Landlord and tenant — Rent review clause in lease — Arbitration — Award — Landlord’s challenge — Motion to set aside or remit award — Tenant’s summons to stay proceedings — Arbitrator’s failure to send to each side a copy of the comments made by the other side on the primary submissions — Effect of landlord’s demand for rent on the basis of award before having seen a copy of the tenant’s comments — Whether issue of rent demand operated as a final election by landlord to affirm award — Tenant’s summons to stay proceedings dismissed
arbitrator in this case determined the rent for the purpose of the rent review
clause on the basis of written submissions — He had given instructions for the
exchange of copies of the parties’ primary submissions and for the sending to
him of the comments made by each side on the other’s primary submissions — He
did not, however, give a direction that copies of the comments on the primary
submissions should be exchanged between the parties and the award was made without
such an exchange having taken place — The landlord’s surveyors collected the
award and were disappointed with its terms but nevertheless entered the
reviewed rent on the firm’s computer, so that a demand for the payment of the
new rent was issued to the tenant — About the same time as this issue a copy of
the tenant’s comments on the landlord’s primary submissions, which the
surveyors had requested, was received — In the opinion of the landlord’s
surveyors these comments were open to objection as containing allegations of
fact which were not properly matters of reply or were based on hearsay or
should in fairness have been put to the landlord for comment before acceptance
— The landlord took legal advice, returned the cheque for the rent demanded and
commenced proceedings to have the award set aside or remitted — The tenant
issued a summons to stay these proceedings — It claimed that the landlord had
made an unequivocal election to adopt the award by demanding rent as determined
by it and was estopped from challenging its effectiveness — A master made an
order staying the landlord’s motion and the landlord appealed
first of all rejected the submission based on estoppel — The rent demand might
be treated as a representation by the landlord that it intended to accept and
adopt the award — Estoppel, however, required proof that the tenant had relied
on the representation to its detriment by altering its position in a way which
would make it unjust for the landlord to be allowed to challenge the award —
Here there was no evidence of such a change of position by the tenant as would
make it unjust for the landlord to go back on the representation involved in
the demand for rent
however, another ground on which a party may be held to his choice and that is
the doctrine of election — Hoffmann J referred to various authorities
illustrating different principles which are regarded as falling under the
conception of election — There was, however, one condition common to the
different applications of election, namely that a party will not be held to
have made an election if he did not know that he had a right to elect — In the
present case, when the landlord’s firm sent out the demand for rent it was not
aware that it might have grounds for challenging the award — Through no fault
of its own it had not then had an opportunity of seeing the tenant’s comments
which, when subsequently received and examined, raised questions of importance
— This essential element of knowledge of choice was emphasised in Lissenden v C A V Bosch Ltd
and Peyman v Lanjani — The issue of the rent demand did not, therefore, in the
circumstances amount to an irrevocable choice by the landlord — Appeal from the
master allowed and tenant’s summons to stay proceedings dismissed
The following
cases are referred to in this report.
Blackstone
(David) Ltd v Burnetts (West End) Ltd [1973]
1 WLR 1487; [1973] 3 All ER 782; (1973) 27 P&CR 70
Dexters
Ltd v Hill Crest Oil Co (Bradford) Ltd
[1926] 1 KB 348
European
Grain & Shipping Ltd v Johnston [1983]
QB 520; [1983] 2 WLR 241; [1982] 3 All ER 989; [1982] 2 Lloyd’s Rep 550, CA
Ker v Wauchope (1819) 1 Bli 1, HL
Lissenden v C A V Bosch Ltd [1940] AC 412; [1940] 1 All ER 425; 109
LJKB 350; 162 LT 195; 56 TLR 347
Peyman v Lanjani [1985] Ch 457; [1985] 2 WLR 154; [1984] 3 All ER
703, CA
This was an
appeal by the landlord, Banner Industrial & Commercial Properties Ltd, from
an order of Master Munrow staying the landlord’s motion to set aside or remit a
rent review award, of premises at Wye Industrial Estate, London Road, High
Wycombe, Buckinghamshire, on the ground that the landlord had adopted the award
by demanding rent at the rate determined by the arbitrator. The master’s order
had been made on a summons issued by the tenant, Clark Paterson Ltd, to stay
the proceedings on the landlord’s motion.
David
Neuberger QC (instructed by Carter Faber) appeared on behalf of the landlord;
Richard Walford (instructed by Winter-Taylors) represented the tenant.
Giving
judgment, HOFFMANN J said: This is an appeal from an order of Master
Munrow dated June 29 1989 staying a landlord’s
the order on the ground that the landlord had adopted the award by demanding
rent at the rate determined by the arbitrator.
The arbitrator
had determined the rent on the basis of written submissions. He had given
directions for primary submissions together with the exchange of copies and for
the submission to him (but not for the exchange) of comments on the other
side’s primary submissions. When the arbitrator gave notice on March 10 1989
that his award was ready for collection, neither side had been shown the
other’s comments on the primary submissions.
The landlord’s
surveyors collected the award on March 17. They were disappointed but entered
the rent determined by the arbitrator on the firm’s computer with a view to the
issue of a demand for the March quarter day. On March 20 the landlord’s
surveyor asked the arbitrator for a copy of the tenant’s comments, which the
arbitrator sent off on the same day. On March 22 the computer dispatched a
demand for rent at the new rate. The comments arrived some time afterwards,
possibly on the same day. Reading them, the landlord’s surveyor thought that
they contained allegations of fact which were not properly matters of reply, or
were based on hearsay, or should in fairness have been communicated to the
landlord for comment before being accepted. He also thought that the arbitrator
could not have fixed the rent which he did unless he had accepted these
allegations as true. He suggested that the landlord take legal advice on
whether the award could be challenged.
The landlord
consulted solicitors on March 30. On March 31 the tenant posted a cheque for
the rent which had been demanded. It arrived on April 3. The landlord kept it
until April 10, when it was returned under cover of a letter saying that the
landlord was considering proceedings to set aside the award and had been
advised not to accept rent in the meanwhile. The motion to set aside the award
was actually issued on the same day.
On May 16 the
tenant issued a summons to stay the proceedings. It says that the return of the
cheque was too late. The issue of the rent demand was a final election to
affirm the award. Alternatively, the issue of the demand was an unequivocal act
by which the landlord signified that it had chosen to adopt the award and in
reliance on which the tenant has changed its position to its detriment. The
landlord is therefore estopped from challenging the award.
I shall deal
first with the question of estoppel. The rent demand may be treated as a
representation by the landlord that it intended to accept the award. But
estoppel requires that the tenant should have relied upon that representation
to its detriment, in the sense that he has altered his position in a way which
would make it unjust for the landlord now to be allowed to challenge the award.
In this case
about three weeks elapsed between the date when the tenant received the rent
demand and the date on which the landlord wrote to say that it might be
applying to set the award aside. How did the tenant alter its position during
that period? It wrote and posted a
cheque which was returned a week later. Mrs Liddle, a director of the tenant
company, has sworn an affidavit saying that having written the cheque she
regarded the money as spent and not available for other purposes. She does not,
however, say that the tenant would otherwise have spent the money on anything
else. She also said that she and her fellow directors spent some time thinking
about how they would spend the ‘anticipated retained profits after payment of
the revised rent’, by which I understand her to mean the savings as a result of
the rent being fixed at an unexpectedly low figure. She also says that the
board had been considering moving out and putting up its prices but did nothing
further about these matters. On the other hand, there is nothing to suggest
that the tenant would have moved out or put up prices if the landlord had given
immediate notice of its intention to challenge the award.
The detriment
suffered by the tenant as a result of a change of position must be such as to
make it unjust to allow the landlord to go back on his representation. In my
judgment, the acts relied upon as detriment are far too trivial to satisfy this
test.
There is,
however, another principle upon which a party may be held to his choice and
that is the doctrine of election. ‘Election’, as Viscount Maugham pointed out
in Lissenden v C A V Bosch Ltd [1940] AC 412 at pp 417-418, is a
term used in different senses. There is an equitable doctrine of election
(known in Scotland as the doctrine of ‘approbate and reprobate’) encapsulated
in Lord Eldon’s dictum that ‘no person can accept and reject the same
instrument’: Ker v Wauchope (1819) 1 Blight 1 at p 21. Its main
application has been to a will, deed or other instrument which confers a benefit
upon a party and at the same time purports to dispose of his property to
someone else. The principle requires that if he accepts the benefit, he must
also accept the burden of giving effect to the purported disposition of his own
property or compensating the person intended to benefit thereby. There is also
the common law principle of election, under which in certain circumstances a
party faced with a choice of remedies (such as whether to affirm or repudiate a
contract induced by misrepresentation) may be held to the choice he has made.
The circumstances in which the two doctrines will apply are quite distinct.
There are two
cases in the Court of Appeal in which an act of affirmation has been held to
bar a challenge to the award, but the precise principle upon which they went is
perhaps not ideally clear. In Dexters Ltd v Hill Crest Oil Co
(Bradford) Ltd [1926] 1 KB 348 the arbitrator had stated a special case in
the form of three alternative awards. The first, which Roche J upheld, was for
£2,000 damages in favour of a buyer. The second was for damages in a higher
amount and the third was for no damages at all. The buyer demanded and received
payment of the £2,000 and then appealed on the ground that the judge should
have preferred the higher award. Scrutton LJ said:
He wrote to
the other side demanding £2,000 under the award. That involved the assertion
that the award was right. He could hardly have taken up the position: ‘The
award is wrong, but pay me under it.’ . . . It has often been stated as the law
that you cannot approbate and reprobate the same act; you cannot take advantage
of a document or a right under it and at the same time say it is not a document
which binds you.
Bankes LJ
emphasised the fact that the buyer had taken the money:
. . . having
taken the £2,000 the appellants cannot now be heard to say that the award under
which they took the money was based on a wrong view of the law.
Warrington LJ
was impressed by the fact that the seller, having paid the money, would not
thereafter have been entitled to say that no damages should have been awarded.
He therefore thought that it was wrong that the buyer, who had created this
position by demanding payment, should be entitled to appeal.
In European
Grain & Shipping Ltd v Johnston [1983] QB 520 a seller of wheat
delivered 100 tonnes instead of the 200 tonnes contracted for. The buyer bought
in the other 100 tonnes at a higher price and claimed to deduct £2,775 damages
from the price of the wheat he had received under the contract. The arbitrators
decided that the buyer was wrong to make this deduction. He should have
submitted a cross-claim to arbitration. They ordered him to pay back the
deducted money with interest. Then they dealt with his crossclaim and awarded
him £2,859 damages. The buyer paid back the £2,775 and interest. The seller
accepted it, but then moved to have the award set aside on the grounds of
misconduct by the arbitrators. Lord Denning MR cited Scrutton LJ in Dexters
and said:
Those
observations apply exactly to this case . . . Having accepted the benefit — as
the sellers did — from the first part of the award, they cannot afterwards
dispute the award and say they do not like the second part.
Mr Walford,
who appeared for the tenant on this appeal, said that these cases were based upon
the equitable doctrine of election. He pointed out that Scrutton LJ uses the
phrase ‘you cannot approbate and reprobate’, which alludes to the Scottish
equivalent of the equitable doctrine: Lissenden v C A V Bosch Ltd,
supra. The submission also gains some support from the speech of Lord Atkin
in Lissenden. Having said that the Court of Appeal in that case were
wrong to apply the doctrine so as to prevent a workman who had accepted payment
under an award under the Workmen’s Compensation Act 1925 from appealing on the
ground that the award should have been higher, Lord Atkin said that the Court
of Appeal’s mistake was to treat an ‘award’ under the Workmen’s Compensation
Act as identical for the purposes of appeal with the award of an arbitrator
under an ordinary arbitration. In the latter case, Lord Atkin said at p 426:
. . . there
is no appeal, the only right is to set aside the award, eg for misconduct of
the arbitrator, or error of law on the face of the award, or defects in not
awarding in full or in awarding in excess of the submission. In those cases the
whole award goes: there is no power in any court to affirm part and disaffirm
part. In these circumstances it may be right to say that if a party takes a
benefit under an award he cannot afterwards be heard to say that it was
entirely invalid, for, if so, he would have had no right to the benefit he
took. I do not propose to decide what the law is in such a case. It may be that
even then the question is merely one of restitution.
The last
remark is a reference to the possibility, in cases of equitable election, of
allowing a person who has taken a benefit
his property by returning the benefit. Mr Neuberger, on the other hand, on
behalf of the landlord, treated the case as one of common law election: the
party to the arbitration must choose whether he wants to challenge it or
enforce it. I do not need to decide which view is right because there is one
element common to both. In either case a party will not be held to have made an
election if he did not know that he had a right to elect. Thus in Lissenden
Viscount Maugham said of the equitable doctrine:
. . . no
person is taken to have made an election until he has had an opportunity of
ascertaining his rights and is aware of their nature and extent.
In Peyman
v Lanjani [1985] Ch 457, 500 Slade LJ said of the common law doctrine:
With
Stephenson and May LJJ I do not think that a person . . . can be held to have
made the irrevocable choice between rescission and affirmation which election
involves unless he had knowledge of his legal right to choose and actually
chose with that knowledge.
The landlord’s
surveyor, Mr Peter Wilkinson [FRICS], says in his affidavit:
When the
letter demanding rent was sent by this firm neither I nor the [landlord’s] (nor
to the best of my knowledge and belief anyone else on the [landlord’s] behalf)
were aware that there were grounds for seeking to challenge the award.
At that stage
he had not received the tenant’s counter-submission. This evidence has not been
challenged and it seems to me to follow that the requisite knowledge of the
existence of choice has not been demonstrated. Mr Walford said that the rent
demand was an unequivocal act, consistent only with an intention to affirm the
award. He referred me to the analogy of a demand for rent after a breach of
covenant: see Blackstone (David) Ltd v Burnett’s (West End) Ltd
[1973] 1 WLR 1487. But an unequivocal act which outwardly signifies an election
is not enough. Knowledge of the choice is an additional requirement. Nor does
this seem to me an unfair result. As Slade LJ said in Peyman v Lanjani
at p 501:
If A has
acted to his detriment in reliance on an apparent election by B, he will
in most cases be able to plead and rely on an estoppel by conduct . . . If, on
the other hand, A has not acted to his detriment in reliance on any such
apparent election, justice would not seem to preclude B from sheltering behind
his ignorance of his legal rights.
In my judgment,
therefore, the issue of the rent demand did not in the circumstances amount to
an irrevocable choice by the landlord. I shall therefore allow the appeal and
dismiss the summons.
