Rent review — Arbitration — Arbitrator adopting different approach to comparables from that suggested by parties’ experts — Whether serious irregularity — Section 68 of Arbitration Act 1996 — Appeal dismissed
The appellant was the landlord and the respondent was the tenant under a 125-year lease, commencing in 1981, of a light industrial estate in Derby. The premises were let at an initial rent of £11,250 pa, which was subject to review from time to time. The lease contained a user clause prohibiting retail use.
A review fell due in 1997, at which date the rent was £18,500 pa. The review was conducted by an arbitrator on the basis of written surveyors’ reports. The respondent’s expert presented, as a comparable, a nearby property in respect of which, on a 1989 review, the rent had been uplifted in consideration of a relaxation of the user covenants to permit an element of retail use. However, he took the view that a straightforward application of the formula to be derived from the 1989 settlement to the 1997 rents of that property would produce a result that was not compatible with other evidence. Consequently, the appellant’s expert did not deal with that issue in depth in his submissions. In his decision, the arbitrator found that the 1989 settlement did provide a valid basis for review, and increased the rent to £27,897 pa.
On appeal from that decision, the appellant contended that the arbitrator had committed a serious irregularity, within the meaning of section 68 of the Arbitration Act 1996, by adopting an approach to valuation that was not advocated by either party and without giving prior notice of his intention to do so. Thus, neither party had been given the opportunity to make submissions as to whether that approach was correct. The judge dismissed the appeal, holding that, once the parties had put the 1989 settlements into the arena, the arbitrator had been entitled to extract from them a case that the differential in the 1989 settlements should be applied. The appellant appealed.
Held: The appeal was dismissed.
The arbitrator had not committed a serious irregularity. Having identified the most appropriate comparable, he had had to determine a suitable deduction to reflect the lack of retail use at the appellant’s premises. That was a question that neither expert had specifically addressed, and the arbitrator had been entitled to look to the 1989 figures for that purpose. The respondent’s expert had not disclaimed the formula derived from the 1989 settlements, but had merely questioned the reliability, as comparables, of the 1997 rents. The arbitrator had not breached his duty of fairness by deploying the 1989 figures in a way that was materially different from that of the respondent’s expert without first giving the parties the opportunity to make representations as to the appropriateness of so doing. The judge had correctly concluded that those matters had been put into the arena. Moreover, even supposing that the arbitrator’s approach did constitute an serious irregularity, the appellant had not suffered substantial injustice as a result.
Nicholas Dowding QC (instructed by Beachcroft Wansbroughs) appeared for the appellant; Rosemary Jackson (instructed by Flint Bishop & Barnett) appeared for the respondent.
Sally Dobson, barrister
