ALARM NEW ZEALAND LIMITED v 15 HOPETOUN LIMITED [2016] NZHC 352

ALARM NEW ZEALAND LIMITED v 15 HOPETOUN LIMITED [2016] NZHC 352 [4 March 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2014-404-1293[2016] NZHC 352BETWEEN ALARM NEW ZEALAND LIMITEDApplicantAND 15 HOPETOUN LIMITEDRespondentHearing: 3 March 2016 (by telephone)Appearances: B M Stainton for ApplicantR Butler for RespondentJudgment: 4 March 2016JUDGMENT OF WHATA JThis judgment was delivered by Justice Whata on4 March 2016 at 11.00 a.m., pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors:Stainton Chellew, Auckland[1] This matter came before me as Duty Judge under urgency. The plaintiff, Alarm New Zealand Ltd, seeks an urgent interim injunction restraining the defendant, 15 Hopetoun Ltd, from selling, transferring, or providing exclusive possession to persons other than the plaintiff, accessory units numbered AU73-76 inclusive, as included in Computer Unit Title Register Identifier 721740 pending further order of the Court.[2] The application was initially made without notice, but under direction from me a copy of the application was served on the defendant. Having conferred withcounsel it was agreed that, for clarity's sake, an interim injunction should be imposedpending a hearing of the application proper. Timetabling was also agreed and is noted at paragraph [20].[3] I also indicated to counsel that I considered it would be appropriate for me to briefly state the reasons in support of the interim injunction and that is the purpose of this judgment.Overview of issues[4] Alarm leases premises from 15 Hopetoun Ltd. On 12 February 2016 Associate Judge Christiansen made the following order:To restrain the defendant from disposing of or diminishing the value of its right, title and interest (legal or beneficial) in level 3, pending further order of the Court.[5] An application to review that decision was filed challenging the jurisdictionof the Judge to make such an order and the Judge's substantive decision.[6] The defendant claims, among other things, that the freezing order was in the nature of an injunction with the jurisdiction conferred by s 26J of the Judicature Act 1908.[7] Complicating matters, the defendant intends now to transfer two accessory units (AU73 and 74), being two car parks. The plaintiff and the defendant disagreeas to whether the Judge's order affects these units.[8] These issues came before Muir J and undertakings to protect the plaintiff'sinterests together with the prospect of an application for interim injunction in relation to AU73 and 74 were mooted. In any event, Muir J made a number of orders timetabling the defendant's review application to a hearing.[9] As noted, the application for interim injunction in respect of the units (and additional units 75 and 76) has now been filed and has been placed before me as Duty Judge.Background[10] I preface this judgment by observing that this application is not an opportunity to revisit (and/or regularise) the judgment of Associate Judge Christiansen by side route. That judgment has effect unless and until set aside by way of the review process. I, therefore, adopt the background as provided by Associate Judge Christiansen:Background[1] The plaintiff applies for particular discovery and a freezing order.The plaintiff is the tenanted occupant of Level 3, 15 Hopetoun Street,Freemans Bay, Auckland (Level 3). It entered into a lease of Level 3 bydeed dated 1 October 2013. Its lease is for 10 years. It has a five year rightof renewal.[2] The defendant acquired ownership of the building at 15 Hopetoun Street in December 2013.[3] The building comprised 11 levels. On 2 December 2013 the defendant obtained resource consent for a change of use of the building from commercial offices to 91 residential apartments. On 19 December 2013 the defendant applied to Auckland Council (the Council) for building consent to add a further three levels to the building and to convert each tower level to six self contained residential apartments. The building consent application showed the plaintiff's leased premises on Level 3 were divided into sixresidential apartments.[4] The building consent application plans included seismic structural strengthening design construction features.[5] The evidence is that the plaintiff did not know nor was consultedregarding the plans for Level 3.[6] There was discussion between the parties in February 2014 concerning disruption of the plaintiff's quiet enjoyment of the lease duringbuilding renovation works. On 23 February the plaintiffs sent an email toMr Mahoney the defendant's director and sole shareholder setting out possible terms and conditions for relocating including the requirement for assistance with expenses, costs and compensation. There was no reply.[7] On 24 February the defendant's consultant engineers expressly acting as the defendant's agents wrote to the Council's building consentdivision advising they had carried out a review of the building and identified what they considered were critical structural weaknesses, requiring [sic] to be addressed in the building consent. The plaintiff says this and othercommunications on behalf of the defendant amounted to a request by thedefendant for the Council to issue an earthquake prone notice when thedefendant and its agents knew or ought to have known that the building didnot meet the criteria required for the issue of such.[8] On 27 February 2014 the Council issued an earthquake prone notice (Council Notice) in respect of the building. On 11 March 2014 thedefendant forwarded the Council Notice with the defendant's own notice aslessor citing clause 21.1 of the lease and requiring the plaintiff to give fulland uninterrupted access to the leased premises to carry out the structuralstrengthening work as described in the Council Notice.[9] On 21 March 2014 the defendant's solicitor wrote to the plaintiffstating that due to the Council Notice and advice from engineers stating thebuilding could not be occupied while Council Notice work was carried out,that the plaintiff would be required to vacate the premises until that workwas completed and to enable entry into the premises to carry out the repairwork.[10] The defendant indicated work would be completed by 30 September 2014.[11] The defendant refused to offer any compensation.[12] On 15 August 2014 the Chief Executive, Ministry of Business Innovation and Employment (MBIE) determined pursuant to s 188 of the Building Act 2004 that the Council incorrectly exercised its power of decision in issuing the Council Notice and reversed that decision.[11] The Associate Judge also provides details as to the nature of the plaintiff's claim and the defendant's claim at paragraph [14]-[18] of his judgment:The plaintiff's claim[14] The plaintiff's initial statement of claim was filed on 29 May 2014. It sought special damages of $255,000 for temporary relocation costs and $120,000 for loss of business profit. At the same time the plaintiff filed an application for orders restraining the defendant from pre-selling any proposed apartments on Level 3 or from undertaking any work on Level 3 not related to earthquake structural strengthening, and preventing the defendant from removing the plaintiff's fitout or from erecting any walls, partitions or otherwise reconfiguring the layout of Level 3. Those issues resulted in the defendant's undertaking agreeing that Level 3 would not beconverted to residential apartments while the plaintiff's lease of the premises was on foot.[15] An amended statement of claim was filed on 23 January 2015. That claimed damages of $530,277 for temporary relocation costs, loss of business profit and legal expenses. Causes of action included, inter alia:(a) Breach of quiet enjoyment of the lease for failing to take all steps to arrange for the renovation work to be carried out in ways and by means that minimised disruption of access and due to having deliberately sought an incorrect and invalid notice from the Council in order to force the plaintiff to relocate.(b) Misrepresenting the reasons why the plaintiff should relocate temporarily by promising the work required to be done would be limited when the Council Notice did not require the property to be vacated at all.(c) That the defendant breached undertakings including permitting reoccupation on 30 September 2014 and failed to honour undertakings to consult in a timely way with the plaintiff as to additional work being done on Level 3 which had not been heralded.(d) Misleading and deceptive conduct by the manner and means used to require the plaintiff to relocate by 31 May 2014 when no such proper reason existed.(e) Trespass — for all those various reasons already identified.[16] Mr Stainton for the plaintiff summarises the position as the defendant removing the plaintiff it having obtained and relied upon an invalid earthquake-prone notice issued by the Council and misrepresented the plaintiff would be in breach of its lease unless it vacated to enable building strengthening work required by the notice. Further that it was in fact the defendant that carried out all the renovation work using Level 3 and having failed to reinstate Level 3 premises to the same standard as it undertook to this Court and to the plaintiff. Further, the plaintiff says the defendant has lost the fitout the plaintiff had when it vacated Level 3.The defence[17] The defendant filed a statement of defence on 13 February 2015. The defendant does not dispute the plaintiff's lease "continues" in the sense that itruns with the title to Level 3.[18] Regarding the plaintiff's claim that the defendant obtained and relied on the Notice in order to obtain possession over Level 3 and to undertake renovations for the remainder of the building, this is denied. The defendant does admit:(a) It wrote to the Council with respect to the presence of non-ductile, and therefore earthquake prone, columns within the building;(b) The Council for its part issued the Notice;(c) The plaintiff was served with the Notice, and a related notice under clause 22.1 of the lease, which, in effect, required the plaintiff to vacate the premises;(d) The parties entered into negotiations with respect to the plaintiff's relocation and the plaintiff relocated as a result;(e) The Notice was subsequently found by MBIE to have been invalidly issued; and(f) The defendant gave undertakings, dated 19 June 2014, to the effect that the renovations were without prejudice to the plaintiff's rights under the lease.[12] In short, the plaintiff's leasehold interest is not disputed, but the defendantdenies that it relied on a Building Act notice in order to obtain possession of level 3.The basis for the application[13] The plaintiff claims that its leasehold interest in level 3 and the 10 identified car park spaces at 15 Hopetoun Street have been compromised by the defendant changing the nature of the ownership of the building from freehold title to separate titles for principal units and accessory units (car parks), two of which it has sold to third parties. It claims further that the defendant has retained for itself level 3 and 11 car parks, but now seeks to transfer AU73 and 74. These spaces, the plaintiff says, must be retained in order for the defendant to perform its lease obligations.[14] The plaintiff is concerned that, while the freezing order provides a temporary hold on the transfer of level 3, it is unclear as to whether it applies to AU73 and AU74.[15] The plaintiff has also provided an undertaking as to damages in support of its application in the usual way.The defendant's position[16] Mr Butler has helpfully provided a detailed memorandum setting out the position of the defendant in relation to the application. While he agrees that a temporary injunction pending a proper hearing of the application is in order, he does not resile from his core position, namely that:(a) The plaintiff has no exclusive interest in AU73 and AU74;(b) The defendant has complied with its obligations under the lease in terms of assigning ten covered car parks to the plaintiff;(c) Transferring the two car parks would not impinge upon the freezing order and that the only connection between the AUs in level 3 is that level 3 happens to also be the Principal Unit for the purposes of the Unit Titles Act 2010;(d) Overall the plaintiff has no seriously arguable case for exclusive interest, the balance of convenience lies in protecting the right of the defendant to sell, as well as the equitable interests of the third parties. It follows that the overall interests of justice support the declining of an interim injunction.Assessment[17] Given that this is only a temporary injunction pending the substantive hearing I record in summary form only the basis for the order namely:(a) A temporary injunction is necessary as Units AU73 and 74 are subject to a sale and purchase agreement;(b) I am satisfied (in a preliminary way) that the plaintiff has a seriously arguable case that it enjoys proprietary interests in AU73 and 74 (as secured car parks);(c) The transfer of the car parks to the third parties (bona fide purchasers)would defeat the plaintiff's application for injunction as the car parkscould not then be returned to the plaintiffs.[18] I further observe, as Mr Butler correctly noted, that given the potential effect of the freezing order it would not be prudent, in any event, for the defendant to transfer AU73 and 74 as that may in fact breach the freezing order. The legality ofthe freezing order and its scope, of course, is a matter that is set down to be resolved in April. Mr Butler also indicated that the defendant is prepared to abide by that freezing order and will not transfer the units pending the outcome of that review.[19] For completeness, I note that the plaintiff had sought an order in relation to two other units. There is nothing before me to suggest that there is any risk of the transfer of those units. Therefore my order at this stage is simply limited to restraining 15 Hopetoun Ltd from transferring its interests in the AU73 and 74 units to the third parties, pending the resolution of the interim injunction.Orders[20] Given the foregoing I make the following orders:(a) The defendant, 15 Hopetoun Ltd, is restrained from selling or transferring, or providing exclusive possession to other than the plaintiff, accessory units numbered AU73–74 inclusive, as included in Computer Unit Title Register Identifier 721740, pending the hearing of this application for interim injunction;(b) The plaintiff must serve a copy of the application and any supporting affidavits together with a copy of this judgment on the third parties by way of their solicitors, Burton & Co by 5.00 pm Friday 4 March 2016. I reserve leave to those solicitors to come back to this Court in the event that service on them has not proven to be effective for the purposes of notifying the third parties of this proceeding.(c) Any notice of opposition and affidavit in support of such notice is to be filed by the defendant and the third parties by 5.00 pm Friday 11 March 2016;(d) Any reply affidavits are to be filed by 5.00 pm Wednesday 16 March 2016;(e) There shall be a half-day hearing as soon as possible thereafter.(f) Submissions in support of the application are to be filed four days out from the hearing and submissions in opposition are to be filed two days out from the hearing.[21] I also grant leave for any party to come back to the Court on 48 hours notice if, for whatever reason, it is necessary for the Court to address the interim injunction or other orders made.