Precinct Properties Holdings Limited v OMV New Zealand Limited
[2017] NZHC 3230
•19 December 2017
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE
CIV-2017-485-476 [2017] NZHC 3230
BETWEEN PRECINCT PROPERTIES HOLDINGS
LIMITED Plaintiff
AND
OMV NEW ZEALAND LIMITED Defendant
Hearing: 8 December 2017 (by telephone conference) Appearances:
R J Gordon and N J G Smith for the plaintiff/respondent
A M Stevens and E P P Maclaurin for the defendant/applicantJudgment:
19 December 2017
RESERVED JUDGMENT OF ASSOCIATE JUDGE SMITH
[1] The plaintiff (Precinct) has sued the defendant (OMV) to recover rent said to be owing on certain commercial premises in Wellington. OMV denies liability for the rent, contending that the lease terminated when the premises became untenantable following the November 2016 Kaikoura earthquake.
[2] On 28 November 2017, I gave a judgment (the judgment) in which I refused an application by the defendant (OMV) for a stay of the proceeding. OMV’s stay application was based on an arbitration clause in the relevant deed of lease between the parties, that materially provided:
44.1. UNLESS any dispute or difference is resolved by mediation or other agreement, the same shall be submitted to arbitration of one arbitrator who shall conduct the arbitral proceedings in accordance with the Arbitration Act
1996 and any amendment thereof or any other statutory provision relating to arbitration.
PRECINCT PROPERTIES HOLDINGS LIMITED v OMV NEW ZEALAND LIMITED [2017] NZHC 3230 [19
December 2017]
…
44.3. THE procedures prescribed in this clause shall not prevent the Landlord from taking proceedings for the recovery of rent or other monies payable hereunder which remains unpaid or from exercising the rights and remedies in the event of such default prescribed in clauses 28 and 29 hereof.
[3] OMV relied on article 8(1) of the first schedule to the Arbitration Act 1996, which 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.
[4] In Zurich Australian Insurance v Cognition Education,1 the Supreme Court held that, under article 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 that the defendant is not acting bona fide in asserting that there is a dispute or that there is, in reality, no dispute.
[5] Precinct did not contend at the hearing of the stay application that OMV was not acting bona fide in applying for a stay. It simply contended that it was entitled to sue for recovery of the rent under cl 44.3 of the lease, and that cl 44.1 had no application.
[6] In the judgment, I accepted the submission of Precinct that, as long as the lessor was pursuing recovery of rent or other monies identified in the Lease as being payable by the tenant, the claim could be brought in court. On that basis I refused OMV’s application for a stay under Article 8(1).
[7] OMV now applies under s 56 of the Senior Courts Act 2016 (the Act) for leave to appeal against the judgment
The law on applications for leave to appeal
[8] Section 56 of the Act materially provides:
56 Jurisdiction
…
(3) No appeal, except an appeal under subsection (4), lies from any order or decision of the High Court made on an interlocutory application in respect of any civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court on application made within 20 working days after the date of that order or decision or within any further time that the High Court may allow.
…
(5) If the High Court refuses leave to appeal under subsection (3), the Court of Appeal may grant that leave on application made to the Court of Appeal within 20 working days after the date of the refusal of leave by the High Court.
(6) If leave to appeal under subsection (3) or (5) is refused in respect of an order or a decision of the High Court made on an interlocutory application, nothing in this section prevents any point raised in the application for leave to appeal from being raised in an appeal against the substantive High Court decision.
[9] There is as yet little authority on s 56(3). However, both counsel referred to the judgment of Fitzgerald J in Finewood Upholstery Ltd v Vaughan, where the learned judge addressed the circumstances in which leave to appeal may be granted. Her Honour said:2
[8] Counsel informed me that this case appears to be the first consideration of an application for leave to appeal pursuant to s 56 of the Act. Mr Kennedy did, however, refer me to Dobson J’s decision in A v Minister of Internal Affairs [[2017] NZHC 887], in which Dobson J considered such an application, though found that leave was not in fact required.
[9] Dobson J nevertheless went on to consider whether he would have granted leave to appeal, had it been required. In that context , and as
Mr Kennedy submitted on the present application, Dobson J observed that the following considerations would be relevant to any such
application:
(a) A high threshold exists for the granting of leave. An allegation of error of law or fact is generally insufficient. An applicant should raise an arguable error.
(b) Leave should only be granted where the circumstances warrant incurring further delay.
(c) The alleged error should be of general or public importance that requires determination, or otherwise be of sufficient importance to the applicant to outweigh the lack of any general or precedential importance.
…
[13] The requirement for leave to appeal should serve as a “filtering mechanism”, to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to either the parties or more generally, do not unnecessarily delay the proceedings in which the orders were made.
[14] Ultimately, and taking into account those considerations set out at [9] above, the court hearing an application for leave to appeal from an interlocutory order will need to stand back and assess, in a pragmatic and realistic way, whether the interests of justice are served by granting leave to appeal.
The parties’ submissions
OMV
[10] Mr Stevens submitted that the threshold to show that there is some error of law in the judgment is a relatively low one, and the overall interests of justice favour the granting of leave.
[11] Mr Stevens identified a number of aspects of the judgment in which he submitted I had fallen into error. First, he submitted that the judgment did not give effect to the mandatory reference of disputes to arbitration provided for in cl 44.1 of the lease and article 8(1) of the first schedule to the Arbitration Act 1996. He submitted that the judgment failed to consider and apply the strong policy emphasis on giving effect to arbitration clauses, reflected in the Supreme Court decision in Zurich Australian Insurance3.
[12] Secondly Mr Stevens submitted that the judgment failed to give effect to the words “payable hereunder” in cl 44.3, and failed to apply the principles established in
Hi-Tech Investments Ltd v World Aviation Systems (Australia) Pty Ltd.4 Thirdly, the
3 Zurich Australian Insurance, above n 1.
4 Hi-Tech Investments Ltd v World Aviation Systems (Australia) Pty Ltd HC Auckland,
judgment wrongly applied the decision of Venning J in Drake City Ltd v Tasman-Jones,5 notwithstanding that (unlike Drake) this case does not involve a set- off. The last of the claimed errors is that the judgment is said to have wrongly framed the issue as whether OMV “validly” “cancelled” or “terminated” the lease, those words wrongly suggesting that OMV had some evidential burden. The primary dispute was whether cl 26(a) of the lease ended the lease by operation of law.
[13] Mr Stevens submitted that the circumstances of this case do warrant the further delay that will be inevitable if leave to appeal is granted. He referred again to the arbitration agreement at cl 44.1 of the lease, and pointed to delays of Precinct’s own making when it amended its statement of claim and its application for summary judgment. Mr Stevens also referred to Precinct’s resistance to providing discovery of documents, particularly complete expert reports and documents clarifying whether it will demolish or strengthen the building. He submitted that any belated demolition or strengthening decision should impact on whether a rent claim can proceed at all. The risks associated with an unnecessary summary judgment hearing ahead of discovery, outweigh any possible considerations regarding delay.
[14] Mr Stevens further submitted that the appeal is both of general and public importance, and is of particular significance to OMV. He submitted that there are now conflicting authorities as to the correct interpretation of cls 44.1 and 44.3, and that key elements of the judgment, such as the expanded application of “pay now, argue later” principles to a case not involving a set-off, could have significant ramifications for other cases.
[15] Mr Stevens noted that this will in effect be a final decision on the issue of jurisdiction (litigation or arbitration). He submitted that the “finality” of an interlocutory judgment will always be an important consideration on a leave
application.6
CIV-2006-404-3579, 13 October 2006.
5 Drake City Ltd v Tasman-Jones [2016] NZHC 899.
6 Citing Stone v Newman (2002) 16 PRNZ 77 at [19].
[16] If leave is granted, Mr Stevens advised that OMV could have its appeal filed within ten working days, and security for costs (assuming the security can be fixed at
$6,600) paid within the same period. The court might also impose a condition that the appeal be progressed with reasonable expedition.
Precinct
[17] Mr Gordon submitted that there is no reasonably arguable error in the judgment. OMV is glossing over cl 44.3 of the lease in its submissions, and over- emphasising cl 44.1.
[18] Mr Gordon rejected Mr Stevens’ submission that the bar for granting leave is set relatively low, so that any argument that is not frivolous or vexatious will meet the standard. Some arguable error in the judgment must be identified, and it is important to give effect to the “filtering” purpose of s 56 of the Act: unless there is a clearly arguable error in a judgment given on an interlocutory application, the Court of Appeal should not have to deal with any appeal against that judgment.
[19] Mr Gordon emphasised the detriment Precinct says would result from the further delay if leave were granted. It is receiving no rent for the premises, and it is important to Precinct that its claim be determined without further delay.
[20] In response to Mr Stevens’ submission on the claimed conflict of authorities (between Hi-Tech and Drake), Mr Gordon submitted that there are no conflicting authorities on cl 44.3. In this case, the claim is a relatively straightforward claim for rent.
[21] On the conditions proposed by Mr Stevens, Mr Gordon submitted that they should not be permitted to effectively “lower the threshold” for the granting of leave. However, if leave is granted, there should at least be a condition that the rent (calculated from 13 March 2017) be paid into court pending the determination of the appeal.
Discussion and conclusions
[22] I am satisfied that this is a proper case for the granting of leave to appeal, subject to OMV meeting certain conditions.
[23] First, I accept Mr Stevens’ submission that my determination on the stay application will have final effect, at least on the issue of the forum in which the dispute will be determined. In Stone v Newman, the Court of Appeal was concerned with an application for leave to appeal from a decision of Williams J in a Commercial List proceeding, on the Australia-based defendants protest to the New Zealand jurisdiction. The Court of Appeal noted the “well recognised … principle that a foreign citizen resident abroad is not lightly made subject to what, for him, is a foreign jurisdiction”, and went on to note that, for that reason “and because of the finality of the Court’s decision on jurisdiction, which is inevitably made at an early stage of a proceeding”, the court should more readily entertain the application for leave to appeal than might otherwise have been the case.7
[24] Mr Gordon sought to distinguish Stone v Newman on the grounds that it was decided on different facts and involved the application of the principle that a foreign resident should not lightly be compelled to litigate in New Zealand, but I accept
Mr Stevens’ submission that the level of “finality” of the interlocutory decision can be, and in this case is, a relevant factor weighing in favour of the grant of leave. The judgment effectively decided that the dispute must be resolved in one forum (the court) and not another (before an arbitral tribunal), and in that sense the judgment had an element of finality similar to that with which the Court of Appeal was concerned in Stone v Newman.
[25] Wherever the threshold sits on the question of arguable error in the judgment, I think it is sufficiently met in this case. Neither Hi-Tech nor Drake was concerned with a situation where the lessee was contending that no rent was payable because the relevant lease was no longer in existence, and I think in those circumstances it is not beyond reasonable argument for OMV that there would be no rent “payable hereunder” within the meaning of cl 44.3 of the lease. I do not think that is in fact the
correct interpretation, but I am only here concerned with whether OMV has put forward at least one alleged error in the judgment which is reasonably arguable.
[26] I also take into account, in favour of granting the application, that the form of lease used in this case is apparently commonly used between commercial parties in New Zealand, and the relationship between cl 44.1 and cl 44.3 may be of considerable practical importance to quite a wide section of the commercial community. I think there is likely to be considerable public benefit in having guidance from the Court of Appeal on the circumstances in which a landlord may proceed under cl 44.3 in the face of an argument from the tenant that the lease is no longer in existence (whether because of the operation of a clause in the lease, as in this case, or because the lease has been validly cancelled by the tenant, or has come to an end by some other means).
[27] As I noted in the judgment8 there is some question as to how the Hi-Tech judgment of Associate Judge Abbot should be applied. Depending on how that judgment is read, there may also be an issue as to whether it was correct. Venning J did not refer to Hi-Tech in the Drake decision, and I think it is desirable in the public interest that the Court of Appeal should resolve any conflicts between the judgment and the decisions in Hi-Tech and Drake.
[28] I accept that the issue of delay must weigh against the application, but I think Precinct’s concerns under this head can be met (or at least mitigated) by the imposition of appropriate conditions on the grant of leave.
[29] In summary, I am satisfied that the overall justice of the case favours the grant of leave to appeal against the judgment, There will be an order accordingly, subject to the conditions set out below.
Result
[30] Leave is granted to OMV to appeal to the Court of Appeal against the judgment. The leave is granted on the following conditions:
(a) the notice of appeal is to be filed and served within 10 working days of the date of this judgment;
(b)OMV is to post security for Precinct’s costs in the Court of Appeal within 10 working days of the date of this judgment. In the event that security is fixed in a sum greater than the standard $6,600, that sum is to be paid into the Court of Appeal on account within the 10 working day period just mentioned, with any balance to be paid within such further time as the Court of Appeal may direct;
(c) OMV is to pursue the appeal with expedition;
[31] I make no direction as to the obtaining of an early fixture in the Court of Appeal. Once the appeal has been filed and served, it will be open to Precinct to seek any order for an early hearing of the appeal it may wish to seek. Nor do I see this as a case where a condition should be imposed requiring OMV to pay the rent payments into Court pending the hearing of the appeal. The issues on appeal are narrow, and it should be possible to obtain a hearing in the Court of Appeal fairly promptly. In those circumstances, and in circumstances where Precinct has no present entitlement to have the rent payments secured, I am not prepared to impose the condition sought by Mr Gordon.
[32] In accordance with r 14.8, OMV is entitled to costs, but I do not think full costs on a 2B basis are appropriate in circumstances where the hearing was short (one hour) and lengthy written submissions were not required. I award costs to OMV in the sum of $2,500 together with disbursements as fixed by the registrar.
Associate Judge Smith
Solicitors:
MinterEllisonRuddWatts, Wellington for the plaintiff/respondent
Izard Weston, Wellington for the defendant/applicant
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