Peryer Construction WGTN Limited v Cathie
[2019] NZHC 2881
•6 November 2019
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2018-485-301
[2019] NZHC 2881
BETWEEN PERYER CONSTRUCTION WGTN LIMITED
Plaintiff/ApplicantAND
ELIZABETH MARY CATHIE
Defendant/Respondent
Hearing: 23 October 2019 Appearances:
F B Collins and D C Calder for plaintiff/applicant P S J Withnall for defendant/respondent
Judgment:
6 November 2019
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
TABLE OF CONTENTS
Introduction [1]
Background to proceeding [2]
Protest to jurisdiction – relevant principles [10]
Dispute resolution clause [17]
Application to set aside Ms Cathie’s protest to jurisdiction [20]
Result [43]
PERYER CONSTRUCTION WGTN LIMITED v CATHIE [2019] NZHC 2881 [6 November 2019]
Introduction
[1] Before the Court for determination is the plaintiff’s interlocutory application dated 24 May 2019 for an order setting aside the defendant’s appearance under protest to jurisdiction dated 18 April 2019.
Background to proceeding
[2] The substantive proceeding was commenced by notice of proceeding and statement of claim on 30 April 2018. On commencement the plaintiff sought summary judgment by interlocutory application of the same date. This was opposed by the defendant in her notice of opposition dated 27 July 2018.
[3] In October 2016, the parties entered into a contract pursuant to which Ms Cathie engaged the plaintiff, Peryer Construction Wgtn Ltd (Peryer), to carry out certain work on her home. Essentially, this involved a re-clad.
[4] In April 2017, after Peryer notified Ms Cathie that it had completed the contract work, a dispute arose between the parties. In October 2017, Peryer sought to refer this dispute for expert determination, which was the first-tier dispute resolution mechanism provided for in the contract. This gave rise to differences between the parties and a considerable amount of correspondence between them, their advisers and the expert as to jurisdictional issues and the like. Ultimately, the expert determined a very narrow preliminary issue. Peryer commenced this proceeding seeking orders enabling the expert to determine the balance of the dispute.
[5] In his judgment declining summary judgment, Associate Judge Osborne outlined the background in detail. Both parties accept the Judge’s description as accurate. Accordingly, I replicate it here:
[7] The building contract between the parties is in the form of contract published by Standards New Zealand for Building and Civil Engineering Construction (where no person is appointed to act as engineer to the contract) (NZS3915:2005), with special conditions of contract, specifications and drawings incorporated.
[8] The contract stated that cedar weatherboards were to be replaced with new cedar weatherboards after Peryer had installed a rigid air barrier and cavity system.
[9] In April 2017, a dispute arose between the parties as to whether Peryer had achieved practical completion. “Practical completion” is defined under General Condition (GC) 10.4 of the contract by reference to when works are complete except for minor omissions and minor defects, subject to some qualifications.
[10] The contract contains in GC 13 provisions for the resolution of disputes.
[11] On 5 October 2017, Peryer gave notice in writing to Ms Cathie (pursuant to GC 13.2), requiring any dispute or difference between the parties in respect of any alleged defects which were preventing practical completion to be referred to an expert. The President of the Arbitrators’ and Mediators’ Institute of New Zealand (AMINZ) subsequently appointed Rob Ashcroft as the Expert to assist in the dispute pursuant to GC 13.2.
[12] Mr Ashcroft accepted his appointment on 2 November 2017 and initially identified the scope of his appointment as encompassing determination of the following disputes:
Those disputes particularised in documents forwarded by AMINZ, namely:
·What works remain defective or uncompleted under the contract.
·Whether the contractor is in default under the contract.
·What monies, if any, are owed under the contract.
Such further disputes that are submitted by either or both parties in accordance with the relevant provisions of the contract.
[13] Mr Ashcroft convened a telephone conference with Ms Cathie and Mr and Mrs Peryer (of Peryer). Ms Cathie was insistent that the first issue to be dealt with, on its own, should be whether Peryer was in default under the contract. What the parties had agreed with him:
MATTERS IN DISPUTE
Issues to be Determined
The issues are to be determined progressively. Issue 1 has been agreed. Subsequent issues need to be agreed – those listed below are preliminary.
ISSUE1: Whether or not the contractor is in default under the contract.
ISSUE2: Is the cladding stain a defect and if so what is the remedy.
ISSUE3: What other items require to be completed or remedied by the contractor in order to achieve practical completion.
ISSUE4: Agreement on a programme to complete outstanding items and defects.
ISSUE 5: What monies are due under the contract.
[14] Mr Ashcroft attached to his record of agreement the Rules which would apply to his determination.
[15]Mr Ashcroft examined the site and considered submissions.
[16] On 20 December 2017, Mr Ashcroft issued his expert determination on Issue 1. He certified that, in his opinion, Peryer persistently, flagrantly and/or wilfully neglected to carry out its obligations under the contract. He apportioned the costs of the determination to be paid by Peryer as to $5,000 plus GST and by Ms Cathie as to $2,500 plus GST.
General Condition 14.2.1
[17] The contract contained provisions as to remedies for breach. Where the Expert certified that in his opinion the contractor was persistently, flagrantly and/or wilfully neglecting to carry out its obligations under the contract, Ms Cathie was entitled to give notice to Peryer that she was resuming possession of the site. Ms Cathie gave notice to Peryer on 22 December 2017 of her intention to resume possession on 11 January 2018 unless Peryer remedied all the defaults identified in the Experts’ report on or before that date.
[18] On 24 January 2018, Ms Cathie gave notice that she had resumed possession of the site.
[19] Although Peryer has pleaded in its statement of claim that Ms Cathie gave notice that she intended to terminate the building contract and subsequently did so, those allegations are unsupported by the evidence. Ms Cathie had the option of either giving notice of termination of the contract or resuming possession of the site, and she elected the latter. The contract accordingly remains on foot. Responsibly, Mr Calder, for Peryer, conceded that that is so.
[20] Once Ms Cathie resumed possession of the property, GC 14.2.3 entitled her to take a number of actions. Under GC 14.2.3(b), she became entitled to complete and remedy defects in any part of the Contracts Work remaining to be completed. In that event, GC 14.2.4 provided:
14.2.4 On completion of the Contract Works, any Plant, Temporary Works and surplus Materials of which the Principal has taken possession shall be handed back to the Contractor. The Expert shall enquire into the Cost to the Principal of completing the Contract Works. Should the amount determined by the Expert exceed the Cost to the Principal had the Contract Works been completed by the Contractor, the difference between the two amounts shall be determined by the Expert and paid by the Contractor to the Principal. Should the amount determined by the Expert be less than the Cost to the Principal had the Contract Works been completed by the Contractor, the difference between the two amounts shall be paid by the Principal to the Contractor.
[21] On 26 January 2018, Ms Cathie notified Mr Ashcroft that she intended to complete the project and to deal with the costs issues when the information was available to accurately do so. She identified GC 14.2.3(b) as entitling her to complete and remedy the defects without any requirement to identify the defects and costs first. Mr Ashcroft replied the same day recording that he did not disagree with Ms Cathie’s interpretation of the contract.
[22] On 9 February 2018, Peryer’s lawyers, Gibson Sheat, wrote to Mr Ashcroft to seek further determinations. In particular, Gibson Sheat’s letter invited Mr Ashcroft, in relation to what were identified as Issues 2, 3, 4 and 5 in the 29 November 2017 list of issues to be determined to:
(a)Issue 2 – determine what is the appropriate remedy for the cladding stain defect;
(b)Issues 2, 3 and 5 – outline a suggested process for determining these matters;
(c)Generally confirm that Mr Ashcroft could still proceed as appointed expert whether or not Ms Cathie agreed (provided Peryer was prepared to pay any security for Mr Ashcroft’s costs).
(I note that Issue 4 – relating to a programme for completion – fell away once Ms Cathie resumed possession of the site and decided to complete the works herself).
[23] Mr Ashcroft responded on 12 February 2018 confirming that the determination of Issues 2 (part) and 3 would proceed on an outlined basis subject to Mr Ashcroft’s receiving any objection of Ms Cathie to that process. The process Mr Ashcroft set out involved:
(a)Parties by 20 February 2018 seeking agreement on the working of the issues to be submitted for determination;
(b)Following a site visit by Mr Ashcroft, Peryer to have five working days to make its submission;
(c)Ms Cathie to have five working days thereafter to respond;
(d)Parties to make no further submissions except upon a specific request by Mr Ashcroft.
[24] On 13 February 2018, Ms Cathie replied to Mr Ashcroft. She objected to the process outlined by Mr Ashcroft. She gave detailed reasons for her objection.
[25] Ms Cathie then apparently took advice from Colin Orchiston (a registered architect, arbitrator, adjudicator and mediator). On 20 February 2018, Mr Orchiston wrote to Mr Ashcroft and to Gibson Sheat. As the letter sets out much that is relevant to Ms Cathie’s opposition to the summary judgment application, I reproduce it in full:
Ms Cathie has sought my opinion on whether she is required to respond to the contractor submissions that the defects and remediation
works need to be determined now, and to the Expert’s suggestions in relation to those matters. I set out my views - and understanding of the present position - below:
1.It is my considered view that the resolution of this dispute is likely to have a less adverse outcome for all if the Principal is given the opportunity to deal with completion, and after that, the “loose ends” are dealt with all in one hit.
2.The Expert Determination is now binding, the time for objection to it having passed.
3.The Expert Determination confirmed:
3.1. The exterior stain is a defect
3.2. The right of the Principal to take control of the site
4.The Principal, having given the required Notice, has taken control of the site, and is addressing the several issues required to bring the project to completion.
5:The Principal has noted the defects items addressed to date by the Contractor, and has, on an ongoing basis, been compiling a further list of defects and outstanding work, in the same manner as - but for the dispute - would have been the case under the normal provisions of the contract.
6.The Principal has the right to complete the contract and remediate the defects in whatever manner it deems appropriate.
7.But there will come a “day of reckoning” when the costs and advisability of the Principal’s work will need to be resolved,
8.At that “day of reckoning” the outstanding questions can be addressed by the Expert (refer NZS3915, 14.2.4).
9.Except to the extent that the Expert is required (by 14.2.4) to enquire into additional costs incurred - or savings made - by reason of the work not having been done by the Contractor, the Contractor has no part to play in how that work is carried out, when, why, nor the costs of doing so; nor to make further submissions to the Expert on those matters.
10.Following the Expert’s determination the right to review it arises under 13.2.7, 13.3 or 13.4.
11.The Principal has informed me that they will not participate in either a teleconference or site visit as now suggested, but will instead retain such records as they consider necessary to resolve the outstanding matters when they can be crystallised.
12.Sections 13.2 and 14.2 if read together entitle the Principal to take that position.
13.As a result of the Expert Determination (as given) 14.2.3(d) required the Contractor to hand over information and/or assign matters to the Principal. That has not been done. Given that the Principal may be reliant on that documentation to complete the project, or to complete it expeditiously, there would seem to be every reason for the Contractor to fulfil the requirement.
Yours faithfully
Colin R Orchiston
[26] Ms Cathie sent a detailed (four page) email to Mr Ashcroft on 21 February 2018 setting out her objection to the process suggested by Mr Ashcroft. In her email, she stated that she would not be attending a site meeting and would not be participating in a telephone conference. She insisted on a right to complete and remedy defects in the contract work before having to address Issues 2 (part) and 3.
[27] Mr Ashcroft emailed Ms Cathie later on 21 February 2018. He stated that he did not disagree with the observations of Mr Orchiston. He noted that the approach (which he recommended) would have addressed the “loose ends” and been to the benefit of all.
[28] On 2 March 2018, Mr Ashcroft wrote to the parties. He noted that the parties had not particularised and raised for determination a dispute. He referred to GC 13.1.2 which defined “dispute or difference” for the purposes of the disputes provisions under the contract. It includes “every question which by these conditions is to be agreed between the Principal and the Contractor, and on which they have been unable to agree”. Mr Ashcroft concluded that establishing that there was no agreement on a specific question was itself sufficient to initiate GC 13.2.
[29] On 20 March 2018, Gibson Sheat referred three matters to Mr Ashcroft as being in dispute:
(a)Issue 2R: what is the remedy for the cladding stain defect?
(b)Issue 3: what other items required to be completed or remedied in order to achieve Practical Completion?
(c)Issue 5: what monies are due under the contract [the time for addressing this issue is to be determined]?
[30] On 21 March 2018, Mr Ashcroft recorded to the parties that he accepted that a dispute had arisen in relation to each of those matters. He observed that in relation to Issue 2R, the substance of the matter for determination was more accurately what damages Ms Cathie was entitled to as a consequence of the defective staining of the cedar cladding. Mr Ashcroft then stated that pursuant to his powers under his Rules, he made the following directions:
(a)A site visit not more than three hours duration shall be undertaken prior to 29 March 2018, at a time suitable to the
parties and himself. He proposed that this be initiated by Ms Cathie.
(b)Peryer to serve any submission on Issues 2R and 3 before
5.00 pm, 9 April 2018.
(c)Ms Cathie to submit a response by 5.00 pm, 16 April 2018.
(d)A determination in relation to Issues 2R and 3 to then follow.
(e)A process and timing in relation to resolution of Issue 5 to then follow.
[31] By emails sent on 27 and 29 March 2018, Ms Cathie challenged the procedure directed by Mr Ashcroft and his jurisdiction to make such directions.
[32] On 10 April 2018, Mr Ashcroft wrote to the parties. He noted the failure of Ms Cathie to cooperate or comply with his directions in relation to a site inspection. He observed that he was unable to see any practical basis upon which the items currently submitted for an expert opinion could properly be determined. On that basis, he stated that it appeared appropriate for him to withdraw from the reference. He awaited comments.
[33] On 13 April 2018, Gibson Sheat advised Mr Ashcroft that they were instructed to apply to the High Court for summary judgment in relation to the directed site inspection and Mr Ashcroft’s jurisdiction. Mr Ashcroft agreed to await the outcome of Peryer’s application for summary judgment before withdrawing or proceeding further.
[34] On 17 April 2018, Mr Ashcroft issued a determination as to interim fees arising from his attendances after his determination of Issue 1. He determined that Ms Cathie was liable for interim fees of $3,900 plus GST and that Peryer was liable for interim fees of $1,350 plus GST. As Peryer was to pay Mr Ashcroft the full amount, Mr Ashcroft directed Ms Cathie to reimburse Peryer the sum of $3,900 plus GST.
[6] Thus, Associate Judge Osborne concluded that, while the contract clearly allowed Peryer to refer a dispute to an expert irrespective of whether Ms Cathie agreed to that referral, it was not beyond argument that the parties had agreed to alter that arrangement in respect of Mr Ashcroft during the preliminary case management in November 2017. That was a matter Ms Cathie could only make out at trial. Accordingly, Peryer’s claim was not amenable to determination by summary judgment.
[7] Following its unsuccessful application for summary judgment, Peryer reformulated its claim. In its amended statement of claim dated 22 March 2019, Peryer abandoned its claim for a declaration as to Mr Ashcroft’s jurisdiction to determine the
dispute and instead now alleges that Ms Cathie is in breach of the contract and seeks damages of “$100,700.92, less any reasonable and necessary cost to Ms Cathie sought to remedy the Defects”. Peryer also claims interest and costs.
[8]Peryer claims that Ms Cathie has breached the contract by:
(a)refusing to allow it to remedy the defects;
(b)refusing to agree on an approach to remedying the defects;
(c)failing to take any steps to remedy the defect herself from the balance of the withheld contract price; and
(d)refusing to allow Mr Ashcroft to determine the disputes about all of the above.
[9] Peryer has thus abandoned its attempt to enforce the contractual submission to dispute resolution and now seeks to have its substantive dispute determined by this Court.
Protest to jurisdiction – relevant principles
[10] A defendant challenging this Court’s jurisdiction is entitled to file and serve an appearance under protest to jurisdiction pursuant to r 5.49 of the High Court Rules 2016. By doing so, a defendant does not submit to the Court’s jurisdiction.1 The plaintiff may apply to the Court to set aside the defendant’s protest, as Peryer has done in this case.2
[11] The basis upon which Ms Cathie protests the Court’s jurisdiction in this case is that the parties’ contract contains a submission to dispute resolution, which she contends is mandatory.
1 High Court Rules 2016, r 5.49(2).
2 Rule 5.49(5).
[12] Such challenges generally take the form of an application for a stay of the proceeding on the grounds that the parties have contractually committed themselves to litigate the dispute to which the proceeding relates pursuant to the submission to dispute resolution. When the Court concludes that the dispute between the parties comes within the terms of the submission, and there are no reasons why the parties should not be held to their contractual arrangement to deal with it by that mechanism, it will stay the proceeding and refer the dispute to be dealt with pursuant to that mechanism.3
[13] The Supreme Court explained the wide scope of r 5.49 in Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd:4
[25] We also conclude that the Court of Appeal’s view of the scope of what can be addressed in an objection to “jurisdiction” under r 5.49 is too restricted. The Court has held that r 5.49 can be invoked in only three situations: first, when the matter is extraterritorial; secondly, when by law the case can only be determined by a different New Zealand court or authority; and thirdly, where the operation of a contractual term or failure to comply with statutory requirements precludes the High Court having jurisdiction. The third of these categories is obviously directed primarily at arbitration. Although each of these situations is clearly covered by r 5.49, it is not easy to read the rule as limited to them as it expresses an unqualified right to challenge a court’s jurisdiction to hear and determine a proceeding. The better approach is to give r 5.49 its ordinary meaning. In that respect, the Court of Appeal’s limitation on the application of the rule appears to cut across Diplock LJ’s classic expression of the meaning of jurisdiction set out in Garthwaite v Garthwaite:
In its narrow and strict sense, the “jurisdiction” of a validly constituted court connotes the limits which are imposed upon its power to hear and determine issues between persons seeking to avail themselves of its process by reference (1) to the subject-matter of the issue or (2) to the persons between whom the issue is joined or (3) to the kind of relief sought, or to any combination of these factors.
[14] There are cases in which this Court has dismissed proceedings under r 5.49 because of the existence of a valid and applicable submissions.5
[15] Rule 5.49(6) addresses the Court’s responsibility in dealing with appearances under protest to jurisdiction. It provides that where the Court hears an application by
3 See Arbitration Act 1996, sch 2, art 8; and Zurich Australian Insurance Ltd t/a Zurich New Zealand v Cognition Education Ltd [2014] NZSC 188, [2015] 1 NZLR 383.
4 Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1 NZLR 804 (footnotes omitted).
5 Lawson v Gawith [2017] NZHC 40; and Openyd Ltd v Lawrence [2019] NZHC 46.
the plaintiff for an order setting aside the defendant’s protest or an application by the defendant to dismiss the proceeding the Court must:
(a)if it is satisfied that it has no jurisdiction to hear and determine the proceeding, dismiss the proceeding; and
(b)if it does not dismiss the proceeding under paragraph (a), set aside the appearance.
[16] Where a defendant has taken an active step in a proceeding, the defendant is taken to have submitted to the jurisdiction of the Court, even where the Court would not otherwise have been prepared to hear and determine the proceeding.6 Engaging in an interlocutory application generally entails a submission to the Court’s jurisdiction:7
An interlocutory application has no independent existence, and jurisdiction to entertain it can only arise from and must be dependent upon the status of the originating proceeding. An application for summary judgment is an interlocutory application … and accordingly this particular application is part of a proceeding which is under challenge as to jurisdiction. If the Court entertains the summary judgment application it is thereby necessarily accepting jurisdiction to hear and determine the proceeding. It is difficult to see how the Court can thereafter logically decide that it has no jurisdiction. It is the jurisdiction of the Court to entertain the claim which is now at issue, and that must be determined prior to the Court embarking on a hearing of the proceeding, whether substantively or in any interlocutory way. If the summary judgment application were to proceed, ACS would have to submit to the jurisdiction if it desired to defend. That would almost certainly involve the filing of affidavits, as well as an appearance by counsel to argue the issues.
Dispute resolution clause
[17] The contract in this case contains a submission to dispute resolution in cl 13.
[18]Clause 13 is lengthy. It begins:
SECTION 13 — DISPUTES
13.1General
13.1.1 No instruction, decision, valuation, or certificate of the Principal shall be questioned or challenged more than three Months after it has been given or more than one Month after the date on which
6 Except in situations where jurisdiction has been actively withdrawn from the Court and conferred on another court or tribunal: Rothmans of Pall Mall (Overseas) Ltd v Saudi Arabian Airlines Corp [1981] 1 QB 368 at 375.
7 Advanced Cardiovascular Systems Inc v Universal Specialties Ltd [1997] 1 NZLR 186 (CA) at 189–190.
any relevant Adjudicator’s Determination is given to the parties, whichever is the later, unless notice has been given to the Principal within that time. This subclause 13.1.1 shall not apply to a Progress Payment Schedule.
13.1.2 Every dispute or difference concerning the contract which is not precluded by the provisions of 12.4, 12.6 or 13.1.1 shall be dealt with under the following provisions of this Section. For the purposes of Section 13, the words “dispute or difference” shall include every question which by these conditions is to be agreed between the Principal and the Contractor, and on which they have been unable to agree.
13.1.3 The Principal and the Contractor may at any stage agree to suspend any dispute resolution under this Section 13 due to any Adjudication proceedings, but in the absence of any such agreement the provisions of Section 13 shall continue to apply and neither party shall be entitled to suspend or delay any dispute resolution under this Section 13 due to any Adjudication proceedings.
13.2 Appointment and determination of Expert
13.2.1 Either party may, by notice in writing, refer any dispute or difference to the Expert.
13.2.2 The Expert shall be a suitably qualified independent person appointed by agreement of the parties. The Expert may be appointed before work commences under the contract, or at any time during the carrying out of the Contract Works. The Expert may be appointed generally for all disputes that may arise or specifically for any particular dispute. If the Expert becomes unable or unwilling to act the parties may agree on another Expert to take his or her place.
13.2.3 It is the intention of the parties that the Expert should be a person who can be available as required within a relatively short time, and who will, after obtaining and considering such documents and information as he or she considers relevant, arrive at a decision fairly and impartially and without undue delay.
13.2.4 If the parties are unable to agree on an appointment within five Days after a request in writing from either of them to the other, then either party may by notice in writing to the Arbitrators’ and Mediators’ Institute of New Zealand (Inc) request the President of the Institute to appoint the Expert. A copy of any such request shall be delivered to the other party on the same day that it is delivered to the Institute.
13.2.5 Each party will bear its own Costs in respect of any determination by the Expert, and shall pay one half of the Expert’s costs.
13.2.6 Unless otherwise agreed between the parties the Expert shall notify the parties of his or her decision within 15 Working Days of receipt by the Expert of notice of the dispute or difference.
13.2.7 The determination of the Expert shall, unless otherwise agreed, be in writing and where requested by either the Principal or the Contractor shall give reasons for the decision. It will be final and binding subject to 13.3 and 13.4.
[19] The clause then goes on to provide for referral to mediation and then arbitration if the parties are dissatisfied the expert’s decision.
Application to set aside Ms Cathie’s protest to jurisdiction
[20] There are some singular aspects to this case. Peryer has entirely reversed its position since its unsuccessful application for summary judgment as already described. Instead of seeking to enforce the submission to dispute resolution, Peryer now argues that it is inapplicable. In one sense, it is easy to understand why Peryer has changed its position. But this presents difficulties for determining this application to set aside Ms Cathie’s protest to jurisdiction. Before turning to those difficulties, it may be helpful briefly to address Peryer’s argument that the dispute resolution mechanism is inapplicable.
[21] For Peryer, Mr Collins submitted that the dispute resolution mechanism provided for in cl 13 of the contract has no application in this case. As I understand his argument, Peryer is saying that Ms Cathie has breached the contract and it is suing her for common law damages for breach, as opposed to any remedy under the contract.
[22] I reject this submission. In clause 13, the parties agreed that any dispute or difference concerning the contract (other than certain types of disputes covered by particular provisions that Peryer accepts do not apply here) are to be dealt with under cl 13. That language is unquestionably wide enough to govern the current dispute, which arises directly from the contract. In my view, the terms in which Peryer has reformulated its claim is not determinative of whether or not the parties are bound by the arrangements they have entered into in relation to the resolution of disputes.
[23] Mr Collins also submitted that cl 13 is not mandatory. His argument was that because cl 13.1.2 does not use the word “must” but the word “shall” it does not require the parties to refer a dispute to determination but merely gives them the option of doing so. He referred also to cl 13.2.1, which uses the permissive term “may”.
[24] This submission too I reject. It seems to me that the words used by the parties in clause 13 signal very clearly that their intention was that any dispute arising from or connected with the contract was to be dealt with pursuant to this comprehensive submission to dispute resolution, which escalates disputes from expert determination through to binding arbitration. I am satisfied that the parties agreed that is the proper mechanism for the resolution of their disputes and that the Court should hold them to their agreement. In the context of cl 13.1.2, the term “shall” was plainly intended to be mandatory. It is true that cl 13.2.1 uses the permissive term “may”, but that merely indicates that a party is free to elect whether or not to raise a dispute. Should he, she or it elect to do so, the only available avenue is through the submission to dispute resolution.
[25] In Concrete Structures (NZ) Ltd v New Zealand Windfarms Ltd, this Court concluded that the identical provision in NZS 3910:2003 bound the parties to utilise the dispute resolution provision.8
[26] For those reasons, my conclusion is that, subject to the aforementioned difficulties, the Court should not subvert the parties’ clear contractual commitments by assuming responsibility for the resolution of the current dispute.
[27] That brings us back to the particular difficulties in this case. Ms Cathie lodged her protest to jurisdiction in response to the amendment statement of claim, which was not filed until after Associate Judge Osbourne had determined Peryer’s summary judgment application. Ms Cathie fully participated in the proceeding at the summary judgment stage, including by filing a notice of opposition, affidavit evidence and by appearing in person at the hearing. Ordinarily, I would conclude that Ms Cathie had submitted to the jurisdiction of the Court.
[28] There is, however, a distinct difference between the nature of Peryer’s original claim, which Ms Cathie was content to dispute before this Court, and Peryer’s amended claim, which Ms Cathie now protests the Court’s jurisdiction to hear. While
8 Concrete Structures (NZ) Ltd v New Zealand Windfarms Ltd HC Christchurch CIV-2009-409- 2301, 24 November 2009 at [50], overturned in Concrete Structures (NZ) Ltd v NZ Windfarms Ltd [2010] NZCA 450 but not on this point.
the present claim would clearly interfere with the parties’ intention to resolve any dispute through the submission to dispute resolution, it is not obvious the claim as originally pleaded would have had that effect. Peryer was essentially seeking two things: a determination of the scope of the expert’s jurisdiction and the assistance of the Court to enforce determinations of the expert, namely as to a site visit and an award of costs.
[29] Expert determination is of course different from arbitration. To begin with, expert determination is not given statutory force in the way arbitration is through the Arbitration Act 1996. Furthermore, as Fisher J observed in Methanex Motunui Ltd v Spellman, arbitration is a quasi-judicial process, whereas expert determination is not:9
By submitting their dispute to arbitration the parties have manifested a wish to have their dispute determined judicially, with the natural justice that that entails. They have an open choice in this regard. They can dispense with natural justice by referring their dispute to expert determination rather than arbitration…
[30] Unlike an arbitrator, who has the jurisdiction to determine his or her own jurisdiction, the jurisdiction of an expert is always ultimately a matter for the Court. In Barclays Bank plc v Nylon Capital LLC, the Court of Appeal of England and Wales held:10
It is clear, however, that in any case where a dispute arises as to the jurisdiction of an expert, a court is the final decision maker as to whether the expert has jurisdiction, even if a clause purports to confer that jurisdiction on the expert in a manner that is final and binding.
[31] Accordingly, in its original form, Peryer’s claim arguably did not violate the principle that the courts should not interfere with a submission to dispute resolution agreed to by the parties. Setting aside for the moment any role the mediation and arbitration limbs of cl 13 may have played in this, it would be a matter for the Court to determine whether Mr Ashcroft had the jurisdiction Peryer claimed he did. Equally, the Court always retains jurisdiction to lend its assistance to the enforcement of outcomes of alternative dispute resolution.11
9 Methanex Motunui Ltd v Spellman [2004] 1 NZLR 95 (HC) at [46].
10 Barclays Bank plc v Nylon Capital LLC [2011] EWCA Civ 826, [2012] 1 All ER (Comm) 912 at [23].
11 See, for instance, Arbitration Act 1996, sch 1, art 9, which allows the Court to grant interim measures in support of arbitration proceedings.
[32] The relevance of this is that Peryer’s amended claim has put Ms Cathie in a difficult position. While Ms Cathie might not have had grounds to protest the Court’s jurisdiction to hear and determine Peryer’s original claim, she would certainly have had grounds to challenge it in its amended form. The issue is whether, having submitted to the Court’s jurisdiction for the purposes of defending Peryer’s summary judgment application, it is open to Ms Cathie to protest jurisdiction now. As the Court of Appeal stated in Advanced Cardiovascular Systems Inc v Universal Specialties Ltd, it is difficult to see how the Court can, after entertaining a summary judgment application, logically decide that it has no jurisdiction to hear and determine the proceeding.12
[33] That leads me to an assessment of what orders can and should be made in this case. The view I take is that the Court clearly has jurisdiction. Even though the nature of Peryer’s claim is fundamentally different, it would not make sense for the Court to lose jurisdiction it has already assumed. That does not mean, however, the Court should opt to exercise its jurisdiction to hear and determine the substantive claim. The parties have chosen to resolve any substantive dispute through the contractual dispute resolution mechanism and the summary judgment application did not change that. They should be held to their contractual obligations. The proper course therefore is to stay this proceeding and direct the parties to refer the dispute to the contractual process.
[34] It is not of course for this Court, having determined that the dispute between the parties must be resolved by the contractual process to embark upon any analysis of the issues. Indeed, counsel, particularly Mr Withnall, warned me sternly that I should not do so. Nevertheless, counsel touched on these issues, so it seems appropriate to address them.
[35] It appears to me that Mr Ashcroft is no longer seized in this matter. In the end, the parties formulated and put before him one issue, that is to say, whether Peryer was, in terms of cl 14.2.1 of the agreement, in breach of its contractual obligations and therefore whether it was open to Ms Cathie to either cancel the contract or take
12 Advanced Cardiovascular Systems Inc v Universal Specialties Ltd, above n 7, at 189.
possession of the property. He dealt with that issue in his determination dated 20 December 2017. Having done so, it seems to me that he is functus officio, barring any further referral to him of the remaining issues that were discussed in March 2018. Peryer, in reformulating its statement of claim, has effectively abandoned any attempt to put those remaining issues before Mr Ashcroft.
[36] It follows that if Peryer wishes to have a further issue or series of issues resolved, such as its claim for breach of contract, then it must initiate a new dispute pursuant to cl 13 (though of course there is nothing to stop the parties agreeing on using the same expert). This process would be fresh and would not be clouded by any oral variations of the kind contended for by Ms Cathie before Associate Judge Osborne.
[37] Following the earlier expert determination, Ms Cathie elected, as she was entitled to do, not to cancel the contract but to take possession of the property. It is common ground that there are defects that need to be rectified, or at least quantified, and Ms Cathie has yet to pay Peryer the outstanding contract price.
[38]Those factors bring into sharp focus cl 14.2.3 of the contract which provides:
If the Principal elects to resume possession of the Site under the provisions of
14.2.1 or 14.2.2 it may:
…
(c)Take possession of, use and permit other Persons to use, Materials, Plant, Temproary Works and other things which are on the Site owned by the Contractor and are necessary for completing and remedying defects in the Contract Works …
…
In any such case the Contractor shall not be entitled to any further payment until the completion of the Contract Works.
[39] Peryer’s contention is that Ms Cathie, having adopted the course that she has, must take steps to rectify any defects within a reasonable time so that there can be a final wash up (what Mr Orchiston rather melodramatically described as a “day of reckoning”) in order to determine what if any claim Peryer still has. Ms Cathie, on the other hand, contends that as the contract contains no express obligation on her to
carry out the remedial work, or to carry it out within any given period of time, her hand cannot be forced.
[40] Against that background, I would have thought that the first issue that must be determined is whether Peryer is correct in its contention that there is an implied time limit, and if so, what that is. It would then be necessary to determine whether Ms Cathie has complied with any such obligation and, if not, whether an assessment on the basis of expert evidence is necessary to identify the remedial work required and to price this so that it can be determined whether or not the plaintiff is still owed any money and if so how much.
[41] Those appear to me to be the key issues that now need to be resolved in order to enable these two parties to disentangle themselves and move on.
[42] As I commented to both counsel during the course of the hearing, there is no doubt that this Court has inherent jurisdiction to supervise the processes of other decision-making bodies who may not have the necessary jurisdiction or resources properly to ensure that matters are resolved. For that reason, I am concerned that this proceeding not be dismissed but rather stayed, and that both parties have leave to apply to the Court for assistance in ensuring that, at least from this point forward, a proper level of attention is given by both parties to the resolution of this matter. This dispute has now been ongoing for over two years and is no closer to resolution. That is lamentable.
Result
[43]For all of those reasons, I make the following orders:
(a)Pursuant to r 5.49(5) of the High Court Rules, I set aside the defendant’s appearance under protest to jurisdiction.
(b)Pursuant to r 15.1(3) of the High Court Rules, I stay the plaintiff’s proceeding pending the reference of any residual dispute between the parties to resolution pursuant to cl 13 of their contract.
(c)I grant leave to both parties to come back to the Court in this proceeding should that be necessary in order to ensure that the dispute, which must be dealt with pursuant to cl 13 of their agreement, is dealt with appropriately and in a timely way.
(d)I reserve costs, not having heard from counsel as to these. I expect Mr Collins and Mr Withnall will be able to deal with costs. However, if they are unable to do so, they may revert to me by memorandum in the usual way and I will deal with them on the papers.
Associate Judge Johnston
Solicitors:
Gibson Sheat, Wellington for plaintiff/applicant
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