Rent review – Arbitration – Award – Claimant landlords disputing rent review awarded by arbitrator – Claimants applying for order authorising cross-examination of arbitrator – Whether court having jurisdiction to make order sought – Application dismissed
The claimants were landlords of business premises in Falmouth, Cornwall comprising 35 a ground floor, designated for class A1 and/or class A3 units with a connected basement and three upper floors for letting as offices or for residents. The lease was granted for a term of 15 years at an initial rent of £40,000 per annum. The lease provides for an upwards only rent review which, absent agreement, was to be determined by an arbitrator whose task was to determine, acting as an arbitrator not an expert, 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 first defendant was the tenant of the premises and 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 wya of an appeal of law.
Following a witness statement issued in response by the second defendant, the claimants applied for an order allowing them to cross-examine the second defendant in court in order to understand or be clear as to his reasoning. The second defendant argued that, in the light of section 1(c) of the 1996 Act, the limits of the court’s power to require reasoning from an arbitrator were those set out in section 70(4) which provided: “If on an application or appeal it appears to the court that the award— (a) does not contain the tribunal’s reasons, or (b) does not set out the tribunal’s reasons in sufficient detail to enable the court properly to consider the application or appeal, the court may order the tribunal to state the reasons for its award in sufficient detail for that purpose.”
Held: The application was dismissed.
Sections 1(c) and 70(4) of the 1996 Act discouraged intervention by the court but they did not prohibit or point against the existence of jurisdiction to direct cross-examination. Section 1(c) was not mandatory, “must not”, but was discouraging, “should not”. Section 70(4) was aimed at putting the court in a position to resolve an application rather than providing a portal through which a party might call for an arbitrator to make their award and then speak to it. Sections 1(c) and 70(4) did not go so far, on their natural and ordinary meaning, as to impose anything approaching an absolute bar to an arbitrator being required to state his reasons orally under cross-examination; nor did the sections go so far as to require the court alone to set out what was to be stated.
In the present case, an order requiring the arbitrator to state his reasoning in court would be unnecessary and inappropriate. The parties had selected a written arbitration process and it was for the arbitrator to call for oral participation if he saw fit. The process was to involve only experienced surveyors who had relevant valuation experience and not lawyers. The key requirement was that an expert decision should be made by someone experienced in the field upon considering the expert evidence of experienced professionals selected by the parties. The sole issue, the market rent at the review date, was a factual and subject to assumptions and disregards familiar to the three professionals involved. The second defendant had been engaged to and had produced a written report. The claimants would succeed in their claim if they could show that the reasoning of the arbitrator was flawed. Further interrogation of him would be contrary to the principles that underpinned the arbitration process, both generally and as deliberately selected by the parties, namely a relatively inexpensive and swift mechanism for obtaining an expert final decision to resolve a commercial dispute.
John Dagnall (instructed by Nick Makin, of Coalville) appeared for the claimants; Adam Rosenthal (instructed by Plexus Law) appeared for the defendants.
Eileen O’Grady, barrister
