Restaurant Brands Limited v QST Limited

[2021] NZHC 1798

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1957

[2021] NZHC 1798

UNDER

Cl 5(5) of Schedule 2 of the Arbitration Act 1996

IN THE MATTER

of an application for leave to appeal to the Court of Appeal

BETWEEN

RESTAURANT BRANDS LIMITED

Applicant

AND

QST LIMITED

Respondent

Hearing:	25 June 2021
Appearances:	M Davies and P Comrie-Thomson for the Plaintiff L McEntegart and A Steel for the Defendant
Judgment:	16 July 2021

JUDGMENT OF HARLAND J

This judgment was delivered by me on 16 July 2021 at 10:00 am Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar  Date:…………………………….

Counsel/Solicitors:

M Davies, Meredith Connell, Auckland

P Comrie-Thomson, Meredith Connell, Auckland L McEntegart, Barrister, Auckland

A Steel, Barrister, Auckland Thompson Blackie Biddles, Auckland

Introduction

[1]    In my judgment of 4 May 2021, I refused the applicant (Restaurant Brands) leave to appeal to the High Court an interim award made by the Arbitral Tribunal appointed by the parties to determine the rent payable upon review under a sublease.1 The interim award was made by the Tribunal following its adoption of an expert opinion provided by the Honourable Rhys Harrison QC (the Expert). The award determined the interpretation of cl 4.2 of the sublease, favouring QST’s interpretation of the clause.

[2]    Restaurant Brands now seeks leave to appeal my decision refusing leave to appeal to the High Court, to the Court of Appeal.

[3]QST opposes the application for leave.

[4]    I have decided that Restaurant Brands’ application for leave to appeal my decision to refuse leave should be granted. This judgment sets out my reasons for reaching that decision.

The test for leave to appeal

[5]Clause 5(5) of Schedule 2 to the Arbitration Act 1996 applies. It provides:

5        Appeals on questions of law

...

(5)     With the leave of the High Court, any party may appeal to the Court  of Appeal from any refusal of the High Court to grant leave or from any determination of the High Court under this clause.

[6]    Case law has assisted to distil the principles that ought to apply; however, most of these cases involve applications for leave to appeal against a determination on the merits by the High Court. A subtle difference in this case is that leave to appeal is sought against my decision refusing leave to appeal to the High Court.

1      Restaurant Brands Ltd v QST Ltd [2021] NZHC 971.

[7]    The test for leave to appeal against a determination on the merits is that suggested by the High Court in Cooper v Symes2 and approved by the Court of Appeal in Downer Construction (New Zealand) Ltd v Silverfield Developments Ltd.3 In Downer, the Court of Appeal held that the primary focus is on whether the question of law is worthy of consideration,4 to be considered in light of the following principles identified by Randerson J in Cooper:5

(a)The appeal must raise some question of law or fact 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 which has already been twice considered and ruled upon by a Court.

[8]    This approach has also been applied to applications for leave to appeal against an initial refusal to grant leave.6 However, in Shell (Petroleum Mining) Co Ltd v Todd Petroleum (Mining) Co Ltd, Dobson J proposed that the following considerations should apply to such applications:7

(a)Assess the likelihood of success on the appeal against the refusal (which must reach a threshold of at least being capable of bona fide and serious argument);

(b)Assess the importance to the parties of the appeal against the refusal;

(c)Assess the public interest involved;

2      Cooper v Symes (2001) 15 PRNZ 166 (HC).

3      Downer Construction (New Zealand) Ltd v Silverfield Developments Ltd [2007] NZCA 355, [2008] 2 NZLR 591.

4 At [33].

5      Cooper, above n 3, at [12].

6      See for example Nixon v Walker [2010] NZSC 119 as cited in David Williams and Amokura Kawharu Williams & Kawharu on Arbitration (2nd ed, LexisNexis, Wellington, 2017) at 551.

7      Shell (Petroleum Mining) Co Ltd v Todd Petroleum (Mining) Co Ltd HC Wellington CIV-2009- 485-2024, 8 June 2010 at [23].

(d)Balance these factors against the costs and delays involved in an appeal.

[9]    On appeal, the Court of Appeal observed that in Downer there had been a determination of a point of law in the High Court, but no such determination had been made in the case before it.8 The Court held:9

… It follows, in our view, that the considerations identified in Downer need to be considered in that light. It is to be borne in mind nevertheless that the High Court has twice considered the questions raised and whether there was an arguable case of error: first in declining leave to appeal to the High Court in the first place and, secondly, in refusing leave to appeal to this Court.

Is the question of law raised by Restaurant Brands capable of bona fide and serious argument?

[10]   The question of law in this case relates to the application of the principles relevant to granting leave to appeal against arbitral awards to the High Court, as they were outlined in Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd.10

[11]Restaurant Brands submits that:

(a)The Court failed to properly apply the principles of contractual interpretation in concluding that there was not a strongly arguable case of error in the Expert’s interpretation of cl 4.2 of the sublease, by failing to give effect to the definition of “Land” as expressed in the First Schedule of the sublease.

(b)The Court misapplied the guidelines in Gold and Resource Developments in determining whether to grant leave in a finely balanced case by (among other things):

(i)assessing the points of Restaurant Brands’ contractual interpretation argument individually rather than cumulatively when considering the strength of the challenge (guideline one); and

8      Todd Petroleum (Mining) Co Ltd v Shell (Petroleum Mining) Co Ltd [2010] NZCA 580.

9 At [11].

10     Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 (CA).

(ii)taking into account the expertise of the Expert both in terms of whether Restaurant Brands has a strongly arguable case (guideline one) and in terms of the qualifications of the arbitrator (guideline three), thereby double-counting the expertise of the Expert in the assessment.

[12]QST submits:

(a)In declining to grant leave the Court correctly adopted and applied the relevant principles in Gold and Resource Developments,11 in particular:

(i)At paragraphs [42] and [59], the Court directed itself as to the relevant primary consideration for the granting of leave, namely whether Restaurant Brands has a strongly arguable case;

(ii)The Court concluded at [64] and [72] that even if arguable, Restaurant Brands’ case could not be regarded as strongly arguable, which was alone enough to dispose of the application for leave;

(iii)There was no aspect of “double-counting” in the Court’s approach to Gold and Resource Developments guidelines one and three by the Court having regard to the expert’s analysis (at [60]) and the fact the expert was legally qualified (at [65]).

(b)The Court properly directed itself as to the relevant principles of contractual interpretation in assessing the strength of Restaurant Brands’ proposed grounds of appeal.

Proper application of the principles of contractual interpretation

[13]   This ground relates to the Court’s assessment of whether Restaurant Brands had a strongly arguable case (guideline 1 in Gold and Resource Developments). The

11     Gold and Resource Developments, above n 10.

Court’s finding was that two of the points raised by Restaurant Brands were arguable, but not strongly arguable.

[14]   Restaurant Brands’ main argument in the High Court was that principles of contractual interpretation should have been given more weight than the principles of land law in determining the meaning of “the Land” as it appears in the sublease, the latter being the approach taken by the Expert and adopted by the arbitrator. Mr Davies submitted that for the purposes of the application for leave to appeal the arbitrator’s decision to the High Court, the question was not whether the Expert was wrong (as outlined at [59] of the judgment) but whether the error of law, namely failing to apply the contractual definition, was strongly arguable.

[15]   Further, Mr Davies submitted that the judgment ought to have considered the points advanced by Restaurant Brands in support of its argument cumulatively, not “issue by issue in isolation”, an approach he submitted is visible at [54] of the judgment. Mr Davies submitted that when these points are viewed in combination, the alleged error of law is strongly arguable.

[16]   Mr McEntegart for QST submitted that the issue-by-issue analysis undertaken in the judgment reflected the mode and substance of the case as it was presented to the Court by Restaurant Brands. He further submitted that the proposition that the individual assessment of the two points (and others inferentially) as “arguable” if assessed “cumulatively” would have elevated them from “arguable” to “seriously arguable” is plainly a non sequitur.

[17]   I am not persuaded that there is any merit in Restaurant Brands’ argument that a cumulative approach would elevate points considered to be “arguable” to “seriously arguable”. However, I am persuaded that the correct approach to the interpretation issue (principles of contractual interpretation versus principles of land law) is an argument which for the purposes of this application is capable of bona fide and serious argument, and might be capable of being considered by the Court of Appeal as “strongly arguable” as opposed to “arguable”.

[18]   The last point under this heading raised by Restaurant Brands was that the judgment double-counted the expertise of the Expert, taking it into account in the analysis of guideline 1 and then again under guideline 3 of Gold and Resource Developments.12 Mr Davies submitted that the expertise of the Expert was therefore double-counted, and the bar was set too high in terms of the “strongly arguable” threshold.

[19]   Mr McEntegart however submitted that this submission is devoid of any factual foundation as there is no link between the passage cited in the judgment from Ipswich Borough Council v Fisons Plc13 and the analysis of “strongly arguable” several paragraphs later at [54] of the judgment.

[20] I am not persuaded that this argument adds to Restaurant Brands’ case for leave to appeal, but in any event, it is not necessary to address it given my finding at [17] above.

Are there public or private interests of enough importance to outweigh the costs and delay of a further appeal?

[21]   Restaurant Brands submitted that the public and private interests in determining the questions of law outweigh the costs and delay of the intended appeal because:

(a)The amount of money involved is significant, and the proper interpretation of cl 4.2 of the sublease is of ongoing significance.

(b)The determination of the above questions of law, and the subsequent hearing of an appeal of the award, are of interest other than just between the parties. Neighbouring properties are subleased to other parties with the same or similar rent review terms, and so stand to be guided and affected by a determination on the proper interpretation of cl 4.2.

12 I note that in its memorandum in support, Restaurant Brands submitted that the judgment also considered the Expert’s expertise as a separate matter under guideline 2 (how the question of law arose before the arbitrator) in addition to guidelines 1 and 3.

13 Ipswich Borough Council v Fisons Plc [1990] 1 Ch 709 (CA) at 724.

(c)The costs and delay of the intended appeal will be relatively insignificant and in all the circumstances should not preclude the granting of leave to Restaurant Brands.

[22]QST submitted:

(a)The proposed appeal involves no question of general or public importance.

(b)The delay that will be occasioned by Restaurant Brands’ proposed appeal will be significant and will prejudice the applicant and the efficient progression of the rent review arbitration presently underway.

[23]   Although QST did not contend in the first hearing before me that the delay occasioned by an appeal to the High Court would weigh against the grant of leave, if leave to appeal to the Court of Appeal is granted on this application, Mr McEntegart submitted there would be a risk of significant and additional delay to QST. This is primarily because the arbitration in relation to the valuation issues on the rent review has been scheduled for hearing on 20 September 2021, with exchanges of evidence timetabled for 21 July, 11 August and 25 August 2021. Mr McEntegart highlighted that the rent review was due to be carried out almost three years ago on 2 August 2018.

[24]   If leave is granted to appeal to the Court of Appeal, as Mr McEntegart rightly submitted, there is a very real risk that the presently scheduled arbitration hearing would be unable to proceed. Mr McEntegart submitted that in a worst-case scenario the outcome would be the antithesis of the object of arbitration, which is to provide an efficient method of resolving commercial disputes14 with constrained judicial involvement.

[25]   Further, Mr McEntegart submitted that there is no longer any other private interest involved in or concerned about the interpretation issue. Mr McEntegart advised that the remaining lessee who may have been interested in this issue has resolved its concerns with QST.

14     See Arbitration Act 1996, s 5(a).

[26]   Restaurant Brands’ position was that any delay would be insignificant when viewed in the context of the term of lease (it expires in 2037) and the amount at stake.

[27]   Restaurant Brands is now the only party interested in the outcome of any appeal. The question is whether its interest is of enough importance to outweigh the cost and delay of a further appeal. By a narrow margin, I decide that it is. I reach this conclusion because the amount of money involved is substantial, the lease has some time to run, and any appeal to the Court of Appeal is relatively constrained because the arguments are well known and have been rehearsed before on several occasions by both parties. If the Court of Appeal upholds my decision, then little time will be lost. If it does not, then there will be some delay, which is the reason I have reached the view that under this aspect of the test, the matter is finely balanced.

Conclusion

[28]   I am persuaded that leave ought to be granted to appeal my decision refusing leave to appeal to the High Court, to the Court of Appeal, for the reasons expressed above.

Result

[29]   The application for leave to appeal my judgment refusing leave to appeal to the High Court is granted.

[30]   Costs are reserved, to be revisited once the outcome of the appeal to the Court of Appeal is known.

Harland J