Lease of commercial premises — Rent review provisions — Time limit for application to appoint arbitrator — Whether landlords should be permitted to apply out of time –Whether change in law contemplated by parties — Section 12 of Arbitration Act 1996 — Claim dismissed
The claimants were the landlords and the defendant was the tenant of premises under a 25-year lease, granted in October 1997, at an initial rent of £15,000 pa, which was subject to five-year, upwards-only reviews. In the event that the parties failed to agree a revised rent on review, the lease provided that either the landlords or the tenant could apply to the president of the RICS for the appointment of an arbitrator. Clause 8.2(E) provided that where the revised rent had not been agreed before the relevant review date, and the landlords had not made any application to the president, the tenant would be entitled to serve on the landlords written notice of a proposed revised rent “and the amount so proposed shall be deemed to have been agreed by the parties as the Revised Rent for the relevant Review Period… unless the Landlord shall make such application as aforesaid within one month after service of such notice by the Tenant”.
The parties failed to agree a rent for the 2002 review by the requisite date of 30 October 2002. On that day, the defendant gave notice to the claimants proposing a revised rent of £21,000. The claimants rejected that proposal, and, on 9 December, they applied to appoint of an arbitrator: the defendant pointed out that the application was outside the time limit stipulated by clause 8. The claimants subsequently applied to the court for an extension of time under section 12 of the Arbitration Act 1996. Section 12(3) enabled the court to grant an extension only if it were satisfied: “(a) that the circumstances are such as were outside the reasonable contemplation of the parties when they agreed the provision in question, and that it would be just to extend the time”. The claimants argued that the parties had not contemplated the change in the law effected by a Court of Appeal judgment in 2001, overruling previous case law that had suggested that time was not of the essence in provisions such as clause 8.
Held: The claim was dismissed.
Section 12(3) was applicable to clause 8 of the lease when determining whether an extension of time could be granted. The decision in Mecca Leisure Ltd v Renown Investments (Holdings) Ltd [1984] 2 EGLR 137, that time was not of the essence, had never been accepted without reservation, and doubts had been expressed about it in subsequent cases, even though it had not been overruled until the Court of Appeal decision in Starmark Enterprises Ltd v CPL Distribution Ltd [2001] EWCA Civ 1252; [2002] 2 WLR 1009. In the circumstances, not only was a change in the law foreseeable by the parties, but such a change was also not unlikely. Furthermore, the change had not contributed to the claimants’ failure to effect a reference; it had been fully publicised a year before the review date and was well known to solicitors and surveyors operating in the world of commercial property. The failure to give notice in time was not attributable to the change in the law, but lay with the claimants’ solicitor or agent. That such solicitor or agent might not give notice in time, for whatever reason, was a fact of commercial life and would have been readily contemplated in October 1997. Accordingly, the first condition for an extension of time had not been satisfied, and the court therefore had no jurisdiction to extend the time, even if it thought it just to do so: Harbour & General Works Ltd v Environment Agency [2001] 1 WLR 950 applied.
Emily Windsor (instructed by asb law, of Crawley) appeared for the claimants; Janet Bignell (instructed by Lewis Silkin) appeared for the defendant.
Sally Dobson, barrister
