Westport Insurance Corp v Gordian Runoff Ltd [2011] HCA 37: The High Court Rules on Appeals from Arbitral Awards and Extent of Accompanying Reasons

• Author: Ashwin Nair
• Position: LLB candidate, Murdoch University, Perth, Western Australia
• Pages: 240-247

(2011) 26 A&NZ Mar LJ

THE HIGH COURT RULES ON APPEALS FROM ARBITRAL AWARDS AND EXTENT

OF ACCOMPANYING REASONS: WESTPORT INSURANCE CORP V GORDIAN

RUNOFF LTD [2011] HCA 37

Ashwin Na ir∗

Maritime contractual disputes often contain arbitration clauses whereby parties agree for disputes to be resolved by

an arbitrator or a panel of arbitrators. In his Dethridge Memorial Address to the Maritime Law Association of

Australia and New Zealand Conference in October 2010, Christopher Lau SC noted that parties are increasingly

electing to resolve disputes by arbitration in the Asia-Pacific region.1 He points, among others, to the 2010 opening

in Sydney of the International Dispute Resolution Centre, which houses the Australian Maritime and Transport

Arbitration Commission (AMTAC), and the relatively nascent International Arbitration Amendment Act 2010 (Cth)

as reflective of this growth.2

Commercial arbitration in Australia, including maritime and transport arbitration, is subject to the state-based

uniform Commercial Arbitration Acts and the federal International Arbitration Act 1974 (Cth), as amended by the

International Arbitration Amendment Act 2010 (Cth). The legislation seeks to achieve an effective balance between

the utility of arbitration and party autonomy on the one hand, and justice through judicial reviewability on the other.3

As Professor Martin Davies reiterated in his 2009 address to AMTAC, ‘[f]inding the right balance between

autonomy and reviewability is an important but difficult task for a country that seeks to establish itself as being

hospitable to arbitration.’4

The decision of the High Court of Australia on 5 October 2011 in Westport Insurance Corporation v Gordian Runoff

Ltd (‘Westport’)5

thus provides critical insight into the delineation between arbitral autonomy and judicial

intervention in Australia. It clarifies the ‘manifest error’ ground of appeal from arbitral decisions, and resolves the

apparent inconsistency existing between state courts’ views on the extent of reasoning required of arbitrators under

the Commercial Arbitration Acts.

Fa c ts

Directors of FAI Insurances Ltd bought Directors’ and Officers’ Liability (D&O) cover in 1998. It protected them

from possible claims arising out of their conduct in the takeover of FAI by HIH Winterthur International Holdings

Ltd. Gordian underwrote part of the policy, which afforded the FAI directors protection for claims made and notified

to insurers within the next seven years. At all material times, Gordian was reinsured. The reinsurance treaty at issue

partially covered Gordian for liability arising out of any underlying D&O policies that were not longer than three

years in duration. Gordian failed to inform reinsurers about the FAI policy.

In 2001, FAI directors notified Gordian of likely claims under the D&O policy. Gordian informed their reinsurers,

who refused to pay. For reinsurers, the reason was simple. The treaty covered underlying policies that were not

longer than three years. The FAI policy’s term was seven years. This excluded it from the scope of the reinsurance

treaty. Gordian claimed that by virtue of s 18B of the Insurance Act 1902 (NSW) (‘Insurance Act’), the FAI claim

was covered since it was made and notified within a three-year period.

The reinsurers and cedant commenced arbitration in 2004. The arbitration was subject to the Commercial Arbitration

Act 1984 (NSW) (‘CAA’). Arbitrators agreed that the FAI policy was not subject to the reinsurance treaty. However,

they applied s 18B of the Insurance Act and found that the statutory provision placed the FAI policy within the scope

of reinsurance.

∗ LLB candidate, Murdoch University, Perth, Western Australia.

1 Christopher Lau, ‘Opportunities in multiparty maritime arbitration’ (2011) 25 A&NZ Maritime Law Journal 108, 108.

2 Ibid.

3 Vicki Donnenberg, ‘Judicial review of arbitration awards under the Commercial Arbitration Acts’ (2008) 30 Australian Bar Review 177, 177-8.

4 Martin Davies, ‘More lawyers but less law: Maritime arbitration in the 21st century’ (2010) 24 A&NZ Maritime Law Journal 13, 13.

5 [2011] HCA 37 (‘Westport’).

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