I am asked to define what makes a rent review award judge proof. I am tempted to take the easy way out and say that what makes an award judge proof is the quality of the arbitrator.
Second, I am tempted to say: “Why fear the judge?” Provided the award is carefully and properly arrived at the arbitrator has nothing to fear from an appeal.
Appointments
It is now a fact that over 16,000 appointments are made each year by the president of the Royal Institution of Chartered Surveyors acting under the powers normally given him within the lease. It would be naive to imagine that the president himself undertakes the administration, which is done for him by the head of the arbitration services at the RICS, who is Peter McMahon and his staff. Peter Short is the assistant secretary general, directly responsible for the service. Mathematics need not be your forte to conclude that some 300 or so appointments are made each working week. This does not include other appointments made privately between parties or by the courts. A conservative estimate may be 20,000 rent review cases each year of which most require the expertise of the arbitrator to help towards an early settlement or ultimately to make an award.
It is a measure of the quality of the service that most cases are appointed after proper inquiry within a reasonable time and most cases proceed to a conclusion, either by agreement or by determination, without the RICS service having to be further involved. Indeed it would not be appropriate for the president to do other than make the appointment. His task is not to administer the arbitration nor to provide a back-up service.
In considering whom to appoint the president requires a candidate to confirm in writing that:
(a) The subject-matter of the dispute falls within the sphere of the potential arbitrator’s normal practice.
(b) He will be able to undertake the task with all reasonable expedition.
(c) He is not aware of any matters which need to be disclosed in order that the president may decide whether they constitute an interest in the outcome of the dispute or grounds for a reasonably minded person to apprehend a real likelihood of bias if appointed.
(d) There is no other reason why he should not accept the appointment.
Only then will the president consider making such an appointment. It is fair, therefore, to say that much care is taken in selecting the appropriate man for the job.
Directions
Successive presidents of the RICS have taken steps to improve the quality of arbitrators and during the past five or more years many training courses have been held, both for those coming new to the practice and by way of refresher for those who have done it before.
To indicate the complexity and detail which an arbitrator needs to achieve I have set out a typical draft agenda for a preliminary meeting which would then result in directions being issued.
Draft agenda
To be considered at a preliminary meeting on date …
Re — Rent review arbitration …
Date of review …
1. Confirm
(a) Parties
(b) Parties’ representatives
(c) Claimants (usually landlords) Respondents (usually tenants)
2. Determine
(a) Nature of dispute and points at issue
(b) If legal points at issue — how parties wish to deal with them. Whether:
(i) By court as preliminary matter prior to reference or
(ii) by arbitrator with or without legal assessor with reasoned award.
(iii) Exclude right of appeal.
(c) Procedure and programme to be adopted for reference either:
(i) Written submission and counter submission. Informal meeting after submissions?
(ii) Exchange of statements of case. Points of reply. Exchange of experts’ reports. Representation at and arrangements for hearing.
(iii) Formal procedure of points of claim. Points of defence. Points of reply. Submission of experts’ reports. Representation at and arrangements for hearing.
(d) Expert witnesses — number and nature of evidence.
(e) Any discovery wanted?
3. Production of agreed schedules of fact — programme
(a) Property the subject of the reference.
(i) Documents lease — underleases — assignments — licenses etc.
(ii) Physical features — floor areas and plans, structure, standard of services.
(iii) Schedule of tenants’ improvements.
(b) Agree and isolate outstanding differences re reference property.
(c) Properties used for comparative purposes.
(i) Facts relating to transaction and premises.
(ii) Dates of transactions.
(d) Agree form of confirmation of comparative evidence if facts not agreed.
4. Inspection
Inspection of properties and comparables by arbitrator.
(i) After receipt of submissions.
(ii) Before and after hearing.
5. Correspondence
Parties to copy to each other all correspondence with me.
6. Award
(a) Speaking. Non-speaking.
7. Costs
(a) Basics of charge for arbitrator.
(b) Reimbursement of arbitration expenses and legal advice.
(c) Parties’ costs.
8. Parties at liberty to apply for further directions.
If the arbitration can be concluded on the basis that everyone is seeking to arrive at the correct result without surprises or secrets the award is more likely to be sound and more likely to be judge supportive.
Evidence
An arbitration can be conducted either by way of a formal hearing or by way of written representations. Either way it is true that the quality of the award will only be as good as the quality of the evidence. An arbitrator can only do so much to help the parties, using his own specialist knowledge (Fisher v Wellfair (1982) 263 EG 589 at p 657). Indeed, if the arbitrator uses his own specialist knowledge without telling the parties that he has done so and without inviting the parties to participate the award will be far from judge proof.
In Top Shop Estates Ltd v Danino [1985] 1 EGLR 9; (1984) 273 EG 197 the arbitrator did his own pedestrian count without telling the parties and used this as a basis for his award; the award was upset and the arbitrator removed.
Disclosure
At the beginning, even before accepting the appointment, the arbitrator should disclose any matter which might put in doubt his suitability or impartiality.
During the proceedings the arbitrator should disclose any matters of which he is aware and which the parties are not — and in the award disclosure is perhaps another word for reasons.
Challenging an award
I would like now to examine the methods which exist to challenge an arbitrator’s award. There are two:
(i) under section 22(1) of the Arbitration Act 1950 — the court has power to remit an award, that is to send it back to the arbitrator for reconsideration and/or variation; and
(ii) section 1 of the Arbitration Act 1979 permits an appeal against an arbitrator’s award.
So far as the section 22 procedure is concerned, Lord Donaldson said in M F King v Thomas McKenna Ltd [1991] 1 All ER 653 that in the past it had been argued that section 22 applied only in four specific cases: (1) where the award was bad on its face; (2) where there had been misconduct on the part of the arbitrator; (3) where there was additional evidence which had not been before the arbitrator prior to making the award; and (4) where the arbitrator asks for the matter to be remitted on the grounds that there has been a mistake.
Lord Donaldson says that section 22 forms part of a series of sections designed to enable the High Court both to assist the process of settling dispute by arbitration and to supervise that process. In ascertaining the limits of the court’s jurisdiction he did not see any reasons why section 22 should be not construed as meaning what it said. The jurisdiction was wholly unlimited.
He went on to say that the remission jurisdiction extended beyond the four traditional grounds. Any cases could be remitted where, notwithstanding that the arbitrator had acted with complete propriety, because of a mishap or misunderstanding some aspect of the dispute had not been considered and adjudicated on as fully as possible, it would be inequitable to allow any award to take effect without some further consideration by the arbitrator: see [1991] 1 All ER 653 at p 660 h-i.
It is my opinion that these words should give comfort to arbitrators and not a sense of fear. The award may not be judge proof, but it is comforting to know there is support and help in reserve.
So far as section 1 is concerned, this appeal procedure replaced the old “special case stated” system. Section 1 of the Arbitration Act 1979 abolished the old method of judicial review by way of special cases and introduced a new right of appeal. If a party to an arbitration considers that there is a point of law which may affect the award and upon which he may wish to appeal he should request the arbitrator to make a reasoned award and from such an award an appeal lies to the High Court either:
(1) if all other parties to the arbitration consent, or
(2) if the court grants leave. Leave will not be granted unless the court considers that, having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more of the parties to the arbitration agreement.
This is generally the situation and I am indebted to The Handbook of Rent Review for the following observations. Each has an important bearing upon the appeal machinery and especially upon the arbitrator and his judge-proof award.
(a) Exclusion agreements.
Sections 2 and 4 of the Arbitration Act 1979 specify the circumstances in which the parties to the reference made by an agreement in writing (called an exclusion agreement) exclude the right of appeal under section 1.
(b) Appeal where a reasoned award was not requested.
If a reasoned award was not requested and the other parties to the reference do not all consent to an application to the High Court for an order that the arbitrator state the reasons for his award the High Court will not order the arbitrator to give reasons or to give further reasons for the award unless it is satisfied that there is some special reason why notice requiring the arbitrator to give a reasoned award was not given before he made his award.
· (c) Order for reasons or further reasons.
If such notice was given to the arbitrator but it appears to the High Court that the award does not give any reasons or does not give sufficient reasons then with the consent of all the other parties to the reference or by leave of the court the court may order the arbitrator to state the reasons for his award in sufficient detail to enable the court to consider any question of law arising out of the award.
· (d) Appeal against the award.
Unless the parties have entered into an exclusion agreement an appeal may be brought by any party with the consent of all the other parties to the reference or, failing such consent, with leave of the court. The court is precluded from granting leave unless it considers that the determination of the question of law concerned could substantially affect the right of one or more of the parties to the arbitration agreement.
· (e) Procedure.
An application for leave to appeal is normally lodged in the Commercial Court and if leave is granted the commercial judge normally directs that the appeal be heard by a judge in the Chancery Division.
It will not have escaped your notice that the word “reasons” has occurred frequently in the above passage. The word strikes fear into the heart of some arbitrators and joy in others. I should explain that an unreasoned award (ie a non-speaking award) contains merely enough to identify the property and the circumstances of the case and sets out the rent review figure. A reasoned award (speaking award) may be summarised as follows:
The arbitrator should:
(a) explain why the arbitration came about;
(b) recount the facts as agreed between the parties;
(c) as regards the controversial issues, first set out the alternative versions both in relation to points of law and matters of fact and value;
(d) give his reason on each such issue and the reasons why the alternatives have been rejected; and
(e) end with his conclusion and his determination as to costs.
I continue to quote from the RICS Guidance Notes for Surveyors acting as Arbitrators document as to what happens when a reasoned award is requested. This quotation is from the 4th ed, which I understand is shortly to be revised, and especially with regard to section 3.88. It is symptomatic of the present fluid situation that this paragraph has been revised several times within the past two or three years. What the paragraph says now is:
when a Reasoned Award is requested it is suggested that the arbitrator approach the question whether or not to give Reasons in the following way:
(1) If neither party asks him to give reasons he should not do so.
(2) If both parties request an Award supported by reasons he should comply.
(3) If one party asks him to give reasons and the other party is either silent or specifically requests that no reasons be given he should consider whether under the Arbitration Act 1979 the Courts will be likely to require a Reasoned Award because a question of law is likely to arise out of his Award; whether the party asking for this is acting bona fide or is merely seeking to delay matters; whether there are other circumstances making it desirable to give an Award supported by reasons (for example because a point of principle not amounting to a point of law is involved it is likely to recur in future dealings between the parties). Unless he is satisfied that there is no justification for making an Award containing reasons he should normally accede to the request that he should give reasons.
(4) If the dispute concerns value only with no legal issues or issues of principle arising then a Reasoned Award is not justified.
I hasten to state that no (4) is the one which is causing debate and is likely to be reviewed along the lines:
Even if the dispute concerns value only with no legal issues or issues of principle arising then a short reasoned award may be justified;
(or (4) may be changed in some other manner or deleted altogether.)
It seems to me that it can only be good that such a debate is occurring and that the likely outcome is a more open arbitration award. A judge is required to give his reasons for his judgment and I see no reason in this consumer age why arbitrators should not at least follow the Lord Donaldson guidance and “tell the story”. The losing party will be no happier, but at least he will know why he lost.
If this trend continues I foresee applications for leave to appeal increasing in number, but appeals themselves may not.
At the outset we asked, what makes an award “judge proof”? I prefer to amend those words to say, what makes an award “judge supportive”, because I believe that the great strength of arbitration is its working togetherness between members of the Bar, the Law Society, and the Royal Institution of Chartered Surveyors and most of all by the legislature, thus avoiding a “them and us” situation.
My answer to the question is a simple one and you will by now know what it is — it is quality.
