Centreland Management Ltd v HSBC Pension Trust (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Vos |
| Judgment Date | 04 July 2013 |
| Neutral Citation | [2013] EWHC 3238 (Ch) |
| Date | 04 July 2013 |
| Court | Chancery Division |
| Docket Number | Case No: HC12C04546 |
[2013] EWHC 3238 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building
7 Rolls Buildings
Fetter Lane
London
EC4A 1NL
Mr Justice Vos
Case No: HC12C04546
Mr T C Dutton QC (instructed by Howard Kennedy) appeared on behalf of the Appellant
Mr Wayne Clark (instructed by Stephenson Harwood) appeared on behalf of the Respondent
Introduction
This is the hearing of an appeal under s.69 of the Arbitration Act 1996, for which permission has already been granted, from an arbitrator in respect of the costs order that he made in a rent only arbitration to determine a rent under s.64 of Part 2 of the Landlord and Tenant act 1954 (the "1954 Act"). The premises are offices at Suite 20, Third Floor, Harcourt House, Cavendish Square, London W1 (the "Premises"). The tenant Appellant is Centreland Management Limited (the "tenant"). The landlord Respondent is HSBC Pension Trust (UK) Limited (the "landlord").
The short facts are that the tenant made a Calderbank offer at a rent of £68,000 per annum, and nine months later the arbitrator determined the rent at £69,000 per annum. Three months after that, the arbitrator ordered that each side should bear their own costs of the arbitration and pay the arbitrator's costs 50/50.
The short issue in the case before me is described in slightly different terms by the parties. The tenant puts it like this:
"…whether the reasonableness of a refusal to accept a 'Calderbank' offer made in a dispute under s.34 of the Landlord and Tenant Act 1954 is to be assessed by comparing the rent proposed in that offer with the subject property's rental value (i) at (or at about) the time the 'Calderbank' offer was made or (ii) at the time the dispute under s.34 was subsequently determined."
The landlord encapsulated the issue as follows:
"…whether, when considering a Calderbank offer made in a rent only arbitration, the Arbitrator should, in assessing the impact on costs, if any, of the Calderbank offer, compare the rent provided for by his Award with the rent offered in the Calderbank (D's case) or, should ignore the rent provided for by his Award and compare the rent that he would have awarded at the date of the Calderbank offer with the rent offered in the Calderbank (C's case)."
I am not sure that either formulation is entirely accurate, for the reasons that I shall come to in a moment. But before coming to that and turning to the law and to the competing positions of the parties on the merits, I will set out the facts in chronological order in just a little more detail than I have done thus far.
Chronology
On 6 th January 2010 the landlord served a s.25 notice on the tenant.
On 22 nd September 2010 the tenant served Particulars of Claim specifying the rent at £56,820 per annum.
On 8 th April 2011 the landlord made a Calderbank offer with rent specified of £79,120 per annum.
On 28 th September 2011 His Honour Judge Mitchell made a consent order based on the parties having agreed the terms of a new lease of the premises, save for the initial rent and the interim rent and ordered as follows:
"2. The initial rent payable under the new tenancy shall be determined by an independent third party under the provisions of Part 1 of the Schedule to this Order in accordance with Section 34 of the Act and, as if the new tenancy were to commence on the date of the third party's determination in accordance with Part 1 of the Schedule.
3. Pursuant to Section 24A of the Act, the interim rent payable from 28 th September 2010 for so long as the current tenancy continues by virtue of Section 24 of the Act shall be at the same rate as is agreed between the Parties or determined by a third party under the provisions of Part 1 of the Schedule to this Order in accordance with Section 24A of the Act.
4. The duration of the new tenancy shall be a term ending on 25 th December 2015.
…
6. The third party under the provisions of Part 1 of the Schedule to this Order shall have power to determine liability for the costs of these proceedings by applying the principles as set out in the Civil Procedure Rules 1998 (as amended)."
Paragraphs A, D and E of the Part 1 of the Schedule to the agreed order provided as follows:
"(A) The matter referred to in paragraphs 2 and 3 of the Consent Order ('the Rents') shall be determined by an independent third party acting as an arbitrator in accordance with the Arbitration Act 1996…"
"(D) The Arbitrator shall make a single award ('the Award') determining the Rents and where any of the Rents are agreed between the parties during the course of the Arbitration, the Arbitrator will incorporate their agreement in the Award. The Substantive Issues do not include, for this purpose, any issues solely related to costs. The Arbitrator will make a separate award on costs unless otherwise agreed by both parties.
(E) The Substantive Issue shall be finally determined on the earliest date by which the arbitration proceedings on the Substantive Issues (…) have been determined and any time for making any such application or appeal or further application or appeal has expired without an application for extension of that time having been made."
Part 2 of the Schedule to the agreed order contained a draft of the agreed terms of the lease. The only relevant provision for my purposes is clause 3 headed "The Demise," which provided as follows:
"The Landlord hereby demises with full title guarantee to the Tenant the Premises together with the rights stated in the First Schedule hereto (…) to hold unto the Tenant for a term of [•] years commencing on 29 th September 2010 and terminating on [ to be agreed] at a yearly rent of [ to be agreed] payable during the Term by equal quarterly payments in advance on the usual quarter days. The first payment for the period from and including 29 th September 2010 to and including [•] to be made on the date hereof PROVIDED THAT the amount of the first payment shall be reduced by any interim rent paid by the Tenant for the period from and including 29 th September 2010 to and including[ ]."
On 5 th October 2011, Howard Kennedy the tenant's solicitors, wrote a "without prejudice save as to costs" offer in the following terms to the landlord's solicitors:
"We write further to our without prejudice save as to costs letters dated 18 th March (2), 31 st March and 26 th May. Without prejudice to the offers made in the above letters our client makes a further improved offer of rent in the sum of £68,000 per annum, subject to the following terms:
1. This offer will remain open until 4pm on Friday, 28 th October 2011.
2. This offer may be accepted after the above deadline provided your client pays our client's costs (both legal and surveying) in respect of work undertaken on this matter after the above deadline.
As noted above this offer is made without prejudice save as to costs and thus we reserve the right to refer to this letter on the issue of costs at any stage during the lease renewal process."
On 28 th October 2011 the final "without prejudice save as to costs" offer, to which I have already referred, by the tenant expired and was not accepted by the landlord.
On 27 th June 2012 Mr Andrew C Marriott FRIC, MCI.Arb (the "Arbitrator") issued his award on all matters save costs, determining the open market rent for the premises of the date of the award at £69,000 per annum for a total of 1,917.35 square feet at £36 per square foot (the "award"). The award included the following:
"As mentioned above, I find the comparable that is of most weight is the sub-letting of Suite 1, Harcourt House. There are different interpretations on this letting from the parties. I deduce a net effective rent on an overall basis of £30.69 per sq ft, which is for a three year term certain (until the first break) allowing three months of the five month rent free period for fitting out purposes…"
"There are further factors to take into account when considering the net effective rent of £36.13 per sq ft and applying it to the subject premises. Suite 1 has been more recently refurbished and the subject space and there is some underfloor trunking/raised floor, more modern lighting, wiring and radiators (full central heating, not part) with not such an 'old-fashioned' feel. The subtenant of Suite 1 also has the benefit of a service charge cap unlike the tenant for Suite 20. I would therefore round down of £36.13 by 2.5% to allow for these factors, thus a figure of £35.23 per sq ft…"
"The letting of Suite 1 Harcourt House took place in September 2011 and the rent review of 11 Queen Anne Street a year ago. The valuation date for this Arbitration is the date of my Award i.e. mid 2012. Mr Smith, in his letter of 20 th March 2012 has mentioned strengthening of rents in 2012 and the high levels of the rents achieved at 3/5 Barrett Street (although not comparable for the reasons outlined above) goes some way to demonstrate this. My own experience is that there has been a tightening of supply in the West End during 2012 with rents being affected as a result.
I would therefore round up the rent of £35.23 per sq ft to £36.00 per sq ft to allow for the passage of time."
On 23 rd October 2012 the arbitrator issued his award on costs (the "costs award") determining that each party should bear its own costs of the arbitration and should pay 50 per cent of his costs as arbitrator. The costs award included the following:
"24. My main reference point however, is Section 61(2) of the Arbitration...
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