Durrant v Crane Distribution (NZ) Limited
[2014] NZHC 2498
•10 October 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-1472 [2014] NZHC 2498
UNDER the Arbitration Act 1996 IN THE MATTER
of an Application for Leave to Appeal under Article 5(1)(c), Second Schedule, Arbitration Act 1996 and Part 26 High Court Rules
BETWEEN
GREGORY DAVID DURRANT Applicant
AND
CRANE DISTRIBUTION (NZ) LIMITED
Respondent
Hearing: 30 September 2014 Appearances:
J B Samuel for Applicant
R J Connell for RespondentJudgment:
10 October 2014
JUDGMENT OF KEANE J
This judgment was delivered by me on 10 October 2014 at 4pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Jennifer G Connell & Associates, Newmarket, Auckland
Connell & Connell, Auckland
DURRANT v CRANE DISTRIBUTION (NZ) LIMITED [2014] NZHC 2498 [10 October 2014]
[1] On 14 November 2011 Insight Plumbing North Harbour Limited, which had been incorporated four days before by its principal shareholder, Gregory Durrant, opened a credit account with Crane Distributors (NZ) Limited. To obtain credit IPNHL had to subscribe to Crane’s terms and conditions of sale and Mr Durrant had to guarantee due and punctual payment of any sum that became owing.
[2] On 11 April 2012 Crane declined to advance IPNHL any further credit and on
22 November 2012 Crane sought summary judgment in this Court against Mr Durrant, as guarantor, for $135,050; the sum it contended that IPNHL then owed it for goods supplied. In response Mr Durrant entered a protest to jurisdiction. He contended that he had a defence to the claim precluding summary judgment and that, in any event, the terms of sale required that any dispute go to arbitration.
[3] On 5 July 2013 Doogue AJ nevertheless gave summary judgment in favour of Crane. But he confined judgment to $8,954, in respect of 33 invoiced supplies as to which IPNHL’s sole defence was that Crane could not identify an order number. He stayed Crane’s application for summary judgment as to the balance. As to those invoiced supplies, he accepted, Mr Durrant had a sufficiently arguable defence to warrant arbitration.
[4] On 8 August 2013 the agreed Arbitrator, Mr A M R Dean, a quantity surveyor, set out in a letter to counsel the terms they had subscribed to the day before, and his own directions. He set the arbitration down for two days in November 2013, timetabled the exchange of pleadings and witness briefs, and confirmed that he did not intend to record the oral evidence given at the hearing unless instructed to. As a result there is no record of the evidence given.
[5] On 24 January 2014 Mr Dean issued his partial award in which he found Mr Durrant to be liable for most of the invoiced supplies; and, as a result, in his final award, dated 31 March 2013, held Mr Durrant liable to a further $113,744, and interest amounting to $66,917. He also held Mr Durrant liable to pay Crane $29,059 costs, and to meet all of his costs, $32,875.88.
[6] On 12 September 2014 Mr Durrant filed in this Court an application for leave to appeal the Arbitrator’s award, contending that the Arbitrator made five errors of law, which are sufficiently arguable and significant to warrant leave. Crane contends that the first three of those grounds, which relate to the invoiced supplies, are rather issues of fact and that all five lack merit.
Proposed grounds of appeal
[7] In the award made, Mr Durrant contends, the Arbitrator made three errors of law, when applying Crane’s own terms and conditions of sale and those arising from related documents. The Arbitrator was wrong, he contends, to hold that:
(a) The goods Crane supplied had been ordered by IPNHL, in the absence of any evidence that those who ordered them did so with direct or ostensible authority.
(b)Crane was entitled to deliver any goods ordered by permitting them to be collected from its depot, or by delivering them to a nominated building site, as opposed to IPNHL’s own nominated address.
(c) The price payable was that invoiced, that applying at the time of dispatch, when the goods were collected or were ready for delivery, as opposed to the actual time of dispatch and regardless of whether they were dispatched to IPNHL’s nominated address.
[8] In his award, Mr Durrant contends also, the Arbitrator made two other errors of law. One was that the Arbitrator found Mr Durrant liable for the supplies invoiced without expressly finding to the civil standard, the balance of probabilities, that those supplies had been made on the terms of sale subscribed to on the application for credit. The other is that, in exercising his discretion as to costs, he applied the High Court instead of the District Court scale.
Leave to appeal
[9] An arbitrator’s award may only be appealed on a question of law.1 And, while that can include ‘an incorrect interpretation of the applicable law (whether or not the error appears on the record of the decision)’, there are two questions that it cannot include: (i) ‘whether an award, in whole or part, is ‘supported by any evidence or any sufficient or substantial evidence’, and (ii) whether the arbitrator
‘drew the correct factual inferences from the relevant primary facts’.2
[10] Even where the issue is one of law, leave is prohibited unless the issue is truly significant:3
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.
[11] In Gold and Resource Developments (NZ) Ltd v Doug Hood Limited,4 moreover, the Court of Appeal held that, as s 5 of the Arbitration Act 1996, which defines the purposes of the Act makes clear, the intent of the Act is 'to encourage the use of arbitration to resolve disputes between parties, and to limit the High Court's involvement in reviewing and setting aside arbitral decisions'.
[12] Even when there is a significant issue of law, moreover, the Court continued to say, that satisfies a pre-condition only. The Court retains an 'important discretion' as to whether to grant leave.5 That discretion, the Court said, must be exercised 'in a disciplined way'.6 Eight guidelines are to be taken into account, the first of which it said was the most important - the strength of the challenge and the nature of the point of law. As to that the Court said:7
If it is a one-off point, in the sense that it is unlikely to occur again and cannot be seen as having any precedent value, either generally or to the parties on another occasion, then unless there are very strong indications of
1 Arbitration Act 1996, 2nd Schedule, cl 5(1)(c).
2 Clause 5(10).
3 Clause 5(2).
4 Gold and Resource Developments (NZ) Ltd v Doug Hood Limited [2000] 3 NZLR 318 at [14].
5 At [11].
6 At [54].
7 At [54](1).
error leave should rarely be given. In other cases, the Court will be looking for a somewhat less stringent assessment. In those cases a strongly arguable case would normally be required for leave to be granted.
[13] So, as the Court then went on to illustrate in each of the eight guidelines, the nature and significance of the issue of law is very relevant to the question of leave. Is the question novel, or of general interest? If it is neither is a lot of money involved? Is the issue central to the result, and did the arbitrator clearly get it wrong? No less relevant is how it was that the arbitrator came to decide the issue. Is it the very issue that was entrusted to the arbitrator by reason of his or her competence? Or is it one that arose incidentally, and happened to lie beyond the usual competence of the
arbitrator? Did the parties agree that the arbitrator’s decision should be final?8
[14] That assessment is to be made with economy. Where leave is granted the reasons why are not to be stated. Where leave is refused short reasons, for the benefit of the parties, are all that is called for.9
Standard of proof issue
[15] The most pervasive error of law Mr Durrant contends for, that the Arbitrator held him liable for each of the supplies made without applying the civil standard to the related issues of fact, is without substance.
[16] First, speaking of Crane’s claim, resting on some 72 invoices, that Mr Durrant as guarantor owed it $126,095.67, including interest up to 31 August 2012, the Arbitrator said that ‘speaking broadly’ Mr Durrant contended that:
Crane has not been able to prove its claims (on the balance of probabilities) because it could not show (1) that the goods were ordered by someone with authority and/or (2) that the goods were delivered to the correct address and/or (3) the correct prices had been charged for the goods.
To resolve the claim, the Arbitrator then said, he intended to assess four issues, first generally, and then as to each disputed invoice: the issues of authority, purchase
orders, delivery and price.
8 At [54].
9 At [58], [59]; see also HCR rr 26.16 - 26.18.
[17] Secondly, while the Arbitrator did not accept that each invoice involved a single contract, but characterised each as an instance of supply under a contract entered into when IPNHL applied for credit on 14 November 2012, he accepted that he had to examine each disputed invoice individually to determine what, if anything, was properly payable.
[18] Thirdly, when speaking of the second of the invoiced supplies in dispute, he applied the civil standard in the most literal way. He said:
On the balance of probabilities, I am satisfied that these materials were ordered by an authorised representative of IPNHL, that they were collected by IPNHL rather than being delivered to the Albany address, and I have no evidence to show that the prices were incorrect.
[19] Mr Durrant’s point, that as to the first disputed invoice the Arbitrator said only that he was satisfied ‘on balance’ and then omitted to refer to the standard as to each further invoice, saying instead only that he was ‘satisfied’ as to the matters requisite, takes no account of the fact that the Arbitrator had already clearly identified the need to conform with the civil standard, as he illustrated in the case of the second disputed invoice.
[20] Fourthly, and quite independently, the Arbitrator confirmed in his final award that he could be satisfied as to the date of supply from which interest was to run because, as he said:
In my partial award I considered every disputed invoice as to authority to purchase, delivery (or collection), and price. When I was satisfied that Crane had established on the balance of probabilities that the products had been properly ordered, delivered and priced, then I allowed the claim for recovery of payment from Durrant. It must follow that I am satisfied that Crane has established a date of supply from which a proper date for payment can be computed.
[21] It follows that the Arbitrator made no seriously arguable error of law in his assessment of each invoiced supply turning on any misapplication of the civil onus and standard of proof. The issue is whether he made errors of law as to the issues of authority, delivery and price; and any error of law in his award of costs.
Authority issue
[22] Mr Durrant’s second proposed point of law, the first of the three he raises as to the invoiced supplies made, is that the Arbitrator has held him liable for supplies placed by tradesmen without actual or ostensible authority, and inconsistently with the terms of sale for credit.
[23] The issue Mr Durrant raises is, as it was put in Saville v Chase Holdings (Wellington) Ltd,10 whether IPNHL ever represented to Crane that its tradesmen did have authority to place the orders to which Crane responded. That representation, he accepts, does not have to be express. It can arise out of ‘a course of dealing’, to which the principal has acquiesced, but, he says, Crane knew that Mr Durrant had expressly withheld that authority when completing the application for credit.11 An agent’s authority derives from the principal, and not the agent’s assertion.12
[24] There are a number of reasons why I consider this proposed point of law is without substance and the first is that the Arbitrator was alive to the fact that Mr Durrant had not completed the section of the application for credit which IPNHL was to nominate those beyond the directors who were to have authority, and he found that omission deliberate. He asked himself whether that meant that only Mr Durrant and his co-director, Mr Rundberg could place orders on IPNHL’s behalf.
[25] Secondly, Mr Durrant himself accepts that this omission was not decisive. He accepts that IPNHL tradesmen were entitled to order goods on its behalf as long as they completed its order form, as they did in the case of many of the invoices disputed. His issue is with those supplies in which they did not use that form. This concession begs the question, however, with what authority they used the form. It points rather to a more flexible trade practice in which IPNHL acquiesced.
[26] Thirdly, on the evidence, the Arbitrator was entitled to conclude that over the
five months IPNHL’s orders were almost invariably placed not by the directors but by tradesmen. He was entitled to find that this was:
10 Saville v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 at 304 – 305.
11 Amagas Ltd v Mundogas SA [1986] AC 717 at 777.
12 New Zealand Tenancy Bonds Ltd v Mooney [1986] 1 NZLR 280 at 283.
… confirmed by the behaviour of the parties over the five months that the AFCA applied, when IPHNL ordered materials without properly completed purchase orders, and Crane continued to supply materials without purchase orders, or without properly completed purchase orders.
[27] Fourthly, the Arbitrator was equally able to rely on the wider documentary record, and to find the authority accorded to tradesmen reflected there. He was entitled to hold that:
… the evidence did show that there was a list of names entered into the Crane computer system, and these names were printed on the delivery dockets and shown on the tax invoices above the ‘delivery address’. This strongly suggests to me that these people were authorised by IPNHL to place orders for materials against the IPNHL credit account. I have received no evidence to indicate that IPNHL protested about these names shown on the invoices, which suggests that the directors (or management) approved of these persons making purchases on the company account.
[28] Fifthly, it was equally open to the Arbitrator to conclude that this practice was both practical and to IPNHL’s advantage. As he said, there was advantage to IPHNHL in tradesmen ordering supplies at the counter to take advantage of discounted prices on the day. It was of advantage to have supplies delivered to the sites where the work was being done as opposed to IPNHL’s nominated site, its office and small warehouse.
[29] Sixthly, the Arbitrator was entitled to conclude that, while it might have been highly desirable from IPNHL’s point of view to have a proper ordering system in place to track materials for specific jobs, that was of concern only to it. It was not an impediment to Crane’s claim for supplies made in the absence of a purchase order or one with a unique number.
[30] In this analysis, I conclude, the Arbitrator made no seriously arguable error of law. He was alert to the point taken by Mr Durrant as to whether the tradesmen had actual or ostensible authority and was entitled on the evidence to conclude that they did. In the absence of any error of law his findings of fact were for him alone to make.
Delivery
[31] Mr Durrant’s next ground of appeal concerning the disputed invoices, concerning delivery, as he accepts, is directly related to his issue concerning authority. His short point is that in the application for credit he nominated IPNHL’s address, 9C Park Head Place, Albany, as the only address to which deliveries could be made in the absence of an express variation. This point too lacks substance.
[32] Mr Durrant relies, on this appeal, on s 31(1) of the Sale of Goods Act 1908, to which his counsel apparently did not refer at the arbitration. It states, subject to any agreement to the contrary:
whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, expressed or implied between the parties.
He then contends, as he did before the Arbitrator, that the contract was quite clear as to where delivery was to be made and that was for the benefit of both parties, and not to be departed from.13
[33] Here too, however, it was open to the Arbitrator to find, as he did when resolving the issue of authority, that the practice, which came into play from the outset, was that IPNHL tradesmen collected supplies at the counter, or had required that supplies be delivered to their work sites; and that, as he said, had obvious advantages for IPNHL.
[34] The Arbitrator was entitled to conclude, equally, that the IPNHL forms completed by its tradesmen pointed to that flexible and sensible practice; a practice inconsistent with any rigid adherence to IPHNL’s nominated address. Sometimes they collected the section ‘delivery to’ and sometimes they did not. In either event, the deliveries made were consistent with the work they were then undertaking.
[35] On this evidence the Arbitrator was entitled to conclude that, while Mr
Durrant had only nominated IPNHL’s own address for deliveries, that was never
13 Pyne Gould Guiness Ltd v Meredith & Co & John Mill & Co Ltd [1926] NZLR 241; Galbraith
& Grant v Block [1922] 2 KB 155, (1922) All ER Rep 443.
decisive. The more flexible practice he identified in which IPNHL acquiesced reconciles readily with s 31(1) of the Sale of Goods Act and the cases to which he refers. The Arbitrator made no seriously arguable error of law.
Issue as to price
[36] Mr Durrant’s third challenge to the disputed invoices, that concerning price, turns on the effect the Arbitrator gave to cl 3(i) of the agreement as to prices and terms of payment:
All prices listed or quoted are subject to alternation without prior notice; listed or quoted prices charged will be current at the time of dispatch of the goods.
[37] Mr Durrant contends that the Arbitrator wrongly equated ‘the time of dispatch of the goods’ with the time when the goods were ready for collection or delivery. He contends that the ‘time of dispatch’ had to be when the goods were actually dispatched. Otherwise IPNHL would never have known what price was properly payable.
[38] The Arbitrator’s immediate answer to this was, as he was entitled to find on the evidence, that ‘IPNHL knew the prices, or could have found out the prices, before it committed to purchasing the goods’. In this he had regard to the fact that Crane had an on-line link to which IPNHL tradesmen had access, and they could always check the price at the counter before purchasing.
[39] The Arbitrator’s conclusion is also consistent with undisputed oral evidence to which he does not seemingly refer, given by the regional manager of the Crane division in question, that the delivery docket issued triggered electronically the issue of an invoice on the same day. There could never have been any discrepancy between the price on delivery and that invoiced.
[40] The distinction that Mr Durrant makes, therefore, between the time when good are ready for collection or delivery, and the time of actual supply, is without significance. The Arbitrator made no seriously arguable error of law.
Costs award
[41] Finally, Mr Durrant contends that the Arbitrator erred in law in his costs award by applying the scale of this Court and not that of the District Court, when the quantum of the claim dictated the latter scale. He contends that this Court’s rules required that. This too I consider to be without substance.
[42] As the Arbitrator held, he had a wide discretion as to costs, as long as he acted judicially. In this he echoed Henry J in Angus Group v Lincoln Industries Ltd, who there said that ‘the general rule is that unless an arbitration agreement expresses a contrary intention, an arbitrator has a full discretion as to the costs of the reference’ as long as that discretion is ‘exercised judicially, that is in accordance with
established principle’.14
[43] The Arbitration Act 1996 does not prescribe how an arbitrator is to fix costs.15 Nor did r 14.13 preclude the Arbitrator applying this Court’s intermediate scale and, even if he were bound by that rule, it is not absolute. It says:
Costs ordered to be paid to a successful plaintiff must not exceed the costs and disbursements that the plaintiff would have recovered in the District Court if the proceeding could have been brought there, unless the Court otherwise directs.
[44] Conversely, the Arbitrator was obliged to award Crane costs having regard to the terms of credit, which include this statement: ‘The buyer shall also be liable to pay all expenses and costs of Crane in relation to the recovery of the debt.’ In fixing Crane’s indemnity costs the Arbitrator was entitled, on his assessment of the case, to adopt as a surrogate the intermediate High Court scale; and he refused any uplift.
[45] Furthermore, as Mr Durrant’s counsel accepts, if this were the sole error attributable to the Arbitrator, it would not suffice to justify a grant of leave to appeal.
14 Angus Group v Lincoln Industries Ltd [1990] 3 NZLR 83 at 86.
15 Arbitration Act 1996, Schedule 2, rule 6(1)(a).
Conclusion
[46] Mr Durrant’s liability to meet the invoices he disputes has been resolved at arbitration as he himself asserted it had to be, when he protested the jurisdiction of this Court. He agreed to an arbitration before the arbitrator who was not a lawyer, and to the oral evidence being unrecorded, both features of the arbitration in tension with any later appeal in point of law. Ultimately, however, he has not raised any seriously arguable error of law in the award, let alone any of the significance justifying an appeal.
[47] I decline Mr Durrant’s application for leave to appeal the award. Crane is entitled to an award of costs, in scale 2B, and disbursements as fixed by the
Registrar.
P.J. Keane J
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