Tonicstar Insurance Ltd v Allianz Insurance PLC [2017] EWHC 2753 (Comm)

In Tonicstar v Allianz the High Court (Teare J) considered the meaning of an arbitration clause concerning the qualifications of arbitrators which provided:-

“Unless the parties otherwise agree the arbitration tribunal shall consist of persons with not less than ten years’ experience of insurance or reinsurance”

The Court concluded that the definition did not extend to a QC specialising in insurance law, but rather required the appointee to have experience in the business of insurance and reinsurance itself.

BACKGROUND

This short point arose out of the ongoing reinsurance litigation following the attacks on the World Trade Centre in 2001. In submitting the dispute to arbitration the Respondents sought to appoint Alistair Schaff QC as their arbitrator. The Claimant challenged the appointment.

The Contract of Reinsurance incorporated the “Joint Excess Loss Committee, Excess Loss Clauses” which were drafted by that committee under the instructions of The Institute of London Underwriters and were published in January 1997. Clause 15, stipulating the qualifications of the arbitrators, is set out above.

THE DECISION

Earlier Authority

The first point Teare J had to grapple with was a decision of Morison J in 2000 in Company X v Company Y (17.07.00, unreported).

In that case Morison J had determined the very same question which arose here, concluding that Clause 15 envisaged a “trade arbitration”, noting that in default of party appointment, the appointment was to be made by underwriting professionals and not lawyers.

Doctrine of Precedent

Teare J was asked by the Respondent to depart from the decision of Morison J on the groudns that it was wrong.

The Court noted the guidance in Willers v Joyce [2016] UKSC 44 that a first instance judge should generally follow a previous decision at first instance unless there is a powerful reason for not doing so.

The Conclusion

In those circumstances Teare J considered that he was compelled to follow the earlier decision of Morison J unless it was “obviously wrong”.

He concluded that it was not obviously wrong. It was an important factor that after the decision of Morison J in 2000, the Joint Excess Loss Committee reissued its standard clauses in 2003, but did not amend the arbitration agreement; indicating that the profession was content with the meaning attributed by Morison J.

However, Teare J reached that conclusion with undisguised reluctance, stating that were it not for the earlier decision he “might well” have decided the point in favour of the Respondents, on the grounds that the “context” argument was not enough to outweigh the natural and ordinary meaning of the words.

A jurisdictional point

The Respondent took a further point, that the effect of ss.24 and 30 of the Arbitration Act was that the Court had no power to rule on this question because the tribunal itself should first rule on its own jurisdiction. That was rejected on the basis that the two arbitrators appointed by the parties did not have the power to remove one of them. That would be a different power to ruling on their own jurisdiction. The Court therefore did have jurisdiction.

COMMENT

There was some debate as to how well known the earlier decision of Morison J was; it did not appear in most of the books. It seems likely that arbitrations will have taken place with the parties acquiescing in arbitrators who did not, strictly speaking, comply with the strictures of Clause 15. Given the proviso “unless the parties otherwise agree” this decision would however seem an unpromising platform on which to attack any historic appointments.

Now that the decision of Morison J has been publicised through the decision of Teare J, parties can be expected to take the point more often, which of course increases the likelihood of an appeal in which the somewhat surprising construction placed upon Clause 15 in these decisions might be “corrected”.

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