Tenant’s Appeal Against Arbitrator’s Decision in Rent Dispute Refused
A tenant who challenged the decision of an arbitrator in a dispute with a landlord over rent due under a lease of a hotel has failed in a “serious irregularity appeal”.
The tenant contended that the arbitrator had departed from his appointed role and had acted as an expert in reaching his determination.
By way of background the Court heard that in 1969 a hotel was leased for a term of 125 years with upward only rent reviews every fourteen years. In other words rent couldn’t be reduced – it would either stay the same or be increased after a rent review.
The parties were unable to agree a figure for the last rent review and referred the matter to arbitration.
The tenant’s position was that the annual rent should remain at £350,000 while the landlord argued that the rent should be increased to just over £1.1million. The arbitrator decided upon a figure of £802,500 per annum.
In looking for a fresh arbitration before a new arbitrator, the tenant made a “serious irregularity appeal” under Rule 69 of the Scottish Arbitration Rules and also sought leave to bring in an “Error of Law” appeal under Rule 68.
The lease provided that, in the absence of agreement on reviewed rent, the President of the Royal Institute of Chartered Surveyors in Scotland would appoint an arbitrator.
Shortly after his appointment the arbitrator sent a letter to each of the parties’ surveyors which, amongst other things asked them to declare what role they intended to adopt in the arbitration – in other words as an advocate or an expert witness.
The surveyors replied that they intended to act as advocates which meant that they required the permission of the arbitrator before putting forward their own opinion evidence.
On behalf of the tenant it was submitted that there had been a serious irregularity in the arbitration because (1) the landlord’s surveyor had acted not only as an advocate but also as an expert, (2) the arbitrator had himself acted as an expert and (3) the arbitrator’s reasoning was deficient, or absent, and (4) the arbitrator wrongly took into account inadmissible evidence.
The Court noted that in the course of his submissions the landlord’s surveyor used the expression “in my opinion” but the Court did not regard that wording as converting him from being an advocate to an expert.
The Court did find that there was some blurring of lines between the role of advocate and expert witness but the arbitrator was made aware of this issue before making his award.
The Judge also rejected the argument that the arbitrator had acted as an expert and issued what was in fact his “own view” on the matter.
The Court commented that the lease envisaged that the parties intended any rent review arbitration to be a practical exercise carried out quickly by an experienced surveyor. The arbitrator would be expected to deploy his knowledge in arriving at his decision.
The Court therefore noted that there was nothing within the award to indicate that the arbitrator stepped out-with his role.
It is always important to look closely at rent review provisions in a lease and what is provided in the event the parties cannot agree rent at a review.
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