Harrison v Bell HC Auckland CIV 2008-488-000511

[2008] NZHC 2499

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2008-488-000511

BETWEEN  DAVID JOHN HARRISON Plaintiff

ANDJOHN ALEXANDER LEONARD BELL Defendant

Hearing:         11 August 2008

Appearances: A E Malone for Applicant

No Appearance for Respondent

Judgment:      12 August 2008 at 3 pm

JUDGMENT OF ASSOCIATE JUDGE ROBINSON

This judgment was delivered by me on 12 August 2008 at 3 pm, Pursuant to Rule 540(4) of the High Court Rules

Registrar/Deputy Registrar

Date……

Solicitors:           Webb Ross, Private Bag 9012, Whangarei

HARRISON V BELL HC AK CIV 2008-488-000511  12 August 2008

[1]      The  applicant  and  the  respondent  carried  on  the  practice  of  chartered accountants in Kaitaia in terms of a partnership agreement entered into by them on

19 July 1999.

[2]      On 5 October 2007, the applicant gave the respondent notice under clause 36 of the agreement dissolving the partnership. Clause 36 of the agreement provides:

In the event of a partner wishing to leave the partnership to practice (sic) as a “Chartered Accountant in Public Practice” within one hundred kilometres radius of Kaitaia, he shall be entitled to receive from the remaining partners, in cash, or in kind, his share of the net assets and work in progress of the partnership, valued as at the date he leaves, payment to be made by twelve equal monthly instalments without interest, the first to be on the outgoing partner’s final day with the partnership providing he has given at least one month’s notice of his intention to leave, otherwise the first payment to be within one month of the date that he gives notice.

[3]      The applicant and the respondent agreed on the payment of money to the applicant from the respondent under clause 36 of the agreement. In terms of their agreement, the applicant received payment from the respondent for December 2007, January 2008, February 2008 and March 2008.

[4]      In  the  course  of  the  dissolution  of  the  partnership,  disputes  have  arisen relating to the following:

a)        An accounting fee charged to the old partnership by the respondent. b)         A sickness adjustment claimed by the respondent.

[5]      Because of the above disputed matters, the respondent has withheld payments which the applicant claims to be due and payable to him in terms of clause 36 of the agreement.

[6]      Clause 53 of the agreement provides for the following method of settling disputes:

In the event of any dispute arising between the parties hereto, as to meaning or  effect  of  any  clause  in  this  agreement,  the  same  shall  be  settled  by

reference  to  one  arbitrator,  if  the  parties  can  agree  on  one,  or  failing agreement , to two or more arbitrators appointed one each by the disputing parties, or their umpires in the manner provided by the Arbitration Act 1996.

[7]      On 21 May 2008 the applicant wrote to the respondent requiring the two matters in dispute namely the issue of the accounting fee and the sickness adjustment to be referred to arbitration. The respondent has rejected the applicant’s request for the dispute to be referred to arbitration.

[8]      Since 21 May 2008, another issue has arisen. The respondent has sent the applicant two invoices dated 14 July 2008 and 18 July 2008 demanding payment of

$50,000. The applicant does not accept these invoices.

[9]      In July 2008, the applicant’s solicitors wrote to the respondent proposing the appointment of John Carlaw Hagen as sole arbitrator in accordance with clause 53 of the partnership agreement. Mr Hagen is a well known and respected Auckland chartered accountant and is also a qualified arbitrator. He has no prior connection with the applicant or the respondent. He has no knowledge of the matters relating to the dispute. There can be no doubt that Mr Hagen has the suitable qualifications and experience to be the arbitrator in this matter.

[10]     The respondent has refused to consent to the appointment of an arbitrator. Consequently, the applicant applies for an order appointing John Carlaw Hagen arbitrator, for the purpose of resolving the dispute that has arisen under the partnership agreement between the applicant and the respondent. The application is made pursuant to s 6 Arbitration Act 1996 and schedule 1 – 11 to the Arbitration Act

1996. By virtue of those provisions, the provision in the schedule to the Arbitration Act 1996 relating to the appointment of arbitrators applies to the partnership agreement  between  the  applicant  and  the  respondent.  Under  article  11  to  the schedule, the court may appoint an arbitrator if the parties are unable to agree on the arbitrator.

[11]     There is clear authority for the proposition that an arbitration clause similar to clause 53 is to be given a liberal interpretation – see Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 at p 165, Comandate

Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45 and Fiona Trust

& Holding Corporation & ors v Privalov & ors [2007] ALL ER 951 at 958.

[12]     No opposition has been filed by the respondent to this application. However, the respondent has written to the court confirming that he will not be present at the hearing and does not intend to instruct counsel. He concludes his letter to the court as follows:

I also note that in the above notice of originating application, there is not any  mention of  a connection between the  stated  matters  of  dispute  and particular clauses in the partnership agreement.

It is my understanding that on the basis that there is a valid arbitration clause in the original agreement, there is a judicial presumption in favour of a dispute going to arbitration so long as there is some connection between a disputed matter and a clause in the agreement (in this case the partnership agreement).

[13]     According to the applicant there are three matters in dispute following the dissolution of the partnership. Those three matters are:

a)        An accounting fee charged to the old partnership by the respondent. b)         A sickness adjustment claimed by the respondent.

[14]     The alleged removal by the applicant of intellectual property belonging to the respondent being valued at $50,000. Those matters are clearly disputes as to the effect of the provisions in the agreement relating to the division of partnership assets following dissolution of the partnership. Consequently, pursuant to clause 53 of the agreement those disputes must be referred to arbitration.

[15]     As the respondent has refused to agree to the appointment of an arbitrator, the court pursuant to article 11 of the schedule to the Arbitration Act 1996 can appoint an arbitrator. In the circumstances of this case, I am satisfied that it is appropriate for the court to appoint an arbitrator. The evidence satisfied me that Mr Hagen has the appropriate  qualifications  and  is  a  person  who  is  suitable  to  be  appointed  the arbitrator to resolve the issues in dispute between the parties. Consequently, the application to appoint John Carlaw Hagen sole arbitrator is granted.

[16]     The  applicant  is  entitled  to  costs  which  I  assess  on  a  2B  basis  with

disbursements as fixed by the registrar.

Associate Judge Robinson