... The parties have entered into ... an agreement ... which may give rise to disputes. They want those disputes to be decided by a tribunal which they have chosen, commonly on the grounds of such matters as its neutrality, expertise and privacy, the availability of legal services at the seat of arbitration and the unobtrusive efficiency of its supervisory law ...
If one accepts that this is the purpose of an arbitration clause, its construction must be influenced by whether the parties, as rational businessmen, were likely to have intended some of the questions arising out of their relationship were to be submitted to arbitration and others were to be decided by the national courts ... one would need to find very clear language before deciding they must have had such an intention.
Lord Hoffman in Premium Nafta Products Limited v File Shipping Company Limited [2007] UKHL 40 at [6]-[7]
Introduction
The above excerpt from the Fiona Trust case would appear to be unexceptional, and consistent with the purpose of encouraging the use of arbitration in section 5(a) of the Arbitration Act 1996. A similar approach was taken by the UK High Court in 2021 in the catchily named case of NWA & FSY v NVF, RWX & KLB [2021] EWHC 2666, when it held that questions of compliance with preconditions to arbitration were matters to be consider by the arbitral tribunal, rather than jurisdictional matters amenable to court supervision.
It is in this context that the line of cases culminating in the Court of Appeal decision in SRG Global Remediation Services v BC 197281 [2022] NZCA 518, in which the court found that the wording of NZS3910:2013 "lends support" to the view that arbitration is only available under that form of contract during the construction period. It is regrettable that Lord Hoffman's comments in Fiona Trust do not appear to have been brought to the Court's attention in that case.
In that context, it is worth considering the actual wording of clause 13 in NZS3910:2013.
NZS3910:2013 - The Previous Disputes Resolution Procedure
The starting point is that every dispute or difference under the construction contract is to be referred to the engineer no later than 1 month after the final payment schedule or an adjudicator's determination (see clause 13.2.1). Two issues arise - (1) under section 25 of the Construction Contracts Act 2002, a dispute under a construction contract can be referred to adjudication at any time, notwithstanding that a final payment schedule have been issued; and (2) all disputes must go to the engineer in the first instance.
This position is consistent with clause 13.4.1 which provides for disputes to be referred to arbitration only if a party is dissatisfied with the engineer's decision or the engineer has failed to issue a decision within the prescribed period, and that party issues a notice of arbitration within one month of such time period. The position in relation to adjudication determinations is not so clear, if one accepts that the engineer is effectively functus officio on the expiry of one month after the final payment schedule.
To cap the time limited availability of arbitration under NZS3910:2013, decisions of the engineer and adjudication determinations become final and binding after 3 months and 1 month respectively, and cannot be challenged, including in arbitration, after those time periods have expired (see clause 13.1.1).
It is in that context that the Court of Appeal reached its decision in SRG Global Remediation Services and the Supreme Court declined leave to appeal. Following the House of Lords decision in the Fiona Trust and the UK High Court decision in NWA, this issue could have been determined in arbitration, but the unhappy wording in section 13 of NZS3910:2013 would remain.
In practical terms, most parties seem to be happy to proceed with arbitration in any event, and referring the dispute over payment under the Construction Contract Act to court did not seem to result in any procedural benefit to the Body Corporate in that case.
NZS3910:2023 - Disputes Revised
The disputes procedure in the 2023 edition of NZS3910 has been completely revised.
The role of the engineer has been dis-established in favour of a contract administrator and an independent certifier, which issues decisions and final decisions under clause 6.4. There is no provision for such decisions to become legally final and binding, and an independent certifier's decision and/or final decision is not a precondition to arbitration.
References to adjudication under the Construction Contracts Act have not been carried over to the new form.
The new clause 13 simply provides for good faith negotiation (clause 13.1.1), optional mediation (clause 13.2) and arbitration (clause 13.3). The only arguable precondition to taking any steps in dispute resolution is good faith negotiation between senior members of each party.
Under clause 13.3.1, the parties agree to refer any dispute or difference between them to arbitration, including, but not as a pre-requisite, a final decision of the independent certifier. Not long stop date or time bar has been included in clause 13.3.2
Comment
While the High Court and Court of Appeal reasoning in SRG may be questionable in the context of Lord Hoffman's comments in the Fiona Trust case, the result is hardly surprising in the context of the unhappy wording of the previous editions of NZS3910.
The new edition (NZS3910:2023) clarifies that all disputes or differences are to be referred to arbitration; and the reasoning in NWA, and article 16 in Schedule 1 to the Arbitration Act 1996, remove any doubt that issues regarding compliance with conditions precedent and jurisdiction are matters for the arbitral tribunal to determine.