Is it ‘obviously wrong’?

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This article examines the meaning of the phrase ‘obviously wrong’ in the context of obtaining leave to appeal an arbitral award under English and Hong Kong law.

In Hong Kong, Schedule 2 of the Arbitration Ordinance Cap.609 enables those that have expressly opted in to include by reference provisions contained in Schedule 2 into their contract to appeal against an arbitral award on a question of law, among other things. (Section 101 of the Ordinance provides that if Schedule 2 is opted into automatically by virtue of section 100 of the Ordinance for the main contract, Schedule 2 will also apply to any sub-contracts. After 31 May 2017, parties can no longer rely on section 101 for the automatic opt-in unless the main contract was entered into before 1 June 2011.)

Specifically, section 5(1) provides that subject to section 6 of the Schedule (the making of a fresh award), a party to arbitral proceedings may apply to the High Court for leave to appeal to the court on a question of law arising out of an award made in the arbitral proceedings. If leave is granted, the court, in turn, must under section 5(3), decide the question of law which is the subject of the appeal on the basis of the findings of fact in the award.

Leave to appeal is to be granted only if the court is, among other things, satisfied that (under section 6(4)):

  • the decision of the question will substantially affect the rights of one or more of the parties;
  • the question is one which the arbitral tribunal was asked to decide; and
  • on the basis of the findings of fact in the award –
    • the decision of the arbitral tribunal on the question is obviously wrong; or
    • the question is one of general importance and the decision of the arbitral tribunal is at least open to serious doubt.


Obtaining leave to appeal an arbitral award is, on any analysis, a high bar to overcome. Hong Kong like many jurisdictions is very pro arbitration and the courts are generally reluctant to upset the arbitral process. However, particularly in the context of construction contracts, parties frequently wish to include the provisions of Schedule 2 of the Ordinance which, among other things, enables an appeal of an arbitral award on a question of law.

English Law

As highlighted above, one of the hurdles that a party must surmount in order to obtain leave to appeal is to demonstrate that the decision of the arbitral tribunal is ‘obviously wrong’. The phrase ‘obviously wrong’, one would have thought has a meaning which is simple and straight forward and a phrase used in common parlance. However, this phrase has been the subject of judicial scrutiny, in particular, under English law and to a lesser degree in Hong Kong.

In HMV UK Ltd -v- Propinvest Friar Ltd Partnership [2011] CA (Civ Div) a dispute between the landlord (Propinvest) and the tenant (HMV) centred around a secondary rear exit to the premises in question because that exit reduced the amount of useable retail space and that fact ought (as HMV argued) to be taken into account when determining the amount of rent payable on the premises under the 25 year lease, subject to five-yearly rent reviews. The parties could not agree the amount of rent at one such rent review and referred the matter to arbitration. The arbitrator was a QC who specialised in Landlord and Tenant matters.

HMV wished to appeal the arbitrator’s award (that the secondary exit was irrelevant to the amount of rent payable) under section 69(3)(c)(i) of the Arbitration Act 1996 stating that the arbitrator was ‘obviously wrong’.

In its decision, denying leave to appeal, the court stated that rights of appeal under section 69 of the Act are severely restricted. An arguable error, or a notion that a different judge might have reached a different conclusion are insufficient to allow a challenge. Importantly, the court held that the word ‘obvious’ denotes the required quality of the error – it must be severely egregious, or a major intellectual aberration. The court held that the arbitrator was not obviously wrong, it also noted that the arbitrator was a specialist barrister in Landlord and Tenant law and was entitled, in the circumstances, to reach his decision.

In National Trust for Places of Historic Interest or Natural Beauty -v- Fleming [2009] EWHC 1789 (Ch) a dispute arose between the National Trust and Mr. Fleming and others, concerning the true construction of a deed over land on which the Flemings wished to establish caravans to house migrant farm workers. The arbitrator found in favour of the Flemings and the National Trust applied for leave to appeal the arbitrator’s award.

Mr Justice Henderson, who dealt with the application stated, among other things, that:

“… the ‘obviously wrong’ test is, self-evidently, a stringent one which will seldom be satisfied. It carries with it the implication that the error should normally be demonstrable on the face of the award itself, and that it should not require too close a scrutiny to expose it. The threshold is very much higher than the usual test of “a real prospect of success” which the court applies to applications for permission to appeal…The reason for this, of course, is that arbitration is essentially an alternative method of dispute resolution which the parties have agreed to choose in preference to litigation in court. Moreover, in most cases…they will have agreed to submit resolution of the dispute to an arbitrator who is not a trained lawyer. The court should therefore be very sparing in its interventions in arbitral process, and this philosophy is reflected in the provisions of section 69.”

Further helpful discussion on the meaning of ‘obviously wrong’ can be found in Merthyr (South Wales) Ltd -v- Cwmbargoed Estates Ltd and Dowlais Top Investment Company Ltd [2019] EWHC 704 (Ch). In this case, HHJ Paul Matthews (sitting as a judge of the High Court), referred to several authorities including Braes of Doune Wind Farm (Scotland) Ltd -v- Alfred McAlpine Business Services Ltd [2008] EWHC 426 (TCC) in which Akenhead J said:

“…It is not enough that a part of his or her reasoning is wrong or that conceivably another tribunal might respectably have reached the opposite decision. I consider however that the test of obviousness is not only passed if the Award is obviously wrong to the judge considering leave after half an hour’s reading of the papers by the judge considering leave…If it takes four hours for the judge to understand the submissions and he or she then forms the view that the Section 69 criteria are established, those criteria are established.

To be ‘obviously wrong’, the decision must first be wrong at least in the eyes of the judge giving leave. However, any judge of any competence, having come to the view that it is wrong, will often form the view that the decision is obviously wrong. It is not necessarily so, however, as a judge may recognise that his or her view is one reached just on balance and one which respectable intellects might well disagree; in those circumstances, the decision is wrong but not necessarily ‘obviously’ so.”

HHJ Paul Matthews stated that it seemed to him that the kind of situation envisaged is one where the judge looks at the award and thinks, “Something must have gone seriously wrong; that just cannot be right”.

In City of Plymouth -v- Jones [2005] 2356 (TCC) (cited by HHJ Matthews) which was decided under the 1996 English Act, HHJ Coulson QC (as he then was) said:

“…The authorities make plain that the obvious error must normally be demonstrable on the face of the award itself…I also note that the Second Edition of the TCC Guide, published on 3 October 2005, states at paragraph 10.2.4 that, save in exceptionable circumstances, the only material admissible on an application of this kind is the award itself, together with any documents attached to it.”

HHJ Mathews focused in on the statement made by HHJ Coulson QC that obvious error must be demonstrable on the face of the award. It is not intended that the parties should adduce copious evidence of the factual matrix of the case and to advance complex written arguments to show the consequences of the award are not as contended by either party. HHJ Matthews emphasised that he was dealing with an arbitration award (not litigation), the product of a free choice by the parties to arbitrate rather than litigate. The award is intended to be final except in rare cases. One of these (rare) cases is where the award is ‘obviously wrong’ in law looking at the face of the award.

In summary, whether an award is ‘obviously wrong’ is to be decided on the face of the award and not by the analysis of detailed and lengthy submissions from the parties. ‘Obviously wrong’ must be circumstances where something has gone seriously wrong such that it cannot (as a matter of law) be right.

Hong Kong Law

In A and Others -v- Housing Authority [2017] HCCT 54/2017 the Honourable Mimmie Chan J stated that the legal principles governing applications for leave to appeal against an arbitral award are clear. Under section 6(4) of Schedule 2 to the Ordinance, leave to appeal is to be granted only if the court is satisfied that, on the basis of the findings of fact in the award, the decision of the arbitral tribunal on the question is ‘obviously wrong’; or the question is one of general importance and the decision of the arbitral tribunal is “at least open to serious doubt”.

As to the meaning of ‘obviously wrong’, Mimmie Chan J, in the application before her, referred to the dicta in Pioneer Shipping Ltd -v- BTP Tioxide Ltd (The Nema) [1982] AC 724, which was cited with approval in the Court of Final Appeal decision in Swire Properties -v- Secretary for Justice [2003] 6 HKCFAR 236. Specifically, Mimmie Chan J referred to a passage in The Nema as follows:

“Where, as in the instant case, a question of law involved is the construction of a ‘one-off’ clause the application of which to the particular facts of the case is an issue in the arbitration, leave should not normally be given unless it is apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument, that the meaning ascribed to the clause by the arbitrator is obviously wrong. But if on such perusal it appears to the judge that it is possible that argument might persuade him, despite first impression to the contrary, that the arbitrator might be right, he should not grant leave; the parties should be left to accept, for better or for worse the decision of the Tribunal that they had chosen to decide the matter in the first instance.”

Mimmie Chan J added that whether the appropriate test to be applied is ‘obviously wrong’ or ‘open to serious doubt’, the threshold is high. It is not sufficient for it to be shown that the decision of the tribunal is arguably wrong, or that it is arguable that the question is open to some doubt. The decision has to be clearly seen to be obviously or demonstrably wrong, or that the correctness of the decision is seriously in doubt. The learned judge emphasised that leave to appeal would only be granted in exceptional cases, where it can be demonstrated that the arbitrator is plainly wrong.

Mimmie Chan J further stated that in a matter concerning the construction of a contractual document, the court dealing with the application for leave to appeal may have a different view as to the possible meaning of a provision, but it does not follow from that, that the meaning ascribed by the tribunal to that provision was ‘obviously wrong’.

In P and C [2019] HKCFI 2625, Mimmie Chan J adopted the same analysis (at paragraph 58) in dismissing an application for leave to appeal against an interim award. Earlier in her judgment in that case, the learned judge stated that:

“Overall, the arbitrator was in the best position to consider and analyse in detail the documents and evidence placed before him by the witnesses in the Arbitration, to decide whether the notice was given in time, whether sufficient particulars were given, and whether the condition precedent had been satisfied, and this Court is entitled to give weight to the analysis made of such evidence by the arbitrator, in its consideration of whether his decision in the Award is obviously wrong, or open to serious doubt, or not. On my review of the Award, I do not find the arbitrator’s analysis of the evidence and his findings on the Time Bar Question to be obviously wrong.”

What has to be demonstrated to the court, quickly and easily, without meticulous legal argument, is that the decision of the tribunal simply cannot be right, or that there are serious doubts as to the correctness or reasoning of the Award.

Concluding remarks

Although there is perhaps less judicial authority in Hong Kong on the precise meaning of the phrase ‘obviously wrong’ there is alignment (between English and Hong Kong law) on the requirement to obtain leave to appeal an arbitrator’s award. Further, the granting of leave to appeal will be an exceptional and rare event.

In Hong Kong when an application for leave to appeal is made, the court will not embark upon (or require) a forensic examination of all the surrounding circumstances and of detailed (adversarial) submissions from the parties. The court will look at the face of the award and see whether the party seeking leave has demonstrated to the court quickly and easily that the decision of the tribunal cannot be right, or that there are serious doubts as to the correctness or reasoning of the award.

What is clear is that the phrase ‘obviously wrong’ cannot be demonstrated by very fine or strained arguments that would defeat the meaning of the word ‘obviously’. As stated in the National Trust -v- Fleming case, the ‘obviously wrong’ test is, self-evidently, a stringent one which will seldom be satisfied. Therefore, those advising their clients about seeking leave to appeal should make it abundantly clear that the prospects of obtaining leave to appeal are, generally speaking, remote.

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