Rent review — Arbitration — Open market rental value — Arbitrator laid down rules of procedure — Submissions on behalf of tenant did not comply — Award published without oral hearing — Whether arbitrator accepted evidence in breach of his rules — Whether arbitrator wrongly failed to communicate letter received from one party — Whether misconduct
An arbitrator was appointed in a rent review arbitration concerning a sports shop in Leegate shopping centre, Lee Green, London SE12. The arbitrator had to determine the rental value for the last seven years of the 21-year term. The arbitrator notified the parties of his appointment on July 28 1987 proposing certain rules of procedure. The parties had to submit their respective opinions of rental value and comparables; the general rules of evidence applied to the comparables, which had to be within the direct knowledge of the surveyor concerned, supported by documentary evidence or agreed between the parties. An opportunity was given for counter-submissions, following which “I will allow no further correspondence but will make contact with the parties to discuss whether the matter should proceed by hearing or written submission”. All communications were to be through the arbitrator.
Submissions made by the tenant’s surveyor contained details of a number of shops but gave no indication whether the surveyor had direct knowledge of the transactions. The arbitrator wrote to the surveyor on September 22 1987 drawing attention to this omission; the landlord’s surveyor in his counter-submissions of October 5 1987 made the same point. The tenant’s surveyor dealt with these points in his counter-submissions of October 6 1987, saying “we have been involved directly in the majority of the rent review negotiations and we believe that these more accurately represent true rental values in the area”; he also referred to a letter he enclosed written by his client commenting on the property.
Although the arbitrator sent the tenant’s counter-submissions to the landlord’s surveyor, he failed to send the tenant’s letter. The arbitrator did not contact either party to discuss whether an oral hearing should be held, and published his award on November 18 1987. The landlord sought to set aside or remit the award under section 22 or 23 of the Arbitration Act 1950 on the grounds of the arbitrator’s alleged misconduct or procedural mishap in failing to enforce his own rule on the evidence of comparables, and in receiving the tenant’s letter without forwarding it.
Held There was misconduct of the proceedings or a procedural mishap. The arbitrator had clearly set down rules of procedure he intended should apply. The tenant’s surveyor dealt with that request in a sloppy way and, even following the arbitrator’s request and the landlord’s surveyor’s counter-submissions, failed to clarify which transactions in his list of comparables were in his direct knowledge.
Although the landlord’s surveyor might have objected at the time to the receipt of inadmissible evidence and to the failure to send a copy of the tenant’s letter, the arbitrator had proceeded to an award without an oral hearing. This was contrary to the indication that he would discuss with the parties whether an oral hearing was required. The landlord’s surveyor was entitled to assume that he should wait for the arbitrator to contact him about that matter. The award was set aside and in the circumstances no order as to costs was made.
Shield Properties & Investments Ltd v Anglo-Overseas Transport Co Ltd
[1985] 1 EGLR 7 considered.
David Neuberger QC (instructed by D J Freeman & Co) appeared for the plaintiff landlord; and Nicholas le Poidevin (instructed by Lionel J Lewis) appeared for the defendant tenant.