Lawson v Gawith
[2017] NZHC 40
•27 January 2017
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2016-435-3 [2017] NZHC 40
BETWEEN KEVIN JAMES LAWSON AND
ROSEMARY LYNN LAWSON Applicant
AND
EDWARD BRIAN GAWITH First Respondent
AND
EDWARD BRIAN GAWITH, JOSEPHINE ANNE GAWITH AND PETER NEVILLE PUMPHREY Second Respondents
Hearing: 9 May 2016 Counsel:
G M Richards for Applicant
K B Johnston and P W Michalik for RespondentsJudgment:
27 January 2017
JUDGMENT OF CLARK J
Introduction
[1] Kevin and Rosemary Lawson are lessees of dairy farming land at Martinborough – Masterton Road, Gladstone in the Masterton area. The lease commenced on 1 June 2004 and was for a term of six years with two rights of renewal of six years each.
[2] Under the deed of lease the lessor is the Uwhiroa Trust, the trustees of whom are Edward Gawith, Josephine Gawith and Peter Pumphrey (the trustees).
[3] In response to the Lawsons notifying their intention to renew the lease for a six year term beginning on 1 June 2016 the trustees notified their refusal to renew.
LAWSON AND LAWSON v GAWITH [2017] NZHC 40 [27 January 2017]
[4] The Lawsons applied to the Court for an order renewing the lease of land (the relief application). The relief application is made in reliance on ss 261 – 264 of the Property Law Act 2007 (the Property Law Act).
[5] In reliance on an arbitration clause in the lease the trustees apply for an order dismissing or striking out the proceeding. Clause 12.3 of the lease is in the following terms:
12.3 Arbitration
(a) If any dispute or difference shall arise between the parties as to: (i) the meaning or application of any part of this Lease; or
(ii) any other matter in connection with or which may have an effect on this Lease
the dispute or difference (“the Issue”) shall be referred to the award of a single arbitrator to be agreed upon between the Lessor and the Lessee.
[6] The Lawsons did not attempt to commence arbitration.
[7] It is the trustees’ application which is the subject of this judgment.
The parties’ positions
[8] The application to the Court for orders dismissing the relief application is made on the basis of an arbitration clause in the lease. The trustees say the relief application should have been referred to arbitration in accordance with the lease. The Court has no jurisdiction to hear and determine the Lawsons’ application because the parties agreed under their lease to resolve such matters by arbitration. But, because the Lawsons did not commence an arbitration within the three month
period that the Property Law Act prescribes1 for such applications it is now too late
to refer the dispute to arbitration.
[9] The Lawsons’ primary argument is that the relief application is not able to be
submitted to arbitration. Such applications, it is said, are among a small group of matters that are not arbitrable. But, if the Court should find otherwise, the relief
1 Property Law Act 2007, s 262.
application should be stayed in this Court and referred to arbitration because the interests of justice require that the Lawsons should not be left without any forum in which to pursue the relief application. The Court can extend the time for commencement of arbitration and the tenants ask the Court to do so.
Principles applicable to dismissal and strike-out
[10] The application by the trustees is brought under under r 5.49 and r 15.1 of the
High Court Rules 2016 alternatively.
[11] Rule 5.49 provides the procedure to be followed by a defendant who objects to the jurisdiction of the Court. Where the Court is satisfied it lacks jurisdiction it must dismiss the proceedings:
5.49 Appearance and objection to jurisdiction
(1) A defendant who objects to the jurisdiction of the court to hear and determine the proceeding may, within the time allowed for filing a statement of defence and instead of so doing, file and serve an appearance stating the defendant's objection and the grounds for it.
(2) The filing and serving of an appearance does not operate as a submission to the jurisdiction of the court.
(3) A defendant who has filed an appearance may apply to the court to dismiss the proceeding on the ground that the court has no jurisdiction to hear and determine it.
(4) The court hearing an application under subclause (3) must,—
(a) if it is satisfied that it has no jurisdiction to hear and determine the proceeding, dismiss the proceeding; but
(b) if it is satisfied that it has jurisdiction to hear and determine the proceeding, dismiss the application and set aside the appearance.
[12] The procedure for objecting to jurisdiction under r 5.49 is suitable where the High Court’s jurisdiction is precluded by the operation of a contractual term.2 In Sure Care Services Ltd v At Your Request Franchise Group Ltd a proceeding was
dismissed under r 5.49 following a defendant’s protest to jurisdiction on the basis of
2 Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2011] NZCA 638, [2012] 2
NZLR 823 at [52] (overturned on appeal on a different point: Commissioner of Inland Revenue v
Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1 NZLR 804).
an arbitration agreement.3 Likewise, proceedings were dismissed on the same grounds in Allan Scott Wines and Estates Ltd v Eurowine Fine Wines (1990) Ltd.4
[13] The principles applicable to a strike-out application under r 15.1 are not contentious:5
(a) Pleaded facts, whether or not admitted, are assumed to be true. This does not extend to pleaded allegations which are entirely speculative and without foundation.
(b) The cause of action must be clearly untenable.
(c) The jurisdiction is to be exercised sparingly and only in clear cases.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.
(e) The Court should be particularly slow to strike out a claim in any developing area of law.
Issues
[14] To resolve the present application for strike-out four issues fall to be determined:
(a) Is the Court’s jurisdiction excluded by the arbitration agreement?
(b)If the answer to (a) is yes, are the trustees nonetheless precluded from relying on the arbitration agreement by estoppel, waiver or for any
other reason?
3 Sure Care Services Ltd v At Your Request Franchise Group Ltd HC Auckland CIV-2008-404-
5112, 31 July 2009, cited in Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue
[2011] NZCA 638, [2012] 2 NZLR 823.
4 Allan Scott Wines and Estates Ltd v Eurowine Fine Wines (1990) Ltd HC Wellington CIV-2007-
485-1728, 30 January 2008, also cited in Redcliffe Forestry Venture Ltd v Commissioner of
Inland Revenue [2011] NZCA 638, [2012] 2 NZLR 823.
5 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267; Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
(c) If the answer to (b) is no, are the Lawsons out of time to refer the relief application to arbitration?
(d)If the answer to (c) is yes, should the application be dismissed or struck out?
[15] I address each in turn.
Is the Court’s jurisdiction excluded by the arbitration agreement?
[16] This question involves the subordinate issues of:
(a) the arbitrability of the relief application; and
(b) the scope of the arbitration agreement.6
Parties’ submissions
[17] Mr Johnston, for the Lawsons, contended:
(a) The relief application under the Property Law Act is not a dispute and accordingly falls outside the terms of the arbitration agreement. The relief application does not involve the resolution of a dispute between the trustees and the Lawsons as to what the lease requires of each. Instead it concerns the question of whether the Court will intervene.
(b)The Court has exclusive jurisdiction to hear a relief application made under ss 261 – 264 of the Property Law Act. That proposition is supported by the judgment of Collins J in Highgate on Broadway v Devine (‘Highgate’) where His Honour concluded that that an arbitrator panel was not a court for the purposes of the Act.7
Mr Johnston also emphasised the numerous references to “court” in
the ss 261–264 of the Property Law Act.
6 See [5] above.
7 Highgate on Broadway v Devine [2012] NZHC 2590 at [39].
(c) For various public policy reasons, the relief application is among a small number of matters that are not arbitrable.
[18] The trustees’ position is that the relief application is plainly within the arbitration agreement. The Property Law Act does not confer an exclusive jurisdiction on the courts to determine the relief application. Mr Richards suggested that the Court should depart from the conclusion of Collins in Highgate on Broadway v Devine.
Analysis
[19] I do not accept the submission that the relief application is not a dispute in terms of the arbitration agreement. Renewal of a lease which includes a covenant relating to renewal is plainly a “dispute or difference … between the parties as to … the meaning or application of any part of [the] Lease … or any other matter in connection with or which may have an effect on [the] Lease” in the terms of the arbitration agreement.
[20] I have also concluded the relief application is capable of determination by an arbitrator notwithstanding the references to “court” in provisions of the Property Law Act.
[21] In arriving at this conclusion I have considered the analysis of Collins J in Highgate. In that case an applicant landlord sought a declaration that an arbitrator had no jurisdiction to hear a dispute between that landlord and the tenant. The principal issue was whether the arbitration agreement was brought to an end when the tenant commenced proceedings in the High Court.8 The landlord had submitted that the tenant should have elected a forum for the whole dispute and not dissected the dispute into issues brought in different fora. The tenant’s position was that the Court had exclusive jurisdiction:
[38] The tenant responds to the submission [that it should have submitted all aspects of the dispute to arbitration] by saying that as a matter of law, the issues under the Act could only be resolved by a court. The tenant supports the submission by referring to the following provisions of the Act:
8 At [27].
(1) Section 243(2) which provides that relief against:
(a) the actual or proposed cancellation of a lease; or
(b) the refusal to extent or renew a lease
may only be given by exercising the powers conferred by ss
253 to 264 of the Act.
(2) Sections 253 to 264 all refer to relief being granted by “a court” or “the court”.
The term “court is defined in s 4 of the Act to mean “… the
court before which the matter falls to be determined”.
[22] Collins J concluded:
[39] In my assessment there is merit in the approach taken by the tenant. I do not accept that an arbitrator panel is a court for the purposes of the Act. When passing the Act Parliament drew a clear distinction between arbitral proceedings and court proceedings. Thus, whereas ss 253 to 264 of the Act refer to issues arising under those sections being determined by a court, Schedule 3, Part 2, cl 4(5) of the Act refers to disputes arising under that clause [concerning covenants, conditions and powers implied in all leases of land] being referred to arbitration under the Arbitration Act 1996. Parliament would not have referred to court proceedings in relation to disputes under ss
253 to 264, and arbitration proceedings in relation to disputes under
Schedule 3 if the two fora were synonymous.
[23] I accept Mr Richards’ submission that it appears Collins J was not invited in the course of argument to consider the Arbitration Act 1996. Section 12 of the Arbitration Act provides that unless otherwise agreed by the parties an arbitration agreement is deemed to provide that an arbitral tribunal may award any remedy or relief that could have been ordered by the High Court if the dispute had been the subject of civil proceedings in that Court.
[24] Section 10 is also material to this case:
10 Arbitrability of disputes
(1) Any dispute which the parties have agreed to submit to arbitration under an arbitration agreement may be determined by arbitration unless the arbitration agreement is contrary to public policy or, under any other law, such a dispute is not capable of determination by arbitration.
(2) The fact that an enactment confers jurisdiction in respect of any matter on the High Court or a District Court but does not refer to the determination of that matter by arbitration does not, of itself,
indicate that a dispute about that matter is not capable of determination by arbitration.
[25] The Law Commission said of s 10 that it expresses a presumption in favour of arbitration and diminishes the force of general jurisdiction provisions which confer powers on courts generally, leaving the question of arbitrability to be approached in terms of s 10(1).9 The Commission was of the view that s 10 can be relied upon to adapt references to the courts generally or the High Court so as to permit their application by an arbitral tribunal.10 Mr Johnston contended that the repeated references to the “court” or “courts” supported the proposition that the courts have exclusive jurisdiction in relation to the relevant Property Law Act remedies. Section 10(2), and the Commission’s commentary on it, diminishes the force of that argument. It provides that a reference to general jurisdiction does not preclude arbitration.
[26] The only remaining basis on which it could be maintained that the relief application is not arbitrable is if, per s 10(1) of the Arbitration Act, whether “the arbitration agreement is contrary to public policy or, under any other law, such a dispute is not capable of determination by arbitration.”
[27] The tenants’ position is that rights in rem, such as the existence of a lease of land, are unsuited to private arbitration. Leases potentially implicate the interests of third parties to the lease such as mortgagees, sublessees and receivers who may not be party to an arbitration agreement. These indicia of leases tell against the arbitrability of an application for relief against renewal. Citing, as a recent example, Auckland Council v Cosdo Equity Ltd11 Mr Johnston submitted the courts have dealt with applications such as the present application notwithstanding the existence of arbitration agreements similar to that in the lease in question.
[28] I am unable to accept that the authorities upon which the tenants rely establish that the relief application is not arbitrable. There is nothing in the nature of these disputes and the relief sought which means they should not be determined by
arbitration. Renewal of a lease is a quintessentially private law matter capable of
9 Law Commission Arbitration (NZLC R20, 1991) at [233].
10 At [259].
11 Auckland Council v Cosdo Equity Ltd [2014] NZHC 1900, (2014) 15 NZCPR 537.
determination inter partes. Mortgagees, receivers and other third parties with potential interests in a lease but who are not party to the arbitration agreement may apply to the courts under the Property Law Act.
[29] Nor does the existence of interests in land, of itself, render the dispute not arbitrable. Commercial leases frequently include arbitration agreements. Indeed Schedule 3, Part 2, cl 4 of the Property Law Act implies into all leases of land a covenant relating to payment of rent and abatement of rent where the leased premises are damaged. Clause 4(5) provides:
Any dispute arising under this clause will be referred to arbitration under the Arbitration Act 1996.” As Mr Richards submitted, it would be a strange outcome if, absent contrary intention by the parties, all rental disputes were to be referred to arbitration but that most other Property Law Act matters could be determined only by the courts and to the exclusion of arbitration.
[30] There are instances of Property Law Act applications being determined in the High Court notwithstanding the existence of an arbitration agreement. They seem to me to be explicable on the basis that neither party sought to rely on the arbitration agreement. In Auckland Council v Cosdo Equity Ltd, to which Mr Johnston referred, the parties had yet to invoke the arbitration agreement at the time Duffy J heard the
application in issue.12 The authorities which Duffy J reviewed included examples of
the High Court staying proceedings on the basis that the matter should be referred to arbitration.13 Indeed, concerning the correctness of the procedure adopted by the applicant in Auckland Council v Cosdo Equity Ltd, Duffy J observed:
[34] Moreover, since both parties accept that their dispute is one covered by the arbitration provision in the lease, unless they both wanted to forego arbitration, which the Council does not, I cannot see how this Court could embark on resolving their dispute.
[31] Duffy J resolved the application by, in effect, making interim orders ahead of arbitration.14 That case does not support the Lawons’ argument that the courts routinely grant Property Law Act relief notwithstanding the presence of arbitration
agreements in leases.
12 At [6].
13 Robt Jones Investments Ltd v RG Caie Ltd HC Wellington CP695/88, 22 November 1988, cited at [27]–[28].
14 At [43].
[32] Finally, I note that the Arbitration Act 1908 provided that an arbitrator had the same power as the courts to order specific performance of any contract except a contract relating to land or any interest in land.15 No similar provision exists in the Arbitration Act 1996. The absence of a similar exclusion of interests in land from arbitration suggests that existence of interests in land does not, of itself, render a dispute not arbitrable.
Are the trustees precluded from relying on the arbitration agreement by estoppel, waiver or for any other reason?
[33] The Lawsons contend that the terms of the notice provided on 18 November
2015 constitute waiver or estoppel preventing the landlords from insisting on arbitration. By their notice the trustees:
(a) refused to grant a renewal of the lease dated 26 February 2004;
(b)stated that the Lawsons were entitled to apply to a court for relief against that refusal;
(c) advised that the Lawsons’ right to apply for relief would lapse if the
application was not made to the court within three months. [34] Mr Johnston submitted:
(a) The notice was “written advice” from the trustees to the Lawsons.
(b)The Lawsons’ application to the court constituted reliance on the trustees’ representation that the court was the appropriate forum.
(c) Having advised that the Lawsons could apply to the court, the trustees cannot now say that the Lawsons should have instead commenced arbitration. They are either estopped from asserting the dispute should have been referred to arbitration, or they have waived their
right to rely on the arbitration agreement.
15 Arbitration Act 1908, s 4 and sch 2, cl 10.
[35] Mr Richards emphasised that the notice was required of the trustees by ss 262(b) and 263 of the Property Law Act and conformed with the matters prescribed by s 263, including that the lessee “may apply to a court for relief against refusal” and that it is advisable to seek “legal advice on the exercise of the right to apply to a court for relief.” There was little choice but for the trustees to issue the notice in the form that they did, following the statutory language.
[36] The claims of waiver and estoppel can best be dealt with in terms of the question of reliance. Essential to both is that the party seeking to rely on a purported waiver or estoppel must establish that they in fact relied upon the communication said to constitute the waiver or estoppel.16
[37] I do not consider that it is open to the Lawsons to even argue that they relied upon the notice as a waiver of the arbitration agreement or as an expression of the landlords’ preference for resolution by a court. In his affidavit Mr Lawson did not touch upon receipt of the notice much less reliance on its terms. Nor was there any evidence bearing on the Lawsons’ decision to apply to the Court rather than refer the matter to arbitration. Moreover, the parties have previously had disputes in relation to the lease although the positions were reversed. It was the Lawsons who sought a stay and dismissal of the trustees’ proceeding on the basis of the arbitration
agreement.17 In all the circumstances it is not, in my view, realistically arguable that
the notice was in fact relied upon.
Are the Lawsons out of time to refer the relief application to arbitration?
[38] Mr Johnston accepted that, if the tenants were obliged to refer the matter to arbitration, the three month time limit for commencement of proceedings for relief against refusal to renew the lease has run out. In reliance though on art 7 of sch 2 of the Arbitration Act he suggested the time limit for commencement of an arbitration could be extended:
7 Extension of time for commencing arbitration proceedings
16 Bell v BDO Spicers Manawatu Ltd [2012] NZHC 1598 at [47].
17 Gawith v Lawson HC Masterton CIV-2010-435-253, 4 May 2011.
(1) Where an arbitration agreement provides that no arbitral proceedings are to be commenced unless steps have been taken to commence the proceedings within the time specified in the agreement, the High Court or a District Court, as the case may be, may, notwithstanding that the specified time has expired, extend the time for such period as it thinks fit, if, in its opinion, undue hardship would otherwise be caused to the parties.
(2) An extension may be subject to any such conditions as the justice of the case may require.
[39] In my view there are two difficulties in relying on art 7 to extend time.
(a) The time which may be extended under art 7 is the time specified by the parties in an arbitration agreement. The present time limit arises not from the arbitration agreement but the Property Law Act. The power provided in art 7(1) to extend an essentially contractual time limit is not available to extend a statutory time limit.
(b)Nor is the relevant time limit, established by s 262 of the Property Law Act, able to be extended. It is settled law that this timeframe operates as a limitation provision and there is no power to grant an extension of time: “it is intractable: that is, compliance is mandatory.”18
[40] The Lawsons are accordingly out of time to refer the relief application to arbitration and, in the event that these proceedings are struck out or dismissed, the Court cannot grant an extension of time.
Should the application be struck out or dismissed?
[41] I am satisfied that the arbitration agreement requires the relief application to be determined by arbitration. I am not persuaded that the relief application is, for any reason, not arbitrable. Accordingly, the Court lacks jurisdiction to determine the
tenants’ application for relief.
18 Boyden v New Zealand Guardian Trust Co Ltd [1995] 3 NZLR 208 (HC) at 211, concerning the predecessor to current s 262.
[42] The appropriate forum, an arbitral tribunal, can no longer, however, hear the application. The time limit in s 262 of the Property Law Act has elapsed. Mr Johnston submitted, relying on Miro Property Holdings Ltd v Fletcher Construction Company Ltd (‘Miro’),19 that the tenants must not be left without a remedy. Therefore, if the time for reference to arbitration cannot be extended this Court should hear the relief application.
[43] In Miro Associate Judge Gendall granted a stay of proceedings while the parties pursued the alternative dispute resolution process agreed in the contract at issue. It had been argued by one party that the dispute resolution process was inoperative because of the difficulties faced in following the agreed procedure. The Associate Judge placed a condition on the stay on the basis that if the alternative
dispute resolution process failed, the plaintiff may not be left without a remedy:20
The interests of justice in this case require that if the alternative dispute method agreed between the parties in the Contract including the Arbitration Agreement is unable to be used here then, to avoid any party being left without a proper remedy, a Court action must be available to either party.
[44] The facts of that case are quite unlike the facts in the present case. In Miro the plaintiff claimed that a significant number of practical and procedural impediments effectively blocked the path to arbitration; the arbitration agreement could not be performed and the plaintiff was able therefore to pursue litigation.
[45] The Associate Judge did not agree that the arbitration agreement was “inoperative” or “incapable of being performed”, and granted the application for a stay of the plaintiff ’s claim in breach of contract to enable the dispute to proceed to arbitration. The Associate Judge was concerned, however, that if a notice requirement in the contract was effective to prevent arbitration, the plaintiff would be without a remedy. Thus the Associate Judge’s conclusion which I have set out above at [43].
[46] In the present case the obstacle the parties face does not arise from difficulties in performing the agreement to arbitrate. The Lawsons are prevented
19 Miro Property Holdings Ltd v Fletcher Construction Company Ltd HC Wellington CIV-2010-
485-2540, 31 May 2011.
20 At [63].
from referring the relief application to arbitration by operation of statute and there is no power to extend that time. Compliance with the three month timeframe, within which an application for relief must be brought, is mandatory.21
[47] Having concluded that the dispute should have been referred to arbitration and that there is no concurrent jurisdiction in this Court to entertain the proceeding, but that the time for arbitration has elapsed, I must now decide whether the Lawsons’ application for relief should be dismissed or struck out.
[48] Rule 5.49(4)(a) is cast in mandatory terms. If I am satisfied the Court has no jurisdiction to hear and determine the proceeding I must dismiss the proceeding.
[49] In Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd the Supreme Court addressed r 5.49 and its relationship to r 15.1. As the trustees have brought their application in reliance on both rules, the Supreme Court’s observations are relevant:22
[34] Sometimes a defendant’s objection to the High Court’s power or authority to try a claim will be directed to whether the plaintiff has pleaded a cause of action that is capable of displacing the finality and conclusiveness of an earlier judgment. In such a case the objection is to the Court’s jurisdiction and may properly be brought under r 5.49. In other cases, the objection is rather concerned with questions of adequacy and cogency of a pleading which are more appropriately addressed in r 15.1. There is clearly an overlap between the two rules. It will often be convenient to apply under both. Despite Ms Hinde’s submission to the contrary, we see nothing in either rule that prevents this.
[50] The conclusions I have reached concerning the absence of jurisdiction in this Court to hear the relief application require dismissal of the proceeding under r 5.49. Although the Lawsons raise both estoppel and waiver, as I have observed the arguments are asserted but lack any evidential basis and cannot realistically be advanced. Consequently, the estoppel and waiver contentions have not overcome the protest to jurisdiction. The trustees’ application is successful on the ground of want
of jurisdiction.
21 See [39](b) above.
22 Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1
NZLR 804.
[51] The strike-out threshold in r 15.1 is also satisfied but as want of jurisdiction is established it is appropriate that I dismiss the relief application on that basis.
Result
[52] The application for relief is dismissed.
[53] The respondents are entitled to costs.
Karen Clark J
Solicitors:
John Freebairn, Palmerston North for Applicants
Lloyd Dodson & Pringle, Dannevirke for Respondents
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