Have you an arbitration clause or not?

A recent case from a Crest Nicholson
(Eastern) Limited .v. Mr & Mrs Western opened up a whole examination of
Arbitration Clauses.  It so
happened to be that this was a domestic situation with a Warranty Provider’s Policy
upon which they felt that there was an Arbitration Clause.

 It was a very straight forward matter
where there was a dispute regarding defects to a dwelling.  The Warranty Provider examined the
dwelling and found that the Contractor was responsible for a number of the
defects and required them to be corrected.  The Contractor said no!  There was a dispute with regard to fees that the homeowner
wished to reclaim and there where other issues and as a result the Contractor
dug its heels in.  That was about three
years ago.

 The matter has gone to Arbitration and
then even more has gone to High Court! 
I don’t know why it actually went there as the Warranty Provider had the
where with all to correct the defects under the warranty but leave that aside
for now.  There was an examination
of the Warranty Providers Scheme documents.  It has always been my view and thought that there was an
Arbitration Clause within the documents, having worked with them on numerous
occasions.  When you read the
documentation it is written in a way that you believe that there is an
Arbitrator.  The Westerns had an
Arbitrator appointed by the RICS.  The
Contractor said no, that it was a wrong appointment in that there was no
Arbitration Clause in the Scheme but furthermore if there was, only the
Chartered Institute of Arbitrators could appoint in this matter.

 They took a further view that it didn’t
matter how eminent the Arbitrator was or what list he sat on it was wrong
appointment.  The Arbitrator point
rightly heard the arguments and he sat on wrongly in my view – that’s the
trouble some don’t know when to quit! 
In other words, he looked at his own jurisdiction and said he could
proceed.  The Contractor said no,
he took that decision to the High Court and appealed it.  There was a judgement issued by Mr
Justice Akenhead which is quite revealing.  He, in his summing up, examined the causal matrix as he
would do in any other event.  He
examined what was the form of the Insurance Scheme, it has a Dispute Resolution
Service which is respected and which in this instance failed because the
homeowner wished to include fees. 
Now the total of this dispute was about £20,000.00 worth of work and
£7,000.00 worth of fees incurred by the homeowner for their expert. 

 There was guidance in the Warranty
document regarding Arbitration and how that would settle the matter indicating
the Institute of Arbitrators and highlighting a number of other methods.  Throughout the warranty document it
talks about resolution, that the dispute can be referred to Arbitration under
their Rule 55.  The Rule goes on to
indicate that the Rules are for Contractors solely and not between them the
homeowner and the Warranty Provider, it says “they do not and are not intended to, confer any rights or benefits
what so ever on any third parties”. 
In the discussion the Judge essentially looked at the arguments and the
relationships between the parties. 
The Judge made a comment that it was abundantly clear that there where
rules for builders and developers and their register, for regulation between
the builder and the Warranty Provider. 

 The Arbitration Clause as regards to the
rules was between the builder/developer and the Warranty Provider itself.  The Judge analysed each Clause on a
Clause by Clause basis and came to the conclusion “given that view, one must go on to consider whether the complaints and
dispute procedures part of that scheme contains an Arbitration Agreement.  It is clear that there is no
Arbitration Agreement as such at all. 
All that the complaints and disputes procedures do is provide for a
number of options.”  He went on
to say that even he was wrong about this, that the appointing body was
proscriptive in that the Chartered Institute of Arbitrators would be the
Appointing Institution and that is if you “wish to proceed with Arbitration,
the Institute will appoint an Arbitrator upon your application”.  He indicated that given that
Arbitration was a consensual process, that the parties agreed upon particular bodies
to nominate an Arbitrator.  In circumstances
where the parties themselves cannot agree an Arbitrator, the Courts give effect
to that which the parties have agreed. 
He indicated that once the parties have agreed a particular nominating
body it is simply not open to one party to go to another in exclusion to seek a
nomination.  It does not matter if
that person nominated by this other institution is highly qualified or
experienced or sits on both panels, the nominating body was wrong, so much for
ruling on his or her own jurisdiction! 
The Arbitrator in my view should have Known in any event.

 In conclusion, he said that there was no
Arbitration agreement in this case of any sort.  Secondly even if there was it would have been the Chartered
Institute of Arbitrators which would have appointed the nominated Arbitrator
and given it was the RICS that nominated him, the Arbitrators appointment was
invalid and he has no jurisdiction as Arbitrator to resolve the dispute between
the parties.  The Judge saw that it
was appropriate for the Court to grant a declaration that the Arbitrator had no
jurisdiction as Arbitrator to resolve the dispute between the Claimant and the
Defendant.

 The moral of this story is, read the fine
print with the mind of the party to which the injury occurs and seek out if
there is a remedy available for you within that framework.  In this instance the wording has been
clouded to a degree that there was no legal Arbitration Clause between the
homeowner and the Contractor.  It
appeared to be a mechanism simply between the Contractor and the Warranty
Provider.  I found this highly
interesting.  But the further
interesting matter is that the original dispute was over additional fees and circa
£20,000.00 worth of work and I wonder what it has cost to date.  Is that justice or even common sense?

 The
actual Court case is Crest Nicholson (Eastern) Limited, Claimant and Mr &
Mrs Western, Defendants in the England and Wales High Court (Technology and
Construction Court).