COURT SETS ASIDE AWARD

The Court of Appeal sets aside award made by arbitral tribunal


In a judgment just handed down in Ngāti Hurungaterangi v Ngāti Wahiao [2017] NZCA 429 (26 September 2017), the Court of Appeal set aside the award made by the arbitral tribunal saying the reasons given were so inadequate and inconsistent that they fall short of discharging the panel’s mandate to give a reasoned award

 

REASONS FOR REASONS

By John Green


I recall one of my colleagues on the WHRS Tribunal once saying: “so we have to give reasons for reasons” the answer then and the answer now remains the same – yes!

 

In a judgment just handed down in Ngāti Hurungaterangi v Ngāti Wahiao [2017] NZCA 429 (26 September 2017), the Court of Appeal set aside the award made by the arbitral tribunal saying the reasons given were so inadequate and inconsistent that they fall short of discharging the panel’s mandate to give a reasoned award

 

This is only the second time the Court of Appeal has considered the obligation to give reasons.  The first was in Casata v General Distributors Ltd, in which the Court noted, in the context of an unsuccessful challenge to an arbitrator’s determination on a rent review, that elaborate reasons were not required for each and every component of an award; and that an expert arbitral panel was entitled to express a conclusory preference for one side’s experts over another. 

 

In Ngāti Hurungaterangi v Ngāti Wahiao the Court has made it clear that while the reasons stated for findings by an arbitral tribunal may not need to be as extensive as may be expected of a formal judgment, they must be sufficiently full for the parties to understand the pathway taken by the arbitral tribunal to reach the result. 
 

Background

 

In the late nineteenth century, the Crown acquired from Māori certain ancestral lands near Rotorua known as Whakarewarewa and Arikikapakapa.Court Case-652

In 2008, immediately following a critical report by the Waitangi Tribunal, the Crown agreed to return the lands to Ngāti Hurungaterangi, Ngāti Taeotu me Ngāti Te Kahu o Ngāti Whakaue (Ngāti Whakaue) and those hapū comprising Tuhourangi Ngāti Wahiao (Ngāti Wahiao). However, Ngāti Whakaue and Ngāti Wahiao were unable to agree on which of them was entitled to the lands. Each claimed exclusive beneficial ownership. They were unable to settle their differences and an arbitral panel was later convened pursuant to the Trust Deed to determine the competing rights of beneficial ownership according to mana whenua.

 

The arbitral tribunal held hearings over 13 sitting days between November 2012 and May 2013. The competing iwi were represented by legal counsel. Extensive evidence was called of both an oral and documentary nature.

 

The tribunal’s interim decision was delivered a month later on 7 June 2013 and adopted in whole as the final award delivered on 14 November 2014. The arbitral tribunal’s reasons for its finding that the three Ngāti Whakaue hapū, the three Ngāti Wahiao hapū and the beneficiaries of the Trust were eligible to be final beneficiaries but that the Tuhourangi Tribunal Authority was not, were contained in five paragraphs under the heading ‘Conclusion’.

 

Ngāti Whakaue was dissatisfied and challenged the award in the High Court for error of law. In 2014 the Court of Appeal granted Ngāti Whakaue special leave under art 5(6) of sch 2 to the Arbitration Act 1996 to bring an appeal to the High Court on a number of questions of law.

 

High Court proceedings

 

Moore J heard Ngāti Whakaue’s substantive appeal and its separate challenge to the award for breach of natural justice. Ngāti Whakaue’s primary challenge was to the adequacy of the tribunal’s reasoning. Moore J’s judgment captures the essence of Ngāti Whakaue’s complaint as being directed to:
 

[87] … the ascertainment of the applicable law (including statute, common law and tikanga), the identification and interpretation of the principles under the Deed and the identification of those facts which the Panel was required to take into account in reaching its decision.
 

Moore J subjected the issue as to whether the award satisfied the panel’s obligation deriving from art 31(2) of sch 1 to the Arbitration Act and cl 15.8 of the Second Schedule to the Trust Deed to state the reasons on which the award is based, to a thorough analysis. His Honour concluded by a fine margin that the arbitral tribunal properly discharged its legal duty notwithstanding the Judge’s acknowledgment at [120] of the paucity of the panel’s reasons.

 

Moore J ultimately dismissed this ground of the panel’s inadequate reasons and all other grounds of Ngāti Whakaue’s appeal, but later granted the iwi leave to appeal on approved questions of law. The first of which is at the heart of Ngāti Whakaue’s appeal, namely whether the panel’s reasons were adequate.

 

Decision on appeal

 

On appeal, the Court of Appeal held that whether the panel’s reasons were adequate could only be determined against the unique and complex cultural, legal and legislative background to the dispute that informs the nature and extent of the panel’s obligation to give reasons.  

 

The Court went on to set out in detail the historical origins and nature of the parties’ competing claims leading to the relevant Native Land Court decisions and the Waitangi Tribunal’s criticisms of the Crown’s acquisition process.  It then reviewed the Crown’s response to the Tribunal’s report and summarised the terms of the Vesting Act and the Trust Deed, which provide the legal foundation for the appeal.

 

The arbitral tribunal’s reasons for its finding were contained in five paragraphs under the heading ‘Conclusion’. The Court said at [59]:
 

We must determine whether the award as a whole, but these passages in particular, satisfied the panel’s obligation deriving from art 31(2) of sch 1 to the Arbitration Act and cl 15.8 of the Second Schedule to the Trust Deed to state the reasons on which the award is based. Moore J subjected this issue to a thorough analysis, concluding “by a fine margin” that the panel properly discharged its legal duty. The question is whether that equivocal conclusion can be justified having regard to the Judge’s own earlier acknowledgment of the paucity of the panel’s reasons.


Citing the English Court of Appeal’s decision in Flannery v Halifax Estate Agencies Ltd the Court’s analysis of the obligation to give reasons and the purpose of the duty at [60] and [61] is worthy of restatement here in full:
 

[60] Article 31(2) of sch 1 to the Arbitration Act marked an important legislative development by requiring that an arbitral award “shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given”. Neither its predecessor, the Arbitration Act 1908, nor the common law imposed an obligation to deliver a reasoned award. Its introduction in 1996 along with a range of other new measures incorporated the provisions of the UNCITRAL Model Law on International Commercial Arbitration, recognised the increasing significance of arbitration as a means of formal dispute resolution and aligned more closely the arbitral and judicial functions and our statutory code with international practice. Compliance with the obligation is now mandatory unless the parties specifically agree otherwise. The Law Commission earlier reported “strong support for such a change” to New Zealand’s arbitral jurisdiction.


[61] The purpose of the arbitral obligation to give reasons merits restatement. Within the arbitral framework for determining competing rights and obligations, the reasons explain how the adjudicator progressed from a particular state of affairs to a particular result. The reasons are the articulation of the logical process employed by a person whose particular skills, expertise or qualification the parties have chosen to decide their dispute. The reasons expose to the parties the disciplined thought pattern of the specialist adjudicator, thereby dispelling any suggestion of arbitrariness. A requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not.


The Court observed that the nature and extent of the duty to give reasons for an award will be contextual, and necessarily imports a degree of flexibility according to the circumstances, including the subject matter being arbitrated, its significance to the parties and the interests at stake.  There is no qualitative measure of adequacy.  The reasons are not required to meet a minimum criterion or extent — or to satisfy the curial standard — except that they must be coherent and comply with an elementary level of logic of adequate substance to enable the parties to understand how and why the arbitrator moved in the particular circumstances from the beginning to the end points.  They must engage with the parties’ competing cases and the evidence sufficiently to justify the result.  They must be the reasons on which the award is based; if they do not satisfy these requirements, they are not reasons. 

 

Decision

 

The interim award issued by the arbitral panel on 7 June 2013 and adopted as the final award on 14 November 2014 was set aside.

 

The Court found that the five paragraphs constitute the only section of the panel’s award which might arguably be said to provide reasons for its decision.  The Court said it is perhaps telling that the panel headed the section as its conclusion as the reasons are essentially conclusory in nature, and to the extent that they purport to explain the result, they are so inadequate and inconsistent that they fell short of discharging the panel’s mandate to give a reasoned award.  The Court found the reasons were not commensurate with the importance of the subject matter and the panel’s conclusion. 

 

Conclusions and implications

 

Any decision by an arbitral tribunal is made by applying the appropriate legal principles to the preferred evidence.

 

What is required first, is a clear identification and formulation of issues which serves as an organised framework for the arbitral reasoning process (while it is not mandatory, arbitrators frequently request the parties to submit a list of issues for that purpose).

 

The decision must be reached on an adequate factual foundation. That will involve weighing or evaluating the positions of relative evidential strength and identifying the evidence relied upon to reach the decision.

 

While the arbitral tribunal is effectively ‘master of the facts’ and exclusively entitled to decide ‘the admissibility, relevance, materiality, and weight of any evidence’, such evidentiary discretion does not absolve the arbitral tribunal from stating why it preferred certain evidence, and what that evidence was, and why it disregarded other evidence.  

 

The reasons expose to the parties the disciplined thought pattern of the specialist adjudicator, thereby dispelling any suggestion of arbitrariness. Drawing analogies with the judicial process can be diversionary. The reasons may not necessarily be as extensive as may be expected of a formal judgment - the standard required will be dictated by the context.

 

The reasons must be sufficiently full for the parties to understand the pathway taken by the arbitral tribunal, and be set out in such a manner as to provide a logical and coherent explanation of adequate substance to enable the parties to understand why the tribunal reached the decision.

 

- Article written by John Green 

 

 

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