THE GAMA FOUNDATION v FLETCHER STEEL LIMITED [2021] NZHC 633

THE GAMA FOUNDATION v FLETCHER STEEL LIMITED [2021] NZHC 633 [26 March 2021]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2020-409-000183[2021] NZHC 633UNDER the Arbitration Act 1996IN THE MATTER of an application for leave to appeal anarbitral awardBETWEEN THE GAMA FOUNDATIONPlaintiffAND FLETCHER STEEL LIMITEDDefendantHearing: 3 September 2020Appearances: A J Forbes QC and R A Hearn for PlaintiffW R Potter and J M Phillips for DefendantJudgment: 26 March 2021JUDGMENT OF OSBORNE JThis judgment was delivered by me on 26 March 2021 at 4.00 pm pursuant to Rule 11.5of the High Court RulesRegistrar/Deputy RegistrarDate:The application[1] The plaintiff, The Gama Foundation (Gama) seeks leave to appeal parts of anaward arising from an arbitration between Gama and the defendant, Fletcher Steel Ltd(Fletcher Steel).[2] The arbitration was conducted by Tόmas Kennedy-Grant QC. The award isdated 5 February 2020.[3] The arbitrator in his introduction to the award summarised the background andthe issues thus:1. 55 Lunns Road is a large industrial property in Middleton,Christchurch. It was created in or about 1972 as part of a largersubdivision in Lunns Road. From shortly after its creation as aseparate property until 31 August 2016 it was tenanted by a Fletchercompany, most recently by Fletcher Steel Ltd ("Fletcher Steel") undera lease ("the Lease") entered into with effect from 1 September 2006for a term of 10 years, with two rights of renewal each of five years.2. Between 1972 and 2006 the property had on it:... one large warehouse of 3,967m2 (the "Front Warehouse"), anamenities block with 88m2 and the main office block of 557m2("together "the Front Existing Buildings"). There was anasphalted parking area outside the well set back front fence, andan asphalted driveway to and from the Front Warehouse. Theyard areas beside the Front Warehouse were hard filled and therear half of the Property was unmowed grass.3. As part of the negotiations for the Lease it was agreed that The GamaFoundation ("Gama"), as landlord, would construct a new warehouseon the rear of the Property ("the Rear Warehouse") and asphalt theremaining parts of the property.4. In common with many other buildings in the Christchurch area, theproperty, including the buildings on it, was damaged by theearthquakes of 4 September 2010 and 22 February 2011.5. At the expiry of the Lease on 31 August 2016, in addition to therebeing an issue as to whether there was unrepaired earthquake damage,there was an issue between the parties as to whether Fletcher Steel haddischarged its other obligations in respect of repair and maintenanceunder the Lease. It is these issues which are together the subject ofthis Arbitration.[4] The arbitrator was appointed sole arbitrator in April 2017. The substantivehearing eventually took place in November 2019. Many of the claimed repair items(in terms of number but not of value) were paid by Fletcher Steel prior to or duringthe course of the arbitration.1 For the purpose of the award, 50 claimed items remainedin dispute. Of those the arbitrator awarded all or some of Gama's claims in respect of27 items and disallowed 23 items.2The subject-matter of Gama's intended appeal[5] Mr Forbes QC, for Gama, explained there were three major repair items inrelation to which the arbitrator found the repairs actually carried out by Gama couldhave been effected on a more restricted or cheaper basis. Mr Forbes' explanation ofthose three items is here set out:(a) Front warehouse floor. This was originally constructed in or about1973 as an asphalt floor. Fletcher Steel subsequently installed aconcrete drive-through and numerous concrete pads and a pit. Thearbitrator found that the asphalt was contaminated to some extent withoils and cutting fluids because of Fletcher Steel's steel manufacturingoperations. Gama acted on advice from a consulting engineer and theconstruction company it had engaged after Fletcher Steel vacated thepremises (on expiry of the lease) for the necessary repair work. In theabsence of any input from Fletcher Steel, despite many requests for itto be involved in determining the repair strategy, Gama encapsulatedthe entire damaged floor with concrete. This was based on advice fromthe consulting engineer and the construction company that this wouldbe both a better and cheaper option than replacement of all of theasphalt (including removal of concreted areas and disposal ofcontaminated soils and materials).(b) Rear Warehouse floor. This was a new concrete floor that was builtin 2006. It suffered impact and earthquake damage during the leaseterm (which were both the responsibility of Fletcher Steel under thelease due to Fletcher Steel taking out an insurance policy with a $10million excess). The arbitrator allowed most of Gama's claim as tothis but did not award the full value of the repair work because hefound that there was some fair wear and tear which could not bequantified on the evidence.(c) Yard areas. The large yard areas at the premises were asphalted.There was extensive damage and extensive rust staining to the asphaltcaused by Fletcher Steel as the tenant. It was a feature of Gama's casethat it made many requests to Fletcher Steel to have their expert orrepresentative help determine the work to be done and to agree on thecosts but these requests were ignored. Gama was advised by aconsulting engineer after Fletcher Steel vacated that the entire yard1 The arbitrator recorded at [100] of the Award that Fletcher Steel had paid in full 118 of the 193claimed items of tenant damage and 29 of the 39 claimed items of earthquake damage.2 Summarised in The Gama Foundation v Fletcher Steel Ltd (First Award) 5 February 2020 [Award]at [306].area required replacement. However it only replaced part of the yardarea and claimed the cost of that replacement. The arbitrator allowedonly part of Gama's claim, deciding that Fletcher Steel, as the tenant,could, under the lease, have replaced less than what was claimed forby Gama.[6] There were more repair item claims disallowed by the arbitrator, which Gamaasserts would be affected by a successful appeal.[7] The arbitrator also disallowed Gama's claim for interest on repair costs at thedefault rate under the lease. The question of interest, otherwise than at the default rate,is reserved by Gama pending the outcome of this application and any appeal.[8] Part of Gama's claim against Fletcher Steel was for items of consequential loss.The arbitrator dismissed the claim for consequential loss on the facts.3Leave to appealThe statutory regime[9] By sch 2, cl 5(2), Arbitration Act 1996, the High Court may by leave entertainappeals on questions of law arising from an arbitral award if it considers, having regardto all the circumstances, that the determination of the question of law concerned couldsubstantially affect the rights of one or more of the parties.4 As explained by the Courtof Appeal in Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd (DougHood), the pre-condition in cl 5(2) is designed to ensure disputes will not be referredto the High Court if, as between the immediate parties, the matter is largely academic.5[10] The Court further explained, once the cl 5(2) precondition is met, there remainsa discretion whether leave to appeal should be granted which is to be exercised by thecourt in a disciplined way.63 At [307]–[314].4 Arbitration Act 1996, sch 2, cl 5(2).5 Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 (CA) [DougHood] at [11].6 At [54].[11] The Court set out and discussed eight (non-exhaustive) considerations whichshould be taken into account in the circumstances of a particular case, explaining thatthey are guidelines, rather than governing criteria.7 The head-note to the reportaccurately summarises the considerations identified by the Court:8(1) Where the question was a one-off point and of little precedent valuethe Court would not grant leave unless there were very strong indications ofan error. Where the question was of precedent value the lower standard of astrongly arguable case that an error existed would be sufficient. Whereconflicting decisions existed on the point in question this would weigh infavour of granting leave. This first consideration was the most important.(2) If the question of law under consideration was the very reason for thearbitration this would weigh against exercising the discretion. Converselywhere the question of law emerged incidentally during the arbitral processleave would be more readily granted.(3) Where the arbitrators were legally qualified it would be more difficultto obtain leave to appeal the arbitral decision on a question of law.(4) Where the dispute was of great significance to the parties this wouldweigh in favour of exercising the discretion.(5) Where a very substantial amount of money was involved it might besomewhat easier for the parties to obtain leave.(6) Where the likely amount of delay consequent on granting leave wasdisproportionate to the significance of the dispute, or if the issue was urgent,the discretion was less likely to be exercised.(7) If the parties had agreed that the arbitral award was final this, whilenot determinative, would weigh against the exercise of the discretion.(8) If the dispute was of an international nature and the parties hadexpressly opted in to cl 5 (the appeal provisions of the Arbitration Act 1996,Second Schedule) this would weigh in favour of exercising the discretion (seepara [54]).Gama's proposed questions of law[12] Gama's proposed questions of law fall into four categories:(a) the effect of the rule in Joyner v Weeks9 (five questions);7 At [54].8 At 318–319.9 Joyner v Weeks (1891) 2 QB 31.(b) whether moneys payable to Gama for breach of repair covenants aremoneys payable under the lease (for interest purposes) in terms of cl5.1 of the lease (two questions);(c) whether there is a time limitation on when repairs must be effectedunder the repair notice contemplated by cl 14.1 of the lease (onequestion); and(d) the correct test and onus of proof under cl 8.1(a) of the lease (in relationto the rear warehouse floor) (two questions).The original articulation of the rule[13] The rule in Joyner v Weeks, as articulated by Lord Esher MR in a decision ofthe English Court of Appeal, was stated thus as a rule of law:10The rule is that, when there is a lease with a covenant to leave the premises inrepair at the end of the term, and such covenant is broken, the lessee must paywhat the lessor proves to be a reasonable and proper amount for putting thepremises into the state of repair in which they ought to have been left.[14] The approach to the rule in Joyner v Weeks in New Zealand, which is bindingupon this Court, is that stated by the Court of Appeal in Maori Trustee v RogrossFarms Limited (Rogross Farms), where Tipping J, delivering the judgment of theCourt, recorded:11We would therefore state the law as follows. The rule in Joyner v Weeks is notan absolute rule. It is, however, the prima facie rule which will be appliedunless the lessee can show by sufficiently cogent evidence that in both theshort and the long term the lessor will definitely suffer no loss or will suffer aloss which can definitely be assessed at less than the prima facie measure.The competing positions before the arbitrator[15] Gama argued the only effect of the rule in Joyner v Weeks is that where a tenanthas breached its repair obligations and the landlord has not carried out those repairs,then the landlord is nevertheless entitled to damages for that breach.1210 At 43.11 Maori Trustee v Rogross Farms Ltd [1994] 3 NZLR 410 at 420 (CA) [Rogross Farms].12 Award, above n 2, at [44].[16] Fletcher Steel submitted before the arbitrator that the rule in Joyner v Weeks isfar more wide-reaching. It submitted, notwithstanding that a landlord does not haveto have carried out the required repair work in order to recover its value, the landlordmust also prove in respect of each item of its claim that the expenditure claimed wasor is necessary and proper (whether expenditure has been already incurred or is yet tobe incurred). Fletcher Steel submitted the normal contractual rules allowing therecovery of costs reasonably incurred in the course of mitigating damage do not applywhere the rule in Joyner v Weeks applies.13The arbitrator's findings[17] The arbitrator (at [47d.] of the award) identified five issues raised by thesubmissions in relation to Joyner v Weeks:14These submissions raise the following issues:a. Is the decision in Joyner v Weeks limited in its effect as argued for byGama?b. If not, what is its scope and effect?c. By what standard is the cost of necessary repairs to be judged?d. Does the answer to (b) mean that the rule normally applying that costincurred as a result of action reasonably taken in the course ofattempting to mitigate the damage suffered as a result of the otherparty's breach of contract is recoverable does not apply in a case suchas this?e. Which party bears the onus of proof?[18] The arbitrator then set out his answers to those five questions as follows:a. The effect of Joyner v Weeks is not limited in the way argued for byGama;b. The rule in Joyner v Weeks applies in respect of all repairs necessaryat the end of a lease, including repairs that have been carried out, andrequires payment of "a reasonable and proper amount for putting thepremises into the state of repair in which they ought to have been left";c. While the standard of repair is the repair necessary to put the premisesinto the state of repair in which they ought to have been left, the tenantis not obliged to execute the repair in a manner advantageous to the13 At [45].14 At [46].landlord if, by executing the repair in a manner which is lessadvantageous to the landlord but still sufficient to meet the tenant'sobligations under the lease, the tenant is able to reduce the cost ofrepair;d. While none of the authorities referred to by Counsel deals specificallywith the question of whether the rules relating to mitigation of damageapply in a case such as this, the conclusion I draw from my finding asto the scope and effect of Joyner v Weeks (see sub-paragraph (b)above) is that the rule normally applying, i.e. that cost incurred as aresult of action reasonably taken in the course of attempting tomitigate the damage suffered as a result of the other party's breach ofcontract is recoverable does not apply in a satiation such as thepresent;e. The onus of proof is on Gama.[19] The arbitrator then undertook a detailed review of the authorities which hadled him to the five answers he had stated.15Is there settled New Zealand authority in relation to Joyner v Weeks?[20] The application for leave to appeal requires the Court to consider the strengthof the question of law. Accordingly, it is appropriate before considering the questionsof law which Gama proposes to pursue to first consider the state of New Zealandauthorities in relation to the rule in Joyner v Weeks.[21] Before Joyner v Weeks was decided, the law appears not to have been settledin relation to a lessor's remedies where there was a breach of the covenant to repair atthe end of the term. One approach would have been to allow the lessor the diminutionin the value of the reversion. The alternative, upheld in Joyner v Weeks, was to allowthe landlord to recover the entire cost of the remedial works (whether or not thediminution in value of the reversion was lower or the cost of remedial works had eithernot been incurred or would not be incurred).[22] The rule in Joyner v Weeks, as stated by Lord Esher in the case (set out at [13]above), was an adoption of what his Lordship referred to as "inveterate practice" inrelation to what were and are known as dilapidation cases.1615 At [48]–[54].16 Joyner v Weeks, above n 9, at [43].[23] It was recognised by Lord Esher that there was an issue as to whether the rulewas an absolute rule. But his Lordship went on to require the avoidance of "the subtlerefinements" which the basic principle of damages for compensating a claimant's losswould introduce.17[24] The rule in Joyner v Weeks has subsequently attracted criticism both judiciallyand academically.18 The rule was seen as creating anomalies such as through the lessorobtaining windfall or excessive recoveries. In the United Kingdom, s 18(1) Landlordand Tenant Act 1927 was enacted not to replace the common law measure under therule in Joyner v Weeks, but instead to prescribe limits on the amount recoverable. Therule itself remained good law.[25] As observed by the authors of the 2018 edition of Dowding & Reynolds;Dilapidations: The Modern Law in Practice (Dilapidations):19 it seems tolerably clear that (up to the level of the Court of Appeal, at anyrate) the common law measure remains that laid down by Joyner v Weeks.[26] The leading authority in New Zealand in relation to the rule is the decision ofthe Court of Appeal in Rogross Farms.20 The Court recognised the standing of Joynerv Weeks in New Zealand had never risen for direct consideration by that Court. Ittherefore extensively reviewed the New Zealand case law from 1927 and consideredthe case law in other jurisdictions.[27] The review led Tipping J, delivering the judgment of the Court, to state:21In the High Court the potential injustice of an absolute application of the rulehas several times been pointed out but at no stage has it been clearly held thatthe rule must be applied absolutely in New Zealand. It can also be said thatthe trend of authority in the High Court, until the decision under appeal, hasbeen to acknowledge the existence of the rule. But in some cases the rule hasnot been applied on grounds of pragmatism rather than principle. The rule hasbeen distinguished in those cases where the lessee was entitled tocompensation for improvements and where the covenants in question wereimpossible of performance.17 At [43].18 See D W McMorland and others, Hinde, McMorland and Sim Land Law in New Zealand (looseleafed, LexisNexis) at [11.126.]; Nicholas Dowding, Kirk Reynolds and Alison Oakes Dowding &Reynolds; Dilapidations: The Modern Law in Practice (6th ed, Sweet & Maxwell, London 2018)at [29-07]–[29-09] [Dilapidations].19 Dilapidations, above n 18, at [29-09]. (Footnote omitted).20 Rogross Farms, above n 11.21 Rogross Farms, above n 11, at 417.For completeness we note the views expressed in Garrow's Law of RealProperty (5th ed, 1961) at p 654 and in Hinde, McMorland and Sim's LandLaw (1978) at p 515 (para 5.098), Garrow states the rule as being absolute andapplicable even where the landlord will lose nothing through the breach of thecovenant. Hinde similarly states the rule in absolute terms, saying, forexample, that it applies even though the landlord proposes to demolish thepremises. However some of the decisions which have commentedunfavourably on the rule, at least in its absolute form, are noted.[28] The Court then referred to the report of the New Zealand Law Commission"Aspects of damages: The Rules in Bain v Fothergill and Joyner v Weeks".22 TheCommission considered policy arguments in favour of and against the abolition of therule in Joyner v Weeks. The Law Commission recommended abolition of the rule.23[29] In its judgment in Rogross Farms, the Court determined the rule in Joyner vWeeks continued to apply in New Zealand. In doing so it rejected aspects of thecriticism made against the rule but recognised that criticisms as to theapparent inflexibility of the rule could be met by holding that the rule is not absolute.Tipping J explained that solution in this way:24It should be said at the outset that the rule is not as inconsistent with generalprinciples in relation to the assessment of damages for breach of contract ashas on occasions been suggested. Damages in tort are designed to reflect whatthe plaintiff has lost by reason of the wrong. Damages in contract are designed to put the injured party, as nearly as possible, and so far as money can doit, into the position he would have been in if the contract had been performed.Thus, if a lessee fails to perform a covenant and the term has expired a sum ofmoney must replace the performance of the covenant. That sum of moneywill ordinarily equate the cost to the lessor of having the covenant performed.It is when the lessor is unable or does not wish, for whatever reason, to havethe covenant performed that the difficulties said to be inherent in the rule arise.It follows that there is justification for holding that the rule is not absolute.But on a prima facie basis the rule fits comfortably with the purpose ofdamages for breach of contract.[30] Tipping J went on to further explain:25In this instance a prima facie rule would, in our view, adopt the advantagesbut avoid the disadvantages identified by the Law Commission and others inthe rule in Joyner v Weeks. With respect to Greig J and the Law Commission,we do not consider that it is in the overall interests of justice to abolish the22 Law Commission Aspects of Damages: The rules in Bain v Fothergill and Joyner v Weeks (NZLCR19, 1991).23 At [83].24 Rogross Farms, above n 11, at 418–419.25 At 420.rule in Joyner v Weeks altogether. There is a strong case for holding that it isnot an absolute rule but there is also a strong case for retaining the rule on aprima facie basis, if only because people who have agreed to do somethingshould, prima facie at least, be required to do it.We would therefore state the law as follows. The rule in Joyner v Weeks is notan absolute rule. It is, however, the prima facie rule which will be appliedunless the lessee can show by sufficiently cogent evidence that in both theshort and the long term the lessor will definitely suffer no loss or will suffer aloss which can definitely be assessed at less than the prima facie measure.[31] In short, the rule in Joyner v Weeks will be rendered inapplicable in onecircumstance. That is in the windfall situation where a lessee establishes that the lessorwill in fact suffer no loss or less than the prima facie measure.[32] The Court of Appeal has subsequently, in Cornwall Park Trust Board Inc vChen, refused to review its decision in Rogross Farms, following a direct request bycounsel to do so.26The five proposed questions relating to the rule in Joyner v Weeks[33] Gama seeks leave to pursue an appeal on five questions of law relating to theeffect of the rule in Joyner v Weeks on which the arbitrator is said to have erred.Question 1: Did the arbitrator err in holding that the rule in Joyner v Weeks is in scopeand in effect a sui generis regime which both prescribes and proscribes the lossesclaimable by a commercial landlord, including it being an absolute bar toconsequential loss suffered by the landlord beyond rental and operating expensesduring the repair time period?[34] This question is a somewhat extended way of asking whether the arbitratorerred in finding (at [64] of the award) that the rule in Joyner v Weeks creates anabsolute bar to a claim in respect of the reduction in the market sale value of a property.The arbitrator found there was such an absolute bar.27 But the arbitrator also foundthat Gama's claim for consequential loss (had it been permitted by law) had not beenproved as a matter of fact.2826 Cornwall Park Trust Board Inc v Chen [2016] NZCA 65, [2016] 2 NZLR 637 at [100].27 Award, above n 2, at [64]–[66].28 At [335]–[365].[35] This proposed question is accordingly moot. It cannot warrant the grant ofleave to appeal.Question 2: Did the arbitrator err in holding that the purpose of the rule in Joyner vWeeks is to avoid the decision-maker having to explore an attempt to determine theactual loss suffered by the landlord?[36] This proposed question refers to one aspect of the arbitrator's reasoning inrelation to the unavailability of damages for consequential loss. The arbitrator foundthe case law clearly indicates the purpose of the rule in Joyner v Weeks is to avoid thecourt or arbitrator having to explore or attempt to determine the actual loss sufferedby a landlord, with all the complications that such an inquiry may involve.29[37] The relevant point in the judgment of the Court of Appeal in Rogross Farms isthe passage in which Tipping J (for the Court) explained that a prima facie Joyner vWeeks rule " gives clear general guidance and thereby tends to avoid disputes exceptin cases which are truly out of the ordinary".30[38] The arbitrator's discussion of the purpose of the rule was in the context of theconsequential loss claims only. It did not form part of the arbitrator's reasoning inrelation to the scope of the rule as it relates to Gama's actual costs. Furthermore, evenif the purpose of the rule was relevant, it was not part of Gama's case here that its costswere "truly out of the ordinary", to adopt the Rogross Farms' test.[39] The purpose of the rule is not an appropriate subject-matter for appeal in thecircumstances of this case.Question 3: Did the arbitrator err in holding that the normal rules applying todamages for breach of contract, including the ability of the landlord to recover actualcost, including additional cost reasonably incurred by it in mitigation of the damagecaused by the tenant's breaches of the lease, are not applicable in claims to which therule in Joyner v Weeks applies?[40] Gama submitted to the arbitrator that the normal rules applying in actions fordamages for breach of contract (including the rule that cost incurred as a result of29 At [65](b).30 Rogross Farms, above n 11, at 420.action reasonably taken in the course of attempting to mitigate damage suffered as aresult of the other party's breach of contract is recoverable) apply in this case, subjectonly to one extension. The extension identified by Gama was that aspect of the rulein Joyner v Weeks which means that a landlord is entitled to recover damages forbreach of the tenant's repair covenants even in respect of repairs which the landlorddoes not carry out.31[41] The arbitrator answered the issue raised by that set of submissions at [47d.] ofthe award (as set out at [17] above).[42] On this application, Mr Forbes referred to a case which he submitted illustratedthe application of standard breach of contract principles concerning the costs ofmitigation. This was the first instance judgment of the United Kingdom Queen'sBench Division in Sunlife Europe Properties Ltd v Tiger Aspect Holdings Ltd (SunlifeEurope).32 In that case, Mr Forbes observed, the landlord's replacement of obsoleteair-conditioning units with a cheaper but better model (so that there was no extra costto the tenant) was held to be appropriate mitigation of loss and limited the landlord'sability to claim the higher cost of repairing the existing units.[43] In Sunlife Europe Edwards-Stuart J dealt with the dilapidations claim of thelessor of commercial premises. The first conclusion of law on which his Lordshipbased his judgment was that "the tenant is entitled to perform his covenants in themanner that is least onerous to him".33 He continued that a landlord's claim for thecost of repairs is subject to the general rule that he cannot recover for a loss which, byacting reasonably, he could have avoided.34[44] I do not read his Lordship's observations in Sunlife Europe as suggesting thatgeneral contractual principles in relation to mitigation (such as recovery of costs foraction reasonably taken in mitigation) have effect where the rule in Joyner v Weeksapplies. Rather, the focus of the case was upon the extent of the lessee's liability by31 Award, above n 2, at [44].32 Sunlife Europe Properties Ltd v Tiger Aspect Holdings Ltd [2013] EWHC 463 (TCC) [SunlifeEurope].33 At [46](1)].34 At [46(5)].reason of what is called the rule of minimal performance. In a passage quoted by thearbitrator in the award (at [50b.], Edwards-Stuart J said:35 Mr Wonnacott relies heavily on what he referred to as the rule of minimalperformance, that is to say the rule that where a contract can be performed inmore than one way, the performing party can choose the way that is leastonerous to him. He is under no obligation to perform the contract in someother more time-consuming or expensive manner, simply because the otherparty would like it, if there is a more economic and compliant means of doingso. I did not understand Mr Hutchings to challenge the rule as a matter ofprinciple, which I regard as correct [45] Flowing on from this approach, Edwards-Stuart J concluded, in relation to theair handling units:[158] Accordingly, although the prima facie measure of damage is the costof this work, Sunlife has mitigated its loss by adopting a lessexpensive solution. The cost of this alternative solution thereforerepresents the amount recoverable. It is irrelevant, as Mr Wonnacottappears to contend, that the solution actually adopted in order tomitigate the loss is not one that would have been open to Tiger.However, Tiger is entitled to take the benefit of the mitigation. [46] The arbitrator, in citing Sunlife Europe clearly had in mind this last-citedpassage from the judgment of Edwards-Stuart J — referring as the arbitrator did to"the reasonableness of the amount spent not the reasonableness of the landlord's actionin spending it".36[47] The Court of Appeal's enunciation (in Rogross Farms) of the rule in Joyner vWeeks requires the rule to be applied, except in one specified instance which does notbring into play the usual mitigation considerations relating to the reasonableness ofthe claiming party's actions taken in mitigation.37 To the extent that mitigating conductwas taken into account in Sunlife Europe, the authors of Dilapidations recognise theobservations of Edwards-Stuart J in relation to mitigation as being explicable in termsof the "minimal performance" rule cited earlier in the judgment. The authorsobserve:3835 At [28].36 Award, above n 2, at [51].37 Rogross Farms, above n 11, at [100].38 Dilapidations, above n 18, at [29-10]. (Footnote omitted).It may therefore be that all the judge meant was that where there are twopossible ways of remedying the disrepair, damages are to be assessed byreference to the lesser cost.[48] Sunlife Europe does not provide a basis for suggesting there should be a furtherexception (relating to costs of mitigation) to the rule in Joyner v Weeks. There is noNew Zealand authority to support such an exception. The Court of Appeal authoritieswhich bind this Court are against such an exception.[49] There is no basis for leave in relation to this issue.Question 4: Did the arbitrator err in holding the rule in Joyner v Weeks is also aminimum cost rule which requires the ascertainment of the hypothetical minimumreasonable repair cost, rather than in an enquiry as to the actual loss suffered by thelandlord and so the landlord is therefore not entitled to recover the reasonable repaircosts that were actually incurred by it?[50] In considering the previous proposed question in relation to mitigation, Ireferred at [44] above to the discussion by Edwards-Stuart J in Sunlife Europe of "therule of minimal performance, that is to say the rule that, where a contract can beperformed in more than one way, the performing party can choose the way that is leastonerous to him".39 Mr Forbes refers to this as the "minimum cost" rule.[51] The arbitrator, consistently with the view that there is a rule of minimalperformance, held (at [47c.] of the award) that the tenant is not obliged to executerepairs in a manner advantageous to the landlord if the tenant, by executing the repairin a manner which is less advantageous to the landlord but still sufficient to meet thetenant's obligations under the lease, is able to reduce the cost of repair.[52] The arbitrator supported that conclusion by reference to the passage I havequoted from Sunlife Europe but also by reference to the discussion by the authors ofDilapidations which occurs under a heading "[w]here there are several different waysof performing the covenant".40 The passages from the text, as set out by the arbitratorin the award, serve to identify and illustrate the principle applied by the arbitrator:4139 Sunlife Europe, above n 32, at [28].40 Dilapidations, above n 18, at [29-12] and [29-13].41 Award, above n 2, at [50a.].In practice there may be a number of different ways of performing a covenantto repair. For example, it may be equally appropriate to repair a defective roofeither by carrying out patching repairs, or by completely replacing it. For thepurposes of applying the common law measure, it is necessary to identify whatworks the tenant might be assumed to be liable to carry out.The general principle of damages is that where the defendant has the optionof performing the contract in alternative ways, damages must be assessed onthe assumption that he will perform it in the way most beneficial to himselfand not in that most beneficial to the claimant. The effect of this is that wherethere are a number of different ways of performing the covenant to repair,damages will, in the ordinary case, be assessed at common law by referenceto the cost of the lesser, and cheaper, work. ....On this approach, the court must ask itself, as a matter of fact, how in practicethe tenant would have remedied the defect had he elected to do so. That willusually be at the least expense to him. Consistently with this, inHammersmatch Properties (Welwyn) v Saint-Gobain Ceramics and Plastics,Ramsey J said:Where a reasonable surveyor might advise either repair or replacement,damages are to be assessed by reference to the cost of repair unlessreplacement would be cheaper.... It should be noted that the principle referred to above (i.e. that damages areto be assessed by reference to the lesser work) will only apply where the lesserwork constitutes a performance of the covenant: if it does not, it is irrelevantfor the purposes of assessing damages. Where it applies, the principle is notaffected by the fact that the landlord has actually carried out more extensiveworks; he will not be entitled to the cost of those works if the tenant could haveperformed the covenant by doing less extensive, and cheaper, work.[53] The authors of Dilapidations cite examples of cases where the damages havebeen assessed at common law by reference to the cost of the lesser, cheaper, work. InCarmel Southend Ltd v Strachan & Henshaw Ltd, the roof of an industrial unit couldhave been repaired at the expiry of the lease either by patch repairs or by over-claddingwith new profile metal sheeting.42 The Court held the damages were to be assessedon the basis of the cost of the lesser work.[54] In coming to discuss the onus of proof, the arbitrator also referred to thedecision of the Appeals Division of the Supreme Court of Victoria in Telecom & CPSCommunity Credit Co-operative Ltd v Heberg Pty Ltd (Telecom & CPS).43 Fullager J42 Carmel Southend Ltd v Strachan & Henshaw Ltd [2007] EWHC 1289. (TCC).43 Telecom & CPS Community Credit Co-operative Ltd v Heberg Pty Ltd [1993] ANZ ConvR 312(VSC) [Telecom & CPS].referred to the common law authorities from the time of Joyner v Weeks and explainedwhat the Court must do to apply that measure of damages. His Honour stated:44To apply this measure of damages, the Court looks at the state of the premisesat the end of the term. It then has to consider what it is that a landlord - ahypothetical and reasonable landlord wishing to put the premises into the stateof repair in which the tenant was bound to leave them - would have to expendin money in order to put the premises into the latter state of repair. I shall callthis sum of money the "essential expenditure". I have called the personconcerned a hypothetical landlord because it is immaterial whether the actuallandlord wishes to repair the premises or not, and immaterial whether theyever will be repaired by anybody. Save in one respect, it is immaterial to knowthat the actual landlord has repaired the premises. In a case where the actuallandlord has done the breach - necessitated repairs or some of them by thetime of the trial, all the repairs he has actually done and the cost of them arematerial only because they may afford reliable (or unreliable) evidence ofwhat the relevant repairs would have cost a reasonable landlord to do. I havecalled the person concerned a reasonable landlord, because when the Court isseeking to determine what is the essential expenditure, breach necessitated, itmust bear in mind that the hypothetical landlord would be bound to mitigatehis loss, in that he would be bound to do the repairs in a reasonable way for areasonable price and within a reasonable time.[55] Later in his judgment, Fullager J continued:45At the risk of repetition, in order to recover damages for breach of the covenantto repair the landlord must prove what it would cost a hypothetical landlord todo in a reasonable way such repairs as are necessary to put the premises intothe condition in which they would have been had there been no breach.[56] For Gama, Mr Forbes submits there is a real question as to whether the enquiryshould be as to the reasonable and actual repair costs incurred by the landlord ratherthan upon the ascertainment of a hypothetical minimum reasonable repair cost.[57] Mr Forbes did not refer to authority, in relation to the rule in Joyner v Weeks,which would place the first focus of enquiry on the costs actually incurred by thelandlord, rather than on an assessment of the cost to the hypothetical landlordidentified by Fullager J in the Telecom & CPS case.46 The conclusion reached by theauthors of Dilapidations bears repetition:4744 At 2.45 At 8.46 At 2.47 Dilapidations, above n 18, at [29-13], citing Sunlife Europe, above n 32; Carmel Southend Ltd vStrachan and Henshaw Ltd, above n 42; and Soward v Leggatt (1836) 7 Car & P 613, 173 ER 269(HC). [w]here the principle applies, it is not affected by the fact that the landlordhas actually carried out more extensive works; he will not be entitled to thecost of those works if the tenant could have performed the covenant by doingless extensive, and cheaper, work.[58] Gama has not established the existence of an appropriate question in thisregard.Question 5: Did the arbitrator err in holding that the rule in Joyner v Weeks meansthat, where repairs have been effected by the landlord after the tenant's breaches ofrepair covenants in the lease, the onus of proof is on the landlord to prove that therepairs actually undertaken were reasonable in terms of minimum cost, scope andtime?[59] In these situations, it is the landlord who makes the claim (for damages). Thearbitrator concluded there is no reason that the normal rule — whereby the claimantbears the onus of proof — should apply in these situations.[60] Mr Forbes did not present written submissions in relation to the proposedquestion concerning the onus of proof. Nor did he develop written submissions on thetopic.[61] The arbitrator, in his award, referred not only to the normal rule concerning theonus but also to authority. He quoted the passage in the judgment of Fullager J in theTelecom & CPS case which expressly identifies the onus of proof upon the landlord.48The arbitrator referred also to the judgment of Blackburne J in Mason v TotalFinaElfUK Ltd in which it was common ground that the burden of proof was upon thelandlord.49 The arbitrator cited also Dilapidations in which the authors reached thesame conclusion, observing:50Prima facie, therefore, he must show not only that the tenant was in breach ofcovenant on the term date, but also the nature and reasonable cost of anynecessary remedial work.[62] In short, no authority can be referred to for the proposition that the onus ofproof is different (from the usual) where a claim of the present kind is involved. That48 Telecom & CPS, above n 43.49 Mason v TotalFinaElf UK Ltd (2003) EWHC 1604 (Ch) at [46]–[48].50 Dilapidations, above n 18, at [29-20].is not to say that, where the landlord has actually done repairs, the cost of the repairsis irrelevant. As Fullager J explained in the Telecom & CPS case, the cost of repairsactually done may be material because they may afford reliable (or unreliable)evidence of what the relevant repairs would have cost a reasonable landlord to do.51[63] As it is, there is no established basis on which to grant leave in relation to aquestion as to the onus of proof as determined by the arbitrator.Questions relating to an entitlement to interest on unpaid money[64] Clause 5.1 of the lease provides:Interest on Unpaid Money5.1 IF the Tenant defaults in payment of the rent or other moneys payablehereunder for 14 days then the Tenant shall pay on demand interest atthe default interest rate on the moneys unpaid from the due date forpayment to the date of payment.[65] In the arbitration, Gama pursued interest on its costs incurred in remedyingFletcher Steel's breaches of covenants to repair.[66] Gama's proposed sixth question relates to the arbitrator's decision on this.[67] Gama proposes a seventh question, closely related. Gama refers to FletcherSteel's obligation under cl 3.1 of the lease to pay "outgoings". This particularargument had not been pursued by Gama at the arbitration hearing but was insteadraised for the first time in supplementary submissions filed after the hearing. FletcherSteel asserts that it had no opportunity to respond. Gama proposes as its seventhquestion whether the arbitrator erred in failing to make a decision in relation to the cl3.1 argument. As Mr Potter submits, there is not a question of law involved in theproposed question. What occurred quite simply was that the arbitrator did not deal atall with an issue raised after the hearing. For that reason alone, leave will not begranted in relation to the proposed seventh question.51 Telecom & CPS, above n 43, at [3].The two proposed questions relating to cl 5.1 interestQuestion 6: did the arbitrator err in holding that costs incurred by the landlord inremedying breaches of the tenant's covenants to repair are not moneys payable underthe lease for the purposes of cl 5 of the lease?The arbitrator's ruling[68] The arbitrator recorded (at [315]–[318] of the award) that Gama relied upon(amongst others) cl 5.1 of the lease in its claim for interest at the default interest ratespecified in the First Schedule to the lease.[69] It appears, in both the opening and closing submissions for Gama, that briefsubmissions were made as to an entitlement to such interest by reason of the wordingof cl 5.1.52[70] Counsel for Fletcher Steel made detailed submissions, by reference to HighCourt authority, as to the default interest rate not being applicable to sums awarded asdamages because such sums are not "moneys payable hereunder" (meaning under thelease). The arbitrator quoted verbatim (at [326b.] of the award) the submissions madefor Fletcher Steel, which focused on a series of four decisions of this Court beginningin 1991.53 In Puhinui Farms Ltd v IH Wedding & Sons Ltd, the defendant (lessee) hadbeen ordered to pay damages for breach of the lease between the parties, throughfailing to reinstate a quarry upon the expiry of the term of the lease.54 The plaintiffsubsequently applied for interest at the default interest rate provided in cl 7.4 of thelease (or, alternatively, interest at the rate prescribed under the Judicature Act 1908.Potter J, while allowing interest at the prescribed rate under the Judicature Act rejectedthe primary submission that the lessor was entitled to interest at the default interestrate under the lease.55 In particular, her Honour recorded:52 See Award, above n 2, at [326(c)].53 Irvine v Shaw HC Auckland CP621/89, 8 July 1991; Puhinui Farms Ltd v IH Wedding & Sons LtdHC Auckland CIV-2006-404-771, 5 June 2008 [Puhinui Farms – interest on damages judgment];Culted Ltd v Wikeley HC Auckland CIV-2008-404-2488, 28 November 2008; and Jansen Ltd vPetra Holdings Ltd [2013] NZHC 1620. Reference may also be made to Robt. Jones HoldingsLtd v Northern Crest Investments Ltd (2010) 11 NZCPR 206 (HC) at [72], in which the decisionin Culted Ltd v Wikeley was applied.54 Puhinui Farms Ltd v IH Wedding & Sons Ltd HC Auckland CIV-2006-404-771, 15 February 2008[Puhinui Farms].55 Puhinui Farms Ltd – interest on damages judgment, above n 53, at [24].[11] I do not consider that damages awarded to Puhinui for Weddings'failure to reinstate are included within the meaning of "royalties or any othermoneys payable under this lease" in terms of cl 7.4.[12] The lease provided in clauses 5 to 8 for Weddings to pay royalties,rates, contributions in respect of an easement of right of way and otherliquidated amounts, and also provided in cl 7.4 for the rate of interest to bepaid on any such amounts that Weddings failed to pay on time. I do notconsider the meaning or intent of cl 7.4 extends to include an amount ofdamages which is required to be assessed by the Court. Neither the plain wordsof the clause nor its context in the lease indicates that this was the intention ofthe parties.Submissions for Gama[71] In his written submissions, Mr Forbes submitted the identified cases dealingwith interest are all distinguishable because "damages payable for breach(es) of acontract are just as much an obligation under the contract as the primary obligationswhich were breached". Mr Forbes referred to the House of Lords' decision in PhotoProduction Ltd v Securicor Transport Ltd (Photo Production).56 Mr Forbes citedparticularly Lord Diplock's discussion of what his Lordship referred to as "primaryobligations" and "secondary obligations".57 His Lordship stated in that context:58Every failure to perform a primary obligation is a breach of contract. Thesecondary obligation on the part of the contract breaker to which it gives riseby implication of the common law is to pay monetary compensation to theother party for the loss sustained by him in consequence of the breach; [72] It is unnecessary to consider in any detail the reliance initially placed by Gamaon Lord Diplock's analysis. Mr Forbes did not place reliance upon it in his oralsubmissions after Mr Potter had responded that the Photo Production judgments haveno relevance to the interpretation of clause 5.1 in the lease in question. The issue LordDiplock was discussing was simply the existence of obligations under a contract forservices.[73] Mr Forbes, at the hearing, instead developed a submission that it was arguablethat the sums awarded for Fletcher Steel's breaches of its repair and maintenance56 Photo Production Ltd v Securicor Transport Ltd [1980] 1 All ER 556, [Photo Production].57 At 565–567.58 At 566g.obligations constituted claims for debt which are in turn "moneys payable under theLease" in terms of cl 5.1 of the lease.[74] Mr Forbes referred to a footnoted commentary in Hinde, McMorland & SimLand Law in New Zealand.59 The authors there observe that the lessor's remedy for abreach of the covenant to repair is usually a proceeding for damages against the lessee(unless the lease contains a power to cancel applicable to the covenant to repair).60There is then a footnote to that commentary in which the authors record:61Where the lessor is entitled to undertake the work upon the default of thelessee, a claim by the lessor to recover the amount expended is, however, aclaim for a debt, and not for damages for breach of covenant: Jervis v Harris[1996] Ch 195; [1996] 1 All ER 303 (CA).[75] An issue arose in Jervis v Harris as to whether a landlord's right to enter aproperty so as to effect repairs himself and then to recover the costs from the tenant isa claim for damages for breach of a covenant by the tenant.62 Millett LJ (with whomthe other members of the Court agreed) found that the landlord's claim was not a claimfor damages, explaining.63The short answer to the question is that the tenant's liability to reimburse thelandlord for his expenditure on repairs is not a liability in damages for breachof his repairing covenant all. The landlord's claim sounds in debt not damages;and it is not a claim to compensation for breach of the tenant's covenant torepair, but for reimbursement of sums actually spent by the landlord incarrying out repairs himself.[76] His Lordship then noted the distinction in the law of contract between a claimfor payment of a debt and a claim for damages for breach of contract. His Honourreferred to authority as to a debt being a definite sum of money fixed by the agreementof the parties as payable by one to the other and observed that the plaintiff who claimspayment of a debt need not prove anything beyond the occurrence of the event orcondition on the occurrence of which the debt became due.6459 McMorland, Hinde, McMorland & Sim Land Law in New Zealand, above n 18.60 At [11.126].61 At [11.126], see footnote 6.62 Jervis v Harris [1996] Ch 195; [1996] 1 All ER 303 (CA).63 At 307.64 At 307-308.Submissions for Fletcher Steel[77] At the hearing, Mr Potter was prepared to respond immediately to the newargument based on Gama's claim being for interest on a debt.[78] Mr Potter observed Gama had not bought its claim in the arbitration as a debtclaim. Gama's claim was expressly for damages ("damages in the total amount of$2,464,810.63"), and Gama particularised as "damages" the items of direct loss anddamage which it had allegedly sustained.Discussion[79] The arbitrator was required to determine Gama's claim for interest upon thebasis of Gama's claim as pleaded. It was a claim for interest upon what Gama assertedin its pleadings to be damages. A party is bound by its pleadings unless and until suchpleadings are amended. Gama did not seek to amend the pleading.[80] In these circumstances it is not arguable that the arbitrator erred in law byfailing to treat Gama's claim as a claim for interest on a debt.[81] There is a further obstacle to Gama's reliance upon Jervis v Harris.65 There,the Court of Appeal was dealing with a claim for reimbursement of sums actually spentby a landlord in carrying out repairs. Millett LJ's finding that the claim in that casewas for a debt arose from the fact that there was a definite sum of money fixed by theagreement between the parties (which became payable the moment the landlordincurred the costs). There was nothing more that the landlord was required to prove.66[82] Such is not the situation in this case where the rule in Joyner v Weeks applies.[83] Accordingly, even had Gama brought its claim alternatively in debt, thearbitrator would have been correct to reject that characterisation.65 Jervis v Harris, above n 62.66 See, at 308.[84] There was no arguable error involved in the arbitrator's treating Gama's claimas one for damages rather than debt (when considering whether cl 5.1 of the leaseapplied).[85] That leaves for consideration the broader argument identified by Mr Forbes inhis initial written submissions for Gama. That is the argument that because paymentof compensation for breach of repair covenants was specifically provided for in thelease then the moneys payable were "payable hereunder" in terms of cl 5.[86] The arbitrator determined that matter in accordance with authority.67 Thedecision of this Court in Puhinui Farms is directly on point.68 The explanation ofPotter J — that her Honour did "not consider the meaning or intent of cl 7.4 extendsto include an amount of damages which is required to be assessed by the Court" — islikely to be generally applicable in New Zealand where (as in this case) the rule inJoyner v Weeks applies.69 As Mr Potter noted in his submissions, counsel for Gamawere unable to point to any contrary authority in New Zealand.[87] Gama has not met the threshold for leave to appeal on this point. Leave willbe declined.Question 7: did the arbitrator err in failing to make a decision as to whether cl 5.1applied to amounts payable by Fletcher Steel for outgoings under cl 13.1 and the Firstand Second Schedules to the lease?[88] This proposed question is dealt with at [67] above. For the reasons there stated,leave will not be granted in relation to it.67 See footnote 48 above.68 Puhinui Farms Ltd – interest on damages judgment, above n 53.69 At [12].Question relating to default interest payable on landlord's repair costsQuestion 8: Did the arbitrator err in holding that interest payable under cl 14.1 ofthe lease only where the repairs required under a repair notice given by the landlordhad been effected by the landlord during the lease term and so this clause does notapply to damages claimed for repair works undertaken after the lease has terminated?[89] Clause 14.1 of the lease provides for the landlord's entry upon the premises toexecute repair works which the tenant has failed to undertake. It provides:14.1 IF default shall be made by the Tenant in the due and punctualcompliance with any repair notice given by the Landlord pursuant tothis lease, or if any repairs for which the Tenant is responsible requireto be undertaken as a matter of urgency then without prejudice to theLandlord's other rights and remedies expressed or implied theLandlord may by the Landlord's employees and contractors with allnecessary equipment and material at all reasonable times enter uponthe premises to execute such works. Any moneys expended by theLandlord in executing such works shall be payable by the Tenant tothe Landlord upon demand together with interest thereon at the defaultinterest rate from the date of expenditure to the date of payment.[90] The arbitrator found that Gama had issued a valid repair notice under cl 14.1.70The arbitrator nevertheless found Gama did not have a right to default interest undercl 14.1, upholding Fletcher Steel's "strongest argument", namely that no work wasdone by Gama under the clause 14.1 procedure.71The arbitrator's decision[91] Fletcher Steel, relevantly to the proposed question, made two submissions tothe arbitrator. Those were that:(a) not all of Gama's claim falls within the repair notice; and(b) no work was done by Gama under the cl 14.1 procedure.72[92] The arbitrator found (without doubt) some of the items claimed by Gama werenot within the repair notice — implicitly that was because the arbitrator accepted that,70 Award, above n 2, at [87]–[97], [319]–[320].71 At [322]–[323].72 At [319].on the evidence, most of the items claimed by Gama were not completed during theterm of the lease.73[93] The arbitrator found Gama had done no work under the cl 14.1 procedure. Heexplained that finding by setting out the closing submissions made on behalf ofFletcher Steel and then adopting them:322. Fletcher Steel's strongest argument in relation to clause 14.1 of theLease is its fourth argument, viz that no work was done by Gamaunder the clause 14.1 procedure. Its argument in this respect is wellput in paragraphs 15.3-15.6 of its Closing Submissions15.3 Clause 14.1 does not (unlike clause 5.1) deal primarily with defaultinterest. Its main function is to provide for a specific procedure,whereby "the Landlord may by the Landlord's employees andcontractors with all necessary equipment and material at allreasonable times enter upon the premises to execute" certain works.15.4 Clause 14.1 is therefore a self-help mechanism, allowing thelandlord to come in and do what the tenant has failed to do. This isa procedure that can only apply during the term of the lease. Afterthe lease ends, of course, the landlord enjoys the full right to enterthe property and do whatever it wants, so the permission providedby the clause would be redundant.15.5 If the landlord exercises its rights under clause 14.1, then defaultinterest is payable on the monies expended by it "in executing suchworks". But the amounts claimed by Gama in this case were notincurred by it pursuant to the clause 14.1 procedure. There is somedebate about whether Fletcher Steel denied Gama access to theproperty, in breach of the lease, or whether the works were deferredby mutual arrangement or by necessity (with Gama reluctantlyacquiescing). But what is not in dispute is that most of the items nowclaimed were not completed by Gama during the term of the lease.15.6 Clause 14.1 can therefore have no application to those works. Gamais not claiming costs that it incurred under the clause 14.1procedure. Costs incurred under that procedure would be liquidatedamounts arising for payment by the tenant during the lease term,and so appropriately clause 14.1 provides for default interest to bepaid on. them. But clause 14.1 does not apply to a damages claimfor disputed works undertaken by the landlord after the end of thelease.323. That clause 14.1 has the meaning argued for by Fletcher Steel is clearwhen one considers the plain wording of the clause.73 At [321]–[322].Submissions for Gama[94] For Gama, Mr Forbes first noted the arbitrator had determined that there is a"temporal limitation" to cl 14.1, namely that the right to recovery in terms of cl 14.1applies only such work as is completed during the term of the lease.[95] Mr Forbes submitted such a construction of cl 14.1 is incorrect. He submitsthe right to default interest under cl 14.1 arises whenever the lessor has had to incurexpenses to repair the premises after the tenant had failed to comply with a notice todo so.[96] Mr Forbes further submitted the lessor's right under cl 14.1 to enter thepremises to effect the repairs during the term of the lease (whether after the lessee'sfailure to comply with the repair notice or in the case of emergency) does not qualifythe right to default interest. Mr Forbes submitted the entitlement to enter the premisesis an additional right of the landlord in order to enable the landlord to have the repairsdone during the course of the lease. He submits it is unnecessary that the landlordexercise the right of re-entry for default interest to become payable under cl 14.1. MrForbes submits the cl 14.1 entitlement in relation to moneys expended "in executingsuch works" is not restricted to works executed as a result of the exercise of the rightto enter and repair or otherwise during the term of the lease.[97] In his oral submissions, Mr Forbes emphasised (regardless of the time at whichGama entered the premises), it was clearly the case that Gama had entered the premisesand carried out works. If the "temporal limitation" does not apply, then Gama oughtto have been found entitled to default interest by reason of cl 14.1.Submissions for Fletcher Steel[98] Mr Potter, for Fletcher Steel, observed that the arbitrator had heard detailedevidence as to the correspondence and negotiations which followed Gama's repairnotice. The evidence in that regard is touched upon in the arbitrator's quotation at[322] of the award where reference is made to the debate (implicitly in the evidence)as to whether Fletcher Steel denied Gama access to the property (in breach of the lease)or whether the works were deferred by mutual agreement or by necessity (Gamareluctantly acquiescing). The arbitrator then went on to find (adopting Fletcher Steel'ssubmissions) that Gama was not claiming costs which it had incurred under the cl 14.1procedure, it not being disputed that most of the items claimed were not completed byGama during the term of the lease.[99] Mr Potter submitted, as the arbitrator's decision was a factual determination,there is no question of law which could be the subject of appeal.[100] To the extent that the arbitrator's construction of cl 14.1 involves the "temporallimitation" referred to by Mr Forbes, Mr Potter noted counsel for Gama have not citedany authority to support an interpretation contrary to that of the arbitrator, who (at[323] of the award) relied for his construction upon "the plain wording of the clause".Discussion[101] The predominant finding which led the arbitrator to not apply the defaultinterest rate pursuant to cl 14.1 is a factual finding that Gama was not claiming costsit had incurred under the cl 14.1 procedure. It is clear from the submissions quoted bythe arbitrator (at [322] of the award) that he accepted as a matter of fact that Gama(for whatever reason) had not exercised its entitlement to go on to the property to effectrepairs (at least in relation to most of the items claimed). In other words, Gama'srepair of those items was effected in its capacity as owner of the premises (unaffectedby any lease) rather than as a landlord entering while the term of the lease subsisted.[102] That was a factual determination available to the arbitrator whether or not heaccepted Gama's "temporal limitation" submission.[103] Even had the "temporal limitation" construction constituted an indispensablepart of the arbitrator's reasoning, I am not satisfied that the discretion to grant leaveshould be exercised in relation to the question of interpretation involved in this case.The present case, in relation to this interest point, is substantially fact-specific. Therehas been no indication that the construction of the specific clause is a matter whichhas previously caused issue or created the need for legal precedent. There are nostrong indications of an error. The arbitrator, a very experienced arbitrator in the area,viewed the construction which he adopted as flowing from "the plain wording of theclause". Such accords with my own independent assessment and reading of cl 14.1.Notwithstanding Mr Forbes' submissions as to the significance of the reference backin cl 14.1 by the use of the specific words "such works", the plain meaning is that thedefault interest rate will be claimable by the landlord under cl 14.1 if there have beenworks carried out in terms of cl 14.1 (that is, leaving aside urgency matters) wherethere have been the four cumulative steps:(a) default by the tenant in relation to repairs; and(b) a repair notice given by the landlord; and(c) entry upon the premises pursuant to the repair notice; and(d) moneys expended executing repair works covered by the repair notice.[104] If repairs are carried out by the landlord after the expiry of the term of the lease(that is, they are repairs carried out quite simply by the owner of the property and notby a landlord pursuant to a specific right under a lease to enter the premises in orderto carry out repairs) the plain meaning of cl 14.1 is that the works (subsequently carriedout) are not "such works" as are referred to in cl 14.1.[105] Gama has not established this is an appropriate case in which to grant leave onthe proposed question relating to cl 14.1 of the lease.Questions relating to the correct test and onus of proof under cl 8.1(a)Question 9: Did the arbitrator err in holding, in respect of the rear warehouse floorthat the correct test under clause 8.1(a) is only the extent of fair wear and tear, asopposed to fair wear and tear arising from reasonable use?Question 10: Did the arbitrator err in holding, in respect of the rear warehouse floorthat the onus of proof was on Gama, as the landlord, to show the damage claimed didnot amount to fair wear and tear.The questions[106] The two questions proposed by Gama in relation to fair wear and tear relate toclaims made by Gama for the cost of works and fees in dealing with the floor cracksin the rear warehouse on the premises. Clause 8.1 of the lease provided for themaintenance and care of the premises, imposing obligations on Fletcher Steel astenant.[107] Clause 8.1(a) of the lease relevantly provides:8.1 THE Tenant shall be responsible to:Maintain the premises(a) In a proper and workmanlike manner and to the reasonablerequirements of the Landlord keep and maintain the interior of thepremises including the Landlord's fixtures and fittings in the sameclean order repair and condition as they were in at thecommencement of this lease and will at the end or earlierdetermination of the term quietly yield up the same in the likeclean order repair and condition. In each case the Tenant shall notbe liable for fair wear and tear arising from reasonable use [108] At the arbitration, it was common ground between the parties that the "fairwear and tear" exception in cl 8.1(a) applied to the interior of the rear warehouse.74[109] The arbitrator dismissed Gama's claims in relation to the rear warehouse floorcracks.75[110] Arising from this ruling, Gama proposes the two questions identified above inrelation to cl 8.1(a).The arbitrator's findings[111] The arbitrator found Gama's claim for damages for breach of the cl 8.1(a)maintenance covenant must fail by reference to seven identified matters, summarisedas:76(a) the parties' acceptance that the question of the extent of fair wear andtear was relevant on this issue;74 At [68].75 At [292]–[296].76 At [294].(b) the fact that neither the building surveyors nor the engineers were ableto agree on the extent to which the damage was the result of fair wearand tear;(c) the conflicting evidence of the building surveyors;(d) the conflicting evidence of the engineers;(e) answers given by Stephen Barrow, a structural engineer called byGama;(f) similar answers given by Andrew Hall and Samuel Polson, engineerscalled respectively by Gama and Fletcher Steel;(g) the onus of proof upon Gama.Submissions for Gama[112] The relevant exceptional category of condition under cl 8.1(a) is expressly "fairwear and tear arising from reasonable use".[113] Mr Forbes submitted the arbitrator had erred in treating the exception as being"fair wear and tear" rather than "fair wear and tear arising from reasonable use". Thissubmission appeared to flow from the arbitrator's reference to "the extent of fair wearand tear".77[114] Mr Forbes further submitted the arbitrator erred in terms of onus. Mr Forbessubmitted it was for the tenant to prove that the condition of the premises falls withinthe fair wear and tear exception. Mr Forbes cited the decision of the House of Lordsin Regis Property Co Ltd v Dudley.78 In particular, Mr Forbes relies upon the judgmentof Viscount Simonds in which his Lordship adopted an earlier statement made byTalbot J in relation to a reasonable wear and tear exception, observing: "If any want77 At [294a.] and [294b.]78 Regis Property Co Ltd v Dudley [1958] 3 All ER 491 (HL).of repair is alleged and proved in fact, it lies on the tenant to show that it comes withinthe exception".79Submissions for Fletcher Steel[115] For Fletcher Steel, Mr Potter noted, in relation to the rear warehouse floor, only$41,000 as in issue. He submitted there was no true precedent value in either of theproposed questions of law. He further submitted Gama had not established a stronglyarguable case as to an error of law.[116] In relation to the extent of the fair wear and tear exception, Mr Potter observedthe references by the arbitrator (at [294]) in his award fall to be read in the context ofthe arbitrator's earlier discussion of "fair wear and tear" at [67]–[71] of the award.There, the arbitrator, having set out in full the provisions of cl 8.1(a) including thewords "arising from reasonable use", quoted extensively from the commentary inHinde, McMorland & Sim Land Law in New Zealand, which in turn quoted therelevant passage concerning the meaning of "reasonable wear and tear" in Haskell vMarlow.80[117] The arbitrator made findings (at [71] of the award) in relation to fair wear andtear, including as to the reasonableness of Fletcher Steel's use of the premises.[118] Mr Potter further noted, in the arbitrator's subsequent review of the surveyor'sevidence, the building surveyors have expressly acknowledged that the tenant was notresponsible for fair wear and tear arising from reasonable use.[119] Turning to the onus of proof, Mr Potter submitted it was incorrect to suggest,as Gama asserts, that the arbitrator misstated the onus of proof.[120] Mr Potter referred to the arbitrator's reliance (at [294d.] on the expert evidence,particularly that of the engineers. The four engineers had agreed that there wasdamage beyond fair wear and tear and that cost of repairs needed to be shared. The79 At 498, citing Haskell v Marlow [1928] 2 KB 45 at 58. See also Hinde, McMorland & Sim LandLaw in New Zealand, above n 18, at [11.121], footnote 8.80 McMorland, Hinde, McMorland & Sim Land Law in New Zealand, above n 18, at [11.121], citingHaskell v Marlow, above n 79, at 59.engineers, in their joint report, recorded they could not agree on the percentage ofdamage that would be considered fair or unfair.[121] Mr Potter noted (as recorded by the arbitrator) that Fletcher Steel had paid$86,000 (plus GST) of the $127,488 (plus GST) claimed for the repair works.81[122] The arbitrator further recorded (at [294e.] passages from the evidence ofGama's witness, Mr Barrow, in which the witness stated that it was difficult to judgehow much repair cost related to matters beyond fair wear and tear.[123] Mr Potter submitted that the arbitrator's determination that Gama's balanceclaim ($41,488) beyond the $86,000 already paid by Fletcher Steel must fail wasinherently factual, as reflected in the detail of evidence reflected by the arbitrator at[294c.–e.] of the award. Mr Potter, acknowledging the arbitrator had gone on (at[292g.] of the award) to state that "the onus of proof is on Gama", submitted thathaving regard to the expert evidence reviewed by the arbitrator, the arbitrator'sdetermination was justified whether or not his concluding observation as to the onusof proof involved an error.Discussion[124] In relation to the extent of the fair wear and tear exception, I accept Mr Potter'ssubmission that the arbitrator did not (as submitted by Mr Forbes) exclude the"reasonable use" qualification from the fair wear and tear exception. When the awardis read as a whole, including the important discussion at [68]–[71], it is clear that thearbitrator applied the relevant aspects of cl 8.1(a) in accordance with the full test andnot one which excluded the "reasonable use" qualification.[125] In relation to the onus of proof, I find it uncertain whether (at [294g.] of theaward) the arbitrator was referring (incorrectly) to the onus of proving that a want ofrepair falls within the fair wear and tear exception or was instead referring moregenerally to the onus upon Gama to establish the level of repair expenses it hadincurred. I view it as arguable, on the face of the award, that the intended meaning of81 Award, above n 2, at [292] and [295].the onus of proof statement was in error. But in the context of this leave application,that is not decisive. For the reasons developed by Mr Potter, this is not a case in whichit would be appropriate to grant leave to appeal on this point. There was a basis onthe evidence for the finding made by the arbitrator. In terms of the considerationsidentified in Doug Hood,82 the question involved is appropriately viewed as a one-offpoint, of little precedent value. As counsel both recognise, the onus of proof iscorrectly identified in the judgment of Talbot J in Haskell v Marlow.83 If the award iscorrectly interpreted to misstate the onus of proof, it is not likely in any way to unsettlethe established understanding of the law.[126] Gama has not established this is an appropriate case in which to grant leaverelating to the final two questions.Outcome[127] The application will be dismissed. Costs must follow the event. There is acertificate for the reasonable travelling and accommodation costs of counsel (with thecertificate for second counsel). In the event that the parties cannot agree on thequantum costs and disbursements, the quantum will be determined by the Court on theprogress, the respondent to file its memorandum first and the applicant to file withinfive working days thereafter (four page limit in each case).Orders[128] I dismiss the application.[129] I order the applicant to pay to the respondent the costs and reasonabledisbursements of the proceeding, with the quantum reserved.Osborne JSolicitors:A J Forbes QC, ChristchurchCorcoran French, ChristchurchMeredith Connell, Auckland82 Doug Hood, above n 5.83 Haskell & Marlow, above n 79.