Back to school…but is it time for a change?
In the case of Crowther v Rayment  EWHC 427 (Ch) it was held amongst other things an agent involved with the management of the property could not act in a judicial capacity as arbitrator.
The claimant lessors sought an order under the Arbitration Act 1996 (the “Act”) s.18 for the appointment of an arbitrator since disputes had arisen under a series of three leases relating to a property in France. The leases each provided for a deposit to be paid by the lessee and held by the lessor's agent, RV, as security. The legal nature of RV was unclear, but it appeared to be a legal rather than a natural person. The parties concluded a further agreement which contained provisions dealing with the treatment of the deposits and provided:
"In the event of any dispute between the Lessor and the Lessee regarding proposed deductions from the deposit, then the Agent's decision shall be final and binding on all parties".
Disputes arose soon after the start of the third lease. In 201 the lessors issued proceedings in the French courts seeking an order for eviction. The lessees, in turn, claimed damages and repayment of rent. In September 2013, the French court upheld the lessees' claims in part.
In April 2014, the lessors sought to appoint RV as arbitrator pursuant to the dispute provision in the further agreement, but no appointment was made. The lessors then applied to court under section 18 for appointment of an arbitrator.
Section 18 of the Act presupposes the existence of a valid arbitration agreement and confers on the court a supportive power to intervene where the arbitral appointment process has failed. Under s.18, the court may make or revoke appointments, or make directions with a view to constituting a tribunal.
Andrew Smith J dismissed the application, holding that he had no power under s.18. He went on to decide that, if he did, he would not have exercised it in any event on the basis that:
Interestingly the judgment explores the issue of the standard of proof. Andrew Smith J considered that any test higher than "no real prospect of success" would, or might, infringe the principle of kompetenz-kompetenz. The judge noted that, although the lessors had accepted the higher "good arguable case" test, they had set the hurdle too high for themselves. The test of "good arguable case" was "easier to state than define" and it was important to ensure that the court did not infringe the tribunal's area of competence.
Further it provides a helpful reminder to practitioners to consider carefully the drafting of such ‘dispute resolution clauses’ and the requirements of an arbitrator.
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