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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Homepace Ltd v Sita South East Ltd [2008] EWCA Civ 1 (15 January 2008) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2008/1.html Cite as: [2008] EWCA Civ 1 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR NICHOLAS STRAUSS Q.C.
Strand, London, WC2A 2LL |
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B e f o r e :
CIVIL DIVISION
LADY JUSTICE SMITH
and
LORD JUSTICE LLOYD
____________________
HOMEPACE LIMITED |
Claimant Respondent |
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- and - |
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SITA SOUTH EAST LIMITED |
Defendant Appellant |
____________________
Mark Wonnacott (instructed by Bevan Brittan LLP) for the Respondent
Hearing date: 26 November 2007
____________________
Crown Copyright ©
Lord Justice Lloyd:
Introduction
The facts
"all minerals including limestone and clay deposits within the Land excluding for the avoidance of doubt the Reserved Minerals"
In turn Reserved Minerals means:
"up to 12000 tonnes in each year of this lease of limestone suitable for use as building walling and/or rockery stone and/or stone tiles and roofing slates"
"3.5.4 The Lessee's liability to pay the Certain Rent shall cease upon the exhaustion of all the reserves of Minerals in on or under the Land or upon those Minerals becoming economically irrecoverable and there being no reasonable prospect of them becoming economically recoverable within the next ten years PROVIDED THAT:
3.5.4.1 not less than twelve (12) months prior to the date on which the liability to pay the Certain Rent ceases the Lessee has served on the Lessor a notice in writing of its intention to cease payment of the Certain Rent which notice shall append a Surveyor's Minerals Exhaustion Certificate; and
3.5.4.2 if at any time after the Lessee's liability to pay the Certain Rent has ceased and during the subsistence of this Lease any Minerals are extracted at the Property the Lessee's liability to pay the Certain Rent shall resume upon the terms herein before contained"
"A certificate signed by the Surveyor which unequivocally confirms that all Minerals in on and under the Land are exhausted or are not economically recoverable and there is no reasonable prospect of them becoming economically recoverable within the next ten years"
"5.15 Provided it is reasonable to do so in the prevailing market conditions throughout the Term and subject to clause 10 to exercise reasonable endeavours to:
5.15.1 Search for dig work and get the Minerals in a skilful and workmanlike manner without any unnecessary waste and without prejudice to the foregoing work the same continuously and without interruption
5.15.2 Procure waste materials for infilling of the land and without prejudice to the foregoing to continuously infill waste materials at the Land
5.15.3 Procure Foreign Waste Materials for bringing onto the Land and without prejudice to the foregoing to continuously bring Foreign Waste Materials onto the Land"
"7. In relation to the extraction of the Reserved Minerals the Lessee and the Lessor covenant and agree and undertake with the other (as appropriate) and so that these covenants shall run with the Land and bind the parties hereto and their successors in title that at all times during the Term:
7.1 The Lessor shall be entitled to extract and remove entirely for its own benefit the Reserved Minerals and exercise the rights granted in the Second Schedule without hindrance or interference from the Lessee provided that the Lessor shall exercise the Reserved Rights in accordance with the relevant planning permission(s) licence(s) and statutory authorisations notified by the Lessee to the Lessor including (without prejudice to he foregoing) the Working Plan and the Lessor will observe the site rules made by the Lessee's site manager acting properly and reasonably in the course of his duties
7.2 The Lessor and the Lessee will work in compliance with the Working Plan and any reasonable directions of the Lessee's site manager and without prejudice to the Lessor's own working practices and programme of works the Lessor will upon request by the Lessee use all reasonable endeavours to extract within a reasonable period any Reserved Minerals from any part of the Land identified by the Lessee so as to enable the Lessee to comply with the Working Plan
7.3 The Lessor shall not permanently remove any Reserved Minerals from the Land without having first weighed and recorded them on the Lessee's weighbridge maintained under clause 5.8.
7.4 The Lessor shall keep proper records of all Reserved Minerals removed from the Land and shall permit the Lessee to inspect the same on reasonable notice to the Lessor and to take copies
7.5 The Lessee shall not agree with any relevant authority or body any draft Working Plan containing provisions affecting the exercise of the Lessor's rights in respect of the extraction of Reserved Minerals without first obtaining the Lessor's prior written approval to those provisions which approval shall not be unreasonably withheld or delayed
7.6 The Lessor shall indemnify the Lessee against any outgoings charges or expenses in relation to the extraction of the Reserved Minerals
7.7 The Lessor and the Lessee each covenant with the other to use all reasonable endeavours not to interfere with or interrupt the other in its extraction of minerals from the Land and the parties shall wherever possible give the other reasonable notice of their intention to excavate minerals from a particular part of the Land having regard to the operations of the other
7.8 The Lessor and the Lessee each covenant with the other to use all reasonable endeavours not to cause any damage to any minerals being excavated having been excavated or capable of being excavated by the other
7.9 The Lessee shall exercise reasonable endeavours not to use the Land or deal with the Minerals so as to prejudice the commercial operation of that part of the Lessor's business which is based on the exercise of the Reserved Rights
7.10 If a dispute shall arise between the parties over a conflict between the exercise of the rights of the Lessee under this lease and the rights of the Lessor under this clause the matter may be referred by either party for resolution to an independent Chartered Surveyor pursuant to clause 14 hereof but if such Surveyor shall determine that the Lessor's rights cannot be exercised without materially adversely affecting the Lessee's rights hereunder the Lessee's rights shall prevail"
"If at any time after the date of this lease any dispute doubt or question shall arise between the Lessor and the Lessee touching the construction meaning or effect of this lease or any clause or thing contained in it or their respective rights and liabilities under this lease or in case any valuation shall require to be made or amount determined under the provisions contained above then every such dispute doubt question valuation or amount shall be referred to the decision in accordance with the Arbitration Acts 1950 to 1979 of an independent chartered surveyor experienced in mineral matters to be appointed by agreement between the parties or failing agreement to be appointed by the President for the time being of the Royal Institution of Chartered Surveyors or if more appropriate by the President for the time being of the Law Society and whose fees shall be borne equally between the parties to this lease"
"10.3.1 Mineral Exhaustion. There are proven recoverable permitted mineral reserves of limestone remaining to be exploited at Knockdown Quarry and hence it is not appropriate to consider such certification on mineral reserve grounds.
10.3.2 Economic viability The current evidence in respect of costs, selling prices, competitor activity and planning policies / guidance does not support the economic viability of the Knockdown operation but the opposite when considering the situation under each of the individual headings in turn. This Surveyor's Mineral Exhaustion Certificate therefore unequivocally confirms that the Minerals as defined in the lease dated 10 September 1996 are not economically recoverable and there is no reasonable prospect of them becoming economically recoverable within the next ten years."
The law
"Both Campbell v. Edwards [1976] 1 W.L.R. 403 and Baber v. Kenwood Manufacturing Co. Ltd. [1978] 1 Lloyd's Rep. 175 were cases of non-speaking valuations and it is convenient to say a little at this juncture about the distinction between speaking and non-speaking valuations or certificates, which to my mind is not a relevant distinction. Even speaking valuations may say much or little; they may be voluble or taciturn if not wholly dumb. The real question is whether it is possible to say from all the evidence which is properly before the court, and not only from the valuation or certificate itself, what the valuer or certifier has done and why he has done it. The less evidence there is available, the more difficult it will be for a party to mount a challenge to the certificate. This may lead of course to questions such as whether it is proper to join the certifier as a defendant in proceedings for the purpose of getting discovery from him, a matter considered by Geoffrey Lane L.J. in Campbell v. Edwards [1976] 1 W.L.R. 403, 408-409, and whether it is proper to administer interrogatories to the certifier to discover his reasons, a matter considered in an analogous field in Berry v. Tottenham Hotspur Football and Athletic Co. Ltd. [1935] Ch. 718 and Duke of Sutherland v. British Dominions Land Settlement Corporation Ltd. [1926] Ch. 746; but those questions do not arise on this appeal."
"On principle, the first step must be to see what the parties have agreed to remit to the expert, this being, as Lord Denning M.R. said in Campbell v. Edwards [1976] 1 W.L.R. 403, 407G, a matter of contract. The next step must be to see what the nature of the mistake was, if there is evidence to show that. If the mistake made was that the expert departed from his instructions in a material respect - e.g., if he valued the wrong number of shares, or valued shares in the wrong company, or if, as in Jones (M.) v. Jones (R.R.) [1971] 1 W.L.R. 840, the expert had valued machinery himself whereas his instructions were to employ an expert valuer of his choice to do that - either party would be able to say that the certificate was not binding because the expert had not done what he was appointed to do."
His conclusion, to the effect that the determination could not be challenged, is expressed at page 288:
"If the parties to an agreement have referred a matter which is within the expertise of the accountancy profession to accountants to determine, and have agreed that the determination of the accountants is to be conclusive, final and binding for all purposes, and the chosen accountants have made their determination, it does not seem appropriate that the court should rush in to substitute its own opinion, with the assistance of further accountants' evidence, for the determination of the chosen accountants. When the parties provided in appendix I to the sale agreement for a third firm of accountants - in the event, Coopers - to act as the expert in the event of disagreement between Peats and Deloittes, they cannot have had in mind merely disagreements between Peats and Deloittes on simple arithmetic - the adding up of the figures of the sales."
Balcombe LJ agreed with him.
"In my view the key question on this application is whether the Society is entitled to have the court, rather than Mr Reilly, determine the matters raised by the originating summons. If yes then an injunction will follow, subject always to questions of the so-called balance of convenience. If not, not. Whether the Society is so entitled in turn depends on what, as a question of interpretation of the agreement, is the ambit of the matters entrusted by the parties to the nominated arbiter for determination by him. This accords with the approach enunciated by the Court of Appeal in Jones v Sherwood Computer Services plc. … If, on the proper construction of the agreement, the question sought to be put to the court is an issue within the scope of the matters remitted to the nominated arbiter, then (by definition) the parties have chosen, for better or for worse, to have the question determined by a tribunal other than the court."
In the Court of Appeal Dillon LJ approved this approach and agreed with the judge's decision. The other members of the Court of Appeal also agreed.
"What has to be done in the present case under condition 13, as incorporated in clause 29 of the agreement, depends upon the proper interpretation of the words "fully allocated costs" which the defendants agree raises a question of construction and therefore of law, and "relevant overheads" which may raise analogous questions. If the Director misinterprets these phrases and makes a determination on the basis of an incorrect interpretation, he does not do what he was asked to do. If he interprets the words correctly then the application of those words to the facts may in the absence of fraud be beyond challenge. In my view when the parties agreed in clause 29.5 that the Director's determination should be limited to such matters as the Director would have power to determine under condition 13 of the B.T. licence and that the principles to be applied by him should be "those set out in those conditions" they intended him to deal with such matters and such principles as correctly interpreted. They did not intend him simply to apply such meaning as he himself thought they should bear. His interpretation could therefore be reviewed by the court. There is no provision expressly or impliedly that these matters were remitted exclusively to the Director, even though in order to carry out his task he must be obliged to interpret them in the first place for himself. Nor is there any provision excluding altogether the intervention of the court. On the contrary clause 29.5 contemplates that the determination shall be implemented "not being the subject of any appeal or proceedings." In my opinion, subject to the other points raised, the issues of construction are ones which are not removed from the court's jurisdiction by the agreement of the parties."
"Even if it were permissible to join the expert as a party for the purpose of discovery or to administer interrogatories to him (and in my view it would not be permissible) that has not been done. Any application to call the expert to give oral evidence on such a matter could only be on a speculative basis to fish out an unpleaded case and there is no justification in law for such a course. … Counsel for the Defendants accepts that any manifest error must be manifest without evidence from the expert, and the same must apply to any alleged failure to comply with instructions. Since the basis determined and applied by the expert is unknown it cannot be shown that there was any breach of instructions."
Later, in conclusion, he said this:
"As a matter of first impression, I find that on the true construction of the words of the agreement taken as a whole … for an error on the part of Mr Jackson to be manifest it must be plain and obvious on the face of his written decision. The error must be manifest: the terms of the agreement do not contemplate an error which after a lengthy enquiry may be made manifest."
"As to the first of the manifest errors contended for by the purchasers, the expert's determination contained a simple statement of reference to the submissions. However, in the further reasons given by the expert in its letter of 15 March 2001 reference is made to specific paragraphs of the purchasers' first and second submissions. Should the court consider the further reasons? It seems to me the court should. If an expert considers it necessary to amplify or (as in this case) clarify the reasons given, when the terms of reference require reasons, it would not be right to ignore those further reasons in examining the question of manifest error. The documents setting out the further reasons, together with the original reasons, represent the totality of the reasoning and it is that totality that should be examined."
The agreement between the parties
i) The surveyor must have relevant experience in mineral matters; he is appointed either (as in this case) by agreement between the parties or in default by the President of the RICS. There is no question of a unilateral appointment.
ii) According to its definition, the certificate must provide unequivocal confirmation of one or other of the two matters referred to.
iii) Its effect is governed by clause 3.5.4.1; it provides the evidence of a fact whose existence is a precondition for the suspension of the lessee's liability to pay the Certain Rent.
iv) The relevant facts for the present case are two: all Minerals (as defined) are not economically recoverable, and there is no reasonable prospect that they will become economically recoverable within the next 10 years.
v) Nothing in the lease provides expressly that the certificate is conclusive as between the parties, or that it is conclusive absent manifest error, nor is any other such phrase used, nor does the definition expressly require a statement of reasons.
The expert's determination
What is meant by "the Minerals?"
Was the certificate issued on a mistaken basis?
Does this error vitiate the certificate?
Lady Justice Smith
Lord Justice Waller