CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
33 BULL STREET BIRMINGHAM B4 6DS |
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Dates of hearing: 8 December 2009 Date of draft judgment: 5 January 2010 Date Of Judgment: 15 January 2010 |
B e f o r e :
sitting as a High Court Judge
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LIDL GMBH | Claimant | |
and | ||
(1) JUST FITNESS LIMITED | ||
and | ||
(2) BANNATYNE FITNESS LIMITED | Defendants |
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Mr Duncan Kynoch of Counsel (instructed by Ward Hadaway) for the defendants
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Crown Copyright ©
Background
"It is an express term of the Underlease (clause 3.13.2) that LIDL could not unreasonably withhold its consent to (amongst other things) an assignment of the Underlease. Further and pursuant to section 1(3) and/or section 3 of the Landlord and Tenant Act 1988 LIDL owed our clients a duty not to withhold consent unreasonably to a request to assign.
By a letter dated 15 July 2008 our client sought LIDL's consent to an assignment of the Underlease…and by the end of July 2008 Just Fitness had furnished LIDL with all relevant details and references relating to the proposed Assignee and its Surety that were reasonably required to enable LIDL to consider the request for consent to assign.….LIDL owed a duty to consider the request and give its decision within a reasonable time.. Our client believes that a reasonable time was two weeks.
On 17 September 2008 you indicated that LIDL was not prepared to consent….
Clearly there is a dispute between our respective clients and accordingly we invite you to let us have a list of not less than three and not more than six single arbitrators who would be acceptable to you. In default of agreement or in the absence of a reply we shall apply to the President of the RICS."
"I propose to convene a preliminary meeting in order for me to be addressed by the parties as to the issues in dispute, so that I can then decide what procedure to adopt … I have already indicated above that I am not in possession of any documentation in connection with this arbitration, other than a copy of Merritt & Co's letter to Willmott of 28 November 2008."
"The principal issue which I believe needs to be resolved are the powers that I have as Arbitrator and what actions I am required to take.
A range of procedural issues were discussed and I believe that these can either be agreed or sorted out relatively easily once the main issues has [sic] been resolved.
I referred, during my conversation with Mr Holtham on the telephone, to his letter of 28 November 2008 … and, in particular, to the three actions he sets out on the second page of his letter as follows:- (1) a mandatory injunction requiring LIDL to give its consent; (2) an order for specific performance pursuant to clause 3.13.2 of the underlease; (3) a declaration that LIDL has unreasonably withheld its consent. ….
During the course of the meeting, Mr Holtham referred to section 48 of the Arbitration Act 1996 setting out the powers of the tribunal available to me in the event that the parties do not agree on such powers.
In order to try and help take matters forward, I confirm that, if the parties agree upon the powers exercisable by me as Arbitrator, I will endeavour to work in accordance with that agreement.
In the event that the parties cannot agree, I am reasonably clear that section 48(3) of the Act provides that I may make a declaration as to any matter to be determined and that I believe that this would cover a declaration that LIDL has or has not unreasonably withheld its consent to an assignment (item 3 above).
I believe that I may have the power under section 48(5) to order a party 'to do or refrain from doing anything' and this may have the same effect as a mandatory injunction as referred to by Mr Holtham.
I am not, however, certain at this stage that I have the power to order specific performance as is referred to under section 48(5)(b) and I would need to seek clarification from a legal perspective as to whether the lease under which the specific performance was being sought is or is not a contract relating to land.
Having said this, however, Mr Harrison did indicate during the meeting that, if I were to make a declaration that LIDL had unreasonably withheld consent, his clients would immediately give such consent and it is possible therefore that if the arbitration would proceed on the basis that I was asked to make a declaration one way or the other on this issue, then in effect it would deal with the principal point in dispute.
Taking Mr Holtham's second issue of loss and damage, I believe I have the power under section 48(4) to order the payment of a sum of money and I believe that this covers this point.
I express these views and set out these thoughts to assist the parties initially, strictly on the basis that I have not taken any legal advice. I am conscious that I am addressing two practising solicitors and in addition, that my duty is to deal with the matter as expeditiously and cost effectively as possible. Perhaps therefore I should invite both sides to respond to these proposals. If it is possible to agree how I should proceed, it may obviate the necessity of my taking legal advice on these preliminary points."
Paragraph numbered 3 of those directions states: "The issue in dispute is the refusal of the landlord to grant consent for the assignment of the lease held by Just Fitness Ltd following their application by letter, dated 16 July 2008."
Paragraph numbered 4 states: "The parties have agreed that I am required to decide whether the landlord's decision to withhold consent is unreasonable. In the event that I do come to this conclusion, it is further agreed that I shall issue my Award by way of a declaration for specific performance for the landlord to grant such consent. For the avoidance of doubt, it is further agreed by the parties that I am not required to consider the question of any damages arising in the event that I do conclude that such consent was unreasonably withheld."
"1.4 At paragraph B1 the Claimant [ie JF] alleges unreasonable delay in considering the application for consent. It is submitted that such consideration is outside the scope of the agreed terms of reference which are before the Arbitrator. Paragraph 4 of the Directions confirms as follows: "The parties have agreed that I am required to decide whether the Landlord's decision to withhold consent is unreasonable…"
1.5 Within the agreed terms of reference of the Arbitrator there is no reference to a decision being required as to whether there was unreasonable delay on the part of the Respondent [LIDL]. The Claimant [JF] therefore requests the Arbitrator to disregard those submissions made by the Claimant [JF] under section B1 of the Submissions." [Judge's note: paragraph 1.5 must contain a misprint - it must have been intended that this read: "LIDL therefore requests the Arbitrator to disregard those submissions made by JF…" etc]
"8.17 A significant part of Mr Holtham's case is that there was an unreasonable delay in responding to the tenant's application for the assignment and that a decision should have been given within two weeks. For completeness, I confirm I have considered this point but it is separate from the substantive issue of whether or not the refusal itself was reasonable. I have noted that after the initial application further references were supplied one by one with Espree's accountant's reference being sent finally on 31st July.
8.18 I agree with Mr Holtham that in the normal course of events two weeks after receipt of the final reference should be sufficient time to consider the application and that it is not unreasonable for a tenant to expect a decision within this sort of timescale. However, as Mr Hebblethwaite has pointed out this exchange did take place during the holiday months and I consider it reasonable to extend this period somewhat but certainly not as long as it actually took. I agree with Mr Holtham that a decision should have been forthcoming well before Merritt & Co needed to write their letter of 4 September.
8.19 As a result, if I were required to make a decision on this point I would have said that a formal response either way should have been forthcoming by 17 August as opposed to 17 September, that is to say one month sooner than actually occurred.
8.20 What the implications might be of such a decision is, I believe, not something I am required to consider as the question of damages is specifically excluded from my jurisdiction."
"We are not suggesting that any issue which was before the Arbitrator should be re-opened. The Landlord and Tenant Act 1988 imposed duties on your client first, to give consent, unless it was reasonable to refuse it; and second, to give written notice of its decision within a reasonable time. Your letter repeats the suggestion that both issues were resolved by the Arbitration. With respect, this is simply not so. It is clear from paragraphs 8.17 and 8.19 of the Award that Mr Corns was not asked to deal with the issue of whether your client's refusal was given within a reasonable time, and did not do so. His Award is limited to the issue of whether or not the refusal was itself unreasonable.
As however there is an issue as to this, we suggest that Mr Corns resume the reference to him to determine (or clarify) his Award as follows:
(1) pursuant to section 30(1) Arbitration Act 1996, whether the Award dealt with the issue of your client's refusal of consent being given (or not) within a reasonable time; if Mr Corns decides that it did not deal with that issue,
(2) whether your client's written notice of its decision in your firm's e-mail of 17 September 2008 was given within a reasonable time in accordance with its statutory duty in section 1(3) of the 1988 Act; if Mr Corns awards that it was not,
(3) the consequences [of] that breach of duty."
"The question raised by WH … is whether the landlord gave notice of its decision in response to the tenant's application for assignment in reasonable time, in accordance with section 1(3) of the Landlord and Tenant Act 1988.
I would confirm that this was not a matter referred to me as part of the Arbitration and, in accordance with the specific agreement of the parties, the Arbitration was restricted entirely to the issue of reasonableness or otherwise in relation to the landlord's decision to withhold consent. My Award related to that issue only and made no Award on the question of timing of the landlord's response, as set out above.
My Directions in the Arbitration, dated 15 April 2009, were clear on this matter. In particular, Direction 4 confirms the agreement of the parties to limit the Arbitration to the question of reasonableness or otherwise.
The reference in my Award to this matter was only included because Mr Holtham had made significant reference to the timing of the landlord's decision in his submissions and had contended that it had been delayed unnecessarily and unreasonably. I needed to address this point but paragraph 8.17 of my Award deliberately identified that it was a separate matter entirely from the substantive issue that I was required to decide. Similarly, paragraphs 8.19 and 8.20 made it entirely clear that, although I expressed a view on Mr Holtham's submission, I was not required to and did not make a decision or an award on this point.
I have noted Clarke Willmott's view that the Arbitration has been concluded and that I am functus officio, ie that I no longer have any powers or duties under the reference, save for the assessment of costs and the other points listed in paragraph 2 of their letter.
My preliminary view, therefore, is that, as the question of the timing of the landlord's response was not referred to me as part of the Arbitration by agreement, it is not appropriate for me to reopen the Arbitration and consider this as a fresh and separate matter."
"The dispute is as to whether [LIDL's] notice of its decision (viz its solicitors' e-mail dated 17 September 2008) was given in accordance with, or in breach of, [LIDL's] statutory duty under section 1(3) of the Landlord and Tenant Act 1988; and, in the event that [LIDL] has breached its statutory duty under the said section 1(3) of the 1988 Act, whether [JF] is free to assign the Lease without breaching its covenant; and the sum which [LIDL] is liable to pay to [JF] as damages for breach of statutory duty."
The issues
Relevant law
"Mr Macgregor maintains that arbitrations are concerned with disputes and not with causes of action and he says that within a cause of action there may be many disputes and the arbitrator is only concerned with disputes. He contends boldly, for the view that Conquer v Boot [1928] 2 KB 336 has no application at all to arbitrations in general; Mr Dyson says it does, and that seems to be the first point on which the court should give a decision.
I must confess that I would feel very reluctant to extend the draconian doctrine of Conquer v Boot into fields to which I am not constrained to extend it and neither counsel has been able to put before me any case which constrains me to do so. There is no authority binding upon me, indeed I think counsel say there is no authority at all, which indicates that the doctrine of Conquer v Boot has to be applied in arbitrations. But it seems to me that it is unnecessary to decide this case on this general point, because there are other more particular points which enable the question for the decision of the court to be answered. The first of these arises on Mr Macgregor's next argument: that where you have a previous arbitration Conquer v Boot can only apply to the matters which were therein referred to the arbitrator. In other words, you have to look at what was in the terms of reference and if an issue arises on the terms of reference, then there is an estoppel per rem judicatam in so far as the arbitrator has made an award upon that issue. Or indeed, I think Mr Macgregor would go so far as to say, whether or not he has made an award upon that issue. What determines the matter is whether it is included within the terms of reference; as he indicated, the fact is that, although it is within the terms of reference, it does not find its way into the points of claim, means that to that extent the general doctrine of Conquer v Boot applies. You are estopped per rem judicatam even though you did not raise the matter in your points of claim, if the matter clearly lies within the ambit of the terms of reference."
"… the most that can be said for the rule in Conquer v Boot in arbitration proceedings is that the terms of reference of the arbitrator are the matters which determined the issues which the arbitrator has to decide. If those terms of reference include a particular issue, then whether or not, in the end, the arbitrator makes an award in relation to that issue, that issue has been raised and an adjudication has been made in this sense: that if nothing is done about the arbitrator's award - and due time for appeals and so on and so forth, referring the matter to the High Court in one way or another, has gone - then it is no good the claimant subsequently saying 'Ah, but the arbitrator did not make an award upon this issue'. The proper remedy would have been to have challenged the award by any of the appropriate methods, and if he does not challenge the award by one of those approved methods, he will find himself estopped per rem judicatam if he seeks to raise such an issue in the subsequent arbitration proceedings."
Discussion
first, the terms of reference of the dispute referred to Mr Corns and in particular whether the delay point was referred to him;
if so, then, secondly, whether it was agreed that Mr Corns should deal only with the question of unreasonable refusal to consent to the assignment and that JF would be free to pursue the delay issue at a later stage; and
thirdly, the question of equitable relief.
What was the dispute referred to Mr Corns?
Was such agreement reached?
"The provisions of this Part are founded on the following principles, and shall be construed accordingly –
(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest; …"
Is LIDL entitled to equitable relief?
Conclusion