Read the full judgment text of HCA 004758/2002 on BabelCite. This High Court CFI judgment was delivered on 19 February 2004 before Reyes J.
Civil procedure – arbitration – stay of court proceedings – Arbitration Ordinance (Cap. 341) – employees compensation insurance policy – clause 10 making arbitral award a condition precedent to any right of action – insurer bringing subrogation action for contribution against alleged co-insured subcontractor in its own name and in the names of the main contractor and another subcontractor – whether court has discretion to refuse stay – issue of whether defendant is a subcontractor covered by the policy is for the arbitrator – whether defendant has taken a step in the action precluding recourse to arbitration – application for extension of time to serve defence and application for discovery do not amount to delivery of a defence – defendant entitled to apply for stay before delivery of substantial defence – action stayed for arbitration – costs of stay application to defendant – Civil procedure – arbitration – stay of court proceedings – Arbitration Ordinance (Cap. 341) – employees compensation insurance policy – clause 10 making arbitral award a condition precedent to any right of action – insurer bringing subrogation action for contribution against alleged co-insured subcontractor in its own name and in the names of the main contractor and another subcontractor – whether court has discretion to refuse stay – issue of whether defendant is a subcontractor covered by the policy is for the arbitrator – whether defendant has taken a step in the action precluding recourse to arbitration – application for extension of time to serve defence and application for discovery do not amount to delivery of a defence – defendant entitled to apply for stay before delivery of substantial defence – action stayed for arbitration – costs of stay application to defendant. The dispute arose from an employees compensation policy issued by the 3rd plaintiff insurer covering the 1st plaintiff main contractor and its subcontractors. After the insurer paid damages for a workplace injury, it sued the 1st defendant for contribution, claiming in its own name and in the names of the 1st and 2nd plaintiffs. The 1st defendant asserted that it was itself a co-insured subcontractor under the same policy and that the insurer could not pursue it via subrogation. The defendant applied to stay the action in reliance on clause 10 of the policy and the Arbitration Ordinance (Cap. 341). On the first issue, the court held that the dispute was a difference arising out of the arbitration agreement, and the court had no discretion to refuse a stay under the Arbitration Ordinance; the question of whether the 1st defendant was in fact a subcontractor covered by the policy, and the related question of whether it could be sued in subrogation, were matters for the arbitrator in the first instance, given that the defendant had raised a good arguable case that it fell within the policy. On the second issue, the court rejected the plaintiffs' contention that the 1st defendant had taken a step in the action barring it from seeking a stay; the court held that an application for an extension of time to serve a defence and an application for discovery of the policy did not amount to the delivery of a substantial defence, and the defendant was therefore entitled to apply to stay the proceedings before filing its defence. In the result, the action was ordered to be stayed for arbitration, and the 1st defendant was awarded the costs of the stay application, to be taxed if not agreed.
Legal issues: Whether the court must stay court proceedings in favour of arbitration under an insurance policy arbitration clause · Whether the 1st defendant had taken a step in the action precluding recourse to arbitration
Outcome: Action stayed for arbitration under the arbitration clause in the insurance policy; 1st defendant's application for a stay granted; 1st defendant awarded costs of the stay application.