HI-TECH INVESTMENT LTD V WORLD AVIATION SYSTEMS (AUSTRALIA) PTY LTD CA CA385/2009

HI-TECH INVESTMENT LTD V WORLD AVIATION SYSTEMS (AUSTRALIA) PTY LTD CA CA385/2009 23 September 2009IN THE COURT OF APPEAL OF NEW ZEALAND CA385/2009 [2009] NZCA 427BETWEEN HI-TECH INVESTMENT LIMITED Applicant AND WORLD AVIATION SYSTEMS (AUSTRALIA) PTY LIMITED Respondent Hearing: 15 September 2009 Court: William Young P, O'Regan and Arnold JJ Counsel: D F Dugdale for Applicant W M J Marsh for Respondent Judgment: 23 September 2009 at 10 amJUDGMENT OF THE COURT A The applicant is granted an extension of time to file its application for leave to appeal. B The applicant is granted leave to appeal on the question set out in [7] below and the respondent is granted leave to cross-appeal on the question set out in [8] below. REASONS OF THE COURT(Given by Arnold J)[1] The applicant seeks leave to appeal on a point of law against a decision of Priestley J on an appeal from an arbitrator's decision, the Judge himself having refused leave: HC AK CIV 2008-404-004189 16 December 2008 and 29 April 2009 respectively. As the leave application was filed out of time, the applicant also seeks an extension of time within which to file it. [2] The respondent opposes both applications. [3] The background is that the applicant leased premises to the respondent, at a concessional rent for an initial period. The lease agreement provided for a rent review. As contemplated by the rent review clause, the applicant sent a notice to the respondent advising of the new rental (the September notice). Unfortunately, the applicant mistakenly used the concessional rental figure as the basis for the calculation of the new rental, not the rate applicable once the concessional period had ended. [4] The respondent did not respond to the September notice, but simply started to pay the new rental specified in it. The applicant realised its mistake, and sent a new notice containing the correct rental calculation (the November notice). (There was a further notice in March the following year, which we ignore for present purposes.) The respondent refused to pay the corrected rental, or to embark on the contractual rent review process. Rather, it said that the effect of the rent review clause was that if it did not dispute the September notice, it was deemed to have accepted the new rental contained in it. So, once it started to pay the rent specified in the September notice, the parties were bound and the figure specified in that notice was the new rental figure. [5] The parties referred their dispute to arbitration before Mr Galbraith QC. Having heard evidence, he found that the respondent realised that the likelihood was that the applicant had erroneously calculated the rental in the September notice when it started to pay rent in accordance with it. However, he found that the rent in the September notice had become the rent payable under the lease. The arbitrator considered that:(a) The first notice was within the terms of the rent review clause. The applicant had argued that the notice was invalid because the rent proposed was lower than the minimum rent provided for in the review clause (which contained a ratchet provision), but the arbitrator rejected that. (b) Relief under the Contractual Mistakes Act 1977 was not available as the rent review process did not result in a contractual variation or a collateral contract. Rather, the tenant simply accepted the figure proffered by the applicant, thereby simply giving effect to the existing contractual arrangement. (c) Restitutionary principles did not provide relief as the New Zealand courts have not recognised a general restitutionary right based on unjust enrichment. The arbitrator also noted that had he found otherwise, he would not have upheld the respondent's argument that the applicant was estopped from seeking rent in excess of that stated in the September notice. [6] As the reference to arbitration permitted an appeal to the High Court on a question of law arising out of the award, the applicant appealed. There were two questions of law:(a) Was the notice of 27 September 2005 served by the plaintiff on the defendant ineffective because it claimed a reviewed rental that was lower than the rent reserved by the lease between the parties and therefore inconsistent with clause 2.1(b) of that lease, amended by clause 2.1.1 of the Second Schedule to the lease? (b) Was the arbitrator correct to refuse the plaintiff a remedy founded on the unjust enrichment of the tenant, unjust enrichment being available to the plaintiff either as an independent cause of action or as a basis of rectification?In addition, the respondent cross-appealed on the estoppel point.[7] Priestley J found for the respondent on both points, and in view of that did not address the estoppel issue. The applicant then applied to the High Court for leave to appeal to this Court on the following question of law:Whether the arbitrator was wrong to refuse, on grounds of the lack of power, to set aside on grounds that it was founded on a mistake apparent to the recipient, the [appellant's] notice of 27 September 2005.[8] The respondent opposed this application, but applied to the Court to remove its estoppel question to this Court if the applicant was granted leave on its question. The respondent's question was:Was the [appellant] estopped and/or debarred from claiming a rental different from that contained in its notice of rent review dated 27 September 2005 served by the [appellant] on the [respondent].[9] Priestley J declined leave, essentially for three reasons. First, he considered that the question proposed was a new one, not merely a refinement of what had been before him. Second, he considered that there was a public interest in the finality of awards. Third, although he acknowledged that the question whether equity should grant relief grounded on mistake was an important one, he did not consider that the facts in the present case justified incurring the costs and delay of a further appeal on that point. [10] The applicant now seeks special leave to appeal from this Court, as provided for in art 5(6) of Schedule 2 to the Arbitration Act 1996. It also seeks an extension of time within which to file its application, it being 26 working days out of time. [11] The respondent opposes both applications, but if they are granted the respondent wishes to be able to argue its estoppel question by way of cross-appeal. [12] In opposing the applicant's applications, Mr Marsh submits that no adequate explanation has been offered for the delay in filing the application for leave to appeal. In addition, he submits that the respondent would suffer prejudice if time were extended and leave granted as it has altered its position on the basis that the period for appeal had expired, so that there would not be an appeal. Further, he supports the Judge's reasons for denying leave.[13] As to the explanation for the delay, the affidavit evidence indicates that the responsibility for the delay lies with the applicant's solicitors, who inadvertently overlooked the time limit. Although this is not a case where the time limit was missed by a few days, the delay is still relatively short and we are not inclined to hold the solicitor's error against the applicant, so long as the delay has not caused prejudice to the respondent. [14] The respondent's representative, Mr Reeder has filed two affidavits in which he sets out the prejudice that the respondent claims to have suffered. What is said is that the respondent agreed to extend its lease arrangement with the applicant in circumstances where it understood that there would be no further appeal. Had it known the true position, it would not have extended the lease but looked for alternative premises. Mr Reeder notes that, from the respondent's perspective, there has been a decline in the quality of services provided by the applicant, which made other premises attractive. [15] The difficulty with this argument as we see it is that the rental arrangements for the extended lease period (which is in any event relatively short) have been "ring fenced" from the current dispute, so that the outcome of the dispute will not affect the rental for the extended period. In financial terms, the respondent will not be prejudiced as a consequence of agreeing the extension if the appeal is allowed to proceed. While the respondent may have preferred to move elsewhere rather than remain in a building with whose owner it was in dispute, that is a matter of taste or desire rather than real prejudice. [16] Turning to the substance of the dispute, the approach to be adopted in cases such as the present was discussed by this Court in Downer Construction (New Zealand) Ltd v Silverfield Developments Ltd [2008] 2 NZLR 591 at [29] – [44]. In particular, there must be a question of law of sufficient importance to justify a second appeal and the question of law proposed must be one which was before the High Court (even though its wording may be refined). [17] Applying the approach articulated in Downer Construction, we consider that leave should be granted.[18] First, we do not agree that the question on which the applicant seeks leave is new. Mr Dugdale wishes to argue that, while the courts have not recognised unjust enrichment as a stand-alone cause of action, that concept does underlie equitable forms of relief such as rectification. He wishes to argue that setting aside a unilateral document (the September notice) is a form of relief analogous to rectification. He relies in particular on the observations of Millet J in Gibbon v Mitchell [1990] 1 WLR 1304 at 1307 (Ch). [19] This same argument was made to Priestley J and he addressed it at [53] – [57] of his December judgment. It arises fairly out of the pleadings. We do not see the proposed question as being an amalgam of the two questions argued before Priestley J. It is, as Mr Dugdale said, simply a refinement of the second of the two questions considered by the Judge. [20] Second, we consider that the question is an important one, with significance beyond this case. Similar situations could arise in a variety of contexts. On the face of it, it is certainly arguable that the law should provide a remedy where one contracting party seeks to take advantage of the other party's known mistake in circumstances such as the present. [21] Accordingly we extend time for filing the application for leave to appeal and grant the applicant leave to appeal on the question set out in [7] above. We also give leave to the respondent in respect of its cross-appeal question set out at [8] above. [22] In the circumstances, we make no order as to costs.Solicitors: Patel Nand Legal, Auckland for Appellant Morrison Kent, Auckland for Respondent