Flock Hill Holdings v University of Canterbury
[2015] NZHC 3169
•11 December 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2014-409-000889 [2015] NZHC 3169
BETWEEN
AND AND
AND
FLOCK HILL HOLDINGS
First Plaintiff
GLENTHORNE STATION LIMITED Second Plaintiff
ACHERON STATION LAND LIMITED Third Plaintiff
MILES FARMING CO LIMITED Fourth Plaintiff
AND
UNIVERSITY OF CANTERBURY Defendant
Hearing: 22 June 2015 Appearances:
A J Forbes QC and K W Clay for Defendant/Applicant
S P Rennie and A G M Whalan for Plaintiffs/RespondentsJudgment:
11 December 2015
JUDGMENT OF ASSOCIATE JUDGE OSBORNE AS TO DEFENDANT'S STAY APPLICATION
Introduction
[1] The original four plaintiffs are companies which lease high country farm properties from the defendant (the University). The leases contain perpetual rights of renewal for 33 years. The renewal dates for plaintiffs’ leases fell variously in late- February and early-March 2009. The plaintiffs sue for specific performance and in particular an order that the University renew the leases at a fair annual rental
determined in accordance with pt 1A Crown Pastoral Land Act 1998 (the CPLA).
FLOCK HILL HOLDINGS v UNIVERSITY OF CANTERBURY [2015] NZHC 3169 [11 December 2015]
[2] The University asserts that the CPLA does not apply to the leases. It says that the leases are subject to the Public Bodies Leases Act 1969 (the PBLA). It says, consequently, that disputes as to rent are to be determined in accordance with the provisions of sch 1 of the PBLA.1 It says that the valuation of reviewed rent must be “… the fair annual rent”.2
The plaintiffs’ summary judgment application
[3] The proceeding was initially issued by the Canterbury University High Country Lessees Association as an association of lessees. The four plaintiffs were subsequently joined and effectively replaced the Association as a party.
[4] In issuing the proceeding, the Association applied for summary judgment, an application which the plaintiffs intend to pursue.
[5] It was common ground between the parties that any hearing of the plaintiffs’ summary judgment application should be deferred pending the outcome of the present application before the Court.
The University’s stay application
[6]
juris
The iction o
(a)
University entered an appearance under protest to object to the f the Court to hear and determine the proceeding. It asserts:
by reason of the PBLA, the rental dispute must be dealt with by
arbitration; (b)
the plaintiffs are estopped, through estoppel by convention, from
asserting a method of determining rental other than through the PBLA
process (including the arbitration of a disputed rental valuation);
(c)
the statutory provisions relied upon by the plaintiffs are not applicable to the leases;
1 Public Bodies Leases Act 1969, s 22.
2 Schedule 1, cl 2.
(d)the Flock Hill lease was in substitution and renewal of the previous lease; and
(e) the University has not failed to renew any lease under the PBLA because the rent applicable for the first period of renewal has yet to be determined by arbitration.
[7] The University applies for an order staying the proceeding and referring the parties to arbitration. It relies upon the grounds contained in its appearance under protest.
The plaintiffs’ opposition
[8] All four plaintiffs initially opposed the University’s stay application. They assert that, through the provisions of the CPLA, they have an entitlement to renewal of their leases; there is accordingly no issue to arbitrate, and the Arbitration Act 1996 therefore does not apply.
[9] The plaintiffs assert that the rental is to be determined as if the land were part of the Crown Ownership under the CPLA.
Withdrawal of the opposition of the third and fourth plaintiffs
[10] At the start of the hearing Mr Rennie, for the plaintiffs, stated that the third and fourth plaintiffs no longer wished to be heard in opposition. I made an oral order granting the third and fourth plaintiffs leave to withdraw their opposition, with costs reserved. I then made an oral order, unopposed, staying the proceeding to the extent of the claims of the third and fourth plaintiffs, with costs reserved.
[11] This has left as the active plaintiffs:
(a) first plaintiff – Flock Hill Holdings Ltd (Flock Hill); and
(b) second plaintiff – Glenthorne Station Ltd (Glenthorne).
In the remainder of this judgment, I will refer to these two plaintiffs as “the
plaintiffs”.
The Flock Hill lease
Provisions as to renewal of the lease and rental payable
[12] Flock Hill pleads, and it is common ground, that Flock Hill leases its relevant property from the University pursuant to lease L160022.1. The term of the lease was
33 years from 1 March 1976.
[13] Flock Hill pleads, and this is common ground, that the lease was granted by the University pursuant to the PBLA.
[14] The University invokes the express terms of the lease and, by reference, the provisions of the PBLA and the Arbitration Act 1996 as a basis for asserting that the dispute between the parties as to the rent for the 11 years from 1 March 2009 is required to be referred to arbitration.
[15] Relevantly, the Flock Hill lease contains in clauses 22 and 26 provisions relating to renewal of the lease and the rental payable, whereby Flock Hill covenants with the University:
22. THAT if the LESSEE shall during the term hereby created pay the rent and observe and perform the covenants and conditions on the part of the LESSEE herein contained or implied then on the expiry by effluxion of time of the term hereby granted the LESSEE shall have the right to obtain in accordance with the provisions of the First Schedule to the Public Bodies Leases Act 1969 a renewed lease of the said land for a term of thirty-three years at a rental for the first eleven years to be determined in accordance with the said provisions (the valuation thereunder not to take account of improvements as defined in Section 14 (9) of the Public Bodies Leases Act
1969 effected purchased or acquired by the LESSEE) computed from the expiration of the lease hereby granted and subject to the same covenants and
provisions of this lease and including this present provision for renewal thereof and all provisions ancillary or in relation thereto. The rent for
subsequent periods of eleven years of the term of the lease shall be determined as aforesaid.
…
26. THAT the yearly rental payable hereunder shall be reviewed at periodic intervals of eleven years calculated from the commencement of the term of this lease and the provisions of Section 22 of the Public Bodies Leases Act 1969 shall apply accordingly (the valuation thereunder not to
take account of improvements as defined in Section 14 (9) of the Public
Bodies Leases Act 1969).
[16] Section 22 of the PBLA (as incorporated into the lease by clause 26) provides for the determination of the rent valuation by arbitration when the parties to the lease do not agree upon the fair annual rent.
[17] Section 22(2) provides:
(2) Where a lease contains any such provision for the review of rent—
(a) not earlier than 9 months and not later than 3 months before the expiry by effluxion of time of any such period (not being the last such period of the term of the lease), or as soon thereafter as may be, the leasing authority shall cause a valuation to be made by a person whom the leasing authority reasonably believes to be competent to make the valuation of the fair annual rent of the land for the next ensuing period of the term of the lease, so that the rent so valued shall be uniform throughout the whole of that ensuing period:
(b) as soon as possible after that valuation has been made, the leasing authority shall give to the lessee notice in writing informing him of the amount of that valuation and requiring him to notify the leasing authority in writing within 2 months whether he agrees to the amount of that valuation or requires that valuation to be determined by arbitration in accordance with paragraph (c):
(c) within 2 months after the giving of that notice to the lessee, he shall give notice in writing to the leasing authority stating whether he agrees to the valuation specified in the notice given to him or requires that valuation to be determined by arbitration. If he so requires, that valuation shall be determined in accordance with the provisions of clauses 7 to
11 of Schedule 1, which shall, with the necessary modifications, apply as if the valuation were being made to
determine the rent payable under a renewal lease:
(d) if the lessee fails to give to the leasing authority within the time specified in paragraph (c) the notice referred in that paragraph, he shall be deemed to have agreed to the valuation set out in the notice given to him under paragraph (b):
(e) the yearly rent agreed to or deemed to have been agreed to by the lessee or determined by arbitration under this subsection shall be the yearly rent payable under the lease for that ensuing period.
[18] Clauses 7 to 11 of sch 1 of the PBLA (as referred to in s 22(2)(c) of the
PBLA) provide for the establishment of an arbitration, its conduct and its outcome.
[19] Within the Flock Hill lease there are, in addition to clauses 22 and 26, six further clauses referring to the PBLA. References are made to arbitration in accordance with the procedures in sch 1 of the PBLA.3
[20] For the University, Mr Forbes QC notes that the CPLA, which is centrally relied upon by the plaintiffs, was enacted in 1998, after Flock Hill’s (1977) Memorandum of Lease was entered into. There is, therefore, no reference in the Flock Hill lease to the CPLA. To the extent (as I will come to) that the plaintiffs’ arguments rely upon the provisions of the Canterbury Educational Reserves Sale and Leasing Act 1876 (the 1876 Act) and the Land Act 1924, Mr Forbes notes a paucity of any reference in the Flock Hill lease to those statutes. The only reference to either is in clause 21 of the lease where the term “minerals” is defined to have “the meaning of the Land Act 1948”. Apart from this limited definitional reference to the Land Act there is nothing in the lease to incorporate operative provisions of the 1876
Act or of the Land Act.
The Glenthorne lease
Provisions as to renewal of the lease and rental payable
[21] Counsel, in their submissions, focused upon the Flock Hill lease as representative of the leases involved in the subject of the proceeding. The Glenthorne lease contains provisions in relation to renewal of the lease and the rental payable, which are materially the same as those of the Flock Hill lease. I therefore identify only the basic details of the Glenthorne lease.
[22] Glenthorne pleads, and it is common ground, that Glenthorne leases its relevant property from the University pursuant to lease L555261.3. The term of the lease was 25 years from 1 March 1984. Although, by reason of the lessee’s name I am referring to it as the Glenthorne lease, it relates to a block of land known as
“Ryton”.
3 In particular cls 19(iv) and 21.
[23] As with the Flock Hill lease, the lease was granted by the University, pursuant to the PBLA. Clauses 22 and 26 in the Flock Hill lease are replicated as clauses 23 and 27 in the Glenthorne lease.
[24] The submissions in relation to the requirements of arbitration under the Flock
Hill lease therefore apply equally to the Glenthorne lease.
Steps taken on expiry of the leases
[25] The term of each lease most recently expired on 28 February 2009, with the consequence that in each case 1 March 2009 became the renewal date.
[26] Pursuant to the valuation procedures under s 22(2) of the PBLA, the
University gave notice of the amount of its valuation of fair annual rent: (a) to Flock Hill on 19 December 2011; and
(b) to Glenthorne on 27 June 2012.
[27] By reference to their rights under their leases to disagree with the University’s rental valuation and to require the valuation to be determined by arbitration in terms of the PBLA, the lessees gave to the University notice within two months that they required a determination by arbitration:
(a) in the case of Flock Hill, on 8 February 2012; and
(b) in the case of Glenthorne, on 27 June 2012.
[28] I omit detailed reference to the notices exchanged between the University and the other two plaintiffs (who ultimately have accepted arbitration) – the exchanges in those two cases reflected the exchanges which initially took place between the University on the one hand and Flock Hill and Glenthorne on the other.
[29] Informal discussions ensued between the University and representatives of the various lessees. Properly the content of those discussions is not before the Court.
The University in the meantime sought, in the case of Flock Hill, the lessee’s identification of its arbitrator. It was anticipated that the result of one arbitration might give guidance which might lead to settlement of others or at least reduce disputed issues.
[30] Around June 2014 the four plaintiffs instructed Tavendale and Partners, a Christchurch law firm, to represent them in relation to the renewal of the leases and the determination of rentals. Christopher (Kit) Mouat of that firm wrote to the University’s solicitors on 3 June 2014. He asserted that the University appeared to be seeking higher rents than provided for under the terms of the leases. He stated that a fair rent under PBLA for each lease was one that is required to be determined under the provisions of pt 1A of the CPLA, with the fair rent determined in the same manner as for Crown pastoral leases. (It is common ground between the parties that the rent fixed under a Crown pastoral lease must follow the formula laid out in s 23B of the CPLA.) Mr Mouat’s letter also contained the assertion that there had been a failure by the University to renew the leases.
[31] The University’s solicitors responded by letter in August 2014. They rejected the contention that there had been a failure by the University to renew the leases and referred to the right of the lessees after determination of the rental figure to decide whether to renew or not. They maintained the need to proceed with arbitration to determine the rental. They asked Tavendale and Partners to take steps to have the lessees appoint arbitrators. They rejected the assertion that the various leases are to be treated as Crown pastoral leases with rental to be fixed under the CPLA.
[32] None of the plaintiffs appointed an arbitrator.
[33] Instead, the Association on behalf of the plaintiffs filed this proceeding. They claim an order by way of specific performance directing the University to renew the leases at a fair annual rental determined in accordance with pt 1A of the CPLA.
Is there an arbitration agreement between the parties?
The provisions of the leases
[34] By cls 22 and 23 of the Flock Hill and Glenthorne leases respectively, the parties have agreed upon the mechanisms in the first schedule of the PBLA as their means of determining rental upon renewal. I have referred to cls 7 to 11 of sch 1 of the PBLA which provide (in the event of disagreement as to rental) for the establishment of an arbitration, its conduct and its outcome. As the introduction to sch 1 of the PBLA indicates, the various clauses (including the arbitration clauses) are provisions which in some cases are automatically incorporated into leases and in other cases may be incorporated into leases.
[35] In the present case, it is clear from the terms of the leases that (whether or not the parties were required to incorporate the arbitration arrangements under the PBLA) the parties agreed to incorporate those provisions.
[36] There is evidence that the agreement as to arbitration has been acted upon in the past at least in the case of Flock Hill in 1998. An arbitration was established by the parties because of their inability to agree upon the rental value to apply for the 11 years from 1 March 1998. Two arbitrators made their award establishing the applicable rental (expressly pursuant to the provisions of s 22 of the PBLA).
[37] The plaintiffs’ case is based on the proposition that the properties are subject to Crown pastoral leases with fair annual rental to be determined in accordance with the provisions of the CPLA. As Mr Rennie identified them, the plaintiffs’ substantive issues are:
(a) whether the fair annual rental is to be determined in accordance with pt 1A of the CPLA; and
(b)whether the University is required to renew the leases pending determination of the fair annual rental.
[38] Assuming for the purposes of this immediate discussion that the fair annual rental which the lessees are to pay is to be assessed by reference to the considerations identified in the CPLA, I turn to Mr Rennie’s submissions.
[39] In his written submissions, which Mr Rennie followed in his oral submissions, Mr Rennie stated:
The CPLA does not permit arbitration but rather establishes a prescriptive rental. The procedure under Part 1A of the CPLA involves appointing an assessor to determine base and current carrying capacity and proceed to a “resolution hearing”, if necessary. So whereas the PBLA procedure expressly invokes the Arbitration Act, the CPLA expressly disavows the application of the Arbitration Act 1996. [At this point, Mr Rennie referred to s 23H(4) of the CPLA] So to the extent the lease confers a right to arbitrate the rental, it is now contrary to, and trumped by, the CPLA.
[40] The provisions of pt 1A of the CPLA (ss 23A – 23Q), to which Mr Rennie refers, deal with the setting of rents for pastoral leases.
[41] These include in s 23B, a formula for calculating annual rents for pastoral leases and, in ss 23C – 23L, provisions for a dispute resolution system. In s 23A of the CPLA (setting out the purpose of pt 1A), it is stated that to help achieve the purpose of pt 1A the framework set out:
(c) provides for a dispute resolution system to facilitate early agreement between the Crown and lessees on the base carrying capacity and the current carrying capacity.
[42] The formula (of which base carrying capacity and current carrying capacity are a part) is that contained in s 23B. The CPLA thereby identifies the basis upon which the annual rental is to be assessed.
[43] The purpose of pt 1A of the CPLA is explained in s 23A(1):
23A Purpose of this Part
(1) The purpose of this Part is to establish a framework for specifying an efficient, predictable, and objective process to set rents for pastoral leases based on—
(a) the productive capacity of the land when used for pastoral farming; and
(b) the earnings available from that productive capacity.
[44] The dispute resolution system under the CPLA, in summary, deals with dispute resolution between the lessor (the Crown) and the lessee following initial assessments of capacity. Provision is made for the appointment of a lessee’s assessor and a Crown assessor, attempted agreement on the rental, and (failing agreement), a resolution meeting chaired by an expert determiner with the two assessors to finally determine the base carrying capacity and current carrying capacity for inclusion in the formula for calculating the annual rent.
[45] This leads to Mr Rennie’s culminating submission that “to the extent the lease confers a right to arbitrate the rental, it is now contrary to and trumped by the CPLA”.
[46] For the proposition that the plaintiffs’ covenants to submit rental issues to arbitration are contrary to the CPLA, Mr Rennie points to the sequence of steps provided by pt 1A of the CPLA, which are all addressed in terms of “must”. I give examples:
(a) The Commissioner must appoint a Crown assessor to make an initial assessment.4
(b) A Crown assessor must … inspect the land and formulate an initial
assessment.5
(c) If the lessee rejects the initial assessment… the Commissioner must… appoint an expert determiner [and] the lessee must appoint an assessor.6
(d) The Commissioner… must, if the Commissioner and the lessee are
unable to agree, appoint a person who is nominated by the Valuer- General [the Crown assessor].7
4 Crown Pastoral Land Act 1998, s 23C(1) and (3).
5 Section 23D(1).
6 Section 23F.
7 Section 23F(2) – (3).
(e) If an agreement is not reached between the lessee’s assessor and the Crown assessor… the expert determiner must chair a resolution meeting with the lessee’s assessor and the Crown assessor…8
[47] As the explanation of the purpose of pt 1A (in s 23A) of the CPLA indicates, the “framework” in pt 1A has the function of specifying “an efficient, predictable, and objective process to set rents”.
Arbitration under the Arbitration Act
[48] The University relies upon the express provisions under the leases requiring arbitration and, in turn, the Arbitration Act.
[49] Article 8(1) of sch 1 of the Arbitration Act contains the stay jurisdiction upon which the University relies. It 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.
[50] The operation of art 8(1) was considered by the Supreme Court in Zurich
Australian Insurance Limited v Cognition Education Limited.9 The Court held:10
Under art 8(1), a stay must be granted unless the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed or it is immediately demonstrable either the defendant is not acting bona fide in asserting that there is a dispute or that there is, in reality, no dispute.
[51] The Court went on to observe that, where there are opposing applications for summary judgment and for stay, the principled approach is to first determine the stay
application and (only if that is rejected) to then consider the summary judgment
8 Section 23F.
9 Zurich Australian Insurance Limited v Cognition Education Limited [2014] NZSC 188, [2014] 1
NZLR 281
application.11 That is the procedure which counsel agreed on in this case, and the
Court adopted.
Discussion
The plaintiff ’s first submission – an inoperative arbitration agreement
[52] The cornerstone of Mr Rennie’s submission as to the express covenants in the Flock Hill and Glenmore leases as to arbitration is that the right to arbitrate rental is contrary to and therefore “trumped” by the CPLA. By this argument, the plaintiffs seek to bring themselves within the stay exceptions under art 8(1) of sch 1 of the Arbitration Act (above at [48]) as articulated by the Supreme Court in Zurich Australian Insurance Ltd v Cognition Education Ltd. In particular they rely on the exceptions expressed as being where the arbitration agreement is null, void or inoperative.
[53] Mr Rennie relies upon two particular features of the CPLA, being:
(a) the prescription of a procedure under pt 1A of the CPLA; and
(b)the “disavowal” of the application of the Arbitration Act under s 23H(4). I shall deal with the second point first.
A disavowal of arbitration in the CPLA?
[54] Section 23H(4) of the CPLA, to which Mr Rennie refers, provides:
The Arbitration Act 1996 does not apply to the resolution hearing, but the expert determiner may apply any provision of that Act to a resolution hearing in any procedures that the expert determiner may establish.
It is this provision which Mr Rennie characterises as a provision by which “the
CPLA expressly disavows the application of the Arbitration Act”.
[55] While s 23H(4) means that the Arbitration Act does not automatically apply to the resolution hearing, the expert determiner may incorporate provisions of the
Arbitration Act into the procedures adopted. Parliament recognises thereby that arbitral procedures (from the Arbitration Act) may be adopted. Such adoption could occur under s 23H(4) either on the expert determiner’s own initiative or following the request of the Crown and the lessee. Accordingly, while the default position is that the Arbitration Act procedures do not automatically apply, there is expressly recognised scope for them to be adopted into the process (albeit by the decision of the expert determiner rather than the parties).
A prescriptive procedure in the CPLA?
[56] At that point it is necessary to return to the requirements of pt 1A of the CPLA. In particular, to the provisions from s 23C onwards in which there is specified (as explained in s 23A(1)) an “objective process” by which to set rents. It is framed in terms of requirements that particular people must perform particular acts.
[57] Mr Rennie’s construction is that the process provided under pt 1A of the
CPLA is the only process by which a binding rental may be set.
[58] The University’s primary position remains that the CPLA does not apply to the leased properties. Instead, the University as a leasing authority,12 leases properties to the plaintiffs under the PBLA. But whether or not the lease is pursuant to the PBLA (the University’s case) or the CPLA (the plaintiffs’ case), the University asserts the entitlement of the parties (lessor and lessee) to adopt (in this case through express arbitration provisions in their leases) a procedure which differs from that
which would be followed under the CPLA if each step from s 23C to s 23I were followed. The focus is upon the procedure (essentially a contest between the arbitration procedure specifically referred to in the leases and the pt 1A procedure under the CPLA, invoked by the plaintiffs).
[59] Any agreement of the parties to a particular procedure need not cut across any obligation to have the rental calculated by the criteria set out in any governing legislation, be it a fair annual rental under the PBLA or the formulaic rental
assessment under the CPLA. If, for instance, the parties have within their powers agreed upon arbitration (whether under the PBLA or otherwise) and the rental assessment is found to require the application of the PBLA formula, the process of arbitration is one means of achieving the substantive outcome (the fixing of the rental). The procedural question raised by the plaintiffs’ case in relation to the CPLA is essentially one of Parliamentary intention. Did Parliament intend the pt 1A CPLA process for the setting of rents to exclude any other process by which the rents might be set?
[60] I observe again the distinction between the process (noting the different processes of arbitration under the PBLA and the non-arbitral nature of the CPLA resolution hearing) and the substantive determination of a correct rental. The focus of the present discussion is on process.
[61] First, Parliament has in the CPLA adopted the word “must” in relation to the various steps to be taken in ss 23C – 23I. The words used clearly note requirement. But this does not expressly address whether the requirement arises in relation to all situations of rental assessment or operates as the default position. (I have referred above at [53]) to s 23H(4) of the CPLA which, as the default position, excludes the provisions of the Arbitration Act but expressly allows the expert determiner to apply arbitration provisions in procedures he or she establishes).
[62] Secondly, although pt 1A of the CPLA expressly provides “a framework for specifying an efficient, predicable and objective process to set rents …”,13 the wording in pt 1A recognises the continuing contractual nature of the relationship between the parties. Thus, for instance, s 23A(2)(c) recognises that the statutory framework:
… provides for a dispute resolution system to facilitate early agreement between the Crown and lessees on the base carrying capacity and the current carrying capacity. (Emphasis added)
The CPLA processes for dispute resolution, where the lessee rejects an initial assessment, might be seen as flowing inexorably through the subsequent processes
of appointment of expert determiner and of assessors on either side, individual assessments, analysis and evaluation, resolution hearing, determination. Through that later dispute resolution process, the express terms as to agreement in relation to the process relate to agreement between assessors rather than the parties to the lease. Yet, Parliament in s 23A(2)(c) expressly refers to a system which facilitates early agreement between the Crown and lessees. Implicitly, at whatever point the CPLA process reached when it encountered impasse, it is open to the parties to effect earlier agreement than would occur if awaiting later steps in the process, such as a resolution hearing.
[63] To recognise the right of the parties to adopt a system for rental assessments during the term of the lease other than that under pt 1A of the CPLA is consistent with the parliamentary focus on party agreement.
[64] A specific situation in which the parties might wish to opt out of the pt 1A process despite earlier rejection of the Crown’s initial assessment (to its assessor) would arise where the assessors and expert determiner had met (under s 23F(3) for the purpose of reaching agreement on the capacities but had failed to do so by a small margin). Section 23F does not expressly provide at that point that the Crown and lessee can effectively opt out and set for themselves acceptable capacity figures. Instead, s 23F(4) expressly requires the expert determiner to set a date for the s 23G resolution hearing, which sets in train a significant series of obligations (including good faith discussions between the assessors; meetings with the expert determiner, involving inspections of the land; explanations passing between assessors; formulations of the capacities with detailed explanations; analysis in the valuation by the expert determiner; and guidance by the expert determiner to the assessors). All those steps in the dispute resolution system are in place, as s 23A(2)(c) records, to facilitate early agreement between those parties, that is to say, before any resolution hearing.
[65] Notwithstanding the absence of a provision in pt 1A which expressly allows the Crown and the lessee to simply agree capacity figures and opt out of otherwise required steps following a rejection of the initial assessment, Parliament must have intended the parties to have within their power the mechanism for early agreement.
The parties might equally, instead of reaching direct agreement between themselves, agree to dispense with one of the assessors and the expert determiner and agree to accept the determination (on figures as yet unknown to them) by one of the assessors.
[66] In the present cases, Flock Hill and Glenthorne have covenanted with the University to adopt an arbitral process in order to determine the rental. Although that would constitute a comprehensive “opting out” of the CPLA process (if one assumes that the CPLA provisions apply), it is consistent with Parliament’s intention that what is involved is a lease and that the procedural provisions of pt 1A of the CPLA are essentially default provisions which enable the parties to secure agreement
as to rental.14
[67] I conclude accordingly that, assuming the CPLA applies to Flock Hill and Glenthorne (which I do not decide) and assuming therefore that (failing party agreement) the person who determines the rental figure upon renewal must calculate the rent by application of the s 23B formula, the plaintiffs and the University were within their rights to agree to an arbitration procedure in place of the dispute resolution process under pt 1A of the CPLA.
[68] The plaintiffs have accordingly not established that the arbitration agreement in each lease is null and void or inoperative.
The plaintiffs’ second submission – no dispute
[69] The second exception to the stay requirement under the Supreme Court’s decision in Zurich Australian Insurance v Cognition is where there is, in reality, no dispute.
[70] I have found that there is an operative arbitration agreement. The plaintiffs are therefore unable to avoid the operation of the arbitration clause on that basis.
14 The ability of the parties to opt out of the CPLA process is consistent with the approach to statutory interpretation reflected in the concept that persons may renounce a right introduced for their benefit. The old Latin maxim was quilibet potest renuntiare juri pro se introducto. See the discussion in Oliver Jones (ed) Bennion on Statutory Interpretation (6th ed, Lexis Nexis, Wellington, 2013) at 29-32.
The plaintiffs can avoid the operation of the arbitration provision, then, only if there is in reality no disputed issue to be arbitrated.
[71] There plainly is a real dispute. Counsel presented me with sophisticated arguments based on statutory history from 1873. Mr Forbes referred to a “tortuous interpretive route” which had to be traced from legislation of the nineteenth century through to the current day if the express provisions of the current leases (incorporating the provisions of the PBLA) are to be found to be inapplicable.
[72] The relief which the plaintiffs seek is in the nature of specific performance, both as to renewal of the leases and as to the fixing of rental.
[73] When plaintiffs seek to have the terms of a lease specifically performed otherwise than in their express terms, there is almost inevitably room for dispute both as to the underlying substantive rights and the appropriate relief. In the present case, this is reinforced by the period during which the parties have acted upon the leases according to their terms. The most significant example of that conduct lies in previous arbitrations in which the provisions for rental assessment (in relation to at least Flock Hill and one of the initial plaintiffs) have been implemented strictly according to the arbitration processes covenanted in the leases and not by processes for which the plaintiffs now contend.
[74] The plaintiffs have not satisfied the Court that there is, in reality, no dispute for resolution in relation to these leases.
[75] Areas of real dispute include:
(a) whether the various statutes and regulations relied on by the plaintiffs apply to the current rent reviews;
(b)whether the plaintiffs are successors to those who originally held the pastoring licences under the 1876 Act and the Waste Lands Regulations;
(c) whether the “fair annual rent” required to be determined by the PBLA
sch 1 must not be determined in the way that is contrary to the 1876
Act;
(d)whether the determination of rent under the 1876 Act is required to be under pt 1A of the CPLA;
(e) whether the University has failed to renew the leases in accordance with pt 1A of the CPLA;
(f) whether the plaintiffs are entitled to specific performance directing the University to renew the leases at a fair annual rent determined in accordance with the CPLA; and
(g)whether the plaintiffs are precluded by an estoppel (by convention) in relation to all or any of the relief sought.
[76] In relation to the current rental valuations, Flock Hill and Glenthorne each gave notices as required by sch 1 of the PBLA requiring the rental for the relevant lease to be determined by arbitration.
[77] By art 4(1), sch 2 Arbitration Act, the High Court may determine a question of law arising in the course of an arbitration either with the consent of the arbitral tribunal or with the consent of all parties.
[78] The University invokes this provision, noting that neither the arbitral tribunal nor the University itself has consented to the determination of a question of law by the Court.
[79] I am satisfied that the plaintiffs have no answer to this objection. The thrust of Mr Rennie’s submissions was that there was no real dispute raised by the University. His submission was that Zurich therefore does not apply, leaving the way open for the plaintiffs to proceed on their summary judgment application. Once it is established that there has been a submission to arbitration in this case and that there is a real dispute, the provisions of art 4, sch 2 of the Arbitration Act operate so
as to preclude this Court determining several of the issues raised by the plaintiffs, including centrally those that relate to the operation of the various statutes relied upon by the plaintiffs.
Outcome
[80] The University is entitled to an order staying the proceeding and referring the parties to arbitration.
[81] I will be reserving costs. My preliminary view is that costs must follow the event in the University’s favour both in relation to its appearance under protest to jurisdiction and the orders now made on the University’s interlocutory application. In the event there is disagreement between the parties as to the appropriate costs order, counsel are to file submissions and the Court will determine costs on the papers. Counsel for the University are to file submissions first to be followed within five working days by submissions for the plaintiff (submissions limited to four pages).
[82] The same directions apply in the event that costs have not been resolved as between the University and the two plaintiffs whose claims have already been stayed.
Orders
[83] I order:
(a) This proceeding, as pursued by the first plaintiff and the second plaintiff, is stayed.
(b)The determinations of rentals as between the first and second plaintiffs and the University for the period commencing 1 March 2009 are referred to arbitration, with leave reserved to the parties to seek further directions if required for that purpose.
(c) Costs are reserved.
Solicitors:
MDS Law, Christchurch
Rhodes & Co, ChristchurchCounsel: Austin Forbes QC, Christchurch
K W Clay, Barrister, Christchurch
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