Jersey Unreported Judgments

[2004]JRC092

royal court

(Samedi Division)

 

26^th May 2004

 

 

 

 

Application by the Representor for a declaration that the appointment by the President of the Royal Institution of Chartered Surveyors of an expert to conduct a rent review is invalid as being contrary to the terms of the lease in question.

 

Advocate N G A Pearmain for the Representor

Advocate K J Lawrence for the First Respondent

Advocate F B Robertson for the Second Respondent

 

judgment

DEPUTY bailiff:

1.        This is an application by Epoch Properties Limited ("Epoch") for a declaration that the appointment by the President of the Royal Institution of Chartered Surveyors ("RICS") of Mr Gerard Finn as an expert to conduct a rent review is invalid as being contrary to the terms of the lease in question.  The application raises an interesting question as to the correct approach of the Court in such circumstances, upon which there appears to be no previous authority. 

The lease

2.        The lease was entered into on 25th March 1988 between the Scottish Widows Fund and Life Assurance Society ("Scottish Widows") as owner and British Home Stores (Jersey) Limited ("BHSJ") as tenant in relation to the property 8-18 King Street and 12-12A Don Street, St Helier ("the property").  Epoch subsequently acquired the property from Scottish Widows and is accordingly now in the position of landlord.  The lease provides for periodic rent reviews and a review was due to occur on 25th March 2003.  The rent review clause provides for the rent to be increased to the open market rental as at the relevant review date. 

3.        Paragraph 2 of the second schedule to the lease provides that, in the absence of agreement between the landlord and the tenant as to the open market rental at a review date, the matter is to be referred to the 'Surveyor', who is to be appointed by the landlord and the tenant or, in default of agreement, by the President of the RICS on the application of the landlord or the tenant.  The Surveyor is to act as an expert and his decision is final and binding upon the parties. 

4.        The Surveyor is defined in Clause 1(1) of the lease as follows:-

"An independent Chartered Surveyor of recognised standing experienced in the valuation and letting of premises so far as practicable of similar character or comparable to the Demised Premises within the Island of Jersey or if there are not such premises within the Island of Jersey then within the Channel Islands or nationally (as the case may require) appointed from time to time to determine the Open Market Rent pursuant to the provisions of the Second Schedule."

5.        In order to appreciate the background to this case, it is necessary to refer very briefly to the underlying differences between the parties.  The property is occupied by BHSJ which trades there as British Home Stores.  BHSJ contends that the property is to be regarded as a variety store.  The evidence suggests that the rental value of a variety store is assessed by reference to an assessed figure multiplied by the gross internal area of the premises ("the GIA approach").  Epoch, on the other hand, contends that the property should be treated as a prime retail store.  The evidence suggests that the rental value of such premises is assessed in zones ("the Zone approach").  The underlying rationale of the Zone approach is that the front of a shop is the most valuable because it is the prime space for selling.  Thus Zone A is the area to a depth of 30 feet (in St Helier) from the frontage, the next 20 feet of depth is referred to as Zone B and so on.  In valuation terms, each zone is valued at half the rate of the preceding zone.  Furthermore, unlike variety stores, the rental value is calculated on the net internal floor area which excludes areas such as staircases, staff toilets, pillars and columns. 

Appointment of Mr Finn

6.        The Court has received three affidavits from Mr Ian Padbury who is head of the Dispute Resolution Service at the RICS.  The President receives about 10,000 applications a year for the appointment of dispute resolvers of which some 8,000 are concerned with rent reviews.  These applications are administered by a team of 16 on behalf of the President.  Mr Padbury is the head of the team.

7.        An application for the appointment of a dispute resolver has to be made on a standard application form.  On 27^th December 2002 Mr D H Adamson of Allsop & Co., the surveyors acting for BHSJ, submitted an application to the President for the appointment of an expert to determine the forthcoming rent review in relation to the property.  In the application form, against the box for 'type premises', Mr Adamson had inserted 'variety store'.  In his covering letter he expanded on this by describing the premises as a 'large retail variety store'.  Having set out the definition of 'Surveyor' contained in the lease, he submitted that there were no chartered surveyors practising in Jersey or the Channel Islands with the necessary experience of valuing and letting such properties and he submitted therefore that a chartered surveyor from the United Kingdom would need to be appointed. 

8.        The application was acknowledged on 13^th January 2003 at which time the RICS also wrote to Mr L Baker of Baker Almond, the surveyors advising Epoch.  The RICS enclosed the case details which described the type of property as a 'variety store'.  On 5^th February Mr Baker responded by letter in which, inter alia, he said that he was firmly of the opinion that the expert should be Jersey based.  He did not however explain why he was of this view.  On 27^th February the President appointed Mr Finn as 'the Surveyor' to determine the rent review.  It is agreed by all parties that Mr Finn is eminently well qualified in the letting and valuation of variety stores but that he has no experience of letting or valuing premises in Jersey or the Channel Islands.  Epoch objected to Mr Finn's appointment on the grounds that there were suitable surveyors experienced in the valuation and letting of comparable Jersey properties and that the terms of the lease required such persons to be appointed in preference to someone from the United Kingdom without such experience.  However the President stood by his decision.  Accordingly Epoch has launched these proceedings challenging the appointment of Mr Finn.

9.        In his first affidavit, Mr Padbury explained that the President has a panel of dispute resolvers ("the President's Panel").  Panel members are required to have the necessary qualifications and experience.  The Dispute Resolution Policy Committee has a rigorous selection policy including attendance at the relevant course and assessment, submission of written work and interview.  It is fair to say that Mr Padbury's first affidavit gave the clear impression that no Jersey based surveyor was considered in this case simply because no such surveyor was a member of the President's Panel at the material time; in other words membership of the Panel was in practice regarded as being essential to appointment as an expert.  In fact, as we will mention shortly, it transpired that this first affidavit did not fully reflect the process which the President had followed. However, in case it is of assistance in any future case, we would say that, had the decision of the President been taken on the grounds described in the first affidavit, there seems to us a high likelihood that the Court would have quashed the decision.  The duty of the President is to appoint an expert in accordance with the terms of the particular lease.  The lease in this case makes no reference to the President's Panel; on the contrary it refers to persons having experience in the valuation and letting of premises so far as practicable of similar character to the demised premises within the Island of Jersey.  If the President had failed to consider all Jersey based surveyors simply on the basis that they were not members of his Panel, he would undoubtedly have misdirected himself.  It was his duty to consider whether there were surveyors with suitable Jersey experience who could act as the Surveyor even if they were not on the Panel.  It was only if there were no such surveyors that he could turn to United Kingdom surveyors.  Clearly, where there is more than one person who fits the requirements of the lease, it is open to the President in his discretion to prefer a person who is a member of his Panel; but it is not open to him to ignore the terms of the lease in favour of a person who is a member of the Panel.

10.      However, in his second and third affidavits, (which must be accepted as Epoch has not sought to cross-examine or challenge him upon their contents) Mr Padbury explained that he had formed the view that the property was a variety store.  He had in fact had the opportunity of visiting the property in November/December 2002 when he happened to be in Jersey on other business.  He recalled the property from difficulties which had arisen in connection with the appointment of the Surveyor on previous rent reviews and was therefore interested to visit the property.  His view that the property was a variety store was based upon his own visit, his knowledge of the nature of the business carried out by British Home Stores, the fact that the application by Allsop and Co had described the property as a variety store and the fact that, although the RICS case details sent to Baker Almond on 13^th January had described the property as a variety store, that classification was not challenged by Baker Almond in their reply, albeit that they had argued for the appointment of a Jersey based chartered surveyor.  In summary the President, based on Mr Padbury's advice, had concluded that the property was a variety store and that there was unlikely to be anyone who had the relevant experience in the valuation and letting of comparable premises (i.e. variety stores) within Jersey or Guernsey.  Accordingly the appointment had been made in favour of a UK expert experienced in the valuation of variety stores. 

The Court's approach

11.      In order to fit within the definition in the lease, the person appointed as Surveyor by the President must be:-

(i)        a chartered surveyor;

(ii)       independent;

(iii)      of recognised standing; and

(iv)      experienced in the valuation and letting of premises so far as practicable of similar character or comparable to the demised premises within the Island of Jersey or if there are not such premises within the Island of Jersey then within the Channel Islands or nationally.

12.      The question immediately arises as to the approach to be adopted by the Court in considering the decision of the President.  What is the correct test to be applied?  Somewhat surprisingly the researches of counsel have discovered no case in any jurisdiction where this issue has been considered.  In particular the RICS itself is not aware of this issue having arisen before.

13.      The position is clear in relation to a conventional expert appointed pursuant to a contract.  In the past, where an expert made a mistake in carrying out his role, the Court would set aside his decision if it could be shown that the mistake might have affected the result.  However, following the development of the law in the 1970's to the effect that an expert could be liable in damages if he had acted negligently in giving his certificate, the position changed.  The Court of Appeal in England has held (see Jones -v- Sherwoods Services Limited (heard in 1989 but not reported until (1992) 1 WLR 277) and Veba Oil Supply and Trading Gmbh -v- Petrotrade Inc (2001) EWCA Civ 1832) that, if an expert makes a mistake in carrying out his instructions, the parties are nevertheless bound by it for the very reason that they have agreed to be bound.  However, where the expert departs from his instructions to a material extent, his decision is not binding because he has not done what he was appointed by the contract to do.  In these circumstances the parties have not agreed to be bound because he has done something different from that which they agreed he should do.  So, for example, if an expert appointed to value shares values the wrong number of shares or shares in the wrong company, his certificate will not be binding because he will have departed from his instructions.  He has not done what he was appointed to do.  But if, in calculating the value of shares, the expert makes a mistake (e.g. he takes the wrong figure for the turnover of the company) the parties will still be bound however serious the mistake.  The expert has done what he was appointed to do; he has just done it very incompetently. 

14.      The Court was referred to two decisions at first instance where the principles described above had been applied, namely Nikko Hotels (UK) Limited -v- MEPC plc (1991) 28 EG 86 and Pontsard Investments Limited -v- Pankki (1992) 22 EG 103.  The latter case in particular indicates the unwillingness of the Court to go behind a mistake by categorising it as a departure from instructions.  Thus the judge in that case at page 9 of the judgment said:-

"I am unable to accept this submission [that he had departed from his instructions].  It depends, as I see it, upon the expression "fit for immediate occupation and use" bearing the meaning attributed to it by Mr Barnes as being beyond any question or argument.  As I shall show later, other meanings are fairly arguable.  Accordingly, the true construction of this expression was a matter with which the expert was required to grapple.  The fact that he may have placed upon it a particular construction and sought to justify it with reasoning which is flawed -- or even incomprehensible, (Mr Barnes went that far) - would simply mean that he had answered the right question wrongly.  I would go further.  Even if the construction of Mr Barnes was self-evidently right, I would not consider that the expert departed from his instructions in a material respect.  The examples given by Lord Justice Dillon are cases of departure from express instructions.  In this case the express instructions are to determine the open market rental as defined and to give reasons.  If he had totally ignored a material element there might be a question, but the expert had made an attempt to deal with the element as part of his instructions.  At worst, he had come to a wrong conclusion.  The fact that he may be patently wrong does not mean that he has not done what he was appointed to do nor that he has asked himself the wrong question.  To take any other view would lead to the sort of refined arguments such as have been deployed here and go a long way to emasculate the requirement that the decision of the expert, as a matter of contract between the parties, be final and binding.  Thus, the advantages of cost, speed and finality would be seriously diminished."

15.      The President is not acting as an expert in the conventional sense.  He is merely the person who appoints the expert who will then carry out the rent review.  But all counsel before us were inclined to accept that he should be treated as an expert in this limited role.  We agree.  His services are required because the parties have been unable to agree upon the appointment of a Surveyor.  They have agreed that the President should make the appointment.  The parties must be taken to have agreed that the President has the necessary expertise to select a person with the relevant experience, qualifications and standing to carry out the rent review under the lease.  The decision as to whom he should appoint will involve the exercise of a discretion and the parties have clearly agreed to be bound by the President's exercise of that discretion.  They have in effect chosen him because of his expertise in choosing other experts in this field.  We agree therefore that he should be considered as an expert and the legal principles described earlier are applicable to him in this role.  It follows that the fact that he may make a mistake in his appointment, however elementary, will not invalidate his appointment.  However his power to appoint comes entirely from the contract between the landlord and the tenant and accordingly he must appoint an expert who fulfils the criteria laid down in the lease.  If he does not do so, he departs from his instructions by appointing a Surveyor who does not have the qualifications which the parties have agreed should be present. 

16.      The difficulty is to decide upon the test which the Court should adopt when considering whether the President has departed from his instructions.  How does the Court decide whether the four stipulated characteristics listed in paragraph 11 are satisfied by the President's appointee?  There will be no difficulty in relation to some of the characteristics.  Thus, suppose that the President appointed a lawyer instead of a chartered surveyor.  The Court would clearly find that he had departed from his instructions.  But what approach should the Court adopt where the characteristics merge into the area of the President's expertise and the undoubted discretion which the parties have conferred upon him?  The areas of standing and experience fall within this category.  Miss Lawrence submitted that all such areas fall within the President's discretion so that the parties are bound by his decision, no matter how unreasonable.  Mr Robertson and Mr Pearmain, on the other hand, accepted that there must come a point at which a decision is so clearly and obviously erroneous that it must mark a departure from the instructions contained in the lease.

17.      Suppose the President appointed a chartered surveyor who had only qualified the day before?  Presumably the Court would have little difficulty in those circumstances in deciding that such a person could not be of recognised standing and could not have the stipulated experience.  Is this because the Court forms its own view upon the required level of standing and experience or is it because such a decision on the part of the President would be a decision to which no reasonable President could come on principles analogous to Wednesbury unreasonableness?  In relation to the requirement of 'recognised standing' and the stipulated experience, there is clearly room for differing views.  One person may think that X has the necessary experience and/or recognised standing whereas another may think otherwise.  It seems to us that it would not be right for the Court to form its own view on such matters.  The parties have not chosen the Court to appoint the Surveyor; they have chosen the President, no doubt because of his expertise.  It must follow that, within margins, they have agreed to be bound by his decision.  But there must come a time when X is so obviously not of recognised standing or the stipulated experience that the President must be found to have departed from his instructions, which are to appoint a person of recognised standing and the stipulated experience. 

18.      We think therefore that, when deciding whether the President has departed to a material extent from his instructions in those areas where the parties have clearly chosen him for his experience and expertise, the Court should apply a test analogous to Wednesbury unreasonableness.  If the decision of the President as to whether his appointee has the stipulated experience or standing is one to which no reasonable President could come, the Court will find that he has departed from his instructions.  If, however, the Court is merely of the view that he has reached a decision on these matters which the Court concludes is wrong, this would amount to a mistake in the exercise of his role rather than a departure from his terms of reference.  It would be the very exercise of discretion which the parties had conferred upon him even though neither the Court nor the parties might agree with his decision.  In these circumstances his decision would stand.

19.      In summary, the test is whether the President has departed from his instructions as set out in the lease.  If he has, his decision is invalid.  If, on the other hand, he has simply made a mistake within his instructions, his appointment is binding and cannot be set aside by the Court.  Where the question of whether he has departed from his instructions involves an area falling within the very expertise for which the President was appointed (e.g. questions of standing and experience) the Court will not find that the President has departed from his instructions unless he has reached a decision which no reasonable President could have reached.

20.      In this case no one has suggested that Mr Finn is not a chartered surveyor or that he is not independent or that he is not of recognised standing.  The sole question therefore is whether the decision of the President that Mr Finn's appointment complies with the stipulated requirements of the lease as to experience is one to which the President could reasonably have come. 

The correct interpretation of the definition of Surveyor

21.      The parties disagreed on the meaning of the definition of 'Surveyor' and, in particular, the effect of the inclusion of the words "so far as practicable".  It is helpful to begin by reciting the relevant part of the definition without that phrase:-

"............ experienced in the valuation ...... of premises ....... of similar character or comparable to the demised premises within the Island of Jersey or if there are not such premises within the Island of Jersey then within the Channel Islands or nationally......."

We think the meaning of the above passage is clear.  The Surveyor must be experienced in valuing property in Jersey which is similar or comparable to the demised premises.  Only if there are not such premises in Jersey may one look for experience of valuing similar or comparable premises in the other Channel Islands, failing which in the United Kingdom.

22.      If one then re-inserts the phrase 'so far as practicable' the relevant part reads:-

"................ experienced in the valuation ........ of premises so far as practicable of similar character or comparable to the demised premises within the Island of Jersey......"

Miss Lawrence argues that the phrase 'so far as practicable' qualifies the word ' experienced' whereas Mr Pearmain argues that it qualifies the phrase 'premises.......... of similar character.............'.  We are not sure that a great deal turns on the point and the phrase may not add a great deal one way or the other; but we agree with Mr Pearmain.  The location of the phrase in the definition points to its qualifying the 'premises' rather than the 'experience' and it is reasonably easy to give a meaning to the phrase when so understood.  We think that it has the effect of marginally diluting the requirement for similarity or comparability to the demised premises.  As Mr Pearmain submitted, it extends to premises which are 'broadly similar' or 'broadly comparable' to the demised premises rather than only those which are strictly similar or comparable.  Thus the person appointed as Surveyor should be experienced in the valuation of premises in Jersey which are broadly similar or comparable to the demised premises.  Only if such a person is not available may one turn to a person who has experience of letting broadly similar or comparable properties in the other Channel Islands, failing which in the United Kingdom. 

The evidence

23.      The President, through Mr Padbury, asserted that he had appointed Mr Finn because he regarded the property as a variety store and there was no Jersey practitioner with the relevant experience.  During the course of the hearing, Mr Pearmain was constrained to concede that, if the property was indeed correctly categorised as a variety store, he could not realistically submit that any practitioner experienced in valuing Jersey property had experience of valuing variety stores.  However, on the basis of the evidence of Mr Baker, his expert, he submitted (i) that the property was in fact prime retail and (ii) even if it were not, there were still other properties in Jersey which were broadly similar or comparable (even though not variety stores) so that an experienced Jersey valuer would have the necessary experience in order to be able to value the property.  We need therefore to turn to the expert evidence produced by BHSJ and Epoch respectively. 

24.      There is no dispute that commercial premises fall into various categories and these are the subject of specialist skills.  Thus, in the application form to become a member of the President's Panel, there is a list of categories issued by the RICS in relation to rent reviews and any applicant to join the Panel is asked to tick those categories in which he feels qualified to act as an expert or arbitrator.  Cleary some practitioners will cover more than one field.  Category R1 is described as 'prime retail', Category R7 as 'department stores' and Category R9 as 'variety stores'. 

25.      Mr David Adamson produced a report and gave evidence on behalf of BHSJ.  He is a consultant with Allsop & Co, Chartered Surveyors of London.  He has some 35 years experience in commercial property valuation.  Until he became a consultant he was the equity partner responsible for the rent review and rates department.  In both fields he specialised in variety stores and acted amongst others for Boots, British Home Stores, Littlewoods and Marks & Spencer.  He was a member of the President's Panel until recently. 

26.      He described the three categories to which we have referred earlier.  Prime retail relates to the traditional standard shop unit in the best retail location in a city or town.  Such units vary in size but are generally below 20,000 sq ft.  In small to medium sized towns, the average shop will be between 2,000 and 4,000 sq ft; large towns 4,000 to 8,000 sq ft and in city centres 6,000 to 12,000 sq ft. 

27.      Department stores are the largest form of retail premises, generally between 80,000 and over 500,000 sq ft.  They provide several floors of retail sales space and provide a large range of merchandise. 

28.      Variety stores provide a wide range of merchandise primarily branded under the occupier's own label.  Examples are British Home Stores, Boots, Marks & Spencer, Littlewoods, Woolworth, Next and Primark.  In terms of size, the premises are generally between 20,000 and 120,000 sq ft and may provide several floors of retail sales space, usually accessed by lifts and escalators.  In recent times, variety stores had tended to become smaller because modern methods of stock control had reduced the amount of stock which stores needed to carry on the premises.  It was therefore the older stores which tended to be the larger ones.

29.      As summarised earlier and as set out in some detail in his report, Mr Adamson stated that the method of valuation of prime retail space is very different to department stores and variety stores.  In the case of prime retail outlets the key feature is the first 20 or 30 ft in depth of the shop as the front of the unit shop is the most valuable because it is the prime space for selling.  The Zone approach (described earlier) is therefore universally accepted as the valuation method for prime retail shops throughout the United Kingdom.  Because there is a regular flow of transactions in prime retail shops in a particular locality, it is not difficult to assess the Zone A rental value of the prime retail location in question.  The value reflects the demand for a standard shop unit in the town/city and takes into account the demographics, catchment area and other local factors.  In the case of department stores and variety stores, the frontage is less important.  Unlike prime retail shops, sales potential does not diminish with depth.  Accordingly the Zone approach is not reflective of the value of the sales space and is never used in variety stores or department stores.  The method used is the GIA approach.  In other words, all the advantages and disadvantages (including factors particular to the relevant town or area in which it is situated) are considered and reflected in the assessment of a single rate per square foot which is then applied to the gross internal floor area of the premises (i.e. including escalators, toilets etc).  According to Mr Adamson, in broad terms, stores of less than 20,000 sq ft are prime retail and so the Zone approach applies, whereas stores over 20,000 sq ft are valued on the basis of the GIA approach.  Variety stores of 35,000 sq ft - the size of this property - are invariably valued by reference to the GIA approach although he accepted that he was wrong to describe the property as a large variety store in his initial letter of 27^th December 2002 to the RICS.  It was a variety store but not a large one.

30.      In his opinion, the property is undoubtedly a variety store.  The primary determinant is size.  It has a gross internal area of approximately 35,000 sq ft and is occupied by British Home Stores, a traditional variety store operator.  In support of his evidence concerning size, he produced a list of rent reviews carried out by his firm since January 2000.  There are 24 stores listed.  All were assessed as variety stores using the GIA approach.  The largest was 97,000 sq ft and the smallest 24,800 sq ft gross internal area.  He also referred to a list of 93 stores where his firm had carried out a rating assessment for the year 2000.  The rating assessment is based on the rental value.  As the Zone approach produces a higher rental figure than the GIA approach, the revenue authorities could be expected to press for the Zone approach to be used wherever possible.  However, in relation to variety stores, they had always accepted that the GIA approach reflected the valuation method actually applied in the market and therefore reflected the market rental.  All 93 properties had been assessed for rating purposes on the GIA basis as variety stores for the purpose of calculating their rental value and they varied in size from just under 20,000 sq ft to just under 100,000 sq ft gross internal area. 

31.      As to location, variety stores do not need to be in the prime retail area but they often are.  Thus, many a high street contains a Boots or Marks & Spencer store.  The fact that the property is situated in the prime St Helier retail area, namely King Street, does not militate against its being a variety store.

32.      As to configuration, the vast majority of variety stores were built using the grid system with pillars at equal intervals.  This allowed for maximum flexibility.  The configuration used in respect of the property was exactly what one would expect.  It had to be recalled that it was BHS which built the property before selling and leasing it back in 1988.  It would be surprising therefore if the configuration of the property had not taken into account the need of BHS to operate a variety store. 

33.      As to shape, there was no set shape for variety stores.  It was true that they did not require an enormous shop frontage but it was useful to have a reasonable frontage.  He thought that the property was a typical variety store in respect of its shape. 

34.      In summary, all the characteristics of the property were consistent with and pointed towards its being a variety store, the prime characteristic being its size at 35,000 sq ft.  He was of the clear opinion that the property was a variety store and its rental value should be assessed by reference to the GIA approach by an expert experienced in valuing variety stores.  Such a person could, of course, having had representations made to him by the parties, make allowances for any particular Jersey factors when assessing the rate to be applied to each square foot of gross internal area.  He did not consider that the various stores referred to by Mr Baker (to which we shall refer later) provided any useful guidance or comparisons.  They were all much smaller premises and not variety stores.

35.       The only variety stores in Jersey were Marks & Spencer, Boots and Woolworths.  However none of these provided a proper comparator.  Boots was let at a peppercorn rent.  Marks & Spencer was owned by a company which was in the same group as the tenant.  There was therefore no arms length negotiation of the rental figure.  In the case of Woolworths, the two parts of the property were let quite separately as they were in different ownership.  The front part was too small on its own to be treated as a variety store and was therefore assessed as prime retail on the Zone approach. 

36.      Mr Leslie Baker swore two affidavits and gave oral evidence on behalf of Epoch.  He is the managing partner of Baker Almond, Chartered Surveyors in London and is retained by Epoch to advise on the rent review of the property.  He has substantial personal experience of the valuation and letting of various retail shops in Jersey notwithstanding that he is based in London.  He accepted that commercial properties were categorised in the manner listed in the RICS form as described by Mr Adamson.  He also accepted that each classification is a specialist area and will thus influence the identity of an appropriate surveyor to act as an expert for rent review purposes.  He accepted that he was not a variety store specialist. 

37.      Nevertheless, he disagreed with Mr Adamson that the property was a variety store.  In his opinion it falls within the prime retail category.  He stated that, in terms of defining a variety store, one must have regard inter alia to four matters, namely size, shape, configuration and location. 

38.      As to size, he was of the opinion that a variety store would generally be between 50,000 and 120,000 sq ft.  He disagreed with Mr Adamson's opinion that 20,000 sq ft was the lower figure.  He accepted that there might be a few variety stores of less than 50,000 sq ft but these would be historical and not many in number.  All modern variety stores would exceed 50,000 sq ft.  He therefore disagreed with Mr Adamson's view that modern stock control methods meant that variety stores do not have to be as large as in the past.

39.      As to shape, he was of the opinion that frontage to depth ratio was a relevant factor.  He felt that the dimensions of the property were more typical of a prime retail shop than of a variety store. 

40.      As to configuration, he said in his affidavit that the property was constructed in order to be able to be split into a maximum of four individual retail units by means of the pillar layout in the internal part of the building.  He did not consider that the layout of the property lent itself to any classic definition of a variety store. 

41.      As to location, he said that variety stores would not normally be located in a prime pitch site such as King Street.  This was because they were of substantial size and would rely upon customer loyalty so that there was no need to be in the most desirable (and therefore expensive) part of a town.  The fact that the property in this case was in the prime location of King Street pointed against its being a variety store and in favour of it being assessed as prime retail.

42.      He made a number of additional points.  The fact that BHSJ used the property as a variety store was not relevant.  The rent review clause required an assumption of vacant possession so that one would disregard the particular tenant.  Furthermore the lease allowed for sub-letting and for the property to be used as a 'shop or shops'.  It could therefore be sub-let into four retail units of more modest size. 

43.      He did not accept that 20,000 sq ft was the usual upper limit for prime retail property as suggested by Mr Adamson.  Importantly, there were a number of factors which distinguished the Jersey commercial property market from that in the United Kingdom.  For example the formula applied to the Zone approach in Jersey was not the same as in the United Kingdom, the taxation position was different, rates were lower etc.  It was important that the expert chosen should be familiar with all these particular aspects and the President could not have placed sufficient regard upon this important aspect. 

44.      As to comparable properties in Jersey, he felt that Woolworths and Marks & Spencer were directly comparable.  There were others which, although smaller, were nevertheless retail stores and could be regarded as useful comparables.  These included Ottakars, Next, Etams, Evans, Barretts, Burtons and WH Smith. 

Conclusion

45.      Having had the benefit of seeing and hearing the two expert witnesses, we have no hesitation in concluding that it was perfectly reasonable for the President to conclude that the property was a variety store.  Indeed, if it were necessary for us to reach a conclusion on the point, we would hold that he was correct to so find.  Our reasons for preferring the evidence of Mr Adamson to that of Mr Baker can be summarised as follows:-

(i)        Mr Adamson is a specialist in variety stores; Mr Baker, on his own admission, is not.

(ii)       As to size, we were convinced by Mr Adamson's evidence.  He said that size was the key factor and variety stores ran from a low point of 20,000 sq ft up to 120,000 sq ft.  The property of course is some 35,000 sq ft in terms of gross internal area.  Mr Baker said that the minimum level was 50,000 sq ft and that only a few historical variety stores would be less than 50,000 sq ft.  He produced no evidence to support this whereas Mr Adamson produced details of variety stores whose rent had been assessed by his firm since January 2000 and which had been the subject of assessment for rating purposes.  Of the 24 variety stores dealt with on rent reviews by his firm since January 2000, only six exceeded 50,000 sq ft; the remaining three quarters were less than 50,000 sq ft.  In relation to the 93 variety stores dealt with for rating purposes in the year 2000, just over half were less than 50,000 sq ft.  These figures are inconsistent with Mr Baker's assertion and he was unable to come up with any convincing explanation for them.  We also accept Mr Adamson's evidence about modern methods of stock control and their effect on the size of variety stores.

(iii)      As to shape, Mr Baker was forced to admit that the figure which he had used for the depth of the property in relation to this aspect was incorrect.  We preferred Mr Adamson's evidence on this point.

(iv)      As to configuration, Mr Baker asserted in his affidavit that the layout of the property, in particular the layout of the pillars, did not fit in with any classic definition of a variety store.  He was cross-examined by Miss Lawrence about Mr Adamson's evidence that, on the contrary, this was a standard and ideal layout for a variety store.  In the end he was forced to concede that there was nothing about the pillar system and layout which was inconsistent with the property being a variety store.  We accept Mr Adamson's evidence on this point.  Furthermore it is not wholly irrelevant that the property was built by British Home Stores, presumably with the intention of using the premises as a variety store and of course it has in practice been used by them ever since.  On the face of it, it would be somewhat surprising if they had designed and built premises which were not consistent with use as a variety store.  The fact that, in theory the property could be subdivided does not affect the position.  No doubt, many, if not most, large premises are capable of such division but this does not lead to them being treated as prime retail rather than variety stores.

(v)       As to location, we accept that variety stores do not need to be in the prime location but we also accept that in many instances they are in such locations.  Indeed in St Helier itself, one can think of Marks & Spencer and Boots, which lie in King Street and Queen Street respectively.  We do not find that the location of the property points against it being a variety store. 

46.      In summary we accept Mr Adamson's evidence and we find that the President's decision to treat the property as a variety store was not only wholly reasonable but was also correct.

47.      The question then arises as to whether it was reasonable for the President, having so concluded, to decide that there was no practitioner experienced in valuing and letting Jersey properties of a broadly similar or comparable character.  Mr Pearmain conceded that he could not challenge the President's conclusion that there was no Jersey practitioner experienced in letting or valuing variety stores and that Woolworths, Marks & Spencer and Boots, because of their own individual circumstances to which we have referred earlier, did not provide any comparator for assessing the market rental for variety stores in Jersey.  He suggested however, on the basis of Mr Baker's evidence, that the various retail premises referred to in paragraph 44 above could be used as comparators and could be regarded as broadly similar or comparable.  However, apart from Next and WH Smith, all of them are much smaller, having a maximum net area of 6,000 sq ft.  WH Smith has a net area of 7,177 sq ft and Next has 12,388 sq ft.  The net area of the property is some 28,000 sq ft and it is therefore much larger.  Furthermore, and most importantly, it would seem that the basis of the valuation would be different.  Both experts were agreed that for prime retail property the Zone approach is used whereas for variety stores the GIA approach is used.  It follows presumably that all of the stores referred to by Mr Baker would have been valued on the Zone approach whereas the property ought presumably to be assessed on a GIA approach.  It cannot therefore be unreasonable for the President to have concluded that practitioners who were experienced in valuing the various retail properties described by Mr Baker would not be sufficiently experienced to value the property as a variety store. 

48.      Furthermore the lease itself clearly envisages that there might be difficulty in finding practitioners with the relevant Jersey experience.  The Court was given examples of standard commercial leases of retail units in Jersey.  Indeed the Court could almost take judicial notice of the fact that such leases contain rent review clauses which usually provide for the President to appoint an expert for rent review purposes who is experienced in valuing property in Jersey.  There is no anticipation in such clauses of the possibility that it might not be possible to find such a person because, inevitably, there are any number of persons experienced in dealing with Jersey retail property because of the substantial number of such properties.  If it had really been envisaged by the parties that any practitioner experienced in valuing ordinary retail units in Jersey would have had the necessary expertise to value the property, there would have been no need to insert the default provision about looking for persons with the relevant experience in the Channel Islands or the United Kingdom.  All of this supports the conclusion of the President that, having decided that the property should be treated as a variety store, he had to look primarily for a person with experience in letting or valuing variety stores and that person experienced in valuing smaller Jersey retail units would not have the experience required by the definition. 

49.      For these reasons we find that the decision of the President to conclude that there was no one with the requisite experience of valuing or letting broadly similar or comparable premises in Jersey or the Channel Islands and that he therefore had to appoint a person with experience of variety stores in the United Kingdom, was perfectly reasonable.  There is no challenge to the identification of Mr Finn as a person with the necessary experience in relation to variety stores in the United Kingdom.  The President's decision therefore did not depart from his instructions and is accordingly binding on the parties.

50.      Given the test which we have laid down earlier, this is sufficient to uphold the President's decision.  However, in case it should be held that the test should be drawn more tightly and that the Court should reach its own view on the facts as to whether the person appointed falls within the prescribed criteria in the lease, we find that the President's decision was not only reasonable but was also correct.  The Court would have reached the same decision itself.  The property is correctly to be regarded as a variety store, there is no other variety store which is let at arms length in Jersey and therefore there is no person with experience of valuing variety stores in Jersey.  We do not find that the various retail units suggested by Mr Baker can properly be regarded as broadly similar or comparable because they are much smaller and would fall to be assessed on a different basis.  No one has suggested that there is a person with the requisite experience elsewhere in the Channel Islands.  We therefore find that the President's decision does not amount to a departure from his instructions. 

51.      We would add that we were informed that, on two previous rent reviews, a Jersey based surveyor was appointed.  We attribute no significance to this.  On the last occasion BHSJ objected on the same grounds as they have put forward on this occasion but did not ultimately challenge the appointment in the courts.  Our task is to consider the proper interpretation of the lease and whether the President on this occasion has made an appointment which falls within the terms of the lease.  What may have happened on previous occasions, with or without objection, is not significant.

52.      For the reasons which we have given, we dismiss the application.

Authorities.

Jones -v- Sherwoods Services Limited (1992) 1 WLR 277).

Veba Oil Supply and Trading Gmbh -v- Petrotrade Inc (2001) EWCA Civ 1832.

Nikko Hotels (UK) Limited -v- MEPC plc (1991) 28 EG 86.

Pontsard Investments Limited -v- Pankki (1992) 22 EG 103.