WHANGAREI INDUSTRIAL PARK LTD v WHANGAREI DISTRICT COUNCIL [2018] NZHC 805

WHANGAREI INDUSTRIAL PARK LTD v WHANGAREI DISTRICT COUNCIL [2018] NZHC 805 [26 April2018]IN THE HIGH COURT OF NEW ZEALANDWHANGAREI REGISTRYI TE KŌTI MATUA O AOTEAROAWHANGĀREI TERENGA PARĀOA ROHECIV-2017-488-000118[2018] NZHC 805IN THE MATTER of an application under the Arbitration Act1996 for leave to appealBETWEEN WHANGAREI INDUSTRIAL PARKLIMITEDApplicantAND WHANGAREI DISTRICT COUNCILRespondentHearing: 26 April 2018Appearances: J Browne for the ApplicantL McEntegart and G Mathias for the RespondentJudgment: 26 April 2018JUDGMENT OF WOOLFORD J[Re: Application for leave to appeal]Solicitors / Counsel:Henderson Reeves Lawyers, WhangareiL McEntegart, AucklandThomson Wilson, Whangarei[1] Whangarei Industrial Park Ltd (the applicant) applies for leave to appealagainst an arbitral award. The application is opposed by the Whangarei DistrictCouncil (the respondent).Background[2] The respondent owns a property at 18 Kioreroa Road. The property is leasedto the applicant on a 21 year perpetually renewable ground lease. The lease is underthe provisions of the Public Bodies Leases Act 1969.[3] The parties were unable to agree on a new annual rental for the period from1 October 2015. Therefore, it was to be determined by arbitration. Each partyappointed an arbitrator. The arbitrators were unable to agree. Accordingly, the newrental was decided by an umpire.[4] The umpire decided the new rental should be $230,550 plus GST. The previousrental was $24,800 plus GST. I note the arbitrators' findings were, respectively, thatthe annual rental should be $187,866 plus GST and $236,500 plus GST.[5] The applicant seeks leave to appeal on four questions. I address these in turnafter setting out the relevant law.The Law[6] Clause 5 of sch 2 of the Arbitration Act 1996 provides for appeals on questionsof law, unless the parties agreed otherwise. It applies to the present case by way of s 6of the Arbitration Act. The Applicant requires leave to appeal under cl 5(1)(c).[7] An appeal may only be made in respect of a "question of law arising out of anaward". Clause 5(10) provides:(10) For the purposes of this clause, question of law—(a) includes an error of law that involves an incorrectinterpretation of the applicable law (whether or not the errorappears on the record of the decision); but(b) does not include any question as to whether—(i) the award or any part of the award was supported byany evidence or any sufficient or substantialevidence; and(ii) the arbitral tribunal drew the correct factualinferences from the relevant primary facts.[8] Questions of fact cannot be appealed. There is uncertainty as to whether mixedquestions of law and fact fall under "question of law" and are therefore appealable.1Mixed questions essentially involve the application of legal tests to facts.[9] Clause 5(2) addresses whether leave should be granted:(2) The High Court shall not grant leave under subclause (1)(c) unless itconsiders that, having regard to all the circumstances, thedetermination of the question of law concerned could substantiallyaffect the rights of 1 or more of the parties.[10] I am of the view that the threshold is met in the present case and the Court nowneeds to exercise its discretion to determine whether leave should be granted. Counselhave referred me to the Court of Appeal decision in Gold and Resource Developments(NZ) Ltd v Doug Hood Ltd as setting out the factors to be considered in exercising thatdiscretion.2 The "strength of the challenge / nature of the point of law" is said to bethe "most important" factor. The remaining factors, in no particular order, are:(a) How the question arose before the arbitrators;(b) The qualifications of the arbitrators;(c) The importance of the dispute to the parties;(d) The amount of money involved;(e) The amount of delay involved in going through the Courts;1 David AR Williams and Amokura Kawharu Williams & Kawharu on Arbitration (2nd ed,LexisNexis, Wellington, 2017) at [18.4.3] and Jack Davies and Jack Alexander "Appeals on mixedquestions under the Arbitration Act 1996" [2018] NZLJ 27.2 Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 (CA).(f) Whether the contracts provides for the arbitral award to be final andbinding; and(g) Whether the dispute before the arbitrators is international or domestic.[11] The Court is not required to give reasons for granting leave unless it thinksreasons are required in the circumstances.3 The Court must give reasons if it refusesto grant leave.4Question One[12] The first proposed question is:Did the umpire misdirect himself as to his task at paragraph 70 of the award?[13] Paragraph 70 of the award provides:The task I have to perform is to consider the respective arbitrator'ssubmissions that were based on the evidence heard at the hearing, along withthe supporting documentation, and arrive at a valuation neither higher norlower than these two submissions.[14] Regardless of the nature of this question, I am of the view that this ground ofchallenge has no merit. In my view, paragraph 70 is an unobjectionable summary ofthe umpire's duty under the lease, as set out in cl 10 of sch 1 of the Public BodiesLeases Act:5The duty of the umpire, on reference to him of any question, shall be toconsider the respective valuations of the 2 arbitrators in the matters in whichtheir valuations do not agree, and then to make an independent and substantivevaluation, and the last-mentioned valuation shall be the decision of the umpire;but in giving his decision on any question so referred to him the umpire shallin every case be bound to make a valuation not exceeding the higher and notless than the lower of the valuations made by the arbitrators respectively.Question Two[15] The second proposed question is:3 High Court Rules 2016, r 26.17.4 High Court Rules 2016, r 26.18.5 The umpire also quoted this clause at [10] of the award.Did the umpire, despite quoting clause 10 of schedule 1 to the Public BodiesLeases Act 1969, fail to make an independent and substantive valuation asrequired by that clause but instead selected a land value from the rangeadopted by the arbitrators?[16] This, in my view, is a mixed question of law and fact. But, again, regardlessof its nature, I do not consider there is any merit in this challenge. The umpire gave areasoned decision, which involved detailed consideration of the other arbitrators'decisions and the evidence before determining the rental. I am satisfied that he madean independent and substantive valuation.Question Three[17] The third proposed question is:In valuing the subject property, does clause 7(3) of Schedule B to the leaseallow one to take into account the increase in the profile of the area flowingfrom the presence of improvements on the subject property?[18] Clause 7(3) of sch B to the lease provides:In making the said valuation no account shall be taken of the value of thefollowing improvements of the said land: all buildings structures and erectionsnow or hereafter built constructed or erected.[19] The interpretation of the lease is a question of law.[20] The applicant says the presence of buildings, structures and erections on theproperty have improved the quality of the neighbourhood and hence increased theunderlying land value. It says, given the umpire's final rental is closer to thatcontended for by the respondent, the umpire must have "taken into account the generallift in the profile of the area occasioned by the improvements on the subject property".[21] The umpire specifically noted in paragraph 5, that "in making a valuation ofthe land for renewal no account shall be taken of all buildings, structures and erectionsnow or hereafter built constructed or erected".6 Further, the award does not refer tothe notion of land value increasing because of the quality of the neighbourhood, nor6 At [5] of the award.has such an increase in land value been established. In my view, it cannot be shownthat the umpire erred on this basis.[22] In any event, the interpretation of cl 7(3) advanced by the applicant seemssomewhat tenuous. The clause provides "no account shall be taken of the value of thefollowing improvements of the said land". An ordinary reading of this clause is thevaluations should be for the land excluding improvements; its value as if no buildingsor other improvements had been effected to it. It seems artificial to decrease the valueof the land because its value increased after buildings and other developmentsultimately resulted in improvements to the character of the neighbourhood.Question Four[23] The fourth proposed question is:Noting that the award ultimately determined the land value of the subjectproperty to be its rating valuation: Was the Tribunal right to introduce exhibit13 concerning the rating valuation [of $3,180,000] of the subject property intoevidence?[24] The applicant says the umpire erred in allowing this exhibit to be introducedas it is not relevant. It says the opinions of an unnamed valuer as to land value thatwas not called to give evidence cannot be relevant. It further says, "it is impossible tothink that the rating value of the subject property did not play a part" in the umpire'sdecision because he arrived at the same valuation.[25] In my view, this ground must also fail.[26] First, an arbitral tribunal generally has wide powers as to the admissibility ofevidence. Article 19(2) of sch 1 of the Arbitration Act provides:(2) Failing such agreement, the arbitral tribunal may, subject to theprovisions of this schedule, conduct the arbitration in such manner asit considers appropriate. The power conferred upon the arbitraltribunal includes the power to determine the admissibility, relevance,materiality, and weight of any evidence.[27] Second, the evidence appears relevant, especially as the witness wasaddressing rating valuations when it was introduced.[28] Third, the umpire clearly articulated the basis on which he arrived at the landvalue of $3,180,000.7 The reasoning was as follows:My assessment of the freehold land value is as follows:2.9604ha @110m2 $3,256,440LessPower easement/powerlines2,803m2 @110m2 x 50% $154,165$3,102,275PlusFor "rats tail" 2,196m2 $3,102,275 @ 2.5% $77,557$3,179,832Round to $3,180,000(THREE MILLION ONE HUNDRED AND EIGHT THOUSANDDOLLARS) Plus GST (if any).[29] The figures used by the umpire were sourced from the other arbitrators'reasoning and the evidence, but in my view the arbitrator was entitled to do so. Theapplicant was not shown any error in this approach.Conclusion[30] I do not consider that any of the difficulties identified can be overcome by theother factors listed in the earlier reference to Gold and Resource Developments (NZ)Ltd v Doug Hood Ltd.[31] Leave to appeal is, therefore, declined on all four proposed questions. Theapplication is dismissed.[32] Costs are payable by the applicant on a 2B basis._________________________Woolford J7 At [36] of the award.