Glenthorne Station Limited v University of Canterbury

[2023] NZHC 849

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-000070

[2023] NZHC 849

IN THE MATTER OF

The Arbitration Act 1996

BETWEEN

GLENTHORNE STATION LIMITED

Applicant

AND

UNIVERSITY OF CANTERBURY

Respondent

Hearing:

7 March 2023

Appearances:

S P Rennie and F H Scrase for the Applicant

H R Smith and J W C Nicolle for the Respondent

Judgment:

19 April 2023

JUDGMENT OF GENDALL J

Introduction and background

[1]    Before the Court is an Application for Determination of Separate Questions pursuant to r 10.15 of the High Court Rules 2016 filed on 26 April 2022. This application concerns the issue of whether those separate questions about the release of an interim and supplementary arbitral award (the Awards) should be determined independently of substantive applications brought by the Applicant Glenthorne Station Limited (Glenthorne) both to set aside the Awards and for a grant of leave to appeal those Awards.

[2]    Glenthorne, a farming company, owns and operates a South Island high country station, in part on pastoral land leased from the respondent, the University of Canterbury (the University) and in part under leases from the Crown. For the past

GLENTHORNE STATION LIMITED v UNIVERSITY OF CANTERBURY [2023] NZHC 849 [19 April 2023]

eight years, the parties have been involved in a lengthy arbitral dispute (the Arbitration) over the appropriate level of rental to be paid for that portion of the pastoral land owned by the University and leased to Glenthorne (the Land).

[3]    As I understand the position, assessment of the rental in question required decisions on:

(a)whether the Crown Pastoral Land Act 1998 (CPLA) (Glenthorne’s position) or the Public Bodies Leases Act 1969 (PBLA) (the University’s position) applies to the lease;

(b)if the PBLA applies, whether amenity values should be taken into account; and

(c)the appropriate rental.

[4]    The Arbitration in question involved hearings which took place on 7 – 9 November 2019, 17-19 February 2020, and 10 – 12 March 2020. Those hearings addressed which Act either the CPLA or the PBLA applied to the determination of the rental. As Arbitrators the University had appointed its valuer, Philip Murray (Mr Murray), Glenthorne had appointed its valuer, Paul Mills (Mr Mills) and the parties agreed that Bill Wilson KC (Mr Wilson) would be the third Arbitrator/umpire. Those three men formed the appointed Arbitration Tribunal (the Tribunal) at the time.

1. According to the University:

(a)From 26 February 2020, Glenthorne had made various claims that the University had failed to disclose all correspondence with its valuers and previous valuation reports (including draft reports), that the University or its lawyers had falsified or altered emails that had been disclosed, that Mr Murray was not impartial and lacked independence, and that any disclosure by Mr Murray or the University was late.

(b)Glenthorne did not, however, challenge Mr Murray as Arbitrator under Article 13, Schedule One to the Arbitration Act 1996.

[6]    During the arbitral hearing on 10 – 12 March 2020 the University says it was agreed that Mr Murray and Mr Mills would not participate in the determination of the rental valuation, meaning that these men would only participate in an award deciding which Act of the CPLA and the PBLA applied and whether amenity values should be taken into account here. Mr Murray and Mr Mills were then to resign as Arbitrators so that they could give valuation evidence before Mr Wilson, who would determine the quantum of the rental assessment alone.

[7]    It seems then that on 24 July 2020 all three men as Arbitrators signed the Interim Award but it was not, however, released to the parties at that point.

[8]    More than a year after the last arbitral hearing date, Glenthorne on 9 April 2021 gave formal notice under Article 13(2) of Schedule One to the Arbitration Act, challenging the continued appointment of Mr Murray as an Arbitrator. This challenge was made Glenthorne claimed on the basis of Mr Murray’s alleged lack of impartiality and his lack of independence. Glenthorne requested the Tribunal to decide the challenge, and to establish a procedure for doing so under Article 13. A number of Memoranda followed from counsel for the parties relating both to this challenge and to requests which had been made for further disclosure.

[9]    Mr Wilson, it seems, then sought legal advice to assist him relating to the logistics and managing delivery of the Awards.

[10]Later, in December 2021 and January 2022:

(a)Mr Rennie for Glenthorne asked Mr Wilson to consider withdrawing from his office as Arbitrator/umpire.

(b)Glenthorne filed a Memorandum (dated 25 January 2022) with the Tribunal, suggesting that Glenthorne could only infer there were circumstances that had arisen affecting Mr Wilson’s ability to perform his functions. This Memorandum stated:

Glenthorne is of a mind to now request the High Court to decide the issue. Glenthorne is very reluctant to take this step but, in the circumstances, does not consider it has any other realistic option.

(c)Mr Mills (on 28 January 2022) also notified the parties that he did not consent to any awards being issued until matters that had been raised by Glenthorne had been resolved.

(d)Mr Wilson (on 31 January 2022) issued the Awards. This was on the basis, he said, that he was authorised by:

(i)a majority of the Arbitrators (himself and Mr Murray) to release the Interim Award; and/or

(ii)the parties to release the Awards.

[11] By the Interim Award (which, as I note at [7] above, had been signed by all three Arbitrators, Mr Wilson, Mr Mills and Mr Murray on 24 July 2020, but from which Mr Mills subsequently retracted on 28 January 2022), the Tribunal purported to decide first, that the PBLA applied here (the University’s position) and secondly, that amenity values should be taken into account when fixing the rental at issue. A Supplementary Award (issued by Mr Wilson alone) then determined the lease rental by applying the Interim Award. Mr Wilson’s determination of the rental was lower than the University had suggested, but higher than Glenthorne had suggested.1

[12]   On 11 February 2022 Mr Mills issued what he described as an “Independent Award” in which he decided the PBLA applied here but that amenity values should

not be taken into account when fixing the rental at issue.

[13]   Earlier, in his Memorandum released on 31 January 2022, Mr Wilson had explained that the Interim Award was being released on a provisional basis, subject to any “residual issues” (such as Glenthorne’s allegations of bias and non-disclosure), that any of the parties might wish to pursue. According to the University, this meant that it remained open for Glenthorne to have its allegations determined by the Arbitrators, and depending on the outcome, the Interim Award could be made final, amended, or withdrawn. The University complained however that Glenthorne elected

1      As I understand the position, on that current rental arbitration, the difference between the parties was approximately $63,000 per annum.

then not to take that path. Instead, it pursued its challenge in this Court by filing the present Applications both for Leave to Appeal, and for the Awards to be Set Aside. These were followed by Glenthorne’s present Application for Determination of Separate Questions filed in April 2022. The University says it was only on 3 October 2022 that Glenthorne asked the Arbitrators to find that the Awards were of no effect and should be withdrawn. On 23 December 2022, the further allegation was made that bias and non-disclosure had “tainted the entire proceeding”. In the meantime, however, the University took the view that:

(a)On the challenge to Mr Murray as an Arbitrator, now that Glenthorne had involved the High Court on that issue, it is this Court which must now determine it. This is so that a final Award may be issued or the issues referred back to the Tribunal for re-determination;

(b)On the request for further post-hearing discovery, the matters raised by Glenthorne have been raised too late, they seek disproportionate, privileged or irrelevant documents, and they have also already been put before the High Court and therefore are to be determined here.

The present application

[14]   Glenthorne, in its present application, seeks orders that the following questions be decided separately from any other question and before trial in this proceeding:

(a)Did the parties or all members of the Tribunal authorise Mr Wilson, pursuant to the requirement in Article 29, Schedule 1 of the Arbitration Act 1996 to decide procedural issues, including to set aside the challenge and disregard the requested order for disclosure, in order for him to be able to issue the Wilson Awards?

(b)If the answer is “No”, should the Wilson Awards be ordered to be immediately set aside?

[15]   The pleaded grounds on which the orders are sought are set out in Glenthorne’s application as follows:

(a)The questions are easily demarcated from the issues to be determined.

(b)Any facts required to be put before the Court to determine the questions are not contentious.

(c)The determination of the above questions will either resolve the matters at issue between the parties, or narrow the matters to be determined at any subsequent trial.

(d)There is no significant overlap in the evidence required to determine the questions, and the evidence required to determine the remaining issues and questions of law.

(e)A separate questions’ hearing is unlikely to cause any significant delay in finally resolving the proceeding.

…..

The law

[16]   This present application as I note is brought in reliance on r 10.15 of the  High Court Rules 2016.

[17]Rule 10.15 provides:

10.15 Orders for decision

The court may, whether or not the decision will dispose of the proceeding, make orders for—

(a)  the decision of any question separately from any other question, before, at, or after any trial or further trial in the proceeding; and

(b)   the formulation of the question for decision and, if thought necessary, the statement of a case.

[18]   McGechan on Procedure, addresses Rule 10.15 in some detail and states in part:

The starting point is the assumption that all matters in issue are to be determined in one trial because that will normally be the most expeditious and efficient manner for dealing with the proceeding…

[and]

Consequently, the burden of displacing the presumption rests on the party contending for split trials. The burden has variously been described as “not insignificant”, “moderate”, and “heavy”. An appropriate approach is to consider whether the applicant has established good, preponderant reasons in favour of a separate question determination.2

[19]   And, whilst noting several judicial warnings, emphasising the risks involved in ordering split trials, McGechan on Procedure goes on at para HR10.15.06 to set out some principles and criteria for a court to take into account in deciding whether to exercise the discretion to order a split trial:

HR 10.15.06 Principles

(1) Criteria

The main criteria that have been taken into account in deciding whether to exercise the discretion to order a split trial are:

(a)The likelihood of delay in finally resolving the proceeding.

(b)The probable length of the hearings if there is a split trial.

(c)Whether a decision one way or the other on the separate question(s) would end the litigation.

(d)The impact on the length of any subsequent hearing.

(e)A balancing of the advantages to the parties and the public interest in shortening litigation against any disadvantages asserted by parties opposing a split trial.

(f)Demarcation difficulties in defining issues to be addressed at the first trial, and those left for the second.

(g)Resulting difficulties of issue estoppel.

(h)Inadvertent disqualification of a Judge who has expressed views at the first trial on matters for decision at the second trial.

(i)Inadvertent findings at the first trial upon matters that are for full evidence and argument at the second hearing.

(j)The need to recall some witnesses at the second hearing.

2      McGechan on Procedure, loose leaf edition, Thomson Brookers at HR 10.15.05 (1) and (2).

(k)The duplication of time involved in the Court and counsel “coming up to speed” again for the second hearing.

(l)The prospect of multiple appeals.

(m)The need for a second round of discovery or other interlocutories and amended pleadings following the first trial.

(n)Rostering difficulties in ensuring that the same Judge is available for the second hearing.

Those are the criteria listed in Turners & Growers Ltd v Zespri Group Ltd HC Auckland CIV-2009-404-4392, 5 May 2010 at [11]. They represent the Courts’ experience gained over many decades.

[20]   Always taking into account the need to consider the individual circumstances of each case, McGechan on Procedure at HR 10.15.06(3) nevertheless sets out a practical approach for analysis of the issues under r 10.15 in the following way:

(3) A practical approach

A practical approach in working through the criteria set out in (1) above is demonstrated by Haden v Attorney-General HC Wellington CIV-2010-485-2380, 4 November 2011 at [50]–[67], adopted in Karam v Fairfax NZ Ltd at [60]–[89]. Those two cases addressed five questions in turn:

·Question 1: Will there be difficult demarcation questions between those issues to be addressed at the first trial and those left for the second?

·Question 2: Will the proceedings be brought to an end?

·Question 3: What potential timesaving does the separate question offer?

·Question 4: How will appeals be dealt with?

·Question 5: Are there any other practical considerations tending one way or the other?

[21]I adopt that approach here as a suitable basis for analysis in this case.

Question 1: Will there be difficult demarcation questions between those issues to be addressed at the first trial and those left for the second?

[22]   In its submissions before me, Glenthorne raises, the prospect of this Court hearing the separate questions proposed on the papers. The University’s position on this aspect is that, if this Court does make an order for the determination of separate questions, a hearing is required given that the dispute is factually complex. I agree.

[23]   This decision, therefore, addresses the simple issue as to whether an order should be made on Glenthorne’s application that the suggested questions be separately determined.

[24]Interestingly, Kós J in Haden v Attorney-General3 observed:

The interaction between issues in split trials is said to be the single most important question for consideration by a Court, considering a r 10.15 application..

…

Issues in the two hearings desirably should be discrete.

[25]   Here, as I understand the position, the decision by Mr Wilson to issue the Arbitral Award and the actual issue of the award were made purely on a provisional basis. Mr Wilson made it clear, in issuing this provisional award, that the parties could raise certain matters and specifically that he did not decide issues on Glenthorne’s challenges to bias on the part of Mr Murray and disclosure questions.

[26]   Mr Wilson did not purport to resolve these issues and I repeat he clearly said he was issuing the award expressly on a provisional basis. It also seems clear that  Mr Wilson was authorised to bring the long-running arbitration between the parties to some form of closure. It is the case however that the arbitration did not come to a final conclusion because matters were still reserved.

[27]   I am satisfied too at this point that it is not appropriate for any parties to endeavour to enforce the award when it was issued as it was on a provisional basis only.

[28]   Essentially, then, Mr Wilson was endeavouring in this case to move on the arbitration and the interminable dispute between the parties, given too that it had become stalled. In doing so, clearly, as I see it, he reserved the position that the parties could pursue matters that were raised by taking these to the Tribunal. They had until December 2022 to raise issues they wished to. Until December 2022 the parties, however, did not do so. Instead, Glenthorne filed in this Court the present application

3      Haden v Attorney-General, HC, Wellington, CIV-2010-485-2380, 4 November 2011

for leave to appeal the award and to set it aside. Doing so, Glenthorne has raised what is says are natural justice concerns.

[29]   In this case I need to say also that the first question which it is proposed by Glenthorne needs to be answered in my view suffers from a range of difficulties. First, it suggests that Mr Wilson made a “procedural decision” to set aside Glenthorne’s bias challenge and to disregard its requested order for disclosure. No such procedural decisions in my view appear to have been made. Mr Wilson confirmed the awards were expressly released on an interim basis and the outstanding procedural issues, namely those relating to the bias challenge to Mr Murray and disclosure, were reserved.

[30]   Next, Glenthorne, in my view, is in error when it contends that procedural decisions are required to be unanimous and here there was no unanimity. Article 29 refers to “any” decisions of an Arbitral Tribunal. These decisions can be made by a majority of the Arbitrators. Accordingly, in this case it required only Mr Wilson and Mr Murray to authorise any decision. This must include a procedural one.

[31]   Lastly, there is nothing in the Arbitration Act 1996 that prevents Arbitrators from continuing arbitral proceedings and releasing Awards while an arbitrator such as Mr Murray is under challenge (albeit one which the University says is out of time) or while a request for further disclosure remains outstanding.

[32]   As I see it, the Tribunal here was entitled to release the awards on a provisional/interim basis as it did while issues of bias and non-disclosure were still being considered. Article 13(3) of Schedule 1 of the Arbitration Act says that if a challenge to an arbitral procedure is not successful, the challenging party may request the High Court to decide on the challenge and that:

While such a request is pending, the Arbitral Tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an Award.

[33]   Further, it is clear in my judgement that the suggested second question in Glenthorne’s present application (“If the answer is ‘no’, should the Wilson Awards be ordered to be immediately set aside?”) clearly leads to demarcation difficulties. In my

view, those difficulties relate to properly defining the issues for each hearing. Further, they will not, in any event, resolve the dispute between the parties.

[34]   Glenthorne’s unsupported assertion here is that a failure by all the Arbitrators to authorise the release of the awards automatically leads to them being set aside. That is not so.

[35]   The basis on which a Court can set aside an arbitral award is outlined in Article 34 of Schedule 1 of the Arbitration Act.

[36]   As I understand Glenthorne’s setting aside application, it claims that a breach of natural justice has occurred, which perhaps might be seen as a breach of public policy ground under the Article. For this to be established, Glenthorne necessarily must show that it would “shock the conscience” to enforce the award, or that the integrity of the Court’s processes and powers would be abused by the enforcement of the Award.

[37]   And, in any event, even if Glenthorne was to be successful in establishing a setting aside ground, this Court retains a residual discretion not to set aside an award. This is evident from the use of the word “may” in the opening text of Article 34(2). The Court of Appeal has recognised that this Court must exercise the discretion with regard to the policies underpinning the Arbitration Act. Particular attention needs to be given to the purposes of encouraging arbitration as a method of dispute resolution, and facilitating the recognition and enforcement of arbitral Awards.4

[38]   Examples do exist of a Court immediately setting aside an arbitral Award, but the circumstances where this occurs are extreme and, in my view, are clearly distinguishable from the present case.

[39]   It is true also that the interim award here originally was signed by all three Arbitrators but, before it was issued, Mr Mills withdrew his agreement to this. As I understand the position, his independent award still reached the same conclusion as to

4      Galloway Cooke Allan v Carr [2013] NZCA 11 at [66] and Kyburn Investments Ltd v Beca Corporate Holdings Ltd [2015] NZCA 290.

the applicable Act but he had a difference of opinion about amenity value which he explained in his decision.

[40]   Overall, I am satisfied the proposed separate questions advanced by Glenthorne cannot be determined in a vacuum. Any attempt immediately to set aside the arbitral decision in my view is not appropriate in all the circumstances here. Instead, this Court will need to consider the extent to which any procedural deficiency (if established) might have had an impact on the outcome of the dispute and whether the Tribunal might have reached a different conclusion had it adopted what is suggested to be the correct approach. In my view, here this Court would not be able to determine whether any unauthorised award, assuming it even reaches that view after a full hearing, was consequential or not until a full exploration of all matters is undertaken. This is to include a consideration of all the relevant evidence.

[41]   Glenthorne’s challenge to Mr Murray under the Arbitration Act is also arguably barred by the time limitation contained in Article 13(2) of Schedule 1 of the Arbitration Act. I leave that aspect on one side here, however.

[42]   For all these reasons, I am satisfied that if Glenthorne’s present application is to succeed, there will be difficult demarcation questions between those issues to be addressed at the first trial and those left for the second. The questions posed here in Glenthorne’s application are not properly discrete. The appropriate course is for this Court to consider all matters raised by Glenthorne in one hearing and where the Court has the benefit of evidence on contested matters.

Question 2: Will the proceedings be brought to an end?

[43]   At the outset I need to say I am satisfied the entire proceeding here will not be brought to an end if the proposed questions are answered in favour of Glenthorne. Glenthorne contends in its Application that the facts underlying the separate questions are not contentious. In my view, that is not correct. First, it seems from submissions advanced for the University that Glenthorne’s claim that the decisions to release the Awards was a “procedural decision” is firmly denied. There are conflicts in the evidence too relating to this. Mr Wilson, it seems, believed he was duly authorised by the parties to release the Awards, but Glenthorne refers to conflicting evidence which

says that it did not  give  Mr Wilson  authority.  Other  parties,  including  perhaps Mr Forbes KC and Mr Rennie, might be required to provide evidence to assist in what may be needed to properly determine this aspect.

[44]   And, in any event, even if Glenthorne could show that Mr Wilson was not authorised to issue the Awards (which the University does not accept) arguably those Awards, it seems, can still be maintained if they were issued on a majority basis. The University also does not accept Glenthorne’s allegation of apparent bias on the part of Mr Murray. To establish that the Awards should be set aside is likely to require a finding of bias and I am satisfied at this point this is not available, given Glenthorne’s challenge is out of time and the evidence to support its allegations would seem to be unsubstantiated.

[45]   If I may be wrong on this and Glenthorne is able to prove Mr Murray was biased, that is an issue that might go some way to tainting the Awards but not, as I see it, their allegedly unauthorised release. Overall I am satisfied all substantive issues here should be considered by this Court at a full hearing of all matters and not by way of a separate questions hearing which would not bring these very long-standing proceedings to an end.

Question 3: What potential time saving does the separate question offer?

[46]   This is a complex dispute and it already has a significant and long history. By its current Application to Set Aside the Awards, Glenthorne, as I see it, has raised a number of issues which are interrelated. These also clearly relate to this Court’s discretion to set aside an arbitral award. No decision of this Court in the exercise of its discretion can, in my view, be arrived at in a vacuum.

[47]   To grant Glenthorne’s current application, this Court must be sure that the questions posed by it are properly discrete and are not intertwined with other questions of law or fact.5

5      All Seasons Properties Ltd v Brian Smith, Court of Appeal 28 May 1997, CA151/96 at page 1.

[48]   The questions posed, in my view, are not discrete here and the appropriate pathway is for this Court to consider all matters raised by Glenthorne in this proceeding in one hearing and to hear all the evidence on contested matters.

[49]   A likely impact of a separate questions consideration in my view would simply be additional delay with no potential timesaving achieved. It would only deal with one part of Glenthorne’s setting aside application and without considering, as this Court would be required to do and in context, whether the Court should exercise its discretion to set aside the awards. The time saving argument does not assist Glenthorne here.

Question 4: How will appeals be dealt with?

[50]   As I have already noted, this matter already has a long and complex history. A likely impact of a separate questions hearing and decision on that in my view would be further rounds of appeals with the additional delays they would require. In their interim award the Arbitrators observed they had been:

…provided with thousands of pages of evidence, submissions and authorities.6

[51]   Subsequently, it seems, there have been no fewer than 25 Memoranda of counsel filed between the last hearing dates and the release of the awards (18 of these filed by counsel for Glenthorne) with even more, it seems, filed subsequently. Further appeals will only delay matters again. This aspect does not assist Glenthorne’s present application.

Question 5: Are there any other practical considerations tending one way or the other?

[52]   Behind this question, as I see it, is essentially a reframing of the issue in r 10.15 of the High Court Rules, which is whether any proposed preliminary hearing in this proceeding is likely to expedite the proceeding, saving inconvenience, and expense, and without causing any countervailing injustice.

6 Interim Award, dated 24 July 2020 at [6].

[53]   With the opening words of the first question posed by Glenthorne here, there is likely to be an intense factual consideration of matters which preceded the release of the provisional awards. Like many matters in this proceeding, as I understand the position, this is hotly disputed. I am satisfied any proposed preliminary hearing of those questions would not in any way expedite this proceeding saving inconvenience or expense to the parties. The proposed separate questions in this case, in my view, are more complicated than might at first appear and some careful examination of many aspects of the factual position would be required. The assumption in this case, as I see it, is in favour of a single trial. There are significant countervailing factors tending against the determination of a separate question here, which this Court must bring into the balance.

[54]   As I have noted, the questions proposed for separate determination relate largely to what is said to be the unauthorised release and the decision relating to “procedural issues”. Glenthorne’s application, if successful, in my view is likely to require the Arbitrators and others to give evidence potentially on multiple occasions when that would not necessarily be the case for determination of the substantive issues before the parties.

Conclusion

[55]   For all the reasons I have outlined above, I find that Glenthorne has not discharged the “not insignificant” burden/onus upon it of establishing that it is appropriate in this case to order that the proposed questions be decided separately.

Orders

[56]Accordingly, I order:

(a)Glenthorne’s Application for Determination of Separate Questions is dismissed; and

(b)Costs are reserved. Counsel are encouraged to liaise with a view to determining costs by agreement between them. In the event that costs cannot be so agreed, then counsel may file memoranda sequentially

(each memorandum not to exceed five pages) which are to be referred to me, and I will decide the question of costs based upon the material then filed.

Gendall J

Solicitors:

Rhodes & Co, Christchurch for the Applicant Simpson Grierson, Christchurch for the Respondent