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DOWNER CONSTRUCTION (NZ) LTD V SILVERFIELD DEVELOPMENTS LTD (FORMERLY REDWOOD GROUP NO 8 LIMITED) HC AK CIV2005-404-6800 [2006] NZHC 60 (13 February 2006)

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
                                                                     CIV2005-404-6800



              BETWEEN                      DOWNER CONSTRUCTION (NEW
                                           ZEALAND) LIMITED
                                           Plaintiff

              AND                          SILVERFIELD DEVELOPMENTS
      
                                    LIMITED (FORMERLY REDWOOD
                                           GROUP NO 8 LIMITED)
   
                                       Defendant


Hearing:      8 February 2006

Counsel:      D A R Williams QC and C J Booth for
Plaintiff
              C M Meechan for Defendant

Judgment:     13 February 2006 at 4 pm


                RESERVED JUDGMENT OF
RANDERSON J




Solicitors:   Kensington Swan, Private Bag 92101, Auckland
              Bell Gully, PO Box 4199, Auckland

Counsel:
     D A R Williams, QC, PO Box 405, Shortland Street, Auckland

DOWNER CONSTRUCTION (NZ) LTD V SILVERFIELD DEVELOPMENTS LTD (FORMERLY
REDWOOD GROUP NO 8 LIMITED) HC AK CIV2005-404-6800 13 February 2006

Introduction


[1]    The plaintiff seeks leave to appeal on
points of law arising from three partial
awards delivered by Mr T W H Kennedy-Grant QC in an arbitration arising from a
dispute between
the parties over the construction of 65 townhouses at 3 Wagener
Place, St Lukes.


[2]    The first partial award was made on 26
August 2005; the second on
3 November 2005 and the third on 16 November 2005. Three separate applications
have been made by the plaintiff
for leave to appeal under clause 5(1)(c) of the
Second Schedule of the Arbitration Act 1996.


Limitation Point


[3]    Ms Meechan
for the defendant submitted as a preliminary point that the
applications for leave to appeal were out of time. In essence, she submitted
the
applications were out of time because the provisions of the First and Second
Schedules of the Arbitration Act required leave
to be obtained and an appeal filed
and served within three months of the date on which the plaintiff received the award.
She based
that submission on clause 5(8) of the Second Schedule of the Act which
imports the three month time limit which applies to an application
for setting aside
an award under clause 34(3) of the First Schedule to the Act.


[4]    In contrast, Mr Williams QC for the plaintiff
submitted that on the proper
construction of the Act and the High Court Rules, it is only necessary to file and
serve an application
for leave within the three month period. He also submitted that,
if leave were granted, it was not necessary to file any separate
notice of appeal
thereafter.


[5]    It is common ground that if Ms Meechan's submission is correct, the three
month period for
appealing the first and second partial awards has now gone by and
that the three month period for appealing the third partial award
will expire on

16 February 2006. On the other hand, if Mr Williams' argument is correct, there is
no doubt that all three applications
for leave to appeal were filed and served within
the three month period from the dates of the respective awards.


[6]    There is
no authority directly in point although I accept Ms Meechan's
submission that the purposes of the 1996 Act include encouraging arbitration
and
restricting the scope of intervention by the court in arbitral awards: Downer-Hill
Joint Venture v Government of Fiji  [2005] 1 NZLR 554 at 560 referring at [31] to the
decision of the Court of Appeal in Opotiki Packing and Coolstore Limited v Opotiki
Fruitgrowers Co-operative
Limited (In Receivership)  [2003] 1 NZLR 205 at 220.


[7]    Essentially, the determination of the issue is a matter of construction of the
Arbitration Act combined with the
High Court Rules.


[8]    There are two routes to challenge the award of an arbitral tribunal under the
Act. The first is an application
to set aside the award under article 34 of the First
Schedule of the Act. The second is to appeal to this court on questions of law
under
clause 5 of the Second Schedule. Clause 5 provides:

       5   Appeals on questions of law--

       (1) Notwithstanding anything
in articles 5 or 34 of the Schedule 1, any
       party may appeal to the High Court on any question of law arising out of an
  
    award--

           (a)    If the parties have so agreed before the making of that award; or

           (b) With the consent
of every other party given after the making of
           that award; or

            (c)   With the leave of the High Court.

 
     (2) The High Court shall not grant leave under subclause (1)(c) unless it
       considers that, having regard to all the circumstances,
the determination of
       the question of law concerned could substantially affect the rights of one or
       more of the parties.

       (3) The High Court may grant leave under subclause (1)(c) on such
       conditions as it sees fit.

       (4) On the determination
of an appeal under this clause, the High Court
       may, by order,--

           (a)    Confirm, vary, or set aside the award;
or

            (b)    Remit the award, together with the High Court's opinion on the
            question of law which was the
subject of the appeal, to the arbitral
            tribunal for reconsideration or, where a new arbitral tribunal has been
     
      appointed, to that arbitral tribunal for consideration,--

       and, where the award is remitted under paragraph (b), the
arbitral tribunal
       shall, unless the order otherwise directs, make the award not later than 3
       months after the date
of the order.

       (5) With the leave of the High Court, any party may appeal to the Court of
       Appeal from any refusal of
the High Court to grant leave or from any
       determination of the High Court under this clause.

       (6) If the High Court
refuses to grant leave to appeal under subclause (5),
       the Court of Appeal may grant special leave to appeal.

       (7) Where
the award of an arbitral tribunal is varied on an appeal under this
       clause, the award as varied shall have effect (except
for the purposes of this
       clause) as if it were the award of the arbitral tribunal; and the party relying
       on the award
or applying for its enforcement under article 35(2) of the
       Schedule 1 shall supply the duly authenticated original order of
the High
       Court varying the award or a duly certified copy.

       (8) Article 34(3) and (4) of the Schedule 1 apply to an
appeal under this
       clause as they do to an application for the setting aside of an award under
       that article.

     
 (9) For the purposes of article 36 of the Schedule 1,--

            (a)    An appeal under this clause shall be treated as an application
for
            the setting aside of an award; and

            (b) An award which has been remitted by the High Court under
   
        subclause 4(b) to the original or a new arbitral tribunal shall be treated
            as an award which has been suspended.

[9]    The Act and the High Court Rules draw a distinction between appeals under
clause 5(1)(a) and (b) on the one hand and an appeal
under clause 5 (1)(c) on the
other. Appeals under clause 5 (1)(a) and (b) depend upon the agreement of the
parties (either before
or after the making of an award) and do not require the leave of
the court. But if the parties have not agreed to the High Court
determining an appeal
on any question of law, the leave of this Court is required under clause 5(1)(c).
Leave may not be granted
unless the court considers that, having regard to all the
circumstances, the determination of the question of law could substantially affect the
rights of one or more
of the parties. If leave is granted, it may be given on such
conditions as the court sees fit.

[10]    Critically for present purposes,
clause 5(8) of the Second Schedule imports
article 34(3) and (4) to the First Schedule. These are to "apply to an appeal under
this
clause [5] as they do to an application for the setting aside of an award under
that article".


[11]    Article 34(4) is not relevant
for the present purposes but article 34(3)
provides:

        An application for setting aside may not be made after 3 months have
        elapsed from the date on which the party making that application had
        received the award or, if a request had been
made under article 33, from the
        date on which that request had been disposed of by the arbitral tribunal. This
        paragraph
does not apply to an application for setting aside on the ground
        that the award was induced or affected by fraud or corruption.

[12]    There is scope for ambiguity in importing the time limit for an application to
set aside under article 34 into the appeals
regime under clause 5 of the Second
Schedule. The ambiguity arises from the two different types of appeal envisaged by
clause 5(1).
Where there is agreement under clause 5(1)(a) or (b), no leave is
required and the initiating document required by the Rules must
be filed and served
before the period of three months has elapsed from the date on which the party
seeking to appeal has received
the award (or, if a request has been made under article
33, from the date on which that request has been disposed of by the arbitral
tribunal).
But how is article 34(3) to be applied to an appeal which requires leave under clause
5(1)(c)? Is it sufficient for the
application for leave to be filed and served within the
three month period or is the intending appellant required to obtain leave
within the
three month period and file some additional form of notice of appeal within that
period as well?


[13]    Guidance may
be obtained from Part 17 High Court Rules which was
introduced with effect from 1 August 2000. Prior to that time, appeals from arbitral
awards under the 1996 Act were regulated by Part 10 of the High Court Rules. Part
17 was introduced to provide a separate regime
for appeals under the 1996 Act.
Under Part 17, appeals under the Act are commenced by originating application.
Rules 879 and 891
draw a distinction between appeals under clause 5(1)(a) or (b) of
the Second Schedule and those which require leave under clause
5(1)(c).

[14]   Rule 879 provides for appeals under clause 5(1)(a) or (b). The plaintiff must
commence the appeal by filing an
originating application in Form 108. Various
procedural rules then apply relating to service of the application, the filing of a
notice of opposition, cross-appeals, the filing of the record and the transcription of
evidence (rr 880 to 890).


[15]   Rule 891
covers applications for leave to appeal where clause 5(1)(c) of the
Second Schedule of the Act applies. In that case, "the plaintiff
must commence the
proceeding by filing an originating application ..." in Form 109. The latter requires
the parties seeking leave
to specify the questions of law, the relief which is sought
and the grounds for the application. Whereas r 879(1) refers to the commencement
of the appeal by filing an originating application, r 891 refers to the commencement
of the proceeding by filing an originating application.
This distinction is probably
explained by the obvious point that an appeal under clause 5(1)(c) cannot proceed
unless and until leave
is granted.


[16]   The important point however is that Part 17 does not contain any provision
for any further document in the nature
of an appeal to be filed after leave is granted.
That is the case for appeals under both r 879 and r 891. The rules which follow
r 891
simply provide for submissions in relation to the leave application (r 892) and for the
granting or refusal of leave (rr 893 and 894). Although under
clause 5(3) of the
Second Schedule of the Act, the court may grant leave on such conditions as it sees
fit, there is no provision
either in the Act or in Part 17 for a direction requiring any
further document by way of appeal to be filed.


[17]   The provisions
of Part 17 in these respects may be contrasted with those in
Part 10 of the High Court Rules which apply to appeals to this Court
under any
enactment other than appeals under the Summary Proceedings Act 1957, the
Arbitration Act 1996, the Bail Act 2000 and appeals
or references to the court by
way of case stated to which Part 11 applies: r 701. The provisions of Part 10 apply
subject to any
express provision in the enactment under which the appeal is brought
or sought to be brought: r 701(3).

[18]   Where an enactment
provides that an appeal may not be brought without
leave, an application for leave must be filed within stated time limits: r 703(1)
and
(2). Importantly, r 703(3) goes on to provide for the bringing of an appeal after leave
is granted:

       The appeal must be
brought--

       (a)    by the date fixed when the decision-maker or the Court grants leave; or

       (b)    if the decision-maker
or the Court fails to fix a date, within 20 working
               days after the grant of leave.

[19]   Rule 704 provides for the
time for bringing an appeal where there exists a
right of appeal without leave. Rules 705 to 709 then contain elaborate provisions
for
the commencement of the relevant time periods, the filing and service of the notice
of appeal and the contents thereof.


[20]
  Rule 430 relating to case management conferences for appeals covers appeals
under both Part 10 and Part 17. The language used in
this rule maintains the
distinction between notices of appeal under Part 10 and originating applications
under Part 17. And, there
is nothing in r 430 which suggests that any further
document by way of appeal is required after leave to appeal is granted on r 891.
In
relation to Part 17, a case management conference is to be held within 15 working
days after the filing of an originating application
under r 879 or within the same
period after leave to appeal is granted under r 891(1): r 430(1). Separate provisions
for appeals
under Part 10 and 17 are also made in r 430(4)(e) and (f) and r 430(6)
and (7).


[21]   Reading the Schedules to the Arbitration
Act and the High Court Rules
together, I conclude that Parliament did not intend to import Article 34(3) of the First
Schedule into
the appeal regime of clause 5 of the Second Schedule to the Act
without appropriate modification to recognise the different types
of appeal envisaged
by clause 5 namely those where the parties agree to permit appeals to this Court on
questions of law and those
where no such agreement exists and leave is required.


[22]   Part 17 of the High Court Rules not only sets up a separate regime
for appeals
under the Arbitration Act but also recognises the distinction between those appeals

which require the leave of this
Court and those which do not. Importantly, and in
contrast to appeals under Part 10, Part 17 does not require any additional document
by way of appeal to be lodged after leave to appeal is granted under r 891. All that is
required is the filing of the originating
application for leave under r 891 and the
supporting affidavit required by r 880 and the service of both documents either
before
or immediately after they are filed: r  882. Form 109 requires the plaintiff to
set out the question of law at issue, the grounds for the appeal and the relief sought.
The need for this
level of detail supports the proposition that no further appeal
document is needed after leave is granted. The appeal is effectively
brought by the
originating application for leave which may later be modified by conditions imposed
on the grant of leave.


[23]
   My conclusions as to the proper construction of the Arbitration Act and the
Rules are also supported by issues of practicality
and workability. An intending
appellant and the Court could be placed under difficult or impossible strictures if Ms
Meechan's submission
were accepted.           On her submission, the originating
application for leave would have to be filed, the court would have to
conduct a
hearing and issue a decision and some further appeal document (not envisaged by the
Rules) would have to be filed and served,
all within the three month period from the
date on which the award was received.          These difficulties would be gravely
exacerbated
if leave were refused by this Court and the intending appellant sought
leave to appeal to the Court of Appeal under clause 5(5) of
the Second Schedule of
the Act. Given current pressures on both this Court and the Court of Appeal,
compliance with the three month
time limit of the manner submitted by Ms Meechan
would likely be impossible to achieve without the court putting aside other work
and
giving priority to applications for leave to appeal of the type at issue in this case.
That cannot have been envisaged by the
legislature.


[24]    I conclude that by filing and serving the applications for leave to appeal
within three months from the date
the awards were received, the plaintiff is within
time.

The Questions of Law


[25]     A number of points of law were raised but,
during the course of argument,
they have narrowed to the following question of law arising out of the second partial
award:

   
     In the particular circumstances of this case did the Arbitrator err in law in
         making an order for specific performance
in the terms set out in the Schedule
         to the Third Partial Award in that:

         (i) The Defendant did not have possession
of the land which was the
             subject of the specific performance order (Second Partial Award, para
             24);


        (ii) The Defendant had no right to sue for the loss suffered by the individual
              unit owners in respect of defects
in their units and resulting damage
              (Second Partial Award, para 35);

         (iii) The only losses suffered by the
Defendant were:

             a.   an unquantified "considerable expense" in endeavouring to
                  determine the nature,
extent and effect of defects in the
                  development;

             b.   an exposure to potential claims by the unit
owners of the
                  development in respect of defects.

             (Second Partial Award, para 34)

[26]     I intend
to grant leave in respect of the identified question of law. In terms of
r 893 of the High Court Rules, where leave to appeal is
granted, the court must not
give reasons for granting leave unless, in the opinion of the court, the circumstances
require it to
do so. I am satisfied that there are no circumstances which require the
court to give reasons for granting leave in this case.


[27]     I also intend to grant leave to appeal in relation to the first and third partial
awards. But I record the acknowledgement
made by Mr Williams QC for the
plaintiff that there are no separate questions of law arising in relation to the first and
third partial
awards. Leave will therefore only be granted to the extent that those
awards are or may be consequentially affected by the determination
of the question
of law identified in relation to the second partial award.

[28]     Ms Meechan for the defendant expressed a concern
that the Arbitrator's
finding in the first partial award, in which he rejected the plaintiff's submission that
payment certificate 13 and the related formal decision
were rendered invalid by any
or all of the factors identified in para [35] of the plaintiff's second amended
statement of claim,
should not be subject to challenge on appeal to this Court. I do
not consider it appropriate to constrain any potential effect on
the Arbitrator's
findings in relation to payment certificate 13 which may be consequential upon the
outcome of the appeal on the
identified question of law in respect of the second
partial award. That is because the Arbitrator has reserved his decision on whether
he
should open up, review and revise the decision of the engineer in relation to payment
certificate 13. It will be a matter in due
course for the court to decide what, if any,
consequential effects there may be in relation to the first and third partial awards
and
what relief, if any, should be granted to the plaintiff.


[29]     Ms Meechan also sought to limit the relief sought by the
plaintiff to an order
setting aside the order made by the Arbitrator for specific performance. I am not
willing to so limit the relief
sought. It is for the plaintiff to decide what relief it will
seek and this has been clearly set out in the application for leave.


Result


[30]     Leave to appeal is granted in respect of the question of law arising out of the
second partial award which is
identified in paragraph [25] above.


[31]     Leave to appeal is also granted in relation to the first and third partial awards
but only to the extent that those awards are or may be consequentially affected by the
determination of the question of law identified
in respect of the second partial award.


[32]     There will be no limitation on the nature of the relief sought by the plaintiff
as set out in paragraph [7] of the application dated 23 January 2006 for leave to
appeal the Arbitrator's second partial award.


[33]     The costs on these applications for leave will be reserved to be dealt with
when the substantive appeals are heard.

[34]
  The registrar is requested to allocate a date for a case management
conference before a Judge within 15 working days after the
date of this decision
(refer r 430(1) High Court Rules).


[35]   Counsel are to confer and file memoranda at least one clear working
day
prior to the conference regarding the directions considered appropriate to prepare
this matter for hearing.




            
                                ______________________________
                                                      A P Randerson,
J
                                                   Chief High Court Judge