Telia Sonera AB v Hilcourt (Docklands) Ltd

For the purposes of section 48(5)(b) of the Arbitration Act 1996, a contract relating to land is confined to a contract for the creation or transfer of an interest in land. The relevant contract or obligation must be characterised by reference to the relief sought, rather than automatically by reference to the contract as a whole. An obligation to carry out building or refurbishment works is not within the exclusion merely because the works concern buildings or form part of the consideration for granting a lease. The substance of the relief must also be examined: a claim described as a mandatory injunction may in substance seek specific performance and therefore fall within section 48(5)(b).

Telia appealed from an arbitrator’s second interim award in an arbitration concerning a lease of commercial property. Telia had undertaken to procure refurbishment and refitting works after completion of the lease. Hilcourt sought a mandatory injunction requiring those works to be completed.

The preliminary issue was whether section 48(5)(b) of the Arbitration Act 1996 prevented the arbitrator from ordering specific performance because the relevant contract related to land. The arbitrator held that the building obligation could be considered separately and was not such a contract. Telia challenged that conclusion.

1. The appeal was dismissed. The arbitrator had correctly held that the relevant obligation was not excluded by section 48(5)(b) of the Arbitration Act 1996.

2. The words “contract relating to land” were ambiguous and could not bear their widest literal meaning, since that would include any contract having even a tenuous connection with land. In light of the legislative history, the expression was confined to contracts for the creation or transfer of an interest in land.

3. The proper approach was to characterise the obligation for which specific performance was sought, rather than necessarily characterising the entire agreement. Care was required where an obligation was inseparably connected with the transfer of land, such as an obligation to pay the purchase price. The refurbishment obligation was separate from the obligation to grant and take the lease, particularly because its performance began only after the lease had been granted.

4. The fact that the refurbishment obligation formed part of the consideration for the grant of the lease did not alter the result. The relief did not concern an executory obligation to transfer land, pay money required to obtain it, or perform another condition necessary to obtain the land.

5. The court accepted that the claim, although framed as a mandatory injunction, was in substance a claim for specific performance. Section 48(5)(b) qualified the power in section 48(5)(a). The parties’ ability under section 48(1) to confer wider remedial powers on an arbitral tribunal did not affect the proper interpretation of section 48(5)(b).

6. Objections based on the post-completion character of the agreement and the merger doctrine did not assist. The character of the contract was determined at its conclusion and did not change merely because the lease had later been granted, although a wholly separate and severable provision could be treated differently.

Telia appealed to the High Court from the arbitrator’s second interim award dated 31 March 2003. Permission to appeal was granted by Neuberger J on 29 May 2003. The High Court dismissed the appeal.