Mylcrist Builders Ltd v Buck

A consumer arbitration clause in a standard-form construction contract may be unfair under the Unfair Terms in Consumer Contracts Regulations 1999. The assessment requires consideration of significant imbalance, detriment and good faith, including fair and open dealing, the prominence and effect of the clause, the consumer’s bargaining position, and the relative cost of arbitration.

An arbitration clause is not arbitration covered by legal provisions merely because the Arbitration Act 1996 governs the arbitration. Where the parties have failed jointly to appoint a sole arbitrator under section 16(3), section 17 does not permit one party unilaterally to appoint that arbitrator. The award cannot then be enforced under section 66.

Mylcrist Builders Ltd sought permission under section 66 of the Arbitration Act 1996 to enforce an award against Mrs Buck arising from building works at her bungalow.

The contract contained a standard-form arbitration clause. Mrs Buck had not participated in the appointment process or the arbitration. The arbitrator had been approached and appointed unilaterally by the builder, and the award included substantial arbitrator’s fees.

The court considered whether the arbitrator had been validly appointed and whether the arbitration clause was unfair and therefore non-binding under the Unfair Terms in Consumer Contracts Regulations 1999.

1. The application was dismissed. The award was not enforceable because the arbitration clause was not binding on Mrs Buck and, independently, the arbitrator had not been properly appointed.

2. Under sections 15(3) and 16(3) of the Arbitration Act 1996, the tribunal was to consist of a sole arbitrator jointly appointed by the parties. Mrs Buck had not jointly appointed Mr Hannent. Section 17 applied where each party was to appoint an arbitrator and one party defaulted after the other had duly appointed his arbitrator. It did not apply where the agreed procedure required joint appointment of a sole arbitrator. The court had not appointed an arbitrator under section 18. The tribunal therefore lacked substantive jurisdiction.

3. The claim exceeded the £5,000 threshold specified under section 91 of the 1996 Act, including VAT. The arbitration clause was therefore assessed under the general provisions of the 1999 Regulations.

4. Applying Regulation 5, the arbitration clause had not been individually negotiated. It caused a significant imbalance to Mrs Buck’s detriment and was contrary to good faith. Good faith required fair and open dealing. The arbitration clause hindered access to the courts, imposed potentially significant fees on a consumer pursuing a relatively small claim, and was insufficiently clear and prominent for a layperson.

5. Schedule 2 paragraph 1(q) identified compulsory arbitration clauses as potentially unfair. The expression “arbitration not covered by legal provisions” did not include arbitration generally conducted under the 1996 Act; it referred, for example, to statutory arbitration. Under Regulation 8(1), the clause was not binding on Mrs Buck.

First-instance decision. No prior appellate decision is stated in the judgment.