Landlord and tenant — Rent review clause in lease — Construction — Ambiguous provisions as to capacity of independent surveyor appointed by agreement of parties to determine rack-rental value — Lease provided that such value at review date should be as agreed by the parties or, in default of such agreement, as determined by an independent surveyor agreed by the parties or, in default of such agreement, by an arbitrator nominated by the president of the RICS ‘and this lease shall be deemed for this purpose to be a submission to arbitration within the Arbitration Act 1950’ — Whether the independent surveyor, who was in fact appointed by agreement of the parties, and not by the president, was to be regarded as acting as an arbitrator under the 1950 Act or simply as an expert valuer — The matter came before Scott J both by way of appeal by originating motion, on the assumption that the surveyor was an arbitrator, and by way of originating summons asking the court to decide whether or not he was an arbitrator — The plaintiff lessees wished to challenge the surveyor’s assessment of the rack-rental value at £17,865 per annum, which appeared to them excessive as they had failed for some years before the review to find anyone willing to purchase the lease at the existing rent of £5,725 — The term was 42 years from December 1 1969 and the first rent review was on December 1 1983 — It was argued for the plaintiffs that it would be strange if the person appointed by agreement between the parties was not to act in the same capacity as the person to be appointed by the president of the RICS — On the other side it was pointed out that the lease drew a clear distinction between an independent surveyor and an arbitrator and that parties might be content to have their own appointee act as a valuer, but might wish to have the president’s nominee subject to the arbitral machinery with its judicial features — The main authorities considered were Sutcliffe v Thackrah, Arenson v Casson Beckman Rutley & Co and Palacath v Flanagan — Held, on balance, although the indicia were not very strong, that it was intended that the independent surveyor should act as an expert if appointed (as he was) by agreement of the parties, but that he should act as an arbitrator if appointed, in default of such agreement, by the president of the RICS — This decision necessarily disposed of the motion by way of appeal under the 1950 Act — The judge refrained from making any declaration as to whether the surveyor, having been found not to be an arbitrator, was amenable to a suit for negligence — That issue had not been raised on the summons and it involved serious questions which required considered submissions
The following
cases are referred to in this report.
Arenson v Casson Beckman Rutley & Co (on appeal from Arenson
v Arenson) [1977] AC 405; [1975] 3 WLR 815; [1975] 3 All ER 901; [1976]
1 Lloyd’s Rep 179, HL
Langham
House Developments Ltd v Brompton Securities Ltd
(1980) 256 EG 719, [1980] 2 EGLR 117
Palacath
Ltd v Flanagan [1985] 2 All ER 161; [1985] 1
EGLR 86; (1985) 274 EG 143
Safeway
Food Stores Ltd v Banderway Ltd [1983] EGD
213; (1983) 267 EG 850, [1983] 2 EGLR 116
Schuler
(L) AG v Wickman Machine Tool Sales Ltd
[1974] AC 235; [1973] 2 WLR 683; [1973] 2 All ER 39; [1973] 2 Lloyd’s Rep 53,
HL
Sutcliffe v Thackrah [1974] AC 727; [1974] 2 WLR 295; [1974] 1 All ER
859; [1974] 1 Lloyd’s Rep 319, HL
The plaintiffs
both in respect of the originating motion by way of appeal under the
Arbitration Act 1950 and the originating summons were North Eastern
Co-operative Society Ltd, lessees of supermarket premises in Newcastle upon
Tyne. The respondent to the originating motion was Newcastle upon Tyne City
Council and the council was also the first defendant to the originating
summons. The second defendant to the summons was David Kendrick FRICS, the
independent surveyor.
Grant Crawford
(instructed by Punch Robson, of Middlesbrough) appeared on behalf of the
plaintiffs; K Hornby (instructed by R A A Brockington, director of administration,
Newcastle upon Tyne) represented the city council; Miss Erica Foggin
(instructed by Hadaway & Hadaway, of Newcastle upon Tyne) represented Mr
Kendrick.
Giving
judgment, SCOTT J said: I have before me two matters which are connected. Both
arise as a result of a rent review carried out
North Eastern Co-operative Society Ltd, is the lessee, and the first defendant,
Newcastle upon Tyne City Council, is the lessor. The lease is a lease of
supermarket premises in Newcastle upon Tyne. The supermarket is located in a
shopping precinct in a housing estate which, I understand, has suffered urban
decay. The lease granted a term of 42 years from December 1 1969. The lease was
dated January 12 1971. It reserved the rent of £5,725 per annum for the first
14 years of the term and provided for rent reviews thereafter. The first rent
review date, therefore, was December 1 1983.
I must refer
in detail to the contents of the lease so far as concerns the rent review, but,
put shortly, it provided a scheme under which the lessor and lessee were first
to try to agree the new rent and, in default of agreement, the rent was to be
fixed either by an independent surveyor agreed upon by the two parties or by an
arbitrator to be appointed by the president of the Royal Institution of
Chartered Surveyors.
The new rent
was to correspond with what was called in the lease the ‘rack-rental value’ of
the demised premises. The rent was not, however, to fall below the initial
£5,725 per annum.
Some three
years or so before the rent review date arrived, the lessee ceased using the
premises as a supermarket and offered its lease for acquisition. It was
offered, of course, at the rent reserved of £5,725 per annum.
For three
years up to the time of the rent review there were no takers; virtually no
interest seems to have been shown by would-be purchasers in acquiring the
plaintiff’s lease. The plaintiff regards that as an indication that the
rack-rental value of the premises could not have exceeded £5,725 per annum.
The lessor,
the city council, did not agree that that was so. It contended that the
rack-rental value of the premises for the seven-year period following December
1 1983 ought to be a sum in the region of £25,000.
As the parties
could not agree, the machinery prescribed by the lease came into effect. The
parties agreed on an individual to be appointed as the independent surveyor who
was to determine the new rent. The person concerned was Mr David Kendrick, who
is the second defendant before me. He was appointed and, after considering
representations in writing from both sides, he gave what he called an ‘award’
in which he assessed the rent to be paid for the seven years from December 1
1983 at the sum of £17,865.
The plaintiff
regarded that decision as quite unwarranted. In argument the plaintiff contends
that a conclusion to that effect could not for a moment be supported in view of
the fact that nobody was willing to take the property at a rent of £5,725 per
annum. It seems, from the material before me, that Mr Kendrick was particularly
influenced by the rent that had been agreed on a rent review for another
supermarket in broadly the same area as the supermarket with which I am
concerned. The rent review in that case had proceeded, apparently, on the basis
of the rent that might be expected to be commanded for the property if offered
with vacant possession. Influenced by that, Mr Kendrick, with various
adjustments, arrived at his figure of £17,865 per annum. The plaintiff contends
that Mr Kendrick has applied quite the wrong tests. He has taken his eye off
the required criterion of rack-rental value and allowed himself to be diverted,
first, by the rent agreed, or fixed, on the rent review of the other
supermarket and, second, by what he regarded as a reasonable rent for the
tenant to be required to pay.
The plaintiff,
having formed the view, rightly or wrongly, to which I have referred, naturally
wished to challenge Mr Kendrick’s decision. The form to be taken by the
challenge became, however, complicated by doubt as to whether Mr Kendrick was
acting as an arbitrator under the Arbitration Act 1950 in making his decision,
in which case the appropriate remedy for the plaintiff would be to obtain leave
to appeal against his decision and then to prosecute such appeal by application
to the High Court, or whether Mr Kendrick was, in truth, not an arbitrator but
simply acting as an expert in making his valuation decision. In the latter case
an appeal under the provisions of the Arbitration Act 1950 would not be available
and the plaintiff’s only remedy would be by way of a negligence action against
Mr Kendrick.
Mr Kendrick’s
award was given on December 5 1985. On February 5 1986 the plaintiff issued a
summons for leave to appeal out of time against the award. That was, of course,
on the footing that Mr Kendrick had been acting as an arbitrator and that the
relevant provisions of the Arbitration Act 1950 applied. The complication
caused by the doubt as to whether Mr Kendrick was or was not an arbitrator had
led to the expiry of the time within which leave to appeal ought normally to
have been sought and so leave to apply out of time was necessary.
On March 26
1986 Hoffmann J gave leave to the plaintiff to appeal out of time, but in his
order he expressed that leave to be without prejudice to the contention of the
city council that Mr Kendrick was not an arbitrator and that, for that reason,
an appeal did not lie.
On February 7
1986, in optimistic anticipation of the order of Hoffmann J that was eventually
made, notice of originating motion was issued by the plaintiff by way of
appeal. That notice would be an effective notice if, but not unless, Mr
Kendrick was, in truth, an arbitrator. That notice of originating motion is
before me.
Then, on April
18 1986, the plaintiff issued an originating summons asking the court to
decide, in effect, whether or not Mr Kendrick was an arbitrator. That
originating summons is before me. The city council is first defendant and Mr
Kendrick is second defendant. The city council is, of course, respondent to the
originating motion whereby the appeal is brought. Mr Kendrick is not a party to
the appeal.
The issues
arising out of the originating summons have been argued before me. That was
right and logical, because they are by way of being preliminary issues to the
appeal itself. If Mr Kendrick was not an arbitrator the appeal falls away.
Para 1 of the
originating summons seeks a declaration that Mr Kendrick was acting as
arbitrator. Para 2 asks, in the alternative, for a declaration as to the capacity
in which Mr Kendrick was acting in determining the new rent to be paid.
It was, I
think, in the mind of Mr Crawford, who has appeared before me for the
plaintiff, that, if not satisfied that Mr Kendrick was acting as arbitrator, I
might make a declaration that he was acting as quasi-arbitrator or, perhaps, as
an expert. At an early stage in the arguments I indicated that
‘quasi-arbitrator’ was not, to my mind, a term of art. A declaration that
somebody was acting as a ‘quasi-arbitrator’ would be likely itself to be the
subject of a future application to the court as to what the declaration meant.
A declaration that a person was acting as an expert would be merely a
preliminary to some further proceedings. It is quite clear to me what the
plaintiff has in mind. If the plaintiff cannot prosecute the appeal because Mr
Kendrick was not an arbitrator, it would then wish to sue him in negligence.
The plaintiff wants to establish that he is amenable to being sued in
negligence. The plaintiff has in mind that Mr Kendrick might contend, as a
defence to a negligence action, that, in determining the new rent, he was
acting, if not as arbitrator, then at least in such a quasi-judicial capacity
as entitled him to immunity from suit. The plaintiff wants that possible
defence to be dealt with under the originating summons. Hence para 2 of the
prayer. I will return to this aspect of the summons later.
The main point
is whether or not in determining the rent Mr Kendrick was acting as arbitrator.
I must now
turn to the lease and refer in more detail to its relevant provisions.
Para 3 of the
lease reserves the rent. The rent is expressed to be £5,725 for the first 14
years of the term. The clause then proceeds:
and
thereafter such other annual rent as shall be agreed between the parties hereto
in accordance with the provisions contained in the third part of the schedule
hereto.
I turn to part
III of the schedule. Para (1) of part III entitles either party to give a
notice in writing requiring a rent review.
Para (2) I
should read in full.
From the
relevant date of review the yearly rent shall (in default of agreement) be the
said yearly rent of £5,725 or the yearly rent of an amount equal to the rack
rental value of the premises as at that date as agreed by the parties hereto or
(in default of such agreement) as is determined by an independent surveyor
agreed between the lessors and the lessee or (in default of agreement) by an
arbitrator to be nominated by the President of the Royal Institution of
Chartered Surveyors on the application of either party and this lease shall be
deemed for this purpose to be a submission to arbitration within the
Arbitration Act 1950 or any statutory modification or re-enactment thereof for
the time being in force and the assessment fixed by the independent surveyor or
arbitrator as the case may be shall be communicated to the parties hereto in
writing and immediately upon such communication the rent so assessed as the
reasonable rent for the ensuing period of the term granted by the lease immediately
following the date of review until the next date of review shall be the rent
payable for the said period under the terms of the lease and an endorsement to
that effect shall be made on the lease and counterpart thereof and executed by
the lessors and lessee respectively.
Para (3) more
accurately defines what is meant by ‘rack-rental value’. I think I need not
read that, although it would be highly relevant to the question of an appeal,
if appeal there is to be.
Para (4), too,
I need not read; but para (5) is relevant. It is in these terms:
The fees
payable to the independent surveyor or arbitrator hereinbefore mentioned for
such assessment as aforesaid shall be borne by the parties hereto equally.
There is one
other provision of the lease to which I ought to refer. It is to be found in
clause 6(f) thereof. Clause 6(f) is dealing with the event of the premises
becoming damaged or destroyed by fire so as to be unfit for occupation or use.
It provides for a suspension of the rent or some part thereof for an
appropriate period until the premises shall have been reinstated and once more
be rendered fit for occupation and use. At the end of the clause there is this:
any dispute
concerning this clause shall be determined by a single arbitrator in accordance
with the Arbitration Act 1950 or any statutory enactment in that behalf for the
time being in force.
Those are the
relevant provisions of the lease.
The question
for me is whether Mr Kendrick, having been appointed by the parties as the
independent surveyor and having then proceeded to determine the rent in the sum
I have mentioned, was acting as an arbitrator under the Arbitration Act 1950 or
was simply an independent surveyor acting as a valuer or expert.
The arguments
put forward by Mr Crawford for the plaintiff and Mr Hornby for the first
defendant were on both sides, I thought, very cogent and very simple.
Mr Crawford
referred to the provisions for an arbitrator to be nominated by the president
of the Royal Institution and to the provision that the lease ‘shall be deemed
for this purpose to be a submission to arbitration within the Arbitration Act
1950’. It would be strange, he pointed out, if the parties had not contemplated
that the same function would be discharged by the independent surveyor, if they
could agree on one, as by the person to be appointed by the president of the
Royal Institution of Chartered Surveyors. It is clear from the clause that the
person to be appointed by the president is to be an arbitrator and so it should
follow, said Mr Crawford, that the person appointed by the parties should be an
arbitrator: both would be discharging the same function.
As against
that, Mr Hornby drew attention to the contrast in part of the schedule between
the independent surveyor, on the one hand, and the arbitrator, on the other
hand. The contrast is not simply to be found in the first mention of
‘independent surveyor’ and ‘arbitrator’ respectively, namely, in the part of
the clause in which it is said that the rent shall be determined by ‘an
independent surveyor agreed between the parties or, in default of agreement, by
an arbitrator’. The distinction is drawn again in the passage which refers to
‘the assessment fixed by the independent surveyor or arbitrator’, and also in
clause 5, which refers to ‘The fees payable to the independent surveyor or
arbitrator . . .’. Mr Hornby relied on those references as indicating that the
parties were not regarding the function of the independent surveyor appointed
by the parties and of the arbitrator appointed by the president as the same.
I was referred
to the correspondence which led to the appointment of Mr Kendrick. The
correspondence commenced with a letter of September 4 1985 from the city
council to Mr Kendrick. He was by this letter asked to:
act as
independent surveyor for the purpose of assessing the annual rental in
accordance with the terms of the lease.
That is
language consistent with Mr Kendrick’s simply being a valuer. However, in the
last line of the letter Mr Kendrick was asked for ‘your confirmation that a
reasoned award will be given’. That is language more consistent with
arbitration than simply with valuation. Mr Kendrick wrote on September 10 1985
to chartered surveyors acting for the plaintiffs. He said, among other things:
‘I would be pleased to act as an independent surveyor in respect of this
matter. I do, however, feel that it is prudent to invite written submissions
from the parties’, and he then set out a suggested time-table for submissions.
Mr Hornby
pointed out — I think rightly pointed out — that that language was more
consistent with Mr Kendrick’s not being an arbitrator than with his being one.
He was not regarding it as inevitable that written submissions would be invited
from both parties: he simply put the suggestion forward as something he thought
a good idea as a matter of prudence.
On September
10 1985 Mr Kendrick wrote also to the city council in answer to the city
council’s letter of September 4. The letter is in broadly the same terms as his
letter to the plaintiff’s surveyors; but he rather underlined the point that he
was acting as an independent surveyor in saying this: ‘Although acting as an
independent surveyor I do . . . feel that it is prudent to invite written
submissions from the parties.’
The point made
by Mr Hornby arising out of the previous letter is, therefore, accentuated in
the letter to the city council.
That is
consistent with an affidavit sworn by Mr Kendrick on May 28 of this year in
which he sets out his own understanding of the position. In para 4 he says: ‘It
was clear to me that my appointment was as an independent surveyor and not as
an arbitrator.’
However, it
does not seem that Mr Kendrick’s understanding of the position, nor the
understanding of the position by any other of the parties, has been entirely
consistent. In a letter of September 26 1985, Mr Kendrick wrote again to the
plaintiff’s surveyor and said: ‘I would also confirm that I would be willing to
grant a reasoned award in this arbitration.’
The
correspondence leaves it, in my view, at large whether the parties thought that
they were setting in train an arbitration as opposed simply to a valuation
procedure.
I have had
submissions from both counsel as to the criteria that ought to be applied in
order to identify an arbitration, strictly so-called, from a mere valuation. I
have been referred in this connection to two cases in the House of Lords, Sutcliffe
v Thackrah [1974] AC 727 and Arenson v Casson Beckman Rutley
& Co [1977] AC 405. Neither case directly raised the question whether
an individual was acting as valuer or as arbitrator. Sutcliffe v Thackrah
concerned the position of an architect employed under an RIBA contract who had
issued certificates from time to time. The question for decision was whether
the architect was amenable to being sued for negligence as a consequence of the
certificates issued. It was suggested, on the strength of some earlier
authority, that an architect, acting under an RIBA contract, was in a judicial
or quasi-judicial position — in a position, if not that of an arbitrator, then
that of a quasi-arbitrator — and that there was a public interest immunity from
suit enjoyed by persons acting in a judicial or quasi-judicial capacity. There
had apparently been Court of Appeal authority in the early years of this
century to that effect. That Court of Appeal authority was overruled by the
House of Lords in Sutcliffe v Thackrah. In Arenson v Casson
Beckman Rutley & Co the defendants were chartered accountants who had
valued shares in a private company for the purpose of fixing the ‘fair value’
at which the shares were to be sold. Sutcliffe v Thackrah was
followed. In both cases there are dicta bearing upon the indicia of arbitral
judicial proceedings as opposed to proceedings not of that character. In Sutcliffe
v Thackrah Lord Salmon at p 763 said this:
In In re
Hopper Cockburn CJ, with whom Blackburn and Lush JJ agreed, was in effect
saying that the question as to whether anyone was to be treated as an
arbitrator depended upon whether the role which he performed was invested with
the characteristic attributes of the judicial role. If an expert were employed
to certify, making a valuation or appraisal or settle compensation as between
opposing interests, this did not, of itself, put him in the position of an arbitrator.
He might, eg, do no more than examine goods or work or accounts and make a
decision accordingly. On the other hand, he might, as in In re Hopper,
hear the evidence and submissions of the parties, in which case he would
clearly be regarded as an arbitrator. Everything would depend upon the facts of
the particular case. I entirely agree with this view of the law.
In the Arenson
case Lord Simon at p 423 expressed the issue in this way:
The main
issue in this part of the case was whether it was of the essence of a judicial
decision that it answers a question (the respondents’ contention) or decides a
dispute (the appellant’s contention). The latter seems to me to be the right
view both in principle and on authority
Then, a little
further down the same paragraph, he says:
The general
judicial role in society is to resolve disputes which the parties themselves
cannot resolve by conciliation, compromise or surrender
At p 424 Lord
Simon said this:
There may
well be other indicia that a valuer is acting in a judicial role, such as the
reception of rival contentions or of evidence, or the giving of a reasoned
judgment. But in my view the essential prerequisite for him to claim immunity
as an arbitrator is that, by the time the matter is submitted to him for decision,
there should be a formulated dispute between at least two parties which his
decision is required to resolve. It is not enough that parties who may be
affected by the decision have opposed interests — still less that the decision
is on a matter which is not agreed between them.
Lord Wheatley
at p 428 set out what, in his view, were the indicia of the judicial
proceedings as opposed to that of mere valuation. He said:
The indicia
are as follows: (a) there is a dispute or a difference between the parties
which has been formulated in some way or another; (b) the dispute or difference
has been remitted by the parties to the person to resolve in such a manner that
he is called upon to exercise a judicial function; (c) where appropriate, the
parties must have been provided with an opportunity to present evidence and/or
submissions in support of their respective claims in the dispute; and (d) the
parties have agreed to accept his decision.
Mr Crawford,
in his submissions, asserted that each one of these indicia was to be found in
the present case. Mr Hornby, on the other hand, submitted that the indicia were
inconclusive. He submitted that a valuation exercise would, in rent review
cases at least, be likely to involve a dispute or difference between the parties;
it would certainly involve the parties having agreed to accept the decision; it
might well involve the parties being entitled to place evidence before the
tribunal; it might very well involve the tribunal exercising some element of
judgment upon the material placed before it.
Before
returning to the particular submissions and the issue which I must decide, I
think I should refer to the last of the authorities placed before me. This was
a decision of Mars-Jones J in Palacath Ltd v Flanagan, reported
in [1985] 2 All ER 161.* The question in
this case, like that which arose for decision in Sutcliffe v Thackrah
and Arenson v Casson Beckman Rutley & Co, was whether a
particular individual was liable to be sued for negligence arising out of his
function in acting to resolve a question or dispute between the parties. In Palacath
v Flanagan the person concerned was a surveyor who had determined the
rent under a rent review clause in a lease. The relevant provision of the lease
whereunder he was appointed provided as follows:
The surveyor:
(1) will act as an expert and not as an arbitrator; (2) will consider any
statement of reasons or valuation or report submitted to him as aforesaid but
will not be in any way limited or fettered thereby; (3) will be entitled to rely
on his own judgment and opinion; (4) will within two months after his
appointment or within such extended period as the landlord and the tenant may
agree give to the landlord and to the tenant written notice of the amount of
the rent as determined by him and his determination will be final and binding
on the landlord and on the tenant.
*Editor’s
note: Also reported at [1985] 1 EGLR 86 and (1985) 274 EG 143.
The point
before Mars-Jones J for decision was not whether the surveyor had acted as an
arbitrator. It would, I think, have been impossible to have contended that he
did, in the face of the express statement in the lease that the surveyor ‘will
act as an expert and not as an arbitrator’. The question before the learned
judge was whether the surveyor was amenable to suit for negligence. He held
that he was. At p 166, however, Mars-Jones J analysed what, in his view, were
the particular distinctions of importance between the role of a person acting as
arbitrator — acting judicially — and the role of a person acting simply as
valuer. He said:
the ultimate
test is: how was he to arrive at his decision?
Was he obliged to act wholly or in part on the evidence and submissions
made by the parties? Or was he entitled
to act solely on his own expert opinion?
If the answer to the question is the latter, then the defendant could
not be exercising a judicial function or a quasi-judicial function, if there is
any such distinction. In the instant case, the defendant was specifically
enjoined in clause 8 of the second schedule to act as an expert, and was not to
be limited or fettered in any way by the statement of reasons or valuations
submitted by the parties, but was entitled to rely on his own judgment and opinion.
In the light of those express provisions it is impossible for me to hold that
the parties intended that the defendant should act as an arbitrator or
quasi-arbitrator in determining the revised rent. I am satisfied that the
provisions of clause 8 were not intended to set up a judicial or quasi-judicial
machinery for the resolution of this dispute or difference about the amount of
the revised rent. Its object was to enable the defendant to inform himself of
the matters which the parties considered were relevant to the issue. He was not
obliged to make any finding or findings, accepting or rejecting the opposing
contentions.
In that case,
as it seems to me, the argument against the surveyor having been an arbitrator
was a good deal stronger than the corresponding argument in the case before me.
I return to
the language of the lease in order to try to discern from it what the parties
must have contemplated would be the role of the independent surveyor. It was
commented by Mr Hornby that the reference in clause 6(f) to arbitration was
relevant in that it showed that the draftsman of the lease, and, accordingly,
the parties, knew well how to make clear that an arbitration procedure was
intended. I find myself unimpressed by that as a guide. In para 2 of part III
of the schedule there is a clear arbitration provision as well as a reference
to the appointment of an independent surveyor. If the contrasting references to
‘arbitrator’ and to ‘independent surveyor’ in that paragraph do not suffice to
justify the distinction between the intended function of the independent
surveyor and the intended function of the arbitrator, the contents of clause
6(f) cannot, in my view, do so.
The relevant
provisions in part III of the schedule follow upon the failure of the parties
to agree on the new rent. The first provision is that ‘in default of such
agreement the rent shall be determined by an independent surveyor agreed
between the lessors and the lessee’. If the clause had stopped there, there
would, I think, have been little difficulty in concluding that the independent
surveyor was intended to act simply as a valuer and was not acting as an arbitrator.
That was the decision come to by Sir Robert Megarry V-C in Langham House
Developments Ltd v Brompton Securities Ltd (1980) 256 EG 719, [1980]
2 EGLR 117. It was the decision come to also by Goulding J in Safeway Food
Stores Ltd v Banderway Ltd (1983) 267 EG 850. If the provision in
the lease with which I am concerned had stopped at the place I indicated, there
would have been no valid grounds of distinction, in my view, between this lease
and those leases. The provision, however, goes on: ‘In default of agreement,’
that is to say, in default of agreement as to the identity of the independent
surveyor, the rent is to be determined ‘by an arbitrator . . . ‘.
The question
then is whether the parties, having clearly intended an arbitral function, to
that extent a judicial function for the arbitrator, must be taken to have
intended the same function for the independent surveyor.
Mr Crawford’s
argument rested very heavily on the improbability of the parties having
intended a different machinery for the independent surveyor than that which
they must clearly be taken to have contemplated for the arbitrator. He referred
in this connection to the dictum of Lord Reid in L Schuler AG v Wickman
Machine Tool Sales Ltd [1974] AC 235 to the effect that the court should
lean against a construction which would attribute to the parties an
unreasonable or perverse intention.
Mr Hornby,
however, had what to my mind was a fair answer to that submission. He pointed
out that the independent surveyor would have to be a person in whom both
parties had confidence and who was known to both parties. He would almost
certainly be a person practising in the area in which the demised premises are
to be found. It is understandable, said Mr Hornby, that the parties might be
content that their own approved appointee should act as a valuer and as an
expert, while wishing, none the less, to have arbitral machinery, with its
judicial characteristics, for the nominee of the president of the RICS. The
president’s nominee would not necessarily be known to them or necessarily
practise in the same area as that in which the demised premises are to be
found. Whether thinking of that character was in fact part of the reasons why
the parties accepted para 2 in the form in which it stands I know not; but the
reasonableness of the possibility, in my view, deprives Mr Crawford’s argument
of much of its force.
I turn again
to the language of the paragraph. After the reference to the appointment of the
arbitrator by the president the paragraph continues: ‘and this lease shall be
deemed for this purpose to be a submission to arbitration within the
Arbitration Act 1950’. I take this language to be a slight indication that the
‘purpose’ is limited to that of the arbitrator. The phrase could have been
‘this lease shall be deemed for these purposes to be a submission to
arbitration’. That might have been more apt if it had been intended to be a
submission to arbitration not simply for the purpose of the arbitrator and his
function, but also for the purposes of the independent surveyor and his
function.
Then there is
the reference to the ‘assessment fixed by the independent surveyor or
arbitrator as the case may be’. That language is not wholly inconsistent with
the view that the independent surveyor was to have an arbitral function, but it
points a contrast between ‘independent surveyor’, on the one hand, and
‘arbitrator’, on the other. That point is underlined and given a little more
substance than it would otherwise have by the wording of para 5 relating to
fees — ‘the fees payable to the independent surveyor or arbitrator hereinbefore
mentioned’. Again there is the contrast.
I have to say
that none of these points seems to me to be very strong. The parties have left
it unclear, to my mind, as to whether the independent surveyor was to be acting
simply as valuer or was to be, like his colleague appointed by the president,
an arbitrator. But, on
surveyor was not intended to be an arbitrator and was intended to act as an
expert.
Returning to
the indicia, there was, of course, a dispute between the parties at the time in
question in the sense that they could not agree on the amount of the yearly
rent; but it was not a dispute in which each had formulated a view which was
then placed for decision before the independent surveyor. The independent
surveyor asked for their submissions in order to assist him in his task. He did
not proceed on the footing that he was obliged to have their submissions. He
was not appointed in order to arbitrate between £5,725 per annum on the one
hand and £24,000-odd on the other hand. I am not clear, therefore, that there
was a formulated dispute in quite the sense that, for instance, Lord Wheatley
had in mind in the Arenson case. Second, to ask whether the dispute or
difference was to be resolved by the independent surveyor in a judicial manner
is to beg the question. If he was an arbitrator, he would have to resolve the
dispute in a judicial manner: if he was simply a valuer, he would be able to
call for such assistance as he might think desirable but would deal with that
assistance and with the submissions and evidence the parties might think fit to
place before him as a valuer. He would not be bound to confine himself to that
evidence. He could go beyond it and, of course, could reject it. I am not clear
that that indicium is satisfied in the present case.
The third
indicium was that the parties must have been provided with an opportunity to
present evidence and/or submissions in support of their respective claims.
Although, in fact, they were presented with that opportunity, that machinery
was not written in as an essential procedure to be followed by the independent surveyor.
It was suggested by him in his letters of acceptance of office.
Finally, the
parties are bound to accept the independent surveyor’s decision. This is the
only one of Lord Wheatley’s four indicia that is clearly present.
On balance,
therefore, I conclude that Mr Kendrick was not an arbitrator and I do not
propose to make the declaration sought by para 1 of the originating summons.
That conclusion means that the originating motion by way of appeal pursuant to
the provisions of the Arbitration Act 1950 cannot proceed.
I now return
to para 2 of the originating summons. It raises, not in its terms but in its
intended effect, the question whether Mr Kendrick, not having been an
arbitrator, is amenable to being sued for negligence. Whether, of course, there
was any negligence is a matter on which I say nothing at all.
The only
question for consideration, if it is a question I can decide on this
application, is whether he is amenable to being sued or whether there may not
be some public interest amenity behind which he is entitled to shelter.
In finding
that he was not an arbitrator I am finding, in a negative sense, something
about his capacity. I am not prepared to make a declaration in a positive sense
as to his capacity because I do not understand that any accurate meaning can be
ascribed to such an expression as ‘quasi-arbitrator’. Nor am I prepared to make
a declaration that he was acting in the capacity of expert because I am not
clear what that would encompass either. Mr Kendrick was employed, and accepted
office, to apply his expertise to the question before him for determination.
That must be common ground between the parties.
If the
question had been clearly raised on the originating summons whether Mr Kendrick
was entitled to public interest immunity from suit, I would have dealt with it.
It is a proper matter, as it seems to me, to be raised by way of preliminary
point and it might as well have been raised by the originating summons as in a
summons taken out in an action actually commenced against Mr Kendrick. Mr
Kendrick is a party to this summons. But that issue has not been clearly raised
on the originating summons. It arises only incidentally, it seems to me, in
trying to think through what lies behind para 2 of the summons.
Neither
counsel is able to refer me to any authority to the effect that a person in Mr
Kendrick’s position is entitled to public interest immunity. Mars-Jones J’s
decision in the Palacath Ltd case was that the surveyor with whom he was
concerned was not entitled to that immunity. That decision, of course, is not
binding upon me and I do not know, because it has not been explored, whether
there are any distinguishing features between that case and this. There is a
sense, of course, in which, though not an arbitrator, Mr Kendrick was
exercising judgment on rival contentions which he had invited and which, no
doubt, he had considered. Whether that would be sufficient to allow him on
public policy grounds to immunity from suit raises, in my view, very serious
questions indeed. I am loath to decide that question without counsel having had
a full opportunity of researching any relevant case law that there may be and
making considered submissions. I think it is too important a topic to be
satisfactorily dealt with as it were by a side-wind arising out of para 2 of
the originating summons in its present form. I therefore propose to say nothing
more about it.
The
plaintiffs were ordered to pay the costs of both defendants.
