Cognition Education Ltd v Zurich Australian Insurance Ltd T/A Zurich New Zealand Hc Ak

• Jurisdiction: New Zealand
• Judge: Bell
• Judgment Date: 05 December 2012
• Neutral Citation: [2012] NZHC 3257
• Docket Number: CIV-2012-404-1246
• Court: High Court
• Date: 05 December 2012

BETWEEN

Cognition Education Limited

Plaintiff

and

Zurich Australian Insurance Limited T/A Zurich New Zealand

Defendant

[2012] NZHC 3257

CIV-2012-404-1246

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application by plaintiff to have its summary judgment application heard before the defendant's objection to jurisdiction under r5.49 High Court Rules (appearance and objection to jurisdiction) on the ground that the dispute had to be referred to arbitration – alternatively the plaintiff applied to have both applications heard together — plaintiff was under a contract frustration insurance policy — policy contained a submission to arbitration clause – whether summary judgment should be granted where there was no defence, even if the parties were contractually obligated to refer the dispute to arbitration – meaning of “dispute” in Art 8 first schedule Arbitration Act 1996 (arbitration agreement and substantive claim before court) – whether the test for stay of proceedings should be applied to a summary judgment application

Counsel:

M G Ring QC and P R Rzepecky for Plaintiff

A R Galbraith QC and M J Francis for Defendant

RULING OF ASSOCIATE JUDGE Bell

Bell

Introduction

1 This decision is on a procedural point. The plaintiff has applied for summary judgment. The defendant has filed an appearance under r 5.49 objecting to the jurisdiction of the court on the ground that there is a dispute which must be referred to arbitration. The ability to apply to the court to obtain summary judgment and the right to require a dispute to be referred to arbitration are incompatible. The parties are apart on how the inconsistency is to be resolved.

2 The plaintiff argues for priority for the right to apply for summary judgment. It says that if it can make out a case for summary judgment, then there is no dispute to be referred to arbitration. Its summary judgment application should be heard at the same time as the defendant's objection to this court hearing the case. On the other hand, the defendant says that if there are matters between the plaintiff and the defendant which are capable of being disputed, then the matter should go to arbitration, even if it should be found in the arbitration that the defendant does not have an arguable defence. Its objection to the jurisdiction should be decided before the summary judgment application.

3 The plaintiff has sued the defendant under a contract frustration insurance policy. The defendant has declined the plaintiff's claim. The policy contains a submission to arbitration:

Any dispute, controversy or claim arising out of, relating to, or in connection with this Insurance Policy, shall be finally settled by arbitration. The arbitration shall be conducted in accordance with the Rules for the Conduct of Commercial Arbitrations of the Institute of Arbitrators and Mediators of New Zealand in effect at the time of the arbitration and shall be conducted in English. The seat of the arbitration shall be Auckland, New Zealand, or alternative (sic) Sydney, Australia, if mutually agreed by all parties.

4 For this ruling I am not required to consider the merits of the plaintiff's claim under the policy or of the defendant's rejection.

5 Summary judgment is granted under r 12.2(1) of the High Court Rules:

12.2 Judgment when there is no defence or when no cause of action can succeed

(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

6 The Court of Appeal's decision in Jowada Holdings Ltd v Cullen Investments Ltd 1 summarises the approach taken on plaintiffs' applications for summary judgment. 2

[28] In order to obtain summary judgment under Rule 136 of the High Court Rules a plaintiff must satisfy the Court that the defendant has no defence to its claim. In essence, the Court must be persuaded that on the material before the Court the plaintiff has established the necessary facts and legal basis for its claim and that there is no reasonably arguable defence available to the defendant. Once the plaintiff has established a prima facie case, if the defence raises questions of fact, on which the Court's decision may turn, summary judgment will usually be inappropriate. That is particularly so if resolution of such matters depends on the assessment by the Court of credibility or reliability of witnesses. On the other hand, where despite the differences on certain factual matters the lack of a tenable defence is plain on the material before the Court, to the extent that the Court is sure on the point, summary judgment will in general be entered. That will be the case even if legal arguments must be ruled on to reach the decision. Once the Court has been satisfied there is no defence Rule 136 confers a discretion to refuse summary judgment. The general purpose of the Rules however is the just, speedy, and unexpensive determination of proceedings, and if there are no circumstances suggesting summary judgment might cause injustice, the application will invariably be granted. All these principles emerge from well known decisions of the Court including Pemberton v Chappell [1987] NZLR 1, 3-4, 5; National Bank of New Zealand Ltd v Loomes (1989) 2 PRNZ 211, 214; and Sudfeldt v UDC Finance Ltd (1987) 1 PRNZ 205, 209.

[29] This present appeal is concerned with a contract based claim in circumstances where both parties seek to rely on evidence of circumstances said to form part of the relevant context in which the contract is to be interpreted. Their evidence is in conflict. That, however, does not preclude the Court from giving summary judgment in a contract claim if it is satisfied that resolution of the factual matters in dispute is not necessary to provide the Court with such contextual background as is necessary to resolve the claim. This is simply an application of the principle that where, despite differences on factual matters, the lack of a tenable defence to a cause of action is plain on the material before the Court, and the Court is sure on that point, summary judgment will normally be

entered. In such circumstances there is no reason why a contract should not be interpreted and applied in summary judgment proceedings: Pemberton v Chappell at pp 4 and 8 CA; Haines v Carter [2001] 2 NZLR 167, para 128 CA.

[30] Once the Court has been satisfied that there is no defence Rule 136 confers on it a discretion to refuse summary judgment which is of a residual kind. While the types of cases in which the discretion will be exercised to refuse judgment cannot be exhaustively defined, the most common instance is where there would be an unfairness in proceeding immediately to judgment, for example if the defendant were unable to get in touch in the time available with a material witness who it was reasonably thought might be able to provide it with material for a defence: Bank fÜr Gemeinwirtschaft v City of London Garages Ltd [1971] 1 All ER 541, 548 (CA). In that case Cairns LJ also said that harsh or unconscionable behaviour of the plaintiff might require a matter to proceed to trial so that any judgment obtained was in the full light of publicity. Generally, however, where the ground relied on in seeking summary judgment goes to the substance of the litigation, the interests of justice would not permit refusal of judgment unless they provided a basis for it to be refused at the substantive hearing: Inner City Properties Ltd v Mercury Energy Ltd (1990) 13 PRNZ 73 (CA). It should not be thought that a plaintiff who has shown that there is no arguable defence will be denied judgment except in rare circumstances.

7 The significance of this summary is that it shows that in a summary judgment application the court may analyse facts and law to find whether the lack of an arguable defence is plain. In some cases, such an inquiry may be extensive.

8 The Arbitration Act 1996 governs the extent of the court's interference in arbitration. As the place of arbitration in this case is in New Zealand, the first schedule of the Act applies. 3 Article 5 of the first schedule says:

In matters governed by this Schedule, no court shall intervene except where so provided in this Schedule.

9 Article 8 says: 4

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.

[Emphasis added]

10 The argument has focused on the italicised words. Under s 5(b), one of the purposes of the Act is to promote international consistency of the arbitral régimes based on the Model Law of International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985. The first schedule of the Arbitration Act 1996 largely corresponds with the provisions of the Model Law. However, Article 8 of the Model Law does not contain the italicised words. In this judgment, these are “the added words”.

The plaintiff's case

11 The plaintiff supports its argument by tracing the history of the added words....