Diamond Hostel Limited v Kim - [2020] NZHC 663

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-2172

[2020] NZHC 663

UNDER the Arbitration Act 1996

IN THE MATTER

of an Application for Leave to Appeal against Arbitration Tribunal’s Award

BETWEEN

DIAMOND HOSTEL LIMITED

Applicant

AND

SUNGJA KIM

Respondent

Hearing: 19 March 2020

Appearances:

S Kang for the Applicant A Ho for the Respondent

Judgment:

31 March 2020

JUDGMENT OF GORDON J

This judgment was delivered by me On 31 March 2020 at 2 pm, pursuant to
R 11.5 of the High Court Rules

Solicitors: Fairbrother Family Law, Napier

Norling Law Limited, Auckland

DIAMOND HOSTEL LTD v KIM [2020] NZHC 663 [31 March 2020]

Application

[1] Diamond Hostel Ltd (Diamond) applies under cl 5(1)(c) of sch 2 of the Arbitration Act 1996 for leave to appeal part of a decision of an arbitrator given on 9 July 2019. The exercise of the discretion to grant leave is subject to cl 5(2).

[2] The dispute relates to Diamond’s liability for outgoings under a lease of a property, presently owned by Ms Kim, at Spring Creek, north of Blenheim. The arbitrator found Diamond was liable for outgoings under the terms of the lease. Diamond seeks leave to appeal on a question of law arising out of the arbitrator’s determination on liability. Ms Kim opposes leaves.

Background

[3] Diamond leases the property from Ms Kim and operates a low-cost accommodation service there called “Swampys Backpackers”. Mr Kim is the sole shareholder and director of Diamond. Prior to 2017, Diamond occupied the property under an informal arrangement with the then landowner. Novagen Developments Ltd acquired the property during 2017 and required a formal lease. This was signed on 24 May 2017. It is in the standard ADLS form for commercial leases (sixth edition, 2012). Ms Kim acquired the property on 15 May 2018.

[4] The terms of the lease are largely unremarkable for the purposes of this application. Clause 18 in the first schedule to the lease is a list of outgoings for which the tenant is liable. There are 13 items in the list. One has been deleted, presumably because it is not relevant (body corporate charges for insurance premiums for cover held by the body corporate).

[5] Under the terms of the lease as executed, Diamond is liable for outgoings under cl 3.1. The arbitrator, Royden Hindle, estimated the annual amount to be between
$15,000 and $20,000, though he considered the latter figure to be at the upper end of the range. Over a 20-year period, the total liability could be between $300,000 and
$400,000.1

1 The parties agree that the relevant sum for the purposes of this application is between $30,000 and
$40,000 being the arrears for outgoings ($30,000) plus interest.

Submissions for the applicant

[6] In the application seeking leave to appeal filed on behalf of Diamond, a number of errors of law were alleged. However, in his oral submissions Mr Kang, for Diamond, abandoned all but one alleged…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] NZHC 663
Decision Date: 31 March 2020

CaseChat Overview and Summary

Diamond Hostel Limited (Diamond) applied for leave to appeal an arbitration award finding it liable for outgoings under a lease of property owned by Sungja Kim (Ms Kim). The dispute concerns the liability of Diamond, a small business operating a budget accommodation service, for outgoings under a lease of property in Spring Creek. The lease was executed on 24 May 2017 in a standard form. The relevant clause imposes a liability on the tenant for outgoings. The arbitrator found Diamond liable for outgoings and awarded interest on that sum. The appeal concerns a question of law arising from the determination of liability for outgoings. The central issue is whether the arbitrator erred in failing to consider s 231 of the Property Law Act 2007 (PLA). The court considered the application under cl 5(2) of Schedule 2 of the Arbitration Act 1996. The court found the precondition under cl 5(2) was not met as it could not be established that the determination of the question of law could substantially affect Diamond’s rights. The court also found that the strength of the challenge and the nature of the point of law did not satisfy the threshold for leave. The court considered other factors but found them to be against granting leave. The court declined leave to appeal the partial award of the arbitrator. Costs were reserved.

Orders