Challenges to the agreement

Challenges to the award

The Arbitration Act creates an exhaustive code for challenging awards. Appeals are possible only if the parties had been unwise enough to voluntarily create that opportunity for further litigation, and even then any appeal must be strictly confined to questions of law.⁴¹ Awards can be set aside on review, or found to be unenforceable, only if one of the few stated grounds is established.⁴²

Of the possible grounds for setting aside or declining to enforce under the Arbitration Act, only two could be regarded as having particular application to relationship property awards. One ground is that the arbitration agreement was not valid.⁴³ That would permit the argument that the parties had failed to observe the formalities for a valid agreement required by s 21F of the PRA. The other relevant ground is that the award or its enforcement would conflict with public policy of New Zealand.⁴⁴ That could permit the argument that the relationship property regime adopted under the agreement was not one that is acceptable in New Zealand.⁴⁵ Neither ground could arise if the parties had attended to normal signing formalities when they signed their arbitration agreement and had invoked either the PRA relationship property regime itself or some other regime regarded as broadly acceptable in a New Zealand society.

There does not appear to be room for a third potential ground for setting aside based on s 21J (serious injustice) or s 26 (interests of the children) of the PRA. Under the Arbitration Act the only relevant ground for setting aside an award is that the “agreement is not valid under the law to which the parties have subjected it, or, failing any indication on that question, under the law of New Zealand”.⁴⁶ So the Arbitration Act ground is all about contractual validity. The jurisdiction conferred by s 21J of the PRA, on the other hand, permits a court to set aside a valid agreement on the ground that “giving effect to the agreement would cause serious injustice.” In exercising that discretion the Court must take into account a range of considerations including “the length of time since the agreement was made” and “whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made”.⁴⁷ This is clearly the act of judicially modifying existing contractual rights rather than declaring that the agreement was invalid from the beginning in the normal contractual sense. The Act expressly preserves existing rules of law and equity for determining validity.⁴⁸ Since the relevant ground for setting aside an award under the Arbitration Act is confined to contractual validity, it is not an invitation to revisit the justice of the agreement under s 21J of the PRA. The same considerations must apply to the jurisdiction to intervene on behalf of children under s 26 of the PRA.

Nor does the jurisdiction to intervene under ss 21J or 26 of the PRA extend to the award itself. The jurisdiction to set aside is confined to “agreements”. Certainly the PRA is a code to which other statutes are subject⁴⁹ and any other statute prevails over the Arbitration Act if there is inconsistency between the two.⁵⁰ But there is no conflict between the PRA and the Arbitration Act in this respect. The PRA governs challenges to an “agreement”; the Arbitration Act governs challenges to an “award”.

An agreement and an award are distinct legal concepts. An agreement is the basis for a cause of action in contract. The cause of action is converted into an order susceptible to direct enforcement by the State when a court or arbitrator takes the further step of promulgating a decision defining the parties’ substantive rights.

For so long as the agreement remains the basis for the parties’ rights, it continues to be subject to challenge under ss 21J and 26 of the PRA. The position changes once an award is issued. The award has its own statutory foundation and is independently enforceable.⁵¹ Once the award is issued it becomes the source of the parties’ rights unless and until the award is set aside. It can be set aside only if the case is brought within one of the statutory grounds specific to arbitration awards. As noted earlier, one of the grounds is invalidity of the antecedent arbitration agreement. But it is important to note that invalidity of the agreement does not of itself invalidate the award. Not even a specific judicial finding that the agreement was invalid is enough on its own. It is only if the Court both finds that the agreement had been invalid, and goes on to exercise a remedial discretion against the award, that the award will be set aside.⁵²

The statutory code for setting aside arbitration awards is an exhaustive one. It leaves no room for a collateral challenge based on the PRA. It follows that arbitration awards are beyond the reach of ss 21J and 26 of the PRA.⁵³