Arts & Antiques Ltd v Richards & Ors

An arbitral determination may give rise to issue estoppel where an issue was necessarily decided and is relevant to later proceedings between the same parties or their privies. Even where issue estoppel does not arise, relitigating a finally determined issue may be an abuse of process. The court must make a broad, merits-based assessment of all the circumstances, including fairness, finality and the public interest. This jurisdiction can apply where the earlier decision was made by an arbitral tribunal and the later claim is against a non-party, although that will ordinarily be rare. A party cannot use fresh proceedings as a collateral appeal against an arbitration award. Where an insurance policy objectively incorporated agreed wording containing a condition precedent, the insured was bound by that wording. Claims depending on the contrary premise were struck out or met by summary judgment.

Arts & Antiques Limited, a jeweller, claimed against Zurich Insurance Plc and its broker, Towergate London Market Limited, and the individual broker, Peter Richards. The claims arose from a robbery and the rejection of an insurance claim because stock records did not comply with Condition Precedent 2 of the policy.

A&A had previously pursued arbitration against Zurich. The arbitrator determined that the applicable policy contained Condition Precedent 2, that Towergate acted as A&A’s broker rather than Zurich’s agent, and dismissed A&A’s insurance claim. Challenges to the awards under sections 67, 68 and 69 of the Arbitration Act 1996 failed.

The defendants applied to strike out the present claims or obtain summary judgment. The central issues were whether the arbitral findings created issue estoppel or abuse of process, whether the contract contained Condition Precedent 2, and whether Towergate had acted as Zurich’s agent.

1. Claims against Zurich. The arbitrator had necessarily decided that the insurance contract contained Condition Precedent 2 and had dismissed A&A’s claim on that basis. A&A was therefore issue estopped from advancing causes of action which depended on the policy not containing that condition. There were no special circumstances making it unjust to give effect to the determination.
2. The arbitrator’s agency finding was not an issue estoppel because it was not necessary or fundamental to the decision that A&A’s claim under the policy failed. Nevertheless, it would be an abuse of process to relitigate that issue. It had been fully argued, finally determined and unsuccessfully challenged. The new Binding Authority confirmed that Towergate had no authority to act as Zurich’s underwriting agent. The claims against Zurich were accordingly struck out.
3. Claims against Towergate and Mr Richards. Although they were not parties or privies to the arbitration, it would be oppressive and unfair, and would bring the administration of justice into disrepute, to permit a collateral attack on the arbitrator’s final and binding determination of the policy terms. All claims depending on the assertion that the policy did not contain Condition Precedent 2 were struck out. This included the allegations of forgery and fraud against Mr Richards.
4. The contract was concluded on 2 October 2006 on the basis of a Broker Proof of Cover stating that Section A was subject to the agreed Zurich wording. That wording included Condition Precedent 2. A&A was bound by it whether or not it had seen the wording. There was no real prospect of establishing the contrary, so summary judgment would have been available in any event.
5. A&A had a real prospect of succeeding in a negligence claim against Towergate based on failure to advise about the presence or potential effect of the onerous condition precedent. That claim required proper pleading and was adjourned for that purpose. All claims against Mr Richards were struck out.
6. Towergate was in principle entitled to security for costs. A&A had not shown that an order would stifle the claim, and the amount of security was left for further consideration.

Not an appellate decision. The judgment records that challenges to the arbitral awards under sections 67, 68 and 69 of the Arbitration Act 1996 had been dismissed, but no appellate history of this decision is stated.