Outer House denies leave to appeal against arbitrator’s determination that commercial tenancy repairs notice was invalid

About this case:

• Citation:
  [2026] CSOH 63
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lord Sandison

The petitioner, whose identity remained confidential, raised a challenge to the decision of an arbitrator under rules 69 and 70 of the Scottish Arbitration Rules, seeking leave to appeal on the ground that the arbitrator erred on a point of Scots law. The proposed respondent resisted the application, denying that the petitioner’s claim for leave to appeal was well-founded.

Determination of the application, which took place without a hearing in accordance with rule 70(5) of the Rules, was conducted by Lord Sandison in the Outer House of the Court of Session.

Defective in a number of substantive requirements

The petitioner was the landlord in a 15-year lease of office premises in Edinburgh. After the tenant vacated the premises at the lease’s ish in October 2024, various disputes concerning the condition of the subjects were submitted to arbitration. One such dispute arose in relation to the validity of a notice, sent by the petitioner in February 2024, ordering the tenant to remove works it had carried out on one floor of the premises.

Determining that the purported notice at issue was not valid, the arbitrator referred to “a number of substantive requirements” in which the notice was “defective”. For one, it claimed breach by the tenant of a provision of the contract which did not create obligations incumbent upon it. Moreover, the notice demanded more than what was contemplated by the relevant clauses in three respects. First, it claimed damages for the works carried out instead of ordering that the tenant make reinstatement. Second, it ordered that any works be carried out “within a reasonable period”, rather than at the termination of the lease. Finally, a schedule of dilapidations attached to the notice likewise ordered the tenant to make reinstatements on floors of the premises on which it had not carried out works, an order thus falling outside the scope of the relevant clause.

The petitioner argued that the arbitrator’s determination had been tainted by an error on a point of Scots law and sought leave to appeal. Aside from the various inconsistencies apparent in the arbitrator’s reasoning, it maintained that a reasonable recipient of the purported notice would have understood it as invoking the specific provisions of the lease. In reply, the tenant and proposed respondent insisted that the arbitrator’s determination was not susceptible to appeal under the Rules, for it was “not wrong, let alone obviously wrong” and did not concern a point of general importance.

No major intellectual aberration

Reflecting on the authorities, Lord Sandison began his decision by noting: “The overall policy of the law in relation to legal error appeals is ‘in the interests of party autonomy, privacy and finality, that such awards should not be readily transferred to the courts for appellate review’. That policy is part of the pattern of benefits and disadvantages which falls to be taken into account by parties in deciding whether to introduce arbitration clauses into their contractual relations or in deciding whether to refer an established dispute to arbitration.”

Establishing the standard to be applied to the petitioner’s arguments, he continued: “It has been said that in this context, for a decision to be obviously wrong, it must have something in the nature of a major intellectual aberration, or ‘making a false leap in logic or reaching a result for which there was no reasonable explanation’. One may be searching for a conclusion which is so obviously wrong as to preclude even the possibility that the arbitrator was right. It does not suffice to meet the criterion of obvious error if the criticised decision is one in relation to which respectable intellects might well disagree.”

Proceeding to evaluate the arbitrator’s finding that, “on a proper construction, the substance of the letter failed to convey the message which it needed to convey”, Lord Sandison added: “Having regard to the obscurities and contradictions in the letter identified by the arbitrator, that conclusion cannot be faulted, and certainly cannot be said to represent any major intellectual aberration, or to constitute a decision for which there was no reasonable explanation. The test for obvious legal error is accordingly not met.”

Rejecting the petitioner’s reliance on the tenant’s subjective understanding of the letter, he said: “[T]he question is not how the notice was in fact understood by its recipient, but what a reasonable person in his place would have understood from it. The question of whether the letter adequately conveyed the message which it was required to convey is resolved by reference to the ‘reasonable recipient’ criterion and to no other.”

Dismissing likewise the petitioner’s esto argument that its appeal raised a question of general importance, Lord Sandison concluded: “[T]he submission misses the point that the terms of [the clause] are quite clear, and that the problem which arose here emerged not from those terms, but rather from what might most kindly be called the suboptimal terms in which the [letter] was couched. No point of general importance is raised in relation to the matter truly determined by the arbitrator, namely whether the terms of that particular letter did or did not meet the requirements of the reasonable recipient criterion.”

The application for leave to appeal was accordingly refused.