LAKEWOOD PLAZA LIMITED PARTNERSHIP v KINARA TRUSTEE LIMITED [2019] NZHC 552

LAKEWOOD PLAZA LIMITED PARTNERSHIP v KINARA TRUSTEE LIMITED [2019] NZHC 552 [25March 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2018-404-2522[2019] NZHC 552UNDER THE Arbitration Act 1996IN THE MATTER of An application for leave to appeal underclause 5(1)(c) of schedule 2 to theArbitration Act 1996BETWEEN LAKEWOOD PLAZA LIMITEDPARTNERSHIPApplicantAND KINARA TRUSTEE LIMITEDRespondentHearing: 18 March 2019Appearances: R B Stewart QC and F B Q Collins for the ApplicantA R B Barker and J A Zwi for the RespondentJudgment: 25 March 2019JUDGMENT OF POWELL JThis judgment was delivered by me on 25 March 2019 at 3.30 pm pursuant toR 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:[1] The applicant, Lakewood Plaza Ltd Partnership ("Lakewood"), has applied forleave to appeal an arbitral award determined by Rodney Hansen QC on 27 August2018. The award determined that the respondent Kinara Trustee Ltd ("Kinara") wasentitled to user damages in the sum of $275,000 and exemplary damages in the sumof $20,000, as well as injunctive relief, interest and costs in consequence of interferingwith two rights of way located on Lakewood's property that Kinara had rights to use.[2] Seeking leave to appeal Lakewood does not dispute the award of exemplarydamages nor the injunctive relief ordered, and seeks to challenge only the award ofuser damages on the basis that the arbitrator made an error of law.Leave to appeal[3] The application for leave to appeal is made pursuant to cl 5(1)(c) of the SecondSchedule to the Arbitration Act 1996 which provides any party may appeal on anyquestion of law with the leave of the High Court.[4] There is no dispute that the factors to be taken into account in deciding whetherleave should be granted for an appeal from an arbitral award are those set out in thejudgment of the Court of Appeal in Gold & Resource Development (NZ) Ltd v DougHood Ltd.1[5] In particular an applicant for leave to appeal must show:2(a) an error of law, the determination of which could substantially affect itsrights; and(b) that the various discretionary factors identified by the Court favour thegrant of leave.1 Gold & Resource Development (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 (CA).2 At [54].[6] The Court of Appeal went on to note:3If the Judge decides to grant leave, reasons should ordinarily not be given. Itis undesirable that the Judge who is to hear the substantive argument shouldbe embarrassed or influenced by the existence of written reasons.If leave is not granted, the Judge should deliver a short judgment for thebenefit of the parties indicating, where necessary, whether the matter in issueis considered to be one-off, and why the case did not meet the requiredstandard. A detailed analysis of the alleged error of law is not required.The facts[7] Lakewood is the owner of 8 Lakewood Court ("8 Lakewood"). Kinara is theowner of the neighbouring property at 726 Great South Road ("726 GSR").[8] There are two registered rights of way that pass over 8 Lakewood for thebenefit of 726 GSR:(a) right of way B, which provides users of 726 GSR with access toRedoubt Rd; and(b) right of way C, which provides users of 726 GSR with access toLakewood Court.[9] There is a third right of way, right of way A, formed but never legally enacted,that passes over 12 Lakewood Court over land owned by Infinity Enterprises NZLimited ("Infinity"), connecting right of way B to Redoubt Road.[10] There is no dispute that from 1991 these right of way provided continuousaccess to Kinara's property from both Redoubt Road and Lakewood Court.4[11] In June 2017 Lakewood began construction of a 151 apartment complex.When construction started access over rights of way A and B was cut off and remainedso at the date of the arbitration.5 Right of way C was never permanently blocked butbecause it was the primary access to the building site there have been periods whenthe right of way has been blocked for days at a time, and sometimes overnight.63 Gold & Resource Development (NZ) Ltd v Doug Hood Ltd, above n 1, at [58] and [59].4 Kinara Trustee Ltd v Lakewood Plaza Ltd Partnership (Award) Rodney Hansen QC, 27 August2018 at [7].5 At [10].6 At [12].The error of law alleged[12] Lakewood took no issue with the arbitrator's summary of the matters in disputenor the central issue that the arbitration involved the determination of the quantum ofuser damages for Lakewood's interference with Kinara's rights of way.7[13] Likewise, Lakewood accepts the arbitrator correctly set out the principles forthe payment of user damages.8 In contrast to common law damages which require theconsideration of the actual loss suffered by a plaintiff, user damages do not requireactual loss to be shown with the damages being assessed by reference to the value ofthe right infringed. This is determined with reference to a hypothetical negotiationbetween the parties to determine what would have been appropriate for the defendantto pay for the right exercised had it been negotiated in advance.9[14] In this case, the arbitrator based his assessment on the evidence of the amountssaved by Lakewood as a result of its infringements on rights of way B and C – the"profits" made by Lakewood in this case.10 It is not disputed that this was appropriate.Where Lakewood takes issue with the arbitrator's analysis and where it submits thearbitrator was wrong in law, was that he focussed solely on quantifying the benefits(the costs savings) derived by Lakewood from its interference with the easements, andfailed to consider matters that would have reduced the quantum of damages; whetherbenefits accruing to Kinara as a result of the interference or the weaknesses in itsposition. Lakewood argues that had the arbitrator done so it would have been requiredto:(a) take into account the uncertainty of Kinara's right over right of way Aas this impacted on the value of right of way B that interfered with byLakewood;(b) the benefit to Kinara of having a 151 apartment complex completed onLakewood's property;7 At [15]-[16].8 At [21]-[30].9 Roberts v Rodney District Council [2001] 2 NZLR 402 at [11]-[12].10 Kinara Trustee Ltd v Lakewood Plaza Ltd Partnership, above n 4, at [36].(c) the lettable value of the right of ways as a vacant storage area;(d) the other access able to be utilised by Kinara off Great South Road; and(e) that Lakewood had rights to use the right of way which were equal toand corresponding to Kinara's rights.[15] Lakewood submitted that unless all matters affecting the value of the rights toKinara were taken into account the analysis undertaken by the arbitrator wasnecessarily flawed.Discussion[16] Having considered the submissions of both parties, I am satisfied that leave toappeal should not be granted.[17] First, to the extent that the question identified by Lakewood is a question oflaw it can only be described as very weak. In particular, I accept Mr Barker'ssubmissions on behalf of Kinara that the case law is well settled that in determiningthe sum that should be paid for the wrongful use of land it is not necessary for theplaintiff to show loss or that he or she would have applied the land to some other useand derived income therefrom.11 Nor is it necessary for the party infringing to havederived actual profit from the infringement.12[18] The following illustrations provide useful examples of the principlesapplicable:(a) In Watson, Laidlaw & Co Ltd v Pot, Cassels & Williamson, the courtdescribed the principle as follows:13If A, being a liveryman, keeps his horse idle in the stable, and B, againsthis wish or without his knowledge, rides or drives it out, it is no answerto A for B to say: 'Against what loss do you want to be restored? Irestore the horse. There is no loss. The horse in none the worse; it isbetter for the exercise.11 For example, see Roberts v Rodney District Council, above n 9, at [27]. See also, Waugh vAttorney-General [2006] 2 NZLR 812: Cooper J adjusted the quantum due to the uniquecircumstances of the case but otherwise adopted the principles of Roberts.12 Roberts v Rodney District Council, above n 9, at [28].13 Watson, Laidlaw & Co Ltd v Pot, Cassels & Williamson, 1914 SC (HL) 18 at 31 per Lord Shaw.(b) The statement of Nicholls LJ in Stoke-on-Trent City Council v W & JWass Ltd.14 in such a case it is no answer for the wrongdoer to show that theproperty owner would probably not have used the property himself hadthe wrongdoer not done so. In The Mediana [1900] AC 113, 117, Earlof Halsbury LC made the famous observation that a defendant who haddeprived the plaintiff of one of the chairs in his room for 12 monthscould not diminish the damages by showing that the plaintiff did notusually sit upon that chair or that there were plenty of other chairs inthe room.[19] As the detailed analysis of Barker J in Roberts v Rodney District Councildemonstrated, such an approach is not restitutionary in character but remainsessentially compensatory,15 rather it provided an alternative mechanism for assessingcompensation where it was otherwise impossible for a party to show loss.[20] It follows that to take into account the lack of actual loss suffered by Kinara inthis case, and/or actual benefits received, misconstrues the nature of user damages asopposed to common law damages, which Kinara had specifically elected not to pursue.For the arbitrator to have done so would have meant using the lack of identifiable lossto minimise the damages payable, an approach that is not supported by the authorities.This does not mean that the actual profit of the infringing party and/or the actual lossof the infringed party are not irrelevant to the analysis required to be undertaken.16[21] Contrary to Lakewood's submissions, the recent decision of the Court ofAppeal in Eminem Esque17 does not assist. As noted by Mr Stewart and Mr Collins,damages were discounted by the Court of Appeal but on the primary basis of the briefnature of the infringement, a factual matter which was clearly also taken into accountby the arbitrator in this case.[22] Taken together, while the issue raised by Lakewood is a question of law, it iscontrary to established authority on the nature of user damages and at best raises a14 Stoke-on-Trent City Council v W & J Wass Ltd [1988] 1 WLR 1406 at 1416 per Nicholls LJ.15 Roberts v Rodney District Council, above n 9, at [28].16 At [30]-[31].17 The New Zealand National Party & Anor v Eight Mile Style, LLC & Ors [2018] NZCA 596[Eminem Esque].weak issue. On the law as it stands, the arbitrator did not err in only considering thebenefit to Lakewood of the infringement.[23] In any event, there are also considerable difficulties with the particularsidentified by Lakewood. First the issue with regard to any uncertainty with right ofway A, the arbitrator had found as a fact that there was no evidence from Infinity, theowner of the land over which right of way A passed. As right of way A is a matterbetween Kinara and Infinity,18 the arbitrator essentially noted it was not relevant toLakewood's infringement in any event. Similar issues arise for the second particularwith regard to any benefit accruing to Kinara caused by the construction of a151 apartment complex on Lakewood's adjoining property. This was in fact not raisedas an issue in connection with user damages in the course of the arbitration but hadbeen raised only in connection with the assessment of common law damages.[24] The arbitrator likewise considered the valuation assessment as to the lettablevalue of land on right of ways B and C and made a finding of fact that Kinara, inconducting any notional negotiation, would not have regard to the value of the land asa storage rental.[25] In addition to the overall weakness of the question of law identified, theremaining discretionary factors noted in the Gold & Resource Developments decisionalso do not favour the granting of leave to appeal.[26] Specifically, while arbitration was the prescribed process under the PropertyLaw Act 2007, there is no question that the arbitrator, a retired High Court Judge, wasimminently qualified to consider the arbitration and the arbitration was domestic inorigin. There is also no evidence to suggest the dispute is of particular significance incircumstances where Lakewood does not dispute that an award of user damages isappropriate, nor is the amount of money significant. It has in fact already been paidand there is therefore no suggestion that enforcement of the arbitral award will threatenthe viability of Lakewood. On the contrary, it appears to be relatively minor in thecontext of a 151 apartment development. On the other hand, if leave is granted it willmean the final position as between the parties is not resolved for a considerable period.18 Subject to separate proceedings in this Court.Decision[27] The application for leave to appeal is declined. Kinara is entitled to 2B costsand disbursements on the application, with leave reserved to return to the Court in theevent of any dispute as to the appropriate calculation._______________________________Powell J