COUNTRY CLUB APARTMENTS LTD V MFT PROPERTIES LTD COA CA244/2011

COUNTRY CLUB APARTMENTS LTD V MFT PROPERTIES LTD COA CA244/2011 8 November 2011IN THE COURT OF APPEAL OF NEW ZEALANDCA244/2011[2011] NZCA 560BETWEEN COUNTRY CLUB APARTMENTSLIMITEDAppellantAND MFT PROPERTIES LIMITEDRespondentHearing: 16 August 2011Court: Arnold, Winkelmann and Andrews JJCounsel: L Turner for AppellantR S Pidgeon for RespondentJudgment: 8 November 2011 at 11:30 AMJUDGMENT OF THE COURTA The appeal is allowed.B The orders made by the High Court are set aside.C The respondent must repay the appellant, within 28 days, such part of the $33,442 which, in terms of this judgment, is an overpayment of rent plus interest.D The respondent must repay the appellant, within 28 days, sums paid by way of rental and outgoings to the extent they are in excess of the agreed rental of $8,607.75, plus interest.E The appellant is entitled to a set off in respect of the cost of accommodation provided to Mr Colvin, calculated at a rate of $350 per week.F The respondent must pay the appellant costs for a standard appeal on a band A basis with usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Winkelmann J)Introduction[1] The appellant, Country Club Apartments Ltd (Country Club), leased premises from the respondent MFT Properties Ltd (MFT). In 2010 MFT purported to cancel the lease, relying on Country Club‟s non-payment of rent and failure to formally renew the lease. When its right to cancel was challenged by Country Club, MFT applied to the High Court for an order cancelling the lease. Country Club in turn applied to the High Court for relief against the refusal by MFT to renew and against forfeiture of the lease for non-payment of rent, relying upon a purported variation of the lease which reduced the rent payable.[2] Woolford J granted relief against the refusal to renew and the cancellation, but found that the arrangement regarding a lower rental was not a binding contract –it was not recorded in writing as required by the Contracts Enforcement Act 1956 (the Act)1 and was therefore an indulgence revocable at will.2 He ordered Country Club to pay the difference between the lower rental rate and that fixed in the lease from 15 October 2009 until the date of judgment within 14 days, or the lease would be cancelled.[3] Country Club argues that the Judge was wrong to find that there was no binding agreement in relation to the reduction of rent. It says that he also erred in applying the provisions of the Act, but having applied the Act, that he should have found there was an adequate memorandum in writing of the agreement for the1 Now repealed but still applicable to this lease – Property Law Act 2007, s 367.2 MFT Properties Ltd v Country Club Apartments Ltd HC Auckland CIV-2010-404-5913, 13 April2011.purposes of the Act. In the alternative, Country Club says that there was part performance of the agreement and therefore the contract was enforceable at equity.[4] The issues in relation to these aspects of the appeal are as follows:(a) Was there a variation to the lease reducing the rent payable?(b) If so, were the provisions of the Act engaged?(c) If the provisions of the Act are engaged, was there a sufficient written memorandum of that agreement to fulfil the requirements of the Act?(d) If there was not a sufficient memorandum, can Country Club rely upon the doctrine of part performance to enable it to enforce the agreement to vary rent?[5] Country Club also brings an appeal in relation to the Judge‟s rejection of a setoff claimed on account of accommodation provided by Country Club at the requestof MFT‟s director, Mr McNabb. Country Club appeals the Judge‟s finding that theobligation to pay for the accommodation lay with a third party, not MFT, so that no set off was available.Appeal in relation to cancellation of leaseFactual background[6] Country Club operates the „Quest on Mount‟, which is in the business ofproviding serviced apartments. Part of the building used for the business is leased from MFT.[7] When Country Club bought the business in March 2006 it took an assignment of the lease. The assigned lease was for a term of five years with three further rights of renewal of five years each. The lease provided for biennial rent reviews, and obliged the tenant to pay 100 per cent of the outgoings. The Deed of Assignment ofthe lease from the previous tenant to Country Club recorded an annual rent for the premises of $136,000 plus GST per annum.[8] A monthly amount calculated in accordance with this annual amount waspaid for the first few months of Country Club‟s occupation of the leased premises.In mid-2006 Country Club‟s sole director and shareholder, Mr Graeme Latta,proposed to MFT‟s director, Mr McNabb, the payment of rental and outgoings on areduced basis. From that time until the purported cancellation of the lease by MFT, Country Club paid a monthly rental of $8,420 (equating to $101,040 per annum) and MFT paid outgoings comprising rates and body corporate charges.[9] The formal lease expired on 30 September 2006, seven months after Country Club took over the business. Although it was never formally renewed,Country Club‟s occupancy ran on with the (reduced) rent being paid, althoughpayment was late on occasions.[10] In mid-2009 Mr Latta sought a further reduction in rent from Mr McNabb. He proposed a 12 per cent reduction to $7,410 (inclusive of GST) per month. MFT did not agree to that reduction, but discussions regarding the rent were put on hold as the parties entered into negotiations about the possible purchase of the leased premises by Country Club.[11] In October 2009, and whilst those negotiations were still taking place, solicitors acting for MFT wrote to Country Club advising that the concession that MFT had given to Country Club in relation to rent and operating expenses was at an end and requiring Country Club to pay the contract rent of $136,000 plus GST and outgoings from that date. Country Club responded that the rent it was paying was not a concession but rather was a variation settled through a rent review process.[12] Country Club did not pay the increased rent or the outgoings as requested by MFT. Nevertheless the parties continued negotiating over the possible purchase of the business. When those negotiations broke down in mid-2010, MFT served a notice of intention to cancel the lease. It relied on alleged breaches of the obligation to pay the rent and outgoings as recorded in the Deed of Assignment. WhenCountry Club protested that the rent had been paid as agreed between the parties, MFT responded by saying that because of a failure by Country Club to take therequired steps to formally renew the lease, Country Club‟s tenancy was a monthly tenancy. Country Club‟s request for renewal of the lease was refused.[13] MFT then filed an application for orders cancelling the lease, for possession of the property and back rent. Country Club applied for relief against forfeiture in respect of both the purported termination and refusal to renew the lease.High Court judgment[14] The first issue the Judge addressed was Country Club‟s application for reliefagainst the refusal to renew the lease under s 261 of the Property Law Act 2007. The Judge accepted that the failure to give notice of renewal was clearly inadvertent and granted relief against the refusal to renew.3 That finding is not the subject of appeal.[15] The Judge commenced his analysis of the cross applications for orders cancelling the lease and relief against forfeiture with the initial Deed of Lease dated 1 October 2001, which was assigned to Country Club on 1 March 2006. The Deed recorded the annual rent payable on the Deed of Lease as $110,900 (exclusive of GST). It also included an obligation on the tenant to pay 100 per cent of the outgoings on the premises. He noted that the annual rent was increased to $136,000 (exclusive of GST) by the Deed of Assignment dated 1 March 2006. The Judge observed that the Deed of Assignment met the requirements of s 2(2) of the Act which provided:43 At [28].4 Section 2 of the Act applies in this case, because of the provisions of s 2(1) and (4) whichprovide:Proof of contracts relating to land and to guarantees(1) This section applies to –...(b) Every contract to enter into any disposition of land, being a disposition that is required by any enactment to be made by deed or instrument or in writing or to be proved by writing:...(4) For the purposes of this section, –Disposition includes any conveyance, transfer, grant, partition, exchange, lease, assignment, surrender, disclaimer, appointment, settlement, or other assurance; and any declaration or creation of a trust; and any devise, bequest, or appointment by a willLand means any estate or interest, whether freehold or chattel, in real property.(2) No contract to which this section applies shall be enforceable by action unless the contract or some memorandum or note thereof is in writing and is signed by the party to be charged therewith or by some other person lawfully authorised by him.[16] The Judge recorded that Country Club relied on an email from Mr McNabb,referred to in argument as "the rent review email," as a sufficient memorandum ornote for the purposes of the Act. The email was dated 14 May 2009, some three years after the alleged agreement. In the email Mr McNabb recorded existing monthly rent and his proposal for increases to the monthly rent. The email wassigned "Gary", Mr McNabb‟s first name.[17] The Judge said the first difficulty with the email was that it might not accurately reflect the rent payable as Country Club claimed the agreed rent was $8,420 inclusive of GST, whereas the email made plain that the figure was GST exclusive. The parties therefore did not appear to have been ad idem, which suggested there was no concluded agreement.5[18] The second difficulty identified was how the email was signed. The Judge said that use of the name Gary to sign off the email, although sufficiently identifying Mr McNabb, did not evidence an intention to bind MFT to the contents of the document. He said that in that email Mr McNabb was expressing a personal view during the course of negotiations, and not expressing an intention to bind MFT to the reduced rent it had been receiving. In his view it did not meet the requirements of s 2(2) of the Act.6[19] The Judge then turned to address the alternative argument by Country Club that the doctrine of part performance would render the 2006 rent agreement enforceable. He referred to the decision of Tipping J in TA Dellaca Ltd v PDL Industries Ltd which identified the following matters to be considered by the Court in part performance:71. Was there a sufficient oral agreement such as would have been enforceable but for the Act?5 At [37].6 At [38]–[39].7 TA Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 (HC) at 109.2. Has there been part performance of that oral agreement by the doing of something which:(a) clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the oral contract; and(b) when viewed independently of the oral contract was, on the probabilities, done on the footing that a contract relating to the land and such as that alleged was in existence.3. Do the circumstances in which that part performance took place make it unconscionable (fraudulent in equity) for the defendant to rely on the Act?[20] The Judge considered that in relying on the doctrine of part performance Country Club was seeking to enforce an oral agreement, which it could not do because of the provisions of the Act. The Judge referred to Take Harvest Ltd v Liu.8In that case the Privy Council said that raising the existence of an oral agreement as a defence could amount to seeking to enforce it, a course of action not permitted by the Hong Kong equivalent of the Act.9 Having referred to that decision the Judge said it was not therefore unconscionable for MFT to rely on s 2 of the Act.10[21] The Judge was also satisfied that Country Club had not acted to its detriment in reliance on the oral agreement, because it had a substantial benefit over a lengthy period of time through reduced rent and the payment of outgoings by MFT.[22] The Judge said he adopted a similar approach to Associate Judge Gendall inTennyson Motor Inn (2003) Ltd v Wallace,11 that the rent payable for the premises remained as recorded in the Deed of Assignment and the agreement reached with Mr McNabb in mid 2006 that MFT would accept a reduced rent and pay the outgoings was an indulgence or a waiver of the strict provisions of the lease.12[23] The situation therefore was that MFT had revoked its indulgence by email from its solicitors dated 15 October 2009 and had sought payment from that date of the rental of $136,000 plus GST per annum and of all the outgoings. Country Club8 Take Harvest Ltd v Liu [1993] AC 552 (PC).9 Hong Kong Conveyancing and Property Ordinance, s 3(1).10 At [44]. The Judge actually says that "it would be unconscionable for MFT to rely on s 2" but itis clear from the context that "not" has inadvertently been omitted.11 Tennyson Motor Inn (2003) Ltd v Wallace HC Napier CIV-2007-441-739, 19 November 2007.12 At [45]–[46].had refused to pay rent at that rate and had refused to pay any of the outgoings. Country Club had been knowingly in breach of the lease since 15 October 2009 and owed MFT the difference between what it had paid since that time and the rent of $136,000 plus GST per annum and all outgoings.13[24] The Judge made orders:14(a) Renewing the lease for a period of five years from 1 October 2006, to expire on 30 September 2011.(b) Cancelling the lease with effect from 14 days following the date of judgment unless within those 14 days Country Club paid MFT a sum equivalent to the difference between the rent of $136,000 plus GST per annum together with all outgoings on the premises from 15 October 2009 until the date of judgment and the rent actually paid in that period.(c) Permitting MFT to take possession of the premises 14 days after the date of judgment unless the sum specified in (b) above was paid within those 14 days.[25] Country Club sought a stay of execution of the judgment. By judgment dated 6 May 2011 the Judge granted a stay, but on the condition that Country Club pay $33,442 to MFT within 28 days of judgment, consisting of the rental unpaid for the months of January, February, March 2011, together with contribution made by MFT to the body corporate arrears.15 A further condition imposed was that Country Club pay rental of $136,000 plus GST per annum and all outgoings from the date of the earlier judgment to the expiry of the lease in September 2011.13 At [48]–[50].14 At [54].15 MFT Properties Ltd v Country Club Apartments Ltd HC Auckland CIV-2010-404-5913, 6 May2011.Was there an agreement to vary the rent?[26] The first issue to address in respect of both the applications for cancellation of the lease for non-payment of rent and the application for relief against forfeiture was whether there was an oral agreement that rent should be paid at a reduced rate, and if so, what the terms of that oral agreement were. That issue had to be resolved before consideration of issues of enforceability. However, this was not the approach adopted by the Judge. He moved directly to the issue of whether or not there was an adequate written memorandum for the purposes of the Act, mixing that issue with the issue of whether there was an agreement. Having found that there was no adequate memorandum in writing, he concluded that the arrangement was no more than a waiver or indulgence.[27] We have reviewed the evidence in relation to the nature of the arrangement reached in mid-2006. Both Mr McNabb and Mr Latta filed affidavits and were cross-examined on them.[28] Mr Latta‟s evidence was that he had discussions with Mr McNabb during 2006 and in the course of those discussions they agreed to a reduction in pricing in respect of the leased premises. The rent was reduced to a monthly amount of $8,420 including GST. He said that he had understood from the earlier tenant that outgoings were paid by MFT, although he acknowledged that was not what was recorded in the Deed of Assignment of Lease that he entered into. In any event, it was agreed in 2006 that MFT would take over responsibility for outgoings. Country Club began paying rent at the reduced rate following those discussions. In early 2009 Mr Latta decided that it was time to discuss a further reduction of the rent because of market conditions and initiated discussions with Mr McNabb, suggesting further reductions.[29] In his affidavit Mr McNabb said that he did not agree to any rent reductions - Mr Latta simply stated the amount he could afford and started to pay it. Accepting this reduced rent was a concession by MFT and its only concession. Invoices for outgoings (rates and body corporate charges) were sent to Country Club but never paid.[30] On cross-examination Mr McNabb changed his evidence. He accepted that he had agreed to a reduction of rent, but said that it was only a temporary reduction. The full amount remained payable. The arrangement was no more than an indulgence, the intention being that the shortfall would be sorted out when Country Club sold its business.[31] Mr McNabb maintained that there was no concession in respect of the outgoings and that the MFT team continued to attempt to recover them from Country Club throughout the duration of its lease.[32] There was therefore a conflict of evidence as to whether an agreement to vary the rent was reached. The Judge was required to resolve that conflict, but did not do so. We have therefore reached our own view having considered the competing evidence.[33] In considering the evidence of Mr McNabb and Mr Latta we have attached weight to the following. The discussions in 2006 were initiated by a letter from Mr Latta to Mr McNabb dated 13 June 2006 in which he wrote to MFT introducing himself and Country Club and suggesting that he obtain a valuation in light of the upcoming rent review. Mr McNabb accepted that it was following receipt of that letter that he and Mr Latta discussed the rental, and it was following this meeting that Country Club commenced paying rent at the rate that Mr Latta claims was agreed, without any protest by MFT to the reduced rate. Mr Latta was consistent in his account that there was such an agreement. This appears in correspondence, in his affidavits and under cross-examination.[34] Under cross-examination, Mr McNabb changed his evidence from that contained in his affidavit (denying the existence of any arrangement for a reduced rent), accepting for the first time that there was an arrangement that the rent be reduced although insisting this was an indulgence only.[35] The claim that the arrangement was a temporary indulgence is undermined by the wording of the rent review email sent by Mr McNabb to Mr Latta, which refers to the $8,420 as the monthly rent. We set this out in full:Hi Graeme,Trust you are well.Sorry its taken a while to get back to you.With regard to the rent issue.I feel we need to be treated differently than other owners, as our holdings are predominantly Commercial, and based on a below market rate of $250 psm the conference centre alone would be $30,000 pa plus outgoings, and personally I think where it sits at the moment is not unreasonable, especially as we have been chopped now several times. If it were to be formally valued I believe it would sit at the 2002 level.2002 2004 2006 ProposedMonthly rent $9,242 $9,242 $8,420 $7,410Outgoings 0 $3,200 $3,200 $3,200NET to us $9,242 $6,042 $5,220 $4,210These figures are GST exclusive.It also represents $2m of property at cost, and you are proposing a 2.5% return.So I hope you can see it from my perspective.I will pop in for coffee next week sometimeregardsGary[36] It is of significance that the amount which is described as the monthly rentaccords with Mr Latta‟s evidence of rent payable (subject to the issue we return toshortly, as to whether the figure was GST inclusive or exclusive). So too is the statement in the email by Mr McNabb that "we have been chopped now several times". The notion of a rent being "chopped" is inconsistent with a concession orindulgence being given.[37] It is also significant that Mr McNabb did not claim to have communicated to Country Club in the 2006 discussion that MFT would only accept a reduced rent on a temporary basis, the shortfall to be sorted out on sale of the business by Country Club. In any event, this seems an unlikely arrangement to have beenreached immediately following Country Club‟s own purchase of the business.[38] Mr McNabb‟s evidence was that he raised the obligation to pay arrears duringdiscussions with Country Club about the purchase of the leased premises. But that discussion came several years after the arrangement regarding the reduced rent. The claim to a deferred obligation is also undermined by an email of 15 October 2009from MFT‟s solicitor notifying an end to the concessional rate and stating that the "contract rent of $136,000 plus GST and outgoings will apply from today‟s date".No mention is made of an obligation to make back payment.[39] Similarly we find no support in the documentation of Mr McNabb‟s claimthat no concession was made regarding outgoings or that the $8,420 was to be GST exclusive. Mr McNabb accepted that throughout the entire period following the 2006 rent review decisions and prior to the rent review email, no written demand was made of Country Club to pay the additional GST or the outgoings, and that MFT continued to pay the outgoings. Mr McNabb claimed that his mother-in-law, who was in charge of the accounts, did chase Mr Latta up in respect of those amounts, but there was no evidence from his mother-in-law to substantiate that claim.[40] In our view, the parties‟ conduct, and contemporaneous documents, stronglysupport Mr Latta‟s account that it was agreed that the rent would be reduced to$8,420 (GST inclusive) and that MFT would pay the outgoings. We also attach weight to the fact that Mr McNabb‟s recollection of the arrangements shiftedsignificantly from the account he gave in his affidavits, to the evidence he gave on cross-examination. We find that there was an agreement reached in 2006 on the terms recounted by Mr Latta.Does the Contracts Enforcement Act 1956 apply?[41] MFT relies on s 2 of the Act in advancing its submission that any rent reduction agreement is unenforceable. Country Club argues that the Act does not apply in the present case, as it will only be engaged in circumstances where a party is seeking to enforce an agreement by action. Country Club says that rather than seeking to enforce the oral agreement reached between the parties in 2006, it hasraised the existence of it as a defence to MFT‟s action for an order cancelling thelease. Because Country Club has proved the existence of an agreement for reducedrent, the grounds on which MFT seeks an order cancelling the lease (non-payment of rent) are not made out.[42] The Act applies to oral agreements sought to be enforced by action. There is conflicting authority as to whether raising the existence of an agreement by way of defence amounts to enforcing the agreement. In Thomas v Brown16 the parties had made an oral contract for the sale of land, under which the purchaser paid a deposit to the vendor. The purchaser then decided not to go ahead with the transaction and brought an action to recover the deposit. The action failed. While the seller could not have sued on the contract, he could rely on it to justify the retention of the deposit.[43] However, the Privy Council in Take Harvest v Liu held that an unenforceable agreement can be used as a defence in an action brought by another party only if raising that defence does not amount to de facto enforcement of the oral contract. Their Lordships stated that they did not accept:17... in its unqualified form the proposition that ... an oral agreement is available as a defence in the same way and to the same extent as any enforceable contract. If due regard is to be paid to the statute, the question in any given case must be whether the party who relies on the oral agreement is in substance seeking to enforce it. If he is so seeking, it matters not whether he happens to be plaintiff or defendant in the proceedings or whether, as a matter of formal pleading, he is seeking to enforce the oral agreement by way of claim, defence, counterclaim or otherwise ... In any such case due effect must be given to the statute.[44] Although there is some difficulty reconciling this approach with some of the earlier authority referred to by the Privy Council in its judgment,18 we think that when regard is had to the policy of the Act (the avoidance of fraud) the analysis of the Privy Council must be correct. If that were not the case, a fraudulent party could sidestep the difficulties otherwise presented to it by the Act by taking possession of the property and then raising the existence of an alleged oral agreement as a defence16 Thomas v Brown (1876) 1 QBD 714 (Divisional Court).17 At 569.18 The Privy Council sought to distinguish Thomas v Brown, stating that the vendor was notseeking in substance to enforce the oral contract; he was merely asking the court to recognise thetitle to the money which he had already acquired by virtue of the valid, though unenforceable,contract.to any action for relief. In Savill v Chase Holdings (Wellington) Ltd, Tipping J said:19One must always remember that the Contracts Enforcement Act 1956 is designed for the purpose inter alia of avoiding doubts as to whether or not contracts in respect of land have been entered into. While a substantial jurisprudence has built up in relation to what can constitute a note or memorandum the essential purpose of the Act should not in my view be overlooked.[45] It follows that we are satisfied that by both resisting an action for cancellation by proving the existence of the agreement and bringing an application for relief against forfeiture, Country Club is relying upon the existence of the agreement and is seeking to enforce it by action.Is the agreement enforceable against MFT because there is a sufficient memorandum in writing of that agreement?[46] Country Club argues that the rent review email of May 2006 was a sufficient memorandum for the purpose of s 2 of the Act. MFT supports the Judge‟s findingthat it was not an adequate note for the purposes of the Act, because the signature by Mr McNabb was too informal and did not evidence an intention to bind MFT to thecontents of the document, and because the agreement did not accord with Mr Latta‟saccount of what the agreement was.[47] It is helpful to first set out what are the requirements of the note or memorandum in writing for the purposes of the Act. Where the contract itself is not in writing but is evidenced by written memorandum, that memorandum must have come into existence after the contract was made and before the proceedings in which the agreement is sought to be enforced were commenced.20 The memorandum need not have been made immediately after the contract was entered into, it can be made at any time afterwards.21 There is no particular requirement as to the form the note must take. Any writing that contains the parties, property and price and any other agreed terms, acknowledges the existence of the contract and is signed as required is19 Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 (HC) at 285.20 Munday v Asprey (1880) 13 ChD 855 at 857.21 Welch v Crawford (1905) 25 NZLR 361 (CA).sufficient.22 The reason for which the writing is brought into being is irrelevant – it need not have been brought into being in order to record the agreement or to act as a memorandum,23 but it must contain an express or implied recognition that the oral contract had in fact been entered into.24[48] As to the requirements of signature, the provision states the document shouldbe "signed by the party to be charged". Regardless of the form or position of the signature, it must have been placed on the memorandum with the intention of authenticating the whole of the writing.25 However, as McMorland states:26From the fact that the writing need not have been brought into being in order to record the agreement or to act as a memorandum, it follows that the signature need not have been made in order to authenticate the writing as a memorandum. The requirement is that the signature must have been made to authenticate the writing for whatever purpose it was brought into being.[49] A variation of a contract must also comply with s 2 to be enforceable. If a variation does not comply, it will be disregarded and the original contract enforced.Application to these circumstances[50] It was common ground before us that Mr McNabb‟s attaching his name to thefoot of an email was a signature for the purposes of the Act. Nevertheless, MFTadopts the Judge‟s reasoning that by signing the document "Gary", Mr McNabb wasnot expressing an intention to bind MFT. In keeping with the principles identified above, it was not necessary for Mr McNabb's signature to evince an intention to bind MFT. Rather, all that was required was that it be sufficient to signify an authentication of that which had gone before. In this case we have no doubt that Mr McNabb signed the email "Gary" to signify that he, acting in his capacity as adirector of MFT, was recording the past and present rent in relation to the leased premises, and proposing a new rent. That is sufficient authentication for the purposes of the Act.22 D W McMorland Sale of Land (2nd ed, Cathcart Trust, Auckland, 2000) at [4.04].23 Ibid.24 Newton-King v Wilkinson [1976] 2 NZLR 321 (SC) at 325.25 Ogilvie v Foljambe (1817) 3 Mer 53, 36 ER 21 at 24–25; Caton v Caton (1867) LR 2 HL 127 at142–143.26 McMorland, at [4.15]. (Citations omitted.)[51] The next issue that arises is whether the matters recorded in the email are sufficient for the purposes of the Act. Although the memorandum records the reduced rent it contains a misdescription, recording the rent as GST exclusive. Is that misdescription fatal? We think not. The doctrine of rectification is available to amend an instrument to correctly reflect an oral agreement, even if the effect of granting rectification is that a party may no longer rely upon the Act. InUnited States of America v Motor Trucks Ltd27 it was argued that rectification should not be granted because to do so would be inconsistent with the Statute of Frauds.28The decision of the Privy Council was delivered by the Earl of Birkenhead. In addressing that argument he said:29It was further suggested that the present action involved an attempt to enforce a parol contract inconsistently with the principle of the Statute of Frauds. It is, however, well settled by a series of familiar authorities that the Statute of Frauds is not allowed by any Court administering the doctrines of equity to become an instrument for enabling sharp practice to be committed. And indeed the power of the Court to rectify mutual mistake implies that this power may be exercised notwithstanding that the true agreement of the parties has not been expressed in writing. Nor does the rule make any inroad upon another principle, that the plaintiff must show first that there was an actually concluded agreement antecedent to the instrument which is sought to be rectified; and secondly, that such agreement has been inaccurately represented in the instrument. When this is proved either party may claim, in spite of the Statute of Frauds, that the instrument on which the other insists does not represent the real agreement. The statute, in fact, only provides that no agreement not in writing and not duly signed shall be sued on; but when the written instrument is rectified there is a writing which satisfies the statute, the jurisdiction of the Court to rectify being outside the prohibition of the statute.[52] In this case we are satisfied that there is sufficient evidence of an antecedent oral agreement in the terms alleged by Country Club to found a claim for rectification.30 Although we note that rectification was not pleaded in this case, Mr Pidgeon for MFT properly acknowledged that he could not take that point, as MFT did not plead its reliance upon the Act. The Act was only raised by MFT during closing submissions.27 United States of America v Motor Trucks Ltd [1924] AC 196 (PC).28 See also Whiting v Diver Plumber & Heating [1992] 1 NZLR 560 (HC).29 United States of America, at 200–201.30 See McMorland, at [4.13] where it is stated that rectification can "cause to comply with s 2 aninstrument that was formerly not adequate either as a written contract or as a memorandum".Alternatively, is an agreement enforceable against MFT because of the application of the doctrine of part performance?[53] The finding that there is a sufficient memorandum of the agreement is dispositive of the appeal, as MFT could not be entitled to an order cancelling the lease if there were no arrears of rent. However, we propose to address Country Club‟s alternative argument that the agreement is enforceable as partlyperformed. We do so to address a difficulty we see with the reasoning at first instance.[54] Country Club has alleged that the 2006 agreement was performed by the parties by way of payment of the agreed rent and acceptance without demur on a monthly basis on literally dozens of occasions over the years. Again MFT supportsthe Judge‟s reasoning in rejecting that argument.[55] The Judge‟s rejection of Country Club‟s reliance upon the doctrine of partperformance was based in part on his finding that it was thereby seeking to enforce the oral agreement in breach of s 2 of the Act. We cannot accept the Judge‟sreasoning in relation to this point. Section 2(3) of the Act provides that the requirement for a written note or memorandum of an agreement before it will be enforceable by action does not affect the law operating in relation to part performance. In the case referred to by the Judge, Take Harvest Ltd v Liu, their Lordships made clear that the prohibition on enforcing an oral agreement falling within the ambit of the Hong Kong equivalent of the Act was subject to the possible operation of the doctrine of part performance.31[56] The Judge‟s second reason for finding that the doctrine did not apply was that Country Club had not acted to its detriment, but rather had had a substantial benefit by reason of the reduced rent it had paid over the years. Since that payment was pursuant to an agreement, it is hard to see how this was a substantial benefit. But in any case, there is no requirement that Country Club show that it had acted to its31 Take Harvest, at 571.detriment in reliance on the oral agreement.32 Rather, the requirement is that Country Club has done acts in performance of the agreement.[57] In this case we accept Country Club‟s submission that the elements are amplymet in the present circumstances. The steps taken by Country Club by way of payment of the agreed amount of rental over a number of years without objection by MFT, were taken because an agreement as to reduced rent did exist. We consider that it would be unconscionable for MFT to resile from the agreement and rely upon non-payment of the agreed rent as a basis for terminating the lease.33[58] Finally the Judge said that he adopted a similar approach to Associate Judge Gendall in Tennyson Motor Inn (2003) Ltd v Wallace. In that case the Associate Judge found that there was no oral agreement of the type alleged, and the doctrine of part performance could not therefore assist the applicant. Tennyson was then a very different case, decided on its own facts, and provided no assistance in resolving the dispute in this case.[59] For these reasons we are satisfied that the elements of part performance are, as Country Club submitted, made out in this case.Appeal in relation to set off for accommodation provided[60] In addition to filing its application for possession and to cancel the lease, MFT also issued a statutory demand in respect of rent that had been withheld by Country Club. Country Club applied to set aside the statutory demand. It said that it had provided Mr David Colvin, a colleague of Mr McNabb, with six month‟saccommodation at Mr McNabb‟s request. The withheld rent was by way of payment for that accommodation. It subsequently received payment of $5,358 against what Country Club claimed to be a liability of $31,800. The Judge described the factual background relevant to this appeal point as follows:[18] While the parties were still on amicable terms, Mr McNabb approached Mr Latta in February 2010 requesting long stay accommodation32 Dellaca, at 108–109.33 For a case raising similar factual issues, see Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281 (CA).for a colleague. The colleague was David Colvin, the Chief Executive Officer of New Zealand Mint Limited, another company owned by the McNabb Investment Trust. Mr Latta agreed to provide accommodation. The length of stay was however, not agreed. Nor was the rate to be paid. Mr Latta did not in fact learn that Mr Colvin was employed by New Zealand Mint Limited until sometime after he started staying at the Quest on Mount.[61] The Judge accepted that it was an implied term of the arrangement that, if agreement could not later be reached between the parties, a reasonable weekly ratewould be paid in respect of Mr Colvin‟s accommodation. He found that a reasonableweekly rate for Mr Colvin‟s accommodation was $350 per week, rather than the$180 to $215 per night that Country Club had used to calculate its set off. This was on the basis that he stayed in a studio apartment and there was some servicing of it. He found, however, that the accommodation debt was clearly a liability of New Zealand Mint Ltd (NZ Mint).[62] Country Club contends that the Judge erred in both determining the applicable rent and in finding that the liability was that of NZ Mint. It submits that there was no evidential basis for the rate the Judge settled upon. Those were rates for long stay, unserviced rooms, not for serviced accommodation of uncertain duration. The finding that NZ Mint was liable for the rent and not MFT was stated without any articulated process of reasoning and was directly contrary to the evidence.[63] It is the case that the Judge provides no reasoning to support his finding that the liability to pay rent was that of NZ Mint. It is also true that it is a finding which is contrary to the evidence. In his affidavit evidence, Mr Latta said that it was clearthat the responsibility for the cost of Mr Colvin‟s accommodation was that of MFT.Mr McNabb asked Country Club to provide Mr Colvin with accommodation with no certainty as to length of stay. From those dealings, Mr Latta understood Mr McNabb to be making the request on behalf of MFT. As the Judge noted, it was not until Mr Colvin had been living in the apartment for some time that Mr Latta was told that he worked for NZ Mint.[64] In his affidavits, Mr McNabb claimed that NZ Mint was the correct debtor and that Mr Latta was aware that Mr Colvin was the CEO of NZ Mint. However,under cross-examination he accepted that the arrangements for the accommodation were not with NZ Mint but rather with MFT. He also said that he expected payment to be made by a set off against what MFT was owed for rent.[65] On the basis of this evidence, we find that the arrangements regarding Mr Colvin‟s accommodation were between MFT and Country Club. There is no basis for a finding that the obligation to pay for the rent was that of NZ Mint.[66] The next issue is the appropriate rental payment. Mr McNabb‟s evidence wasthat the apartment was a student-style one bedroom apartment which would probably rent for about $200 a week. He understood from Mr Colvin that the apartment was not serviced. MFT also relied on an affidavit of Mr Hayden Syers, the chiefoperating officer for NZ Mint. Attached to Mr Syers‟ affidavit was a print out of room rates from the Quest on Mount web site which advertised long stay rates for a serviced studio at $315 per week, and for a one bedroom apartment of $350 per week. He said that he had received a copy of a Knight Frank valuation which provided a summary of advertised rental accommodation in the range of $250 to $360 per week for one bedroom apartments.[67] Mr Latta‟s evidence was that there was never any certainty as to length ofstay so that a long term rate was not appropriate. Because there was no such arrangement, the appropriate rate was the rack rate.[68] Setting a rate in the absence of express agreement is a difficult task. We seenothing wrong with the Judge‟s approach of settling upon the long stay rate for aserviced apartment of $350 per week. That was the advertised long stay rate for a serviced one bedroom apartment in the Quest on Mount and is within the range of valuations provided by Knight Frank. As matters developed, this was a long stay. We do not attach any weight to the absence of agreement in advance as to the duration of stay. Providers accept a reduced rate for long stays because of the cash flow benefits that come from receiving regular payments. Those benefits were available to Country Club even if in the form of a set off.Result[69] The appeal is allowed in respect of the finding that there was no binding agreement for a reduction of rental and outgoings as alleged by Country Club. The orders made in the High Court that the lease is cancelled unless payment of the amounts set out in the judgment are made, and permitting MFT to take possession in those circumstances, are set aside. The lease remains on foot.[70] The appeal is allowed in respect of the Judge‟s finding that Country Club wasnot entitled to a set off in respect of the cost of accommodation provided to Mr Colvin. The cost of that accommodation is however to be calculated in accordance with the rate prescribed in the judgment of $350 per week.[71] We direct, by reference to [17](a) of the stay judgment,34 that within 28 days MFT repay to Country Club such part of the $33,442 which is an overpayment of rent and outgoings in terms of this judgment. We are unable to be more exact as we have insufficient information to determine the effect of our finding in relation to the claimed set off on the amount calculated by the Judge. MFT is also to pay interest on the amount overpaid, at the prescribed rate calculated from the date of payment (3 June 2011) to the date of repayment by MFT.[72] We further direct, by reference to [17](b) of the stay judgment, that within 28 days MFT repay to Country Club sums paid by way of „rental‟ and outgoings pursuant to the Judge‟s order, to the extent they are in excess of the agreed monthlyrental of $8,607.75, plus interest at the prescribed rate, calculated from the date of each excessive payment to the date of repayment by MFT.[73] Country Club is entitled to costs on this appeal. MFT must pay Country Club costs for a standard appeal on a band A basis with usual disbursements.Solicitors:Whaley & Garnett, Auckland for AppellantThorne, Thorne, White & Clark-Walker, Auckland for Respondent34 MFT Properties Ltd v Country Club Apartments Ltd HC Auckland CIV-2010-404-5913, 6 May 2011.