Restaurant Brands Ltd v QST Ltd - [2021] NZCA 680

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA461/2021
[2021] NZCA 680

BETWEEN	RESTAURANT BRANDS LIMITED Appellant
AND	QST LIMITED Respondent

Hearing:	25 November 2021
Court:	Kós P, French and Brown JJ
Counsel:	M T Davies and P I Comrie-Thomson for Appellant L McEntegart and A J Steel for Respondent
Judgment:	16 December 2021 at 11 am

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Kós P)

This is a tenant’s appeal against a High Court Judge’s refusal to grant leave to appeal an arbitrator’s interim award concerning the meaning and effect of a sublease. The award had adopted a report by an expert, a Queen’s Counsel appointed by the parties. The Judge said the expert’s analysis was highly persuasive, and the tenant did not have a strongly arguable case that it was wrong.[1] So the Judge declined leave to appeal to the High Court.[2]
[1]Restaurant Brands Ltd v QST Ltd [2021] NZHC 971 [Judgment appealed] at [60]–[64].
[2]At [75].
But the Judge then granted leave to appeal — to this Court — against her original leave decision, on the basis the tenant’s argument about the expert’s approach to contractual interpretation was seriously arguable, and perhaps strongly so.[3]
[3]Restaurant Brands Ltd v QST Ltd [2021] NZHC 1798 [Second leave judgment] at [17].
If we allow this appeal, a Judge in the High Court will now have to hear the original appeal. We are here, therefore, as gatekeepers under the Arbitration Act 1996.
We conclude however that the Judge was right to decline leave to appeal to the High Court. The expert’s analysis of the sublease is plainly right, and the tenant’s argument, while ingenious, is so plainly wrong that it is not strongly arguable. The award should stand.

Background

In this case QST Ltd is the landlord, and Restaurant Brands Ltd is the tenant. We shall use those generic terms for ease of understanding.
The landlord itself is a lessee of land on Quay Street, Central Auckland under a headlease from the Ngāti Whātua O Ōrakei Māori Trust Board. It subleases part of that land to the tenant, which operates a fast food business there. The parties’ rights and obligations in respect of the land are recorded in the headlease and the sublease, the latter formally incorporating the former.

Sublease

The sublease, entered into after a unit plan was deposited in relation to the headlease, is dated 14 April 1998. The sublease comprises a stratum estate in leasehold for several units on the land. It is for a period of 20 years with one right of renewal for a further 20-year term. On 15 April 2017, the tenant gave notice to the landlord to renew the sublease.
The annual rental is reviewed every seven years. The last rent review took place on 2 August…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] NZCA 680
Decision Date: 16 December 2021 at 11 am

CaseChat Overview and Summary

In this case, Restaurant Brands Ltd (the tenant) appealed against the High Court's refusal to grant leave to appeal an arbitrator's interim award concerning the meaning and effect of a sublease. The dispute revolved around the interpretation of a clause in the sublease, specifically the words "the current freehold market undeveloped block value... of the Land." The tenant argued that the "Land" references the definition in the First Schedule, which refers to the leasehold stratum estate, while the landlord argued that the "Land" refers to the physical area of freehold land being demised. The expert, appointed by the parties, found in favour of the landlord's interpretation, which was adopted by the arbitrator. The High Court declined to grant leave to appeal, finding the tenant's argument not strongly arguable. However, the tenant was granted leave to appeal the High Court's decision to this Court. The Court of Appeal dismissed the appeal, finding that the expert's analysis of the sublease was correct, and the tenant's argument was plainly wrong and not strongly arguable. The award should stand, and the tenant must pay the respondent's costs for a standard appeal on a band A basis and usual disbursements.

Orders