Van Brandenburg v Muir

[2005] NZCA 231

IN THE COURT OF APPEAL OF NEW ZEALAND

CA46/04

BETWEENFREDERICKUS PETRUS MARIA VAN BRANDENBURG

Appellant

ANDMACGREGOR ROBIN MUIR AND ROSEMARY ELLEN MUIR

Respondents

Hearing:16 March 2005

Court:Anderson  P, Glazebrook and William Young JJ

Counsel:M E Parker and D J Taylor for Appellant

R T Chapman for Respondents

Judgment:6 September 2005 

JUDGMENT OF THE COURT

A        The appeal is dismissed.

B        Costs to the respondents of $3,000 and usual disbursements.

REASONS

(Given by Anderson P)

Nature of the appeal   

[1]       In 1992 Mr Van Brandenburg, an architect, designed a house for Mr and Mrs Muir.  It was built by Mr Tanner.  The house had problems with leaking and Mr and Mrs Muir had to spend almost $70,000 to remedy the defects.  They sued Mr Tanner and Mr Van Brandenburg in the District Court at Alexandra.

[2]       In November 2000 the case was set down for hearing before Judge Macdonald.  The parties were urged to take the sensible course and attempt settlement.  With the benefit of counsel’s advice they decided they would follow such a course and they recorded their willingness to do so in writing.  They filed a consent memorandum in the following terms:

MAY IT PLEASE THE COURT

At the request of His Honour Judge McDonald, Counsel for the Plaintiffs, the First Defendant and the Second Defendant confirm the following agreement was made for the determination of this proceeding:

1.   The two issues to be determined are:

(a)  What amounts claimed by the Plaintiffs are due to them?

(b)     In what proportion (if any) are the First and Second Defendants liable to the Plaintiffs?

2.   His Honour was requested to hear the matter first as a Judicial Settlement Conference.  However if the parties were unable to reach settlement at the conclusion of the settlement conference, then His Honour would determine the matter as arbitrator of the dispute and his judgment would be binding on the parties.

3.   Counsel for the parties confirm that settlement has not been reached between the parties and accordingly His Honour is requested to give judgment in this matter.

[3]       The parties were unable to reach a settlement and Judge Macdonald was asked to determine the matter, which he did. 

[4]       On 13 February 2001, Judge Macdonald issued a 23 page document in the intituling of the case and described by him as “Reserved Judgment of Judge J E Macdonald.”  He found Mr Tanner liable to pay $68,754.84 and Mr Brandenburg liable to pay $22,028.30.  The reasons for judgment were signed by the Judge.

[5]       On 10 May 2001 Mr Van Brandenburg filed submissions to which Judge Macdonald responded with a formal minute in the following terms:

MINUTE OF JUDGE J E MACDONALD

1.   On 10 May 2001 I received the submissions of the second defendant seeking clarification of the judgment.

2.   Having read the submissions, I perceive that rather than being a request for clarification, it is simply a request to justify the conclusions that I had reached.

3.   I have given my decision.  If the second defendant is unhappy then his remedy lies in appeal.

J E Macdonald
District Court Judge

[6]       There followed a dispute between the parties over the costs for expert witnesses, and on 30 July 2001 Judge Macdonald issued what is described as “Decision of Judge J E Macdonald (as to expert witnesses’ costs)”.  The Judge also signed that document in his capacity as a District Court Judge.

[7]       Mr and Mrs Muir then submitted a form of judgment for sealing.  The document is described as “Judgment After Hearing”.  It specifies the awards against Mr Tanner and Mr Van Brandenburg and orders as to interest, costs and disbursements.  The District Court at Alexandra sealed and dated that document on 5 September 2001. 

[8]       Mr Tanner has met his obligations but Mr Van Brandenburg refuses to pay up.  He filed an appeal.  At a judicial conference John Hansen J queried whether the judgment was a nullity.  Counsel considered the matter and decided that it was.  Mr Van Brandenburg withdrew the appeal.

[9]       Mr and Mrs Muir then sought summary judgment in the District Court on the basis that the consent memorandum constituted an agreement between the parties to refer the dispute to arbitration.  Summary judgment was refused because the Judge was not satisfied that Mr Van Brandenburg had no defence.  No appeal was brought against the dismissal of the summary judgment application, nor has the proceeding been pursued.

[10]     Next, Mr and Mrs Muir sought to enforce Judge Macdonald’s decision by entering it for judgment in the High Court as an award pursuant to Art 35 of the First Schedule to the Arbitration Act 1996.  That application was opposed by Mr Van Brandenburg.  He argued that Judge Macdonald’s decision was not an arbitral award, that the Judge was not an arbitral tribunal, and that arbitral procedure had not been followed.  He also argued that the decision was a nullity and that recognition or enforcement of it as an award would be contrary to the public policy of New Zealand.  He said that it was antithetical to judicial status and responsibility for a sitting Judge to act as an arbitrator.

[11]     Associate Judge Christiansen found in favour of Mr and Mrs Muir.  Mr and Mrs Van Brandenburg then took the matter on review to a Judge of the High Court.

[12]     The application for review was heard by Chisholm J.  He delivered judgment on 26 February 2004 in favour of the Muirs.  Chisholm J dismissed a submission on the part of Mr Van Brandenburg that the agreement dated 21 November 2000 was neither a judgment in a court proceeding nor the issue of an award pursuant to the Arbitration Act.  The legal reasons for that proposition did not seem to the Judge to be clearly articulated.  He considered the agreement to be relatively straight-forward and susceptible of only two interpretations.  One was that there would be a conventional decision in a proceeding.  The other was that there would be a decision of an arbitrator.  He noted that both parties appeared to agree that the first interpretation was not open.  That left the conclusion that the decision was an arbitral award pursuant to an arbitration agreement, as that term is defined in s 2 of the Arbitration Act.

[13]     Chisholm J then went on to consider s 10(1) of the Arbitration Act, which provides as follows:

10     Arbitrability of disputes

(1)     Any dispute which the parties have agreed to submit to arbitration under an arbitration agreement may be determined by arbitration unless the arbitration agreement is contrary to public policy or, under any other law, such a dispute is not capable of determination by arbitration.

[14]     Chisholm J dealt with the public policy argument on behalf of Mr Van Brandenburg in the following terms:

[13]  However, Mr Parker maintained that it is not competent for a District Court Judge to serve as an arbitrator.  This proposition is not supported by the Arbitration Act which reflects a regime under which the parties are free to choose their own arbitrator.  Moreover, nothing in the District Courts Act 1947 precludes a Judge accepting appointment as an arbitrator.  As the Master pointed out, if a Judge accepts appointment the Judge will be acting as an arbitrator chosen by the parties, not as a District Court Judge.  In reality the situation is not dissimilar to a District Court Judge being appointed to conduct an inquiry (for example, the Cave Creek inquiry) where the Judge exercises powers under the Commissions of Inquiry Act 1908.  Judicial status does not preclude such an appointment.  I do not read any significance into the fact that Judge MacDonald’s decision is referred to as a “judgment” and that it has been signed by him as District Court Judge because, as he expressly stated, his decision was given on the basis set out in the consent memorandum.  In other words, he was acting as an arbitrator at the express request of the parties.

[15]     Mr Van Brandenburg has now appealed to this Court, raising essentially the same arguments which he advanced, unsuccessfully, before Associate Judge Christiansen and Chisholm J.

[16]     Mr Parker submitted, for the appellant, that Judge Macdonald did not have jurisdiction to act in the capacity of an arbitrator.  The Judge is a statutory officer appointed under the provisions of the District Courts Act 1947 and the jurisdiction of District Court Judges is circumscribed by that statute.  The jurisdiction does not embrace arbitral, as distinguished from judicial, functions.  Further, if the decision is a nullity in terms of judicial proceedings it cannot be other than a nullity for all other purposes.

[17]     Mr Parker also submitted that the consent memorandum is not an “agreement” in terms of the Arbitration Act definition being, rather, in the nature of an interlocutory application.  Unfazed by his previous submission that Judge Macdonald’s decision is, in effect, a juridical nullity, Mr Parker then submitted that the Judge went beyond the intention of the parties in delivering an award. The parties had intended that the Judge would give a judgment amenable to appeal, and were not intending to oust the jurisdiction of the Court.

[18]     A further submission on behalf of the appellant was that all indicia are against a conclusion that the consent memorandum is an arbitration agreement.  The Judge in his decision tendered a judgment and all the indications were that the Judge was acting in his judicial capacity.  Counsel submitted that the Judge took it upon himself to appoint himself as an arbitrator.  In all the circumstances it was not open to the High Court, submitted Mr Parker, to regard the consent memorandum as an agreement to arbitrate.

[19]     Further, the agreement did not provide an arbitral procedure and because the jurisdiction of the arbitrator was not in accordance with the District Courts Act 1947, it was not in accordance with the law of the country where the arbitration took place.

[20]     It would be contrary to the public policy of New Zealand, said Mr Parker, for the courts to recognise or enforce an award which was a nullity; also, because to do so would sanction a statutory officer having acted outside the four corners of the statutory office and powers.

[21]     The Arbitration Act provides, in s 9(1) that where a provision of the Act is inconsistent with a provision of any other enactment, the other enactment shall, to the extent of the inconsistency, prevail.  Mr Parker submitted that there is an inconsistency between the Arbitration Act and the District Courts Act, the latter being precise in its conferring of jurisdiction.

[22]     Further, the Muirs did not act on the decision as if it was an arbitral award but as if it were a judgment of the District Court.

[23]     Mr Parker submitted that it was against public policy to allow enforcement of an award given or purportedly given by a judicial officer acting in excess of jurisdiction.

Respondents’ submissions

[24]     Mr Chapman submitted on behalf of the respondents that Chisholm J was correct to consider the consent memorandum as having only two possible characters, being either a court decision or an arbitral award.  The parties, by their counsel, had eschewed the first possibility and logically that left the alternative. 

[25]     Further, it was wrong to suggest that Judge Macdonald appointed himself arbitrator.  He was appointed at the request and with the consent of the parties who were legally represented.  His authority to decide the dispute was not derived from his judicial status but from the agreement of the parties.  Nor was there anything in the District Courts Act 1947 to preclude a Judge from accepting appointment as an arbitrator.

Discussion

[26]     This litigation is marked by age and infirmity.  The dispute arose some 12 years ago and the relatively modest sum awarded against the appellant remains unpaid although, as a condition of appeal, the judgment debt sum has been paid into court as a condition of leave to appeal.  The infirmity is evidenced by the stumbling from court to court and jurisdiction to jurisdiction, notwithstanding the original intention that Judge Macdonald should resolve the dispute in a relatively pragmatic, and from the parties’ view at least, relatively cost effective way.  Where things started to go wrong was when the parties decided that a sealed judgment of the District Court was a nullity.  In our view the appellant should have pursued his appeal to the High Court and the respondents should have pursued execution of Judge Macdonald’s judgment.  But that did not happen.

[27]     The parties decided to enter into settlement negotiations with the assistance of Judge Macdonald.  The Rules of the District Court permit that.  The parties also agreed that if settlement could not be reached Judge Macdonald could hear and determine the matter notwithstanding that he had presided over the settlement negotiations.  That course is permitted by r 438(2).  Certainly the Judge considered himself acting in a judicial capacity because he gave his decision in the form of a judgment and, as indicated earlier, he acknowledged the susceptibility of the judgment to an appeal. 

[28]     Regrettably, by their conduct, the parties have precluded argument that the decision is in reality an ordinary judgment of the District Court. 

[29]     We therefore turn, as the High Court Judge and Associate Judge did, to consider whether the agreement is capable of being construed as an agreement to arbitrate and whether there are any public policy reasons precluding enforcement. 

[30]     It is perfectly plain that the parties had a dispute which they wanted resolved and that they agreed it should be resolved by Judge Macdonald.  They identified the issues they wanted determined and agreed that the Judge would “determine the matter as arbitrator of the dispute.”  They also agreed that the Judge’s determination would be binding.  Such an agreement is plainly adequate to constitute an arbitration agreement.  The issue then is whether Judge Macdonald was precluded from acting in the intended capacity.

[31]     We reject the argument on behalf of the appellant that Judge Macdonald could not act as an arbitrator because power to do so was not accorded by the District Courts Act.  The Judge’s authority was derived, not from the Act, but from the agreement of the parties.  It is simply the case that the Judge’s status as a District Court Judge conferred on the parties the benefit of public funding and public facilities for the resolution of their dispute. 

[32]     It is not customary for Judges to conduct arbitrations but it is not unknown.  Any countervailing policy reasons could only relate to the inexpediency of Judges being amenable to personal litigation at the suit of a disaffected party.

[33]     Some of the members of this Court recall occasions, albeit rare, when Judges have, with the agreement of the parties, resolved disputes in an arbitral rather than strictly judicial process.  The eschewing of formal procedures and some rules of evidence, as well as the ability to settle facts by a more inquisitorial process than a court action allows, has sometimes been perceived by the parties as advantageous. 

[34]     The process is more systematised in, for example, the United Kingdom Technology and Construction Court.  Judges of that Court have long been arbitrators.  Judges of the Commercial Court may also be appointed as arbitrators.  The Judges of each of those Courts are High Court Judges. 

[35]     In the United Kingdom there exists a statutory basis for the appointment of a Judge of the Technology and Construction Court to sit as an arbitrator.  That is s 93 of the United Kingdom’s Arbitration Act 1996.  There is, as one would expect, an established protocol for the acceptance and discharge of arbitral responsibilities.  It is the absence of such procedures rather than any public policy consideration which should make New Zealand judges circumspect about dealing with matters in an arbitral way.  But in principle, we do not see s 10(1) of the Arbitration Act 1996 engaged by a Judge performing an arbitral function in the context of a publicly provided and funded court.

Conclusion

[36]     Although, as we have indicated, this litigation ought to have proceeded on the basis that Judge Macdonald’s decision was a judgment of the District Court, we have been constrained by the parties’ unwillingness to approach the matter on that basis.  In the circumstances we have considered the matter on the alternative basis adopted by the Associate Judge and Judge in the High Court.  Although it was somewhat unusual, we do not think it was an impermissible approach.  Certainly the unfortunate background to their decisions indicates a need for a robust process. 

[37]     The onus is on the appellant to satisfy us that Chisholm J’s decision was wrong.  For the reasons we have given we are not satisfied that the onus has been discharged.  The appeal is accordingly dismissed with costs to the respondents of  $3,000 and usual disbursements.

Solicitors:
Michael Parker, Queenstown for Appellant
Cruickshank Pryde, Invercargill for Respondents