Terra Firma Chambers’ Robert Sutherland successfully represented the respondents in an appeal in terms of rule 68 of the Scottish Arbitration Rules whereby the petitioners challenged the decision of an arbitrator on the basis that there was a serious irregularity in the conduct of the arbitration.  Terra Firma Chambers’ Graeme Milloy appeared on behalf of the Petitioners.

The parties are members of a farming partnership whereby the partnership agreement allows a partner to be expelled "upon the partners becoming aware" of circumstances which justified expulsion.  The arbitrator had decided that a notice to expel one of the partners from the partnership was invalid and of no effect.  On the facts he found to be established, the arbitrator accepted a submission that the expulsion notice had not been served within a reasonable period of the other partners becoming aware of the conduct which might have justified such service.  The unsuccessful partners petitioned the Court of Session to appeal on the grounds that there had been a serious procedural irregularity on the part of the arbitrator resulting in substantial injustice to them and that the arbitrator had also made a legal error.

Lord Sandison issued an earlier judgement ([2024] CSOH 83) where he refused the petitioners legal error appeal on the grounds that the terms of the partnership agreement stated that the arbitrators decision was final and binding, and also contained a provision that excluded the ability of the arbitrator to state a case to the court.  Lord Sandison held that these stipulations in the partnership agreement excluded the ability of the petitioners to make a legal error appeal.

The most recent decision deals with the procedural irregularity appeal.  As the petitioners had asked the arbitrator to uphold the notice, Lord Sandison held that it was intrinsic that the notice was valid and effective, and there was nothing which prevented it from being a valid and effective notice.  The question of the timing of the conduct being complained about was inherent to the validity of the notice.  The petitioners had failed to establish to the satisfaction of the arbitrator any relevant behaviour after December 2020, so the timing of the notice became very pertinent.  There was no material irregularity in the procedure adopted by the arbitrator in allowing parties to adduce such evidence as they saw fit and make the submissions which they considered apt in reaction to the evidence which emerged.  An agreement and consequent order at the commencement of the arbitration hearing that the rules of evidence and procedure applicable in the Scottish courts would apply did not support the petitioner’s argument that this limited the points of law which might be found relevant by the arbitrator in the determination of the dispute; rather the reverse.

Lord Sandison concluded that the petitioners failed to establish the occurrence of any material irregularity in the conduct of the arbitration, or to show that anything of which they complained, even if regarded as such an irregularity, could have resulted in the doing of any substantial injustice to them.

The full judgement can be found by following this link: ARBITRATION APPEAL NO 2 OF 2024