Unit Owners v Body Corporate 346799
[2023] NZHC 1497
•16 June 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1178
[2023] NZHC 1497
UNDER The Arbitration Act 1996 IN THE MATTER OF
Arbitration of Objecting Unit Owners of Victopia Apartments
BETWEEN
UNIT OWNERS as set out in Schedule of Unit Owners
Plaintiffs
AND
BODY CORPORATE 346799 being the
Body Corporate for Victopia Apartments
located at 135 Victoria Street West, Central Auckland
Defendant
Hearing: 20 October 2023 Appearances:
T M Bates for the plaintiffs
E St John and C Baker for the defendant
Judgment:
16 June 2023
JUDGMENT OF ROBINSON J
This judgment was delivered by me on 16 June 2023 at 11:00 am pursuant to Rule 11.5 of the High Court Rules
…………………………………………………………………… Registrar/Deputy Registrar
Solicitors/counsel:
TM Bates & Co, Auckland Price Baker Berridge, Auckland E St John, Auckland
UNIT OWNERS v BODY CORPORATE 346799 [2023] NZHC 1497 [16 June 2023]
Introduction
[1] The plaintiffs own some of the apartments in a unit title development at 135 Victoria Street West, Auckland (Victopia). Victopia has suffered damage as a result of building defects and requires significant repairs. In 2013 this Court settled a scheme pursuant to s 74 of the Unit Titles Act 2010 (UTA) authorising the defendant Body Corporate to manage those repairs and to raise levies to pay for them (Scheme).1
[2] On 25 June 2021 the Body Corporate passed three resolutions under the Scheme to raise repair levies from the unit owners. The owners were notified by letter dated 5 July 2021. The plaintiffs have objected. Their objections have been referred to arbitration in accordance with the terms of the Scheme. Mr Paul David KC is the appointed arbitrator.
[3]This judgment concerns two of the arbitrator’s preliminary decisions:
(a)dated 2 March 2022, declining most of an application by the plaintiffs for further discovery (discovery decision); and
(b)dated 14 June 2022, relating to an Amended Notice of Objection the plaintiffs purported to file in response to the discovery decision (scope of arbitration decision). In that decision the arbitrator determined that some of the plaintiffs’ allegations that the defendant had breached the Scheme and its statutory duties were outside the scope of the dispute properly before the arbitrator.
[4]In this proceeding the plaintiffs initially sought:
(a)leave to appeal the discovery decision;
(b)leave to appeal the scope of arbitration decision; and
1 Re Body Corporate 346799 [2013] NZHC 3335.
(c)a ruling on the arbitral tribunal’s jurisdiction under art 16(3) of sch 1 to the Arbitration Act 1996 (Schedule 1) (Act).
[5] In written submissions filed in advance of the hearing, counsel for the plaintiffs advised the plaintiffs no longer sought leave to appeal the discovery decision because the documents in question had since been provided by way of discovery in separate High Court proceedings. Instead, in the course of submissions counsel for the plaintiffs sought a ruling that these documents are admissible in the arbitration.
[6]The Body Corporate opposes all applications.
Background
The Scheme
[7] The building defects in Victopia require significant repair. The defects include, but are not limited to, cracking in the cladding system; failure of the waterproof membrane to the concrete balconies on levels 13 and 14; and moisture leaking into the basement carpark.
[8] The Scheme was settled in 2013 to enable the Body Corporate to manage remedial work to rectify those defects on behalf of the unit owners. The Scheme also applies to any other defects or repairs the Body Corporate identifies throughout the repair process.
[9] The Scheme provides that the Body Corporate is appointed to act as agent for each owner with full and irrevocable authority to authorise, commit and undertake the repairs on their behalf. The Body Corporate has a broad range of powers to undertake the repairs. The Scheme also imposes duties with which the Body Corporate must comply, including: to seek advice from suitably qualified advisers; to have the repairs undertaken as diligently and as expeditiously as is practical; to keep minutes of all its meetings and decisions in connection with the Scheme, and to make those available to owners upon request; and to advise owners on a regular basis of its decisions and the progress of repairs.
[10] The Body Corporate is to levy and collect from the owners such money as it considers necessary in order to undertake the repairs. The owners are to pay for repairs to the exterior cladding and the basement leaks in accordance with their ownership interests, while the owners of units on level 13 and 14 are to pay for the costs of repairing their balconies. The Body Corporate is to determine how any remaining costs are to be levied and paid. The Body Corporate may demand payment of levies in such amounts and at such times as it may determine.
[11]Clause 15 of the Scheme provides that the Body Corporate must:
(a)Account to the Owners for all money that the Body Corporate or its agent(s) receives and expends on behalf of the Owners under this Scheme;
(b)Ensure that all the monies received from the Owners are only allocated and paid out for purposes authorised by this Scheme;
(c)Upon receipt of reasonable notice from any Owner supplied to that Owner oral and written information relating to the funds received and expended for the Repairs and associated costs;
…
[12] Clauses 17 – 21 of the Scheme set out a dispute resolution process and define that process’ scope. The Body Corporate’s decisions on matters arising under the Scheme are final in all respects; except where an owner raises an objection exceeding
$30,000 in monetary terms or more than one owner raises objections exceeding
$60,000 in total. Objections must be by written notice to the Body Corporate within 10 days of notice of the decision objected to, and must outline the grounds on which the objection is made. On receipt of a qualifying objection notice the Body Corporate will refer the matter to an arbitrator, who shall determine the matter in accordance with the provisions of the Act. Clause 20 of the Scheme provides that the arbitrator’s decision shall be final.
The Resolutions
[13] The background to the arbitration is accurately described in the arbitrator’s discovery decision. The Body Corporate recovered a fund of approximately $26.5 million in settlement of proceedings against various parties involved in Victopia’s
construction.2 Remediation works under the Scheme began in 2019. However, it became apparent that the funds recovered would be insufficient to complete the works.3 As a result, at a committee meeting on 25 June 2021 the Body Corporate passed three resolutions for further repair work under the Scheme and to levy the owners for that further work. In his discovery decision the arbitrator summarised the resolutions as follows:4
Resolution 1 – costs of repairs to mechanical ventilation – the Body Corporate resolved to undertake the work to the mechanical ventilation as recommended by consultants. The Body corporate resolved that the affected owners would be levied the sum of $1,609,953.00 (including GST) to be paid in two equal instalments as per Schedule [sic].
Resolution 2 – costs of repairs to balconies – the Body Corporate resolved to carry out work as recommended by Babbage Consultants to reconstruct podium balconies on the eastern elevation and curved balconies from ground to level 12 of the building. The Body Corporate resolved to levy the individual affected unit owners the sum of $857,343.00 (including GST) to be paid in two equal instalments as set out in the Schedule.
Resolution 3 – cost to complete repairs to external cladding – the Body Corporate resolved that the work of recladding would now include the recladding of the recessed section of the eastern lobby side elevation and that all owners would be levied the sum of $15,237,500 (including GST) to complete the recladding based on their ownership interests, including the work to the eastern elevation with this levy to be paid in three equal instalments.
[14] The Body Corporate advised the owners of the resolutions by letter of 5 July 2021. Various apartment owners objected to the Body Corporate’s resolutions.5 The objections were received by email. There does not appear to be any issue that they were received within the 10-working day period provided for in cl 18 of the Scheme. Those emails are not before the Court but were summarised by the arbitrator as follows:6
a. the mechanical ventilation levy under Resolution 1 was unrelated to the weather-tightness remediation and lacked detailed information.
2 Unit Owners v Body Corporate 346799 (Decision on Application for Discovery by Applicants)
Paul David KC 2 March 2022 at [6].
3 At [6].
4 At [7].
5 The discovery decision records (at [12]) that objections were received from 39 owners. A schedule to the plaintiffs’ application to this Court lists the owners of 37 units as plaintiffs represented by Mr Bates in this proceeding. However, counsel advises that the owners of two of the 37 units referred to in the schedule to the plaintiffs’ application no longer wish to remain part of the arbitration or this proceeding. I use the term “plaintiffs” to refer to whichever owners formed part of the objecting group at the relevant time.
6 Discovery decision, above n 2, at [9] (emphasis added).
b. the deck repair levy under Resolution 2 was for repairs that were not necessary and/or there was insufficient information to show that they were necessary.
c. in respect of Resolution 3, it was not clear why the original $26.5 million funds would run out with this work not completed and there was insufficient material to support aspects of the work and to check the previous expenditure of funds.
Arbitration
[15] The dispute arising out of the objections to the resolutions was referred to arbitration. On 19 August 2021 Mr David was appointed as arbitrator. On 8 October 2021 Mr David sent out his terms of appointment, which recorded that:
2. The dispute concerns the liability of the respondents to pay levies for the cost of remedial works at an apartment building at 135 Victoria Street West, Auckland (“Victopia Apartments”). The claimant has issued the levies for the costs of repair to the building under a scheme approved by the High Court under s 74 Unit Titles Act 2010. Proprietors of apartments at Victopia Apartments have objected to the levies. The objections raised by the proprietors as to the liability to pay the levies have been referred to arbitration under the provisions of the approved scheme.
[16] On 26 November 2021 the plaintiffs filed a Notice of Objection setting out their objections to the resolutions. At paras [1] – [9] the plaintiffs alleged the Body Corporate had breached various powers, duties and obligations under the Scheme. At paras [10] – [20] the plaintiffs set out the particulars of the breaches. The particulars focused on the levies raised in the resolutions and contained the following.
[17] Regarding all three resolutions, the plaintiffs alleged that they were passed without proper consultation and without providing adequate supporting documentation.
[18] Concerning resolution 1, the plaintiffs allege that the determination to impose the levy for further work on the building and ventilation systems was unreasonable and/or improper and/or negligent given that the projected cost of the further works was $1,399,595 (exclusive of GST) when that cost should have been $748,405 (exclusive of GST).
[19] Concerning resolution 2, the plaintiffs allege the decision to impose the levy for further work on balconies was unreasonable and/or improper and/or negligent given that the projected costs of the works was $745,516 (exclusive of GST) when that cost should have been only $450,710 (exclusive of GST). The plaintiffs also objected to a determination the Body Corporate had made in June 2020 to carry out work on other balconies.
[20] Concerning resolution 3, the plaintiffs allege that the Body Corporate’s determination to impose levies for $15,237,000 for the recladding work was made without proper consultation and without providing the plaintiffs with supporting documentation.
Discovery decision
[21] In early December 2021 the plaintiffs applied for discovery of documents relevant to their objections. A hearing was held (remotely) on 16 February 2022. In the discovery decision that followed, the arbitrator declined most of the plaintiffs’ application. Although the plaintiffs no longer seek leave to appeal the discovery decision, it is procedurally relevant to their remaining applications.
[22] The plaintiffs sought discovery of various documents including all accounting records for the repair works carried out under the scheme since the inception of the repair contract. These documents were sought in relation to a general but serious allegation that the Body Corporate and its committee have mismanaged the repair contract throughout the period of the works.7 The arbitrator noted there was no particularised allegation of mismanagement in the Notice of Objection. Instead, it appeared in the grounds put forward in support of the discovery application.8
[23] Essentially, the plaintiffs sought to challenge the levy imposed in resolution 3 on the basis that the Body Corporate had mismanaged the $26.5 million fund that would otherwise have been available to pay for those works. To support that allegation
7 At [30].
8 At [30].
the plaintiffs sought discovery of accounting records for the whole project from its inception to enable an expert accountant they had instructed to undertake an audit.
[24]In declining this aspect of the discovery application, the arbitrator held:
32. The objection regime is concerned with objections to decisions to carry out repairs and works to bring about the remediation of the building (and the consequential levies for the intended works). Even if there was a proper basis for the allegation of previous mismanagement (as opposed to general assertion of this), I do not consider that an objection to the decisions of June 25, 2021, can be made on this basis on the proper construction of the Scheme. This is because the objection regime provided in the Scheme is about deciding on specific objections to decisions to carry out future work and the levies to do that work. Allegations of previous mismanagement on earlier decisions cannot in my view be brought within the objections made.
[25] The arbitrator then made timetable orders including for the filing of evidence so the arbitration could proceed to a hearing.9
Amended Notice of Objection
[26] On 4 April 2022 the plaintiffs filed their evidence. They also filed an Amended Notice of Objection. The Amended Notice included allegations that the Body Corporate had breached various obligations imposed by the Scheme, the UTA and the Unit Titles Regulations 2011 “by failing to account to the owners for all money that the Body Corporate had received and expended on behalf of the owners under the Scheme”.
[27] By memorandum of counsel, the Body Corporate objected to the Amended Notice on the basis it was wide-ranging, out of time and "relate[d] to topics which [were] incapable of meeting the requirements of an arbitration available under the Scheme”. The Body Corporate objected to aspects of the plaintiffs’ evidence on the same basis.
[28] Following a hearing with counsel the arbitrator sought further submissions concerning the scope of the Scheme and its objection regime so that he could
9 At [38] and [40].
determine which allegations were properly within the scope of the arbitration. Otherwise he granted the plaintiffs leave to file the Amended Notice.
The scope of arbitration decision
[29] The arbitrator recorded counsel for the owners’ submission that the challenge to the Body Corporate’s decision would be “multi layered”, and that the notified objections to the decisions could involve consideration of previous decisions on construction works. The owners submitted (as they had in relation to their discovery application) that they could object to a levy on the basis that funds available to the Body Corporate to pay for the repairs had been wrongly diminished by the Body Corporate’s previous incorrect decisions.10
[30]The Arbitrator did not accept that submission. He ruled that:
18.The Arbitrator does not consider that this form of objection that impugns earlier decisions that have become final under the Scheme is available. Such an approach to objections is contrary to previous decisions being final in all respects and not consistent with the overall purpose of the Scheme – the completion of the repairs to remedy the defects by a committed project of work.
19.Similarly, while those objecting to a decision to impose a levy for repair works are entitled to be provided with the information that supports the decision to undertake the repair works and the financial and accounting information relevant to the estimated cost of the work and the calculation of the levy for the works (and may raise the absence of such information as part of an objection), an objection does not entitle those objecting to call for an audit of the entire project to date on the basis of allegations that the Body Corporate has failed generally in its duties as regards previous expenses. A party objecting to a levy for intended works is entitled to receive and scrutinise the financial information and accounts that support the levy imposed by the decision objected to, but that exercise must be relevant to the calculation of the levy imposed for the decision under objection. It cannot be concerned with allegations that previous decisions have been wrongly made so that the costs have been wrongly expended (thereby wrongly reducing the funds held by the Body Corporate).
[31]On that basis, the arbitrator ruled:11
10 Unit Owners v Body Corporate 346799 (Decision Relating to Amended Notice of Objection on Scope of Arbitration) Paul David KC 14 June 2022 at [17].
11 At [20].
·Paragraphs 3 – 6 of the Amended Notice dealing with alleged breaches of the Scheme and of statutory duties to keep accounts, and failing to account for all money received and expended under the Scheme, were not properly within the scope of the dispute raised by the objections to the decision.
·Paragraph 7, alleging breaches of clause 15(b) of the Scheme, was not within the scope of the dispute raised by the objections.
·Paragraph 8 was within scope of the dispute raised by the objections to the extent it related to the provision of construction information that was relevant to the decisions to carry out works and to the calculation of levies. However, it was not within the scope of the dispute raised by the objections to the extent it related to construction and financial information concerning previous decisions and the accounting for them.
·Paragraphs 9 and 10(a) were within the scope of the dispute raised by the objections. Paragraph 10(b), alleging failure to account for all money received under the Scheme for the entire project, was not.
·Paragraphs 11 and 12, relating to previous decisions and their alleged effect on costs, were not within the scope of the dispute.
[32]The plaintiffs seek leave to appeal this decision.
Arbitration Act 2006 – Relevant legal principles
[33] The rules set out in schs 1 and 2 to the Act apply.12 The plaintiffs rely on arts 5(1)(c) and 5(2) of sch 2 to the Act in support of their application for leave to appeal. In support of their request for a ruling on the arbitral tribunal’s jurisdiction the plaintiffs rely on art 16(3) of sch 1 to the Act. They also refer to rr 26.1 – 26.4 of the High Court Rules 2016.
[34] The arbitral tribunal may conduct the arbitration in such manner as it considers appropriate, subject to the provisions of sch 1.13 Amongst other things, the arbitral tribunal has the power to determine the admissibility and relevance of any evidence.14 In the absence of agreement the arbitrator has the power to order discovery and production of documents.15
12 Arbitration Act 1996, s 6.
13 Schedule 1, art 19(2).
14 Schedule 1, art 19(2).
15 Schedule 2, art 3(1)(f).
Appeals
[35] The Court is not to intervene in matters governed by sch 1, except as sch 1 provides.16 However, any party may (with the other parties’ consent or with this Court’s leave) appeal to the High Court on any question of law arising out of an award.17 An award is a decision of the arbitral tribunal on the substance of the dispute, and includes any interim, interlocutory or partial award. The High Court shall not grant leave unless it considers that the determination of the question of law concerned could substantially affect the rights of one or more of the parties.18
[36] This Court may also determine challenges to jurisdiction. While an arbitral tribunal may rule on its own jurisdiction,19 a party may plead that the tribunal does not have jurisdiction.20 The arbitral tribunal may rule on any such plea either as a preliminary question or in an award on the merits.21 If it rules on the plea as a preliminary question, any party may within 30 days request that this Court decide the matter.22 This Court’s decision shall not be subject to an appeal.23
Leave to appeal the discovery decision
[37] The plaintiffs do not pursue their application for leave to appeal the discovery decision. If they had, I would not have granted it.
[38] I do not consider the arbitrator’s discovery decision to be an “award”, namely a decision on the substance of the dispute.
[39] The term “substance of the dispute” distinguishes between those matters which are procedural and practical; and those substantive matters which affect the rights of the parties. Substantive law defines, creates or confers legal rights or status; or defines and imposes the nature and extent of legal duties. The function of practice and
16 Schedule 1, art 5.
17 Schedule 2, art 5(1).
18 Schedule 2, art 5(2).
19 Schedule 1, art 16(1).
20 Schedule 1, art 16(2).
21 Schedule 1, art 16(3).
22 Schedule 1, art 16(3).
23 Schedule 1, art 16(3).
procedure is to provide the machinery by which those legal rights and duties are recognised and enforced.24
[40] The arbitrator’s discovery decision is not a decision on the substance of the dispute. It concerns purely procedural matters that fall to be determined by the arbitrator. I do not consider these are matters upon which the Court can intervene.
[41] In any event, I agree with the arbitrator’s discovery decision. On a proper interpretation of the Scheme I do not consider the Body Corporate should be obliged to provide discovery of historic financial material to enable an independent audit of the entire Remediation project. This would be contrary to the nature and purpose of the Scheme, including the finality provision. In my view the objection regime is intended to deal with particular objections to specific decisions, rather than to broad and general allegations of mismanagement.
Admissibility
[42] In submissions counsel for the plaintiffs sought an order that financial material the plaintiffs have received by way of discovery in separate proceedings are admissible in the arbitration. I do not consider the Court has jurisdiction to make such an order. If it does, I would not. It is for the arbitrator to determine the admissibility of any evidence in the arbitration before him.25 I also note that a party who obtains a document by way of inspection in High Court proceedings may only use that document for the purposes of that proceeding and must not make it available to any other person except for the purposes of the proceeding,26
Application for leave to appeal scope of arbitration decision
[43] The arbitrator ruled that certain parts of the plaintiffs’ Amended Notice of Claim were outside the scope of the dispute raised by their objections to the Body Corporate’s resolutions. The arbitrator did not consider it was open to the plaintiffs to
24 McConnell Dowell Constructors Ltd v Pipeflow Technology Ltd HC Auckland M2029/98, 25 March 1999 per Paterson J; General Distributors Ltd v Melanesian Mission Trust Board [2008] 3 NZLR 718 (HC).
25 Arbitration Act 1996, sch 1, cl 19.
26 High Court Rules 2016, r 8.30.4.
object to the decisions made on 25 June 2021 by impugning earlier decisions by the Body Corporate that had become final under the Scheme. This was contrary to the finality provisions within the Scheme and the overall purpose of the Scheme to implement a project to complete the repairs and remedy the defects.
[44] The plaintiffs complain that in this way the arbitrator misinterpreted cls 17 – 21 which set up the dispute resolution mechanism at cls 17 – 21 of the Scheme. They say the arbitrator’s interpretation is too narrow. Counsel submits that disputes concerning the calculation of levies are squarely within the scope of the Scheme’s dispute resolution mechanism, and that the quantum of levies required to complete the repairs will be directly affected by the Body Corporate’s (alleged) previous misuse of funds.
[45] Counsel submits that the arbitrator’s ruling concerning the scope of arbitration raises question of law about the proper interpretation of cls 17 – 21 of the Scheme. These questions are set out in counsel’s supplementary submissions as follows:
(a)Is the Arbitrator’s interpretation of the Dispute Resolution mechanism in the Section 74 Scheme (Clauses 17 – 21) correct when he rules financial decisions made outside of the 10-working day timeframe from when the 25 June 2021 shortfall levy was raised, fall outside the jurisdiction of the arbitration when considering the plaintiffs’ objection to the shortfall levy?
(b)Has the Arbitrator correctly applied the law as stated in [Westen v Abdoelrahman]27 that says where a party files a defence to allegations made in the form of a pleading, it has submitted the dispute to the jurisdiction of the Tribunal. Furthermore, has the Arbitrator correctly applied article 16(2) of schedule 1 to the Arbitration Act 1996 which says that a plea of no jurisdiction has to be raised on submission of the statement of defence. In particular breaches of 15(a) and 15(c) of the Section 74 [sic] were not objected to as being outside the jurisdiction of the Arbitration, when the defendant filed its Response to the Notice of Objection.
[46] In terms of what amounts to a question of law, counsel refers to art 5(10) of sch 1 to the Act which provides that a question of law includes an error of law that involves an incorrect interpretation of the applicable law. Counsel also refers me to
27 Westen v Abdoelrahman HC Auckland CIV-2010-404-2998, 11 October 2010.
this Court’s earlier decisions in Gee v Scheurich,28 Nixon v Walker29 and Millar v Fletcher.30
[47] In terms of art 5(2) of sch 2, counsel for the plaintiffs submits that the arbitrator’s narrow interpretation of the Scheme will effectively leave unit owners with no realistic mechanism to protect themselves against having to meet levies where there has been a misuse of project funds. Counsel says it is only when the plaintiffs received notice of resolution 3 that they became aware there was shortfall arising out of the Body Corporate’s earlier decisions. On the arbitrator’s narrow interpretation of cls 17
– 21 of the Scheme, it is now too late for the plaintiffs to challenge the decisions that gave rise to the alleged shortfall.
Discussion
[48] Once again, I do not consider that the scope of arbitration decision is an award. The decision defines the scope of the dispute but it does not decide the substance of the dispute. It is an interlocutory procedural decision and I do not consider the Court has jurisdiction to grant leave to appeal it.
[49] Nor does the scope of the arbitration decision raise any questions of law that will substantially affect rights.31 In this regard counsel for the plaintiffs submits they have gone to significant trouble to identify the alleged misuse of project funds, only to have the allegations ruled out of the arbitration. He says that the costs of repairs at Victopia have more than doubled, and “the plaintiffs are entitled to answers”.
[50] It is impossible from the material before the Court to form even a preliminary view as to whether these serious allegations have merit. But even if they do, the arbitrator’s decision does not deprive the plaintiffs of a remedy. There are other avenues available to the plaintiffs if they wish to pursue their allegations. The arbitrator has simply ruled that these allegations are not to be determined in the course
28 Gee v Scheurich HC Hamilton M313/98, 20 January 1999.
29 Nixon v Walker HC Auckland CIV-2007-404-1372, 13 July 2007.
30 Millar v Fletcher HC Invercargill AP2/02, 16 July 2002.
31 Arbitration Act 1996, sch 2, art 5(2).
of the current arbitration. Article 5(2) of sch 2 precludes the Court from granting leave to appeal that ruling.
[51] Even if I am wrong on that, I would not exercise the Court’s discretion to grant leave. To the extent that the considerations identified in Gold & Resource Developments (New Zealand) Ltd v Doug Hood Ltd might apply they tell strongly against granting leave.32 I do not consider the plaintiffs’ case that the Arbitrator has erred is strong. On the contrary, I agree with him. The scope of the dispute resolution process within the scheme is narrow. The Scheme emphasises finality and efficiency. The expanded allegations contained in the plaintiffs’ Amended Notice were raised for the first time much more than 10 working days after the decisions to which they relate. The fresh allegations are potentially much more serious and complex than the issues presently before the arbitrator. If the plaintiffs wish to pursue those allegations they should be dealt with in separate proceedings, rather than shoehorned into the current arbitration.
[52] For all these reasons the plaintiffs’ application for leave to appeal the scope of arbitration award is declined.
Ruling as to jurisdiction
[53] In the alternative, the plaintiffs submit that the decision as to the scope of arbitration amounts to a decision by the arbitrator as to his own jurisdiction. In essence they submit that decision was made as a preliminary ruling in respect of a plea by the Body Corporate that the arbitral tribunal did not have jurisdiction. On that basis the plaintiffs ask the Court to rule pursuant to art 16(3) of sch 1 on the scope of the arbitral tribunal’s authority.
[54] Counsel refers to the learned authors of Williams and Kawharu on Arbitration,33 and to Downer Construction (New Zealand) Ltd v Silverfield Developments Ltd34 for the proposition that a High Court hearing under art 16(3) is
32 Gold & Resource Developments (New Zealand) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 (CA).
33 David AR Williams and others Williams and Kawharu on Arbitration (2nd ed, LexisNexis, Wellington, 2017) at [7.4].
34 Downer Construction (New Zealand) Ltd v Silverfield Developments Ltd HC Auckland CIV-2004- 404-4488, 26 October 2004 at [56].
not an appeal and must proceed as a de novo hearing. As such, counsel submits that none of the constraints that apply in respect of applications for leave to appeal pursuant to art 5(1)(c) of sch 2 apply to hearings under art 16(3) of sch 1. The plaintiffs do not need to establish there is a question of law; nor that the determination will substantially affect the rights of one or more of the parties. The overall discretion of the Court does not apply.
[55] I agree with counsel for the Body Corporate that the arbitrator’s scope of arbitration decision was a perfectly conventional decision as to what can and cannot be included within the arbitration. To the extent this decision amounts to a ruling by the arbitrator on the limits of his own jurisdiction it is a ruling he was entitled to make. Moreover, it will be apparent from my reasons declining leave to appeal that I agree with the arbitrator. The dispute resolution mechanism contained within the Scheme is narrow and emphasises finality. The plaintiffs’ fresh allegations either fall outside the scope of the Scheme’s dispute resolution mechanism, or relate to Body Corporate decisions that have become final. This is not to say that the plaintiffs are necessarily deprived of a remedy, but I agree with the arbitrator that certain allegations in the Amended Notice are not properly within the scope of the dispute before him.
Result
[56]The plaintiffs’ application for leave to appeal is dismissed.
[57] To the extent that the arbitrator has ruled on a matter referred to in art 16(3) of sch 1 of the Act, the arbitrator’s ruling is confirmed.
[58] The Body Corporate is entitled to costs. My preliminary view is that 2B is appropriate. If the parties cannot agree, the Body Corporate should file a memorandum within 15 working days, and the plaintiffs five working days after that. Memoranda should be no more than five pages in length (excluding attachments). Unless I require assistance I will deal with costs on the papers.
Robinson J
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