Section 48(1)(a)(vii) of the Arbitration Act (the Act) gives the court the power to set aside an arbitration award if a party can prove that a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of the party have been prejudiced.

This case arose out of an arbitration between Daimler and Front Row relating to a dispute under a joint venture agreement. Daimler commenced the arbitration proceedings to recover moneys allegedly owed by Front Row under the agreement. Front Row disputed Daimler's claim and also brought a counterclaim against Daimler on the basis of misrepresentation.

The arbitrator dismissed both Daimler's claim and Front Row's counterclaim and in the case of the latter, the arbitrator found that by the close of Front Row's case it had "ceased to rely on a number of the points pleaded" and that "having asserted that it was induced to enter into the agreement by reason of several misrepresentations, [Front Row] ended up asserting inducement from a single alleged misrepresentation."

Front Row applied to set aside part of the arbitral award pursuant to section 48(1)(a)(vii) of the Act. It argued that the arbitrator had inexplicably concluded that Front Row relied upon only one misrepresentation when there was no basis on which he could have concluded that it had abandoned reliance on the rest. In doing so, Front Row claimed that the arbitrator had breached the rule of natural justice expressed in the Latin maxim audi alteram partem, that is, that the parties must be given adequate notice and opportunity to be heard, thereby entitling it to have the award set aside under s 48(1)(a)((vii).

Whilst the court noted that Front Row had a high threshold to surmount in satisfying section 48(1)(a)(vii), it allowed Front Row's application.

The court referred to authorities where the decision of a court or tribunal had been found to be in breach of natural justice because the case was decided on a basis not raised or contemplated by the parties and held that the corollary was also true – "that a court or tribunal will be in breach of natural justice if in the course of reaching its decision it disregarded the submissions and arguments made by the parties on the issues (without considering the merits thereof)." In both cases, it determined that the mischief was the same: a party is denied the opportunity to address its position to the judicial mind. As the arbitrator's breach of natural justice was causally linked to his decision to dismiss Front Row's counterclaim, Front Row's rights had been prejudiced and the part of the arbitration award relating to Front Row's counterclaim must be set aside.