South Tyneside Borough Council v Wickes Building Supplies Ltd
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Gross,Mr Justice Gross |
| Judgment Date | 04 November 2004 |
| Neutral Citation | [2004] EWHC 2428 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 04 November 2004 |
[2004] EWHC 2428 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Gross
Katharine Holland (instructed by Mayer, Brown, Rowe & Maw LLP) for the Claimant
John Male QC (instructed by Wragge & Co LLP) for B & Q plc
Timothy Morshead (instructed by Nabarro Nathanson) for Mr Jordison
Hearing dates: 17 th September 2004
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.
INTRODUCTION
There are before the Court applications by B&Q Plc ("B&Q") and Mr. Don Jordison to set aside Witness Summonses issued on the 20 th August, 2004 ("the Witness Summons" or "Summonses", as appropriate) by the Claimant ("Tyneside").
In a nutshell, Tyneside is the landlord of premises occupied by the Defendant ("Wickes") at Hanger Lane, Alperton ("Alperton"). There is a dispute as to the rent payable on a rent review under the lease of those premises; that dispute has been referred to a rent review arbitration ("the arbitration").
Although the lease of Alperton was not in evidence, it is understood from Tyneside's skeleton argument that the rent is to be reviewed by reference to "the Open Market Rent", defined as "the full yearly rent at which the Premises might reasonably be expected to be let at the Relevant Review Date by a willing landlord to a willing tenant". The inquiry in the arbitration accordingly goes to the open market rent payable by a hypothetical tenant to a hypothetical landlord for Alperton. The "Relevant Review Date" is the 29 th September, 2003.
For its part, B&Q is in the process of acquiring a lease of premises known as West 5 Centre, Acton (" Acton"). Allied Dunbar Assurance Plc ("ADA") will be the landlord. Mr. Jordison is a director of Threadneedle Asset Management Limited ("Threadneedle") which acts for ADA. On the material before me, there is in existence an Agreement for Lease dated 1 st July 2004 ("the Agreement") with a draft lease attached but the lease has itself not yet been completed. Though for reasons which go to the heart of the present applications the Agreement has not been in evidence, I have been told that it contains a confidentiality clause in the following terms:
" Except as required to comply with any statutory, regulatory or Court requirement and save insofar as already in the public domain, each party will treat the financial terms of this agreement confidential to it and to its professional advisers."
As is well known, B&Q and Wickes are competitors in the DIY market. Additionally, B&Q and Wickes were rival bidders for Acton; in the event B&Q was successful.
The Witness Summonses were issued by Tyneside pursuant to s. 43(2) of the Arbitration Act 1996 ("the 1996 Act"), with (it is said, see below) the agreement of Wickes and the permission of the arbitrator. The Tyneside argument, to which it will of course be necessary to return, is that Acton is a "comparable" which ought to be available for the purposes of the arbitration. As issued, the terms of the Witness Summonses required the Company Secretary of B&Q and Mr. Jordison to attend at the offices of the arbitrator on the 21 st September, 2004 to produce the following documents:
" The transaction documentation relating to the recent letting of premises on the West 5 Centre, Acton, to B&Q Plc, including any expert reports, Heads of Terms, lease and ancillary documentation in relation to the terms or rent."
As already noted, the Witness Summonses were issued pursuant to s.43 of the 1996 Act, which (so far as material) provides as follows:
" 43. Securing the attendance of witnesses
(1) A party to arbitral proceedings may use the same court procedures as are available in relation to legal proceedings to secure the attendance before the tribunal of a witness in order to …produce documents or other material evidence.
(2) This may only be done with the permission of the tribunal or the agreement of the other parties.
(4) A person shall not be compelled by virtue of this section to produce any document or other material evidence which he could not be compelled to produce in legal proceedings."
For present purposes, the relevant court procedures are to be found in CPR 34.1 – 34.3; it is unnecessary to set out those provisions here. For completeness, it may be observed that the provisions of CPR 31.17, dealing with orders for disclosure against non-parties to the proceedings, are limited by sub-part (3) thereof, as follows:
" (3) The court may make an order under this rule only –
(a) the documents of which disclosure is sought are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings;
and
(b) disclosure is necessary in order to dispose fairly of the claim or to save costs."
By way of procedural clarification, I record that no application was made to have this matter transferred to the Chancery Division. As all parties were present and represented on the day the matter was to be heard, it seemed to me right to proceed.
I further record that by the conclusion of the hearing the following background matters were either common ground or not seriously disputable:
i) In the context of rent review arbitrations, counsel were unaware of any practice of proceeding by way of witness summonses where a confidentiality clause was to be found in the lease or agreement, the production of which was sought.
ii) Some rent reviews proceed by way of expert valuation rather than arbitration; there is no equivalent procedural mechanism in such instances for obtaining non-party documents. That said and though there was some debate between counsel for B&Q and counsel for Mr. Jordison (ADA) on this topic, I proceed on the assumption (favoured by counsel for B&Q) that most large rent reviews proceed by way of arbitration.
iii) In the ordinary course of events, information as to rent could be discovered by inspecting the Land Register. This feature, however, does not assist in disposing of the present applications; first, because an application for exemption from publication in the Land Register can be made; secondly, because such information would not in any event become public for some months.
THE EVIDENCE
The evidence relied on by Tyneside is to be found in the Witness Statement of a Mr. Garofalo, dated 16 th September, 2004. Mr. Garofalo is a partner in the firm of Knight Frank LLP, which is retained by Tyneside to act on its behalf in the rent review concerning Alperton. Mr. Garofalo said this:
" (a) In a rent review the quality of evidence is hierarchical. It is accepted that open market evidence provides the best guide as to value followed by lease renewals and … rent reviews….
(b) There is a shortage of open market evidence in the retail warehouse sector in particular in London….
(d) Where there is a shortage of open market evidence the arbitrator is obliged to rely heavily upon [rent] review evidence. Rent review evidence is, by its very nature, retrospective and self perpetuating, and a reliance upon this increases the risk of a flawed valuation."
Mr. Garofalo went on to say that evidence as to Acton was "particularly significant" because, inter alia, in summary: (1) it involved an open market valuation; ( 2) Acton was geographically proximate to Alperton; (3) the planning consents were identical; (4) the businesses of both B&Q and Wickes were in the DIY sector; ( 5) Acton "was agreed" within 9 months of the effective valuation date for the Alperton review. From a "Schedule of Evidence" exhibited to Mr. Garofalo's Witness Statement ("the Schedule"), it is apparent that in the absence of evidence as to Acton, there would be available in the arbitration evidence of 6 rent reviews and 2 comparable open market lettings —albeit that, according to Mr. Garofalo, these open market lettings were less "apposite" geographically and further removed in point of time.
So far as concerns the permission of the arbitrator and the consent of Wickes, Tyneside point, firstly, to an e-mail dated 5 th August, 2004 from the arbitrator in the following terms:
" I understand that both parties [i.e. Tyneside and Wickes] are agreed that it is desirable and necessary to issue witness summons to Threadneedle and B&Q in respect of a recent agreement close to the subject property. In the circumstances it does not seem appropriate to incur further delay and costs through a meeting, and I therefore give permission as requested for a witness summons to be served on these parties."
Secondly, an e-mail from Mr. Garofalo to the arbitrator also dated 5 th August, 2004, states that Wickes does "not object" to the issue of the Witness Summonses.
B&Q's evidence in support of the applications to set aside the Witness Summonses is contained in the Witness Statement dated 10 th September, 2004, from a Mr. Grant, a director of Estates Management employed by B&Q. Mr. Grant, inter alia, questioned the relevance of Acton to Alperton, remarking that "the rent review date is almost 12 months ago and the lease of Acton remains uncompleted". Importantly, Mr. Grant went on to say the following:
" The agreement for lease in respect of Acton contains a confidentiality clause which was a requirement of B&Q in relation to entering into the transaction. The Defendant is Wickes…a major competitor of B&Q. In the circumstances, B&Q resist disclosure of any financial information on the affairs of B&Q to a competitor. B&Q wish the confidentiality of this transaction to be preserved. The level of the rent paid by B&Q at ...
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