Antipodes New Zealand Limited v Accel (HK) Company Limited
[2021] NZHC 1623
•2 July 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-002411
[2021] NZHC 1623
BETWEEN ANTIPODES NEW ZEALAND LIMITED
Plaintiff
AND
ACCEL (HK) COMPANY LIMITED
Defendant
Hearing: 23 June 2021 Appearances:
S J Corlett for Plaintiff
A Kirk and C J Pendleton for Defendant
Judgment:
2 July 2021
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
ANTIPODES NZ LTD v ACCEL (HK) CO LTD [2021] NZHC 1623 [2 July 2021]
Introduction
[1] Antipodes1 is a New Zealand company that supplies organic skincare and cosmetic products. Accel2 is a Hong Kong company that provides online retail services, including the establishment and operation of market stores and platforms.
[2] In April 2019, the parties entered into a services agreement where Accel agreed to provide online retail services to Antipodes in China (the Agreement).
[3] In the substantive proceedings Antipodes sues Accel for breach of the Agreement, alleging amongst other things that Accel failed to strive to reach or exceed sales targets and that it sold Antipodes’ product at a significantly discounted rate, damaging Antipodes’ reputation and goodwill.
[4] In the present interlocutory application, Accel seeks an order staying the proceedings pursuant to Aritcle 8 of Schedule 1 to the Arbitration Act 1996 (the Act) on the grounds that the Services Agreement contains an arbitration clause (cl 20.3).
[5]The critical issues I must determine are:
(a)Is there a valid and binding arbitration agreement so that Article 8 (a stay is mandatory) is engaged?
(b)Is the arbitration agreement unworkable?
(c)Is there a dispute in relation to excess stock for the purposes of the arbitration agreement clause?
Factual background
[6]Clause 20 of the Agreement reads:
20. Disputes
20.1Procedure
1 The plaintiff, Antipodes NZ Ltd.
2 The defendant, Accel (HK) Co Ltd.
If a dispute arises under this Agreement, the Parties shall attempt to resolve the dispute using the dispute resolution process set out below in Clauses 20.2 and 20.3.
20.2Informal resolution
Either Party may initiate the dispute resolution process by giving written Notice of the dispute to the other Party (“ Dispute Notice”). Upon the other Party receiving the Dispute Notice, the Parties shall work together in good faith to resolve the dispute. Pending resolution of the dispute, each Party shall, to the extent it is able, continue to perform its obligations under this Agreement.
20.3Litigation
Any dispute or difference arising out of or in connection with this Agreement, or the subject matter of this Agreement, including any question about its existence, validity or termination, shall be referred to and finally resolved by arbitration by the New Zealand Dispute Resolution Centre (NZDRC) in accordance with its arbitration rules in force at the time.
[7] Clause 22.3 is an “entire agreement” clause. In accordance with cl 22.12, the Agreement is to be interpreted and construed exclusively according to the laws of New Zealand.
[8] On 9 April 2020, Antipodes sent an email to Accel raising three issues under a Dispute Notice made in reliance on cl 20.2. The issues included inaccurate sales forecasts, anti-subsidies and over-stated margins.
[9] The parties subsequently exchanged correspondence in relation to their dispute.
[10] On 25 August 2020, Accel sent an email to Antipodes saying that if the parties could not resolve their dispute under the Agreement that this would need to be resolved through arbitration.
[11] On 22 June 2021, and after the interlocutory application for a stay had been filed, Accel served Antipodes with a notice referring the dispute to arbitration in accordance with cl 20.3.
Relevant legal principles
[12] Where a party brings proceedings before a court in the matter which is the subject of an arbitration agreement, Article 8 of Schedule 1 to the Arbitration Act3 requires the court to stay those proceedings and refer the parties to arbitration.
[13]Article 8 is mandatory, and is subject to specified limited exceptions:4
(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.
Analysis and decision
Issue (a) – Is there a valid and binding arbitration agreement so that Article 8 (a stay is mandatory) is engaged?
[14] Mr Corlett, for Antipodes, accepts that Article 8 is expressed in mandatory terms; if the proceedings in the matter are the subject of an arbitration agreement, the Court must stay the proceedings and refer the parties to arbitration. However, he contends that Article 8 is not engaged in this case because there is no valid or binding arbitration agreement; arbitration is optional. The parties did not expressly agree to the exclusion of the Court’s jurisdiction.
[15] Antipodes’ position is that cl 20.1 is the governing clause, and Mr Corlett submits as follows. Clause 20.1 is the first step in a graduated process and is confined to disputes arising “under this Agreement”. Those words are narrower than those appearing in cl 20.3 which refer to “any dispute or difference arising out of or in connection with this Agreement, or the subject matter of this Agreement”. Importantly, cl 20.1 expressly refers to the dispute resolution process set out in cls 20.2
3 I simply refer to this as “Article 8” herein.
4 Pathak v Tourism Transport Ltd [2002] 3 NZLR 681 (HC) at [19]; Pokeno Village Holdings Ltd v Pokeno Nine Ltd [2019] NZHC 2358 at [6]; Tamihere v Mediaworks Radio Ltd [2014] NZHC 2082, [2014] NZAR 1113.
and 20.3. He contends, therefore, that unless the dispute falls under cl 20.1 it cannot give rise to any binding arbitration requirement under cl 20.3.
[16] However, as Cooke J held in Van Leeuwen v Attorney-General, “Arbitration clauses are given a broad interpretation to give effect to a ‘one stop shop’ concept and to prevent issues being excluded from the scope of arbitration as a matter of interpretation.”5 Cooke J also stated:6
[18] The High Court is normally receptive to such arguments [contending proceedings should be struck out to allow arbitration clauses to be given effect]. The Court recognises the importance of arbitral proceedings, and the autonomy of the parties who which to choose arbitration for dispute resolution. The principle of non-interference in the face of an arbitration agreement accept the parties’ right to conduct their private affairs as they choose. The role of the Courts is to support, not supplant, the extra-judicial process the parties have chosen to adopt.
(citations omitted)
[17] A similar approach was adopted in Marnell Corrao Associates Inc v Sensation Yachts Ltd.7 Applying the principle that courts should uphold arbitration, Wild J held the courts should not allow any inconsistencies or uncertainties in the wording or operation of the arbitration clause to thwart the parties’ intention to submit to arbitration.
[18] Wild J also referred to the “strong New Zealand policy” of favouring of enforcing contractual arbitration provisions, especially in international commercial disputes.8 This clearly applies to the present dispute.
[19] In addressing Mr Corlett’s contentions, it is also important to note and apply the principle of prima facie review, that an arbitral tribunal has power to rule on its own jurisdiction and that a court should refer the issue to the arbitral tribunal if it finds a prima facie case for the existence of a valid arbitration agreement.9
5 Van Leeuwen v Attorney-General [2020] 2 NZLR 502 at [18].
6 Van Leeuwen v Attorney-General, above n 5, at [19].
7 Marnell Corrao Associates Inc v Sensation Yachts Ltd (2000) 15 PRNZ 608 at [61].
8 Marnell Corrao Associates Inc v Sensation Yachts Ltd, above n 7, at [62].
9 Tamihere v Mediaworks Radio Ltd, above n 4, at [20]; Ursem v Chung [2014] NZHC 436, [2014] NZAR 1123 at [32]–[35].
[20] Applying the prima facie test, I find that there is clearly a valid and binding arbitration agreement. For reasons addressed below, I doubt that the inconsistencies in the wording of cl 20 make any material difference to this case. But in any event, it will be for an arbitral tribunal to determine any question of jurisdiction.
[21] On the facts of this case, the single cause of action in the statement of claim, breach of contract, clearly falls within the scope of cl 20.1. A dispute has arisen under the Agreement and that is apparent from the email sent by Antipodes on 9 April 2020. Mr Corlett’s contention that cl 20.1 is the governing clause, and the commencement of a graduated process, even if correct, is irrelevant to this case. The governing clause is engaged.
[22] I also find that the submission that cl 20 was never intended to prohibit the parties from having disputes under the Agreement determined by the Court, is equally misguided. The mandatory requirement to stay the proceedings arises under Article 8 and it is not necessary for the arbitration clause itself to expressly prohibit the parties from having disputes determined by a court. In any event, cl 20.3 is expressed in mandatory terms; it states that any dispute “shall be referred to” (emphasis added).
[23] As submitted by Ms Kirk, for Accel, it is not common practice for arbitration clauses to contain a clause expressly excluding the jurisdiction of the Court. The “silent concomitant” of clauses containing language such as “should” or “shall” be submitted to arbitration, is that neither party will seek any relief in respect of disputes in any other forum.10 This approach is confirmed by the learned authors of Williams & Kawharu on Arbitration:11
The agreement to arbitrate has positive and negative obligations. As to the first, the negative obligation is not to litigate. This obligation is given effect by art 8 of sch 1, which obliges the Court to stay any litigation brought in breach of a valid arbitration agreement.
(citations omitted)
10 Anzen Ltd v Hermes One Ltd [2016] UKPC 1 at [12].
11 David R Williams and Amokura Kawharu Williams & Kawharu on Arbitration (2nd ed, LexisNexis, Wellington, 2017) at 103.
[24] The Privy Council decision relied upon by Mr Corlett, Anzen Ltd v Hermes One Ltd,12 does not assist his case. The arbitration clause in that case (within a shareholders’ agreement) provided that, “any party may submit the dispute to binding arbitration”. The Privy Council held a party wishing to submit the dispute to arbitration had a right, but not an obligation, to arbitrate.13 That party could instead choose to bring court proceedings. In the case before them, the Privy Council held that both parties had an option to require arbitration, and that this option could be exercised before or after litigation had commenced. The Court, could on the application of an aggrieved party, stay the proceedings and require the parties to submit the dispute to arbitration.14 That is, “may” means it is mandatory if one party requires it. Here, of course, the arbitration clause is expressed in different words, namely mandatory terms, and in any event Accel has exercised its option to have the dispute resolved by arbitration.
[25] The Court of Appeal’s decision in Worldsites International Inc v Korving15 is likewise of no assistance to Antipodes. In that case, there was an express right to choose to litigate and there were already proceedings before the Court brought by the appellant, the party objecting to a counterclaim from the respondent being determined in the same forum. The Court held all matters should be heard together to avoid separate proceedings in two countries, each invoking different laws.16 By contrast, there is no optionality clause in this case and in any event, the facts are quite different.
[26] I also reject Antipodes’ submission that cl 21.5, which provides for the parties to seek equitable relief for a breach of the confidentiality provisions in cl 21, suggests that the Court’s jurisdiction has not been excluded. There is nothing in cl 21.5 that requires such relief to be sought from the Court. An arbitral tribunal can grant equitable relief, including injunctive relief and specific performance.17 Section 12(1)(a) of the Act expressly provides that an arbitral tribunal may award any remedy
12 Anzen Ltd v Hermes One Ltd, above n 10.
13 Anzen Ltd v Hermes One Ltd, above n 10, at [12].
14 Anzen Ltd v Hermes One Ltd, above n 10, at [35].
15 Worldsites International Inc v Korving CA220/01, 13 December 2001.
16 Worldsites International Inc v Korving, above n 15, at [33].
17 Williams and Kawharu, above n 11, at 412.
or relief that could have been ordered by this Court if the dispute had been the subject of civil proceedings in this Court.
[27] For all these reasons, I conclude that there is a valid and binding arbitration agreement.
Issue (b) – Is the arbitration clause in the Agreement unworkable?
[28] I accept that cl 20.1 is more narrowly drafted than cl 20.3. As Fisher J held in Hodgetts v Stephens, the phrase in cl 20.3, namely “arising out of or in connection with”, has a wider meaning than arising “under”.18 However, in the circumstances of this case the difference in wording provides no basis for reaching a conclusion that the arbitration clause is unworkable and therefore would fall within one of the limited exceptions to the mandatory requirement of Article 8.
[29] Antipodes’ objections are highly technical and contrary to the approach of Van Leeuwen v Attorney-General and Marnell Corrao Associates Inc v Sensation Yachts Ltd. Antipodes’ submission unnecessarily frustrates the principle the courts should give effect to parties’ intentions to arbitrate.
[30] It appears that there are some drafting errors in cl 20 as a whole, but such errors do not provide any basis for concluding that the clause as a whole is unworkable. Furthermore, as noted above, the one cause of action in the statement of claim clearly falls within both cls 20.1 and 20.3. The matter at issue in the proceedings is the subject of an arbitration agreement for the purposes of Article 8.
[31] Antipodes’ additional objections lack merit. This includes the heading “litigation” at cl 20.3, the fact that “difference” is not referred to in the primary cl 20.1, but is in 20.3, and the contrast between the word “attempt” in cl 20.1 and the concept of “finally resolved” in cl 20.3. Again, the interpretation Antipodes contends for runs contrary to the approach the courts take to interpretation, discussed above, including
18 Hodgetts v Stephens HC Whangarei M98/92, 6 September 1993 at 7.
one consistent with New Zealand’s international obligations under the New York Convention.19
[32] For all these reasons I conclude that the arbitration agreement is a workable one and does not fall within the exception to Article 8 that it is inoperative or incapable of being performed.
Issue (c) - Is there a dispute in relation to excess stock for the purposes of the arbitration agreement clause?
[33] The bald assertion of a dispute is not enough to justify the granting of a stay where it is immediately demonstrable that there is, in reality, no dispute.20
[34] Antipodes contends that there is no dispute in respect of its claim concerning excess stock left over from the 11/11 online event. Antipodes says that Accel verbally agreed to purchase the excess stock in July 2020 and therefore the disputes provision cannot be triggered.
[35] Accel accepts, in principle, there was an oral agreement to purchase the stock but says there was no agreement on price.
[36] I find that there is no basis for Antipodes’ contention that Accel is not raising a bona fide dispute. It is not the case there are no demonstrable issues. On the evidence before me there is a clear dispute about price and thus a dispute about excess stock. That issue is the subject of the arbitration agreement. Therefore, Article 8 is triggered.
[37] Antipodes further contends that even if there is a dispute about the purchase of excess stock, in addition to contractual claims under the Agreement it has other claims that would clearly fall outside the scope of cl 20.1 and are thus not subject to the
19 Article 8 of Schedule 1 of the Act is based on the UNCITRAL Model Law on International Commercial Arbitration (1985) and Article II(3) of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (opened for signature 10 June 1958, entered into force 7 June 1959) 330 UNTS 38 (1959) (New York Convention). Section 5(f) of the Act specifies one of its purposes is to give effect to New Zealand’s obligations under the New York Convention.
20 Rintoul Group Ltd v Far North District Council [2019] NZHC 2577 at [25]; Zurich Australian Insurance Ltd v Cognition Education Ltd [2014] NZSC 188, [2015] 1 NZLR 383 at [39].
disputes provisions in cl 20.3. On this basis, Antipodes contends the Court has no jurisdiction to determine those other claims. These other claims are said to be disputes that do not arise “under the Agreement” and thus fall outside of cl 20 altogether because they do not, in the first instance, fall within the scope of the cl 20.1 governing clause.
[38] I very much doubt that these other claims fall outside of cl 20.1. As noted in [18], the parties’ relationship is entirely contractual and arises out of an international commercial agreement. In adopting the liberal approach of Van Leeuwen and Marnell Corrao Associates, it would be wrong to exclude such claims from the operation of cl
20. In any event, even if these contended other disputes fall outside cl 20, this is the very sort of case where the Court should exercise its inherent jurisdiction and conclude, in accordance with the “one-stop shop” principle, all of the matters in dispute between the parties should be referred to arbitration. As Cooke J held in Van Leeuwen, the courts have extended the scope of the jurisdiction to stay High Court proceedings to allow for arbitral proceedings even when they are not strictly within the provisions of the Act. 21 In addition, Cooke J concluded the Court can exercise its inherent jurisdiction to stay High Court proceedings when the proceedings are only related to disputes that are subject to arbitration.22 That is done on the basis that it is more appropriate for the matters to be determined by arbitration, or for the arbitration to proceed first.23
[39] I thus conclude that there is both a dispute in relation to the excess stock issue and that all the other claims that Antipodes says are in dispute fall within the arbitration agreement clause. Whether in accordance with Article 8, or as a matter of inherent jurisdiction (or a combination of both), a stay should be granted.
Conclusion
[40] I find that there is a valid and binding arbitration agreement. In accordance with Article 8, I am required to grant a stay of the proceedings, as sought by Accel.
21 Van Leeuwen v Attorney-General, above n 5, at [19].
22 Van Leeuwen v Attorney-General, above n 5, at [19].
23 Van Leeuwen v Attorney-General, above n 5, at [19].
The arbitration agreement is workable and none of the limited exceptions to the application of Article 8 apply.
[41] There is a bona fide dispute in relation to the excess stock issue and all other claims advanced by Antipodes fall within the arbitration clause and must be the subject of a stay under Article 8.
Result
[42] I grant Accel (HK) Company Ltd’s application for a stay of proceedings pursuant to Article 8 of Schedule 1 of the Arbitration Act 1996. The disputes are to be referred to arbitration.
[43] As to costs, I am of the preliminary view that having succeeded, the defendant, Accel, is entitled to costs on a 2B basis plus disbursements. If agreement cannot be reached then memoranda are to be filed (no more than three pages’ length) within 14 days.
Associate Judge P J Andrew
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