Leave for Scots “Legal Error” Appeals: High “Obviously Wrong” Threshold and Strict Objective Construction of Contractual Notices

Case: Petition Arbitration Application No 2 of 2026 (Court of Session)
Citation: [2026] CSOH 63
Court: Outer House, Court of Session (Lord Sandison)
Date: 26 June 2026

1. Introduction

This Outer House decision concerns the gatekeeping function of the Court of Session under rules 69 and 70 of the Scottish Arbitration Rules (under the Arbitration (Scotland) Act 2010 framework) when a party seeks to appeal an arbitral award for “legal error”. The petitioner (the landlord under a commercial lease) sought leave to challenge an arbitrator’s determination that a pre-expiry letter and attached schedule of dilapidations did not operate as an effective lease notice requiring the tenant to reinstate tenant alterations to part of the premises. The respondent (the tenant) opposed leave.

The dispute arose on lease termination (“ish”) in October 2024. The landlord’s ability to recover reinstatement costs depended on whether it had properly exercised a contractual option—by notice served at least six months before expiry—requiring reinstatement under clause 6.19 of the lease.

Key legal issues

  • Leave threshold: whether the arbitrator’s decision was “obviously wrong” (rule 70(3)(c)(i)), or (if a point of general importance) open to serious doubt (rule 70(3)(c)(ii)).
  • Notice validity and construction: whether the landlord’s letter objectively conveyed, to a reasonable recipient, a clear exercise of the lease power to require reinstatement by lease expiry.
  • Objective approach: whether the tenant’s alleged subjective understanding could cure ambiguity or defects in the notice.

2. Summary of the Judgment

Lord Sandison refused leave to appeal. The court held that the arbitrator’s approach and conclusion were not “obviously wrong” and did not raise a point of general importance warranting leave.

In substance, the court agreed that the landlord’s letter (16 February 2024), though served timeously and in writing, contained obscurities and self-contradictions such that a reasonable recipient would not be left in “no doubt” as to what was being required under the lease. The court emphasised that the correct test is objective (reasonable recipient), and that any subjective understanding by the tenant is legally irrelevant.

3. Analysis

3.1 The statutory/rules framework and the policy of restraint

The judgment is anchored in the policy that arbitral finality and party autonomy would be undermined if “legal error” appeals were readily permitted. Lord Sandison adopted the rationale articulated by Rix LJ in CGU International Insurance Plc v AstraZeneca Insurance Co Ltd [2006] EWCA Civ 1340 at [3], noting that the Arbitration (Scotland) Act 2010 model closely follows the English Arbitration Act 1996.

Rule 70(3) imposes a deliberately high barrier where the opponent does not consent to an appeal. Here, two prerequisites were not disputed: (a) deciding the point would substantially affect rights; and (b) the tribunal was asked to decide the point. The application therefore turned on rule 70(3)(c).

3.2 “Obviously wrong” in Scots arbitration appeals: the demanding standard reaffirmed

Lord Sandison reaffirmed (and synthesised) the existing Scottish and comparative authorities on “obviously wrong”, emphasising that it denotes more than a plausible mistake. The standard is met only where the decision is so clearly erroneous that one can conclude, with a high degree of confidence, that it cannot stand.

Authorities applied to the “obviously wrong” test

  • HMV UK Ltd v Propinvest Friar Ltd Partnership [2012] 1 Lloyd's Rep 416; Arbitration Application 1 of 2013 [2014] CSOH 83 at [32]: “major intellectual aberration” / “false leap in logic” / no reasonable explanation.
  • Antaios Compania Naviera SA v Salen Rederierna AB [1985] 1 AC 191; Arbitration Appeal No 1 of 2019 2019 SLT 1309 at [8]; Arbitration Appeal No 1 of 2021 [2021] CSOH 41 at [19]: one may be “searching for a conclusion” so wrong that it excludes the arbitrator being right.
  • Doune Wind Farm (Scotland) Ltd v Alfred McAlpine Business Services Ltd [2008] EWHC 426 (TCC); Arbitration Appeal No 1 of 2019 at [6]: if respectable intellects could disagree, it is not “obviously wrong”.
  • Arbitration Application No 2 of 2016 [2017] CSOH 23 at [9]; Arbitration Appeal No 3 of 2024 [2025] CSOH 7 at [35]: if arguably correct, cannot be obviously wrong.
  • Benaim (UK) v Davies Middleton & Davies [2005] EWHC 1370 (TCC); Arbitration Appeal No 4 of 2019 [2020] CSOH 46 at [31]: misapplication of correct legal principles to facts is not necessarily an error of law.

The court also made an important contextual point for construction disputes. While contractual construction aims at a single “true” meaning, construction frequently admits of reasonable disagreement—hence it is a paradigm area where an arbitrator may not be “obviously wrong” even if a court might have construed the document differently (Arbitration Appeal No 1 of 2019 at [15]; Arbitration Appeal No 1 of 2021 at [30]; Arbitration Appeal No 1 of 2023 [2023] CSOH 78 at [24]).

3.3 Scots law: construction as a mixed question of fact and law (contrast with England)

Lord Sandison highlighted a Scots-law nuance: unlike England (where, historically, construction is treated as a question of law), in Scotland the “true construction” is a mixed question of fact and law because background circumstances may be highly pertinent. The judgment contrasts this with the English position referenced via Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724.

Practical significance: where factual context is disputed or evaluative, it becomes harder to characterise a tribunal’s construction decision as legally wrong. Here, the relevant background was “clear and undisputed”, allowing more confident evaluation—yet still not meeting the “obviously wrong” threshold.

3.4 The notice question: from “formal validity” to the reasonable recipient test

A central part of the court’s reasoning is a clarifying reframing of the issues. Lord Sandison considered it “slightly puzzling” that the parties split the debate into two questions (formal validity; and reasonable recipient understanding). Drawing on Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, the court distinguished:

  • “Formal and technical requirements” of a notice power (here: writing; served at least six months before expiry); and
  • Substantive sufficiency—whether the notice’s content objectively conveys the intended exercise of the contractual power.

Because formal requirements were admitted to be satisfied, and because the lease did not prescribe any additional indispensable informational requirements (again referencing Mannai, per Lord Steyn at 767E), “the only live question” was what the reasonable recipient would understand from the letter’s terms.

3.5 The reasonable recipient test for notices: clarity without pedantry

Lord Sandison restated the controlling approach: a notice is effective if it is sufficiently clear and unambiguous that a reasonable recipient, using common sense in context, is left in “no doubt” as to how and when it is intended to operate—without demanding absolute perfection or eliminating every conceivable ambiguity. The court cited:

  • Delta Vale Properties Ltd v Mills [1990] 1 WLR 445 (Slade LJ at 454E–G);
  • Carradine Properties Ltd v Aslam [1976] 1 WLR 442 (Goulding J at 444); and
  • Mannai (Lord Steyn at 768E–H; Lord Clyde at 782C–D).

3.6 Why the letter failed on an objective construction (and why that was not “obviously wrong”)

The court endorsed the arbitrator’s identification of multiple combined sources of uncertainty, treating them as going to substance rather than mere technicality. The defects were not confined to an omitted clause reference; they included internal inconsistency and an overall framing inconsistent with the contractual mechanism.

The four principal clarity problems (as accepted by the court)

  1. Misdescription of obligations and clause anchoring: the letter asserted breach of repair/maintenance obligations “contained in” clause 6.19.2, though 6.19.2 is primarily a remedial/notice mechanism, and the primary obligation structure sits in 6.19.1.
  2. Self-contradiction about works and timing: paragraph 2 suggested works had already been carried out by the landlord, while paragraph 3 required the tenant to carry them out. The phrase “within a reasonable period” sat awkwardly against a lease structure focusing on reinstatement “by” lease expiry.
  3. Damages framing vs specific implement structure: the letter proceeded as if the tenant was already in breach and liable in damages, whereas the clause envisaged a staged mechanism—first, a clear reinstatement requirement; then, landlord self-help and recharge if the tenant failed.
  4. Dilapidations concept mismatch: the schedule’s “dilapidations” framing suggested defects in repair, whereas clause 6.19 addressed removal of tenant alterations which might not involve disrepair at all (the arbitrator’s concept discussion referenced Grove Investments Ltd v Cape Building Products Ltd, 2014 Hous LR 35 at [14]–[15]).

Against that background, Lord Sandison held the arbitrator’s conclusion to be comfortably within the realm of reasoned decision-making. Even if an alternative view were possible, there was no “major intellectual aberration” and no conclusion lacking reasonable explanation. Accordingly, the rule 70(3)(c)(i) test was not met.

3.7 Subjective understanding is irrelevant: objective construction only

The landlord argued that the tenant’s reply letter showed the tenant understood clause 6.19.2 to be invoked. The court rejected this as a legal basis for validity. First, the tenant’s response could be read as expressing puzzlement rather than comprehension. More fundamentally, the court reaffirmed the objective approach: the question is what the reasonable recipient would have understood, not what the recipient in fact understood.

This principle was grounded in Mannai (Lord Steyn at 767G–H; Lord Clyde at 782D–E) and the reference there to Micrografix v Woking 8 Ltd [1995] 2 EGLR 32.

3.8 “General importance” and “serious doubt”: bespoke-document disputes rarely qualify

The landlord also sought to invoke rule 70(3)(c)(ii), arguing that lease clauses of this kind are common and the approach to notices is important. Lord Sandison rejected that characterisation. Even if similar clauses appear in the market, the determinative issue was the particular letter’s drafting defects, not an uncertain or novel interpretation of the clause itself.

The court drew on the established distinction that standard form contract construction issues are more likely to raise “general importance” than bespoke arrangements, citing:

  • Arbitration Application No 3 of 2011 2012 SLT 150 at [26] (standard form issues);
  • Arbitration Application No 2 of 2016 [2017] CSOH 23 at [10] (no significant alterations caveat);
  • Arbitration Application 1 of 2013 [2014] CSOH 83 at [33]; Arbitration Appeal No 1 of 2023 [2023] CSOH 78 at [24]; Arbitration Application No 2 of 2024 [2024] CSOH 83 at [22] (bespoke contract decisions usually lack wider resonance).

In any event, the court added that the arbitrator’s careful reasoning meant the decision was not “open to serious doubt”.

4. Impact

Likely practical consequences

  • Arbitration finality reinforced: parties face a steep uphill task to obtain leave under rule 70; “construction disagreements” will seldom qualify as “obvious” errors.
  • Notice drafting discipline in property disputes: landlords seeking reinstatement or dilapidations-related remedies must align correspondence precisely with the contractual mechanism (and avoid mixed messages such as “we have done the works” vs “you must do the works”, or damages language that blurs the remedy structure).
  • Objective interpretation clarified: a counterparty’s alleged subjective understanding (or partial understanding) cannot salvage a notice that fails the reasonable recipient standard.
  • General-importance arguments narrowed: attempting to elevate an idiosyncratic letter to a “market-wide” issue is unlikely to succeed; the court will focus on whether the legal point, rather than the drafting failure, has broader significance.

5. Complex Concepts Simplified

  • “Ish”: the end date/expiry of a lease.
  • Rule 69 “legal error appeal”: a limited right to appeal an arbitral award to the Outer House on a point of Scots law.
  • Rule 70 “leave”: unless the parties agree, the court must grant permission; it will do so only if strict criteria are met.
  • “Obviously wrong”: not merely “probably wrong” or “debatably wrong”; it denotes a plainly indefensible legal conclusion.
  • “Reasonable recipient” test: the notice is read objectively—what a reasonable person in the recipient’s position, with the contract and context, would understand.
  • “Specific implement” vs “damages”: “specific implement” compels performance of the contractual obligation (here: do reinstatement works); “damages” compensates for breach. A notice framed as a damages claim may fail to communicate an election to require performance where the contract prescribes that staged remedy.
  • “Dilapidations”: typically refers to disrepair/physical defects in premises; it may be a poor conceptual fit where the issue is removal of tenant alterations not involving disrepair.

6. Conclusion

[2026] CSOH 63 is a strong reaffirmation of restraint in Scottish arbitration appeals: leave will be refused unless the arbitrator’s legal conclusion is plainly untenable, or (rarely) the point is of genuine general importance and open to serious doubt. On contractual notices, the decision underscores that where formal requirements are met, the decisive question is objective: whether the notice’s substance leaves the reasonable recipient in no doubt as to the contractual power being exercised and its operative effect. Poor drafting—especially contradictory messaging and remedy confusion—can therefore be fatal, and will not readily be re-litigated through a “legal error” appeal.