Checkpoint Ltd v Strathclyde Pension Fund
| Jurisdiction | England & Wales |
| Judge | Mr Justice Park |
| Judgment Date | 21 March 2002 |
| Neutral Citation | [2002] EWHC 432 (Ch) |
| Court | Chancery Division |
| Date | 21 March 2002 |
| Docket Number | Case No: TLC807/01 |
[2002] EWHC 432 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Park
Case No: TLC807/01
Guy Fetherstonhaugh (instructed by Marfarlanes of London EC4A 1BD) for the Claimant
Jonathan Seitler (instructed by Nabarro Nathanson of London WCIX 8RW) for the Defendant
Hearing dates : 6 February 2002
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this
Judgment and that copies of this version as handed down may be treated as authentic.
Overview
1. This case arises from a lease of a property in Bracknell, Berkshire. The parties to the case are the landlord and the tenant. The landlord is the Strathclyde Pension Fund, and the tenant is Checkpoint Limited (originally called Checkpoint Meto Limited). I will refer to them in this judgment as the landlord and the tenant. The rent fell to be reviewed to the current market rent as at 2 May 2000. The landlord and the tenant did not agree on the new rent, so under provisions in the lease it fell to be determined by arbitration. The arbitrator determined the rent at the full level for which the landlord had contended. In this case the tenant seeks to challenge the determination under sections 68 and 69 of the Arbitration Act 1996. The tenant has been represented before me by Mr Guy Fetherstonhaugh of counsel. The landlord has been represented by Mr Jonathan Seitler of counsel.
2. Section 68 provides that an award by an arbitrator (in any arbitration proceedings, not just in rent review arbitrations) may be challenged on grounds of serious irregularity. Section 69 provides for an appeal to the court on a question of law arising out of the arbitral proceedings. Both sections contain detailed provisions which heavily circumscribe the ability of an unsuccessful party in an arbitration to challenge the award in court, either on the section 68 ground of serious irregularity or on the section 69 ground of an appeal on a question of law. In this case the arbitration plainly went very badly for the tenant, and I can well understand why the tenant wishes to challenge it. However, I do not think that the tenant can bring any of its grounds of challenge within the rigorous requirements of either section. I shall dismiss this application. Unwelcome though the result of the arbitration no doubt was to the tenant, in my opinion the tenant is bound by it and has no grounds in law for escaping from the outcome.
The facts until the arbitrator's award
3. The leased premises are a building called Arrow Point at 43 Weston Road, Bracknell. It is a storage and distribution depot. The internal floor area is 42,973 sq ft of which 28,059 are warehouse and 14,914 are offices. This is a 34.7% office content, which is a good deal higher than the standard office content for warehouse buildings. As will appear later, this had an impact on the arguments of the parties in the rent arbitration. The lease was granted in 1995 for 15 years, with upwards-only rent reviews on 2 May 2000 and 2 May 2005. This case arises from the 2000 rent review.
4. The lease contained a rent review clause in fairly standard terms which I need not set out at length. The core concept was: ‘the open market yearly rent for which the Premises could be expected to be let with vacant possession on the Relevant Review Date in the open market by a willing lessor to a willing lessee … ’. If the landlord and the tenant could not agree upon the open market rent, which they could not in this case, it would be determined by an independent surveyor appointed (failing agreement between the parties upon his identity)
by the President of the Royal Institution of Chartered Surveyors. The Surveyor so appointed was to act as an arbitrator under the provisions of the Arbitration Acts: clause 15.4 of the lease, which of course brought into operation the provisions of the Arbitration Act 1996, especially sections 68 and 69 with which I am concerned in this judgment. I will quote one provision of the lease which described the characteristics required of the arbitrator:
“15.2 The Surveyor must be a Chartered Surveyor experienced
in the letting and/or valuation of property which is of a similar
nature to the Premises, is situated in the same region as the
Premises and used for purposes similar to those authorised
under this Lease at the date of the Surveyor's appointment. “
5. In this case all the stages of the arbitration took place in the first half of 2001. On 26 January 2001 the President of the RICS appointed Mr T Bloomfield to be the arbitrator. The parties were represented by chartered surveyors: Mr M J Garvey represented the landlord, and Mr K J Tapping represented the tenant. The procedure was governed by written directions which the arbitrator gave on 13 February 2001. The arbitration was to be conducted on the basis of written representations, without an oral hearing. The basic scheme was that there was to be a statement of agreed facts, after which each party was to submit two sets of representations: initial representations and then supplemental representations in response to the initial
representations of the other party. Each pair of written representations was to be submitted simultaneously, not sequentially. In fact there was a slight departure from this, which I will describe below.
6. The statement of agreed facts was supplied by Mr Garvey and Mr Tapping on 14 March 2001. It described the property (Arrow Point) and the nature of the dispute. Scheduled to it was a list of comparable transactions agreed between the parties, that is to say other properties of which the agreed rents or the adjudicated rents might provide guidance for what the reviewed rent for Arrow Point should be. By describing these ‘comparables’ as ‘agreed’ Mr Garvey and Mr Tapping were not agreeing with each other that they were sufficiently comparable to be used. How far they were sufficiently comparable was a matter for argument. Mr Garvey and Mr Tapping were merely agreeing on a list which should include those properties which either of them might wish to argue were instructive comparables for the arbitrator to take into account in his award. The initial written representations of Mr Garvey and Mr Tapping were dated 15 March 2001, and their second set of representations (their counter-submissions in reply to each other) were dated 5 April 2001. I said above that there was a slight departure from the pattern of two exchanges of simultaneous written representations. It arose because Mr Garvey knew from prior discussions or correspondence between himself and Mr Tapping that Mr Tapping was intending to rely heavily on one comparable transaction in his initial written representations, and Mr Garvey was still making enquiries about it at the time of finalising his own initial representations. So he said that he would be submitting a supplemental representation about it. He did that on 21 March 2001, after the exchange of initial submissions but before the exchange of counter-submissions in reply.
7. I will now attempt to encapsulate the essence of the two parties’ written submissions. In Mr Garvey's initial submission he said that he was a partner in a firm in Bracknell, and had extensive personal experience of lettings and rent reviews in the town. He also had a good experience of the broader regional market. In Bracknell there were three Industrial Areas, Western, Eastern and Southern. The Western was the dominant commercial district. Arrow Point was located on the spine road of the Western Industrial Area. He considered it important that Arrow Point had a high office content, since rents per square foot for warehouses with high office content were significantly higher than they were for warehouses with standard office content. Rental levels had been fairly constant from 1999 to 2001. Some schemes in Bracknell (he instanced one called The Sterling Centre, of which I shall say a little more later) had struggled to let fully in that period, but all lettings that had been made had been at good rents. He reviewed all of the comparables listed in the agreed statement of facts. He knew that Mr Tapping would be relying heavily on one of them, namely Unit 3 Doncastle Road, in Bracknell. This was the property as respects which he was still making enquiries, and for which he intended to put in a supplemental submission. He considered that the most instructive comparables were not in Bracknell itself, but at Winnersh Triangle, which was about six miles away (quite a lot of it by motorway) towards Reading. The relevance of two lettings at Winnersh Triangle was that they were of buildings with high office contents, comparable in that respect to Arrow Point. He accepted that Winnersh Triangle was a better location than Bracknell, and on that account he discounted by 15% the rent which might otherwise have been suggested by the Winnersh Triangle lettings. He made a discount of a further 10% for age: Arrow Point was a few years older than the recently let Winnersh Triangle comparables. His calculations to that point suggested a rent for Arrow Point of between £10 and £11 per square foot. He adopted as his valuation £10.25 per square foot, which converted to £440,000 per annum for the building.
8. Mr Tapping's initial submission was dominated by one comparable: Unit 3 Doncastle Road. There had been a letting of this property in May 2000, the month in which the review date for Arrow Point fell, at a rent of £6.35 per square foot. This was ‘an irrefutable item of evidence setting the trend for the subject building [Arrow Point]’. Doncastle Road was ‘the premier location for distribution’. He said that, for a
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