Case updates

Napier City Council v H2O Management (Napier) Ltd [2020] NZHC 1913

This case relates to an appeal from a domestic arbitration under clause 5 of Schedule 2 of New Zealand’s Arbitration Act 1996, which allows the Court to intervene in instances where there is an appeal on the basis of a question of law.

The relevant contract between the parties included a dispute resolution clause referring the parties to arbitration. The arbitration was undertaken in two parts, and both were subject of the appeal.

Napier City Council contended that there was an error by the arbitrator pursuant to clause 5 of Schedule 2 of New Zealand’s Arbitration Act 1996. The section requires that the High Court not grant leave unless a question of law arises and the determination of the question could substantially affect the rights of one or more of the parties. If that threshold is met, the court has a general discretion to grant leave to appeal.

The application of this discretionary provision is guided by eight considerations outlined by the Full Court of the Court of Appeal in Gold & Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 (CA). Those considerations are:

  • the strength of the challenge/nature of point of law;
  • how the question arose before the arbitrators;
  • the qualifications of the arbitrators;
  • the importance of the dispute to the parties;
  • the amount of money involved;
  • the amount of delay involved in going through the courts;
  • whether the contract provides for the arbitral award to be final and binding;
  • whether the dispute before the arbitrators is international or domestic.

Here, the High Court found that the arbitrator adopted an orthodox approach to contractual interpretation, and referred to a number of well established authorities that were relied upon by both parties’ submissions. The limited use of this section by the courts in New Zealand and the judicial respect for the autonomy of the arbitration process has been reaffirmed in this case.

Milk New Zealand (Shanghai) Co. Limited v Miraka Limited [2019] NZHC 2713

The parties entered into a supply and purchase agreement for UHT milk, and a dispute arose as to which party was responsible for the failure to meet the minimum obligations under the agreement. The parties commenced arbitration and Milk New Zealand challenged the award made against them on the basis of an error of law by the arbitrator because, among other things, they implied terms in a manner inconsistent with legal principles.

This case also explored the application of clause 5 of Schedule 2 of New Zealand’s Arbitration Act 1996. The court found that when hearing application for leave to appeal from arbitral awards, the court must give careful consideration to whether the real matter in issue is the meaning of the contract, or the facts upon which that meaning is wholly or partly based.

In this case, as with Napier City Council, the court find the arbitrator did not make an error of law, and schedule 2 of the Arbitration Act did not apply to give the court discretion to grant leave to appeal.

Other key developments

New Resolution Institute Arbitration Rules 2020

On 1 January 2020, the Resolution Institute Arbitration Rules 2020 took effect. These updated rules are to be used in any contract entered into after 1 January 2020 that reference Resolution Institute or IAMA Arbitration Rules.

While continuing to closely follow UNCITRAL, the new rules provide updated provisions that include when they operate, the commercial relationship with the arbitrator and how joinder of subsequent disputes between the same parties will be dealt with. They strive for consistency and complementarity with New Zealand’s Arbitration Act 1996.

Some key aspects of the new rules are below:

  • providing greater flexibility in hearing procedures (Rules 27 to 28) by removing previous constraints on whether a hearing and discovery occur on the basis of the amount in dispute;
  • removing the power to appoint experts without the parties consent (Rule 29);
  • improving immunity for arbitrators and nominee arbitrators (Rule 45);
  • providing that the law of the arbitration agreement is the law of the contract – a controversy commonly arising in international law (Rule 35.4); and
  • providing complete flexibility in relation to fees and encourage arbitrators and parties to make their own arrangements (Rule 41.1); and
  • the rules (at Rules 23 and 46) attempt to fill gaps where the New Zealand Arbitration Act 1996 does not apply, with respect to confidentially and pleas as to jurisdiction.

The rules provide a sound base for practices and procedures that are being adopted by arbitrators.