Pokeno Village Holdings Limited v Pokeno Nine Limited [2019] NZHC 2358 (18 September 2019)

JUDGMENT OF GAULT J

This judgment was delivered by me on 18 September 2019 at 4.00 p.m. pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Solicitors:

Mr C R Andrews and Mr K T O’Halloran, McVeagh Fleming, Auckland Mr S J Tee, Morton Tee Ltd, Takapuna

Mr B M Stewart, Simpson Western, Auckland

POKENO VILLAGE HOLDINGS LTD v POKENO NINE LTD & ORS [2019] NZHC 2358 [18 September 2019]

[1] The plaintiffs seek summary judgment on their claim for specific enforcement and liquidated damages in relation to alleged breach of covenants relating to the Gateway Business Park in Pokeno.

[2] The defendants filed appearances protesting jurisdiction on the basis of an arbitration clause in the relevant covenants. The plaintiffs have applied for orders setting aside the appearances under protest. The parties agree that the protests need to be resolved before the summary judgment application can proceed.

Issue

[3] The issue for determination is whether steps taken by the defendants in the proceeding prior to filing their notices of appearance under protest amount to submission to the jurisdiction of the Court. The parties agree that the issue is confined to submission to jurisdiction, waiver and estoppel – not the merits of the dispute – and can be dealt with on the papers.

Steps taken by the defendants in the proceeding

[4] The steps taken by the defendants prior to filing their notices of appearance under protest are not in dispute:

(a) On 23 May 2019 the first and second defendants filed a memorandum of counsel (unsigned) informing the Court of their position that they considered they were entitled to respond against the claim filed against them in a final form and, in view of the first plaintiff’s pending application to seek leave to amend, that they proposed to do so after determination of the application for leave to amend and therefore filed that memorandum to preserve their position in the interim.

(b) On 24 May 2019 the first plaintiff and third defendant filed a joint memorandum seeking directions by consent adjourning the summary judgment application against the third defendant, extending time for the third defendant to file any intended notice of opposition and affidavit
in support, timetabling reply affidavits, and recording the third defendant’s consent to leave to join the second plaintiffs.

(c) On 27 May 2019 by email to the registry, counsel for the first plaintiff and the first and second defendants requested a one week adjournment to enable counsel for the first defendant to obtain instructions from his client, whose principal was travelling abroad at the time.

(d) On 31 May 2019 counsel for the first plaintiff and the first and second defendants filed a joint memorandum on similar terms to the joint memorandum filed by the first plaintiff and third defendant on 24 May 2019.

Legal principles

Article 8 of Schedule 1 of the Arbitration Act 1996 (the Act)

[5] Article 8 corresponds in all relevant respects to the Model Law on International Commercial Arbitration adopted by UNCITRAL. It states:

8 Arbitration agreement and substantive claim before court

(1) A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting that party’s first statement on the substance of the dispute, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative, or incapable of being performed, or that there is not in fact any dispute between the parties with regard to the matters agreed to be referred.

(2) Where proceedings referred to in paragraph (1) have been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.

[6] Article 8 is mandatory. If it is determined that article 8 applies, the Court shall stay the proceeding and refer the parties to arbitration.

[7] In determining whether there has been a statement on the substance of the dispute this Court should focus on whether a particular party has elected to submit the substantive dispute to the jurisdiction of the Court.

[8] A party may make a first statement on the substance of the dispute in a variety of ways, some of which vary depending on whether the party seeking the stay is the plaintiff or defendant. There can be no general prescription.

Rule 5.49 of the High Court Rules 2016

[9] Rule 5.49(1) provides that a defendant who objects to the jurisdiction of the Court to hear and determine the proceeding may, within the time allowed for filing a statement of defence and instead of so doing, file and serve an appearance stating the defendant’s objection and the grounds for it.

Waiver

[10] The plaintiffs rely on, and the defendants do not dispute, the classic description of waiver by Lord Denning MR in W J Alan & Co Ltd v El Nasr Export and Import Co:

The principle of waiver is simply this: If one party, by his conduct, leads another to believe that the strict rights arising under the contract will not be insisted upon, intending that the other should act on that belief, and he does act on it, then the first party will not afterwards be allowed to insist on the strict legal rights when it would be inequitable for him to do so.

Promissory estoppel

[11] In relation to promissory estoppel, the plaintiffs rely on the statement in Laws of New Zealand, of which it is sufficient to state only part:

When one party has made a clear and unequivocal promise or assurance by words or by conduct to another party which was intended to affect the legal relations between the parties and to be acted on accordingly, then once the promisee has taken the promisor at his or her word and acted on the promise, the promisor is bound by it.

Submissions

[12] Mr Andrews for the plaintiffs submits that the defendants cannot rely upon article 8 because:

(a) they have already submitted to the jurisdiction of the Court and their notices of appearance came too late as a result of prior steps taken and/or statements made by them in this Court; and/or

(b) by virtue of their prior actions and/or statements and actions consequently taken by the plaintiffs in reliance on those, each of the defendants has waived its entitlement to rely on the arbitration agreement in confronting the plaintiffs’ claims or are estopped from doing so.

[13] Mr Andrews submits that, in order to give effect to r 5.49’s broader scope to capture all grounds of jurisdictional objection while recognising the superior legislative effect of article 8, where a defendant takes steps in a Court proceeding intimating some intention to oppose or defend the claim on the merits without first or contemporaneously filing an appearance under protest to jurisdiction, this should be treated as a submission to the Court’s jurisdiction or a waiver of that party’s entitlement to rely upon any applicable arbitration agreement – particularly where the opposing party has taken steps in the proceeding in reliance upon the indication given by the first party.

[14] Mr Andrews submits that the defendants could hardly have conveyed a more clear intention to fight in this Court than when they each signed respective consent memoranda agreeing to the Court allowing the second plaintiffs to join the fight as additional parties, and for all plaintiffs then to continue to pursue summary judgment application on an amended statement of claim directly against all three defendants. Further, the defendants also joined in seeking directions by consent setting out a
timetable for them to file respect of notices of opposition and affidavits in answer to the plaintiffs’ summary judgment application. The defendant’s actions in this regard can only sensibly be interpreted as an expression by them of an intention to oppose the plaintiffs’ claim in this proceeding on the merits. If defendants take steps that are necessary or useful only if jurisdiction is conceded, then by those steps the defendants submit to the jurisdiction.

[15] The defendants submit that their memoranda filed in this proceeding did not constitute a “statement on the substance of the dispute” in terms of article 8, nor involve any representation giving rise to waiver or any representation and reliance giving rise to estoppel.

Discussion

[16] For the purposes of the application to set aside, the plaintiffs accept that:

(a) there is an otherwise valid and enforceable arbitration agreement between the parties; and

(b) notwithstanding that the defendants have not yet set out or provided any particulars of grounds on which they purport to dispute the plaintiffs’ claims, the defendants have raised a qualifying dispute for the purposes of article 8 of Schedule 1 of the Act.

[17] I do not consider that the defendants’ participation in initial case management in this proceeding amounted to a statement on the substance of the dispute in terms of article 8. Giving effect to r 5.49 does not justify a departure from this Court’s usual approach to determining whether there has been a statement on the substance of the dispute in terms of article 8, namely whether a party has elected to submit the substantive dispute to the jurisdiction of the Court. It would be inconsistent with one of the purposes of the Act, namely encouraging the use of arbitration as an agreed method of resolving commercial and other disputes, to give “statement on the substance of the dispute” a broader interpretation. Also, in interpreting article 8, it is important not to undermine its purpose by concentrating on the particular manner in which court proceedings are conducted and case managed in New Zealand.

[18] This case does not involve an application for interim relief, where the cases show that the position may depend on whether the application for interim relief is in anticipation or in aid of arbitral proceedings.

[19] The plaintiffs rely on the judgment of Associate Judge Doogue in Stockco Ltd v Denize, which cited a passage from McGechan on Procedure:

If a defendant takes a step that is necessary or useful only if jurisdiction is conceded, then by that step a defendant submits to the New Zealand jurisdiction: Equiticorp Industries Group Ltd (in stat man) v Hawkins (No 2) [1991] 3 NZLR 700 (HC), at 715-717. This includes taking a step in response to a summary judgment application…

[20] In Stockco the defendants had filed a notice of opposition to an application for summary judgment. “Necessary or useful only if jurisdiction is conceded” needs to be understood in context. Here the defendants have not filed any notice of opposition.

[21] Participation in case management steps may or may not involve a statement on the substance of the dispute for the purposes of article 8. Here, I consider it did not. The defendants did no more than an address timetabling and consent to joinder of the second plaintiffs. Consenting to an adjournment of an initial call of a summary judgment application was hardly a substantive step. While consenting to a timetable for notices of opposition may have suggested the defendants intended to oppose, I do not consider in the circumstances of this case that it amounted to an election to submit the substantive dispute to the jurisdiction of the Court so as to be a “statement on the substance of the dispute”. It was agreeing the timeframe for their substantive response. The delay was only a month. Nor did consenting to joinder of the second plaintiffs and an amended statement of claim amount to such an election in the circumstances.

The defendants were entitled to receive the amended statement of claim before taking a substantive step.

[22] For essentially the same reasons, I do not consider that waiver or promissory estoppel are made out. The defendants did not make a representation electing to submit to the jurisdiction. Nor was there particular reliance beyond extending time and paying a filing fee for the amended statement of claim. The need for joinder and an amended statement of claim reflected the plaintiffs’ view that it would simplify the claims under the Property Law Act 2007. It was signalled before the first call of the summary judgment application.

[23] The plaintiffs’ desire for prompt resolution is understandable. However, I do not consider the defendants’ cooperative approach to initial consent orders should be treated suspiciously. The plaintiffs could have referred the dispute to arbitration at the outset. As it is accepted there is a qualifying dispute for the purposes of article 8, I expect the parties will be able to proceed as expeditiously in an arbitration as they could by way of summary judgment in this Court. Also, insofar as the plaintiffs incurred wasted costs in the proceeding as a result of the timing of the defendants’ protests, that may be considered under r 14.7.

[24] The defendants submit that if the Court finds they have not submitted to the jurisdiction, the proceedings must not only be stayed in terms of article 8 but must also be dismissed in terms of r 5.49. I consider the reference to stay in article 8 is effectively implemented in the High Court Rules by dismissal in terms of r 5.49 (6)(a).

Result

[25] The application is dismissed.

[26] The proceeding is dismissed under r 5.49 (6)(a) in favour of arbitration.

[27] The defendants are entitled to costs subject to considering whether r 14.7 applies. If costs cannot be agreed, I will receive brief memoranda within 14 days.

Gault J