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Khatram v. The New India Assurance Co. Ltd. Civ. Case 34-A-68; 24/1/70; Platt j.



Khatram v. The New India Assurance Co. Ltd. Civ. Case 34-A-68; 24/1/70; Platt j.

It was agreed in a commercial vehicle policy of insurance agreement between plaintiff and defendant that all differences arising out of the policy would be referred to the decision of an Arbitrator to be appointed by the parties. By the same agreement, any claim against the defendant Insurance Company had to be referred to arbitration within twelve months of the Insurance Company dis-claiming liability otherwise the claim would be deemed to have been abandoned. In an action filed by plaintiff defendant pleaded that there was no cause of action as the plaintiffs had not resorted to arbitration first. After this action had been dismissed, plaintiffs appointed an Arbitrator and informed defendants whereupon the defendants replied that the plaintiffs were no longer entitled to have recourse to the provisions of arbitration. Plaintiff brought this suit and defendants took a preliminary objection that once again plaintiffs had brought their suit prematurely without first referring to arbitration. Plaintiffs argued that by reason of its attitude towards plaintiff’s claim, the defendant company had waived the condition precedent of obtaining an award and it was estopped from claiming that such an award is a condition precedent to any right of action. The Defendant’s reply was that they had merely pointed out to the plaintiffs that they had no right to go to arbitration, and this did not mean that they need not go to arbitration, and that plaintiffs were not entitled to go to arbitration after having lost their first suit.

            Held: (1) “What is really said by the plaintiffs is that there was no possible reason for them to go on to arbitration at all. Therefore it is contended that whatever the plaintiffs did, the defendants would simply object to any stop taken. Although it was not Mr. Vohora but Mr. Lakha who referred me to BARRETT BROS. (TAXIS) LTD. v. DAVIES (1966) 1 W.L.R. 1334. It may be that that authority was more in favour of the plaintiffs than the defendants. Lord Denning (at page 1339) made the point very clearly that he law never compels a person to do that which is useless and unnecessary. So in that case although the Insured ought to have informed the Insurers of the details of the Police investigation and legal action taken against him, the Insurers had received all this information from the Police direct. Therefore they could not complain because the Insured had not duplicated all the information which the Police had provided the. In Lord Denning’s view, it would have been useless and unnecessary for the Insured to provide it. In the instant case, the situation was different, but if the defendants were saying that whatever the plaintiffs did with regard to arbitration, they could not go to arbitration at all, what use was it for the plaintiffs to have delayed the matter by trying to get an Arbitrator appointed to whom the defendants would simply object? It is this aspect of the letter of the 26th September which I think is of greatest importance. In these circumstances I find the following comment in Russell on Arbitration 16th Ed. p. 85 of some guidance. A party will be precluded from setting up a condition precedent in an agreement if he waives his right to insist on arbitration as a condition precedent, “or if by his neglect or default, the claiming party had been unable to obtain an award in spite of taking all proper steps to do so.” Several

Cases are then cited of which CIA. PANAMENA EUROPEA NAVIGATION v. LEYLAND (1947) A. C. 428 may be compared, as there a certificate was refused on a misconstruction of the contract. In the instant case, the plaintiffs were going to be met by the wrongful refusal of the defendants to appoint an Arbitrator, on a misunderstanding of the application of the provisions of the arbitration agreement to the facts. I think that was a sufficient neglect or default preventing the plaintiffs from taking further steps in obtaining an award. I would hold that on that ground, as pleaded in paragraph 11 of the plaint, that he defendants are debarred from raising any defence as to the condition precedent.” (2) “On the other hand, there are the claims in paragraph 12. Lord Denning in the Barrett Bros.’ Case set out his definition of what a waiver consists in, namely that if one party by his conduct leads another to believe that the strict rights arising under the contract will not be insisted upon intending that the other should act on that belief, and he does act on it, then the first party would not afterwards be allowed to insist on the strict rights when it would be inequitable for his so to do. On looking at the letter of 26th September, there could be said to be some ambiguity as to what was actually intended. I have already set out Mr. Lakha’s interpretation, but on the other hand, it was read by the plaintiffs as meaning that the defendants considered that the parties could not go to arbitration and that therefore the plaintiff could take whatever other steps they pleased. The defendants could have expressed 3rd October saying that as the defendants refused to refer the matter to arbitration, they would take legal proceedings. As fro as I am aware, there was no answer to that letter. It was said that this letter was not pleaded, but I do not consider that of any importance. When one reads the correspondence together with paragraph 1 of the defence, one discovers that the defendants must have objected because the plaint was brought outside the period of twelve calendar months from the date that the defendants disclaimed liability. Apparently nothing else was in their minds and this view has now been abandoned, it must have seemed a strange defence to the  plaintiffs’, as it indeed was, and I think it not unreasonable in the circumstances, that the plaintiffs inferred that he defendants were not really interested in arbitration. The defendants certainly knew that the plaintiffs would take legal action if the defendants waived the condition, and their ambiguous letter for the 26th September clearly misled the plaintiffs into thinking that they could do so. Therefore I do not think that the defendants can now rely upon the condition, which I consider was waived by that conduct” (3) Objection overruled.

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