Michael John Arnold and Others v National Westminster Bank Plc
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PETER GIBSON,LORD JUSTICE SIMON BROWN,LORD JUSTICE GLIDEWELL |
| Judgment Date | 09 March 1994 |
| Judgment citation (vLex) | [1994] EWCA Civ J0309-6 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 92/1650/B |
| Date | 09 March 1994 |
[1994] EWCA Civ J0309-6
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
(Mr. Justice Knox)
Before: Lord Justice Glidewell Lord Justice Simon Brown Lord Justice Peter Gibson
92/1650/B
MR. J MUNBY QC (Instructed by Freshfields EC4) appeared on behalf of the Appellant
MISS H WILLIAMSON QC (Instructed by Stephenson Harwood, EC4M 85H) appeared on behalf of the Respondent
( )
Wednesday 9 March 1994
The Appellants ("the tenants"), a well-known firm of chartered accountants, labour under a deep sense of grievance. As tenants of 7 Rolls Buildings, Fetter Lane, London EC4 they have for many years been battling to escape the consequences of two decisions, now said by the highest court in the land to have been wrongly made by Walton J., first when as a result of an erroneous construction of the lease he varied the award of an arbitrator on a rent review, and second when he refused to give a certificate under s.1(7) Arbitration Act 1979 ("the 1979 Act"), thereby preventing an appeal from the first decision. In consequence instead of paying an annual rent of £1,003,000 for the 5 years from December 1983, the tenants have had to pay a rent of £1,209,000 per annum. Their grievance is the more keenly felt because, but for the retrospective operation of the 1979 Act to arbitration agreements entered into prior to that Act, they would not have been barred from challenging on appeal a decision of the High Court. Happily for them they have succeeded in preventing the erroneous decision on construction infecting subsequent reviews. In June 1987, with a view to reclaiming the excess rent, they commenced an action for (amongst other things) rectification of the lease. But, since service of the defence on 21 April 1988, no further steps have been taken to pursue that claim, it may be because of certain provisional but unfavourable judicial comments on it. On 5 December 1991 the tenants embarked on a previously unheralded course: they applied by originating motion for an order that the varied award be remitted to the arbitrator pursuant to s.22 Arbitration Act 1950 ("the 1950 Act"). That application was dismissed on 20 November 1992 by Knox J. from which order the tenants now appeal with his leave.
The decision of the Judge has been fully reported in [1993] 1 E.G.L.R. 23 and as it contains a careful and complete statement of the facts, I propose only to rehearse briefly those matters which are necessary to make this judgment intelligible.
(1) By a subunderlease ("the lease") dated 28 October 1976 the owners of an underlease of 7 Rolls Buildings granted the tenants a subunderlease for a term from that date to 24 June 2008 with rent reviews in 1983, 1988, 1993, 1998 and 2004.
(2) The lease contained provisions for arbitration if the parties failed to agree on what was called the fair market rent, the formula for which provided for a hypothetical letting.
(3) The Bank, as trustee for two pension funds, acquired the reversion to the lease on 7 July 1977.
(4) The parties were unable to agree, in relation to the first rent review, whether the rent under the hypothetical lease should be fixed on the basis that it contained the same provisions for rent reviews as in the actual lease or no provision for any such review.
(5) The dispute was referred to the arbitrator who on 19 March 1984 made a fully reasoned award in which he decided that, as the tenants contended, the rent should be that for a hypothetical lease containing rent review provisions. But he also decided that if the alternative view contended for by the Bank was correct and the rent should be that for a hypothetical lease containing no such provisions, the annual rent would be £206,000 higher.
(6) The tenants appealed and on 26 November 1984 Walton J. held that the Bank's contention was correct, ordered that "the …. award be varied by substituting therefor an award in the sum of £1,209,000 per annum" and refused a certificate under s.1(7) of the 1979 Act ( National Westminster Bank plc v Arthur Young McClelland Moores & Co. [1985] 1 E.G.L.R. 61).
(7) Before his order was perfected a second attempt was made to obtain a certificate from Walton J. but that met the same fate, and on 13 June 1985 the Court of Appeal held that it had no jurisdiction to hear an appeal by the tenants from Walton J.'s refusal of a certificate ( National Westminster Bank plc v Arthur Young McClelland Moores & Co.) [1985] 1 W.L.R. 1123).
(8) On 6 February 1986 Sir Nicolas Browne-Wilkinson V.-C. expressed views contrary to those of Walton J. on the construction of rent review clauses and laid down "the correct approach" to the construction of such clauses ( British Gas Corporation v Universities Superannuation Scheme Ltd. [1986] 1 W.L.R. 398 at p. 403).
(9) On 17 June 1987 the tenants issued a writ and a statement of claim in which they claimed against the Bank rectification of the lease and, by paragraph 20, a declaration as to the basis on which the future rent reviews were to be conducted and contended that the true construction of the rent review clause was that for which they had contended before the arbitrator.
(10) On 3 November 1987 the Court of Appeal approved and applied "the correct approach" of the Vice-Chancellor in Basingstoke and Deane Borough Council v Host Group Ltd. [1988] 1 W.L.R. 348 (reported on 4 March 1988).
(11) The Bank applied to strike out paragraph 20 as disclosing no reasonable cause of action on the ground of issue estoppel, Walton J. having determined the issue raised in that paragraph, but on 1 July 1988 Sir Nicolas Browne-Wilkinson V.-C. dismissed the application ( Arnold v National Westminster Bank plc [1989] Ch. 63. It was his view that the law admitted of special circumstances which could prevent an issue estoppel from arising, that such special circumstances included the situation where relevant new material, not available at the time of the first decision, has subsequently come to light and that such new material might include not only the discovery of new facts but also a change in the law. The change in the law to which he referred as relevant was the disapproval of Walton J.'s decision in the subsequent cases.
(12) On 8 November 1989 on an appeal by the Bank the Court of Appeal affirmed the decision of the Vice-Chancellor upon substantially the same grounds ( [1990] Ch. 573).
(13) On 25 April 1991 on further appeal by the Bank the House of Lords dismissed the appeal, again on substantially the same grounds ( [1991] 2 A.C. 93).
(14) On 24 March 1992 Master Monroe made the order sought by the tenants in paragraph 20 of their statement of claim. Thereby the tenants, as Knox J. pointed out ( [1993] 1 E.G. L.R. 23 at p.27A), "now have the benefit of cause of action estoppel in relation to all rent reviews later than 1983 in favour of the contention for which they have so long struggled."
Under O. 73 r.5, if the tenants wanted the power to remit under s.22 of the 1979 Act to be exercised, they had 21 days from the award being made and published to apply. The tenants of course have no quarrel with the award made by the arbitrator but only with the award as varied by Walton J. By s.1(8) of the 1979 Act an award which is varied on appeal has effect as if it were the award of the arbitrator. Accordingly the tenants should have applied for an order to remit within 21 days of Walton J.'s order
made on 26 November 1984. Their application on 5 December 1991 was therefore long out of time and they sought from Knox J. an extension of time.
The principal submission of the tenants to the Judge, as he recorded (at p. 29A), "was that an analogy between issue estoppel cases can be drawn with remission cases in a variety of aspects and that the latest development in the law of issue estoppel in the House of Lords in …. this case …. should be applied by analogy for the purpose of remission here, in that it can be said, under both issue estoppel and remission, that the principle of finality should, if its application involves a sufficient degree of injustice, bow to the demands of justice. Fresh evidence is capable of producing such a state of affairs if the stringent conditions regarding the admissibility of fresh evidence are met. So, it is argued, should the discovery of new law….. It is just such new law that sufficed in [this case] to persuade the House of Lords to uphold the decision that issue estoppel should not … be treated as binding in regard to the rent reviews after the first." That submission was repeated in this Court.
The Judge held that the tenants' application should fail on two grounds. First he said that the delay in making the application was excessive: in his view, the path for their remedy, if they had one by way of s.22, was clear at latest when the Court of Appeal's decision in the Basingstoke case was reported on 4 March 1988, and he considered that the 3 3/4 years' delay was greater than it would be right for him to bridge over by extending time. Second, as a matter of substance, he did not regard the case as one appropriate for remission under s.22 for 3 reasons:
(1) the tenants' application was based on an argument that the determination that the reference to arbitration reached was wrong as a matter of law; the error was that of Walton J. and was unappealable and the statutory bar on an appeal should not be circumvented;
(2) if there be any analogy between estoppel and remission it should have been with estoppel per rem judicatam which is not flexible;
(3) prior to the 1979 Act the Court would not have...
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