Arbitration Act 1979 — Jurisdiction of High Court to determine a preliminary question of law — Conditions to be satisfied under section 2(2) before an application to determine such a question can be entertained — Arbitration arising out of rent review provisions in a lease — Two matters on which the determination of the court was sought — The first was whether the rack rental value as defined in the lease was the best rent at which the premises could be let for a term of 106 years from March 25 1980 with no provision for later review of the rent — The second was whether the best rent meant the best at which the premises could be let as a whole or the best aggregate of rents for individual parts — The judge held that the second matter was a pure question of valuation, not raising any question of law — The first matter did raise a question of law, but it was a point of construction, not to be decided in the abstract without evidence but in the light of the arbitrator’s findings of fact in relation to the surrounding circumstances — Further, a preliminary determination of this point would not be likely to produce substantial savings in costs to the parties as contemplated by section 2(2)(a) of the Act — Even if the judge had been satisfied as to the likelihood of such savings, he would nevertheless in the exercise of his discretion have refused the application — There would be dangers in this case in the court deciding a preliminary point of construction without having the full findings of fact before it — Application refused
The plaintiff
in this case, Mr Chapman, sought determinations by the court on two matters
which he submitted to be questions of law arising in the course of an
arbitration between himself and the defendants, Charlwood Alliance Properties
Ltd. The application was made in pursuance of the provisions of section 2 of
the Arbitration Act 1979 in regard to the determination of preliminary points
of law by the court.
A C Steynor
(instructed by Russell-Cooke, Potter & Chapman) appeared on behalf of the
plaintiff; J S Brock (instructed by Speechly, Bircham) represented the
defendants.
Giving
judgment, HODGSON J said: In this case the plaintiff seeks from the court an
order pursuant to section 2(2) of the Arbitration Act 1979 for leave for the
High Court to determine two questions of so-called law which are set out in the
notice of motion in paragraphs 2(a) and 2(b); the point of law set out in
paragraph 2(c) no longer being in contention between the parties.
The
arbitration between the parties arises out of a lease dated June 15 1966 in
relation to premises known as the Victoria Works, Osier Road, Wandsworth, in
London. The lease contains a number of unusual clauses which I do not need
specifically to identify. It also contains provisions for rent review; and it
is out of the schedule to the lease, in which the provisions as to review are
set out, that the dispute between the parties arises.
By the
schedule the parties agreed that in default of agreement as to the new rent to
be charged, the rack rental value should be determined by an arbitrator. The
arbitrator appointed is a very experienced arbitrator. While it has not been
agreed between the parties that he should sit with a legal assessor, I think I
can assume that that will be the situation, and he will be asked to give a reasoned
award.
I am told that
there has been no reported decision on section 2(2) of the 1979 Act. Clearly
section 2 of the Act is designed to give parties arbitrating the same
facilities that litigants have to get preliminary points of law determined by the
court; and I think that I have to take into account, in deciding how to
exercise my discretion, the warnings as to the disadvantages of trying
preliminary points of law which have been reiterated a number of times by the
courts; perhaps most recently by Lord Scarman in the case of Tilling v Whiteman
[1980] AC 1, Lord Scarman’s observations being found at p 25.
Before I can
entertain an application under section 2(1) of the Act I have to be satisfied
of a number of things. The first requirement is that either the consent of all
parties or the consent of the arbitrator be obtained. In this case the
arbitrator has been persuaded to give his consent and in doing so I am told
that he directed himself, in my view properly, in saying that if there was an
arguable point of law involved in the proposed application, it was not for him
but for this court to decide whether leave should be given.
Before I am
able to entertain an application I have to be satisfied that (a) the
determination of the application might produce substantial savings in costs to
the parties and (b) the question of law is one in respect of which leave to
appeal would be likely to be given under section 1(3)(b) of the Act. If a court
does so satisfy itself then, in my judgment, there comes a time when the court
has to exercise its discretion as to whether in the particular circumstances of
the instant case it should accede to the application.
The two points
upon which it is sought to get the decision of this court arise out of the
schedule, and out of paragraph 3 of the schedule, which seeks to define rack
rental value.
The first
point, set out in paragraph 2(a) of the notice of motion, is:
What is
sought is a declaration that on a true construction of the above mentioned
lease and in the events which have happened (a) the rack rental value as
defined by the schedule to the above-mentioned lease, of the above-mentioned
premises on March 25 1980, is the best rent at which the above-mentioned
premises could then be let on a lease for a term of 106 years from March 25
1980 with no provision for the later review of that rent but otherwise upon the
terms of the above-mentioned lease.
The plaintiff
says that that issue is a pure issue of law and that it can be decided without
reference to evidence. It is, in my judgment, a point of construction and
therefore it is, in my judgment, a point of law. But the defendants argue that
it is a point of law which should not be looked at in the abstract as it were,
but that, in view particularly of the very unusual nature of the lease itself,
it is a construction point which should not be decided until what has been
called the matrix, the surrounding circumstances, has been looked at in so far
as the rules of parole evidence do not prevent its examination, and they say that
therefore that point of construction ought not to be decided before the
arbitrator has made his findings as to fact in relation to the matrix. I agree
with that view and though I have not looked of course at all the submissions, I
have listened carefully to counsel and have had certain submissions pointed out
to me, and I think that that contention on the part of the defendants is
correct.
Further, the
defendants say, if I have understood the argument correctly, that depending
upon findings of fact as to whether there is in fact an open market for 106
years to a hypothetical tenant, the point raised might prove to be academic;
and I think that, too, is correct.
So far as the
second point of law is involved, that is stated in these terms:
What is
sought is a declaration that on a true construction of the lease the rack
rental value as aforesaid of the above-mentioned premises is the best rent at
which the above-mentioned premises could be let as a whole or the best
aggregate of the rents to which individual parts of the above-mentioned
premises could be separately let, whichever is the higher.
On behalf of
the defendants it is contended that at its very best that is a question of
mixed law and fact and that in reality it is a pure question of valuation. It
seems to me that it is essentially a pure question of valuation and something
which the parties have specifically agreed should be decided by a surveyor and
that the application, so far as that second point is concerned, fails in
limine because I do not think that it raises a question of law at all.
I have already
said that in my judgment the first issue set out in paragraph 2(a) of the
notice of motion does raise a question of law and I also think that it is a
question of law which falls within section 1(4) of the Act, being a question of
law in respect of which leave to appeal would be likely to be given under
section 1(3)(b).
Secondly, I
have to be satisfied that the determination of the application might produce
substantial savings in costs to the parties. I am by no means satisfied as to
that. Indeed, it seems to me that, both surveyors having, as it were, based
their evidence and calculations on a five-year review, it is very unlikely that
there will be any substantial savings in costs if this first point or, if I am
wrong about it being a question of fact, the second point were decided now.
As I am not so
satisfied I cannot entertain an application under subsection 1(a), but before I
leave that point it seems to me clear that if the plaintiff is right in his
contention then there is no way in which there will be, so far as he is
concerned, any loss of costs at all. I repeat that having made that finding I
cannot entertain an application under subsection 1(a), but even if I were
satisfied in this case that substantial savings in costs might be produced by
giving leave under section 2(2) I should still, in the circumstances of this
case, and in the exercise of my discretion, refuse leave. This is obviously,
financially, a very important matter between the parties. It is one which the
parties agreed should be decided by an arbitrator, and it seems to me that were
this court to make a finding on a preliminary point of construction, many of
the dangers of making findings of law without having the full findings of fact
before the court at the time, might arise. So that, as I have said, were I
wrong about the saving of costs, were I wrong about the second point not being
a question of law, I should still, in the circumstances of this case, exercise
my discretion against the plaintiff and refuse leave. Accordingly, leave is
refused.
The
application for leave was refused, the plaintiff to pay the costs.