IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV 2023-404-624
[2023] NZHC 3446	

UNDER	the Declaratory Judgments Act 1908 and Part 18 of the High Court Rules	
IN THE MATTER OF	the interpretation of a Concession Agreement	
BETWEEN	SKYCITY ENTERTAINMENT GROUP LIMITED
First Plaintiff

SKYCITY AUCKLAND LIMITED
Second Plaintiff	
AND	MPF PARKING NZ LIMITED
Defendant	

Hearing:	19 September 2023	
Appearances:	D Cooper KC, H McQueen and D Scholes for the plaintiffs J Cooper KC, T Lindsay and S McNae for the defendant	
Judgment:	30 November 2023	

JUDGMENT OF CAMPBELL J

This judgment was delivered by me on 30 November 2023 at 9 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

SKYCITY ENTERTAINMENT GROUP LIMITED v MPF PARKING NZ LIMITED [2023] NZHC 3446 [30
November 2023]

Introduction

[1]	The parties entered into a contract known as a Concession Agreement in April 2019. In consideration for a payment of $220 million, the plaintiffs (together, SkyCity) granted the defendant (MPF) a 29-year concession to operate car parks situated in both the SkyCity Casino site in central Auckland and the New Zealand International Convention Centre, which was to be built on a nearby site.

[2]	A fire that began on 22 October 2019 damaged the Convention Centre before it was completed. SkyCity elected to reinstate car parks in an area that had been damaged.  SkyCity failed to complete the remediation works within the timeframe  in the Concession Agreement. This meant MPF could elect to terminate the Concession Agreement. MPF elected to do so.

[3]	Upon termination, SkyCity is required to pay MPF a specified sum (the Compensation Sum). The Concession Agreement defines Compensation Sum as “the Market Value of the Concession calculated as at the date immediately prior to the destruction or damage”. The Agreement defines “Market Value” as “the market value of the Concession Holder’s rights and interests in the Concession … at the relevant date” (Market Value).

[4]	The parties seek competing declarations as to the interpretation of the Concession Agreement. SkyCity seeks a declaration that the Agreement means that the Market Value of the Concession is to be calculated as at the date immediately prior to the fire, 21 October 2019. MPF seeks a declaration that the Market Value of the Concession  is  to  be   determined   on   the   proposed   termination   date,   being  24 November 2022, but calculated by reference to the facts and circumstances as at 21 October 2019.

[5]	On SkyCity’s interpretation, the amount payable is about $188 million. On MPF’s interpretation, it is about $240 million.

Background

The Main Site and the Convention Centre

[6]	SkyCity owns and operates an entertainment precinct in Auckland. The precinct includes the Sky Tower, SkyCity Auckland Theatre, SkyCity Hotel and SkyCity Auckland Casino. These are located on a site bounded by Victoria Street West, Federal Street, Wellesley Street West and Hobson Street (the Main Site). The Main Site includes an underground car park of about 1,950 parking spaces (the Main Site Car Park).

[7]	In November 2015, a subsidiary of SkyCity contracted for The Fletcher Construction Company Ltd (Fletchers) to construct the New Zealand International Convention Centre (NZICC). The NZICC is in the block to the west of the Main Site. It is to include about 1,250 basement car parks.

[8]	The building works contract for the Convention Centre provides for 600 car parks in the basement of the Convention Centre to be completed separately and in advance of the balance  of the contract  works.  The building works contract refers  to this as separable portion one (SP1). Practical completion of SP1 was achieved on 21 December 2018.

The Concession Agreement

[9]	On 3 April 2019, SkyCity and Macquarie Group Holdings No.3 Pty Ltd (Macquarie) entered into the Concession Agreement. Macquarie’s rights and obligations  under  the  Agreement   were   assigned   and   novated   to   MPF   on  19 August 2019.

[10]	Under the Concession Agreement, SkyCity granted to MPF a long-term concession to operate SkyCity’s car parks at the Main Site and the NZICC. Those car parks were to be:

(a)	The Main Site Car Park of about 1,950 car parks.

(b)	The 600 car parks in SP1 of the NZICC that were available for use as at the date of the Concession Agreement (the Initial NZICC Car Parks).

(c)	A minimum of a further 650 car parks in the NZICC to be made available not later than 31 December 2020 (the Second Tranche NZICC Car Parks).1

[11]	The purchase price for the concession was $220 million, plus GST. MPF paid this price to SkyCity.  The Concession Agreement commenced on 20 August 2019.  It has a final expiry date of 30 June 2048.

Fire and election to reinstate

[12]	On 22 October 2019, before the Second Tranche NZICC Car Parks had been completed, a major fire broke out during Fletchers’ construction of the NZICC. The fire and fire-fighting efforts damaged the 600 Initial NZICC Car Parks and made them unavailable for use. The fire and damage also delayed completion of the Second Tranche NZICC Car Parks but did not affect the availability of the Main Site Car Parks.

[13]	The Concession Agreement provides in cl 30.3(f) that if, as happened, the NZICC Car Parks are partially destroyed or damaged prior to the Second Tranche NZICC Car Parks becoming available, SkyCity may elect to either terminate the Agreement  or  reinstate  the  NZICC  Car  Parks.   If  SkyCity  elects  to  reinstate,  cl 30.3(f)(ii)(B) provides that SkyCity must pay MPF $29.79 per “Compromised Parking Space” per day for the period each compromised parking space remains unavailable for use by MPF. The parties have referred to this as the “ticking fee”, though that is not a term used in the Agreement.

[14]	SkyCity elected to reinstate. Accordingly, it has paid the ticking fee to MPF since the fire. Currently, the ticking fee is about $30,000 per day. Meanwhile, MPF

1	There is a dispute as to the number of required Second Tranche NZICC Car Parks. The dispute is irrelevant to the interpretation issue determined in this judgment.

has also been able to use (and earn revenue from) the Main Site Car Parks and any reinstated NZICC Car Parks.

MPF elects to terminate the Concession Agreement

[15]	The effect of cl 30.5 of the Concession Agreement is that if SkyCity elects   to reinstate under cl 30.3(f) (which it did), but the damage to the NZICC Car Parks  is not repaired or reinstated by SkyCity to at least the same standard prior to the damage within 36 months, MPF may elect to terminate the Agreement. If MPF elects to terminate, cl 30.6 provides that SkyCity will pay to MPF “the relevant Compensation Sum”.

[16]	The 36-month period expired on 22 October 2022. SkyCity had not repaired the damage by then. On 27 October 2022, MPF elected to  terminate  the  Concession Agreement by serving a termination notice under cl 30.5. In the termination notice, MPF also elected under cl 26.5 that the Agreement would remain in force until SkyCity paid the Compensation Sum. There is no dispute that both elections were valid.

Determination of the Compensation Sum

[17]	MPF having elected to terminate the Concession Agreement under cl 30.5, SkyCity is obliged by cl 30.6 to pay to MPF “the relevant Compensation Sum”. Clause 1 says that, for the purposes of cl 30.6, Compensation Sum means “the Market Value of the Concession calculated as at the date immediately prior to the destruction or damage”.

[18]	Clause 1 defines “Market Value of the Concession” as “the market value of the Concession Holder’s rights and interests in the Concession in respect of the Concession at the relevant date”. Clause 1 provides that the Market Value is to be as agreed by the parties or, failing agreement, as determined in accordance with Schedule 10.

[19]	Schedule 10 provides for an expert determination process. Each party is to appoint a valuer. The valuers are to endeavour to jointly determine the Market Value

in accordance with valuation principles set out in para 1.3 of Schedule 10. If the valuers are unable to agree the Market Value within 40 working days, they are to appoint an umpire to make the determination. The umpire is to be instructed to determine the Market Value within a further 20 working days. The determination, whether of the valuers or the umpire, is final and binding on the parties.

[20]	The valuation principles in Schedule 10 include that the valuers and the umpire are to establish the net present value of the Concession applying a discounted cash flow valuation methodology for the period from the “Proposed Termination Date” (agreed to be 24 November 2022) to the “Final Expiry Date” (30 June 2048).

The interpretation issue arises

[21]	SkyCity  and  MPF  failed  to  agree  the  Market Value.  This  is  because  of a disagreement about the meaning of the provisions relating to the calculation of the Market Value and the Compensation Sum.

[22]	The parties agree that the cash flows to be valued and discounted are those identified by the valuation principles in Schedule 10, namely the cash flows for the period from 24 November 2022 to 30 June 2048. They disagree about the date on which those cash flows are to be valued and therefore the date to which the cash flows are to be discounted. SkyCity’s view is that the provisions mean that the cash flows are to be discounted to 21 October 2019 (the date immediately prior to the damage). MPF’s view is that the cash flows are to be discounted to 24 November 2022 (the Proposed Termination Date), but assuming facts and circumstances as at 21 October 2019.

Expert determination process suspended and proceeding commenced

[23]	Because the parties failed to agree the Market Value, the Schedule 10 process was triggered. SkyCity appointed Deloitte and MPF appointed KPMG as their respective valuers. Deloitte determined Market Value at about $188 million, KPMG at about $240 million. The difference was attributable to the interpretation issue described above.

[24]	On 14 March 2023, the parties appointed John Farrant as umpire to determine the Market Value. Both parties made submissions to the umpire on the interpretation issue. Then, on 23 March 2023, MPF asserted that the umpire did not have the power to determine the interpretation issue and that it should instead be resolved under the general dispute resolution process in cl 38 of the Concession Agreement. MPF served a notice under cl 38 and requested the umpire to suspend the Schedule 10 process. On 29 March 2023, the umpire suspended the Schedule 10 process.

[25]	SkyCity considered  the  cl  38  dispute  resolution  process  did  not  apply.  It commenced this proceeding on 6 April 2023, seeking a declaration on the interpretation issue. MPF did not rely on cl 38 to protest the Court’s jurisdiction to determine the issue. Rather, it brought a counterclaim seeking its own declaration on the issue. Ms Cooper KC, counsel for MPF, confirmed that MPF does not dispute that this Court is the proper forum to resolve the interpretation issue.

Relief sought by each party

[26]	SkyCity pleads that the parties are in dispute as to the correct interpretation  of the Concession Agreement in relation to the determination of Market Value. It seeks a declaration under s 3 of the Declaratory Judgments Act 1908 that:

… for the purposes of determining the Compensation Sum payable in respect of MPF’s Termination Notice served 27 October 2022, the Concession Agreement requires the Market Value of the Concession to be determined, including by any Valuer and/or Umpire appointed under Schedule 10, as at the valuation date 21 October 2019 (being the date immediately before the NZICC Fire) by applying a discounted cashflow methodology to future cash flows from 24 November 2022 to 30 June 2048, discounted to the valuation date of 21 October 2019.

[27]	MPF also pleads that the parties are in dispute as to the correct interpretation of the Concession Agreement, namely the correct interpretation of the relevant definition of Compensation Sum (including the meaning of Market Value). It resists the declaration sought by SkyCity. By way of counterclaim, it seeks declarations under s 3 of the Declaratory Judgments Act that:

a.	the relevant Compensation Sum payable to MPF is the market value of MPF’s rights and interests in the Concession in respect of the Concession at the Proposed Termination Date calculated by reference to the facts and circumstances as at 21 October 2019; and

b.	in this case calculation of the relevant Compensation Sum requires applying a discounted cash flow methodology:

(i)	to forecast cash flows for the period from the Proposed Termination Date (in this case, 24 November 2022) to the Final Expiry Date (30 June 2048);

(ii)	discounted to the Proposed Termination Date (in this case, 24 November 2022); and

(iii)	assuming the facts and circumstances as at 21 October 2019.

[28]	The respective declarations reflect, of course, the parties’ respective views on the interpretation of the Concession Agreement. There is one additional aspect to the form of declaration sought by SkyCity. Its declaration would state that the Agreement requires the Market Value of the Concession to be determined as at 21 October 2019, including by any Valuer and/or Umpire appointed under Schedule 10. SkyCity says the purpose of the italicised words is to make it clear to the umpire that Market Value is to be determined in accordance with the declaration, “thereby achieving the purpose of allowing the Schedule 10 process to resume so that the Concession Agreement can actually terminate”. MPF says the italicised words are not necessary or appropriate.

The issues

[29]	Declaratory relief under the Declaratory Judgments Act is discretionary. In its written submissions, MPF made some arguments against the exercise of that discretion and reserved its position on whether declaratory relief is appropriate in  this case.   At the hearing, however, MPF did not advance any opposition to the grant of declaratory relief. Given the nature of the dispute and that each party saw fit to seek declarations, granting a declaration is plainly appropriate.

[30]	That leaves two substantive issues for determination. Stated at  a high level  of generality, they are:

(a)	What is the proper interpretation of Concession Agreement?

(b)	What form should any declaration take?

[31]	Evidential issues also arose, as each party objected to some of the extrinsic evidence that the other party sought to adduce as an aid to interpretation of the Concession Agreement. Before addressing the substantive issues, I therefore summarise the principles governing contractual interpretation and the admissibility of extrinsic evidence, and determine the evidence objections.

Principles governing the interpretation of contracts

[32]	Contracts are interpreted objectively. In the case of a contract that is documented, the aim is to ascertain “the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”.2 This approach reflects that “contractual language, like all language, must be interpreted within its overall context, broadly viewed”.3

[33]	A purposive or contextual interpretation is not dependent on the contractual language being ambiguous.4 However, in Firm PI 1 Ltd v Zurich Australian Insurance Ltd the Supreme Court said it must not be overlooked that:5

… the language of many commercial contracts will have features that ordinary language (even a “serious utterance”) is unlikely to have, namely that it will result from a process of negotiation, will attempt to record in a formal way the consensus reached and will have the important purpose of creating certainty, both for the parties and for third parties (such as financiers). The fact that parties are aware their contract might be relied upon by a third party may justify a more restrictive approach to the use of background in some instances, the parties’ awareness being itself part of the relevant background. … To some extent, then, the scope for resort to background is itself contextual.

[34]	In Firm PI, the Supreme Court also said that, while context is a necessary part of interpretation and the focus is on interpreting the document rather than particular words, “the text remains centrally important”.6 Accordingly, if the language, “construed in the context of the contract as a whole, has an ordinary and natural

2	Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL) at 912 per Lord Hoffmann, cited with approval in Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60].
3	Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [61].
4	At [61].
5	At [62] (footnotes omitted).
6	At [63].

meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant”.7 This approach was confirmed by the Supreme Court in Bathurst Resources Ltd v L&M Coal Holdings Ltd,8 the Court saying that “[g]iving primacy to the written words of the agreement” accorded with the policy of providing commercial certainty.9 The Court nonetheless affirmed that by allowing a contextual reading of the written words:10

… the Firm PI approach recognises both that words have to be read in context and that the promotion of commercial certainty should not be allowed to defeat what the parties actually meant by the words in which they recorded their agreement.

[35]	The Supreme Court in Bathurst said the objective approach to contractual interpretation was grounded in three policy objectives: providing the certainty needed to facilitate the efficient conduct of commerce; holding people to the bargains they make; and supporting access to justice through the efficient and just conduct of proceedings.11

[36]	In Firm PI the Supreme Court said that, in interpreting a clause in a commercial contract, a court should have regard to the commercial purpose of the clause and the contract, and to the structure of the contract, “to the extent that they can reliably be identified”.12 But the Court also cautioned that there were some dangers in this approach, which they identified when discussing the use of arguments that a particular interpretation produced a “commercially absurd” result.13 In Bathurst, the Supreme Court summarised the approach to such arguments:14
[45] The Court in Firm PI also clarified the principle of commercial absurdity in relation to contractual interpretation, which is often linked to the use of extrinsic material. McGrath, Glazebrook and Arnold JJ, while emphasising the primacy of the text, accepted that “if a particular interpretation produces a commercially absurd result, that may be a reason to read the contract in a different way than the language might suggest”. However, this does not mean

7	At [63].
8	Bathurst Resources Ltd v L&M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696. At [43], the Court confirmed the objective and contextual approach to contract interpretation.
9	At [46]. See also at [44].
10	At [46].
11	At [46].
12	Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [79].
13	At [88]–[93].
14	Bathurst Resources Ltd v L&M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 (footnotes omitted).

that a court should conclude that a contract does not mean what it says simply because this interpretation would be unduly favourable to one party. There is a need for caution in this area, when “commercial absurdity tends to lie in the eye of the beholder”, and courts are not necessarily well placed for the assessment of what can be industry-specific considerations. Moreover, the compromises that occur in commercial negotiations may not be easily perceived or understood by a court in hindsight, even if exposed as part of the relevant background. Therefore, the conclusion that an ordinary and natural meaning of contractual language produces a commercially absurd result “should be reached only in the most obvious and extreme of cases”.

Principles governing the admissibility of extrinsic evidence

[37]	In  Bathurst,  the  Supreme  Court   held   that   whether  extrinsic  evidence  is admissible to aid the interpretation of a contract is an evidential issue. Such issues are to be determined in accordance with the law of evidence, in light of the substantive law of contractual interpretation.15 The law of contractual interpretation “fundamentally shapes what is relevant, and what is therefore admissible, extrinsic evidence”.16

[38]	The Supreme Court said that, in cases of contractual interpretation, the effect of s 7 of the Evidence Act 2006 is that evidence is admissible (subject to any exclusionary rules) if it has “a tendency to prove or disprove anything of consequence to determining the meaning the contractual document would convey to a reasonable person having all the background knowledge reasonably available to the parties in the situation in which they were at the time of the contract”.17 The exclusionary rule that is most likely to be relevant is s 8(1)(b) of the Evidence Act, which provides that a Judge must exclude evidence if its probative value is outweighed by the risk that the evidence will needlessly prolong the proceeding. The Supreme Court said this provision addresses the concern that admission of extrinsic evidence may involve expenditure of unnecessary time and resources for the parties and the court.18

[39]	The Supreme Court said it was inappropriate to lay down rigid rules overlaying those in the Evidence Act.19 The Court was prepared only to provide guidance as to how its framework could be applied to various categories of extrinsic evidence:

15	At [57].
16	At [55].
17	At [62].
18	At [64].
19	At [66].

declarations of subjective intent, prior negotiations, specialised meanings and subsequent conduct.20 I refer to that guidance, as necessary, in dealing below with various objections to the admissibility of evidence.

[40]	Mr Cooper KC, counsel for SkyCity, submitted that when dealing with issues of contractual interpretation, evidence will pass through the threshold created by ss 7 and 8 of the Evidence Act only where the evidence is reasonably capable of altering the ordinary meaning of the words of the contract or sufficiently compelling to have an impact on the proper interpretation of the contract. Mr Cooper relied on statements in the judgments of the Court of Appeal and Supreme Court in the recent Napier City Council decisions.21 I do not accept the submission. I do not consider either of those Courts was laying down any rules in substitution for those in the Evidence Act. To have done so would have been contrary to the Supreme Court’s clear direction in Bathurst that there should not be rigid rules overlaying the Act.

The evidence

[41]	SkyCity commenced this proceeding under Part 18 of the High Court Rules 2016. Rule 18.15 requires evidence in Part 18 proceedings to be given by affidavit  or an agreed statement of facts, unless a judge directs otherwise. MPF applied, unsuccessfully,22 for directions varying that default procedure.

[42]	SkyCity filed an affidavit of Kelly Mackenzie in support of its declaration. Ms Mackenzie is commercial director for the NZICC project. Her affidavit exhibited the Concession Agreement and briefly described the background to the dispute.

[43]	MPF filed four affidavits in response, from:

(a)	Gregory Nicholas, who is the managing director of Macquarie Corporate Holdings Ltd. Mr Nicholas’s affidavit included extensive comment on the negotiation of the Concession Agreement.

20 At [67]–[90].
21 Napier City Council v Local Government Mutual Funds Trustee Ltd [2022] NZCA 422, [2022] 3 NZLR 528 at [43] and Local Government Mutual Funds Trustee Ltd v Napier City Council [2023] NZSC 97 at [68].
22	SkyCity Entertainment Group Ltd v MPF Parking NZ Ltd [2023] NZHC 1818.

(b)	Richard Caldwell, a consultant  based  in  London  with  experience  in economic and financial analysis and valuation across a range of sectors. In his affidavit, Mr Caldwell expresses his opinion on “market practices in relation to certain corporate finance and economic concepts” in the context of the Concession Agreement.

(c)	Alex Yew, a director and consultant based in London with expertise  in the financing, bidding, structuring and negotiations of Public Private Partnerships (PPPs). In  his  affidavit,  Mr Yew  says  he  was  asked to “comment on the nature of the transaction under the Concession Agreement, including industry practice in relation to such transactions”.

(d)	Christopher Higson, a London-based accountant who has been Professor  in  Accounting  Practice  at   London   Business   School. Dr Higson provides an opinion about the International Valuation Standards (the IVS).

[44]	SkyCity objected to parts of Mr Nicholas’s affidavit and to all of Mr Caldwell’s and Mr Yew’s evidence. SkyCity filed two affidavits in reply,23 from:

(a)	Tony van Zijl, a Professor of Accounting and Financial Management at Victoria University of Wellington. Professor van Zijl responded to  Mr Caldwell’s and Dr Higson’s evidence on the IVS and finance concepts. He also commented on some matters raised by MPF in its then recently-amended pleading.

(b)	Robert Hamilton, a former SkyCity executive. Mr Hamilton responded to evidence by Mr Nicholas that MPF considered the Concession Agreement to be a PPP. That was evidence to which SkyCity had objected. SkyCity only sought to adduce Mr Hamilton’s evidence if it was held that Mr Nicholas’s evidence on the topic is admissible.

23	Lang J had directed that SkyCity be able to file affidavits in reply in an interlocutory decision,
SkyCity Entertainment Group Ltd v MPF Parking NZ Ltd [2023] NZHC 1818 at [16] and [25].

[45]	MPF objected to the entirety of Professor van Zijl’s affidavit. It sought an order that the affidavit be ruled inadmissible. Alternatively, MPF sought leave to file two affidavits in reply  to Professor van Zijl’s  evidence,  from  Mr Caldwell and    Dr Higson.

[46]	The  week  before  the  hearing,  MPF  filed  an   updated   affidavit   from  Mr Nicholas. This removed some of the evidence to which SkyCity had objected.

[47]	At about the same time, SkyCity sought leave to file a further affidavit, from Philip Leightley. SkyCity said that Mr Leightley’s affidavit responded to two factual assertions made in MPF’s written submissions.

[48]	Before the hearing I issued a minute ruling on MPF’s objection to Professor van Zijl’s affidavit (with reasons to follow in this judgment). I upheld only two specific objections and I declined to grant MPF leave to file affidavits in reply. I did not have time before the hearing to determine SkyCity’s various objections.

[49]	My minute also indicated my provisional view on SkyCity’s application for leave to file Mr Leightley’s affidavit. I said that the factual assertions made by MPF in its submissions, to which the affidavit would respond, appeared irrelevant and/or unproven and that at that stage I was not inclined to grant leave. I have not shifted from my provisional view. Accordingly, leave is declined.

[50]	SkyCity served a notice requiring Dr Higson to appear for cross-examination. MPF did the same in respect of Professor van Zijl. Both appeared and were cross- examined.

SkyCity’s remaining objections to Mr Nicholas’s affidavit

[51]	At [34] of his affidavit, Mr Nicholas explains how MPF priced its bid for the concession using a discounted cash flow valuation methodology. Mr Nicholas says this was not shared with SkyCity at the time. This is simply evidence of MPF’s

subjective   view   of the  concession.	Given that this subjective view was not communicated to SkyCity, it is irrelevant and inadmissible.24

[52]	At [37], Mr Nicholas says that Macquarie’s final offer for the concession on 16 January 2019 included a commitment letter from Goldman Sachs (as underwriter of the financing for the transaction) and a term sheet outlining the key matters to be addressed in a Financier Direct Deed. That term sheet provided that the Financier Direct Deed was to be based on recent PPP transactions. This is evidence of prior negotiations. Such evidence is admissible only if it tends to prove something relevant to the notional reasonable person.25 Prior negotiations will not be relevant if they do not address the issues in contention in the interpretation dispute.26 That the Financier Direct Deed – a separate contract from the Concession Agreement – might be based on recent PPP transactions says nothing about the Concession Agreement, let alone about the provisions of that Agreement that are at issue in this case. This paragraph is inadmissible.

[53]	At [40], Mr Nicholas says there were extensive negotiations from mid-January 2019 to April 2019 over the Concession Agreement and related documents. He does not refer to the content of the negotiations.  I consider this evidence has a tendency  to prove something (that there were extensive negotiations) that is of consequence to the interpretation issue in this proceeding. This is because, the more extensive the negotiations, the more cautiously will a court approach an argument such as one based on commercial absurdity.27 It is therefore admissible.

[54]	At [41], Mr Nicholas says that MPF’s financiers approached the negotiations (towards the Financier Direct Deed) on the basis that the transaction was “quasi-PPP” in nature and that the Deed and the Concession Agreement should follow the approach in the New Zealand Model PPP agreement. This is evidence of a third-party’s negotiating stance, primarily towards a separate agreement.   It does not assist in

24	Bathurst Resources Ltd v L&M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [68].
25	At [75].
26	At [75] and [79].
27	Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [90]– [91].

understanding the objective meaning of the contract in issue in this proceeding and so is inadmissible.

[55]	At [42], Mr Nicholas says that the ticking fee was a negotiated solution to the unavailability of business interruption insurance. It is evidence of the purpose of the ticking fee. Mr Nicholas’s evidence is that this was a mutually agreed purpose. It is not purely subjective evidence. Both parties saw fit to address me on the ticking fee. This evidence is admissible.

[56]	SkyCity also objects to various paragraphs that it says address irrelevant matters. At [6], Mr Nicholas describes  the effect of the fire and SkyCity’s election  to reinstate on MPF. This is not relevant to the interpretation issue. At [13] Mr Nicholas refers to MPF’s funding arrangements. This is irrelevant. At [18]–[20] Mr Nicholas sets out his understanding of the reasons for the construction of the NZICC and SkyCity’s agreement with the Crown. None of this is relevant to the interpretation issue. At [64] Mr Nicholas says he understands SkyCity is entitled to be reimbursed by Fletchers for the ticking fee. Mr Nicholas’s understanding of this matter, and whether SkyCity has some reimbursement entitlement, is irrelevant to the interpretation issue.

[57] In summary,  paragraphs  [6],  [13],  [18]–[20],  [34], [37],  [41]  and  [64]  of Mr Nicholas’s affidavit are inadmissible. It is unnecessary for me to determine the objections to the paragraphs that MPF removed when filing an updated affidavit from Mr Nicholas.

SkyCity’s objections to Mr Caldwell’s affidavit

[58]	At the outset of his 51-page affidavit Mr Caldwell says he was asked to provide an opinion on five topics:

(a)	The economics of the Concession.

(b)	Market usage as it relates to the corporate finance, market value and IVS principles reflected in the Concession Agreement.

(c)	The economics of compensation mechanisms in long-term contracts.

(d)	The economic implications of two alternative proposals (that is, SkyCity’s and MPF’s) to determine the Compensation Sum payable pursuant to cl 30.6 of the Concession Agreement.

(e)	Whether the parties’ respective proposals “are consistent with the corporate finance and market value instructions in the [Concession Agreement], and in accordance with the IVS”.

[59]	Immediately after setting out these topics, Mr Caldwell says he does not offer any assessment of the interpretation of the Concession Agreement. I disagree. The fifth of his topics necessarily involves Mr Caldwell adopting an interpretation of the Agreement. That is the only way in which he can assess whether the respective parties’ “proposals” (interpretations) are consistent with the “instructions” (provisions) of the Agreement. Interpretation of the Agreement is for the Court. His evidence on that topic is of no help (let alone substantial help) and is therefore inadmissible.28

[60]	Mr Caldwell’s opinion on the first topic (the economics of the Concession) runs to 12 pages. It is primarily commentary on the provisions and structure of the Concession Agreement. Much of it is the sort of commentary that can be provided by counsel in submissions. There are a few economic observations. These tend, with respect, to be banal: that the basic economic regime of the Agreement involved an upfront payment by MPF in exchange for the rights to a long-term stream of operating cash flows; that SkyCity’s logical goal in the negotiating process would have been  to maximise the upfront price obtained from bidders. These are matters that are evident from the Agreement itself. Mr Caldwell’s opinion on them is not of substantial help. Further, the evidence needlessly prolonged the proceeding because the commentary could have been (and was) provided by counsel.

[61]	In the second topic, Mr Caldwell explains the discounted cash flow methodology and the concepts of net present value and market value, and comments briefly on their use in the Concession Agreement. These are not difficult

28	Evidence Act 2006, s 25.

methodologies or concepts. Expert evidence on them is seldom likely to be of substantial help to a judge in interpreting a commercial contract. Mr Caldwell’s explanations were not substantially helpful (despite referencing a 969-page textbook, the entirety of which MPF included in the electronic bundle). Mr Caldwell’s evidence on this topic is inadmissible.

[62]	Mr Caldwell’s third topic addresses how long-term contracts should address issues of termination and termination payments. This is not relevant to the interpretation of the actual contract before the Court. Mr Caldwell does not suggest that any of the words that the parties actually used in this contract have a specialised market or industry meaning. Under this topic, Mr Caldwell also opines that the market value of the Concession would increase  over the course of about the first 15 years  of the Concession’s life.   As I understood it, MPF wished to rely on this evidence   to submit that there was nothing “high” about  MPF’s  valuation of $240 million     (in comparison to the $220 million purchase price). This evidence is of no assistance in understanding the meaning of the words in the Concession Agreement.

[63]	The fourth topic that Mr Caldwell addresses is  the economic implications    of the parties’ respective interpretations. He says that he analyses whether those economic implications are “appropriate in light of the purpose of the valuation exercise under the [Concession Agreement]” (emphasis in  original).  As  reflected  in his conclusion on this topic, Mr Caldwell is here trespassing into the area of interpretation. Further, the economic implications of the competing interpretations are, with respect, rather obvious. The key implication is that SkyCity’s interpretation sees cash flows discounted to a date about three years prior to the Proposed Termination Date. The Court does not need expert evidence to understand this.

[64]	I conclude, therefore, that the entirety of Mr Caldwell’s affidavit is inadmissible.

SkyCity’s objections to Mr Yew’s affidavit

[65]	Mr Yew’s “comments” on the nature of the transaction and on industry practice relating to such transactions runs to almost 40 pages. MPF included in the electronic

casebook much of the extensive academic literature to which Mr Yew refers, including the entirety of three textbooks on the policy, finance and economics of PPPs.29

[66]	Mr Yew’s evidence  is  essentially  commentary  on  how  transactions  such as PPPs, and their termination and compensation regimes, can and should be drafted. He particularly addresses how termination and compensation regimes should allocate risks between the parties. In so doing, however, Mr Yew acknowledged that risk allocation needs to be agreed in each case and that there is a link between risk allocation and price.30 A court determining an interpretation dispute is not assisted by evidence as to how a contract dealing with a particular transaction should be drafted. The court is interested in the words of the actual contract and what those words mean. There is no evidence that the parties objectively agreed to the norms that Mr Yew considers underpin ideal termination and compensation regimes. I find that the entirety of Mr Yew’s affidavit is inadmissible.

MPF’s objection to Professor van Zijl’s affidavit

[67]	As noted, Professor van Zijl’s affidavit was directed to the IVS and to some allegations that MPF had made in an amended pleading. MPF objected to the affidavit on the  ground  it  was  not  properly  in  reply.  MPF  said  the  matters  addressed  by Professor van Zijl were not new matters raised for the first time in MPF’s affidavits, but rather had formed part of SkyCity’s and MPF’s cases from the outset. In particular, MPF said that SkyCity’s statement of claim pleaded and put in issue IVS concepts as well as the corporate finance concepts of net present value, discounted cash flow methodology and market value. MPF said that SkyCity was attempting, impermissibly, to keep its powder dry on those matters.

[68]	I considered that Professor van Zijl’s affidavit was properly in reply, except in respect of two relatively minor aspects. That SkyCity had referred in its statement of claim to the IVS and to concepts such as net present value did not mean that those concepts were put in issue or that SkyCity was obliged to lead expert evidence on their

29	Unsurprisingly, during oral submissions I was taken to only a few brief passages in one of those three textbooks. I did not feel any need to read the rest.
30	I provide examples of this later in this judgment when explaining why, even if I had admitted Mr Yew’s evidence, I would not have accepted the submission that MPF made in reliance on it.

meaning when filing its principal affidavits. Professor van Zijl’s affidavit responded primarily to explanations in Mr Caldwell’s and Dr Higson’s affidavits (relating to the IVS and various finance concepts) that MPF apparently was putting forward to support its interpretation of the Concession Agreement. Nothing in the material to which MPF referred me in support of its objection suggested that those particular explanations had been advanced by MPF prior to service of Mr Caldwell’s and Dr Higson’s affidavits. They were therefore new matters to which SkyCity was entitled to respond by way of a reply affidavit. The same is also true of those parts of Professor van Zijl’s affidavit that commented on new matters raised in MPF’s then recently amended pleading.

[69]	There were two aspects of Professor van Zijl’s affidavit that I found were not properly in reply and which I said I would not be considering:

(a)	Those parts of the affidavit in which Professor van Zijl characterised MPF’s rights under cl 30.5 as a put option and which relied on that characterisation. This did not reply to anything in MPF’s affidavits. Further, the evidence was  not  substantially  helpful,  as  the  nature of MPF’s rights under that clause are plain from the words and structure of the Concession Agreement.

(b)	Paragraph [61], which is the first part of Professor van Zijl’s conclusion. This paragraph offered an interpretation of the relevant clauses of the Concession Agreement. It did not respond to anything in MPF’s affidavits and also was not substantially helpful.

[70]	Given that I found Professor van Zijl’s affidavit  to  be almost  all  properly  in reply, I saw no reason to grant leave to MPF to file further affidavits responding to his affidavit.

What is the proper interpretation of the Concession Agreement?

Introduction: identifying the central issue

[71]	SkyCity is obliged by cl 30.6 of the Concession Agreement to pay “the relevant Compensation Sum” to MPF. Clause 1 defines “Compensation Sum”. It contains nine

definitions of the term. Each definition applies for the purposes of a particular clause in the Agreement. Relevantly, cl 1 provides that Compensation Sum means:

… for the purposes of clause 30.6 (Damage or destruction), the Market Value of the Concession calculated as at the date immediately prior to the destruction or damage …

[72]	That definition uses the term “Market Value of the Concession”. Clause 1 says that term is interchangeable with “Market Value” and that both terms mean:

… the market value of the Concession Holder’s rights and interests in the Concession in respect of the Concession at the relevant date …

(a)	as agreed by SKYCITY and the Concession Holder in writing; or

(b)	failing such agreement … the market value as determined in accordance with Schedule 10 (Determination of Market Value)

[73]	As the parties failed to reach agreement, para (b) is engaged. It is clear (and is common ground) that the words “market value” in para (b) are shorthand for the words that appear in the introductory part of the definition: “the market value of the Concession Holder’s rights and interests in the Concession in respect of the Concession at the relevant date”.31 It is that market value which para (b) requires to be determined in accordance with Schedule 10.

[74]	Among other things, Schedule 10 contains valuation principles that the valuers and umpire are instructed to apply in determining the Market Value. A key principle is that Market Value is to be determined by establishing the net present value of the Concession applying a discounted cash flow valuation methodology for a period from (in this case) the relevant Proposed Termination Date to the Final Expiry Date.

[75]	The central issue is the meaning of the words “the relevant date” in the definition of Market Value. SkyCity says “the relevant date” means the date identified in the relevant definition of Compensation Sum, which in this case is “the date immediately prior to the destruction or damage”, namely 21 October 2019. MPF says “the relevant date” is the date that starts the period of cash flows that are to be valued and discounted under the valuation principles in Schedule 10, which in this case is

31	This is confirmed by Schedule 10, which says the umpire is to be instructed to determine “the Market Value of the Concession” (cls 1.2(e) and 1.3).

“the relevant Proposed Termination Date”, namely 24 November 2022. MPF says that the date identified in the relevant definition of Compensation Sum does not supply “the relevant date” in the definition of Market Value. MPF says the definition of Compensation Sum merely means that,  in valuing  the  cash  flows  on  the  Proposed Termination date, the valuers and umpire must assume facts and circumstances as at the date immediately prior to the destruction or damage.

Meaning of “the relevant date”: the text construed in the context of the Concession Agreement as a whole

[76]	By defining Market Value as the market value of Concession Holder’s rights at “the relevant date”, the Concession Agreement contemplates that “the relevant date” will vary, depending on either the circumstances or the purposes for which a Market Value is to be determined. In a detailed agreement that runs to 237 pages, one would expect the balance of the Agreement to indicate how “the relevant date” is to be identified in any particular case. Both parties take that approach. SkyCity says the definition of Compensation Sum indicates how to identify “the relevant date”. MPF says “the relevant date” is indicated by the valuation principles in Schedule 10.

[77]	The Concession Agreement uses the concept of Market Value solely for the purpose of determining the Compensation Sum that is payable by SkyCity to MPF in various circumstances. It is necessary to set out the lengthy definition of “Compensation Sum”:

Compensation Sum means:

(a)	for the purposes of clause 11.2(c)(i)(A) (Limited exclusion rights):

(i)	if the Exclusion Notice is given prior to the NZICC Car Park Commencement Date, 1/2,550 multiplied by the amount set out in clause 6.6(d) (per Parking Space);

(ii)	if the Exclusion Notice is given after the NZICC Car Park Commencement Date, 1/3,174 multiplied by the amount set out in clause 6.6(d) (per Parking Space);

(b)	for the purposes of clause 24.3(a)(i) (Termination following Concession Holder Default), the amount specified in that clause calculated as at the relevant Proposed Termination Date;

(c)	for the purposes of clause 24.3(a)(ii) (Termination following Concession Holder Default if Re-tendering Concession), the amount

specified in Schedule 11 (Compensation Sum if Re-tendering Concession);

(d)	for the purposes of clause 25.5 (Termination following SKYCITY Default), the aggregate Market Value of the Concession calculated as at the relevant Proposed Termination Date;

(e)	for the purposes of clause 25A (No Fault Termination Rights), the aggregate Market Value of the Concession calculated as at the relevant Proposed Termination Date;

(f)	for the purposes of clause 28.1(d) (Termination following Cancellation of Gaming Licence), the Market Value of the Concession calculated as at the date immediately prior to the Gaming Licence Loss;

(g)	for the purposes of clause 30.3(d) (Destruction of NZICC Car Park before NZICC Car Park Commencement), the Market Value of the Concession calculated as at the date immediately prior to the destruction or damage, but assuming that the NZICC Car Park Commencement Date has occurred in respect of the Second Tranche NZICC Car Parks;

(h)	for the purposes of clause 30.3(e) (Destruction of NZICC Car Park before NZICC Car Park Commencement), an amount equal to:

(i)	(1,250/3,174) multiplied by the Purchase Price (excluding GST); less

(ii)	any amount received by the Concession Holder pursuant to clause 6.5(b) (Delay of NZICC Car Park Commencement Date); less

(iii)	the Car Parking Revenue received from, or in respect of, Staff (or other persons permitted to park in the NZICC Car Park pursuant to clause 4.3(c)) that parked in the NZICC Car Park; less

(iv)	a sum which takes into account any insurance proceeds that the Concession Holder has or will receive in relation to the relevant damage or destruction under its Required Insurances (including under a Hybrid Policy);

(i)	for the purposes of clause 30.6 (Damage or destruction), the Market Value of the Concession calculated as at the date immediately prior to the destruction or damage;

[78]	Of the nine definitions of Compensation Sum, all except paras (a) and (h) use the concept of Market Value. In the case of paras (b) and (c), this is done by reference: the amounts specified in the other provisions to which they refer are amounts that are a function of Market Value.

[79]	Of the definitions that use the concept of Market Value, all say that the Market Value is to be “calculated as at” a particular date:

(a)	Paras (b), (c),32 (d) and (e) say that Market Value is to be “calculated as at the relevant Proposed Termination Date”.

(b)	Para (f) says that Market Value is to be “calculated as at the date immediately prior to the Gaming Licence Loss”.

(c)	Paras (g) and (i) say that Market Value is to be “calculated as at the date immediately prior to the destruction or damage”.

[80]	To summarise: the Concession Agreement uses the concept of Market Value solely to determine the Compensation Sum; every time the definition of Compensation Sum relies on that concept it says Market Value is to be “calculated as at” a particular date; and the particular date varies among the paragraphs of the definition. These three factors together strongly point to “the relevant date” being the date specified in the applicable (that is, relevant) definition of Compensation Sum.

[81]	That is not the end of the inquiry. Schedule 10 contains valuation principles to be applied in determining the Market Value. MPF says these principles indicate that “the relevant date” is the Proposed Termination Date (24 November 2022). The principles are in para 1.3 of Schedule 10:

1.3	Principles for valuation

In determining the Market Value of the Concession in respect of the relevant Car Park(s), each Valuer and Umpire (if applicable) is to be instructed to conduct the valuation applying the following principles:

(a)	in accordance with International Valuation Standards as issued by the International Valuation Standards Council (or successor);

(b)	as if the Term was to continue until the Final Expiry Date;

(c)	establishing the net present value of the Concession applying a discounted cash flow valuation methodology for the period from:

32  Paragraph (c) does not say this on its face, but it refers to the amount specified in Schedule 11,   para 1.2 of which refers to Market Value “calculated as at the relevant Proposed Termination Date”.

(i)	the relevant Proposed Termination Date; or

(ii)		where a notice has been given under clause 26.5, the date that is 15 Working Days after the date on which the notice is given,

to the Final Expiry Date (ignoring for these purposes that the Actual Termination Date may have been extended pursuant to clause 26.5);

(d)	on the basis of an arm’s length transaction between an informed and willing seller and an informed and willing buyer, of the Concession on substantially the same terms as this Agreement, under no compulsion to sell or buy, respectively;

(e)	on the assumptions (regardless of whether or not they are valid at the time) that:

(i)	SKYCITY is financially sound and reputable;

(ii)	SKYCITY holds a valid Gaming Licence in relation to the SKYCITY Auckland Casino (or its successor gaming business) and that gaming business is located on the Main Site;

(iii)	SKYCITY is not in breach of this Agreement;

(iv)	there has been no damage or destruction (except damage or destruction caused by the Concession Holder) to the Car Parks or access or egress to those Car Parks; and

(v)	the Encumbrances are registered on the Main Site and the NZICC Car Park Site, and the licences appended thereto have not been terminated.

(f)	if a Qualifying Sale and Leaseback has occurred, on the assumptions (regardless of whether or not they are valid at the time) that: (x) the Qualifying Lease will remain on foot until the Final Expiry Date; and
(y) SCEG maintains exclusive possession of the NZICC Car Park Site until the Final Expiry Date;

(g)	for the purposes of determining the Market Value following a No Fault Event:

(i)	if the No Fault Event is one of the events in clause 25A.1(a),
(b) or (d), taking into account the impact of the No Fault Event (except as set out in (ii) below);

(ii)	if that No Fault Event has been caused by a breach by SKYCITY or any of its Related Parties prior to Commencement (whether before or after the Agreement Date) of the condition that the total number of cars parked on the site at any one time between the hours of 8 am to 5 pm Monday to Friday (but excluding public holidays) shall not exceed 1700 (being condition 10 of the resource consent held by SKYCITY for car parking at Main Site, being

R/LUC/1992/843), ignoring the impact of the No Fault Event; or

(iii)	if the No Fault Event is the event in clause 25A.1(c) then:

(A)	if that No Fault Event has been caused by the Concession Holder undertaking an action (other than merely carrying out the Parking Operations) which has resulted in the Secretary (as defined in the Gambling Act 2003) being satisfied that the continuance of this Agreement jeopardises the integrity of gambling at SKYCITY’s casino, taking into account the impact of the No Fault Event; or

(B)	in any other case, ignoring the impact of the No Fault Event;

(h)	subject to (e), with regard to the financial performance, financial position, strategic positioning, future prospects and undertaking the Concession at the Car Parks;

(i)	the Concession Holder’s book value of any Alterations carried out by the Concession Holder that are not removed by the Concession Holder shall be taken into account;

(j)	without reference to any synergistic benefits that the buyer might obtain from an acquisition of the Car Parks; and

(k)	taking into account any other matter (not inconsistent with the other provisions of this paragraph 1.3 of this Schedule 10), on any basis that it considers is appropriate.

[82]	MPF principally relies on para 1.3(c). MPF says para 1.3(c) not only instructs what is to be established (the net present value of the cash flows for the period from the Proposed Termination Date to the Final Expiry Date) and how that is to be established (by applying a discounted cash flow methodology) but also the date to which the cash flows are to be discounted (the start of the period, namely the Proposed Termination Date). MPF says that discount date is “the relevant date” for the purposes of the definition of Market Value.

[83]	MPF is correct that para 1.3(c) instructs the valuers and umpire to establish the net present value of the cash flows for the period from the Proposed Termination Date to the Final Expiry Date by applying a discounted cash flow methodology. Paragraph 1.3(c) says so in clear terms (and SkyCity accepts this is what is to be valued and how it is to be valued). But the text of para 1.3(c) does not instruct the valuers and umpire

that the cash flows are to be discounted to the start of that cash flow period. Paragraph 1.3(c) is silent as to the discount date.

[84]	MPF nonetheless submits that para 1.3(c), properly interpreted, instructs the discount date (and therefore “the relevant date”). MPF says this is because:

The DCF [discounted cash flow] method is a standard method for implementing the income approach to valuation. It is used to determine the net present value of an asset by projecting all future positive and negative cash flows and discounting them back to the start of the cash flow forecast period at a discount rate that accounts for the risk of an investment in that asset and the time value of money.

It follows that cl 1.3(c) instructs the discount date. That is because establishing the net present value of the Concession for the cash flow forecast period from the Proposed Termination Date to the Final Expiry Date requires those cash flows to be discounted to the start of that cash flow forecast period, which is the Proposed Termination Date.

(emphasis added)

[85]	This submission assumes that establishing the net present value of a period  of cash flows necessarily involves establishing the net present value on the date on which the period of cash flows starts. It equates “present” with the start of the cash flow period. From a non-expert perspective, I see no basis for that assumption. It is commonplace for a net present value to be calculated for a period of future cash flows where the date on which the value is “present” (what would usually be thought of as the valuation date) is well before the start of the cash flow period. Indeed, it is not unusual for a net present value to be calculated of a single cash flow that is to occur on a future date. On MPF’s approach, establishing the net present value of that single future cash flow would require the single future cash flow to be discounted “back”  to the date when that cash flow was expected to occur. That would be a pointless exercise involving no discounting.

[86]	MPF says, however, that para 1.3(c) uses technical terms, namely the “corporate finance concepts” of net present value and the discounted cash flow (DCF) methodology. MPF relies, in support of its interpretation of para 1.3(c), on expert evidence on the meaning of those terms in corporate finance and valuation practice. MPF says this evidence supports its interpretation of para 1.3(c).

[87]	I accept that net present value and the DCF methodology are concepts used  in valuation and finance (though they are not corporate finance concepts). But they are concepts familiar to any commercial panel judge. Expert evidence on the meaning of such well-known concepts is seldom likely to be of any assistance to such a judge in interpreting a commercial contract, especially when the evidence strays (as it did so readily here) either into evidence of how the contract should be interpreted or into evidence that was based on the expert’s interpretation of the contract.33

[88]	That said, in this case the valuation principles include, in para 1.3(a), that the valuers and umpire are to conduct the valuation in accordance with the IVS. Expert evidence on the IVS was adduced through affidavits from Dr Higson and Professor van Zijl. This evidence was helpful. In the course of their evidence, Professor van Zijl and Dr Higson used and discussed the concepts of net present value and the DCF methodology. I have considered that evidence to see whether it supports MPF’s interpretation of para 1.3(c).

[89]	MPF, in support of its submission that the DCF methodology (and therefore para 1.3(c)) requires that cash flows be discounted back to the start of the cash flow period, referred to several passages from Dr Higson’s affidavit.34 None of those passages supports MPF’s submission. Dr Higson’s explanation of the DCF method said that the valuer “forms a forecast of anticipated cash flows then discounts them to the valuation date to arrive at the NPV [net present value] on that same valuation date”.35 In that explanation, Dr Higson did not suggest that the valuation date is the date on which the period of forecast cash flows commences. Indeed, he went on to describe the valuation date as simply “the date to which future cash flows are discounted in a valuation”.36

[90]	Further, Dr Higson was cross examined on this point. At the end of the cross‑examination, it was put to Dr Higson that the date to which cash flows were discounted may or may not be the same as the date on which the cash flows

33	This observation is directed also, though to a  lesser  degree,  at  the  expert evidence adduced  by SkyCity.
34	Dr Higson’s affidavit at [43]–[47], [61], [66] and [71].
35	At [44].
36	At [48].

commenced. Dr Higson agreed. It was put to Dr Higson that it would therefore be common to do a DCF methodology of future cash flows to a valuation date even though the cash flows did not begin to accrue until a future date. Dr Higson said this was quite common. When it was put to Dr Higson that if one wanted to know the market value today of an annuity that produced cash flows from 2030 to 2050 one would discount those cash flows to today, Dr Higson  said  that was “basic DCF”.  Dr Higson’s acceptances are contrary to MPF’s submission on DCF methodology.

[91]	Professor van Zijl commented in his affidavit on MPF’s pleading that the effect of para 1.3(c) was that the forecast cash flows were to be “discounted back to the start of that same forecast period”. Professor van Zijl said that cl 50.2 of IVS 105 requires that the cash flows are discounted back to the valuation date and that it is often the case that the cash flows are not forecast to commence until after the valuation date to which they are required to be discounted. This evidence was against MPF’s submission.

[92]	In cross-examination, it was put to Professor van Zijl that in a standard calculation of net present value using the DCF methodology a valuer would include all cash flows from the valuation date going forward. Professor van Zijl agreed. It was also put to him that a valuer would simply discount the cash flows back to the start of the cash flow period “because that would normally also be the valuation date”. Again, Professor van Zijl agreed. MPF submitted that Professor van Zijl’s acknowledgements supported its submission on DCF methodology and therefore on the interpretation of para 1.3(c). I do not accept that. The first proposition put to Professor van Zijl said nothing about when the cash flows might start, and so did not reflect MPF’s interpretation of para 1.3(c). The second proposition assumed a norm in which the valuation date is the start of the cash flow period, and so assumed the very thing that MPF wishes to establish.37

[93]	I therefore conclude that the expert evidence provides no support for MPF’s submission that the DCF methodology (and therefore para 1.3(c)) requires that cash flows be discounted back to the start of the cash flow period.

37	The same is true of the follow-up question put to Professor van Zijl.

[94]	Nor is any support for that submission to be found in para  1.3(a)  of  Schedule 10, which says the valuation is to be in accordance with the IVS. Clause 50.2 of IVS 105 says that “[u]nder the DCF method the forecasted cash flow is discounted back to the valuation date, resulting in a present value of the asset”. Thus, under the IVS the net present value is a present value on the valuation date. In other words, it equates “present” with the “valuation date”, whereas MPF’s submission equates “present” with the start of the cash flow period. Neither cl 50.2 nor any other provision in the IVS suggests that the cash flows must be discounted back to the date that is the start of the cash flow period, or that that date is the valuation date.

[95]	For these reasons, I reject MPF’s submission that para 1.3 instructs that the date to which the period of cash flows is to be discounted is the start of the period, namely the Proposed Termination Date.

[96]	That, however, is not MPF’s only submission based on para 1.3. MPF submits that the IVS, incorporated by para 1.3(a), support the view that “the relevant date” in the Market Value definition is the Proposed Termination Date. There are three threads to MPF’s submission.

[97]	First, MPF submits that the IVS provide that the market value of an asset “is established when a willing buyer and willing seller agree to exchange claims on the exchange date”. MPF says that under the IVS this “exchange date” is therefore the relevant date for market value purposes. MPF then says that the relevant date in this case is the Proposed Termination Date, “because that is the date for the market value exchange in this case as provided for in cl 1.3(c) of Schedule 10.”

[98]	I do not accept that submission. The IVS use the concept of an “exchange” in their definition of “market value”, which is:

The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.

[99]	This definition is referring to a hypothetical exchange. The IVS make this clear, explaining that the words “an asset or liability should exchange” refer to:38

… the fact that the value of an asset or liability is an estimated amount rather than a predetermined amount or actual sale price. It is the price in a transaction that meets all the elements of the market value definition at the valuation date.

[100]	So, under the IVS, the exchange is merely one that hypothetically occurs on the valuation date. One first identifies the valuation date, which is a matter of interpreting the instructions to the valuer, whether those instructions are in a contract or elsewhere. One then hypothesises an exchange on that date. It is not a matter of identifying (as MPF would have it) a hypothetical exchange which then provides an “exchange date”. The IVS do not use a concept of an “exchange date”.

[101]	Further, MPF’s submission relies on para 1.3(c). To the extent that MPF relies on its interpretation of that provision, I have rejected that interpretation. To the extent that MPF is submitting that, independently of that interpretation, para 1.3(c) identifies a hypothetical exchange, I disagree. The paragraph merely identifies what cash flows are to be valued and the valuation methodology.

[102]	Dr Higson did employ the concept of an exchange date in his affidavit evidence. He said:

Market Value is to be determined by establishing the “net present value” of the Concession for the period from the Proposed Termination Date (in this case November 2022) to the Final Expiry Date (Schedule 10, clause 1.3(c),
p. 199.) The Proposed Termination Date is the point at which the parties exchange claims – the value of the Concession at this point is exchanged for the future cash flows. I refer to this as the exchange date.

[103]	Dr Higson’s statements that the Proposed Termination Date “is the point at which the parties exchange claims” and that the value of the Concession “at this point” is exchanged for the future cash flows are both interpretations of para 1.3(c). I was not assisted by expert evidence on how the Concession Agreement should be interpreted.

38	International Valuation Standards, cl 30.2(b).

[104]	The second thread of MPF’s submission is that the IVS require that any valuation take account of the purpose of the valuation. MPF pointed to the following provisions of the IVS:

IVS 101 cl 20.1: All valuation advice and the work undertaken in its preparation must be appropriate for the intended purpose.

IVS 101 cl 20.3(f): The purpose of the valuation will also typically influence or determine the basis/bases of value to be used.

IVS 104 cl 30.5: The nature and source of the valuation inputs must be consistent with the basis of value, which in turn must have regard to the valuation purpose.

[105]	I consider that these provisions are not relevant to identifying the valuation date, which is what is in issue here. For example, IVS 101 cl 20.3(f) is directed at the basis of value that is to be used. Here, it is not in dispute that the appropriate basis of value is market value. IVS 104 cl 30.5 is directed at the selection of inputs. The clause goes on to explain that a market approach to value should use market-derived data and inputs. A valuation date is not an input in this sense.

[106]	The third thread of MPF’s submission is that the IVS allow a departure from the standard paradigm under which market value is assessed by reference to the facts and circumstances prevailing at the valuation date. MPF makes this submission because its interpretation of the Concession Agreement is that MPF’s rights in the Concession are to be valued at the Proposed Termination Date of 24 November 2022 (that is, the cash flows are discounted only back to that date) but that this market value is to be calculated by reference to the facts and circumstances as at 21 October 2019.

[107]	MPF relies on IVS 104 cl 200. It will suffice to set out the first two sub‑clauses:

200.	Assumptions and Special Assumptions

200.1.	In addition to stating the basis of value, it is often necessary to make an assumption or multiple assumptions to clarify either the state of the asset in the hypothetical exchange or the circumstances under which the asset is assumed to be exchanged. Such assumptions can have a significant impact on value.

200.2.	These types of assumptions generally fall into one of two categories:

(a)	assumed facts that are consistent with, or could be consistent with, those existing at the date of valuation, and

(b)	assumed facts that differ from those existing at the date of valuation.

[108]	Clause 200.4 of the IVS then says that where assumed facts differ from those existing at the date of valuation, they are referred to as a “special assumption”. MPF says that a special assumption can include where a valuation requires market value to be assessed on assumed facts that differ from those on the valuation date. MPF submits that is the effect of the instruction, in the relevant definition of Compensation Sum, that the market value be “calculated as at” the date immediately prior to the destruction or damage.

[109]	SkyCity acknowledges that a valuation can proceed on the basis of special assumptions. But it says that special assumptions relate to the item being valued and do not permit a departure from the requirement in IVS 104 cl 30.2 that the definition of market value “must” be applied in accordance with, among other things, the following:

(c)	“On the valuation date” requires that the value is time-specific as of a given date. Because markets and market conditions may change, the estimated value may be incorrect or inappropriate at another time. The valuation amount will reflect the market state and circumstances as at the valuation date, not those at any other date.

[110]	SkyCity (and Professor van Zijl) say that this requirement is mandatory. MPF (and Dr Higson) say it is not.

[111]	I accept that the requirement in IVS 104 cl 30.2(c) is expressed in mandatory terms. The IVS say in their glossary that “must” indicates “an unconditional responsibility”. But the parties are at liberty to contract around that requirement. The question is whether, the Concession Agreement having recorded in para 1.3(a) that the valuation is to be conducted in accordance with the IVS, the Agreement has elsewhere departed from the requirement in cl 30.2(c).

[112]	The most obvious place for such a departure would be in para 1.3, given that this sets out valuation principles. Paragraph 1.3 does contain several assumptions and special  assumptions.  Each  is  expressed  in  clear  terms.   For   example,   sub‑paras (e) and (f) say that the valuation must be conducted on certain assumptions

“regardless of whether or not they are valid at the time”. Each is also specific (for example, that SkyCity is not in breach of the Concession Agreement). None is as wide-ranging as the special assumption for which MPF contends.

[113]	It is not surprising that each of the special assumptions in para 1.3 is expressed in clear terms. In a detailed contract such as the Concession Agreement, one would normally expect departures from general rules (such as IVS 104 cl 30.2(c)) to be clearly expressed — particularly where the departure is as fundamental as the one MPF seeks.

[114]	MPF submits that the special assumption arises from the direction in the definition of Compensation Sum that the Market Value be “calculated as at the date immediately prior to the destruction or damage”. MPF focuses on the words “calculated as at”. MPF submits those words mean that the market value is to be “calculated by reference to the facts and circumstances as at” the date immediately prior to the destruction or damage.39 MPF’s interpretation needs the italicised words to be read into that definition. This highlights that the words on which MPF relies do not clearly express a departure from IVS 104 cl 30.2(c) — especially not a fundamental departure. Indeed, I consider the natural and ordinary meaning of the words is that the date immediately prior to the destruction or damage is the date as at which the Market Value is to be calculated — what is commonly called the valuation date.

[115]	To advance its preferred interpretation of the words “calculated as at”, MPF makes two submissions. One is that the words have to be construed in light of para 1.3(c) of Schedule 10, which MPF submits requires the cash flows to be discounted to the Proposed Termination Date. I have already rejected that view of para 1.3(c). The other submission is that the words have to be construed in the context in which they are found. MPF submits that when the definition of Market Value is incorporated into the relevant definition of Compensation Sum, the latter refers to two dates:

… [the market value of the Concession Holder’s rights and interests in the Concession in respect of the Concession at the relevant date] calculated as at the date immediately prior to the destruction or damage …

39	Emphasis added.

[116]	MPF says that on SkyCity’s interpretation of the Concession Agreement, the two dates are the same, and so the words “calculated as at” serve no useful purpose and are redundant. MPF says that its interpretation is the only one that gives meaning to the words “calculated as at”.

[117]	The presumption against redundancy is an interpretative tool that must be used with caution, as it often assumes a perfection in drafting that is seldom achieved.40 In any event, in this case the presumption is of no interpretative assistance, as neither party’s interpretation creates a redundancy. If SkyCity’s interpretation is correct, it is an error, when incorporating the definition of Market Value into the relevant definition of Compensation Sum, to incorporate (as MPF does in its submission) the words “at the relevant date”. That is because, if (as SkyCity contends) “the relevant date” means the date specified in the relevant definition of Compensation Sum, the natural and ordinary way of reading the definitions together is not to repeat that part of the definition of Market Value that refers to a date already specified in the relevant definition of Compensation Sum.

[118]	I conclude that the words “the relevant date” in the definition of Market Value, when read in the context of the Concession Agreement as a whole, have only one ordinary and natural meaning. They mean the date identified in the relevant definition of Compensation Sum, which in this case is “the date immediately prior to the destruction or damage”, namely 21 October 2019. I do not consider that MPF’s interpretation of “the relevant date” is an ordinary and natural meaning that those words can bear.

Meaning of “the relevant date”: the text construed in the context of the commercial purpose of cl 30.6

[119]	MPF says the purpose of the Compensation Sum payable under cl 30.6(a)(iii) is to compensate MPF for the loss of cash flows from the Proposed Termination Date. MPF says its interpretation achieves this purpose because it values those cash flows on that date. MPF says that SkyCity’s interpretation does not achieve this purpose.

40 See the authorities discussed in Kim Lewison, The Interpretation of Contracts (7th ed, Sweet & Maxwell, London, 2021) at [7.28]. In this case, for example, both parties seemed to accept that in the definition of Market Value the words “in respect of the Concession” were redundant.

Rather, by discounting the cash flows back to 21 October 2019, “it has the effect of paying MPF for the cash flows lost in 2022 in 2019 dollars”.

[120]	I accept that the purpose of the Compensation Sum is as stated by MPF. The Compensation Sum is payable as a result of MPF having elected to terminate the Concession Agreement under cl 30.5. Paragraph 1.3(c) of Schedule 10 specifies that the   cash   flows   to   be   valued   are   those   for   the   period   from    the Proposed Termination Date to the Final Expiry Date. The reason the cashflow period starts from the Proposed Termination Date is that MPF will already have received the cash flows up to the Proposed Termination Date. The Compensation Sum is payable for the loss of cash flows from the Proposed Termination Date onwards.

[121]	By discounting the cash flows back to the Proposed Termination Date, MPF’s interpretation values MPF’s lost future cash flows at about the time that the Concession Agreement terminates.41 It provides full compensation for those lost cash flows. SkyCity’s interpretation achieves the purpose of cl 30.6(a)(iii) to a large extent, but it provides less than full compensation, as the lost cash flows are discounted back to the date immediately before the damage (21 October 2019). MPF’s interpretation therefore achieves the purpose of cl 30.6(a)(iii) better than does SkyCity’s interpretation. Further, there is no obvious commercial rationale for discounting the cash flows back to the date immediately before the damage.

[122]	MPF’s interpretation therefore makes better commercial sense than SkyCity’s interpretation. But it is easy to exaggerate the extent to which this is so by focussing on what happened in this case. The proper perspective is that of reasonable persons in the position of the parties at the time they entered into the Concession Agreement.42 Such persons would have considered the full range of circumstances that might have given rise to an election under cl 30.5 and triggered payment of a Compensation Sum under cl 30.6. While there is a three-year time gap in this case between the damage and the Proposed Termination Date, under cl 30.5 that time gap could be six months

41	For simplicity of analysis, I am ignoring the effect of MPF having elected, under cl 26.5, that the Concession Agreement terminate only once SkyCity pays the Compensation Sum.
42	Arnold v Britton [2015] UKSC 36, [2015] AC 1619 at [19] per Lord Neuberger, who said that “commercial common sense is not to be invoked retrospectively”.

or less.43 While SkyCity’s interpretation is unfavourable to MPF, MPF was not forced to terminate. MPF could have elected to keep the Agreement on foot, in which case it would have continued to receive the cash flows and could have assigned its interest under the Agreement to a third party.44 In either case, MPF would not have faced the discounting issue that arises here.

[123]	That MPF’s interpretation better achieves the purpose of cl 30.6, and therefore makes better commercial sense, is not in this case a sufficient reason for adopting that interpretation. I have concluded that the only ordinary and natural meaning of the words “the relevant date”, construed in the context of the contract as a whole, is the meaning advanced by SkyCity. As the Supreme Court said in Firm PI:45
[A] court is not justified in concluding that a contract does not mean what it seems to say simply because the court considers that, so interpreted, the contract is unduly favourable to one party.

(footnotes omitted)

[124]	The meaning of “the relevant date” that I favour is one that is well short of producing a commercially absurd result that might justify a court in adopting a meaning of those words other than their ordinary and natural meaning. This was a negotiated commercial contract. Both parties had control of the language ultimately chosen. There is no suggestion that something went wrong with the contractual language. Mr Nicholas’s affidavit referred to the Information Memorandum that SkyCity provided to Macquarie describing the opportunity to purchase the car parking concession. This stated that in the event of termination of the Concession Agreement for destruction or damage, SkyCity would pay compensation in an amount described as “market value at the date of destruction/damage”. That is consistent with the more detailed wording that appeared in the Concession Agreement.

43 Clause 30.5(a) gives MPF an election to terminate if reinstatement is not completed within “the Applicable BI Period”. The Applicable BI Period could, depending on what insurance cover SkyCity was able to obtain, be as short as six months. Clause 30.5(b) gives MPF an election to terminate if, on completion of the repairs, the number of parking spaces is at least 160 less than the number of car parks prior to the damage. Conceivably this could arise in a time period less than six months.
44 Under cl 39.2, MPF cannot assign the Concession Agreement without SkyCity’s consent, but SkyCity cannot unreasonably withhold consent.
45 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [89]. The Supreme Court made the same point in Bathurst Resources Ltd v L&M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [45].

Meaning of “the relevant date”: the text construed in the context of the commercial purpose and structure of the Concession Agreement

[125]	MPF submits that its interpretation is reinforced by the commercial purpose and structure of the Concession Agreement. It says these considerations point away from SkyCity’s interpretation.

[126]	There are three distinct strands to MPF’s submission. First, MPF submits that the fundamental economic structure of the Concession Agreement is “grounded in corporate finance principles, in particular the time value of money and the willing buyer/seller paradigm”. MPF says its interpretation is consistent with these principles and that SkyCity’s is not. MPF says SkyCity’s interpretation violates the principles because it fails to account for the time value of money.

[127]	This submission is a repeat of the submission based on the commercial purpose of cl 30.6, this time dressed up in finance terminology. I reject this submission for the same reasons I rejected that submission. Further, while I accept that finance principles, including the time value of money, would have informed the parties’ respective approaches to negotiating the Concession Agreement,46 and that the Agreement uses finance and valuation terms (particularly in para 1.3 of Schedule 10), this does not mean the parties agreed that every one of their obligations would be consistent with finance or valuation principles. Determining the meaning of “the relevant date” in this case is a matter of interpreting those words in their context, not of applying some unstated finance principle.

[128]	Secondly, MPF submits that the market value of a concession is often expected to increase over the short to medium term. MPF relies on Mr Caldwell’s evidence to this effect. That evidence is irrelevant and inadmissible, for reasons I set out earlier.

[129]	Thirdly (and this is the main thrust of MPF’s submission under this head), MPF says the structure of the Concession Agreement reflects the “norms and principles” of

46 The basic economic structure of the Concession Agreement is that MPF pays a lump sum upfront price in exchange for expected cash flows from operating the car parks for a term of approximately 29 years. MPF did not intend to actually operate the car parks. Clause 15 allows MPF to appoint a manager to perform MPF’s obligations under the Agreement. SkyCity’s consent is required, but cl 15.1(c) provides that SkyCity is deemed to have consented to the appointment of the manager (a third party) named in that clause.

long-term infrastructure concessions and the related project finance and PPP “principles” that underpin them. MPF submits this background reinforces and explains MPF’s interpretation, because:

(a)	A key principle of PPPs is that parties allocate risks and financial implications relating to certain termination events and corresponding compensation sums to the party best able to address and/or bear them;

(b)	A key principle of PPPs is that the private partner (in this case, MPF) should be no better off or worse off as a result of a termination it has not caused; and

(c)	A common technique used in PPPs to achieve that purpose is to separate the date for valuation assumptions from the valuation date.

[130]	MPF submits that these principles and techniques are seen in the compensation regime in cl 30 of the Concession Agreement. MPF says those definitions of Compensation Sum that depend on the Market Value of the Concession and their corresponding termination rights are all structured in this way, allocating any financial implications of the relevant termination event to the party best able to avoid or bear the risk of that event. MPF also submits that PPP principles hold that risks “should be” allocated in a way that does not create perverse incentives.

[131]	MPF’s submission relies on the evidence of Mr Yew and Mr Caldwell as to the nature and economics of PPPs and transactions similar to PPPs. I have held that evidence to be inadmissible. However, even if I had admitted that evidence, I would have rejected MPF’s submission. I will explain why.

[132]	MPF’s submission, at its  heart,  is  a  submission  as  to  how  the  Concession Agreement should have been drafted, rather than a submission as to what the Agreement, as drafted, means. This is clear from the manner in which Mr Yew expressed himself throughout his affidavit. He talked of “model” PPP agreements and “guides” to their use.47 He said risks “should be” borne by the party better equipped

47	Mr Yew’s affidavit at [25].

to control them, that risks “should be” allocated in a way that did not create perverse incentives, that compensation provisions “should” ensure the private partner is neither better nor worse off as a result of an early termination, and that compensation by way of market value at termination is a “starting point” after which adjustments for the specific risks of a project are taken into account.48 Consistently with that approach, Mr Yew acknowledged that risk allocation would need to be decided in each case, that the grantor (in this case, SkyCity) may try to pass on some risks to the private party, that there is a direct link between risk allocation in relation to termination events and price, and that the practices and precedents to which he referred provided parties with “a menu of options” but that the approach adopted “is often a commercial decision ultimately”.49

[133]	Mr Caldwell’s affidavit was similar. He gave evidence of market practices, particularly in relation to issues of termination and termination payments, and of which of the parties’ interpretations was superior from an economic perspective. He acknowledged that the provisions of a termination regime would be relevant to the price a bidder was prepared to pay.50

[134]	There is nothing in the Concession Agreement to suggest that the parties intended, objectively, to create a contract, or even a termination and compensation regime, that followed the financial or economic ideals referred to by Mr Yew  and  Mr Caldwell. The Concession Agreement does employ some finance concepts, but the parties do not subscribe, anywhere, to general financial or economic ideals.

[135]	Further, the termination and compensation regime in cl 30 does not allocate risk in the way advocated by Mr Yew or submitted by MPF. MPF says the regime allocates the financial implications of the relevant termination event to the party best able to avoid or bear the risk of that event. In particular, MPF says that cl 30.6(a)(iii) (the provision under which the Compensation Sum is payable in this case) does this. MPF’s argument is as follows:

48	At [35], [39], [40], [52], [56], [60]–[61], [64] and [76].
49	At [37], [38], [55] and [76]–[77].
50	Mr Caldwell’s affidavit at [92]–[93] and [108].

(a)	This Compensation Sum is payable following SkyCity’s inability to reinstate the NZICC Car Park following a Partial Pre-NZICC Delivery Destruction. The market value of the Concession may be impacted by:

(i)	the destruction or damage itself;

(ii)	any movements (up or down) in market circumstances following SkyCity’s election to reinstate; and

(iii)	the choice of discount date.

(b)	The effect of the instruction in the relevant definition of Compensation Sum that the market value of the Concession is to be calculated as at the date immediately prior to the destruction or damage is to neutralise these impacts.

(i)	The underlying destruction or damage is by definition not caused by MPF, and at the same time SkyCity is best placed to address the risk of such damage, by insurance or other means. Risks arising during the reinstatement period after SkyCity has made an election to reinstate, such as delays or changes in market circumstances, are also outside MPF’s control. SkyCity has the sole discretion to make such election and as such, is best placed to assess and bear those risks.

(ii)	SkyCity is also responsible for the reinstatement works and timing of them. In turn, the Compensation Sum is only payable if SkyCity fails to reinstate despite its own election to do so. Such risks therefore only crystallise if SkyCity fails to reinstate.

(iii)	In both these respects, SkyCity is the party who controls or is better able to address the financial implications of these events. Consistently, the Agreement allocates the financial implications of these risks to SkyCity.

(c)	The choice of discounting date also has financial implications. Discounting the market value of the Concession to the date that best approximates the time of termination (that is, MPF’s interpretation of the words “the relevant date”) ensures that the financial implications (time value of money) of SkyCity’s election to reinstate and failure to do so are borne by the party responsible for the risk and therefore better able to address it. MPF says that SkyCity is the party that controls or is better able to address the financial implications of its election to reinstate and its failure to do so. MPF says its interpretation is therefore consistent with its (and Mr Yew’s) ideal of how risks should be allocated.

[136]	This argument assumes that whenever a Compensation Sum has become payable under cl 30.6(a)(iii) of the Concession Agreement, SkyCity will have failed to reinstate within time because of some matter that it is better able than MPF to control or address. This is not so. Clause 30.3(f) provides that if SkyCity elects to reinstate, cl 30.2 will apply. Clause 30.2 says SkyCity will with all reasonable speed expend all insurance money it receives in reinstating the Car Parks. But its obligation to do so is subject to SkyCity’s insurance policies for the damage “not having been avoided by any act or omission of [MPF] in breach of this Agreement” and SkyCity is not liable to expend any sum of money greater than the amount of insurance money received by it.

[137]	The Concession Agreement therefore contemplates that one cause of SkyCity’s failure to reinstate within the three-year limit may be MPF breaching the Agreement in a way that causes SkyCity’s insurance to be avoided. MPF is presumably (under Mr Yew’s and MPF’s ideal) the party better placed to address the risk of it breaching the Agreement.

[138]	Similarly, cl 30.6(a)(ii) provides for SkyCity to pay a Compensation Sum to MPF if SkyCity issues a valid termination notice under cl 30.4. Clause 30.4 allows SkyCity, following damage to or destruction of the car parks, and on the happening of one of three events, to issue a termination notice. One of the events that can give SkyCity the right to terminate is that SkyCity’s insurance policies have been avoided

by an act or omission of MPF in breach of the Concession Agreement. If SkyCity issues a termination notice, the Compensation Sum payable under cl 30.6(a)(ii) is defined in the same way as the Compensation Sum payable under cl 30.6(a)(iii).

[139]	Clause 30.6(a) therefore provides for a Compensation Sum to be payable in a range of circumstances. Some of the circumstances may be ones that, as MPF submits, are within SkyCity’s control. But others are plainly within MPF’s control. Despite this, cl 30.6(a) employs the same definition of Compensation Sum. Contrary to MPF’s submission, the clause does not consistently allocate the financial implications of the relevant termination event to the party better able to avoid or bear the risk of that event.

[140]	When I raised this point at the hearing, MPF’s response was that if MPF breached the Concession Agreement in a way that avoided SkyCity’s insurance, that would trigger a termination right in SkyCity’s favour under cl 24, under which the Compensation Sum payable would be Market Value less 20 per cent. Even if that were so, it does not answer the point. That SkyCity might have additional rights does not detract from the fact that cl 30.6(a) addresses a range of termination events, some within SkyCity’s control, some within MPF’s, yet defines the Compensation Sum in the same way for each of those termination events.

Summary on interpretation

[141]	The words “the relevant date” in the definition of Market Value, when read in the context of the Concession Agreement as a whole, have only one ordinary and natural meaning. They mean the date identified in the relevant definition of Compensation Sum, which in this case is “the date immediately prior to the destruction or damage”,  namely  21  October  2019.  MPF’s  submissions  on  the  purpose  of  cl 30.6(a)(iii), and the commercial purpose and structure of the Agreement, do not persuade me that I should adopt some meaning other than that ordinary and natural meaning.

What form should any declaration take?

[142]	As noted earlier, SkyCity seeks a declaration that:

… for the purposes of determining the Compensation Sum payable in respect of MPF’s Termination Notice served 27 October 2022, the Concession Agreement requires the Market Value of the Concession to be determined,
 including by any Valuer and/or Umpire appointed under Schedule 10, as at the valuation date 21 October 2019 (being the date immediately before the NZICC Fire) by applying a discounted cashflow methodology to future cash flows from 24 November 2022 to 30 June 2048, discounted to the valuation date of 21 October 2019.

[143]	Given my conclusion on the interpretation issue, I will make a declaration generally in this form. The one remaining issue is whether the declaration should include the underlined words.

[144]	SkyCity says that MPF has previously subverted and delayed the umpire process. SkyCity says it wants the declaration to be in a form that does not allow MPF to continue to do that. SkyCity says the purpose of the underlined words is to make  it clear to the umpire (or valuer) that Market Value is to be determined in accordance with the declaration, “thereby achieving the purpose of allowing the Schedule 10 process to resume so that the Concession Agreement can actually terminate”.

[145]	MPF denies having subverted or delayed the umpire process. MPF also says that SkyCity’s suggestion that upon receiving a declaration the umpire must recommence the Schedule 10 process is not before the Court and MPF reserves its position on it.

[146]	It is not appropriate for me to resolve the dispute about whether MPF subverted or delayed the umpire process. No such allegation was pleaded by SkyCity. Nor is it necessary for me to resolve that dispute. The dispute is not relevant to whether the underlined words should form part of the declaration. Those words are directed at the valuers and umpire, not at MPF.

[147]	A declaration under the Declaratory Judgments Act will generally be made only where there is a genuine dispute. The underlined words should be included only if there is a genuine suggestion that, following the making of a declaration as to how the Concession Agreement requires Market Value to be determined, the umpire would not resume the Schedule 10 process and determine Market Value in accordance with that declaration. In that respect, the relevant events are:

(a)	On 23 March 2023, MPF wrote to the umpire saying that the parties were in a legal dispute as to the meaning of the Concession Agreement. MPF invited the umpire to “pause the Umpire process and not deliver your determination until the interpretation of the Concession Agreement for the purposes of the cl 30.6 Compensation Sum is finally determined pursuant to cl 38 of the Concession Agreement”.51

(b)	The same day, the umpire sent an email saying he acknowledged MPF’s request to “pause work on the Umpire process”. He paused work then, while awaiting SkyCity’s response.

(c)	On 27 March 2023, the umpire sent another email, saying he had ceased work “whilst the legal dispute is resolved”.

(d)	On 28 March 2023, MPF sent a letter to SkyCity, explaining that MPF had been left with little option but to ask the umpire to “pause” the umpire process.

[148]	All this makes it plain that MPF merely asked the umpire to pause the Schedule 10 process whilst the legal dispute is resolved and that that is all the umpire agreed  to do. Nothing in the material suggests that the umpire will not resume the process once a declaration is made, let alone that the umpire would not determine Market Value in accordance with the declaration.

[149]	Plainly, the declaration will bind SkyCity and MPF.52 That will include binding them in respect of their interactions with the umpire pursuant to the Concession Agreement.

[150]	Given the binding nature of the declaration, and that there is no suggestion that the umpire will not resume the Schedule 10 process and determine Market Value     in accordance with the declaration, I see no need to include the underlined words in

51 This reflects the language of cl 38, which says that a determination under that clause is final and binding. As noted elsewhere in this judgment, MPF did not protest this court’s jurisdiction to determine the interpretation issue.
52 Declaratory Judgments Act 1908, s 4.

the declaration. However, in case any issues do arise, I will reserve leave to SkyCity to apply for further orders or other relief as may be necessary to give effect to the declaration.

Costs

[151]	SkyCity is entitled to costs. If costs cannot be agreed, brief memoranda may be filed. These are to be of no more than three pages each, excluding relevant schedules or annexures. SkyCity is to file and serve its memorandum first, followed by MPF within five working days.

Result

[152]	I make a declaration under s 3 of the Declaratory Judgments Act 1908 that for the purposes of determining the Compensation Sum payable in respect of MPF’s Termination Notice served 27 October 2022, the Concession Agreement requires the Market Value of the Concession to be determined as at the valuation date 21 October 2019 (being the date immediately before the NZICC Fire) by applying a discounted cashflow methodology to future cash flows from 24 November 2022 to 30 June 2048, discounted to the valuation date of 21 October 2019.

[153]	I reserve leave to SkyCity to apply for further orders or other relief as may be necessary to give effect to the declaration.

[154]	I dismiss MPF’s counterclaim.

Campbell J