Noe v Ratzapper Australasia Limited - [2018] NZCA 597

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA724/2017
[2018] NZCA 597

BETWEEN	ROBERT NOE First Appellant
AND	ATRAP INCORPORATED Second Appellant
AND	RATZAPPER AUSTRALASIA LIMITED Respondent

Hearing:	25 October 2018
Court:	Miller, Clifford and Gilbert JJ
Counsel:	D J G Cox for Appellants W A McCartney for Respondent
Judgment:	18 December 2018 at 2.30 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe appellants are jointly and severally liable to pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Gilbert J)

An arbitral award for a sum of money is made in a private arbitration between the appellants, the respondent and others. The award is made by default after the first appellant was debarred from defending the claim due to his persistent failure over a prolonged period to comply with his discovery obligations. The appellants assert their legal advisors were solely responsible for this failure. As a result, they claim they were denied an opportunity to present their defence in breach of the rules of natural justice.
The question on this appeal is whether it would be contrary to the public policy of New Zealand to enforce the award. Article 36(3) of sch 1 of the Arbitration Act 1996 (the Act) provides that an award is contrary to the public policy of New Zealand if a breach of the rules of natural justice occurred during the arbitral proceedings or in connection with the making of the award.
The High Court found that even if it could be proved that responsibility for the default on discovery rested solely with the appellants’ legal advisors, there was no breach of natural justice and it would not be contrary to public policy to enforce the award.[1]
[1]Ratzapper Australasia Ltd v Noe [2017] NZHC 2931, [2018] NZAR 1 [High Court judgment].
On appeal, the appellants repeat the arguments they made in the High Court.
We start by briefly explaining the background to the dispute and the agreement to arbitrate. We then set out the arbitral process in some detail. This is necessary to assess the appellants’ contention that through no fault of theirs they had no opportunity to present their defence to the claim and were therefore denied natural justice. We then summarise the key findings in both the award and the High Court judgment before addressing the submissions on appeal.

The dispute

The first appellant, Mr Noe, was at all material times living in California. Mr Noe developed an electronic rat trap called the “Raticator”. In about 2005, Mr Noe entered into an agreement with Mr Hinds, who lives in New Zealand, for Mr Hinds to distribute these traps in New Zealand and Australia. The traps were supplied by Agrizap Inc, a company controlled by Mr Noe and based in California.
Agrizap filed for voluntary bankruptcy under chapter 11 of the United States Bankruptcy Code in April 2010. In 2012,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] NZCA 597
Decision Date: 18 December 2018 at 2.30 pm

CaseChat Overview and Summary

The case of Noe v Ratzapper Australasia Limited, CA724/2017 [2018] NZCA 597, involved an appeal against an arbitral award made in a private arbitration between the appellants, the respondent, and others. The award was made by default after the first appellant, Mr Noe, was debarred from defending the claim due to his persistent failure over a prolonged period to comply with his discovery obligations. The appellants argued that they were denied an opportunity to present their defence in breach of the rules of natural justice and sought to challenge the enforcement of the award. The Court of Appeal dismissed the appeal and found that the award should be enforced.

The Court began by explaining the background to the dispute and the arbitration agreement between the parties. Mr Noe, a Californian inventor, had developed an electronic rat trap and entered into an agreement with Mr Hinds, a New Zealander, for Mr Hinds to distribute these traps in New Zealand and Australia. A disagreement over the handling of monies arose between Mr Noe and Mr Hinds, leading to Mr Hinds refusing to release a container of traps to Atrap until amounts claimed by Ratzapper were paid. The impasse was resolved by a written agreement between Trapco, Ratzapper, Atrap, Mr Hinds, and Mr Noe, which included a commitment to make full disclosure of all documentation required to enable the accounting and reconciliation process to be completed. The agreement was to be governed by New Zealand law, with exclusive jurisdiction conferred on the New Zealand courts and any dispute to be determined by arbitration under the provisions of the Arbitration Act 1996.

The Court then outlined the arbitral process in detail, highlighting the claim for a full accounting and reconciliation process to show that Atrap was indebted to Ratzapper in the sum of USD 275,213 for traps supplied between April and December 2012. The Court described the discovery orders and non-compliance by Mr Noe, who did not provide the necessary documents and was eventually debarred from defending the claim. The Court then summarised the key findings in both the award and the High Court judgment before addressing the submissions on appeal.

The Court found that the appellants had not established a breach of natural justice. Even viewing Mr Noe's evidence in its most favourable light, the Court was not persuaded that he had no responsibility for the default on discovery which led to him being debarred from defending the claim. The Court held that the responsibility to provide discovery rested with Mr Noe and his non-compliance appeared to have been both persistent and flagrant, as the arbitrator found. The Court concluded that the appeal must be dismissed and that the arbitral award should be enforced. The appellants were jointly and severally liable to pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

Orders