Turville Heath Inc v Chartis Insurance UK Ltd

A dispute about the amount payable under an insurance policy falls within a loss-valuation clause even if pleaded as damages, declarations, estoppel or breach of contractual duties. A contractual procedure is not an arbitration agreement under the Arbitration Act 1996 where the purported arbitrator cannot make an independent and binding decision without securing the agreement of an appraiser. Nevertheless, the court may stay proceedings under its inherent jurisdiction where the parties have chosen the procedure, participated in it, invested substantial sums, and continuation is likely to provide a fairer, quicker or more economical resolution.

Turville claimed against Chartis under a property insurance policy following a fire that destroyed a pool house. Chartis admitted liability in principle but disputed the amount of the indemnity, particularly the cost of demolishing and rebuilding the substructure and the professional fees.

The policy contained a procedure under which independent appraisers assessed the loss and an appointed arbitrator considered their differences. After the procedure had begun, Turville issued court proceedings, alleging that the dispute included liability issues and that the procedure had broken down. Chartis sought a statutory stay under section 9 of the Arbitration Act 1996, alternatively a stay under the court’s inherent jurisdiction.

1. Nature and scope of the dispute. The pleaded claims for damages, declarations, estoppel, collateral agreement, breach of express or implied terms and breach of the duty of utmost good faith did not create disputes about coverage or liability. They concerned the proper measure and amount of the indemnity. The entire dispute therefore fell within the contractual loss-assessment procedure.
2. Statutory stay refused. The option to invoke the procedure had been exercised in writing and the clause was not ineffective merely because it was optional. However, the independent appraisers were experts, while the purported arbitrator had to obtain the agreement of one appraiser before a decision became binding. A true arbitration requires an impartial tribunal capable of making its own binding decision. The clause was therefore not an arbitration agreement within section 6 of the Arbitration Act 1996, and the application under section 9 failed.
3. The clause’s machinery had not broken down or become incapable of performance. Delay and frustration did not prevent operation of the procedure, particularly since Turville could reappoint its appraiser.
4. Inherent jurisdiction. The court had a broad case-management discretion under section 49 of the Senior Courts Act 1981. Relevant factors included Turville’s unprotesting participation, the substantial expenditure already incurred, the progress made by the appraisers, shared responsibility for delay, the possibility of a prompt negotiated determination, and the comparative speed and economy of litigation.
5. The balance favoured continuation of the chosen process. The proceedings were stayed under the court’s inherent jurisdiction. Questions concerning the form of relief and costs were left for further determination if not agreed.