29 March 20226 minute read

New Zealand

Case updates

Background to New Zealand’s Arbitration Act 1996

The Arbitration Act 1996 contains two primary schedules: a mandatory Schedule 1, closely based upon the Model Law; and an optional Schedule 2, incorporating additional procedural rules including the possibility of an appeal on a question of law.

By virtue of section 6 of the Act, Schedule 2 applies to a domestic arbitration unless the parties agree otherwise; and to an international arbitration only if the parties so agree. Accordingly, case law concerning appeals on a question of law under Schedule 2 may be applicable to both domestic and international arbitration cases.

Alusi Ltd v GJ Lawrence Dental Ltd [2021] NZCA 87 This was a Court of Appeal decision that upheld a lower court decision that refused an application for special leave to appeal against an arbitral award on questions of law. The Court of Appeal refused to grant leave after having regard to all the circumstances finding that the determination of the question of law concerned would not substantially affect the rights of one or more of the parties: Article 5(2) of Schedule 2 of the Arbitration Act 1996.1 In reaching that decision the Court applied the principle that courts have a general reluctance to interfere with arbitral awards. It stated that the purposes of the Arbitration Act 1996, and its provisions as to judicial challenge, encourage that reluctance. Save in very limited circumstances, an arbitrator’s determination as to a matter of fact is final and binding. Appeals on questions of law may be brought in the courts, but only by agreement or with leave for such appeals: Article 5(1) of Schedule 2 of the Arbitration Act 1996.

Antipodes New Zealand ltd v Accel (HK) Company Ltd [2021] NZHC 1623

The main issue in this case was whether there was a valid and binding arbitration agreement so that Article 8 of Schedule 1 to the Arbitration Act 1996 was engaged. Article 8 has mandatory application and requires the court to stay proceedings and refer the parties to arbitration. It is subject to specified limited exceptions:

(a) where the arbitration agreement is null and void, inoperative or incapable of being performed; or

(b) there is not in fact any dispute between the parties with regard to the matters agreed to be referred. In this case, the Court held that there was a valid and binding arbitration agreement. The single cause of action in the statement of claim, breach of contract, fell within the scope of the arbitration clause. A dispute had arisen under the agreement and the mandatory requirement to stay the proceedings arose under Article 8. The Court further held that it was not necessary for the arbitration clause itself to expressly prohibit the parties from having the dispute determined by a court finding that the natural meaning of clauses containing language such as “should” or “shall” be submitted to arbitration, was that neither party would seek any relief in respect of disputes in any other forum. The Court held that there was no basis for reaching a conclusion that the arbitration clause was unworkable (being one of the limited exceptions to the mandatory requirement of Article 8).

Ventura Limited v Robinson [2021] NZHC 932 This case confirmed New Zealand courts’ restrictive approach to the grant of leave to appeal an arbitral award on questions of law pursuant to Article 5 of Schedule 2 of the Arbitration Act 1996. The Court held that, although the threshold requirement in article 5(2) of Schedule 2 had been satisfied, in terms of the overriding discretion as to whether to grant leave, there was no arguable error of law in the award, still less one that was strongly or very strongly arguable in terms of the test set out in Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd: [2000] 3 NZLR 318.

Botev Trustee Limited v tait [2021] NZHC 2205 This case involved an application for enforcement, by entry as a judgment, of an arbitral award pursuant to article 35(1)(b) of Schedule 1 of the Arbitration Act 1996. The Court was required to consider whether entry as a judgment should be refused on the basis that such enforcement of the award would be contrary to the public policy of New Zealand (article 36(1)(b)(ii) of Schedule 1). The Court, in rejecting the application, confirmed that a narrow reading was to be given to the public policy ground in article 36, which is concerned with fundamental principles of law and justice and is a high threshold.

Other key developments

Statutory class action and litigation funding regimes

There is an absence of a regulatory regime for litigation funding (and class actions) in New Zealand. Accordingly, New Zealand courts have been content to adopt a permissive approach, generally interfering with a funding arrangement only where it raises an issue of abuse of process or amounts to an impermissible assignment. Due to the uncertainty created by the lack of legislative guidance, in 2018, the Law Commission (an independent law reform agency established by statute) announced that it was going to review the law relating to class actions and litigation funding, with a view to making reform recommendations to the Minister of Justice. The task of the Law Commission was to assess whether the potential benefits of class actions and litigation funding can be realised in a manner that outweighs any costs and disadvantages to which they might give rise.

2021 marked the year in which the Law Commission sought and received feedback on submissions received regarding its “preliminary view” that litigation funding and a statutory class action regime were both desirable. The Law Commission is continuing its review of the submissions received and is expected to issue its report in 2022. Once the report is completed, New Zealand’s government will decide whether to accept any of the recommendations to implement them as legislation.

New Zealand Arbitration Survey

2021 saw the New Zealand Dispute Resolution Centre survey New Zealand arbitrators (and only arbitrators) in an attempt to find out more about arbitral disputes in New Zealand including the number and kind of arbitrations undertaken in New Zealand. The responses will be used to produce a report with statistics about Arbitration in New Zealand between 2019 and 2020, expected to be published in 2022.

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