Crest Nicholson (Eastern) Ltd v Western & Anor

A contractual reference to the NHBC Buildmark Scheme ordinarily identifies the prescribed Buildmark warranty and insurance document, rather than a generic collection of NHBC materials. Guidance describing arbitration as one possible dispute-resolution option does not itself create a binding arbitration agreement. Where parties have agreed that a specified institution is to appoint an arbitrator, one party cannot obtain a valid appointment from another institution. An arbitrator appointed without jurisdiction has no authority to determine the dispute.

The claimant house builder sold the defendants a dwelling subject to NHBC Buildmark arrangements. Defects were reported and the NHBC issued a resolution report requiring remedial works. A dispute then arose concerning professional fees.

The President of RICS appointed an arbitrator at the defendants’ request. The claimant challenged the appointment, contending that there was no arbitration agreement and, alternatively, that any appointment had to be made by the Chartered Institute of Arbitrators under the NHBC documentation. The defendants argued that the relevant NHBC documents, read together, gave them a right to arbitration and permitted the appointment. The court had to determine the scope of the contractual reference to the Buildmark Scheme, whether it contained an arbitration agreement, and whether the arbitrator had jurisdiction.

1. Construction of the contractual reference. Clause 13 referred to a document in the prescribed form which defined the seller’s liability for defects. The document answering that description was the NHBC Buildmark Warranty and Insurance Cover document. The NHBC Rules for Builders and Developers regulated only the relationship between NHBC and registered builders or developers. They did not govern the relationship between a builder and a house owner. The NHBC Claims Charter principally governed NHBC’s relationship with owners and was informative rather than prescriptive regarding arbitration.
2. No arbitration agreement. The Buildmark document presented arbitration, the small claims court, other courts and alternative dispute resolution as options and gave guidance on choosing a suitable method. Its wording was not prescriptive and did not amount to an agreement to arbitrate. At most, it represented an agreement to agree on the appropriate dispute-resolution process.
3. Appointment of the arbitrator. Even if the documentation gave the owner a right to refer the dispute to arbitration, it prescribed appointment by the Chartered Institute of Arbitrators. Because arbitration is consensual, the court would give effect to the parties’ agreed appointing body. A party could not instead obtain an appointment from RICS, however qualified or experienced its nominee might be. Mr Malone’s appointment was therefore invalid and he had no jurisdiction.
4. Declaration and costs. The court declared that Mr Malone had no jurisdiction as arbitrator. The court had no jurisdiction to order payment of costs incurred in the purported arbitration, absent a clear statutory power. It did, however, have jurisdiction over the costs of proceedings under section 67 of the Arbitration Act 1996. The defendants were ordered to pay £4,000 towards the claimant’s court costs, reflecting the limited scale of the dispute and proportionality.