Property law reports

Rent review: Arbitration

Rent review - arbitration - arbitrator adopting different approach to comparables from that suggested by parties' experts - whether serious irregularity - section 68 of Arbitration Act 1996 - appeal dismissed

Warborough Investments Ltd v S Robinson & Sons (Holdings) Ltd; CA (Lords Justice Clarke and Jonathan Parker): 10 June 2003

The appellant was the landlord and the respondent was the tenant under a 125-year lease, commencing in 1981, of a light industrial estate in Derby.

The premises were let at an initial rent of 11,250 per annum, which was subject to review from time to time.

The lease contained a user clause prohibiting retail use.

A review fell due in 1997, at which date the rent was 18,500 per annum.

The review was conducted by an arbitrator on the basis of written surveyors' reports.

The respondent's expert presented, as a comparable, a nearby property in respect of which, on a 1989 review, the rent had been uplifted in consideration of a relaxation of the user covenants to permit an element of retail use.

However, he took the view that a straightforward application of the formula to be derived from the 1989 settlement to the 1997 rents of that property would produce a result that was not compatible with other evidence.

Consequently, the appellant's expert did not deal with that issue in depth in his submissions.

In his decision, the arbitrator found that the 1989 settlement did provide a valid basis for review, and increased the rent to 27,897 per annum.

On appeal from that decision, the appellant contended that the arbitrator had committed a serious irregularity, within the meaning of section 68 of the Arbitration Act 1996, by adopting an approach to valuation that was not advocated by either party and without giving prior notice of his intention to do so.

Thus, neither party had been given the opportunity to make submissions as to whether that approach was correct.

The judge dismissed the appeal, holding that, once the parties had put the 1989 settlements into the arena, the arbitrator had been entitled to extract from them a case that the differential in the 1989 settlements should be applied.

The appellant appealed.

Nicholas Dowding QC (instructed by Beachcroft Wansbroughs) for the appellant; Rosemary Jackson (instructed by Flint Bishop & Barnett) for the respondent.

Held: The appeal was dismissed.

The arbitrator had not committed a serious irregularity.

Having identified the most appropriate comparable, he had had to determine a suitable deduction to reflect the lack of retail use at the appellant's premises.

That was a question that neither expert had specifically addressed, and the arbitrator had been entitled to look to the 1989 figures for that purpose.

The respondent's expert had not disclaimed the formula derived from the 1989 settlements, but had merely questioned the reliability, as comparables, of the 1997 rents.

The arbitrator had not breached his duty of fairness by deploying the 1989 figures in a way that was materially different from that of the respondent's expert without first giving the parties the opportunity to make representations as to the appropriateness of so doing.

The judge had correctly concluded that those matters had been put into the arena.

Moreover, even supposing that the arbitrator's approach did constitute a serious irregularity, the appellant had not suffered substantial injustice as a result.

Bankruptcy: Occupation rent

Appellant paying mortgage on matrimonial home following husband's bankruptcy - husband residing in matrimonial home until his death - whether appellant liable for occupation rent - appeal dismissed

Byford v Butler: ChD (Mr Justice Lawrence Collins): 10 June 2003

The appellant's husband was adjudged bankrupt in 1991.

Thereafter, the appellant took over the mortgage payments on the family home, which was in their joint names.

The couple lived together in the property until the husband died in 2000.

In proceedings initiated by the respondent trustee in bankruptcy, the judge found, among other things, that the appellant was liable for occupation rent for the period following her husband's bankruptcy.

The appellant appealed.

She contended that the general rule at common law was that one joint owner did not have to pay an occupation rent to the other merely because he or she was in sole occupation of the property unless the joint owner had occupied the property to the exclusion of the other.

The only way in which the appellant could have excluded the trustee in the instant case would have been by refusing to co-operate with the sale of the property, and this had not been the case.

The trustee had, for some considerable time, failed to take any action to protect his interests.

Thus, in the spirit of section 383A of the Insolvency Act 1986 (to be introduced by way of section 261 of the Enterprise Act 2002, which was not then in force), it was inequitable for the trustee in bankruptcy to bring any action at such a late stage.

Roger Bartlett (instructed by Shah & Burke) for the appellant; Adam Deacock (instructed by Darbys Mallam Lewis, Oxford) for the respondent.

Held: The appeal was dismissed.

An occupation rent was not a rule of law but a rule of convenience that would enable the courts to exercise broad justice between co-owners.

Physical occupation of the property, ouster, or forcible exclusion from the property were not necessarily deciding factors in respect of the trustee's entitlement to charge occupation rent.

The trustee had been unable to obtain any financial benefit from the property during the time that the bankrupt's spouse resided in it, and creditors could derive no such benefit until the trustee was able to exercise the remedies available to him.

The appellant had sought and obtained an account of mortgage interest payments.

It was inequitable for her to claim such an account where she had remained in occupation unless she had been willing to submit to an occupation rent: see Leake (formerly Bruzzi) v Bruzzi [1974] 1 WLR 1528.

Section 261 of the 2002 Act provided that if a trustee failed to take steps to realise his interest in the home of a bankrupt or his or her spouse within three years of the bankruptcy, the property would vest in the bankrupt.

However, even if this provision had been in force, it would have been of little assistance.

Although the trustee could have realised his remedies earlier, the appellant had benefited from the trustee's inactivity: house prices, for instance, had risen steeply during that period of time.