Landlord and tenant — Construction of rent review clause in lease — Appeal by landlords from decision of Lloyd J in favour of tenants — Proceedings before Lloyd J consisted both of a notice of motion by the tenants under section 1(2) of the Arbitration Act 1979 and a notice of motion by the landlords to remit the award of the arbitrator under section 22 of the Arbitration Act 1950 — Subject matter was a lease for 98 years from 1975 of a substantial tower office block in the City of London — Dispute was as to construction in the review clause of the definition of yearly rental value — Relevant part of clause provided that the amount to be determined by the arbitrator was that which in his opinion represented a fair yearly rent for the demised premises at the valuation date having regard to rental values then current for property let without a premium with vacant possession — It was common ground that there was no precise comparable and that the rental value had necessarily to be approached on a floor-to-floor basis — The arbitrator’s award was £6,700,000 pa with an alternative award, on the assumption that the entire building was vacant, of £6,065,000 — Landlords’ figure was £7,451,000, while the tenants supported the arbitrator’s alternative award of £6,065,000 — Tenants argued that in a letting with vacant possession account had to be taken of the fact that a tenant would require a period of rent-free occupation in order to find subtenants and might have to allow the latter a rent-free period to fit up the premises — Landlords did not agree that the rent had to be determined on the assumption that the premises were available to be let; they argued that regard must be had to values current for let properties and that the suggested rent-free period deduction should not be made — Thus the main issue was whether the arbitrator should assume that the building was available for letting with vacant possession or should assume that it was already let — Lloyd J found ‘irresistible’ the submission that there could be no conceivable point in the lease directing that the arbitrator should have regard to comparable lettings with vacant possession if the subject premises were to be assumed to be let — The Court of Appeal held that the judge had come to the correct conclusion and dismissed the appeal
This was an
appeal by the landlords, the Prudential Assurance Co Ltd, from a decision of
Lloyd J (reported at (1984) 270 EG 950, [1984] 1 EGLR 137) allowing an appeal
by the tenants, 99 Bishopsgate Ltd, from the award of an arbitrator, Mr J R
King Smith FRICS, and varying the arbitrator’s award. The tenants held a lease
for 98 years from September 29 1975 of an important office block in Bishopsgate
consisting of two lower ground floors, ground floor, mezzanine and 26 other
floors. The landlords had been the claimants in the arbitration.
Ronald
Bernstein QC and Christopher Priday (instructed by R J Hunter) appeared on
behalf of the appellants; T L G Cullen QC and Miss Hazel Williamson (instructed
by Stephenson Harwood) represented the respondents.
Giving
judgment, OLIVER LJ said: This is an appeal from a judgment of Lloyd J in the
Commercial Court on April 10 of last year, by which he allowed the present
respondent’s appeal from an award of an arbitrator on a point of law — the
point being the correct construction of a rent review clause in a lease.
The lease with
which the case is concerned was a joint development lease of a substantial
tower office block in the City of London, 99 Bishopsgate. The lease was dated
September 29 1975. It was for a term of 98 years from September 29 1975, with
an option to renew for a further 27 years at the end of that term. It contained
provisions for an initial rent of £1,531,250 per annum for the period to
September 29 1982; thereafter, for 12 successive periods of seven years, during
which a reviewed rent is paid — the review date in each case being the end of
the last quarter but one of the current rent period.
The
calculation of the initial rent was based on a fixed percentage of 50.6 of an
initial rental value — which is shown at p 3 of the lease which is before us —
and the reddendum is in these terms:
. . . PAYING
therefor yearly during the said term and so in proportion for any less time
than a year the respective rents following (that is to say):- (1) during the
first rent period the initial rent and (2) during each of the subsequent rent
periods at a yearly rent whichever shall be the greater of (i) the yearly rent
payable during the last year of the last preceding rent period or (ii) 50.6%
(or such other percentage as may be agreed in accordance with the provisions of
clause 3 hereof)
and I
interpolate that that provides for an adjustment of the percentage in the case
of a change of user
of the amount
of the yearly rental value of the demised premises as at the last quarter day
but one before the end of the last preceding rent period . . .
That brings me
to the critical clause, which is the definition in clause 1 of the lease of the
yearly rental value.
Subclause (d)
of clause 1 provides:
‘the yearly
rental value of the demised premises’ as at the last quarter day but one before
the end of a rent period shall mean the amount agreed at any time between the Landlords
and the Lessee as they yearly rental value of the demised premises as at such
day on the bases specified by this subclause or failing agreement before such
day the amount determined as the yearly rental value of the demised premises as
at such day on the said bases by an arbitrator, such arbitrator to be
and it
describes who the arbitrator is and how he is appointed and I need not read
that
and so that
in the case of such arbitration the amount to be determined by the arbitrator
shall be the amount which shall in his opinion represent a fair yearly rent for
the demised premises as at such day having regard to rental values current as
at such day for property let without a premium with vacant possession and to
the provisions of this Lease (other than the rent hereby reserved) and on the
assumption that the covenants herein contained have been fully performed and
observed . . .
Then there is
a provision relating to the destruction or damage to the premises by fire,
which I need not repeat.
I go immediately
to the first proviso, which deals with the things which are not to be taken
into account:
Provided also
that the arbitrator shall take no account of (i) any effect on rent of any
goodwill attributable to the demised premises by reason of any trade or
business carried on therein and (ii) any increase in rental value of the
demised premises solely attributable to the existence on the review date in
question of any structural addition to the existing building comprised in the
demised premises or an alteration within the building comprised in the demised
premises which may be carried out by the Lessee or any permitted sublessee in
accordance with the terms and conditions of any Licence granted by the
landlords . . .
I pause to
remark that it follows (though not in precise terms) fairly closely the
provisions of section 34 of the Landlord and Tenant Act 1954.
Then the lease
continues with a provision, which again I do not think it is necessary to read,
as to what is to happen if the user of parts of the premises for office use is
discontinued or altered. The salient parts of the clause are the ones which I
have read.
The lease was
assigned by the original tenant, which is a company called Bishopsgate
Developments Ltd, to the present respondent, 99 Bishopsgate Ltd, which, as I
understand it, is a subsidiary of the Hongkong and Shanghai Bank, which occupies
a substantial part of the building. No agreement having been reached on the
first review date as to the rent to be payable during the next seven years,
that matter was referred to arbitration.
The arbitrator
had before him evidence from both sides as to the levels of office rents, but
it was common ground that there was no precisely comparable building, and the
evaluation of the rent payable for the whole — which was what the arbitrator of
course had to determine — had necessarily to be approached on a floor-by-floor
basis. The arbitrator, quite rightly, in my judgment, considered that the
circumstances of the actual parties to the arbitration and their relationship inter
se was irrelevant because at p 16 of the award he says this:
Other
Valuation Considerations: In arriving at my
findings and award, I have ignored the existence of the present parties to the
subject lease since from my earlier findings above as to the interpretation of
the rent review clause 1(d) it is necessary for me to pay no regard to the
existing parties including particularly the existing lessee or any underlessees
because of the guidance given as to the basis of valuation namely ‘. . . having
regard to rental values current as at such day for property let without a
premium with vacant possession . . .’. This approach appears to be consistent
with the approaches adopted by both the claimants’ and the respondents’ expert
witnesses, in that their respective schedules of comparables included lettings
and rent reviews of entire properties and also lettings and rent reviews of
individual floors within larger blocks — although had there been a perfect
comparable comprising a City central core tower office block of approximately
the same size which was vacant and had been let on or shortly before March 25
1982, this probably would have provided the best evidence for the purpose of
the yearly rental value to be found under clause 1(d).
I read those
words in particular because Mr Cullen in his submission attaches some
importance to them.
The arbitrator
continues:
I accept the
evidence given during the hearing that it was unlikely, and possibly very
unlikely that if the building were vacant a tenant would be found who would
require the entire building for his own occupation, and that in the event of
the building being physically vacant and available to let the most likely
lessee would be a tenant, similar to the Hongkong Shanghai Bank, who would
require a substantial part of the premises, for his own occupation, and who
would sublet the remainder.
I turn next to
his findings, which are at p 18 of his award, where he says this in a paragraph
beginning ‘Thus’ — though I am not sure I see that the ‘Thus’ follows from what
he said before:
Thus I find
that any hypothetical potential lessee leasing the subject premises on the
basis of ‘the (fair) yearly rental value of the demised premises’ whether for
occupation of part of the premises and under-letting the balance, or whether
for investment purposes as was apparently envisaged by the original parties to
the subject lease, would expect and obtain from the landlords a reduction for
the size of the subject premises and hence I find for the respondents on this
point and have adjusted my valuation to take account of the 10% reduction for
which they contended.
That is
challenged by the appellants in the present appeal, but it is not something
which arises at this stage and the challenge is (by common concession) one
which arises only if this court is of the opinion that the learned judge came
to the wrong conclusion.
The arbitrator
continued:
Conversely,
however, for the purposes of this rent review, I reject the respondents’ claim
for a further 20% reduction for the obligations for the length of lease, having
regard to the Service Charge provisions in the underleases, and those matters
to which I have referred under the heading of Location, although I accept that
this situation may have altered by the date of the next or subsequent rent
reviews.
Then he goes
on to his findings and award, and says:
Having regard
to all the foregoing matters I set out hereunder my valuation of the subject
property as at March 25 1982, in accordance with clause 1(d) of the subject
lease dated September 29 1975 made between the Prudential Assurance Co Ltd and
Bishopsgate Developments Ltd, as follows . . .
and he sets out
a table at p 19 of the award, in which he goes through the block, floor by
floor, and against each series of floors, he puts an area of sq ft, a rent per
sq ft and a rent per annum. The grand total at the bottom comes to a figure of
£7,142,915. He then adds to that 3% which was agreed for 7 years as compared
with 5-year rent reviews — and I pause to explain that was because most of the
comparables were for leases with 5-year rent reviews and, as has already been
pointed out, the reviews under this lease were 7-year rent reviews. He then
adds also ‘For rent payable in arrears Basis Appendix II of Mr C N G Arding’s
Proof of Evidence — £94,056’ — because the lease here was payable, as I
understand it, in advance. He then deducts 10% discount for size — £745,126 —
arriving at a final figure of £6,706,132, which he rounds off to £6.7m per
annum.
He then
continues with an ‘Alternative Award’ — and this is where the contest between
the parties becomes apparent. At p 20 he says this:
Under my
alternative award it is necessary for me to assume that the entire building is
vacant and that a lessee holding under the subject lease would, as given in
evidence by Mr Spooner, require an allowance for marketing to find tenants for
the entire subject premises, and additionally would probably find it necessary
to allow prospective subtenants a rent-free period for completing the fitting
out of the premises to suit their requirements prior to actual occupation.
While at the valuation date there was a shortage of prime and prestigious
accommodation in the City centre core suitable for potential tenants within the
banking and financial services’ sector, the effect on the market of the
availability of 300,000 sq ft in a tower block would in my opinion enable
prospective tenants, particularly tenants with a high calibre of covenant, to
negotiate more favourable terms than those which generally applied as at March
25 1982. Hence I would find and award the 16-month rent-free period claimed by
the respondents’ expert witness Mr A G Spooner, but as I find it likely that
any such underlettings would be for a term of 14 years, I have applied this
rent-free period over that term rather than over the period of seven years for
which he contended. Thus if my analysis and interpretation of the rent review
clause 1(d) referred to earlier is incorrect, and I was required to have regard
to the entire subject premises being vacant, I would find and award a ‘fair
yearly rent for the demised premises’ of £6,067,453 which I round down to
£6,065,000 per annum.
There is the
difference between the parties, and the primary points of contention on this
appeal have been this first point (a critical point) as to whether there should
be a deduction in respect of a rent-free period on the basis that that is
something which would be allowed in the case of premises let without a premium
for vacant possession; and secondly the 10% size discount which, as I have
said, does not arise on this part of the case. It arises only if the arbitrator
was right in the first award to which he came in favour of the present
appellants.
The
respondents’ criticisms of the arbitrator’s award is, as I have said, that it
gives (they say) substantially no effect to the concept of vacant possession to
which the arbitrator was in fact directed by the provisions of clause 1(d) of
the lease. What is said is that, on a letting with vacant possession, there has
to be taken into account the fact that a tenant would be likely to require a
period of rent-free
of that period, the ingoing tenant would also take into account that he himself
might have to allow a period of rent-free occupation to his subtenant, for the
purposes of fitting-up their premises. It is said that that necessarily reduces
the rental value over the period of the lease below the figure of the actual
rent at a given period of time.
Indeed, as I
understand the argument which Mr Bernstein advanced before us, it really is common
ground that such a period is frequently allowed, and allowance has to be made
for it somewhere in arriving at the rental value of the premises on a vacant
possession basis — because the rental value is not necessarily the same as the
rent. What one has to do is to attribute the rent over the whole term of the
lease to find out what the rental value is.
From that
award of the arbitrator, the respondents appealed to the High Court; Lloyd J
allowed the appeal and upheld the arbitrator’s alternative award.
In his
judgment he refers briefly to the pleadings — and I can take this passage
fairly quickly. It is to be found at pp 2 and 3 of the transcript [(1984) 270
EG 950 at p 951, [1984] 1 EGLR 137]. The landlords’ formulation of what the
arbitration was is determined in these terms in the statement of claim:
The amount
that in the opinion of the arbitrator is a fair yearly rent for the tenant to
pay and for the landlord to receive for the premises having regard to rental
values current at a valuation date whether for property of comparable size to
the premises or for property of a smaller size whether within the premises or
elsewhere and having regard to the provisions of the lease and taking no
account of the matters specified in clause 1(d) of the lease.
Then the
learned judge says:
It will be
noticed that the landlords’ formulation nowhere refers to vacant possession
whether for property of a comparable size, or property of a smaller size within
the premises (by which is presumably meant one or more of the floors) or
elsewhere. In calculating their figure for the revised rent, the landlords take
a figure for the rental value of each floor in turn, so arriving at a total for
the building as a whole. They make two relatively minor adjustments to the
total figure. Since these are not in dispute, I need not refer to them further.
The tenants, in their statement of case, also adopt a floor by floor approach.
In each case the figure, as one would expect, is somewhat lower. The tenants
then make three important deductions, namely (1) 10% discount for size, (2) 20%
discount to take account of the length of the lease
and the
arbitrator rejected that, and there is no appeal against that
and (3) an
average of 16 months’ rent-free period over 7 years. By way of amplification,
the tenants explain that: ‘The Arbitrator is to have regard to rental values
current as at (March 25 1982) for property let without a premium with vacant
possession‘ (their emphasis, not mine) that is to say ‘(a) that the
existence of any subletting of the whole or any part of the demised premises on
March 25 1982 must be ignored; (b) an allowance must be made for the rent-free
fitting-out period that would be required by an incoming tenant’. In their
reply the landlords take issue with the deductions (1)-(3) above. Since the
paragraph is important, I will set it out in full:
‘The Claimant
denies that Clause 1(d) of the Lease must be construed in the manner contended
for by the respondent. In particular, the claimant denies the respondent’s
assertion that the Arbitrator has to determine a rent on the assumption that
the premises are available to be let; the Arbitrator has to have regard
to values current for property let. The adjustments (1), (2) and (3) cannot be
made’.
The learned
judge continues:
Thus the main
issue on the pleadings (apart from any difference as to the figures themselves)
was whether the arbitrator was to assume that the building was available for
letting with vacant possession, or whether he was to assume it was already let.
A little
further on in his judgment, the learned judge said he was unable to follow the
arbitrator’s preference for the landlords’ contention, and having referred to
the passage to which I have already referred in the award, which came under the
heading of ‘Other valuation considerations’, the learned judge said this:
These
paragraphs, particularly the second, seem to me to suggest that, other things
being equal, the arbitrator would have preferred the tenants’ construction, but
that, since there were no perfect comparables on that construction, he was
driven back to the landlords’ construction. Yet that cannot be right, for the
arbitrator starts his alternative award with the words: ‘Under my alternative
award it is necessary for me to assume that the entire building is vacant’. And
later in his alternative award, the arbitrator says: ‘Thus if my analysis and
interpretation of the rent review clause 1(d) referred to earlier is incorrect,
and I was required to have regard to the entire subject premises being vacant,
I would find and award . . .
Then the
learned judge continued:
Mr Cullen
argued that there could be no conceivable point in directing the arbitrator to
have regard to comparable lettings with vacant possession, if the subject
premises were to be assumed to be let. I find that argument irresistible.
Indeed, unless there is something I have missed, I should have thought it was
almost self-evident.
Then he refers
to Mr Bernstein’s argument, based on section 34 of the statutory disregards, to
which he clearly attached little weight, and he says:
Mr Bernstein
also had a more subtle argument. The direction to have regard to ‘property let
. . . with vacant possession’ meant that the arbitrator had to have regard to
rental values of individual floors on the assumption that they were being let
with vacant possession, but not the building as a whole. He submits that
that is what the arbitrator has in fact done. The figures at p19 of the award
are all, he says, vacant possession values, and take account, so far as may
have been appropriate, of a rent-free period for fitting out. My first
observation as to that argument is that it is inconsistent with the landlords’
pleading, which I have already quoted.
A little
further on he says:
but there is
a second, and to my mind conclusive reason why I cannot accept Mr Bernstein’s
argument. If the figures on p19 are, as he argues, figures arrived at on the
assumption of vacant possession of each of the floors, and therefore take account
of any rent-free period that might be appropriate in letting the floors, the
alternative award would, as I see it, be allowing a rent-free period twice over
. . .
The learned
judge concludes that the arbitrator could not have had that in mind and therefore
it follows, as I read his reasoning of the figures on p 19, they did not in
fact comprehend any such deduction.
He continues:
At one stage
of the hearing it occurred to me that I might be compelled to remit the award
of my own motion in order to find out precisely what it is that the figures on
p 19 are meant to represent. But on reflection, I do not regard this as
necessary. It seems to me that the tenants’ construction, under which the
arbitrator was to assume that the entire building was vacant, is so clearly
right that I can adopt the alternative award without more ado. The landlords’
construction, as developed by Mr Bernstein, required the arbitrator to assume
that all the floors were to be let with vacant possession, but not the building
as a whole. I find that concept hard to grasp.
He finally
concludes:
I would hold
that, in arriving at his figure for the yearly rental value for the demised
premises, the arbitrator was required to assume that the entire building was
being let with vacant possession.
So the learned
judge was saying that what was really irrefutable was that the figures on p 19
cannot have taken the rent-free period into account — and indeed, as Mr Cullen
points out, the valuers on both sides apparently arrived at their figures of square
foot valuation without initially making any deduction for a rent-free period.
The difference between them was that the respondents’ valuer made a deduction
at the end, which is effected in the alternative award (although in fact the
arbitrator halved the amount of the award by spreading it over a larger period)
and the appellants’ valuer did not.
The argument
which Mr Bernstein advances substantially — and I hope by abbreviating it I
shall not be thought to be in any way disrespectful — amounts to this: he
submits that the rent initially payable was not fixed by reference to market
value with vacant possession, and one should not approach the review clause
with an expectation that it will call for a market value with vacant
possession. He refers in this context to section 34 of the 1954 Act and the
proviso as to the disregards.
Review
clauses, he says, ought to be divided into two: those which refer to a market
rent and those which refer to a fair rent, and the two concepts are not
necessarily the same. This clause calls for the assessment of a fair rent,
having regard to the market rent of other properties. Thus, the primary
question is: what is the fair rent for the premises? And what you have to have
regard to is the current value of comparable premises with vacant possession
but no premium. He says that one does not have to assume that the premises with
which one is dealing (the rent of which is in question) are themselves to be
let with vacant possession. One merely has to look at property let with vacant
possession as one factor or pointer as to what the fair rent might be, and have
regard to that in fixing the rent of the premises.
I follow the
argument, but I am bound to say the question then arises in my mind: why, if
you are to do this and to look as a guide-line or yardstick at premises which
are let with vacant possession without a premium — why then do you, as it were,
have to ignore the discounts which it is common ground you have to make in
arriving at the rental value of those premises, when you come to consider the
fair rent of the premises as a whole?
However, Mr
Bernstein submits that the clause does not mean a fair rent for the demised
premises, without a premium and with vacant possession. And in terms, of
course, it does not say that, and Mr Bernstein contrasts the clause with the
other clause in the lease — namely clause 3(b)(i) which relates to the
adjustment of the initial rent, where there is no reference to a fair rent but
merely to an open market rent.
What he says
is that here the lease was dealing with a very large office building of quite
unprecedented size, for which it would be unlikely there would be any
comparable building as a whole, and that the reference to vacant possession was
really no more than one guide line which had to be taken into account by the
valuer (or by the arbitrator); and the guide line was taken into account —
indeed, he submits that the discounts in relation to the rent-free period, in
so far as they were applicable, must have been taken into account by the
arbitrator in the figures which he set out at p 19 of the award.
I am bound to
say I cannot, for my part, accept that submission. It seems quite clear to me,
reading the award, that clearly the arbitrator was not taking into account, in
the figures on p 19, any discounts for a rent-free period. Indeed, he specifies
at the bottom of the page what deductions he has allowed, and the following
passage at the beginning of the alternative award makes it clear, to my mind,
that he is only treating this discount as applicable at all on the
footing that the alternative award is the right approach.
Mr Cullen in
his argument says: what one has to look at is the rental value of property let
without a premium with vacant possession. It may be true that that is simply
something to which you have to have regard, but you are compelled to
have regard to it because the lease says so. You are compelled also to have
regard not only to that but to the actual term of the lease.
The arbitrator
agrees, apparently, as appears from the passage in his award to which I have
referred, that had there been a comparable building which had been let recently
with vacant possession, that would have been the best evidence of what the fair
rent was. He says — and I do not think this can be controverted — that
undoubtedly, if there had been such a comparable building and one which had
been let recently, then the rental value would have to allow for a discount for
any rent-free period which had been allowed to the tenant.
Why, then, Mr
Cullen asks forensically, should the court feel compelled to approach the
matter on a different basis when, by necessity, the building has to be looked
at on a floor by floor basis? One could put it in two ways. One could take the
discount into account floor by floor, by allowing against the comparables a
discount for a notional rent-free period for each floor; or one could take it
into account, as the arbitrator did in his alternative award, at the end; and
since what one is doing is in fact arriving at a fair rent not for each floor
separately but for the building as a whole, the way in which the arbitrator
approached it was the correct way.
At the end of
the day, the point is a fairly short one and, I suppose, to some extent a
matter of impression, but speaking for myself, I have come to the clear
conclusion that the learned judge was right in the conclusion to which he came.
The salient features of this clause, as it seems to me, are, first, that what
has been fixed is the fair yearly rental for the premises as a whole; secondly,
that ‘fair’, of course, means not ‘fair’ between these particular parties,
circumstances being as they are, but what a hypothetical tenant would fairly be
expected to pay if taking the premises from a hypothetical landlord. Thirdly,
the lease directs that that is to be ascertained by reference to the vacant
possession rental values of property at the relevant date. In other words, one
has to look not at property generally but property of a particular type — let
without a premium and with vacant possession.
I cannot see
for my part that if one is compelled to have regard to that in arriving at a
fair rental for the whole premises, one is then, as it were, entitled or
obliged to throw that consideration away at the second stage when one comes to
consider what the fair rental is.
For these
reasons, therefore, I would hold that the learned judge came to the right
conclusion, and I would dismiss this appeal.
Agreeing,
NEILL LJ said: The arbitrator’s task was to determine the amount which, in his
opinion, represented a fair yearly rent for the demised premises as at what can
conveniently be called the ‘valuation date’.
In carrying
out this task, the arbitrator had to have regard to two factors, to disregard
two other factors, and to make an assumption about the covenants in the lease.
It is only
necessary for me to refer to the words ‘having regard to’ in subclause 1(d).
First, the arbitrator had to have regard to rental values current as at the
valuation date for a property let without a premium with vacant possession.
Secondly, he had to have regard to the provisions of the lease other than the
provision for the rent.
I accept Mr
Bernstein’s argument that the arbitrator had to look at the matter in two
stages. He had to examine the evidence of comparables and consider the other
criteria to which his attention was directed. Then he had to make his
assessment of the fair yearly rental. But, as it seems to me, when making this
assessment at the second stage, the arbitrator had to give full effect to the
fact that the comparables to which his attention was directed were current
rental values for property let with vacant possession. This was one of his
guidelines, and I am unable to accept that the arbitrator, in determining a
fair yearly rental, could adjust this guideline to eliminate the element which
reflected the discount applicable to a rent-free period.
Furthermore, I
share my lord’s view that the figures on p 19 cannot be read as taking account
of any discount for a rent-free period.
In this
context I would draw attention to a short passage in the alternative award at p
20, where the arbitrator said this: ‘Hence I would find and award the 16 month
rent-free period claimed by the respondents’ expert witness Mr A G Spooner . .
.’. He made some adjustment to the figure to spread it over a term of 14 years.
As I
understand the matter, the adjustment made by Mr Spooner was the adjustment
which appears in appendix V to the award. In note 4 it was said that there
should be a deduction of an average of 16 months’ rent-free period over seven
years, and in a further note it was added that that was to reflect an allowance
made for the rent-free fitting-out period which would be required by an
incoming tenant.
It seems to me
plain, as far as one can judge from the documents before us, that on p 19 the
arbitrator was not taking account of any rent-free period at that stage.
For these
reasons, and those given by my lord, I too would dismiss this appeal.
Also agreeing,
SIR DAVID CAIRNS said: I agree that this appeal should be dismissed for the
reasons which have been given in the two judgments already delivered.
I find some
support for this conclusion in the decision in the House of Lords in Ponsford
v HMS Aerosols Ltd [1979] AC 63. Although the circumstances of that case
were very different from the circumstances of the present case, and the words
to be interpreted there were a ‘reasonable rent for the demised premises’ and
not, as here, a ‘fair yearly rent for the demised premises’, the ratio of the
decision, namely, that the test of what is a reasonable rent (and the same must
apply to fair rent) for the premises, is something to be decided not as between
the particular landlord and tenant, who are parties to the proceedings, but in
relation to a hypothetical letting of the premises.
The appeal
was dismissed and leave to appeal to the House of Lords was refused. It was
ordered that the costs of the appeal and the respondents’ notice should be paid
by the appellants.
