Arnold and others v National Westminster Bank plc

Rent review clause — Finding in earlier proceedings that hypothetical tenancy did not contain rent reviews — Later proceedings seek to reopen question in respect of second review — Whether issue estoppel bars tenants from reopening question — Whether special circumstances — Whether change of law within exception — Appeal by landlords dismissedThe appellants are the landlords of premises in Fetter Lane, London EC4, let to the respondent firm of chartered accountants. The respondents hold a term until June 24 2008 subject to five-yearly rent reviews to a fair market rent “subject to the provisions of this … lease other than the rent hereby reserved …”. In respect of the first rent review in 1983 Walton J held (National Westminster Bank plc v Arthur Young McClelland Moores & Co [1985] 1 EGLR 61; (1984) 273 EG 402) that the arbitrator had been wrong in deciding that the hypothetical lease for the purposes of the review itself contained provisions for rent review. Walton J refused leave to appeal and a certificate under section 1(7)(b) of the Arbitration Act 1979; the Court of Appeal held that it had no jurisdiction to entertain an appeal against the refusal of the certificate: [1985] 2 EGLR 13; (1985) 275 EG 717. In respect of the second rent review in 1988 the respondents sought to reopen the question of the construction of the review clause contending that following British Gas Corporation v Universities Superannuation Scheme Ltd [1986] 1 EGLR 120 and its approval by the Court of Appeal in Basingstoke and Deane Borough Council v Host Group Ltd [1987] 2 EGLR 147 the rent review only required the amount of the rent to be disregarded in the hypothetical lease not the provision for rent review. The appellants sought to strike out the respondents’ claim for a declaration on the ground that they were barred by issue estoppel. The Court of Appeal affirmed ([1990] 1 EGLR 137) the Vice-Chancellor’s decision that the respondents were not so estopped ([1988] 2 EGLR 161). The appellants appealed. Held The appeal was dismissed. There is a distinction between cause of action estoppel and issue estoppel the latter arising where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to reopen that issue. The bar is absolute in cause of action estoppel. In issue estoppel there may be an exception in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings. A subsequent change of the law may be sufficient to bring a case within the exception. In the instant there were special circumstances such as to require the respondents to be permitted to reopen the question of construction decided against them by Walton J. Because Walton J had refused to grant a certificate there was no right of appeal against his decision; it would also be most unjust for the respondent tenants to face a succession of rent review proceeding on a possible misconstruction of the rent review clause. Terence Cullen QC and Hazel Williamson QC (instructed by Stephenson Harwood) appeared for the appellants; and James Munby QC and Jonathan Gaunt (instructed by Freshfields) appeared for the respondents.