This article was first published in the Practical Law Arbitration Blog, and can be found here.

The judgment of Sir Michael Burton in P v D provides a salutary warning to those appearing as advocates in London seated arbitrations of the dangers of failing to cross-examine key witnesses on essential issues. In addition, it provides a salutary warning to arbitrators of the dangers of failing to ensure that “proper” cross-examination is conducted or of rejecting evidence on essential issues which has not been the subject of “proper” cross-examination.

Facts

D’s claim in the arbitration was (amongst other matters) for repayment of loans made to P.

P contended that at a meeting in August 2015 between Mr E of P and Mr D of D, it was agreed that D would not demand repayment until 1 January 2018, which was then extended to 1 January 2020. P also contended that that agreement was confirmed at a further meeting with Mr D in June 2016.

P, therefore, argued that D was estopped from claiming that the sums loaned were repayable, demand having been made prior to 1 January 2020.

Both Mr E and Mr D gave written and oral evidence in the arbitration.

There was no support for the alleged agreement in the documentary evidence. There was some hearsay evidence supportive of Mr E from other witnesses. A Mr J of D was present at the June 2016 meeting. When cross-examined, he said that he had no recollection of there being any discussion about repayment of the loans.

Against that backdrop, Sir Michael Burton said at paragraph 14:

“The stage was thus set for a contest of credibility between the two prime participants to be cross-examined in relation to what had been said, if anything, about an extension at the August 2015 meeting, said by P to have been confirmed at the June 2016 meeting”.

In the event, the advocate for D did not cross-examine Mr E about the August 2015 meeting. In the course of the cross-examination of Mr E, the chairman of the tribunal pointed out to the advocate that he had not yet put any questions in respect of “the core issue”, as it had been described by the advocate for P.

At paragraph 16 of the judgment, the judge set out the limited exchanges in cross-examination pertaining to the August 2015 meeting which, in fact, were raised by Mr E himself when being cross-examined about the June 2016 meeting.

Mr D was cross-examined about the August 2015 meeting.

The award

In the award, the tribunal noted the following:

“Mr E was not cross-examined at all on his version of events at this meeting. Whilst we do not expect each and every matter in dispute to be put punctiliously to witnesses in commercial arbitration, the decision not to put Mr D’s account of this potentially significant meeting to him in cross-examination was somewhat surprising”.

Notwithstanding that observation, the tribunal held that P did not fully succeed in its estoppel argument in that the tribunal held that there was only an estoppel precluding a demand being made before 1 January 2018. The reason why the tribunal rejected P’s case that an estoppel arose preventing a demand before 1 January 2020 was because:

  • There was no agreement or promise extending the period of the loan to 1 January 2020 at the August 2015 meeting. In other words, Mr E’s evidence was rejected.
  • If there had been, “at most there was a promise, representation or common assumption that an extension [until January 2020] would need to be incorporated into a wider package which would cover other things as well”. In other words, any such estoppel would have been conditional on matters which were never fulfilled.

The challenge to the Commercial Court

There is no entitlement directly to challenge or appeal findings of fact contained in arbitral awards under the Arbitration Act 1996 (AA 1996).

However, P brought a challenge to the award under section 68(2)(a) of the AA 1996, contending that there had been a failure by the tribunal to conduct the proceedings fairly, and to give it a reasonable opportunity of putting its case and dealing with that of its opponent as part of the tribunal’s general duty under section 33 of the AA 1996. P relied upon:

  • The fact that Mr E’s evidence that there was an agreement until January 2020 was not challenged in cross-examination and yet was rejected (ground one).
  • The fact that the argument that any common assumption or promise was conditional upon being “incorporated into a wider package…” formed no part of D’s case or Mr D’s evidence and was never put to Mr E (ground two).

Ground one was an argument that it would not be a fair procedure for a tribunal to determine a core issue as to credibility against a particular witness of a party, unless that witness’ evidence had been directly challenged in cross-examination.

Ground two was an argument that it would be unfair for the tribunal to determine an issue against a party by reference to a case not argued against it. (The failure to cross-examine also applied equally to ground two).

The judgement and analysis

P succeeded on both grounds.

The court’s reasoning on ground two seems unobjectionable as there is no indication in the judgment that P could reasonably have understood that D was advancing the argument in question or, for that matter, that the tribunal was contemplating deciding the claim on that basis. Furthermore, the finding challenged under ground two was a major area of material primary fact. As Professor Merkin QC and Louis Flannery put it in Arbitration Act 1996 (5th edition):

“… it may be normally contrary to the arbitrator’s duty to fail to give the parties an opportunity to address them on proposed findings of major areas of material primary facts which have not been raised during the hearing…”

Given the judge’s conclusion on ground two, it is perhaps unsurprising that the judge reached the conclusion that he did on ground one given how connected the two grounds were. Indeed, at paragraph 34 he acknowledged that the inter-relationship between the two grounds made it much more difficult to determine whether there was an exception on the facts to the principle set down in Browne v Dunn that a party could not impugn the credibility of a witness without cross-examining on the relevant part of his or her evidence.

Had it been possible to consider ground one in isolation from ground two, the court’s ruling would have been more finely balanced.

Notwithstanding the judge’s characterisation that Mr E’s evidence as to the meeting of August 2015 was not challenged at all, the advocate for D, in the brief exchanges set out at paragraph 16 of the judgment:

  • Put it to Mr E that his evidence that an extension had been agreed prior to the June 2016 meeting was a “nonsense”.
  • In effect put it to Mr E that there was no credible basis upon which the parties would have ever agreed an extension until 2020.

Whilst the cross-examination was brief and at the highest level of generality, Mr E’s evidence was challenged. Furthermore, it appears from the judgment that the witness statement evidence of Mr D was such as to restrict the scope of permissible cross-examination, given that his evidence was limited to denying that there was an agreement without condescending to any particular detail of what was in fact discussed. Indeed, in his oral evidence, he said he had no recollection of the August 2015 meeting. Further, Mr E had had the opportunity to set out in detail his account of the meeting in his witness statement and, indeed, a supplemental statement made with knowledge of, and in response to, Mr D’s account.

Given all of these matters, it may be questioned whether Mr E had not been given sufficient “opportunity of affirming or commenting on the challenge” to his evidence (see Floyd LJ in Edwards Lifesciences LLC and others v Boston Scientific Scimed Inc at paragraph 66).

Be that is may, the case demonstrates that where, as here, a tribunal is concerned that a particular witness’ evidence on a key issue has not been sufficiently explored in cross-examination, the tribunal will need either to:

  • Make clear to the advocate for the other party both that it would be assisted by further cross-examination and the possible consequences if the evidence was not properly challenged, that is, that the tribunal might be left with no choice but to accept that evidence.
  • Assume the burden itself of asking questions of the relevant witness to satisfy itself of the credibility and correctness of that account.