Abstract

Article

In Tensioned Concrete Pty Ltd -v- Munich Re [2020] WASC 431, an insured in its own right and its insurers, exercising subrogation for part of the insured’s loss which had been indemnified, successfully sought to stay, pending the determination of existing arbitration in the insured’s name, the plaintiff’s action claiming a declaration as to its benefit to the cover provided by the insured’s policies, or alternatively that the insured was in breach of contract by failing to obtain such cover. A third ground was the presence of the insurers’ waiver of subrogation by the policies.

 

Because their subrogated claims were necessarily brought in the insured’s name, the insurers were not on the record as parties to the arbitration. But in respect of indemnified losses, the insured would hold any funds recouped by way of recovered loss and damage on a constructive trust for the benefit of its indemnifying insurers: see Castellain v Preston (1883) 11 QBD 380; Morley v Moore [1936] 2 KB 359.

 

The plaintiff’s argument, in answer to the application for a stay,  that the proceedings differed because the insurers, which were defendnts in its action, were not named as parties to the arbitration failed. By the Commercial Arbitration Act 2012 (WA))'s expanded definition of 'party', their status in the arbitration through their subrogated claims will meet it. Further, the term 'disputes' in the arbitration agreement between the insured and the plaintiff  was expressed broadly so as to embrace wider disputes as between the parties 'in connection with' the subject matter of the subcontract. To the extent that they pursue a subrogated recovery claim through the insured as claimant in that arbitration to recoup indemnified losses, the defendant subrogor insurers meet the description of persons claiming through or under the insured as parties to the arbitration agreement, as it presents under cl 42 of the Subcontract and, indeed, thereby, to the arbitration itself.

 

If a matter is governed by the Act, a court must not intervene, except where it permits.

In order for the arbitration agreement to exclude litigation, it is not necessary that all controversies as between an arbitration and litigation be entirely co-extensive: Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 93 ALJR 582 at [68]; Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [2020] WASCA 77 at [119] - [122], and it is sufficient if most of the controversy sought to be raised under the litigation by the plaintiff also forms a component of the dispute which is also the subject of the arbitration agreement and which is currently pending for hearing before the arbitrator. Matters concerning insurance coverage, alleged breach of the insurance policies and waiver of subrogation arematters governed by the Act. Hancock Prospecting Pty Ltd v DFD Rhodes (supra) at [299] - [300] and [322.

 

A stay under the general inherent powers of the court when there is such a substantial degree of overlap of factual or legal issues that it would be inappropriate for both Court and arbitral proceedings to proceed simultaneously, even if the matters in the litigation were not the subject of an arbitration agreement in a way which would engage the Act. Carter Holt Harvey Ltd v Genesis Power Ltd [2006] 2 NZLR 794 at [61]  The exercise of such a power would raise issues of discretion. For the principles, see Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd (supra); Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [2020] WASCA 77 (S) at [31(1)]. Considerations towards a stay would include which proceeding was commenced first, whether the termination of one proceeding is likely to have a material effect on the other, the undesirability of two courts competing to see which of them determines common facts first, whether work done on pleadings, particulars, discovery, interlocutories and preparation might be wasted, the undesirability of substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues, how far advanced the proceedings are in each court, the law should strive against permitting multiplicity of proceedings in relation to similar issues, and generally balancing the advantages and disadvantages to each party.

Cases of clashing complex jurisdictional choice between contracts variously choosing different forum jurisdictions, such as Airbus SAS v Generali Italia SPA [2019] 2 Lloyd's Rep 59; Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] 1 Lloyd's Law Reports 767; UBS AG v HSH Nordbank AG [2009] EWCA Civ 585; [2010] 1 All ER (Comm) 727 and Sebastian Holdings Inc v Deutsche Bank AG [2011] 1 Lloyd's Law Reports 106 are irrelevant if there is no issue as to whether the court has jurisdiction. Then, the question is whether in exercising it the court is either obliged by the Act, or should, as a matter of discretion, stay the progress of the litigation to allow for the pending arbitration proceedings under way to proceed.