Hynes Ltd v O'Malley Property Ltd

• Jurisdiction: Ireland
• Judge: FINLAY C.J.
• Judgment Date: 31 January 1989
• Neutral Citation: 1989 WJSC-SC 361
• Court: Supreme Court
• Date: 31 January 1989

1989 WJSC-SC 361

THE SUPREME COURT

Finlay C.J.

Walsh J.

Griffin J.

25/88

HYNES LTD v. O'MALLEY PROPERTY LTD

IN THE MATTER OF THE ARBITRATION ACTS 1954TO 1980

AND IN THE MATTER OF AN ARBITRATION BETWEEN O'MALLEY PROPERTYLIMITED AND HYNES LIMITED

BETWEEN

HYNES LIMITED

Appellant

and

O'MALLEY PROPERTY LIMITED

Respondent

Citations:

GILSENAN V FOUNDARY HOUSE 1980 ILRM 273

HYNES V INDEPENDENT NEWSPAPERS 1980 IR 204

MCLOUGHLIN V MIN PUBLIC SERVICE 1985 IR 631

UNITED SCIENTIFIC HOLDINGS LTD V BURNLEY BOROUGH COUNCIL 1976 CH 128, 1978 AC 904

PONSFORD V HMS AEROSOLS LTD 1979 AC 63

FR EVANS (LEEDS) LTD V ENGLISH ELECTRIC CO 1977 36 P&CR 185

BRITISH GAS CORPORATION V UNIVERSITIES SUPERANNUATION SCHEME LTD 1986 1 AER 978

O'MALLEY PROPERTY LTD V HYNES LTD 1988 3 567

Synopsis:

LANDLORD AND TENANT

Lease

Rent - Review - Clause - Construction - Office block - Arbitration - Case Stated - Function of High Court - Hynes Ltd. was the lessee of an office block known as the Hynes Building in the the city of Galway - The building consisted of 59,32O square feet of accommodation on three floors - The premises were held by Hynes Ltd. from the lessors (O'Malley Property Ltd.) under a Lease dated 29/3/72 for a term of 99 years from 1/1/72 subject to an initial annual rent of #42,000 and to the covenants on the part of the lessee and the conditions therin contained - The lease contained a rent-review clause wherby the lessors could seek to have the annual rent of the premises increased every seven years of the said term - The clause provided that, in default of agreement, the amount of any increased yearly rent was to be determined by an arbitrator. The parties failed to agree upon the revised rent payable from 1/1/86 and the lessors referred the dispute to arbitration - The rent-review clause provided that, at any such revision the arbitrator should "fix the amount of the new rent at a sum equal to whichever of the following shall be the greater (i) the then existing rent payable hereunder or (ii) a sum equal to the yearly rent which having regard to the terms of this lease (other than the amount of the rent reserved) might then reasonably be expected on a letting of the demised premises with vacant possession on an open market by a willing lessor to a willing tenant for a term equivalent to the residue then remaining and unexpired of the term hereby created without having regard to the effect on letting value of the trade or business then carried on thereat (except in respect of the portion of the demised premises in the actual occupation of the Lessee itself) and without having regard to any improvement lawfully made by the Lessee (other than in pursuance of any obligation under this Lease) provided that in respect of those parts of the demised premises lawfully sublet by the Lessee the rent shall be assessed having regard to the rent recoverable by the Lessee including any restriction on such rent imposed by the Landlord and Tenant Acts and also to the Lessee's responsibility for maintenance repairs and the other outgoings not recoverable under the sub-leases" - The arbitrator stated a special case for decision by the High Court on certain questions of law which arose in the course of the reference - The arbitrator enquired (inter alia) whether, upon the true construction of the lease and the rent-review clause, the "market rental value of the premises on 1st January, l986, should be determined ... taking into account any improvements lawfully made by the lessee (otherwise than in pursuance of an obligation under the lease)" - The lease contained a covenant by the lessees that they would not make any alteration, addition or improvement to the demised premises except by permission of the lessors, and the latter covenanted not to withhold their consent unreasonably in respect of an improvement within the meaning of the Landlord and Tenant Acts - The High Court delivered judgment on 3O/11/87 and the lessees appealed against the judgment and order of the High Court insofar as they related to the said question posed by the arbitrator - Held, in allowing the appeal, that the essential issue was the proper construction to be placed on the words "without having regard to any improvements lawfully made by the lessee (otherwise than in pursuance of any obligation under this lease)" - Held that those words meant that the arbitrator, in determining the amount of the revised rent, should disregard the improvements made by the lessees lawfully other than improvements made by them in pursuance of obligations imposed on them by the lease - Held that the result was that improvements made by the lessees with the consent of the lessors, not being made pursuant to an obligation imposed on the lessees, were made lawfully and did not form the basis of any part of an increased rent; that improvements made by the lessees pursuant to an obligation imposed on them by the lease would form the basis of part of an increased rent, and that improvements made by the lessees in breach of covenant would also form the basis of part of an increased rent - Held that the function of the High Court, in answering the questions posed by the arbitrator in such circumstances, is to construe the relevant part of the contract made by the parties as expressed by them in the lease and to present to the arbitrator, for application by him, the directions of the parties as so construed by the court - (25/88 - Supreme Court - 31/1/89) 1989 ILRM 619

|O'Malley Property Ltd. v. Hynes Ltd.|

CASE STATED

High Court

Jurisdiction - Arbitration - Contract - Construction - Questions posed by arbitrator - Nature of assistance given by High Court - ~See~ Landlord and Tenant, lease - (25/88 - Supreme Court - 31/1/89) 1989 ILRM 619

|O'Malley Property Ltd. v. Hynes Ltd.|

HIGH COURT

Jurisdiction

Case Stated - Arbitration - Contract - Construction - Questions posed by arbitrator - Nature of assistance given by High Court - ~See~ Landlord and Tenant, lease - (25/88 - Supreme Court - 31/1/89) 1989 ILRM 619

|O'Malley Property Ltd. v. Hynes Ltd.|

1 JUDGMENT delivered on the 31st day of January 1989by FINLAY C.J. [NEM DISS]

2 This is an appeal against an Order made in the High Court on the 14th December 1987 on a case stated to the High Court at the request of the parties by an arbitrator, pursuant to the provisions of the Arbitration Acts 1954to 1980.

3 Hynes Limited are the lessees, and O'Malley Property Limited are now the owners of the lessor's interest in premises situate in the City of Galway which were demised by predecessors in title of O'Malley Property Limited toHynes Limited by Indenture of Lease dated the 29th March 1972 for the term of 99 years from the 1st day of January 1972. The premises concerned were commercial premises and the rent provided for in the Lease was subject to review at seven-yearly intervals in accordance with detailed terms provided in the Lease itself, the review in the absence of agreement to be determined by arbitration.

4 The parties failed to agree on the rent payable as and from the 1st January 1986 by reason of the review then falling due, and submitted the dispute thus arising to the determination of a sole arbitrator, namely, John F. Mulcahy, a Fellow of the Royal Institute of CharteredSurveyors.

5 In the course of the hearing before the said arbitrator, differences arose between the parties as to the proper interpretation of the rent review clause contained in the Lease, and as a result he stated a case submitting three questions for the determination of the High Court. After hearing the parties to thecase stated, Gannon J. reserved judgment in the High Court and delivered his...