IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2018-404-2522
[2019] NZHC 552	

UNDER THE	Arbitration Act 1996	
IN THE MATTER of	An application for leave to appeal under clause 5(1)(c) of schedule 2 to the Arbitration Act 1996	
BETWEEN	LAKEWOOD PLAZA LIMITED PARTNERSHIP
Applicant	
AND	KINARA TRUSTEE LIMITED
Respondent	

Hearing:	18 March 2019	
Appearances:	R B Stewart QC and F B Q Collins for the Applicant A R B Barker and J A Zwi for the Respondent	
Judgment:	25 March 2019	

JUDGMENT OF POWELL J

This judgment was delivered by me on 25 March 2019 at 3.30 pm pursuant to R 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

LAKEWOOD PLAZA LIMITED PARTNERSHIP v KINARA TRUSTEE LIMITED [2019] NZHC 552 [25
March 2019]

[1]	The applicant, Lakewood Plaza Ltd Partnership (“Lakewood”), has applied for leave to appeal an arbitral award determined by Rodney Hansen QC on 27 August 2018. The award determined that the respondent Kinara Trustee Ltd (“Kinara”) was entitled to user damages in the sum of $275,000 and exemplary damages in the sum of $20,000, as well as injunctive relief, interest and costs in consequence of interfering with two rights of way located on Lakewood’s property that Kinara had rights to use.

[2]	Seeking leave to appeal Lakewood does not dispute the award of exemplary damages nor the injunctive relief ordered, and seeks to challenge only the award of user damages on the basis that the arbitrator made an error of law.

Leave to appeal

[3]	The application for leave to appeal is made pursuant to cl 5(1)(c) of the Second Schedule to the Arbitration Act 1996 which provides any party may appeal on any question of law with the leave of the High Court.

[4]	There is no dispute that the factors to be taken into account in deciding whether leave should be granted for an appeal from an arbitral award are those set out in the judgment of the Court of Appeal in Gold & Resource Development (NZ) Ltd v Doug Hood Ltd.1

[5]	In particular an applicant for leave to appeal must show:2

(a)	an error of law, the determination of which could substantially affect its rights; and

(b)	that the various discretionary factors identified by the Court favour the grant of leave.

1	Gold & Resource Development (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 (CA).
2	At [54].

[6]	The Court of Appeal went on to note:3

If the Judge decides to grant leave, reasons should ordinarily not be given. It is undesirable that the Judge who is to hear the substantive argument should be embarrassed or influenced by the existence of written reasons.

If leave is not granted, the Judge should deliver a short judgment for the benefit of the parties indicating, where necessary, whether the matter in issue is considered to be one-off, and why the case did not meet the required standard. A detailed analysis of the alleged error of law is not required.

The facts

[7]	Lakewood is the owner of 8 Lakewood Court (“8 Lakewood”). Kinara is the owner of the neighbouring property at 726 Great South Road (“726 GSR”).

[8]	There are two registered rights of way that pass over 8 Lakewood for the benefit of 726 GSR:

(a)	right of way B, which provides users of 726 GSR with access to Redoubt Rd; and

(b)	right of way C, which provides users of 726 GSR with access to Lakewood Court.

[9]	There is a third right of way, right of way A, formed but never legally enacted, that passes over 12 Lakewood Court over land owned by Infinity Enterprises NZ Limited (“Infinity”), connecting right of way B to Redoubt Road.

[10]	There is no dispute that from 1991 these right of way provided continuous access to Kinara’s property from both Redoubt Road and Lakewood Court.4

[11]	In June 2017 Lakewood began construction of a 151 apartment complex. When construction started access over rights of way A and B was cut off and remained so at the date of the arbitration.5 Right of way C was never permanently blocked but because it was the primary access to the building site there have been periods when the right of way has been blocked for days at a time, and sometimes overnight.6

3	Gold & Resource Development (NZ) Ltd v Doug Hood Ltd, above n 1, at [58] and [59].
4	Kinara Trustee Ltd v Lakewood Plaza Ltd Partnership (Award) Rodney Hansen QC, 27 August 2018 at [7].
5	At [10].
6	At [12].

The error of law alleged

[12]	Lakewood took no issue with the arbitrator’s summary of the matters in dispute nor the central issue that the arbitration involved the determination of the quantum of user damages for Lakewood’s interference with Kinara’s rights of way.7

[13]	Likewise, Lakewood accepts the arbitrator correctly set out the principles for the payment of user damages.8 In contrast to common law damages which require the consideration of the actual loss suffered by a plaintiff, user damages do not require actual loss to be shown with the damages being assessed by reference to the value of the right infringed. This is determined with reference to a hypothetical negotiation between the parties to determine what would have been appropriate for the defendant to pay for the right exercised had it been negotiated in advance.9

[14]	In this case, the arbitrator based his assessment on the evidence of the amounts saved by Lakewood as a result of its infringements on rights of way B and C – the “profits” made by Lakewood in this case.10 It is not disputed that this was appropriate. Where Lakewood takes issue with the arbitrator’s analysis and where it submits the arbitrator was wrong in law, was that he focussed solely on quantifying the benefits (the costs savings) derived by Lakewood from its interference with the easements, and failed to consider matters that would have reduced the quantum of damages; whether benefits accruing to Kinara as a result of the interference or the weaknesses in its position. Lakewood argues that had the arbitrator done so it would have been required to:

(a)	take into account the uncertainty of Kinara’s right over right of way A as this impacted on the value of right of way B that interfered with by Lakewood;

(b)	the benefit to Kinara of having a 151 apartment complex completed on Lakewood’s property;

7	At [15]-[16].
8	At [21]-[30].
9	Roberts v Rodney District Council [2001] 2 NZLR 402 at [11]-[12].
10	Kinara Trustee Ltd v Lakewood Plaza Ltd Partnership, above n 4, at [36].

(c)	the lettable value of the right of ways as a vacant storage area;

(d)	the other access able to be utilised by Kinara off Great South Road; and

(e)	that Lakewood had rights to use the right of way which were equal to and corresponding to Kinara’s rights.

[15]	Lakewood submitted that unless all matters affecting the value of the rights to Kinara were taken into account the analysis undertaken by the arbitrator was necessarily flawed.

Discussion

[16]	Having considered the submissions of both parties, I am satisfied that leave to appeal should not be granted.

[17]	First, to the extent that the question identified by Lakewood is a question of law it can only be described as very weak. In particular, I accept Mr Barker’s submissions on behalf of Kinara that the case law is well settled that in determining the sum that should be paid for the wrongful use of land it is not necessary for the plaintiff to show loss or that he or she would have applied the land to some other use and derived income therefrom.11 Nor is it necessary for the party infringing to have derived actual profit from the infringement.12

[18]	The following illustrations provide useful examples of the principles applicable:
(a)	In Watson, Laidlaw & Co Ltd v Pot, Cassels & Williamson, the court described the principle as follows:13
If A, being a liveryman, keeps his horse idle in the stable, and B, against his wish or without his knowledge, rides or drives it out, it is no answer to A for B to say: ‘Against what loss do you want to be restored? I restore the horse. There is no loss. The horse in none the worse; it is better for the exercise.

11 For example, see Roberts v Rodney District Council, above n 9, at [27]. See also, Waugh v Attorney-General [2006] 2 NZLR 812: Cooper J adjusted the quantum due to the unique circumstances of the case but otherwise adopted the principles of Roberts.
12 Roberts v Rodney District Council, above n 9, at [28].
13 Watson, Laidlaw & Co Ltd v Pot, Cassels & Williamson, 1914 SC (HL) 18 at 31 per Lord Shaw.

(b)	The statement of Nicholls LJ in Stoke-on-Trent City Council v W & J Wass Ltd.14
… in such a case it is no answer for the wrongdoer to show that the property owner would probably not have used the property himself had the wrongdoer not done so. In The Mediana [1900] AC 113, 117, Earl of Halsbury LC made the famous observation that a defendant who had deprived the plaintiff of one of the chairs in his room for 12 months could not diminish the damages by showing that the plaintiff did not usually sit upon that chair or that there were plenty of other chairs in the room.

[19]	As the detailed analysis of Barker J in Roberts v Rodney District Council demonstrated, such an approach is not restitutionary in character but remains essentially compensatory,15 rather it provided an alternative mechanism for assessing compensation where it was otherwise impossible for a party to show loss.

[20]	It follows that to take into account the lack of actual loss suffered by Kinara in this case, and/or actual benefits received, misconstrues the nature of user damages as opposed to common law damages, which Kinara had specifically elected not to pursue. For the arbitrator to have done so would have meant using the lack of identifiable loss to minimise the damages payable, an approach that is not supported by the authorities. This does not mean that the actual profit of the infringing party and/or the actual loss of the infringed party are not irrelevant to the analysis required to be undertaken.16

[21]	Contrary to Lakewood’s submissions, the recent decision of the Court of Appeal in Eminem Esque17 does not assist. As noted by Mr Stewart and Mr Collins, damages were discounted by the Court of Appeal but on the primary basis of the brief nature of the infringement, a factual matter which was clearly also taken into account by the arbitrator in this case.

[22]	Taken together, while the issue raised by Lakewood is a question of law, it is contrary to established authority on the nature of user damages and at best raises a

14	Stoke-on-Trent City Council v W & J Wass Ltd [1988] 1 WLR 1406 at 1416 per Nicholls LJ.
15	Roberts v Rodney District Council, above n 9, at [28].
16	At [30]-[31].
17	The New Zealand National Party & Anor v Eight Mile Style, LLC & Ors [2018] NZCA 596 [Eminem Esque].

weak issue. On the law as it stands, the arbitrator did not err in only considering the benefit to Lakewood of the infringement.

[23]	In any event, there are also considerable difficulties with the particulars identified by Lakewood. First the issue with regard to any uncertainty with right of way A, the arbitrator had found as a fact that there was no evidence from Infinity, the owner of the land over which right of way A passed. As right of way A is a matter between Kinara and Infinity,18 the arbitrator essentially noted it was not relevant to Lakewood’s infringement in any event. Similar issues arise for the second particular with regard to any benefit accruing  to  Kinara  caused  by  the  construction  of  a 151 apartment complex on Lakewood’s adjoining property. This was in fact not raised as an issue in connection with user damages in the course of the arbitration but had been raised only in connection with the assessment of common law damages.

[24]	The arbitrator likewise considered the valuation assessment as to the lettable value of land on right of ways B and C and made a finding of fact that Kinara, in conducting any notional negotiation, would not have regard to the value of the land as a storage rental.

[25]	In addition to the overall weakness of the question of law identified, the remaining discretionary factors noted in the Gold & Resource Developments decision also do not favour the granting of leave to appeal.

[26]	Specifically, while arbitration was the prescribed process under the Property Law Act 2007, there is no question that the arbitrator, a retired High Court Judge, was imminently qualified to consider the arbitration and the arbitration was domestic in origin. There is also no evidence to suggest the dispute is of particular significance in circumstances where Lakewood does not dispute that an award of user damages is appropriate, nor is the amount of money significant. It has in fact already been paid and there is therefore no suggestion that enforcement of the arbitral award will threaten the viability of Lakewood. On the contrary, it appears to be relatively minor in the context of a 151 apartment development. On the other hand, if leave is granted it will mean the final position as between the parties is not resolved for a considerable period.

18	Subject to separate proceedings in this Court.

Decision

[27]	The application for leave to appeal is declined. Kinara is entitled to 2B costs and disbursements on the application, with leave reserved to return to the Court in the event of any dispute as to the appropriate calculation.

Powell J