MILK NEW ZEALAND (SHANGHAI) CO. LIMITED v MIRAKA LIMITED [2019] NZHC 2713 [23 October 2019]

MILK NEW ZEALAND (SHANGHAI) CO. LIMITED v MIRAKA LIMITED [2019] NZHC 2713[23 October 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2018-404-2433[2019] NZHC 2713UNDER the Arbitration Act 1996IN THE MATTER of an appeal against an Arbitral AwardBETWEEN MILK NEW ZEALAND (SHANGHAI) CO.LIMITEDPlaintiffAND MIRAKA LIMITEDDefendantHearing: 29 May 2019Appearances: J Anderson, L H Mau and S J Jones for PlaintiffL A O'Gorman and A N Birkenshaw for DefendantJudgment: 23 October 2019JUDGMENT OF WALKER JThis judgment was delivered by me on 23 October 2019 at 2.30 pmPursuant to Rule 11.5 High Court RulesRegistrar/Deputy RegistrarTABLE OF CONTENTS____________________________________________________________________Introduction [1]Factual background [5]Approach to Appeal [43]The Jurisdictional Threshold [43]Standard of review [60]Issue One – Does the UHT Agreement exclude any right to common law damages?[63]Does this constitute an appealable question of law? [64]How was this issue dealt with in the Award? [66]Did the Arbitrator make an error of law? [88]Conclusion on Issue One [100]Issues Two and Three – What is the relationship between the notificationregime and Minimum Volume obligations in the UHT Agreement? [101Does this constitute an appealable question of law? [103]How was this issue dealt with in the Award? [104]Did the Arbitrator make an error of law? [115]Conclusion on Issues Two and Three [137]Issue Four – Is contractual interest payable on damages? [139]Does this constitute an appealable question of law? [139]How was this issue dealt with in the Award? [143]Did the Arbitrator make an error of law? [148]Conclusion on Issue Four [169]Summary of conclusions [172]Costs [173]Introduction[1] Milk New Zealand (Shanghai) Co. Limited (MNZ) appeals a Partial Award ofthe Hon Robert Fisher QC delivered on 2 August 2018 (Award).1 The Awarddetermined a contractual dispute between MNZ and the defendant, Miraka Limited(Miraka), arising from a supply and purchase agreement for UHT milk (UHTAgreement).[2] The essential dispute before the Arbitrator can be shortly stated: which partywas responsible for failure to meet the Minimum Volume obligations under the UHTAgreement and what was the appropriate remedy?2 After a hearing which occupiedfive days, the Arbitrator found:(a) MNZ had breached the Minimum Volume obligations in cl 3.2;(b) Miraka was entitled to damages for actual loss suffered in two seasonsrather than liquidated damages for breaches in certain months;(c) neither party had complied with the contract scheme for annual andmonthly notices required by cls 5.1 and 5.3 of the UHT Agreement;(d) once MNZ knew that Miraka had completed construction of the UHTPlant extension, and that it was fully operational, MNZ did not requirefurther notice or information from Miraka to make the contract work.The initiative moved to MNZ alone;(e) the lack of adequate notice from MNZ reduced Miraka's obligation toone which only required it to use its best endeavours to meet MNZ'sorders, after due allowance for any difficulties attributable to lack ofadequate notice from MNZ;1 Miraka Ltd v Milk New Zealand (Shanghai) Co. Ltd (Partial Award) Robert Fisher QC,2 August 2018.2 In addition, there were subsidiary arguments about alleged shortcomings in the quality of UHTmilk supplied by Miraka which are not before this Court.(f) with adequate pre-season notifications and rolling forecasts, Mirakawould have produced and supplied REDACTED litres of UHT in SeasonTwo, and REDACTED litres in Season Three (which is less than theMinimum Volumes of REDACTED and REDACTED million litresrespectively);(g) MNZ was obliged to pay contractual interest on the actual damages(calculated by the parties after delivery of the Award) from12 October 2016 and 13 September 2017 (for Season Two and Threerespectively).[3] A second Award dated 30 October 2018 calculated the damages sum to Mirakafor Seasons Two and Three, plus interest at the contractual interest rate, and costs.[4] No leave to appeal is required, as the parties reserved the right to appeal onquestions of law in an arbitration agreement.3 MNZ submits that the Arbitrator haserred in his interpretation or application of the UHT Agreement in respect of theMinimum Volume obligations, the available remedies and applicability of thecontractual interest rate.Factual background[5] To provide the necessary background understanding I gratefully adopt theArbitrator's concise summary of the factual background.[6] Miraka was a New Zealand company which owned and operated a dairyprocessing plant near Taupō.[7] A corporate group in China, variously known as the Shanghai Pengxin Groupand the Dakang Farming Group (the Pengxin Group), bought dairy farms in NewZealand. The farms were acquired in the name of a company incorporated for thepurpose, MNZ Dairy. MNZ Dairy was wholly owned by another member of the3 Arbitration Act 1996, sch 2 cl 5(1)(a).Pengxin Group, MNZ. MNZ was incorporated in China to carry on business there asan importer and distributor of dairy products.[8] In late 2011, discussions began between Miraka and the Pengxin Group overthe supply of milk from MNZ Dairy to Miraka. Discussions developed into theadditional proposal that Miraka would produce and supply UHT milk which MNZwould sell in China. The project required Miraka to construct a new UHT facility witha production capacity of REDACTED litres per year at an estimated cost of REDACTED .While MNZ did not know the business model by which Miraka expected to receive anadequate return on its capital outlay, it was aware that volumes were required to be atcertain levels since the investment in the factory and pricing of the product was basedon this. The investment was justified over a REDACTED -year period. Consequently,the volumes were specified in the UHT Supply Agreement for REDACTED years, witha REDACTED -year notice period to ensure the minimum contract period is REDACTEDyears.[9] Apart from the peak months of October and November, the parties knew thatwith adequate warning, Miraka should be able to divert milk that had been ordered inanticipation of MNZ orders to its own dried milk power production or, at some cost,to other dairy producers.[10] MNZ was committed to spending REDACTED to market MNZ dairy productsin China over the first five years. However, there was known to be a substantial riskthat MNZ would be unable to build its market in time to meet Minimum Volumes inthe early years.[11] The New Zealand dairy season runs for 10 months from 1 August to 31 May.Miraka needed to secure its milk supplies from farmers by 31 May, up to which datecease of supply notices to Fonterra could be withdrawn.[12] During the given season the availability of raw milk from suppliers rises andfalls in the shape of a bell curve. The maximum availability of milk is in the peakmonths of October and November. During the peak months Miraka's spray dryer, usedto produce milk powder, ran at maximum capacity. There was, therefore, specialtreatment in the UHT Agreement for the peak months.[13] The product needed to be supplied to MNZ in packages of a size and design tobe designated in advance by MNZ. It would normally require 10-12 weeks to gothrough the full process from design to delivery of packaging to the Plant.[14] Ideally, three to four months would be taken to recruit and train staff to manthe UHT production lines. However, Miraka had a basic level of trained staff in thelead-up to, and during, the first season. The training of staff could be reduced to sixweeks if necessary, but a fall-off in line efficiency could result.[15] Shipping would need to be booked about four weeks before product wasshipped to China. Because the product had a limited shelf life, Miraka needed todeliver it to the port for immediate shipment within two weeks of production. It wouldnot be practicable to stockpile significant quantities in anticipation of possible orders.[16] The parties agreed in principle that Miraka would construct a REDACTEDextension to its existing Plant to enable it to produce the UHT milk MNZ required. Inreturn MNZ would commit to purchasing a Minimum Volume of the product in eachof the REDACTED annual Production Seasons of the Agreement's initial term. Giventhe various constraints within which the dairy industry had to operate, a system wouldbe needed to ensure that Miraka received adequate notice of the product required fromtime to time by MNZ.[17] By November 2012, discussions had progressed to the point that drafts of theproposed agreement were exchanged between the solicitors of the respective parties.[18] The first few drafts of the Agreement contained the Minimum Volumes to bepurchased by MNZ, without reference to a remedy if it fell short of those volumes.[19] The parties were aware of two areas of particular risk. One was MNZ'sconcern that it would need time to build its market in China. That risk was catered forby agreeing that the Minimum Volume for the first season would be REDACTED litres,rather than the REDACTED per annum envisaged in the longer term. The second seasonwas also reduced to REDACTED .[20] The other was Miraka's concern that during the peak months of each season(October and November) it would have little opportunity to divert any surplus milk todried milk or other dairy plants if MNZ failed to order sufficient product. That wascatered for by agreeing that during the peak months MNZ would need to take not lessthan REDACTED per cent of the total purchase for the whole season.[21] As a consequence of these concerns, the parties discussed possible remedies ifMNZ failed to take the Minimum Volumes. MNZ initially proposed the compensationbe equal to Miraka's actual loss, and then later in the negotiations, actual loss cappedat REDACTED per cent of the price for any shortfall over the entire season.[22] Miraka resisted reliance on actual loss. In a letter of 19 December 2012,Miraka's solicitors forwarded a revised draft which would entitle Miraka to liquidateddamages based on a percentage of the prevailing price. This was to apply to bothfailure to attain the Minimum Volume in the first season, and failure to reach theMinimum Volumes in the peak months for each season.[23] After further negotiation the parties agreed on the liquidated damages thatwould apply. Both in the first season, and for peak months thereafter, the liquidateddamages would be a stated percentage of the price prevailing at the time.[24] The Agreement was ultimately signed on 13 February 2013. On 12 April2013, the parties signed a Supplementary Agreement which had no bearing on thematters in dispute.[25] Following the agreement, Miraka constructed the UHT Plant, engaged andtrained additional staff, contracted with suppliers to purchase additional raw milk and,in collaboration with MNZ, ordered the necessary packaging.[26] The first season following the agreement ran from 1 August 2014 to31 May 2015. MNZ's market in China did not grow as rapidly as hoped. MNZ wasunable to order the REDACTED litres Minimum Volume required for Season One.Miraka issued an invoice for the shortfall, which MNZ duly paid.[27] In preparation for Season Two (1 August 2015 to 31 May 2016) Miraka saidto MNZ:What we need to understand from you is what sort of volume do you thinkSP/Mengeniu (effectively MNZ) will get to next season given we haveREDACTED litres in the contract for 15/16?[28] On 22 April 2015, Miraka representatives attended a meeting in China withMNZ representatives. MNZ stated at the meeting that all it could forecast for SeasonTwo at that time was REDACTED litres.[29] A month later, MNZ gave Miraka its best estimate of REDACTED litres for theforthcoming season (an estimate which turned out to be broadly correct).[30] On various dates, Miraka exhorted MNZ to provide more explicit forecasts forSeason Two. Miraka noted that although MNZ had indicated that it hoped to take asclose to REDACTED litres as possible, this had not been reflected in its forecast to date.Miraka pointed out to MNZ that the lack of accurate forecasts for MNZ created realdifficulties for Miraka in planning and resourcing for milk and staff. Miraka said thatbased on current information regarding forecasts, staff and milk, it believed that itcould produce REDACTED litres. If MNZ required a 3.8 per cent spec for REDACTEDlitres Miraka would consider sourcing from other companies and would revert to whatit believed to be possible.[31] On 28 August 2015, Miraka advised MNZ by email:The amount we can produce is determined by three key factors, staff, lineefficiency, and milk availability. [Miraka] needs to reiterate that when wevisited you in China the key objective was to get a forecast so that we can planaround staff. We can manufacture REDACTED litres over 10 months, but weneed additional shifts to achieve this. We have actioned below.There followed further details as to how Miraka could achieve the contractualminimum of REDACTED litres.[32] Beyond those communications neither party provided the annual noticescontemplated by the agreement. Nor did either party provide rolling forecasts.Instead, individual orders were placed by MNZ on an ad hoc basis and responded toby Miraka in kind.[33] From time to time during Season Two there were difficulties in the quality ofthe product provided by Miraka. The problems included sour milk, fat separation,swollen or blown packs, gelling milk, bitter milk and smudged or missing dates onpackages. In those cases where MNZ made complaints to Miraka, Miraka paidcompensation in accordance with cl 19.4 of the Agreement. In addition, in most casesMiraka paid for MNZ's additional out-of-pocket expenses.[34] In several cases Miraka also failed to deliver the volumes ordered by MNZ dueto unstable milk protein, incorrect products and recall due to a missing part. Theparties referred to these as "short shipments' to distinguish them from MNZ's failureto order the Minimum Volumes.[35] By the end of Season Two, MNZ had ordered only about REDACTED litres.This was about REDACTED litres short of the contractual minimum of REDACTEDlitres for that season.[36] Season three ran from 1 August 2016 to 31 May 2017. In preparation for theseason Miraka provided its pre-season notification on 29 April 2016. This forecast aproduction capacity of REDACTED litres for each month of season three, a total ofREDACTED litres. As in earlier years, MNZ did not provide a pre-season notification.[37] Neither party provided rolling forecasts in accordance with the Agreement.MNZ's ordering continued on an ad hoc basis.[38] From time to time there were also quality issues during Season Three. As inSeason Two, Miraka paid MNZ compensation when complaints were made.[39] In October and November 2016, Miraka was unable to produce the productordered by MNZ due to unexpected machine failure.[40] By the end of the season, MNZ had purchased REDACTED litres. This wasabout REDACTED litres short of the contractual minimum of REDACTED .[41] Miraka issued invoices for the annual shortfalls in Seasons Two and Three.MNZ declined to pay. At the end of 2016, Miraka referred the dispute about SeasonTwo to arbitration. When that process did not result in any award within the specifiedperiod, it applied for summary judgment. MNZ objected both to the forum and theappropriateness of the summary judgment procedure where the contract depended onextrinsic factual matrix matters for its interpretation. The High Court proceeding wasstayed pending arbitration.4[42] The resulting arbitration dealt with product volume shortfalls in both SeasonsTwo and Three.Approach to AppealThe Jurisdictional Threshold[43] Only questions of law can be appealed under the Arbitration Act 1996 (theAct). The Act does not define what a question of law is except that it excludes anyquestion as to whether:5(a) the award or any part of the award was supported by any evidence orany sufficient or substantial evidence; and(b) the arbitral tribunal drew the correct factual inferences from therelevant primary facts.[44] The first issue is therefore a threshold one. This Court must determine whetherthe questions identified by MNZ are issues of law, issues of fact, or issues of mixedlaw and fact. If they are mixed law and fact, this Court must determine the extent towhich they are appealable and the appropriate standard of review.4 Miraka Ltd v Milk New Zealand (Shanghai) Co Ltd [2017] NZHC 2163.5 Arbitration Act 1996, sch 2 cl 5(10).[45] MNZ's Notice of Appeal identifies the following purported questions of law:(a) Whether the Arbitrator erred in his interpretation of the UHTAgreement in finding:(i) the UHT Agreement did not exclude the right to common lawdamages although the parties had agreed a liquidated damagesframework and compensation based on actual damages wasexpressly rejected during negotiation of the contract;(ii) the investment return required by Miraka was accepted by bothparties as the basis for the Minimum Volumes clauses of theUHT Agreement and established a contractual intention to allowfor common law damages for breach of those clauses;(iii) the email of REDACTED of 22 December 2012 could be used asthe basis for the finding in (ii) above while, at the same time,the fact that Miraka had refused to include any provision in theagreement measuring damages on the basis of actual loss wasnot taken into account as an aid to interpretation;(iv) Miraka was entitled to choose between common law damagesor liquidated damages (despite not pleading a right to elect);(v) an implied term that Miraka's Minimum Volume obligationbecame a "best endeavours" obligation to meet MNZ orders;(vi) Miraka's Minimum Volume obligation is conditional on MNZ'scompliance with the notification procedures;66 At the hearing issues (v), (vi) and (vii) were more broadly described as whether the ArbitralTribunal erred in the interpretation of the Minimum Volume and notification clauses of the UHTAgreement.(vii) MNZ's obligation to purchase was not conditional on Miraka'sability to produce the Minimum Volume of contractuallycompliant Product; and(viii) Miraka was entitled to contractual interest on common lawdamages.[46] The distinction between questions of law and questions of fact is succinctlysummarised in the Canadian case of Canada (Director of Investigation and Research)v Southam Inc:7Briefly stated, questions of law are questions about what the correct legal testis; questions of fact are questions about what actually took place between theparties; and questions of mixed law and fact are questions about whether thefacts satisfy the legal tests.[47] The term 'mixed question' most commonly refers to a question of application.8Such questions involve two component parts. The first is the factual underpinning andthe second is the legal consequence of those facts. In my view, the questions are mixedonly in so far as the assessment depends on both a factual inquiry and application of alegal test. Only the application of the legal test is appealable.[48] Ms Anderson (who did not appear at the arbitration) submits for MNZ thatconstruction of a contract is an orthodox question of law. She acknowledges thedevelopments in Canadian jurisprudence but says this Court is bound by the decisionsof the Supreme Court in Bryson v Three Foot Six Ltd and New Zealand Air Line Pilots'Association Inc v Air New Zealand Ltd.9 She notes that the orthodoxy is wellillustrated by recent New Zealand decisions.10[49] Ms O'Gorman for Miraka submits that Bryson only applies to construction ofa written document where that question is determined by the text. It does not apply7 Canada (Director of Investigation and Research) v Southam Inc [1997] 1 SCR 748 at [35].8 Commerce Commission v Harmoney Ltd [2017] NZHC 1167, (2017) 23 PRNZ 644 at [31] (thesubstantive decision was appealed only).9 Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721; New Zealand Air Line Pilots'Association Inc v Air New Zealand Ltd [2017] NZSC 111, [2017] 1 NZLR 948.10 Busby v Sargent HC Wellington CIV-2009-435-215, 4 March 2010; Ex UCL Ltd v SolarixNetworks Ltd [2016] NZHC 1303; Todd Petroleum Mining Co Ltd v Vector Gas Trading Ltd [2017]NZHC 1166.when oral exchanges and conduct are necessary to determine the objective intentionof the parties. She supports this interpretation with two primary policy arguments.First, as recognised by the Supreme Court of Canada in Sattva Capital Corporation vCreston Moly Corporation, the rationale for treating contract interpretation as a specialcase is outdated.11 Secondly, there is no good reason to undermine party autonomyand the parties' choice that matters be determined by arbitration.12[50] Blanchard J, delivering the decision of the Court in Bryson stated:13The construction of a document is a question of law. That rule has its originsin trial by jury in medieval times when juries were illiterate and most of thedocuments which came before a jury were deeds drafted by lawyers. It doesnot apply when the intention of the parties, objectively ascertained, hasto be gathered partly from documents, but also from oral exchanges andconduct. Then the terms of the contract are a question of fact. (emphasisadded).[51] Although arguably obiter, this has been accepted as orthodoxy in NewZealand.14 However, Bryson also recognises that many contracts of employmentbefore the Court are not cases governed by comprehensive written contracts andinvolve "mixed fact and law".15 I conclude that Blanchard J was referring to issueswhere the terms of the contract need to be ascertained through documents and oralexchanges, rather than merely construing already ascertained terms. My view isreinforced by the words "the terms of the contract" in the ultimate sentence of thepassage quoted above.[52] In my view, nothing in Bryson opens the door to the modern Canadianapproach in which questions of construction of contracts are treated as questions ofmixed law and fact outside the appellate jurisdiction for arbitral awards.11 Sattva Capital Corp v Creston Moly Corp [2014] SCC 53; [2014] 2 SCR 633; approved in TealCedar Products Ltd v British Columbia [2017] SCC 32, [2017] 1 SCR 688.12 There is another policy consideration at stake however which is that the parties should be permittedto pursue the rights they have contractually agreed to. Refer Ex UCL Ltd v Solarix Networks Ltd[2016] NZHC 1303, at [25].13 Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721 at [20] (citations omitted).14 Commerce Commission v Harmoney Ltd [2017] NZHC 1167, (2017) 23 PRNZ 644 at [48].15 Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721 at [22].[53] MNZ also relies, to a more limited extent, on the Supreme Court decision inNew Zealand Airline Pilots' Association Inc. v Air New Zealand Limited.16 TheSupreme Court held, by a majority, that a question of law can encompass errors ininterpretive principle or errors in the application of those principles. This is so evenwhen the statutory framework excludes questions of construction of an agreementfrom the appellate jurisdiction:17It would be an odd result in the current statutory framework for thesupervisory appellate jurisdiction to be removed by a recitation of theprinciples where one or more of the principles was then misapplied or notapplied at all, with an operative effect on the outcome.[54] This supports the proposition that a decision is appealable if the decision-maker relies, for example, on the subjective intention or negotiating stance of oneparty, or fails to consider the background of the contract, or overlooks the text itself.A question of law also potentially arises if one or more of the principles wasmisapplied or not applied at all.[55] While I have reached the view that Bryson precludes reliance on the ratio ofSattva, it is still useful to turn to the decision.18 Rothstein J, for the Court, held thatconstruction of an agreement is a question of mixed fact and law.19 The Courtrecognised that this represented an abandonment of the traditional approach. Itjustified this based on consistency with the importance of the factual matrix in themodern approach to contractual interpretation.[56] Rothstein J accepted that it is possible to identify an extricable question of lawin an interpretation case, such as the application of an incorrect principle, failure toconsider a required element of a legal test, or failure to consider a relevant factor. Hepointed however to the difficulty inherent in the close relationship between selectionand application of principles of contractual interpretation and construction whichmakes extraction of a legal question rare.2016 New Zealand Airline Pilots' Association Inc. v Air New Zealand Limited [2017] NZSC 111, [2017]1 NZLR 948 at [62].17 New Zealand Airline Pilots' Association Inc. v Air New Zealand Limited [2017] NZSC 111 at [51].18 Sattva Capital Corp v Creston Moly Corp [2014] SCC 53; [2014] 2 SCR 633.19 At [50].20 At [55].[57] A differently constituted Supreme Court of Canada re-examined the issue inTeal Cedar Products v British Columbia.21 The majority added two glosses to theSattva judgment. First, they held that an extricable legal question arises if there issome alteration of the legal test in its application as this amounted to a "covert formof legal question". Secondly, they pointed out that identifying a question, broadly, asone of contractual interpretation does not necessarily resolve the nature of the questionat issue:22Contractual interpretation involves factual, legal, and mixed questions, andcharacterising the nature of the specific question before the court requiresdelicate consideration of the narrow issue actually in dispute. In general,contractual interpretation remains a mixed question, not a legal question, as itinvolves applying contractual law (principles of contractual law) tocontractual facts (the contract itself and its factual matrix).[58] I turn back now to New Zealand decisions dealing with the appellatejurisdiction from arbitral awards. Perhaps one of the most helpful, having beendecided after Sattva, is Todd Petroleum Mining Company Limited v Vector GasTrading Limited.23 The dispute related to the terms of sale and purchase of petroleumproducts from the Kapuni gas field. Williams J began his judgment with the gatewayquestion of whether there was a question of law, the determination of which couldsubstantially affect the rights of one or more of the parties.24 He cited the orthodoxposition that contractual interpretation is essentially a question of law. However, henoted the need to carefully look at the factual context of the contract:25That means the interpretation of the contract, while generally seen in NewZealand as an exercise in legal interpretation, can quickly become aboutfinding facts. Just how the division between fact and law should be drawngiven the terms of cl 5(10) of Sch 2 is a matter of some controversy.He went on to say:26And that in turn necessarily now makes contractual interpretation a mix of factfinding and word interpretation. Findings of fact, one might expect, willroutinely underpin the court's perspective on the meaning of contractualterms. This will then require courts hearing applications for leave to appeal21 Teal Cedar Products v British Columbia [2017] 1 SCR 687, [2017] 1 SCR 688.22 Teal Cedar at [47].23 Todd Petroleum Mining Company Limited v Vector Gas Trading Limited [2017] NZHC 1161.24 At [45]. The parties had not expressly reserved the ability to appeal questions of law so proceededunder Clause 5 of Sch 2 of the Act.25 At [54].26 At [57].from arbitral awards to give careful consideration to whether the real matteris issue is the meaning of the contract, or the facts upon which that meaningis wholly or partly based. The former may raise a question of law. The latterwill not. So, a debate about whether a fact said to affect meaning is proved,will not raise a question of law. Nor, to my mind, will a debate about whethera proved fact is capable of supporting an inference going to contractualintention.[59] Although the issue of whether questions of mixed fact and law are amenableto appeal has received inconsistent treatment in New Zealand case law, my review ofthose cases still guides my approach.27 The starting point is that the interpretation ofcontract terms raises a question of law, but it does not follow that all errors ininterpretation are properly characterised as errors of law. A more nuanced approach isrequired to ensure that the identified error is not in reality a challenge to factualinferences or sufficiency of evidence.Standard of review[60] Appeals of this kind are by way of rehearing under r 26.13(1) of the High CourtRules 2016. Once the threshold for appeal is met, this Court's role is to determinewhether the tribunal erred in law within the terms of the questions of law on the appeal.This Court has a discretionary power to confirm, vary or set aside an award. If theCourt sets aside an award it may, among other things, remit the award to the originaltribunal for reconsideration.28[61] Ms O'Gorman submits that the standard for review is only satisfied when "thelaw requires that a certain answer be given because the facts permit only one answer"or "the true and only reasonable conclusion" to be drawn from the evidence is differentfrom the determination reached by the decision. She relies on the dicta in Bryson:29It is for the Court to weigh the relevant facts in the light of the applicable law.Provided that the Court has not overlooked any relevant matter or takenaccount of some matter which is irrelevant to the proper application of the law,27 Trustees of Rotoaira Forest Trust v Attorney-General [1998] 3 NZLR 89 at 101; Turnwald vWalling HC Hamilton CIV-2008-419-1094, 5 May 2009 at [13]; Nixon v Walker HC AucklandCIV-2007-404-1372, 13 July 2007 at [26]; Busby v Sargent HC Wellington CIV-2009-435-215,23 April 2010 at [10].28 Arbitration Act 1996, sch 2 cl 5(4).29 Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721 at [25]. Ms O'Gorman alsocites Sattva Capital Corp v Creston Moly Corp [2014] SCC 53, [2014] 2 SCR 63, [2014] 2 RCS633 at [106].the conclusion is a matter for the fact-finding Court, unless it is clearlyunsupportable.[62] I consider that this statement supports a narrow appellate approach when thechallenge is to the application of the law to the facts. That it relates to such questionsis evident in the next paragraphs of the Bryson judgment where Blanchard J discussedthe instance of a conclusion of a fact-finding body which is so insupportable as toamount to an error of law. It is this situation which Blanchard J says presents a "veryhigh hurdle" for an appellant. In the arbitration context, an appellant must alsoconfront the express exclusion from the jurisdiction of any question about whether thetribunal drew the correct factual inferences from the relevant primary facts.Issue One – Does the UHT Agreement exclude any right to common lawdamages?[63] MNZ's first challenge is to the Arbitrator's determination that common lawdamages were available to Miraka for breach of cls 3.2(b) and (c) and 3.3 of the UHTAgreement. These clauses set out the obligations on MNZ to purchase MinimumVolumes in Season Two and following.Does this constitute an appealable question of law?[64] MNZ's Notice of Appeal particularises the purported errors of law. During thehearing, I understood Ms Anderson to recast the extricable question of law at a higher-level: whether the liquidated damages provisions of the UHT Agreement are acomprehensive code to the exclusion of common law damages or, put another way,whether the UHT Agreement gave Miraka a remedy for whole season shortfalls.30[65] In my judgment this is an issue which squarely turns on the construction of theUHT Agreement and is therefore an appealable question of law. The pleadedparticulars in the Notice of Appeal are however better described as challenges to theArbitrator's reliance on aspects of the factual matrix in that exercise of interpretation.30 This is because if the UHT Agreement is a remedial code, there is no provision for recovery ofcommon law or liquidated damages for whole season shortfalls after the first season.How was this issue dealt with in the Award?[66] I begin with the Award.[67] The Award sets out those facts and commercial objectives known to bothparties by the date of the UHT Agreement. This is the factual matrix against whichthe objectively ascertained intention of the parties is to be assessed. These findingsare unassailable.[68] Although they are not expressed in any hierarchy, it may be relevant that thefirst identified objective is the commercial return to justify Miraka's considerableinvestment in a new UHT facility. The Arbitrator also found that the parties knew that,apart from the peak months and with adequate warning, Miraka should be able todivert milk ordered in anticipation of MNZ orders to its own dried milk production or,at some cost, to other dairy producers.[69] The Arbitrator identified the parties' awareness of two areas of particular risk– the risk that in the first season MNZ may not be able to sufficiently build its Chinamarket and the peak month issue. The first risk was catered for by agreeing a reductionin first year Minimum Volume obligations. Special treatment of peak month volumeswas largely justified by the fact that during the period of maximum availability ofmilk, Miraka's spray drier that produced milk powder ran at maximum capacity. Thusthere would be no opportunity to divert surplus milk.[70] He pointed out that it was against the background of these two particular areasof risk that the parties discussed remedies for failure to take the stipulated MinimumVolumes.[71] The Arbitrator then turned to the significant features of the UHT Agreement,highlighting three areas: the Minimum Volumes clauses; the notice provisions orsystem; and the express remedies provision.[72] Clauses 3.2, 3.3 and 3.6 of the UHT read:3.2 Minimum VolumesThe Vendor shall produce, and the Purchaser shall purchase andtake delivery of at least the following Minimum Volumes in thefollowing Production Seasons:(a) REDACTED litres of Produce in the first ProductionSeason;(b) REDACTED litres of Produce in the second ProductionSeason;(c) REDACTED litres of Product in the third ProductionSeason;(d) During any subsequent Production Season,notwithstanding any other provision in this agreement tothe contrary and subject to sub-clause 3.5 below, theMinimum Volume for each Production Season shall bethe minimum purchase volume specified in thePurchaser's Pre-Season Notification, provided that theMinimum Volume in any given Production Season willbe no less than the Minimum Volume in the previousProduction Season or at least REDACTED litres for eachProduction Season after the third Production Season.3.3 Orders to be for at least the Minimum VolumeThe Purchaser shall:(a) Not issue a Rolling Purchase Forecast containing aBinding Order, Confirmed Order and Expected Orderthat would, when taken together with the amount ofProduct purchased in that Production Season to date, andthe amount of Product expected to be purchased in theremaining months of the Production Season as detailedin the Pre-Season Notification (excluding the threemonths covered by the Rolling Forecast) result in thePurchaser purchasing less than the Minimum Volume inthat Production Season;(b) Purchase monthly volumes equal to the total annualMinimum Volume for any season divided by 10 duringeach of the months of October and November of eachseason.3.6 Purchaser does not purchase Minimum VolumeIn the event that the Purchaser does not purchase:(a) The Minimum Volume of Product in the first ProductionSeason at the expiry of that Production Season it shall beliable to pay to the Vendor an amount equal toREDACTED of the Prevailing Price of the shortfallvolume of Product purchased compared to the MinimumVolume in that first Production Season; and(b) The Minimum Volumes to be produced in each of themonths of October and November in each ProductionSeason (determined by the provisions of paragraph 3.3),at the expiry of that Production Season it shall be liableto pay to the Vendor an amount equal to REDACTED ofthe Prevailing Price of the shortfall volume of Productpurchased compared to the Minimum Volume to bepurchased in each of October and November in thatProduction Season; provided that the payment shall be atthe rate of REDACTED , rather than at the rate ofREDACTED , if the Vendor can resell or redirect theshortfall volume of milk purchased but not yet processedinto Product to another process or processor on normalcommercial terms before it is manufactured into Product.[73] The Arbitrator summarised the chronology of performance issues. Relevantly,by the end of Season Two, MNZ's orders were about REDACTED litres short of thecontractual minimum and by the end of Season Three, MNZ's orders were aboutREDACTED litres short of the contractual minimum.[74] The Arbitrator began his analysis on Issue One with the general principle thatbreach of a contractual term entitles the aggrieved party to damages. The principle isdisplaced if the contract expressly or impliedly addresses the consequence of breach.This is an uncontroversial principle.31[75] He illustrated this proposition by referring to the liquidated damages provisionin cl 3.6(b). The implication of that clause was that breach of the obligation was notintended to permit common law damages in addition to, or in substitution for, theprescribed remedy. He stated:32The position is less obvious where, as here, the cause of action arises from thebreach of a different provision in the contract for which no remedy has beenexpressly prescribed. In those circumstances everything turns on the intentionto be elicited from the agreement as a whole.31 Peter Blanchard (ed) Civil Remedies in New Zealand (2nd ed, Brookers, Wellington, 2011) at 43;Edwin Peel Treitel: The Law of Contract (14th ed, Sweet & Maxwell, London, 2015) at [20-002].32 Award at [88].[76] He said that the ultimate question was "what was intended on an objectiveassessment of the particular document and its surrounding circumstances".33[77] The Arbitrator traversed MNZ's arguments in favour of the proposition that cl3.6 left no room for any other remedy for failure to attain Minimum Volumes. Heagreed that the heading and introductory phrase of that clause was more consistentwith the "exhaustive formula" proposition. I respectfully disagree. I do not considerthat the heading can be relied on in this way. The UHT Agreement expressly stipulatesin the interpretation section that "Headings are for convenience only and do not affectinterpretation." MNZ's written submissions acknowledge this but suggest thatreference may still be had to a clause heading if it is consistent with the substance ofthe clause, relying on Citicorp International Ltd v Castex Technologies Ltd.34 I amnot persuaded that the dicta in Citicorp has application in this case. Whether theheading is consistent or not essentially begs the question.[78] The Arbitrator also agreed that, all else being equal, the fact that there is aliquidated damages scheme at all implies the exclusion of other remedies. At the sametime, he acknowledged that cl 3.6 might be regarded as incomplete because it does notaddress the consequences of failure to meet the minimums for the whole season.[79] He agreed that the desire for certainty was one of the expressed aims of theparties and that liquidated damages is a way of achieving this. He expressly referredto Miraka's rejection in negotiations of a remedy based wholly or in part on actualloss. However, he also found, as a matter of fact, that negotiations over the nature ofthe remedy arose in the context of discussing the two particular risks – the first seasonrisk and lack of outlets for excess milk during the peak months. He found that "theparties did not necessarily turn their minds to the question of remedies in areas wherethey did not foresee an equivalent level of risk".35[80] He was less persuaded by MNZ's argument that liquidated damages for monthsother than the peak months would have been unnecessary because of the ability to33 At [90].34 Citicorp International Ltd v Castex Technologies Ltd [2016] EWHC 349 (Comm) at [30].35 Award at [91(e)].redirect milk elsewhere. As the Arbitrator stated, MNZ could scarcely have thoughtthat an assumed ability to redirect milk could be equated with the expectation of profitif the milk were used to supply its original purpose of selling UHT to MNZ.[81] The Arbitrator also rejected MNZ's argument that Miraka's interpretationrequires an implied term, pointing out that if there is a right to damages for full seasonshortfalls, it stems directly from the contractual obligation itself.[82] Finally, he rejected an argument that there was a lack of evidence that theparties mutually believed that actual damages were necessary to keep Miraka whole.In response to the submission that during the negotiations Miraka was not sure whethera failure to order would have a detrimental effect "on it", the Arbitrator pointed outthat actual belief of a party is not relevant to the proper interpretation of a contract.[83] He then turned to Miraka's arguments. The first was that MNZ's interpretationwould mean that cls 3.2(b) and (c) and 3.3(a) became redundant after the first seasonsince the liquidated damages formula had no application to full season MinimumVolumes after the first year.[84] Miraka next emphasised the known requirement that full season MinimumVolumes were needed to ensure an adequate return on investment, relying on astatement from the Miraka representative, shared with MNZ, and which expressed therationale for the Minimum Volume approach.[85] Finally, he referred to Miraka's argument about the lack of mutuality in anyinterpretation which saw Miraka being liable for failure to supply the seasonalMinimum Volume throughout the term but MNZ's own seasonal liability limited tothe first season.[86] The Arbitrator identified the relevant breach as not a breach in respect of peakmonthly requirements but a different provision in respect of which no remedy has beenexpressly prescribed. Whether the usual right to damages was displaced depended onwhether there was an express or implied intention to displace it as determined by anobjective assessment of the UHT agreement and its surrounding circumstances.36[87] In his view, the arguments for Miraka's interpretation were overwhelming fortwo primary reasons. First, the reasonable assumption that a term in a contract isintended to have a legal consequence, by which I understand to mean a remedialconsequence. A right to terminate was a hollow remedy in circumstances whereMiraka needed a return on its original investment and specific performance was notpracticable.37 Secondly, displacing a right to a damages remedy for seasonal under-ordering would produce an inequality between cls 3.4 and 3.6 for which there was noexplanation.Did the Arbitrator make an error of law?[88] Before this Court, both parties acknowledged that the Arbitrator correctlyidentified and stated the relevant principles of contractual interpretation.38[89] MNZ submits that the carefully negotiated liquidated damages framework inthe UHT Agreement limits Miraka's right to compensation for breach to the shortfallvolume of Produce in the Peak months. As such, any shortfall volume for the wholeSeason does not entitle Miraka to any compensation.[90] In terms of identifying purported errors of law in the Award, MNZ says thatthe Arbitrator gave too much weight to one element of the pre-contractualnegotiations, permitting this evidence to overwhelm the text. In doing so, he reacheda conclusion as to what the parties "must have meant" from a rational commercialperspective rather than reaching an objective and relevantly informed reading of theagreement. MNZ contends that an assessment of the proper weight to be accorded toevidence of pre-contractual negotiations between the parties is a question of law,relying on Foodstuffs (Wellington) Co-operative Society Ltd v Holden.39 However, bymy reading of the judgment of Woolford J, the case does not provide this support. The36 Award at [90].37 A finding of fact which is unimpeachable in this appellate jurisdiction.38 Relying on Firm Pi 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR432 at [60].39 Foodstuffs (Wellington) Co-operative Society Ltd v Holden [2013] NZHC 3379 at [14].conclusion that Woolford J reached was that the background context in thecircumstances of that case was not, "as a matter of proof" evidence of the parties'intention. I read this as a suggestion that the conclusion reached was "effectivelyoutside the realm of reasonable outcomes" and therefore appealable.40 It does notsuggest that assessments as to the proper weight to be given to pre-contractualnegotiations inherently raise extricable questions of law.[91] In a similar vein, MNZ says that no real weight was given to Miraka's expressrejection of its suggestion during negotiations that damages for breach of cls 3.2 or 3.3be measured by reference to actual loss. The submission is that by taking onecontextual factor into account but not the other, the Arbitrator fell into error,contributing to a conclusion that was incorrect as a matter of law.[92] I reject this ground of the challenge for two related reasons. First, I disagreethat no real weight was given to this aspect of the pre-contractual negotiations. TheArbitrator expressly referred to Miraka's rejection and qualified its significance byreference to the specific context. Secondly, the conclusion is primarily fact dependentand far from clearly unreasonable. It was open for the Arbitrator to reach thisconclusion.[93] MNZ contends that the Arbitrator erroneously implied a right to elect betweenliquidated and common law damages for breach of cl 3.2 for the full season, contraryto the clear wording of cl 3.6 and the parties' clear intention to promote certainty ofoutcome. It says that this too had the effect of substantially rewriting the agreement,an obviously impermissible outcome.41[94] I disagree. Rather than implying an entitlement to common law damages, theconverse was true; the Arbitrator rejected any implication that the general principle ofentitlement to damages was displaced in the UHT Agreement. I apprehend that at thehearing, Ms Anderson subtly shifted ground. She rightly disavowed any reliance ona technical pleading point and accepted that the common law right to damages would40 As in Shell (Petroleum Mining) Company Ltd v Todd Petroleum Mining Co Ltd [2014] NZHC 31at [46].41 Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn & Todd on the Law of Contractin New Zealand (6th ed, LexisNexis, Wellington, 2017) at [6.3.4(a)]-[6.3.5].have to be excluded expressly or by implication. Her point was that was exactly whattranspired here; the liquidated damages clause by its terms codified the remedialresponse by implication. Further, she said that the background negotiations cementthis construction because they illustrate that the common intention was to produce aset of known outcomes against the background of the two particular identified areasof risk.[95] Attractive though the argument may be at first blush, it does not answerMs O'Gorman's submission that the peak month and seasonal shortfall obligations didnot necessarily overlap. It did not follow that a shortfall in the Peak months necessarilyled to a seasonal shortfall. Similarly, a seasonal shortfall did not necessarily meanthere had been a shortfall in the peak months. Rather, MNZ's purchasing obligationsin the peak months are independently stipulated in cl 3.3, in respect of which theliquidated damages clause applies. MNZ's obligations in respect of ordering for thewhole season are stipulated in cls 3.2(b) and (c) and 3.3(a). Miraka is entitled toliquidated damages for shortfalls in the peak months even if there was no shortfallover the whole season. In that scenario, there can be no entitlement to common lawdamages because the breach event falls within the ambit of the prescribed remedy. Inthe event of a shortfall over the whole season, but no shortfall over the peak months,Miraka is entitled to common law damages for the season shortfall but not liquidateddamages in respect of the peak months. In the event of breaches in the same seasonof both the peak season shortfall and shortfall over the whole season, it is entitled toone or other remedy. The only limiting principle is that double recovery must beavoided.[96] I consider that this is not the same as electing between two available remediesfor the same breach. It does not strip cl 3.6 of any utility and it does not mean thatMiraka would always need to calculate and prove its actual loss. Rather, asMs O'Gorman submits, Miraka was suing for an event which did not fall within theambit of the liquidated damages provision.4242 James Edelman McGregor on Damages (20th ed, Sweet & Maxwell, London, 2018) at [16-024].[97] MNZ submits that the wording of cl 3.6 is clear and definitive in its statementof the consequences of the failure to purchase and leaves no room for any otherdamages. It points to the fact that cls 3.6(a) and (b) provide that MNZ becomes liableto pay such sums at the expiry of the relevant season as supportive of its proposition.I disagree. At best it is equivocal. The fact that the obligation to pay liquidateddamages for the peak season shortfall is triggered at the end of the relevant season isequally consistent with the view that it is only then that the position in respect of thewhole season obligation is known. At that point Miraka has to decide what recoveryit seeks.[98] I consider there is no ambiguity about the ambit of the liquidated damagesclause in the UHT Agreement; both the text and the documentary context support thesame interpretation. I am satisfied that cl 3.6(a) covers only the consequences of afailure to order the relevant Minimum Volumes in Season One and cl 3.6(b) onlycovers the peak months of any season.[99] It seems to me that the concerns of the parties in respect of Minimum Volumesin the peak seasons and over the whole season were different. As the Arbitrator found,the seasonal volume requirements were a mechanism to justify the investment ofconstructing the UHT Plant over a minimum REDACTED -year period. I agree that inthe circumstances of this case redundancy of the Minimum Volume obligations couldnot have been the parties' intention. While arguments against reading a contractualclause in a particular way that would render the clause redundant are often of limitedvalue, in this instance, the particular clauses go to the heart of the commercial deal.43Conclusion on Issue One[100] I find no error of law in the Arbitrator's determination and confirm the Awardin respect of Issue One.43 Beaufort Developments (NI) Limited v Gilbert-Ash NI Limited [1999] 1 AC 266 (HL) at 274. Thecase at hand is not one where the choice is which clause to render redundant, cf Totara InvestmentsLtd v Crismac Ltd [2010] NZSC 36, [2010] 2 NZLR 285.Issues Two and Three – What is the relationship between the notification regimeand Minimum Volume obligations in the UHT Agreement?[101] The second ground in MNZ's Notice of Appeal challenges the Arbitrator'sdetermination that:(a) Miraka's Minimum Volume obligations were conditional on MNZ'scompliance with the notification regime; and(b) without MNZ's compliance with the notification regime, Miraka'sobligations reduced to an obligation to use "best endeavours" to meetMNZ's orders.44[102] The second ground is closely related to the third – whether the Arbitrator erredin holding that MNZ's obligation to order the Minimum Volume was not conditionalon Miraka's ability to produce compliant product. Indeed, MNZ has described the thirdissue as the flipside of the second ground of appeal.Does this constitute an appealable question of law?[103] During the hearing, Ms Anderson was content to describe the purportedquestion of law more broadly than is pleaded, namely whether the Arbitrator erred inhis interpretation of the Minimum Volume obligations. I therefore approach thesecond and third grounds together. I consider the question of law which these issuesengage is the extent to which (if at all) the parties' respective Minimum Volumeobligations are interdependent or amount to promissory condition precedents and whatconsequences flow from this assessment. I am satisfied that, expressed at this level,there is an appealable question of law on any orthodox approach. However, there arealso elements of (at best) mixed fact and law along with critical facts which are notcapable of being disturbed on appeal. These have a material bearing on the analysisand, potentially, the review threshold.44 MNZ's Notice of Appeal also challenged the determination that Miraka was not in breach of cl3.2 and not liable for liquidated damages. This aspect was not pursued on appeal.How was this issue dealt with in the Award?[104] As a precursor to his analysis, the Arbitrator examined the contractual noticeregime. He described the regime as an elaborate series of annual 'pre-seasonnotifications' followed by monthly 'rolling forecasts' throughout the term. He foundthat the regime's purpose was to ensure that each party would receive the informationit required in time to carry out that party's obligations under the contract. Had thissequence been followed, Miraka would have been able to plan its production for theentire season before it began.45 The sequence was not in fact followed since the parties"largely failed to give effect to the contractual notice system."46[105] Despite the break-down in the notice system, the Arbitrator found that theparties continued to regard the agreement as binding in all other respects. They didnot treat it as releasing them from their other obligations. MNZ placed orders forproduct on an ad hoc basis and Miraka generally met the orders except for smallperiods of short supply due for various explained reasons.47[106] He concluded that the parties therefore "obviously intended that in thesecircumstances a more informal system would operate".48 Factually, this conclusionwas based on the evidence of the actual conduct of the parties. Conceptually, thisconclusion was derived either from the implication of a term/terms or through acontractual variation inferred by subsequent conduct. The former was the preferredanalytical route of the Arbitrator but both routes placed reliance on the subsequentconduct of the parties. Although not expressed as such, it seems to me that the analysisalso contributed to the Arbitrator's conclusions as to which party bore responsibilityfor the under-ordering in Seasons Two and Three.[107] The implied term found, and the start point, was that each party had to dowhatever would be reasonably required to keep the UHT Agreement working at acommercial level.49 Whether justified on the basis of business efficacy or to achievecommercial or practical coherence, such an implied term is hardly controversial in a45 Award at [46].46 At [47].47 Miraka paid compensation to MNZ for short supply or quality issues in respect of these periods.48 Award at [53].49 Award at [53].commercial contract.50 Clause 5.4(e) of the UHT Agreement requires the parties tojointly attend to and actively attempt in good faith to resolve any problems or issuesthat may arise during the currency of the Agreement. While the expression might bedifferent, the intent of this clause is similar to the identified implied term.[108] I consider it is unnecessary in the circumstances of this case to try to resolveany question about the proper approach to implication of terms following a perceiveddeparture from tradition in Attorney-General of Belize v Belize Telecom Ltd and thereassessment of the issue in Marks and Spencer plc v BNP Paribas Securities ServicesTrust Co (Jersey) Ltd.51 In any event, I am bound by the decision in The MalthouseLimited v Rangatira Limited, which I read as endorsing the BP Refinery test.52[109] Similarly, whether the criteria set out in BP Refinery are alternative bases forimplication of terms, a collection of methods to assess contractual meaning orcomposite requirements is not dispositive in this case as I consider that all five of thetraditional BP Refinery criteria or elements are satisfied.[110] Next, the Arbitrator sought to identify what was reasonably required to keepthe Agreement working. He relied on the purpose of the formal notice system – toensure that each party received the information it needed to carry out its obligation –and made several key findings of fact based on the evidence before him. These factsare unimpeachable on appeal:(a) Before it committed to ordering product, MNZ needed to know thatMiraka would be in a position to provide it;(b) MNZ knew that with adequate notice Miraka could secure thenecessary raw milk for the forthcoming season. Suppliers did not need50 Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72,[2016] AC 742 at [21].51 Attorney-General of Belize v Belize Telecom [2009] UKPC 10, [2009] 2 All ER 1127, [2009] 1WLR 1988; Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd[2015] UKSC 72, [2016] AC 742.52 The Malthouse Limited v Rangatira Limited [2018] NZCA 621; BP Refinery (Westernport) PtyLtd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 277 (PC).to commit to either Miraka or Fonterra until 31 May. Miraka couldoutbid Fonterra where required;53(c) In the normal course it would take Miraka six to 13 weeks to recruitand train extra staff. It must have been clear by the second season thatMiraka already had a core of trained staff. The training of additionalstaff could be reduced to six weeks if necessary and packaging couldbe ordered in time once MNZ advised what it required;54(d) MNZ knew that Miraka had a fully operational UHT Plant and that,with adequate warning, it could source the milk, staff and packaging,to meet orders from MNZ;(e) The limitations in Miraka's capacity later were due to inadequate noticefrom MNZ, not the inherent unavailability of resources at Miraka'send;55(f) At all times the price was independently ascertainable by either party.In addition, quarterly spreadsheets regularly passed between the partieson the topic of price;56(g) MNZ was not reliant on annual or monthly notices from Miraka as aprecursor to the ordering of product. It already knew the capacity ofthe Plant and, with adequate warning, Miraka's capacity to supply;(h) There were three matters within the exclusive control of MNZ: MNZ'sactual annual requirement as distinct from its contractual commitment;how the annual quantity was to be allocated between individualmonths; and the packaging sizes and specifications it required withinany given month.5753 Award at [57].54 At [57].55 At [58].56 At [59].57 At [62].[111] Most significantly for the purposes of this appeal, the Arbitrator found that lackof compliant notices from Miraka was not the reason for MNZ's under-ordering. Thefailure was due exclusively to unanticipated slowness in the development of a marketfor MNZ in China and hence, MNZ's unwillingness to commit to the MinimumVolumes.[112] These matters persuaded the Arbitrator that the critical notices needed to comefrom MNZ, not Miraka, and that MNZ needed to give Miraka annual and monthlynotices sufficiently far in advance to enable Miraka to meet those orders. Since it wasimplied that the parties will do whatever is reasonably necessary to make the contractwork, it was consequently implied that Miraka would have to use its best endeavoursto meet orders as and when received. Any failure by it to meet orders was not a breachif it came about due to inadequate notice from MNZ.58[113] In my judgment, while framing Miraka's obligation as a "best endeavours"obligation may not have been necessary, the analysis achieved commercial coherence.The essential point to emerge was that MNZ would have no right to assert breach forMiraka's failure to supply ordered product if late notice prevented Miraka'sperformance. I will return to this point later in this judgment.[114] Having established what was reasonably required, the Arbitrator rejected theargument that Miraka's failure to comply with the formal notification system barred itfrom compensation. He also rejected MNZ's argument that Miraka had to establishthat it was "ready, willing and able" to supply the Minimum Volumes before MNZ'sown obligation was triggered.59 He held that Miraka's performance ability was not apromissory condition precedent and there was no basis to imply a term to this effect.60On the contrary, MNZ's obligation to provide annual and monthly notices created apromissory condition precedent to Miraka's obligation to produce and Miraka'scapacity was only relevant to assessment of the extent of loss caused by MNZ'sbreach.6158 Award at [64]-[65].59 A further argument that MNZ was released from its obligation by quality breaches was rejectedand is not in issue in this appeal.60 Award at [76].61 At [80].Did the Arbitrator make an error of law?[115] MNZ's argument, as developed by Ms Anderson before me, has three mainlimbs. She says that the Arbitrator erred:(a) by implying a term or terms in a manner inconsistent with legalprinciple;(b) by construing Miraka's Minimum Volume obligation as conditional onor altered by MNZ's lack of compliance with the notice regime; and(c) by construing MNZ's Minimum Purchase obligation as existingindependently of Miraka's ability or willingness to produce thatvolume.[116] She contends that the implied term fails to meet the BP Refinery criteria as itcontradicts the express terms of the UHT Agreement. The parties had provided forwhat was to happen regarding forecasting without a "back-up" framework in the eventof a failure to observe the express notification terms. This submission is effectivelyan assertion that the Arbitrator unjustifiably rewrote the UHT Agreement.[117] I disagree that there is any contradiction or inconsistency. The primary impliedterm is an obligation to do what was reasonably required to keep the Agreementworking at a commercial level. This is not inconsistent with any express term. On oneview of it, the 'reasonable requirements' filled an unintended gap which only aroseonce the parties failed to meet their notice obligations. Those reasonable requirementswere driven by the provisions of the UHT, understood in its context and with referenceto its commercial purpose.[118] On the related point of the nature of the volume obligations on each party,Ms Anderson submitted that the literal text in the UHT Agreement supported theproposition that Miraka's Minimum Volume obligation was independent of MNZ'scompliance with the notice scheme. She went so far as to say that, as neither partycomplied with the notification regime, both were discharged from their respectiveMinimum Volume obligations (although, as I understand it, not from other obligationsunder the UHT Agreement). This submission relied on a decision of the SupremeCourt of Queensland, McConnell Dowell Constructors (Aust) P/L & Anor v QCLNGPipeline P/L, and the line of authorities cited in that case.62 These authorities had notbeen referred to the Arbitrator.[119] On behalf of Miraka, Ms O'Gorman placed only light reliance on the impliedterm approach in either her written or oral submissions. She submitted that theArbitrator's approach was entirely reasonable in the matrix circumstances and that tothe extent that the Arbitrator used the concept of implied terms, the result wasappropriate regardless of which test properly applies.63[120] Instead, Ms O'Gorman relied on the Arbitrator's finding that MNZ's failure toorder the Minimum Volumes was due exclusively to unanticipated slowness in thedevelopment of a market for MNZ in China and its consequent unwillingness to meetits Minimum Volume obligations.[121] I apprehend that Ms O'Gorman's approach is primarily one of interpretation. Ido not accept that, properly understood, Miraka had an independent obligation tosupply the Minimum Volumes. I prefer Ms O'Gorman's submission that to construethe UHT Agreement as requiring Miraka to be "ready, willing and able" to produceREDACTED or REDACTED litres of UHT on demand, in the absence of forecasts ororders, is untenable and commercially far-fetched. I accept that cl 3.1 is telling. It onlyobliges Miraka to sell and deliver all the "Product Ordered". The prefatory words ofcl 3.1 "Notwithstanding any other provision in this agreement to the contrary",underscores the importance of this clause. I consider that the design of the forecastingand ordering regime in cls 5.1 to 5.3 supports this view.[122] I accept Ms O'Gorman's submission that it is reasonable to understandMiraka's commitment to producing the Minimum Volumes assumed that suchvolumes were notified, forecast and ordered by MNZ in compliance with MNZ'sobligations under the UHT Agreement. I also accept that this assumption was62 McConnell Dowell Constructors (Aust) P/L & Anor v QCLNG Pipeline P/L [2014] QSC 157.63 This is a reference to the minority judgment of Kós J in Ward Equipment Ltd v Preston [2018]NZCCLR 15 (CA)predicated on the practical requirements for producing UHT milk which were largelyknown to MNZ's negotiating representative. Those requirements related torecruitment of milk, processing of milk within a window, packaging and shipping ofthe product and MNZ's own planning requirements.[123] Although Ms O'Gorman does not express this point in the language ofpromissory condition precedent, it seems to me that the conceptual approach for whichshe argues is that MNZ's compliance with its notification obligations (and thereforewith its ordering obligations) was a condition precedent to Miraka's Minimum Volumecommitments. Properly understood, Miraka had no obligation to supply thecontractual Minimum Volumes in circumstances of MNZ's default; neither did it haveto establish its own ability to meet the Minimum Volume requirements. It follows that"back-up" provisions in the event of a break-down in the notification system wereunnecessary. I accept Ms O'Gorman's argument that Miraka's performance ability inthe circumstances are matters of mitigation and that it would be irrational and a waste- "a commercial nonsense" - to recruit milk for UHT production, let alone supplyproduct, in the absence of forecast orders when MNZ did not want the product anyway.[124] Another route to the same answer is that both parties had Minimum Volumeobligations. The Arbitrator did not interpret MNZ's obligation to purchase asindependent or having no relationship to Miraka's obligation to supply. The liabilityfor the annual volume shortfall falls on the party who caused the shortfall, in thisinstance, MNZ. Where the shortfall was the responsibility of MNZ (as the Arbitratorfound), and not in any way contributed to by Miraka, Miraka was excused from itsperformance.[125] The case of McConnell Dowell, relied on by Ms Anderson, was an applicationfor leave to appeal an arbitral award relating to a construction contract. The defendant,QCLNG, was in breach for failing to obtain relevant regulatory authorisations withina reasonable time. This held up the start of works and led to McConnell Dowellincurring wasted costs. Though QCLNG was in breach, the Arbitral Panel declined toaward damages attributable to the delayed start of works. Their reasoning was that thedelayed start was not solely due to QCLNG's breach. Rather, McConnell Dowell wasitself in breach by failing to provide timely assistance in the exchange of informationneeded to obtain the authorisations. That failure led to QCLNG's default. The ArbitralPanel relied on a principle they expressed as an inability to take advantage of one'sown breach of a contractual promise to obtain redress from the other party. citingAlghussein Establishment v Eton College and Cheall v APEX.64[126] McConnell Dowell sought leave to appeal on a question of law. The pleadedgrounds were that there is no such principle precluding recovery where a claimant isfound to have breached the contract, or alternatively, that such principle does notoperate where the claimant's breach was only one of the causes for the defendant'sbreach.[127] While doubting that the principle expressed in the authorities was as wide asthe Arbitral Panel had described it, Jackson J ultimately found it unnecessary toaddress its scope. He stated:65MCJV's claim for damages is not concerned with a question of the properconstruction of a contract where a party has taken advantage of its own breachof contract to bring about a state of affairs where it claims a benefit under theterms of the contract.In argument, I raised whether there might be a relevant cognate principle,which precludes a party that is not ready and willing to perform theircontractual obligations from claiming damages for breach of contract from theother party, in accordance with Macquarie International Health Clinic Pty Ltdv Sydney South West Area Health Service, Foran & Anor v Wight & Anor andHensley v Reschke.The line of authority Jackson J was referring to in this passage concerns contractswhere the obligations of the parties are mutually dependent and concurrent. TheAustralian High Court case of Foran concerned a contract for sale of land to beperformed by an exchange of the purchase price for a conveyance of land.66 When thevendor informed the purchaser it would not be able to complete on the appointed dayfor settlement, the purchasers did not tend the money. The question was whether thepurchasers were required to prove they were ready and willing to perform the contract64 See Cheall v APEX (1983) 1 All ER 1130; Alghussein Establishment v Eton College (1991) 1 AllER 267.65 McConnell Dowell Constructors (Aust) P/L & Anor v QCLNG Pipeline P/L [2014] QSC 157 at[30]-[31] (footnotes omitted).66 Foran & Anor v Wight & Anor (1989) 168 CLR 385, 400-401, cited and approved in New Zealandin Property Ventures Investments Ltd v Regalwood holdings Ltd [2010] NZSC 47 at [82] perBlanchard J.to succeed in a declaration that they had validly terminated the contract for thevendor's breach.[128] Although only declaratory relief was in issue, there was obiter discussion asto whether readiness and willingness of the plaintiff to perform the mutually dependentand concurrent conditions is an element of a cause of action for damages. Two of thethree judges treated the matter as one of proof of damages or causation rather than asan element of the cause of action. The dissenting judgment of Mason CJ expressedthe view that it was an element of the cause of action. As Jackson J observed, Foransupports the principle that "it is necessary in proof of damages for a cause of actionfor damages for breach that a plaintiff must be ready and willing to perform mutuallydependent and concurrent conditions or obligations to the defendant's breach ofcontract" (emphasis added).[129] Jackson J noted a similar point is made in Macquarie:67... for [the claimant] to be entitled to any more than nominal damages, it wouldbe necessary that, but for the breach, some benefit to which they were entitledunder the contract, and did not receive, would have been received. This isbecause otherwise they would have suffered no loss. This in turn means that,if they were entitled to such a benefit only if they for their part affordedsubstantial performance, they are not entitled to more than nominal damagesunless they did provide, or would but for the breach have provided,substantial performance on their part. a plaintiff seeking to obtain damages for breach of contract referable to itsnot receiving a benefit under the contract must prove that it did or would butfor the breach have done what was required of it to become entitled to thatbenefit. That is, in general terms, if the plaintiff has not afforded substantialperformance of the contract, it must prove it was ready, willing and able to doso.."[130] Relevantly, one of the issues for the Court on the leave application was whetherthe obligation to obtain the approvals operated as a conditional obligation, triggeredonly when the other party took certain steps, or an obligation which existedindependently. If conditional, the question was whether a party that is not ready andwilling to perform their contractual obligations was precluded from claiming damagesfrom the other party.67 At [38], quoting Macquarie International Health Clinic Pty Ltd v Sydney South West Area HealthService [2010] NSWCA 268.[131] Jackson J held that the Foran principle operates in relation to mutuallydependent and concurrent conditions, bypassing the question of whether it is limitedto such conditions.68 He held that the obligations in the construction contract wereinterdependent. Where a reason for the breach of contract was the claimant's failureto give the required assistance, consistent with the concurrent nature of the operationof the obligations, the claimant was not entitled to claim damages.[132] In my judgment, neither McConnell Dowell, nor the line of authoritiesrepresented by Foran assists MNZ. The Foran principle is limited to mutuallydependent and concurrent conditions, or potentially concurrent conditions. It does notconcern a breach of a condition or obligation by the plaintiff which is a conditionprecedent to the relevant performance obligation of the defendant. In that instance, ifthe condition precedent has not been satisfied, a dependent subsequent performanceobligation will not arise.[133] It seems to me that where contractual obligations operate interdependently therelevance to recovery is twofold; either because proof of damages requires that theclaimant is ready and willing to perform mutually dependent and concurrentconditions (otherwise there is no loss) or because it is not possible to disentangle thecauses of breach or to attribute fault to one party or another.[134] To the extent it is relevant, McConnell supports Ms O'Gorman's submissionthat Miraka's ability to perform is properly an aspect of mitigation of damages. Anyinability to be ready, willing and capable of producing the Minimum Volume does notprevent Miraka from being able to sue but is properly taken into account in thedamages assessment. This is because, while Miraka's Minimum Volume obligationsunder the UHT Agreement are not independent, neither are they mutually dependentand concurrent in the same way that a contract for the sale of land or even sale ofshares may generally be.69[135] Neither of these conditions are met in the case at hand. The Arbitrator clearlyfound that the shortfall in the annual Minimum Volumes was solely caused by MNZ;68 At [41].69 See Doherty v Fannigan Holdings Ltd [2018] 2 BCLC 623 (EWCA).no conduct or default by Miraka caused the shortfall. Moreover, I agree with theArbitrator that MNZ's obligation to provide annual and monthly notices created apromissory condition precedent to Miraka's obligation to produce. In short, these werenot obligations meeting the character of mutually dependent and concurrentconditions.[136] It is also clear that the Arbitrator found, as a matter of fact, that the inability byMiraka to meet its Minimum Volume obligation was caused by MNZ's conduct. Thiscausation finding is critical. Another way of viewing the Arbitrator's analysis of thenotification regime was as a means of ascertaining which party was responsible forthe volume shortfalls. I accept Ms O'Gorman's submission that it makes nocommercial sense for Miraka to be obligated to produce product which MNZ has notordered; once it was on notice that MNZ would not order the Minimum Volumes forthe season, the proper course must have been to mitigate its position. To the extentthat it was not able to show an ability to produce to the level of Minimum Volume(although arguably it did establish substantial performance) the impact is only as tothe level of damages. It is not a precondition to a cause of action.Conclusion on Issues Two and Three[137] I find no error in the result reached by the Arbitrator. Whether the route is byimplied term or through construction of the nature of the respective obligations of theparties under the UHT Agreement, I conclude, as did the Arbitrator, that Miraka isentitled to damages in respect of MNZ's under-ordering for Seasons Two and Three.[138] In conclusion, I confirm the Award in respect of Issues Two and Three.Issue Four – Is contractual interest payable on damages?Does this constitute an appealable question of law?[139] The final challenge by MNZ to the Arbitral Award is in respect of theArbitrator's determination that Miraka is entitled to contractual interest on commonlaw damages. This raises an issue of interpretation which is a question of law.[140] The respective positions of the parties may be shortly summarised. MNZcontends that the contractual interest clause in the UHT Agreement is not applicableto an award of common law damages. Interest on common law damages may only beawarded under s 12 of the Act, which provides that every arbitration agreement isdeemed to empower an Arbitral Tribunal to award interest unless it expressly providesotherwise. The period from which interest is payable and the rate is within theTribunal's discretion, which must be exercised in accordance with establishedprinciples.70 If the arbitration agreement, or the contract under scrutiny, does notspecify an interest rate, an award of interest is restricted to the Judicature Act 1908rate, that being the relevant legislation before amendment by the Interest on MoneyClaims Act 2016.71[141] MNZ further contends, that the rate of interest applicable should be no morethan five per cent based on rates available under the Judicature Act 1908. Also, itcontends that because no claim for actual damages was made until Miraka filed itspoints of claim and its entitlement to compensation could not be quantified until eitherthe hearing or the date of the Award, interest commences running only from the dateof the Award and not the date of breach.[142] In response, Miraka supports the decision of the Arbitrator that cls 8.2 and 8.3of the UHT Agreement operate. It submits it is irrelevant whether the underlyingtrigger for MNZ's liability is classified as a "debt" or "damages", and the fact that theamount invoiced by Miraka under cl 8 differed from the amount ultimately held by theArbitrator to arise from the contractual breach does not extinguish the contractual rightto interest.How was this issue dealt with in the Award?[143] Clause 8 of the UHT Agreement is titled "Payment and Invoicing". Clause 8.1sets out the letter of credit provisions. The effect of cl 8.1 is that Miraka was expresslynot exposed to any credit risk in connection with supplying product to MNZ.70 The Arbitration Act 1996 before it was amended by the Interest on Money Claims Act 2016 appliesto this arbitration and appeal.71 Rebecca Atkins (ed) Green and Hunt on Arbitration Law and Practice (online ed, ThomsonReuters) at [DA11.2.02].[144] Clause 8.2 reads:8.2 Miscellaneous InvoicesAny amount which one party is liable to pay the other party under thisAgreement and which does not arise from the sale and delivery ofProduct to the Purchaser shall be invoiced by the other party to theowing party on the last day of the month in which the liability arises,and shall be payable by the owing party within 10 Business Days ofreceipt, without set-off or deduction, in New Zealand dollars byelectronic transfer to the account of the other party as it shall adviseto the [sic] owing in writing from time to time.8.3 Interest payableThe Purchaser must pay interest on any amount more than 30 daysoverdue for payment under this clause 8 (but subject to sub-clause 8.4)at an annual interest rate of REDACTED %. Upon payment of theoutstanding amount in full, the Vendor shall invoice the Purchaserseparately for the interest outstanding. Payment of that invoice is tobe made in accordance with sub-clause 8.2.[145] Clause 8.4 is headed "Dispute as to amount of invoice". It relates solely todisputes regarding invoices rendered by the vendor (Miraka) for the supply of product.[146] After setting out the respective clauses, the Arbitrator acknowledged that theinvoices, issued by Miraka for failure to meet Minimum Volume obligations forSeasons Two and Three, were for sums larger than those eventually claimed in thearbitration. He described the sums invoiced as "take or pay" calculated sums ratherthan damages. However, he construed the "implied purpose" of cl 8.2 as simply beingto give the other party notice that a claim is made, and an opportunity to pay it, beforeinterest starts to run.[147] The Arbitrator considered that the notification purpose of the clause had beenbroadly fulfilled by the issuing of invoices.72 Despite the differences between theamounts invoiced and their categorisation, and the damages ultimately awarded, heconsidered that cls 8.2 and 8.3 had been triggered. It followed that interest at thecontractual rate was applied to the sums awarded, calculated by reference to the periodof 10 business days after receipt of each invoice date for Season Two and Three.7372 Partial Award at [121].73 The Arbitrator recorded that there was no challenge to the interest calculations recorded in a tableproduced in the Award. MNZ contends that this conclusion overlooked MNZ's submission thatDid the Arbitrator make an error of law?[148] Whether the award of contractual interest is an error of law depends on theinterpretation of cls 8.2 and 8.3, within the context of the UHT Agreement as a whole.The first step is to unpick the elements of cl 8.2. Only if these elements are satisfiedis there an entitlement to issue an invoice and only where an invoice is properly issuedis the obligation to pay contractual interest triggered.[149] The required elements of cl 8.2 are:(a) Is there any amount which one party is "liable" to pay the other?(b) Is the liability to pay "under this agreement"?(c) Does the liability arise from the sale and delivery of Product to thepurchaser?(emphasis added)[150] If the first two questions are answered affirmatively, and the third negatively,then cl 8.2 is applicable. A party is then entitled to raise an invoice on the last day ofthe month in which the liability arises, which is payable without set-off or deductionby the owing party within 10 business days of receipt.[151] Where any amount invoiced under cl 8.2 is more than 30 days overdue forpayment, cl 8.3 provides that the outstanding amount is subject to an annual interestrate. The remainder of cl 3 prescribes the mechanics for the invoicing of interest andthe requirements for payment of that interest.[152] MNZ's primary point is that none of the elements in cl 8.2 existed.Ms Anderson focused on the unascertained and unliquidated nature of the 'liability'and contends that these clauses apply only to sums payable under the contract forascertained amounts. In contrast, the liability amount in respect of damages was onlythere is no amount due for payment under cl 8 on which contractual interest could be payableunder cl 8.3 and no other claim for interest was pleaded by Miraka.fixed once the Arbitrator determined the key factual inputs of the agreed model for thedamages calculation.[153] This submission is predicated on the traditional distinction between debts andunliquidated amounts. Ms Anderson says that it follows that the invoices invoiced byMiraka were for sums without any basis in the contract. She adds that the nature of theclause itself also lends weight to the notion that the UHT Agreement was intended tobe a code which prescribed all remedies for non-performance.[154] The purported errors of law which MNZ identifies are that the Arbitrator:(a) misconstrued the UHT Agreement; or(b) incorrectly implied a term to find that cls 8.2 and 8.3 applied tocommon law damages; or(c) erred in his application of the correct interpretation of cls 8.2 and 8.3.[155] I accept that the invoiced amounts were calculated on a basis other than ascommon law damages. In my view, this is not necessarily fatal. Mischaracterisationof the conceptual basis for an amount owing does not answer the question as towhether there is "any amount which one party is liable to pay the other party". Theintroductory words of cl 8.2 – "any amount" are indicative of an intent to spread thenet widely rather than being limited to a debt, or a liquidated sum. I reach this viewnotwithstanding the cogency of Ms Anderson's submission that a clause like this wasnever intended to relate to damages, which are unliquidated and eventually ascertainedon a completely different basis than the basis for the issue of the invoice.[156] I do not accept that the Arbitrator's finding depended on importation of a term.He relied on "implied purpose" to construe meaning rather than implication of a term.MNZ's reliance on a purported error of law derived from an implication of term fallsat the first hurdle.[157] I prefer the submission by Ms O'Gorman that a liability to pay an amountaccrued when MNZ breached the agreement under cl 3.2 to purchase and take deliveryof at least the Minimum Volume in each of Production Seasons Two and Three. Giventhe breadth of the words "any amount which one party is liable to pay", thecharacterisation or conceptual nature of that liability – whether debt or damages – maynot be material. However, in my view, this does not provide the answer to the questionof entitlement to contractual interest either. The real question of construction as I seeit is whether the liability to pay an amount accrued "under this Agreement".74[158] Is a claim to common law damages a liability "under this Agreement"? It iscertainly a liability deriving from the terms of the Agreement in that the primaryobligations are defined by the terms of the Agreement; it is a liability which "resultsfrom" or "in connection with" or even "arises out" of the Agreement. However, is thescope of cl 8.2 narrower than these concepts?[159] One context in which this sort of inquiry arises is in the interpretation of disputeclauses. By way of illustration, in Fiona Trust & Holding Corporation and Ors vPrivalov and Ors the Court had to decide whether an arbitration clause was apt todetermine a dispute about whether the charter party was lawfully rescinded for fraud.75This fell in part to be determined by whether the words "any dispute arising under thischarter" were wide enough to encompass a question as to whether an owner ever madethe contract because they had not truly consented to the terms. If so, the clause gavethe Arbitrator jurisdiction over the disputes.[160] Morison J held that the dispute clause should be read so that the word "under"was equivalent to "arising out of".76 He was primarily influenced by the noticeprovisions of the charter party agreement which required a party exercising its optionto go to arbitration to serve a written notice of dispute stating that "a dispute has arisenout of this charter", using this phrase interchangeably with the dispute clause's use ofthe word "under". It is likely that he was also influenced to adopt a 'generous'interpretation of dispute resolution clauses to apply a presumption in favour of one-stop adjudication.74 This is a point which was not addressed in the written submissions but was briefly touched on inthe hearing of this appeal.75 Fiona Trust & Holding Corporation and Ors v Privalov and Ors [2006] EWHC 2583 (Comm);[2007] 1 All ER (Comm) 81.76 At [21].[161] Another context is illustrated by M Van der Wal Builders & Contractors Ltd vWalker & Anor.77 This was an application for summary judgment to enforce paymentof an award of damages made by an adjudicator under the Construction Contracts Act2002 (CCA). The question that arose was whether or not a liability to pay damagesfor breach of contract is a liability to "make a payment under" that contract. Thequestion arises because the Act differentiates between determinations as to "a liabilityto make a payment under the relevant construction contract" and determinations as to"parties' rights and obligations under the relevant construction contract". Only theformer is enforceable as a debt.[162] The Court expressed the view that a liability to pay damages for a contractbreach is not the same as a liability to "make a payment under" the contract. A claimfor damages falls within the scope of a "rights and obligations determination" and isnot a claim for payment under a construction contract.78:The differentiation between liability to pay a debt and liability for damages isa well-established one. I agree with Mr Price's submission that for a damagesfor breach of contract determination to come within s48(1)(a) one would eitherneed to treat an award of damages as being an obligation to pay money underthe contract (which could not be the case) or to treat "under the contract" asmeaning "arising out of" which would be contrary to the distinction betweenmatters "under" and "arising out of" an agreement.[163] In a similar building contract dispute context, one party appealed the entry ofsummary judgment against him for a sum which the Building Disputes Tribunaldetermined he owed.79 The construction contract stipulated that the contractor wasentitled to recover certain costs, expense and damages if the owner refused access tothe property. The adjudicator determined the sum the owner was liable to pay underthis provision, expressly holding that his determination was made under s 48(1)(a) ofthe CCA. An amount determined by an adjudication under s 48(1)(a) can be recoveredas a due debt in any Court under the terms of the CCA.[164] The owner resisted entry of summary judgment on the basis that thedetermination was really a finding as to damages which could only be made under77 M Van der Wal Builders & Contractors Ltd v Walker& Anor HC Auckland Civ-2011-004-000083,26 August 2011.78 At [98].79 Clark v Central Lakes Homes Limited [2016] NZHC 1694.s 48(1)(b) and was not enforceable as a debt. Mander J disagreed. He held that underthe terms of the contract meant, the owner became liable under the contract if theconditions which trigger the liability are met. The liability arises independently of anycommon law right of action for breach of contract. He distinguished between damagesunder the contract and damages for breach of the contract, relying on Keating onConstruction Contracts.80 At [33], he said:The liability of the owner for the specified items of restitution orindemnification, whether described as payments owing, damages, orexpenses, arise under the contract and is an entitlement provided for by thecontract itself. While analogous to damages at common law for breach ofcontract, the liability for payment is not dependent on proof of breach but theestablishment of the stipulated conditions precedent."[165] The Court distinguished Van der Wal Builders v Walker on the basis that theCourt was there concerned with a prospective liability to pay damages at common lawfor a contractual breach which clearly could not be categorised as a claim for paymentunder the construction contract.[166] While these cases are in very different contexts, they illustrate the differencebetween liability for payments under a contract and liabilities arising out of or inconnection with a contract. In my judgment, the plain, ordinary meaning of a liabilityfor payment under a contract or "an amount which one party is liable to pay the otherparty under this Agreement" is a payment obligation stipulated by a contractual term.The obligation or liability arises when the stipulated conditions arise, or somestipulated event triggers the obligation. The obligation does not depend on proof of abreach of contract but may coincidentally also represent a breach of contract.[167] In the case of the UHT agreement, amounts which one party could becomeliable to pay the other under "this Agreement", in respect of which there is anentitlement to render an invoice under cl 8 include:(a) Amounts equal to REDACTED % of the Prevailing Price of the shortfallof Product produced, payable by the Vendor under cl 3.4 if it does notsupply the Minimum Volume in any given Production Season;80 Stephen Furst and others Keating on Construction Contracts (9th ed, Sweet and Maxwell, London,2011) at [9-001].(b) Amounts equal to REDACTED % of the Prevailing Price of the shortfallvolume of Product purchased, payable by the Purchaser under cl 3.6(a);(c) Amounts equal to REDACTED % of the Prevailing Price of the shortfallof Product purchased compared to the Minimum Volume to bepurchased in each of October and November (reduced in certaincircumstances), payable by the Purchaser under cl 3.6(b);(d) Amounts equal to REDACTED % of the prevailing price of the Productnot delivered against the binding order for any period, payable by theVendor if it fails to provide Samples by the stipulated due dates causingshipping delays, under cl 3.7.[168] The question is then whether there is anything in the factual matrix or contextof the UHT agreement which suggests that the plain, ordinary meaning was notintended by the parties. I am not persuaded. While the UHT Agreement, objectivelyconstrued, intended that Miraka not take any credit risk, the fact that the miscellaneousinvoice provisions applied to any amounts either party is liable to pay under theAgreement dilutes the force of Ms O'Gorman's argument.Conclusion on Issue Four[169] I am satisfied that the Arbitrator's determination that contractual interest ispayable on an award of common law damages is an error of law.[170] I set aside the award of interest to Miraka. For the avoidance of doubt, this doesnot affect the Arbitrator's conclusion that Miraka is entitled to damages and interest.[171] Although I have power to vary the Award, I consider it more appropriate toremit to the Arbitrator both the question of the reasonable rate of interest payable onthe award of damages to Miraka, and the determination of the appropriate period forthe calculation of interest. Whether or not interest ought to be payable from the dateof breach to reflect the use of money advantage enjoyed by MNZ is a fact-based matterwhich the Arbitrator is best placed to determine.Summary of conclusions[172] In summary, for the reasons set out:(a) I confirm the Award in respect of Issue One;(b) I confirm the Award in respect of Issues Two and Three;(c) I set aside the Award in respect of Issue Four and remit to the Arbitratorboth the questions of the reasonable rate of interest payable on theaward of damages to Miraka and the determination of the appropriateperiod for the calculation of interest.Costs[173] I will hear the parties on costs if they cannot resolve the question. Anymemorandum on costs is to be made within 21 days of the date of this Judgment. Anymemorandum in response is to be filed and served within a further 10 days thereafter.The memoranda are not to exceed 5 pages in length.......................................................Walker J