Whangarei Industrial Park Limited v Whangarei District Council [2018] NZHC 805 (26 April 2018)

Last Updated: 10 May 2018

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY I TE KŌTI MATUA O AOTEAROA WHANGĀREI TERENGA PARĀOA ROHE

CIV-2017-488-000118 [2018] NZHC 805

IN THE MATTER	of an application under the Arbitration Act 1996 for leave to appeal
BETWEEN	WHANGAREI INDUSTRIAL PARK LIMITED Applicant
AND	WHANGAREI DISTRICT COUNCIL Respondent

Hearing:	26 April 2018
Appearances:	J Browne for the Applicant L McEntegart and G Mathias for the Respondent
Judgment:	26 April 2018

JUDGMENT OF WOOLFORD J

[Re: Application for leave to appeal]

Solicitors / Counsel:

Henderson Reeves Lawyers, Whangarei L McEntegart, Auckland

Thomson Wilson, Whangarei

WHANGAREI INDUSTRIAL PARK LTD v WHANGAREI DISTRICT COUNCIL [2018] NZHC 805 [26 April 2018]

[1] Whangarei Industrial Park Ltd (the applicant) applies for leave to appeal against an arbitral award. The application is opposed by the Whangarei District Council (the respondent).

Background

[2] The respondent owns a property at 18 Kioreroa Road. The property is leased to the applicant on a 21 year perpetually renewable ground lease. The lease is under the provisions of the Public Bodies Leases Act 1969.

[3] The parties were unable to agree on a new annual rental for the period from 1 October 2015. Therefore, it was to be determined by arbitration. Each party appointed an arbitrator. The arbitrators were unable to agree. Accordingly, the new rental was decided by an umpire.

[4] The umpire decided the new rental should be $230,550 plus GST. The previous rental was $24,800 plus GST. I note the arbitrators’ findings were, respectively, that the annual rental should be $187,866 plus GST and $236,500 plus GST.

[5] The applicant seeks leave to appeal on four questions. I address these in turn after setting out the relevant law.

The Law

[6] Clause 5 of sch 2 of the Arbitration Act 1996 provides for appeals on questions of law, unless the parties agreed otherwise. It applies to the present case by way of s 6 of the Arbitration Act. The Applicant requires leave to appeal under cl 5(1)(c).

[7] An appeal may only be made in respect of a “question of law arising out of an award”. Clause 5(10) provides:

(10) For the purposes of this clause, question of law—

(a) includes an error of law that involves an incorrect interpretation of the applicable law (whether or not the error appears on the record of the decision); but

(b) does not include any question as to whether—

• (i) the award or any part of the award was supported by any evidence or any sufficient or substantial evidence; and

(ii) the arbitral tribunal drew the correct factual inferences from the relevant primary facts.

[8] Questions of fact cannot be appealed. There is uncertainty as to whether mixed questions of law and fact fall under “question of law” and are therefore appealable.¹ Mixed questions essentially involve the application of legal tests to facts.

[9] Clause 5(2) addresses whether leave should be granted:

(2) The High Court shall not grant leave under subclause (1)(c) unless it considers that, having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of 1 or more of the parties.

[10] I am of the view that the threshold is met in the present case and the Court now needs to exercise its discretion to determine whether leave should be granted. Counsel have referred me to the Court of Appeal decision in Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd as setting out the factors to be considered in exercising that discretion.² The “strength of the challenge / nature of the point of law” is said to be the “most important” factor. The remaining factors, in no particular order, are:

(a) How the question arose before the arbitrators;

(b) The qualifications of the arbitrators;

(c) The importance of the dispute to the parties;

(d) The amount of money involved;

(e) The amount of delay involved in going through the Courts;

1. David AR Williams and Amokura Kawharu Williams & Kawharu on Arbitration (2nd ed, LexisNexis, Wellington, 2017) at [18.4.3] and Jack Davies and Jack Alexander “Appeals on mixed questions under the Arbitration Act 1996” [2018] NZLJ 27.

² Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] NZCA 131; [2000] 3 NZLR 318 (CA).

(f) Whether the contracts provides for the arbitral award to be final and binding; and

(g) Whether the dispute before the arbitrators is international or domestic.

[11] The Court is not required to give reasons for granting leave unless it thinks reasons are required in the circumstances.³ The Court must give reasons if it refuses to grant leave.⁴

Question One

[12] The first proposed question is:

Did the umpire misdirect himself as to his task at paragraph 70 of the award?

[13] Paragraph 70 of the award provides:

The task I have to perform is to consider the respective arbitrator’s submissions that were based on the evidence heard at the hearing, along with the supporting documentation, and arrive at a valuation neither higher nor lower than these two submissions.

[14] Regardless of the nature of this question, I am of the view that this ground of challenge has no merit. In my view, paragraph 70 is an unobjectionable summary of the umpire’s duty under the lease, as set out in cl 10 of sch 1 of the Public Bodies Leases Act:⁵

The duty of the umpire, on reference to him of any question, shall be to consider the respective valuations of the 2 arbitrators in the matters in which their valuations do not agree, and then to make an independent and substantive valuation, and the last-mentioned valuation shall be the decision of the umpire; but in giving his decision on any question so referred to him the umpire shall in every case be bound to make a valuation not exceeding the higher and not less than the lower of the valuations made by the arbitrators respectively.

Question Two

[15] The second proposed question is:

³ High Court Rules 2016, r 26.17.

⁴ High Court Rules 2016, r 26.18.

⁵ The umpire also quoted this clause at [10] of the award.

Did the umpire, despite quoting clause 10 of schedule 1 to the Public Bodies Leases Act 1969, fail to make an independent and substantive valuation as required by that clause but instead selected a land value from the range adopted by the arbitrators?

[16] This, in my view, is a mixed question of law and fact. But, again, regardless of its nature, I do not consider there is any merit in this challenge. The umpire gave a reasoned decision, which involved detailed consideration of the other arbitrators’ decisions and the evidence before determining the rental. I am satisfied that he made an independent and substantive valuation.

Question Three

[17] The third proposed question is:

In valuing the subject property, does clause 7(3) of Schedule B to the lease allow one to take into account the increase in the profile of the area flowing from the presence of improvements on the subject property?

[18] Clause 7(3) of sch B to the lease provides:

In making the said valuation no account shall be taken of the value of the following improvements of the said land: all buildings structures and erections now or hereafter built constructed or erected.

[19] The interpretation of the lease is a question of law.

[20] The applicant says the presence of buildings, structures and erections on the property have improved the quality of the neighbourhood and hence increased the underlying land value. It says, given the umpire’s final rental is closer to that contended for by the respondent, the umpire must have “taken into account the general lift in the profile of the area occasioned by the improvements on the subject property”.

[21] The umpire specifically noted in paragraph 5, that “in making a valuation of the land for renewal no account shall be taken of all buildings, structures and erections now or hereafter built constructed or erected”.⁶ Further, the award does not refer to the notion of land value increasing because of the quality of the neighbourhood, nor

⁶ At [5] of the award.

has such an increase in land value been established. In my view, it cannot be shown that the umpire erred on this basis.

[22] In any event, the interpretation of cl 7(3) advanced by the applicant seems somewhat tenuous. The clause provides “no account shall be taken of the value of the following improvements of the said land...”. An ordinary reading of this clause is the valuations should be for the land excluding improvements; its value as if no buildings or other improvements had been effected to it. It seems artificial to decrease the value of the land because its value increased after buildings and other developments ultimately resulted in improvements to the character of the neighbourhood.

Question Four

[23] The fourth proposed question is:

Noting that the award ultimately determined the land value of the subject property to be its rating valuation: Was the Tribunal right to introduce exhibit 13 concerning the rating valuation [of $3,180,000] of the subject property into evidence?

[24] The applicant says the umpire erred in allowing this exhibit to be introduced as it is not relevant. It says the opinions of an unnamed valuer as to land value that was not called to give evidence cannot be relevant. It further says, “it is impossible to think that the rating value of the subject property did not play a part” in the umpire’s decision because he arrived at the same valuation.

[25] In my view, this ground must also fail.

[26] First, an arbitral tribunal generally has wide powers as to the admissibility of evidence. Article 19(2) of sch 1 of the Arbitration Act provides:

(2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this schedule, conduct the arbitration in such manner as it considers appropriate. The power conferred upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality, and weight of any evidence.

[27] Second, the evidence appears relevant, especially as the witness was addressing rating valuations when it was introduced.
[28] Third, the umpire clearly articulated the basis on which he arrived at the land value of $3,180,000.⁷ The reasoning was as follows:

My assessment of the freehold land value is as follows:

2.9604ha @110m² $3,256,440

Less

Power easement/powerlines

2,803m2 @110m2 x 50%	$154,165
	$3,102,275
Plus
For “rats tail” 2,196m2 $3,102,275 @ 2.5%	$77,557
	$3,179,832
Round to	$3,180,000
(THREE MILLION ONE HUNDRED AND EIGHT DOLLARS) Plus GST (if any).	THOUSAND

[29] The figures used by the umpire were sourced from the other arbitrators’ reasoning and the evidence, but in my view the arbitrator was entitled to do so. The applicant was not shown any error in this approach.

Conclusion

[30] I do not consider that any of the difficulties identified can be overcome by the other factors listed in the earlier reference to Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd.

[31] Leave to appeal is, therefore, declined on all four proposed questions. The application is dismissed.

[32] Costs are payable by the applicant on a 2B basis.



Woolford J

⁷ At [36] of the award.