ASIAN FOODS WEST CITY LTD V WEST CITY SHOPPING CENTRE LTD HC AK CIV 2007-404-1215

ASIAN FOODS WEST CITY LTD V WEST CITY SHOPPING CENTRE LTD HC AK CIV 2007-404-1215 11 September 2007IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2007-404-1215UNDER the Arbitration Act 1996 IN THE MATTER OF an application to set aside an arbitral award of Nola Kay Dangen BETWEEN ASIAN FOODS WEST CITY LTD Plaintiff AND WEST CITY SHOPPING CENTRE LTD Defendant Hearing: 11 September 2007 Appearances: Peter Chan for Plaintiff Graeme Christie and Sarah Devoy for Defendant Judgment: 11 September 2007JUDGMENT OF HARRISON J_________________________________________________________________________________ SOLICITORS Eastland Legal (Auckland) for Plaintiff Simpson Grierson (Auckland) for DefendantIntroduction[1] This is an application for an order setting aside an arbitral award made by an Auckland solicitor, Ms Nola Dangen, on 18 December 2006. The application relies on two grounds. First, the applicant complains that it was not given proper notice of the arbitral proceedings and was unable to properly and fairly present its case: Article 34(2)(a)(ii) Arbitration Act 1996. Second or alternatively, the applicant says the award is in conflict with public policy in New Zealand as there was a breach of natural justice: Article 34(2)(b)(ii). [2] Ultimately it will be unnecessary for me to examine either ground in any detail. For the purposes of determining the application I am prepared to proceed on the premise that the award is set aside. In adopting this approach, I mean no criticism of the arbitrator, nor any implied endorsement of the grounds of challenge. To the contrary, I am not satisfied that either ground is sustainable. But, even if it was, the question is: would the award have been any different?Background[3] The brief background is as follows. West City Shopping Centre Ltd (WCSC) owns and operates a shopping centre at Henderson known as Westfield Shoppingtown WestCity. On 16 August 2001 it entered into an agreement to lease Shop 290 to Eat Asian West City Ltd (now Asian Foods West City Ltd) for a term of 10 years. Asian Foods subsequently entered into licensing arrangements with various parties to sell food from units within the shop. [4] Differences arose between the parties in 2006. It is unnecessary to traverse their genesis, nature or extent here. What is unchallenged is that Asian Foods through its duly authorised agent, one Bing Young, approached WCSC with a request to consent to surrendering its lease. Negotiations followed. [5] On 10 August 2006 WCSC wrote to Asian Foods as follows:RE: LETTER OF INTENT TO SURRENDER THE LEASE FOR SHOP 290WESTFIELD WESTCITY (THE 'PREMISES')We refer to previous discussions with you about your wish to surrender your lease of the premises dated 16 August 2001 (the 'Lease'). We note that Asian Foods West City Ltd (the 'Lessee') wishes to surrender the Lease. WestCity Shopping Centre Limited (the 'Lessor') is prepared to accept such surrender on the following terms and conditions: Such agreed Surrender would also terminate the formal seating arrangement associated with the Asian Foods West City Ltd Lease as from the same date. (Letter on file ex Westfield dated 06 July 2001).1 TimingThe surrender of the Lease is to take place on a date nominated by the Lessor (the 'Date of Surrender'). (It is presently estimated that the Date of Surrender will be 07 January 2007). The Lessor undertakes to give the Lessee not less than four weeks' notice in writing of the actual Date of Surrender.2 Compliance with Lease termsPrior to the Date of Surrender the Lessee undertakes to fully comply with all terms and conditions of the Lease including but not limited to:• Payment of all money due under the Lease by due date; and• Pay for the cost of the removal of all of the fitout in the Premises and the removal of all signage (and reinstatement of the Premises to a bare shell). Such works to be undertaken by the Lessor who will obtain three quotes (possibly including one from Westfield) for the cost of that work and show them to the Lessee, the Lessee being liable to pay the amount that is the lowest quote (even if the Lessor selects another contractor to undertake the works).3 Special ConditionsThe surrender of the Lease by the Lessee is entirely conditional upon: (a) the Lessor obtaining the approval to the terms of this letter from the Executive of Westfield (New Zealand) Limited within 10 days of the date of this letter; and (b) by COB Wednesday 16th August 2006: (i) the Lessor obtaining (on terms and conditions which are entirely satisfactory to the Lessor) a signed and unconditional (from the tenant's perspective) Agreement to Lease with a third party for a lease of Shop 290 Westfield WestCity to commence after the Date of Surrender; and(ii) the Lessor locating alternative premises for the subtenant of the Lessee trading as Wok Wok within the Centre and entering into a new agreement to lease such alternative premises with the owners of that Wok Wok business on terms and conditions satisfactory to the Lessor or the owners of that Wok Wok business agreeing to vacate Westfield WestCity (if being expressly agreed that under no circumstances will the Lessor be paying any incentive or compensation to (or in respect of) the owners of the Wok Wok business whether they move within Westfield WestCity or vacate the centre). All such conditions being for the benefit of the Lessor and only able to be waived by the Lessor.4 DocumentationThe Lessee will execute any and all documentation required to give effect to the above and undertakes to pay the Lessor's solicitor legal fees associated with the preparation of a Deed of Surrender (including all disbursements) upon demand. If you wish to proceed with the surrender of lease, please sign below and return the original to the writer by 4pm Wednesday 16 th August 2006. Should you have any queries in respect of this matter, please do not hesitate to contact the writer.[6] On 15 August 2006 Asian Foods through Mr Young's agency signed the letter in these terms:Eat Asian WestCity Limited hereby agree to surrender the Lease of Shop 290 Westfield WestCity (subject to the terms and conditions detailed above) and undertakes to pay all monies due under the terms of the Lease up to the Date of Surrender and carry out all the obligations contained above and will have no further interest in the Premises whatsoever, from the Date of Surrender.[7] The agreement was subject to three nominated conditions. WCSC's evidence is that all conditions were satisfied on or before 20 August 2006. One of its representatives phoned Mr Young on 22 August to advise him to this effect. However, on 31 August Mr Young wrote to WestCity as follows:As you know we are trying our best to accommodate all parties to get a favourable result for all. But there comes a time when the deal becomes to hard. This is one of those times. Unless Wok Wok stays at it's present location until 31 December 2006. The deal can not and will not proceed. I have made a commercial discussion and will not change this discussion.I assume that Mr Young's use of the word 'discussion' is erroneous and that he meant to write the word 'decision' – otherwise the letter would be a nonsense. [8] Mr Young's letter, on any analysis, was a unilateral repudiation or cancellation of what appeared to be an unconditional agreement. WCSC was surprised at Mr Young's conduct. After all, he had initiated the surrender process on Asian Foods' behalf. His conduct was inconsistent, to say the least. [9] Further discussions followed between the parties. Mr Young adhered to his changed position, continuing to reject his earlier unconditional assent to what were plainly unambiguous terms. WCSC was in a difficult position. It had acted in reliance on Asian Foods' original assent to its offer. By October WCSC had arranged for a new tenant to take possession on 7 January 2007. [10] On 25 October WCSC gave Asian Foods notice of its requirement that disputes which have arisen between the parties 'be referred to and resolved by arbitration in accordance with clause 13.9 of the lease'. In summary, they were (1) whether the letter of intent to surrender the lease was unconditional and binding; (2) whether the lease would be surrendered as at 7 January 2007; and (3) whether Asian Foods was required to surrender the lease and possession of the premises on 7 January. It sought relief by way of declarations and orders. [11] WCSC's solicitors, Simpson Grierson, served a copy of the notice on Asian Foods that day and on 31 October faxed another copy to the company's solicitors. Its letter referred to the parties' requirement to agree on an arbitrator within 14 days; that was by 9 November. However, Asian Foods did not respond in a timely fashion. WCSC requested the President of the Auckland District Law Society to nominate an arbitrator. Ms Dangen was appointed on 13 November. [12] Simpson Grierson advised the arbitrator that completion of the arbitration process was a matter of urgency. Plainly it was in the interests of both parties to resolve the dispute before 7 January 2007. Nevertheless, Asian Foods by its solicitors, Eastland Legal, requested a hearing in the New Year but without givingreasons. At Simpson Grierson's request the arbitrator set a timetable designed to ensure that the dispute was ready for hearing before the Christmas vacation. [13] Without going into detail, like the arbitrator I am in no doubt that Asian Foods and its solicitors attempted to frustrate the timetable which she set for an urgent fixture. Among other things, Eastland Legal insisted on discovery, full pleadings, and a full hearing, without an apparent purpose. Simpson Grierson filed a comprehensive statement of claim. Asian Foods' solicitor, Mr David Liu, gave numerous and questionable excuses for his unavailability. [14] Simpson Grierson submitted a synopsis of submissions to the arbitrator and supporting affidavits. Asian Foods filed an affidavit from Mr Young in response together with a synopsis of submissions. Eastland Legal's synopsis recorded, among other things, that 'what is being disputed are the events that occurred subsequent to the signing of the surrender'. Later the synopsis said this:2.1 Westfield's position is that all of the conditions were satisfied within the time limit and therefore the surrender has become a binding contract. Whereas, Asian Foods' position is that one or more conditions under the surrender had not been fulfilled by the date for fulfilment, and therefore the surrender is discharged and they still have a valid lease with Westfield. 4.1 It is submitted that if one or more of the conditions under the surrender was not fulfilled within the time limit stipulated, the surrender must be treated as discharged. Counsel notes that the surrender was entirely conditional upon the fulfilment of the conditions and in order to avoid uncertainties various time limits were inserted for the fulfilment of the conditions.[15] The arbitrator then determined the dispute. In her award dated 18 December she concluded that:17. I find that the special conditions in the letter of intent to surrender have all been satisfied and that a few days time difference is immaterial in the result of the case. There is no requirement within the document that the lessee be advised either verbally or in writing of the satisfaction of the conditions nor is there any right given to the lessee to cancel the agreement.[16] Asian Foods vacated the premises on or before 7 January 2007. WCSC's counsel, Mr Graeme Christie, says with some force that the issue is now sterile or academic.Decision[17] When opening this judgment I observed that it was unnecessary to determine either of the grounds raised by Asian Foods. I should say, though, that I am satisfied there was no breach of natural justice. Asian Foods was given an ample opportunity to be heard. I repeat my satisfaction that the company and its solicitors set out to frustrate and delay the arbitration process. There was no need, for example, to require discovery; nor was there any need for a formal hearing, although I note that the arbitrator offered the parties an opportunity to appear and present submissions. The facts were not in material dispute but, even if they were, they were irrelevant to the discrete legal issues falling for determination. [18] However, I propose to determine this application on the premise that for the purposes of argument the award may be set aside. The inquiry then is to determine the result of what is said to be the substantive or underlying dispute between the parties. [19] In his written synopsis filed in support of the application, Asian Foods' counsel, Mr Peter Chan, submitted:2.1 What is in dispute are the events that occurred subsequent to the signing of the Letter of Intent. The Plaintiff doubts that the Defendant entered into a new agreement to lease alternative premises to Wok Wok on or before 16 August 2006 as required under the terms of the Letter of Intent. This is evident from a cursory inspection in the lease documents which show a discrepancy between the date inserted in the Agreement to Lease and the date inserted in the guarantee. Both these documents were purportedly signed by Wok Wok. Judging from the date inserted on the guarantee, the plaintiff believes that the agreement to lease was back-dated. Thus the conditions were not satisfied within the time limit agreed. The consequence of this was that the agreement to surrender was subsequently void. Alternatively, the agreement to surrender became voidable and the Plaintiff duly exercised their right to avoid the same.2.2 There was therefore a clear dispute of fact which had to be resolved. This was recognised by the Defendant who then referred the matter to arbitration. It was the Defendant not the Plaintiff who issued the Notice of Arbitration.[20] In oral argument this morning Mr Chan did not attempt to rely on these grounds. They were plainly without any substance. Whether Asian Foods 'doubts' whether a new agreement to lease was entered into is irrelevant. So, too, is its belief 'that the agreement to lease [with Wok Wok] was back-dated'. A submission that the conditions were not satisfied by the agreed date chooses to ignore the plain words of the agreement. The parties expressly acknowledged that all conditions were for WCSC's benefit and only able to be waived by that party. Furthermore, of course, time was not of the essence. [21] Mr Chan's submission that there was a clear dispute of fact which required resolution cannot stand. There was no challenge to WCSC's evidence that all three conditions were satisfied on or before due date. Mr Chan gave notice of his intention to cross-examine at today's hearing but then withdrew it. Mr Chan's assertion was made without any evidential or legal foundation and continues the misunderstanding of basic legal principles which has permeated Asian Foods' stance throughout. The issue was of a purely legal nature and within an arrow and straightforward compass. [22] Instead, in oral argument Mr Chan has raised two entirely new grounds, presumably as a result of reading Mr Christie's synopsis in answer. First, he says there was no agreement. He refers to the heading of the letter. He says the document is no more than a statement of intent to surrender the lease. He also refers to the operative words in the second paragraph, namely that WCSC 'is prepared to accept such surrender'. He notes that the letter does not use the word 'agree'. He says with some confidence that commercial parties would have drafted a document with much more lucidity. [23] With respect, Mr Chan's argument ignores the elementary principles of offer and acceptance which lie at the heart of the law of contract. Construed as a whole, WCSC's letter was plainly an offer on terms. The facts that it does not use the word 'agree' or that it is headed 'letter of intent to surrender' are irrelevant. It was converted into a binding agreement by Asian Foods' unequivocal agreement toaccept its terms and surrender the lease subject to the conditions set out in the letter. This argument has no merit at all. [24] Alternatively, Mr Chan says that the terms of the contract are uncertain and thus unenforceable. He refers to the statement that 'the surrender of the lease is to take place on a date nominated by the lessor'. He says the parties failed to agree on the actual date of surrender. He relies on dicta from The Plaza Pakuranga Ltd v Warehouse Clothing Ltd, Auckland Registry, CL 59/91, 10 April 1992, Anderson J, in particular this passage: at 9-10:Similar considerations could apply to an executory agreement for the surrender of a lease. It could be readily perceived that a prudent landlord, in the position of the plaintiff in this case, would not intend that a lease should be surrendered without stipulation of the day on which it would be surrendered. The landlord would be concerned with re-tenanting and would wish to know when a new tenant could assume the premises. A tenant for its part would wish to know when its obligations were to cease so that it could proceed with alternative arrangements in connection with its business. There is an attractiveness in the argument that just as there must be certainty of commencement and termination of a lease in the case of an executory agreement for lease, so also must there be certainty of termination of an existing lease in the case of an executory agreement for surrender. I do not intend to decide this interesting point in the present case[25] Again, with respect to Mr Chan, these statements are of no assistance whatsoever. The Plaza Pakuranga case is distinguishable. The question was whether or not there was an enforceable contract for the surrender of a lease in the Pakuranga Town Centre. The parties had entered into negotiations and correspondence. Among other things, they had never referred to a date by which the lease, if it was to be surrendered, would be surrendered. The Judge was satisfied there was no enforceable contract to surrender the lease. [26] In this case the parties had agreed on a date for surrender. That date was the date to be nominated by WCSC on no less than four weeks written notice. At the time they signed the agreement the date was estimated to be 7 January 2007. It was confirmed on 22 August, by which date all conditions had been satisfied. There was no uncertainty in this term. Again this argument must fail.[27] Second, without any notice to Mr Christie, Mr Chan raises a new argument about jurisdiction. It did not feature in his written synopsis. He says that the arbitrator had no power to hear the dispute. He observes that the notice to arbitrate referred to clause 13.9 of the lease, which states:All differences and disputes which may arise between the parties in respect of this Lease except as otherwise expressly provided will be referred to the arbitration in New Zealand of one arbitrator (agreed on by the parties, or if they are unable to agree within 14 days one appointed by the President or any Vice-President for the time being of the Auckland District Law Society) in accordance with the Arbitration Act 1996. Any reference in this Lease to arbitration will be deemed to be a reference to this clause 13.9. Nothing in this clause 13.9 will prevent the Lessor from exercising the rights and powers of the Lessor in clause 3.4.2 or in section 10.[28] Mr Chan says that a lease signed in 2001 could not extend to a difference or dispute arising between the parties in 2006. I reject his submission. Again the provision is plain. It embraces all differences and disputes which may arise in respect of the lease; that is, throughout its 10 year term. The phrase 'in respect of' is very wide. It extends to all disputes or differences between the parties touching on or connected to the instrument or any steps taken arising out of or which may affect the contractual relationship created by the lease. [29] In any event, even if I was wrong, it was always open to the parties to submit their dispute to arbitration. I have drawn Mr Chan's attention to a number of letters written by Mr Liu to Simpson Grierson and the arbitrator. Individually and collectively they provide incontrovertible evidence of Asian Foods' intention to submit to the arbitration process. At no stage did Mr Liu ever raise an objection to jurisdiction. To the contrary, he affirmatively participated on Asian Foods' behalf. Any rights of challenge have long been waived. [30] Mr Chan protests that Mr Liu would have raised jurisdictional challenges if he had further time. Like other arguments advanced today, that proposition is speculative and without an evidential basis. Mr Liu has never asserted that he would have taken this point; his conduct points affirmatively in the other direction.[31] I am satisfied that the arbitral award was substantively correct, and the result would have been no different if it was set aside and the dispute was re-litigated. The application is dismissed. [32] I am satisfied also that WCSC is entitled to an award of indemnity costs, to be on a reasonable solicitor/client basis. I am satisfied that this application was hopelessly misconceived from the outset. I certify for one counsel. [33] I agree with Mr Christie that WCSC should be entitled to costs against both Asian Foods and Mr Young personally, and I order accordingly on condition that WCSC first exhausts its rights against Asian Foods before resorting to its rights against Mr Young. I am satisfied that Mr Young has authorised and driven this application. [34] I note that it was unnecessary for me to call upon Mr Christie in oral argument, but I acknowledge the real assistance I have derived from his written synopsis. ______________________________________ Rhys Harrison J