Ventura Limited v Robinson
[2021] NZHC 932
•29 April 2021
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2020-470-000095
[2021] NZHC 932
BETWEEN VENTURA LIMITED
Applicant
AND
BRUCE ROBINSON & CAROL ROBINSON
Respondents
Hearing: 9 December 2020 Appearances:
S McKenna and A Osama for the Applicant S J Clews for the Respondents
Judgment:
29 April 2021
JUDGMENT OF POWELL J
This judgment was delivered by me on 29 April 2021 at 4 pm pursuant to R 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
VENTURA LIMITED v ROBINSON [2021] NZHC 932 [29 April 2021]
[1] The appellant, Ventura Limited (“Ventura”), seeks leave to appeal a partial award (“the award”) of an arbitral tribunal (“the Tribunal”) dated 24 September 2020.
[2] Ventura is the lessee of premises in Hamilton pursuant to a lease dated 1 October 2007 from the respondents, Bruce and Carol Robinson (“the lessors”). The award determined, as a preliminary issue in the course of a wider arbitration between the parties, that there was no obligation on the lessors “to replace fixtures and fittings when they reach the end of their useable life”.1 The Tribunal in fact concluded that neither party had an obligation to replace fixtures and fittings under the lease:2
Rather, it is up to the lessee to decide what it will replace, when, and how – and then to meet the costs of doing so. It will be entitled to recover a fair market value for such fixtures and fittings as are on the premises at leases’ end.
[3] In particular, the Tribunal rejected Ventura’s submission that the absence of an express obligation on either party constituted a “gap” in the lease and instead considered it reflected “an entirely rational commercial outcome”.3
Relevant legal principles
[4] Leave is reserved for any appeal pursuant to clause 51(c) and 2 of the second schedule to the Arbitration Act 1996. This provides that leave may be granted “on any question of law arising out of an award”4 if the “determination of the question of law concerned could substantially effect the rights of 1 or more of the parties”.5
[5] In this case there is no dispute that the threshold requirement in cl 5(2) is met. The grant of leave remains the exercise of a discretion and the relevant factors to be considered are those set out in Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd.6 The most important factor is the strength of the challenge/nature of the point of law, in respect of which the Court of Appeal commented:
1 The award at [52].
2 At [53]
3 At [45].
4 Arbitration Act 1996, sch 2, cl 5(1).
5 Arbitration Act, sch 2, cl 5(2).
6 Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 (CA) at [54].
If it is a one-off point, in the sense that it is unlikely to occur again and cannot be seen as having any precedent value, either generally or to the parties on another occasion, then unless there are very strong indications of error leave should rarely be given. In other cases, the Court will be looking for a somewhat less stringent assessment. In those cases a strongly arguable case would normally be required for leave to be granted. The existence of conflicting decisions will also be relevant.
[6]If there is an arguable error of law, the other factors relevant in this case are:
(a)how the question arose before the Tribunal;
(b)the qualifications of the Tribunal;
(c)the importance of the dispute to the parties;
(d)the amount of money involved; and
(e)the amount of delay involved in going through the Court.
The case for Ventura
[7] On behalf of Ventura, Mr McKenna submitted that while there was no express obligation on the lessors to replace the fixtures and fittings it was nonetheless implicit within the express terms of the agreement in terms of the test set out in Vickery v Waitaki International Ltd.7 In particular, Mr McKenna submitted that the lack of any obligation on Ventura imposed by the lease necessarily implied an obligation on the lessors. Particular weight was placed on the failure of the Tribunal to recognise that the lease gave Ventura the right to use the fixtures and fittings for the duration of the lease, and that it must pay the same amount throughout the lease even if the fixtures and fittings were worn out. As a result, Mr McKenna submitted that if the lessors were benefitting from income for the use of their fixtures and fittings, they were therefore obligated to ensure that those fixtures and fittings were able to be used by Ventura.
[8] In the alternative, Mr McKenna submitted that if any obligation on the lessors to replace the fixtures and fittings could not be implied from the express terms of the
7 Vickery v Waitaki International Ltd [1992] 2 NZLR 58 at [64], [66] and [67].
lease, it meant that the Tribunal erred in determining there was no gap in the lease and the Court would therefore have to consider implying a term on the basis set in BP Refinery (Western Port) Pty Ltd v Shire of Hastings.8
Discussion
[9] Contrary to the submissions made on behalf of the Ventura I am not satisfied that there is any arguable error of law in the award, still less one that is strongly or very strongly arguable in terms of the test in Gold and Resource Developments. Instead, I entirely agree with the Tribunal’s conclusion that there is no gap in the lease and that the absence of any express obligation on either party to replace fixtures and fittings was “an entirely rational commercial outcome”.9
[10] The Tribunal’s conclusion was, as Mr Clews submitted on behalf of the lessors, entirely consistent with the Court of Appeal decision in Avondale Hotel No 1 Ltd v Portage Licensing Trust.10 In that case, the Court reached exactly the same conclusion: that neither party was responsible for the replacement of the chattels, fixtures, fittings, plants, machinery and equipment at issue, referred to in that case as CFFPME. While that gave rise to some practical problems in that case, it was not enough to warrant imposing an obligation on the lessor nor otherwise implying a term to give the lease business efficacy. Instead, the Court of Appeal commented:11
… There is logic in the contention that, where CFFPME comprises part of what is being leased by a landlord, the landlord should bear the cost. But we do not think that it can be said that an obligation on Avondale to replace CFFPME, no matter how logical that might be, can properly be said to be implicit in the express terms of the lease, applying the test in Vickery. The fact that a proposition makes commercial sense does not, of itself, lead to the conclusion that a requirement to bring about that commercial outcome must be implicit in what the parties agreed. That is especially so when the parties have recorded their commercial agreements in considerable detail and revisited and renegotiated them more than once.
[11] The Court’s comments are equally apposite in this case, particularly insofar as while the Court in Avondale Hotel used the parties’ descriptor of the result as a “black
8 BP Refinery (Western Port) Pty Ltd v Shire of Hastings (1977) 16 ALR 363 (PC).
9 The award, above n 1, at [45].
10 Avondale Hotel No 1 v Portage Licensing Trust (2005) 6 NZCPR 702 (CA).
11 At [70].
hole”, it was not necessary to conclude that an express term was implicit or otherwise should be implied. Instead, as the Tribunal noted in the present case, there is a clear logic to leaving it to the “lessee to decide how and when fixtures and fittings (such as the air-conditioning units and the lift) should be replaced during the course of a 45 year period”:12
After all, throughout that period the lessors have no direct interest in the way in which the fixtures and fittings are being used – the business of operating the hotel at the premises is that of the lessee, not the lessors. It must be possible that the lessees might choose (for example) to replace the air conditioning units with a different air conditioning system altogether, or to put in a new kind of lift during the term of the lease. The benefit of doing so accrues to its (the lessee’s) business.
[12] Moreover, the complicating factors identified by the Court in Avondale Hotel, namely the ownership of the replacement items at issue and the potential inequitable impact on future rent reviews, do not arise in the current dispute.13 Instead, under the lease in issue:
(a)the fixtures and fittings purchased by the lessee remain the property of the lessee and are either required to be removed by the lessors at the end of the lease or purchased by the lessors;14 and
(b)the “value of the lessee’s fixtures [and] fittings in the premises” is expressly excluded in calculating any rent review.15
[13] More broadly, Mr McKenna’s submission that because the rental includes payment for use of the lessor’s fixtures and fittings it follows that it is the lessor’s obligation to replace those fixtures and fittings does not bear close scrutiny. As the Tribunal noted:16
Nor is there any reason to suppose that the rent agreed at the outset does not reflect that allocation of commercial responsibilities. We can only speculate whether the rent might have been higher if it had been made clear that the lessor was to replace fixtures and fittings at the end of their useable life, or lower if it had been explicitly stated that was to be a cost to the lessee. What
12 The award, above n 1, at [45]-[46].
13 Avondale Hotel, above n 10, at [71]-[73].
14 Lease clauses 3.10 and 3.11.
15 Lease cl 3.8(a).
16 The award, above n 1, at [47]-[48].
we do know is that the parties agreed to a rental which incorporated both the demise of the premises and the right to use the lessors’ fixtures and fittings as they were on the premises at the outset. Again, given the long term of the lease, it makes commercial sense that the parties would allocate responsibility for decisions to replace the fixtures and fittings to the lessee that was to use them, rather than the lessors who were not. This is nothing like a two, three or five-year lease.
Our view in this respect seems to us to be confirmed by reference to clause
3.11. The opening part of that clause makes it explicitly clear that the parties contemplated at the outset that fixtures and fittings would be replaced or renewed during the term of the lease, and by the lessee.
[14] There is otherwise no other express term in the lease that implicitly imposes an obligation upon the lessors to replace fixtures and fittings as the old fixtures and fittings wear out. On the contrary:
(a)The fair wear and tear exception contained in cl 1.8(a) does no more than confirm the lessee’s obligations to keep the premises in the same order, condition and repair. It does not extend to an obligation to purchase new fixtures and fittings.
(b)Clause 1.8(e) simply confirms the lessee is not required to undertake matters which are the responsibility of the lessor but is insufficient to impose an obligation to purchase fixtures and fittings where none exists.
(c)The cross-reference to cl 1.10(2) contained in cl 1.8(e) also does not assist Ventura as cl 1.10 is quite clearly concerned with the limits to the lessee’s obligations rather than imposing obligations upon the lessor.
[15] Given the conclusion I have reached, that there is no arguable error of law, it is not necessary to consider the other factors identified in Gold and Resource Developments in any detail. For completeness I consider that overall the other factors in Gold and Resource Developments also did not favour the grant of leave. While clearly the dispute was important to both parties it is clear that the issue was raised directly by the parties and agreement was reached that it be dealt with as a preliminary and specific issue in the arbitration. The issue was determined by a Tribunal which was a well qualified and experienced panel with two of the members experienced
lawyer-arbitrators, and the third an experienced arbitrator. Although there would not have been significant delays defending the issue in the Court, the overall amount of money at stake although significant was nonetheless relatively small in the context of the lease as a whole.
Decision
[16]The application for leave to appeal is dismissed.
[17] The lessors are entitled to costs on the appeal. If these cannot be agreed within one month, the lessors have leave to file a memorandum detailing the costs sought. Ventura will then have two weeks to respond, following which I will determine the issue on the papers.
Powell J
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