Akai Pty Limited v People’s Insurance Company Limited (1996) 188 CLR 418

Facts: P was insured by D. P (NSW) sued D (Singapore) in NSW in respect of an insurance contract which was expressly governed by English law. It included a term (Clause 9) that “This policy shall be governed by the laws of England. Any dispute arising from this policy shall be referred to the Courts of England.”

However, s(8)(2) Insurance Contracts Act (Cth) prevents parties of an insurance contract from contracting out of the Act by selecting a law of the contract other than the law of a State where that law would be the proper law. In addition, s 52 Insurance Contracts Act (Cth) provides that provisions of insurance contracts are void if they exclude, restrict or modify the operation of the Act to the prejudice of a person other than the insurer.

s 8(2) Insurance Contracts Act (Cth): “...where the proper law of a contract or proposed contract would, but for an express provision to the contrary included or to be included in the contract or in some other contract, be the law of a State or of a Territory in which this Act applies or to which this Act extends, then, notwithstanding that provision, the proper law of the contract is the law of that State or Territory.”

s 52 Insurance Contracts Act (Cth): “Where a provision of a contract of insurance (including a provision that is not set out in the contract but is incorporated in the contract by another provision of the contract) purports to exclude, restrict or modify, or would, but for this subsection, have the effect of excluding, restricting or modifying, to the prejudice of a person other than the insurer, the operation of this Act, the provision is void.”

Issue: Should the NSW court give effect to the foreign jurisdiction clause (nominating UK) and order a stay of proceedings despite the AU Insurance Contracts Act?

Held: Refused a stay of proceedings despite the foreign jurisdiction clause. Giving effect to the foreign jurisdiction clause would circumvent Cth legislation (Insurance Contracts Act) and therefore, enforcement would be contrary to Australian public policy. In any event, the clause was void under s 52 of the Act, which negates provisions excluding, restricting or modifying, the operation of the Act, to the prejudice of the insured. The express choice was to be ignored, the objective proper law (system with closest & most real connection) was NSW law.

Held (Toohey, Gaudron and Gummow JJ: “[T]he policy of the Act … is against the use of private engagements to circumvent its remedial provisions. To grant a stay in the present case would be to prefer the private engagement to the binding effect upon the State court of the law of the Parliament. This indicates a strong reason against the exercise of the discretion in favour of a stay.”

Note: English courts granted an anti-suit injunction against Pl on ground that Pl was commencing foreign (i.e. Australian) proceedings in breach of an exclusive jurisdiction clause. International comity did not require the court to give effect to the foreign (HCA) decision, which was overriding party bargain and express choice. The parties had clearly bargained for English law, and the court should give effect to that intention; the fact that the HCA found the clause void by operation of Australian legislation did not affect this conclusion.