Christian Mutual Life Insurance Company and Others v ACE Bermuda Insurance Ltd

• Jurisdiction: Bermuda
• Judgment Date: 06 December 2002
• Date: 06 December 2002
• Docket Number: Civil Appeal No. 18 of 2001 & 6 of 2002,Civil Jurisdiction 2001: No. 187
• Court: Supreme Court (Bermuda)

In the Supreme Court of Bermuda

Meerabux, J

Civil Jurisdiction 2001: No. 187

BETWEEN:

Christian Mutual Life Insurance Company

Central Untied Life Insurance Company

Connecticut Reassurance Corporation

Applicants

-and-

Ace Bermuda Insurance Limited

Respondent

Mr. J. Woloniecki for the Applicants.

Mr. N. Hargun for the Respondent.

Bermuda International Conciliation and Arbitration Act 1993

application for stay of proceedings — arbitration clause — proceedings in Court of Appeal under Model Law Article 34

JUDGMENT

PRELIMINARY

There are two summonses, both dated 11 February 2002, before the Court.

The Applicants' summons, which seeks directions for a trial pursuant to the Court's order dated 23 January 2002 and costs.

The Respondent's cross-summons, which seeks to stay these proceedings and in the alternative seeks directions for a trial pursuant to the Court's order dated 23 January 2002.

The Applicants' attorneys have written to the Respondent's attorneys indicating that they are prepared to agree to the trial directions proposed in the Respondent's summons. Thus, there are only two issues for the Court to decide.

The first is whether to disregard its previous order dated 23 January 2002 that there be a trial and grant the Respondent's application for a stay and the second is costs.

I have ruled that we proceed on the stay application.

FACTUAL BACKGROUND

The Applicants, Christian Mutual Life Insurance Company (‘Christian Mutual,’) and now known as Investors Consolidated Insurance Company, Central United Life Insurance Company (‘Central United’) and Connecticut Reassurance Corporation (‘Conn Re’), now known as Manhattan Insurance Group, are three companies incorporated in the states of New Hampshire, Texas, and Connecticut, respectively. The Respondent, ACE Bermuda Limited (‘ACE’) is incorporated in Bermuda. These proceedings, which are brought under the Bermuda International Conciliation and Arbitration Act 1993 (‘the 1993 Act’) arise out of an arbitration being held in Bermuda in which ACE is the Claimant and the Applicants are the Respondents.

A hearing took place on the Applicants' Originating Summons directions before me and I rendered judgment on 23 January 2002. At the conclusion of that judgment I said:

‘Accordingly, I rule that the Model Law as presently worded does not create a doctrine of absolute indestructibility of an arbitration clause.

However, Mr. Woloniecki submits that where the matter comes before the Court, the Court must consider first whether the contract in which the arbitration clause is embedded is valid or invalid and in determining such in the present case may very well involve a trial of disputed facts before considering the validity or invalidity of the arbitration clause. I agree with that submission.

In the circumstances I rule that he Court should determine first whether the contract in which the arbitration clause is embedded is valid or invalid and I order there be a trial.

Accordingly, I order that the Applicants' application for a declaration be adjourned.

I also order that the Applicants' Summons seeking an order for discovery be adjourned. I will hear argument as to costs.’

ARGUMENTS

Counsel for the Respondent argues that.

(1) These proceedings should be stayed permanently in favour of the application before the Court of Appeal under Article 34 of the Model Law (Civil Appeal 2001 No. 18) on the grounds set out in paragraph 1 of the Respondent's cross-summons:

‘a. Since the Applicants have commenced proceedings in the Court of Appeal under Article 34 (1) of the Model Law, the Court of Appeal is the only forum which has jurisdiction to determine the Applicants' challenge to the jurisdiction of the arbitrators and / or to the award.

b. The present proceedings raise identical issues (inter alia) to those before the Court of Appeal in the Civil Appeal 2001 No. 18. It is an abuse of the process and / or oppressive for the Applicants to proceed with the present proceedings whilst also making application to the Court of Appeal to determine identical issues.’

(2) Alternatively, these proceedings should be stayed pending the making of an award in the Penn Mutual arbitration, on the following grounds (set out in paragraph 2 of Mr. Hargun's affidavit):

‘(a) It is an abuse of the process and or oppressive for the Applicants to proceed the present proceedings before the resolution of the Penn Mutual arbitration.

(b) The Penn Mutual arbitration raises identical issues to the issues before this Honourable Court.

(c) The Penn Mutual arbitration is the agreed forum for the determination of the issues with Penn Mutual and is likely to be concluded in June 2002.

(d) The continuation of these proceedings raises the danger of inconsistent findings by this Honourable Court and the Penn Mutual arbitral tribunal.’

Counsel for the Applicants submits that the Court of Appeal was informed at the time of the September hearing of the Applicants' intention to file an application under Article 34 of the Model Law with the Court of Appeal. He argues that paragraph 10.2 of the Applicants' skeleton argument of 3 September 2002, states as follows:

‘The Originating Summons herein is an application challenging the tribunal's 16^th May 2001 ruling on jurisdiction pursuant to Article 16 (3) of the Model Law / section 25 (1) (a) of the 1993 Act. The Supreme Court of Bermuda has no jurisdiction under the Model Law / 1993 Act to hear any application in relation to the interim award. The Applicants reserve the right to apply to the Court of Appeal to set aside the 15^th June 2001 interim award pursuant to Article 34 (2) of the Model Law / section 25 (1) (b) of the 1993 Act.’

He argues that the Supreme Court, and only the Supreme Court, has jurisdiction in relation to applications under Article 16 (3) challenging a preliminary ruling on jurisdiction and that the Court of Appeal, and only the Court of Appeal, has jurisdiction to in relation to applications under Article 34 to set aside an award. He contends that the Respondent's submission that, once an application is filed under Article 34 with the Court of Appeal the Supreme Court has no jurisdiction to hear an application under Article 16 (3) which is pending before it, is manifestly absurd. He argues that if the Respondent is correct this would mean that the Supreme Court ceased to have jurisdiction on 13 September 2002 while the hearing before Mr. Justice Meerabux was in progress. It follows, on the Respondent's case, that Mr. Justice Meerabux was functus from that moment and that he had no jurisdiction to give his judgment on 23 January 2002. Moreover, as appears from the correspondence with the Acting Registrar of the Court of Appeal in a letter dated 14 December 2001 we wrote that we ‘confirm that counsel for the Respondents has no objection to this course being taken.’ Furthermore, he contends that the wording of the above letter was agreed by the Respondent's Attorneys. He submits that the Respondent is estopped from asking for the Court of Appeal matter to be listed before the Supreme Court matter has been concluded. He mentions that the Acting Registrar of the Court of Appeal has informed the parties that the President of the Court of Appeal has suggested a short hearing on 28 March 2002 to address the de-listing of the appeal from the June session. He says that the Applicants have undertaken that they will not argue the same points relating to the jurisdiction of the arbitral tribunal before the Court of Appeal in the Article 34 application which they have raised before the Supreme Court and will abide by the decision of the Supreme Court.

As regards the abuse of process point raised by Respondent's attorney he recalls that the abuse of process point was raised by the Respodent's attorney at the hearing on 10–14 September 2000 and was the subject of legal submissions by the Applicants' attorney.

He contends that the Court heard submissions from counsel on the point and made an order on 23 January 2002 that there be a trial on the issue of whether the three indemnification agreements between the Respondent and each of Christian Mutual, Central United and Connecticut Re are valid and that the Order has not been the subject of any appeal. He submits that it is not open to the Respondent to argue at this stage that it is somehow an abuse of process for this Court to give directions for a trial in accordance with its previous Order.

As regards the likelihood of the Penn Mutual arbitration being concluded in June 2002, he states that the statement that, ‘the Penn Mutual arbitration is the agreed forum for the determination of the issues with Penn Mutual…’ is correct. He contends that the Penn Mutual arbitration will determine the validity of the reinsurance agreement as between the parties to the agreement. As stated earlier he submits that the Penn Mutual arbitration will not determine the validity of the indemnity agreements and that neither Central United nor Connecticut Re are parties to the Penn Mutual arbitration. Moreover, he argues that the Respondent has previously asserted that the validity of the indemnification agreements does not depend on the validity of the reinsurance agreement. He states that the time table in the Penn Mutual arbitration has slipped somewhat since Messrs. Hargun and Raim swore their affidavits. He mentions that the present position is that the hearing of the Penn Mutual arbitration has been fixed for the two weeks beginning 2^nd December 2002. He submits that there is no reason why the trial, which this Court has previously ordered be held, should await the outcome of the Penn Mutual arbitration.

As regards the risk of inconsistent findings he argues that the position which the Respondent has now adopted is diametrically opposed to the position the Respondent took a year ago in the previous Supreme Court proceedings between the same parties (Civil...