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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Checkpoint Ltd. v Strathclyde Pension Fund  EWCA Civ 84 (06 February 2003)
Cite as:  EWCA Civ 84,  L & TR 22,  1 EGLR 1,  14 EG 124,  8 EG 128
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
(The Hon. Mr Justice Park)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE MUMMERY
LORD JUSTICE JONATHAN PARKER
| CHECKPOINT LTD.||Appellant|
|- and -|
|STRATHCLYDE PENSION FUND||Respondent|
Jonathan Seitler (instructed by Nabarro Nathanson) for the Respondent
Hearing date : 17th October 2002
Crown Copyright ©
Lord Justice Ward :
The scope of this appeal.
"(a) Whether, to the extent that the arbitrator took into account his own personal experience of specific transactions without giving the parties an opportunity to comment, the arbitrator committed a serious irregularity within section 68(2) of the Arbitration Act 1996, and, if so, whether the irregularity has caused substantial injustice to the [appellant].
(b) Whether the arbitrator's failure to address the [appellant's] evidence concerning the over-supply of and poor demand for comparable premises in the immediate locality of the subject premises was a serious irregularity and, if so, whether this caused substantial injustice to the [appellant]".
"15.2 The surveyor must be a chartered surveyor experienced in the letting and/or valuation of property which is of a similar nature to the Premises, is situate in the same region as the Premises and used for purposes similar to those authorised under this Lease at the date of the Surveyor's appointment.
15.4 The Surveyor will act as an arbitrator under the provisions of the Arbitration Acts (to whom the referral will be a submission to arbitration in accordance with the Arbitration Acts). The Surveyor's decision will be final and binding on every person who at any time is or has been the Landlord or Tenant or a Guarantor under this Lease."
"The parties' representatives adopt a completely different approach to their valuations of the property and that reflects in the comparables they have relied upon."
"Firstly it is a matter of fact that although the first letting of Unit 415 Winnersh Triangle was in September 1999, the second letting of Unit 650 was in August 2000. If one finds that they [provide] a better guide to the value of Arrow Point than say, Doncastle Road, which I have, then the fact that they occurred 8 months [before] and 4 months after the valuation date is not relevant unless there has been some dramatic changes in market conditions. Whilst both parties' representatives seem to have different views on the state of the market, neither of them suggest there has been any dramatic deterioration. Secondly the parties know that I was instructed and personally involved with Winnersh Triangle for some years including the period within which these two lettings were achieved. My experience as letting agent confirms that companies considering Winnersh Triangle would consider similar type buildings in other locations such as Bracknell, Wokingham, Reading and Camberley and indeed potential lettings were lost to locations such as those mentioned, which were possibly inferior but cheaper than Winnersh Triangle." [I have added the emphasis because this is a passage to which the tenant takes exception].
"Mr Tapping submits that there is no demand for high office content buildings in Bracknell and therefore the higher office content of the subject property will not be reflected in a better rent than say, the Sterling Centre. As I have already stated my own experience in the market at Winnersh Triangle does not support that contention." (Again I add the emphasis).
"I therefore accept Mr Garvey's submissions that if one adjusts for differences between Arrow Point and the lettings at the two locations at Winnersh Triangle and Sterling Centre that one arrives correctly at a potential rental of £11 per square foot for the subject property.
There is lastly one further difference between the parties which I must consider. Mr Tapping submits that it is clearly understood in the market that as buildings increase in size there is a decrease in their rental value. Mr Garvey however, argues that this is a simplistic view, there are separate bands in sizes and it is only when one moves from one band to the next that there is a change in rental value.
However, Mr Garvey having arrived at a potential rental of £11 per square foot with which I agree, he then makes a further discount down to £10.25 per square foot which appears to be his feel for the market rather than a discount for any particular factor. If there is a discount for size then I find that it is amply taken into account in this discount."
The challenge to the arbitrator's award.
"referred on two occasions to evidence obtained through his own experience in an area known as Winnersh Triangle (from which the respondent primarily drew its comparables). Specifically, the arbitrator referred to the demand for properties in that area contrasted with demands for properties in the location of the premises, which was not for him in evidence in such terms."
"did not deal with an important part of the evidence set out in the submission and counter-submission of the applicant's surveyor concerning the over-supply of and poor demand for comparable premises in the immediate locality of the premises."
The statutory provisions.
"(1) A party to arbitral proceeding may 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);
(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;
(d) failure by the tribunal to deal with all the issues that were put to it;
(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may
(a) remit the award to the tribunal, in whole or in part, for reconsideration,
(b) set the award aside in whole or in part, or
(c) declare the award to be of no effect, in whole or in part.
The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.
(4) The leave of the court is required for any appeal from a decision of the court under this section."
"(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 opponents. "
"(1) It shall be for the tribunal to decide all procedural and evidential matters, subject to the right of the parties to agree any matter.
(2) Procedural and evidential matters include -
(g) whether and to what extent the tribunal should itself take the initiative in ascertaining the facts and the law."
The judgment of Park J.
"He was entitled to take his personal experience into account, and I do not accept that, when he mentioned in his award a specific component of that personal experience, he thereby infringed the general duty of fairness and impartiality required of him by section 33."
"In my opinion it has not. Mr Fetherstonhaugh says that the award doubled the rent payable by the tenant and that that is a substantial injustice. I accept that the doubling of the rent is a substantial and heavy burden for the tenant. It does not follow that it is a substantial injustice but more importantly, I consider that Mr Fetherstonhaugh's argument about what constitutes the alleged substantial injustice fails to address the question of causation which subsection (2) raises. A crucial question is whether, even assuming that the doubling of the rent is a substantial injustice, the doubling of the rent has been caused by the alleged irregularity on the part of the arbitrator. I have to ask this question: if the arbitrator had not taken into account his personal experience of lettings at Winnersh Triangle, or if he had but had told the parties about it first so that they could comment, do I consider (see "the court considers" in the opening part of section 68(2)) that the arbitrator's award would have been different? Only if my answer is yes could I intervene under the section. I cannot say that the answer is yes. I think it probable that the arbitrator's award would have been exactly the same."
He drew support from the judgment of Tuckey J. in Egmatra A.G. v Marco Trading Corporation  1 Lloyds Reports 862 to which I will refer later.
"If I use Inquisitorial Powers conferred on me under the Arbitration Act I will inform the parties of my findings and ask them to comment on the same."
The judge accepted the landlord's submission that that was a reference to some of the powers which the arbitrator has under section 34 of the Arbitration Act. He was satisfied that:-
"For the arbitrator to draw on his personal experience was not to use inquisitorial powers."
"It is correct that the arbitrator said very little in his award about assertions by Mr Tapping in his two submissions that there was little demand in Bracknell for premises like Arrow Point. However, I do not think that he can be seriously criticised for not doing so, particularly when the criticism is that his decision in this respect exhibited a serious irregularity. My principal reason is that all the references by Mr Tapping to lack of demand for comparable premises in Bracknell were subservient to the ultimate submission that there was one decisive comparable, namely Unit 3 Doncastle Road, and that the rental value for Arrow Point should be the same as the rent which had been agreed for Unit 3."
"to have gone on from there to have worked out a rental value for himself, disregarding the Unit 3 rent but deducing a rent level from the existence of unlet premises and the alleged absence of demand".
The first ground of appeal: the arbitrator's taking into account his own personal experience.
Using personal experience.
The tenant's case.
i) An arbitrator may use his personal knowledge to evaluate the evidence and submissions before him but not to supplement or supplant that evidence: see Fox v Wellfair Ltd.  Lloyd's Rep. 514.
ii) If using knowledge of a specialised character rather than such as may be generally known to an expert in that area, then the arbitrator must afford the parties the chance to comment: compare Top Shop Estates Ltd. v Danino  1 EGLR 9.
iii) When the arbitrator drew upon his own knowledge, he was using his inquisitorial powers as much as if he had consulted someone else: no different standard should be applied just because some of the information was "intracranial rather than external".
iv) Here the arbitrator introduced new evidence, namely that Winnersh Triangle and Bracknell were part and parcel of the same market and subject to similar demand which was not the case advanced by either Mr Garvey or Mr Tapping. That information:
a) was a special fact known only to him;
b) was, therefore, fresh evidence, which
c) was being used to supplant the evidence given in the case, not to evaluate it and which
d) ought, therefore, to have been disclosed.
The landlord's case.
i) Top Shop Estates Ltd. v Danino related to an arbitration governed by the Arbitration Act 1950 which was in different terms from the 1996 Act.
ii) In drawing on his local knowledge, the arbitrator was doing what clause 15.2 of the lease required him to do.
iii) The language of his award ("my experience confirms ") makes it plain he was evaluating the evidence.
iv) Identification of the market and demand was an application of general knowledge.
v) It was known to both parties that the arbitrator's firm has acted as the lessor's agent in the letting of the units at the Winnersh Triangle and so the arbitrator was likely to have acquired information relating to those lettings.
vi) Since it was not suggested that the arbitrator had made independent enquiries of third parties, he was not using his inquisitorial powers.
vii) In answer to my enquiry during argument whether the jurisprudence in the administrative law field threw light on the problem, he helpfully supplied the fruits of that further research for which we are grateful. Mr Fetherstonhaugh was, of course, informed and given the opportunity to comment!
The struggle for a test to determine when the arbitrator's use of personal knowledge constitutes a procedural irregularity.
" it seems to me that an expert arbitrator should not in effect give evidence to himself without disclosing the evidence on which he relies to the parties, or if only one to that party. He should not act on his private opinion without disclosing it. It is undoubtedly true that an expert arbitrator can use his own expert knowledge. But a distinction is made in the cases between general expert knowledge and knowledge of special facts relevant to the particular case."
"The distinction between the general and the specific is easy to state in a broad way, but it tends to break down when analysed with care."
It will not always be easy to determine when special facts relating to a special or particular case become subsumed within the general knowledge which a busy and experienced expert is bound to acquire.
"His [the arbitrator's] function is not to supply evidence for the defendants but to adjudicate upon the evidence given before him. He can and should use his special knowledge so as to understand the evidence that is given the letters that have passed the usage of the trade the dealings in the market and to appreciate the worth of all that he sees upon a view. But he cannot use his special knowledge or at any rate he should not use it so as to provide evidence on behalf of the defendants which they have not chosen to provide for themselves. For then he would be discarding the role of an impartial arbitrator and assuming the role of advocate for the defaulting side. At any rate he should not use his own knowledge to derogate from the evidence of the plaintiffs' experts without putting his own knowledge to them and giving them a chance of answering it and showing that his view is wrong."
Dunn L.J. put it this way at p.529:-
"If the expert arbitrator, as he may be entitled to do, forms a view of the facts different from that given in the evidence which might produce a contrary result to that which emerges from the evidence, then he should bring that view to the attention of the parties."
"What does "new evidence" in this context mean? It cannot mean that, because the inspector has not seen it before, everything that he sees is new evidence. If it meant that, every time that an inspector went on a view he would have to re-open the inquiry because he would be taking into account new evidence, and, of course, at that inquiry, in accordance with the terms of Rule 13(ii) of the Rules of 1974, he would have to go and have another view, and he would then be having further fresh evidence which would require him to re-open the inquiry once more, and one would have a never-ending case like a cat chasing its tail. The task of inspectors would then be even worse than it is at the moment. "New evidence" simply cannot mean that. I think that what it means is simply this: that, if what is seen on a view raises a point that was either not raised during evidence or argument at the inquiry or, if it was raised, was taken as being so peripheral as to be of virtually no account, then there is a duty to reconvene the inquiry or at least to give an opportunity of making representations. If, however, when [what] is seen on a view simply serves to underline or give greater emphasis to some point that was raised at the inquiry, then no such opportunity need to be given. Any other view of the matter seems to me to result in a multiplicity of opportunities for making further representations."
Did the arbitrator act unfairly in this case using his personal knowledge of the Winnersh Triangle lettings?
"11.2 High office content developments such as those undertaken by Slough Estates at Winnersh have established the demand for this type of space where occupiers want the flexibility to operate administrative, as well as core business activities, from the same premises.
12.10 I accept that Winnersh Triangle is regarded as a premier business location and clearly the levels of rent achieved over many lettings reflects this. Nevertheless, the willing tenant when considering a rental bid for the subject property will be aware of this evidence and the levels of rent necessary to secure high office content accommodation. It would no doubt make adjustments for specific location, in the same way as I have in my valuation but the evidence is nevertheless relevant.
13.4 The Slough Estates Development at Winnersh Triangle is one of the closest examples to the subject property and I have highlighted just two of the many lettings that have occurred over the past few years.
14.10 I consider the evidence arising from Winnersh Triangle to be particularly helpful as it demonstrates the level of premium rent that occupiers are prepared to pay in the market. I do, however, accept that Winnersh Triangle is a premier business location and that an allowance should be made for this, together with an allowance for the fact that the properties here are new/more modern with a high office content."
I agree with Mr Seitler that it is implicit in this submission that Winnersh and Bracknell were parts of the same market and subject to similar demands.
"The best evidence that is available is as a result of the letting of Unit 3, Doncastle Road in May 2000.
There is seemingly no other evidence in the market of a similar style of building, at similar date. This leads me to the conclusion that this is an irrefutable item of evidence setting the rental trend for the subject building.
The subject building is a distribution unit and is used as such by the occupiers. The location is some distance from the motorway junctions and is in fact, due to the immediate road layout, somewhat difficult to access when being approached from Bracknell town centre direction. It is pointless comparing the subject unit to new units at the new high tech distribution park at Winnersh Triangle for this "locational" reason as well as for many other reasons."
"It is not "pointless" to compare the subject property with Winnersh Triangle as this is a location where high office content warehouses have been developed and successfully let. Within my valuation I have made adequate allowance for the location advantage enjoyed by Winnersh Triangle, although this does not detract from the appropriateness of comparison."
"It is in my view very odd to suggest that in May 2000 there was a market in the Greater Thames Valley area (presumably an area including Winnersh, Reading etc.), characterised by good tenant demand and to include Bracknell in the same statement. Developers built high office content sheds where they believed there is a strong element of tenant demand i.e. in Winnersh Triangle but not in Bracknell. There is no evidence in the local market to suggest that demand for high office content exists or produces a higher tenant rental bid.
I have already stated my concern over including the Winnersh Triangle as comparable evidence as it is a different style of development with high tech warehousing, its own motorway junction and the estate has always attracted higher rental bids than available buildings within Bracknell itself."
Did the arbitrator fail to conduct the proceedings in accordance with the agreed procedure that if he used his inquisitorial powers, he would inform the parties and ask them to comment?
The second ground, namely whether the arbitrator failed to deal with the issue of over-supply of and poor demand for comparable premises in the immediate locality of the subject premises..
"17. In Egil Trust Co. Ltd. v Pigott-Brown  3 All ER 119, 122 Griffiths L.J. stated that there was no duty on a judge, in giving his reasons, to deal with every argument presented by counsel in support of his case.
"When dealing with an application in chambers to strike out for want of prosecution a judge should give his reasons in sufficient detail to show the Court of Appeal the principles on which he has acted and the reasons that have led him to his decision. They need not be elaborate. I cannot stress too strongly that there is no duty on a judge, in giving his reasons, to deal with every argument presented by counsel in support of his case. It is sufficient if what he says shows the parties and, if need be, the Court of Appeal, the basis on which he has acted. (See Sachs L.J. in Knight v Clifton  Ch 700, 721)".
18. In our judgment these observations of Griffiths L.J. apply to judgments of all descriptions
19. It follows that, if the appellate process is to work satisfactorily, the judgment must enable the appellate court to understand why the judge reached his decision. This does not mean that every factor which weighed with the judge in his appraisal of the evidence has to be identified and explained. But the issues the resolution of which were vital to the judge's conclusion should be stated and the manner in which he resolved them explained. It does require the judge to identify and record those matters which were critical to his decision."
"Looking at the market for industrial and warehousing accommodation in Bracknell itself, it is clear to see that the level of demand for warehousing units is very low. Some new developments such as the Sterling Centre have taken over a year to find occupation. Indeed, the completion of this scheme pre-dates the subject rent review and even today, some units within that development remain available. There are a number of units in the market which have been marketed by professional agencies for some time. Notably the Western Centre, directly opposite the subject property, are high office content warehouses and these have been on the market for over 18 months."
"JT considers that "the demand for warehousing units is very low" in Bracknell. I agree that some units are sticking on the market and that is why I suggest that market conditions have been fairly static between 1999 and the present day. Nevertheless when deals are concluded they are at high levels of rent and on long lease terms. The evidence clearly demonstrates this.
JT mentions the Western Centre again, but provides no details. One of the units that has "been marketed by professional agents for some time" might be the Astron Centre on Western Road I act for the landlord Terms are being negotiated with an occupier presently who is prepared to take a long lease at the quoted rent. Therefore, the availability of the units referred to by JT is not necessarily as simple as it seems."
"Whilst both parties representatives seem to have different views on the state of the market, neither of them suggest that there has been a dramatic deterioration."
"There was no serious irregularity if, given that the evidence did contain what Mr Garvey had written, the arbitrator did not feel impelled to start on a whole new line of reasoning about what ought to have been the impact on the rental value of Arrow Point of the existence of unlet warehouse buildings in Bracknell."
If there was a serious irregularity, has it caused substantial injustice to the tenant?
"The test of "substantial injustice" is intended to be applied by a way of support of the arbitral process, not by way of interference with that process. Thus it is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process that we would expect the court to take action. In short, clause 68 [which is now section 68] is 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."
Tuckey J. observed, and I agree with him:-
"So this is no soft option clause as an alternative to a failed application for leave to appeal."
Jonathan Parker L.J.: