Jephson & Anor v Aviva Insurance Ireland DAC (Approved)

Factual and Procedural Background

The claimants initiated High Court proceedings in June 2017 against the respondent concerning an insurance dispute related to damage caused by subsidence and landslip to a property insured under a policy held by the deceased. The claimants alleged wrongful denial of indemnity by the respondent under the insurance contract. In January 2020, the High Court granted a stay on the proceedings to allow the dispute to be resolved by arbitration pursuant to an agreed order between the parties. This agreed order included an undertaking by the respondent's solicitor to participate in the arbitration in a "timely and efficient fashion" and provided that the claimants could apply to lift the stay if there was any non-compliance with that undertaking.

Following the stay, significant delays occurred in the arbitration process, particularly concerning discovery and procedural progress, which the claimants attributed to the respondent's failure to comply with the undertaking. The claimants applied in 2022 to lift the stay on the High Court proceedings on the basis of these delays and alleged breaches of the undertaking. The respondent opposed the application, contending that the issues should be addressed by the arbitrator and that the court lacked jurisdiction to lift the stay absent a finding that the arbitration agreement was null and void, inoperative, or incapable of being performed under Article 8(1) of the UNCITRAL Model Law.

Legal Issues Presented

1. Whether the court has jurisdiction to lift a stay of proceedings imposed to allow arbitration, based on non-compliance with an undertaking given by the respondent's solicitor to participate in the arbitration in a timely and efficient manner.
2. Whether the threshold for lifting the stay is governed solely by Article 8(1) of the UNCITRAL Model Law, requiring the arbitration agreement to be null and void, inoperative, or incapable of being performed, or whether the parties' agreed order modifies this standard.
3. The proper forum for addressing procedural delays and disputes concerning the conduct of the arbitration—whether the court or the arbitrator should have exclusive jurisdiction.

Arguments of the Parties

Claimants' Arguments

• The respondent breached the undertaking to participate in the arbitration in a timely and efficient fashion by causing unacceptable delays, particularly in discovery and procedural matters.
• The agreed court order expressly permits the claimants to apply to lift the stay upon any non-compliance with the undertaking, which has occurred.
• The court has inherent jurisdiction to lift the stay where the parties have agreed such a condition, and the claimant was entitled to invoke this remedy rather than await further delay.
• The claimant was not obliged to first apply to the arbitrator to address the delays or procedural disputes before applying to the court to lift the stay.

Respondent's Arguments

• The court's jurisdiction to lift the stay is limited by Article 8(1) of the UNCITRAL Model Law, which only permits lifting if the arbitration agreement is null and void, inoperative, or incapable of being performed; the delays do not meet this threshold.
• All procedural and discovery disputes, including delays, should be addressed exclusively by the arbitrator pursuant to the agreed directions and arbitration agreement.
• The claimant failed to invoke the arbitrator's jurisdiction over these matters and instead improperly sought to bypass the arbitration process by applying to the court.
• The respondent acknowledges some delay but contends no prejudice was caused and that the delays do not justify lifting the stay.
• The respondent denies that the undertaking given by its solicitor displaces the exclusive jurisdiction of the arbitrator to manage the arbitration process.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analyzed the terms of the agreed order made on 22 January 2020, which stayed the High Court proceedings to allow arbitration subject to a specific undertaking by the respondent's solicitor to participate in the arbitration in a "timely and efficient fashion". The order expressly permitted the claimants to apply to lift the stay upon any non-compliance with that undertaking.

The respondent argued that Article 8(1) of the UNCITRAL Model Law strictly governs the court's jurisdiction to lift a stay, limiting it to situations where the arbitration agreement is null and void, inoperative, or incapable of being performed. The court rejected this argument, finding that the parties had expressly agreed a lower threshold for lifting the stay, namely any non-compliance with the undertaking, and that the court's inherent jurisdiction to stay proceedings equally includes jurisdiction to lift such stay in appropriate circumstances.

The court found that the respondent had failed to conduct the arbitration in a timely and efficient manner, as evidenced by substantial undisputed delays in discovery and procedural matters. While the respondent contended that the claimant should have first invoked the arbitrator's jurisdiction to address these delays, the court held that the claimant was entitled to rely on the agreed order and apply directly to the court to lift the stay.

The court further noted that the respondent's attempts to rely on the mutual obligation of parties to cooperate in arbitration did not justify the respondent's failure to comply with the undertaking or shift the burden onto the claimant to rectify the delays through the arbitrator.

Accordingly, the court concluded that the claimant was entitled to the relief sought to lift the stay on the proceedings.

Holding and Implications

The court's final decision was to GRANT THE APPLICATION TO LIFT THE STAY on the High Court proceedings imposed by the order of 22 January 2020.

As a consequence, the High Court proceedings will resume, and the parties were directed to confer to agree directions for progressing the litigation expeditiously. The court also indicated that any application by the respondent to try a preliminary issue should be made without delay. The court expressed an indicative view that the claimant is entitled to its costs of the application.

No new precedent was established beyond affirming that the parties' agreed terms in a court order can modify the standard for lifting a stay imposed for arbitration, and that the court's inherent jurisdiction to stay proceedings includes the power to lift such stay where agreed conditions are breached.