Living Waters Christian Centres Ltd v Fetherstonhaugh

In a rent review arbitration, an arbitrator’s assessment of the weight to be given to comparable evidence is not ordinarily misconduct. It may amount to misconduct only where the assessment results from procedural irregularity or unfairness, or produces a conclusion which no reasonable arbitrator could reach on the evidence. A property may remain evidentially relevant despite being an imperfect comparable or having incomplete information. The arbitrator may determine admissibility in the reasoned award rather than by an advance ruling. Agreed facts may be considered even though they are not confirmed by persons involved in the underlying transaction. An error of law, without more, does not itself constitute misconduct.

The tenant appealed from the dismissal by Colman J of applications to set aside or remit a rent review award for alleged arbitrator misconduct. The dispute concerned whether the arbitrator had improperly admitted and relied on information about St Brigid’s School as a comparable property.

The arbitrator had directed that normal rules of evidence would apply and had set requirements concerning written confirmation of comparable transactions. Both parties nevertheless relied on material supplied by Mr Williams, some of which was expressly identified as hearsay. The arbitrator treated certain facts about St Brigid’s as agreed and used the property as the most useful, though imperfect, comparable.

The central issue was whether receiving and weighing that material, and declining to rule on admissibility before the award, amounted to misconduct or procedural unfairness.

1. Appeal dismissed. The arbitrator was entitled to consider the admissible and undisputed facts relating to St Brigid’s School and to attach such weight to them as he considered appropriate.
2. The Court of Appeal accepted Colman J’s general observations about comparables. The expression “comparable” includes a property making any evidential contribution to valuation. A property with incomplete information or special circumstances may be a poor comparable, but that affects weight rather than necessarily admissibility. A comparable is inadmissible only where the evidence of its material characteristics is inadmissible, for example because it is hearsay.
3. The weight given to a comparable is ordinarily a matter for the arbitrator. An error in evaluating weight is not misconduct unless it results from procedural irregularity or unfairness, or leads to a conclusion which no reasonable arbitrator could reach on the evidence.
4. The arbitrator had not breached his directions. He was entitled to defer the admissibility question until the reasoned award. The directions permitted him to reach conclusions on facts agreed in writing between the parties. They expressed a preference for confirmation by persons involved in the transaction, but did not make that confirmation an absolute precondition to considering other agreed facts.
5. Both parties had relied on Mr Williams’s letter, and the arbitrator was entitled to find that particular facts were undisputed. The tenant’s challenge to the open-market character of the St Brigid’s rent itself depended on hearsay which Mr Williams had expressly identified as such.
6. Alternatively, even if the arbitrator had erred in admitting some evidence, the error would not by itself amount to misconduct, applying the principle referred to in Biakh v Hyundai and Moran v Lloyd’s. The award therefore stood, with costs to the respondent.

• Court of Appeal (Civil Division): The appeal from Colman J’s dismissal of the tenant’s applications was dismissed with costs.
• High Court, Queen’s Bench Division, Commercial Court: Colman J dismissed the applications on 6 August 1997.