THE PARTY BUS COMPANY LIMITED V THE ATTORNEY-GENERAL COA CA24/2012

THE PARTY BUS COMPANY LIMITED V THE ATTORNEY-GENERAL COA CA24/2012 [16 May 2012]IN THE COURT OF APPEAL OF NEW ZEALANDCA24/2012[2012] NZCA 194BETWEEN THE PARTY BUS COMPANY LIMITEDApplicantAND THE ATTORNEY-GENERALRespondentHearing: 8 May 2012Court: Arnold, Ellen France and White JJCounsel: S R Carey for ApplicantU R Jagose and D L Harris for RespondentJudgment: 16 May 2012 at 3.00pmJUDGMENT OF THE COURTA The application for leave to appeal is dismissed.B The applicant must pay the respondent costs for a standard application on a band A basis together with usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by White J)[1] The applicant seeks leave to appeal to this Court under cl 5(6) of sch 2 of the Arbitration Act 1996 against a decision of Miller J in the High Court1 dismissing its application to set aside an arbitral award of the Hon Peter Salmon QC dated 7 February 2011. The arbitrator decided that four buses owned by the applicant hadbeen "ordered off the road" by a "Vehicle Safety Officer" and that, as a consequence,1 The Party Bus Company Ltd v Attorney-General HC Auckland CIV-2011-404-1319,30 September 2011.the Ministry of Education was justified in terminating a contract which it had with the applicant for the provision of school bus services.[2] The application to this Court is necessary because Miller J in the High Court also declined the applicant leave to appeal.2[3] There is no dispute that, to succeed in its application, the applicant must establish that there is a question of law capable of serious argument in a case involving public or private interest of sufficient importance to outweigh the cost and delay of a further appeal.3[4] The single question of law identified by Mr Carey in his submissions for theapplicant is whether the four buses in question were "ordered off the road by aVehicle Safety Officer of the New Zealand Police Commercial Vehicle Inspection Unit" for the purposes of cl 87.3 of the contract between the applicant and the Ministry of Education.[5] Mr Carey submitted that if cl 87.3, which is a termination clause, had been given a strict construction by the arbitrator, as required by authorities and texts which he cited,4 the answer to the question would have been "no". The arbitrator therefore erred in answering the question "yes". In support of this submission Mr Carey relied on the fact that, while the ordering off decisions had been made by a Vehicle Safety Officer, notice of the decisions had been conveyed to the applicant by a police constable who was not a Vehicle Safety Officer. Mr Carey said that this meant that there had not been strict compliance with cl 87.3 because the buses had not been ordered off by a Vehicle Safety Officer.2 The Party Bus Company Ltd v Attorney-General HC Auckland CIV-2011-404-1319,16 December 2011.3 Downer Construction (NZ) Ltd v Silverfield Developments Limited (2008) 2 NZLR 591 (CA) at[29]–[35]; and Todd Petroleum (Mining) Company Ltd v Shell (Petroleum Mining) CompanyLimited [2010] NZCA 580 at [10].4 Brown and Doherty v Whangarei County Council [1988] 1 NZLR 33 (HC) at 36; WeightWatchers International Inc v Hansells (NZ) Ltd HC Auckland CP60/93, 22 November 1993;Gerald McMeel The Construction of Contracts (2nd ed, Oxford University Press, Oxford, 2011)at [23.06]; and Kim Lewison The Interpretation of Contracts (3rd ed, Sweet and Maxwell,London, 2004) at [16.14].[6] Mr Carey also submitted that the severity of the consequences to the applicant, which lost a significant source of income (upwards of $10 million, excluding renewals), added strength to the call for a strict construction of cl 87.3 and that the burden of proving that the vehicles were ordered off the road by a Vehicle Safety Officer lay with the respondent rather than the applicant.[7] Mr Carey then submitted that the question of law was not only of significant interest to the applicant but was also of interest to the Ministry of Education and others in New Zealand who were parties to similar standard form contracts. The private and public interests outweighed the cost and delay of an appeal.[8] The relevant part of cl 87 of the contract between the applicant and the Ministry of Education provided that the Ministry might terminate the contract immediately where:87.3 A Vehicle is ordered off the road by a Vehicle Safety Officer of the New Zealand Police Commercial Vehicle Inspection Unit or Vehicle Standards Adviser/Investigator of the New Zealand Transport Agency for any of the four key safety features of brakes, tyres, suspension or steering.[9] The arbitrator found in his award that, as a matter of fact, the four buses had been ordered off by a Vehicle Safety Officer. In our view the fact that the VehicleSafety Officer's ordering off decisions were conveyed to the applicant by a policeconstable rather than the Vehicle Safety Officer does not mean that there was not strict compliance with cl 87.3. We do not accept that the means of conveyance of the decision detracted from the fact of compliance, especially as Mr Carey acknowledged, quite properly, in argument that, in terms of the contract, the Vehicle Safety Officer might have conveyed the decision orally to the applicant.[10] In these circumstances no question of law for determination has been identified.[11] Our conclusion is also reinforced by the following further factors:(a) Mr Carey did not rely on the provisions of s 115(1)(b) of the Land Transport Act 1998 and cl 4A of the Land Transport (Ordering aVehicle off the Road) Notice 1999 to support his submission. He relied solely on the terms of cl 87.3 of the contract.(b) Lewison's The Interpretation of Contracts, the text relied on by Mr Carey, states that it is important to distinguish between"substantive conditions" precedent to the exercise of a terminationclause, for example, the occurrence of an event such as the breach of an obligation, and conditions related simply to the communication of the termination. The former "must be fulfilled precisely", while thelatter are addressed by applying the "ordinary principles of interpretation".5 If this distinction is accepted, then in this case there has been precise fulfilment of the substantive condition precedent to the exercise of the termination clause, namely an ordering off decision by a Vehicle Safety Officer, with the communication of the termination through the means of a police constable.(c) Mr Carey's submission would have required the court to read intocl 87.3 words which are not there, namely "orally or by a notice signed by a Vehicle Safety Inspection Officer". We do not consider that the applicant would succeed in establishing that a further requirement of this nature should be implied in the clause.(d) The authorities relied on by Mr Carey to support a strict construction of a termination clause need to be read today in light of later authorities which support the proposition that such clauses should be interpreted in the normal way.6[12] The application for leave to appeal is therefore dismissed and the applicant is ordered to pay costs for a standard application on a band A basis to the respondent together with usual disbursements.5 Kim Lewison The Interpretation of Contracts (5th ed, Sweet and Maxwell, London, 2011) at[17.13].6 Mannai Investment Company Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 (HL); ANZNational Bank Ltd v Tower Insurance Ltd [2010] NZCA 267, (2010) 16 ANZ Insurance Cases61-849 at [27]–[36]. See also John Burrows, Jeremy Finn and Stephen Todd Law of Contract inNew Zealand (4th ed, LexisNexis, Wellington, 2012) at [7.3.1].Solicitors:Kumeu-Huapai Law Centre, Kumeu for ApplicantCrown Law Office, Wellington for Respondent