An assured (“Midnight”) claimed under a P&I Policy. Cover was declined. The policy contained a contractual one-year time bar and a London arbitration clause. For reasons which are not clear Midnight ignored this and commenced court proceedings in Canada.
The insurer’s (“Miller’s”) response was to appoint a London arbitrator seeking a declaration of non liability. It was agreed the assured need not appoint their own arbitrator until an application to stay the Canadian proceedings had run its course.
The Canadian courts found in favour of Miller and the Canadian proceedings were stayed. In response, Midnight did nothing for years. They had gone well past the statutory 6-year time limit (the I year contractual limit had been waived) before appointing an arbitrator.
Not unsurprisingly Miller’s response in the arbitration was to ask the tribunal to find that the claim was either time barred or to dismiss it on the grounds that there had been “inordinate and inexcusable delay on the part of the claimant in pursuing his claim” under section 41 (3) of the Arbitration Act 1996 (the “Act”).
The more interesting of the points is the time bar one. Midnight’s point was that time had already been protected for their claim by Miller’s appointment of an arbitrator. The arbitrators found, by a majority, on this that time was not protected. Although Miller’s claim for a declaration of non liability under the policy had been referred to arbitration within time, Midnight’s claim under the policy had not been.
With respect, that decision does seem to be wrong. It’s open to the logical incongruity that Males J identified. Miller had appointed an arbitrator so that they could state before the Canadian Courts that Midnight’s claim had been referred to the contractually agreed forum in the contractually agreed jurisdiction. It is difficult to see, in those circumstances, how it did not thereby protect time both for Miller and Midnight.
Males J indicated he would have given leave to appeal further on this point had it stood alone. It didn’t. It lies there open for consideration in a later case. In this case, however, it was embroiled in procedural objections and caught up by the other grounds on which the claim had been dismissed in arbitration – “inordinate” delay under the Act.
Midnight challenged this on purely legal grounds. They said section 41(3) applied only to delays “on the part of the claimant”. They, so they submitted, were not pursuing a claim but defending Miller’s claim for a declaration of non liability.
Males J had little time for that argument. He noted that section 82 (1) of the Act extended section 41(3) to counterclaims and counterclaimants. He then noted that the only way in which the arbitration would actually proceed was if Midnight took the initiative and pursued their claim under the P&I policy.
As he astutely pointed out, Midnight were “impaled on an insuperable dilemma”. There were only two choices. Firstly, if Midnight’s claim was not referred to arbitration by the appointment, it follows that it was time barred. If it was, the arbitrators were entitled to find that there had been inordinate and inexcusable delay.