Fulham Broadway Trustees v Telefonica UK [2014] EWHC 1048 (Ch)

Case No HC13F03882[2014] EWHC 1048 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue The Rolls Building, 7 Rolls Buildings, Fetter LaneDate Thursday, 20 February 2014
London
EC4A 1NL
Before
MR GEORGE BOMPAS QC(Sitting as a Deputy Judge of the High Court)
Between
FULHAM BROADWAY TRUSTEESClaimantTELEFONICA UKDefendant
Digital Transcript of Wordwave International, a Merrill Corporation Company165 Fleet Street, 8th Floor, London, EC4A 2DYTel No: 020 7421 4046 Fax No: 020 7422 6134Web: www.merrillcorp.com/mls Email: mlstape@merrillcorp.com(Official Shorthand Writers to the Court)
JONATHAN SEITLER QC (instructed by Teacher Stern) appeared for ClaimantEDWARD PETERS (instructed by Shoesmiths) appeared for Defendant
JudgmentMR GEORGE BOMPAS QC:
[1]I have to decide an application made by the Claimant landlord (“the Landlord”) under section 68 of the Arbitration Act 1996 (“the 1996 Act”), the Landlord’s Claim Form having been issued on the 4September 2013. The Defendant (“the Tenant”) is the tenant of shop premises, Unit 9, Fulham Broadway Retail Centre, London SW6. I shall refer to these premises as “Unit 9”. The Landlord is the owner of Fulham Broadway Retail Centre (“the Retail Centre”), and the landlord of other units within the Retail Centre.[2]The facts which give rise to this application are as follows. The Lease of Unit 9 was granted on the 1 July 2005 for a term 15 years from 29 September 2002. The Lease contains a rent review clause with a review of the rent on the 29 September 2012. It also contains a provision for arbitration in the event of disagreement. The reviewed rent was to be the “Open Market Rent”, as defined in the Lease; that is to say:
“The yearly rent which might reasonably be expected to be paid by a willing tenant to a willing landlord for a letting of the whole of the Premises in the open market with vacant possession without a fine or premium for a term of fifteen (15) years (or the residue of the Term remaining at the relevant Review Date whichever shall be the longer) commencing on the relevant Review Date and upon the terms of this Lease (except as the amount of the Principle Rent but including the provisions for rent review every 5 years) and upon [various] assumptions ...”
[3]The parties failed to agree on the reviewed rent at 29 September 2012 and the matter was remitted to arbitration, with Mr Mervyn Saunders, FRICS, being appointed to be the arbitrator by the President’s Office of the Royal Institution of Chartered Surveyors. Procedural directions for the arbitration were given by the Arbitrator in March 2013. These provided materially for the parties to agree a Statement of Agreed Facts, and for there to be two rounds of submissions from each party.[4]The Statement of Agreed facts was to provide for various matters relevant to the reference to arbitration, including, details of Unit 9 (that is the dimensions, areas, zones, if appropriate, uses and relevant facts generally). There was also to be agreement on such matters as, for example, a plan of the geographical and commercial setting of Unit 9. Significantly the statement of agreed facts was to include: “Relevant details in respect of property transactions which have been considered for comparison purposes”.[5]The two rounds of submissions contemplated by the March 2013 directions were, broadly speaking, to be presented in a process of exchange such that neither side would see in advance the submissions which, at the time, the other side was making. The first round of submissions was to be by way of Reports submitted on the 12 April 2013, and the second round by way of Points of Reply to be submitted on the 26 April 2013.[6]There were directions as to what was to be contained within the various rounds of submissions. Paragraph 10 of the directions was as follows:
“The parties’ representatives will agree the facts regarding the comparison transactions between themselves and incorporate these within the Statement of Agreed Facts. If there are transactions which it is not possible ... to incorporate within the Statement of Agreed Facts, then the issue to be proven to the best of your ability and to a minimum standard involving the production of the pro forma Statements signed by one of the parties who were involved with the transaction and can speak to the facts in respect of it. I reserve the right generally to attach such weight as I consider appropriate to all evidence presented to me.”
[7]The March 2013 directions also said this about the Points of Reply:
“The Points of Reply are to be a commentary and criticism by each Expert on the arguments and valuation of the other as contained within the Statements of Case. New evidence in fact, should not be introduced at this stage except by way of rebuttal.”
[8]The intended programme for the exchange of Experts’ Reports followed by Points of Reply appears to have slipped a little. At all events, by the beginning of May the parties’ Surveyors had exchanged their first round of Reports containing evidence and submissions.[9]The Landlord’s surveyor is a Mr Simon Goulddbourn BSc MIRCS, a charted surveyor and a partner of the property consultancy known as Kitchen La Frenais Morgan. He or his firm acted generally for the Landlord in relation to the Retail Centre. By that I mean that he or his firm act not only in relation to the review and arbitration concerning Unit 9, but have acted for the Landlord in relation to other lettings at the Retail Centre.[10]The Tenant’s surveyor is a Mr Ross Thomson MRICS, a chartered surveyor and associate director at Jones Lang LaSalle.[11]At the same time as the Expert’s Reports were signed off on the 1 May 2012, the Statement of Agreed Facts was also signed off. In the Statement of Agreed Facts, there was reference to a letting to a company called “3 Store” in mid-2012 of part of Unit 8 at the Retail Centre (identified in the Statement of Agreed Facts as a comparable for the purposes of the review of the rent at Unit 9). At section 5 of the Statement of Agreed Facts is the heading “Comparable Evidence” and the legend: “Unit 8, Fulham Broadway Retail centre, Fulham Broadway (3 Store)”; and below this is the text “Term: 10 years from the 12 June 2012”; and “Transaction: Open Market Letting”; and “Agreed Rent: £165,000 per annum”; and then there are other matters relating to the 2012 letting of Unit 8, such as the effective date, a break option, provision as to repairs and alienation and so forth, as well as the area (and areas of zones) within Unit 8.[12]I should just mention that from time to time I will refer to this particular letting, describing it as the “2012 Unit 8 Letting.” I do this to distinguish this particular letting from a previous letting of the whole of the same unit, Unit 8, in 2007 to Monsoon. This 2007 letting was discussed in the course of the arbitration as being relevant to the review of the rent of Unit 9.[13]In his first Report, Mr Gouldbourn said various things about the 2012 Unit 8 Letting. This Report included, in section 8 of his Report, the following text under the heading “Comments on Comparable Evidence”:
“8.1 My agency colleagues received confirmation that Hutchinson 3G UK Limited required representation within Fulham Broadway Retail Centre in early 2012. 8.2 My agency partner, Mostafa Sbitri, established a dialogue with Monsoon, alongside his negotiations with Hutchinson 3G such that, a surrender of unit 8 in his entirety could be undertaken to facilitate a letting to Hutchinson 3G. 8.3 The basement accommodation was excluded and is utilised as storage accommodation by Wagamama, who have taken restaurant premises at first floor. 8.4 The previous letting to Monsoon was in the sum of £159,500 per annum based on £170.31 Zone A, with the basement ancillary accommodation taken at A/20.”
[14]In his first Report, Mr Thomson commented on the 2012 Unit 8 letting. Section 8 of his Report, under the heading “Evidence of Value” contained, at paragraph 8.1, about 16 or 17 unnumbered paragraphs, amongst which he said:
“In arriving at my opinion of the yearly rental value of the demised premises, I relied upon the limited recent evidence within the scheme and my own opinion of the open market rental value based on my experience. There has been one recent letting to 3 Store. This was not openly marketed but was an off-market transaction with the removal of one occupier, Monsoon, by way of a surrender of their existing lease and a re-letting to 3 Store. I question the motives of the landlord here; bearing in mind the mobile phone use and the new Tenant, bringing another Phone Shop into an existing Centre with both 02 and EE, already represented in the 10 internal unit shops suggests to me a letting to generate evidence to manipulate the forthcoming rent reviews within the Centre as opposed to a letting to improve the tenant mix, dwell time etc, which is what most Landlord’s (sic) of a shopping centre would strive for. Effectively the tenant mix constitutes 30% of internal unit shops in the scheme, being occupied by phone occupiers, which I believe is an unsustainable amount of competition for all existing Tenants concerned.”
Mr Thomson made various other observations and submissions in his paragraph 8.1, and a little later on continued:
“However, I believe the amount of occupiers who can afford these rents is dwindling significantly. If we look at the hypothetical Tenant as per the rent review assumptions, I believe the quantum of even the passing rent that this unit commands limits the market for this shop.”
Mr Thomson then went on to describe some work that he had undertaken to find evidence to support his belief, adding:
“I approached occupiers that are similar to the existing, i.e. phone operators not represented plus 02, who are hypothetically not in occupation. I also approached other sandwich and coffee operators. The third group I approached were Tenant’s (sic) with a published requirement or the limited number of acquisitive occupiers in the market, such as Card Factory and Vision Express. From the responses that I have received to date demand for this unit appears to be extremely limited if non-existent. There are other units available within the shopping centre, which again are not being openly marketed. I am aware the shop currently occupied by Joy is being offered to potential tenants following a tenant exercising a break option within their lease, effectively bringing their lease to an end in January 2013. I understand that they will have had to give the landlord six months notice to operate the break clause and therefore the landlord has been aware of this pending void from July 2012. It can only therefore be reasonably concluded that the Landlord has been seeking a replacement tenant since July 2012. You will, however, note that Joy remain in occupation, as at the date of this report. I understand they are in occupation on a revised flexible basis requiring 4 weeks notice for either party to bring this agreement to an end. The rent previously payable was £160,000 per annum, where the tenant is now paying £130,000 per annum (pro rata) plus service charge.”
I should just add that the premises occupied by Joy I understand to be Unit 10, next door to Unit 9 on the other side from Unit 8.[15]At the end of May the two Surveyors submitted their Points of Reply to the Arbitrator, again in a process of exchange. Mr Gouldbourn’s Points of Reply contained the following about the 2012 Unit 8 letting and its relevance as a comparable. At section 8 of his Points of Reply, under the heading “Evidence of Rental Value,” Mr Gouldbourn explained:
“Mr Thomson has signed a Statement of Agreed Facts (SOAF) confirming that the letting to 3 Store at unit 8 is an open market letting. If Mr Thomson believed the letting to 3 Store was not on an open market basis then he would not have signed the SOAF. The SOAF was signed by both parties and must be relied upon. You will note elsewhere within these Replies that this is not the only example of Mr Thomson seeking to distance himself from matters which are in his knowledge. Within the second paragraph under this heading, Mr Thomson suggests that the mobile phone operators, such as his existing retained client, are prepared to pay higher rents than other operators to secure representation. He offers no evidence of this, although he has had ample opportunity to provide various examples of his client having paid an overage elsewhere. Mr Thomson goes on to suggest that the Landlord is trying to manipulate the evidence, but then concludes that the addition of another mobile phone operator is unsustainable within this centre. This is contradictory, unsubstantiated hearsay opinion. Mr Thomson has already confirmed within the SOAF that the letting to 3 Store is an open market letting. Any operator would have an understanding of the levels of trade it perceived it could generate within this environment prior to making a bid. If it was of the opinion that competition was unsustainable then it would not have made an offer. Mr Thomson lacks understanding of shopping centres attached to busy transport hubs...”
Then Mr Gouldbourn continued by making several other observations about Mr Thomson’s first Report. Mr Thomson lacks understanding of shopping centres attached to busy transport hubs...”[16]Mr Thomson, for his part, made in his Points of Reply various submissions about the 2012 Unit 8 Letting. These I shall mention later.[17]The Arbitrator’s Award was given on the 7 August 2013. The Award contained formal parts describing the Arbitrator’s appointment, the parties’ representation in the arbitration by the two Surveyors, the directions that he had given, his inspection of the property, and so forth. In particular, at paragraph 7 of the Award, the Arbitrator referred to the Statement of Agreed Facts. He said:
“[The] Statement of Agreed Facts ... does not cover all the details of the few transactions and developing commercial circumstances which one or other of the surveyors regard as key to an understanding of rental values in the Centre, but otherwise, it is relatively comprehensive and includes...[various matters]”
Then in several various numbered sub-paragraphs the Arbitrator described the contents of the Statement of Agreed Facts, including what had been said about the layout of Unit 9, the terms of the Lease and the rent review provisions. Then at numbered paragraph (ix), the following was said:
“Unit 8 Fulham Broadway Retail Centre – Three – OML 12th June 2012: a proforma providing details of the accommodation and terms of the transaction, which are discussed more fully in the Reports.”
I should just add that it is common ground that “OML”, the letters appearing in this part of the Award, are shorthand for Open Market Letting.[18]The Award continued in paragraph 8 to describe the evidence provided by Mr Gouldbourn. As to the 2012 Unit 8 Letting the Award included the same caption that had appeared in paragraph 7 (at sub-paragraph (ix)) dealing with the Statement of Agreed Facts (namely “Unit 8 Fulham Broadway Retail Centre – Three – OML – 12th June 2012”) and followed this with this description:
“This is next door, and [Mr Gouldbourn] considers and analyses both the recent letting of the ground floor unit and the 2007 letting to Monsoon Accessorize when the premises comprised the ground floor with the basement below it. The landlord negotiated a simultaneous surrender of Monsoon Accessorize’s lease at a letting of just the ground floor for 10 years, with a tenant’s break after five years at a reserved rental of £165,000 per annum.”
Pausing there I would comment that what was here stated by the Arbitrator is material which is to be collected from what Mr Gouldbourn had said in his first Report.[19]In paragraph 8 of the Award the Arbitrator also drew attention to certain further evidence provided by Mr Gouldbourn in his Points of Reply and made a finding about this evidence in which he explained that he did not consider it to assist.[20]At paragraph 9 of the Award the Arbitrator dealt with the submissions made and evidence advanced by Mr Thomson. As to this the Arbitrator said the following among other things:
“Mr Thomson questions the evidential merits of the letting to Three. Consequently his is essentially opinion evidence, based significantly on his experience in personal understanding of the open market...”
And then the Award continued with reference to the letting of Unit 10 to Joy. As to this, the Arbitrator commented that what was said by Mr Thomson was:
“discursive, and drawn from information provided by Mr Gouldbourn, who clarifies but does not challenge the terms recited, although he has a different view regarding the commercial context.”
Then the Arbitrator made referenced to Mr Thomson’s belief that the Landlord had been discreetly marketing Unit 10, but without success to date, and that the Landlord had “accordingly” agreed a short term arrangement with Joy at the equivalent of £130,000 per annum plus service charge.[21]At paragraph 10 of the Award the Arbitrator explained:
“There has been a substantial amount of agreement between the parties’ surveyors as to Procedure and regulatory framework to be adopted for the conduct of the arbitration, regarding the state, arrangement and general commercial circumstances of the subject premises to be assumed for the purposes of rental assessment and regarding the facts (but not necessarily the relevance) of the comparison transactions. There are a number of subordinate issues in respect of which the parties disagree, and I list and discuss below those which I regard as the most material, with my findings on them shown below in italicised and in bold lettering.”
[22]There then followed under headings various matters which the Arbitrator regarded as issues, as to which there had been disagreement, with his findings on those issues. These included, for example, findings as to the location of Unit 9, with the Arbitrator recording that Mr Gouldbourn’s was case that the location was primary in a strong retail centre while Mr Thomson’s position was that Unit 9 was simply an end-line unit in a poor retail centre. As to this particular issue, for example, the Award concluded with an italicised and bold lettered finding as follows:
“I rather share Mr Thomson’s view in the matter, and I am not persuaded that the shop is other than one of a terrace in a Centre, with a relatively limited offer.”
[23]In this same fashion the Award dealt with issues surrounding the ground floor area of Unit 9 in terms of Zone A; it dealt with an issue concerning the basement value and another issue concerning reductions as to value to be attributable to the basement letting; it dealt with the state of the market, and submissions as to that and the findings that the Arbitrator could make; it made findings about the assumed 15 year term which was in play for the purposes of the review of rent of Unit 9; and then finally it dealt with the Zone A price. As to this the Arbitrator said as follows:
“Mr Gouldbourn considers that this is £195.50 per sq ft, and that this is clearly demonstrated by the letting of Unit 8 to Three. Mr Thomson considers that in particular the circumstance in respect of Unit 10 reveal that it is £154.39 per square foot.”
And on the Zone A price issue the Arbitrator concluded:
“I am not persuaded that the evidence reliably indicates either a decline or a growth in rental value since Unit 8 was let in 2007, so I shall adopt the rental price of £170.31 per sq ft set then.”
[24]In paragraph 11 of the Award the Arbitrator amplified the arguments about, and his findings in relation to, the Zone A price. He commented that there was a dearth transaction evidence in the Retail Centre, this comprising the 2012 Unit 8 Letting (which he referred to as “a tri-partite arrangement between the landlord, the previous tenant, and the new tenant”); the letting of Unit 8 in 2007; the dealings with Unit 10 (the Joy letting); and “the implications of the vacant Unit 12”. He then went on to consider in more detail the first three of these matters, and to make further findings about them.[25]As to the 2012 Unit 8 Letting the Award set out the familiar caption (“Unit 8 Fulham Broadway Retail Centre - Three – OML – 12th June 2012”), and continued (so far as material for present purposes) as follows with the description of the relevant issue:
“This is next door, and I have inspected it fully, and save for some minor irregularities at the rear, it appears to offer relatively clear space to the full depth. Even after deduction of space for wc’s the NIA here is larger than ground floor of the subject premises. Mr Gouldbourn considers and analyses both the recent open market letting of the ground floor unit, and the 2007 letting to Monsoon Accessorize at a rental of £159,500 per annum when the premises comprised a ground floor with a basement below it. The landlord negotiated the surrender of Monsoon Accessorize’s lease and a letting of just the ground floor for 10 years with a tenant’s break after 5 years. He regards the recent letting as the only recent, and open market, event in the Centre and as such the best available evidence of value. On his analysis the agreed rental of £165,000 per annum equates to a Zone A price of about £195.50 per sq ft … In the view of Mr Thomson, this was not an “open market” but an “off-market” arrangement, the landlord’s motive for engagement and releasing the previous tenant from its lease including a wish to provide apparently authoritative rental evidence for the rent review purposes. Mr Thomson considers that the rental outcome is inconsistent with the true state of the market which in his opinion underlies a failure by the Centre’s letting agents to let Units 10 and 12.”
Then the Award set out the Arbitrator’s finding on the issue, this finding being in his italicised and bold text:
“This letting clearly deserves careful consideration, but I agree with Mr Thomson that it was a closed transaction, and not an open market event; accordingly I find that I should treat it with some caution, and consider it in the context the evolving commercial scene, building up and apparently prevailing of the time of the rent review.”
[26]The Arbitrator continued in paragraph 14 of his Award to deal with the way in which the Surveyors had arrived at their respective reviewed rents for Unit 9; and at paragraph 15 the Arbitrator set out own calculation of the Open Market Rent: this, he was persuaded, was £151,250.00. That was the rent which he concluded for the purposes of his Award and so published.[27]Before me the Landlord seeks to have the Award remitted to the Arbitrator or alternatively set aside. The grounds for this are summarised in the Claim Form as follows:
“(a) failure by the Tribunal to comply with its duty under Section 33 of the Arbitration Act 1996; and (b) failure by the Tribunal to deal with all of the issues that were put to it.”
[28]The relevant statutory provisions, as regards the Landlord’s application, are as follows. First, section 1 of the 1996 Act, headed “General Principles”, is so as far as material in the following terms:
“The provisions of this Part are founded on the following principles, and shall be construed accordingly - (a) the object of arbitration is to obtain a fair resolution of disputes by an impartial tribunal without unnecessary delay or expense ...”
Next, section 33 of the 1996 Act, the section referred to in the Landlord’s Claim Form, is headed “General Duty of the Tribunal” and provides as follows, so far as material:
“(1) The tribunal shall - (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstances of the particular case ... so as to provide a fair means for the resolution of the matters falling to be determined.”
Finally, section 68 of the 1996 Act, which is headed “Challenging the Award: Serious Irregularity” provides as follows, so far as material:
“(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. (2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant - (a) failure by the tribunal to comply with section 33 (general duty of tribunal)... (d) failure by the tribunal to deal with all the issues that were put to it…”
And then sub-section 3 of section 68 gives the court power to make various orders:
“(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award...”
The orders that might be made include remitting the award to the Arbitrator in whole or in part for reconsideration, or setting the award aside in whole or in part. (a) the object of arbitration is to obtain a fair resolution of disputes by an impartial tribunal without unnecessary delay or expense ...” (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstances of the particular case ... so as to provide a fair means for the resolution of the matters falling to be determined.” (a) failure by the tribunal to comply with section 33 (general duty of tribunal)... (d) failure by the tribunal to deal with all the issues that were put to it…”[29]It is common ground between the parties that arbitration, at any rate, in a case such as the present, is intended to be quick and cost effective. It is also clear that, as a consequence, the process may be relatively robust and that the parties should not be unduly sensitive if there is some roughness in the process. Furthermore, the court should approach an arbitrator’s award as a commercial document, not to be parsed in excessive detail or subject to elaborate textual analysis; and the court should allow an arbitrator a reasonable margin of appreciation. I was reminded in particular that the court should not be quick to intervene to upset the arbitral process. Rather the court’s function is to support and protect the integrity of the process, intervening in the process where necessary to discharge that function.[30]In this connection I was shown extracts from numerous judgments. They are sufficiently encapsulated for present purposes by Lawrence Collins LJ in paragraph [46] of his judgment in Bandwidth Shipping Corporation v. Intaari [2007] EWCA Civ 998. What Lawrence Collins LJ said was as follows:
“As Christopher Clarke J observed, paragraph 280 of the Departmental Advisory Committee Report on the Arbitration Bill has been referred to often in this context. It is unnecessary to set it out again. What it emphasises is that what became section 68 was intended for cases where it could be said that what had happened was so far removed from what could reasonably be expected of the arbitral process that the court could be expected to take action. It was ‘really designed as a longstop, only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected.’…”
Then Lawrence Collins LJ made reference to various authorities that supported the proposition he was describing.[31]With this I turn to the arguments which have been made on this present application.[32]As to the Landlord’s first ground, ground (a) in paragraph 27 above, the case set out in the Claim Form is that before the Arbitrator the Tenant had not raised: “The issue of Unit 8 squarely so the landlord did not have a chance to deal with that case before the Award was made. The “issue of Unit 8” said not be have been raised squarely is described as being an issue as to whether the worth of the 2012 Unit 8 Letting as a comparable should have been diminished by the fact that Unit 8 was not openly marketed. It was said, quoting this time from paragraph 14 of Mr Gouldbourn’s witness statement in support of the Claim Form, that: “The fact is that Mr Thomson, though saying that Unit 8 was not openly marketed, did not say that it should therefore be attributed at a lower weight. The [Tenant] did not raise the issue of Unit 8 squarely so the [Landlord] did not have a chance to deal with that case before the Award was made”.[33]In the Claim Form it is then explained that what went wrong was that, as a consequence of the “issue of Unit 8” not having been squarely raised, the Landlord did not explain and make submissions to the arbitrator as to “the difference between the concepts of(i) an open market rental; and(ii) the property being marketed openly in the sense of being advertised and extensively publicised”. Further, so it is said, as a consequence of the “issue of Unit 8” not having been squarely raised, the Landlord failed to point out, as it would have otherwise have done, that:
“the Claimant had targeted a number of operators and had discussed proposed rental values with regard to the availability of Unit 9, instead of just limiting his response to the fact of agreement of Unit 8 being an “Open Market Letting” under the Statement of Agreed Facts.”
[34]As to the Landlord’s second ground, ground (b) in paragraph 27 above, the case made is that there was an important issue for the arbitrator to resolve which he failed to deal with. This, as described in the Claim Form, is that Unit 8 having been “signed off as an open market (sic) under the Statement of Agreed Facts”, it “required explanation from Mr Thomson as to how he came to sign the Statement of Agreed Facts if he was then going to challenge Unit 8 as an ‘open market letting’.”[35]The Claim Form and Mr Gouldbourn’s witness statement in support assert that these grounds constituted serious irregularities which caused substantial injustice because (and I quote from paragraph 19 of Mr Gouldbourn’s witness statement): “had [the Arbitrator] had the benefit of my submissions as to how an ‘Open Market Rent’ can be reached even without public advertisement and had he considered the effect of Mr Thomson agreeing and admitting that Unit 8 was an ‘Open Market Letting’ in the SOAF, he might well have reached another conclusion as to the reviewed rent of Unit 9 favourable to the Claimant, namely a higher rent”.[36]Ground (a) as set out in the Claim Form is in my judgment completely hopeless. In his first Report Mr Thomson did squarely put in play the manner in which the 2012 Unit 8 Letting had come about as a matter impacting on the worth of that transaction as a comparable. His point was that the transaction was “off market”, not having been advertised, and that therefore the weight to be attached to the letting was qualified and other evidence should be given weight. This other evidence was that the Retail Centre was less attractive than it might seem and that the Landlord proceeded to maintain the appearance of value by not openly marketing units.[37]I have set out parts of Mr Thomson’s Report which made this point, in particular the first, second and eighth paragraphs within his paragraph 8.1. Other parts to similar effect are within the twelfth and fifteenth paragraphs of his paragraph 8.1. As to the second of these, what was said:
“With only one piece of off market evidence put forward by the landlord, I do not believe that the letting to 3 Store represents a true reflection of what a tenant on the open market would pay. I have, therefore, carried out some marketing of the subject premises myself and approached accredited retailers that I know are still acquiring shops despite the economic climate and also retailers who had had published requirements …”
And he set out in a table what he considered his research to have shown.[38]Mr Gouldbourn responded in his Points of Reply in a way which conveyed that he understood Mr Thomson’s argument. In his Points of Reply he drew attention to the fact, conceded and agreed in the Statement of Agreed Facts, that the 2012 Unit 8 letting was an open market letting. He further dealt with the substance of Mr Thomson’s argument by making forensic points aimed at countering, by argument rather than by fresh evidence, the suggestion that the 2012 Unit 8 Letting involved an attempt by the Landlord to manipulate evidence. And Mr Gouldbourn also explained, as regards the 2012 Unit 8 Letting, and as relevant to it being an open market letting, that (and I take this from his Points of Reply, a passage quoted above already):
“Any operator would have an understanding of the levels of trade it perceived it could generate within the environment prior to making a bid. If it was of the opinion that competition was unsustainable then it would not have made an offer.”
[39]I am satisfied that the second of the two points in particular made by Mr Gouldbourn would naturally have been read and understood by the Arbitrator as indicating an acceptance of a proposition that Unit 8 had been an off market transaction. Specifically, not only had Mr Gouldbourn not challenged Mr Thomson’s description in this respect, but he had sought to make argument as the evidential value that such a transaction might have, it being accepted that the transaction had not involved advertising and extensive publicity.[40]The argument put forward before me by Mr Jonathan Seitler, Queen’s Counsel, on behalf of the Landlord is that Mr Gouldbourn recognised that he had a killer point, deployed the killer point, and believed that because it was a killer point he had no further need to deal with the case made by Mr Thomson as regards the 2012 Unit 8 Letting. This case, that is Mr Thomson’s case in relation to the 2012 Unit 8 Letting not being an open market one, Mr Seitler says was one which had “put its head above a parapet”, which I take to mean it was a case which had been raised.[41]Mr Seitler’s argument, it is to be noted, is at odds with and destructive of the Landlord’s case on ground (a) as set out in the Claim Form. It presupposes that Mr Gouldbourn had indeed identified that Mr Thomson had put in question the worth of the 2012 Unit 8 Letting as a comparable and was taking the point that while an open market letting the circumstances of it meant that it was unreliable as a guide to the Open Market Rent of Unit 9.[42]As I see it, Mr Seitler’s argument is a brave attempt to save an otherwise impossible position. I reject it for a number of reasons.[43]The first concerns the so-called killer point. The killer point is the point that, having agreed that the 2012 Unit 8 Letting was an open market letting, it was not open to Mr Thomson to advance argument or evidence as to the letting which might call into question the worth as a comparable by reference to the manner in which the transaction had been brought about. In other words it was not open to Mr Thomson to submit to the Arbitrator, or for the Arbitrator to find, that the transaction was an off market one so that there could be some question as to it’s worth as a comparable.[44]It is noticeable that the Claim Form did not put forward the so-called killer point. The case presented by the Landlord was not at inception, and indeed has not been put before me, that the submission made by Mr Thomson to the Arbitrator was one that was ruled out once and for all by Mr Thomson’s agreement of the Statement of Agreed Facts.[45]Second, I have not seen among the materials before the court any evidence to support the case that Mr Gouldbourn believed that he had the so-called killer point to take in a way which would prevent any argument or finding to qualify the value of the 2012 Unit 8 Letting as a comparable. In particular as to this, Mr Gouldbourn’s explanation in his witness statement does not say that he believed that he had any killer point. He simply repeats in his paragraph 14 what is to be found in the Claim Form. That is:
“The fact is that Mr Thomson, though saying that Unit 8 was not openly marketed, did not say that it should therefore be attributed to a lower weight. The [Tenant] did not raise the issue of Unit 8 squarely so the [Landlord] did not have the chance to deal with that case before the Award was made.”
[46]The only other relevant evidence given by Mr Gouldbourn is in paragraph 17 of his witness statement. This, an expansion of the material to be found in the passage in the Claim Form which I have set out in paragraph 33 above, is that:
“Had I known that Unit 8 would have been treated as having a low weight in the Award as a result of it not having been advertised, I would have addressed this point in my submissions in reply and would have highlighted that the [Landlord] had targeted a number of operators and, to discuss proposed rental values with regard to the availability of Unit 9, instead of just limiting my response to the fact of agreement of Unit 8 being an ‘Open Market Letting’ under the SOAF.”
[47]This is no more than assertion that, had Mr Gouldbourn known that the Arbitrator would reject what he had put forward in his Points of Reply as to the worth of the 2012 Unit 8 Letting as a comparable, he would have put in further argument or evidence (so the Claim Form and his witness statement would indicate) as to the relevance of the letting in the light of the way that it had been brought about. But this is not an assertion that he had failed to appreciate that the worth of the Unit 8 2012 Letting as a comparable had been raised.[48]Third, Mr Gouldbourn’s own Points of Reply did not take the so-called killer point. By drawing attention to the fact that 2012 Unit 8 Letting was agreed to be an open market letting, he went on to explain, as I see it, and to make submissions as to, the inferences which might be drawn from the point, not disputed by him, that there had not been an open marketing but that the transaction was off market as stated by Mr Thomson.[49]My conclusion is that, as submitted by Mr Edward Peters for the tenant, Mr Gouldbourn chose not to add to the evidence in relation to the 2012 Unit 8 Letting, not because he thought that the so-called killer point disposed of any possible argument as to the weight to be attached to that transaction by reason of its circumstances, but because he judged that tactically the Landlord’s case was better served by argument than by evidence as to the process which had brought about the transaction.[50]In this regard Mr Gouldbourn was certainly not inhibited in advancing fresh evidence in his Points of Reply, where it appeared that evidence might assist his case. This appears from what was said by the Arbitrator in paragraph 8 of the Award, between sub-paragraphs 5 and 6. The Arbitrator pointed out that Mr Gouldbourn’s Points of Reply contained fresh evidence. It is also to be mentioned that the Arbitrator’s directions at the outset of the arbitration had contemplated that the Points of Reply could include new evidence by way of rebuttal.[51]At all events, whatever may have been Mr Gouldbourn’s state of mind when he chose not to adduce further evidence in relation to the 2012 Unit 8 Letting, any mistaken belief that he may have had was not the fault of the Arbitrator or the result of any procedural failure by the Arbitrator in the conduct of the arbitration. Within the language of section 33 of the 1996 Act, as I find, the Arbitrator had given the Landlord a reasonable opportunity of dealing with the case of its opponent.[52]A further argument advanced by Mr Seitler, to found the Landlord’s first ground, ground (a) in paragraph 27 above, was (i) that following Mr Thomson’s Points of Reply, Mr Gouldbourn believed reasonably that any attack on the weight to be attached to the 2012 Unit 8 Letting as a comparable was precluded by virtue of his own Points of Reply, and (ii) that for this reason Mr Gouldbourn did not seek to put further evidence or argument to the Arbitrator. The proposition seems to be that Mr Thomson’s Points of Reply had in some way abandoned any attack on the 2012 Unit 8 Letting, or so Mr Gouldbourn was led to believe by the Points of Reply.[53]Quite simply, there is no evidence to support this argument. In any case I believe it to be fanciful because it ignores the fact that in his Points of Reply Mr Thomson did indeed repeat his case that the 2012 Unit 8 Letting was not to be regarded as simply a letting following open marketing, but was an off market transaction as part of an attempt to manipulate rental values. This is set out in his paragraph 7.1 of his Points of Reply, where he made submissions conveying that the letting of Unit 8 had involved the intending tenant being “lined up” to take space. It is also in paragraph 8, where Mr Thomson had pointed out that in his first Report:
“Mr Gouldbourn has kept his comments [that is on the Unit 8 2012 Letting] to the bare minimum with the obvious statement that the surrender of the Monsoon unit to make way for the letting to 3 Store and simultaneous provision of basement ancillary storage to Wagamamma has been provided.”
In other words he drew attention to the fact that Mr Gouldbourn had taken the discussion concerning the circumstances of the 2012 Unit 8 Letting to the bare and known minimum and had chosen to go no further.[54]The Landlord’s second ground, ground (b), is, in my judgment, equally to be rejected. Again there are several reasons.[55]First, as will be apparent from what I have already said. I am not satisfied that Mr Gouldbourn fairly made any case that by reason of a so-called killer point it was not open to the Arbitrator to qualify the worth of the 2012 Unit 8 Letting as a comparable. If this is correct it cannot possibly be concluded that by reference to the killer point there was any issue, let alone any important issue, which was before the Arbitrator and which he failed to deal with.[56]On this particular point, I note that the contention put forward in the Claim Form was not that the killer point was an issue which required resolution but which the arbitrator failed to resolve, but that there was an issue concerning the need for Mr Thomson to give an explanation as to how he had come to sign the Statement of Agreed Facts.[57]Second, it is in fact clear that the Arbitrator did deal with the question surrounding the evidential value of the 2012 Unit 8 Letting in that he concluded that it was open to him to accept Mr Thomson’s case on the point. This was the case that by reference to what he had been told about the circumstances of 2012 Unit 8 Letting the weight to be attached to the value of the letting as a comparable could be qualified. Essentially therefore the objection is not that the arbitrator failed to deal with the issue but that he failed to give reasons for the way he dealt with the issue.[58]However, that is not a ground of objection under section 68(2)(d) of the 1996 Act. As to this I would refer to the judgment of Morison J in the case of Fidelity Management SA v. Myriad International Holdings BP [2005] 2 Lloyd’s Rep 508. At paragraph [9], Morrison J cited extracts from the judgment of Coleman J in World Trade Corporation v. Czarnikow Sugar Ltd [2005] 1 Lloyd’s Rep 422, which I shall mention below; and then at paragraph [10] he summarised the position as follows:
“I agree with what Colman J has said. But, at the end of the day, I regard it as the duty of the court to apply the clear wording of section 68, without any judicial gloss, in the light of the scheme of the Act and its legislative purpose. The 'issue' referred to in section 68(2)(d) must be an important or fundamental issue for only a failure to deal with such could be capable of causing substantial injustice; the 'issue' must have been 'put to' the tribunal; there is a difference between a failure to deal with an issue on the one hand and a failure to provide any or any sufficient reasons for the decision. Against this background, I turn to the background to the dispute between the parties and to the award itself.”
[59]To similar effect is the comment made by Thomas J in the case of Hussman (Europe) Ltd vAl Ameen Development&Trade Co [2007] 2 Lloyd’s Rep 83 at page 97 where he observed:
“I do not consider that section 68(2)(d) requires a tribunal to set out each step by which they reach their conclusion or deal with each point made by a party in an arbitration. Any failure by the arbitrators in that respect is not a failure to deal with an issue that was put to it. It may amount to a criticism of the reasoning, but it is no more than that.”
[60]Third, in my judgment the so-called killer point was not an “issue” at all within the meaning of section 68(2)(d). It was simply an argument concerning the way in which the Arbitrator should approach the question of the weight to be given to the 2012 Unit 8 Letting as a comparable. As put by Coleman J in World Trade Corporation v. Czarnikow Sugar Ltd [2005] 1 Lloyd’s Rep 422 at [20], section 68(2)(d) “is confined in its application to essential issues as distinct from the reasons for determining them”.[61]It follows that the application is to be dismissed and strictly it is not necessary for me to deal with the question whether or not one or other of the irregularities contended for gave rise to a “substantial injustice” within the meaning of section 68 of the 1996 Act. However, as I have reached a clear conclusion on this question, I shall deal with it briefly.[62]In my judgment the Landlord has failed to show that the matters complained, even if made out would have reached the threshold required to establish substantial injustice.[63]As to the alleged irregularity argued for as giving rise to ground (a) in paragraph 27 above, the supposed failure to comply with section 33 of the 1996 Act, the argument is described in the Claim Form and in Mr Gouldbourn’s witness statement as being that, had Mr Gouldbourn had a proper opportunity to respond to Mr Thomson’s, case the Arbitrator:
“would have had [Mr Gouldbourn’s] submissions as to how an open market rent could be reached even without public advertisement”
. As to the substantial injustice contended to flow from the ground (a) alleged irregularity, Mr Seitler relied on Mr Gouldbourn’s statement at paragraph 17, the material part of which I have set out above.[64]As to the alleged irregularity argued for as giving rise to ground (b), the supposed failure to deal with all issues put to the Arbitrator, the argument is described in the Claim Form and in Mr Gouldbourn’s witness statement as being that the Arbitrator failed to consider the effect of Mr Thomson agreeing and admitting that the 2012 Unit 8 Letting was an open market letting when he signed the Statement of Agreed Facts; and it is said that had he done so he might have arrived at a different conclusion as to the reviewed rent at Unit 9, and one favourable to the Landlord.[65]When a party alleges that an irregularity of a type set out in the various paragraphs of section 68(2) of the 1996 Act has given rise, or will give rise, to a substantial injustice within the meaning of the section, the onus lies on that party to explain the injustice and to satisfy the court of that injustice. The injustice to be shown is more than the fact of an irregularity: there must be something resulting from the irregularity, that is a real risk of unfairness or prejudice to the party concerned. As to this I refer to what was said by Steyne L in the Lesotho Highlands Development Authority v. Impregilo SpA and others [2006]1 AC 221 at paragraph 28, where he was discussing the requirements set down by section 68 of the 1996 Act. He pointed out that the requirement to be met is a “serious irregularity” with a high threshold required to be satisfied. But he went on to say this:
“Thirdly, it must be established that the irregularity caused or will cause substantial injustice to the applicant. This is designed to eliminate technical and unmeritorious challenges.”
[66]Borrowing from language used by Jonathan Parker LJ in the case of Warborough Investments Limited v. S Robinson & Sons (Holdings) Limited [2003] EWCA Civ 751, [2003] 2 EGLR 149, at paragraph [58], I am not satisfied that the case which would have been presented by Mr Gouldbourn, had he been afforded an opportunity to submit a further report along the lines indicated in his witness statement, would have been so different as to justify the conclusion that the lack of that opportunity in itself caused a substantial injustice, regardless of what the outcome of the arbitration would have been. Nor for that matter, am I satisfied that the outcome in that event would have been materially different.[67]Specifically as to the evidence before the court, Mr Gouldbourn has not explained, beyond the brief summary in paragraph 17 of his witness statement, what further evidence he would have put in to show that the circumstances of the 2012 Unit 8 Letting had in fact resulted in the rental arrived at being one which demonstrated the open market rental value of Unit 9 or how that evidence might have assisted his case. Perhaps the elliptical nature of Mr Gouldbourn’s evidence in his witness statement is because the injustice specifically mentioned in his witness statement was not the missing of an opportunity to put before the Arbitrator evidence which the Landlord might have had, but was his missed opportunity to develop argument concerning valuation concepts. However that may be, I think it was incumbent on the Landlord in this application to give more detail as to the evidence concerned so that the court can see that in fact that there is a real, not fantasy unfairness.[68]I would add that I see nothing in the proposition that Mr Gouldbourn’s supposed missed opportunity to develop argument as to the valuation concepts caused injustice. I say this because the point is only that Mr Gouldbourn might have expanded upon what he said anyway in the eighth paragraph in section 8.1 of his Points of Reply.[69]As to ground (b), there is no evidence or indeed inference that the supposed irregularity had any effect at all. What is apparent is that the Arbitrator did not conclude that by reason of anything in Statement of Agreed Facts he was shut out from looking at the circumstances of the 2012 Unit 8 Letting. That conclusion was open to him, in my judgment. Given that, there was no substantial injustice in his rejection of what Mr Seitler called the killer point, if in so far as ever made, without at the same time giving express reasons. There can have been no effect on his Award, and I cannot see any other basis on which it might be said that the ground (b) irregularity, if established, could have caused injustice to the Landlord.[70]For all these reasons this application is to be dismissed.