David Wilson Homes Ltd v Survey Services Ltd & Anor

A clause referring every dispute or difference under an insurance policy to an agreed Queen’s Counsel, or to one appointed by the Chairman of the Bar Council, is an arbitration agreement even though it does not use the words “arbitration” or “arbitrator”. The essential question is whether the parties agreed to refer disputes to a person other than the court for binding resolution. A clause addressing disputes that have arisen is not naturally an expert valuation clause, nor a merely optional non-binding opinion. Proceedings may therefore be stayed under the Arbitration Act 1996.

A house builder brought proceedings concerning remedial works to a bridge and claimed against the insurers of a design-services company in liquidation under the Third Parties (Rights Against Insurers) Act 1930. The policy contained a general condition requiring any dispute or difference between the insured and insurers to be referred to a mutually agreed Queen’s Counsel, or, if the parties disagreed, to one appointed by the Chairman of the Bar Council.

The Technology and Construction Court held that the condition provided for an expert or, more probably, a non-binding opinion. It refused a stay under the Arbitration Act 1996 and under the court’s inherent jurisdiction. The issue on appeal was whether the condition was an arbitration agreement within section 6, so that the proceedings could be stayed under section 9(4).

1. Appeal allowed. The proceedings were stayed, with costs of the appeal and below. Permission to appeal to the House of Lords was refused.
2. Per Longmore LJ, the clause was an arbitration agreement within section 6 of the Arbitration Act 1996. The necessary attributes were an agreement to refer disputes to a person other than the court who would resolve them in a manner binding on the parties. The clause satisfied that requirement without expressly describing the appointed Queen’s Counsel as an arbitrator.
3. The proper characterisation depended on construction of the clause in its contractual context. The clause contemplated an existing dispute or difference. It therefore fell within the category identified in Re Carus-Wilson v Green (1887) 18 QBD 7, where the decision-maker is intended to conduct an inquiry in the nature of a judicial inquiry, hear the parties’ respective cases and decide on the evidence. It was not a valuation arrangement intended merely to prevent differences arising.
4. The proposed constructions involving an expert determination or a non-binding opinion were commercially unlikely because they would provide no finality. The provision for appointment by the Chairman of the Bar Council reinforced the conclusion that the reference was intended to produce a binding determination. Section 58(1) also supplied finality and binding effect unless the parties agreed otherwise, although that provision presupposed the existence of an arbitration agreement.
5. Simon Brown LJ agreed. He emphasised that the express reference to a dispute already having arisen was inconsistent with an expert valuation clause, and that the appointment mechanism made sense only if the process resulted in a final and binding determination rather than an optional non-binding opinion.

• Court of Appeal (Civil Division): Appeal allowed. The clause was held to be an arbitration agreement, the proceedings were stayed, and costs were awarded for the appeal and below.
• Technology and Construction Court: His Honour Judge Anthony Thornton QC held that the clause was not an arbitration agreement and refused a stay under section 9(4) of the Arbitration Act 1996 and under the inherent jurisdiction.