WHAI RAWA RAILWAY LANDS LP v BODY CORPORATE 201036 [2023] NZCA 490

WHAI RAWA RAILWAY LANDS LP v BODY CORPORATE 201036 [2023] NZCA 490 [11 October 2023]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA171/2023[2023] NZCA 490BETWEEN WHAI RAWA RAILWAY LANDS LPAppellantAND BODY CORPORATE 201036RespondentCourt: Brown and Wylie JJCounsel: D M Salmon KC, R M Keane and S G T Ma Ching for AppellantJ Heatlie and J P Wood for RespondentJudgment:(On the papers)11 October 2023 at 10.30 amJUDGMENT OF THE COURTA The application for leave to appeal is granted.B Costs on the application are reserved pending the determination of theappeal.____________________________________________________________________REASONS OF THE COURT(Given by Brown J)Introduction[1] The respondent (the Body Corporate) is the lessee of the several unitscomprising the Parnell Terraces located at the corner of Ronayne Street and The Strandin Parnell, Auckland. Whai Rawa Railway Lands LP (Whai Rawa) is the presentground lessor of the Parnell Terraces under a 150-year ground lease which commencedon 2 August 1996. The rental payable is calculated at 6 per cent per annum of thevalue of the unimproved land. The Body Corporate brought proceedings with theobject of varying the amount of ground rent payable to Whai Rawa, seeking adeclaration that the rental clause is harsh or unconscionable.[2] Whai Rawa filed an application to strike out the claim and, in the alternative,an application for summary judgment against the Body Corporate. Those applicationswere dismissed in a judgment of Associate Judge Taylor dated 7 April 2022.1Whai Rawa's application to the High Court for leave to appeal under s 56(3) of theSenior Courts Act 2016 was declined.2 Whai Rawa now applies to this Court unders 56(5) for leave to appeal.The High Court judgment[3] Whai Rawa submitted that the High Court had no jurisdiction to vary the leaseby way of declaratory relief. It contended that the Body Corporate's claim wasuntenable and reliant on a misapplication of provisions in the Residential TenanciesAct 1986 (RTA).3 It submitted that in enacting the "harsh and unconscionable"provision in s 78(1)(f) of the RTA, Parliament did not intend to empower theTenancy Tribunal to amend mechanisms for the agreement of rent in ground leasesbetween arm's-length parties.4 Whai Rawa also submitted that the relevant clause wasneither harsh nor unconscionable.5[4] The Body Corporate submitted that its claim was founded on the plain andunambiguous wording of the legislation, that the pleadings alleged the jurisdictionalfacts on which the claim was founded, and that the relevant factual allegations areeither uncontested or supported by the evidence of an appropriately qualified expert.Consequently it submitted there is a real issue to be tried and the claim ought toproceed to a full hearing.61 Body Corporate 201036 v Whai Rawa Railway Lands LP [2022] NZHC 700 [Substantivedecision].2 Body Corporate 201036 v Whai Rawa Railway Lands LP [2023] NZHC 389.3 Substantive decision, above n 1, at [39].4 At [40].5 At [41].6 At [47].[5] The judgment recorded that the parties' submissions dealt at length with therelevant sections of the Unit Titles Act 2010 (UTA) and the RTA.7 However the Judgereached the view that the scope of s 78 of the RTA, as imported into the UTA by s 176of that Act, should be determined at a substantive hearing and it was not a suitablequestion to be resolved in a strike-out or summary judgment context.8[6] The Judge concluded that Whai Rawa had not established that theBody Corporate's claims were speculative and without foundation, nor that they wereutterly baseless on the evidence. Whai Rawa had not shown that the Body Corporate'scause of action was untenable.9 The Judge summarised his conclusions in this way:10(a) as to the legal interpretation of the relevant provisions of the UTA andthe RTA, while the arguments lean in favour of [counsel forWhai Rawa's] submissions, the issue is not free from doubt and needsto be fully tested at a substantive hearing;(b) if the jurisdictional argument is determined in favour of theBody Corporate, whether the formula in the rental clause is harsh orunconscionable needs to be fully tested in a substantive proceeding.There is expert evidence before the Court as to the [Body Corporate's]view, and this issue is unable to be resolved without hearing opposingviews; and(c) the Body Corporate claims that the issue of whether the lease wasentered into between truly arm's-length parties goes to the issue ofwhether the rental clause in the lease is harsh or unconscionable.This issue needs to be dealt with through discovery as part of thesubstantive proceeding.Relevant principles[7] The requirement for leave in s 56(3) of the Senior Courts Act serves as afiltering mechanism to ensure that unmeritorious appeals of interlocutory orders, orappeals of interlocutory orders of no great significance to either the parties or moregenerally, do not unnecessarily delay the proceedings in which the orders were made.11In Greendrake v District Court of New Zealand this Court recognised the followingconsiderations as being relevant on an application for leave to appeal:127 At [58].8 At [77].9 At [94].10 At [93].11 Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13].12 Greendrake v District Court of New Zealand [2020] NZCA 122 at [6].(a) a high threshold exists;(b) the applicant must identify an arguable error of law or fact;(c) the alleged error should be of general or public importance warrantingdetermination or otherwise of sufficient importance to the applicant tooutweigh the lack of general or precedential value;(d) the circumstances must warrant incurring further delay; and(e) the ultimate question is whether the interests of justice are served bygranting leave.Whai Rawa's submission[8] While Whai Rawa accepts that the High Court correctly identified the relevanttests for strike out and summary judgment,13 it contends that the Court misdirecteditself as to the correct approach under those tests by accepting that an arguableinterpretation of the relevant legislative provisions provided a basis for decliningstrike out and requiring that a trial proceed. It submits that it is well established thatthe Court's jurisdiction to strike out is not excluded by the need to decide difficultquestions of law requiring extensive argument.14[9] While acknowledging that the Court should be slow to strike out claims in adeveloping area of the law, Whai Rawa submits that its application raised "two simplepoints" that needed to be considered:(a) whether an application under s 78(1)(f) of the RTA was available to theBody Corporate; and(b) whether s 78(1)(f) could provide the relief sought.13 Substantive decision, above n 1, at [53]–[56].14 Citing Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].[10] Whai Rawa submits that the Court erred in law or principle when concludingthat:(a) there were policy considerations relevant to the meaning of the UTAand RTA that needed to be considered at a substantive trial;(b) as such it could not determine at the strike-out stage whether theBody Corporate's pleading disclosed a "unit title dispute" entitling it toseek relief under s 78(1)(f); and(c) it could not determine at the strike-out stage whether, if theBody Corporate's factual allegations were presumed true, s 78(1)(f)permitted the type of orders sought.It submits that any "policy considerations" were established when the UTA wasenacted by Parliament and that such considerations do not depend on the parties,discovery, evidence or a trial.[11] In its submissions Whai Rawa raises a new point, which is not included in thedraft notice of appeal annexed to its application, to the effect that there is no abilityfor the Body Corporate to obtain the relief it seeks because the proceeding relates tothe title of land, a matter in respect of which the Tenancy Tribunal has no jurisdiction.The Body Corporate's submission[12] Drawing attention to [68] of the substantive judgment, the Body Corporateemphasises that in the High Court Whai Rawa leaned heavily on the theory that theground lease was a commercial bargain struck by parties at arm's length, and putforward specific policy considerations that it said the Court needed to consider.15The Body Corporate argues that the Judge fairly and rationally exercised his discretionto defer to a trial the interpretation of the legislation in view of the policyconsiderations which Whai Rawa had advanced. The Body Corporate characterisesWhai Rawa's leave application as an attempt to relitigate its failed applications in the15 Substantive decision, above n 1.High Court, observing that Whai Rawa has reformulated its arguments to sanitise themof the policy considerations which it previously argued were relevant to a properinterpretation of s 78(1)(f).[13] The Body Corporate submits that the decision to defer the interpretation of thelegislation was not an error of law or principle. It observes that on an application forstrike out or summary judgment the Court "may" determine complex issues of law,but is not required to do so. The Court may, in its discretion, leave those issues to bedetermined at the substantive hearing where it considers it appropriate to do so.[14] With reference to Whai Rawa's new argument that the dispute relates to thetitle of land, the Body Corporate submits that, that issue not having been raised or dealtwith by the High Court, it cannot constitute an error relevant to the grant of leave.It disputes the proposition that the proceeding is about the title of land but argues that,in any event, that consideration does not affect the High Court's jurisdiction to hearunit title disputes under s 173 of the UTA.Discussion[15] Soon after the introduction of the summary judgment procedure in 1986,this Court signalled that the procedure was apt for addressing claims that turned onquestions of law. In Pemberton v Chappell16 this Court said:Where the only arguable defence is a question of law which is clear-cut anddoes not require findings on disputed facts or the ascertainment of further factsthe Court should normally decide it on the application for summary judgment,just as it will do so on an application to strike out a claim or defence beforetrial on the ground that it raises no cause of action or no defence [16] One of the authorities cited in support of that proposition was European AsianBank AG v Punjab & Sind Bank (No 2), where Robert Goff LJ stated:17 this court has made it plain that it will not hesitate, in an appropriate case,to decide questions of law under [the summary judgment provision], even ifthe question of law is at first blush of some complexity and therefore takes"a little longer to understand". It may offend against the whole purpose of[the summary judgment provision] not to decide a case which raises a clear-cutissue, when full argument has been addressed to the court, and the only result16 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 4.17 European Asian Bank AG v Punjab & Sind Bank (No 2) [1983] 1 WLR 642 (CA) at 654.of not deciding it will be that the case will go for trial and the argument willbe rehearsed all over again before a judge, with the possibility of yet anotherappeal The approach taken in Pemberton was reiterated only days later in International Ore& Fertilizer Corporation v East Coast Fertiliser Co Ltd.18[17] However that approach is subject to the qualification most recently explainedby Elias CJ in Sandman v McKay:19But where the cause of action is novel or where established principle must beapplied to novel circumstances, peremptory determination in the absence offull understanding of context established at a hearing of the facts is often notappropriate. A court may refuse summary judgment if amendment to thestatement of claim reasonably in prospect would raise a cause of action uponwhich the court is not satisfied the plaintiff could not succeed.[18] It is common ground that the Body Corporate's claim is novel. However thisis not a claim in tort or in equity where the factual matrix provides important contextfor the decision whether a new duty or obligation should be recognised. Rather it is aclaim which has statute law as its launching pad, indeed the interaction of two statutes.Unless the Body Corporate can establish that the statutes in combination conferjurisdiction on the High Court to entertain its claim and grant the relief it seeks, itsclaim must founder. It is that threshold question that is the target of Whai Rawa'sapplications for strike out or summary judgment. That issue is one of statutoryinterpretation. If it is resolved in Whai Rawa's favour that would be the end of theproceeding.[19] The Body Corporate submits that discovery and a trial are necessary,emphasising that there are disputed facts which have been amplified as a consequenceof the amended statement of claim filed subsequent to the substantive decision.In Select 2000 Ltd v ENZA Ltd this Court allowed an appeal against a decision that aclaim for breach of statutory duty was unsuitable for summary judgment.20In response to a submission that the factual background created by evidence at trialwould be useful "backlighting", this Court considered that was more likely to distort18 International Ore & Fertilizer Corporation v East Coast Fertiliser Co Ltd [1987] 1 NZLR9 (CA) at 16.19 Sandman v McKay [2019] NZSC 41, [2019] 1 NZLR 519 at [113] (footnotes omitted).20 Select 2000 Ltd v ENZA Ltd [2002] 2 NZLR 367 (CA).what must be an objective and rigorous statutory construction exercise.21 We considerthat the same approach is apt in this case.[20] As Whai Rawa's submissions correctly observe, there is no clear authority onthe interpretation, and more particularly the interaction, of the material sections of theUTA and RTA. In these circumstances we consider that the Judge should havedetermined the statutory interpretation issue. It is an issue which potentially hasbroader significance than the present case. Whai Rawa submits that findings on thescope and meanings of the relevant provisions of the UTA and RTA are likely to havesignificant ramifications for ground lessors and lessees connected with unit titledevelopments throughout New Zealand. Consequently we consider that the highthreshold recognised in Greendrake is crossed.Result[21] The application for leave to appeal is granted.[22] Costs on the application are reserved pending the determination of the appeal.Solicitors:Lee Salmon Long, Auckland for Appellant21 At [27].