THE BIG BASIN LIMITED v STOCKCO LIMITED [2022] NZHC 1020

THE BIG BASIN LIMITED v STOCKCO LIMITED [2022] NZHC 1020 [13 May 2022]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2022-409-14[2022] NZHC 1020BETWEEN THE BIG BASIN LIMITEDPlaintiffAND STOCKCO LIMITEDDefendantHearing: 16 March 2022Appearances: P A Cowey and F A Trowbridge for PlaintiffM H L Morrison and J A Zwi for DefendantJudgment: 13 May 2022Reissued: 17 May 2022JUDGMENT OF DUNNINGHAM JThis judgment was delivered by me on 13 May 2022 at 3.30 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:[1] On 21 October 2021, an interim arbitral award was issued by the HonourableNicholas Davidson QC. In substance, it rejected The Big Basin Ltd's (Big Basin)defence to StockCo Ltd's (StockCo) claim for payment of the financing costs of bullsacquired by Big Basin.[2] Big Basin is unhappy with the outcome of that decision. It seeks leave toappeal under cl 5(1)(c) of the Arbitration Act 1996 on six alleged questions of lawarising out of the interim award.[3] StockCo opposes the application. It says none of the grounds raised reachedthe requisite threshold of being strongly arguable errors of law. Indeed, it says someare not errors of law at all but are challenges to factual findings which cannot beappealed.[4] At issue is whether leave to appeal the interim arbitral award should be grantedon any one or more of the errors of law alleged.The factual background[5] StockCo is a livestock financier which provides finance to farmers pursuant tothe terms of its standard Master Livestock Agreement (MLA). As stock lots aredelivered to the farm, each transaction is incorporated into the MLA by way of aseparate supplementary agreement.[6] The applicant, Big Basin, was a company established by its four directors,Carolyn Menzies, Leonard Bourton, Daniel Thomas, and Kerryn Thomas, to farmlivestock financed by StockCo.[7] Each of the four directors signed the MLA on 27 June 2017. At around thesame time they also provided personal guarantees for the payment of amounts owingto StockCo under the MLA and supplementary agreements as well as directors'certificates confirming their authority to execute the MLA and supplementaryagreements.[8] The issue in the arbitration was whether Big Basin was liable for the total costprice paid by StockCo for 787 R2 bulls under the terms of the MLA andSupplementary Agreement 1 (SA(1)), plus applicable finance costs and interest. The787 R2 bulls had apparently been purchased for Alliance Group by Leonard Bourtonin the first half of 2017, and he had already taken possession of them.[9] On 2 June 2017, StockCo purchased 519 of the bulls in Lots 1-15 from AllianceGroup. This was before Big Basin was incorporated or had signed any documentationwith StockCo. On 6 July 2017, StockCo purchased the remaining 268 bulls inLots 16-24 from Alliance Group.[10] Big Basin was incorporated on 14 June 2017 and proposed farming the 787 R2bulls which were financed by StockCo. Documentation was eventually signed by BigBasin, including SA(1),1 which covered all 24 lots making up the 787 R2 bulls.StockCo then loaded the debt for 787 bulls to the account of Big Basin. StockCo paidthe supplier, Alliance, the cost price of $1,114,485.79 (including GST) in respect ofthe 787 R2 bulls, based on Alliance's invoices addressed to Big Basin (as StockCo'sauthorised agent) and which detailed the numbers, stock class, weight and purchasecost of the 787 R2 bulls.[11] Big Basin defaulted on its obligations under the MLA, and StockCo terminatedit on 30 August 2019. In due course, StockCo pursued a contractual liquidated debtclaim, in reliance on the terms of the MLA and SA(1), including in respect of the debtowed by Big Basin for the 787 R2 bulls. Big Basin denied liability for the debt relatingto the bulls, claiming it did not receive all the bulls. StockCo, however, denied itneeded to prove delivery or even ascertainment of the bulls. It was Big Basin'sresponsibility under the MLA to locate and take delivery of the bulls, and Big Basinwas liable to StockCo under the contract regardless of whether the bulls had beendelivered.[12] The interim arbitral award, which issued on 21 October 2021,2 was acomprehensive document comprising 124 pages of factual findings and analysis of thelegal arguments. In the end, the arbitrator agreed with StockCo's position and heldthat the parties were bound by the MLA and SA(1). Big Basin was therefore liable toStockCo for the debt and related costs associated with financing the 787 R2 bulls.That debt was to be quantified following further submissions when a final awardwould issue.1 Although an issue raised by Big Basin is whether such signing complied with the requirements ofthe directors' certificate.2 Although dated 6 October 2021.Principle applying to an application for leave to appeal an arbitral award[13] Parties to an arbitration do not have automatic rights of appeal to theHigh Court. Clause 5(1)(c) of the second schedule of the Arbitration Act 1966 limitsappeals to "any question of law arising out of an award with the leave of theHigh Court". Leave may only be granted where the High Court "considers that,having regard to all the circumstances, the determination of the question of lawconcerned could substantially affect the rights of 1 or more of the parties".3 A questionof law is defined in cl 5(10), which says it:(a) includes an error of law that involves an incorrect interpretation of theapplicable law (whether or not the error appears on the record of thedecision); but(b) does not include any question as to whether–(i) the award or any part of the award was supported by anyevidence or any sufficient or substantial evidence; and(ii) the arbitral Tribunal drew the correct factual inferences fromthe relevant primary facts.[14] If the statutory threshold is met, that is, there is an error of law that couldsubstantially affect the rights of one or more of the parties, there remains a discretionas to whether leave should be granted. In exercising that discretion, Blanchard J inGold and Resource Developments (NZ) Ltd v Doug Hood Ltd held the primaryconsideration is the prospective appellant's ability to show it has "a very stronglyarguable case that the arbitral tribunal has erred in law".4 This is because:5 our Parliament, like those in the United Kingdom and Australia, has chosento favour finality, certainty and party autonomy over [wide rights of appeal].It intended to encourage arbitration as a dispute resolution mechanism. Byenacting a statute with the expressed purpose of re-defining and clarifying thelimits of judicial review of arbitral awards, Parliament has made clear itsintention that parties should be made to accept the arbitral decision where theyhave chosen to submit their dispute to resolution in such a manner. It plainlyintended a strict limitation on the involvement of the Courts where this choicehas been made.3 Clause 5(2).4 Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 (CA) at [54](1).5 At [52] and [54](1).The Court should consider in a preliminary way the strength of theargument that there has been an error of law and the nature of that point. If itis a one-off point, in the sense that it is unlikely to occur again and cannot beseen as having any precedent value, either generally or to the parties onanother occasion, then unless there are very strong indications of error leaveshould rarely be given.[15] Other factors which were identified in Gold and Resource Developments (NZ)Ltd v Doug Hood Ltd as being potentially relevant to the Court's exercise of discretion,and which may have relevance in this case, include:6(a) the importance of the dispute to the parties so, by way of example,where the dispute has a non-monetary significance to the parties andmay be a useful precedent for governing their relationship goingforward, it will be easier to obtain leave;(b) how the question arose before the arbitrator, with leave being moredifficult to obtain on a question of law that was at the centre of thearbitration;(c) the qualifications of the arbitrator, as where (as here) the arbitrator islegally qualified it may be harder to obtain leave, although equally, asMr Cowey points out, the fact the parties retained a well-qualifiedarbitrator may signal it was vitally important to the parties that the lawbe applied correctly;(d) the amount of money involved, with leave being more readily grantedwhere a substantial amount of money is involved; and(e) the delay involved in going through the Court system, as where thedelay is disproportionate to the size of the dispute, that would weighagainst leave being granted.6 At [54].The proposed questions of law[16] Big Basin seeks to appeal the interim award on the following six questions oflaw:Question 1 – Application of bailment principlesWhether the Tribunal erred at [515] in deciding that bailment principles,including delivery, did not apply to the MLA and SA(1).Question 2 – Implication of termsHaving held, at [507], with respect correctly, that to contract out of bailmentprinciples requires clear language, whether the Tribunal erred at [513] indeciding that the bailment principle of delivery could be contracted out of byan implied term, when:(a) terms that are implied are not "the clearest expressed terms"required to contract out of bailment principles (Union TransportFinance v British Car Auctions Ltd);7 and(b) such implied term was not necessary to give business efficacyto the contract.Question 3 – Findings beyond scope of arbitrationWhether the Tribunal erred in:(a) having held at [62], with respect correctly, that StockCo's case wasadvanced on the basis that liability was not conditional on proof ofdelivery, and at [65], that it is not for the Tribunal to embark on a furtherenquiry into delivery, the Tribunal went beyond the submission toarbitration and enquired into the circumstances of delivery; and7 Union Transport Finance v British Car Auctions Ltd [1978] 2 All ER 385 at 391.(b) reaching the conclusion at [351] which is untenable given the variousinconsistent findings of delivery at, inter alia, [179], [238], [349],[512], [517], and [573].Question 4 – Interpretation of directors' certificationWhether the Tribunal erred at [357] in interpreting clauses 2(1)(d) and 13 ofthe directors' certification to mean that any single director of Big Basin hadauthority to bind the company (with the consequence that SA(1) wasenforceable).Question 5 – Implication of contractual terms into dealingsWhether the Tribunal erred at [516] in its alternate finding that if thecontractual documents were unenforceable, then "by necessary implication theterms would have been the same as the contractual document provide"when:(a) Liability was not advanced on the basis of implied terms. No impliedterms were pleaded and the alternate finding was therefore beyond thescope of the submission to arbitration;(b) The terms of the contractual documents do not meet the test for thenecessary implication; and(c) Terms cannot be implied into non-contractual dealings.Question 6 – Liability for unascertained goodsWhether the Tribunal erred at [514] and [515] in finding that Big Basin couldbe liable for unascertained goods.Questions 1 – 3 – Relevance of bailment principles to StockCo's claim[17] I address Big Basin's questions of law 1 – 3 together, as they all deal with theapplication of bailment principles to StockCo's claim. As Mr Cowey says:(a) Question 1 asks whether bailment principles, including delivery, applyas a matter of law.(b) Question 2 concerns whether the test requiring clear language toexclude bailment principles can be met by an implied term, and whetherthe implied term, in any event, meets the criteria for implication ofterms.(c) Question 3 relates to a process issue. Did the Tribunal depart from thequestions submitted to arbitration, when StockCo pleaded that deliverywas not an essential element of its cause of action?[18] Big Basin's primary submission is that the MLA and SA(1) are contracts ofbailment. They assume that ownership and possession of the livestock will beseparated, with livestock which are owned by StockCo being placed in the possessionof a farmer. As a consequence, the common law bailment rules apply unless contractedout of in the clearest express terms.[19] Big Basin says StockCo acknowledges this is a bailment contract in itsamended points of claim where it says:StockCo's business includes the purchase, ownership and taking clear title tolivestock that is then bailed to its particular farmer/customer pursuant to theterms of StockCo's Standard Master Livestock Agreement (Stock):(a) the Master Livestock Agreement creates a facility for particular 'lots'of Stock to be bailed to the farmer;(b) various lots of Stock are incorporated into the facility by way ofvarious supplementary agreements that are entered into between thefarmer/customer and StockCo.[20] Furthermore, the MLA expressly provides for the separation of ownership andpossession in the following clauses:5. Purchase and Ownership of Stock5.1 Title and property in all Stock will pass to and remain at all times ofStockCo.6. Grazing – Management – Inspection6.1 The stock shall be located and grazed on the Land without cost to us.[21] For the contract of bailment to take effect, Mr Cowey argues the bailor musttransfer possession of the thing bailed to the bailee. For example, in Palmer onBailment, it is stated "in cases where a delivery is attempted, that delivery must beperfected in order for a bailment to take effect".8 Similarly, in Harding v CIR, CoatesJ observed:9The essential element of a bailment is the delivery of possession of the thingbailed. By the transfer of possession from bailor to bailee the latter acquiresan interest in the chattel bailed because he then has the right to possess anduse it.[22] Big Basin asserts it has a strongly arguable case that the essential element ofbailment, the transfer of possession, applies to the MLA and SA(1). In that regard,because the contracts relied on are bailment contracts, the common law rules as tobailment apply unless ousted in "the clearest express terms".10 Here, StockCo cannotprove that possession was transferred to Big Basin nor did it expressly contract out ofthis requirement, and this affects StockCo's entitlement to succeed on its claim underthe contracts.[23] In its submissions on the second alleged error of law, Big Basin says thearbitrator accepted that if the common law rules of bailment are not to apply to acontract of bailment, it requires clear language, but then erred in finding, at [513], thatan implied term could override the obligation on StockCo, as bailor, to deliver thestock to Big Basin, as bailee, saying:It is in my view implicit that the party with the liability for the costs oftransport must make sure the stock is delivered correctly in order to performthe obligations to graze or finish stock, and here that liability fell on Big Basin.8 Norman Palmer, Palmer on Bailment (3rd ed, Sweet and Maxwell, England and Wales, 2009) at22.9 Harding v CIR [1977] 1 NZLR 337 (HC) at 341.10 Union Transport Finance v British Car Auctions Ltd, above n 7, at [391].In Mr Cowey's submission, the arbitrator's view that an implied term would meet thetest for excluding the requirement for delivery was erroneous.[24] Furthermore, Big Basin says it has a strongly arguable case that the impliedterm found in [513] was implied in error. It did not meet the established test forimplication of a contractual term because it was not necessary to give business efficacyto the contract.11 In any event, StockCo did not plead reliance on implied terms. Itscase was the contract made Big Basin liable for delivery.[25] Big Basin's third challenge to the arbitrator's findings on bailment was that hemade findings on delivery of the R2 bulls which were beyond the scope of thearbitration. The arbitrator found, at [351], "that at least 720 head were delivered",although he expresses it differently at other paragraphs. For example, at [349], he says"there were more than 673 R2 bulls delivered out of the 787, probably many morethan that", and, at [350], he stated "it is very likely to have been more than 673 head,somewhere between that number and 760".[26] Big Basin says the Tribunal was in error in making a finding on delivery. OnStockCo's pleaded case, delivery was not an issue in dispute, and the parties had notassembled evidence on it. StockCo's position that delivery and location of the bullswas not relevant because it was pursuing a liquidated contractual debt claim wasreiterated in its submissions to the Tribunal. If StockCo had pleaded that delivery hadoccurred, then Big Basin would have obtained discovery to confirm what bulls weredelivered. It had not done so, as this was not the case Big Basin needed to answer.[27] Big Basin also says that, by making findings of delivery, the arbitratordisregarded the fact StockCo carried the onus to prove delivery and effectivelyreversed the onus onto Big Basin to prove non-delivery. This is important becauseBig Basin says that if it is right and bailment principles do apply, the arbitrator found,as a matter of fact, that the vast majority of the stock was delivered to Big Basin. Ifthat finding is not challenged, it affects whether leave to appeal should be granted on11 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] NZCCLR 17 at[116]; and BP Refinery (Westernport) Proprietary Ltd v Shire of Hasings (Victoria) [1977] UKPC13.the bailment questions as, even if it is held delivery was required to be proved, theoutcome as between the parties would not be substantially different.[28] Big Basin also submits that there were inconsistent findings as to whether theR2 bulls comprising lots 1 – 24 were largely delivered. In paragraphs [179], [238] and[573] the arbitrator made differently worded findings to the effect that at least 473 ofthe R2 bulls, but may be close to 519 bulls, were delivered to Killermont Station(where two of the directors lived), by 6 July 2017. There are then the findings madeat [349], [350] and [351], which are set out at [25] above. Subsequently, at [512], thearbitrator says "more than 673 were delivered to Killermont. The true delivery toKillermont . will never be known", while at [517] he says "I find at least 700 weredelivered". Big Basin submits the inconsistency in these findings highlights that thefindings on delivery were beyond the scope of submission to arbitration.Discussion[29] There is a fundamental divergence between StockCo and Big Basin on therelevance of the law of bailment. In that regard, I accept StockCo's position thatBig Basin wrongly assumes StockCo's claim is an action in bailment, and not a claimfor sums owed under a contract. As is said in the text, Palmer on Bailment:12Claims against bailees are commonly framed in contract and/or tort and maylead to an award of damages calculated without reference to any specialprinciple of bailment. That is also true of claims brought against bailors. Butbailment is the relationship sui generis and a bailor may in principle sue thebailee for breach of bailment: either cumulatively or alternatively to a claimin contract or tort, or independently of any such claim, on facts that discloseno liability in either contract or tort.(footnotes omitted)I accept StockCo has chosen to pursue a contractual damages claim under the MLAand SA(1), and had no need to prove the elements of a claim founded on bailment.[30] Although Big Basin relies on the English case of Union Transport Finance vBritish Car Auctions to support its argument, I do not think it assists. That was a casewhere the plaintiff sought to rely on its rights at common law as a bailor, giving it an12 Palmer, above n 8, at 1742.immediate right to repossession of the car it owned but had transferred to another partyunder a hire purchase agreement, to pursue a claim in conversion against the defendantwho sold the car.13 The defendant, however, sought to rely on the express terms of thehire purchase contract between the plaintiff and the car purchaser to show the plaintiffwas not immediately entitled to possession, and so could not pursue its claim toconversion. That argument was rejected by the Court. The right to immediatepossession of the car, which was held by the plaintiff as bailor, was additional to itsright to repossess the car under the terms of the hire purchase contract. This case wasnot synonymous with the present circumstances at all, and indeed, serves to highlightthe separate nature of a claim in contract as opposed to a claim relying on the rights asbetween a bailor and bailee.[31] Similarly, the case of Harding v CIR, which is also relied on by Big Basin, doesnot support its position. The question there was whether a purported bailment waseffective for tax purposes.14 It does not demonstrate that contracts which involve anelement of bailment cannot be enforced on their own terms without reference to thecommon law principles of bailment.[32] Accordingly, as StockCo was not pursuing a claim founded on bailment, norseeking to avail itself of common law remedies as a bailor, there was no need toconsider whether the terms of the MLA expressly precluded bailment obligations.None of the authorities relied on by Big Basin demonstrate the arbitrator erred inrejecting Big Basin's argument that StockCo needed to prove delivery of the 787 R2bulls to Big Basin in order to succeed on its contractual debt claim under the MLA andSA(1).[33] This is not a strongly arguable error of law. Indeed, I consider the arbitratorwas almost certainly correct to find at [515] that the MLA and SA(1) applied, and toreject Big Basin's argument that bailment principles applied and needed to be proved.[34] My view that there is no real merit to the first question of law because itfundamentally misunderstands StockCo's claim, effectively determines the response13 Union Transport Finance v British Car Auctions, above n 7.14 Harding v CIR, above n 9.to question two as well. The assertion that contracting out of bailment principlesrequires clear language and could not be achieved by implication is only relevant ifStockCo is relying on its status as bailor to make the claim and has to prove it deliveredthe bulls to the bailee. However, as I have already explained, it is not. The contractdid not require StockCo to ensure delivery, but the arbitrator went further to say it wasimplicit in the contract that Big Basin was responsible for ensuring delivery of thebulls to Killermont Station. That is not a finding of an implied term but simplyreinforces the lack of obligation on StockCo to achieve delivery. A successfulchallenge to it would not materially affect the outcome.[35] Accordingly, the second question does not engage a sufficiently material errorof law warranting leave to appeal being granted.[36] The third question involves the arbitrator's findings as to whether the bullswere actually delivered. Big Basin's challenge to this finding (whatever the exactnumber) is that it was beyond the scope of the submission to arbitration and, in anyevent, is untenable, given the inconsistent findings in the interim award as to the exactnumber which were delivered.[37] I discuss the second part of Big Basin's challenge first, that is, that the arbitratormade "inconsistent findings". In that regard, I accept, as Stockco submits, that readcarefully, in their full context, the findings are consistent with each other. None of thefindings are conclusive as to the number which were delivered, but each indicates aminimum number, resulting in a finding that "at least 720" were delivered. I acceptthat this is a factual finding which is not appealable.[38] However, Big Basin also suggests that this issue was "beyond the scope ofsubmission to arbitration". I do not consider that is correct. The issue did arise in thepleadings because Big Basin's defence put the matter in issue. It claimed that as thecontract involved bailment of the bulls, and possession of stock was not transferred toBig Basin, it had a defence to the claim. For that reason, it was open to the arbitratorto make a finding on the evidence before him as to whether delivery had occurred.[39] I also accept that the arbitrator did not say it was not for him to embark on aninquiry into delivery. Rather, he held at [65] that it was not appropriate to embark onan inquiry into obtaining further evidence on this issue during the course of thehearing, particularly when Big Basin had abandoned its earlier interlocutoryapplication for further discovery of documents relating to delivery.[40] Accordingly, I accept it was open to the arbitrator to make a finding that at least720 of the bulls were delivered. This was a factual finding within the scope of thearbitration and leave to appeal on this issue is declined.Question 4 – Did the Tribunal err in interpreting the directors' certificate?[41] Big Basin argues the arbitrator erred at [357] in finding "any director couldbind Big Basin under the directors' certificate by clause 2.1(d) and clause 13 which bynecessary inference mean that each director had authority to bind Big Basin". If BigBasin is right, it says the SA(1) is unenforceable for want of proper execution.[42] Mr Cowey submits the customary authority of a single company director actingalone is limited.15 Here, the directors' certificate does not give or represent that asingle director can bind Big Basin. Clauses 2.1(d) and 13 of the directors' certificatestate that the directors certify:2.1 All resolutions and all other necessary action required pursuant tothe Constitution and relevant legislation in order to:(d) authorise the persons specified in paragraph 13 to:(i) give any notices and other communications requiredunder or in connection with the Documents andTransactions on behalf of the company; and(ii) take any other action required under or in connectionwith Documents and Transactions on behalf of theCompany, have been passed and taken.15 Bishop Warden Property Holdings Ltd v Autumn Tree Ltd [2018] NZCA 285, [2018] 3 NZLR 809at [27].13. Authorised signaturesThe following are the true signatures of the persons, other thanDirectors, who have been authorised to give notices and othercommunications, and take any other action required, under or inconnection with the Documents and on behalf of the company.[43] Mr Cowey says the directors' certificate needs to be interpreted according tothe ordinary principles of contractual interpretation.16 He notes there were nosignatures following cl 13, and there is no language in the certificate that could beconstrued as meaning a single company director had authority to contract onBig Basin's behalf.[44] Mr Cowey says that while StockCo suggests this is a question of fact, or atleast partly so, it is a question of law because it involves the construction of adocument. In Milk New Zealand (Shanghai) Co Ltd v Miraka Ltd, which dealt withthe Court's jurisdiction to determine questions of contractual interpretation undercl 5(1) of the Arbitration Act 1996, the Court said:17The 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 does not 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.[45] Here, Mr Cowey says the question is clearly one of law. The directors'certificate is a legal document crafted by StockCo, and its interpretation does not turnon any oral exchanges or conduct. Its interpretation is confined to the meaning to betaken from the words of the directors' certificate.Discussion[46] I accept, as Mr Morrison acknowledged in written submissions for StockCo,interpretation of a contract is a question of law. The issue for me is whether the16 As set out in Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR432.17 Milk New Zealand (Shanghai) Co Ltd v Miraka Ltd [2019] NZHC 2713 at [50]–[51], citing Brysonv Three Foot Six [2005] NZSC 34, [2005] 3 NZLR 271 at [20].arbitrator's interpretation was strongly arguable to be in error and that, in the exerciseof my discretion, leave should be granted to pursue that issue on appeal.[47] The relevant findings made by the arbitrator were as follows:[357] In short, I conclude any director could bind Big Basin under thedirectors' certificate by clause 2.1(d) and clause 13 which bynecessary inference mean that each director had authority to bind BigBasin, unless that authority was qualified by the variation or estoppelsas pleaded.[358] Kerryn said she did not realise that. Although she says that, thedocuments are submitted the best evidence objectively of what wasintended, and by themselves they fly in the face of a variation whichwould qualify Carolyn Menzies' authority as alleged. I reject the BigBasin contention that a single director could not transact, and if not,then requirement for all directors to transact makes no commercialsense, and would require express definition.[48] What is at issue is whether Big Basin's contention that if the directors'certificates are interpreted correctly more than one director was required to sign eachsupplementary agreement, rather than just Carolyn Menzies, as occurred.[49] I do not consider that this issue is strongly arguable. The directors' certificate,which was signed by all four directors, confirmed that the directors authorised theexecution of the documents listed in the schedule. The schedule had only one entrywhich read:Master Livestock Agreement and supporting schedules and SupplementaryAgreement(s).[50] It also said, at 2.1(c), that all resolutions which were required to "authorise theexecution of the Documents on behalf of the Company had been passed and taken".While no non-directors had been given authority to sign the documents under cl 13, itwas clearly open to the arbitrator to interpret that clause, alongside cl 2.1, asauthorising each director of the company to sign the MLA and SAs.[51] The most logical reading of cl 13 is that each director has authority to sign theMLA and SAs, but that no non-director has been given that authority. There would beno point otherwise in inserting the words "other than Directors" in that clause. Theonly point of the document is to confirm the directors' authority to sign the document(given no non-directors are given that authority), and there would be no businessefficacy to the document if it did not authorise any director to sign the MLA and SA(1).[52] In those circumstances, while arguable, I do not consider Big Basin'sinterpretation is strongly arguable. Furthermore, as counsel for StockCo note,Mr Bourton was held to have also confirmed Big Basin's agreement to SA(1), so therewas compliance with s 181(a)(i) of the Companies Act 1993 in any event.18[53] In summary, while I consider question four raises a point of law, it advances astrained interpretation which is not strongly arguable. Furthermore, given theevidence that two directors authorised entry into SA(1) in any event, it would notmaterially change the outcome.[54] I decline leave to appeal on this ground.Question 5 – implication of contractual terms[55] At [516] the arbitrator stated:Had my conclusion been different, that MLA and SA(1) are not enforceablethen by necessary implication the terms on which more than 673 bulls weredelivered to Killermont would have been the same as the contractualdocuments provide. Big Basin could not sit on its hands as if its possessionof this large herd was under some other contractual or common law principle,stipulate a grazing fee, and return some processing receipts, while denyingliability for the bulls, at the same time knowing of and accepting the terms ofthe Facility for many further head of stock, cattle and sheep.[56] Big Basin seeks that this alternative finding is overturned, saying it is wrongin law.[57] First, StockCo did not advance its case on the basis that StockCo could implyits contractual terms into other dealings with Big Basin.[58] Second, Big Basin says terms cannot be implied into dealings in the absenceof contractual formalities being complied with. The plaintiff would have to resort toequitable remedies such as quantum meruit in such circumstances. Any suggestion18 Interim award at [258] and [569].StockCo purchased lots 1 – 24 on Big Basin's promises, and should be entitled toequitable relief, is not open to StockCo on its pleadings. Furthermore, Big Basin doesnot own Killermont Station which received the bulls. A separate company does, andso any cause of action would need to be brought up against Killermont Station, notagainst Big Basin.Discussion[59] On this issue I accept StockCo's position that these were, in effect, obitercomments as to what ruling the arbitrator would have made had the MLA and SA(1)not been enforceable. He did, however, find that the MLA and SA(1) wereenforceable, and there would be no utility in allowing Big Basin to pursue this claimederror in law.[60] Accordingly, leave to appeal on this issue is declined.Question 6 – did the Tribunal err in finding that Big Basin could be liable forunascertained goods?[61] The last error of law asserted is that the arbitrator erred in making the followingfinding:[514] While Mr Cowey refers to StockCo v Gibson that is a very differentcase to the instant.19 It was not a claim by Stockco against a farmerclient but rather a contest between competing securities held byStockco and bank lenders for a debt owed by Nugen or Nugen FarmsLtd.[515] As I have found the MLA and SA(1) apply in principle the case forBig Basin of bailment of unascertained goods without contractualreference to such terms is rejected.(footnote added)[62] Mr Cowey says StockCo's entire claim is predicated on it being the owner andbailor of the bulls which were the subject of lots 1 – 24, as it pleaded in each case thatit took title and ownership of the lots and bailed the lots to Big Basin. Mr Cowey says19 StockCo v Gibson [2012] NZCA 330.on StockCo's own case, it could not have been the owner, as the bulls which were thesubject of lots 1 – 24 were unascertainable, noting the arbitrator found:20It was a frustration through the interlocutory process and hearing, that thereseemed to be no reliable evidential track of each of the R2 bulls [63] In asserting that the bulls which comprised lots 1 – 24 had to be ascertainable,Mr Cowey relied on Re Goldcorp Exchange Ltd (In Receivership) as the leading caseon unascertained goods.21 In that case, Goldcorp became insolvent while in possessionof an undifferentiated quantity of gold. Lord Mustill found that title to the gold hadnot passed to the purchasers, the gold was unascertained, and goods need to beascertained before property in them passes to the purchaser.[64] Mr Cowey also cites Healey v Howlett and Sons, a claim under the Sale ofGoods Act for supplying fish which were not of merchantable quality. The claim wasrejected on the basis that the fish were not the property of the buyer when they wereput on the rail and deteriorated, as the 20 boxes of fish which were intended for thedefendant had not been ascertained or differentiated from the balance of the boxes offish.22[65] Lastly, Mr Cowey relies on Gibson v StockCo, where the High Court held bullsthat were unascertained could not be subject to Stockco's security, nor couldunascertained bulls be gifted.23 He says if the bulls cannot be ascertained, thenStockCo's pleaded claim for lots 1 – 24 cannot succeed.Discussion[66] To a large extent, this argument is a continuation of Big Basin's argument thatthe contract involves a bailment, and the goods which were bailed need to be bothidentified and possession given to the bailee.[67] I have already held that argument misunderstands StockCo's claim. It is aclaim for monies owing under the contracts entered into. In particular, StockCo points20 At [56].21 Re Goldcorp Exchange Ltd (In Receivership) [1994] 3 NZLR 385 (PC).22 Healey v Howlett and Sons (1917) 116 LT 591.23 Gibson v StockCo HC Auckland CIV-2009-404-3120, 17 December 2010 at [224]–[226].to various clauses in the MLA, including cl 1.2(e) whereby Big Basin agreed to "[b]eliable to StockCo for the aggregate cost price of all Stock including all Stocksubsequently acquired, interest on that amount until it is repaid, and the costs andcharges and any other money due under this Agreement". For the purpose ofinterpreting that clause, "Stock" was defined in cl 2.3 to mean "all livestock specifiedin the Schedule and in any supplementary agreement", the word "Schedule" in turnwas defined to mean "the specific details of the Stock as contained in the Agreementor any Supplementary Agreement or amendment".[68] Furthermore, it was Big Basin's obligation under the agreement to ensure thestock became StockCo's property. In particular, StockCo points to cl 3.4 which saysBig Basin agreed "that the Stock upon acquisition will be StockCo's absolute propertyexclusively and that the same are free and unencumbered" and, under cl 5.2, that BigBasin would "do all things necessary and further warrant that pursuant to the transferscontemplated by this clause, clear title to all of the Stock has been or will be transferredto [StockCo], on and from the settlement date applicable to that Stock, free of anysecurity interest or other encumbrance". In short, it was Big Basin's obligation toensure StockCo obtained title and property in the stock and, as Mr Morrison submits,it is not open to Big Basin to deny liability on the basis that StockCo did not obtaintitle to the 787 bulls which were described in SA(1).[69] I am satisfied that the cases referred to by Big Basin in support of this allegederror of law do not assist its argument. This is not a case where StockCo seeks toclaim an interest in the R2 bulls, and so it can be distinguished from Re Goldcorp andHealey v Howlett. I also do not consider the decision in StockCo v Gibson is relevantto this alleged error of law. It involved a dispute between StockCo, as the securedcreditor of Nugen Farms Ltd, and certain banks who had a general security agreementin respect of a separate group of companies which had owned the relevant 750 cows.It did not concern a claim by StockCo against its farmer client, Nugen Farms Ltd, andindeed, in that case, there was no dispute that Nugen Farms Ltd was liable to StockCofor the sum paid to it for the 750 cows.[70] An additional hurdle for Big Basin is that there was no finding that the 787 R2bulls were not ascertained. Evidence was given by Mr McLean of Alliance as to theascertainment in sale of the 787 bulls from the original vendor to Alliance, and heexplained that the Alliance invoices to StockCo were populated using that information.SA(1) was also populated with the same information as to the ascertainment details of787 R2 bulls, and Big Basin acknowledged that Mr Bourton took possession of thosebulls. There would be difficulties, in those circumstances, to argue that the bulls werenot sufficiently ascertained, even if this was a relevant issue.[71] In addition, of course, the arbitrator made a factual finding that at least 720 ofthe 787 R2 bulls were delivered. To that extent, at least, the bulls must have beenascertained and, as Mr Morrison argues, the maximum shortfall of 67 R2 bulls couldnot be sufficient to show that one of the questions of law could substantially affectBig Basin's rights.[72] Again, I do not consider this is a sufficiently arguable error of law to warrantgranting leave to appeal.Exercise of discretion[73] As I have found that none of the alleged errors of law meet the statutory testfor the grant of leave, strictly speaking I do not need to consider any other factor whichwould bear on the exercise of my discretion. However, having regard to the additionalfactors identified in Gold and Resource Developments (NZ) Ltd, as set out in [15]above, I consider there are other factors which, in addition to the strength of theargument as to an error of law, point against leave being granted.[74] In that regard, I note the qualifications of the arbitrator. He is a Queen'sCounsel with significant experience in commercial disputes, as well as being a formerHigh Court Judge. He also has significant experience as an arbitrator and wasappointed because of this experience.[75] While the importance of the dispute and the amount of money involved mightfavour the grant of leave to appeal, I accept this is not a dispute which will haveprecedent value for the parties. It is simply a debt collection claim. While the amountof money involved, being close to $1,600,000, is relatively significant, it is not sosignificant as to warrant the cost of ongoing litigation when those arguments are notstrong. That factor is reinforced by the fact a factual finding was made that at least720 bulls were delivered to Big Basin, and so the arguments as to bailment would onlyapply to a small part of the contractual claim.[76] Finally, I accept that the further delay of pursuing a High Court appeal is simplynot warranted in the absence of a seriously arguable question of law. The arbitrationagreement was entered into more than two years ago. In the absence of a stronglyarguable case that there has been an error of law, the significant further delay whichwould be occasioned by allowing an appeal cannot be justified.Conclusion[77] The statutory threshold for granting leave to appeal is not met, nor has BigBasin demonstrated it can present a strongly arguable case that the interim awardcontains errors of law. Accordingly, leave to appeal is declined.[78] Costs are reserved, but my preliminary view is that the respondent is entitledto 2B costs. If costs cannot be agreed, any application for costs must be made within20 working days of the date of this decision.Solicitors:Parry Field Lawyers Ltd T/A Parry Field, ChristchurchMorrison Mallett, Auckland