England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

		Royal Courts of Justice
		Friday, 10th March 2006

MR. JUSTICE PARK:

INTRODUCTION

1. This is an appeal from a decision of Registrar Derrett given on 5^th January of this year. On 22^nd September 2005 Mr. Rossall presented a petition to wind up Best Beat Limited, contending that, for reasons which I will explain later, Best Beat owed him £36,500 and was unable to pay the debt. By an ordinary application Best Beat applied for an order that the petition be stayed by reason of section 9 of the Arbitration Act 1996. The application was heard by Registrar Derrett on 5^th January. She dismissed it and ordered that the petition should proceed to a hearing. That hearing has not yet taken place because Best Beat has appealed against the order of the Registrar.
2. That appeal has now come before me. In support of it Miss Parker has said everything that can be said, and has said it clearly and concisely. In my judgment, however, the decision of the Registrar was plainly correct. I will therefore dismiss the appeal.

THE FACTUAL BACKGROUND

3. Until last year Mr. Rossall was the tenant of business premises to which Part 2 of the Landlord And Tenant Act 1954 applied. By that time Best Beat was the landlord. The lease was a 20 years lease, having commenced in 1985. Thus it would expire in accordance with its terms on 23^rd June last year, 2005. Under section 26 of the Landlord and Tenant Act Mr. Rossall had a right to serve a notice requesting a new tenancy. He did that. Under section 26(6) the landlord could give a notice opposing the grant of a new tenancy and stating the grounds of opposition. Best Beat did that.
4. Mr. Rossall decided not to contest Best Beat's opposition to a new tenancy. But, given the ground of Best Beat's opposition, he had a right under section 37 of the Act to receive from his landlord, Best Beat, compensation of twice the rateable value of the premises.
5. The valuation office agency determined the rateable value as £18,250. Therefore Mr. Rossall says that under the statute Best Beat owes him £36,500.
6. None of the foregoing appears to have been disputed by Best Beat on any ground, good or bad. Nevertheless, Best Beat has not paid the £36,500 or any other sum. In those circumstances, Mr. Rossall not having obtained payment pursuant to requests by him for it, petitioned to wind Best Beat up.

BEST BEAT'S APPLICATION FOR A STAY

7. There are provisions in the lease which refer to arbitration. I will say more in detail about them shortly. However, I first refer to section 9 of the Arbitration Act 1986. I will read section 9(1) and 9(4).

"9-(1) A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.

9-(4) On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and voic, inoperative, or incapable of being performed".

8. Best Beat's argument was and is that the combined effect of those sections and the arbitration provisions in the lease is that the winding up petition must be stayed. Miss Parker fairly and realistically accepts that Best Beat's position has some unattractive elements. Best Beat has not suggested any ground on which it disputes Mr. Rossall's claim that it owes him £36,500. When I asked Miss Parker what the dispute was, she said that she had no instructions on that aspect of the matter. Her instructions were simply that Best Beat had refused to pay. She submitted that – unattractive though Best Beat's stance might be – once it was apparent that Best Beat was refusing to pay, then given the existence of the arbitration provisions in the lease, Best Beat was, as a matter of law, entitled to the stay provided for by the Arbitration Act.
9. A further unattractive aspect of Best Beat's case is that, as far as I understand the position, it has taken absolutely no steps towards causing an arbitration to take place. In particular, I believe I am right in saying that Best Beat has made no request to Mr. Rossall to join with it in arranging for an arbitration. Its position seems to be that, given its refusal to make payment, it can take advantage of the Arbitration Act and certain of the clauses of the lease to adopt a policy of what might be described as masterly inactivity. Under that policy it does nothing to move an arbitration forward, but contends that because of the possibility of arbitration, the winding up petition must be stayed.
10. Whether those results are correct or not in law depends on the technical matters to which I will now turn.

THE PROVISIONS OF THE LEASE

11. Unless I have overlooked something, arbitration is referred to at three points in the lease. They are as follows:

1 Clause 4.2 is side-noted "Abatement of rent". It provides for rent to be abated or suspended if the premises are at any time within the lease term destroyed or damaged. At the end of the main provision, the following appears:

"Any dispute as to the amount of extent of such cesser of rent shall be referred to arbitration in manner hereinafter provided".

2 Clause 4(9) is side-noted "Arbitration". It has two paragraphs (A) and (B). I should I think read both of them.

"4(9)(A) Any reference to arbitration made pursuant to the provisions of this lease shall be to the award of a single arbitrator to be agreed between the landlord and the tenant, or failing such agreement within 28 days of arbitration being first demanded, an arbitrator to be appointed by the President of the Royal Institute of Chartered Surveyors and in either case in accordance with the provisions of the Arbitration Acts 1950 and 1979 or any statutory re-enactment or modification thereof for the time being in force.

(B) If the landlord and the tenant shall agree to refer any dispute arising under this lease to arbitration, then unless the contrary shall have been agreed, the provisions of the preceding sub-clause shall be deemed to be incorporated in their agreement".

3 Clause 5 is the rent review clause. Clause 5.4 provides in summary that if, before a rent review date, the landlord and tenant have not agreed on the new rent, then either of them may "require an independent surveyor to determine the open market rent". Clause 5.7 states in part:

"The surveyor … shall at the option of the landlord … act either as an arbitrator pursuant to the provisions of the Arbitration Acts 1950 and 1979 or as an expert valuer …".

12. In my judgment it is important to note what the lease does not provide. It does not provide that any dispute of any nature arising under the lease is to be referred to arbitration. Many commercial contracts which contain arbitration clauses do express the clauses in that form. An example is the arbitration clause in a case which Miss Parker cited to me, Halki Shipping Corporation v Sopex Oils Limited [1998] 1 WLR 760:

"Any dispute arising from or in connection with this charter party shall be referred to arbitration in London".

13. In this case the lease does not say "any dispute arising from or in connection with this lease shall be referred to arbitration". Miss Parker would, I think, submit that clause 4(9)(B) of the lease has a similar effect to a provision worded as I have just set out, but for reasons which I will give later, I cannot agree.

ANALYSIS AND DISCUSSION

14. I begin by making two points about section 9(1) of the Arbitration Act.

(1) A party, to be entitled to apply for a stay, has to be "a person against whom legal proceedings are brought(whether by way of claim or counter-claim)".

(2) The claim has to be "in respect of a matter which under the agreement is to be referred to arbitration".

15. The more significant point of those two, so far as this case is concerned, is (2) but in my view Best Beat is in difficulties over (1) as well. Best Beat is a party against which legal proceedings have been brought, but the proceedings are not by way of claim or counter-claim. A winding up petition is a species of legal proceedings but it is not a claim or a counter-claim. That would appear to mean that Best Beat has no standing to invoke section 9 by making an application under the section.
16. Moving to point (2) even if a winding up petition against Best Beat might be enough to empower Best Beat to bring an application under section 9(1) Best Beat's obligation under the Landlord and Tenant Act to pay compensation to Mr. Rossall is in my opinion not:

"a matter which under the [lease] is to be referred to arbitration".

Plainly it is not a matter about either of the specific subjects which the lease provides are to be or may be the subject matter or arbitrations. That is to say it is not a matter about rent reduction or rent cesser in the event of destruction or damage to the premises. Further, it is not a matter about rent review.

17. Miss Parker, however, submits that clause 4(9)(B) which I read earlier, has the effect of subjecting any dispute between the landlord and the tenant and arising under the lease to arbitration. In my judgment, however, it definitely does not have that effect. It is important to note that clause 4(9)(B) begins with the word "If". The introductory condition set out in clause 4(9)(B) which must exist before its operative provisions can have any effect, is:

"If the landlord and the tenant shall agree to refer any dispute arising under this lease to arbitration".

For the moment, let me assume that the sub-clause stops at that point.

18. In this case there is no doubt about it. The landlord and the tenant have not agreed to refer any dispute about Mr. Rossall's right to compensation to arbitration.
19. I move on in the sub-clause. Miss Parker says the position is changed by the later words in the sub-paragraph:

"Then unless the contrary shall have been agreed".

That submission, as it seems to me, amounts to reading the sub-paragraph as if it said:

"Unless the contrary shall have been agreed the landlord and tenant shall refer any dispute arising under this lease to arbitration".

That is not what the sub-paragraph says and, in my firm opinion, it is not what it means.

20. The true meaning is that:

(1) If the landlord and tenant agree to refer a dispute to arbitration, the dispute shall go to arbitration, and

(2) The arbitration shall be of the type described in clause 4(9)(A): a single arbitrator appointed by the President of the Royal Institute of Chartered Surveyors, and so on; unless

(3) The landlord and tenant agree that it shall be a different type of arbitration, in which case it will be the different type upon which the landlord and tenant have agreed.

21. It remains the case that element (1) in that formulation:

"If the landlord and tenant agree to refer a dispute to arbitration",

has to be satisfied before the rest of clause 4(9)(B) can have any effect. That element 1 is not satisfied in this case.

22. There is another objection to Best Beat's submission which, in my view, is equally conclusive. For a dispute to be within clause 4(9)(B) at all, it has to be a dispute "arising under this lease". As I have said earlier, it is not clear to me whether there is any real dispute in this case at all. Best Beat's position seems to be "we do not dispute what you say about the Act, but we still refuse to pay". But the critical point in this connection is that, if there is a dispute, it does not arise under the lease. It does arise in connection with the relationship of landlord and tenant which formerly existed between Best Beat and Mr. Rossall, and that relationship did arise under the lease. But if there is a dispute here, it does not arise under the lease. If at all, it arises under the statutory provisions of the Landlord and Tenant Act. Best Beat, as far as I can see, does not disagree with Mr. Rossall about anything for which the lease provides. If Best Beat disagrees on any matter, it can only be a disagreement about the effect of the Landlord and Tenant Act. In my judgment, that is a further reason why Best Beat's attempt to secure a stay of the winding up petition by relying on section 9 of the Arbitration Act cannot succeed.

CONCLUSION

23. For the foregoing reasons, in my judgment the Registrar's decision was correct and I dismiss this appeal.