Dispute Resolution

High Court’s new specialist commercial panel starts work today

The Senior Courts (High Court Commercial Panel) Order 2017 received Royal Assent on 7 August 2017.   Clause 5 authorises the Chief High Court Judge to assign panel judges to deal with specialist commercial disputes and applications under the Arbitration Act 1996 where the sum at issue is not less than $2 million. 

On 10 August 2017, the Chief High Court Judge announced the establishment of a specialist judicial commercial panel, comprising Justices Venning, Heath, Courtney, Wylie, Katz and Muir in Auckland, and Justices Mallon and Dobson in Wellington.

The order came into force today, 1 September.

This is great news for arbitration practitioners; this is a strong bench with considerable arbitration expertise; Justice Venning’s decision in the Danone v Fonterra case springs to mind, and Justice Heath has been a long time member and former Council member of AMINZ.

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Direct Payment Agreements and s292 – Ebert Construction v Sanson

There is growing acceptance across the construction industry, particularly among financiers and owners, that payments need to flow down the contract chain to those actually doing the work.  This has seen a growth in construction contracts requiring head contractors to prove payment of their subcontractors, if cashflow is to continue; and in financiers also requiring proof of such payment.  Similarly, head contractors are seeking direct payment obligations from project financiers to protect themselves against developer default.

The difficulty with these arrangements is that, in the event of insolvency, preferring one subcontractor over other unsecured creditors (for the obvious reason that they are needed on site), thereby diverting those payments out of the creditor pool, runs the risk of being voidable insolvent transactions in terms of s292 of the Companies Act 1993.

The recent decision of the Court of Appeal in Ebert Construction v Sanson clarifies that position.  The attached article was published in the September edition of LawTalk and has been submitted to the International Bar Association’s publication Construction Law International.

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The Arbitration Amendment Bill 2017

Submissions to the Electoral and Justice Select Committee closed on 22 June 2017.  I will post a copy of the AMINZ submissions once they have been published by the Select Committee.  We will certainly be making oral submissions, once the dates have been notified.

In the interim, here is a copy of an article written by Jeremy Johnson and me published in the July edition of LawTalk, the New Zealand Law Society’s publication, outlining the changes proposed in the Bill.

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AMINZ Arbitration Rules approved by Council

After more years and considerably more work than anticipated, on 22 June 2017 the AMINZ Council approved the AMINZ Arbitration Rules.

The Rules are intended for both domestic and international arbitrations, and they therefore tread a fine line between offering clarity, flexibility and apparent simplicity while addressing some of the more complex issues high value international arbitration requires.  To that end, the drafting committee has been ruthless in monitoring international trends in arbitration rules and adopting those concepts which seemed to us to be most relevant.  There have been a number of rules published since this project started (notably, the LCIA, SIAC and ICC); we have assessed each to consider how and to what extent they contain procedures which may be of benefit.

We hope that the new Rules will find favour, providing a New Zealand version of what is state of the art internationally while being user friendly.  An Emergency Arbitrator Protocol has also been provided for those wanting interim measures and/or preliminary orders without adopting the Rules and, of course, avoiding recourse to the High Court.

A PDF is available online, and hard copies will be published later in the year.

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Arbitrator appointment notices under clause 1 – a word of warning!

Where parties are unable to agree on the appointment of their arbitrator, or there is default in complying with the agreed procedure, clause 1(4) of the Second Schedule to the Arbitration Act 1996 provides:

… any party may, by written communication delivered to every such party, arbitrator or third party, specify the details of that person’s default and propose that, if that default is not remedied within the period specified in the communication (being not less than 7 days after the date on which the communication is received by all of the persons to whom it is delivered), a person named in the communication shall be appointed …

The normal practice is, once there is clear disagreement over the appointment of an arbitrator (usually within a time period specified in the agreement to arbitrate) either party may try to pre-empt further disagreement by naming their preferred arbitrator and giving the other party not less than seven days to respond.

In Body Corporate 200012 v Naylor Love Construction Limited Justice Muir was not convinced that there was in fact any disagreement or default, and he was not minded to follow the longstanding reasoning established by Justice Hansen in Hitex Plastering Ltd v Santa Barbara Homes Ltd [2002] 3 NZLR 695.  Interestingly, both parties issued notices against each other in the Naylor Love case – one proposing retired Justice Rodney Hansen QC and the other a Mr Walton, none other than the author of this post.

Regrettably, we both missed out on the appointment when the parties settled on Mr Tómas Kennedy-Grant QC.

Such is life!

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Arbitration Amendment Bill 2017 passes first reading

The Arbitration Amendment Bill 2017 (No 245-1) completed its first reading yesterday, and has been referred to the Justice and Electoral Committee.

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Related Services under the Construction Contracts Act 2002

The definition of construction work under section 6 of the Construction Contracts Act 2002 has, with effect from 1 September 2016, been extended to include related services, which are defined in the new subsection (1A) as including:

(1A)   construction work includes –

(a)    design or engineering work carried out in New Zealand in respect of work of the kind referred to in subsection (1)(a) to (d) and (f):

(b)    quantity surveying work carried out in New Zealand in respect of work of the kind referred to in subsection (1)(a) to (g)

For architects, engineers and quantity surveyors, the protections for progress payments under the Act now apply.  Similarly, the provisions relating to adjudicating disputes under their appointment agreements also apply.

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AMINZ replaces the High Court as the default appointing body for arbitrators

One of the changes brought in by the Arbitration Amendment Act 2016 was the substitution of  “the appointed body” for the High Court in Article 11 of Schedule 1 of the Act.  The appointed body was to be a suitably qualified body appointed by the Minister of Justice.  On 2 March 2017, Hon Mark Mitchell, the Associate Minister of Justice, appointed AMINZ as that body.

In practical terms, this will mean that in those rare occasions where the parties agree to any disputes or disagreements being arbitrated, but fail to agree on their arbitral tribunal, AMINZ will make the appointment for them.  Under the new AMINZ Appointment Process, before the appointment is made, the Executive Director or the President (as the case may be) will consult with members of the Appointments Panel to ensure that the best person is appointed for the dispute.

Appointing AMINZ to this role is important as it ensures that the best arbitrator determines the dispute on a robust and reasonably transparent basis (baring in mind the confidential nature of arbitration following the 2007 Amendment); and it also recognises the role that AMINZ plays in dispute resolution more generally.

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Court of Appeal considers payment claims, again …

On 3 February 2017, the Court of Appeal released its decision in the case of CJ Parker Construction Ltd (in liq) v Ketan [2017] NZCA 3.

Observing that the consequences for not complying with the scheme under section 23 of the Construction Contracts Act 2002 may be draconian, Justice Toogood observed that “a pragmatic, common sense and contextual approach” was required when considering the validity of a payment claim in terms of section 20.  More critically, the Court of Appeal has perhaps thrown a lifeline to owners who are unable to provide a valid payment schedule for an amount less than claimed, if the payment claim itself provides insufficient information.

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Sir David Williams QC

It was with great pleasure that I learned this morning that David Williams QC, leading member of Bankside Chambers and former President of AMNZ, was to be appointed a Knight Companion of the New Zealand Order of Merit (KNZM); Derek Firth (another former President of AMINZ) appointed a Member of the New Zealand Order of Merit (MNZM); and AMINZ member, David Hosking, a Queen Services Medal (QSM).

Richly deserved recognition on all counts.

AMINZ Press Release

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