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

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 - NSWSC 2006 case summary — Zoe

[5]

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

[7]

325 George Street Pty Ltd (in liquidation) v Norwich Union Fire Insurance Society Ltd (1980) 1 ANZ Ins Cas 60-404 Agnew v Lansforsakringsbolagens [2000] Lloyd's Rep IR 317 Akai Pty Limited v People's Insurance Company Ltd (1996) 188 CLR 418 Alex Kay Pty Limited v General Motors Acceptance Corporation and Hartford Fire Insurance Company [1963] VR 458 American Airlines Inc v Hope [1974] 2 Lloyd's Rep 301 Ansett Transport Industries (Operations) Pty Limited v Wardley (1980) 142 CLR 237 AssetInsure Pty Ltd v New Cap Reinsurance Corporation Limited (in liq) (2006) 226 ALR 1 Attorney-General (NSW) v Brewery Employees Union of New South Wales & Anor (1908) 6 CLR 469 Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 Australian Casualty Co Ltd v Federico (1986) 160 CLR 513 Barcelo v Electrolytic Zinc Co of Australasia Limited (1932) 48 CLR 391 BP plc v National Union Fire Insurance Co [2004] EWHC 1132 British Dominions General Insurance Company Ltd v Duder [1915] 2 KB 394 Bull v Attorney-General (NSW) (1913) 17 CLR 370 Bulong Nickel Pty Limited, Re (2002) 42 ACSR 52 Charter Reinsurance Co Ltd v Fagan [1997] AC 313 Chloe Z Fishing Co Inc (US) v Odyssey Re (London) Ltd formerly known as Sphere Drake Insurance Plc (UK) 109 Fed Supp 2nd Series (SD) Cal 2000, 1236 Clyde Engineering v Cowburn (1926) 37 CLR 466 Commercial Radio Coffs Harbour v Fuller (1986) 161 CLR 47 Commercial Union Assurance Co Plc v NRG Victory Reinsurance Limited [1998] 1 Lloyd's Rep. 80 Darlington Futures Limited v Delco Australia Pty Limited (1986) 161 CLR 500 Daval Aciers D'Usinor et de Sacilor v Amare SRI ["The Nerano"] [1996] 1 Lloyd's Rep 1 Day and Dent Constructions Pty Ltd v North Australian Properties Pty Ltd (1982) 150 CLR 85 Devenish v Jewel Food Stores Pty Ltd(Milk Vendors case) (1991) 172 CLR 32 Dominion Insurance Co of Australia Ltd and the Companies Act, Re [1980] 1 NSWLR 271 Du Pont v. Agnew [1987] 2 Lloyd's Rep 585 Eagle Star Insurance Co v Spratt [1971] 2 Lloyd's Rep 116 E I Du Pont de Nemours & Co v I C Agnew [1987] 2 Lloyd's Rep. 585 Ethiopian Oilseeds v Rio del Mar [1990] 1 Lloyd's Rep 86 Forsikringaktieselskapet National of Copenhagen v Attorney General [1925] AC 639 Forsikringaktieselskapet Vesta v J N E Butcher [1989] AC 852 Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 Heath Lambert Limited v Sociedad de Corretaje de Seguros [2004] 1 Lloyd's Rep. 495 Hide & Skin Trading Pty Limited v Oceanic Meat Traders Limited (1990) 20 NSWLR 310 Hi-Fert Pty Limited v Kiukiang Maritime Carriers Inc. (No 5) (1998) 90 FCR 1 CASES CITED : Holmes v Permanent Trustee Co of New South Wales Ltd (1932) 47 CLR 113 IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 James Allen (Ireland) Ltd v Marea Producten B.V. (Netherlands) (Yearbook X (1985) p 485) James Buchanan & Co Ltd v Babco Forwarding and Shipping (UK) Ltd [1978] AC 141 K A & C Smith Pty Limited v Ward (1998) 45 NSWLR 702 Kahn Lucas Lancaster Inc v Lark International Ltd (1999) 14 Mealey's International Reports C1 (29 July 1999); (1999) 186 F 3d 210 King v Brandywine Reinsurance Co (UK) Ltd [2004] 2 Lloyd's Rep. 670 La Donna Pty Limited v Wolford AG (2005) 194 FLR 26 Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 Lief Investments Pty Ltd v Conagra International Fertiliser Company (1997) 141 FLR 124; [1998] NSWSC 481] Lo v Aetna 2000 WL 565465 (US District Court, District of Connecticut) McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 Metrocall Inc v Electronic Tracking Systems Pty Ltd (2000) 52 NSWLR 1 MGICA Ltd v United City Merchants (Australia) Limited (1986) 4 ANZ Ins Cas 60-729 Myer Emporium Limited v Commission of Stamp Duties (1967) 85 WN (Part 2) (NSW) 115 O'Sullivan v Noarlunga Meat (1954) 92 CLR 565 Palmdale Insurance Ltd (in liq) (No. 3), Re [1986] VR 439 Pan Australia Shipping Pty Ltd v The Ship 'Comandate' (No 2) Comandate Marine Corp [2006] FCA 1112 Parr v Rural Agents Pty Limited [1975] 2 NSWLR 347 Paul Smith Ltd v H&S International Holding Inc [1991] 2 Lloyd's Rep 127 Prenn v Simmonds [1971] 1 WLR 1381 R v Slator (1881) 8 QBD 267 Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 Samuel v Newbold [1906] AC 461 Shell International Petroleum v Coral Oil Co Ltd [1999] 1 Lloyd's Rep 72 Shipping Corporation of India Ltd v Gamlen Chemical Co Australasia Pty Ltd (1980) 147 CLR 142 Tariff Reinsurance Ltd v Commissioner of Taxation (Vic) (1938) 59 CLR 194 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Toomey v Eagle Star Insurance Co. Ltd [1994] 1 Lloyd's Rep. 516 Vimar Seguros y Reaseguros SA v M/V Sky Reefer 515 US 528 Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 1102 Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581 Waugh v Kippen (1986) 160 CLR 156 Wik Peoples v State of Queensland (1996) 187 CLR 1 Wilson v Moss (1909) 8 CLR 146 Woolworths Limited v DS McMillan (unreported, Supreme Court of New South Wales, Rogers J, 29 February 1988) Zambia Steel Building Supplies Ltd v James Clark & Eaton Ltd [1986] 2 Lloyd's Rep. 225

[120]

"We are satisfied that no inconsistency arises between the International Arbitration Act (Cth) and s106 of the Industrial Relations Act so as to deprive the Commission in Court Session of jurisdiction to hear the application. We agree with Schmidt J that s7 of the International Arbitration Act (Cth) is to be construed as operating on the basis that the relevant court has jurisdiction as to the proceedings sought to be stayed. The International Arbitration Act (Cth) does not purport to alter the jurisdiction of courts to entertain proceedings as to agreements to which it applies. It merely requires those courts to stay proceedings in the event that there is an arbitration agreement which applies to the matters raised in those proceedings. Even then, the court is only required to stay the proceedings on application by a party. The International Arbitration Act (Cth) contemplates courts having jurisdiction to determine the existence of an arbitration clause, whether the proceedings involve a matter which is capable of settlement by arbitration (s7( 2)), whether to make any interim or supplementary orders (s7(3)) and whether the arbitration clause is "null and void, inoperative or incapable of being performed" (s7(5)). These findings must be made by the court as a prerequisite to the granting of a stay of proceedings : see Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No.5) at 14. As Emmett J observed in that case, at 28: Section 7(2) is only invoked upon the application of a party. It is open to the parties not to invoke s7(2) or the discretionary inherent jurisdiction of the Court. If a party chooses to make no application, then there will be no occasion for the Court to consider ordering a stay under s7(2)." [emphasis added] [ Hi-Fert is referred to later in these reasons] 49 Hence the same analysis as given in Metrocall, [where it was held that State legislation applied without any inconsistencies to answer the question whether the matter the subject of the arbitration agreement was capable of settlement by arbitration], requires to be given in relation to the issue presently before the Court [where s 19 of the Insurance Act answers the question as to whether or not the arbitration agreement was inoperative]. 50 Nor do I accept as correct Syndicate 683's submissions in reply seeking to put the matter rather than on the basis that the alleged right is an absolute right, upon the basis that if s 19 of the Insurance Act was valid, and thereby limited the right created in s 7, then the State Act would alter, impair or detract from the operation of the Commonwealth Act. 51 I reject the submission by Syndicate 683 that although section 7 (2) is subject to section 7 (5), the only part of the general law applicable to determining whether an agreement is null and void, inoperative or incapable of being performed are "ordinary common law principles, including, for example, the doctrines of frustration and repudiation". As HIH has contended, on this view, any State legislation that might be relevant to whether an agreement is binding or enforceable would have no role to play. 52 Additionally to the reasons earlier given, apart from the fact that the proposition sought to be put by the Syndicate is wholly incongruous with the international (i.e. not solely common law) character of the New York Convention, it seeks to draw a distinction between common law and statute which cannot be maintained. As HIH has contended, this is because:

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iii. finally, there is legislation in NSW which applies to specific categories of contract, such as consumer credit contracts, retail leases, or contracts relating to the sale of land. 53 I accept as correct the contention put by HIH that the Insurance Act falls into this third category. It lays down provisions which relate to all contracts of insurance, other than those which are specifically exempted from its operation. It alters the common law of contract in relation to the consequences of breach (s18), the consequences of misrepresentation (s18A), the effect of limitation clauses (s18B), and the enforceability of arbitration clauses (s19). 54 A contention that this Act needs to be ignored, and that the Court should have regard solely to the common law, eschews the fact that the general law background against which the International Arbitration Act operates consists of both common law and statute, and that in some respects (including in relation to contracts of insurance) the common law has been supplanted by statute. Finding with respect to the "right to a stay" argument put by Syndicate 683 55 For the reasons already given the finding is that insofar as section 7(2) confers a 'right' to have proceedings stayed and referred to arbitration, it is not an absolute 'right', but is expressly subject to section 7(5), which provides that the Court has no power to grant a stay where the arbitration agreement is "null and void, inoperative or incapable of being performed". 56 The Commonwealth statute does not set down any criteria for determining when section 7(5) shall apply, but instead leaves the issue to be determined against the background of the general law, which includes any applicable State legislation. 57 It is artificial to draw a line between the common law and legislative components of the general law, particularly in circumstances where aspects of the law have been codified, where statutes (such as the Fair Trading Act) allow the Court to declare a contract void or unenforceable in certain circumstances, and where there exists legislation (such as the Insurance Act) which specifically modifies the common law applicable to certain categories of contract.

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The intention of the Commonwealth Act is to maintain the provision of high quality and technically efficient broadcasting services which are commercially viable and receptive to the needs of the community. It does so by the prohibition of broadcasting except under licence granted subject to certain conditions. But the relaxation of the prohibition by the granting of a licence does not confer an immunity from other laws, Commonwealth or State. The Act does not purport to lay down the whole legislative framework within which the activity of broadcasting is to be carried on. It is intended to operate within the setting of other laws with which the grantee of a licence will be required to comply. … In the words of Dixon J in Ex parte McLean … the Act was intended to be 'supplementary to or cumulative upon the State law' . [emphasis added] 77 Similarly here, the intention of the International Arbitration Act (as shown by sub-section 7(5)) is not to confer an immunity from the general law requirements for there to be a binding arbitration agreement. It does not purport to lay down the entire legislative framework within which the enforceability of arbitration agreements is to be determined. Instead, it is intended to operate within the setting of other laws, both Commonwealth and State, both common law and statute, which determine the circumstances in which an agreement is null and void, inoperative or incapable of being performed. In this sense, it is intended not to remove any field of operation for State law, but to be supplementary to or cumulative upon the State law. 78 It follows that there is no inconsistency between section 19 of the Insurance Act and the International Arbitration Act so that in the circumstance of section 19 otherwise applying, extending as it does to contracts of reinsurance [as a species of the genus 'contracts of insurance'], it renders the arbitration clause upon which the Syndicate relies non-binding and, in terms of section 7(5) of the International Arbitration Act, "inoperative".

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"It is idle to suggest that the underwriters would not have foreseen the possibility that a dispute triggering the service clause may involve non-disclosure or misrepresentation. There are very few cases indeed in my experience where an underwriter declining liability under a policy fails to allege non-disclosure. In other words, when, as part of their commercial bargain with the plaintiff, the underwriters submitted to the jurisdiction of the Court, they could not have been unaware of the possible inconvenience or cost that could be occasioned by Sydney being selected as the forum for determination of any such dispute between them." 93 HIH has submitted and I accept, that although his Honour's observations were made in the context of an application for a stay in proceedings on forum non conveniens grounds, what his Honour said in relation to the above passage is directly inconsistent with Syndicate 683's submission that the service of suit clause in the present case should be confined as a matter of construction to disputes for the payment of confirmed balances. 94 It is also true that Syndicate 683's submission lacks any textual support for the extreme limitation of the kind sought to be imposed on the clause by that submission. As HIH has submitted, if the submission were correct, this aspect of Article XVIII would be redundant because its work would be done entirely by the final sentence of Article XIX which, it will be recalled, provides that "[a]ctions for the payment of confirmed balances shall come under the jurisdiction of the ordinary Courts." 95 Syndicate 683 also sought to pray in aid the terms of section 1(1) of the Arbitration Act 1975 (UK) in giving meaning to the policy. However the particular phrase from that section relied upon- "there is not in fact any dispute between the parties with regard to the matter agreed to be referred" - has no counterpart in any Australian legislation. As HIH has contended, this is significant because the arbitration clause in the policies contemplates arbitration not in the United Kingdom but in Australia. 96 HIH also contends and I accept that Syndicate 683's submission is also inconsistent with the width of the phrase "dispute arising under this agreement". Section 1(1) of the Arbitration Act 1975 (UK) contemplates no disputes; Article XVIII contemplates the opposite. 97 As HIH has further contended, the dispute raised in the current proceedings is a dispute arising under the reinsurance policies, namely whether or not, on their proper construction, the balances claimed to be owing to HIH under the policies are owing and, in particular, the question whether the policies require a reinsured first to have paid out its underlying insureds as a precondition to its entitlement to indemnity under the reinsurance policy. This is the issue which went to the House of Lords in Charter Reinsurance Co Ltd v Fagan [1997] AC 313. 98 In my view where, as here, a dispute arises under the policies, provided that the dispute is not in effect a claim for a confirmed balance [in which case it cannot be the subject of a reference to arbitration], HIH has an option to require that dispute to be litigated pursuant to Article XVIII in a competent court in the Commonwealth of Australia of its choosing or, alternatively, to submit that dispute for determination by way of arbitration. The issue is dealt with below. 99 Syndicate 683's submission that Article XVIII is limited to actions for payment of confirmed balances, and that such "actions" ought to be limited to proceedings commenced pursuant to the statutory demand procedure, or other proceedings of a similar nature, also fails to take account of the jurisdiction choice provided to HIH under Article XVIII, namely the Courts of Australia, not England. The statutory demand procedure under section 459E Corporations Act 2001, and any consequential proceedings under section 459P, are simply unavailable to HIH in Australia against the Syndicate or any of its members or the other reinsurers, since they have no relevant presence within the jurisdiction, such as registration, or carrying on business in the jurisdiction. 100 The suggested limitation to the nature of "actions" under Article XVIII is ignores the clear words of the Article which is not limited to claims for debts which are not disputed. An option to litigate 101 Continuing the analysis pointing up New South Wales as the governing law of the policies, the following matters may be noted, again adopting the submissions put by HIH:

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ii. The above decision of Colman J also involved a reinsurance policy which juxtaposed a " Service of Suit Clause " in materially similar terms to Article XVIII with an arbitration clause. The Service of Suit Clause in Brandywine relevantly provided that: "It is agreed that in the event of the failure of Insurers hereon to pay any amount claimed to be due hereunder, Insurers hereon, at the request of the Insured, will submit to the jurisdiction of any Court of Competent jurisdiction within the United States and will comply with all requirements necessary to give such Court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such Court." Colman J said of the Service of Suit Clause (at 680 [39]) that: "Its effect is to confer on the assured an option to select the jurisdiction of the New York courts or, in the case of Section IIIB, any United States court for the resolution of any dispute in respect of which insurers have failed to pay a claim made by the assured. If that option is exercised by the assured, the insurers are obliged to comply with all procedural requirements necessary to give the New York court or (under section III B) other Court jurisdiction and all matters arising are to be determined in accordance with New York law and practice or in the case of III B the law and practice of the Court selected. This clearly provides for an express choice of law, but it is contingent on the assured being entitled to exercise the option as to jurisdiction and on the assured having exercised it. It is thus clear that a dispute might arise in respect of which the assured was not entitled to exercise the option: for example an allegation by insurers that they were entitled to avoid the policies for non-disclosure before any claim for payment had arisen. Equally the assured might choose to sue the insurers in their place of business not in the United States and so not to exercise its option to undertake New York or United States jurisdiction. In either event, there would be no effective express incorporation of either New York jurisdiction or New York law or under Section III B any other jurisdiction or law." [His Lordship repeated the language of an " option " for New York jurisdiction in [53] and [54]. Although aspects of this decision were reversed on appeal (see (2005) 1 Lloyd's Rep. 655), no criticism was made of the analysis of the Service of Suit Clause as providing an option on the part of the assured to litigate.]

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Hence the contract in question did not include a choice of law clause governing the contract, a service of suit clause, nor a choice of law and jurisdiction clause conferring an option to litigate. 109 Shell International Petroleum v Coral Oil Co Ltd [1999] 1 Lloyd's Rep 72 concerned the construction of a choice of law and jurisdiction clause (art 13) and an arbitration clause (art 14). The jurisdiction clause was held to confer only limited jurisdiction on English Courts in relation to any dispute "under this provision", being the choice of law clause itself. This case is distinguishable because the scope of disputes the subject of the jurisdiction clause was construed as being limited to disputes about the proper law only. Article XVIII presently before the Court is however expressed in broad terms covering a dispute arising "under this Agreement" and is not limited to disputes about the proper law of the treaties. 110 Daval Aciers D'Usinor et de Sacilor v Amare SRI ["The Nerano"] [1996] 1 Lloyd's Rep 1 concerned an arbitration clause in a charter party which was held to have been incorporated into a bill of lading, the terms of which provided "English Law and Jurisdiction applies". The arbitration clause was able to be read consistently with the provision in the bill of lading on the basis that the English Court retained a supervisory jurisdiction over the arbitration. The case did not concern a service of suit clause, nor a choice of law and jurisdiction clause conferring an option to litigate. Returning to the present litigation 111 In the result whatever the proper law of the policies may have been prior to the commencement of the proceedings, it was "retrospectively varied on the exercise of a contractual option" (to quote Bingham LJ in Du Pont v Agnew at 592) and that exercise rendered New South Wales the governing law of the policies referred to in the summons. 112 Later in these reasons the section 109 issue is determined adversely to the Syndicate. Taking that finding into account for present purposes, the correct analysis is that it is because the policies were governed by New South Wales law that section 19 of the Insurance Act applies, with the effect that the arbitration clause does not bind HIH: cf. for example, Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581 at 601 where Dixon J said:

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"…an enactment describing acts, matters or things in general words, so that, if restrained by no consideration lying outside its expressed meaning, its intended application would be universal, is to be read as confined to what, according to the rules of international law administered or recognized in our Courts, it is within the province of our law to affect or control. The rule is one of construction only, and it may have little or no place where some other restriction is supplied by context or subject matter. But, in the absence of any countervailing consideration, the principle is, I think, that general words should not be understood as extending to cases which, according to the rules of private international law administered in our Courts, are governed by foreign law." 113 The converse of this proposition is that statutes whose criterion of operation is not spelt out in terms on the face of the statute apply to contracts whose governing law, according to the forum's choice of law rules, "picks up" the statute: see Akai Pty Limited v People's Insurance Company Ltd (1996) 188 CLR 418 at 442-443. That is to say, if the forum's choice of law rules indicate that the contract is governed by New South Wales law, New South Wales statutes are picked up and apply to the contract in question. See also Barcelo v Electrolytic Zinc Co of Australasia Limited (1932) 48 CLR 391 at 424; Myer Emporium Limited v Commission of Stamp Duties (1967) 85 WN (Part 2) (NSW) 115; see also K A & C Smith Pty Limited v Ward (1998) 45 NSWLR 702; Re Bulong Nickel Pty Limited (2002) 42 ACSR 52. 114 The granting by the policy to HIH of an option to litigate or arbitrate is consistent with the existence and operation of section 19 of the Insurance Act 1902 which as earlier observed, formed part of the contractual matrix against which the policies were entered into and against which they fall to be construed (see Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289). 115 As HIH has submitted, in this context Yeldham J's observations in Parr v Rural Agents Pty Limited [1975] 2 NSWLR 347 at 354 are in point. His Honour said that:

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117 Article XVIII would not only be denuded of force and effect if, once a party had triggered its operation, the Court proceedings could be immediately stayed by reference to Article XIX but also such a construction would destroy the effect of the right on the part of HIH in effect to choose the governing law through its choice of jurisdiction. It would also arguably denude it of the opportunity to bind all Reinsurers on the programme (because there is no equivalent to clause (iii) of Article XVIII in Article XIX). 118 Finally the context permits the Court to infer that the parties would not have intended a potentially difficult legal question of policy construction to be resolved by insurance or reinsurance executives who were not bound to apply any legal standard and from whose decision no appeal would lie. 119 Reasoning of this kind was deployed by the Full Court of the Federal Court in Hi-Fert Pty Limited v Kiukiang Maritime Carriers Inc. (1998) 90 FCR 1 at 6G (per Beaumont J) and 23G (per Emmett J, with whom Branson J agreed) where the Court refused to attribute to the parties an intention to invest arbitrators (commercial men) in London with responsibility for resolving questions involving the construction of an Australian statute (the Trade Practices Act) and possibly complex private international law questions. 120 In like fashion HIH has submitted and I accept that the Court would not readily attribute such an intention to the parties in the current case in relation to the proper construction of a clause of the policy. Syndicate 683's alternative contention 121 Syndicate 683's alternative contention that the natural and ordinary meaning of article XVIII is that it is a submission to jurisdiction clause, specifying "the jurisdiction of any competent Court in the Commonwealth of Australia" and that the relevant Court may thus be a "Court of Arbitration" as it is referred to throughout article XIX, or a Court of law such as the Supreme Court requires to be rejected. 122 The problems with this analysis are as follows:

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Primary Layer First Excess Layer Third Excess Layer ($1 million) ($1 million/$1 million) ($5 million/$5 million) GT118F GT843K 1988 Wording (TJW1 p174-183) LPSO; GT160E 1986-1992* Wording (TJW1 p87-103) LPSO 1988-1990 slips (to be tendered) (Wording to be agreed by Leading Underwriter/ Wording to be agreed by Leading Underwriter only/ Wording to be advised L/U only) No wording available 1993 1993 Slip (TJW1 p1-6) (wording as expiring) scratched p6, p4 LPSO p3 1991-1992 Slips (TJW1 p159-164; 165-173) ("wording as expiring") 1993 Slip (TJW1 p184-207) (wording as expiring) scratched p196; LPSO 1993 wording processed by LPSO 23/9/94 (TJW2, p297) 1993 Slip (TJW1 p104-113) ("wording as expiring") scratched p.108; LPSO 1993 wording processed by LPSO 23/9/1994 (TJW2, p300) 1993 wording processed by LPSO 1/7/94 and/or 6/7/94 (TJW2, p299) GT843L GT118G GT160F 1986-1992* Wording (TJW1 p87-103) LPSO 1994 Wording (to be tendered) LPSO 1994 Wording (TJW1 p224-233) LPSO 1994 1994 Slip (TJW1 p45-51) (wording as expiring) scratched pp 45, 46, 49; LPSO 1994 Slip (TJW1 p147-158) scratched p150-155, 157-158 LPSO p147 1994 Slip (TJW1 p208-223) scratched p211, 213, 214, 220-223; LPSO 1994 wording processed by LPSO 12/8/94 and/or 18/1/05 (TJW2, p302) GT843M GT118H GT160G 1995 1995 Wording (TJW2 p1-22) LPSO/HIH 1995 Wording (TJW2 p98-118) LPSO/HIH 1995 Wording (TJW2 p188-206) LPSO/HIH 1995 Slip (TJW1 p34-44) scratched 1995 Slip (TJW1 p135-146) scratched/ LPSO 1995 Slip (TJW1 p234-251) scratched /LPSO GT843N GT118J GT160H 1996 1996 Wording (TJW2 p23-76) LPSO/HIH 1996 Wording (TJW2 p119-157) LPSO/HIH 1996 Wording (TJW2 p207-255) LPSO/HIH 1996 Slip (TJW1 p21-33) scratched 1996 Slip (TJW1 p124-134) scratched/ LPSO 1996 Slip (TJW1 p252-263) scratched GT843P GT118K GT160J 1997 1997 Wording (TJW2 p77-97) LPSO/HIH 1997 Slip (TJW1 p114-123) scratched p118; LPSO 1997 Slip (TJW1 p264-274) scratched 269; LPSO 1997 Slip (TJW1 p7-20) scratched 1997 Wording (TJW2 p158-187) LPSO/HIH 1997 Wording (TJW2 p256-277) LPSO/HIH

[237]

144 As earlier indicated issue raised with respect to each of the above policies is that no policies, which are signed by both parties for these layers in these policy years are in evidence. 145 The burden undoubtedly lies on Syndicate 683, as the party seeking a stay of proceedings pursuant to the International Arbitration Act, to satisfy the Court that "agreement in writing" meeting the description of that term in the Act, as it has been construed, were once in existence. 146 Mr Whittaker's evidence that it was not the practice of Syndicate 683 to receive signed copies from HIH is equivocal as to whether the policies were signed by both sides for the relevant years. This evidence clearly falls short of establishing the fact on the balance of probabilities. 147 It is critical for Syndicate 683 to establish that HIH had a consistent practice of signing the policies in place for the years in question. However, Syndicate 683 has not put forward any policy signed by both parties in any policy year prior to 1993 and the only signed policies are dated from 1995 onwards. The available evidence supports no more than the inference that such a practice began after 1995. 148 It is inappropriate to draw an inference that the 1993 and 1994 policies were signed from the mere fact that they were processed by the LPSO. Rather the evidence suggests significant lapses in time between the dates when the policies were processed and when they were signed. 149 HIH concedes that the position may have been different if there were policies signed by both parties prior to 1993. The liquidators of HIH were obliged to bring forward any such policies had they existed. None were identified. 150 The finding is that the established procedure of scratching, stamping and processing the slips did not render the slips "agreements in writing" within the meaning of the Act signed by both parties. Estoppel 151 There is no substance in the contention by Syndicate 683 that HIH is estopped from denying the existence of an arbitration agreement containing signed policies for the purposes of s7 (1) (d) of the International Arbitration Act. The matter is put in terms of an estoppel by a convention. There is no evidence of any detrimental reliance by Syndicate 683 on any such assumption. That is of course an essential element for any estoppel case because the necessary consideration for the Court, when considering whether relief sought is proportional to the detriment, is to have regard to the detrimental reliance contended for. There was no evidence from the syndicate, in particular Mr Whittaker, that he acted in reliance upon any such assumption. The obvious mistake 152 Mr Sackar QC appearing for Syndicate 683 drew attention to the fact that in some policies certain of the articles clearly had slightly different headings to the others. 153 This matter is shortly explained by the fact that the variation appears only in four policies in the third access layer. The scheme of the vast bulk of the policies involved Article V1 being headed "Commission" and Article VII being headed "Contingent Commission". It so happens that the scheme in the third access layer was that it did not include an article in relation to contingent commissions whereas the policies for the underlying layers did include the contingent commission article. 154 A mistake appears to have occurred with respect to the subject four policies. In terms of the placement of the relevant headings for the "Service of suit" and "Arbitration" articles, all the articles had been brought forward by one for those four years, resulting in the mistaken repositioning of the material headings. 155 The mistake was ultimately corrected [cf Exhibit R2] removing the matter from contention as an issue. Discretionary considerations 156 HIH has accepted that the usual principle [where agreements are binding, operative and where proceedings fall within their scope] is that the Courts begin with a firm disposition in favour of maintaining the bargain unless strong reasons be adduced against a stay: Akai Pty Ltd v People's Insurance Company (1988) 188 CLR 418 at 445. 157 Notwithstanding that circumstance it is true that the Court retains a discretion such that even had HIH not succeeded in its several cascading contentions, the Court would not be obliged to grant a stay of the present proceedings. 158 HIH's submission that:

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