Foodstuffs (Wellington) Co-operative Society v Holden

[2014] NZHC 490

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-470-000223 [2014] NZHC 490

BETWEEN

FOODSTUFFS (WELLINGTON) CO-

OPERATIVE SOCIETY Plaintiff

AND

DAVID ANDREW HOLDEN and MARIE ALICE HOLDEN as trustees of the D &

M HOLDEN TRUST Defendants

Hearing:	On the papers
Appearances:	R Laurenson for Plaintiff N Campbell QC for Defendants
Judgment:	18 March 2014

JUDGMENT OF WOOLFORD J [on application for leave to appeal]

This judgment was delivered by me on Tuesday, 18 March 2014 at 11.00 am pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Gillespie Young Watson, PO Box 30-940, Lower Hutt

AnnanLaw Limited, PO Box 13383, Tauranga 3141

Counsel:            R Laurenson, PO Box 5606, Wellington 6145

N Campbell QC, PO Box 4338, Shortland Street, Auckland 1140

FOODSTUFFS (WELLINGTON) CO-OPERATIVE SOCIETY v HOLDEN & Anor [2014] NZHC 490 [18

March 2014]

Introduction

[1]      David and Marie Holden apply for leave to appeal to the Court of Appeal from my judgment of 16 December 2013 in which I allowed an appeal against an arbitrator’s award.

Background

[2]     Foodstuffs (Wellington) Co-operative Society Limited (Foodstuffs) lease premises from David and Marie Holden in their capacity as trustees of the D & M Holden Trust (the Trust).  Foodstuffs continues to pay the fixed annual rent, but has stopped paying the one per cent of gross sales in excess of $5.2 million per annum required by the lease, as it had closed the supermarket business it ran from the site and opened a supermarket across the road.

[3]      B J Paterson QC found that Foodstuffs was in breach of the provision in its lease with the Holdens that obliged it to duly and punctually pay rent.  He found that Foodstuffs was required to continue to pay turnover rent as it was obligated to keep the supermarket open on the premises, or in the alternative, sublease or assign the premises to another business with a turnover of at least $5.2 million per annum.  He determined  that  Foodstuffs  was  liable  for  additional  rent  based  on  turnover  of

$186,283.00.

[4]      Foodstuffs appealed against the arbitrator’s award on a question of law to this Court.1   I considered that the arbitrator had erred in his approach to the interpretation of the lease.   I considered that the words in cl 2.19 “other than as premises for carrying on in an efficient and proper manner the businesses of a Supermarket or for any other use as may be a predominant use under the operative District Scheme for the zone within which the demised premises are situated” could not be read down to mean that only a supermarket or other business with turnover of at least $5.2 million

per annum could lease the premises.   The plain words of the lease presented no turnover requirement and to hold otherwise would be to substantially rewrite the clause.   I held that Foodstuffs was only liable to pay the fixed annual rent to the

Trust.

1      Foodstuffs (Wellington) Co-operative Society Ltd v Holden [2013] NZHC 3379.

Leave application

[5]      David and Marie Holden seek leave to appeal to the Court of Appeal against my decision on the following questions of law:

(a)       Whether clause 2.19 of the lease is to be interpreted as I found, or as the arbitrator found;

(b)Whether, even if clause 2.19 is interpreted as I found, the plaintiff is liable in damages for its breach of its obligation in clause 2.19; and

(c)       Whether, even if clause 2.19 is interpreted as I found, the plaintiff is liable for turnover rent in the same amount as found by the arbitrator.

[6]      Foodstuffs opposes the application on the grounds that the question of law set out in [5](a) above is not capable of bona fide and serious argument and does not involve a public or private interest of sufficient importance to outweigh the cost and delay of a further appeal.   In relation to the questions set out at [5](b) and [5](c) above, Foodstuffs opposes the application as these questions were not before this Court and are outside any question of law which might be advanced on this application for leave to appeal.  Additionally Foodstuffs opposes the application on the grounds that these questions are not capable of bona fide and serious argument, do not involve a public or private interest sufficient to outweigh cost and delay, and are not of general public importance.

Relevant law

[7]      The power to grant leave to appeal to the Court of Appeal arises under clause

5(5) of Schedule 2 of the Arbitration Act 1996 – “with the leave of the High Court, any party may appeal to the Court of Appeal … from any determination of the High Court under this clause.”

[8]      The test for the High Court in granting leave to appeal to the Court of Appeal is set out in Waller v Hider.2    In Snee v Snee the Court of Appeal reaffirmed the

2    Waller v Hider [1998] 1 NZLR 412 (CA) at 413-414.

strictness of the Waller v Hider test as a necessary requirement of a functioning Court system.3      In Downer Construction (New Zealand) Ltd v Silverfield Developments Ltd, the Court of Appeal adopted Randerson J’s summary of the test to apply under cl 5(5), which is effectively the Waller v Hider test:4

(a)      The appeal must raise some question of law … capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal.

(b)Upon a second appeal, the Court of Appeal is not engaged in the general correction of error. Its primary function is then to clarify the law and to determine whether it has been properly construed and applied by the Court below.

(c)      Not every alleged error of law is of such importance either generally or to the parties as to justify further pursuit of litigation that has been twice considered and ruled upon by a Court.

Decision

[9]      In my view, the first question of law is not capable of bona fide and serious argument and does not involve a public or private interest of sufficient importance to outweigh the cost and delay of a further appeal.  There is no public or private interest in arguing this question before the Court of Appeal as the issue is one of contractual interpretation,  the  approach  to  which  has  been  authoritatively  decided  by  the Supreme Court in Vector Gas v Bay of Plenty Energy.5    There is no need for an appeal to clarify the law in this area.  The correct interpretation of cl 2.19 was found by a straight application of contractual interpretation principles.

[10]     The applicants’ second question of law is the same as the first and in my view, is therefore also not capable of bona fide and serious argument.  The second

question is whether, on my interpretation of cl 2.19, Foodstuffs is liable for damages

3      Snee v Snee [2000] NZFLR 130 (CA) at [15] – [22].

4      Downer Construction (New Zealand) Ltd v Silverfield Developments Ltd [2008] 2 NZLR 591 (CA) at [33].

5      Vector Gas v Bay of Plenty Energy [2010] NZSC 5, [2010] 2 NZLR 444.

in the amount found by the arbitrator for its breach of cl 2.19 when the arbitrator found that the only way the plaintiff could have complied with the obligation was to operate a supermarket from the premises.  My interpretation was that cl 2.19 did not require the operation of only a supermarket business on the premises.  The premises could be used in the words of cl 2.19 “for any other use as may be a predominant use under the operative District Scheme …”  The second question of law is answered – the arbitrator was wrong to find that only a supermarket could be operated from the premises.

[11]     The third question of law was not argued before me.  It is inappropriate for leave to be granted on this question.  As Foodstuffs has said, the applicants did not cross appeal to this Court from the abitrator’s award or file additional grounds in this Court to support the arbitrator’s award.

Outcome

[12]     I decline to grant leave to appeal to the Court of Appeal.

……………………………….

Woolford J