Arbitration or Summary Judgment?

In a recent High Court case, Teak Construction Limited v Andrew Brands Limited [2015] NZHC 2312, Associate Judge J P Doogue granted an application to dismiss summary judgment proceedings on the grounds that the Court had no jurisdiction as the parties had agreed to submit disputes to arbitration by the terms of their contract (NZS 3910:2003).

Teak Construction had entered into a contract with Andrew Brands (a property developer) to construct four retail units in Auckland. The dispute was over Teak Construction’s entitlement to a payment claim. As Andrew Brands had not issued a valid payment schedule in time, Teak Construction sought to enforce the debt via summary judgment proceedings in the High Court. In other words, Teak Construction sought enforcement of the amount claimed for by judgment entered by the High Court without a full trial.

Court proceedings in respect of contracts which contain arbitration clauses will almost always be stayed (dismissed). That’s the whole point of an arbitration clause. The parties have agreed to refer their disputes to arbitration rather than have them resolved by the courts.

However, in Zurich Australian Insurance Limited t/a Zurich New Zealand v Cognition Education Limited [2014] NZSC 188, the Supreme Court said that summary judgment proceedings should not be stayed where the defendant was not acting in good faith in asserting a dispute. In the Teak Construction case, the Court was not satisfied that there was no dispute.

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