City & General (Holborn) Ltd. v AYH Plc

Where related arbitration agreements provide for disputes raising substantially the same or connected issues to be heard by the same arbitrator, a material portion of the issues is sufficient; every issue, or a majority of issues, need not overlap. The clause should be construed in its contractual and commercial context, including the avoidance of duplicated proceedings, costs and inconsistent findings. Where the agreed appointment procedure fails because a party refuses to accept the designated arbitrator, the court may appoint that arbitrator under section 18 of the Arbitration Act 1996. A small claim outside the arbitration clause does not necessarily justify refusing appointment where most of the dispute falls within the clause.

City & General (Holborn) Limited sought the appointment of Rowan Planterose QC as arbitrator in disputes with AYH plc concerning AYH’s project management and quantity surveying services. Planterose had already been appointed in related arbitrations between City & General and the main contractor, Kier Regional Limited.

AYH disputed whether parts of the claims fell within the arbitration clauses, whether the disputes contained substantially the same or connected issues, and whether the court should appoint Planterose under section 18 of the Arbitration Act 1996. The court determined those three questions.

1. Scope of arbitration clause. Item 3 fell within the quantity surveying services. Item 4 contained two distinct complaints: the allegation concerning assessment of loss and expense fell within the clause, while the allegation concerning certification did not. Item 7 fell within the project management service requiring AYH to co-ordinate consultants so that information was provided to the contractor on time.
2. Construction of clause 17.2. The clause was to be given its ordinary and natural meaning, read in the context of the deeds and the background known to the parties, and, where unclear, consistently with its obvious commercial purpose. The court relied on ICS v West Bromwich Building Society, Antaios Compania Naviera v Salen Rederierna, Manai Investments v Eagle Star and Sirius International Insurance Company v FAI General Insurance Limited. It also treated Trafalgar House Construction (Regions) Limited v Railtrack plc as assisting on the construction of a similar provision.
3. Clause 17.2 did not require every issue in the later dispute, or a majority of those issues, to overlap. A material portion was sufficient. This interpretation advanced the commercial purpose of avoiding multiplicity, excessive costs and inconsistent findings. The clause was not limited to disputes between an employer and different professional advisers.
4. Four issues materially overlapped between the Kier arbitration and the AYH arbitration: the actual cost of the works, late information, delay caused by late information, and loss and expense under clause 26 of the building contract. Clause 17.2 was therefore triggered.
5. AYH’s refusal to accept Planterose meant that the appointment procedure had failed. The court exercised its discretion under section 18. The fact that the certification limb of Item 4 might require separate resolution did not justify refusing appointment, because most disputes fell within the arbitration clause.
6. The court ordered that Planterose be appointed for the arbitration commenced by the notice of 11 March 2005, with the certification limb of Item 4 excluded. Costs and the precise form of order were left for agreement or further determination.