Restaurant Brands Ltd v QST Ltd - [2016] NZHC 2226

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-001790 [2016] NZHC 2226

UNDER
Clause 5(1)(c) of Schedule 2 of the

Arbitration Act 1996

IN THE MATTER

of an application for leave to appeal against an arbitral award

BETWEEN

RESTAURANT BRANDS LIMITED Plaintiff

AND

QST LIMITED Defendant

Hearing: 20 September 2016

Counsel:

M T Davies for Plaintiff
L McEntegart and L Keen for Defendant

Judgment:

21 September 2016

JUDGMENT OF DOWNS J

This judgment was delivered by me on Wednesday, 21 September 2016 at 1 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:
Meredith Connell, Auckland.
Martelli McKegg, Auckland. L McEntegart, Auckland.

RESTAURANT BRANDS LTD v QST LTD [2016] NZHC 2226 [21 September 2016]

The issue

[1] The plaintiff and defendant are at loggerheads over how the rent review clause of their lease should be interpreted; their dispute arose in 2011. The dispute was the subject of arbitration. The Tribunal found for the defendant. The plaintiff seeks leave to appeal on a question of law arising out of the Tribunal’s award. The defendant opposes leave.

[2] I have concluded the plaintiff should have leave to appeal. Rule 26.17 of the High Court Rules provides reasons are not required unless the Court “thinks reasons are required in the circumstances”. This judgment contains brief reasons for my decision.

Background

[3] The defendant leases land at Quay Street in Auckland from the Ngati Whatua O Orakei Maori Trust Board (the Trust Board). It subleases some of the land to the plaintiff, which operates a fast-food chain there. Clause 3.3 of the defendant’s lease with the Trust Board (the headlease) provides that from 2 August
2011, “and at each rent review thereafter (every seven years)”, the rental payable by the defendant to the head lessor is “six per cent per annum of the current freehold market undeveloped block value of the Land”.

[4] Clause 4.2 of the lease between the defendant and plaintiff (the sublease) provides that from 2 August 2011 and at each rent review date thereafter (again, recorded as being every seven years), the plaintiff is required to pay the defendant nine per cent per annum “of the current freehold market undeveloped block value (as defined in the Headlease) of the Land”.

[5] It is common ground the headlease contains no definition of “current freehold market undeveloped block value”. Therein lies the problem.

[6] On 24 June 2016, the Tribunal appointed B J Paterson QC, a retired High Court Judge, to provide expert advice on the correct construction of cl 4.2. The plaintiff contended cl 4.2 should be understood as a reference to the current freehold

market undeveloped block value as determined under the headlease, so that the figure (of which rent is a percentage) would be the same in both agreements. The defendant contended that as the land governed by the headlease was greater than that governed by the sublease, the apparent elegance of the symmetry of the plaintiff's argument was misconceived; what was intended was…

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: [2016] NZHC 2226
Decision Date: 21 September 2016

CaseChat Overview and Summary

Restaurant Brands Limited, the plaintiff, sought leave to appeal against an arbitral award in a dispute over the interpretation of a rent review clause in a sublease agreement. The defendant, QST Limited, opposed the application. The High Court of New Zealand was tasked with determining whether the plaintiff should be granted leave to appeal on a question of law arising from the Tribunal's award. The core legal issue was whether the Tribunal erred in its interpretation of the rent review clause in the sublease agreement. The plaintiff argued that the Tribunal misapplied the principles of contractual construction, while the defendant contended that any question of law arose from the expert's advice, not the award itself. The Court concluded that the interpretation of the rent review clause did indeed give rise to a question of law that "arises out of the award." The Court found that the strength of the challenge and the nature of the proposed point of law, which had potential precedent value beyond the parties, outweighed other considerations such as the parties' election to arbitrate and the qualifications of the expert. The Court granted the plaintiff leave to appeal, emphasizing that this decision did not prejudge the outcome of the appeal itself. The Court directed the relevant question of law to be whether the Tribunal erred in concluding that the rent review clause did not require the adoption of the current freehold market undeveloped block value as determined under the headlease.

Orders