Arbitrator on rent review applying own experience of area in vicinity of demised premises — Whether serious irregularity and procedural unfairness — Whether distinction to be made between application of general knowledge and personal knowledge of specific matters — Whether arbitrator impermissibly introducing own evidence — Appeal dismissed
The appellant was the tenant and the respondent was the landlord under a 15-year lease, commencing in 1995, of a warehouse building with office accommodation. The initial rent was £220,000 pa, with provision for two upwards-only rent reviews to an open market rent, which, if not agreed by the parties, was to be determined by “a chartered surveyor experienced in the letting and/or valuation of property that is of a similar nature to the premises, and is situated in the same region as the premises and used for purposes similar to those authorised under this lease”.
On the first review in 2000, the parties failed to agree the rent, and an arbitrator was appointed. In his initial directions, he confirmed that if he used his inquisitorial powers, he would inform the parties of his findings and ask them to comment. In written submissions, the landlord’s expert witness argued for a 100% increase to a rent of £440,000, relying upon comparables within the Winnersh Triangle area, six miles from the warehouse. The tenant relied heavily upon one property in Bracknell as being the best comparable, and also pointed to the over-supply of, and poor demand for, comparable premises in Bracknell within the immediate vicinity of the warehouse. The arbitrator accepted the landlord’s comparables, and fixed the rent at £440,000, basing his decision, in part, upon his own experience in the Winnersh Triangle area.
The tenant appealed, under section 68 of the Arbitration Act 1996, on the ground of serious irregularity in the arbitrator’s decision. It argued that the arbitrator had not been entitled to rely upon his own experience, in particular upon matters for which he had been given no evidence, and that to do so had constituted procedural unfairness. The judge dismissed the claim ([2002] 13 EG 101 (CS)), holding that the terms of the lease contemplated that the arbitrator would, to some extent, draw upon his personal knowledge. He rejected any distinction between the general knowledge acquired by a surveyor, which, it was accepted, he could apply, and that surveyor’s personal knowledge of specific matters. The tenant appealed on that point, contending that the arbitrator had used inquisitorial powers without following the agreed procedure, and that he had failed to deal with the issue of over-supply and poor demand.
Held: The appeal was dismissed.
A line was to be drawn between permissible use of general knowledge and the use of specialised knowledge, which was proscribed: Fox v PG Wellfair Ltd [1982] 2 EGLR 11 applied. The question was whether the information upon which the arbitrator had relied fell within the range of knowledge that one would reasonably expect him to have acquired if he were experienced in the letting and valuation of property of a similar nature to the demised premises, in the same region as those premises, and used for similar purposes to those authorised under the leases. If he relied upon knowledge of that kind, he would act fairly, but if he drew upon knowledge outside that field, he would not. The distinction was that between the arbitrator evaluating the evidence before him and adjudicating upon it, or introducing new and different evidence of his own. In the instant case, the arbitrator had not acted unfairly. The parties had disagreed upon the market and demand. The arbitrator had been required to determine whether Winnersh and Bracknell were in the same market and subject to the same demands, and, in relying upon his own experience to confirm that the Winnersh units were comparable, he had been engaged in the proper process of evaluating the evidence before him and using his own knowledge to that end. In referring to his own experience, he was explaining why he preferred the landlord’s case, not setting out fresh evidence on a point that had not previously been raised: Winchester City Council v Secretary of State for the Environment (1978) 36 P&CR 455 applied.
The arbitrator had not exercised his inquisitorial powers. He had not strayed outside the issues raised by the parties, nor had he made independent enquiries of anyone; he had merely used his own knowledge. Accordingly, no serious irregularity could be identified on that ground.
There was no force in the tenant’s submissions on the issue of over-supply and poor demand. Its references before the arbitrator to lack of demand had been subservient to its ultimate submission that there was only one decisive comparable. Accordingly, that issue was not one that had needed to be resolved.
Guy Fetherstonhaugh (instructed by Macfarlanes) appeared for the appellant; Jonathan Seitler (instructed by Nabarro Nathanson) appeared for the respondent.
Sally Dobson, barrister
