Openyd Limited v G J Lawrence Dental Limited [2018] NZHC 1618 (3 July 2018)

Last Updated: 12 July 2018

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE

CIV-2018-485-267 [2018] NZHC 1618

UNDER	section 244 of the Property Law Act 2007, Part 19 of the High Court Rules 2016 and common law
IN THE MATTER OF	an application for an order for possession of land
BETWEEN	OPENYD LIMITED Applicant
AND	G J LAWRENCE DENTAL LIMITED Respondent

Hearing:	25 June 2018
Appearances:	C Griggs and C M Kenworthy for the Applicant R C Laurenson and D Butler for the Respondent
Judgment:	3 July 2018

JUDGMENT OF COOKE J

[1] This is a further iteration of disputes between dentists who presently share premises in Raumati Beach. In a judgment dated 26 March 2018, this Court declined to grant the respondent an interim injunction preventing further steps to exclude him from the premises because undertakings that had been given were sufficient.¹ Then by a judgment dated 8 June 2018, the Court stayed proceedings that had been commenced by the respondent seeking the identification and enforcement of the arrangements between them.² This further proceeding is an originating application by

¹ G J Lawrence Dental Ltd v Alusi Ltd [2018] NZHC 533.

² G J Lawrence Dental Ltd v Alusi Ltd [2018] NZHC 1342.

OPENYD v G J LAWRENCE DENTAL [2018] NZHC 1618 [3 July 2018]

the holding and administration company established under those arrangements, requiring the respondent to vacate the premises.

[2] The current application is an application by the respondent seeking a stay of the present proceedings, and an order that they be consolidated with the two proceedings that have already been stayed.

Background

[3] The background is described in the two earlier judgments of this Court. Dr Lawrence is a director of the respondent (Lawrence Dental). He has been operating as a dentist at Raumati Beach for over 35 years. In 1996, he sold two thirds of his practice to dentists who previously worked for him, which is the origin of the three- party arrangements associated with what is known as the Raumati Dental Centre.

[4] In 1995 the three dentists incorporated Openyd Ltd (Openyd) who is the applicant in the present proceeding. It is the holding and administration company for the group dental practices. The premises themselves are owned by the family trust of Dr Lawrence and his wife. In 2011 Openyd became a lessee of the premises.

[5] There were changes in the identity of the dentists operating from the premises in 2000, and in 2005. In 2012 Dr Imbrahim acquired a one third share operating through his operating company, Alusi Ltd (Alusi). At that stage, he joined Dr Al- Sabak, who operated through Creative Dentistry Ltd (Creative) and Dr Lawrence who operated through Lawrence Dental.

[6] When Dr Imbrahim joined in 2012 a Deed of Association was entered into with effect from 31 August 2012. The parties to the Deed were the three operating companies. The Deed covered the various arrangements between the parties for the operation of the dental practices. There are a number of relevant clauses, including the right of the remaining parties to purchase at market value the interest of any party wishing to retire from the Association, and that any new party enter the Association on similar terms and conditions. Importantly the Deed of Association contains the following clause:

20. All questions, differences or disputes whatsoever which may arise between parties touching or concerning this agreement or the construction, meaning, operation or effect hereby or any clause herein contained or as to rights, duties or liabilities of the parties or any of them under or by virtue of this agreement shall if they cannot be resolved by negotiation between the parties be referred to a single arbitrator nominated by mutual agreement between the parties and in the event of non-agreement between the parties of the Wellington District Law Society who shall not be or have every been a dental practitioner. The arbitration shall be conducted in accordance with the provisions of the Arbitration Act 1996 or any statutory modification or re- enforcement therefore for the time being in force.

[7] The parties began to experience difficulties from 2016. On 1 November 2017 Creative sold its practice to Alusi. When this occurred, Creative gave Alusi a power of attorney over its Openyd shares, effectively giving Alusi control of Openyd by controlling two-thirds of the shares. Lawrence Dental says that this is not appropriate and is inconsistent with the Deed of Association, which it says requires Creative’s shares in Openyd to be transferred to Lawrence Dental and Alusi equally.

[8] Lawrence Dental then gave notice of an intention to retire from the Association. Alusi indicated it did not intend to acquire Lawrence Dental’s one-third share. Lawrence Dental then sought unsuccessfully to sell to a third party. Under the Deed of Association if a sale to a third party does not proceed the Association is to be liquidated (cl 15(b)).

[9] Lawrence Dental then filed two proceedings: CIV-2018-485-117, which was an application for declarations concerning the status of the Deed of Association, together with an application that a receiver be appointed; and CIV-2018-485-118, being an application to place Openyd into liquidation.

[10] At a shareholders meeting on 25 January 2018, Dr Lawrence was removed as chair and as a director, and Dr Imbrahim’s son (Mr Abdulqadir) was appointed as chair and director. On 27 February 2018, notice was given by Openyd to Lawrence Dental terminating its statutory tenancy at the premises.

[11] As a consequence, Lawrence Dental applied for an interim injunction seeking to restrain:

• (a) any action of any kind against the plaintiff or any director, officer or employee of the plaintiff until further order of the Court;

(b) any action of any kind whatsoever to enforce a document headed Notice of Termination of Statutory Tenancy and dated “7.00 am this 27th day of February 2018” and addressed to the plaintiff, until further order of the Court.

[12] The application for an injunction was heard by Grice J on 14 March 2018. At that stage Alusi and Openyd gave undertakings in the following terms:

The respondents, Openyd Ltd and Alusi Ltd, undertake that no steps will be taken to enforce the termination of the statutory tenancy of G J Lawrence Dental Limited pending the High Court's determination of an application for an order for possession under the Property Law Act 2007 ...

[13] Grice J held that on the evidence before her it was certainly arguable that the actions of Openyd and Alusi were to exclude Lawrence Dental and promote Alusi’s interests, and she noted that “... the eviction would leave Lawrence Dental with no practice, no income and a need to ensure its patients were looked after”.³ She held, however, that in light of the undertakings, and the width of the orders sought, that an interim injunction would not be granted.⁴

[14] The next step was taken by the Alusi interests who applied to stay both of the proceedings brought by Lawrence Dental, on the basis of the arbitration clause in the Deed of Association, and particularly given art 8(1) of sch 1 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.

³ Lawrence Dental, above n 1, at [42] and [44].

⁴ Lawrence Dental, above n 1, at [59].

[15] When granting the stay Simon France J held as follows:

[24] ... I am satisfied that the correct course is to stay 118 pursuant to r 15.1(3) of the High Court Rules 2016. The stay is to allow proceeding 117 to be resolved by arbitration. The reason for this is the link between the two proceedings.

[25] The reference to Openyd not being a party to the arbitration agreement is technically correct but masks the reality of 118 as pleaded by Lawrence Dental. Lawrence Dental's consistent position, found throughout the proceedings, is that Openyd exists only as a functionary of the association. The parties to the association are its sole shareholders and it has no other purpose.

[26] The pleading in 118 cites extensively from the deed of association. It pleads the events said to constitute cancellation and dissolution of the association. It claims shareholder oppression based on the same disputes and actions that will inform the damages claim in 117. These are two aspects of the same broad dispute.

[27] I am not persuaded that the fact Openyd is not a party to the deed means that this proceeding is not affected by the arbitration agreement. The matters underlying the liquidation application very much involve the operation of the association and the rights, duties and liabilities of the parties to the deed. It cannot be ignored, as Lawrence Dental itself emphasises, that the reason for Openyd’s existence is to give effect to the deed and the association's decisions.

The present proceedings

[16] The present proceedings are the third set of proceedings arising out of the disputes, and involve an originating application for an order for possession of land brought by Openyd against Lawrence Dental. The central allegations are that Openyd holds the lease that was granted by Dr Lawrence’s trust, that Lawrence Dental has a sub-lease terminable at will pursuant to s 201(2) of the Property Law Act 2007, and that Lawrence Dental can now be required to leave. Lawrence Dental has filed a notice of opposition dated 1 May 2018, and it has also filed an interlocutory application for a dismissal/stay/consolidation of the proceedings.

[17] It is this application that was called before me in the Judge’s Chambers List, and which I now deal with having arranged an urgent hearing.

Lawrence Dental’s submissions

[18] Mr Laurenson submitted for Lawrence Dental that a stay should be granted either because the disputes in the present proceeding are within the terms of the arbitration clause, or if not, because it would be an abuse of process to allow this proceeding to continue when the main disputes were subject to the arbitration process.

[19] In terms of the separate legal status of Openyd, he relied on the findings of Simon France J and said that Openyd was a functionary of the Alusi interests. He outlined the disputes between the parties in the litigation that involved Openyd that could properly be subject to the arbitration process.

[20] On his alternative approach, he relied on the judgment of Lord Bingham in Reichhold Norway ASA v Goldman Sachs International in support of the proposition that litigation can be stayed in support of an arbitration, even when the issues in the proceeding were not themselves subject to an arbitration agreement.⁵ He relied on rr 10.12 and 15.1 of the High Court Rules, the judgment of the Court of Appeal in Regan v Gill,⁶ and the judgment of Rodney Hansen J in Medlab Hamilton Ltd v Waikato District Health Board, which described the consolidation power as a broad one.⁷ He argued that the fact that Simon France J had ordered a stay of the liquidation proceedings meant that it was fair for a stay to be entered on these proceedings for the same reason. He said the sub-tenancy was at large in these proceedings, and it could not be assumed that it was legitimately terminated. He also pointed out that there had always been an application under r 10.12 for consolidation of the present proceedings with the proceedings that have already been stayed by Simon France J, and that consolidation now would have the effect of appropriately extending the stay.

[21] In terms of the argument advanced by Openyd that Lawrence Dental had submitted to the Court’s jurisdiction, and could not now seek arbitration, he relied on the test outlined by Lord Denning in Eagle Star Insurance Co Ltd v Yuval Insurance

⁵ Reichhold Norway ASA v Goldman Sachs International [1999] EWCA Civ 1703; [2000] 1 WLR 173 (EWCA).

⁶ Regan v Gill [2011] NZCA 607 at [10].

⁷ Medlab Hamilton Ltd v Waikato District Health Board [2007] NZHC 1780; (2007) 18 PRNZ 517 (HC) at [8].

Co Ltd, which required an affirmation of legal proceedings as being the correct procedure, which he said did not arise in the present case.⁸

Openyd’s submissions

[22] Mr Griggs emphasised that he appeared only for Openyd in this proceeding. He argued that none of the four heads relied upon by Lawrence Dental, being the power to consolidate proceedings, the English authorities, the potential for abuse of process under r 15.1, or the inherent jurisdiction of the Court, allowed the stay to be entered.

[23] In response to the “one-stop adjudication” proposition that had been raised by the Court during argument, he relied on the fact that Openyd was not a party to the Deed of Association, and therefore it was not a party to the arbitration agreement, and the issue concerning that statutory tenancy was not related to the matters to be arbitrated. He said the application in this proceeding was straight forward as Openyd held the lease, there was a statutory tenancy, and it could be terminated.

[24] To emphasise the point that there were separate proceedings dealing with separate issues, he referred to the fact that there was now a further proceeding filed in the High Court by Dr Lawrence’s family trust against Openyd concerning the lease that Openyd held. He argued that this demonstrated it was better to deal with each of the discrete issues raised in each of the separate proceedings.

[25] He also argued that Lawrence Dental had submitted to the Court’s jurisdiction, and could not now seek a stay in support of a submission to arbitration. He relied on an even earlier judgment of Denning LJ in Re Dulles’ Settlement Trusts, where his Lordship held that when a party decides to fight the case on its merits he must be taken to have submitted to the jurisdiction.⁹ He argued that Lawrence Dental’s notice of opposition did just that as it had joined issue with the substance of the dispute.

⁸ Eagle Star Insurance Co Ltd v Yuval Insurance Co Ltd [1978] 1 Lloyd’s Rep 357 (EWCA) at 361.

⁹ Re Dulles’ Settlement Trusts [1951] 2 All ER 69 (EWCA) at 72.

[26] He also argued that Lawrence Dental was now estopped from contending that the continuation of these proceedings in this Court was an abuse of process, as that argument had been made to Simon France J and rejected by the Court.

Discussion

Nature of the dispute

[27] I begin by making the somewhat obvious point that the relevant parties are in dispute. The disputes centre around the arrangements between them for operating their respective practices out of the premises.

[28] Dr Lawrence’s interests are the owners of the premises, but Dr Imbrahim’s interests hold the lease. At present both operate their practices out of the premises in somewhat strained circumstances. In the end, it may be that the parties will need to have their disputes resolved by other processes, which for the reasons outlined below may involve an arbitration. As I made plain at the hearing, however, it seems to me that it is in the best interests for each side to make an attempt to resolve their differences and reach a settlement, possibly with the assistance of a mediator. But that is not something the Court can rule upon, or direct.

[29] Each side has sought to take apparently decisive legal steps to defeat the other. Dr Imbrahim’s interests first gave notice to Dr Lawrence’s interests that they had to vacate the premises, and the injunction proceedings then taken by Dr Lawrence’s interests were responded to by undertakings that the eviction would not be acted upon pending further determination of that issue by the Court. Dr Lawrence’s interests then sought to bring proceedings, including proceedings for the liquidation of Openyd, which I take it had a similar ultimate ambition – that is to exclude Dr Imbrahim’s interests from the premises. That resulted in a judgment of Simon France J concluding that those proceedings needed to be stayed to give effect to the arbitration clause in the Deed of Association regulating the arrangement between the parties.

[30] I see the current matter as simply a continuation of the disputes, and the misplaced ambition to achieve a decisive legal victory. Dr Imbrahim, through Openyd, again seeks to evict Dr Lawrence. In substance, this is the same matter that came
before Grice J, which was resolved when Dr Imbrahim’s interests gave undertakings. As it happens, however, the precise terms of the undertakings given allowed these proceedings to be continued. It is, in substance, the same matter that was addressed by Grice J, however.

[31] Openyd’s ability to seek and obtain an order of possession is in dispute for essentially the same reason that everything else is in dispute at present. That includes contentions that:

(a) Openyd is not lawfully controlled by Dr Imbrahim’s interests, as control was obtained in breach of the Deed of Association;

(b) Openyd’s ability to take steps is subject to limitations arising from the Deed of Association, and its role as the holding and administrating company for the parties’ arrangements;

(c) using Openyd to advance Alusi’s interests is not in the best interests of the company itself, and is otherwise in breach of the Companies Act 1993; and

(d) Openyd should be liquidated, with the fate of the assets, including the lease and sub-tenancies, to be determined by the liquidator or potentially a receiver.

Interpretation of the arbitration clause

[32] Given the existence of the disputes in this proceeding, the first question is whether they fall within the arbitration clause in the Deed of Association. The appropriate approach for interpreting the meaning and effect of an arbitration clause is now well established by the authorities. In Marnell Corrao Associates Inc v Sensation Yachts Ltd, Wild J held:¹⁰

[61] That result gives effect to the general principle that Courts should uphold arbitration, by striving to give effect to the intention of parties to submit disputes to arbitration, and not allow any inconsistencies or

¹⁰ Marnell Corrao Associates Inc v Sensation Yachts Ltd (2000) 15 PRNZ 608 (HC) at [61].

uncertainties in the wording or operation of the arbitration clause to thwart that intention. That is stated in Redfern & Hunters Law and Practice of International Commercial Arbitration (3rd ed), 1999, pp 172-173. To similar effect is Russell on Arbitration (21st ed) 1997, para 2-006, citing the Privy Council's decision in Queensland Electricity Generating Board v New Hope Colleries Pty Ltd [1989] 1 Lloyds Reports 205. Their Lordships' opinion was delivered by Sir Robin Cooke, who said (at p 210):

“At the present day, in cases where the parties have agreed on an arbitration or valuation clause in wide enough terms, the Courts accord full weight to their manifest intention to create continuing legal relations.”

[33] There is a related principle of “one-stop adjudication”, which comes from the decision of Lord Hoffman in Fiona Trust & Holding Corp v Privalov.¹¹ Lord Hoffman’s approach has been adopted and applied in New Zealand. For example, in Tamahere v Media Works Radio Ltd Simon France J quoted Lord Hoffman when he held:¹²

• [23] The second principle is the “one stop” idea, which takes as a starting point that parties to a commercial contract would not ordinarily be expected to submit only some of their disputes to the jurisdiction they have selected:

[13] In my opinion the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction.

[24] Ultimately the task is to interpret the scope of the arbitration agreement contained within the parties’ written contract. Consistent with my earlier conclusion, if there is a prima facie case to say the subject matter of these claims is covered by the agreement, a stay should be entered and the parties referred to arbitration.

[34] In that case the Court granted a stay of defamation proceedings in the context of an arbitration clause in an agreement between radio hosts and the relevant broadcaster. The fact that defamation proceedings were stayed in favour of arbitration illustrates the breadth of the one-stop adjudication approach. The authors of Williams & Kawharu on Arbitration indicate that the New Zealand authorities following the

¹¹ Fiona Trust & Holding Corp v Privalov [2007] UKHL 40, [2007] 4 All ER 951.

12. Tamahere v Media Works Radio Ltd [2014] NZHC 2082, [2014] NZAR 113 at [23]–[24] (footnote omitted).

“one-stop adjudication” approach “... confirm a common liberal approach to the interpretation of arbitration clauses in England, Australia and New Zealand”.¹³

[35] It seems clear to me that the present dispute concerning the ability of Openyd to evict Lawrence Dental is within the disputes contemplated by the arbitration clause, and is merely one of the aspects of the dispute between the parties. It would be inconsistent with the intention of the parties to hold that some of their disputes are to be resolved in the High Court, and the others through arbitration. That is particularly so given that it is accepted that the arguments in the arbitration would determine whether Dr Imbrahim’s interests can evict Dr Lawrence’s interests.

[36] I share the views of Simon France J in response to the argument that the arbitration clause does not apply as Openyd is not a party. Openyd is controlled by Dr Imbrahim, and the matters in dispute extend to whether Openyd can legally take the steps that are challenged. They are within the jurisdiction of the arbitrator to determine.

Stay in support of arbitration

[37] Even if the arbitration clause did not cover the dispute that is the subject of the present proceedings, I also accept that the Court could nevertheless grant a stay so that the underlying substantive disputes could be resolved first in the arbitration, with the consequential legal steps then following. That was part of the reasoning of Simon France J in staying the liquidation proceedings.¹⁴ I accept that the Court has jurisdiction to grant a stay of proceedings to support arbitration proceedings, even when the matter in dispute in the proceedings is not itself subject to an arbitration clause. For example, when the proceedings deal with downstream matters, or enforcement steps, and the substantive disputes are subject to arbitration a stay may be appropriate.

[38] Whilst Mr Griggs emphasised the difference between the English and New Zealand procedural rules, it seems to me that the New Zealand procedural rules with

13. David Williams and Amokura Kawharu Williams & Kawharu on Arbitration (2nd ed, LexisNexis, Wellington, 2017) at 121, n 128.

¹⁴ G J Lawrence Dental, above n 2, at [28].

respect to a stay are wide and flexible. In Regan, the Court of Appeal indicated that it was “difficult to conceive of a wider procedural discretion” than the general consolidation power.¹⁵ The same approach appears to me to apply to r 15.1. If it is in the interests of justice, as it is here, to stay court proceedings to allow the primary dispute resolution procedures chosen by the parties to operate, then such a stay should be granted.

Issue estoppel

[39] I see no substance in the argument that there is an issue estoppel arising out of Simon France J’s judgment that prevents the above course being followed. The relevant passage is in the part of the judgment which addressed whether Openyd and Alusi had submitted to the Court’s jurisdiction such that they could not obtain a stay in support of arbitration. The Court said:

[46] The other matter relied upon as constituting submission is the filing by Openyd of an application for possession of the Raumati Dental Centre. Mr Laurenson submits it would be an abuse to allow Alusi to obtain a stay on these proceedings whilst itself submitting aspects of the dispute to the Court.

[47] The resolution of these new proceedings lies in a determination of the legal basis on which Lawrence Dental occupies its position of the premises (leaving to one side the disputes about control of Openyd). I do not consider these proceedings constitute submission to jurisdiction in 117 or 118. The context is the same but the particular order sought is quite different. It is open to Lawrence Dental, if it wishes, to claim the arbitration agreement applies.

[40] In this passage, the Judge was explaining why the present proceedings did not involve Alusi submitting the disputes to the Court’s jurisdiction, rather than arbitration. The Court did not conclude, or have as an essential ingredient of its reasoning, that the subject matter of the present proceedings were outside the arbitration clause. On the contrary the Judge expressly stated that “it is open to Lawrence Dental, if it wishes, to claim the arbitration agreement applies”. That seems to me to encompass all arguments that such disputes should be referred to arbitration, including the argument that a stay should be entered in support of the arbitration process, as continuing with litigation would be an abuse of process.

¹⁵ Regan, above n 6, at [10].

Submission to jurisdiction

[41] I also reject the idea that Lawrence Dental’s notice of opposition to the originating application filed by Openyd, which disputed the Court’s jurisdiction, did not plead that the Court’s jurisdiction should not be exercised given the arbitration clause sufficiently clearly. Not only did the notice of opposition plead that the application was not within the Court’s jurisdiction, but in circumstances such as the present, where it really makes no sense to conclude that some of the disputes are to be resolved by arbitration and some by the Court processes, it would take a somewhat overwhelming case before a Court would conclude that a stay could not be granted because of a failure to object to the Court’s jurisdiction is sufficiently clear terms when filing papers in opposition. The only definitive legal requirements in this respect are in cl 8 of sch 1 of the Arbitration Act, and they are met.

[42] For those reasons, I grant a stay of these proceedings to enable arbitration to take place.

The way forward

[43] The advice provided at the hearing that there were yet further proceedings that have been commenced by Dr Lawrence’s family trust against Openyd prompted me to enquire of Mr Laurenson whether it could be agreed that the dipsutes covered by it also be referred to arbitration. Mr Laurenson was able to obtain instructions agreeing to that course during the hearing, as Dr Lawrence was present. Mr Griggs was more circumspect, partly because Dr Imbrahim was not present at the hearing.

[44] More generally I wish to reiterate the point I made at the hearing. The continued litigation between the parties is not likely to lead to a satisfactory outcome for either side. Either the parties will be able to find some way where they can co- exist at the premises, or one or other of them will have to leave. At this stage I do not have a complete understanding of the issues that would be placed before an arbitrator, but the view that I have at the moment is that some of the issues are difficult ones. It would be unwise, I would suggest, for either side to think that they will achieve a decisive victory in an arbitration process. It seems to me that the attempts to do so are likely simply to add further to the cost and delay involved.
[45] The most sensible course is for the parties to attempt, perhaps through mediation, to seek some resolution that is satisfactory to both of them. That is more likely to be in their best interests than any outcome in the arbitration process. At the hearing Dr Lawrence, through Mr Laurenson, was able to give an indication that he was prepared to attempt mediation. Again, Mr Griggs was more circumspect, not only because Dr Imbrahim was not present, but also because he advised that Dr Imbrahim was somewhat sceptical that a mediation outcome could provide a resolution, as it had failed to do so in the past. But as I say, any adjudication process seems to me to be unlikely to provide a better way forward.

Result and costs

[46] For the reasons identified above I grant the respondent’s application for a stay of these proceedings in favour of the arbitration processes.

[47] The respondent is entitled to costs on a 2B basis.

Cooke J

Solicitors:

Lawler & Co, Auckland

Gillespie Young Watson, Lower Hutt