Arnold v National Westminster Bank Plc
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DILLON,LORD JUSTICE STAUGHTON,LORD JUSTICE MANN |
| Judgment Date | 08 November 1989 |
| Judgment citation (vLex) | [1989] EWCA Civ J1108-3 |
| Docket Number | 89/1069 |
| Court | Court of Appeal (Civil Division) |
| Date | 08 November 1989 |
[1989] EWCA Civ J1108-3
Lord Justice Dillon
Lord Justice Staughton
and
Lord Justice Mann
89/1069
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(On appeal from the Vice-Chancellor)
Royal Courts of Justice
MR. JAMES MUNBY, Q.C. and MR. JONATHAN GAUNT (instructed by Messrs Freshfields) appeared on behalf of the Respondent/ Plaintiffs.
MR. TERENCE CULLEN, Q.C. and MISS HAZEL WILLIAMSON (instructed by Messrs Stephenson Harwood) appeared on behalf of the Appellant/Defendant.
This is an appeal against a decision of Sir Nicolas Browne-Wilkinson, V.C., given on 1st July 1988. His judgment was reserved and is reported in [1989] Ch. 63. The appeal is by the National Westminster Bank plc, the defendants in the proceedings, as trustee of the British Rail Pension Trust. They are the landlords of the premises in question. The plaintiffs, who are the tenants, are the partners in the well-known firm of Arthur Young, formerly Arthur Young McClelland Moores & Co.
The Vice-chancellor rejected a claim by the defendant to strike out parts of the statement of claim as disclosing no reasonable cause of action and held on a preliminary point of law that the plaintiffs are not estopped from raising in this action the issue of the true construction of the rent review clause in a certain sub-underlease.
The sub-underlease ("the lease") is dated 28th October 1976. It demised to the plaintiffs the premises known as 7 Rolls Buildings, Fetter Lane in the City of Westminster for a term from 28th October 1976 to 24th June 2008 (just under 32 years) at an initial yearly rent of £800,000, subject to review on 24th June 1983, 1988, 1993, 1998 and 2004. The freehold reversion immediately expectant on the lease has been vested in the defendant Bank since 1977.
The scheme of the lease is that there are six rent periods; the first period began on the day on which the term created by the lease began and ended on the 24th day of June 1983, the second period began on the 24th June 1983, and the third, fourth, fifth and sixth periods were to run from the subsequent rent review dates, which I have mentioned. The rent payable is reserved during the first rent period as the basic rent of £800,000 per year. During the subsequent rent periods the rent is whichever is the greater of a rent equal to the rent payable during the last preceding rent period, and the fair market rent at the relevant review date which in default of agreement is to be fixed by arbitration. The "fair market rent" is defined as meaning "such amount as shall represent a yearly rent at which the demised premises might reasonably be expected to be let at the Relevant Review Date in the open market by a landlord to a tenant without a premium with vacant possession and subject to the provisions of this Sub-Underlease other than the rent hereby reserved there being disregarded any effect on rent of any of the matters set out in paragraphs (a) (b) or (c) of Section 34 of the Landlord and Tenant Act 1954 (as amended)".
It is common ground that that presupposes a hypothetical lease for the unexpired residue of the term of the lease. The question was whether that hypothetical lease did or did not include rent review provisions at the successive review dates as under the actual lease. The evidence on the 1983 rent review was that if no rent reviews were to be taken into account, the rent during the second rent period would be 20 percent higher than if the reviews were taken into account.
The present action claims primarily rectification of the lease, on the basis that it was not the intention of the parties that the words in the definition of 'fair market rent' for the purpose of the rent review clause, referring to a letting "subject to the provisions of this Sub-Underlease other than the rent hereby reserved" were to exclude all future rent reviews from the hypothetical lease. However, paragraph 20 in the statement of claim claims further or in the alternative to the claim for rectification a determination as to the basis on which the periodic reviews are to be conducted.
The defendant claims to strike out that paragraph and the consequential prayers for relief on the ground that there is issue estoppel per rem judicatam because of a decision of Walton J. on the 1983 rent review.
The decision of Walton J. was given on 26th November 1984. It is reported in [1985] 1 EGLR. 61. Walton J. refused a certificate under section 1(7)(b) of the Arbitration Act 1979 that the question of law was one of general public importance, or one which for some other reason should be considered by the Court of Appeal. There is no appeal against the refusal of such a certificate. (See National Westminster Bank plc v. Arthur Young McClelland Moores & Co. [1985] 1 WLR 1123, the decision of this court on the attempt by the plaintiffs to appeal against Walton J's refusal of the certificate).
The view of Walton J. was that future rent reviews were excluded from consideration in operating the 1983 review. In the relevant part of his judgment he said this:
"The first and I think probably the main question which arises here is whether, when the arbitrator is deciding what is to be the fair market rent for the next rent period, he is to do that upon the basis that the lease contains (as, of course, we know it does in fact contain) a rent review clause or whether, on the other hand, he is to fix the fair market rent on the basis that there is no such clause in the lease. I do not think that there is a presumption one way or the other. I think that in every case that must depend upon the precise terms of the lease, because it must be very much borne in mind that there is no such thing as a fair market rent of any premises in the abstract.
There is only a fair market rent upon a set of abstractions which may be actual, may be hypothetical and in most cases under rent reviews are a mixture of the one and the other. For example, here we have that the premises are expected to be let with vacant possession, which is, of course, something which we know as a fact just is not the case because the tenants are actually in possession and are certainly not just going to move out for the purpose of a rent review.
So the attempt by Mr. Morritt [who was appearing for the tenants] to poison my mind in advance to achieve the lower of the two values by defining the fair market rent as something which favours the tenant, as in fact he was attempting to do, I do not think impresses me very much."
Then he went on to say that the words were unusual and seemed to him to be very odd, and he said that something was missing from the clause and that quite clearly the rent was not a provision. He said what "rent" was. He suggested various words that might be written in and then referred to the odd suppositions that would arise if the words were taken literally. He said:
"One might have the supposition that there is no direct covenant to pay the rent. One might have the supposition that there was no power of re-entry for non-payment of the rent. Be it so, if those have any effect on the valuation of the rent…".
Later he said:
"…..however unfortunate it may be and whether it was intended or not, in this particular lease the fair market rent is to be ascertained upon the somewhat curious assumption that there is no rent revision clause contained in the hypothetical terms which the arbitrator is considering. In the present case, that is stated by the arbitrator, who told us what the effect of that would be. It would be very considerable because it would put up a not inconsiderable rent by no less than 20.5%; but it is a simple point and it seems to me an inescapable one in view of the way the definition of 'fair market rent' is drawn."
In his judgment under appeal the Vice-Chancellor sets out at page 66F the two questions which, as he saw it, arise.
(1) Is the doctrine of issue estoppel absolute, or can a party in exceptional circumstances be permitted to relitigate a point; and
(2) are the circumstances of this case such as (as the Vice-Chancellor thought) to constitute exceptional circumstances which would defeat the estoppel?
Basically the circumstances are that later decisions on rent review clauses indicate that Walton J. was wrong.
The Vice-chancellor in British Gas Corporation v. Universities Superannuation Scheme [1986] 1 WLR 398 laid down general guidelines for the construction of rent review clauses which this court has approved in Equity & Law Life Assurance Society pic v. Bodfield Ltd. [1987] 1 EGLR 124 and Basingstoke & Deane Borough Council v. Host Group Ltd. [1988] 1 WLR 348. The particular guidelines laid down by the Vice-chancellor are set out on page 67 B-C of his judgment. He recognises in (b) that "clear words which require the rent review provisions (as opposed to all provisions as to rent) to. be disregarded…must be given effect to, however wayward the result", but continued in (c): "subject to (b), in the absence of special circumstances it is proper to give effect to the underlying commercial purpose of a rent review clause and to construe the words so as to give effect, to that purpose by requiring future rent reviews to be taken into account in fixing the open market rental under the hypothetical letting". It is plain that the approach of Walton J., in the passage I "have cited from his judgment, is inconsistent with that...
To continue reading
Request your trial
-
Yukos Capital S.a.r.L (a company incorporated in the Luxembourg) v OJSC Rosneft Oil Company (a company incorporated in the Russian Federation)
...mere dispute about facts divorced from their legal consequences is not an ‘issue’ [for the purposes of issue estoppel].” (3) Arnold v National Westminster Bank plc [1991] 2 AC 93 in which Lord Keith said at 105D-E: “Issue estoppel may arise where a particular issue forming a necessary ingr......
- A-G of Singapore; JB Jeyaretnam
-
Beng Tiong Trading, Import And Export (1988) Pte Ltd v Maria Janda Achmad Bin Abdullah Wachdin Basharahil Alias Maria and Others
... ... cited Property & Revisionary Ltd v Templar [1977] 1 WLR 1223 and Arnold v National Westminister Bank [1991] 3 All ER 41 to support his argument ... ...
- Chee Pok Choy and Others v Scotch Leasing Sdn Bhd