HMV UK v Propinvest Friar Ltd Partnership
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice Longmore,Lord Justice McFarlane |
| Judgment Date | 10 November 2011 |
| Neutral Citation | [2011] EWCA Civ 1708 |
| Docket Number | Case No : A3/2011/1193 |
| Court | Court of Appeal (Civil Division) |
| Date | 10 November 2011 |
[2011] EWCA Civ 1708
Lady Justice Arden
Lord Justice Longmore
and
Lord Justice Macfarlane
Case No : A3/2011/1193
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE WARREN)
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Guy Fetherstonhaugh QC (instructed by Shoosmiths) appeared on behalf of the Appellant.
Mr John Furber QC (instructed by Bond Pearce LLP) appeared on behalf of the Respondent.
This is an appeal against the order of Warren J refusing the application of the appellant, HMV Records Limited, for permission to appeal from the award of Mr John Male QC sitting as an arbitrator. The respondent, Propinvest Friar Limited Partnership, owns a two-storey retail shop at 138/141 Friar Street, Reading ("the premises"). The premises were demised to a predecessor of the appellant and the appellant is associated with the original tenant. The lease was for a term of 25 years at a rent subject to review at five-yearly intervals. The appellant is also an associated company of the current tenant and it is concerned with the rent review which was required by the lease at the end of a certain number of years into the lease.
The parties were unable to agree the rent payable with effect from March 2005. One of the issues was as to the interpretation of part of the rent review clause in clause 7, to which I will come shortly. The parties agreed that a number of points should be determined by Queen's Counsel experienced in property matters. They instructed Mr Male QC as arbitrator to determine three issues, which the parties formulated jointly. In his award, Mr Male QC determined the first two issues in favour of the appellant and the third in favour of the respondent.
As this was an arbitration award, and the parties did not agree that there should be an appeal to the court, leave of the court is required for any appeal. The court cannot give leave to appeal from the award of the arbitrator except in compliance with Section 69 of the Arbitration Act 1996 ("the 1996 Act"). This provides:
"(1)Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings.
An agreement to dispense with reasons for the tribunal's award shall be considered an agreement to exclude the court's jurisdiction under this section.
(2)An appeal shall not be brought under this section except—
(a)with the agreement of all the other parties to the proceedings, or
(b)with the leave of the court.
The right to appeal is also subject to the restrictions in section 70(2) and (3).
(3)Leave to appeal shall be given only if the court is satisfied—
(a)that the determination of the question will substantially affect the rights of one or more of the parties,
(b)that the question is one which the tribunal was asked to determine,
(c)that, on the basis of the findings of fact in the award—
(i)the decision of the tribunal on the question is obviously wrong, or
(ii)the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and
(d)that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.
(4)An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted.
(5)The court shall determine an application for leave to appeal under this section without a hearing unless it appears to the court that a hearing is required.
(6)The leave of the court is required for any appeal from a decision of the court under this section to grant or refuse leave to appeal.
(7)On an appeal under this section the court may by order—
(a)confirm the award,
(b)vary the award,
(c)remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court's determination, or
(d)set aside the award in whole or in part.
The court shall not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.
(8)The decision of the court on an appeal under this section shall be treated as a judgment of the court for the purposes of a further appeal.
But no such appeal lies without the leave of the court which shall not be given unless the court considers that the question is one of general importance or is one which for some other special reason should be considered by the Court of Appeal."
The crucial provision for our purposes is subsection (3)(c)(i). This establishes that it is a pre-condition to giving leave that the decision of the tribunal on the question was "obviously wrong". Subsection 3(c)(i) is available as a ground for giving leave as an alternative to subsection (3)(c)(ii) under that provision the point must be one of general public importance. That provision is not one which can be used in the present case because the point which arises is one of the interpretation of a purely private arrangement contained in a lease. If an appellant seeks to rely on subsection (3)(c)(i), it also has to satisfy other matters, including in particular in this case paragraph (d) of subsection (3), that it is just and proper in all the circumstances for the court to determine the question notwithstanding the agreement for arbitration.
It will be apparent from section 69 that rights of appeal from an arbitration award are severely restricted. It is not enough, therefore, simply to show that there is an arguable error on a point of law. Nor is it enough that the judge to whom the application for leave is made might himself or herself have come to a different answer. The required quality of the accepted error is that it must be "obviously wrong". Thus the alleged error must be transparent. It must also, at the least, be clear. The word "obvious" is a word of emphasis which means that the courts must not whittle away the restriction on rights of appeal in subsection (c)(i) by being over generous in their determination of the clarity of the wrong.
The words "obviously wrong" should be seen as reflecting the case law on the predecessor provision in section 1(3)(b) of the Arbitration Act 1979. In the well-known case of The Nema [1982] AC 742–3, Lord Diplock held:
"Where…a question of law involved is the construction of a 'one-off' clause, the application of which to the particular facts of the case is an issue in the arbitration, leave should not normally be given unless it is apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument, that the meaning ascribed to the clause by the arbitrator is obviously wrong. But if on such perusal it appears to the judge that it is possible that argument might persuade him, despite first impression to the contrary, that the arbitrator might be right, he should not grant leave…"
The effect of the Arbitration Act 1979 in this regard was thus, in my judgment, carried through into section 69 of the 1996 Act. Lord Diplock referred to adversarial argument and to the court determining the question of leave without the benefit of adversarial argument. In the context, it seems to me that he meant primarily oral argument. Contrary to the passages I have cited, in this case this court has heard oral argument, as did the judge, but it is to be noted that Lord Diplock considered that this should not normally happen. The matter should therefore normally be dealt with on paper. I shall come back to these points at the end of my judgment. The point, however, that I wish to emphasise at this stage is that Lord Diplock was clearly contemplating that the error is one which can be grasped simply by a perusal, that is, a study, of the award itself.
We have been taken to the authority of Braes of Doune Wind Farm (Scotland) Ltd v Alfred McAlpine Business Services Ltd [2008] 1 Lloyds Rep 608 where there is a helpful analysis by Akenhead J. He uses the memorable phrase "a major intellectual aberration" in paragraph 31 of his judgment, which I have found a useful way of bringing to mind that the error on which we are concerned, if there be an error, must be an obvious one.
I turn now to the provisions of the lease. Clause 7.2 of the lease requires the principal rent to be reviewed at each rent review date and to be the greatest of the passing rent, the Market Rental Value and the Comparable Rental Value. The latter two expressions are defined in Clause 7.1 of the lease. The parties therefore agreed that the reviewed rent would be the highest of those values. Mr John Furber QC, who appears for the respondent, emphasises to us that the provision for the ascertainment of the principal rent and the definitions of Comparable Rental Value and Market Rental Value were clearly ones which were used with the intention of benefiting the landlord so that he could take the highest of these amounts.
Clause 7.1 defines the Market Rental Value (so far as material) as follows:
"the yearly rent at which the Demised Premises might be expected to be let in accordance with the terms of this Lease in the open market at the relevant Rent Review Date for a term of 15 years and for a Term equivalent to the then unexpired residue of the term whichever period shall be the longer…and on the further assumptions that…(b) the...
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