The Commercial Rent (Coronavirus) Bill, currently making its way through parliament, and the mandatory arbitration process it will introduce for remaining Covid lockdown rent arrears, are not without their critics. Among the many voices expressing their thoughts on the bill is former High Court judge Sir Paul Morgan, who, writing for The Times, said the government’s impact assessment for the arbitration scheme included estimates of time and costs that were “completely unrealistic”.
Nonetheless, Morgan does see considerable potential in the scheme. “I want to be positive about it and not negative,” he is quick to insist when asked by EG to expand on his views. “I think there is great merit in some system being imposed so parties can get an answer to what would otherwise be a real problem – one that would produce insolvencies and redundancies.
“That, plainly, is unsatisfactory for the trading tenant and the workforce, and it’s not a happy result for a property owner either, with empty premises or a claim in insolvency which won’t result in anything like full payment. So I’m positive about the idea. I don’t want to knock it. It’s something that, with amendment, could be well worth having.”
Career change
Morgan is well placed to share his insights on refining the scheme, and properly putting it into practice, having hung up his judicial robes last summer to become an arbitrator and mediator at Wilberforce Chambers.
With plans afoot to extend the retirement ages for judges to 75, 69-year-old Morgan could have enjoyed a further six years on the bench, but felt the time was right to pursue a new challenge. Having been a property specialist at the bar, he enjoyed his “varied and usually stimulating” caseload in the Chancery Division, which prides itself on its judges being generalists. “That does broaden your experience and can be very helpful,” he says.
Like many of his judicial colleagues, Morgan admits that a frustration of the job is seeing so many people priced out of the court process. “The cost of litigation is a huge subject,” he says, “but I can probably boil it down to one conclusion: that it’s far, far too expensive. An ordinary citizen cannot afford to litigate about even a substantial sum of money. And I’m not sure I can give you a solution. I think most people would say that attempts to cut costs have generally increased costs.”
After 14 years, Morgan felt he had done “the full range of work” available to him. “I didn’t feel I was going to be doing anything very different if I continued,” he says. “So I didn’t have the challenge.” But far from ready for retirement, he sought a new direction – albeit one that would nevertheless allow him more time to indulge in a particular passion.
“I thought I’d like to have a period, post-full-time work, when I’m still fit and well,” he says. “I’m sitting in a chalet in the French Alps as we speak, having come out for a week skiing. Before I become completely decrepit and fall off my skis, I’d like to spend a few winters doing that, but I didn’t want to leave the legal world altogether. It’s a work-life balance, and I decided to change the balance.”
Mediation and arbitration
Though he practised from Falcon Chambers as a barrister, Morgan was attracted to Wilberforce to begin his new chapter as an arbitrator and mediator. In the few months he has been offering his services, Morgan has received “many more requests” for mediation, and he believes the process offers certain advantages over litigation.
“Mediation can deliver a result that a court can’t deliver,” he says. “A court could give you a remedy, but it can’t impose a relationship for the future that both sides want to have. Whereas a mediated settlement – an end to warfare – can give rise to a happier future, with the parties working together to mutual advantage.”
Morgan confesses that he is increasingly becoming an advocate of mediation, which he believes will continue to “grow and develop”. He highlights two main types.
“Facilitative mediation, the standard model, is where the mediator does not tell the parties what he or she thinks, and doesn’t tell the parties what they should do. The mediator doesn’t give advice, but rather facilitates the parties to identify for themselves the things that might resolve their dispute. There’s also something called neutral evaluation or evaluative mediation, which I think has a major part to play.”
An evaluative mediator can assist parties by pointing out weaknesses in their respective cases, and offering an assessment of the likely outcome of a court trial, against which they can carry out an informed negotiation. The mediator, Morgan adds, can then say: “Go away and see if you can do better than that by agreement, or even produce that result by agreement, because if you produce it by agreement, you’re going to get there a year and a half earlier and save yourself a very substantial pile of costs.”
There isn’t much evaluative mediation in the property world, Morgan says, but he feels that both models will continue to develop and that “the pace of change is going to be quite rapid”.
Arbitration, on the other hand, is a lot more similar to litigation. An arbitrator, like a judge, is deciding a contested matter between two or more parties, typically represented by solicitors and counsel, with pre-hearing procedures, a hearing and an eventual award, rather than a judgment.
“Is arbitration superior to litigation? In some ways it is,” Morgan says. “You pick your judge, or arbitrator. The process is confidential, which some parties value significantly. Arbitration can be speedier. But I don’t think arbitration is cheaper. You might say it’s more expensive, because you have to pay the arbitrator.”
Covid disputes
Which brings us neatly back to the government’s planned scheme – and Morgan’s possible place within it.
Morgan notes some of the “shortcomings” identified by other commentators in their discussion of the bill and its arbitration system, including that it doesn’t deal satisfactorily with the position of guarantors or original tenants, and, in particular, the question marks over how the crucial issue of tenant viability will be determined.
“Viability is a key concept for the operation of the new law,” Morgan says, with any assessment that a tenant would not be viable even after benefiting from the provisions of the eventual act meaning that it should be allowed to go into some form of insolvency.
He predicts there will be “real arguments” over this core issue, which he finds fascinating. “I confess, I would like to conduct an arbitration in such a case,” he says. “I would like to hear the argument and then produce a solution, resolving it.”
Morgan adds that the government’s desire for a public process may raise “real confidentiality concerns” in some cases, and hopes that the final legislation will grant arbitrators the power to sit in private.
He also feels it is “unhealthy” that the bill envisages each party must bear its own costs. “There are unreasonable litigants,” he says, “and they do string things out and they do run up costs, so it should be simple enough that the arbitrator should have power, in a case where there’s been unreasonable behaviour, to make an adverse order for costs.”
Returning to the points he outlined in The Times, Morgan queries suggestions in the government’s impact assessment that parties may be able to get their case ready in a couple of hours, with a hearing taking place in less than a day, and solicitors charging £111 an hour.
“That is so far away from reality that it can’t really be given any credence,” Morgan says. “Some cases might be negotiated and settle, and that will be a very good thing and the bill has given them a framework. But if you have a large property company and a large trader, and a point that’s going to occur in other cases, and a large sum of money – that is a classic cocktail for legal representation, preliminary issues about disclosure of documents, expert evidence on viability and a hearing.”
He notes that, when he used to practise, a rent review dispute might take five days, or even 15, to determine what a market rent was. “I think the Coronavirus Bill concepts could be rather more difficult,” he says. “I wouldn’t be astonished if you had a three- or a five-day hearing. The picture painted by the impact assessment is not realistic.”
He is optimistic that some or all of these concerns will be addressed before the bill receives royal assent, expected in March. But he admits a degree of self-regard when it comes to one outstanding query: who will appoint the panel of arbitrators needed to handle, potentially, a large number of disputes?
“I would like to be one of the names on the panel,” he says, “but if the appointing bodies are bodies of businessmen or chartered surveyors, then I won’t be. That, in the first instance, caused me to ask this question from naked self-interest. Who will be the appointing bodies? And we still don’t know the answer to that.”
Whether it is the Chartered Institute of Arbitrators or the Centre for Effective Dispute Resolution, both consulted by the government, or perhaps other potential approved bodies, including the Law Society and the Royal Institution of Chartered Surveyors, they could surely do worse than give Morgan a call.
“I would be interested,” he says, “because it would take me back to property matters, and I’ve done a lot of cases on the insolvency side, so I think I have a skill set that could be easily adapted to this. I’m very ready to put myself forward, but maybe I will be disappointed. I may be a bystander. But, yes, my hat is in the ring.”
To send feedback, e-mail jess.harrold@eg.co.uk or tweet @EGPropertyNews
