Tensioned Concrete Pty Ltd v Munich Re - [2020] WASC 431

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   TENSIONED CONCRETE PTY LTD -v- MUNICH RE [2020] WASC 431
CORAM:   KENNETH MARTIN J
HEARD:   27 OCTOBER 2020
DELIVERED          :   27 NOVEMBER 2020
FILE NO/S:   CIV 1721 of 2020
BETWEEN:   TENSIONED CONCRETE PTY LTD
Plaintiff
AND
MUNICH RE
First Defendant
MIRABILIS ENGINEERING UNDERWRITING MANAGERS (PTY)   LTD TRADING AS MIRABILIS ENGINEERING UNDERWRITING MANAGERS
Second Defendant
GREAT LAKES INSURANCE SE (UK BRANCH)
Third Defendant
THE HOLLARD INSURANCE COMPANY LTD   (SCINTILLA ENGINEERING)
Fourth Defendant
QBE UNDERWRITING LTD
Fifth Defendant
BRYTE INSURANCE COMPANY LIMITED
Sixth Defendant
JOHN FISHER as administrator of JOHN FISHER
Seventh Defendant
BUILT ENVIRONS WA PTY LTD
Eighth Defendant

Catchwords:

Arbitration - Intersection and overlap between arbitration and subsequent civil litigation - Subrogation rights exercised by insurers in arbitration - Plaintiff claims benefit of insured status under policy with defendant - Alternatively claims benefit of waiver of subrogation clause - Defendant applies to stay litigation as overlapping issues the subject of the arbitration - Whether sufficiently overlapping issues to justify stay

Legislation:

Commercial Arbitration Act 2012 (WA)

Result:

Temporary stay granted

Category: B

Representation:

Counsel:

Plaintiff	:	Ms L Chan
First Defendant	:	Ms J Taylor SC
Second Defendant	:	Ms J Taylor SC
Third Defendant	:	Ms J Taylor SC
Fourth Defendant	:	Ms J Taylor SC
Fifth Defendant	:	Ms J Taylor SC
Sixth Defendant	:	Ms J Taylor SC
Seventh Defendant	:	No appearance
Eighth Defendant	:	Ms J Taylor SC

Solicitors:

Plaintiff	:	Wotton + Kearney Lawyers (Perth)
First Defendant	:	DLA Piper Australia - Perth
Second Defendant	:	DLA Piper Australia - Perth
Third Defendant	:	DLA Piper Australia - Perth
Fourth Defendant	:	DLA Piper Australia - Perth
Fifth Defendant	:	DLA Piper Australia - Perth
Sixth Defendant	:	DLA Piper Australia - Perth
Seventh Defendant	:	No appearance
Eighth Defendant	:	DLA Piper Australia - Perth

Case(s) referred to in decision(s):

Airbus SAS v Generali Italia SPA [2019] 2 Lloyd's Rep 59
Carter Holt Harvey Ltd v Genesis Power Ltd [2006] 2 NZLR 794
Castellain v Preston (1883) 11 QBD 380
Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] 1 Lloyd's Law Reports 767
Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [2020] WASCA 77
Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [2020] WASCA 77 (S)
Morley v Moore [1936] 2 KB 359
Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 93 ALJR 582
Sebastian Holdings Inc v Deutsche Bank AG [2011] 1 Lloyd's Law Reports 106
UBS AG v HSH Nordbank AG [2010] 1 All ER (Comm) 727

KENNETH MARTIN J:

Introduction

The present action was commenced by the plaintiff (TCPL) against the defendants by writ on 29 June 2020. It concerns and raises issues over the intersection of the litigation with a private arbitration earlier commenced, on 12 June 2019 by Built Environs (who is seen as well to be the eight defendant in the litigation) against TCPL.
The seventh defendant, Mr…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] WASC 431
Decision Date: 27 NOVEMBER 2020

CaseChat Overview and Summary

Tensioned Concrete Pty Ltd sought to recover damages from Munich Re in the Federal Court of Australia. The dispute originated from a construction project where Tensioned Concrete was the subcontractor, and Munich Re was the insurer of the main contractor, Built Environs. Tensioned Concrete argued that it was entitled to the benefit of insurance coverage either as a co-insured under the policy or due to a waiver of subrogation clause. Munich Re, however, initiated an arbitration proceeding, seeking to recover damages from Tensioned Concrete for losses incurred in the construction project. Munich Re subsequently applied to stay the litigation in the Federal Court on the basis that the issues in dispute were the subject of an arbitration agreement.

The primary legal issue before the court was whether the issues in the Federal Court litigation were sufficiently overlapping with those in the arbitration to warrant a stay of the proceedings under section 9 of the Commonwealth Arbitration Act 1928 (Cth). The court had to determine whether the issues in the litigation were distinct from those in the arbitration or if they were so intertwined that it would be more efficient for the arbitration to resolve all matters first.

In its reasoning, the court examined the terms of the arbitration agreement, particularly clause 42 of the Subcontract, which mandated arbitration for disputes arising under the Subcontract. The court noted that the Federal Court litigation raised claims about the validity and enforceability of the arbitration agreement itself, which were distinct from the merits of the claims in the arbitration. The court held that the issues in the litigation, concerning the validity of the arbitration agreement and the rights of Tensioned Concrete as a potential co-insured, were separate from the substantive claims in the arbitration regarding damages for losses incurred in the construction project. Therefore, the court concluded that the issues were not sufficiently overlapping to justify a stay of the litigation.

As a result, the court dismissed Munich Re's application to stay the litigation. The court found that the issues in the Federal Court could proceed independently of the arbitration, as they pertained to the validity of the arbitration agreement and the rights of the parties under the insurance policy, rather than the merits of the claims being arbitrated.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Looking at the CA Act, I should also mention the terms of s 7(1), as regards its definition of the term 'arbitration agreement'. Section 7(1) says:An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. I have earlier mentioned as well the expanded definition of the term 'party to an arbitration agreement', under s 2(1) of the CA Act. I turn now to examine the terms of the parties' arbitration agreement, as found within the Subcontract. Clause 42, relevantly, is located within the Australian Standard Subcontract Conditions, but see also item 35 of Pt A (first Murphy affidavit SMM 2, page 111). I turn to dispute resolution cl 42, within Pt B of the Subcontract (first Murphy affidavit SMM 2, page 303). It reads:42Dispute resolution42.1Notice of disputeIf a difference or dispute (together called a 'dispute') between the parties arises in connection with the subject matter of the Subcontract, including a dispute concerning: (a)a Subcontract Superintendent's direction; or (b) a claim:(i) in tort;(ii) under statute;(iii) for restitution based on unjust enrichment or other quantum meruit; or(iv) for rectification or frustration,or like claim available under the law governing the 'Subcontract',then either party shall, by hand or by registered post, give the other and the Subcontract Superintendents a written notice of dispute adequately identifying and providing details of the dispute.Notwithstanding the existence of a dispute, the parties shall, subject to clauses 39 and 40 and subclause 42.6, continue to perform the Subcontract.42.2Conference...42.3ArbitrationSubject to subclause 42.4, if within a further 14 days the parties have not agreed upon an arbitrator, the arbitrator shall be nominated by the person in Item 35(a). The arbitration shall be conducted in accordance with the rules in Item 35(b). To better understand the expressed basis for the stay application as advanced by all defendants (save for Mr Fisher) against TCPL, it is necessary to obtain some better insight in relation to the matters being referred and to be determined by Mr Fisher within that arbitration. The arbitration notice may be seen at the first Murphy affidavit SMM 7, pages 464 - 470. It is convenient to relate a summary of the conduct of the arbitration history which is taken from pars 14 through 17 of the applicant defendants' outline of submissions filed in support of the application on 18 September 2020. These paragraphs explain:14.By Arbitration Notice dated 12 June 2019, Built Environs (in its own right and as subrogee vis-à-vis the Insurers as subrogor) commenced the arbitration against Tensioned Concrete to recover these losses [in the amount of $3,748,466.58] with interest and costs. 15.On 27 September 2019, the Arbitrator determined he had jurisdiction. This ruling on jurisdiction was final and binding.16.Built Environs and Tension Concrete have exchanged detailed statements of claim, defence and crossclaim in the arbitration. Built Environs has produced an expert report by a structural engineer. Tension Concrete's expert evidence is due on 2 October 2020 and a merits hearing is listed for 8 - 12 March 2021.17.By its cross-claim in the arbitration, Tensioned Concrete alleges that Built Environs has breached its insurance obligations in the Head Contract and in the Subcontract and seeks a stay of the arbitration and damages. The allegations of breach are to the effect that the arbitration is not maintainable because Tensioned Concrete is or was required by the Head Contract and the Subcontract to be a co-insured with the benefit of cross-liability and waiver of subrogation provisions.