Anderson v European Profile Company Limited
[2015] NZHC 3100
•8 December 2015
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2015-485-694 [2015] NZHC 3100
BETWEEN MAURICE HENRY ANDERSON
Plaintiff
AND
EUROPEAN PROFILE COMPANY LIMITED
Defendant
Hearing: 3 December 2015 Counsel:
A B Darroch for Applicant
P S J Withnall and S U Gunawardana for RespondentJudgment:
8 December 2015
JUDGMENT OF WILLIAMS J
[1] On 29 April 2015, the arbitrator in a building dispute terminated an arbitration between the parties in this proceeding. The plaintiff had failed to comply with an agreed timetable for giving particulars of the claim. The arbitrator concluded in his decision that he had no power to extend time for compliance and the arbitration was at an end.
[2] The plaintiff now seeks leave to appeal that decision in accordance with cl 5(1)(c) of the second schedule of the Arbitration Act 1996. The plaintiff poses two questions of law in that respect:
(a) Whether the arbitrator correctly interpreted the agreement to arbitrate as providing no jurisdiction or option other than termination after the
plaintiff failed to file his points of claim within the time agreed.
ANDERSON v EUROPEAN PROFILE COMPANY LIMITED [2015] NZHC 3100 [8 December 2015]
(b)If the answer to (a) above is no (as the plaintiff contends), whether the arbitrator breached the rules of natural justice by failing to exercise the jurisdiction to extend time under cl 2.3 of the agreement.
Factual background
[3] The parties were in dispute over the quality of aluminium window joinery provided by the defendant. A claim was lodged in the District Court but discontinued when on 18 June 2015 the parties appointed John Green of the Building Disputes Tribunal as arbitrator and signed an agreement to arbitrate.
[4] The terms of the Arbitration Agreement were in the standard format provided by the arbitrator. Clause 1 of the agreement provided as follows:
1.0 Purpose of these Rules
1.1The Purpose of these Rules is to ensure that the arbitration is conducted fairly, promptly and cost effectively and in a manner that is proportionate to the amounts in dispute and the complexity of the issues involved.
1.2The Overriding Objective is to enable the Arbitrator to produce a Final Award including a determination as to costs within sixty (60) working days from the date upon which the Building Disputes Tribunal (the Tribunal) communicates acceptance of the Arbitrator’s appointment to the parties.
1.3To give effect to the stated Purpose and the Overriding Objective, the parties agree to be bound by, and will comply without delay with, the timetabling and procedural provisions in these Rules and any further directions or rulings of the Arbitrator as to procedural or evidentiary matters.
[5] The 60 working days target provided in cl 1.2 made timetable compliance a particular focus of the agreement.
[6] The agreement contained cl 8.1 as follows:
The Claimant shall, on or before the 5th working day from the acceptance date, deliver to the Arbitrator and to the Respondent a statement in writing giving particulars of the claim (the Points of Claim).
[7] The five day period would in this case have ended on Thursday 25 June 2015 but the parties agreed by email exchange on 18 June (the date of the agreement itself) that this deadline be extended to 5pm on 3 July 2015.
[8] Clause 17.1 provides as follows:
If the claimant fails to communicate the Points of Claim in accordance with clause 8.1 the Arbitrator shall terminate the proceedings.
[9] Clause 17.2 provides consequences for a respondent’s failure to communicate any defence and counterclaim within the required period for that step. In those circumstances, the arbitrator “must not determine the dispute having regard to that defence and counterclaim.” Similarly, pursuant to cl 17.3, any failure by the claimant to communicate in time, his Points of Defence to the respondent’s counterclaim, produces a similar consequence in relation to those points. Clauses
17.2 and 17.3 both refer to the availability of extensions of time pursuant to cls 2.3 and 2.4. though, significantly the defendant says, cl 17.1 in relation to Points of Claim does not.
[10] Clauses 2.3 and 2.4 provide:
Any times fixed in accordance with these Rules may be varied by agreement of the parties, or in the absence of such agreement, the Arbitrator may in exceptional circumstances vary the times for actions by the parties up to a maximum period of five (5) working days for actions by each party. The Arbitrator may vary the times for actions by the parties if the Arbitrator is satisfied that in the circumstances the additional time is reasonably required in the interests of justice and on such terms as to costs or otherwise as the Arbitrator considers reasonable in the circumstances.
Any extension of time for any action by a party must be applied for in writing by that party before the expiry of the existing time limit.
[11] Also relevant is cl 23.3:
The Points of Claim, the Defence and Counterclaim, and the Defence to the Counterclaim, must be delivered to the Arbitrator and the other party by courier at the addresses for service recorded below.
[12] Simon Gaines, solicitor for the applicant sent his Points of Claim to the arbitrator and the defendant by email at 5pm on 3 July. The email was not received
by either intended recipients. Instead, it bounced back to the sender because the file was too large.
[13] The solicitor for the respondent emailed the arbitrator and Mr Gaines at
5.02pm submitting that the arbitration must be terminated for non-compliance with cl 8.1 and cl 17.1.
[14] At 5.12pm Mr Gaines responded by email, explaining what he perceived to be the technical problem obstructing his compliance. He then split the email into several packages and resent the Points of Claim in a series of emails between 5.17pm and 5.23pm.
[15] Hard copies were sent by courier and arrived on 7 July 2015 three days after the agreed deadline for such delivery per cl 23.3. It is also common ground that no application for extension of time had been made in terms of cl 2.4.
[16] With the issue of termination now engaged, the arbitrator timetabled submissions on the question and then issued his decision on 29 July 2015.
[17] The arbitrator found that cl 17.1 of the agreement was:1
… in effect a “drop dead” provision that stipulates a finite deadline for service of the Points of Claim which, if not met, will automatically trigger adverse consequences. It is plainly intended to ensure the Purpose and Overriding Objective of the Agreement, namely to enable the Arbitrator to produce a Final Award including a determination as to costs within
60 working days are able to be met.
Statutory provisions
[18] In addition to the provisions of the Arbitration Agreement itself, the schedules to the Arbitration Act 1996 also cover questions of the arbitrator’s competence to rule on jurisdiction as well as appeal and review pathways both for
preliminary determinations and substantive awards.
1 Anderson v European Profile Company Ltd Procedural Ruling of Arbitral Tribunal 29 July 2015.
[19] Clause 16 of Schedule 1 provides for the competence of the arbitral tribunal to rule on its own jurisdiction and for appeals in that respect to this Court. The clause relevantly provides:
(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. …
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. …
(3) The arbitral tribunal may rule on a plea referred to in paragraph (2) either as a preliminary question or in an award on the merits. If the arbitral tribunal rules on such a plea as a preliminary question, any party may request, within 30 days after having received notice of that ruling, the High Court to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.
[20] Clause 5 of the Second Schedule provides for appeals on questions of law.
(1) Notwithstanding anything in articles 5 to 34 of Schedule 1, any party may appeal to the High Court on any question of law arising out of an award–
(a) If the parties have so agreed before the making of that award; or
(b) With the consent of every other party given after the making of that award; or
(c) With the leave of the High Court.
(2) The High Court shall not grant leave under subclause (1)(c) unless it considers that, having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more of the parties.
[21] “Award” is defined in s 2(1) of the Act as “a decision of the arbitral tribunal on the substance of the dispute and includes any interim, interlocutory or partial award.”
[22] A key issue in this application is whether the arbitrator’s interpretation of cl 17.1 is a question of law “arising out of an award” in accordance with cl 5(1).
Submissions
[23] The essence of the argument for Mr Anderson is that the arbitrator misconstrued the arbitration agreement. Clause 2.3, he said, entitled the arbitrator to vary any timetabling requirement including that set out in cl 8.1 as subsequently varied by the parties in relation to delivery of Points of Claim.
[24] The plaintiff pointed to cls 14.1 and 14.2 that accord the arbitrator “the widest discretion permitted by law to resolve the dispute in a just, speedy and final manner” and the arbitrator has the jurisdiction and power “to make any rulings and give any directions that the arbitrator thinks fit …”
[25] Seen in context, it was submitted that the breach was minor and there was no prejudice to the defendant. The arbitrator therefore had ample discretion to permit it.
[26] The plaintiff submitted that although the decision to terminate the arbitration was described as a procedural decision, it had a substantive effect – that is, it finally resolved the dispute between the parties. This is (in part) because the plaintiff is now time-barred from pursuing his claim in the ordinary courts. The ruling therefore, in practical terms, determined the plaintiff’s rights.
[27] The plaintiff submitted that the ruling amounted to an award accordingly and the procedure in cl 5(1)(c) of sch 2 by way of leave to appeal is the correct procedure to adopt.
[28] The plaintiff then argued that the discretionary factors appropriate for consideration under cl 5(1)(c) justified the grant of leave.2 The construction challenge is strong on the merits; the issue is collateral to the substantive merits of the dispute; the arbitrator was not legally qualified; the dispute is significant to the plaintiff and the money involved is also significant; any arbitral award is by the agreement to be final and binding but sch 2 appeal rights are preserved in the
agreement.
[29] For the defendant, three arguments were made. First, cl 17.1 is mandatory and cl 2.3 allowing for extensions has no application. The defendant argued that the agreement focused on tight timeframes making it clear that compliance was of the essence. Unlike cls 17.2 and 17.3 in relation to the defendant’s and plaintiff’s response filings, cl 17.1 made no express reference to extensions under cl 2.3. The arbitrator was right therefore to conclude that cl 17.1 was a “drop dead” clause.
[30] Second, the application for leave relies on cl 5(1)(c) of the Second Schedule providing for an appeal “on any question of law arising out of an award”.
[31] The defendant submits that the arbitrator’s procedural ruling in this case does not deal with the substance of the dispute but rather, by definition, refuses to deal with the substance of the dispute for the reason that a fatal non-compliance has occurred. The correct procedure therefore for testing the matter in the courts is by way of a request to the High Court to decide that preliminary matter pursuant to cl 16(3) sch 2. Such request must be made within 30 days of receipt of the arbitral tribunal’s ruling. The plaintiff has failed to bring the application in accordance with the requirements of cl 16.3 and there is no jurisdiction to extend time in that respect. The procedure adopted therefore is not available, nor is any other procedure still available.
[32] The third ground for the defence is that, if there is jurisdiction to grant leave to appeal, then in exercise of my discretion under cl 5(1)(c) of sch 2, leave should not be granted on application of the factors set out in Gold & Resource Developments (NZ) Ltd v Doug Hood Ltd.3
Analysis
“Drop dead” clause?
[33] It is, I accept, arguable that the deadline set out in cl 8.1 and extended by agreement of the parties is a time “fixed in accordance with these rules” for the purposes of cl 2.3 or a time “for actions by the parties” which the arbitrator is
entitled to vary if “satisfied that in the circumstances the additional time is
3 Above n 2.
reasonably required in the interests of justice”. I do not take the absence of a reference to cl 2.3 in cl 17.1 as necessarily fatal to that arguability. The timeline in cl 17.1 and the extension as agreed are, at least arguably, fixed “in accordance with these rules”. What is more, I do not see how allowing the plaintiff an extra 20 minutes or so to resend his email is inconsistent with the purpose and overriding objective of the rules.
[34] The force of the plaintiff ’s argument is much reduced however in light of the effect of cl 2.4 and 23.3. It will be recalled that cl 2.4 requires that an extension of time for any action “must be applied for in writing by that party before the expiry of the existing time limit”, and the plaintiff’s solicitor made no such application. I note also the terms of cl 23.3 requiring that the Points of Claim must be delivered (the same word used in cl 8.1) by courier at the address for service. The plaintiff was always going to breach these requirements given his documents were not even ready until the deadline for delivery, but he took no steps to obtain a ruling early.
[35] While it is arguable that cl 17.1 is not a ‘drop dead’ clause, it was well within the arbitrator’s discretion anyway to refuse the extension in light of the procedural non-compliance. Be that as it may, the procedure adopted by the plaintiff in challenging the ruling was wrong and that, in my view, is fatal to his application. I turn to that matter now.
Award?
[36] In my view, the defendant is correct on the first point. The arbitrator’s ruling is not an award, rather it is a ruling that the agreement to arbitrate is an end. It is not a ruling on the substance of the dispute, but a ruling that the substance of the dispute would not, indeed could not now be ruled on because the agreement makes it clear
that a breach of cl 17.1 would remove the arbitrator’s mandate.4 The effect of that is
that although the plaintiff challenge does raise a question of law, it is not a question that arises out of any award.
[37] It follows that the proper procedure for challenge is that set out in cl 16 of the First Schedule rather than cl 5 of the Second Schedule, because it raises a question of jurisdiction (that is of the arbitrator’s mandate to proceed), not a question arising out of any award. The learned authors of Williams and Kawharu on Arbitration terms such preliminary rulings “negative rulings on jurisdiction”. The authors observe that they are not awards in terms of cl 5. Any challenges must be by way of the
procedure in cl 16(3).5 The plaintiff is therefore out of time having failed to make a
request to the High Court within 30 days after receipt of notice of the relevant ruling in accordance with that provision. There is no provision for an extension of the
30 day limit.
[38] The plaintiff is correct in submitting that this ends his prospects of recourse in any forum because his claim, as he submits, will be time-barred in terms of s 4 of the Limitation Act 1950. But that is not an effect of the arbitrator’s ruling. The ruling on its own does not preclude recourse to the courts. It is the age of the dispute that does that.
[39] It is unnecessary for me to address the discretionary factors under cl 5(1)(c), as that clause has no application.
[40] The application for leave to appeal must therefore be dismissed. The defendant will be entitled to costs. Brief memoranda may be filed if necessary.
Williams J
Solicitors:
Duncan Cotterill, Wellington for Applicant
P Withnall, Barrister, Wellington for Respondent
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