Allianz Insurance PLC & Anor v Tonicstar Limited [2018] EWCA Civ 434 (CA)

The English Courts were faced with the issue of whether a barrister and Queen’s Counsel with at least 10 years practice in the insurance and reinsurance field came within the definition of "[a person] with not less than ten years’ experience of insurance or reinsurance". This qualifying definition was adopted under the "Excess Loss Clauses" promulgated by the Joint Excess Loss Committee and many similar qualification conditions apply under similar standard terms.

First Instance

At first instance Teare J. held that, uninhibited by authority, he might well have decided that the barrister in question satisfied the qualification requirement. However, Teare J. felt bound to follow an earlier decision of the Commercial Court in Company X v Company Y (17 July 2000). On materially identical facts, Morison J had held that a Queen’s Counsel who had more than 10 years’ experience of acting in insurance and reinsurance disputes did not qualify for appointment under the clause. In Company X v Company Y Morison J had construed the qualifying clause as requiring persons appointed as arbitrators to have not less than 10 years’ experience of working within the insurance or reinsurance industry on the basis that what was intended was a "trade arbitration".

The Court of Appeal

On appeal, a unanimous Court of Appeal overruled Company X v Company Y and Teare J. and decided that the barrister came within the definition and had been validly appointed for the following reasons:-

• On a plain reading of the words of the clause the clause did not require that a person appointed as an arbitrator must have been employed in the insurance or reinsurance industry for at least 10 years. The clause said only that the persons appointed must have "not less than 10 years’ experience of insurance or reinsurance". It did not impose any restriction on the way in which that experience has been acquired.
• Even if the words had been ambiguous, there was no indication that a "trade arbitration" was intended. The mere fact that an arbitration is drafted by a trade body cannot be taken to mean that only members of the trade are considered suitable to arbitrate disputes between parties who incorporate the clauses in their contract.
• The fact that a default power of appointment was conferred on a trade body did not signify that only persons who had worked within the industry are qualified for appointment. Even if, in default of party choice, a market professional and not a self-employed barrister would in practice have been appointed, this did not demonstrate an intention to prevent the parties from appointing an experienced lawyer as an arbitrator if they choose to do so.
• Even if the underlying clauses gave the tribunal a discretion whether or not to apply strict rules of evidence, this would not ordinarily indicate does an intention to disqualify lawyers from appointment. On the basis that an arbitrator’s task is to decide the dispute by applying "the law" express words in a qualifying clause would be required to show that it was intended to disqualify lawyers from the role.

The Court of Appeal also gave a helpful synopsis of the principles relating to the authority of a judgment at first instance on later Courts. The Court of Appeal held that:-

• A judge of first instance who should generally follow an earlier decision of a court of coordinate jurisdiction unless there is a powerful reason for not doing so: (Willers v Joyce [2016] UKSC 44).
• Where the meaning of a clause in a standard form of agreement has been interpreted by a court, later courts may think it right to adhere to the interpretation previously adopted even if, had they been deciding the question for the first time, they would have taken a different view, for 2 reasons
  • Firstly, the earlier decision may form part of the relevant background against which the parties have contracted.
  • Secondly, adherence to an established interpretation promotes the value of certainty in commercial law. (The Annefield [1971] P 168 Lord Denning MR at 183).

The Court of Appeal held that consideration of the background, including the legal background, against which the parties had contracted, might inform what the words of the contract would reasonably be understood to mean and help to resolve ambiguity. However such context should "not be used to impose on the text a meaning which it cannot reasonably bear". Similarly although certainty was an important value in commerce, a legal system must be able to correct errors and contracting parties should be taken to know that a decision of a court of first instance is not immutable and is capable of being overruled.

The Court of Appeal have sensibly and helpfully re-directed the law on qualifications of arbitrators so as to reflect the words actually used by the parties. The decision will come as a relief to parties, barristers and other legal professionals alike.