Stay of proceedings - Defendant purporting to invoke arbitration clause in consultancy agreement

Wilky Property Holdings PLC v London & Surrey Investments Limited: Chancery Division: (Richard Snowden QC): 17 August 2011

The underlying proceedings concerned a CPR Pt 8 claim brought by the claimant against the defendant in connection with a variety of issues arising out of a consultancy agreement. The claimant was a property investment and development company.

By an agreement entered into in November 1996 (the agreement), the defendant was appointed by the claimant to provide a consultancy service to it in connection with its business. The agreement provided for the payment to the defendant of a fixed monthly fee (the consultancy fee) and for the payment of a further fee (the profit share) whenever an 'Approved Scheme', which was defined in the agreement, came to fruition.

The defendant provided services to the claimant under the agreement, but a dispute arose between them. The defendant claimed that it was entitled to the payment of various sums under the agreement (the disputed sums) and subsequently terminated the agreement in October 2009. In August 2010, the defendant's solicitors wrote a letter to the claimant's solicitors detailing the defendant's complaints and claims which were said to amount to about £5.975m.

The letter also purported to invoke cl 22 of the agreement, stating that that required the appointment of an independent expert (for the text of the clause, see [4] of the judgment). The claimant's solicitors subsequently wrote a letter contending, for a variety of reasons, that the defendant was not entitled to invoke cl 22 at all. In October 2010, following the request of the defendant, the President of the Royal Institution of Chartered Surveyors appointed an independent expert, DP, to determine the dispute between the claimant and the defendant.

Notwithstanding those objections, in November 2010, the claimant issued CPR Pt 8 proceedings seeking a ruling upon a variety of questions concerning the meaning and effect of the agreement and the proper scope of the expert determination. In January 2011, the defendant issued an application for a stay of the proceedings, pursuant to s 9(4) of the Arbitration Act 1996 (the Act) or the inherent jurisdiction of the court under CPR 3.1(2)(f).

The defendant submitted (i) that cl 22 was an arbitration agreement which ought to be interpreted widely so as to cover all disputes arising in relation to the agreement and that it was entitled to a mandatory stay of the Pt 8 claim under s 9(4) of the Act and (ii) in the alternative, that even if cl 22 was not an arbitration clause governed by the Act, it was nevertheless a valid contractual provision to refer disputes between the parties to binding resolution by an independent person.

Accordingly in those circumstances, the court ought to exercise its discretion to stay the Pt 8 claim so as to permit DP to determine the matters referred to him. In relation to (i), the defendant relied upon the decision in David Wilson Homes Ltd v Survey Services Ltd (in liq) [2001] EWCA Civ 34 as deciding that a process that provided for the binding determination of a dispute that had already arisen was an arbitration rather than an expert determination.

The court ruled: (1) The Court of Appeal in David Wilson Homes Ltd v Survey Services Ltd (in liq) [2001] EWCA Civ 34 was not intending to establish any prescriptive rule of general application as to the distinction between arbitrations and expert determinations and the case contained no ratio decidendi to that effect. In particular, the Court of Appeal could not be taken to have established a general proposition that a clause providing for the binding resolution of a pre-existing dispute was necessarily an arbitration clause (see [44] of the judgment).

On the true construction of the agreement, cl 22 provided that in relation to the disputes and differences specified therein, the parties were at liberty to refer the matter to an independent expert for determination, rather than arbitration. The references to determination by an expert were clear and their ordinary meaning was not displaced by any contra-indications from the agreement or the surrounding circumstances (see [63] of the judgment).

The defendant was accordingly not entitled to a stay of any part of the Pt 8 claim under the Act. David Wilson Homes Ltd v Survey Services Ltd (in liq) [2001] EWCA Civ 34 explained; Barclays Bank PLC v Nylon Capital LLP [2011] EWCA Civ 826 explained; Re Carus-Wilson and Greene (1886) 18 QBD 7 considered; Palacath Ltd v Flanagan [1985] 2 All ER 161 considered.

(2) There would be an adjourned hearing at which the court would hear further argument as to whether to exercise its discretion to stay the Pt 8 claim. The further hearing of the defendant's application was made necessary because the time available at the first hearing had proved inadequate. However, it also provided an opportunity for the parties to reassess their respective positions in light of changes in the surrounding circumstances.

There was therefore the prospect that, depending upon how each side put its case, a number of the points raised for decision in the Pt 8 claim may have been overtaken by events and be unnecessary. In any event, the parties should reassess whether there was a real dispute about each of the points raised in the Pt 8 claim and, if there was, whether it was in the interests of justice and convenience to ask the court to determine the point before DP had the opportunity to do so. The balance of the defendant's application would be listed for a further hearing.

Barclays Bank PLC v Nylon Capital LLP [2011] EWCA Civ 826 explained; Mercury Communications Ltd v Director General of Telecommunications [1994] CLC 1125 considered.

Philip Rainey QC (instructed by Charles Russell) for the claimant. Harry Matovu QC (instructed by Berg Legal) for the defendant.