Peter Williams
Posted on 4 Jul 2018

Farm Business Tenancies: A dispute about disputes

It may seem odd to start an article concerning farm business tenancies and dispute resolution with a reference to the Agricultural Holdings Act 1986. Nevertheless, practitioners will be aware that the Deregulation Act 2015 introduced third party determination (usually referred to as expert determination) as an alternative to arbitration in respect of a number of disputes which arise under the 1986 Act. The latest round of proposals from TRIG (the subject of the Winter special edition of Agricultural Lore) seek to encourage a further extension of expert determination.

Part of the reason for this is no doubt the fact that, in some quarters, arbitrations are not in vogue, being seen as very expensive, etc. It remains to be seen whether the RICS initiative to introduce a simplified arbitration scheme (perhaps particularly relevant in the context of rent review) gains traction.

It was noteworthy that, in Wales, the Agricultural Land Tribunal has also been interested in extending its jurisdiction at the expense of arbitrators and indeed those making third party/expert determinations.

Whatever the politics of who is best to determine a dispute in relation to agricultural property, aside from the extension of third party determination into the 1986 Act, it is of course common place to see a reference to expert determination, often alongside arbitration, in farm business tenancies. As one increasingly weighs farm business tenancy agreements, rather than reads them, because they have become so voluminous, the opportunity to have detailed provisions applying to the contract for expert determination becomes almost automatic.

If expert determination is being offered, whether in a farm business tenancy or otherwise, then it does need a very clear contract. It needs to be beyond doubt that it is an expert determination and not an arbitration provision.

The role of an expert

The role of an expert is to decide in relation to an issue in dispute between parties. That is in contrast to the role of an arbitrator who determines the outcome of the dispute based upon the arguments put to him (or her, although at present there is only one female arbitrator on the RICS Panel).

It needs to be borne in mind that the expert’s role is not to perform a judicial function. The expert has a duty to investigate, reaching a decision by his own inquiries and expertise. The expert can reach a decision without receiving any evidence or argument from the parties.

Moreover, where the expert does invite and receive detailed submissions from the parties, he is under no obligation to make his own inquiries, for example, as to further comparables in relation to a rent review. The expert may receive written representation from the parties, but he is not required to do so, unless provision is made in the terms of his appointment. Unlike an arbitrator, the expert may act entirely on his own evidence and opinion. However, that comes at a cost because he owes a duty of care to the parties. He will be in breach of that if he fails to take into account matters that he should.

In an expert determination, should there be a Hearing? What happens in relation to costs? The answer lies entirely in the terms of the contract making the appointment of the expert. If the parties want to be able to recover costs against each other, depending on the outcome of the expert determination, they must expressly provide for that.

The expert clause

The result of this is that, inevitably, more comprehensive and convoluted provisions will be drafted over a period of time dictating the exact format of the expert determination for incorporation into farm business tenancies. Of course, the problem exists, as it does under the 1986 Act, that the nature of disputes that arise can be very different. Under the 1986 Act nothing is more stark than the contrast between a rent review and a notice to quit given under one of the special cases which is challenged and goes to arbitration. Therefore, in the context of farm business tenancies, it may not be a case of one size fits all in relation to the expert determination clause.

Arbitration

Increasingly one sees arbitration and expert determination being offered in the alternative within farm business tenancies. Arbitration is of course compulsory for a determination of rent pursuant to a statutory rent review notice; dealing with a landlord’s refusal or failure to give consent to, or his imposition of an unreasonable condition upon, a proposed improvement to be carried out by the tenant; and any claim for compensation under Part III of the Agricultural Tenancies Act 1995. Beyond that expert determination can be used in relation to any dispute.

What one does see is dispute resolution provisions which have expert determination but allowing the parties being able to contract out into arbitration. What sort of disputes should be dealt with by expert determination in relation to a farm business tenancy? An obvious example would be a rent review which is outside the statutory scheme.

Forfeiture

However, the question leads to a different thought process. It is to recognise that, despite the Law Commission recommending at the start of my career, almost 40 years ago, that forfeiture was antiquated, it still remains at the heart of landlord and tenant relationships, even technically available (where there is a valid forfeiture clause) in relation to tenancies under the AHA 1986.

Relationship between dispute resolution mechanisms

The question which arises is what happens if a landlord wants to take action to forfeit the lease but there is an expert determination clause and an alternative arbitration provision? Where the parties have contracted to utilise such dispute resolution methods, does that stop the landlord being able to rely upon the law of forfeiture and go to the Court? When trying to answer the question,

it is also worth bearing in mind that, where there is an arbitration agreement between the parties (and the Court of Appeal has held that this should apply equally in respect of statutory arbitrations), then Court proceedings will ordinarily be stayed to allow an arbitration to proceed in accordance with Section 9 of the Arbitration Act 1996. However, there is no like provision applying in respect of expert determination.

We are now rising 23 years since the 1995 Act came into operation on 1 September 1995. There is no case authority addressing these issues as to the relationship between dispute resolution mechanisms. That may be because no one has stopped to think about it. However, with the growth of the expert determination industry, and the fightback by arbitrators, perhaps we will see these questions materialise. It may also emerge if TRIG’s proposal for ten year farm business tenancies is adopted. Food for thought.

For more information please contact Peter Williams, Partner in the Agriculture team, on peter.williams@michelmores.com or +44 (0)117 906 9300.