Lennon & Harvey Ltd v Murphy & Whelan

• Jurisdiction: Ireland
• Judge: Mr. Justice Murphy
• Judgment Date: 21 December 2004
• Neutral Citation: [2004] IEHC 402
• Court: High Court
• Docket Number: [No. 468 SP/2003]
• Date: 21 December 2004

[2004] IEHC 402

The High Court

[No. 468 SP/2003]

IEHC 402/[2004]

LENNON & HARVEY LTD v. MURPHY & WHELAN

IN THE MATTER OF THE ARBITRATION ACTS,1954– 1998

AND IN THE MATTER OF AN ARBITRATION

BETWEEN:

LENNON AND HARVEY LIMITED

PLAINTIFF

AND

MARGARET MURPHY AND BRIAN WHELAN

DEFENDANTS

Citations:

ARBITRATION ACT 1954 S18

LONDON EXPORT CORPORATION LTD V JUBILEE COFFEEE ROASTING COMPANY LTD 1958 2 AER 411

GERAGHTY V ROHAN INDUSTRIAL ESTATES LTD 1988 IR 419

ARBITRATION ACT 1954 S38(1)(a)

HEGARTY, STATE V WINTERS 1956 IR 320

MONTROSE CANNED FOODS LTD V ERIC WELLS (MERCHANTS) LTD 1965 1 LLOYDS REP 597

MYRON 1969 1 LLOYDS REP 411

GRANGEFORD STRUCTURES LTD V S H LTD 1990 2 IR 351 1990 ILRM 277

MCCARRICK V GAIETY (SLIGO) LTD 2001 2 IR 266 2002 1 ILRM 55

SOKRATIS ROKOPOULOS V EXPERIA SPA (THE AROS) 1978 1 LLOYDS REP 456

ARBITRATION ACT 1954 S38

ARBITRATION ACT 1954 S36(1)

ARBITRATION ACT 1954 S36(2)

Abstract:

Arbitration - Rent review - The Arbitration Acts, 1954 to 1998 - Whether the arbitrator was guilty of misconduct in determining the matter in the absence of the plaintiff.

The plaintiff claimed that the award of the arbitrator determining the revised rent of the property leased by it from the defendants was the result of misconduct by the arbitrator and that the proceedings were a nullity in that the arbitrator failed to respond to the plaintiff’s request for an adjournment of the hearing of the reference, failed to allow the plaintiff to properly prepare and properly present its case, proceeded with an ex parte hearing, failed to comply with its own order for directions, exceeded his jurisdiction and wrongfully fettered his discretion in refusing to consider the plaintiff’s application for an adjournment. Furthermore the plaintiff alleged that the award contained an error on its face in that it stated that the parties were informed that the arbitrator in the absence of attendances by either party would proceed to hear whatever evidence was available to him on the date of the proposed hearing. The plaintiff submitted that the parties were never specifically so informed.

Held by Murphy J. in setting aside the award and remitting the matter for the consideration of the arbitrator: That the alleged failure to comply with directions did not affect the validity of the hearing. However, the arbitrator was guilty of misconduct in proceeding to determine the matter in the absence of the plaintiff. Furthermore the award contained an error on its face, in that the arbitrator failed to communicate to the plaintiff his intention ‘ in the absence of attendances by either party’ to hear whatever evidence was available to him.

Reporter: L.O’S.

Judgment of

Mr. Justice Murphy

1 dated the 21st day of December, 2004.

1.Background

2 By lease dated 26^th May, 1996 made between the first named defendant and Patrick Murphy, now deceased (the lessors) and John Walsh and Patrick Walsh, the second part (the lessees), the lessors demised unto the lessees the predecessor of the plaintiffs a premises located at Cloghran, County Dublin to hold the same for a period of thirty five years from 1^st December, 1993 subjected to the terms and conditions contained therein.

3 The initial rent from December, 1993 to November 1997 was £9,750 per annum and, for the following year, £10,000 per annum. The review date was 30^th November, 1998 and each fifth year thereafter. No review had taken place in 1998.

4 The sixth Schedule to the lease provided for a review of rent. The rental value was defined as the yearly rack rent at which the demised premises might reasonably be expected to be let in the open market at the relevant review date by willing lessor to a willing lessee without premium or any other payment or inducement on certain standard assumptions. The schedule provided for upwards only review and for the determination by a chartered surveyor in the event of the parties being unable to agree the rental value. The surveyor was to have substantial experience in valuing property of a like kind and character to the demised premises to be agreed upon by the parties and in default of agreement to be nominated by the President for the time being of the predecessor to the Society of Chartered Surveyors upon the application of either the lessor or the lessee. Such surveyor was to act as an arbitrator in accordance with the Arbitration Acts.

5 By deed dated 24^th March, 1997 and made between the lessees and the plaintiffs herein the premises demised by the lease, now registered in folio 86956L of the register County Dublin were assigned to the plaintiff for all the residue on expired of the term of the years granted by the lease and subject to the rent, covenants and conditions therein contained.

6 The plaintiff and the defendants were unable to agree the rental value and on 13^th May, 2003 the President of the Society of Chartered Surveyors (the President) on the application of the lessors, one of its members, to act as arbitrator to determine the revised rent of the property in accordance with the provision on the lease.

7 The arbitrator, having duly entered upon the reference, purported to make an award in writing on or about 17^th September, 2003.

2.The Plaintiff's claim

8 The plaintiff claimed that the said award was the result of misconduct by the arbitrator and that the proceedings were a nullity in that the arbitrator failed to respond to the plaintiff's request on 1^st September, 2003 for an adjournment of the hearing of the reference; failed to allow the plaintiff to properly prepare and properly present its case; proceeded with an ex parte hearing; failed to comply with his own order for directions on 20^th May, 2003; exceeded his jurisdiction and wrongfully fettered his discretion in refusing to consider the plaintiff's application for an adjournment. Furthermore the plaintiff alleged that the award contained an error on its face in that it stated that the parties were informed that the arbitrator "in the absence of attendances by either party", would proceed to hear whatever evidence was available to him on 4^th September, 2003, the date of the proposed hearing. The plaintiff says that the parties were never specifically so informed.

9 In the circumstances the plaintiff claimed:

10 (a) An Order that the award of the arbitrator be deemed null and void;

11 (b) An Order pursuant to s. 38 of the Arbitration Act,1954, setting aside the said award;

12 (c) In the alternative an Order pursuant to s. 36 remitting the Order to the reconsideration of the arbitrator.

3.Plaintiff's affidavit

13 Stephen O'Connell Miley, the plaintiff's solicitor filed an affidavit on 28^th October, 2003. He referred to the lease, assignment and correspondence wherein the defendant, by letter of 16^thDecember, 2002, sought to review the rent from 1998 to 2003 suggesting an increase to IR£200,000. On 24^th April, 2003, some four months later, the deponent raised a number of preliminary issues in relation to the review.

14 Notwithstanding the raising of these issues, he noted that the defendant had proceeded to request the appointment of an arbitrator despite of the fact that there was, arguably, no "default of agreement" at the time of that request.

4.The rent review provisions

15 The review of rent provisions contained in the Sixth Schedule provides for the determination by a surveyor appointed by the President where the lessor and lessee

"shall be unable to agree the rental value of the demised premises (whether or not an attempt to reach agreement shall be made) then it shall be determined at the request of either the lessor or the lessee (made not earlier than three months before the relevant review date) by a chartered surveyor having substantial experience in valuing property of a like kind and character to the demised premises to be agreed upon by the lessor and by the lessee and in default of agreement to be nominated by (the) President upon the application of either the lessor or the lessee".

16 The clause does contain a repetition or duplication of default in slightly different terms. Firstly it contains a proviso that if the parties "shall be unable to agree the rental value" then it shall be determined at the request of either by a surveyor to be agreed upon by the parties. Secondly, if the parties were not able to agree on such surveyor either could apply for the nomination of such surveyor by the President.

17 The clause provides for three stages: the parties to agree the rent; the parties, in default of such agreement, to agree on a surveyor to determine the rent or, in default of such second agreement, for the President to nominate such surveyor. The clause is, accordingly, clear as to these stages.

18 The preliminary issue is whether:

19 the parties have been unable to agree the rental value, and the parties have been unable to agree on a surveyor. If so, then either party could apply to the President for his or her appointment.

5.Correspondence prior to arbitrator's appointment

20 It is clear from the correspondence that the parties themselves were unable to agree the rental value. The lessor's solicitor's letter of 16^th December, 2002 suggested that the rent payable be in the sum of £200,000 by way of formal notice. The lessee's solicitor's letter of 24^th April, 2003 regarded such an increase of 2000% from the previous rent as "totally and absolutely unsustainable". The letter suggested that the matter be dealt with at the next review date on 30^th November, 2003 to avoid the necessity of having to deal with two rent reviews within a very short space of time. It further added that the review sought was "totally unrealistic". The letter continued:

"Given the huge planning constraints on user and the fact that the demised premises is little more than a field, its annual value has not changed much over the last ten years or so. It is accordingly our client's...