Pittalis v Sherefettin

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE FOX,LORD JUSTICE DILLON,LORD JUSTICE NEILL
Judgment Date27 Feb 1986
Judgment citation (vLex)[1986] EWCA Civ J0227-6
Docket Number86/0205

[1986] EWCA Civ J0227-6

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE WESTMINSTER COUNTY COURT

(HIS HONOUR JUDGE MARTIN)

Royal Courts of Justice,

Before:

Lord Justice Fox

Lord Justice Dillon

Lord Justice Neill

86/0205

Plaint No. 8438247

Pittalis
and
Sherefettin

MR J. LITTMAN (instructed by Messrs. Bernard Oberman & Co.) appeared on behalf of the Appellant.

MR J. SARCH (instructed by Messrs. Miles Griffiths Piercy & Co.) appeared on behalf of the Respondent.

LORD JUSTICE FOX
1

This is an appeal from a decision of Judge Martin, Q.C., at the Westminster County Court. It concerns the operation of a rent review clause in a lease. It gives rise to three main questions, namely:

  • (i) Whether in the circumstances Section 27 of the Arbitration Act 1950 is applicable so as to empower the Court to extend a time limit in the lease for an election by the tenant that the rent be determined by an independent surveyor.

    (ii) If Section 27 is so applicable, whether the Judge having, in an oral judgment, decided that he should decline to exercise the discretion conferred by the section in favour of the tenant, was entitled to recall that judgment, which had not been entered, and by a further judgment to review the matter afresh and reverse his previous decision.

    (iii) Whether, if the Judge was so entitled, he exercised his discretion properly. And if he did not, the question then arises: How should this Court exercise the discretion?

2

The lease is dated 30th August 1968, and was made between Errato Pittalis (the first plaintiff) and Maritsa Georgiou of the one part and Hassan Ahmet of the other part. The lease demised to Mrs. Georgiou and her permitted assigns the shop and premises known as 355 Caledonian Road, Islington ("the property") for 21 years from 24th June 1968.

3

The rent payable under the lease was £800 per annum for the first seven years, and £850 per annum for the next period of seven years (i.e. until 24th June 1982). From 24th June 1982 for the remainder of the term of the lease (the review period) the rent should be whichever was the higher of £850, and the open market rental value of the property for the review period.

4

The lease further provided that the open market rental value of the property for the review period meant the sum in relation to that period "…. determined as hereinafter provided as being at the time of such determination the rental value of the" (property) "in the open market for a lease for a term of seven years certain consisting of the review period with vacant possession at the commencement of the term and on the same terms and conditions other than as to the amount of the rent and the length of the term as are herein contained without the payment of any premium and disregarding any goodwill attached to the holding by reason of the carrying on thereat of the business of the Lessee…".

5

The lease further provided:

6

"(2) The aforesaid open market rental value shall be determined in relation to the review period in the following manner that is to say either

7

(i) it shall be such a sum as shall be notified in writing by the Lessors to the Lessee not earlier than the twenty fourth day of June one thousand nine hundred and eighty one or as shall within three months after such notification be agreed between the Lessor and the Lessee in writing in substitution for the sum so notified or

8

(ii) at the election of the Lessee by notice in writing to the Lessor not later than three months after the Lessors' notification in writing mentioned in sub-clause (i) above (time in this respect to be deemed to be of the essence hereof) it shall be determined (in accordance so far as not inconsistent herewith with the provisions of the Arbitration Act 1950 or any statutory modification or re-enactment thereof for the time being in force) by an independent surveyor appointed for that purpose by the Lessors and Lessee by agreement in writing or failing such agreement as to such appointment within one month after the Lessee's said notice of election then by an independent surveyor appointed for that purpose by the President for the time being of the Royal Institution of Chartered Surveyors…."

9

Some time prior to 1981 the plaintiffs acquired the freehold reversion to the lease.

10

On 24th February 1972 the lease was assigned to the defendant, Mr Sherefettin (and I will refer to him hereafter as the tenant).

11

On 29th September 1981 the plaintiff gave notice to the tenant that the open market rental value as from 24th June 1982 should be £6,000 per annum. It is common ground that the letter was a valid notice for the purposes of Proviso 2(i) of Clause 1 of the lease.

12

The tenant claimed that he had, by notice in writing to the plaintiffs within three months after the notification by the plaintiffs in the letter of 29th September 1981, elected to have the open market rental value determined by an independent surveyor pursuant to Proviso (2)(ii) of the lease. Judge Toyn found that no such notice had been served; there is no appeal from that finding. The result is that no election has been made under Proviso (2)(ii).

13

Stopping there, unless the tenant can obtain an extension of time for electing, the position under the provisions of the lease is that as from 24th June 1982 the rent for the premises is £6,000. The tenant therefore invokes the provisions of Section 27 of the Arbitration Act 1950. That section is as follows:

14

"Where the terms of an agreement to refer future disputes to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an arbitrator is given or an arbitrator is appointed or some other step to commence arbitration proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the High Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may, on such terms, if any, as the justice of the case may require, but without prejudice to the provisions of any enactment limiting the time for the commencement of arbitration proceedings, extend the time for such period as it thinks proper".

15

The first issue which has arisen is whether Section 27 applies at all. It is said on behalf of the plaintiffs that the parties were not contemplating arbitration; they merely required the amount of the rent to be determined by an expert. It is contended, therefore, that the case is not one of arbitration but of valuation (see Re Dawdy 15 Q.B.D. 426). I do not think that is correct. The lease provides that the determination should be "…in accordance so far as not inconsistent herewith withthe provisions of the Arbitration Act 1950 or any statutory modification or re-enactment thereof for the time being in force". I see no reason why the parties should expressly incorporate the provisions of the Arbitration Act in relation to this matter unless they were intending that the proceedings should indeed be an arbitration.

16

Then it is said that, since notice of election by the tenant was not given in due time there is no subsisting agreement to arbitrate. But Section 27 is applicable to "an agreement to refer future disputes to arbitration". Leaving aside for the moment the question which I mention later, based upon Baron v. Sunderland Corporation (1966) 2 Q.B. 56, in my opinion the lease did contain an agreement to refer a further dispute to arbitration. That agreement was in no sense an agreement to agree. It was contractual. It is true that there would be no reference to the independent surveyor unless the tenant elected. But an agreement to arbitrate in future if a party so elects can, in my opinion, correctly be described as an agreement to refer a future dispute to arbitration; if there is an election, both parties are bound. Looking at the matter at the point of time when the lease was made, there was an agreement to refer a future dispute to arbitration, and not the less so because the reference was upon a contingency (i.e. election).

17

The next point taken by the plaintiffs is based upon the decision in Tote Bookmakers Ltd. v. Development & Property Holding Co.Ltd. (1985) 2 WLR, 603. In that case the provisions of the lease were very similar to those with which we are concerned here. The open market rental was to be determined by an independent surveyor at the election of the lessee by counter-notice in writing to the lessor not more than three months after the lessor's notice (time to be of the essence). The lessee failed to serve a counter-notice within the three months. The lessee made an application to the Court under Section 27 of the Arbitration Act 1950 for the extension of the period of three months. Peter Gibson J. held that it was an essential attribute of an arbitration clause that it gave either party the right to refer the dispute to arbitration, and that since the lessee had a unilateral right to refer, there was no "agreement to refer future disputes to arbitration."

18

That decision was based upon the statement by Davies L.J. in Baron v. Sunderland Corporation (supra) at page 64 as follows:

19

"It is necessary in an arbitration clause that each party shall agree to refer disputes to arbitration; and it is an essential ingredient of an arbitration clause that either party may, in the event of a dispute arising, refer it, in the provided manner to arbitration. In other words, the clause must give bilateral rights of reference".

20

The judgment of Davies L.J. was concurred in by the other two members of the Court.

21

Peter Gibson J., after observing that the statement of the law by Davies I.J. had been...

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