New Zealand

Case updates

Navaratnam v HG Metal Manufacturing Ltd [2022] NZCA 425

This case related to an award dated 23 April 2020 finding that Mr and Mrs Navaratnam were jointly and severally liable to HG Metal for certain amounts, together with interest and the fees and expenses of the arbitration. Mr and Mrs Navaratnam did not pay the amount due under the Award. By October 2020 they were living in New Zealand.

HG Metal then applied pursuant to Article 35 of Schedule 1 of the Arbitration Act 1996 (“Arbitration Act”) for recognition and enforcement of the award. That application triggered a lengthy procedural battle between HG Metal and Mr and Mrs Navaratnam that culminated in applications by HG Metal to strike out two appeals brought by Mr and Mrs Navaratnam. In both appeals, Mr and Mrs Navaratnam raised the same substantive complaint. They said that HG Metal had not satisfied the statutory requirements for recognition and enforcement of the award under the Arbitration Act because it has not provided a properly authenticated copy of the award itself. They said that, as a result, no obligation had arisen for them to take any steps in the proceeding.

The appeals were ultimately struck out because of failure to comply with High Court Rules and specific directions of the Court.

In making its decision, the Court confirmed that the purposes of the Arbitration Act included the encouragement of arbitration to resolve commercial disputes, the facilitation of the recognition and enforcement of arbitral awards and to give effect to New Zealand’s obligations under the New York Convention. The Court held that there is, accordingly, a general presumption in favour of the enforcement of foreign arbitral awards. This is reflected in the limited requirements to support an application for recognition and enforcement under Article 35 of Schedule 1 of the Arbitration Act. An applicant is required only to supply the duly authenticated original award or a duly certified copy, the original arbitration agreement or a duly certified copy and, if those documents are not in English, a duly certified translation.

The grounds on which an application for recognition and enforcement can be resisted are limited to those specified in Article 36. Although Mr and Mrs Navaratnam initially sought to rely on some of these grounds, their main complaint was that HG Metal failed to supply the duly authenticated award as required by Article 35(2) (a). The Court found that none of these complaints had any substance.

Tavendale & Partners Ltd v Dineen [2022] NZHC 1530

In this case, the plaintiff (“Tavendale”) sued the defendant (“Mr Dineen”) for breach of fiduciary duties and for retaining electronic data in breach of his personal undertaking. In reliance upon Article 8(1) of Schedule 1 of the Arbitration Act, Mr Dineen applied for a stay of the proceeding and a referral of the disputes to arbitration. Tavendale opposed Mr Dineen’s application. The Court held that as there was at least a prima facie case that the claims brought by Tavendale were subject to an arbitration agreement, and were capable of resolution through arbitration. While accepting that prima facie review approach has not been universally applied in New Zealand, the Court did not see any reason to depart from that approach in this case and therefore ordered that the proceedings be stayed pending determination by the arbitral tribunal as to whether it has jurisdiction to determine the disputes.

HWD NZ Investment Co Ltd v Body Corporate 392418 [2022] NZHC 3472

In this case, the defendant, Body Corporate 392418 (“Body Corporate”), protested the jurisdiction of the Court to determine a proceeding brought by HWD NZ Investment Co Ltd’s (“HWD”), arguing that the dispute must be determined by arbitration. The case was unusual in that the alleged agreement to arbitrate was contained in a scheme imposed by court order pursuant to section 74 of the Unit Titles Act 2010. The arbitration clause was therefore an example of a non-consensual arbitration provision (being imposed by the Court) and Article 8(1) of Schedule 1 to the Arbitration Act did not apply. However, the Court accepted that it had jurisdiction to stay the proceeding in any event under the High Court Rules and to enforce the arbitration provision as a court order.

Unlike in the Tavendale case referred to above, in this case the Court found that a full review was appropriate. The Court gave three reasons: (i) there was no prima facie case for the existence of a valid arbitration agreement; (ii) in the particular unusual circumstances, the public policy of upholding voluntary arbitration agreements was not engaged and nor were concerns about party autonomy; and (iii) detailed argument was heard on the scope of the reference to arbitration and neither party contended that the jurisdiction issue should be dealt with by the arbitral tribunal, which was yet to be constituted. The Court also found that conventional principles of interpretation should apply, rather than the ordinary, liberal, approach to interpretation of consensual arbitration clauses.

Ultimately, the Court found that the dispute fell outside of the scope of the arbitration provision in the scheme and set aside the Body Corporate’s protest to the Court’s jurisdiction.

Husky Food Importers & Distributors Ltd v JH Whittaker & Sons Ltd [2022] ONSC 1679

Although not a New Zealand decision, the case of Husky Food Importers & Distributors Ltd. v. JH Whittaker & Sons Limited, 2022 ONSC 1679 involved a New Zealand company in the Ontario Supreme Court. The case demonstrated the importance of clearly outlining the terms of an arbitration agreement in a contract. In this case, JH Whittaker & Sons Limited (“Whittaker’s”) was successful in arguing for a stay of an action brought against it by Husky Food Importers & Distributors Ltd (“Husky”) due to the existence of an arbitration clause in the alleged distribution contract between the two parties. The Court thus referred the parties to arbitration administered by the New Zealand International Arbitration Centre.

The Court held that an arbitration clause existed and was arguably enforceable, and emphasised the low threshold for establishing the existence of an arbitration agreement and that the mere presence of an arbitration clause in a contract can, in some cases, constitute an arbitration agreement.

This decision highlighted the need for parties to thoroughly review and understand the terms of a contract, including any arbitration clauses, before executing it. It also highlighted, the Courts’ willingness to enforce valid arbitration agreements and refer parties to arbitration to resolve disputes.

Other key developments

The Inaugural Aotearoa New Zealand Arbitration Survey 2022

2022 saw the publication of a comprehensive report that uses data to reveal the number of arbitrations in New Zealand every year, types of cases, costs involved, time taken to complete arbitration, plus data on the demographics of arbitrators. The report was made in collaboration with the New Zealand Dispute Resolution Centre. It reflects survey responses from 56 arbitrators comprising 213 completed appointments between 1 January 2019 and 31 December 2020.

The results of the survey certainly demonstrate that arbitration is a staple of the modern dispute resolution landscape. It makes up a significant part of determinative dispute resolution in New Zealand and works in a complementary way to alleviate the workload of the Courts in respect of civil disputes.

The report concludes that there has been a maturing of the arbitration market in New Zealand. It found a spread of disputes that are conducted by a range of arbitrators in a broad cross-section of legal areas. Arbitration in New Zealand is no longer dominated by construction disputes, but covers contractual and commercial disputes, property disputes, Treaty of Waitangi settlement cases, and many other subjects.

Te Aka Matua o te Ture Commission: review of class actions and litigation funding in New Zealand

The Law Commission of New Zealand published its final report on the regulation of class action and litigation funding on 27 June 2022. This report was the result of the Commission’s initial review in 2019. The Commission found that no further regulation was necessary for arbitration clauses that prevent claimants from participating in class action and instead require them to use arbitration. This conclusion was based on the fact that the Arbitration Act provides special protections for consumers. The Commission also stated that the policy, as evident in the Act, is to discourage consumer arbitration due to the potential for unequal bargaining power, standard form contracts, and lack of true consent.

The Government has advised that it intends to begin policy works to advance the Commission’s recommendations this year.