Crowther & Anor v Rayment & Anor

For an application under section 18 of the Arbitration Act 1996, the court should not finally determine whether an arbitration agreement exists. The application should be rejected only if the claim that an agreement exists has no real prospect of success or raises no serious issue. This approach gives effect to kompetenz-kompetenz.

The court must also establish that Part 1 applies and that an appointment procedure has failed. Where no seat has been designated, section 2(4) requires a sufficient connection with the arbitral process, not merely English parties, documents or addresses. An agreement requiring an estate agent’s decision to be final and binding may be a stakeholder-protection provision rather than an arbitration clause.

The lessors sought directions or the appointment of an arbitrator under section 18 of the Arbitration Act 1996. The lessees sought relief under section 72, contending that there was no valid arbitration agreement or that the alleged agreement did not cover the dispute.

The parties’ agreements concerned a property in France and a €60,000 deposit. A further agreement provided that, in a dispute about deductions from the deposit, the agent’s decision would be final and binding. French proceedings concerning the deposit and the lease were ongoing. The issues were whether that provision was an arbitration agreement, whether Part 1 of the Act applied, whether any appointment procedure had failed, and whether the disputed claim fell within the provision.

1. Section 18 threshold. The court had to consider whether the lessors had no real prospect of establishing that they were party to a relevant arbitration agreement, or whether the issue raised no serious issue. It was unnecessary and inappropriate to determine the issue finally at an interlocutory stage. This reflected the kompetenz-kompetenz principle and the need to leave jurisdictional questions initially to the tribunal where an arbitration agreement might exist.
2. No arbitration agreement. Although the dispute provision had several characteristics of an arbitration agreement, those characteristics were necessary rather than sufficient. Its context showed that the parties intended to protect the agent, who held the deposit as stakeholder or in escrow, from liability if the money were paid to one party. The reference to an estate agent, the agent’s prior involvement with the property, and the absence of express reference to arbitration all indicated that the provision was not intended to create an arbitral tribunal.
3. Part 1 and the seat. Even if there had been an arbitration agreement, no seat had been designated or determined. The court could not determine a juridical seat for the purpose of section 3. Section 2(4) required a connection with the arbitral process. English nationality, English addresses and an agreement in English were insufficient. The stronger connections pointed to France, including the property, likely witnesses, French governing law and the probable qualifications of the decision-maker.
4. Scope and discretion. The alleged dispute concerned outstanding bills, damage, repairs and restoration, rather than proposed deductions from the deposit. A generous construction of arbitration clauses did not justify rewriting the agreed wording. The court therefore had no section 18 power and, alternatively, would not have exercised it. The section 72 relief was refused as pointless in light of those conclusions.