there was no comment on this in the lengthy witness statement and submissions which were provided to me on this application. Accordingly, as no point of this kind has been taken, it would be wrong for me to conclude that the arbitrator did anything wrong in this respect. Overall, I consider that the arbitrator’s reasons in respect of his conclusions as to fixed costs were adequate.

I will next consider the arbitrator’s decision in relation to the farmhouse. On behalf of the Claimant, Mrs Martin had stated in her written report that she did not propose to put forward evidence as to the rents paid for individual residential properties in the area of the holding at the relevant date. Instead, she “highlighted” the amount of the Local Housing Allowance which would be used to decide what housing benefit would be available to a person in the Swindon area in 2009. The relevant allowance was £8,340 which for reasons she explained she reduced by 25% to £6,250. The arbitrator summarised the Claimant’s case on this point at paragraph 4.2.4 of the award. The arbitrator held, in effect, that this was not an appropriate way to assess a rental value for the purposes of the 1986 Act. The Claimant sought leave to appeal against this part of the award. Leave to appeal was refused. This part of the arbitrator’s reasoning is not inadequate. His conclusion was that he did not have any relevant evidence from Mrs Martin as to the value of the farmhouse.

That left the evidence from Mr Horton. He relied upon the rent agreed for a farm, the identity of which was not provided. Mr Horton analysed the agreed rent for the unidentified comparable, extracted the figure from the analysis for the farmhouse in that case, reduced it by 10% to reflect disrepair to the farmhouse on the subject holding and expressed the opinion that the rental value of the subject farmhouse should be £2,475.

The arbitrator dealt with the rent for the farmhouse at paragraph 6.1 of the Award, which I have quoted above. He also referred to the farmhouse in paragraph 2.3 of his further reasons. The problem for the arbitrator was that he only had evidence as to the rental value of the farmhouse from one side, i.e. from Mr Horton. The arbitrator felt that he could, and should, accept that evidence. Normally, there would be no doubt that it would be open to the arbitrator to do so and the reasons in his award on this point would have been adequate. However, I now need to return to the question which I discussed earlier as to whether the reasons on this point were adequate given the strenuous attack which had been made on Mr Horton’s reliability. I have already explained that if Mr Horton’s reliability had been a central issue then I would have held that the arbitrator’s explanation for his assessment of Mr Horton was inadequate. It could be argued that I should reach the same conclusion in relation to the arbitrator’s decision to accept Mr Horton’s evidence in relation to the farmhouse. However, I do not reach that conclusion. Mr Horton’s evidence was being relied upon by the arbitrator in one minor respect only and in circumstances where his evidence was the only evidence on that issue. The arbitrator said that he thought Mr Horton was partisan but he was entitled to accept his evidence as the only relevant evidence. Further, even if the reasons were inadequate in this respect, I do not consider that the failure in reasoning in this respect caused substantial prejudice to the Claimant. It cannot be said in this case that the decision left the Claimant in doubt as to whether the arbitrator had committed an error of law or whether the award would be open to challenge by reason of the assessment which the arbitrator had made of Mr Horton; nor could it be said that the lack of reasoning adversely affected the Claimant’s ability to assess its position in relation to future reviews of the rent payable.

I will next consider the arbitrator’s reasons in relation to the Claimant’s case for the addition of marriage value. It is necessary to give my own brief description of what is meant by marriage value in this context. If a potential tenant of the holding were able to occupy and farm the holding together with other land which is available to that person, that fact might produce opportunities and economies which would not be available if the holding were farmed in isolation. This fact might give the holding an enhanced value. This enhanced value is often referred to as “marriage value”. This enhanced value can be reflected in the value of the subject holding when it is valued in accordance with the statutory formula in the 1986 Act. Although paragraph 1(3)(b) of schedule 2 to the 1986 Act directs what is to be done where the rent for a comparable holding contains an element for marriage value in this way, that provision has no bearing on what may be done in relation to any marriage value which is included within the value of the holding itself: see Childers Trustees v Anker [1996] 1 EGLR 1 at 6D. The existence of, and the evaluation of, any such marriage value in relation to the subject holding is a matter for the arbitrator on the basis of the evidence before him.

Mrs Martin on behalf of the Claimant added £1,700 for alleged marriage value in relation to the subject holding. However, her report did not contain any evidence to support the reality of this alleged value. Mr Horton on behalf of the Defendant did not add anything for alleged marriage value in relation to the subject holding.

The arbitrator dealt with marriage value at paragraph 6.2.1 of the Award, which I have quoted above. He held that as marriage value had not been “implemented”, then the value of the subject holding did not include marriage value. I understand his reference to marriage value being “implemented” as meaning that the subject holding was not being occupied and farmed with other land to produce any relevant opportunities or economies. It might be said that this reason was, in law, a bad reason. It might be said that what matters is whether a hypothetical tenant could combine the subject holding with other land so as to give the subject holding an enhanced value. If that had been said, it seems that Mrs Martin had not produced any evidence to suggest that that would be a real possibility. In any case, a criticism of that kind is not a criticism that the arbitrator failed to give adequate reasons for his decision but rather than his reasoning was wrong in law. As I have explained, the Claimant sought permission to appeal the Award under section 69 of the 1996 Act but permission to appeal was refused. In my judgment, there is no separate challenge to this part of the Award based on the alleged inadequacy of the reasons.

Having considered individually the various criticisms of the reasoning in the award, I ought to stand back and consider the position overall. The arbitrator’s reasoning as set out in the award is poor. This has placed a considerable burden on the court of informing itself by reference to the evidence and the parties’ submissions of what the parties themselves are taken to know about the issues in the case. If one is informed in that way, then save in a minor respect the reasoning in the award, although unimpressive, is just about enough to explain the conclusions reached. The minor respect in which the reasons do not explain the conclusions reached does not give rise to substantial injustice to the Claimant.

I will now proceed to consider the other matters which have been raised.

The Claimant says that the arbitrator acted unfairly in giving a direction for the sequential exchange of expert’s reports. As I have explained, at the first directions hearing, the arbitrator ordered the Claimant to serve its expert’s reports first. I was told that the Claimant made clear to the arbitrator that it was unhappy with that direction but it complied with it. The arbitration then took its course. Although the Claimant’s witness statement in support of this claim refers at length to the alleged unfairness of this direction, I fail to see any real unfairness in the arbitrator’s direction. I can also see some justification for it. In any event, the direction dealt with a matter of case management which was a matter for the arbitrator. I do not consider that his direction involved any irregularity of the kind now suggested by the Claimant. In any event, if the direction did involve an irregularity, I do not consider that the direction caused any injustice to the Claimant, let alone any substantial injustice as is required before the court will intervene under section 68 of the 1996 Act.

Notwithstanding the above, the Claimant submits that there was a further irregularity in this context in that the arbitrator did not give reasons for his direction that there should be sequential exchange of expert’s reports. I do not have any specific evidence as to whether the arbitrator said anything about his reasons for making this direction at the first directions hearing. It seems to me to be inherently likely that he said something along the lines that he thought that it was the appropriate direction for him to give. If he did say that, I am not persuaded that he had to say much, if anything, further as to the reasons for a case management direction. But even if the arbitrator had offered no explanation of any kind as to why he was making this direction, this is not a matter which has to be explained as part of the reasons “for the award” within section 52(4) of the 1996 Act. Similarly, a request for such reasons is not within section 57(3)(a) or section 70(4) of the 1996 Act.

The Claimant’s next complaint is that there was an irregularity in relation to the various directions which the arbitrator gave as to the rules of evidence. It is said that he first directed that the strict rules of evidence would apply and then he later changed his mind and directed that those rules need not apply. Further, it is said that he allowed witnesses for the Defendant to give significant further evidence in chief by giving such evidence orally when it was not contained in a report or a witness statement that had been provided at an earlier point in time to the Claimant.

Mr Peters on behalf of the Claimant was not able to throw much light on what the problem was in relation to the application or non-application of the strict rules of evidence. In view of the fact the Civil Evidence Act 1995 applied to this arbitration, the so called “strict rules” of evidence appear to include the rules for the admission of evidence in accordance with that Act. As to the arbitrator’s decision to allow the Defendant to lead supplementary oral evidence in chief, I am not persuaded that this resulted in any procedural unfairness to the Claimant. Accordingly, I do not consider that there was any irregularity in this respect. Further, the Claimant failed to establish that any irregularity in this respect had resulted in any injustice, let alone substantial injustice, to it.

Notwithstanding the above, the Claimant submits that there was a further irregularity in that the arbitrator did not give reasons in his Award for his final stance in relation to the rules of evidence nor as to his decision to allow oral supplementary evidence in chief. As before, I do not have any evidence as to whether the arbitrator said anything about his reasons for making the various directions at the hearing. As to the arbitrator’s duty to give reasons for his award, these are not matters which have to be explained as part of the reasons “for the award” within section 52(4) of the 1996 Act. Similarly, a request for such reasons is not within section 57(3)(a) or section 70(4) of the 1996 Act.

The Claimant also contended that in reaching his conclusions as to the figures he used in his budget he must have gone beyond assessing, and choosing between, the evidence given by the rival experts and impermissibly gave himself evidence (derived from his own knowledge and experience) on relevant matters and then relied on that evidence. It is said that such a course (if it occurred) would be contrary to the principles of natural justice as the arbitrator would have acted on evidence which was not put before him by the parties and without giving the parties an opportunity to deal with that evidence.

It is clear that the arbitrator was able to, indeed had to, use his expertise to evaluate the evidence which was before him. It was permissible for him to use that expertise to adjust the figures put forward by the experts in the way in which he did in this case. He was fully entitled to reach the conclusion that Mr Green’s gross margin figures were over cautious and to determine the appropriate less cautious figures. I do not consider that the Claimant has shown that the arbitrator used his own knowledge and experience in any other way different from this. It follows that it is not necessary on the facts of this case to consider in any detail the guidance given by the Court of Appeal in Checkpoint Ltd v Strathclyde Pension Fund [2003] 1 EGLR 1 as to when it is and when it is not permissible for an arbitrator to rely upon, when reaching his conclusions, the range of knowledge which an arbitrator is expected to have in relation to a dispute of the relevant kind. The Claimant has not shown that the arbitrator did anything impermissible in this respect. Further, I do not consider that it is appropriate to make an order under section 70(4) of the 1996 Act, remitting the matter to the arbitrator for further reasons. I consider that the court has sufficient information to consider the Claimant’s application under section 68 on this ground and to dismiss it.

In its evidence in support of the application, the Claimant referred in great detail to the way in which the arbitrator had dealt with the process of determination of the issue, raised by the Defendant, as to the possible disregard of certain works. It was said that the relevant history showed that the arbitrator had mishandled the arbitration in a number of respects. However, Mr Peters did not press any of those matters at the hearing before me and I need say no more about them.

The result is that I do not accept any of the grounds of challenge in this case. The claim will therefore be dismissed.

If the parties are unable to reach agreement in respect of the costs of this claim after this judgment is handed down, then in order to save expense, I will deal with costs on the basis of written submissions from the parties, to be served in accordance with the following directions. Written submissions in support of any application as to the costs of this claim are to be served on the other party and on the court not later than 14 days after judgment is handed down. Any written submissions in reply are to be served on the other party and on the court not later than 14 days after the application to which they are a reply.