Northland Regional Council v Whangarei Leasehold Owners Association Incorporated and Others Hc Wha

JurisdictionNew Zealand
CourtHigh Court
JudgeWoolford J
Judgment Date24 Feb 2012
Neutral Citation[2012] NZHC 93
Docket NumberCIV 2011-488-000718

[2012] NZHC 93

IN THE HIGH COURT OF NEW ZEAEAND WHANGAREI REGISTRY

CIV 2011-488-000718

Under the Arbitration Act 1996

In the Matter of Parts 7 and 19 of the High Court Rules and Schedule 1 of the Arbitration Act 1996

BETWEEN
Northland Regional Council
Applicant
and
Whangarei Leasehold Owners Association Incorporated & Ors
Respondents
Counsel:

L McEntegart and P Magee for Appellant

A D Banbrook for Respondent

Application challenging appointment of arbitrator — dispute between council and lessees of over fair annual assessment of rent referred to arbitration pursuant to Public Bodies Leases Act 1969 — lessees appointed arbitrator under cl 7, sch1 (person reasonably believed by the party appointing him to be competent to make the valuation) — council objected to lessees' choice of arbitrator on the ground he was not a registered valuer and therefore not competent under provisions of Act — lessees argued no jurisdiction to hear matter as parties had not agreed to any qualifications — whether there was jurisdiction for the court to enquire into the matter — whether the person appointed by the lessees was competent to make valuation.

The issues were: whether the court had jurisdiction to determine the challenge; and, whether the person appointed by the lessees was competent to make the valuation.

Held: The Arbitration Act 1996 (“AA”) applied to the arbitration. Section 6 (rules applying to arbitrations in New Zealand) provided that where the arbitration was in New Zealand, sch1 and sch2 AA applied. The council and the lessees were parties to a lease which imported the provisions of sch1 PBL. Clause 7 of that schedule set out the qualifications for appointment of an arbitrator, namely that the appointing parties had to reasonably believe that the person they were appointing was competent to make the valuation. In terms of cl12 (2) sch1 AA, the qualifications of an arbitrator were therefore agreed to by the parties in the case by the importation of the reference to sch1 PBL into each of the leases. The HC had the jurisdiction to determine the challenge under cl13 (3) sch 1 AA (request to HC to decide challenge).

The lessees genuinely believed in the competence of their appointee but the issue was whether that belief was reasonable ( Banks v Grey District Council). N had considerable knowledge of aspects of the property market, particularly property investment, although a registered valuer might have more knowledge of this area. The actual beliefs and interests of the appointing party might have some weight and their subjective views might give some assistance in providing an objective picture (Banks). On the particular facts of this case, the beliefs of the lessees should be given some weight.

Further, cl7 sch1 PBL did not require a person appointed as an arbitrator to have tertiary qualifications as a valuer or to be a registered valuer. The lessees's views were rationally supportable. Although, N did not have formal qualifications as a registered valuer, he did have a Bachelors degree in Management Studies and a Masters Degree in Property Studies. He also taught a university course that involved an advanced level study of real estate investments, including real estate finance and discounted cash flows analysis of income producing properties.

The valuation required in the present case was not of the land itself as such but a valuation of the fair annual rent of the land. N was qualified to undertake such an exercise. Although this might only be one part of the process of assessing the fair annual rent, all the indications from the evidence presented in affidavits was that the lessees did not any real objections to the land values as such. They were of the view that the crucial issue was the assessment of the fair market rent by application of a percentage figure or rate of return.

Council's objection to appointment of N not upheld.

RESERVED JUDGMENT OF Woolford J

Introduction
1

The applicant, the Northland Regional Council (the “Council”) is in dispute with the Second to Seventh Respondents, who are the lessees of land developed by the former Northland Harbour Board and its predecessor, the Whangarei Harbour Board. The Council is now responsible for the rent review process of that land, which was originally commenced by Council in 2009. The Second to Seventh Respondents have appointed the First Respondent, the Whangarei Leasehold Owners Association Incorporated, to act for them.

2

Following the process set out in the leases, the Council advised the lessees of a new rental assessment. The lessees in turn advised the Council that they did not accept the new rental assessments. The leases provide for arbitration in the event that a new rental assessment cannot be agreed. The Council appointed Mr Julian Rattray of Telfer Young as its arbitrator. The lessees appointed Mr Frank Newman as its arbitrator.

3

The Council objects to the appointment of Mr Newman on the grounds that he is not appropriately qualified. The issues in the proceedings are whether this Court has jurisdiction to rule on the objection and, if so, whether the objection is justified.

Jurisdiction

4

The leases in question all contain a right of renewal that imports the provisions contained in the First Schedule of the Public Bodies Leases Act 1969 (the “Act”). Accordingly, the rent for any renewed term is to be determined in accordance with the provisions of the First Schedule. Clauses 7 —10 of Schedule 1 of the Act provides:

  • 7. Where the valuation of the rent payable under a renewal lease is to be determined by arbitration, that valuation shall be made by 2 persons as arbitrators, each such person being reasonably believed by the party appointing him to be competent to make the valuation, one of whom shall be appointed by the lessor and the other by the lessee: …

  • The arbitrators, before commencing to make the said valuation, shall together appoint a third person, who shall be an umpire 1 as between them.

  • 9. The decision of the 2 arbitrators if they agree or in such respects as they agree, or of the umpire if the arbitrators do not agree or in such respects as they do not agree, shall be binding on all parties.

  • 10. The duty of the umpire, on reference to him of any question, shall be to consider the respective valuations of the 2 arbitrators in the matters in which their valuations do not agree, and then to make an independent and substantive valuation, 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 shall in every case be bound to make a valuation not exceeding the higher and not less than the lower of the valuations made by the arbitrators respectively.

5

The Arbitration Act 1996 also applies to the arbitration. 2 Section 6 of the Arbitration Act provides that if the place of arbitration is in New Zealand the provisions of Schedules 1 and 2 apply in respect of the arbitration. Clause 12 of Schedule 1 of the Arbitration Act provides:

12 Grounds for challenge

  • (1) A person who is approached in connection with that person's possible appointment as an arbitrator shall disclose any circumstances likely to give rise to justifiable doubts as to that person's impartiality or independence. An arbitrator, from the time of appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties unless they have already been informed of them by that arbitrator.

  • (2) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to that arbitrator's impartiality or independence, or if that arbitrator does not possess qualifications agreed to by the parties. A party may challenge an arbitrator appointed by that party, or in whose appointment that party has participated, only for reasons of which that party becomes aware after the appointment has been made.

6

The procedure for challenge of the appointment of an arbitrator is set out in Clause 13 as follows:

13 Challenge procedure

  • (1) The parties are free to agree on a procedure for challenging an arbitrator, subject to the provisions of paragraph (3).

  • (2) Failing such agreement, a party who intends to challenge an arbitrator shall, within 15 days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance referred to in article 12(2), send a written statement of the reasons for the challenge to the arbitral tribunal. Unless the challenged arbitrator withdraws from office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.

  • (3) If a challenge under any procedure agreed upon by the parties or under the procedure of paragraph (2) is not successful, the challenging party may request, within 30 days after having received notice of the decision rejecting the challenge, the High Court to decide on the challenge, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.

7

The respondents submit that I need to be satisfied that I have jurisdiction to decide on the challenge made by the Council. The respondents refer to cl 12(2) of the Arbitration Act, which states that an arbitrator may be challenged “if that arbitrator does not possess qualifications agreed to by the parties”. The respondents submit that no qualifications were agreed to by the parties and therefore the High Court does not have jurisdiction.

8

I am of the view that this issue can be dealt with shortly. The Council and the lessees are parties to a lease which imports the provisions of Schedule 1 to...

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