Changes on the way for commercial lease Covid-19 rent disputes

On 9 March 2017, the Arbitration Amendment Bill (the Bill) was introduced to Parliament. The purpose of the bill is to amend the Arbitration Act 1996 (the Act) to:

• ensure arbitration clauses in trust deeds are given effect;
• extend the presumption of confidentiality in arbitration to a rebuttable presumption of confidentiality in related court proceedings under the Act;
clearly define the grounds for setting aside an arbitral award and bring
• New Zealand’s approach into line with foreign arbitration legislation; and
• confirm the consequence of failing to raise a timely objection to an arbitral tribunal’s jurisdiction.

The High Court (the Court) has declined an application to set aside an arbitral award administered by the New Zealand Dispute Resolution Centre ( NZDRC) and decided by one of its arbitrators, Catherine Green. The decision, A & H (Kumeu) Ltd v Kumeu Playschool Ltd, is noteworthy. ^[1] The Court did not just uphold the award because setting it aside is difficult. Rather, the Court commended the award for its numerical literacy, making note of the arbitrator’s understanding of the mathematical basis of the dispute. The Court also emphatically agreed with the arbitrator’s interpretation of a key clause in the parties’ lease agreement.

We all make mistakes – it’s human nature. However, some mistakes have bigger consequences and a London Court of International Arbitration (LCIA) panel recently had a US$54 million howler! When calculating the value of shares in assessing damages in a Russian commercial dispute, the tribunal of three arbitrators added a sum relating to historic tax labilities instead of subtracting it.

When the US$54 million error was brought to its attention, the tribunal sincerely apologised but refused to amend the award on the grounds it was a “fair assessment” of loss. Needless to say, the claimants weren’t happy. They asked the tribunal to correct the error. The tribunal refused. The claimants then filed a challenge to the award in the English High Court on the grounds that the mistake was a “serious irregularity”, causing “substantial injustice”, and the damages should be reduced to US$4 million. ^[1]

The challenge was heard by Sir Ross Cranston, who described how “a tribunal of leading arbitrators” made a “simple mistake” when assessing the damages. Sir Ross said it was “the sort of mistake any of us can make” but “with the most unfortunate of consequences”. The challenge was successful. The High Court remitted the award back to the tribunal for reconsideration.