Epoch Properties v BHS and Fall

• Jurisdiction: Jersey
• Court: Court of Appeal
• Judge: Nutting JA,Vaughan JA
• Judgment Date: 10 September 2004
• Neutral Citation: [2004] JCA 156
• Date: 10 September 2004

[2004] JCA 156

COURT OF APPEAL

Before:

The Hon. M.J. Beloff, –Q.C., President; Sir John Nutting, Q.C.; and D.A.J. Vaughan, Esq., C.B.E., Q.C.

Between

Epoch Properties Limited

Appellant

and

British Homes Stores (Jersey) Limited

First Respondent

and

Peter Fall as President of the Royal Institution of Chartered Surveyors

Second Respondent

Advocate M.L. Preston for the Appellant;

Advocate K J Lawrence for the First Respondent;

Advocate F B Robertson for the Second Respondent.

Authorities.

Board of Education v. Rice [1911] AC 179

Kanda v. Government of Malaya [1962] AC 322 at 337

New Zealand Government Property Corporation v. H.M. & S. Ltd [1982] Q.B. 1145

Ocean Accident & Guarantee Corporation v. Next plc [1996] 2 EGLR 84.

In re an Advocate (1978) JJ 193.

Browne v Dunn (1893) 6 R 67 (HL).

Pittalis v Grant [1989] QB 605; [1989] 2 All ER 622 (CA).

Nikko Hotels (UK) Ltd v MEPC plc [1991] 28 EG 86; [1991] 2 EGLR 103.

Pontsarn Investments v Pankki [1992] 1 EGLR 148; [1992] 22 EG 103.

Law Society of Jersey Code of Conduct: Rule 18.

Fordham: Judicial Review Handbook: pp.81–87: Materiality.

Re Smith v Fawcett (1942) 1 All ER 542 (CA.).

United Cooperatives v Sun Alliance & London Assurance Co., Ltd. [1987] 1 EGLR 126.

Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1947] 2 All ER 680.

Jones v Sherwood Computer Services Ltd (1992) 1 WLR 277.

Veba Oil supply & Trading GmbH v Petrotrade Inc [2001] EWCA Civ. 1832.

Appeal by the Appellant against the Judgment of the Royal Court of 26th May, 2004, dismissing the Appellant's Application for a declaration that the appointment by the President of the Royal Institution of Chartered Surveyors of an expert to conduct a rent review was invalid as being contrary to the terms of the lease in question.

THE PRESIDENT:

Introduction

1 This is an appeal by the Appellant (“Epoch”) from the Judgment given by the Samedi Division of the Royal Court on 26 ^th May 2004 (“the Judgment”) in which the Royal Court dismissed Epoch's application for a declaration that the appointment of Mr Finn FRICS (“Mr Finn”) on 27 ^th February 2003 by the Second Respondent (“the President”) as an independent expert to determine a rent review between Epoch as landlord and British Home Stores (Jersey) Limited (“BHSJ”) as tenant was invalid.

The lease

2 The lease was entered into on 25 ^th March 1988 between the Scottish Widows Fund and Life Assurance Society (“Scottish Widows”) as owner and BHSJ as tenant in relation to the property at 8–18 King Street and 2–12A Don Street, St Helier (“the premises”). Epoch subsequently acquired the premises from Scottish Widows and is accordingly now the landlord.

The Premises

3 The definition of demised premises in the lease is “ the land and premises” more particularly described in French in the introduction to this present lease, including “ all heating, ventilation and air conditioning plant and equipment, lifts, escalator and lighting but not tenant's display or specialist lighting (xc.1). The French description is (so far as material):

“… certain bâtiment comprenant un grand magasin, bureaux, offices, emmagasinage de monte-charge et appartenances connu sous le nom de “British Home Stores” érigé sur le plupart de l'emplacement sur lequel antérieurement étaient construits les bâtiments formant partie des prémisses connues sous le nom de “Noel & Porter” et comprenant les propriétés numéros huit, dix, douze, quatorze, seize et dix-huit “King Street” et les numéros deux, quatre, six, huit, douze et douze A “Don Street” et un édifice au Nord de ladite propriété numéro douze A “Don Street”.”

4 The lease provides for periodic rent reviews. The premises are in fact (and were on the valuation date) a British Homes Stores (“BHS”) retail store with a lengthy frontage to King Street immediately adjoining Woolworths.

5 The rent review pattern is three-yearly on each third anniversary of the date of grant (the current review was due on 25 ^th March 2003). Under the rent review provisions in Schedule 2, the basic rent is increased by the amount (if any) by which the “Open Market Rent” on the review date in question exceeds the basic rent.

6 “Open Market Rent” is defined in clause 1(1) of the Contract Lease as being (so far as material):

“the fair yearly market rent at which the Demised Premises might reasonably be expected to be let at the Relevant Review Date by a willing landlord to a willing tenant in the open market with vacant possession subject to the provisions of this Lease other than the amount of yearly rent hereby reserved but including the provisions for rent review and without fine or premium for a term equal to the greater of fifteen years and the residue of the contractual term hereby granted but commencing on the Relevant Review Date assuming:–

(a) if not a fact that the Demised Premises and all buildings comprised therein are then in existence and (if damaged) fully restored and enjoy all rights necessary for the full beneficial use thereof

…

(d) that (notwithstanding any act, omission or default of the Tenant or other circumstance) the Demised Premises are fit and ready for immediate occupation and use and can lawfully be used for any of the uses permitted under the terms of this Lease

…

7 Paragraph 2 of the Second Schedule to the lease provides that, in the event that the parties cannot agree the Open Market Rent, either may require it to be referred to

“The Surveyor who shall be appointed by the Landlord and Tenant or in default of agreement on such appointment by the President (or other the Chief Officer or acting Chief Officer) for the time being of the Royal Institution of Chartered Surveyors.”

Paragraphs 3 and 4 provide that the Surveyor is to act as an expert and not as an arbitrator unless the parties agree otherwise and his decision is to be final and binding on the parties.

8 The Surveyor is defined in Clause 1(1) of the lease as follows:–

“An independent Chartered Surveyor of recognised standing experienced in the valuation and letting of premises so far as practicable of similar character or comparable to the Demised Premises within the Island of Jersey or if there are not such premises within the Island of Jersey then within the Channel Islands or nationally (as the case may require) appointed from time to time to determine the Open Market Rent pursuant to the provisions of the Second Schedule”.

9 We also draw attention to the user clause in Schedule 3 to the lease which provides for the covenants and obligations of the tenant, to which we were referred.

USER

20.(1) Not to use the Demised Premises or any part thereof nor permit or suffer the same to be used:–

• (a) for residential purposes or as sleeping accommodation

• (b) for any noisy, noisome, noxious, offensive or dangerous trade, art, manufacture, business or occupation, or for any sale by auction, public exhibition, political meeting, show, spectacle or gambling or for any illegal or immoral purpose

• (c) in any way for any purpose which may be or tend to become a nuisance, damage or disturbance to or prejudice the Landlord or the owners or occupiers of any premises in the ownership of the Landlord adjoining or near the Demised Premises

(2) Without prejudice to the generality of the foregoing not to use the Demised Premises nor permit the same to be used other than as a shop or shops for carrying on a retail trade or business or retail trades or businesses within Class 1 of the Island Planning (Use Classes) Order 1965 and as ancillary to that main use showrooms, restaurants or cafeterias, food hall, storerooms, stockrooms and offices and caretaker accommodation and for the subsidiary uses of banking, insurance, estate agency, financial advice or similar financial service uses.

The Background Dispute

10 The underlying differences between the parties can be summarised as follows: The premises are occupied by BHSJ which trades there as BHS. BHSJ contends that the premises are to be treated as a variety store. A variety store is simply an expression to indicate a very large store and the now modern expression is “large retail” or “large retail space”. The evidence suggests that the rental value of a variety store is assessed by reference to an assessed figure multiplied by the gross internal area of the premises (“the GIA approach”). Epoch, on the other hand, contends that the property should be treated as a prime retail store. The evidence suggests that the rental value of such premises is assessed in zones (“the Zone approach”). The underlying rationale of the Zone approach is that the front of a shop is the most valuable because it is the prime space for selling. Thus Zone A is the area to a depth of 30 feet (in St Helier) from the frontage, the next 20 feet of depth is referred to as Zone B and so on. In valuation terms, each zone is valued at half the rate of the preceding zone. Furthermore, unlike variety stores, the rental value is calculated on the net internal floor area which excludes areas such as staircases, staff toilets, pillars and columns.

The correct interpretation of the definition of Surveyor

11 In order to fit within the definition in the lease, the person appointed as Surveyor by the President must be:–

• (i) a chartered surveyor;

• (ii) independent;

• (iii) of recognised standing; and

• (iv) experienced in the valuation and letting of premises so far as practicable of similar character or comparable to the demised premises within the Island of Jersey (“the relevant experience”) or if there are not such premises within the Island of Jersey then within the Channel Islands or nationally as the case may require.

12 The Royal Court noted the parties disagreed on the effect of the inclusion of the words ‘ so far as practicable”, — although the argument was not resurrected before us.

13 The relevant part of the definition in...