Wijayarayana V. General Insurance

1946  Present : Howard C.J. and de Silva J.

WIJAYARAYANA, Appellant, and GENERAL INSURANCE
CO., LTD., Respondent.

198-D. C. Colombo, 15,283.

Arbitration-Insurance policy-Clause providing for arbitration in case of difference or dispute-Jurisdiction of Court in case of absence of dispute- Arbitration Ordinance (Cop. 83), s. 7.

One of the clauses of a policy of insurance provided that ?all differences arising out of this policy shall be referred to the decision of an arbitrator.?

When a claim was made by plaintiff, the insured, the defendant insurance company stated that it proposed to repudiate liability because the plaintiff had violated policy conditions. The particular act of violation was not stated. The defendant company was asked on what grounds it denied liability and the reply sent to the plaintiff was that when the latter made his claim it would be the occasion for informing him on what ground liability was repudiated.

Held, that, in the circumstances, when action was brought, there was no difference or dispute which could be referred to arbitration.

APPEAL from a decision of the District Judge of Colombo. The plaintiff based his action on a policy of insurance effected with the defendant company in respect of his motor car. The plaintiff?s motor oar collided with a rickshaw puller who recovered damages against the plaintiff. On being called upon to indemnify the plaintiff the defendant company refused to do so. In its defence the defendant company pleaded that it was under no liability to indemnify the plaintiff by reason of the fact that the latter had violated the conditions of the policy by instituting this action without reference to arbitration. The learned District Judge dismissed the plaintiff?s action holding that the matt9rs in dispute between the plaintiff and the defendant were not referred to arbitration and in such circumstances the plaintiff could not maintain this action.

H. V. Perera, K.C. (with him Walter Jayawardene), for the plaintiff, appellant.-The agreement that the award of the arbitration shall be a condition precedent to any right of action against the company was not a bar to this action as there was not, in fact, any difference or dispute to go before an arbitrator.

Even if there was such a dispute the defendant company has by its conduct waived its rights under the relevant clause of the agreement.- Toronto Railway Co. v. National British and Irish Millers Insurance Co., Ltd1.[1 (1914) 111 L. T. 555.] Assuming that the arbitration clause was binding and assuming also that there was a dispute to be referred to arbitration, the order dismissing the plaintiff?s action s wrong; the learned District Judge should have stayed the action and referred the parties to arbitration. Section 7 of the Arbitration Ordinance is wide enough to catch up a case where parties have agreed that no action shall be brought until the arbitrator has given his award.

N. Nadarajah, K. C. (with him D. W. Fernando), for the defendant, respondent.-The relevant clause in the agreement expressly makes an award of the arbitrators a condition precedent to the bringing of an action, end the only course open to the learned District Judge was to dismiss the plaintiff?s action. See Scott v. Avery 1; Trainor v. The Phoenix Fire Assurance Co 2. . The conduct of the respondent (lid not amount to a waiver of its rights under the arbitration clause. Section 7 of the Arbitration Ordinance is similar in terms to section Il of the Common Law Procedure Act of 1854 which was in force when Scott v. Avery was decided.

H. V. Perera, K. C. , in reply.-In Scott v. Avery (supra) no cause of action could arise until the award of the arbitrators was given for the reason that the plaintiff was entitled under the agreement to sue only for such sum as may be awarded by the arbitrators. The plaintiff?s action had therefore to he dismissed. The pres

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