This websites use cookies. By continuing to browse the site you are agreeing to our use of cookies. For more details about cookies and how to manage them, see our cookie policy.

DEMCO Investments & Commercial SA & ors v SE Banken Forsakring Holding Aktiebolag (2005)


There could be no appeal under the Arbitration Act 1996 s.69 against the findings of fact in an award, since under s.69(3)(c) of the Act the facts had to be accepted for the purpose of any application for permission to appeal; it was not open to the court to find that, because there was no evidence justifying the findings of fact, there had been an error of law under s.69.


The applicant (D) applied for permission to appeal under the Arbitration Act 1996 s.69 against arbitrators' findings that a company (X) which it had sold to the respondent bank (B) had mis sold pensions to investors. X operated within the regulatory framework of the Life Assurance and Unit Trust Regulatory Organisation (LAUTRO) rules. A deed of indemnity forming part of the purchase documents provided that D should indemnify B against any losses that B or X may incur relating to the failure prior to the closing of X to comply with any regulations applicable to the company. The arbitrators examined written evidence in respect of 222 sample cases where mis selling was alleged. D submitted that (1) the case raised issues of public importance and the test for whether permission to appeal should be granted was therefore that the arbitrators' decision was "open to serious doubt" even if it was not "obviously wrong"; (2) the findings in some of the sample cases were based on inferences which no reasonable arbitrator could have made. The arbitrators had made a number of crucial errors of law. Furthermore, the cases gave rise to questions as to the ambit of the duty owed to investors, the characteristics of gross negligence and the facts required to support a finding of mis selling or gross negligence; (3) the clause in the deed of indemnity providing that D would indemnify B for losses incurred as a result of failure to comply with "any law, Regulation or Order" did not extend to a breach of the LAUTRO Rules or Code of Conduct; (4) the arbitrators' construction of the notification requirements was wrong and B had failed to give adequate notification of the particulars of its losses; (5) the disclosure letter had contained a paragraph deeming that brief particulars of any matter provided full particulars to the buyer ("the deeming exemption"). Therefore, notice of the existing LAUTRO proceedings effectively disclosed to B all the variants of mis selling revealed by the LAUTRO report so as to bar all claims for indemnity; (6) B's losses did not arise from any complaint under the LAUTRO Rules but as a result of B's decision that X should belong to the Personal Investment Authority which exposed it to greater liability. The deed of indemnity excluded losses arising from voluntary transactions entered into by X after its sale to B.


(1) The form of words used in the purchase agreement and deed of indemnity used by D did not give rise to a matter of public interest and the appropriate test was therefore whether the arbitrators had been obviously wrong. (2) The alleged errors of law and the questions raised by D were issues arising in relation to the arbitrators' findings of fact. Under s.69(3)(c) the arbitrators' findings of fact could not be challenged as they had to be accepted for the purpose of any application for permission to appeal. Furthermore, it was not open to the court to find that, because there was no evidence to support the findings, there had been an error of law giving rise to an appeal under s.69, Geogas SA v Trammo Gas Ltd (The Baleares) (1993) 1 Lloyd's Rep. 215 applied, Edwards (HMIT) v Bairstow 36 TC 220 considered. (3) The words "Rules" and "Regulations" were virtually interchangeable and breaches of the LAUTRO Rules which gave rise to losses were a "failure to comply with Regulations" within the meaning of the deed of indemnity. (4) The arbitrators' findings as to B's compliance with the notice requirements revealed no error of principle and constituted findings of fact from which no question of error of law arose. (5) The arbitrators had not erred in treating the deeming clause as an exemption clause which had to be construed strictly against the party for whose benefit it was included. The narrow construction was consistent with the rest of the deed and did not exclude liability for the mis selling claimed by B. (6) X's application to join the PIA was not a "transaction", since, although membership created a contractual relationship between X and the PIA, it was not the type of commercial engagement envisaged by the deed of indemnity.

Application refused.

View all cases

30 Jun 2005

Queen's Bench Division
Cooke J

‚Äč[2005] EWHC 1398 (Comm)

Practice areas
International & Offshore