IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2023-404-000447
[2023] NZHC 3266	

BETWEEN	SUNNYA PTY LIMITED
Plaintiff	
AND	SUPERMEGA MARKET LIMITED
First Defendant

MEGADAIRY LIMITED
Second Defendant	

Hearing:	5 September 2023	
Appearances:	A L Harlowe for the Plaintiff J Glover for the Defendants	
Judgment:	30 November 2023	

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 30 November 2023 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

A J Park, Auckland
Couch Harlowe Kovacevich, Auckland

SUNNYA PTY LTD v SUPERMEGA MARKET LTD [2023] NZHC 3266 [30 November 2023]

Introduction

[1]	Supermega Market Ltd (Supermega) and Megadairy Ltd (Megadairy), the first and second defendants respectively, apply to stay these proceedings because they and Sunnya Pty Ltd (Sunnya), the first plaintiff, agreed to submit any disputes connected to the contracts between them to arbitration.

[2]	Sunnya opposes the stay application because the arbitration agreement in the contracts is only enforceable between Sunnya and Supermega (not Megadairy), the scope of the arbitration agreement does not extend to all of the matters in dispute in these proceedings, and Supermega and Megadairy (the Mega Companies) have already submitted to the jurisdiction of the Court.

[3]	The issues to decide are:

(a)	Does the whole of the dispute that is the subject of these proceedings fall within the arbitration clause?

(b)	Is Megadairy bound by the arbitration agreement?

(c)	Did the Mega Companies submit to the jurisdiction of the Court?

Factual background

[4]	Sunnya is a company registered in Australia that specialises in the sale of formulated food products, predominantly infant formula (milk powder), in Australia and China under the trademark “NEURIO”. Sunnya owns the NEURIO trademarks in New Zealand and Australia. Another company, Guangzhou Aotea Biological Technology Pty Ltd (GABT) owns the NEURIO trademarks in China. GABT is owned by husband and wife Yinghan He and Yanxia Lu, who were directors of Sunnya until November 2022.

[5]	The Mega Companies are New Zealand companies. Yi “Easter” Wu is the sole director of both entities. Supermega’s shares are wholly owned by a Hong Kong

company, South Pole Brand Management Co Limited. Megadairy’s shares are wholly owned by Mr Wu.

[6]	Sunnya and Supermega had an arrangement which involved Sunnya providing Supermega with empty cans and other items necessary for Supermega to produce finished NEURIO products for export from New Zealand. Supermega was required to supply and process all raw materials and produce cans of finished NEURIO products.

[7]	The arrangement was documented in over 20 individual “sales contracts”. Five contracts dated between March to June 2022 (the Contracts) to produce 60,000 cans of NEURIO products remain uncompleted.

[8]	The Contracts contain the following clause:

Any dispute, in connection with this contract or the execution thereof if unsettled through negotiation shall be submitted in accordance with New Zealand’s arbitration laws to an arbitrator nominated by the Auckland Chamber of Commerce and Industry. The arbitral award shall be final and binding upon both parties. The arbitration expenses shall be borne by the losing party unless otherwise awarded by the arbitrator(s).

(emphasis added)

[9]	Sunnya claims that Supermega breached the Contracts by not supplying the agreed finished NEURIO products to Sunnya. Sunnya terminated the Contracts on  23 December 2022.

[10]	Sunnya further claims that after termination its agents discovered NEURIO products produced by the Mega Companies for sale in China, which Sunnya did not authorise to be produced or exported. Sunnya sought to prevent the infringement of its NEURIO trademarks, seeking undertakings from the Mega Companies. The Mega Companies denied any infringement and claimed that they had not produced any NEURIO products without Sunnya’s approval.

[11]	Sunnya filed substantive proceedings against the Mega Companies for breach of contract and infringement of intellectual property on 21 March 2023. An urgent without notice application for an interim injunction was filed at the same time. Sunnya

sought to restrain the Mega Companies from infringing the NEURIO trademarks, further orders that the Mega Companies deliver up any property bearing the NEURIO trademark, and authorisation for a search of the Mega Companies’ premises by Sunnya and their supervising solicitors. The Mega Companies agreed to interim injunction orders by consent on 28 March 2023.

[12]	The Mega  Companies  filed  an  appearance  under  protest  jurisdiction  on  1 May 2023 and on 8 May 2023, filed the present application for a stay of the proceeding.

[13]	There are proceedings on foot in Australia between Sunnya, its majority shareholder, Jatcorp Limited, Mr He and Ms Lu and various entities owned by, or associated with them, including GABT. In those proceedings, Sunnya claims that Mr He and Ms Lu, directly and/or through entities owned and/or controlled by them, breached directors’ duties owed to Sunnya by causing Sunnya’s NEURIO trademarks in various jurisdictions to be infringed and diverting corporate opportunities for personal profit.

Legal principles

Arbitration Act

[14]	Article 8(1), sch 1 of the Arbitration Act 1996 (Act) provides:

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.

(emphasis added)

[15]	This stay application engages the emphasised words of art 8(1). Are the proceedings brought in a matter which is the subject of the arbitration agreement in

the Contracts? And, have the Mega Companies already submitted their first statement to the Court on the substance of the dispute?

[16]	An arbitration agreement is enforceable only by or against the parties to the agreement.1 The issue here is that Megadairy was not a party to the Contracts.

Does the whole of the dispute fall within the arbitration clause?

The dispute

[17]	In this proceeding Sunnya advances five causes of action against Supermega and Megadairy through its statement of claim:

(a)	first cause of action: breach of contract against Supermega;

(b)	second cause of action: trademark infringement against Supermega and Megadairy;

(c)	third cause of action: copyright infringement against Supermega and Megadairy;

(d)	fourth cause of action: passing off against Supermega and Megadairy; and

(e)	fifth cause of action: breach of s 9 of the Fair Trading Act 1986 against Supermega and Megadairy.

[18]	To expand, Sunnya’s first cause of action is that under the five Contracts, Supermega was required to deliver 160,000 finished cans of NEURIO products to Sunnya. Sunnya claims that in breach of the Contracts, Supermega did not deliver any finished cans to Sunnya (the breach of contract claim). As a result, it has suffered losses of $474,500 — the deposits it paid on the Contracts.

1	Section 2 of the Arbitration Act 1996 defines an arbitration agreement as an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

[19]	Sunnya’s second, third, fourth and fifth causes of action are all variations on the claim that the Mega Companies have infringed Sunnya’s intellectual property (the intellectual property claims). In each of these four causes of action the remedy sought is a permanent injunction restraining the Mega Companies from manufacturing and exporting product using the NEURIO trademark and the design and look of the NEURIO cans.

The parties’ submissions

[20]	The Mega Companies submit that the matters at issue in this proceeding fall within the broadly worded arbitration clause in the Contracts. Further, that the breach of contract and intellectual property claims are closely entwined. They say that the trademark ownership disputes and the other disputes between Sunnya, its former directors, and GABT are important factors as to why the Mega Companies did not fulfil the Contracts with Sunnya, and why they now allege that Sunnya itself is in breach of contract.2 Further, the Mega Companies’ response to the allegations of intellectual property infringement is that their actions were authorised by, and are consistent with, the contractual arrangements between the parties.3   Specifically,    Mr Wu deposes that during December 2022 and early 2023 the Mega Companies continued to export NEURIO branded products in response to orders placed by GABT and pursuant to an authorisation from GABT.4

[21]	Sunnya submits that the breach of contract claim, which is only pursued against Supermega, is unrelated to the intellectual property claims, which are pursued against both Supermega and Megadairy. It submits that not only are the remedies sought different, but the factual matrix in support of the two categories of claims are distinct.

[22]	Sunnya says that for the breach of contract claim against Supermega, the relevant matters are that the Contracts required Supermega to produce 160,000 finished tins of NEURIO products and Supermega failed to deliver any finished NEURIO products, breaching the Contracts as a result.  Sunnya, through its solicitors,

2	Reply affidavit of Yi (Easter) Wu in support of application to stay High Court proceedings, sworn 29 May 2023 at [48] to [51].
3	At [53].
4	At [41].

terminated the Contracts on 23 December 2022 and demanded return of the deposits after Supermega failed to inform Sunnya who had ordered the destruction of Sunnya’s NEURIO cans and because Supermega lacked a feasible plan to complete the five Contracts. Sunnya points out that there is no mention of any breach of intellectual property in the chain of correspondence preceding the Contracts being cancelled.

[23]	Subsequently, Sunnya says, it discovered NEURIO products for sale in China which appeared from the dates on the tins to have been manufactured without Sunnya’s consent or instructions. Sunnya’s solicitors demanded that Supermega immediately cease using Sunnya’s NEURIO trademark and the name NEURIO. Sunnya says that on 10 March 2023, the New Zealand Food Safety Department for the Ministry for Primary Industries confirmed them that in December 2022 and January 2023 Supermega exported NEURIO products to China.

[24]	Thus, Sunnya submits that its intellectual property claims arise out of an entirely separate line of enquiry to the breach of contract claim, and concern the Mega Companies’ manufacture and export of NEURIO branded products between December 2022 and March 2023 without express authority, consent, permission or licence from Sunnya. In terms of the relief awarded, Sunnya seeks a permanent injunction as well as an account of profits or damages, depending on Sunnya’s election following discovery of the Mega Companies’ financial records.

[25]	Sunnya says there is no risk of duplication of resources, or inconsistent findings if the breach of contract claim is referred to arbitration and the intellectual property claims are determined through these proceedings.

The approach to interpreting arbitration agreements

[26]	When interpreting an arbitration agreement, a generous approach is appropriate.5 In Marnell Corrao Associates Inc v Sensation Yachts Ltd Wild J held:6

That result gives effect to the general principle that Courts should uphold arbitration, by striving to give effect to the intention of parties to submit

5	Tamihere v Mediaworks Radio Ltd [2014] NZHC 2082, [2014] NZAR 1113 at [21].
6	Marnell Corrao Associates Inc v Sensation Yachts Ltd HC Auckland CP297-SW00, 22 August 2000 at [61].

disputes to arbitration, and not allow any inconsistencies or uncertainties in the wording or operation of the arbitration clause to thwart that intention. That is stated in Redfern & Hunters Law and Practice of International Commercial Arbitration 3rd Edition 1999 at pp 172-173. To similar effect is Russell on Arbitration 21st 1997 para 2-006, citing the Privy Council's decision in Queensland Electricity Generating Board v New Hope Colleries Pty Ltd [1989] 1 Lloyds Reports 205. Their Lordships' opinion was delivered by Sir Robin Cooke, who said (at p 210):

At the present day, in cases where the parties have agreed on an arbitration or valuation clause in wide enough terms, the Courts accord full weight to their manifest intention to create continuing legal relations…

[27]	In Fiona Trust Holding Corp v Privalov, Lord Longmore said:7

Ordinary businessmen would be surprised at the nice distinctions drawn in the cases and the time taken up by argument in debating whether a particular case falls within one set of words or another very similar set of words. If businessmen go to the trouble of agreeing that their disputes be heard in the courts of a particular country or a tribunal of their choice they do not expect (at any rate when they are making the contract in the first place) that time and expense will be taken in lengthy argument about the nature of the particular causes of action and whether any particular cause of action comes within the meaning of a particular phrase they have chosen in their arbitration cause.

[28]	A related principle is the “one stop” idea. Parties to a commercial contract will not ordinarily be expected to submit only some of their disputes to the jurisdiction they have selected:8
In my opinion the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction.

[29]	If there is a prima facie case to say the subject matter of the dispute is covered by the arbitration agreement, a stay should be entered, and the parties referred to arbitration.9

7	Fiona Trust Holding Corp v Privalov [2007] EWCA Civ 20 at [17].
8	Premium Nafta Products Ltd v Fili Shipping Company Ltd [2007] UKHL 40 at [13], per Lord Hoffmann.
9	Tamihere v Mediaworks [2014] NZHC 2082, [2014] NZAR 1113 at [20] and [24] referring to Ursem v Chung [2014] NZHC 436. See also Donaldson v Donaldson [2015] NZHC 3093, [2016] NZAR 199 at [18]–[20].

[30]	In Sure Care Services Ltd v At Your Request Franchise Group Ltd, Andrews J noted: 10

[56]  It is to be noted that there is in New Zealand a strong policy in favour of enforcing contractual arbitration provisions: see, for example, Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd; Attorney- General v Mobil Oil NZ Ltd; and CBI NZ Ltd v Badger Chiyoda. Section 5 of the Arbitration Act is also relevant. It provides that the purposes of the Arbitration Act include “to encourage the use of arbitration” and “[t]o facilitate the recognition and enforcement of arbitration agreements”.

(footnotes omitted)

[31]	The authors of Williams  &  Kawharu  on  Arbitration  indicate  that  the  New Zealand authorities following the “one stop adjudication” approach confirms “a common liberal approach to the interpretation of arbitration clauses in England,
Australia and New Zealand”.11

[32]	This liberal approach is illustrated by two cases. In Tamihere v Mediaworks Radio Ltd, Simon France J considered the issue of whether there was a prima facie case that the arbitration agreement in the contract for services between Mr Tamihere and Mediaworks covered his claim in defamation.12 His Honour found that the impugned publications, and the dispute which then arose in relation to them, self‑evidently fell within the scope of the arbitration agreement because the challenged content was wholly about the provision of services by Mr Tamihere under the contract for services, as it was in that context that the statements were made.13 He also considered the interpretation principle that the parties to an agreement will generally not be thought to have intended to submit disputes to different tribunals and in those circumstances, he saw no reason generally to consider that the parties intended the arbitration agreement to have a restricted scope.14

10	Sure Care Services Ltd v At Your Request Franchise Group Ltd [2010] 3 NZLR 102 (HC).
11	David AR Williams and Amokura Kawharu Williams & Kawharu on Arbitration (2nd ed, LexisNexis, Wellington, 2017) at [4.10.2], n 128.
12	Tamihere v Mediaworks Radio Ltd [2014] NZHC 2082, [2014] NZAR 1113.
13	At [38].
14	At [39]–[40].

[33]	Kawakawa Station Ltd v New Zealand Walking Access Commission concerned judicial review proceedings.15 Cull J relied on authority from the United Kingdom that the courts should not, without good reason, permit proceedings for judicial review to proceed if a significant part of the issues between the parties could be resolved outside the litigation process.16 Her Honour also noted that given the legislative confidence in the arbitral process, which is reflected in s 5 of the Act, few types of arbitration agreement or subject matters will be deemed non-arbitrable.17 The Act creates a general preference in favour of the arbitrability of disputes which is consistent with the trend of expanding the scope of arbitrable subject matters.18 Her Honour held that there was a prima facie case for the existence of a valid arbitration agreement, and therefore the judicial review proceedings were stayed.19

The present case

[34]	Plainly the breach of contract claim is covered by the agreement to arbitrate. The disputed issue is whether the intellectual property claims, and therefore the whole dispute, fall within the terms of arbitration clause, properly constructed.

[35]	In my view there is a prima facie case that the intellectual property claims fall within the scope of the arbitration agreement as a dispute “in connection with the contract[s]”.20

[36]	The Contracts set out the terms by which Sunnya and Supermega will cooperate to manufacture and export NEURIO milk products to China. The Contracts record that Sunnya will supply NEURIO-branded cans and Supermega will supply all raw ingredients, silica gels, sachet film, and cartons. Supermega is responsible for producing the materials into the final NEURIO branded product, which Sunnya agrees to buy. Supermega must deliver the products within 120 days. Implicitly, Supermega

15	Kawakawa Station Ltd v New Zealand Walking Access Commission [2019] NZHC 791, [2019] NZAR 797.
16	At [58] citing R (Cowl) v Plymouth City Council [2001] EWCA Civ 1935, [2002] 1 WLR 803 at [14].
17	At [59].
18	At [59].
19	At [65].
20	As per the arbitration cl in the Contracts.

legitimately used the NEURIO trademark and design when it was acting under specific sales orders from Sunnya, documented in sales contracts.

[37]	The subject matter of the intellectual property claims is the allegation that Supermega manufactured and exported milk product in tins bearing the NEURIO trademark and design without Sunnya’s authority and consent. The critical issue will be whether, when producing and exporting the offending tins, Supermega did so pursuant to the Contracts or other instructions from Sunnya and therefore with Sunnya’s consent. The Contracts provide the factual backdrop for the intellectual property claims. Taking a liberal approach, the intellectual property dispute is “in connection with” the Contracts.

[38]	Furthermore, there is nothing in the Contracts or the factual matrix to justify a departure from the presumption that the parties intended that all disputes concerning their relationship would be referred to arbitration (the “one-stop” idea). There is no basis for inferring that Sunnya and Supermega intended that one form of dispute between them would be governed by arbitration, and another would not.

[39]	As there is a prima facie case that the intellectual property claims fall within the scope of the arbitration agreement in the Contracts, the proceeding between Sunnya and Supermega must be stayed pursuant to art 8(1) sch 1 of the Act, unless Supermega has submitted a statement on the substance of the dispute.

Is Megadairy bound by the arbitration agreement?

[40]	Sunnya says that because Megadairy is not a party to the Contracts there is no arbitration agreement between Megadairy and Sunnya. Therefore, art 8(1), sch 1 of the Act does not apply.

[41]	The Mega Companies submit that Megadairy was the true product manufacturer and Supermega was merely a sale agent, a fact that Sunnya knew. Furthermore, regardless of the contractual position, the Court retains jurisdiction to stay the proceeding, either under r 15.1(3) of the High Court Rules 2016 or in its inherent jurisdiction, to prevent an abuse of process, including duplicate proceedings.

[42]	In Danone Asia Pacific Holdings Pte Ltd v Fonterra Co-operative Group Ltd,21 Venning J accepted that even where the parties to the proceeding are not both parties to the arbitration agreement (as was the case there) the Court retains jurisdiction to stay the proceedings either under r 15.1(3) or its inherent jurisdiction, including for reasons of sensible case management.22 He stated that the parties do not enjoy an unfettered right to access to the Court; rather, the Court is entitled to impose procedures that are appropriate in the circumstances, having regard to the nature and content of the litigation as a whole.23 The jurisdiction to do so, however, should only be exercised in rare and compelling circumstances.24 There must be a real risk of unfairness or oppression to the defendant if the proceedings were allowed to continue. Considerations of cost, convenience, and the interests of justice must weigh in favour of a stay. The onus is on the applicant to satisfy the Court that such circumstances exist.25

[43]	A stay might be granted, for example, where a non-party’s claims would stand or fall with those of a party to the agreement, or there is a risk of conflicting findings of fact.26

[44]	In Danone, the tortious and statutory claims against the non-party to the agreement were not derived from the agreement in a technical sense. Nonetheless, the Court considered them sufficiently connected to the agreement that it would be unrealistic to divorce them and determine the issues in tandem without reference to each other.27 And there was a significant overlap between the factual and legal issues,28 likely duplication of witnesses and evidence, and a risk of inconsistent findings.29

21 Danone Asia Pacific Holdings Pte Ltd v Fonterra Co-operative Group Ltd [2014] NZHC 1681.
22 At [54].
23  At [54], citing Goldman Sachs International v Reichhold Norway ASA and Anor [1999] 1 All ER 40 (Comm) at 47 as cited in Reichhold Norway ASA & Anor v Goldman Sachs International [2000] 1 WLR 173, [2000] 2 All ER 679 (EWCA Civ).
24	At [55].
25	At [55], citing AKJ v Commissioner of Police [2013] EWCA Civ 1342, [2014] 1 WLR 285 at [51].
26	Wai-iti Developments Ltd v General Distributors Ltd [2019] NZHC 1656 at [106]–[107].
27	Danone Asia Pacific Holdings Pte Ltd v Fonterra Co-operative Group Ltd [2014] NZHC 1681 at [96].
28	At [77].
29 At [94]. See also Openyd Ltd v GJ Lawrence Dental Ltd [2018] NZHC 1618; GJ Lawrence Dental Ltd v Alusi Ltd [2018] NZHC 1342; and Kawakawa Station Ltd v New Zealand Walking Access Commission [2019] NZHC 791, [2019] NZAR 797.

[45]	Having found that the dispute between Sunnya and Supermega must be referred to arbitration, I am of the view that the proceeding against Megadairy must also be stayed. The intellectual property causes of action are brought against Supermega and Megadairy in identical terms. It would make no sense for there to be two proceedings dealing with the same issues running alongside each other in different forums. Considerations of cost, convenience, and the interests of justice weigh in favour of a stay.

[46]	Therefore, I find that, unless the Mega Companies have submitted to the jurisdiction of the Court as alleged by Sunnya, the proceedings against both Supermega and Megadairy will be stayed and referred to arbitration. As against Supermega, this is mandatory pursuant to art 8(1) of the sch 1 to the Act. As against Megadairy, a stay is necessary to manage the Court’s processes and prevent a potential abuse of process arising out of duplicative procedures.

Did the Mega Companies submit to the jurisdiction of the Court?

[47]	The Court must stay the proceeding and refer the parties to arbitration if a party requests it “not later than when submitting that party’s first statement on the substance of the dispute”.30

[48]	There is no general prescription as to what constitutes making a first statement:31

A party may make a first statement on the substance of the dispute in a variety of ways, some of which vary depending on whether the party seeking the stay is the plaintiff or defendant. There can be no general prescription.

(footnotes omitted)

[49]	Sunnya submits that by filing the notice of opposition to its interim injunction application, instead of a protest to jurisdiction or an application for stay, the Mega Companies elected to submit the whole of the dispute concerning the breach of contract and intellectual property claims to the jurisdiction of the Court, and the arbitration clause ceased to have any effect.

30	Arbitration Act 1986, sch 1, art 8(1).
31	Pokeno Village Holdings Ltd v Pokeno Nine Ltd [2019] NZHC 2358 at [8].

[50]	Sunnya relies on Fisken & Associates Ltd v Frew,32 where a notice of opposition and affidavits in opposition to an application for interim injunction were held to constitute a statement on the substance of the dispute.

[51]	Sunnya also relies on The Property People Ltd v Housing New Zealand Ltd, where the relevant contract was terminated by the defendant and the plaintiff issued proceedings seeking immediate interim relief.33 The defendant filed a notice of opposition and affidavit evidence and interim relief was declined; a decision upheld on appeal. Subsequent to the appeal, the defendant raised a protest to jurisdiction and applied for a stay and a reference to arbitration under art 8(1) of sch 1 of the Act. Salmon J held that application had come too late:34
In my view it is clear that the notice of opposition to the interim injunction application and the affidavits filed … did constitute a statement by the defendant on the substance of the dispute. In order to be able to rely on article 8(1) the defendant should have applied for a stay at least prior to the hearing of the interim injunction application. Its failure to do so means that it cannot rely on article 8.

[52]	Sunnya emphasises that one of its directors, Zhan “Jack” Wang filed a comprehensive affidavit in support of the interim injunction application which explained all the facts relevant to this proceeding and ran to 400 pages. Consequently, despite the interim injunction application only relating to the Mega Companies’ infringements of Sunnya’s intellectual property, all evidence relevant to Sunnya’s five causes of action against the Mega Companies were presented to the Court. In response, the Mega Companies filed a notice of opposition in which they stated that the merits of Sunnya’s case were “weak” and that Mr Wang’s evidence presented an overall “misleading impression”. Sunnya submits that in doing so, the Mega Companies made a statement on the substance of the dispute.

[53]	The Mega Companies submit that reference to arbitration was made only five weeks after the Mega Companies were served with these proceedings without prior

32	Fisken & Associates Ltd v Frew HC Dunedin CP33/01, 24 August 2001.
33	The Property People Ltd v Housing New Zealand Ltd (1999) 14 PRNZ 66 (HC).
34	At [24].

warning. Further, relying on GJ Lawrence Dental Ltd v Alusi Ltd,35 Marnell,36 and Pathak v Tourism Transport Ltd,37 filing a notice of opposition to an interim injunction application and agreeing to consent orders to resolve that application do not amount to submitting to the jurisdiction of the Court in a manner that is incompatible with arbitration.

[54]	In GJ Lawrence Dental Ltd v Alusi Ltd there were two relevant acts by Alusi said to constitute submission to jurisdiction: participating in Lawrence Dental’s application for interim relief; and filing related set-off proceedings.38 In terms of the interim relief, GJ Lawrence sought injunctions restraining Alusi, Open YD, and their directors. One of the applications was dealt with by an undertaking from the defendants. However, in relation to the other injunction, Alusi filed a notice of opposition (but no evidence). Alusi filed a protest before the hearing of the injunction.

[55]	Simon France J noted that art 9 of sch 1 of the Act makes it plain that a party may seek interim relief from a Court, notwithstanding an arbitration agreement.39 Article 9 of sch 1 of the Act states:

9 Arbitration agreement and interim measures by Court

(1) It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a Court an interim measure, and for a Court to grant such a measure.

[56]	Simon France J said:

[40]	Article 9 expressly reserves to the Court the ability to grant interim relief, and to the parties the right to seek it without acting in a way incompatible with the arbitration agreement. It would be unexpected if defending a permitted application for interim relief constituted waiver of the protest to jurisdiction. I do not consider Advanced Cardiovascular should be read as requiring that outcome.

[41]	It accords with the justice of the matter not to see defending the injunction as having this drastic consequence. If as here the Court lists the interim relief matter for hearing, the defendant would be in an

35	GJ Lawrence Dental Ltd v Alusi Ltd [2018] NZHC 1342.
36	Marnell Corrao Associates Inc v Sensation Yachts Ltd HC Auckland CP297-SW00, 22 August 2000.
37	Pathak v Tourism Transport Ltd [2002] 3 NZLR 681 (HC).
38	GJ Lawrence Dental Ltd v Alusi Ltd [2018] NZHC 1342 at [31].
39	At [35].

impossible position if to defend it would cost it the right to protest jurisdiction.

[42]	Similar situations have arisen. In Pathak v Tourism Transport Ltd the plaintiffs filed a notice of proceeding, statement of claim and an application for an interim injunction. Express reference was made at the time to an arbitration agreement. The interim relief application was resolved by way of undertakings. Subsequent to this resolution, the plaintiff took several further steps — seeking further and better particulars of the defence, providing further particulars of the claim, swearing a list of documents, filing a memorandum of counsel which detailed the substantive claim, and inspecting documents.

[43]	Heath J held that these steps subsequent to the undertakings constituted submission to jurisdiction. However, of importance to this case, his Honour noted that had the plaintiff sought a stay immediately after the resolution of the application for interim relief, the proceedings would have been stayed. That is the situation here. The protest was lodged prior to interim relief, and the stay has been pursued after the matter was resolved by way of judgment.

[44]	Pathak was applied in Opus International Consultants Ltd v Projenz Ltd. Opus had filed a statement of claim and sought interim relief. However, it was made plain it would thereafter seek a stay. The Master considered a delay of three weeks between the interim relief decision and the stay application was not fatal. Unlike Pathak there had been no substantive steps taken in that time.

[45]	Consistent with these decisions, I do not consider Alusi’s participation in the interim injunction proceedings constitutes submission to jurisdiction. I consider that to be the logical effect of art 9, although as noted the better course is first to determine the protest.

[57]	Relevantly, Simon France J distinguished the case before him from Property People Ltd because Alusi did file a protest before the hearing of the injunction as opposed to waiting until after the injunction hearing.40

[58]	In Marnell Corrao Associates Inc v Sensation Yachts Ltd, the plaintiff applied for an order restraining the defendant from appointing an arbitrator or taking any further related step; and the defendant applied for a stay on the ground that their agreement contained a disputes regime, which extended to a duty to go to arbitration.41 Wild J held the disputes regime to be binding; and, in doing so, held that the defendant had not, before applying for a stay, made any statement on the substance of the dispute. The defendant had done no more than subscribe to interim consent orders restraining

40	At [38]–[39].
41	Marnell Corrao Associates Inc v Sensation Yachts Ltd (2000) 15 PRNZ 608 (HC) at [10].

it from working further on the vessel in issue, giving the plaintiff controlled access, agreeing how the vessel was to be kept secure, and timetabling the case to the fixture. Wild J also said that, in contrast to the Arbitration Act 1908, the 1996 Act gives "powerful new emphasis" to "encouraging the use of arbitration as an agreed method of resolving commercial and other disputes";42 and that also favoured a stay in that case.

[59]	In  my  view  there  is  some  force  to  Sunnya’s   submission   that   the Mega Companies engaged with the substance of the dispute in their notice of opposition. Specifically, at paras 3(a) and (c), they refute Sunnya’s intellectual property claims.

[60]	However, pointing in the other direction is the fact that this was a response to an application for interim relief. I agree with Simon France J that it would be odd if defending an application for interim relief was held to be incompatible with an arbitration agreement when the Act expressly provides that applying for interim relief is not.

[61]	Furthermore, the notice of opposition was filed under urgency due to the ‘without  notice’  application  for  an   interim   injunction   filed   by   Sunnya   on 21 March 2023. On 22 March 2023, when Jagose J refused to determine the application on a ‘without notice’ basis and timetabled that any notice of opposition to the upcoming two‑day hearing was to be filed two days before the hearing, by        27 March 2023.

[62]	The Mega Companies were served on Wednesday 22 March 2023. On Monday 27 March 2023, after instructing new solicitors and counsel, the Mega Companies filed the notice of opposition and offered an undertaking not to use the NEURIO trademark consistent with that part of the interim injunction application. Consent orders were then sought and made on the terms via joint memorandums. The injunction hearing did not proceed.

42	At [67].

[63]	The Mega Companies filed the appearance under protest  to  jurisdiction on   1 May 2023. They did not take any steps in the proceeding in the interim.

[64]	On balance, while the Mega Companies did make some statements on the substance of the dispute in their notice of opposition, those statements were made in the context of an urgent response to an application for an interim injunction. They did not file or serve any evidence that engaged with the substance of the dispute. I do not consider that filing the notice of opposition alone constituted submitting to the jurisdiction of the Court, especially when considered in the context of art 9 of sch 1 of the Act. Relevantly, the Mega Companies did not take any further steps in the proceeding before it filed its protest to jurisdiction.

Result

[65]	I order that this proceeding is stayed, and the parties are referred to arbitration. As between Sunnya and Supermega I do so under art 8(1), sch 1, of the Arbitration Act 1996. As between Sunnya and Megadairy I do so pursuant to r 15.1(3) of the High Court Rules 2016 and the Court’s inherent jurisdiction.

[66]	As to costs, I am of the preliminary view, that having succeeded, Supermega and Megadairy are entitled to costs from Sunnya, on a 2B basis with reasonable disbursements. The parties are encouraged to agreed costs. If they cannot, memoranda (no more than three pages) are to be filed within 15 working days.

Associate Judge Gardiner