Rare Successful Challenge To Arbitral Award On Grounds Of Serious Irregularity

Oldham v QBE Insurance (Europe) Ltd [2017] EWHC 3045 (Comm)

In a decision of the new Business & Property Courts, Mr Justice Popplewell heard applications under section 68 of the Arbitration Act 1996 (AA 1996) (serious irregularity) and AA 1996, s 69 (appeal on a point of law) in respect of an arbitral award. The AA 1996, s 69 appeal concerned a reimbursement of monies paid out under an insurance policy which the arbitrator found did not provide coverage. Popplewell J found no error of law and upheld the award on this point. The challenges under AA 1996, s 68 were, however, successful as the arbitrator had erred in ordering costs and a payment on account of costs in favour of the insurer without giving the insured a fair opportunity to present his arguments. Here we look at the lessons to be learnt from the decision.

Background

Mr Oldham had been one of three joint administrators of a company, MK Airlines. The liquidators of MK Airlines brought High Court proceedings against Mr Oldham (the High Court proceedings) which resulted in a judgment against him for in excess of £1 million. That judgment is currently under appeal.

Mr Oldham's professional indemnity insurers were QBE Insurance (Europe) Ltd (QBE) under a policy covering claims made for 12 months at 19 February 2014 (the Policy). The Policy was subject to minimum indemnity requirements (the Minimum Terms). The Policy stated that the Minimum Terms were to take precedence over the Policy terms in the event of a conflict in which the Minimum Terms were more favourable to the insured.

QBE disputed that the Policy covered Mr Oldham's potential liability in the High Court proceedings. QBE did pay Mr Oldham's costs of the High Court proceedings pending resolution of the coverage dispute as required by the Minimum Terms.

The dispute between Mr Oldham and QBE was referred to arbitration. The arbitrator held that Mr Oldham was not covered by the Policy because the claim had been made against him or notified to him prior to inception. Mr Oldham has not challenged that part of the award.

The award also provided that:

QBE was entitled to reimbursement of the defence costs of the High Court proceedings - Mr Oldham appealed this under AA 1996, s 69 on grounds that as a matter of law QBE had no entitlement under the terms of the Policy to recover such costs. Alternatively, under AA 1996, s 68 that the arbitrator did not give Mr Oldham a fair opportunity to address the question of such entitlement QBE...