Monella and another v PizzaExpress (Restaurants) Ltd
| Jurisdiction | England & Wales |
| Judge | The Vice-Chancellor |
| Judgment Date | 27 November 2003 |
| Neutral Citation | [2003] EWHC 2966 (Ch) |
| Court | Chancery Division |
| Date | 27 November 2003 |
| Docket Number | Case No: HC 03C00870 |
[2003] EWHC 2966 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Vice-Chancellor
(Sir Andrew Morritt)
Case No: HC 03C00870
MISS E. WINDSOR (instructed by ASB Law) for the Claimants
MISS J. BIGNALL (instructed by Messrs. Lewis Silkin) for the Defendant
Approved Judgment
In this action the claimants, Paul Paolino Montalto Monella and Gro Montalto Monella, seek an order under section 12 of the Arbitration Act 1996 extending the time within which they may apply for the appointment of an arbitrator to determine the revised rent to be paid under a rent review clause contained in a lease dated 30th October 1997. The relevant facts may be summarised as follows.
On 31st January 1997, the Arbitration Act 1996 came into force. Accordingly, it formed part of the background against which the lease in question was executed. Section 12 of the Act is in the following terms:
"(1) Where an arbitration agreement to refer future disputes to arbitration provides that a claim shall be barred, or the claimant's right extinguished, unless the claimant takes within a time fixed by the agreement some step –
(a) to begin arbitral proceedings, or
(b) to begin other dispute resolution procedures which must be exhausted before arbitral proceedings can be begun, the court may by order extend the time for taking that step.
(2) Any party to the arbitration agreement may apply for such an order (upon notice to the other parties), but only after a claim has arisen and after exhausting any available arbitral process for obtaining an extension of time.
(3) The court shall make an order only if satisfied –
(a) that the circumstances are such as were outside the reasonable contemplation of the parties when they agreed the provision in question, and that it would be just to extend the time, or
(b) that the conduct of one party makes it unjust to hold the other party to the strict terms of the provision in question."
I need not quote or refer to subsections (4), (5) and (6).
As I have indicated, the lease in question was executed on 30th October 1997. It was made between two individuals and the defendant, Pizza Express (restaurants) Limited. By the lease, the former granted to the latter a term of 25 years in respect of certain premises commencing on 30th October 1997 at an annual rent of 15,000 but subject to quinquennial, upwards-only reviews. The relevant provisions of the review are contained in clause 8.
Clause 8 opens with the words: "The Revised Rent shall be determined as follows". Clause 8.1 provides for the rent to be agreed "or (in the absence of agreement) determined not earlier than the relevant Review Date at the option of the Landlord either by an arbitrator or by an independent valuer (acting as an expert and not as an arbitrator) such arbitrator or valuer to be nominated in the absence of agreement by or on behalf of the President for the time being of the Royal Institute of Chartered Surveyors or his deputy on the application of the Landlord or the Tenant made not earlier than six months before the relevant Review Date and so that, in the case of such arbitration or valuation the Revised Rent to be awarded or determined by the arbitrator or valuer shall be such as he shall decide should be the yearly rent reasonably obtainable in the open market at the relevant Review Date for the Demised Premises."
Paragraph (A) sets out the assumptions on which the valuation is to be made; paragraph (B) sets out the various disregards to which the arbitrator or valuer is to pay no attention.
Clause 8.2 states:
" IT IS HEREBY FURTHER PROVIDED in relation to the Revised Rent as follows:—
"(A) (In the case of arbitration) the arbitration shall be conducted in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof for the time being in force."
Then (B) deals with valuation and the relevant provision is paragraph (E), which is in the following terms:
"Whenever the Revised Rent in respect of a Review Period has not been agreed between the Landlord and the Tenant before the relevant Review Date and the Landlord has not made any application to the President for the time being of the Royal Institute of Chartered Surveyors as hereinbefore provided the Tenant may serve on the Landlord notice in writing containing a proposal as to the amount of such Revised Rent not being less than the rent payable immediately before the commencement of the relevant Review Period and the amount so proposed shall be deemed to have been agreed by the parties as the Revised Rent for the relevant Review Period and sub-clause (D)(i) hereof shall apply accordingly unless the Landlord shall make such application as aforesaid within one month after service of such notice by the Tenant."
On 31st July 2001, the Court of Appeal gave judgment in a case called Starmark Enterprises Ltd v. CPL Distribution Ltd [2002] 2 W.L.R. 100 It is sufficient for present purposes to quote from the headnote. It states, and I quote:
"Held, allowing the appeal, (1) that the normal presumption in rent review cases that the time was not of the essence could be displaced if the contracting parties had shown clear contraindications in their wording of the rent review clauses in the lease; that where by way of a deeming provision the contract expressed a clear intention as to the consequence of a party's failure to comply with the stipulated timetable the court would not read such a deeming provision as mere administrative direction or conclude that time was not of essence, since such a construction would amount to a rewriting of the contract by which the parties had agreed to be bound; and that, accordingly, the tenant's counter-notice had not been validly served …
(2) Where the ratio of an earlier decision of the Court of Appeal was directly applicable to the circumstances of a case before the Court of Appeal but that decision had been wrongly distinguished in a later decision of the Court of Appeal, in principle it was open to the Court of Appeal to apply the ratio of the earlier decision and to decline to follow the later decision".
Reference is then made to United Scientific Holdings Ltd v. Burnley Borough Council [1978] A.C. 904; Trustees of Henry Smith's Charity v. AWADA Trading and Promotion Services Ltd (1983) 47 P&CR 607; and dicta of Simon Brown LJ in Bickenhall Engineering Co Ltd v. Grandmet Restaurants Ltd [1995] 1 EGLR 110, 116. The headnote concludes Mecca Leisure Limited v. Renown Investments Holdings Limited (1984) 49 P&CR 12 CA not followed.
On 9th October 2001, the claimants acquired the freehold reversion to the lease. On 18th June 2002, the claimants' agent wrote to the defendant's agent proposing a Revised Rent of 37,000 per annum. On 24th June the defendant's agent responded that such a rent was too high. There then ensued without prejudice correspondence or other communications and, so far as the court is concerned, the story recommences on 22nd October 2002 when the claimants' agent asked the defendant's agent to assist with the appointment of an arbitrator.
The 30th October 2002 was the first review date under the lease. On the same day the defendant's agent gave notice to the claimants' agent, which it claimed to be in accordance with the lease, proposing that the Revised Rent should be 21,000. Under the provisions of clause 8.2(E) the claimants had one month after service of that notice to apply for the appointment of an arbitrator.
On 2nd November 2002, a notice dated 30th October 2002 was served on the claimants. On 7th November the claimants' agents rejected the proposal for an annual rent of 21,000. Thereafter, further without prejudice communications ensued and on 9th December 2002 the claimants' new agent completed and posted a notice in the RICS form for the appointment of an arbitrator pursuant to clause 8.2(E). I should indicate at this stage that it is not suggested that the without prejudice negotiations either then or at the earlier stage gave rise to any arguable case under section 12(3)(b) of the Arbitration Act 1996.
The appointment of the arbitrator was duly communicated to the agents for the defendant and on 20th December their solicitors point out to the claimants that the notice had been given out of time. On 23rd January 2003, the claimants indicated that they would make an application for an extension of time under section 12. The defendant's solicitors asked in response on 7th February 2003 for a sight of the application in draft. That request was not complied with but on 18th February the claimants' solicitors reiterated that an application for an extension would be made. On 20th February the President of the RICS appointed an arbitrator in accordance with the request and on 10th March this year the claim form, which is now before me, was issued.
The contention of the claimant is clearly and adequately summarised in paragraphs 2.8 to 2.10 of the claim form. They read as follows:
"2.8 Prior to July 2001 time would not have been considered to be of the essence of the one month time limit containing clause 8.2(E) of the lease in the light of the Court of Appeal decision of Mecca Leisure Ltd v. Renown Investments Holdings Ltd (1984) 49 P&CR 12. However, in July 2001, the Court of Appeal in Starmark Enterprises Ltd v. CPL Distribution Ltd [2002] 2 W.L.R. 1009, held that the earlier case was wrongly decided.
2.9 These circumstances are such as were outside the reasonable contemplation of the parties to the lease when they agreed the...
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...extension of time to be given.” 34 Waller LJ's approach has been followed and notably applied by Sir Andrew Morritt V-C in Monella v. PizzaExpress (Restaurants) Ltd [2004] 1 EGLR 43, Toulson J in Korbetis v. Transgrain Shipping BV [2005] EWHC 1345 (QB) and Hamblen J in SOS v. Inerco Trade......