Lease – Rent review – Landlord challenging arbitrator’s award – Section 68(2) of Arbitration Act 1996 – Whether serious procedural irregularities justifying remittance of award for reconsideration – Application dismissed
The claimant was the landlord of licensed premises under a 25-year lease that was vested in the defendant tenant. The rent was subject to five-year reviews and, should the parties be unable to agree a figure for the rent, the matter was to be determined by an arbitrator appointed by agreement between the parties or, in default, by the president of the RICS. The rent to be determined was the sum at which the premises might reasonably be expected to be let in the open market at the review date having regard to certain assumptions.
The assumptions were that the premises would be: (i) available to be let by a willing landlord to a willing tenant in the open market under one lease without a premium being paid by either party and with vacant possession; and (ii) immediately available to be fitted out and equipped by, and at the expense of, the incoming tenant. The determination was to be conducted under the Arbitration Act 1996.
The parties were unable to agree the rent payable from and after the first review date and referred the issue to an arbitrator appointed by the president. The arbitrator proposed to use inquisitorial powers, under section 34(2)(g) of the 1996 Act, and directed that where information, evidence or other relevant factors came to light, he would invite comment from the parties: direction 12.
The arbitration proceeded by way of written representations, followed by an inspection of the premises and comparables by the arbitrator, who subsequently communicated his award in writing. The claimant applied, under section 68 of the 1996 Act, to challenge the award on the ground that serious procedural irregularity in the conduct of the arbitration had given rise to substantial injustice.
The claimant alleged that the arbitrator had reached his conclusions by taking into account matters without: (i) evidence from either party; (ii) proper or adequate reasons or explanation; and (iii) giving either party an opportunity to comment, contrary to direction 12. The claimant sought to set aside the award and remit the matter for reconsideration.
Held: The application was dismissed.
In resolving the issues in favour of the defendant, the arbitrator had acted within the exercise of his powers by assessing and evaluating the evidence before him.
The court would be slow to interfere with an arbitral award under the 1996 Act that was intended as a departure from the arbitral regime prevailing prior to that Act, a major purpose of which was drastically to reduce the extent of court intervention in the arbitral process and promote one stop adjudication: Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2006] 1 AC 221 considered.
The court should accord a reasonably generous margin of appreciation to arbitrators in the discharge of their functions. It should not guess a rental figure and compare it with the amount awarded. The question was whether the arbitrator was evaluating the evidence before him or introducing new and different evidence based upon his own knowledge and expertise. It was necessary to look at the material before the arbitrator and to consider the award in order to determine whether an irregularity had arisen, as alleged by the claimant: Warborough Investments Ltd v S Robinson & Sons (Holdings) Ltd [2003] EWCA Civ 751; [2003] 2 EGLR 149 and Checkpoint Ltd v Strathclyde Pension Fund [2003] EWCA Civ 84; [2003] 1 EGLR 1; [2003] 14 EG 124 considered.
In a long and carefully written determination, the arbitrator had summarised the issues and contentions of both parties and had not strayed outside those issues, nor had he sought to introduce new evidence or take his own course. In reworking the figures or assessing the correct figures based on his findings, the arbitrator had acted within his remit: Winchester City Council v Secretary of State for the Environment [1979] 2 EGLR 126; (1979) 251 EG 259 considered.
Even if that were wrong, there would not have been such “substantial injustice” as to justify remitting the award under section 68(2) of the 1996 Act.
Andrew Noble (instructed by Blackett Hart & Pratt LLP, of Newcastle upon Tyne) appeared for the claimant; Janet Bignell (instructed by Kimbells LLP, of Milton Keynes) appeared for the defendant.
Eileen O’Grady, barrister
