Holloway & Anor v Chancery Mead Ltd

Factual and Procedural Background

These proceedings under part 8 of the CPR were commenced by the Plaintiff against the Defendant concerning a proposed arbitration related to the Plaintiff's purchase of a property known as The Lighthouse. The Defendant was the developer of the property. Under a contract dated 8 May 2006, the Defendant agreed to sell the property to the Plaintiff for 1.95 million, with completion on 21 July 2006.

The Contract included obligations on the Defendant, notably clause 20 requiring the dwelling to be completed in a proper manner and clause 23 obliging the Defendant, as the Seller, to deliver Buildmark Documentation to the Plaintiff as soon as practicable. Subsequent documentation was provided from a builder, Company B, connected to the Defendant. This documentation included an NHBC Buildmark Offer outlining insurance cover and obligations on the builder, particularly regarding defects and damage in the first two years after completion.

Disputes arose between the parties regarding alleged defects. The Plaintiff initiated arbitration proceedings under clause 24 of the Contract by serving a Notice to Refer and draft Statement of Case claiming various costs and damages. The Defendant accepted arbitration only on condition that the Plaintiff first complied with clause 24.1 and 24.6 of the Contract, requiring referral to the NHBC dispute conciliation service, which the Plaintiff disputed.

The Plaintiff applied to the President of the Chartered Institute of Arbitrators for appointment of an arbitrator. The Defendant objected, contending that the condition precedent under clause 24.6 had not been satisfied and threatened court injunction proceedings. The Plaintiff maintained that the arbitrator should be appointed immediately and that jurisdictional issues should be decided by the arbitrator pursuant to section 30 of the Arbitration Act 1996.

The Defendant refused to execute a joint application form for arbitration appointment unless the condition precedent was met. Consequently, the Plaintiff issued these court proceedings seeking declarations on the validity of the Notice to Refer, the right to immediate arbitration, and directions for the appointment of an arbitrator under section 18 of the Arbitration Act 1996.

Legal Issues Presented

1. Whether clause 24.6 and/or clause 24.1 of the Contract constitute enforceable conditions precedent to arbitration requiring referral to the NHBC Resolution Service before arbitration can commence.
2. Whether the Plaintiff is entitled immediately to refer their disputes with the Defendant to arbitration without first complying with the alleged condition precedent.
3. Whether the court should direct the appointment of an arbitrator under section 18 of the Arbitration Act 1996 despite the Defendant’s refusal to cooperate.
4. The extent to which the arbitrator or the court should decide issues of jurisdiction and compliance with conditions precedent under the Arbitration Act 1996.

Arguments of the Parties

Defendant's Arguments

• Clause 24.6 is a condition precedent to arbitration and must be complied with before arbitration can commence.
• Clause 24.1 obliges the parties to refer disputes, within the scope of the NHBC Dispute Resolution Service, to the NHBC conciliation process before arbitration.
• All disputes must be referred first to the NHBC Resolution Service so that one arbitrator can deal with all disputes simultaneously.
• The appointing body cannot appoint an arbitrator until the condition precedent is satisfied.
• The court should not intervene except as expressly permitted by the Arbitration Act 1996; jurisdictional issues can only be decided by an appointed arbitrator.

Plaintiff's Arguments

• The Defendant is not registered with NHBC and is not the Builder under the Buildmark documentation; therefore, the NHBC Resolution Service does not apply to disputes between the Plaintiff and Defendant.
• The condition precedent in clause 24.6 and referral under clause 24.1 are inapplicable or unenforceable as they relate only to disputes with the Builder, not the Seller.
• Clause 24.2 provides for automatic reference of disputes outside the NHBC Resolution Service to arbitration without the need for NHBC investigation.
• The requirement to refer disputes to the NHBC Resolution Service is an erroneous provision and/or an unfair contract term.
• Issues regarding jurisdiction and the condition precedent should be determined by the arbitrator after appointment, pursuant to section 30 of the Arbitration Act 1996.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by distinguishing the rights and obligations under the Contract from those under the Buildmark documentation. The Contract claims relate to damages against the Seller, whereas the Buildmark documentation provides remedies against the Builder for defects with NHBC insurance backing.

The court found that clause 23, which refers to the Seller being registered with NHBC and delivering Buildmark documentation, did not affect the interpretation of clause 24 nor impose conditions on arbitration rights. The Buildmark documentation was delivered, although the Defendant was not the Builder under that scheme.

Regarding clause 24.1, the court held that there is no NHBC Dispute Resolution Service or conciliation as described in the Contract, only the NHBC Resolution Service which applies between the Builder and Buyer for defects. Since the Defendant is not the Builder, clause 24.1's requirement to seek NHBC conciliation is inapplicable and unenforceable as a condition precedent to arbitration between the Plaintiff and Defendant.

The court reasoned that the NHBC Resolution Service only applies to disputes concerning defects remedied by the Builder and does not cover financial claims or disputes with the Seller. The Defendant's argument that all disputes must be referred to NHBC before arbitration was rejected as unworkable and commercially unreasonable.

Clause 24.6 was interpreted as a condition precedent only for disputes within the NHBC Resolution Service's scope. It does not apply to disputes outside that scope, which are automatically referred to arbitration under clause 24.2.

The court also considered whether the NHBC Resolution Service constituted an enforceable dispute resolution agreement. It found that, if applicable, the scheme would be sufficiently certain and binding, meeting requirements established in authorities concerning ADR clauses. However, since it did not apply here, this was a hypothetical consideration.

In conclusion, the court held that clauses 24.1 and 24.6 do not impose enforceable preconditions to arbitration in this case. The Plaintiff is entitled immediately to refer disputes to arbitration without first engaging the NHBC Resolution Service. The parties have agreed the President of the Chartered Institute of Arbitrators should appoint the arbitrator, and the court proposed to adjourn the section 18 application with liberty to apply.

Holding and Implications

Holding: The court declared that the Plaintiff is entitled immediately to refer their present disputes with the Defendant to arbitration under clause 24 of the Contract. The Notice to Refer served on 30 April 2007 was valid and effective. The provisions in clauses 24.1 and 24.6 do not impose enforceable conditions precedent requiring referral to the NHBC Resolution Service before arbitration.

Implications: The decision resolves the deadlock preventing the appointment of an arbitrator and permits the arbitration to proceed without delay. The Defendant is expected to cooperate with the appointment by the President of the Chartered Institute of Arbitrators. No broader legal precedent was set beyond the interpretation of the specific contractual clauses and the application of the Arbitration Act 1996 in this context.