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Hela Pharma AB v Hela Pharma Australasia Limited [2005] NZCA 11 (17 February 2005)

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Hela Pharma AB v Hela Pharma Australasia Limited [2005] NZCA 11 (17 February 2005)

Last Updated: 20 April 2005

IN THE COURT OF APPEAL OF NEW ZEALAND

CA165/03
CA206/03

BETWEEN HELA PHARMA AB
Appellant

AND HELA PHARMA AUSTRALASIA LIMITED
Respondent

Hearing: 1 February 2005

Court: McGrath, Glazebrook and Hammond JJ

Counsel: J R F Fardell QC and T P Mullins for Appellant
P D McKenzie QC for Respondent

Judgment: 17 February 2005

JUDGMENT OF THE COURT

A The appeals are dismissed.

B The appellant is to pay costs of $7,500 to the respondent together with the reasonable disbursements of the respondent on the appeals. In the event that the parties are unable to settle the disbursements, same are to be fixed by the Registrar.

REASONS

(Given by Hammond J)

Table of Contents
	Para No
Introduction	[1]
The facts	[3]
Was the arbitration displaced?	[28]
The interim award	[33]
The appeal and application to the High Court	[39]
The High Court decision	[42]
The submissions in this Court	[52]
The relevant legal principles	[54]
This case	[61]
Conclusion	[71]

Introduction

[1] We have before us appeals from a single judgment of Goddard J in CIV-2002-485-201 and CIV-2002-485-1377 Wellington Registry delivered on 1 August 2003. The same issues arose in both matters. Essentially, the Judge declined to interfere with the decision of an arbitrator as to who the proper parties to the reference to arbitration before him are.
[2] The central facts of the matters which have come before us are not now in dispute. What is in dispute, is the proper characterisation of the relationship (if any) between the parties, at the relevant times. In the result, we take essentially the same view of those issues as were taken by the arbitrator - and in more extended form - by Goddard J on the appeals to the High Court. Those issues can only be appreciated in the particular factual context of this case, to which we now turn.

The facts

[3] Hela i Falkoping AB ("HF") was a Swedish company. It was the product licence-holder of a herpes cream called "Herstat", and certain other products. We use the past tense with respect to "HF" for reasons we will come to later in this judgment.
[4] HF wished to establish a distributor for these products in New Zealand, Australia, the South Pacific and Indonesia. Hela Pharma Australasia Limited ("HAPL"), a New Zealand company, wished to become that distributor.
[5] On 10 June 1996 HF entered into an agreement with HPAL and another in Norway (International Business Developments AS) to effect this enterprise.
[6] The distribution agreement was signed by Mr Per Rabe (who was the president of HF) for that company, and by appropriate representatives of the other parties.
[7] Broadly, HPAL was given the sole and exclusive right to distribute HF’s products in New Zealand, Australia, the South Pacific and Indonesia. It was also given the first option to distribute the products in certain other Asian countries.
[8] The agreement provided for HF to terminate the agreement on six months written notice; and for either party to the agreement to terminate it without notice if the other party became insolvent or went into receivership.
[9] The agreement contained an arbitration clause, in the following terms:

In the event of a dispute between the parties concerning this agreement then either party may refer the dispute to arbitration. Each party will within five working days of receipt of the notice of arbitration appoint an arbitrator and failing the appointment of an arbitrator then the party who does not appoint an arbitrator shall be deemed to have waived the right to appoint an arbitrator. The arbitrators shall appoint an umpire before embarking upon the arbitration. All parties to this agreement shall be bound by the findings of the umpire.

[10] At the time the distribution agreement was executed, HF was registered in the Swedish register of companies under number 556344-8934.
[11] On 31 March 1998 a new company was registered on the Swedish register of companies under the name Hela Pharma AB ("HP") with the registration number being 556518-6789.
[12] A week later, on 6 April 1998, HF changed its registered name to Stenen IVGL AB.
[13] These events were not made known to HPAL. Correspondence between the parties continued to be conducted in HF’s former name. HPAL also received a facsimile dated 28 May 1999, transmitted on Hela Pharma AB letterhead, advising that HPAL "must deal with Hela International" in relation to all future business outside Sweden. Those faxes have the address "C/- Hela Pharma AB ... Sweden" endorsed on them.
[14] On 27 October 1999 a resolution was passed at the general meeting of HF to liquidate that company.
[15] On 11 January 2000 a Mr Rolf Eriksson was appointed as liquidator of HF.
[16] HPAL was quite unaware that HF had gone into voluntary liquidation.
[17] The distribution transaction had not been a success. Relations between the parties had distinctly deteriorated since (at least) the early part of 1998. It is not necessary for present purposes to go into the merits of the disputes (although the nature of them is set out in the particulars filed in the arbitration). It suffices to say, for present purposes, that HPAL took the view that certain serious misrepresentations had been made to it at the outset of this enterprise; HF took the view that HPAL had not performed appropriately, in terms of the distribution agreement. The short point here is that there were allegations both ways between the parties. By mid-2000 HPAL had advised HF (by now, Stenen) that arbitration proceedings were to be commenced.
[18] It was in this context that, on 13 December 2000, Mr Rabe gave written notice to HPAL that "Hela AB/Hela Pharma AB" intended to terminate the distribution agreement with effect as from 9 June 2001. This termination notice contained short-form particulars of "Hela’s" complaints. It was written on "Hela" logo letterhead. It bore the address and registered number of HP. It was signed by Mr Rabe as "Managing Director", in the following manner:

Sincerely
Hela AB/Hela Pharma AB
[signature]
Per Rabe
Managing Director

[19] In December 2000, parties described therein as HPAL and "Hela AB ("Hela")" signed a reference to arbitration which appointed Mr John Marshall, a Wellington barrister, as sole arbitrator of the disputes that had arisen between them.
[20] The recitals to that agreement provided:

INTRODUCTION

A. HPA and Hela are parties to a contract dated 18 June 1996 for the distribution of certain pharmaceutical products.
B. Disputes have arisen between the parties concerning the distribution of the products under this agreement.
C. The contract provides for such disputes to be referred to arbitration.
D. The parties have agreed that all of the matters in dispute shall be referred to arbitration.
E. The parties have agreed that the reference to arbitration shall be on the following terms ...

[21] The questions in dispute to be decided by the arbitrator were to be set out in "particulars of claim" and "particulars of the defence/counterclaim".
[22] Mr Rabe signed this reference to arbitration on behalf of "Hela AB".
[23] The liquidator, Mr Eriksson, deposed:

From the time I was appointed as liquidator I was the only one with the right to sign for the company 556344-8934, but I was free to give other people authority to handle different matters. During the liquidation, the president of the company, Mr Per Rabe, was generally authorised by me to handle different practical matters and in this respect signed for the company, including to handle agreement negotiations of some kind with [HPAL].

[24] On 31 May 2001, HF (Stenen) was dissolved.
[25] This fact, and the events leading up to it, were quite unknown to HPAL and indeed Hela’s New Zealand counsel, Mr Fardell QC. Mr Fardell did not become aware of the true situation until October 2001, when he was in the course of arranging briefs of evidence for HPAL, in the ongoing course of the arbitration.
[26] Mr Fardell advised HPAL’s solicitors of this change in circumstances, when he became aware of it. Mr Rabe gave an explanation that HF had gone into liquidation and been dissolved as "part of a corporate restructuring that had been contemplated for some time", and that "the liquidation of Hela is completely unrelated to this arbitration and restructuring exercises have been ongoing since 1998".
[27] The circumstances as they were now understood to be were then drawn to the attention of the arbitrator.

Was the arbitration displaced?

[28] When the true situation concerning the status of HF was drawn to the attention of the arbitrator, he advised counsel, by Minute, that "it appeared that the dissolution of [what had been] Hela AB meant that the arbitration was at an end". The arbitrator referred to Russell on Arbitration 21 ed 1997 para 3-008, Morris v Harris [1927] AC 252 at 259 (HL), and Baytur SA v Finagro Holdings SA [1991] 4 All ER 129 at 133 per Lloyd LJ.
[29] Counsel gave the matters arising further consideration, and there were conferences with the arbitrator. It is unnecessary to traverse those matters. It suffices to say that counsel recognised that, if the true facts were simply that HF had been dissolved, without more, then it must be correct that the arbitration was at an end, and the arbitrator would necessarily be functus.
[30] However it was possible that there was "more". First, as the arbitrator noted, it might be the case that it would be possible under Swedish law to make an application for HF to be restored to the Swedish register of companies. And Mr McKenzie QC suggested that it was possible that HP might, in some manner, have "taken over" (to us a neutral expression) the position of HF. He wished to give further consideration to that possibility.
[31] In the result, HPAL has not pursued an application to have HF restored to the register. Instead, it elected to pursue before the arbitrator an argument that, to again employ a neutral phrase at this point, HP had been "substituted" for HF. In short, that there was a valid new agreement to resort to arbitration between HP and HPAL.
[32] It was then in this context that, on 22 February 2002, HPAL applied to the arbitrator for a preliminary determination of the identity of the parties to the arbitration agreement. Mr Fardell put the point in issue as being, "who did consent to the arbitral process and who were the parties to this consensual process"?

The interim award

[33] In his interim award, Mr Marshall concluded that HP had indeed "taken over" HF’s place in relation to the distribution agreement. This had come about when Mr Rabe signed the reference to arbitration, for HP. It would follow that HP had accepted the obligation to have all the disputes between the parties (which it will recall went both ways) resolved in this way.
[34] The way the arbitrator put this was:

The inference I draw ... in light of the restructuring and all the other circumstances, is that HP had taken over from HF its rights under the Distribution Agreement, and that when Per Rabe signed the arbitration agreement he did so on behalf of HP. Whether there had been a formal transfer or assignment I do not know. But clearly HP was acting as Hela AB, and the inference which I draw is that there had been a transfer, or a legal or equitable assignment of HF’s rights under the Distribution Agreement to HP.
This inference is further strengthened by the fact that HF had been in liquidation since 11 January 2000, and that only the liquidator, or a person with his authority could sign contracts on behalf of HF.

[35] In reaching that conclusion, the evidence to which the arbitrator had regard fell broadly into three categories: first, there were the contextual circumstances in which Hela had restructured its business operations (including the transfer of the assets of HF/Stenen to HP); second, there was the evidence available to the arbitrator as to the position of a company in liquidation in Sweden, and Mr Rabe’s role in relation to those companies; thirdly, the arbitrator had regard to the correspondence which was exchanged between HPAL, Hela International, and "Hela" over the relevant time period, including the termination notice and the reference agreement.
[36] It is of critical importance that Mr Marshall found as a fact that when Mr Rabe signed the reference to arbitration he had done so on behalf of HP. In so doing, he placed particular weight on Mr Rabe’s contemporaneous signing of the letter of termination dated 13 December 2000, written on HP letterhead, and on behalf of "Hela AB/Hela Pharma AB".
[37] Before us Mr Fardell expressly said - and we think quite properly so - that the appellant had to accept that it was a reasonable inference for the arbitrator to draw that HP was the party which signed the agreement to arbitrate.
[38] This concession - we think responsibly and rightly made - makes it unnecessary for us to traverse further the arbitrator’s detailed reasoning on this point.

The appeal and application to the High Court

[39] On 8 April 2003, Durie J granted leave to HF to appeal to the High Court against this interim award, under cl 5 of the Second Schedule to the Arbitration Act 1996. Contemporaneously, HF applied to set aside the award under cl 16(2) and (3) and cl 34(2)(iii) and (iv) of the First Schedule to the Act. The essential questions relating to both the appeal and the cross-application are the same.
[40] Durie J approved the following six questions of law for determination by the High Court:

Question (1): On the available and relevant evidence and the primary findings of fact could the arbitrator reasonably conclude that the Reference to Arbitration dated December 2000 was executed for and on behalf of the Plaintiff, rather than the party known as Hela AB ...?
Question (2): Did the arbitrator err in law in determining that the relevant parties to the Arbitration were those parties who had signed the Reference to Arbitration, as opposed to the parties to the Distribution Agreement dated 16 June 1996?
Question (3): To the extent that the arbitrator has purported to find that at some time between 1996 and 2000 there had been a "transfer or legal/equitable assignment" of Hela AB’s rights under the Distribution Agreement dated 16 June 1996 ... was this conclusion reasonably available to him on the relevant evidence?
Question (4): If the answer to (3) is yes, does that mean that legally the Plaintiff has assumed the burdens as well as the benefits of the Distribution Agreement dated 16 June 1996?
Question (5): If the answer to (4) is no, was it necessary to find that there had been a novation of the obligations of Hela AB to the Defendant under the Distribution Agreement to the Plaintiff before the arbitrator could conclude that the Plaintiff had become a party to the Arbitration?
Question (6): On the available and relevant evidence and the primary findings of fact was it reasonably open for the arbitrator to hold that there had been such a novation?

[41] The grounds set out in HF’s application for a determination "that no jurisdictional authority" exists for an arbitration between HP and HPAL were that:

(a) The arbitrator only has jurisdiction to hear disputes between the parties to the Distribution Agreement, namely HF and HPAL. He had no jurisdiction to hear a dispute between HP and HPAL.
(b) Accordingly, the interim award deals with a dispute that did not fall within the terms of the applicable submission to arbitration contained in the Distribution Agreement.

The High Court decision

[42] As to the first question, Goddard J was well aware of this decision of the Court in Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318.
[43] The Judge concluded:

[t]here was ample evidence available to the arbitrator to enable him to reach the conclusion that he did on this issue. As is evident, I too would have been led inexorably" to the same conclusion as the arbitrator had I been required to make a finding of fact on this issue. There is no basis on which to uphold Mr Fardell’s contention that the arbitrator’s conclusion on this first issue was "unjudicial, speculative, erroneous or unreasonable". No party known as "Hela AB" existed at the time Mr Rabe signed the reference to arbitration and the only logical inference is that HP had "taken over" from HF "its rights" under the Distribution Agreement.

[44] We add here that Goddard J went further than she may, strictly, have been required to do (given that she had already held that there was an evidential basis for the arbitrator’s findings) because, as the Judge noted, this Court had not definitively pronounced, in Doug Hood, on the extent of challenges that may be made to an arbitrator’s findings of fact. In other words, the Judge took a prudential approach.
[45] On the second issue, the Judge upheld the arbitrator’s conclusion that the reference to arbitration document was a quite separate agreement, with separate parties, to the distribution agreement. The Judge said:

With respect, his finding in this regard must be correct. Whilst the distribution agreement contained the clause entitling the parties to go to arbitration in the event of a dispute, the parties were not compelled to go to arbitration unless they separately agreed to do so. In the event of a dispute it was therefore necessary for the parties to reach agreement as to whether they would proceed to an arbitration or not. The matter was one of option. Mr Fardell sought to argue that the Reference to Arbitration was simply a procedural step in the fulfilment of a contractual obligation in the distribution agreement. He said the Reference could only sensibly be interpreted by looking at the underlying obligation to arbitrate created in the distribution agreement. Whilst I accept that the right to proceed to arbitration derived from clause 7 in the distribution agreement, it was still necessary for the parties to separately agree to go to arbitration in the event of a dispute arising.

[46] Questions 3 and 4 were essentially directed to the position which would arise, if it was found that there was not a new agreement to refer, but rather an assignment of the distribution agreement from HF to HP.
[47] Counsel were apparently agreed that any such assignment must necessarily have been an equitable assignment.
[48] Mr Fardell’s essential concern was that, in accordance with the usual rule, it is possible to assign the benefit of a contract, but not the burden of it. He said that if this was an instance of an assignment there was no basis on which it could be said that HPAL had agreed to an assignment of the burden of the distribution agreement.
[49] Goddard J held:

I find it is open on the facts to imply consent on behalf of HPAL to an assignment of the burden of the distribution agreement to HP at the point at which it accepted the assets of HF and then signed the Reference to Arbitration and termination agreement on behalf of the former HF.

[50] That issue (assignment or not?) had not been formally determined by the arbitrator. As to that, the Judge said:

This issue could properly be remitted back to Mr Marshall for definitive determination, if the parties so wished.

[51] The Judge considered that questions 5 and 6 were essentially answered by reference to the holdings she had already made, and that therefore the answers to each of the questions approved for determination on appeal in the High Court should be as follows:

Question 1: Yes.
Question 2: No.
Question 3: Yes.
Question 4: Yes.
Question 5: No.
Question 6: Yes.

The submissions in this Court

[52] As so often happens, the issues have become refined as this matter has progressed through the various levels of consideration. The essential position of the parties remains as it was before the arbitrator except that, as we have noted, for the purposes of the appeal, before us Mr Fardell accepted that it was a reasonable inference that HP had signed the agreement to arbitrate and that agreement to refer to arbitration was therefore between HP and HPAL.
[53] Against that, in oral argument Mr Fardell suggested the key issues to be:

(a) As a matter of law, is the reference to arbitration a separate agreement with separate parties from the distribution agreement?
(b) Even if it is a separate agreement, as a matter of law, did HP assume whatever obligations there were under the distribution agreement?
(c) In any event, given that this is an arbitral process, before HP could properly be a party to it - in the sense that it is bound by any liabilities created by the arbitration - was it necessary for HP to give formal notice to the relevant other parties (HPAL and the arbitrator)?

The relevant legal principles

[54] It would be highly impractical to commercial life if contractual rights (such as were created by the distribution agreement in this case) could not be somehow transferred to a third party.
[55] In the usual run of cases, such a "transfer" is achieved by one of two transactions: a novation (the making of a separate new agreement); or assignment. Occasionally, hybrid situations may occur. It is possible to have a situation where a party (in the course of an assignment) agrees to assume a liability under a contract as well as receive the benefit of that contract. This assumption of liability may be just as between assignor and assignee or it may also be as regards the other party to the contract (as long as that person is a party to the assignment or a separate contract to that effect and there is consideration). In such circumstances there may not be a novation in the normal sense of the word as both assignee and assignor remain liable. This is sometimes what happens with assignment of leases.
[56] As to "novation", Chitty on Contracts (29 ed) Volume 1 puts the concept thus:

There is no doubt that with the consent of both contracting parties all contracts of any kind may be transferred, and the term "novation" has been introduced from Roman law to describe this species of transfer. Novation takes place where the two contracting parties agree that a third, who also agrees, shall stand in the relation of either of them to the other. There is a new contract and it is therefore essential that the consent of all parties shall be obtained: in this necessity for consent lies the most important difference between novation and assignment (emphasis in text) (citations omitted) (para 19-085).

[57] As Chitty notes, many of the reported cases have arisen out of the amalgamation of companies, or of changes in partnership firms. For instance, where the original contractor is a firm, but a limited company is then formed which takes over the contractor’s business, and an employer accepts the company in place of the original firm (as in Chandler Bros v Boswell [1936] 3 All ER 179, CA).
[58] In an assignment, on the other hand, the benefit of a contract is transferred to a third party. This is a transaction between the person entitled to the benefit of the contract (the assignor) and the third party (the assignee) which results in the assignee becoming entitled to sue the person liable under the contract (in many cases called the "debtor"). The "debtor" is not a party to the transaction and hence his or her consent is not necessary for its validity.
[59] There is no dispute between the parties that, in principle, an arbitration clause is potentially assignable. The requirements for such a transaction, again as it is put in Chitty, Contracts 29 ed Volume 2, are:

An assignee of a contract is bound by and may take the benefit of an arbitration clause contained therein, but he cannot continue an arbitration already commenced by the assignor unless and until he gives notice of the assignment to the other parties to the dispute and submits to the jurisdiction of the arbitrator (citations omitted, which include several of the leading decisions cited to us by counsel) (emphasis added) (at para 32-034).

[60] In this instance, counsel were agreed that if there was an assignment it would have to have been an equitable assignment of a legal chose in action (here, the rights under the agreement). This would not require any particular form. What is critical is an intention to assign, although that may have been established by conduct. Notice is not an essential requirement. An assignment of this character may be perfectly valid in equity without any notice to the third party - although notice is usually said to be "desirable", since, as with statutory assignments, until he or she receives it the third party is entitled to treat the assignor as his or her creditor and to discharge his or her debt by payment to that party. The giving of notice may prevent further equities attaching to a debt. It may also affect priorities.

This case

[61] It will be apparent from the outline we have already given of the views taken by the arbitrator and the High Court Judge, that they both considered that what had occurred, in a transactional sense, in this instance was the complete substitution (by agreement) of HP (for HF), and, in that sense, a new (and separate) agreement had arisen between HP and HPAL. It necessarily followed that the arbitration was still "alive".
[62] We consider that the arbitrator and the Judge were correct to take that view, although some necessary elements for a transaction in this sense to have that character were not precisely spelled out.
[63] First, although the consent of all parties is necessary for such a new agreement, this may be inferred from conduct and need not be express. See Chatsworth Investments Ltd v Cussins (Contractors) Ltd [1969] 1 WLR 1; Tito et ors v Waddell et ors (No 2) [1977] 3 All ER 129, at 277-278. The arbitrator and the Judge in fact proceeded in their analyses on that premise.
[64] Second, it has been long established that there must be consideration for a novation of this kind. (The authorities appear to go back at least as far as Tatlock v Harris [1764] EngR 60; (1789) 3 TR 174; 100 ER 517).
[65] Thirdly, the consent of all parties is required, and hence, necessarily, the consent of HPAL was required to the new agreement.
[66] To take the last point first, in our view, there was ample evidence for the arbitrator and the Judge to find that the consent of the necessary parties could be inferred from the conduct of the parties. This is an appeal, and it is not necessary or appropriate for this Court to traverse the circumstances in detail in the manner of a trial judgment. In summary, there was the contextual evidence of the restructuring of the Hela companies; the transfer of assets from HF to HP as part of that restructuring; the circumstances and timing of the events leading up to and surrounding the arbitration agreement; and the various ways in which the correspondence from Mr Rabe effectively showed that what theretofore had been HF should now be seen as HP. We agree with the arbitrator that it was of very great significance that the reference to arbitration was between HPAL and HP, and that in a context where there were claims both ways between those parties (which were to be particularised and set out in terms of the reference to arbitration by a particulars of claim, defence and counterclaim, as was in fact done).
[67] As to consideration, it is long established that mutual promises (here, to submit extant differences on both sides to arbitration) can amount to consideration.
[68] As to notice, Mr Fardell argued strenuously that there had to be what would, in effect, amount to an informed consent on the part of HPAL as to what it was entering into. Or, as he put it in the course of oral argument, HPAL would "have to know all the true circumstances". As to that, the reference to arbitration should not be seen in isolation. To take only one instance - but one of very great significance - contemporaneously with the reference to arbitration there was the termination notice which was expressly expressed to be by "Hela AB/Hela Pharma AB". This in its own way precisely expressed the continuum which had occurred in the affairs of the "Hela" companies. It is correct that HPAL did not have full knowledge of all the circumstances of the "Hela" companies at the time of the execution of the reference agreement, but in our view, it had quite sufficient knowledge for consent to be inferred, as the arbitrator and Judge did.
[69] In this context, to the extent that any confusion was caused, it was plainly caused by Mr Rabe, who after all was in full possession as to the facts in relation to the Hela enterprises. We appreciate that the significance of the legal niceties in a jurisdiction foreign to him would likely not have been apparent. But we would stress the point that the way Mr Rabe expressed himself in commercial terms suggested that HF (or Hela AB) had been "superseded" (as for instance in the termination notice), and HPAL was plainly content to deal with the matter on the footing actually presented to it by HP as the superseding entity.
[70] Having upheld the arbitrator and the Judge to this point, it is not, strictly speaking, necessary for us to express any view on the question of an assignment. However we do indicate, in short form, in case we should be in error on the principal submission by Mr McKenzie, that, in the alternative, we consider that the requirements for an assignment were met in this case. Notice that HP was now involved in "the dispute" was given by HP in the termination notice. In that document it submitted to the jurisdiction of the arbitrator. As to the argument about whether the burden of the contract was also accepted on an assignment, we would have no difficulty, at least in the circumstances of this case, in saying that, by signing the reference to arbitration without suggesting it was being signed in a limited capacity (again bearing in mind that there were to be claims flowing both ways) HP had agreed to accept whatever came out - either way - from the arbitration.

Conclusion

[71] In the result, the appeals will be dismissed.
[72] As to costs, HPAL has an award of costs in its favour in the High Court. There was no cross-appeal against that award. In this Court, the respondent will have costs of $7,500 and its reasonable disbursements, on the usual terms.

Solicitors:
Lee Salmon Long, Auckland for Appellant
Ruthe Denee & Co, Wellington for Respondent

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[3]	Hela i Falkoping AB ("HF") was a Swedish company. It was the product licence-holder of a herpes cream called "Herstat", and certain other products. We use the past tense with respect to "HF" for reasons we will come to later in this judgment.
[4]	HF wished to establish a distributor for these products in New Zealand, Australia, the South Pacific and Indonesia. Hela Pharma Australasia Limited ("HAPL"), a New Zealand company, wished to become that distributor.
[5]	On 10 June 1996 HF entered into an agreement with HPAL and another in Norway (International Business Developments AS) to effect this enterprise.
[6]	The distribution agreement was signed by Mr Per Rabe (who was the president of HF) for that company, and by appropriate representatives of the other parties.
[7]	Broadly, HPAL was given the sole and exclusive right to distribute HF’s products in New Zealand, Australia, the South Pacific and Indonesia. It was also given the first option to distribute the products in certain other Asian countries.
[8]	The agreement provided for HF to terminate the agreement on six months written notice; and for either party to the agreement to terminate it without notice if the other party became insolvent or went into receivership.
[9]	The agreement contained an arbitration clause, in the following terms:

[10]	At the time the distribution agreement was executed, HF was registered in the Swedish register of companies under number 556344-8934.
[11]	On 31 March 1998 a new company was registered on the Swedish register of companies under the name Hela Pharma AB ("HP") with the registration number being 556518-6789.
[12]	A week later, on 6 April 1998, HF changed its registered name to Stenen IVGL AB.
[13]	These events were not made known to HPAL. Correspondence between the parties continued to be conducted in HF’s former name. HPAL also received a facsimile dated 28 May 1999, transmitted on Hela Pharma AB letterhead, advising that HPAL "must deal with Hela International" in relation to all future business outside Sweden. Those faxes have the address "C/- Hela Pharma AB ... Sweden" endorsed on them.
[14]	On 27 October 1999 a resolution was passed at the general meeting of HF to liquidate that company.
[15]	On 11 January 2000 a Mr Rolf Eriksson was appointed as liquidator of HF.
[16]	HPAL was quite unaware that HF had gone into voluntary liquidation.
[17]	The distribution transaction had not been a success. Relations between the parties had distinctly deteriorated since (at least) the early part of 1998. It is not necessary for present purposes to go into the merits of the disputes (although the nature of them is set out in the particulars filed in the arbitration). It suffices to say, for present purposes, that HPAL took the view that certain serious misrepresentations had been made to it at the outset of this enterprise; HF took the view that HPAL had not performed appropriately, in terms of the distribution agreement. The short point here is that there were allegations both ways between the parties. By mid-2000 HPAL had advised HF (by now, Stenen) that arbitration proceedings were to be commenced.
[18]	It was in this context that, on 13 December 2000, Mr Rabe gave written notice to HPAL that "Hela AB/Hela Pharma AB" intended to terminate the distribution agreement with effect as from 9 June 2001. This termination notice contained short-form particulars of "Hela’s" complaints. It was written on "Hela" logo letterhead. It bore the address and registered number of HP. It was signed by Mr Rabe as "Managing Director", in the following manner:

[19]	In December 2000, parties described therein as HPAL and "Hela AB ("Hela")" signed a reference to arbitration which appointed Mr John Marshall, a Wellington barrister, as sole arbitrator of the disputes that had arisen between them.
[20]	The recitals to that agreement provided:

[21]	The questions in dispute to be decided by the arbitrator were to be set out in "particulars of claim" and "particulars of the defence/counterclaim".
[22]	Mr Rabe signed this reference to arbitration on behalf of "Hela AB".
[23]	The liquidator, Mr Eriksson, deposed:

[24]	On 31 May 2001, HF (Stenen) was dissolved.
[25]	This fact, and the events leading up to it, were quite unknown to HPAL and indeed Hela’s New Zealand counsel, Mr Fardell QC. Mr Fardell did not become aware of the true situation until October 2001, when he was in the course of arranging briefs of evidence for HPAL, in the ongoing course of the arbitration.
[26]	Mr Fardell advised HPAL’s solicitors of this change in circumstances, when he became aware of it. Mr Rabe gave an explanation that HF had gone into liquidation and been dissolved as "part of a corporate restructuring that had been contemplated for some time", and that "the liquidation of Hela is completely unrelated to this arbitration and restructuring exercises have been ongoing since 1998".
[27]	The circumstances as they were now understood to be were then drawn to the attention of the arbitrator.

[28]	When the true situation concerning the status of HF was drawn to the attention of the arbitrator, he advised counsel, by Minute, that "it appeared that the dissolution of [what had been] Hela AB meant that the arbitration was at an end". The arbitrator referred to Russell on Arbitration 21 ed 1997 para 3-008, Morris v Harris [1927] AC 252 at 259 (HL), and Baytur SA v Finagro Holdings SA [1991] 4 All ER 129 at 133 per Lloyd LJ.
[29]	Counsel gave the matters arising further consideration, and there were conferences with the arbitrator. It is unnecessary to traverse those matters. It suffices to say that counsel recognised that, if the true facts were simply that HF had been dissolved, without more, then it must be correct that the arbitration was at an end, and the arbitrator would necessarily be functus.
[30]	However it was possible that there was "more". First, as the arbitrator noted, it might be the case that it would be possible under Swedish law to make an application for HF to be restored to the Swedish register of companies. And Mr McKenzie QC suggested that it was possible that HP might, in some manner, have "taken over" (to us a neutral expression) the position of HF. He wished to give further consideration to that possibility.
[31]	In the result, HPAL has not pursued an application to have HF restored to the register. Instead, it elected to pursue before the arbitrator an argument that, to again employ a neutral phrase at this point, HP had been "substituted" for HF. In short, that there was a valid new agreement to resort to arbitration between HP and HPAL.
[32]	It was then in this context that, on 22 February 2002, HPAL applied to the arbitrator for a preliminary determination of the identity of the parties to the arbitration agreement. Mr Fardell put the point in issue as being, "who did consent to the arbitral process and who were the parties to this consensual process"?

[33]	In his interim award, Mr Marshall concluded that HP had indeed "taken over" HF’s place in relation to the distribution agreement. This had come about when Mr Rabe signed the reference to arbitration, for HP. It would follow that HP had accepted the obligation to have all the disputes between the parties (which it will recall went both ways) resolved in this way.
[34]	The way the arbitrator put this was:

[35]	In reaching that conclusion, the evidence to which the arbitrator had regard fell broadly into three categories: first, there were the contextual circumstances in which Hela had restructured its business operations (including the transfer of the assets of HF/Stenen to HP); second, there was the evidence available to the arbitrator as to the position of a company in liquidation in Sweden, and Mr Rabe’s role in relation to those companies; thirdly, the arbitrator had regard to the correspondence which was exchanged between HPAL, Hela International, and "Hela" over the relevant time period, including the termination notice and the reference agreement.
[36]	It is of critical importance that Mr Marshall found as a fact that when Mr Rabe signed the reference to arbitration he had done so on behalf of HP. In so doing, he placed particular weight on Mr Rabe’s contemporaneous signing of the letter of termination dated 13 December 2000, written on HP letterhead, and on behalf of "Hela AB/Hela Pharma AB".
[37]	Before us Mr Fardell expressly said - and we think quite properly so - that the appellant had to accept that it was a reasonable inference for the arbitrator to draw that HP was the party which signed the agreement to arbitrate.
[38]	This concession - we think responsibly and rightly made - makes it unnecessary for us to traverse further the arbitrator’s detailed reasoning on this point.

[39]	On 8 April 2003, Durie J granted leave to HF to appeal to the High Court against this interim award, under cl 5 of the Second Schedule to the Arbitration Act 1996. Contemporaneously, HF applied to set aside the award under cl 16(2) and (3) and cl 34(2)(iii) and (iv) of the First Schedule to the Act. The essential questions relating to both the appeal and the cross-application are the same.
[40]	Durie J approved the following six questions of law for determination by the High Court:

[42]	As to the first question, Goddard J was well aware of this decision of the Court in Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318.
[43]	The Judge concluded:

[46]	Questions 3 and 4 were essentially directed to the position which would arise, if it was found that there was not a new agreement to refer, but rather an assignment of the distribution agreement from HF to HP.
[47]	Counsel were apparently agreed that any such assignment must necessarily have been an equitable assignment.
[48]	Mr Fardell’s essential concern was that, in accordance with the usual rule, it is possible to assign the benefit of a contract, but not the burden of it. He said that if this was an instance of an assignment there was no basis on which it could be said that HPAL had agreed to an assignment of the burden of the distribution agreement.
[49]	Goddard J held:

[54]	It would be highly impractical to commercial life if contractual rights (such as were created by the distribution agreement in this case) could not be somehow transferred to a third party.
[55]	In the usual run of cases, such a "transfer" is achieved by one of two transactions: a novation (the making of a separate new agreement); or assignment. Occasionally, hybrid situations may occur. It is possible to have a situation where a party (in the course of an assignment) agrees to assume a liability under a contract as well as receive the benefit of that contract. This assumption of liability may be just as between assignor and assignee or it may also be as regards the other party to the contract (as long as that person is a party to the assignment or a separate contract to that effect and there is consideration). In such circumstances there may not be a novation in the normal sense of the word as both assignee and assignor remain liable. This is sometimes what happens with assignment of leases.
[56]	As to "novation", Chitty on Contracts (29 ed) Volume 1 puts the concept thus:

[57]	As Chitty notes, many of the reported cases have arisen out of the amalgamation of companies, or of changes in partnership firms. For instance, where the original contractor is a firm, but a limited company is then formed which takes over the contractor’s business, and an employer accepts the company in place of the original firm (as in Chandler Bros v Boswell [1936] 3 All ER 179, CA).
[58]	In an assignment, on the other hand, the benefit of a contract is transferred to a third party. This is a transaction between the person entitled to the benefit of the contract (the assignor) and the third party (the assignee) which results in the assignee becoming entitled to sue the person liable under the contract (in many cases called the "debtor"). The "debtor" is not a party to the transaction and hence his or her consent is not necessary for its validity.
[59]	There is no dispute between the parties that, in principle, an arbitration clause is potentially assignable. The requirements for such a transaction, again as it is put in Chitty, Contracts 29 ed Volume 2, are:

[61]	It will be apparent from the outline we have already given of the views taken by the arbitrator and the High Court Judge, that they both considered that what had occurred, in a transactional sense, in this instance was the complete substitution (by agreement) of HP (for HF), and, in that sense, a new (and separate) agreement had arisen between HP and HPAL. It necessarily followed that the arbitration was still "alive".
[62]	We consider that the arbitrator and the Judge were correct to take that view, although some necessary elements for a transaction in this sense to have that character were not precisely spelled out.
[63]	First, although the consent of all parties is necessary for such a new agreement, this may be inferred from conduct and need not be express. See Chatsworth Investments Ltd v Cussins (Contractors) Ltd [1969] 1 WLR 1; Tito et ors v Waddell et ors (No 2) [1977] 3 All ER 129, at 277-278. The arbitrator and the Judge in fact proceeded in their analyses on that premise.
[64]	Second, it has been long established that there must be consideration for a novation of this kind. (The authorities appear to go back at least as far as Tatlock v Harris [1764] EngR 60; (1789) 3 TR 174; 100 ER 517).
[65]	Thirdly, the consent of all parties is required, and hence, necessarily, the consent of HPAL was required to the new agreement.
[66]	To take the last point first, in our view, there was ample evidence for the arbitrator and the Judge to find that the consent of the necessary parties could be inferred from the conduct of the parties. This is an appeal, and it is not necessary or appropriate for this Court to traverse the circumstances in detail in the manner of a trial judgment. In summary, there was the contextual evidence of the restructuring of the Hela companies; the transfer of assets from HF to HP as part of that restructuring; the circumstances and timing of the events leading up to and surrounding the arbitration agreement; and the various ways in which the correspondence from Mr Rabe effectively showed that what theretofore had been HF should now be seen as HP. We agree with the arbitrator that it was of very great significance that the reference to arbitration was between HPAL and HP, and that in a context where there were claims both ways between those parties (which were to be particularised and set out in terms of the reference to arbitration by a particulars of claim, defence and counterclaim, as was in fact done).
[67]	As to consideration, it is long established that mutual promises (here, to submit extant differences on both sides to arbitration) can amount to consideration.
[68]	As to notice, Mr Fardell argued strenuously that there had to be what would, in effect, amount to an informed consent on the part of HPAL as to what it was entering into. Or, as he put it in the course of oral argument, HPAL would "have to know all the true circumstances". As to that, the reference to arbitration should not be seen in isolation. To take only one instance - but one of very great significance - contemporaneously with the reference to arbitration there was the termination notice which was expressly expressed to be by "Hela AB/Hela Pharma AB". This in its own way precisely expressed the continuum which had occurred in the affairs of the "Hela" companies. It is correct that HPAL did not have full knowledge of all the circumstances of the "Hela" companies at the time of the execution of the reference agreement, but in our view, it had quite sufficient knowledge for consent to be inferred, as the arbitrator and Judge did.
[69]	In this context, to the extent that any confusion was caused, it was plainly caused by Mr Rabe, who after all was in full possession as to the facts in relation to the Hela enterprises. We appreciate that the significance of the legal niceties in a jurisdiction foreign to him would likely not have been apparent. But we would stress the point that the way Mr Rabe expressed himself in commercial terms suggested that HF (or Hela AB) had been "superseded" (as for instance in the termination notice), and HPAL was plainly content to deal with the matter on the footing actually presented to it by HP as the superseding entity.
[70]	Having upheld the arbitrator and the Judge to this point, it is not, strictly speaking, necessary for us to express any view on the question of an assignment. However we do indicate, in short form, in case we should be in error on the principal submission by Mr McKenzie, that, in the alternative, we consider that the requirements for an assignment were met in this case. Notice that HP was now involved in "the dispute" was given by HP in the termination notice. In that document it submitted to the jurisdiction of the arbitrator. As to the argument about whether the burden of the contract was also accepted on an assignment, we would have no difficulty, at least in the circumstances of this case, in saying that, by signing the reference to arbitration without suggesting it was being signed in a limited capacity (again bearing in mind that there were to be claims flowing both ways) HP had agreed to accept whatever came out - either way - from the arbitration.

[71]	In the result, the appeals will be dismissed.
[72]	As to costs, HPAL has an award of costs in its favour in the High Court. There was no cross-appeal against that award. In this Court, the respondent will have costs of $7,500 and its reasonable disbursements, on the usual terms.