ON APPEAL FROM THE HIGH COURT OF JUSTICE
(MR JUSTICE WARREN)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LONGMORE
LORD JUSTICE MACFARLANE
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Mr John Furber QC (instructed by Bond Pearce LLP) appeared on behalf of the Respondent.
Crown Copyright ©
Lady Justice Arden:
"(1)Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings.
An agreement to dispense with reasons for the tribunal's award shall be considered an agreement to exclude the court's jurisdiction under this section.
(2)An appeal shall not be brought under this section except—
(a)with the agreement of all the other parties to the proceedings, or
(b)with the leave of the court.
The right to appeal is also subject to the restrictions in section 70(2) and (3).
(3)Leave to appeal shall be given only if the court is satisfied—
(a)that the determination of the question will substantially affect the rights of one or more of the parties,
(b)that the question is one which the tribunal was asked to determine,
(c)that, on the basis of the findings of fact in the award—
(i)the decision of the tribunal on the question is obviously wrong, or
(ii)the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and
(d)that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.
(4)An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted.
(5)The court shall determine an application for leave to appeal under this section without a hearing unless it appears to the court that a hearing is required.
(6)The leave of the court is required for any appeal from a decision of the court under this section to grant or refuse leave to appeal.
(7)On an appeal under this section the court may by order—
(a)confirm the award,
(b)vary the award,
(c)remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court's determination, or
(d)set aside the award in whole or in part.
The court shall not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.
(8)The decision of the court on an appeal under this section shall be treated as a judgment of the court for the purposes of a further appeal.
But no such appeal lies without the leave of the court which shall not be given unless the court considers that the question is one of general importance or is one which for some other special reason should be considered by the Court of Appeal."
"Where...a question of law involved is the construction of a 'one-off' clause, the application of which to the particular facts of the case is an issue in the arbitration, leave should not normally be given unless it is apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument, that the meaning ascribed to the clause by the arbitrator is obviously wrong. But if on such perusal it appears to the judge that it is possible that argument might persuade him, despite first impression to the contrary, that the arbitrator might be right, he should not grant leave..."
"the yearly rent at which the Demised Premises might be expected to be let in accordance with the terms of this Lease in the open market at the relevant Rent Review Date for a term of 15 years and for a Term equivalent to the then unexpired residue of the term whichever period shall be the longer … and on the further assumptions that … (b) the provisions of this Lease have been fully performed and observed without prejudice to any rights of any part in regard thereto… "
"57.69 per centum of the rents at which Prime Units situated in the prime retail location in Broad Street, Reading in the County of Berkshire might be expected to be let on the relevant Rent Review Date with vacant possession and subject to the provisions contained in the definition of the Market Rental Value hereinafter contained."
"A unit shop constructed in a proper and workmanlike manner with good quality materials and enjoying similar easements and rights as the Demised Premises."
"[The Tenant covenants] at all times during the Term to comply with all requirements and recommendations from time to time of the appropriate authority and the proper requirements of the insurers in relation to fire precautions."
"1. With reasons, does the definition of 'Comparable Rental Value' in clause 7.1 of the lease made the Second day of August 1990 (a copy of which is enclosed herewith – 'The Lease') when read together with the definition of 'Prime Units', to which it refers) require there to be taken into account 'facilities easements and rights' (and any restrictions therein) of access and egress (and in particular means of escape in case of fire) similar to those available to the Demised Premises at the relevant Review Date?
2. If so, with reasons, is it to be assumed that the 'facilities easements and rights' available to the [Demised] Premises at the relevant Review Date include a secondary means of escape (whether over Fife Court or otherwise)?
3. In the alternative to 1 & 2, with reasons does the definition of 'Comparable Rental Value' in clause 7.1 of the Lease (when read together with the definition of 'Prime Units', to which it refers) require that the Unit is to be assumed to be let in accordance with the terms of the Lease in the open market at the relevant Review Date on the assumption that all requirements and recommendations of the appropriate authority and the proper requirements and recommendations of the insurers in relation to fire precautions have been fully performed and observed so that there is no need for the provision of any means of escape in the case of fire."
(i) A valuation of the 'Comparable Rental Value' is not in any sense whatever a valuation of the demised premises nor is it a valuation of any actual existing premises. The 'Comparable Rental Value' is a percentage of the value of a hypothetical 'unit shop', as described in the definition of 'Prime Units', located somewhere 'in the prime retail location in Broad Street Reading' but not in any precise actual location and thus not in any geographical relationship with any actual buildings or land. The purpose of the introduction of the concept of 'Comparable Rental Value' into the lease is plainly and simply to allow the landlord to obtain a rent for the demised premises which is a fixed percentage of the current rental value of a standard unit in the prime retail location in Reading.
(ii) As the premises to be valued for the purpose of determining the 'Comparable Rental Value' are wholly imaginary, there is no scope for any general application of the 'presumption in favour of reality'. The only reality which is of primary importance for these purposes is the rental tone in the prime retail location which must be identified in order to value the imaginary unit shop.
(iii) All that we and the valuer know about this imaginary unit shop is to be found in the definition of 'Comparable Rental Value', the definition of 'Prime Units' and the various 'provisions contained in the definition of Market Rental Value'. It is not permissible to give the imaginary unit shop any imaginary attributes other than those specified in the relevant provisions of the Lease.
(iv) As should appear from the nature of the questions put to the Arbitrator, there is a dispute between the parties as to what assumptions ought to be made as to the means of fire escape available to the imaginary unit shop. In particular, it is understood that it will be contended on behalf of the Tenant that the actual demised premises do not have or should be deemed not to have a secondary means of escape in the event of fire and that the need to provide such means of escape should be taken into account when valuing the actual demised premises. It will then, it is understood, be contended that the imaginary unit shop should therefore be valued on the assumption that it lacks a secondary means of escape which will need to be provided.
(v) As stated above, when ascertaining the 'Comparable Rental Value' it is only permissible to give the imaginary unit shop attributes expressly provided for in the lease. In one respect, it is permissible to make reference to the actual demised premises, in that it is specified in the definition of 'Prime Units' that the imaginary unit shop enjoys similar facilities easements and rights as the 'Demised Premises' (thus, for example, the right to erect and maintain aerials and dishes on the imaginary roof, subject to obtaining planning consent, as provided in the First Schedule to the lease).
(vi) The lease does not state in terms whether or not the imaginary unit shop has or requires secondary means of escape in the event of fire. However, it does, it is submitted, make it quite clear that no adjustment should be made on account of any imaginary need to make any imaginary physical adjustments to the imaginary unit shop, or to obtain any imaginary rights for the benefit of that shop, in order to make good any imaginary absence of a secondary means of escape in the event of fire. This follows from the matters which are expressly required to be assumed. Firstly, it is to be assumed that all parts of the imaginary unit shop 'are available and fit for immediate occupation and are ready for any use permitted by this lease'; thus there is no scope for any assumption that any part of the imaginary unit shop must be converted for use as a fire escape. Secondly, it is to be assumed that the covenant in clause 3.31 of the actual lease has been performed and observed; thus it is to be assumed that all requirements as to fire precautions have been met, with the consequence that, even if it is for some reason to be assumed that there is no secondary means of escape in the event of fire, such absence is not in breach of any requirements by any appropriate authority and therefore would appear to be irrelevant for the purposes of valuation."
"10. The evident purpose of the comparative exercise required to be carried out by clause 7 is to compare the Market Rental Value with the Comparable Rental Value. The chief characteristic of the comparator was that the Prime Unit should be situation 'in the prime retail location' in Broad Street, Reading. It is not evident that the purpose of this exercise was not merely to compare the characteristics of Broad Street with Friar Street, but was also to upgrade the notional premises so as to remove all the imperfections to which the actual Premises were subject. If that is the result that the parties intended, then clear words should have been used to demonstrate that fact. Far from using clear words, the parties made it plain, in their reference to 'similar facilities easement and rights' that the Prime Unit should be no better, and no worse, in terms of those rights, as the subject premises.
12. This approach involves a false syllogism. First, the assumption in clause 7.1(a) regarding fitness for use and occupation is plainly directed at the physical state of the Premises. As to this, once the Tenant's occupation has been disregarded under clause 7.1(i), the Premises will indeed by 'available and fit for immediate occupation' and 'ready for any use permitted by this Lease'."
"47. Neither party has taken me through the relevant legislation relating to fire precautions or explained to me the source of any legal requirement for a secondary means of escape. However, it seems to me that the Landlord accurately summarises the effect of clause 7.1(b) as it interacts with clause 3.31(a) in the last sentence of para.2(vi) of the [Landlord's Submissions]. The Landlord there says, and I agree, that, even if (as I consider to be the case) it is for some reason to be assumed that there is no secondary means of escape in the event of fire, such absence is not in breach of any requirements by any appropriate authority because the Prime Units are not be assumed to 'comply with all requirements and recommendations from time to time of the appropriate authority... in relation to fire precautions.'
48. Drawing the strands together, the result is as follows. First, as there is no secondary means of access to the Demised Premises it cannot be assumed in the case of the 'Prime Units' that they have such an access because this would conflict with the direction that the 'Prime Units' enjoy 'similar facilities easements and rights as the Demised Premises'. Second, however, the assumption of compliance with covenants requires it to be assumed that the Prime Units 'comply with all requirements... of the appropriate authority...in relation to fire precautions.'"
"that it is not just and proper for the court to determine the question. It seems to me that the parties, having chosen their experienced and learned arbitrator, should be left with his decision and not have the opportunity to challenge it by way of an appeal to the court."
"[i]t would often but not invariably be unjust for an obviously wrong decision on an important question of law not to be put right by the court. That could be thought to be even more so if the chosen highly respected arbitrator had simply had a major intellectual aberration."
The final words constitute the phrase I referred to in paragraph 8, above.
Lord Justice Longmore:
Lord Justice McFarlane:
Order: Appeal dismissed.