Rent review — Appointment of a surveyor — Whether surveyor to be an arbitrator or expert
The plaintiff
landlord holds the reversion to a lease dated January 20 1974; the defendant
tenant holds the term. The lease contains provisions for seven-year rent
reviews. Para 3 of the third schedule provides that, if the parties have not
agreed the open market rent less than six months before the relevant rent
review date, the open market rent ‘shall be determined by a surveyor . . . to
be agreed in writing . . . and in default of such agreement to be nominated by
the president . . . of the Royal Institution of Chartered Surveyors upon the
application of the landlord, to be made not less than three months before the
relevant rent review date’. The lease further provides that, if the landlord
neglects to make the application within the time-limit for the appointment, any
notice by the landlord to have the rent reviewed shall be absolutely void. The
landlord, having failed to apply to the president of the RICS by September 25
1992 in respect of the rent review for December 25 1992, applied under section
27 of the Arbitration Act 1950 seeking the court’s discretion for the
appointment of an arbitrator out of time. On behalf of the tenant it was
contended that section 27 did not apply because the lease provided for the
appointment of an expert and not an arbitrator.
lease do not involve an arbitration procedure, but it does constitute the
appointed surveyor an expert as opposed to an arbitrator. The reasons are: (1)
because of the deliberate non-adoption of any express reference to arbitration,
by clear contrast to the main body of the lease; (2) the third schedule does
not necessarily presuppose a dispute; (3) the nature of the exercise — the
determination of rent under a rent review — which is particularly suitable for
expert procedures.
The following
cases are referred to in this report.
Langham
House Developments Ltd v Brompton Securities Ltd
(1980) 256 EG 719, [1980] 2 EGLR 117
Leigh v English Property Corporation [1976] 2 Lloyd’s Rep 298
Pittalis v Sherefettin [1986] 1 QB 868; [1986] 2 WLR 1003; [1986] 2
All ER 227; [1986] 1 EGLR 130; (1986) 278 EG 153, CA
Safeway
Food Stores Ltd v Banderway Ltd [1983] EGD
213; (1983) 267 EG 850, [1983] 2 EGLR 116
Stephenson
& Son v Orca Properties Ltd [1989] 2
EGLR 129; [1989] 44 EG 81
This was an
application by the plaintiff, Fordgate Bingley Ltd, by originating summons under
section 27 of the Arbitration Act 1950 to extend time for the appointment of an
arbitrator in a rent review under a lease held by the defendant, Argyll Stores
Ltd.
John Martin QC
(instructed by Teacher Stern Selby) appeared for the plaintiff; David Neuberger
QC and Janet Bignell (instructed by the solicitor to Safeway Stores plc)
represented the defendant.
Giving
judgment, MR NICHOLAS STEWART QC said: This is an application by
Fordgate Bingley Ltd, by originating summons, which is the landlord under a
lease dated January 20 1974 made between USP Projects Ltd and the defendant,
who was at that time called Allied Suppliers Ltd. It is an application for
extension of time under section 27 of the Arbitration Act 1950 so as to
validate an application made on the plaintiff’s behalf on November 4 1992 for
the appointment of a surveyor under provisions in the lease to determine the
rent payable for a seven-year period from Christmas Day 1992. The lease is for
a term of 35 years from Christmas 1971, with seven-year reviews.
I straight
away read the relevant provisions, because I do not think that it is easy to
understand what is going on without setting them out reasonably fully. I will
not trouble with clause 2 of the lease, which brings in the rent review provisions
in the third schedule. If we go to the third schedule there is then a
definition of the open market rent, but nothing turns on that particular
definition. The material part for my purposes start at para 2 of that schedule,
which provides:
If at any time
not more than twelve and not less than nine months before one of the rent
review dates
— December 25
1992 here —
the landlord
shall give notice in writing to the tenant of its desire to vary the yearly
rent payable hereunder as from
— that rent
review date —
such yearly
rent shall from and after that date be whichever is the higher of
— and then it
is the yearly rent —
reserved
hereunder immediately before the relevant rent review date and the open market
rent.
So it is
upwards only. The rent up to December 25 1992 was £58,000 pa and of course it
has continued to be that for the time being pending any question of the review
which is now sought by the landlords.
Para 3:
If the
landlord and the tenant shall not have agreed the open market rent less than
six months before the relevant rent review date, the open market rent shall be
determined by a surveyor (hereinafter called ‘the appointed surveyor’), to be
agreed upon in writing by the landlord and the tenant not less than four months
before the relevant review date, and in default of such agreement to be
nominated by the president for the time being of the Royal Institution of
Chartered Surveyors upon the application of the landlord, to be made not less
than three months before the relevant rent review date.
Para 4:
The
determination of the open market rent by the appointed surveyor (which shall be
final and binding on the landlord and the tenant without recourse to the
provisions for arbitration hereinbefore contained), and the fees of the
appointed surveyor shall be borne by the landlord and the tenant in equal
shares.
I will just
pause there and say that, having recited those paragraphs, it will be apparent
that something has gone wrong somewhere with the English in the drafting. I
have read them out and set them out exactly as they appear in the lease.
Para 5:
If on the
relevant rent review date the open-market rent shall not have been agreed or
determined as aforesaid, the yearly rent reserved hereunder immediately before
the relevant rent review date shall continue to be payable
and so on. But
nothing turns on that paragraph.
Para 6:
If the
landlord and the tenant shall not have agreed the open-market rent at least six
months before the relevant rent review date, and the landlord shall neglect to
make the application referred to in paragraph 3 hereof (unless the parties
hereto shall in writing agree otherwise) any notice already given by the
landlord to the tenant under the provisions of paragraph 2 hereof shall be void
and of no effect.
The rest of
the schedule has no particular significance for the present purposes.
The practical
position is that notice to trigger off this procedure should have been served
at some period between Christmas Day 1991 and March 25 1992, but was in fact
not served by the plaintiff, that is the landlord, until May 12 1992. No point
is now taken on that; it is accepted that time is not of the essence in
relation to that particular notice. The next stage was that if there was no
agreement by June 25 1992 then the provisions for the appointment of the
surveyor, which I have already recited, should take effect. There was no
agreement.
There was then
provision, or it was recognised that there was a possibility, that the parties
might agree on a surveyor. There was also no agreement in relation to that. If
not, then an application was to be made to the president of the Royal
Institution of Chartered Surveyors by September 25 1992. In fact, application
was not made by the plaintiff landlord until November 4 1992. That is the
critical point because it is accepted that time was of the essence in relation
to that provision, so that some extension of time is necessary if the plaintiff
landlord is going to be able to achieve a rent review as from December 25 1992.
The only way
in which that could now be achieved is under section 27 of the Arbitration Act
1950, if that section is applicable, which is to say if the rent review
provisions do constitute an arbitration procedure. The originating summons was
issued on March 17 1993, so that was some four or five months after the date
when the application ought to have been made. On the evidence before me it is
apparent that the plaintiff was aware sometime very shortly before or very
shortly after Christmas 1992 that a point was in issue, and was certainly
liable to be taken by the tenant, that the landlord had lost the right to have
the rent reviewed on this particular occasion.
I turn briefly
then to section 27 of the Arbitration Act 1950 to indicate points which are
agreed and do not arise. It provides:
Where the
terms of an agreement to refer future disputes to arbitration provide that any
claims to which the agreement applies shall be barred unless notice to appoint
an arbitrator is given or an arbitrator is appointed or some other step to
commence arbitration proceedings is taken within a time fixed by the agreement,
and a dispute arises to which the agreement applies, the High Court, if it is
of opinion that in the circumstances of the case undue hardship would otherwise
be caused, and notwithstanding that the time so fixed has expired, may, on such
terms, if any, as the justice of the case may require, but without prejudice to
the provisions of any enactment limiting the time for commencement of
arbitration proceedings, extend the time for such period as it thinks proper.
It is accepted
that, if this is an arbitration procedure in the third schedule, then there is
no difficulty for the plaintiff arising out of the phrase ‘refer future
disputes to arbitration’ nor out of the phrase ‘some other step to commence
arbitration proceedings’. The matter would then become a question of discretion
— which is a matter that was also argued before me — but that arises only if I
come to the conclusion that the section is applicable because we are talking
about an arbitration procedure.
I am greatly
helped by the high quality of the submissions made to me, which I would have
expected given the counsel concerned: Mr John Martin QC, for the plaintiff, and
Mr David Neuberger QC and Janet Bignell, for the defendant tenant. One case to
which I was referred, but which I have not found helpful in reaching my
decision, is the case of Pittalis v Sherefettin [1986] 1 QB 868*.
It simply does not cast any particular light on the issue which I have to
decide.
*Editor’s
note: Also reported at [1986] 1 EGLR 130.
The main issue
for me, simply stated, is: was the surveyor, to be appointed under schedule 3
of the lease, to be an arbitrator or an expert?
That of course is a question of the construction of this particular
lease and therefore authority on other leases is of limited help. I say
‘limited help’ because, as I shall indicate, I do find such authority of at
least some help in reaching a conclusion on this matter.
The first case
to which I refer is the case of Leigh v English Property Corporation [1976]
2 Lloyd’s Rep 298, a decision of the Court of Appeal — Stephenson LJ and Sir
Gordon Willmer — but constituting an appeal from a decision of Brightman J.
Brightman J’s judgment is reported. I was referred particularly to a passage in
Brightman J’s judgment at p300 of the report, first column. Without going into
the particular issue and the particular clause under consideration there —
which I do not think will be helpful — the relevant passage, towards the foot
of the page, is:
Before
turning to the authorities cited by Mr Sykes for the defendant company, I will
advert shortly to the distinction between an arbitrator, properly so called,
and a valuer who is not an arbitrator. An agreement for arbitration is an
agreement to settle a difference by recourse to arbitration instead of
litigation. An agreement for a valuation is not, prima facie, an
agreement for arbitration. The function of the valuer is usually to settle a
price so that no difference arises between the parties. His function is not to
make an award after a difference has already arisen. But it is easy for the one
concept to shade into the other. I confess that I find some difficulty in
distinguishing the hall-mark of an arbitrator from the hall-mark of a valuer.
To put the matter in another way, in the absence of a formal reference to
arbitration proceedings, it may be difficult in a valuation case to tell from
the wording of the agreement whether the parties intended the referee to
conduct arbitration proceedings in order to determine value or to effect a
valuation without conducting any such proceedings.
In the
instant case
which, I
comment, was a share valuation case
it was
clearly envisaged by the plaintiff and the defendant company that the auditors
would not be called in until the parties had demonstrated that they were in
disagreement; for the agreement provides that the fair value is to be certified
by the auditors only in the event that the parties fail to agree upon it
themselves. No doubt, in such circumstances, the auditors would be informed of
the rival contentions of the parties. As the agreement envisages that the
auditors are to perform their functions only in the event of a failure of the
parties to reach their own agreement, it is hardly to be supposed that the
auditors would not seek, or that the parties would not be anxious to provide,
an explanation of the dispute between them. In these circumstances it seems to
me that the plaintiff has an arguable case that the auditors, although not
formally so appointed by the agreement, were in fact selected as arbitrators to
compose a difference which the terms of the agreement presupposed to have
arisen between the parties.
I comment
that, as Mr Neuberger emphasised, the decision there was only that there was an
arguable case, and of course it was on a different clause and in a slightly
different type of situation anyway. So the actual decision does not really
carry us anywhere.
In his
reference to the hallmark of an arbitrator and the hallmark of a valuer, what
Brightman J is really saying is that there is not any hallmark that provides
some clear general guide. You do have to look, of course, at the particular
features of the case before you, but what is plainly important is the concept
of resolution of a difference or dispute, that there is at least some
significant indicator that you may have an arbitration rather than a valuation,
that being the basic distinction.
It is said by
Mr Martin, in the present case, that para 3 of schedule 3 of the lease does
contemplate a failure to agree and not just — the way he put it — that the
parties could not be bothered to reach an agreement, or perhaps did not get
round to reaching an agreement. It begins:
If the
landlord and the tenant shall not have agreed the open market rent,
and so on.
As a matter of
language, it is entirely consistent with either the landlord and tenant simply
not having got round to agreement or their not having even attempted to
negotiate an agreement; or alternatively, a practical situation which of course
will often arise, that they have had a go at reaching agreement, with rival
contentions — the landlord obviously asking for more than the tenant is wanting
to pay — and have failed to reach some compromise figure.
Mr Martin also
says that the mere fact that the schedule contemplates using a surveyor
appointed by the president of the Royal Institution of Chartered Surveyors is
not decisive. I certainly accept that that is not decisive. He says that it is,
in fact, completely neutral. I do not find it completely neutral — I think that
is overstating the case — but it is not a major indication.
Mr Martin then
dealt with what he acknowledged were possible counter-indications. In referring
to clause 4, he drew my attention to the bracketed words. Clause 4 is untidy,
to say the least.
. . . determination
of the open market rent by the appointed surveyor.
Then there are
some bracketed words which, when they are closed off, do not make the whole of
that paragraph read at all well as a matter of English. Mr Martin says that the
effect of the bracketed words is in the end neutral, but I shall have to
develop that a little bit more in this judgment.
He referred me
to what he described as the two arbitration provisions in the lease as being
covered by the phrase ‘the provisions for arbitration hereinbefore contained in
para 4’. In fact, as Mr Neuberger pointed out and Mr Martin virtually accepted,
there are three provisions which should be looked at. They are in clause 5 of
the lease and I had better also set those out fairly fully. The first is in subclause
(2). It is a proviso for cesser of rent and it provides:
If the
demised premises or any part thereof shall at any time be destroyed or so
damaged by any of the insured risks as to be unfit for occupation or use . . .
— and I need
not read the next few lines because it concerns an abatement of rent until the
demised premises are fit for occupation and use again —
in case of
dispute as to the proportional period of such abatement the same shall be
referred to arbitration in accordance with the Arbitration Act 1950 or any
statutory modification or re-enactment thereof for the time being in force.
And then
subclause (4) reads:
Any dispute
arising as between the tenant and the lessee’s tenants or occupiers of the
building . . .
— that is
obviously the larger premises, including these demised premises —
or any part
thereof relating to any easement, right or privilege in connection with the
demised premises of the building or any part thereof, or relating to the party
or other walls appertaining to the demised premises, or as to the amount of any
contribution towards the expenses of works to services used in common with the
nearby premises, shall be referred to the landlord, and if any such dispute
cannot be settled to the satisfaction of the tenant and the person or persons
concerned then the same shall be referred to a single arbitrator to be mutually
agreed or (failing agreement) to be nominated by the president for the time
being of the Law Society, and in any event the decision so ascertained shall be
binding upon the parties to such dispute.
And then there
is subclause (6):
If any
dispute shall arise between the parties hereto with regard to the construction
or effect of this underlease or any provision hereof, or otherwise in
connection with the demised premises, such dispute shall be determined by a
single arbitrator appointed by the president for the time being of the Law
Society in accordance with the Arbitration Act 1950 or any statutory
re-enactment or modification thereof.
What Mr Martin
said was that there were two ways of looking at this. First of all, that the
parties did know how to appoint an arbitrator, but were not consistent in their
methods of appointment; they chose variable ways, if one compares the wording
in subclause 5(4) and subclause 5(6). He also pointed out that with subclauses
5(4) and 5(6) nobody would know the nature of the dispute so naturally, he
said, the matter would be expressed in much more general terms. The
conventional terms providing for arbitration would not specify the type of
arbitrator to be appointed — that is to say whether a lawyer, a surveyor or
some other professional. You simply did not know what sort of dispute would
arise, so you would have to use the word ‘arbitration’ to cover the general run
of fairly unpredictable situations that might arise. He said you can draw no
inference from the failure to use the word ‘arbitrator’ in para 3 of the third
schedule.
He also said
that those clauses — and perhaps his point can be reinforced by the fact that
there are three arbitration provisions in clause 5 — showed a clear intention
in this lease to have disputes resolved by arbitration. The thrust of that
point was that because that was the general approach in this lease, it would
indicate that schedule 3 should also be treated as an arbitration provision.
Mr Neuberger
of course argued that in looking at the essential parts of schedule 3, which
were particulary paras 3 and 4, I would get assistance from the arbitration
provisions, there being three of them, in subclauses (2), (4) and (6) of clause
5. He said, for the purpose of that part of his argument, that those subclauses
constituted two unequivocal arbitration provisions and one quite probable arbitration
provision.
I do not have
any difficulty in elevating that probability in relation to subclause 5(4) to
the conclusion that it is also an arbitration provision — although it does not
spell it out quite so unequivocally as the other two subclauses because it does
not refer specifically to the Arbitration Act 1950. I do find that the use of
the phrase ‘shall be referred to a single arbitrator’ is compelling. I do not
see any reason in that instance to quarrel with the label that the parties have
attached to that particular person. In any case, that particular view of
subclause 5(4) is not critical.
What was
suggested in argument was that when one looked at what was said in schedule 3
with reference to those arbitration provisions — and particularly the phrase
‘without recourse to the provisions for arbitration herein contained’ — that
that could mean, first of all, that after determination by the surveyor there
was to be no possibility of arbitration. Mr Neuberger has said that it would be
extraordinary to suppose that the person drafting the lease — and through him
or her the parties — had intended to say that you could not have an arbitration
upon an arbitration, and that indicated that schedule 3 could not itself
involve an arbitration provision. But I do not find it seriously any more
sensible if schedule 3 contemplated an expert procedure as opposed to an
arbitration procedure. Having an appeal — perhaps that is a rather loose phrase
— and going on from an expert’s decision to an arbitration is hardly less
fanciful, in my view, than an arbitration upon an arbitration.
Mr Neuberger
having recognised those possibilities — and Mr Martin, despite my rather
dismissive view of that possible meaning of that provision, contending that it
was designed simply to make it clear that you could not have an arbitration in
addition to the expert procedure under schedule 3 — Mr Neuberger contended that
this was
the case of this procedure under schedule 3 — that is to say, not apply in the
first place to that procedure.
I think that
is right. That seems to me to be the effect of a not at all well drafted
provision. Having said that, my conclusion on that particular point is not
critical to my decision on the essential point in the case anyway. What Mr
Neuberger said was that the arbitration provisions showed that the parties not
only knew how to appoint an arbitrator but also had the Arbitration Act well in
mind. That is correct, they do. Although the lease does not adopt an entirely
consistent way of doing it, in entirely consistent terminology, those
provisions do certainly show that the parties knew how to appoint an arbitrator
and that the Arbitration Act was well in mind, taking the lease as a whole.
He pointed out
that in the rent review provisions in schedule 3 there is no need for a dispute
to have arisen. In the initial notice triggering off the procedure — that is to
say, the notice served on May 12 1992 — the landlord did specify a rent, which
can quite commonly be done. But there is no requirement; the landlord can
simply serve a notice triggering off the procedure and, entirely consistently
with the provisions of schedule 3, it would be possible just to move straight
on to that procedure without any dispute having arisen at all. In practice, the
timetable set out does allow for and envisage — to use the same word that was
used in Brightman J’s judgment in the Leigh case — that there is likely
to be some discussion. No doubt in practice there is frequently likely to be a
dispute, but there does not have to be.
By contrast,
in all three places under clause 5, in all three situations covered by the
provisions to which I have referred — one of which, I do not know whether it is
especially unusual, is different in the sense that it relates to disputes
between the tenant and third parties rather than between landlord and tenant —
you would have a dispute, you would have a referral and you would have an
arbitrator. So you would have very obvious elements of an arbitration
procedure, which he says are certainly not necessarily involved in the
operation of the schedule 3 procedure. That is, on the basis of the language
and the procedure contemplated, a correct submission.
I will mention
one or two points that I do not find of any great weight or, at least in one
instance, any weight at all. Mr Neuberger suggested that the use of the word
‘surveyor’ was significant. I do think it is of some slight significance, but I
do not think that it is particularly compelling. It is fairly clear that a
surveyor is going to be the right sort of person to deal with the question of
the rent review, and that would be true whether it was an arbitration or an
expert procedure. The use of the word ‘determination’ I do not find a pointer
at all. Mr Neuberger very fairly, in any case, pointed out that the word
‘determined’ was used in one of the provisions of clause 5, subclause 5(6) that
is. Nor do I find that the use of the phrase ‘final and binding’ in schedule 3
has any weight at all. That seems to me to be entirely consistent with either
sort of procedure, and the word ‘binding’ in any case also appears in at least
one of the arbitration provisions in clause 5. So I do not think that those are
really helpful pointers at all.
What Mr
Neuberger does say is that the reference in para 4 of schedule 3 to payment of
the fees of the appointed surveyor — that is the provision that ‘the fees of
the appointed surveyor should be borne by the landlord and tenant in equal
shares’ — is significant. I agree that that is of some weight. He points out —
and I think it is right — that, because there is an arbitration agreement, that
provision would be void under section 18(3) of the Arbitration Act 1950.
Although I think that is right, it is not in the end a matter to which I find
it necessary to attach weight in reaching my conclusion. He points out that in
the arbitration clauses in this lease there is no provision for costs because
the parties would be aware that the Arbitration Act would cover the question of
costs. That seems to me to be an entirely realistic suggestion, and that does
draw some distinction between the two sets of provisions, the clause 5
provisions and the schedule 3 provisions.
I turn now to
two cases which I have found of some help. The first is Langham House
Developments Ltd v Brompton Securities Ltd, a decision of Sir Robert
Megarry, the then Vice-Chancellor, reported at (1980) 256 EG 719, [1980] 2 EGLR
117. I will not read out the clause that was under consideration in that case;
it is, of course, in that report. Sir Robert Megarry, towards the end of his
judgment, turns to what was the third question on his summons.
Is the
chartered surveyor nominated by the president for the time being of the Royal
Institution of Chartered Surveyors to perform his task as an arbitrator or is
he to do it as a valuer, without any process of arbitration? Looking at the subclause by itself, I can see
some force both in Mr Ellis’ answer of ‘arbitrator’ and in Mr Dyson’s answer of
‘valuer’. But the subclause does not stand by itself. The clause immediately
preceeding it, clause 4(5), runs as follows . . .
That clause
was also a clause arising in an abatement of rent case if the demised premises
were damaged or destroyed by insured risks and so on. If there was a difference
the clause provided:
in case of
difference touching this proviso the same shall be referred to the award of a
single arbitrator to be appointed by the President for the time being of the
Royal Institution of Chartered Surveyors and in accordance with the provisions
of the Arbitration Act 1950 or any statutory modification thereof for the time
being in force.
So that is
broadly the equivalent provision to the proviso for a cesser of rent in clause
5 subclause (2) of the lease with which I am concerned. That immediately
preceded the rent review clause. I will not read it but it also allowed some
period — a shorter period than in the present case — during which the landlord
and tenant might come to an agreement about the lease, but in default of such
agreement the new rent was to be determined by a chartered surveyor nominated
by the president for the time being of the RICS. There was nothing express in
that case about whether there was to be an arbitration or a valuation, or drawing
that contrast.
What Sir
Robert Megarry then said is that when one put those two clauses side by side
the contrast was striking. The proviso to the cesser of rent clause reeked of
arbitration; it used language such as ‘in case of difference’, ‘award’, ‘single
arbitrator’ and ‘Arbitration Act 1950’, whereas the rent review provision used
none of those words; there was merely a ‘sum’ to be ‘determined’ by a chartered
surveyor on the basis stated. He went on:
None of Mr
Ellis’ ingenuities seem to me to come within striking distance of prevailing
against this clear contrast. The lease was drafted by a draftsman (with the
singular including the plural, and the masculine the feminine) who knew very
well how to make it plain that there was to be an arbitration: and knowing
this, clause 4(6)(a) . . . (that is the rent review clause) . . . was drafted
in terms which neither in substance nor in form pointed in any real way to an
arbitration rather than a valuation. I accept, of course, that under clause
4(6)(a) there might well be a default of agreement that arose from a positive
disagreement rather than a mere failure to make or attempt to make an
agreement: but in face of the contrast, that falls far short of anything that
could establish clause 4(6)(a) as containing an arbitration clause. The process
under that clause is, in my judgment, one of valuation and not arbitration.
The points of
interest there, for present purposes, are that just as in the present case
there could be a positive disagreement rather than simply a mere failure to
make agreement. Sir Robert Megarry did not regard that as compelling him
towards the conclusion that there was an arbitration, although that is one
feature of arbitration procedures. He also attached significance to the contrast
of one clause which, as he said, reeked of arbitration and another clause which
did not mention arbitration in any express term at all.
Mr Martin made
something of the fact that in the case before Sir Robert Megarry the two
clauses were together, the clause which reeked of arbitration being the
immediately preceding subclause. I do not see that as of any real significance.
You take the lease as a whole. Schedule 3 in the present case does refer
expressly back to the provisions for arbitration ‘hereinbefore contained’, so
you go straight back to clause 5 even though it is a few pages before it in the
lease. I do not see that as of any importance.
So that
general approach I find helpful, while of course having to take account of the
particular provisions of the particular case before me.
The other case
which I also find of some help is the case of Safeway Food Stores Ltd v Banderway
Ltd (1983) 267 EG 850, [1983] 2 EGLR 116, a decision of Goulding J. I will
read the clause in that case because it is a little bit different. The
provision for rent review in that case provided:
IT IS HEREBY
AGREED AND DECLARED by and between the parties hereto that if during the
continuance of this demise the Lessor shall not earlier than six months nor
later than three months immediately preceding the expiration of the twenty
first forty second sixty third and eighty fourth year of the term hereby
granted serve upon the Lessee a notice in writing requiring a review of the
yearly rent first hereby reserved . . . then within ten days thereafter each
party shall appoint a duly qualified valuer to negotiate and endeavour to reach
agreement with the valuer of the other party as to the fair market rack rent of
the demised premises at that time for a Lease for a term equivalent to the then
unexpired residue of the said term . . .
Then there are
some disregards. Then he refers to provisions for the determination of a
revised rent if the valuers do not agree.
Just before
the point at which I broke my reading of the rent review clause there is a
direction that the revised rent is to be determined by the valuers on the basis
of a hypothetical lease for a term equivalent to the unexpired residue of the
actual term, disregarding — to put it shortly — goodwill and improvements
effected by the tenant,
On the next
page:
In the event
of such valuers not having reached such agreement by the expiry of a period of
four weeks next following the date of the service of the said notice they shall
agree upon an umpire to settle the question whose decision shall be final and
binding upon both parties and if within the before mentioned period of ten days
either party shall not have appointed a valuer as aforesaid or if within the
said period of one week next following the said period of four weeks the said
two valuers shall not have agreed upon such umpire or such an umpire shall not
have been appointed then in the first contingency the other party and in the
second contingency either party may request the President for the time being of
the Royal Institution of Chartered Surveyors to appoint a member of that Body
(but not the valuer appointed as aforesaid by either party) to settle the
question and the parties hereto shall be bound as aforesaid by the decision of
the person so appointed.
The question
that Goulding J was asked to decide is whether an umpire so appointed must act
as an arbitrator in accordance with the Arbitration Act, or whether, as the
landlord suggested, the umpire is to act as an expert making a valuation. He
had some doubts about deciding that question, which he felt was hypothetical,
but he did. He referred to some differences between how an arbitrator operates,
and what procedure an arbitrator has to adopt and what procedure an expert or
independent valuer may adopt. That is quite helpful. It is from A Handbook
of Rent Review by Mr Ronald Bernstein QC and Mr Kirk Reynolds QC, which
does contain a quite helpful summary of some of those differences.
Goulding J
then went on:
In the
context in which it occurs I think it is pretty plain that this umpire, as he
is called, was intended to be a valuer who was to use his own knowledge and
make such investigations as he, a qualified surveyor, would think fit, not to
act as a quasi-judge upon evidence and arguments of the parties or their
representatives. I say that for four reasons, none of which is conclusive in
itself but which, taken together, seem to me to be a clear pointer.
He then sets
out four reasons, three of which Mr Neuberger says have application to the
present case.
First of all,
the whole question is one of expertise in arriving at a fair market rack rent
at a particular date. It is in its essential nature one of valuation rather
than a question with two clearly defined sides to be argued and decided.
Mr Neuberger
says — and it is correct as far as it goes — that that is also a feature of the
present case. The second point does not arise in the present case and I will
not bother to recite it. And then:
Thirdly, the
umpire is not merely in default of agreement to be appointed by the president
of the Royal Institution of Chartered Surveyors but is expressly to be a member
of that body. Thus it is contemplated that he will need expertise in the field
of a surveyor.
It does not
actually say ‘a member of that body’, but it does refer to ‘Surveyor’, with a
capital ‘S’, in schedule 3 of this lease. That feature also arises in the
present case. I must say that I do not think that it adds terribly much to the
first feature. It seems to me that it comes to really pretty much the same
thing.
Finally, the
fourth point in that case is that there was in quite a different part of the
lease a covenant on the part of the tenant in these terms, which Goulding J
sets out:
To pay to the
Lessor on demand a fair proportion of the expense of cleansing lighting
repairing and maintaining all things used or enjoyed by the Lessee in common
with any other person and of all party and other walls . . . and in the event
of any dispute arising under the provisions of this Clause the matter shall be
referred to a single arbitrator in accordance with and subject to the
provisions of the Arbitration Act 1950 or any statutory modification or
reenactment thereof for the time being in force.
Ending that
citation there and going back to Goulding J’s judgment:
Accordingly,
it is argued, one must conclude that the draftsman of this document, when he
wanted to provide for an arbitrator, did so in express terms.
As I have
said, I do not find any of those points conclusive on its own, but taken
together they appear to me clearly to point to the conclusion that the umpire
is to act as an expert and not as an arbitrator.
And that was
Goulding J’s decision in that case.
I do, as I
have said, have very much in mind the elementary principle that the court
construes the particular document which is before it and not some other
document which is not, but I was referred by Mr Neuberger to a passage in the
judgment of Scott J, as he then was, in the case of Stephenson & Son v
Orca Properties Ltd [1989] 2 EGLR 129, simply for that passage. The
particular facts of that case are absolutely unimportant for present purposes,
but, in dealing with the rent review provision, Scott J said at p132K.
The
construction and effect of leases, and in particular leases of commercial
premises, ought not, in my view, to be subjected to variation caused by minor
and apparently unimportant differences in language. Certainty is highly
important. It would be a disservice to the law if I were, points been in
reliance on such of distinction as have been relied on in the present case, to
give to the rent review clause in the present case a different effect to that
given to the rent review clauses in the two Court of Appeal cases in question.
I do not
suppose for one moment that Scott J would possibly be suggesting that you do
not construe the actual document in front of you; it seems to me that what he
is saying is that you apply rigorously, of course, all the ordinary and proper
principles of construction, but you also apply some common sense as you are
going along. If courts in previous cases have regarded the particular features
of clauses, which you then see in the case before you, as significant pointers,
you regard them also as significant pointers, without being seduced by the
minor variations and the apparently unimportant differences in language to
which Scott J referred. I hope I am not doing a disservice to Scott J by
paraphrasing or interpreting what he said, but I certainly accept and subscribe
to what he has said and the way that he has said it in his judgment.
Looking at
this lease, therefore, I find the overall effect clear. It seems to me that it
does not involve an arbitration procedure, but that it does constitute the
appointed surveyor an expert as opposed to an arbitrator. The particular
considerations which, taken together, lead me to that conclusion are, first of
all, what I describe as the deliberate non-adoption in schedule 3 of any
express reference to arbitration, by clear contrast with the provisions of
clause 5 in the main body of the
necessarily presuppose a dispute, even though in many instances in practice no
doubt that might arise. Third, the nature of the exercise. Of course it could
be conducted by, or it could have provided for it to be conducted by,
arbitration, but it is an exercise — the determination of rent under a rent
review — which is particularly suitable for expert procedures. So, taken in
conjunction with those other considerations that I have mentioned, it seems to
me that overall this clause quite clearly constitutes the appointed surveyor an
expert and not an arbitrator.
That decides
this case because, inevitably, it means that this application is dismissed as
there is no jurisdiction under section 27 to grant the extension which is
sought. I will not, in those circumstances, even begin to deal with or express
any view on how I might have exercised my discretion if my conclusion on that
first point had been different. I have had submissions on that but I will say
only this: it is hypothetical and I do not, on what I have heard, regard it as
an absolutely clear-cut matter which is really so plain that I could simply say
in a sentence what my conclusion might have been. There are points on both
sides and I think it would be unhelpful for me to go into that since it is
hypothetical. I dismiss this application.
Application
dismissed.
