Flatley v Austin Newport Group Ltd

• Jurisdiction: Ireland
• Judge: Mr Justice Twomey
• Judgment Date: 14 June 2024
• Neutral Citation: [2024] IEHC 359
• Court: High Court
• Docket Number: RECORD NUMBER 2023/5909P

Between

Michael Flatley

Plaintiffs

and

Austin Newport Group Limited

First Named Defendant

and

David Cushion

Second Named Defendant

and

Ms Amlin Underwriting Limited

Third Named Defendant

and

AXA XL Underwriting Agencies Limited

Fourth Named Defendant

and

Hamilton Managing Agency Limited

Fifth Named Defendant

and

Hiscox Societe Anonyme

Sixth Named Defndant

[2024] IEHC 359

RECORD NUMBER 2023/5909P

THE HIGH COURT

COMMERCIAL

JUDGMENT OF Mr Justice Twomey delivered on the 14th day of June, 2024

INTRODUCTION

1 . A businessman engages a specialist insurance broker to negotiate an insurance policy for his home, which he spent over €30 million renovating. Under the terms of the insurance policy, the businessman agreed to pay an annual premium of €69,285 for the insurance cover. He also agreed that, if he had a dispute over the terms of the policy, then any such dispute would be resolved by arbitration. He now has a dispute with the insurance company regarding a claim he wants to make under the policy.

2 . The question in this case is whether the businessman can litigate that dispute, even though he agreed to arbitration. The plaintiff (“ Mr. Flatley”) believes that he can. He does so by claiming that he was a consumer when agreeing the terms of his home insurance policy and that referring disputes to arbitration, as distinct from litigation, amounts to an unfair term in a consumer contract and so is not binding on him. Accordingly, he believes that he should be entitled to litigate his dispute with the provider of insurance cover, the sixth defendant (“ Hiscox”), despite his agreement to arbitrate.

3 . For this reason, Mr. Flatley does not see this as a case where he is seeking to avoid honouring his agreement with Hiscox. Rather, Mr. Flatley makes a sworn statement that Hiscox is seeking to ‘ avoid their responsibility to [him]’ in the courts, by insisting that Mr. Flatley honour his agreement to refer the dispute to arbitration.

4 . The key issue for this Court therefore is whether an agreement to arbitrate, as distinct from an agreement to litigate, is an unfair term in a consumer contract, such as to entitle Mr. Flatley avoid the consequences of his agreeing to arbitrate under the terms of his policy with Hiscox.

BACKGROUND

5 . Mr. Flatley is a very successful businessman, as is clear from the fact that he describes himself as a professional dancer, choreographer, creator and producer with an address in Monte Carlo, who has filled some of the largest venues worldwide, who has launched a whiskey brand and who has spent €29 million on renovating his home in Ireland at Castlehyde in County Cork (“ Castlehyde”).

6 . Although a very successful businessman, Mr. Flatley relies, as he is entitled to, on the fact that in obtaining insurance cover for his home in Ireland, he was acting as a ‘consumer’ in his dealings with Hiscox In particular he claims that the arbitration clause (“ Arbitration Clause”), which he agreed to, in his policy of insurance 5187180 (“ Policy”) with Hiscox, is an unfair term. Accordingly, he relies on s. 129(1) the Consumer Rights Act 2022 (“ 2022 Act”), which provides that consumers are not bound by unfair terms in consumer contracts.

7 . The underlying dispute between the parties, which has to be resolved by arbitration or litigation, concerns allegedly defective work done to Castlehyde which gave rise to a claim by Mr. Flatley in the sum of €30 million against his insurer, Hiscox.

8 . As this insurance claim is being disputed by Hiscox, Mr. Flatley issued proceedings against Hiscox in the Commercial Court. However, this judgment concerns Hiscox's application to have the court proceedings issued by Mr. Flatley stayed, and the dispute instead referred to arbitration, in light of the Arbitration Clause in the Policy.

Negotiation of the Policy

9 . Mr. Flatley engaged an insurance broker, AON plc (“ AON”) to find insurance for his house at Castlehyde. Indeed, it is not surprising that Mr. Flatley would engage specialist insurance brokers, such as AON, to negotiate his insurance policy. This is because even though one is dealing with a ‘home insurance’ policy, it is no ordinary home insurance policy. This is clear from the fact that Mr. Flatley gave sworn evidence that he spent €29 million renovating his home at Castlehyde and also the fact the annual premium for this policy is €69,285.

10 . However, despite the fact that entering a policy for this amount of money would be a significant financial transaction for the average person, and the fact that Mr. Flatley engaged a specialist insurance brokerage to negotiate the insurance policy for him, Hiscox are not disputing that Mr. Flatley was acting ‘as a consumer’, when he entered that policy, for the purposes of the 2022 Act. This is because when negotiating the insurance policy for his home in Ireland, albeit through his agent AON, Mr. Flatley was acting ‘for purposes that are wholly or mainly outside that individual's trade, business, craft or profession’ (s. 2(1) of the 2022 Act). As already noted, the business of Mr. Flatley is not negotiating insurance policies, but it is that of dancer, choreographer etc.

11 . AON, on behalf of Mr. Flatley, sought the insurance terms from Hiscox in October 2019 and on 14 November 2019, some four weeks after receiving those terms, which included the Arbitration Clause, Mr. Flatley entered into the Policy with Hiscox. Mr. Flatley does not dispute that he agreed to the terms of the Policy. However, he disputes that he has to honour his agreement to arbitrate his dispute with Hiscox, under the terms of the Arbitration Clause, as he maintains that it is an unfair term.

The core claim of unfairness made by Mr. Flatley

12 . The primary reason Mr. Flatley claims, through his counsel, that the Arbitration Clause is unfair and so not binding on him is because the clause does not make it clear that Mr. Flatley would not have to ‘bear his […]own costs of any arbitration’. In making this novel argument, he relies on s. 132(1)(e) of the 2022 Act, in which this expression is used (and which is set out in full below).

13 . Mr. Flatley is interpreting s. 132(1)(e) to claim that to be ‘fair’, an arbitration clause should make it clear that the arbitration would be at no cost to him, i.e. if he loses the arbitration, he would not be liable for Hiscox's legal costs and Hiscox would have to pay Mr. Flatley's lawyers (for bringing an unmeritorious claim against Hiscox).

14 . It is also relevant to note that Mr. Flatley's interpretation of s. 132(1)(e) would have far-reaching consequences for every consumer arbitration in Ireland. This is because, on Mr. Flatley's interpretation of s 132(1)(e), traders who are pursued by consumers in arbitration would have to pay the consumer's lawyers their legal fees, even where the arbitrator determines that the consumer's claims were completely without merit. Therefore, his interpretation of s. 132(1)(e) requires one to take the view that the Oireachtas, when passing the 2022 Act, decided, as a matter of policy, that in consumer arbitration, lawyers should, in effect, be incentivised to bring unmeritorious claims against traders.

15 . If Mr. Flatley's interpretation is correct, it would mean that a clause providing for the arbitration of disputes between consumers and traders is only valid if it provides that the traders are obliged to pay the lawyers, acting for consumers, for bringing unmeritorious claims — a reversal of the situation when such claims are brought through litigation.

ANALYSIS

16 . On 17 January 2024, Mr. Flatley issued a motion to join Hiscox to his proceedings against the first to fifth defendants, and on 28 February 2024, Hiscox issued this motion to stay the proceedings in light of the Arbitration Clause, which it has with Mr. Flatley.

17 . Hiscox is applying to this Court to refer the dispute to arbitration under Article 8(1) of the UNCITRAL Model on International Commercial Arbitration (which has the force of law in Ireland under s. 6 of the Arbitration Act 2010). Article 8(1) states:

“A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed”.

18 . As previously noted, Mr. Flatley argues that the Arbitration Clause is an ‘unfair’ term in a ‘ consumer contract’, pursuant to the 2022 Act, and so is not binding upon him as a consumer. The Policy was first taken out in 2019 and renewed each year since 2019 until its most recent renewal on 14 November 2023, when the policy was entered into from that date to 13 November 2024 (“ 2023/2024 Renewal”).

19 . The Arbitration Clause, which has remained the same in all renewals of the Policy, states:

“This insurance is governed by the laws of Ireland. Any dispute arising out of or relating to this insurance, including over its construction and validity, will be referred to a single arbitrator in Dublin in accordance with the Arbitration Act then in force. The arbitrator will be an experienced member of the Irish Bar. If agreement cannot be reached on a suitable arbitrator, one will be chosen by the Chairman of the Bar Council of Ireland.”

20 . In resisting this application to refer the dispute to arbitration, Mr Flatley relies on s. 129(1) of the 2022 Act which states:

“An unfair term of a consumer contract is not binding on the consumer”

Hiscox does not dispute that Mr. Flatley is a consumer and that the Policy is a consumer contract. In claiming that the Arbitration Clause in the Policy is an unfair term, Mr. Flatley relies on s. 132(1)(d) but particularly s. 132(1)(e) of the 2022 Act, which this Court was told has not been subject to court...