Crest Nicholson (Eastern) Ltd v Western and another

Sale of land – National House-Building Council Buildmark scheme – Defendant purchasers seeking appointment of arbitrator to settle dispute concerning liability for professional fees – Claimant challenging jurisdiction of person appointed – Whether purchase contract containing arbitration agreement – Whether court having jurisdiction to award costs of abortive or invalid arbitration – Claim allowedIn 2005, the claimant builder sold to the defendants a dwelling-house, that was under construction, and which formed part of a development. The house was sold with the benefit of the National House-building Council (NHBC) Buildmark scheme, by which the claimant and the NHBC gave certain undertakings in respect of defects and damage for 10 following completion. After moving in, the defendants reported a number of alleged defects and, after an investigation, the NHBC called on the claimant to carry out various remedial works. Although the claimant indicated that it was prepared to carry out those works, a dispute arose as to whether it was responsible for professional surveyor’s fees that had been incurred by the defendants as a result of the alleged defects.In April 2007, the president of the Royal Institution of Chartered Surveyors (RICS) appointed an arbitrator at the invitation of the defendants. The claimant asserted that the arbitrator did not have jurisdiction because the contract did not contain an arbitration agreement or, even if it did, it was for the Chartered Institute of Arbitrators (CIA) to make the appointment. After hearing submissions from both sides, the arbitrator concluded that he did have jurisdiction. The claimant sought a declaration that the appointee had no jurisdiction to arbitrate. A further issue arose as to whether the claimant was entitled to its costs of the arbitration if it were found to be abortive or invalid.The claimant argued, inter alia, that, under clause 13 of the purchase contract, the Buildmark scheme meant the NHBC buildmark warranty and insurance cover document. Since this did not contain an arbitration agreement, the arbitrator had no jurisdiction. The defendants argued that the reference in clause 13 was to the overall scheme promulgated by the NHBC so that the warranty and cover document should be read in the light of the NHBC claims charter and the rules for builders and developers registered with the NHBC, which contained further reference to arbitration. Held: The claim was allowed.The arbitrator had no jurisdiction to resolve the disputes between the parties. There was no arbitration agreement, but, even if there were, it was for the CIA to nominate him. Clause 13 of the purchase contract overwhelmingly suggested that a document would be provided that would define and describe the Buildmark scheme. The only document that readily fell into that category was the NHBC Buildmark warranty and insurance cover document. No reference was made to any generic overall scheme or arrangement set up and operated by the NHBC. It related to the insurance policy to be provided. Moreover, the unambiguous language used by the NHBC in the complaints and disputes procedures did not prescribe arbitration as the dispute resolution method. At best, it represented an agreement to agree, whereby the parties could decide and agree upon the most suitable dispute resolution process for the particular case.Once the parties had agreed on a nominating body, it was not open to one party to go to another (albeit wholly respectable) institution to seek a nomination. It did not matter not that the person nominated by the other institution was highly qualified and experienced. He or she would not have jurisdiction to resolve the disputes arising between the parties. If the parties had not agreed upon a nominating body or if that body was unable or unwilling to nominate, the parties’ solution was to go to the court to seek a nomination under the Arbitration Act 1996.Finally, in the absence of any clear statutory power to do so, the court had no jurisdiction to make any order in relation to costs incurred by the parties to the abortive or invalid arbitration proceedings. Sebastian Isaac (instructed by Nabarro, of Sheffield) appeared for the claimant; Daniel Crowley (instructed by WSM Solicitors) appeared for the defendants.Eileen O’Grady, barrister