Travelers Insurance Company Ltd v Countrywide Surveyors Ltd

An arbitration clause covering disputes about the application of an insurance condition may extend to whether the condition is engaged by alleged misrepresentation, non-disclosure or fraudulent intent. The court should construe the clause commercially and avoid an artificial division between the condition’s application and effect.

Where the underlying dispute is to be arbitrated, section 33(2) of the Senior Courts Act 1981 and CPR 31.16 do not confer power to order pre-action disclosure for anticipated High Court proceedings. Nor does section 37(1) provide a general residual jurisdiction. section 44(3) of the Arbitration Act 1996 is reserved for genuine urgency concerning preservation of evidence or assets.

The claimant insurer sought pre-action disclosure concerning possible misrepresentation, non-disclosure and fraudulent intent when the defendant surveyor obtained a professional indemnity policy. The policy contained an arbitration agreement for disputes concerning the application of its special condition, while other policy disputes were subject to the English courts.

The defendant argued that the underlying dispute had to be arbitrated and that the court therefore lacked jurisdiction under CPR 31.16. The claimant argued that the dispute concerned the effect, rather than the application, of the condition, and alternatively relied on section 37(1) of the Senior Courts Act 1981 and section 44(3) of the Arbitration Act 1996. The central issues were the scope of the arbitration clause and whether the court could order pre-action disclosure in support of the anticipated arbitration.

1. Arbitration clause. The dispute concerned whether the special condition operated on the facts, including whether alleged non-disclosure or misrepresentation involved fraudulent intent. That was precisely the type of dispute covered by the arbitration agreement. A distinction between the condition’s application and effect would be artificial and difficult to police. The clause had to be construed to give effect to its commercial purpose, including the confidential determination of allegations involving misrepresentation, non-disclosure and possible fraud, consistently with Fiona Trust Cor v. Yuri Privalov [2007] UKHL 40 (paras [10]-[15]).
2. Section 33 and CPR 31.16. The statutory power required the applicant to appear likely to be a party to subsequent proceedings in the High Court. That requirement was not satisfied where the underlying dispute was subject to arbitration. The policy of the Arbitration Act 1996, including party autonomy and limited court intervention, supported that construction. Pre-action disclosure could not be obtained merely as ancillary assistance to arbitration (paras [16]-[21], [25]).
3. Section 37. The general power to grant an injunction where just and convenient could not supply jurisdiction where no express jurisdiction otherwise existed. The same principle applied to pre-action disclosure in arbitration as to interim injunctions, following the approach discussed in Elektrim SA v. Vivendi Universal SA and Others [2007] EWHC 571 (Comm) (paras [22]-[24]).
4. Section 44(3). The provision was confined to exceptional cases of genuine urgency, such as an imminent risk that critical evidence or assets would be lost, destroyed or rendered useless. Ordinary pressure to progress claims and the general possibility of documents being lost did not engage the provision. No real urgency had been established (paras [25]-[29]).
5. Outcome. The application was dismissed for want of jurisdiction. Obiter, had jurisdiction existed, the court would probably have ordered disclosure under CPR 31.16, because the documents would likely have been disclosable in the arbitration, could narrow the issues and might avoid the dispute altogether (paras [30]-[34]).