HI-GENE LIMITED V SWISHER HYGIENE FRANCHISE CORPORATION CA CA346/2010

HI-GENE LIMITED V SWISHER HYGIENE FRANCHISE CORPORATION CA CA346/2010 9 August 2010IN THE COURT OF APPEAL OF NEW ZEALAND CA346/2010 [2010] NZCA 359BETWEEN HI-GENE LIMITED Appellant AND SWISHER HYGIENE FRANCHISE CORPORATION Respondent Hearing: 26 July 2010 Court: Randerson, Potter and Venning JJ Counsel: A R Gilchrist and M A Karam for Appellant A C H Clemow and N P Tetzlaff for Respondent Judgment: 9 August 2010 at 2.30 p.m.JUDGMENT OF THE COURTA The appeal is dismissed. B The respondent is entitled to costs against the appellant for a standard appeal on a Band A basis together with disbursements as fixed by the Registrar. C The stay of execution granted by Duffy J on 31 March 2010 (as varied by this Court on 28 May 2010) is rescinded. If there are any consequential matters arising, they are to be dealt with in the High Court if necessary.____________________________________________________________________REASONS OF THE COURT(Given by Randerson J)Introduction[1] This appeal arises from an arbitral award made following an international arbitration which took place in Charlotte, North Carolina. The arbitrators found in the award that the appellant was liable to the respondent for damages in the sum of US$454,206 plus further sums for costs and expenses. The respondent applied to the High Court in this country for an order that the award be entered as a judgment against the appellant. In turn, the appellant applied for an order that the recognition and enforcement of the judgment be refused. [2] A feature of the arbitration was that it took place in the absence of the appellant after the arbitrators refused the appellant's application for an adjournment. The essence of the appellant's case before the High Court was that the refusal of the adjournment constituted a breach of natural justice such that the award should not be recognised or enforced. A subsidiary argument was that the award disclosed an error of law. [3] In a judgment delivered on 2 December 2009, 1 Duffy J held that the appellant's application was not made out and that the respondent was entitled to judgment to enforce the award. She later granted a stay of execution on terms which were subsequently varied by this Court.Background facts[4] The respondent ("Swisher") is a company incorporated in the United States. It operates and manages an international franchise cleaning system. In 2006 Swisher entered into a Master Licence Agreement with the appellant ("Hi-Gene"), a company incorporated in New Zealand. Under the Agreement Hi-Gene became the master franchisee in Australia and New Zealand. [5] Difficulties arose in the relationship which resulted in Hi-Gene giving Swisher a formal notice of commencement of arbitral proceedings in December1 Swisher Hygiene Franchise Corporation v Hi-Gene Ltd HC Auckland CIV-2009-404-1573, 2 December 2009.2007. That notice was given in terms of cl xiv of the Master Licence Agreement which provided:XIV. ArbitrationA Any dispute or difference between the parties concerning this agreement or as to any manner in any way connected with or arising out of this agreement, if not resolved by negotiation or mediation, shall be referred to binding arbitration of two arbitrators, one to be appointed by each party, or to an umpire to be appointed by the arbitrators. The arbitration must be conducted in a venue specified by the party that is the recipient of the Notice of Arbitration and will be conducted under the then-current laws governing arbitration in the place in which the arbitration is held. The prevailing party shall also be entitled to recover its reasonable attorneys fees and other professional costs.[6] The Master Licence Agreement also provided that:XV. Governing LawThis Agreement shall be governed by the laws of New Zealand and both parties hereby consent to the jurisdiction and venue of the Courts of New Zealand to enforce an arbitration award entered in the United States or New Zealand.[7] Hi-Gene had two directors and shareholders, a Mr Grant and a Mr Rayward. In January 2008 Mr Rayward specified Charlotte, North Carolina in the United States as the location for the arbitration. Mr Grant maintained that this was done without his knowledge and that Mr Rayward had no authority to specify the arbitral location since he was no longer actively involved in the company's affairs. [8] Hi-Gene's New Zealand counsel, Mr W G C Templeton, immediately advised Swisher's New Zealand solicitors that the specification of Charlotte as the place for the arbitration was disputed. Hi-Gene considered it should occur in New Zealand. Swisher nevertheless nominated an arbitrator and called upon Hi-Gene to nominate its arbitrator. Hi-Gene did not do so. [9] In July 2008 Swisher applied to the North Carolina Superior Court for orders appointing the second arbitrator. Hi-Gene's response was to file a formal opposition protesting the jurisdiction of the US Courts on the basis of its claim that Mr Rayward lacked authority to specify Charlotte as the place of arbitration. Despite Hi-Gene's opposition, Swisher's application was successful and the second arbitrator wasappointed by court order on 25 September 2008. Mr Gilchrist for Hi-Gene accepted that the Superior Court had implicitly rejected Hi-Gene's protest to jurisdiction. The reasons for the Superior Court's decision were not placed before us. [10] The critical events for present purposes then followed and are set out in the form of a chronology: 30 October 2008 A telephone conference took place between the arbitrators and Swisher's US attorney, a Mr Gardner. The telephone conference had been arranged by Mr Gardner after three requests had been made to the arbitrators to arrange the conference. Mr Templeton was given alternative dates for the telephone conference but did not attend despite being advised of the time and place at which it would occur. There was no evidence before the Court as to why Mr Templeton did not attend this telephone conference although Mr Gilchrist suggested in argument that it was because Hi-Gene did not wish to be treated as submitting to the jurisdiction in the United States. 7 November 2008 The arbitrators issued to the parties a formal "Report of Preliminary Hearing and Scheduling Order" which recorded the outcome of the conference. Notice was given of the time and place at which the arbitration would occur. The hearing was scheduled for 28-30 January 2009 in Charlotte. The arbitrators advised that the parties were entitled to submit a pre-hearing brief to them by 21 January 2009. They also directed the parties to notify the arbitrators in writing if there were any discovery issues. The arbitrators' fees were prescribed and it was directed that these should be paid into a specified trust account in advance of the hearing. Mr Gardner was directed to forward a copy of the formal directions to Hi-Gene and to submit proof to the arbitrators that he had done so. 14 November 2008 Mr Templeton responded to the formal notice immediately by letter to Mr Gardner. His letter stated:My instructions are that my client wishes to engage the arbitration but those dates are not suitable. Both Mr Grant and I am not available. I am engaged at that time in preparation for a ten day High Court trial starting on 2 February 2008. Mr Grant is also unavailable during that time because of prior arrangements for personal reasons. My client wishes to be heard in the matter and suggests an appropriate date in mid to late March 2009 and the matter should be adjourned accordingly.14 November 2008 Mr Gardner wrote to the arbitrators sending them a copy of Mr Templeton's 14 November letter. He copied this communication to Mr Templeton:I'm forwarding a letter I received this morning from Warren Templeton, New Zealand counsel for Hi-Gene Limited. Mr Templeton acknowledges receipt of the scheduling order and asks that the hearing scheduled for January 28-30, 2009, be continued to some time in mid to late March 2009. Mr Templeton does not offer any explanation for his absence from the telephone conference held on October 30. FMS, Inc., is opposed to a lengthy continuance of the scheduled hearing. Hi-Gene Limited had ample opportunity to participate in the scheduling conference or to propose a different time for the conference. Consistent with its conduct from the inception of this arbitration, Hi- Gene, instead ignored the process altogether. Hi-Gene has already caused several months of delay. FMS respectfully requests that the hearing take place as scheduled or, if continued, that it be held as soon as possible in February or early March 2009. Mr Templeton, In the future, please consider sending correspondence (preferably via e-mail) directly to the arbitrators, with of course a copy to me.21 January 2009 Swisher sent its pre-arbitration brief to the arbitrators and to Hi-Gene. 22 January 2009 The arbitrators sent to the parties a "Notice of Hearing and Posting of Deposit". This Notice confirmed the time and place of hearing and advised that the full deposit had been paid to the relevant trust account (it was paid in full by Swisher). The Notice then stated:Be it further ordered that counsel for Hi-Gene Limited has requested a continuance through counsel for FMS, Inc and Swisher Hygiene Franchise Corporation. Counsel for FMS, Inc and Swisher Hygiene Franchise Corporation does not consent to such continuance and no such request has been made of the arbitrators. 23 January 2009 Mr Templeton responded on behalf of Hi-Gene by facsimile letter directly to the arbitrators. Mr Templeton confirmed that Hi-Gene wished to be engaged in the arbitration process and referred to his earlier letter to Mr Gardner of 14 November 2008. He reiterated the grounds on which an adjournment was sought in similar terms to those set out in his letter of 14 November and expressed grave concerns that Hi-Gene's rights were being over-ridden. 23 January 2009 Mr Gardner responded by writing to the arbitrators (with a copy to Mr Templeton) strongly opposing any adjournmentand setting out in detail the grounds of opposition. 23 January 2009 Soon afterwards, the arbitrators confirmed that the hearing would commence as scheduled. This advice was sent on a Friday afternoon (US time), a Saturday in New Zealand. No reasons were given at that stage for the refusal of the adjournment. 28 January 2009 The hearing before the arbitrators in Charlotte took place and the award was subsequently issued on 6 February 2009.The terms of the award[11] The arbitrators set out the procedural history in some detail in the first section of their award. The arbitrators were critical of Hi-Gene's conduct. They noted the lack of any explanation for Mr Templeton's failure to attend the telephone conference on 30 October 2008; the absence of any further response on behalf of Hi- Gene after Mr Gardner's email letter of 14 November 2008 opposing the adjournment; the failure to contact the arbitrators directly until 23 January 2009; Hi- Gene's failure to retain local counsel; and the failure to engage Mr Gardner or the arbitrators in a meaningful dialogue despite 75 days advance notice of the hearing. [12] The arbitrators then set out their findings. This included the background facts and the terms of the Master Licence Agreement. The arbitrators found that Hi-Gene had breached its financial obligations and its contractual duties of confidentiality and non-competition. The breaches by Hi-Gene constituted "material defaults" as defined in the Agreement. The arbitrators then found:As a proximate result of Hi-Gene's breach of contract, Swisher has incurred actual damages of US$454,206.00 as of the date of the Hearing.[13] The arbitrators also found that Swisher was entitled to terminate the Agreement due to material default by Hi-Gene. If Swisher exercised its right to terminate, the arbitrators found that Swisher's actual damages would be much larger – at least US$2,228,766.00.[14] The arbitrators based their finding on material presented to them by Mr Gardner about New Zealand law. The arbitrators stated that their findings were based on the general principles of contract as well as breach of the Fair Trading Act 1986. In that respect the arbitrators detailed actions taken by Hi-Gene which they considered misled Swisher. In particular they found that Hi-Gene did not intend to honour its contractual obligations from the outset or did not have the reasonable capability of honouring those obligations. The arbitrators considered that this was a further ground upon which Swisher was entitled to the damages already described. [15] In addition to the damages and costs already noted, the arbitrators made an order under s 41 of the Fair Trading Act forbidding Hi-Gene and its related officers and agents from engaging in actions inconsistent with the terms of the Agreement including diversion of Swisher business or customers to any competitor or competing in Australasia in similar businesses to Swisher.The grounds relied upon by Hi-Gene[16] Hi-Gene's application for an order refusing recognition and enforcement of the award relied principally on two grounds under article 36 of the First Schedule to the Arbitration Act 1986 namely sub-clauses (1)(a)(ii) and (1)(b)(ii). Article 36 relevantly provides:36 Grounds for refusing recognition or enforcement(1) Recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only— (a) At the request of the party against whom it is invoked, if that party furnishes to the court where recognition or enforcement is sought proof that— (ii) The party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present that party's case; or (b) If the court finds that— (ii) The recognition or enforcement of the award would be contrary to the public policy of New Zealand. (3) For the avoidance of doubt, and without limiting the generality of paragraph (1)(b)(ii) , it is hereby declared that an award is contrary to the public policy of New Zealand if— (b) A breach of the rules of natural justice occurred— (i) During the arbitral proceedings, or (ii) In connection with the making of the award.[17] Mr Gilchrist also referred us to articles 18 and 24(2) of the First Schedule but we are satisfied those articles have no application to an arbitration or award where the place of arbitration is outside New Zealand. By virtue of s 7 of the Act, only articles 8, 9, 35 and 36 of the First Schedule apply (with any necessary modifications) to arbitrations outside New Zealand. [18] The focus of Hi-Gene's case was on the arbitrators' refusal to adjourn the arbitration. Mr Gilchrist submitted that this resulted in Hi-Gene being unable to present its case in terms of article 36(1)(a)(ii). The refusal of the adjournment had also resulted in a breach of natural justice which was contrary to public policy under article 36(1)(b)(ii). Mr Gilchrist submitted that the arbitrators had effectively appointed Mr Gardner as their agent by directing him to forward a copy of the Report of Preliminary Hearing and Scheduling Order to Mr Templeton; the request for adjournment had been brought to the arbitrators' attention on or about 14 November 2008 and yet they took no steps to deal with the application; the request for an adjournment was only for a short period of about six weeks; Mr Gardner's opposition could be characterised as "soft" to the extent that his opposition was essentially to any lengthy adjournment; the arbitrators had not communicated directly with Hi-Gene until the notice issued on 22 January 2009; suggestions of delay on the part of Hi-Gene were unfounded; and Hi-Gene made it clear they wanted to be heard yet they were denied that opportunity.Discussion[19] As is well known, New Zealand enacted the Arbitration Act 1986 based on the Model Law on International Commercial Arbitration adopted by the UnitedNations Commission on International Trade Law (UNCITRAL). The purposes of the Act are set out in s 5:5 Purposes of ActThe purposes of this Act are— (a) To encourage the use of arbitration as an agreed method of resolving commercial and other disputes; and (b) To promote international consistency of arbitral regimes based on the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on the 21st day of June 1985; and (c) To promote consistency between the international and domestic arbitral regimes in New Zealand; and (d) To redefine and clarify the limits of judicial review of the arbitral process and of arbitral awards; and (e) To facilitate the recognition and enforcement of arbitration agreements and arbitral awards; and (f) To give effect to the obligations of the Government of New Zealand under the Protocol on Arbitration Clauses (1923), the Convention on the Execution of Foreign Arbitral Awards (1927), and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the English texts of which are set out in the Third Schedule).[20] Of particular relevance here are the purposes of encouraging the use of arbitration as an agreed method of resolving disputes; the promotion of international consistency of arbitral regimes based on the Model Law; and the facilitation of the recognition and enforcement of arbitration agreements and arbitral awards. Consistent with these purposes, the courts of New Zealand have followed the decisions of courts in other jurisdictions in setting a high threshold when considering applications to refuse recognition or enforcement of an arbitral award under article 36. The onus is on the party seeking an order under that provision to establish one or more of the defined grounds. An order refusing recognition or enforcement of the arbitral award may be made only if one or more of those grounds is established.[21] In the context of article 34 of the First Schedule, this Court held in Amaltal Corporation Ltd v Maruha (NZ) Corporation Ltd2 that a narrow reading is to be given to the public policy ground. The Court cited with apparent approval authorities in the United States, the United Kingdom and Canada. These variously described the defence as applying only where enforcement would:• "violate the forum state's most basic notions of morality and justice"; 3• where there was "some element of illegality or that the enforcement of the award would be clearly injurious to the public good or possibly that it would be wholly offensive to the ordinary reasonable and fully informed member of the public on whose behalf the powers of the state are exercised"; 4• where "it is not consonant with our system of justice and general moral outlook to countenance the conduct "; 5 or• where "the integrity of the court's processes and powers will thereby be abused". 6[22] Reference may also be made to a decision of the Supreme Court of India in which it was said that an award could be opposed on public policy grounds where "it shocks the conscience of the court". 7[23] Although the decision of this Court in Amaltal was made in the context of article 34 (which deals with an application to the Court for orders setting aside arbitral awards) the threshold for the public policy ground under article 36 is to be approached in a similar fashion. Indeed, some of the authorities relied upon by this Court in Amaltal derive from cases where the public policy ground was relied upon in an attempt to resist the enforcement of arbitral awards.2 Amaltal Corporation Ltd v Maruha (NZ) Corporation Ltd [2004] 2 NZLR 614 at [41] – [47].3 Parsons & Whittemore Overseas Co Inc v Sociéte Générale De L'Industrié Du Papier (RAKTA)508 F 969 (2d Cir 1974) at 974.4 Deutsche Schactbau v Shell International Petroleum Ltd [1990] 1 AC 295 (HL) at 316.5 Boardwalk Regency Corp v Maalouf (1999) 6 OR (3d) 737 (ONCA) at 743.6 Soleimany v Soleimany [1999] QB 785 at 800.7 Oil & Natural Gas Corporation v SAW Pipes Ltd [2003] SOL Case No 175, 17 April 2003 at [27].[24] Mr Gilchrist submitted that article 36(1)(a)(ii) afforded a discrete ground upon which the enforcement of the arbitral award might be resisted. While that is undoubtedly so, there is a substantial overlap between that ground and the natural justice/public policy ground, at least in the factual context of the present case. It would be contrary to the purposes of the Act to refuse to recognise or enforce an arbitral award in the absence of serious grounds to intervene. It would be anomalous if a different threshold were adopted for the ground in article 36(1)(a)(ii) than that for the public policy ground under article 36(1)(b)(ii) when both involve essentially an allegation of breach of natural justice through the refusal of the adjournment. We endorse the following statement in the Laws of New Zealand Arbitration:8 each party must have a reasonable opportunity to be present throughout the hearing, together with advisers and witnesses. A party should be provided with sufficient time for their case to be properly prepared for the hearing. Efforts should be made to take into account the availability of the parties or important witnesses. However, this does not imply that a party has an absolute right to be consulted in every aspect pertaining to the hearing. The matter is subject to discretion of the arbitral tribunal. The Court will intervene only in cases of positive abuse. If a party elects not to attend a hearing after receiving proper notice, the proceedings may properly proceed in the party's absence.(Emphasis added and footnotes deleted.)[25] This passage essentially adopts similar observations made by the learned editors of The Law and Practice of Commercial Arbitration in England.9[26] The adoption of a high threshold has been said to be appropriate for all the grounds under article 36(1). As Redfern & Hunter explain:10 the intention of the New York Convention and of the Model Law is that the grounds for refusing recognition and enforcement of arbitral awards should be applied restrictively. As a noted commentator on the Convention has stated:11As far as the grounds for refusal for enforcement of the Award as enumerated in Article V are concerned, it means that they have to be construed narrowly.8 Laws of New Zealand (Arbitration) at [76].9 Sir Michael Mustill and Stewart Boyd QC The Law and Practice of Commercial Arbitration in England (2 nd ed. Butterworths, London, 1989) at 303.10 Alan Redfern & Martin Hunter Law and Practice of International Commercial Arbitration (4 thed. Sweet & Maxwell, London, 2004) at 445.11 Albert van den Berg The New York Arbitration Convention of 1958 (Kluwer, The Hague, 1981) at 267-268.[27] The Convention's intention to remove obstacles to enforcement of arbitral awards and to apply a narrow construction (or high threshold) to all grounds for refusing enforcement is confirmed in Parsons Whittemore Overseas Co v Société Générale de L'industrie du Papier,12 a decision cited by this Court in Amaltal.13[28] We agree with the Judge that Hi-Gene could not sustain either of the grounds relied upon in support of its application for an order refusing recognition or enforcement of the arbitral award. Hi-Gene chose not to take part in the telephone conference at which the hearing date was set and at no time explained why it did not do so. Assuming for the sake of argument that Hi-Gene was at that time continuing to take the view that there was no jurisdiction for the arbitration to proceed in the United States, that position had changed by the time Mr Templeton wrote to Mr Gardner on 14 November 2008 seeking an adjournment. By then Hi-Gene had clearly abandoned any protest to jurisdiction and was expressing its willingness to take part in the arbitration in Charlotte. Hi-Gene was immediately made aware by Mr Gardner that an adjournment was opposed. While Mr Gardner made it clear that the opposition was to a lengthy adjournment, he nevertheless requested when writing to the arbitrators that "the hearing take place as scheduled or, if continued, be held as soon as possible in February or early March 2009". [29] As the party seeking the adjournment, it was incumbent upon Hi-Gene to seek a ruling from the arbitrators. There was no agreement from Swisher to an adjournment and, in the absence of any decision from the arbitrators, the hearing date as scheduled remained in place unless and until the arbitrators ruled otherwise. Yet no further inquiry was made by or on behalf of Hi-Gene before 22 January 2009 when Hi-Gene received the Notice of Hearing and Posting of Deposit from the arbitrators. [30] While it would have been desirable for the arbitrators to have communicated with the parties as soon as they received copies of the correspondence between the legal representatives of the parties in mid-November 2008, that does not detract from the essential obligation on the part of Hi-Gene to seek a formal decision on their12 At 973 and 976 – 977.13 At [44].adjournment application. We accept Mr Clemow's submission on behalf of Swisher that Hi-Gene could have, for example, communicated directly with the arbitrators; initiated or requested a telephone conference with them; or instructed local lawyers to pursue the matter. Instead, Hi-Gene did nothing to advance the issue of the adjournment for a period of over two months. [31] We accept Mr Clemow's submission that the obligation on the arbitrators was to provide Hi-Gene with the opportunity to be present at the hearing of the arbitration and to take part in that hearing. That opportunity was provided by the arbitrators giving Hi-Gene ample advance notice of the time and place of the hearing. [32] The arbitrators were not, in the circumstances, obliged to grant the application for an adjournment. It is not in dispute that the arbitrators had a discretion in that respect. Relevant factors include: (a) the strength of the grounds relied upon for the adjournment; (b) the reasonableness of the conduct of the parties seeking the adjournment; (c) the need to do justice to both parties to the arbitration; (d) the desirability of a prompt and effective resolution of the dispute; and (e) the length of the notice given in the hearing date. [33] Counsel referred to several High Court authorities but we have not found it helpful to refer to them. They all turn on their own facts. Mr Gilchrist relied particularly on the decision of the English Court of Appeal in Priddle v Fisher & Sons14 for the proposition that an adjournment ought not to have been refused merely because a party who did not appear did not expressly seek an adjournment and that, before proceeding in his absence, the tribunal ought to have satisfied itself that the14 Priddle v Fisher & Sons [1968] 1 WLR 1478.party was inviting them to proceed in his absence. 15 However, the observations of the Court of Appeal in that case must be considered in context. The party seeking the adjournment had at all times intended to be present but, on the day of the hearing, the union representative who was to speak on his behalf fell ill and the onset of snow prevented the party himself attending the tribunal hearing. Despite telephoned advice of these difficulties, the tribunal proceeded in the absence of the party concerned. Not surprisingly, the Court of Appeal considered that the failure to specifically ask for an adjournment was not fatal to a finding that the tribunal had erred in proceeding in his absence. [34] Given the delays attributable to Hi-Gene, the arbitrators had proper grounds to refuse an adjournment. The grounds relied upon for the adjournment were not compelling. Given the length of the advance notice, alternative counsel could have been arranged either from New Zealand or in the United States. The ill-health of Mr Grant's mother would not ordinarily have been regarded as a proper ground for an adjournment. Mr Templeton had not referred to this in his letter of 14 November 2008 and it appears this was raised for the first time on 23 January 2009. There was no suggestion that she was to be a witness. Swisher's interests in obtaining an early resolution of the dispute were also to be considered. [35] We are satisfied there are no grounds to upset the findings by the Judge that Hi-Gene was not unable to present its case and that there was no breach of natural justice. We do not consider that the high threshold required to establish the public policy ground was made out or that there has been any abuse of process.Alleged error of law[36] This part of the argument was presented by Mr Karam. It will be recalled that cl xv of the Master Licence Agreement provided that the Agreement was to be governed by the law of New Zealand. Mr Karam submitted that the arbitrators had erred in two respects. First, by relying only upon Mr Gardner's submissions as to the relevant law in New Zealand and, secondly, by erring in the application of New Zealand law.15 At 1481.[37] An initial issue is whether an error of law constitutes a ground for resisting the recognition or enforcement of an arbitral award as being contrary to the public policy of New Zealand under article 36(1)(b)(ii). The Judge found that an error of substantive law in an arbitral award does not establish a ground for non-recognition and non-enforcement under this provision. In reaching that conclusion, the Judge relied on the decision of Harrison J16 at first instance in the Amaltal case where it was concluded that the process of an appeal on questions of law under article 5 of the Second Schedule of the Arbitration Act and an application to set aside an award under article 34 were mutually exclusive. It is common ground that the Judge's finding in that respect is in error. [38] On appeal, this Court held in Amaltal17 that the respective processes were not mutually exclusive. The Court also accepted that the public policy ground in article 34 covered fundamental principles of law and justice in both substantive and procedural respects. 18 However, where the public policy ground is relied upon (whether under article 34 or article 36), a court will only intervene where the error of law is of the fundamental character we have already discussed at [21] above. We are not persuaded that the alleged errors are of that character. As discussed by the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd,19 formal proof of foreign law will sometimes, but not always, be required to establish, as a matter of fact, the foreign law before the court or tribunal seeking to apply it. In this case, some materials had been sent by Swisher's New Zealand solicitors to Mr Gardner but he did not place that material before the arbitrators. Rather, he summarised it in his submissions. [39] Mr Karam was unable to point to any error in the material produced to the arbitrators. In our view, the real issue is whether the arbitrators have been shown to have committed any error of law and, if so, whether any such error was of such a fundamental nature as to engage the public policy ground under article 36(1)(b)(ii). In that respect, Mr Karam submitted that the reference in the award to the damages as a "proximate result" of Hi-Gene's breach of contract was not a concept known to16 Amaltal Corporation Ltd v Maruha (NZ) Corporation Ltd [2003] 2 NZLR 92.17 At [38].18 See the discussion of the legislative history of article 34 at [43].19 Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 NZLR 289 at [53] – [54].New Zealand law. He was also critical of the apparent disconnect between the finding of breach of contract and breach of the Fair Trading Act and the damages awarded. There was, he said, no detail given of how the losses arose and there was no breakdown of the amounts awarded. He also submitted the arbitrators had ignored Hi-Gene's counter-claim. [40] We agree that there is a relative paucity of detail in the arbitrators' findings. However, it must be recalled that the award was effectively a formal proof since Hi- Gene did not attend to dispute the evidence and submissions produced on behalf of Swisher. In those circumstances, the arbitrators could not have been expected to produce the level of detail and reasoning which would have been appropriate in a defended arbitration. Nor are we persuaded that the reference to "proximate result" constitutes an error of law. In the absence of any explanation from the arbitrators, they may well have simply been referring to losses directly arising. The arbitrators were not obliged to consider Hi-Gene's counter-claim in their absence and without any evidence in that respect. [41] In any event, we are not persuaded that any of the matters raised on behalf of Hi-Gene could fall into the category of fundamental error sufficient to engage the public policy ground.Result[42] For the reasons given, the appeal is dismissed. [43] The stay of execution granted by Duffy J on 31 March 2010 (as varied by this Court on 28 May 2010) is rescinded. If there are any consequential matters arising, they are to be dealt with in the High Court if necessary. [44] The respondent is entitled to costs against the appellant for a standard appeal on a Band A basis together with disbursements as fixed by the Registrar.Solicitors: Foley & Hughes, Auckland for Appellant Gaze Burt, Auckland for Respondent