RAV Bahamas Ltd and another v Therapy Beach Club Incorporated (Bahamas)

This appeal concerns the proper interpretation of section 90 of the Bahamas Arbitration Act 2009 (“the 2009 Act”) under which challenges to an arbitration award may be made on the ground of serious irregularity. Section 90 is modelled on and is materially identical to section 68 of the English Arbitration Act 1996 (“the 1996 Act”).

The main issue of interpretation which arises is whether section 90 requires there to be a separate and express allegation, consideration and finding of substantial injustice for a serious irregularity to be established.

The claimant and respondent, Therapy Beach Club Incorporated (“Therapy”), is a Florida company operating in the Bahamas. The defendants and appellants, RAV Bahamas Ltd and Bimini Bay Resort Management Ltd, are two Bahamian companies operating in the Bahamas. The latter company is a wholly owned subsidiary of the former company and acted as the agent and manager for the former company in relation to the lease to Therapy that is central to this dispute. The Board will refer to those two companies collectively as “RAV”.

By a lease dated 31 December 2011, RAV leased certain land on the island of Bimini in the Bahamas to Therapy for the building and operation of a restaurant and beach club (together called the “Sakara Beach Club”). Therapy was to pay a percentage rent to RAV based on Therapy’s gross revenue from the Sakara Beach Club plus a proportionate share of what was referred to in the lease as the “common area charge”. By clause 5(t) of the lease, the term of the lease was three years with an option for the lessee, by giving six months’ notice, to renew the lease for a further three years “subject to the parties agreeing to rents to apply to the renewal term.”

Pursuant to clause 2(d) of the lease, Therapy was to pay $150,000 to RAV for the construction of the Sakara Beach Club which was to be completed within 120 days of the receipt of that payment. Therapy alleged that, in breach of contract, the building work was not properly completed, that Therapy had to attempt to complete it at its own expense and that, even by July 2013, it was not fully complete.

On 18 March 2013, proceedings were commenced by RAV against Therapy in the Supreme Court of the Bahamas, alleging that the lease was void, illegal and of no effect, on the grounds that its terms violated the International Persons Landholding Act of the Bahamas. On 31 May 2013, that action came before Chief Justice Barnett, who reserved judgment at the end of that hearing.

On 18 July 2013, however, before that judgment was handed down and while the lease was still in the currency of its original three-year term, the Sakara Beach Club was demolished by RAV and Therapy was evicted from the land. Subsequently, in his judgment dated 12 September 2013, Chief Justice Barnett rejected RAV’s claim that the lease was void, illegal and of no effect.

By an “ad hoc” arbitration agreement, the parties’ dispute arising out of the demolition of the Sakara Beach Club and the eviction of Therapy was referred to arbitration. A retired Bahamian judge, Justice Cheryl Albury, was appointed as the sole arbitrator.

Following a six-day hearing, the decision of the arbitrator, dated 21 August 2017, was, in outline, as follows:

The arbitrator held that Therapy had been wrongfully evicted from the Sakara Beach Club and granted its claims for breach of contract, trespass, conversion and unlawful interference with economic interests.

Therapy had claimed that there had been a variation of the lease with RAV so that, in addition to the Sakara Beach Club, it had a lease of a nearby restaurant known as “Atlantic Seafood”. The arbitrator rejected that claim and held that there had been no such variation of the lease. Therapy’s claims for damages in respect of Atlantic Seafood were therefore dismissed.

In assessing damages for Therapy’s contractual and tortious claims for consequential loss of profits, the arbitrator accepted the approach of Therapy’s expert witness, Mr Ocasio. He had estimated Therapy’s loss of profits for a six-year period, which included a three-year renewal period, as being $12m. However, the arbitrator then discounted that figure in two ways: first, by one third, to reflect the failure of the claim that the lease had been varied to include Atlantic Seafood; and, secondly, by a further 15%, to reflect the fact that Mr Ocasio’s figures were based on his memory and not supported by documents. Therapy was therefore awarded $6.8m as general damages for consequential loss of profits.

The arbitrator also awarded Therapy special damages of $370,000, and exemplary damages of $2,500,000.

The total sum awarded was, therefore, $9,670,000.00 plus interest from 18 July 2013 and costs.

By a notice of motion dated 15 September 2017, RAV applied to challenge the arbitration award in the Supreme Court of the Bahamas on the basis of, inter alia, section 90 of the 2009 Act which deals with “serious irregularity”. The irregularities alleged by RAV fell into two main categories. They were as follows:

The challenge was heard by Winder J. His judgment, dated 24 January 2018, is reported at CariLaw reference BS 2018 SC 7. While rejecting RAV’s other complaints about the arbitration award, Winder J allowed its section 90 “serious irregularity” challenge on both the paragraphs 5-8 ground and the paragraph 10 ground. His central reasoning can be summarised as follows.

First, as regards the paragraphs 5-8 ground, there was a serious irregularity in the determination of the award of general damages because, contrary to section 90(2)(d) of the 2009 Act, the award did not deal with the issue put to the arbitrator of whether Therapy was legally entitled to the recovery of losses for the renewal period. That is, there was no explanation of why the general damages for consequential loss of profit were being awarded for the renewal period (of an extra three years) rather than just until the end of the initial term of the lease (30 December 2014). Winder J said, at para 21, that the importance of the issue as to whether the renewal term was illusory and unenforceable, because it was subject to agreeing rents, was shown by a passage from the decision of Hargrave J in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at para 69. Winder J went on in paras 22 and 24:

Secondly, as regards the paragraph 10 ground, there was a serious irregularity because, contrary to sections 44 and 90(2)(a) of the 2009 Act, the arbitrator acted unfairly in not affording RAV the opportunity to make representations prior to her decision, in assessing damages, to make a one third deduction, and a further 15% deduction, for, respectively, the profits attributable to Atlantic Seafood (which she was disallowing) and the inaccurate recall of Mr Ocasio. As Winder J held at paras 37-38:

Winder J therefore remitted the matter to the arbitrator, in part, for reconsideration of the general damages for consequential loss and, at para 52, he directed that she should: (i) permit RAV to make submissions on the proposed adjustments to the evidence of the expert witnesses’ projections prior to her reconsideration of the consequential damages award; and (ii) consider the issue of whether the award could properly reflect any losses in the option or renewal period, on which she was permitted to receive further submissions.

Winder J made no finding of any serious irregularity in relation to the arbitrator’s treatment of the exemplary damages claim, but held, at para 54, that that award must also be reconsidered because it was based on the amount awarded as general damages. He also stated that the arbitrator could make a fresh award for exemplary damages after the determination of the general damages claim.

Therapy appealed to the Court of Appeal of the Bahamas against that decision of Winder J. By a majority, the Court of Appeal allowed Therapy’s appeal and ordered that Winder J’s remittance orders be set aside and that the arbitration award be upheld. The leading judgment was given by Sir Hartman Longley P with whom Mr Justice Isaacs JA agreed. Sir Michael Barnett JA (Acting) dissented. The judgment is dated 16 August 2018 and is reported at SCCivApp No 23 of 2018 and CariLaw reference BS 2018 CA 117.

The essential reasoning of the majority was that, as regards both the paragraphs 5-8 ground and the paragraph 10 ground (although the Court of Appeal did not explicitly use those shorthand expressions), Winder J’s decision should be reversed because he did not expressly and separately consider and find that substantial injustice had been caused to RAV by the irregularity he had found; and similarly RAV had failed expressly and separately to plead and establish any such substantial injustice. Having considered several English law authorities, such as Bulfracht (Cyprus) Ltd v Boneset Shipping Co Ltd [2002] EWHC 2292 (Comm), [2002] 2 Lloyd’s Rep 681; Lesotho Highlands Development Authority v Impreglio SpA [2005] UKHL 43; [2006] 1 AC 221; Transition Feeds LLP v Itochu Europe plc [2013] EWHC 3629 (Comm), and Brockton Capital LLP v Atlantic-Pacific Capital Inc [2014] EWHC 1459 (Comm); [2015] 2 All ER (Comm) 350, Longley P said the following at paras 34-37 and 44-45:

The majority also held that, first, there was no evidential basis for the judge to find that there was an irregularity as regards the paragraphs 5-8 ground (para 67); secondly, that there was no irregularity as regards the paragraph 10 ground because the parties knew that the relevant central issue was the amount of damages for consequential loss and “the parties had the opportunity to make whatever representation they may have wished to make at the closing stage of the arbitration” (para 72); and thirdly, that the real complaint made by RAV was that the arbitrator had made errors of law in which case the challenge should have been brought by way of appeal on a point of law pursuant to section 91 of the 2009 Act and not under section 90 (paras 58-60, 79).

The dissenting judge, Barnett JA (Ag), considered that Winder J had been correct to find that there had been an irregularity under section 90(2)(d) (as regards the paragraphs 5-8 ground) and that, in this case, there was no need for Winder J to have set out separately why the requirement of “substantial injustice” was satisfied because it was self-evident. He cited extensively from the judgment of Akenhead J in Secretary of State for the Home Department v Raytheon Systems Ltd [2014] EWHC 4375 (TCC) and went on to say at paras 147 and 151:

Although not explicitly considering the paragraph 10 ground, Barnett JA (Ag) made further comments that can be regarded as applicable to that ground. He said, at para 152, that it was unclear how the sum of $6.8m (as general damages for consequential loss) had been determined and “that the respondents ought to know the basis upon which the sum was arrived at by the arbitrator”. He went on at para 154:

Therapy invited the Board to dismiss the appeal on the basis that the judgment of the Court of Appeal of the Bahamas (dated 16 August 2018) was final, it being the determination of a second appeal (on a point of law). The Court of Appeal therefore had no jurisdiction to grant permission to appeal to the Board (which it did in a fully reasoned judgment of the court, given by Sir Michael Barnett JA (Ag), with whom Sir Hartman Longley P and Mr Justice Isaacs JA agreed, dated 11 January 2019); and the only way in which this appeal could have properly come before the Board was if this Board had been asked for, and had given, special leave.

The relevant sections of the Bahamian Court of Appeal Act are as follows:

The wording of section 23 makes plain that the submission of Therapy is misconceived. This is because there is nothing in section 23 that prevents an appeal going to the Privy Council (ie Her Majesty in Council), or which requires special leave from the Privy Council, where the appeal would constitute a third appeal on a point of law. The crucial words are the opening words of section 23(2), “Save as is provided in this section …”.

Indeed, section 23(1) lays down that there is an appeal “as of right” to the Privy Council, without any need for permission from the Court of Appeal of the Bahamas or the Privy Council, if the claim is for at least $4,000. However, it has long been established that, even where there is an appeal “as of right” to the Privy Council, permission must still be sought from the relevant Court of Appeal which can determine whether there is such an appeal as of right and may be able to impose conditions in relation to the appeal: see Ross v Bank of Commerce (Saint Kitts and Nevis) Trust and Savings Association Ltd [2010] UKPC 28; [2011] 1 WLR 125; Lord Mance and Jacob Turner, Privy Council Practice (2017) paras 3.03 - 3.14.

In its judgment of 16 August 2018, the Court of Appeal of the Bahamas rejected this jurisdictional submission of Therapy because an application to challenge an arbitration award under the Arbitration Act 2009 sections 89-90 (which are respectively headed “Challenging the award: substantive jurisdiction” and “Challenging the award: serious irregularity”) does not fall within section 21(1) of the Court of Appeal Act. This was on the ground that a section 90 application involves the exercise of an original statutory jurisdiction and is not an “appeal or revision from a … court, board, committee or authority exercising judicial powers …”. The Board agrees with that reasoning. But as has been said, even if that reasoning were wrong, so that the hearing before Winder J was a first appeal, there would still be no objection to the Privy Council hearing a third appeal (on a point of law). In this case, therefore, the reasoning of the Court of Appeal on jurisdiction merely provides an additional reason (ie additional to that given in para 23) for rejecting Therapy’s submission on jurisdiction.

The 2009 Act is similar in structure and content to the 1996 Act and many of its provisions are materially identical. It was common ground that the policy underlying the two Acts was similar and that it was appropriate to have regard to the English law authorities when interpreting materially identical provisions.

An important aim of the Acts was to be supportive of arbitration and to limit the intervention of the courts. As Lord Steyn stated of the 1996 Act in Lesotho at para 26: “A major purpose of the new Act was to reduce drastically the extent of intervention of courts in the arbitral process”.

Section 90 of the 2009 Act is integral to the achievement of that purpose. Under the predecessor Arbitration Acts the courts were able to intervene and remit matters to the arbitrators on generalised grounds and in a broad category of cases. Under section 90 such intervention is only possible where there is a “serious irregularity”, which means an irregularity of one or more of the kinds listed in section 90 and “which the court considers has caused or will cause substantial injustice”.

Section 90 provides as follows:

As was explained in the 1996 Report on the Arbitration Bill (which became the 1996 Act) of the Departmental Advisory Committee on Arbitration Law (“the DAC”), the test of serious irregularity was intended to limit intervention to “extreme” cases where it could be said that “the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected”. As set out at para 280 of the DAC Report:

In accordance with this guidance the test of serious irregularity has been recognised as imposing a “high threshold” or “high hurdle” - see, for example, Lesotho at para 28 (Lord Steyn); ABB AG v Hochtief Airport GmbH [2006] EWHC 388 (Comm); [2006] 1 All ER (Comm) 529 at para 63 and the cases there cited (Tomlinson J).

The focus is on due process, not the correctness of the decision reached: see, for example, Petroships Pte Ltd v Petec Trading and Investment Corpn (The Petro Ranger) [2001] 2 Lloyd’s Rep 348 at 351; Abuja International Hotels Ltd v Meridien SAS [2012] EWHC 87 (Comm); [2012] 1 Lloyd’s Rep 461, at para 49; Primera Maritime (Hellas) Ltd v Jiangsu Eastern Heavy Industry Co Ltd [2013] EWHC 3066 (Comm); [2014] 1 All ER (Comm) 813 at para 6. As Lord Steyn stated in Lesotho at para 29, referring to section 68 of the 1996 Act which is equivalent to section 90 of the 2009 Act:

Even if a case is shown to fall within one or more of the kinds of irregularities listed in section 90 this will only amount to a serious irregularity if the court considers that it “has caused or will cause substantial injustice”. This means more than some injustice. As Colman J explained in Bulfracht at p 687:

There will be substantial injustice where it is established that, had the irregularity not occurred, the outcome of the arbitration might well have been different: see, for example, Vee Networks Ltd v Econet Wireless International Ltd [2004] EWHC 2909 (Comm); [2005] 1 All ER (Comm) 303 at para 90 (Colman J). It is not necessary to show that the outcome would “necessarily or even probably be different”: Cameroon Airlines v Transnet Ltd [2004] EWHC 1829 (Comm); [2006] TCLR 1, at para 102 (Langley J). As stated by Akenhead J in Raytheon at para 33(i):

Some irregularities may be so serious that substantial justice is “inherently likely” or “likely in the very nature of things” to result. As Toulson J stated in Ascot Commodities NV v Olam International Ltd [2002] CLC 277 at pp 284F-285A:

In such cases substantial injustice may be inferred from the nature of the irregularity and that inference may be so strong that “it almost goes without saying”: see Raytheon at para 61. In that case the arbitrators had failed to deal with “key issues” which may well have impacted on an award of some £126m.

In general, there will, however, be no substantial injustice if it can be shown that the outcome of the arbitration would have been the same regardless of the irregularity - see, for example, Raytheon para 33 (last sub-paragraph).

Section 90(2)(d) sets out that an irregularity occurs where there is a “failure by the tribunal to deal with all the issues that were put to it”. This is the irregularity alleged by RAV in relation to the paragraphs 5-8 ground, which was focussed on first in the submissions and hearing, and it shall therefore be addressed before looking at section 90(2)(a). Section 90(2)(d) can be broken down into three questions. What is an issue? Has the issue been put to the arbitrators? Have the arbitrators failed to deal with it?

As regards all three questions the relevant authorities, on the equivalent section (section 68(2)(d)) in the Arbitration Act 1996), were helpfully drawn together and summarised by Akenhead J in Raytheon at para 33(g).

In relation to the first question of what is an issue, Akenhead J said the following in para 33(g):

While one must be astute to avoid “definitional gloss[es] upon the statute” (see Andrew Smith J in Petrochemical Industries Co (KSC) v Dow Chemical Co [2012] EWHC 2739 (Comm); [2012] 2 Lloyds Rep 691, at para 16), one here sees Akenhead J usefully distinguishing between issues and arguments; and making clear that the arbitrators should deal with an issue that is essential or crucial to the determination of a claim or defence upon which the resolution of the dispute or disputes depends, such that fairness demanded that the issue be dealt with.

Turning to whether the issue has been “put to” the arbitrators, Akenhead J continued in para 33(g) of the Raytheon case as follows:

Finally, as regards whether the arbitrators have failed to deal with the issue, Akenhead J continued in the following way

One can therefore here see Akenhead J helpfully clarifying that, while the arbitrators must deal with an issue, it does not matter for these purposes that they have dealt with the issue badly; and that a court must be very careful not to be hypercritical in determining whether the issue has been dealt with by the arbitrators.

Section 90(2)(a) lays down that an irregularity occurs where there is a “failure by the tribunal to comply with section 44”. Section 44 (which is materially identical to section 33 of the Arbitration Act 1996) provides as follows:

Albeit dealing with where an arbitrator had “misconducted himself or the proceedings” under section 23 of the old Arbitration Act 1950, there is a classic statement by Bingham J of the need to act fairly, by allowing the parties to put their case in relation to a finding by the arbitrator or in relation to a matter on which the arbitrator’s decision is based. This was in Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd [1985] 2 EGLR 14. Bingham J said, at p 15:

Having cited all but the first sentence of the above passage from Bingham J, Langley J in Cameroon Airlines v Transnet Ltd [2004] EWHC 1829 (Comm), [2006] TCLR 1 went on to apply it in relation to a challenge under sections 68 and 33 of the Arbitration Act 1996; and he found that there was a serious irregularity in relation to a decision reached by the arbitrators on a matter of quantification of the value of services under a contract. He said, at para 111:

Similarly, in The Republic of Kazakhstan v World Wide Minerals Ltd [2020] EWHC 3068 (Comm) HH Judge Pelling QC, sitting as a judge of the High Court, partly set aside an arbitration award, and remitted back to the arbitral tribunal the relevant issues, because of serious irregularity under sections 68 and 33 of the 1996 Act. The tribunal had awarded damages to the defendants (WWM) on a basis that had not been advanced by the defendants and on which the claimant (TRK) had not had any fair opportunity to respond. The tribunal had rejected the defendants’ “global claim to damages for expropriation of its investment brought about by the totality of the breaches alleged” (para 43). Instead it had found particular breaches of the relevant treaty. Yet, although no attempt had been made by the defendants to identify which losses were caused by each particular breach, the tribunal went on to assess the damages. In the words of HH Judge Pelling QC, at para 48:

This last reference is to the judgment of Popplewell J in Reliance Industries Ltd v Union of India [2018] EWHC 822 (Comm); [2018] 2 All ER (Comm)1090, at para 32, in which he decided that there had been no serious irregularity under sections 68(2)(a) and 33. Popplewell J said at para 32:

The decision and reasoning of Popplewell J makes clear that a court needs to be careful in determining that the parties have not had an opportunity to put their case on a finding or matter. Another good example of this is provided by Weldon Plant Ltd v Commission for the New Towns [2001] 1 All ER (Comm) 264 HH Judge Humphrey Lloyd QC was there confronted with an allegation that an adjustment made by the arbitrator in relation to a particular measurement of gravel had not been one that Weldon Plant Ltd had had an opportunity to address. He said the following at para 35:

The complaint made by the paragraphs 5-8 ground of appeal concerns the additional three-year period for which general damages for consequential loss of profits were awarded by the arbitrator. It is alleged by RAV that there was a serious irregularity because the arbitrator failed to deal with the issues of no notice of renewal (beyond the original term of three years) having been given and of the renewal option being uncertain, illusory and unenforceable. These two issues can be conveniently drawn together, and will be referred to below as the “lease renewal issue” or “lease renewal point”.

The burden is on the applicant to establish a serious irregularity under section 90 of the 2009 Act and, as the authorities make clear, that is a “high” threshold. In order to cross that threshold, the applicant needs to show both that there has been an irregularity of one or more of the kinds listed in section 90 and that that has caused or will cause substantial injustice to the applicant. The relevant words in section 90(2) are:

The Board agrees with the majority of the Court of Appeal that it is good practice for an applicant challenging an arbitration award under section 90 to set out in its notice of motion, or other originating document, both (i) the listed irregularity relied upon and the grounds for contending that there has been such an irregularity and (ii) that the irregularity has caused or will cause substantial injustice. The Board also agrees that any written evidence relied upon should be provided at the same time. Further, the Board agrees that it is good practice for the judge who is determining the section 90 application to deal, expressly and separately, with each of these elements of what constitutes a serious irregularity. Therapy put before us numerous authorities in which this practice has been followed.

The central question which arises on the appeal is whether this good practice is a mandatory requirement of section 90 so that an application will fail if such practice is not followed, even if, as RAV contends, as a matter of substance, substantial injustice has been established and found.

The majority of the Court of Appeal held that there was no serious irregularity in relation to the paragraphs 5-8 ground of appeal. They held that the ground did not concern an “issue” since it had not been pleaded; that, for essentially the same reason, it had not been “put to” the arbitrator; that it was therefore not a matter which the arbitrator was required to deal with; that it had not been raised by the notice of motion since the only complaint made thereby was one of excess of power; and that, in any event, it was a point of law for appeal rather than a complaint of serious irregularity.

In order to address whether there was a serious irregularity and, if so, whether as a matter of substance substantial injustice has been established and found, it is necessary to trace through the history of the proceedings in so far as it relates to the lease renewal issue.

At the arbitration Therapy pleaded a claim for damages for loss of profits for a six-year period, including the three-year renewal period. In its pleading RAV denied any entitlement to damages but said nothing specific in relation to the lease renewal period.

During oral opening submissions counsel for RAV disputed that there was any entitlement to damages for the renewal period on the grounds that the option for renewal had not been exercised as no notice of renewal had ever been given. This point was repeated during closing submissions, but the further legal submission was also made that no damages could be claimed for the renewal period because the renewal option was void for uncertainty, unenforceable and illusory. In this connection reliance was placed on the Crown Melbourne decision (see para 12 above). In answer to a question from the arbitrator, counsel confirmed that his argument was that the renewal option was illusory. Later on, the arbitrator clarified her understanding that RAV’s case was that, at best, Therapy was entitled to damages up until December 2014. RAV’s counsel confirmed this and explained: “because our argument is that the option period doesn’t apply because it’s illusory and secondly notice was never given”.

In oral reply submissions, counsel for Therapy objected to the point that the option was illusory being raised at such a late stage of proceedings. No ruling on this was made by the arbitrator either at the time or in her award.

Although the lease renewal issue was not specifically pleaded, this is not determinative of whether it was an “issue” for the purposes of section 90(2)(d), contrary to the decision of the majority of the Court of Appeal (para 56). It was expressly raised in oral submissions and the arbitrator acknowledged that it had been so raised and that, if correct, it meant that no damages could be claimed for the period after December 2014. Although the argument that the renewal option was illusory was only raised in closing submissions, this was a purely legal argument and, despite objection, the arbitrator never ruled that it could not be raised. The lease renewal point was essential and crucial to the determination of Therapy’s entitlement to damages as, if accepted, it would mean that it would not be entitled to damages for three years of the six-year claim period. As the Sakara Beach Club needed to be built at the start of the first three-year period, before any profits could be made, the effect of the lease renewal point, if successful, would potentially be to more than halve an award of substantial damages in respect of the Sakara Beach Club. The importance of the issue was such that fairness demanded that it be dealt with. For all these reasons, it was an “issue”. Having regard to the conduct of the arbitration proceedings as a whole, rather than just the pleadings, it is also apparent that the arbitrator’s attention was sufficiently clearly drawn to the issue, as one which she was required to determine, and that she would reasonably be expected to deal with it. It was therefore “put to” the arbitrator.

The arbitrator awarded damages for loss of profits over a six-year period, including the three-year renewal period. After adjustments, this amounted to $6.8m. She made no reference to or ruling upon the lease renewal point. It cannot be inferred that she rejected the point in circumstances where she did not refer to it at all, still less provide any reasons for its rejection. She therefore failed to deal with an “issue” which had been “put to” her. Her failure to do so was an irregularity under section 90(2)(d).

The award was challenged on various grounds. One of the declarations sought by the notice of motion was that “the Tribunal exceeded its powers and failed to deal with all the issues put to it” (emphasis added). In the context of an application which was being made under section 90, this would naturally be read as referring to section 90(2)(b) (“the tribunal exceeding its powers”) and section 90(2)(d) (“failure by the tribunal to deal with all the issues that were put to it”). The declaration sought tracks the language of those two subsections. The grounds upon which the declaration is sought is set out in paragraphs 5-8 of the notice of motion, and the failure to deal with all the issues put to the tribunal is set out in paragraph 7, where reference to the lease renewal point is made in the following terms:

Although section 90(2)(d) is not expressly referred to (as it should have been), and although there is some conflation between the excess of powers complaint and the failure to deal with an issue complaint, the Board agrees with Barnett JA (Ag) that paragraphs 5 to 8 set out the grounds of both a complaint of excess of power under section 90(2)(b) and a failure to deal with an issue put to the tribunal under section 90(2)(d), particularly when construed in the context of the declaration being sought. Indeed, in its skeleton argument before Winder J, Therapy acknowledged that RAV’s “arguments relative to the option clause” were advanced as a “Section 90(2)(d) Challenge”. Nothing, however, was said expressly and separately in the notice of motion about substantial injustice.

Therapy’s skeleton argument in response to the notice of motion contended that none of RAV’s complaints amounted to a serious irregularity but did not state that RAV was required to make, but had not made, an allegation of substantial injustice.

RAV’s skeleton argument similarly made no reference to substantial injustice, but it did contend that the arbitrator had never addressed the issue of whether the lease had been renewed and the “critical issue” of whether the renewal clause was in any event unenforceable. These were said to be “critical failures”, and “the fact that such a large portion of the award is attributable to this renewal period” meant that it should be set aside. It was thereby being said that the failure to deal with this “critical issue” affected the outcome of “a large portion of the award”.

In oral argument, counsel for Therapy did briefly raise the issue of substantial injustice, to which counsel for RAV’s response was that the injustice spoke for itself. Contrary to Therapy’s written case, RAV did therefore assert that substantial injustice followed from the nature of the irregularity alleged.

Given the very limited attention given to the issue of substantial injustice in the parties’ submissions, it is perhaps not surprising that Winder J did not expressly refer to it as an issue. He did, however, make it clear that he regarded the lease renewal point as being a “central” issue. For example, at paragraph 20, he summarised RAV’s argument that the arbitrator did not “address the critical issue … to the effect that the renewal clause was in any event unenforceable”. At paragraph 21 he referred to the case of Crown Melbourne as demonstrating “the importance of the issue”. At paragraph 22, he expressly stated that “this was an issue which turned out to be a central one”. As this was a “central” issue, he concluded at paragraph 24 that RAV was “entitled to the consideration of the Tribunal on this issue and insofar as it was not provided I find that there was a serious irregularity”.

The reason that the judge regarded the lease renewal point as a “central” issue is self-evident. It was central to the proper determination of Therapy’s entitlement to damages for lost profits and would potentially at least halve the quantum of an award. As stated by Barnett JA (Ag) in his dissenting judgment: “If the option was not efficacious, then any award which took into account lost profits during the three-year renewal period would cause substantial injustice. The injustice caused by the failure to consider that issue is self-obvious” (para 147).

This is one of those cases in which the nature of the irregularity and failure of due process means that it is “inherently likely” (see para 35 above) that there has been substantial injustice. Failing to deal with an issue which was put to the tribunal which would potentially more than halve a $6.8m damages award is, on the face of it, obviously unfair and unjust.

It might be otherwise if it was shown that the point in issue was not reasonably arguable. This has not, however, been suggested and we are satisfied that it is so arguable. This is therefore a case in which it has been shown that, had the irregularity not occurred, the outcome of the arbitration might well have been different. As such, it is a case in which, as a matter of substance, substantial injustice has been established.

The Board also considers that this is a case in which, as a matter of substance, a finding of substantial injustice was made. Serious irregularity under section 90 “means” a listed irregularity which has caused or will cause substantial injustice. By finding that there was a serious irregularity Winder J was therefore necessarily finding that there had been substantial injustice. The judge also identified what gave rise to that injustice, namely the failure to deal with a “central” issue relating to damages. This was also set out in his finding of serious irregularity at para 50:

The Board is therefore satisfied that this is a case in which, as a matter of substance, substantial injustice has been both established and found. Does it make any difference that there has not been an express and separate allegation, consideration and finding of substantial injustice? In our view, this should not, and does not, make any difference. In this context, substance is more important than form. Undue formalism should not be required.

The fact that there is no express and separate allegation of substantial injustice is not fatal to an application under section 90. It is implicit in any section 90 application that substantial injustice is being alleged and, provided that there is, when required, the necessary evidential material to support that allegation, it will generally be an issue which is properly before the court. There may be cases requiring evidence in which the failure to make such an allegation clearly causes prejudice to the other party with the consequence that it is held that the allegation is not open to the applicant. That does not, however, arise here where the evidence related to the irregularity and consisted of the available pleadings and hearing transcripts and the argument on the lease renewal point was essentially one of law.

That there is no express and separate consideration and finding of substantial injustice in a judgment does not mean that the issue has not been considered and determined, as the present case illustrates. For the reasons given above, on a fair reading of his judgment, Winder J did consider and find that there was substantial injustice, although he did not use those words. Counsel for Therapy, Krystal Rolle QC, realistically accepted that the words “substantial injustice” do not have to be used. What is important is whether, as a matter of substance, substantial justice has been considered and found, not the precise language used.

Ms Rolle accepted that it is open to a judge to conclude that substantial injustice follows from the nature of the irregularity established, but, if so, she submitted that this should be expressly addressed. That is no doubt preferable, but it is not essential, provided that that conclusion can properly be inferred, as it can be in this case.

Ms Rolle, in her written case and oral submissions, valiantly made a number of further arguments in support of the Court of Appeal majority decision on the paragraphs 5-8 ground. The Board has carefully considered all those arguments but must reject them. In circumstances where, as the Board has held, an irregularity causing substantial injustice has, as a matter of substance, been established and found, her arguments that this does not suffice for section 90 of the 2009 Act must be viewed as technical and unmeritorious, however well presented.

Finally, the Board should note its disagreement with the majority of the Court of Appeal that the challenge made in this case is properly to be regarded as a point of law for appeal rather than a complaint of serious irregularity. Whilst RAV’s application does raise arguments of law, its complaint is that the arbitrator failed to reach any decision on the lease renewal point, not that her decision on that point was wrong in law. There was no such decision. For the purpose of a section 90(2)(d) application relating to a point of law, all that the applicant needs to show is that the point of law which was not dealt with is reasonably arguable. Whether or not it is correct is a matter for the arbitrator, not the court.

For all these reasons the Board would allow RAV’s appeal on the paragraphs 5-8 ground.

The complaint made by the paragraph 10 ground of appeal concerns the assessment of the damages for the consequential loss of profits. It is alleged by RAV that there was a serious irregularity because the arbitrator disaggregated or discounted those losses on a basis (by a third and then by 15%) which was not supported by the evidence and was not canvassed with, or addressed by, the parties and in respect of which RAV had not been given the opportunity to make representations prior to the award. As has been explained in para 9(iii) above, the one third deduction was to reflect the failure of Therapy’s Atlantic Seafood claim; and the 15% deduction was because Mr Ocasio’s figures given in his expert evidence were based on his memory and unsupported by any documents.

In considering this paragraph 10 ground of appeal, it is convenient first to consider whether there was any irregularity within the meaning of section 90(2)(a) which itself cross-refers to the duty to act fairly in section 44. RAV relies on section 44(1)(a) under which the tribunal shall “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 …”. RAV submits that it was not given any opportunity to address the arbitrator on the one third and 15% deductions.

The majority of the Court of Appeal held there was no irregularity as regards the paragraph 10 ground because the parties knew that the relevant central issue was the amount of damages for consequential loss and “the parties had the opportunity to make whatever representation they may have wished to make at the closing stage of the arbitration” (para 72).

The Board disagrees with that reasoning as regards the one third deduction. The case being put by Therapy - and hence the figures being put by its expert Mr Ocasio - did not disaggregate between the alleged lost profits from the Sakara Beach Club and those from the Atlantic Seafood restaurant. Global figures only were put forward. No alternative figures were put forward to deal with the assessment if, as in fact occurred, the arbitrator should rule out any claim for the Atlantic Seafood restaurant. RAV was contending that the damages should be nominal only. It follows that the possibility of there needing to be a disaggregation between the profits of the Sakara Beach Club and those from Atlantic Seafood was simply not “in play” and was not “in the arena” (to use the words of Popplewell J in Reliance Industries Ltd v Union of India set out at para 49 above) and neither party addressed that possibility. As Ms Rolle accepted, after checking the transcript of the arbitration hearing, the one third deduction was not mentioned at the hearing. The first either party knew about it was when it appeared in the reasoning of the arbitrator in her award.

Applying the case law that has been set out in paras 46-50 above, this was an irregularity. To cite the words of Bingham J in Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd, set out at para 46 above, it was “not right” that the decision should be based on specific matters that RAV had never had the chance to deal with and “nor [was] it right that [RAV] should first learn of adverse points in the decision against [it].” And in the words of Langley J in Cameroon Airlines v Transnet Ltd (see para 47 above) it was “fundamentally unfair” to [RAV] that “the Tribunal went its own way to a conclusion which neither [party] had contended for and did so unheralded.” RAV was learning for the first time in the decision of the arbitrator about the one third deduction for disaggregation which RAV had not had the opportunity to address. Indeed, as correctly submitted by counsel for RAV, Vernon Flynn QC, the position here is indistinguishable from the finding of a (serious) irregularity by HH Judge Pelling QC in relation to the arbitrators’ rejection of a claim for a global award of damages in The Republic of Kazakhstan v World Wide Minerals Ltd (see para 48 above).

For essentially the same reasons that have been set out above (see paras 69-72) in relation to the paragraphs 5-8 ground, the Board also considers that that irregularity was a serious irregularity because substantial injustice has been established by RAV and indeed was found by Winder J (because he referred to there being a “serious irregularity” which, by definition, requires that the irregularity has caused, or will cause, substantial injustice). It goes without saying and is self-evident that an arbitrary deduction of damages by a third (when it might be a much higher deduction) is seriously prejudicial to RAV. Although it would have been good practice to do so, there was no mandatory requirement for Winder J to set out, expressly and separately, why substantial injustice was here made out.

The Board also rejects the majority of the Court of Appeal’s reasoning (see para 18 above) that the real complaint of RAV in relation to the one third reduction was that this was an error of law so that the challenge should have been brought by way of appeal under section 91 of the 2009 Act. It is clear to the Board that RAV’s complaint was correctly identified as an irregularity.

The Board does not, however, accept RAV’s submission that the 15% deduction by the arbitrator, because the figures given by Mr Ocasio in his expert evidence were based on his memory and unsupported by any documents, was an irregularity. It should have been obvious to RAV that Mr Ocasio’s evidence was problematic and weakened in those respects and it had ample opportunity to address the arbitrator on that matter. In that sense, the issue was “in play” and “in the arena”. The arbitrator cannot be faulted on procedural grounds for making an impressionistic deduction of 15% and, in essence, any complaint here is that she made an error of law in taking that percentage figure rather than another percentage figure. In contrast to the one third deduction, the deduction of 15% falls on the side of the line epitomised by decisions such as those in Weldon Plant Ltd v Commission for the New Towns and Reliance Industries Ltd v Union of India (see paras 49-50 above). In relation to that 15% deduction, therefore, the Board upholds the reasoning and decision of the majority of the Court of Appeal.

For all these reasons, the Board would allow RAV’s appeal on the paragraph 10 ground as regards the one third deduction but dismiss its appeal as regards the 15% deduction.

In conclusion, while it is good practice and should be encouraged, it is not a requirement of section 90 of the 2009 Act that there be a separate and express allegation, consideration and finding of substantial injustice. It is sufficient that, as a matter of substance, substantial injustice be established and found.

The Board will accordingly humbly advise Her Majesty that the appeal be allowed and that an order for remittal be made that reflects the terms set out in paragraphs 50(1), 50(2), 51, 52 and 54 of the judgment of Winder J (save for paragraph 50(2)(2) relating to the inaccurate recall of Therapy’s expert witness).