Rent review – Arbitration – Award – Claimant applying for permission to challenge arbitrator’s award in dispute concerning rent review – Whether question of law arising out of award – Whether extending time to challenge award for serious irregularity justified — Applications dismissed
By three separate leases in similar tems, the defendant let a building to the claimant for a term of 25 years at an initial aggregate rent of £1,770,100, subject to upward-only five-yearly rent reviews. At the first review date, the initial rents were increased to the aggregate amount of £1,803,300. At the second review, the parties were unable to agree terms and appointed an arbitrator to determine the rent at which the premises might reasonably be expected to be let on the open market.
The arbitrator determined the value at £2,848,000 on the basis that the existing use of the premises as a data centre, as opposed to an office building, was also a use available to a hypothetical open market tenant. The claimant contended that such a conclusion reflected an error of law on the part of the arbitrator in that he had failed to disregard the works that the claimant had carried out otherwise than in the demised premises to enhance the power supply. Accordingly, he had failed to recognise that, without those improvements, the use of the demised premises as a data centre could not be continued.
The claimant sought permission to appeal against the arbitrator’s award, under section 69 of the Arbitration Act 1996, for the court to determine whether the disregard of tenant’s improvements in the rent review provisions in the lease applied to works or improvements carried out otherwise than in the demised premises. The claimant also applied, under section 80(5) of the 1996 Act, for an extension of time to challenge the award under section 68 on the ground that the arbitrator’s failure to deal with that issue was a serious irregularity within section 68(2)(d).
Held: The applications were dismissed.
It was incumbent on a tenant to establish that the improvements that it contended should be disregarded were carried out by it. Not only was that decided by the Court of Appeal in Euripides v Gascoyne Holdings Ltd (1996) 72 P&CR 30, but it was also required by the directions given by the arbitrator and the terms of the disregard. It was impossible to disregard an increase in rent attributable to an improvement to the premises carried out by the tenant if, as in this case, there was no evidence as to the nature of the improvement, who carried it out, when and at what cost. The claimant’s expert had not met those requirements in his statement and there was no indication that he had applied to the arbitrator to adduce further evidence, despite having ample opportunity to do so.
The context in which the arbitrator wrote his awards was that an agreement had been reached as to the claimant’s improvements and the two issues of fact to be determined. Having recorded the agreement in respect of the tenant’s improvements, the arbitrator explained why he considered that it was appropriate to value the building both as a data centre and as an ordinary office and then take the higher value. He had made no finding as to the existence of any external works of enhancement to the power supply carried out by the claimant that could affect the rental value of the building. Therefore, the issue that the claimant relied on was not a question of law arising out of an award made in the proceedings for the purposes of section 69(1); the decision on the point of law was not made on the basis of any findings of fact in the award as to any relevant improvements as required by section 69(3)(c), nor could its determination substantially affect the rights of any party, as required by section 69(3)(a) or be just and proper for the court to determine as required by section 69(3)(d).
Similarly, the issue that the claimant relied on had not been put to the arbitrator for the purposes of section 68. The question of fact was not supported by any evidence sufficient to require a conclusion and, without a relevant factual finding, the point of law was only of hypothetical interest. Even if there had been a technical failure within section 68(2)(d), it could not have caused substantial injury to any party.
Joanne Wicks QC (instructed by Berwin Leighton Paisner LLP) appeared for the claimant; John Male QC (instructed by Wragge & Co, of Birmingham) appeared for the defendant.
Eileen O’Grady, barrister
