DENIS JOHN FETHERSTON V DORCHESTER FINANCE LIMITED CA CA182/2008

DENIS JOHN FETHERSTON V DORCHESTER FINANCE LIMITED CA CA182/2008 2 July 2008IN THE COURT OF APPEAL OF NEW ZEALAND CA182/2008 [2008] NZCA 201BETWEEN DENIS JOHN FETHERSTON Applicant AND DORCHESTER FINANCE LIMITED Respondent Hearing: 16 June 2008 Court: O'Regan, Arnold and Baragwanath JJ Counsel: Applicant in person A W Johnston for Respondent Judgment: 2 July 2008 at 11.30 amJUDGMENT OF THE COURT A The application for special leave to appeal is dismissed. B The applicant must pay to the respondent costs of $1,500 plus usual disbursements. REASONS OF THE COURT(Given by O'Regan J)Introduction[1] The applicant, Mr Fetherston, seeks special leave to appeal against a decision of Randerson J in the High Court (Fetherston v Dorchester Finance Ltd HC AK CIV 2007-404-7016 18 March 2008.). That decision was one of many Court decisions relating to a dispute between Mr Fetherston and the respondent, Dorchester Finance Limited, over a property owned by a trust of which Mr Fetherston is now the sole trustee. Dorchester is the mortgagee of the property and Mr Fetherston and his wife were tenants. [2] The genesis of the present application is an order which Dorchester obtained from the Tenancy Tribunal terminating the tenancy of Mr Fetherston and his wife under s 58(d) of the Residential Tenancies Act 1986 and giving Dorchester possession of the property. Mr Fetherston appealed unsuccessfuly to the District Court against the Tribunal's decision. Randerson J dismissed Mr Fetherston's appeal to the High Court against the District Court decision. [3] Mr Fetherston sought the leave of the High Court to appeal to this Court. Randerson J refused leave: Fetherston v Dorchester Finance Ltd HC AK CIV 2007- 404-7016 7 April 2008. Mr Fetherston then applied to this Court for a stay of execution of the order for possession in favour of Dorchester. That application was dismissed on the basis that Dorchester undertook not to pass title to the property until this Court had decided the present application for special leave: Fetherston v Dorchester Finance Ltd [2008] NZCA 86. Dorchester has now taken possession of the property.Factual background[4] The property was mortgaged by the trust to ASB Bank and Dorchester, with Mr and Mrs Fetherston as personal guarantors. The ASB mortgage was later assigned to Dorchester. Mr and Mrs Fetherston lived in the property as tenants of the trust. This arrangement was recorded in a written tenancy agreement.[5] The trust defaulted on the mortgage payments in 2005. This prompted Dorchester to seek summary judgment against Mr Fetherston as trustee. Dorchester also commenced proceedings against Mr and Mrs Fetherston in the Tenancy Tribunal to terminate the tenancy and obtain an order for possession. The application relied on s 58 of the Act, which permits a mortgagee to seek such orders where the mortgagee is entitled to possession. [6] Associate Judge Gendall entered summary judgment against Mr Fetherston for a sum in excess of $2 million: Dorchester Finance Ltd v Fetherston HC AK CIV 2007-404-2384 13 September 2007. The Associate Judge also ordered that Mr and Mrs Fetherston were to vacate and deliver possession of the property in their capacity as trustees of the family trust. However, the order clearly stated that it did not relate to Mr and Mrs Fetherston's capacity as residential tenants. It is notable that the principal reason for that qualification in the terms of the order was that the Associate Judge accepted Mr Fetherston's submission that the tenancy arrangement between the trust as landlord and his wife and him as tenants was a residential tenancy covered by the Act and the High Court had no jurisdiction to make an order requiring Mr and Mrs Fetherston to deliver possession of the property: at [24] – [29]. [7] The Tribunal decision which is at the heart of the present application was released on the day after Associate Judge Gendall's decision, 14 September 2007. The Tribunal ruled that: (a) The tenancy agreement between Mr and Mrs Fetherston and the family trust was valid and the Tribunal had jurisdiction to hear the application; (b) Dorchester was a mortgagee entitled to possession of the property; (c) As a result the tenancy was terminated and possession of the property was granted to Dorchester under s 58 of the Act.The application[8] Mr Fetherston's application is made under s 120(3) of the Act. That provision allows special leave to be granted only if the appeal involves a question of law that, because of its general or public importance or for any other reason, ought to be submitted to the Court of Appeal for decision. The question of law must be capable of bona fide and serious argument involving some interest, public or private, of sufficient importance to outweigh the cost and delay of further appeal: Waller v Hider [1998] 1 NZLR 412 at 413 (CA).Proposed grounds of appeal[9] The main grounds for the proposed appeal are linked to a question of law relating to whether the Tribunal had jurisdiction to hear Dorchester's application due to the operation of s 5 of the Act. [10] Section 4 of the Act provides that except as otherwise provided, the Act shall apply to every tenancy for residential purposes. Section 5 lists a number of cases where the Act will not apply. The essence of Mr Fetherston's argument is that three subsections of s 5 apply to his tenancy agreement, thereby denying the Tribunal jurisdiction. The subsections are set out below:5 Act excluded in certain casesThis Act shall not apply in the following cases: (ba) Where the premises are let for a fixed-term tenancy of at least 5 years, the tenancy was granted before the commencement, on 1 January 2008, of the Property Law Act 2007, and the tenancy agreement expressly provides that this Act shall not apply: (i) Where the premises constitute part of a building occupied by a club and used by the club for the provision of temporary or transient accommodation to members of the club: (w) if the lease provides for a perpetual right of renewal:[11] We will consider these provisions in the order in which they appear above.Section 5(ba)[12] Mr Fetherston relied s 5(ba), which excludes from the ambit of the Act fixed- term tenancies of at least 5 years where the tenancy agreement expressly provides that the Act does not apply. Randerson J found that the tenancy was either a periodic tenancy or it was a tenancy in perpetuity, but it was not a fixed-term tenancy: at [10]. In addition the tenancy agreement did not expressly provide that the Act was not to apply as required by s 5(ba). This ground is not seriously arguable.Section 5(i)[13] Mr Fetherston argued that the trust provided meals and services to the tenants (his family), which formed 20% of the total rent and that the tenancy is therefore excluded by s 5(i). However, as counsel for Dorchester, Mr Johnston, correctly pointed out, s 5(i) requires the premises to be occupied by a club. That is patently not the situation here. This ground is not capable of serious argument.Section 5(w)[14] Mr Fetherston argued that, because the tenancy agreement provided for a perpetual right of renewal, it was excluded from the jurisdiction of the Tribunal under s 5(w). The tenancy agreement has a provision which says: "This tenancy is for a fixed term, cannot be terminated with notice and is in perpetuity". [15] Randerson J dismissed this ground. He considered that the intention and wording of the agreement was that the tenancy was to be granted in perpetuity. This is distinct from a perpetual right of renewal: the agreement contains no right of renewal. Section 5(w) applies to leases that provide a perpetual right of renewal, not to perpetual leases. He therefore found that s 5(w) was not applicable.[16] Mr Johnston adopted this argument. But it is unnecessary for us to consider it. That is because Mr Johnston argued that there was an even more compelling reason to reject Mr Fetherston's argument based on s 5(w). Section 5(w) was inserted into the Act with effect from 1 January 2008 by s 364 of the Property Law Act 2007. Section 367(3)(a) of the Property Law Act provides that no alteration made by that Act affects "a right, interest, title, immunity, or duty, or a status or capacity, existing under the law so altered and immediately before 1 January 2008". The effect of this section is that Dorchester's right to possess the property under s 58 of the Act is not affected by the introduction of s 5(w). We agree with Mr Johnston that this is a complete answer to Mr Fetherston's argument.Section 58[17] Additionally, Mr Fetherston made the general argument that the clause of the agreement cited above, that the tenancy "is for a fixed term, cannot be terminated with notice and is in perpetuity" meant that Dorchester had no right to terminate the agreement. As found by Randerson J it seems unlikely that the tenancy was for a fixed term, as the wording indicates it is either a periodic or perpetual lease. However, the point is academic as, even if it were a fixed term agreement, s 58(1)(d) of the Act permits Dorchester to terminate the tenancy as if it were a periodic tenancy. Section 58(1) provides:58 Mortgagee or other person becoming entitled to possession(1) Where a mortgagee or other person becomes entitled (as against the landlord) to possession of the premises, the following provisions shall apply: (c) The mortgagee or other person shall have the same rights (if any) as the landlord had under the tenancy agreement or this Act to give notice terminating the tenancy or to apply to the Tribunal for an order terminating the tenancy or for an order for possession of the premises: (d) Without limiting paragraph (c) of this section, but subject to paragraph (e) of this section, in the case of a fixed-term tenancy, the mortgagee or other person shall have the same right to give notice terminating the tenancy as the landlord would have had if the tenancy had been a periodic tenancy:[18] This point is not seriously arguable either.Inconsistency[19] The arguments raised by Mr Fetherston in this Court that the Tribunal had no jurisdiction is contrary to the argument he made to Associate Judge Gendall when he opposed the application for summary judgment. As noted at [6] above, Mr Fetherston successfully argued on that occasion that the tenancy was subject to the Act, so that the High Court had no jurisdiction in respect of it.Result[20] None of the matters which Mr Fetherston seeks to raise if granted special leave is capable of bona fide or serious argument. All of them relate to the terms of an unusual tenancy agreement, and so have no importance other than to the parties. The test for the granting of special leave (see [8] above) is not met and the application is therefore dismissed.Costs[21] We award costs to Dorchester of $1,500 plus usual disbursements.Solicitors: Martelli McKegg Wells & Cormack, Auckland for Respondent