Agricultural Holdings Act 1948, section 8 — Important Court of Appeal decision — Date of appointment of arbitrator by minister reinterpreted — Tenant challenged validity of appointment because he did not receive notice of the appointment until after ‘the next ensuing day’, ie after the term date on which any adjustment of rent would take effect — In this case the minister made his appointment on January 29 1981, the next ensuing day was February 2 and the tenant received notice of the appointment on February 3 — Held by the Court of Appeal, contrary to a fairly general belief, that the receipt of notification by the parties is not necessary to complete the arbitrator’s appointment — Tradax Export SA v Volkswagenwerk AG and old case of Tew v Harris distinguished — Arbitrator’s appointment complete when the instrument of appointment is signed and sealed by minister — But although receipt of notice by the parties is not necessary to complete the appointment, there is an implication that a party must have received notice before the 28 days begin to run against him for the purpose of paragraph 6 of Schedule 6 to the 1948 Act — As to arbitrator’s acceptance of appointment, this is clearly necessary, but, as the court pointed out, in practice the minister will ascertain the arbitrator’s willingness before making the appointment — Appeal from decision of county court judge (who decided that the arbitrator had no jurisdiction) allowed — The judgment of Kerr LJ, who expressed unorthodox views on the absence of any precise correlation between the ‘date of the reference’ and ‘the next ensuing day’, should be noted — As a result of the Court of Appeal’s decision the rules formulated by Judge Meurig-Evans in Richards v Allinson (1979) 249 EG 59, [1979] 1 EGLR 12 as to the requirements for perfecting the arbitrator’s appointment need revision
This was an
appeal from the decision of Judge J D Walker at Doncaster County Court in
favour of the tenant, respondent to the appeal, Michael John Durdy, who had
challenged the appointment of the arbitrator, J G Cleverly FRICS, by the
Minister of Agriculture in connection with a rent arbitration. The appellants,
the
agricultural holdings, the rents of which were the subject of the arbitration,
were Cockwood and Kilham Farms, Cantley, South Yorkshire.
Derek Wood QC
and Miss Joanne Moss (instructed by Hepworth & Chadwick, of Leeds) appeared
on behalf of the appellants; E C Evans Lombe QC and A De Freitas (instructed by
Oxley & Coward, of Rotherham) represented the respondent.
Giving
judgment, EVELEIGH LJ said: By a lease dated March 16 1965 the appellants let
to the respondent two agricultural holdings known as Cockwood and Kilham Farms,
Cantley, in South Yorkshire, for a term of 10 years from February 2 1965 at a
yearly rent of £6,000 payable by equal half-yearly instalments on February 2
and August 1 in every year, ‘the first payment to be made on the 1st day of
August next’. The respondent’s tenancies subsequently became converted into a
yearly tenancy by virtue of the Agricultural Holdings Act 1948. On November 29
1979 the landlord served notice upon the tenant demanding a reference to
arbitration under section 8 of the Act. Application was made to the minister
for the appointment of an arbitrator, and by notice dated January 5 1981 the
minister informed the landlord and the tenant that he was about to appoint an
arbitrator. On January 29 there was signed and sealed, on the authority of the
minister, a document which stated that in exercise of his powers conferred by
the Agricultural Holdings Act 1948 the minister ‘does hereby appoint JG
Cleverly Esq, FRICS, to be the arbitrator for the purpose of settling the
claims, questions or differences between the landlord and the tenant of the
holding mentioned in the First Schedule hereto which are specified in the
Second Schedule hereto’. The First Schedule specified Cockwood and Kilham
Farms, and the Second Schedule read: ‘The rent to be paid for the said holding
as from the next ensuing date on which the tenancy could have been determined
by notice to quit given at the 29th day of November 1979 being the date of the
demand for arbitration made by the landlord to the tenant’. A copy of the
document was sent to the landlord and to the tenant. The landlord received his
on February 2. The tenant received his on February 3. The tenant challenged the
jurisdiction of the arbitrator, and the learned county court judge decided that
the arbitrator had no jurisdiction.
The learned
judge held that the tenancy commenced on February 2 and that the next ensuing
date (after November 29 1979) upon which the tenancy could have been determined
by notice to quit was February 1 1981 and that the decision in Sclater v
Horton [1954] 2 QB 1 required the arbitrator to be appointed before that
date, the appointment did not take effect until February 3 (the date when the
tenant received the notice) and consequently the arbitrator had no
jurisdiction.
Mr Wood for
the appellants contended that as the term was expressed to run from February 2
it began on February 3. Further notice to quit can be given to expire on the
last day of the current term or the day after that. Consequently it could have
been given to expire on February 3. Therefore, as notice of the appointment was
received by the tenant on February 3, the appointment of the arbitrator was in
time because, he says, seeing that February 3 ended at midnight, the
appointment was made before that date. This ingenious rescue operation was not
fully argued by the respondent, as the court indicated that it wished to hear
other points first. I mention it lest anyone reading the judgments in this case
is puzzled by some apparent discrepancies in the dates. I do not find it
necessary to deal with the argument.
It was also
argued that if Sclater v Horton contained the principle which the
learned judge applied and which in effect could be said to make time the
essence, then it was no longer to be followed, in view of the decision of the
House of Lords in United Scientific Holdings Ltd v Burnley Borough
Council [1978] AC 904. Again I do not find it necessary to go into the
argument in detail. That case was dealing with the approach to an arbitration
clause as machinery for settling disputes. In section 8 ‘the date of the
reference’ is not a time-table for a procedural role. It is a fact relevant to
the determination of the arbitrator and it lies at the basis of his decision,
for he has to determine the appropriate rent at that date. The machinery for
arbitration laid down in an arbitration clause must depend upon the
construction of each particular clause, and this was clearly recognised in United
Scientific Holdings Ltd v Burnley Borough Council. I am therefore
unable to regard the decision in that case as an authority which overrules the
decision of the court in Sclater v Horton, which was dealing with
the interpretation of a statute.
In my opinion,
this case admits of a simple solution. I have come to the conclusion that the
arbitrator was appointed at the moment when the minister performed the official
act of appointment by signing and sealing the document. It accords with the
natural meaning of the word ‘appointment’. It is true that paragraph 6 of the
Sixth Schedule to the Act might cause injustice if literally construed, but
that is a reason for the court to avoid a strict construction of the paragraph
and not a reason for departing from the natural meaning of the word ‘appoint’.
Paragraph 6 reads:
The parties
to the arbitration shall, within fourteen days from the appointment of the
arbitrator, deliver to him a statement of their respective cases with all
necessary particulars and — (a) no amendment or addition to the statement or
particulars delivered shall be allowed after the expiration of the said
fourteen days except with the consent of the arbitrator; (b) a party to the
arbitration shall be confined at the hearing to the matters alleged in the
statement and particulars delivered by him and any amendment thereof or
addition thereto duly made.
A benevolent
construction in accordance with natural justice is readily achieved by reading
into the section the requirement that a party must have notice before time
begins to run against him.
In Tradax
Export SA v Volkswagenwerk AG [1970] 1 QB 537 Lord Denning and
Salmon LJ both stated that notice was necessary to complete the appointment of
an arbitrator. They were dealing with a commercial arbitration agreement. Each
party had the right to appoint. What one did could be relevant to the action
taken by the other. Moreover, the court was concerned with the failure to
notify the arbitrator himself, and the question of notice to a party was not
relevant to the decision. Edmund Davies LJ did not deal with that point.
Furthermore, Salmon LJ clearly regarded it as a question of construction of the
arbitration clause. At p 545 at ‘F’ he said:
No doubt the
word ‘appointed’ has different meanings in different contexts. We, however, are
only concerned to construe it as used in the Centrocon arbitration clause which
my Lord has read and which I need not read again.
The case of Tew
v Harris (1847) 11 QB 7, upon which Denning LJ and Salmon LJ relied, was
itself a case where the procedure set out in the clause indicated that notice
was to be given to the other party. For these brief reasons and for those more
fully developed in the judgments of Griffiths LJ and Kerr LJ, I cannot accept
the argument that the appointment is not complete until notice thereof is
received by each party. That being so, the appointment was in time. I would
allow this appeal.
I do not find
it necessary to decide the further arguments submitted on behalf of the
appellants, namely, that it is possible to read the decision in Sclater
v Horton as not requiring strict observance of the need to appoint the
arbitrator before the next ensuing day. However, I have great difficulty in
accepting this argument. On the other hand, I must confess that upon reading
section 8 I treated the words ‘at the date of the reference’ as indicating a
period rather than a particular day. A reference to arbitration is a process
rather than a specific event. Nonetheless I regard the decision of Sclater
v Horton as deciding that for the purpose of section 8 the date of the
reference is the date of the appointment. Romer LJ at p 14 said:
Both the
landlord and the tenant are in agreement that the words ‘the date of the
reference’ in section 8(1) of the Act mean the date of the effective
appointment of the arbitrator, either by agreement or, in default of agreement,
by the Minister, and I think that they are right in that view.
Denning LJ, at
p 13, said:
On the true
construction of the section I am in full agreement with the Master of the Rolls
that the reference must take place within that year, by which I mean that the
arbitrator must be appointed and must accept his appointment within that time.
If the arbitrator is not appointed within the year, then the landlord loses his
right to increase the rent; but if the arbitrator is appointed within the year,
then the arbitrator has to fix the new rent. He must fix it as at the date of
the reference, and that means, I think, as at the date of his appointment.
I further see
great difficulty in saying that the principle enunciated in Sclater v Horton
does not apply if the arbitrator is appointed so that he can give his decision
within the year for which the new rent is to be determined. I appreciate that
the facts in Sclater v Horton were different from those in the
present case. However, the court approached the problem by first determining
the true construction of section 8. This was done by considering the section in
isolation and not by reference to the facts of the case. The Master of the
Rolls, at p 12, scrutinised the wording of the section and the tenses used in
it. Denning LJ was in full agreement with the Master of the Rolls in his
construction of the statute: p 13. I find it difficult to discover a ratio
decidendi of the case other than that based upon the construction of the
statute so positively stated as it was.
Agreeing that
the appeal should be allowed, GRIFFITHS LJ said: The contractual term for which
the farm was let was expressed to run for a term of 10 years from February 2
1965. Thereafter, by virtue of the provisions of the Agricultural Holdings Act
1948, the tenant remained in occupation as a tenant from year to year with the
security of tenure provided by the Act.
By a notice
dated November 29 1979 the landlord demanded of the tenant an arbitration as to
the rent that the tenant should pay for the three years commencing ‘from the
next ensuing day on which the tenancy thereof could be determined by Notice to
Quit given at the date of this demand’. That is from February 2 1981.
The landlord
and tenant could or did not agree upon an arbitration; so on December 10 1980
the landlord called upon the minister to appoint an arbitrator. By an
instrument dated and sealed on January 29 1981 the minister appointed JG
Cleverly Esq as the arbitrator, and by letters of the same day notified the landlord
and tenant of the appointment. The landlord received the letter notifying him
of the appointment on February 2 but the tenant did not receive his letter
until February 3.
The tenant,
relying upon the decisions of this court in Sclater v Horton
[1954] 2 QB 1 and Tradax Export SA v Volkswagenwerk AG [1970] 1
QB 537, has taken the technical point that because he did not receive his
notification until February 3 the reference to arbitration was a day too late
and, if this is right, the landlord will have to wait another two years before
a fair rent can be fixed for the farm which will reflect current inflation.
The county
court judge decided the issue in the tenant’s favour, holding that upon the
authority of Sclater v Horton the arbitrator had to be appointed
before February 2 1981 and that the appointment of the arbitrator was not
complete until notice of the arbitration had been received by the tenant, for
which proposition he relied upon the Tradax case.
Mr Wood on
behalf of the landlord has attacked the judgment upon a number of grounds.
First he says that, in view of the decision of the House of Lords in United
Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904, Sclater
v Horton is no longer binding on this court; it has, he says, been implicitly
overruled because, in the language of Lord Greene in Young v Bristol
Aeroplane Company [1944] 1 KB 718, it can no longer stand with the decision
in United Scientific v Burnley. That case in the House of Lords
decided that there was no presumption that time was of the essence in a rent
review clause in a lease. Part of the reasoning that led their Lordships to
that conclusion was that there was no impediment to the landlord recovering
retrospectively an increase in rent awarded pursuant to a rent review.
In Sclater
v Horton this court construed section 8 of the Agricultural Holdings Act
of 1948 as incorporating a timetable into applications for a rent review. There
are arguments both for and against such a construction and it is clear from the
report that the matter was fully argued before the court. All the members of
the court agreed that section 8 must be construed as requiring that the date of
the reference to arbitration must precede the date upon which the tenancy could
next be determined by a notice to quit. All three members of the court gave as
one of their reasons that, as the arbitrator had to fix the new rent ‘at the
date of the reference’, it must have been intended that that date should
precede the commencement of the new three-year term for which it would apply.
That appears to me to be a very powerful reason for adopting the construction
they did. To allow a rent to be fixed towards the end of a three-year period
based upon values existing at that date and require it to be paid retrospectively
would in an inflationary age produce a most unfair result for the tenant. This
reason is wholly untouched by the decision in the House of Lords.
The other
principal reason given by the Master of the Rolls and with which Denning LJ
agreed depended upon the actual language of the subsection and in particular
the use of the future tense. I am unable to see how a statement of general
principle about the proper approach to the construction of a commercial lease
can be said to overrule a decision of this court based upon the close analysis
of the wording of a subsection in a statute.
The only
reason for the decision in Sclater v Horton that can no longer
stand in the light of the decision in United Scientific Holdings Ltd v Burnley
Borough Council is the doubts expressed by the Master of the Rolls about
the ability to recover retrospectively over- or under-paid rent. But that was
not one of the principal reasons for the decision and it is a wholly
insufficient basis upon which to hold that Sclater v Horton is
not binding upon this court. I cannot therefore accept Mr Wood’s first attack
upon the county court judge’s decision.
Sclater v Horton also decided that ‘the date of the reference’ was
the date by which the arbitrator had been appointed and accepted his
appointment. Denning LJ said at p 13:
On the true
construction of the statute I am in full agreement with the Master of the Rolls
that the reference must take place within that year, by which I mean that the
arbitrator must be appointed and must accept his appointment within that time.
It was not
suggested by any member of the court that the appointment was not complete
until the parties had received notification of the appointment. In the present
case the appointment was dated January 29 and there is no suggestion that the
appointment had not been accepted by February 2. The county court judge,
however, felt impelled to hold that the appointment was not complete because of
the decision in Tradax Export SA v Volkswagenwerk AG. In that
case the Court of Appeal was dealing with the appointment of a commercial
arbitrator under the Centrocon arbitration clause. The point that the court was
called upon to decide was whether an appointment of an arbitrator could be
complete before the arbitrator had been asked if he was willing to act. Not
surprisingly, the court said it could not. But in the course of their judgments
Lord Denning and Salmon LJ also said that the appointment of an arbitrator
required notification to the parties to the arbitration before it was complete.
For this they both relied upon the old case of Tew v Harris
(1847) 11 QB 7. That case turned upon whether a party required to nominate a
valuer could be said to have done so if he had not given his valuer’s name to
the other side.
The agreement
between the plaintiff and defendant in that case provided that the defendant
would purchase the plaintiff’s crops at a valuation to be made by two persons,
one named by each party, and, if they disagreed, by a third person to be named
by them before entering on the valuation. But the agreement also provided that
if one party failed to appoint a valuer, the valuer of the other could make the
final decision. Such an agreement is clearly to be construed as requiring
notice of the appointment of the valuer to be given to the other party. Suppose
the plaintiff appoints a well-respected valuer in whose judgment the defendant
has trust, the defendant may well be content to leave the valuation in his
hands and not appoint another valuer. On the other hand, if the defendant has
no confidence in the plaintiff’s valuer, he will want to appoint his own. In
either case the defendant must know the name of the plaintiff’s valuer. But,
for myself, I should have had considerable hesitation in using that decision as
authority for the general proposition that in all commercial arbitrations the
appointment of an arbitrator was not complete until the parties to the
arbitration had been told of his appointment. Whereas I can readily see that
the arbitrator cannot be said to be appointed until he had been asked to act
and agreed to do so, which is the point that had to be decided in Tradax,
it is not clear to me why in all cases it necessarily follows that his
appointment is not complete until both parties to the arbitration have been notified
of the appointment. Much would depend, I should have thought, upon the
particular wording of the arbitration agreement.
But, whatever
may be the position in commercial arbitrations which require co-operation
between the parties in appointing an arbitrator, I can see no reason why, in
the case of the appointment of an arbitrator by the minister under this Act,
the appointment should not be complete once the appointment has been made in
writing and the arbitrator has agreed to act. As a matter of practice, I would
expect the minister to communicate with the arbitrator and ask whether he is
willing to act before he makes the appointment. On this assumption, there is a
certain date to which the parties can look to see if the reference was made
within time, namely the date of the written instrument of appointment, in this
case January 29 1981. This is a convenient procedure, for it allows the
appointment to be made very close to the date upon which the current rental
period expires, which is the appropriate date at which a new rent should be
assessed.
Neither tenant
nor landlord is given any right to object to the arbitrator appointed by the
minister; having failed to agree upon an arbitration themselves, they are bound
to accept the minister’s appointment. The position is quite different from
commercial arbitrations in which the parties have to co-operate with one
another in the appointment of the arbitrator.
In Palgrave
Gold Mining Co v McMillan [1892] AC 460 the question before the
Privy Council was whether it was necessary to give notice to the parties before
exercising a statutory power to appoint an arbitrator. The trenchant language
in which Lord Hobhouse dismissed the requirement of notice lends some support
to the view that notice to the parties, whether before or after the event, is
not a necessary ingredient to perfect the appointment of an arbitrator under a
statutory power.
I must now
consider the wording of paragraph 6 of the Sixth Schedule, which reads:
The parties
to the arbitration shall, within fourteen days from the appointment of the
arbitrator, deliver to him a statement of their respective cases with all
necessary particulars and — (a) no amendment or addition to the statement or
particulars delivered shall be allowed after the expiration of the said
fourteen days except with the consent of the arbitrator; (b) a party to the
arbitration shall be confined at the hearing to the matters alleged in the
statement and particulars delivered by him and any amendment thereof or
addition thereto duly made.
The arbitrator
has no power to extend the short period of 28 days in which the statement of
the case must be delivered and, as it would be absurd that time should start
running before the party knew of the appointment of the arbitrator, Mr
Evans-Lombe submitted that the appointment cannot be complete until both
parties have notice of it. This, it is said, must have been in the mind of the
draftsman; otherwise he could not have produced a procedure so unfair as to
have the result of debarring a party from submitting his case if his notice of
the appointment of the arbitrator had gone astray in the post. This Act,
however, was drafted over 20 years before the observations in Tradax
and, much as I admire and hold in awe the powers of parliamentary draftsmen, I
am unwilling to assume that the author of this Act had at the forefront of his
mind when drafting the Sixth Schedule the case of Tew v Harris to
be found in the English Reports and decided over a century earlier.
The Sixth
Schedule is dealing with procedural matters, not the question of substantive
rights. The Court of Appeal has been compelled to read a statutory time-table
into section 8 to give effect to its manifest intention, and I have no
inhibition in reading paragraph 6 as implicitly requiring that the landlord or
tenant has received notice of the appointment before time starts to run against
him. This solution is, I think, far preferable to the uncertainty that would
arise if the question whether the reference to arbitration under section 8 had
been made in due time depended upon when notice of the appointment had been
received by both the landlord and the tenant.
Accordingly, I
would hold the appointment is complete once the arbitrator has agreed to act
and the minister has made the appointment in writing. I would therefore allow
this appeal.
I had written
this judgment before I had the opportunity to read the draft of the judgment
about to be delivered by Kerr LJ. The Court of Appeal in Sclater v Horton
did not have the advantage of the powerful argument deployed by Lord Justice
Kerr based in particular upon the elasticity of the meaning to be attached to
‘the reference’ in arbitration proceedings. If the Court of Appeal had received
that argument, I readily accept that they might have construed section 8
differently. But that the court regarded the true construction of section 8 as
vital to their decision is, I think, with all respect, clear beyond doubt.
Indeed, it was because the court appreciated that the construction they placed
upon section 8 might affect the way in which the minister exercised his powers
that they adjourned the first hearing of the appeal so that the minister could
be represented by counsel as amicus curiae. The minister in argument
pointed out that he had no power to impose a time-limit for the arbitration. I
will content myself by quoting two short passages from the judgments of Sir
Raymond Evershed MR and Denning LJ. At p 9 Sir Raymond Evershed says:
In order to
answer the problem presented to the court, it is necessary to construe section
8. Three dates are mentioned in subsection (1), as regards each of which it is
important to come to a clear conclusion. The first date is the date of the
demand of a reference to arbitration. The second date is the next ensuing day on
which the tenancy could have been determined by notice given at the date of the
demand. The third is the date of reference. In stating the dates in that order,
I am not indicating their chronology, but stating the order in which the dates
appear in the subsection;
And later he
says:
Mr Binney
says, therefore, that, in the absence of express language, the court cannot
hold that there is any specific limit of time applicable. I do not agree with
that argument. As I construe this subsection, though it is true that it makes
no express reference to time (as is made in other sections) yet I think that
the necessary and inevitable implication of the language which Parliment has
used is that the termination date, that is the date which is here called ‘the
next ensuing day’, must be after the date of the reference.
Denning LJ, on
p 13, says:
On the true
construction of the statute, I am in full agreement with the Master of the
Rolls that the reference must take place within that year, by which I mean that
the arbitrator must be appointed and must accept his appointment within that
time.
I regard Sclater
v Horton as binding authority for the proposition that the arbitrator
must be appointed before the next ensuing day, and that the decision must be
followed unless and until some different construction is placed upon section 8
by the House of Lords.
Also agreeing
that the appeal should be allowed, KERR LJ said: Section 8 of the Agricultural
Holdings Act 1948 provides the statutory basis for the review of rents for
agricultural holdings by means of arbitration. If either the landlord or the
tenant serves a notice demanding arbitration for this purpose, there is to be a
reference to a single arbitrator by virtue of section 77 and the Sixth Schedule
to the Act. Under paragraph 1(1) of this schedule the arbitrator is to be
appointed by agreement between the parties or, in default of agreement between
the parties, by the minister upon application by either of the parties. Subject
to the option as to whether the arbitrator is to be appointed by the parties or
by the minister, or whether any appointment made by the minister is revoked by
the consent of both parties (see paragraph 3 of the schedule), the effect of
section 77 is that any rent review in relation to agricultural holdings can
only take place by means of the arbitral machinery laid down in the Act.
Upon a demand
for a reference to arbitration, the question to be decided by the arbitrator is
‘what rent should be payable in respect of the holding as from the next ensuing
day on which the tenancy could have been determined by notice to quit given at
the date of demanding the reference?’ In
this connection three general matters concerning the scheme of the Act are
relevant. First, once the contractual term of the tenancy has expired (as was
the case here), there is a continuing tenancy from year to year. Secondly, such
a tenancy can only be determined by at least one year’s notice to quit.
Thirdly, once there has been a rent review by arbitration, it operates as a
determination of the rent for the next three years irrespective of whether the
rent is increased, reduced, or left unchanged by the arbitrator’s award.
Having regard
to the second and third of these factors, it follows that if a demand for
arbitration is made in (rental) year A, the
beginning of year C, and it then applies to the triennium of years C, D and E.
Further, under section 8 the arbitrator must determine the appropriate rent ‘at
the date of the reference’, and the effect of the concluding paragraph of this
subsection is that this is to be based, in effect, on the then prevailing rents
in the open market, subject to certain qualifications in subsection (2) which
are immaterial for present purposes.
Subject to the
foregoing matters, section 8 does not contain anything in the way of a
chronology, let alone a prescribed timetable. Thus, the demand for a reference
can be made at any time during year A, and no time is stipulated for the
appointment of an arbitrator thereafter. There is no definition of ‘reference’,
and the expression ‘the date of the reference’ is also left undefined. In the
context of arbitrations generally, the word ‘reference’ is a loose term capable
of covering a number of matters, beginning (at the latest) with the appointment
of the arbitral tribunal and covering the period up to and including the final
hearing, and perhaps up to the award.
One has only
to read through the Arbitration Act 1950, consolidating the Acts of 1889 and
1934 which were then in force, to see that the word ‘reference’ is used in a
variety of senses in the context of the process of procuring the resolution of
a dispute by means of arbitration. It denotes events over a period of time and
not a particular moment in time. Moreover, in the general context of section 8
there is also no need to assign any precise chronological meaning to the words
‘the date of the reference’. These words govern only the then prevailing market
rents, and since paragraph 13 of the schedule provides that, subject to any
enlargement of time by the minister, the arbitrator is to make his award within
56 days from his appointment, a period during which market rates are unlikely
to fluctuate violently, the scheme of section 8 does not necessitate any
precise determination of any particular day as ‘the date of the reference’.
However, since the arbitrator’s determination will fix the rent as from the
beginning of year C in the way which I have described, the sensible way of
operating the section is clearly that there should be a close degree of
proximity in time between the date of his appointment and the beginning of year
C. Provided that the arbitrator’s appointment is made close to that date, I
cannot see that it makes any legal or practical difference from the point of
view of the operation of the section whether it is made before, or on, or
shortly after this date, though the most sensible course is no doubt to make it
shortly before. Even in that event, however, the final award is unlikely to be
published until one or two months after the beginning of year C, and it will
then date back to this extent.
The foregoing
approach is illustrated by the way in which the section was operated in the
present case. The anniversary date of the tenancy was February 2 and the rent
was payable in arrears on that date and on August 1 of each year. The demand
for a reference had been made by the landlord in November 1979, and we were
told that he applied to the minister to appoint an arbitrator in December 1980.
The rent review could accordingly not take effect earlier than February 2 1981,
and on January 5 1981 the ministry informed both parties that the minister
would make an appointment. Mr J G Cleverly was evidently one of the persons who
were on the panel of arbitrators referred to in paragraph 1 of the Sixth
Schedule, and on January 29 1981 his appointment on behalf of the minister was
sealed to determine the rent ‘as from the next ensuing day on which the tenancy
could have been determined by notice to quit given at November 29 1979’, which
was February 2 1981. Notice of his appointment was duly sent to both parties; it
was received by the landlord on February 2 but by the tenant only on February
3. It is this latter fact alone which is now said to have invalidated the whole
process under section 8; and indeed the learned county court judge has so held.
To my mind
this is a wholly astonishing proposition in the face of section 8. What is said
on behalf of the tenant, however, is that this court is bound by authority to
accept it. The main authority relied upon for this purpose was the decision of
this court in Sclater v Horton [1954] 2 QB 1, to which I turn in
a moment, and then — superimposed upon this decision — we were referred to a
number of decisions in other contexts to which I turn briefly thereafter. The
upshot of the whole argument was that there had to be an effective and complete
appointment of the arbitrator on or before February 2 and that this also
required that both parties should by then have had notice of his appointment.
For the reasons explained below, I cannot accept any part of this argument.
However, before dealing with it, I must mention two matters in passing, though
in my view neither affect the result. First, it was common ground that Mr
Cleverly had in fact accepted the appointment by February 2. Secondly, it was
argued on behalf of the landlord that, since the tenancy was held ‘from’
February 2 and the rent was payable in arrears, notification to the tenant on
February 3 was still in time. I express no view on this question, since in my
view it has no bearing on the decision.
I then turn
first to Sclater v Horton. In my judgment what was said by this
court in that case, albeit in relation to section 8, was said in a context
which was so far removed from the present that it would be an abuse of the
doctrine of stare decisis to rely upon the language of the judgments as
governing the interpretation of section 8 for present purposes. I would
therefore not accept that the way in which the judgments were expressed in that
case governs the present case to any extent, ie quite apart from the further
edifice of other authorities unconnected with section 8 which it was then
sought to superimpose upon that decision. The landlord in that case gave a
notice demanding arbitration shortly before the end of year A, and if this had
been followed by a reference to arbitration the award would have operated as
from the beginning of year C in the way explained above. However, the landlord
did nothing to procure a reference, perhaps deliberately because rents were
rising: see the judgment of Sir Raymond Evershed MR at p 9. Year B and nearly
the whole of year C then went by. The landlord then served a further notice
demanding arbitration shortly before the end of year C. Since any notice to
quit given at that time could not operate until the end of year D, it followed
that any reference to arbitration pursuant to this notice could not
result in an award to review the rent earlier than from the beginning of year
E. However, in relation to this notice the landlord proceeded to demand
a reference to arbitration by applying to the minister to appoint an
arbitrator. He in fact did so on the basis of the demand which he had made in
year A (see ibid), and the minister duly appointed an arbitrator shortly
after the beginning of year D, but (no doubt deliberately) in terms which did not
identify which demand for arbitration was regarded as relevant for this
purpose. The landlord then contended that the relevant demand for arbitration
was the one which he had made in year A, so that, on the basis of market values
in year D, the arbitrator was (according to the landlord) required to determine
the appropriate rent retrospectively for the triennium which had begun with
year C. The tenant, on the other hand, contended that, since that demand for
arbitration had not been followed by any reference, the arbitrator could only
determine the rent for the triennium beginning with year E.
That was the
only issue before this court. All that fell to be decided was whether a request
to the minister to appoint an arbitrator at the end of year C, which was
followed by an appointment in year D, could be based on a demand for
arbitration which had been made in year A, so that the arbitrator would have to
determine, retrospectively in year D, the triennial rent as from the beginning
of year C; or whether, as the tenant contended, the arbitrator could only
determine the rent for the triennium as from the beginning of year E. This
issue, as to which was the relevant triennium, was clearly stated in the
judgment of the Master of the Rolls (see ibid).
Although every
word of the judgments in that case was directed to this issue alone, many
passages in the judgments were subjected to minute verbal analysis in the
arguments before us for the purpose of deciding the present case, in which the
issues are wholly different. It is quite clear that none of the members of the
court then had in mind any precise chronological correlation between the date
of the arbitrator’s appointment and the beginning of the period from which his
award was to be determinative. This can be seen, for instance, from the
following passages. First, the Master of the Rolls at p 11:
If a rent is
to be fixed, the normal and fair date at which it should be fixed is
the date when it begins to operate. I should have thought it plain that the
section is contemplating that the rent is fixed by reference to a fair
commencing date
And per Romer
LJ:
If, on the
other hand, the date of the reference (and, therefore, the date of fixing the
rent) was at or just before the beginning of the new period, the parties would
at least start off with a rent which, presumably, was a fair and proper rent at
that time. That seems to me to be the contemplation of the legislature.
It therefore
seems to me to be clear that in substance this court then approached
section 8 in much the same way as I have indicated above. However, in
formulating the judgments on the issue as to which of the two demands for
arbitration, and which of the two triennia, were the relevant ones, the
language which expressed the reasoning of the court incorporated two steps,
which have been used as the sheet-anchor of the tenant’s argument in the
present case. This is clear from the passages which have already been quoted.
First, the judgments proceeded on the basis that ‘the reference’ must precede
‘the next ensuing day’, ie the date as from which the rent review would be
operative. Secondly, as the result of a concession in which both counsel
acquiesced, and which was accepted by the court, the judgments also proceeded
on the basis that the words ‘the date of the reference’ were synonymous with
‘the effective appointment of the arbitrator’. However, on the issues before
the court in that case, no question arose as to any chronological precision in
relation to either of these steps in the reasoning, or as to any precise
correlation between ‘the date of the reference’, let alone ‘the effective
appointment of the arbitrator’, and ‘the next ensuing day’.
In these
circumstances I cannot accept that these steps in the reasoning of the
judgments for the purposes of that case govern the present one. In relation to
what was there held to be ‘the next ensuing day’, viz the beginning of year E
and not of year C, the arbitrator having been appointed shortly after the
beginning of year D, the precise chronological meaning of ‘the date of the
reference’, let alone of the ‘effective appointment of the arbitrator’, was
wholly irrelevant. The substance of the decision was that, in order to fix a
fair rent on the basis of then prevailing market rentals, the date of the
reference to arbitration and the beginning of the period from which the rent
review would operate should be reasonably and fairly correlative.
Thus, suppose
that in the present case the minister had, due to some administrative
oversight, failed to seal the appointment of Mr Cleverly by February 2 or even
3, that the landlord had then pointed this out as a matter of urgency, and that
the minister had then made the necessary appointment a few days later. Having
regard to the scheme of section 8 and the substance of the decision in Sclater
v Horton, is it then to be said that the landlord had lost his right to
a rent review as from February 1981, and that he had to give a further notice
demanding arbitration which could not have taken effect until February
1983? Similarly, suppose that it could
not be shown that Mr Cleverly had accepted the appointment by February 2 or 3,
but only a few days later, because he was away or because the letter of
appointment had miscarried. There could be a number of slips of this nature covering
the first few days of February. None of them would have any real significance
in relation to the arbitration or its subject-matter. However, on the tenant’s
argument-so far as I can see — the landlord would have no remedy against anyone
for the loss of the chance of obtaining an increase in rent over the next two
years. There is nothing in the wording or purpose of section 8 which compels
this extreme conclusion, and in my view it would be an abuse of the doctrine of
precedent to extract this conclusion from the judgments in Sclater v Horton.
In any of these events the scheme of section 8 and the substance of the
decision in Sclater v Horton would both have been met.
Accordingly, I
would allow the present appeal on this ground alone. However, I also consider,
in agreement with the judgments which have already been given, that the tenant
must fail on the next step of his argument in any event. This was that there
was no ‘effective appointment’ of Mr Cleverly until the appointment had been
made and both parties had had notice of it; or alternatively — which
comes to the same thing — that the appointment of an arbitrator has not been
effectively completed until it has been notified to the parties. This argument
was based on two 19th-century cases and the acceptance of one of these, Tew
v Harris (1847) 11 QB 7, in the decision of this court in Tradax
Export SA v Volkswagenwerk AG [1970] 1 QB 534, although the point
was obiter for the purposes of that case. However, all these cases were
concerned with the appointment of an arbitral tribunal inter partes, and
indeed with the appointment of an umpire or third arbitrator by two arbitrators
appointed respectively by the parties. The constitution of an arbitral tribunal
by such methods clearly requires co-operation and communication between the
parties. In my view these cases cannot govern the question of what constitutes
an ‘effective appointment’ when the appointment is to be made by some outside
agency. All that is necessary for that purpose, in my view, is the making of
the appointment and its acceptance by the arbitrator or other tribunal. Once
this has happened, the appointment as such is complete. However, there may then
be a further factor, which was also present in all these cases. This is that
the date of the appointment may have consequences in terms of time for the
subsequent rights and obligations of the parties and for the conduct of the
arbitration. For this purpose it is accordingly necessary to add a further
implication to any provisions concerning the appointment of the tribunal in
order to give business efficacy to the consequences which flow from such
appointment. This implication is that for such purposes the appointment only
takes effect as from the time when the parties have had notice of it, or at any
rate that party — which is normally the claimant — on whom some obligation is
imposed as from the date of the appointment. This is also the position in
relation to paragraph 6 of the Sixth Schedule to the Act of 1948. I would
therefore construe the obligation concerning the delivery of the statements of
cases within 28 days from the appointment of the arbitrator in this provision
as being subject to the implication that this requirement only begins to run as
from the time when the parties have had notice of the appointment.
For all these
reasons I agree that this appeal should be allowed.
The appeal
was allowed with costs of the appeal and of the hearing before the county court
judge. The question of law in paragraph 10 of the stated case, ie as to whether
the arbitrator had jurisdiction, was answered in the affirmative.
