The case of Morris Homes v Antony Paul Keay and Jeffrey David Keay serves as a useful reminder of the hoops through which applicants must jump in order to satisfy the test for leave to appeal an arbitration award on a point of law under section 69 of the Arbitration Act 1996 (the 1996 Act).

In this case, Morris Homes sought to establish that the tribunal’s decisions on two questions of law were “obviously wrong” (s69(3)(c)(i)); and/or a question “of general public importance” on which the decision was “at least open to serious doubt” (s69(3)(c)(ii)). In order to be granted leave, Morris Homes also needed to establish that, despite the arbitration clause, it was just and proper in all the circumstances for the court to determine the question (s69(3)(d)).

The Court reiterated that once the judge has carried out the exercise of reading and understanding the relevant material, the process of determining the application for leave to appeal should be a summary one. It must be “clear cut” that the criteria in s69(3)(c) and s69(3)(d) are satisfied for leave to be granted.

On the basis of the test, the Court was not satisfied that either of the s69(3)(c) criteria were fulfilled in relation to the questions of law. In particular, the Court noted that in circumstances in which the Keays had put forward arguments which were subtle and complex, it was difficult for Morris Homes to establish that it is clear cut that the decision of the arbitrator is at least open to serious doubt.

Even though it was not necessary to decide the case, the Court considered whether s69(3)(d) would be satisfied by flipping the question posed on its head and considering whether there were any reasons why it would not be just and proper for the court to determine the question.

The arbitration concerned a dispute between the parties arising from Morris Homes’ decision to suspend construction of a medical centre. Morris Homes sought to appeal two aspects of the award. First, it challenged the award on the basis of the scope of the contractual duties which it owed the Keays under two clauses of the agreement (one which provided that Morris Homes should “as soon as reasonably practicable commence and thereafter diligently carry out the Works…” and the other which provided that Morris Homes should “use all reasonable endeavours to ensure that the Works are completed as soon as reasonably practicable…“). Second, it challenged the decision as to the extent, if any, of the losses to the Keays and causation thereof.

The test for leave to appeal in s69(3) has four limbs. It was agreed between the parties that determination of the question would substantially affect the rights of one of the parties (s69(3)(a)) and that the questions were ones which the tribunal was asked to determine (s69(3)(b)). For leave to be granted, the applicant must also satisfy the Court either that the tribunal’s decision on the question was “obviously wrong” (under s69(3)(c)(i)); or that the question is “one of general public importance” and the decision is “at least open to serious doubt” (under s69(3)(c)(ii)). It must also be satisfied that it is just and proper in all the circumstances for the court to determine the question (s69(3)(d)). It was disputed whether the requirements in s69(3)(c) and s69(3)(d) were met by Morris Homes’ application.

The Court found that the nature of the enquiry in an application for leave to appeal was essentially summary in nature. As s69 provides no guidance as to the way in which the threshold test must be applied (stating only that the court must be “satisfied“), the 2003 decision of the Court of Appeal in CMA SA v Beteilingungs KG (MS “North Pioneer”) and Ors gives guidance on this. The Court considered that in respect of each question of law which the claimants sought to challenge, they had to show that it is “clear cut” that one of the criteria in s69(3)(c) and the criteria in s69(3)(d) are made out. This was consistent with the pre-1996 Act dicta in The Nema. In The Nema it was explained that in the case of a one-off contract it had to be “apparent to the judge on a mere perusal” that “the arbitrator is obviously wrong” and in a case involving standard terms, the test was “rather less strict” but the applicant had to establish a strong prima facie case “that the arbitrator had been wrong. It was also consistent with the statement in CMA that application of the threshold test would not “require the drawing of fine lines” and “will (not) usually give much scope for the court to require assistance in the form of submissions or advocacy“.

In relation to the first question, the Court found that whilst “best endeavours” and “diligence” clauses are commonly found in development or construction contracts, the issue was not one of general public importance, as the events to which the clauses in the parties’ contract fell to be applied were “one–off“, unusual circumstances. Neither was the decision of the arbitrator open to serious doubt.

In relation to the second question on the Keays’ loss, the Court found that, for the purposes of establishing that the decision was “obviously wrong“, the error in question must be “transparent and/or clear“. The Court considered the arbitrator’s analysis and concluded that he had carried out the correct and/or appropriate legal analysis. The Court also found that Morris Homes’ application in relation to this question related to findings of fact by the arbitrator and not to any identifiable question of law. Findings of fact cannot be challenged under s69, and it is well-established that s69 should not be used as a means to appeal the merits by challenging the evidence.

Although it was not necessary to determine the application, the Court did consider briefly whether s69(3)(d) could be satisfied. In so doing, it considered whether there were any reasons why it would not be just and reasonable for the court to consider the question. The fact the parties agreed to arbitration was not a factor which carried much weight in this regard.