|
|
Home
| Databases
| WorldLII
| Search
| Feedback
High Court of New Zealand Decisions |
Last Updated: 16 December 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-03143 [2013] NZHC 3246
BETWEEN ANTHONY RUSSELL WILES and BRONWYN ANNE WILES and MURRAY GORDON WELLS
Plaintiffs
AND BRANT HOMES LIMITED First Defendant
SLAB SPECIALISTS LIMITED Second Defendant
BARRY HOBMAN Third Defendant
Hearing: 1 November 2013
Appearances: H P Holland for plaintiffs
D M Law and T J P Bowler for defendants
Judgment: 6 December 2013
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
6.12.13 at 4 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date...............
WILES & ORS v BRANT HOMES LIMITED & ORS [2013] NZHC 3246 [6 December 2013]
Background
[1] This judgment is concerned with an opposed application for
an order pursuant to r 5.49 High Court Rules setting
aside a protest to
jurisdiction which the first and third defendants have filed. Alternatively,
the first defendant seeks leave
to amend the pleadings to apply for a stay while
mediation takes place between the parties.
[2] The protests to jurisdiction are based upon an arbitration clause
contained in the building contract which is at the heart
of the dispute between
the parties. The plaintiffs entered into a building contract with the first
defendant for the construction
of a residence at Remuera in Auckland. Part of
the construction involved building a concrete slab which was subcontracted
by
the first defendant to the second defendant. Engineering work relating
to the concrete slab was subcontracted to the third
defendant. The plaintiffs
claim that the slab failed and had to be removed and replaced giving rise to
loss on their part. They
have brought proceedings alleging breaches of contract
by all defendants, of both express and implied terms.
[3] Mr Bowler told me that the third defendant did not intend to make
separate submissions in support of the protest to jurisdiction.
[4] The relevant provisions of r 5.49 are as follows:
(1) A defendant who objects to the jurisdiction of the court to hear
and determine the proceeding may, within the time allowed
for filing a statement
of defence and instead of so doing, file and serve an appearance stating
the defendant's objection
and the grounds for it.
(2) The filing and serving of an appearance does not operate
as a submission to the jurisdiction of the court.
(3) A defendant who has filed an appearance may apply to the court to
dismiss the proceeding on the ground that the
court has no
jurisdiction to hear and determine it.
(4) The court hearing an application under subclause (3) must,—
(a) If it is satisfied that it has no jurisdiction to hear and determine the proceeding, dismiss the proceeding; but
(b) If it is satisfied that it has jurisdiction to hear and determine
the proceeding, dismiss the application and set aside
the appearance.
(5) At any time after an appearance has been filed, the plaintiff may
apply to the court by interlocutory application to set
aside the
appearance.
(6) The court hearing that application must,—
(a) if it is satisfied that it has jurisdiction to hear and determine
the proceeding, set aside the appearance; but
(b) if it is satisfied that it has no jurisdiction to hear
and determine the proceeding, dismiss both the application
and the
proceeding.
(7) To the extent that an application under this rule relates to
service of process effected outside New Zealand under rule
6.27 or 6.28, it must
be determined under rule 6.29.
(8) The court, in exercising its powers under this rule, may do so on
any terms and conditions the court thinks just
and, in particular, on
setting aside the appearance it may extend the time within which the defendant
may file and serve a statement
of defence and may give any directions that
appear necessary regarding any further steps in the proceeding in all respects
as though
the application were an application for directions under rule
7.9.
[5] The building agreement contained dispute resolution provisions in
the following terms:
DISPUTES Mediation
74 If any dispute or difference between the Owner and the Registered
Master Builder arises out of or in connection with the
Building Contract or the
Works (the Dispute), a party to the Building Contract may not commence
arbitration proceedings relating
to the Dispute unless the party has complied
with the following paragraphs of this clause:
a. a party must give written notice to the other party to the
Building Contract specifying the nature of the Dispute.
b. on receipt of the notice by the other party, the parties must
endeavour, in good faith and expeditiously, to resolve the
Dispute by
mediation.
c. if the parties do not agree within five (5) Working Days of receipt of the notice (or any further period as is agreed in writing by them) as to:
i. the timetable for all steps in the mediation; and
ii. the selection and compensation of the mediator; then the
parties must mediate the Dispute using the services of a
mediator nominated by
the President of the Arbitrators and Mediators Institute of New Zealand
Inc.
d. If no agreement has been reached in mediation within twenty (20)
Working Days of the request for mediation, or within such
further time as the
parties may agree, then either party may refer the Dispute to
arbitration.
Arbitration
75 Subject to clause 74, either party may, by written notice to the
other party, ask that the Dispute be referred to arbitration.
Such notice
shall specify the matter or matters at issue and give detailed particulars of
the Dispute. If both agree then the arbitration
shall be by a single arbitrator
in accordance with the Arbitration Act 1996.
[6] After filing the proceedings in this matter, the plaintiff and the
other parties agreed to mediation which is to occur this
month. However, it is
common ground that no steps had been taken to refer the substantive dispute
between the parties to alternative
dispute resolution (“ADR”) of any
kind before the proceedings were commenced.
[7] The grounds upon which the plaintiff seeks to set aside
the protests to jurisdiction which are dated 19 July
2013 (the first
defendant) and 23 July (the third defendant) are that:
[8] The grounds in the third defendant’s notice of opposition are
essentially the same as those relied upon by the first
defendant – that
the head contract includes an arbitration agreement which precludes the
plaintiffs from filing proceedings
in this Court.
[9] The issues in the case are therefore as follows:
a) did clause 75 contain a compulsory arbitration clause?
Interpretation of the arbitration clause
[10] The doubt about the meaning of the arbitration clause arises from
the use of
the word “agree” in clause 75. The provision in its entirety
reads as follows:
75 Subject to clause 74, either party may, by written notice to the
other party, ask that the Dispute be referred to arbitration.
Such notice
shall specify the matter or matters at issue and give detailed particulars of
the Dispute. If both agree then the arbitration
shall be by a single arbitrator
in accordance with the Arbitration Act 1996.
[11] What the parties meant by their contract is to be determined with
regard to the language used by the parties which, “appropriately
interpreted, is the only source of their intended meaning”,1
and:2
The necessary inquiry therefore concerns what a reasonable and properly
informed third party would consider the parties intended the
words of their
contract to mean. The court embodies that person. To be properly informed the
court must be aware of the commercial
or other context in which the contract was
made and of all the facts and circumstances known to and likely to be operating
on the
parties minds.
[12] The key question in this case concerns whether the background facts
and circumstances known to the parties cast any light
on the issue of whether
they did or did not intend that the reference to arbitration should be
obligatory.
[13] The parties agreement provided additionally:
76 The parties have the right to refer a dispute to adjudication under
the Construction Contracts Act 2002 and may exercise
that right even though the
dispute is the subject of arbitration or court proceedings.
[14] Clause 76 reflected the provisions of the CCA which gives a party the unilateral right to refer a construction contract dispute to adjudication under s 25 of
the Act. Such a right of adjudication could be invoked by one party
without the
1 Vector Gas v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [19].
2 At [19].
consent of the other – certain exceptions which are set out in s 25 of
the Act not being relevant in the circumstances of the
present case.
[15] The language of the agreement therefore suggests that the intention is that a party to the contract should be able to obtain a binding determination (as opposed to having to take part in a consensual process of mediation). The compulsory adjudication would either take the form of an arbitration or an adjudication under the Act. However, before a party could invoke a right to arbitration, clause 74 required that he/she must first have taken the dispute to a mediator. The language of clause
74 suggests that, subject to the last proviso mentioned, the mediation
requirement, it was intended that one party ought to be able
to refer the
dispute to arbitration. That interpretation is reinforced by the phraseology
used in clause 74(d) which appears to
impose a further proviso to arbitration.
The effect of clause 70(d) is that assuming the parties have been through the
mandatory
pre-arbitration mediation process, the agreement contemplates a pause
of not less than 20 working days following which “either
party may refer
the Dispute to arbitration.”
[16] Clause 75 then dealt with the issue of arbitration. Notably, clause 75 opens with words that make it clear that that provision is subject to the provisions of clause
74. That could amount to an intention that the requirements of clause 75 are
without prejudice to clause 74. That would indicate
that clause 75 was not to
be read in a way which would derogate from or obstruct the stated objective of
clause 74.
[17] For clause 75 to be read consistently with the objective of clause 74 would require that it be interpreted if possible consistently with the apparent right in clause
74 of a party to commence arbitration proceedings. The wording of clause
74, speaking as it does of an entitlement to “commence
arbitration
proceedings” does not naturally suggest that what is being referred
to is limited to seeking the agreement
of the other party to refer the
dispute to arbitration.
[18] Therefore when it comes to resolving an uncertainty in clause 75 about whether arbitration can be commenced unilaterally by one party or the other, the clause should be interpreted in such a way that it does not obstruct the apparent
objective of clause 74 if such an approach can be achieved without doing
violence to the text of clause 74.
[19] The first of the two indicators which might suggest that
clause 75 contemplates consensual reference to arbitration
rather than a
unilateral requirement, is to be found in the expression used:
... either party may, by written notice to the other party, ask that
the dispute be referred to arbitration.
(Emphasis added)
[20] The argument is that the use of the word “ask”
references a request to direct the dispute to arbitration and
that it does not
contemplate the exercise of a right to a mandatory unilateral entitlement to
require arbitration.
[21] The second point concerns the expression in the second part of
clause 75 which reads:
If both agree then the Arbitration shall be by a single arbitrator and
in accordance with the Arbitration Act.
(Emphasis added.)
[22] The point is made that the agreement which is referred to is an
agreement to arbitrate rather than being limited to the form
that the
arbitration is to take. There is some force on the point particularly when it
is borne in mind that unless the parties
agree otherwise the default
procedure under the Arbitration Act is for a single arbitrator. Further,
if the agreement that
is referred to is an agreement of the parties that there
should be a single arbitrator, what is the position if they find themselves
unable to agree on that point? In the event of such an occurrence how is the
forum of the arbitration to be constituted?
[23] Dealing with the first argument, my assessment is that the use of the word “ask” is not a weighty consideration. It is true that the use of the term conventionally conveys a request that someone do something but the context can blend at the colouring of a mandatory requirement such as where, for example, a
police officer giving evidence that he “asked” a motorist to
provide a breath sample in circumstances where it was not
open to the latter to
decline.
[24] As to the second point, I accept that the use of the term ask in the first sentence preceding reference to the agreement in the following sentence could be viewed as suggesting that the agreement in the latter is responsive to the request in the former. I also agree that an interpretation which suggests that the agreement contemplated in the second sentence has to do with the form of the arbitration would not be entirely satisfactory because it is inconsistent with the default provisions
under the Arbitration Act 19963 where the parties are free to
determine the number
of arbitrators “but failing such determination” the number of
arbitrators is one. Because the arbitration in this
case would be in New
Zealand then s 6 of the Act applies in which case the provisions of Schedule 1
are obligatory.
[25] The statutory provision therefore provides for arbitration by
a single arbitrator in circumstances where the parties
are unable to agree on
how many arbitrators there should be. The second sentence of clause 75 is to
the reverse effect: that is,
it is only if the parties do agree that such a
provision would apply. It would further mean that if the parties did not agree
there
would be no effective machinery for carrying into effect the intention to
arbitrate. If the matter about which the parties are
to “agree” is
not a logical fit in the second sentence then there is an argument that it must
be taken to refer back
to and relate to the request referred to in the first
sentence. So that when the parties speak of agreement in the second
sentence, the agreement is on the part of party B to what he/she was asked to do
by party A in the first sentence. This would require
taking the first sentence
as meaning that in order for the dispute to be referred to arbitration, which
party A is entitled to ask
for because of the first sentence, there must be an
agreement reached with party B that such a course be followed.
[26] Having in mind the primacy of clause 74 which contains an explicit right to a single party to be able to refer the dispute to arbitration, I consider that clause 75
must be read in such a way as possible that harmonises it with the
former clause.
3 Arbitration Act 1996, Schedule 1, cl 10.
[27] The conclusion I reach is that one party has the right to refer the
dispute to arbitration and that it is not necessary for
both to agree on that
course. The reference to both agreeing holds open the possibility that if the
parties do not agree to a single
arbitrator then they can agree to some other
number of arbitrators. It follows that if the parties concur that there should
be more
than one arbitrator then they are not agreed on a single arbitrator.
The purport of the provision then is that it means that in
the absence of
agreement to the contrary, the arbitration is to be conducted by one
arbitrator.
[28] Read in that way, it is possible to harmonise the provisions of clause
75 with those of clause 74. My conclusion therefore is
that there is a binding
arbitration agreement.
Effect on the protest to Jurisdiction
[29] Before I deal with this part of the dispute between the parties I
need to note that Ms Law sought to orally amend the notice
of opposition which
her client had filed. She sought to include a ground of opposition to the
effect that because the plaintiffs
had not first undertaken alternative
dispute resolution, they were not entitled to commence proceedings. Such an
amendment
was opposed and I decline to permit it because it may be a matter on
which evidence could have had a bearing and which might have
been filed if the
ground was one expressly stated in the notice of opposition.
[30] For the plaintiff, Ms Holland made reference to the
decision of Zurich
Australian Insurance Ltd t/a Zurich New Zealand v Cognition Education
Ltd.4
[31] In that case an application was made for summary judgment. The contract between the parties contained a submission to arbitration. The applicant sought to stay the summary judgment proceeding in reliance on the arbitration clause in the contract which was a contract of insurance. The applicant, Cognition was
unsuccessful in seeking a stay.
4 Zurich Australian Insurance Ltd t/a Zurich New Zealand v Cognition Education Ltd [2013] NZCA
180, [2013] 3 NZLR 219.
[32] Article 8(1) of the First Schedule of the Arbitration Act 1996
provided that a stay of court proceedings on the grounds that
the parties had
agreed to submit the dispute to arbitration was mandatory unless the court found
that the agreement was null and
void, inoperative or incapable of being
performed, or that there was not in fact any dispute between the parties. The
last phrase
had been added by amendment to the statute in 1996. The court came
to the view that whether there was in fact a dispute raised the
question of
whether the party seeking arbitration had an arguable defence to the claim. If
there was no arguable defence, then there
was no dispute. The court affirmed
that the same arguable defence test applied to applications for stays as for
summary judgment
and it therefore followed that there was no dispute if the
defendant did not have an arguable basis for disputing the plaintiff’s
claim. Therefore if the court was able to conclude that there was no arguable
defence, which was a requirement that had to be satisfied
before summary
judgment could be entered, then the court was empowered to refuse an application
for a stay.
[33] However, the application to set aside the protest to jurisdiction
which was filed in this case did not raise the question
of whether there was an
arguable defence. A fair reading of the application conveys that the ground upon
which the plaintiff relied
was that the building contract between the parties
did not contain a binding submission to arbitration. That is the issue upon
which I have found against the plaintiff.
[34] There are no other matters that need to be considered and
accordingly my decision is that the application to set aside the
protest to
jurisdiction should be dismissed.
[35] The parties should confer on the question of costs and if they are
unable to agree they are to file memoranda within
10 working days of
the date of this judgment.
[36] They should similarly confer about progressing the matter from this point. Specifically, they should discuss the issue of discovery, if they have not already done so, whether it is expected that any additional parties will be joined, finalisation of pleadings, close of pleadings date and other matters. In the meantime, the
proceeding is to be listed for call in my Chambers list on 28 February
2014 at 2:15 p.m. for review to occur.
[37] I should add that the first defendant has sought as part of its
submissions an order for stay of the proceedings while
the parties
mediate their dispute. The requirement for such an order are said to be
based upon the requirement in the contract
that the parties “must”
mediate their disputes. Quite apart from the fact that no application has been
made for such
an order, I am confident that an order is not required because the
parties have in fact agreed to mediate and will be embarking on
that course
shortly.
[38] The parties should confer on the matter of costs and if they are unable to agree are to file submissions not exceeding five pages on each side within 10
working days of the date of this
judgment.
J.P. Doogue
Associate Judge
NZLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.nzlii.org/nz/cases/NZHC/2013/3246.html