HIH Casualty & General Insurance Limited (in liquidation) v R J Wallace sued on his own behalf and on behalf of all other members of Syndicate No 683 at Lloyd's of London for the 1993 underwriting account & Ors [2006] NSWSC 1150

Reported Decision : (2007) 14 ANZ Insurance Cases 61-721

New South Wales Supreme Court

CITATION : HIH Casualty & General Insurance Limited (in liquidation) v R J Wallace sued on his own behalf and on behalf of all other members of Syndicate No 683 at Lloyd's of London for the 1993 underwriting account & Ors [2006] NSWSC 1150

HEARING DATE(S) : 23/10/06, 24/10/06

JUDGMENT DATE : 3 November 2006

JURISDICTION : Equity Division Commercial List

JUDGMENT OF : Einstein J

DECISION : Notice of motion seeking stay of proceedings to be dismissed

CATCHWORDS : Reinsurance Treaties - Proper construction and effect of service of suit and arbitration articles - Service of suit article providing that in the event of a dispute arising under the agreement, reinsurers at request of insurer will submit to jurisdiction of any competent court in the Commonwealth of Australia such dispute to be determined in accordance with the law and practice applicable in such court and reinsurers to abide final decision of such court or any competent appellate court - Arbitration article providing that disputes arising out of agreement or concerning its validity to be submitted to decision of a Court of Arbitration consisting of three members to meet in Australia and that decision of Court of Arbitration shall not be subject to appeal - HIH Casualty & General Insurance Ltd (in Liquidation) commences proceedings against Lloyd's Syndicate in Supreme Court seeking to test the analysis of the House of Lords in Charter Reinsurance Co Ltd v Fagan [1997] AC 313 on question of whether payment by the insurer to its insureds is a condition precedent to its right to recover from the reinsurers the balances confirmed from time to time to be owing by reinsurers - Test case likely to affect recovery of amounts from other reinsurers on other reinsurance contracts - Evidence that potential denial of the access of creditors to reinsurance assets that form part of an insurance company's solvency requirements, once the company has entered formal insolvency, may well have serious regulatory implications - Reinsurers seek stay of proceedings under section 7 of International Arbitration Act 1974 (Cth) - Whether arbitration clause/agreement not binding upon HIH by reason of the provisions of section 19 of the Insurance Act 1902 (NSW) - Whether section 19 inconsistent with section 7 of International Arbitration Act and therefore inoperative by virtue of section 109 of the Constitution (Cth) - Whether the effect of section 7 (2) of International Arbitration Act is to provide a party with a right to a stay of proceedings whereas section 19 of Insurance Act purports to limit the availability of that right - Whether International Arbitration Act intended to cover the field for regulating recognition and enforcement of foreign arbitration agreements leaving no scope for operation of section 19 of Insurance Act - Meaning of the term 'Insurance' in section 19 - Whether as a matter of construction section 19 inapplicable to instant circumstances because article dealing with arbitration not 'a provision in a contract of insurance' or 'a provision with respect to the submission to arbitration of any matter arising out of the contract of insurance' - Whether arbitration clause not engaged because properly construed policy gives an option to HIH to litigate rather than to arbitrate - Whether arbitration clause not engaged because action is for payment of 'a confirmed balance' - Whether arbitration agreement not one to which International Arbitration Act applies as it is not ' an agreement in writing' - Consideration of procedures whereunder Lloyds syndicates contractually bind themselves in relation to inwards reinsurance including affixation of syndicate's stamp and 'scratching' on slips presented by broker as agent for ceding insurer - Procedures taken by Lloyds Policy Signing Office - Whether proceedings involve 'claims for the payment of confirmed balances' - Whether arbitration agreement an 'agreement in writing' within meaning of International Arbitration Act - Principles of construction of contractual documents - Estoppel - Whether Court should exercise its discretion to refuse a stay of proceedings - Courts begin with a strong disposition in favour of maintaining a bargain unless strong reasons adduced against grant of a stay