Lease – Rent review – Arbitration – Lease providing for rent review – Parties carrying out review by arbitration — Claimant landlords disputing rent review awarded by arbitrator – Second defendant arbitrator taking account of market comparables but dismissing post-rent review date comparable – Claimants challenging award – Whether award giving rise to serious irregularity – Whether arbitrator erring in law – Claim dismissed
The claimants were landlords of business premises in Falmouth, Cornwall, A lease of the premises was granted to the first defendant for a term of 15 years at an initial rent of £40,000 per annum. It provided for an upwards only rent review which, absent agreement, was to be determined by an arbitrator whose task was to determine the sum at which the premises might reasonably be expected to be let in the market as at the rent review date. The second schedule required the arbitrator to be a suitably experienced chartered surveyor. The second defendant was an arbitrator appointed under the terms of the lease.
The first defendant disputed a rent review award made by the second defendant arbitrator of £36,200, the effect of which was that the rent remained the initial rent of £40,000 per year. The claimants issued proceedings complaining about the second defendant’s unparticularised reference to case law on post-review date evidence and seeking relief under section 68 of the Arbitration Act 1996 on grounds of serious irregularity, alternatively under section 69 by way of an appeal of law.
Issues arose in relation to the admissibility of post-review letting; whether an arbitrator had to give any weight to a post-review letting; and whether a reasonable arbitrator would, in the circumstances, have reached the same conclusions.
Held: The claim was dismissed.
(1) There had been no serious irregularity within any of the categories in section 68(2) of the 1996 Act. It had been accepted that the reference to case law contained in the award had not been to case law but to the summary of the law contained in the Handbook on Rent Review. A misapplication of the law provided to the arbitrator had not given rise to an irregularity in the sense of deciding the case on the basis of arguments or material not put to the arbitrator without the opportunity for the parties to consider the same. There were four stages in coming to a decision on market value. The first was to identify the method to be used, in this case, the same by both parties, namely the use of comparables. The second was to identify the weight to be given to each comparable. The third was to make any adjustments between the comparable and the property in question. The fourth was to make the award final. The obligation to comply with the duties as regards that process, and in particular informing, through the award, the parties of the summary of the reasons for the award, was fundamental to the process: South Bucks District Council v Secretary of State for Transport, Local Government and the Regions and Benaim (UK) Ltd v Davies Middleton & Davies Ltd [2005] EWHC 1370 (TCC); [2005] 102 Con LR 1 applied. Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd [1985] 2 EGLR 14; (1985) 275 EG 1134, Vee Networks Ltd v Econet Wireless International Ltd [2004] EWHC 2909 (Comm); [2004] 1 All ER (Comm) 303, English v Emery Reimbold & Strick Ltd [2002] 3 All ER 385 and Compton Beauchamp Estates Ltd v Spence [2013] EWHC 1101 (Ch); [2013] PLSCS 94 considered.
In the present case, the arbitrator had followed the four stages which had been expected of him in his award. He had weighed the evidence and decided the matter on the weight of the evidence to be given as to the comparables in a way which the claimants had not liked, but which was unexceptionable as an award. His reasons had been adequately set out and there was no flaw in his reasoning of the kind alleged. The fact that there might be other matters which were taken into account, but not mentioned in the award, did not impugn the award.
(2) There had been no error of law satisfying the requirements for a challenge to the award under section 69 of the 1996 Act. It was not appropriate to subject the syntax of the award to the degree of rigour as if it were the construction of a statute. The difference in context between the two expressions “not much weight” and “not attributed any weight” used by the experts for the respective parties in relation to post-review letting was insignificant. Therefore the court was not prepared to accept that there was any point of law, either expressed or to be read by implication or otherwise in or into the award, regarding the admissibility of post-review letting; that the arbitrator had not to give a post-review letting any weight or if not then as pointing towards not giving it any weight; and as to whether a reasonable arbitrator could have come to the conclusions which this arbitrator had. Furthermore, all factual matters, including the weight of the evidence were for the arbitrator. The parties had not identified any issue of law, no point of law had arisen during the course of the proceedings before the arbitrator and the reference to case law had been to the Handbook of Rent Review.
John Dagnall (instructed by Peregrination Ltd, of Coalville) appeared for the claimants; The first defendant did not appear and was not represented; Adam Rosenthal (instructed by Plexus Law) appeared for the second defendant.
Eileen O’Grady, barrister
