LIFESTYLE GROUP LTD V MAXWELL HC NEL CIV-2005-442-395

LIFESTYLE GROUP LTD V MAXWELL HC NEL CIV-2005-442-395 21 June 2006IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY CIV-2005-442-395IN THE MATTER OF an application under the Arbitration Act 1996 BETWEEN LIFESTYLE GROUP LIMITED Plaintiff AND GEORGE MAXWELL AND HELEN KIRSTEN MAXWELL Defendants Hearing: 21 June 2006 Appearances: G J Praat for the plaintiff N Burley for the defendants Judgment: 21 June 2006ORAL JUDGMENT OF MACKENZIE J[1] This is an application for leave to appeal to the Court of Appeal against a judgment of this Court delivered on 21 April 2006. That judgment was a judgment on an appeal from an arbitral award. That means that leave is required pursuant to clause 5(5) of the Second Schedule to the Arbitration Act 1996. [2] As to the test to be applied on such an application, the Court of Appeal in Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 expressed the view at paragraph 21 that the Court is likely to apply to an application under clause 5(5) very much the same test as it does for applications under s 67 of the Judicature Act. That was the course which was adopted by Randerson J inCooper v Symes (2001) 15 PRNZ 166. I apply that test. That is to say, the applicant must show that the appeal raises some question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, ofsufficient importance to outweigh the cost and delay of the further appeal. That is the way the test was expressed by the Court of Appeal in Waller v Hider [1998] 1 NZLR 412. [3] The background is set out in the judgment of Goddard J, and I need mention it only briefly. The defendants were the owners of the Pakawau Beach Motor Camp in Golden Bay. They entered into a lease of that business with the plaintiff as lessee in 2001. The lease contained two provisions which are relevant for present purposes. First was a clause requiring the defendants to install a new sewerage and waste-water disposal system. The second was an option to purchase given to the plaintiff. Problems arose with the waste-water system. The plaintiff exercised the option to purchase, but the purchase was not settled because the purchasers were concerned that the waste-water system had not been properly installed. [4] The matters were taken to arbitration, and the arbitrator's award was given on 25 July 2005. So far as relevant, he held, briefly, that the defendants were not in breach of the clause requiring them to install the new sewerage and waste-water disposal system, as it had been professionally designed as that clause required. He also held that, under the agreement for sale and purchase which had been entered into following the exercise of the option, the delay in settlement was to be treated as governed by the conditions in the sale and purchase agreement dealing with the purchaser default, so that the purchasers were liable for penal interest during the period of the delay. [5] On the appeal to this Court, the finding on the first matter, that is whether the defendants were in breach of the obligation so far as the installation of the waste- water system is concerned, the arbitrator's decision was reversed. It was held that the arbitrator had erred in concluding that, although the design of the water treatment element of the plant was deficient, the defendants had fulfilled their obligation in relation to that element by simply contracting a qualified professional to do the design. The award was directed to be amended accordingly. [6] On the second issue, the decision of the arbitrator was upheld. Her Honour held that the defendants were able to give clear legal title on settlement and the still-deficient state of the waste-water system did not preclude their ability to do so. She held that clause 47, the clause containing the obligation in respect of the waste-water system, was a term of the deed of lease which was not incorporated by reference or otherwise into the agreement for sale and purchase. [7] The plaintiff seeks leave to appeal against the finding on that second question. I think that there are in essence two broad questions which arise for consideration under the Waller v Hider test. The first is the question of whether the provisions of clause 47 or the obligations contained in it are to be imported into the agreement for sale and purchase. The second is the way in which the agreement for sale and purchase on its express terms deals with the question of interest for late settlement. [8] The first of those questions is essentially a matter of the construction of this particular contract and does not itself raise any question of public importance. The second question, however, raises issues as to the application of the clauses in the agreement for sale and purchase of the Real Estate Institute of New Zealand and the Auckland District Law Society. That is a form which is in very extensive use, so that any question as to its interpretation is a matter of considerable public interest. [9] So far as the importance of the matter for the parties, that is to say its private importance, is concerned, I was told from the Bar that the difference between interest at the penal rate, treating the matter as one of purchaser default, and the rate which would apply if the case were one of vendor default, is of the order of $250,000. That is a sum which does make the matter of sufficient importance from a private point of view. [10] As to the question of whether either of the two questions of law, or, as I should perhaps more correctly express it, the two areas in which questions of law arise, are capable of bona fide and serious argument, it is not appropriate on a leave application to examine the merits of the arguments to any substantial extent. I think that it is sufficient to observe that I consider that the question of whether the obligations in respect of the waste-water system which were expressly contained in the lease are to be incorporated in some way in the agreement for sale and purchaseentered into upon the exercise of the option which was also contained in the lease is one which is capable of argument: that is, capable of bona fide and serious argument. [11] The outcome of the second question, that is, how the provisions of the standard form agreement are to be applied, may well depend in large measure on the outcome of that first question. The effect of the arbitrator's award, as upheld by the learned Judge, was that the only breach by the defendants as vendors was a breach of the obligations in clause 6.2 of the standard form of agreement, with the result that clause 6.5 applied. Whether or not that is the case is, in my view, a question which is in itself capable of bona fide and serious argument so as to meet the test. [12] In the circumstances, therefore, leave to appeal is granted. [13] Counsel are agreed that as to costs the appropriate course is for those to be reserved. "A D MacKenzie J"SolicitorsKnapps Lawyers, Richmond, for the plaintiff Hunter Ralfe, Nelson, for the defendants