Arbitrator determining rent one year after agreement of initial rent – Parties failing to reach prior agreement on dimensions as required by arbitrator’s directions – Arbitrator accepting initial rent as best evidence of market rent – Lessors alleging that proceedings misconducted by arbitrator – Lessors’ application dismissed
The parties were respectively lessors and lessee of a public house in Broadstairs, Kent, under a 21-year lease commencing on September 7 1995, at an initial rent of £5,200 pa. The lease provided for the rent to be reviewed on the first anniversary of the lease and thereafter at intervals of three years. At a date before the Arbitration Act 1996 had come into force, an arbitrator was appointed to determine the market rent as at the first review date (September 7 1996).
On March 26 1997 the arbitrator issued directions declaring that he would rely, so far as possible, on written submissions and countersubmissions, which had to include, inter alia, an agreed statement of facts, including dimensions, and full details of any comparables referred to. No such statement was ever agreed or tendered, but the arbitrator noted, from submissions made during May 1997, a measure of disagreement over the size of a yard at the rear and the area of storage available, such area being put at 505.5 sq ft by the lessors and at 417 sq ft by the lessee. A matter not drawn to the arbitrator’s attention was a letter of February 27 1997 from the lessors to their surveyor, to the effect that the consideration for the lease reflected the run-down state of the premises and the payment of a premium. The lessee’s case was that the £5,200 rent, agreed only a year before the review date, was the best available evidence of market value and that there was no evidence of matters which would justify an increase. The lessors, contending that public house rents should be valued in terms of a percentage (45%) of the net profits, referred in somewhat general terms to five comparable licensed properties in the locality which allegedly justified a rent of £15,000.
In his award, dated September 5 1997, the arbitrator preferred the case advanced by the lessee and determined a rent of £5,200. In reaching that decision he observed that the differences over dimensions were not of significant importance to the amount of the market rent and rejected the lessors’ comparables, because they appeared on his external inspection to be of little help. Applying under section 23 of the Arbitration Act 1950, the lessors sought to have the award set aside on the ground that the arbitrator had misconducted the proceedings by failing to adhere to his own directions.
Held The application was dismissed.
The alleged disregard of the difference over dimensions did not amount to misconduct, because the way the parties put their respective cases made it unnecessary to ascertain the precise areas of the yard and the parts used for storage. Nor was it wrong to treat, without further evidence, the original agreed rent as the market rent, as the lessors had failed to adduce any evidence to show why it should not be so regarded. It was again the fault of the lessors that the arbitrator had no knowledge of the letter of February 27 1997 or of any other depreciatory factor affecting the initial rent.
Gregory Dowell (instructed by Barnes Marsland, of Margate) appeared for the applicants; Martin Dray (instructed by Girlings. of Margate) appeared for the respondents.
