A Hamilton retailer has been ordered to pay its former landlord more than $64,000 in rental arrears in a dispute sparked by a leak that destroyed the store’s stock.

Washington Properties Ltd, the owner of Washington Mall, launched arbitration against Patty Court Ltd, trading as Blukids, after the retailer withheld rent for the period between April 2019 and May 2020.

However, the retailer said it had held back the rent after $73,000 of merchandise was damaged when a pipe burst, causing flooding in the storage area it rented from Washington Properties.

An arbitrator found in favour of Washington Properties and, in a decision handed down this week, the Supreme Court declined to grant Patty Court Ltd leave to appeal the arbitrator’s decision.

In a written judgment dated April 14, Puisne Judge Andrew Martin said: “The plaintiff has not shown that the award was based on a misapprehension of the facts, or a misapplication of the relevant legal principles to those facts, or a misinterpretation of the relevant contractual documents.

“The award is therefore not susceptible to challenge on the ground that the decision was plainly wrong or resulted from an intellectual aberration.

“The court is not here purporting to determine the ultimate merits of the appeal nor holding that the arbitrator’s decision is unassailable; the court is merely deciding that the threshold required to obtain leave to appeal from the arbitrator’s decision on a point of law has not been crossed.”

Vaughan Caines, counsel for Patty Court Ltd, said that while his client believed what happened was unfair, the arbitrator and the courts found the law was not in the retailer’s favour.

He explained: “The landlord was relying on a specific clause.

“The arbitrator held that the clause was reasonable on its face and ruled for the landlord, notwithstanding that there were other clauses in an associated lease.

“The arbitrator ruled for the landlord and now the Supreme Court agreed that he was right to do so, but it does seem unfair for my client that for reasons beyond their control their stock was ruined.”

A representative for Washington Properties Ltd declined to comment on the judgment.

The court heard that Patty Court Ltd rented a retail space in Washington Mall, along with a storage unit located in the basement of the premises.

On August 21, 2019, a water pipe burst in the ceiling which caused extensive water damage to the stock in the storage unit, with the retailer claiming it was forced to throw out $73,000 of merchandise and incur $33,000 in “relocation expenses”.

The retailer was not insured against the losses, but sought to recover the expenses from Washington Properties in a claim through the property owner’s insurer.

However, the claim was denied because a lease and storage agreement put upon the plaintiff the risk of loss stored in the unit, stating that the landlord did not take responsibility “for loss or damage to any items howsoever caused”.

Without the reimbursement, the court heard a shareholder of Patty Court Ltd cashed in a life insurance policy to fund the replacement of stock, and the retailer withheld paying rent between April 2019 and May 2020 to offset the financial loss.

As a result, Washington Properties launched arbitration against Patty Court Ltd to recover $64,513.50 of unpaid rent, while Patty Court Ltd counterclaimed seeking to recover the cost of lost merchandise, the relocation expenses and the loss of value of the shareholder’s life insurance.

On July 10, 2025, Delroy Duncan, who presided over the arbitration process, found in favour of Washington Properties and dismissed the counterclaims on the grounds that the terms of the lease and storage agreement provided an absolute defence to the plaintiff’s claims.

On September 26, 2025, Washington Properties served a statutory demand on Patty Court Ltd demanding payment of the amount due and stating that a winding-up petition would be launched if payment was not received.

A winding-up petition was filed on January 28 this year, but Patty Court Ltd sought to stay the petition so that an out-of-time appeal could be heard.

Several grounds of appeal were advanced, including that the arbitrator did not fully address arguments put forward by the plaintiff in its counter and that the exclusionary language in the storage agreement was “unconscionable” in the commercial context.

However, in his ruling, Mr Justice Martin wrote that the arbitrator did not need to answer every argument and that the language in the storage agreement was not “unreasonable or onerous”.

Mr Caines also questioned if the plaintiff would be entitled to assert a beneficial interest in the proceeds of an insurance claim by the landlord since Patty Court Ltd had paid a contribution to the insurance premiums, which included flood damage.

Mr Justice Martin said the argument could have met the high threshold for leave to appeal to be granted, but there did not appear to be evidence before the arbitrator that any insurance claim had been made by the landlord.

He wrote: “The only evidence before the arbitrator was that the attempt by the tenant to make an insurance claim through the landlord had been denied.”

In all the circumstances, Mr Justice Martin declined to grant leave to appeal and refused the application to stay the winding-up petition, but granted the company time to pay the owed funds out of a sum that had been held by the court.

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