OUTER HOUSE, COURT OF SESSION |
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CA41/00 |
OPINION OF LORD MACFADYEN in the cause CO-OPERATIVE WHOLESALE SOCIETY LIMITED Pursuers; against (FIRST) RAVENSEFT PROPERTIES LIMITED and (SECOND) DOUGLAS SHELF SEVEN LIMITED Defenders: ________________ |
Pursuers: Ferguson, Q.C., MacColl; Dundas & Wilson
Second Defenders: Abercrombie, Q.C., Di Emidio; McClure Naismith
8 April 2002
Introduction
"The Tenants shall take possession of and use and occupy the premises for the foregoing purpose from [29 June 1970] and shall within three months thereafter commence trade therefrom and shall continue to so use and occupy the premises and trade therefrom throughout the whole period of this Sub-Lease."
In Clause (TENTH) (Sixteen) the tenants bound and obliged themselves:
"To keep the premises open for retail trade during the usual hours of business in the locality ... the shop display windows being kept dressed in a suitable manner and in keeping with a good class shopping centre".
"AND WHEREAS it has been further agreed between the Landlords and the Tenants that the provision of Clause (SIXTH) shall no longer apply Therefore the Landlords and Tenants DO HEREBY DECLARE that Clause (Sixth) of the said Lease shall be deleted and shall cease to have any force and effect".
The Minute of Variation made no provision for the deletion of Clause (TENTH) (Sixteen) of the Sub-Lease. After the last substantive variation provision, it contained the following passage:
"And save as hereby varied the whole provisions of the said Lease as varied by [certain earlier deeds] will continue in full force and effect".
The Section 9(3) Issue
(a) The Legislation
"This section does not apply to a person - |
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(a) |
who, at the time when he acted or refrained from acting as mentioned in subsection (2) above, knew, or ought in the circumstances known to him at that time to have been aware, that the document ... failed accurately to express the common intention of the parties to the agreement ...; or |
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(b) |
whose reliance on the terms of the document ... was otherwise unreasonable." |
(b) The Pleadings
"Separatim, the said oversight [i.e. the failure to give effect to the alleged common intention of the pursuers and the first defenders by including in the Minute of Variation a provision deleting Clause (TENTH) (Sixteen) as well as the provision deleting Clause (SIXTH)] was patent on the face of the Sub Lease and Minute of Variation and Agreement. In particular, the deletion of Clause (SIXTH) without reference to Clause (TENTH) (Sixteen) was plainly anomalous. Any experienced landlord such as the Second Defenders or their legal advisers would have recognised this anomaly. In these circumstances, the Second Defenders ought to have known (as was obvious) that the Minute of Variation and Agreement failed accurately to express the common intention of the parties to the antecedent agreement to which it purported to give effect."
The second part of the averments, which sets out the basis for invocation of section 9(3)(b), is in the following terms:
"Further and in any event, esto the Second Defenders relied on the terms of the Sub Lease as varied by the Minute of Variation and Agreement (which is not known and not admitted), such reliance was not, in the whole circumstances, reasonable. The Second Defenders made no inquiry as to the reason(s) why the Minute of Variation and Amendment deleted Clause (SIXTH) and not both Clause (SIXTH) and (TENTH) (Sixteen) of the Sub Lease. In the circumstances it would have been reasonable for the Second Defenders to make such inquiry. Had they done so the oversight in the Minute of Variation and Agreement would have been identified to them."
(c) The Parties' Submissions
The Evidence of the Rent Review Arbiter
(a) The Issues
"Furthermore, the Second Defenders acted in reliance on the terms of the said Clause (TENTH) (Sixteen) at the Rent Review Arbitration which took place in about 1998 in accordance with the Sub-Lease. In said arbitration the Second Defenders argued that the said Clause (TENTH) (Sixteen) was valid and binding on the Pursuers. In his determination the Arbiter in said review accepted the Second Defenders' argument and fixed the rent on the basis that said Clause (TENTH) (Sixteen) was an onerous obligation on the pursuers. ... The Arbiter refused to increase the rent due for the premises inter alia on account of the existence of an onerous keep open obligation on the Pursuers as tenants. The rectification proposed by the Pursuers would enable it (sic) as Tenant to benefit from a lower rent while at the same time releasing it from its obligations to keep said premises open. On the other hand the proposed rectification would give the Second Defenders a lower rent without the benefit of the Pursuers being obliged to keep open. Accordingly the Second Defenders have been, and would be adversely affected to a material extent by this action."
"The passing rent would have remained at £20,000 per annum following the rent review arbitration irrespective of whether or not Clause (TENTH) (Sixteen) was an obligation incumbent on the Pursuers."
The pursuers propose to call the arbiter, Mr James Merry, FRICS, as a witness, and to seek to elicit from him evidence in support of that averment.
"The evidence also shows that new leases are of much shorter duration (25 years) and those with longer periods appear to reflect lesser rentals. Although some of the evidence has absolute user conditions applicable, none have 'keep open' clauses such as the Subjects and I feel sure the existence of this condition, and known legal position in this regard at the rent review date, would materially affect the hypothetical tenant's bid. Particularly I consider this to be the case at Whitfield where such a history of unsuccessful marketing of the vacant unit since 1995 exists.
In essence, therefore, I do consider that the cumulo effect of the length of lease term, the possible implementation of the 'keep open' provisions of the lease, the evidence of a market transaction in 1993, together with the unsuccessful marketing campaign over a considerable period of time, leads me to the conclusion that the hypothetical tenant ... would be aware of the whole circumstances surrounding the Subjects and would not be prepared to bid more than the passing rental of £20,000.
Accordingly, I Award that the 'fair yearly rent' as at Whitsunday (28th May) 1998 shall be the 'annual rent payable in immediate preceding period', i.e. TWENTY THOUSAND POUNDS STERLING PER ANNUM (say £20,000 per annum)."
"Where an action for the reduction of an award depends on facts which are not agreed, a proof will be required. The normal rules apply in such cases in order to determine what evidence is admissible and by what method disputed facts may be proved. The arbiter himself, however, is in a special position, because once he has issued his award it is not competent for him to modify or explain it in any way. He may be examined as a witness for certain purposes, particularly as to his actings in the course of the submission where it is suggested that some irregularity has occurred. It has also been held to be competent to examine him as to what matters he took into account in arriving at his award when it was alleged that he had proceeded ultra fines compromissi in a way which was not apparent from the face of the award. An arbiter should be allowed the opportunity to protect himself against an allegation of misconduct, such as that he failed to determine a matter which was properly before him, by giving evidence as to what he did decide. The general rule, however, is that the award must speak for itself, and that the evidence of the arbiter is not admissible to explain, add [to] or contradict what is to be found on the face of the written instrument."
Mr Di Emidio also cited paragraph 98:
"The general rule is that an arbiter is not a competent witness regarding his award. Accordingly he may not be called as a witness to explain or control his award when action is being taken to put it into effect. His written decree arbitral is the only evidence of his decision which is admissible, and the normal rules as to the exclusion of extrinsic evidence apply. Furthermore, since he is functus as soon as he has issued his award he is unable to do anything to alter or modify its terms. ...
Both the arbiter and his clerk may, however, be called as witnesses to the res gestae of the arbitration, that is to say to the actings of the parties, the clerk or the arbiter himself, in so far as these may be relevant to the points at issue in any subsequent litigation. They are in no different position, when dealing with their actings and other matters of procedure, than any other witness who speaks to facts which are within his own knowledge. It may also be noted that a person is not disqualified from giving evidence on matters of substance, such as the condition of heritable subjects when he inspected them, merely because he was acting as an arbiter at the time. While he may not be asked questions which are directed to the terms of his award, he is under no such restriction should his evidence on these matters become relevant for other purposes."
"1. |
That the umpire was a competent witness, like any other person, to prove matters material to the issues. |
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2. |
That questions might properly be put to him for the purpose of proving the proceedings before him, so as to arrive at what was the subject-matter of adjudication when the proceedings closed, and he was about to make his award. |
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3. |
That as regards the effect of the award no questions could properly be put to the umpire for the purpose of proving how it was arrived at, or what items it included, or what was the meaning which he intended at the time to be given to it." |
In expansion of the third point, Cleasby B added (at 434):
"As soon as the award is made it must speak for itself. It must be applied, as in other cases, by extrinsic evidence to the subject matter, - it cannot be explained or varied or extended by extrinsic evidence of the intention of the person making it."
Lord Cairns LC agreed with Cleasby B, and added (at 462):
"It appears to me that upon every point which may be considered to be a matter of fact with reference to the making of the award, the evidence of the arbitrator or umpire was properly admissible. ... [But the] award is a document which must speak for itself, and the evidence of the umpire is not admissible to explain or to aid, much less to attempt to contradict (if any such attempt should be made) what is to be found upon the face of that written instrument."
"The arbiter's award must speak for itself, and it cannot be aided or eked out by extrinsic evidence of what the arbiter has in fact decided."
The second was Johnson v Lamb 1981 SLT 300 in which Lord Maxwell held himself bound by the two last-mentioned cases to hold that the arbiter could not be heard as a witness as to the matters on which he reached a decision in arriving at an award where the question at issue was exhaustion of the reference. Reference was also made to Land Securities plc v Westminster City Council [1993] 4 All ER 124.
"The Tenants bind and oblige themselves to pay to the Landlords in name of rent ... (5) during the remainder of this Sub-Lease [i.e. after the first fourteen years] the higher of (a) the annual rent payable in the immediate preceding period and (b) such rate as shall represent the fair yearly rent for the premises at ... [the relevant term] having regard to the rental values then current for similar property let with vacant possession without a premium and on terms similar to the provisions of this Sub-Lease".
The arbiter's award had to be construed in light of that provision. £20,000 was the passing rent, i.e. the rent mentioned in Clause (THIRD) (5) (a). The arbiter held that "the existence of the [keep open clause] would materially affect the hypothetical tenant's bid". The pursuers did not seek to contradict that. The arbiter went on to hold that the "cumulo effect" of four considerations, including the existence of the keep open clause, was that the hypothetical tenant "would not be prepared to bid more than the passing rental of £20,000". Given the upward-only nature of the rent review provision, that was all that was required to determine the matter. Clause (THIRD) (5) (a) took effect to keep the existing rent in force. The arbiter had not, however, expressed any view as to what the hypothetical tenant's bid would have been (except that it would not have been more than £20,000), or what part each of the four factors relied upon played in his decision. To seek from him evidence of whether the absence of Clause (TENTH) (Sixteen) would have made a difference to the reviewed rent involved putting to him a hypothetical question that he had not addressed in the arbitration. It did not involve contradicting, varying or even explaining his award.
"... The Duke of Buccleuch's case can have no relevance when the award does not constitute a res judicata between the parties but is relied upon as evidence in other proceedings between strangers",
that was of no application in the present case, where the parties represented the same interests as those who had been involved in the rent review arbitration; this was not a case between strangers. The observations of Lord Justice-Clerk Aitchison in Donald v Shiell's Executrix and Lord Maxwell in Johnson v Lamb did not warrant a restrictive reading of the general rule.
Result