According to reports in Australian media, legal documents tendered in the Melbourne court showed that Arthur had felt like "meat in the sandwich" in the divisive feud between Clarke and Watson.
Arthur, who was shown the door days before the Ashes series and two years before his contract was due to expire, has reportedly sought payments and compensation amounting to AUD 4 million or his job back from cricket Australia to the end of his 2015 contract.
"There was major tension between Michael Clarke and Shane Watson," Channel Seven reported from Arthur's document of claim.
The 45-year-old South African, who was replaced by former Australia batsman Darren Lehmann, had to deal with the rift between Clarke and Watson ever since his appointment in November 2011, reports said.
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In the documents, Arthur also claimed that he was racially discriminated against because he was South African and didn't understand the Australian way.
vice-captain Watson for the third Test in India.