Arbitration Act 1979 — Application for leave to appeal — Point of law — Proper test for granting leave — Whether rent review cases different from commercial ones — Whether House of Lords’ guidelines applicable to rent review cases — Whether Lucas test of real doubt proper test — Appeal by tenant dismissed
Pursuant to an agreement of 1955, the appellant company, Fisons plc, constructed an office block on land owned by the respondent borough council at Princess Street, Ipswich, and, as part of that agreement, received a 99-year lease in the terms set out in the schedule to the agreement. The agreement made no provision for the lease to have rent reviews. By clause 25 of the 1955 agreement the respondent agreed to offer the tenant a further lease of certain land for car parking for a term expiring with the main lease. By 1982 clause 25 had expired and the parties entered into a further agreement whereby they extended the time for the offer of a car-park lease.
A lease of the car-park land was offered in October 1986; it contained a three-year rent review clause and the lease was to expire at the same time as the main lease. The appellant had contended in the court below that the new lease should be on the same terms as the 1955 lease and, therefore, should not contain rent reviews. In accordance with the arbitration clause in the 1982 agreement, the dispute was referred to an arbitrator; he decided that as the agreements of 1955 and 1982 were both enforceable, the car park lease should not contain rent reviews. The respondents application for leave to appeal was granted by Sir Nicolas Browne-Wilkinson V-C:see[1989] EGCS 76. The appellants appealed contending that the Vice-Chancellor had not applied the proper test for granting leave. Two issues arose: (1) what criteria should be adopted in deciding whether or not to grant leave to appeal under section 1(3) of the Arbitration Act 1979 when the subject-matter of the arbitration is not “commercial” in the sense of being concerned with contracts of maritime affreightment as was the case in The “Nema” [1982] AC 724 and The “Antaios” [1985] AC 191; and (2) whether the Vice-Chancellor had misdirected himself when exercising his discretion to grant leave.
Held Appeal dismissed and leave to appeal to the House of Lords granted.
The decision on whether or not to grant leave to appeal an arbitrator’s award to the High Court should be arrived at after only brief argument. Following Aden Refinery Co Ltd v Ugland Management Co Ltd [1987] 1 QB 650, the court should approach the question of granting leave in the frame of mind dictated by the “Nema” and “Antaios” cases, namely with a bias towards finality. But the guidelines might require adaptation if, and so far as, in particular cases the problem was not covered by the reasoning and approach adopted in those decisions. Rent review cases are not so different from commercial ones; groups of clauses may bear so strong a family resemblance as not to be readily distinguishable from standard contract clauses. Being left in real doubt whether the arbitrator may or may not have been right — being left in real doubt in that sense — is not sufficient. But the degree of suspicion which is requisite may vary according to the seriousness of the consequences of error to the parties and to the wider public. The House of Lords’ guidelines with regard to one-off contracts — that an obvious error should be shown — assumes a one-off effect and would be true of the last rent review in a lease. But it would not be true of earlier rent reviews: that is anologous to the effect of standard terms. In most rent review cases a “standard terms” approach will be justified requiring a prima facie case of error by the arbitrator.
In relation to the present case, the Vice-Chancellor in applying the test of real doubt in Lucas Industries plc v Welsh Development Agency [1986] 1 EGLR 147 applied the wrong test. A strong prima facie case that the arbitrator had made an error of law had to made out, and on analysis of his award that was the case.
David Grant (instructed by Birketts, of Ipswich) appeared for the appellant; and Kirk Reynolds (instructed by the solicitor to the Ipswich Borough Council) appeared for the respondent.
