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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> O'Sullivan & Anor v. Eagle Star Insurance Company Ltd. [2006] IEHC 249 (10 July 2006) URL: http://www.bailii.org/ie/cases/IEHC/2006/H249.html Cite as: [2006] IEHC 249 |
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Neutral Citation Number: [2006] IEHC 249
2006 No. 56 MCA
IN THE MATTER OF THE ARBITRATION ACTS, 1954 – 1998
AND IN THE MATTER OF A PROPOSED ARBITRATION
BETWEEN/
CLAIMANTS
RESPONDENT
Judgment of Miss Justice Laffoy delivered on 10th July, 2006.
The facts which give rise to this application by the claimants for an order under s. 45 of the Arbitration Act, 1954 (the Act of 1954) extending the time for referring a dispute to arbitration are as follows:
• The plaintiffs are householders and are the owners of a dwelling house at Inchwell, Kanturk, County Cork (the premises).
• During the period from 20th May, 2002 until 20th May, 2003 the premises were covered by a Homestar 25 Plus Policy of insurance issued by the respondent which issued on foot of a proposal form in which, it is averred on behalf of the respondent, the claimants sought "Home Insurance".
• On 5th December, 2002 plenary proceedings were instituted in this Court entitled John O'Neill, plaintiff v. Gerard O'Sullivan and Martina O'Sullivan, defendants (Record No. 2002 No. 15558P) in which the Mr. O'Neill claimed damages for personal injury, loss and damage alleged to have been sustained on or about 12th July, 2002 while he was engaged in works on the premises in the course of his employment with and under the supervision and control of the defendants.
• The respondent became aware of the claim of the plaintiff and of the plenary proceedings prior to 20th March, 2003. On that date the respondent required the claimants to complete a "Household Claim Form". By letter dated 28th March, 2003, the respondent declined to provide an indemnity in respect of the claim to the claimants, giving the following reason for that decision in the letter:
"This policy was proposed to us on the basis of the premises being in good repair. We note that there was no stairway fitted at the time. If we had been aware of this position we would not have accepted the risk. Due to the breach of policy conditions by failure to disclose this material fact we are not in a position to consider indemnity under the policy."
In the final paragraph of the letter the following comment was made:
"It does appear that the matter may be more appropriate for Mr. O'Sullivan's business liability insurers for their consideration."
• By letter dated 22nd December, 2005 the claimants' solicitors informed the respondent that the claimants would be invoking the arbitration clause in the policy, nominated three persons who might act as arbitrator and enclosed a draft submission to arbitration.
• The response of the respondent, which was given by email dated 1st February, 2006, was that under the arbitration clause in the policy the claim is deemed to have been abandoned not having been referred to arbitration within twelve months from the date of disclaimer, which was dated 28th March, 2003.
• This application was initiated by an originating notice of motion dated 15th June, 2006.
• In the interim between 28th March, 2003 and 22nd December, 2005, the claimants had sought an indemnity from their "business liability insurers", Quinn Direct, on 31st March, 2003. Quinn Direct nominated a firm of solicitors, Patrick J. O'Shea & Company, from their panel to protect the claimants' interests on 8th October, 2003. By order of the court in the plenary proceedings made on 13th October, 2003, Mr. O'Neill was granted liberty to enter judgment against the defendants in default of appearance. The assessment of the damages to which Mr. O'Neill is entitled is listed for hearing during the Cork Personal Injuries Sessions at the end of this month.
• I am being deliberately spare and cautious in outlining what transpired between the claimants and Quinn Direct. The first claimant has averred in the affidavit grounding this application that he was notified by letter dated 3rd March, 2005 that Quinn Direct had decided not to provide an indemnity. Before that, however, Patrick J. O'Shea & Company had succeeded in entering an appearance in the Central Office on 4th December, 2003, notwithstanding that an order had been made giving Mr. O'Neill liberty to enter judgment in default of appearance. In September or October, 2005 Patrick J. O'Shea & Company applied to the court in the plenary proceedings for leave to come off record. That application was grounded on the affidavit of Linda O'Shea sworn on 30th September, 2005. The application was obviously on notice to Mr. O'Neill whose solicitor, John F. Daly of the firm of John F. Daly & Co., Solicitors, filed a replying affidavit to that application sworn on 19th October, 2005. Copies of those affidavits have been put before the court on this application and the affidavits have been relied on by both the claimants and the respondent. Whether this has been done with the knowledge of the deponents is not clear. In any event, I think it important that I should emphasise that I have formed no view on the claimants' position vis-à-vis either Quinn Direct of Patrick J. O'Shea & Company on the basis of the averments in those affidavits. Patrick J. O'Shea & Company was allowed to come off record by order of the court made in the plenary proceedings on 5th December, 2005. It was at that stage that the claimants sought to dispute the respondent's declinature of indemnity.
Section 45 of the Act of 1954 provides as follows:
"Where –
(a) the terms of an agreement to refer future disputes to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an arbitrator is given or an arbitrator is appointed or some other step to commence arbitration proceedings is taken within a time fixed by the agreement, and
(b) a dispute arises to which the agreement applies,
the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, but without prejudice to section 42 of this Act, extend the time for such period as it thinks proper."
Section 42 of the Act of 1954 provides that the statutes of limitation shall apply to arbitration under an arbitration agreement as they apply to an action in court.
The clause in the policy on which the respondent relies is clause 4 under the heading "Policy Conditions", which provides as follows:
"If there is a dispute arising out of this Policy, the dispute will be referred to an arbitrator. The arbitrator will be appointed jointly by you and us in accordance with the law at the time. Claims not referred to arbitration within 12 calendar months from the date of disclaimer of liability shall be deemed to have been abandoned."
Only one authority on the application of s. 45 was cited: the decision of Hamilton J., as he then was, in Walsh v. Shield Insurance Company Limited [1976-7] I.L.R.M. 218. In that case, Hamilton J. held that there had been inexcusable delay on the part of the applicant both in commencing arbitration proceedings and in bringing an application under s. 45. The period between the repudiation of liability by the respondent insurance company and what Hamilton J. deemed to be the commencement of the arbitration was the period between 13th October, 1970 and 17th January, 1973. However, unlike the instant case, during that period there had been engagement between the applicant's solicitor and the respondent insurance company. The delay between commencement of the arbitration and the initiation of the s. 45 application was from 30th January, 1973 to 2nd July, 1976. Notwithstanding the inexcusable delay, Hamilton J. made an order deeming the arbitration proceedings to have commenced on 17th January, 1973 and extending the time for commencement to 30th January, 1973. He rationalised his decision on the following basis (at p. 221):
"… I am quite satisfied that the respondent has not been in any way prejudiced by such delay. The respondent has repudiated liability on foot of the policy on the grounds set forth in the letter dated 13 October, 1970 and if these grounds are valid, the delay has not in any way affected them or prevented them from being in a position to make the case before the arbitrator.
I am satisfied that undue hardship would be caused to the applicant if I were not to extend the time for referring the matter to arbitration …"
However, Hamilton J. imposed terms to the making of the order, in that he directed that the applicant be responsible for the costs of the motion and was not to be awarded the costs of the arbitration if successful therein.
It was submitted on behalf of the respondent that both the delay in referring the dispute to arbitration and in initiating this application are inexcusable. The claimants sought to justify the first delay on the ground that the respondent had "advised" that they pass the matter to their business liability insurers for consideration and they had followed the advice. Had they been aware that Quinn Direct would not provide an indemnity, they would have taken immediate steps to refer the dispute with the respondent to arbitration. That line of argument certainly does not excuse the failure to refer the dispute to arbitration immediately after 3rd March, 2005. I do not think that the comment in the letter of 28th March, 2003 can be construed as "advice". Therefore I consider that the delay through the latter half of 2003, through 2004 and through 2005 was inexcusable. Moreover, I consider that a further delay of over four months in bringing this application was inexcusable.
It was submitted on behalf of the respondent that, if the claimants' application were acceded to, the respondent would be prejudiced because, Mr. O'Neill having obtained liberty to enter judgment in default of appearance and there being little prospect of the respondent being able to have that judgment set aside, the respondent will not be in a position to contest the issue of liability in the plenary proceedings and, further, the respondent will not be in a position to be properly prepared to deal with and contest the issue of quantum. It was submitted that the prejudice is significant and that it has occurred without any fault on the part of the respondent. It was further submitted on behalf of the respondent that, insofar as the claimants will suffer hardship as a result of the circumstances which have arisen, that issue can be properly addressed by the claimants bringing a claim against Quinn Direct or the firm of solicitors nominated by them or both for the manner in which the claim of Mr. O'Neill against the claimants was dealt with.
The respondent has not made the case on this application that, if the issue as to whether it had validly declined to indemnify the claimants were to be arbitrated at this juncture, it would be prejudiced by the delay in making the case before the arbitrator that it was entitled to repudiate liability on the grounds set out in the letter of 28th March, 2003. If the dispute goes to arbitration, the respondent can make its case and, if it was entitled to decline indemnity, it will succeed before the arbitrator.
On the other hand, given the current state of the plenary proceedings, the claimants are inevitably going to be fixed with an award of damages in favour of Mr. O'Neill. On the basis of the evidence before the court I think I am entitled to infer that such award will cause the claimants undue hardship if the respondent has wrongfully declined an indemnity and they are deprived of the opportunity of establishing that at arbitration. If, as a result of an arbitration, the respondent is obliged to indemnify the claimants, the respondent will be in no worse position than the claimants in relation to recovering from a third party any loss which has been accrued as a result of the involvement of the third party in the handling of Mr. O'Neill's claim against the claimants, because, as one would expect, there is a subrogation clause in the Policy. Clause 12 under the heading "Policy Conditions" provides:
"We are entitled to:
- take the benefit of your rights against another person before or after we have paid a claim …"
Accordingly, I consider that this is a proper case in which to extend the time for referring the dispute between the claimants and the respondent to arbitration and I extend the time for one week from today, 10th July, 2006, subject to the imposition of conditions similar to the conditions imposed by Hamilton J. Accordingly, the applicant will be responsible for the costs of this motion and will also be responsible for the costs of the arbitration even if successful therein.
Approved: Laffoy J.