Mitchell & Anor v Morris

There has been a longstanding love affair between commercial men, including those inhabiting the landlord and tenant world, and arbitration, now reflected in the Arbitration Act 1996 (“the Act”). Nevertheless, the virtues of arbitration are not universally admired.

Section 1 of the Act trumpets its good intent by declaring that the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense.

The same Section goes on to state that the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest, and, finally, to state that in matters governed by that part of the Act (Part 1) the Court should not intervene except as provided by that Part.

That is reinforced by Section 9, which provides as follows, in Section 9(1):

“A party to an arbitration agreement against whom legal proceedings are brought ... in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.”

Subsection (3) goes on to provide:

“An application may not be made by a person before taking the appropriate procedural step (if any) to acknowledge the legal proceedings against him or after he has taken any step in those proceedings to answer the substantive claim.”

Then subsection (4), most importantly provides:

“On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.”

I need not read subsection (5).

In this case, proceedings have been brought under a lease by the landlord against the tenant, arising out of the apparent disrepair of the demised premises for which the tenant is responsible.

Schedules of Want of Repair have been served, dated 13^th February 2014, 4^th November 2014 and 2^nd April 2015. Some works have been undertaken by the tenant in response to those notices, but they are said by the landlord to be only ‘scratching the surface’, as it is put in correspondence, and to be unsatisfactory. Accordingly, these proceedings have been commenced to enforce the right of the landlord to have access to the premises to carry out the works in question under the lease.

The lease in question is a lease dated 18^th February 1983. Paragraph 4.2 of the Fourth Schedule to that lease provides:

“The Tenant is to execute forthwith ... all repairs and works required to be done by written notice given to him by the landlord PROVIDED ALWAYS that if the Tenant shall not within one month after service of such notice commence and proceed diligently with the execution of the repairs and works mentioned in such notice it shall be lawful for the Landlord and all persons authorised by the Landlord with or without materials and equipment to enter upon the Farm and execute such repairs and works and the costs thereof shall be a debt due from the Tenant to the Landlord and forthwith recoverable by action or distress as rent in arrear.”

The landlord now wishes to enter the premises for that purpose and the defendant, who is the tenant farmer, disputes the landlord’s right to do so. In addition he does not admit the disrepair of which complaint is made. When I say ‘does not admit’, that is his formal position before me.

Paragraph 9 of the Seventh Schedule to the lease provides as follows:

“All disputes and differences which may hereafter arise between the parties hereto under or in connection with this Lease (not being disputes or differences compulsorily referred to arbitration under the 1948 Act) shall be referred in accordance with the Arbitration Act 1950 to a single arbitrator to be nominated in default of agreement by or on behalf of the President of the Royal Institution of Chartered Surveyors on the application of either party. No award made under this clause shall include any matters compulsorily referred to arbitration under the 1948 Act.”

It is common ground that as a result of other provisions in the lease, the 1948 Act, which was a reference to the Agricultural Holdings Act of that year, should now be read as a reference to the Agricultural Holdings Act 1986, replacing the 1948 Act, and the reference to the Arbitration Act 1950 should now be read as a reference to the Act.

The repairing covenants themselves are very wide and are set out in paragraph 2.1 of the Fourth Schedule of the lease.

The repairing covenants are much wider, on their face, than the covenants that would otherwise have been implied by statute at the material time. The relevant implied covenants are those set out in the Agriculture (Maintenance, Repair and Insurance of Fixed Equipment) Regulations 1973. Any reference in this judgment to a Regulation or Regulations is a reference to these Regulations. Later 2015 Regulations have no application in the present case.

By virtue of the Agricultural Holdings Act 1986, Section 7, Model Clauses from the Regulations are incorporated. Section 7 provides:

“The model clauses shall be deemed to be incorporated in every contract of tenancy of an agricultural holding ... except in so far as they would impose on one of the parties to an agreement in writing a liability which under the agreement is imposed on the other.”

The model clauses, as set out in the Schedule to the Regulations, provide, as does the lease though more extensively, for various repairing obligations on the part of the tenant, which entitle the landlord to serve a notice. Paragraph 4(2) of the Schedule provides:

“If the tenant does not start work on the repairs or replacements for which he is liable under paragraphs 5, 6, 7 and 8 within two months, or if he fails to complete them within three months of receiving from the landlord a written notice … specifying the necessary repairs or replacements and calling on him to execute them the landlord may enter and execute such repairs or replacements and recover the reasonable cost from the tenant forthwith.”

There was no counter-notice in this case to the various notices which were served. Mr Mitchell, on behalf of the landlord, contends, following the decision of Mr Justice Owen in Hammond v Allen [1992] 65 P. & C.R. 18, that time was of the essence of a counter-notice, that there was, therefore, no longer a dispute about the matters which might otherwise be regarded as being in issue and, therefore, that he is entitled to bring these proceedings, notwithstanding the arbitration clause to which I have referred.

However, Hammond v Allen was a decision on the 1950 Act, where arbitration did not give rise to a compulsorily stay, at least in the case of a domestic arbitration, which is the case nowadays in the case of any dispute or difference.

Reverting to the terms of the lease, I have already read the arbitration clause. In my judgment, that clause applies to the disputes and differences which are before me.

It is common ground that the differences are not such as are compulsorily referred to arbitration under the 1948 Act, or its replacement the 1986 Act. Accordingly, paragraph 9 of Schedule 7 on the face of it applies.

As mentioned, it is said by Mr Mitchell that there is no real dispute but that is not the way in which the Act has been construed.

Mr Peters, for the defendant, has not addressed me in any detail but it is clear from what he has told me that his client will endeavour to put forward a genuine dispute, if he can.

However, that is simply not the test. Parliament has responded to the needs of the commercial world, or such of that world as supports arbitration, and has required the stay of proceedings, even when there is no real dispute, so long as there is an assertion of a dispute. That much is clear from early authorities on the Act, in particular the decision of the majority in Halki Shipping Corporation v Sopex Oils Limited [1998] 1 WLR 726.

On the face of it, therefore, it seems to me that the defendant is entitled to a stay. The Defendant has acknowledged service but taken no other step in the proceedings.

It also seems to me that the provisions of the Regulations, to which Mr Mitchell has referred me, are irrelevant because the notices of want of repair in this case were not served pursuant to any of the deemed clauses set forth in the Regulations, but were served pursuant to the actual clauses set forth in the lease and the requirement for a timeous counter-notice does not apply to those. It only applies to a counter-notice to any notice served under the deemed clauses, with which I am not concerned.

Accordingly, it seems to me this is a case where a stay must be inevitable; nonetheless, Mr Mitchell urges upon me that I should exercise the powers of the Court under Section 44 of the Arbitration Act in support of arbitral proceedings to grant an injunction requiring the Defendants to permit the Claimants access to carry out the necessary repairs. As Mr Peters points out, that means that the present proceedings, if they were not so before, are now arbitration proceedings within CPR 62 and have not strictly speaking been commenced in proper form, which should be by Part 8 claim form, setting out particulars of the basis upon which Section 44 is invoked. Nevertheless, I shall deal with Mr Mitchell’s reliance on Section 44 on the merits.

Section 44 provides that the Court has, in relation to arbitral proceedings, the same power of making orders about various matters as it has in relation to legal proceedings. The matters are defined as, amongst other things:

“Making orders relating to property which is the subject of the proceedings or as to which any question arises in the proceedings ... for the preservation ... of the property.”

And later on there is a general reference to the power to grant interim injunctions or the appointment of a receiver.

These powers are qualified by subsection (3), where it is stated:

“If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets.”

Subsection (4) continues:

“If the case is not one of urgency, the court shall act only on the application of a party to the arbitral proceedings (upon notice to the other parties and to the tribunal) made with the permission of the tribunal or the agreement in writing of the other parties.”

There is no real urgency in this case, and no relevant permission or agreement. The notice of want of repair historically goes back to February 2014 and was updated over a year ago, in April 2015. Tenders have been obtained and have now expired, but can no doubt be revived. No application was made to the Court until April of this year.

I do not criticise anyone for not wishing to rush off to court unnecessarily, but the fact that no one felt a compelling need to do so is a clear indication of the lack of real urgency. In my judgment, my jurisdiction is simply not engaged.

I would in any event not be minded to exercise my jurisdiction, because the relief that is sought would effectively grant the claimants all the relief they seek in these proceedings, and it seems to me that the defendant would need to have a proper opportunity to answer the claim of urgency, if nothing else.

As it happens, because of the inappropriate procedural institution of these proceedings by a Part 7 claim form, the question of urgency has not been addressed properly. In the evidence there is an assertion of concern on grounds of urgency by Mr Bosley, but he does not set out what his qualifications are which would give his concerns credence and, in reaching the conclusions he does, relies upon an email from a conservation officer of approximately 12 months ago, which of itself contradicts any real suggestion of urgency.

Whilst therefore I acknowledge that, as is obvious, any non-repair if it continues may, if left unchecked, result in further deterioration, that is not the same as turning the case into one of urgency. The imperative requirement of the Act (and of Section 44 as a whole) is not to take the matter out of the hands of the arbitrator, whether appointed or to be appointed, unless it is necessary to do so. This is reinforced by subsection (5) of Section 44, which provides that:

“In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively.”

It may well be that in a case of real urgency I would have accepted that the arbitral process might justifiably be short-circuited, but that is not this case. It seems to me, as presently advised, that an arbitrator would have ample powers under Section 48 of the Arbitration Act 1996, in a non-urgent case, to make \orders which could themselves be enforced in accordance with the procedure under Section 66 of the Act.

In those circumstances, the application for a stay is granted.