DETOUR CLOTHING LTD v STAR FIVE LTD [2016] NZHC 3195

DETOUR CLOTHING LTD v STAR FIVE LTD [2016] NZHC 3195 [22 December 2016]IN THE HIGH COURT OF NEW ZEALANDINVERCARGILL REGISTRYCIV-2016-425-122[2016] NZHC 3195UNDER The Property Law Act 2007IN THE MATTER OF An application under section 253 for reliefagainst cancellation of a lease dated4 February 2014BETWEEN DETOUR CLOTHING LIMITEDApplicantAND STAR FIVE LIMITEDRespondentHearing: 14 December 2016Counsel: D R Tobin and A Holland for ApplicantB M Russell for RespondentJudgment: 22 December 2016JUDGMENT OF NICHOLAS DAVIDSON J(APPLICATION FOR INTERIM INJUNCTION)The application before the Court[1] Detour Clothing Ltd ("Detour") is lessee under a lease of retail space at17 Rees Street, Queenstown ("17 Rees Street"). The lessor is Star Five Ltd ("StarFive").[2] The lease is dated 4 February 2014 and in total the lease term is approximately14 years.[3] Detour agreed to pay $195,100 for goodwill and has spent approximately$240,000 on fit-out. The goodwill figure was later compromised after default in someof the periodic payments.[4] On 26 September 2016, Star Five issued a Property Law Act Notice specifyingthree alleged breaches of the lease, including non-payment of outgoings and legalcosts. Central to this application is the Notice of a breach of the lease in the changeof management of Detour's business, without the consent of the lessor. The notice(relevantly) recorded:1. Default1.1 The Landlord gives you notice that you have breached the followingcovenants:1.2 As a result of a change in shareholding in the Tenant from NatalieAnne Houghton to Michael Roy Collins and the removal of NatalieAnne Houghton as a director of the Tenant and appointment ofMichael Roy Collins as director of the tenant, you have breached thefollowing covenant:a. Clause 33.3: Where any Tenant is a company which is not listedon the main board of a public stock exchange in New Zealand orAustralia, then any change in the legal or beneficial ownership ofits shares or the shares of its shareholder or issue of new capitalin the company or its shareholder where in any case there is aneffective change in management or control of the company willrequire the written consent of the Landlord which will not beunreasonably withheld or delayed.2.1 If you wish to remedy the breach specified in paragraph 1.2 you mustobtain written consent from the Landlord to the effective change inmanagement and control of the Tenant from Natalie Anne Houghtonto Michael Roy Collins by 5:00 p.m. on Tuesday 18 October 2016being 15 working days of the service of this notice (Specified Period).[5] On 19 October 2016, Star Five cancelled the lease for alleged failure to remedythe breaches alleged, and that on 28 October 2016 Star Five changed the locks. Detoursays it would be unjust if the landlord is allowed to cancel the lease, and seeks interimrelief until its full challenge to cancellation is heard.[6] Star Five opposes the application for interim relief, and says that there is noserious question to be tried, that it properly cancelled the lease, and has now enteredinto a lease with another company, Happy Travels NZ Ltd ("Happy Travels"), whichhas taken occupation. Star Five otherwise says that the balance of convenience andjustice of the case favours the status quo, if there is a serious question to be tried, andthat its new lease was entered in the belief that it was entitled to cancel the lease, andwithout the new lessee, Happy Travels, knowing of the dispute and potentialchallenge.[7] Neither Detour nor Star Five assert that Happy Travels was aware of anydispute, nor that it knew Detour had given the lessor notice that it would challenge anycancellation of the lease.Happy Travels[8] A striking feature of the proceedings up to this point is that Happy Travels wasnot aware of the dispute, but if Detour's application for interim relief is successful, itslawful occupancy of the premises would be undone, and not having taken any part inthe proceedings. It was only made aware of the dispute when the Court asked thatcontact be made with its representatives during the hearing.[9] For reasons which I develop further, Happy Travels' position is important inthe resolution of this application. The notion that an order should be made which hasthe effect of dispossessing a party which lawfully entered a lease of premises, andtaken occupation, is not on its face attractive. This is not one of those cases wherelegal or commercial arrangements are entered with full knowledge of the risksassociated with its doing so. It would have been an orthodox step for Detour to haveserved Happy Travels so that it could participate in the proceedings had it chosen orat least advise it of the litigation. So too would it have been a reasonable step for StarFive to have informed Happy Travels of the impact to it of a potential challenge tocancellation of the lease.[10] There is a good deal of evidence before the court for an application such asthis. Not only were there various evidential exchanges before the hearing, butafterwards. In particular, Detour's commercial position in Queenstown, and its abilityto access other premises, was the subject of further affidavits and memoranda whichpassed hither and thither, almost up to the time this judgment is delivered.[11] These later affidavits filed were relevant and have been brought to account, butit is not possible to reach a definitive conclusion on what is disputed evidence withouta fuller hearing, for which there is no time.[12] Before the competing positions are considered in more detail, it is important tonote the timing of this judgment. The parties are on the cusp of Christmas, a crucialtime for the retail and service industries, and in particular in a tourist town such asQueenstown. At stake is the occupation of strategically placed premises inRees Street.For Detour[13] Detour seeks interim orders so that it may resume possession and trading from17 Rees Street, subject to the lease dated 4 February 2014, or that Star Five will notdamage, remove or destroy the fit-out installed by Detour at 17 Rees Street.[14] Mr Tobin, who appeared with Mr Holland for Detour described the chronology,from which I identify salient features as follows.[15] The deed of lease was entered on 4 February 2014, for an initial term of fouryears and seven months with a right of renewal for 10 years. Detour opened its doorson 11 June 2014 and some eight months later a Property Law Act Notice was issuedalleging there had been a breach of the lease in the transfer of interest and control to aMs Houghton, in December 2014. Ms Houghton became a shareholder, and directorin place of Mr Collins. This did not come to much and overall the impression is thatthis issue was informally resolved by Star Five not taking the Property Law Act Noticeany further. On the evidence before the Court, it would seem that Ms Houghtonproved satisfactory to Star Five, at least for a while.[16] Then in mid-July 2016 Ms Houghton, who had been the business and lifepartner of Mr Collins, transferred her shareholding to Mr Collins and resigned asdirector to be replaced by Mr Collins, which led to the second Property LawAct Notice dated 27 September 2016. Star Five again was not asked for consent, andthe second Notice reflected that.[17] Some three weeks later, on 18 October 2016, Detour's solicitors sought therequired consent retrospectively and warned if Star Five that it tried to cancel the lease,Detour would seek relief under s 253 of the Property Law Act 2007 ("the Act"), butStar Five gave notice of cancellation on 19 October 2016.[18] On 27 or 28 October 2016, Star Five re-entered the premises and on3 November 2016, Star Five entered a lease with Happy Travels.[19] The application for relief against cancellation under s 253 of the Act was filedon 8 November 2016. The application for interim relief was filed on14 November 2016.[20] Section 253 of the Act allows a lessee to seek relief against cancellation of alease for breach of a covenant or condition, and under s 256 the Court has wide powersto grant relief, including injunctive relief on such conditions as it thinks fit, restrainingbreach. Relief may be granted even though cancellation was for breach of an essentialterm, or not capable of being remedied. The Court may grant an interim injunctionpreventing the landlord from acting inconsistently with the lease.1[21] The usual considerations apply as to whether there is a serious question to betried, the balance of convenience between the parties, and the overall justice of thecase. Detour has given an undertaking as to damages.[22] This case is not really focused at this point on arrears of rent, OPEX, or legalcosts incurred by the lessor, although there have been late payments of rent and OPEXover time. Star Five did not purport to cancel the lease for non-payment of rent. Theevidence shows that there were, at times, some reasonably significant delays in payingrent, but each time it was brought up to date. The link between those defaults and theconsent refused is whether on a full review by the Court they are relevant to whetherconsent was reasonably withheld.[23] The approach of Hammond J is advanced by Mr Tobin for Detour, when hesaid that in non-rent cases, the essential justice of the case is assessed on aproportionality basis, and whether determination of the lease is a proportionateresponse to the lessee's breach.2 The judgment in Studio X Ltd v Mobil Oil NZ Ltd,31 Palmerston North Cosmopolitan Club v Palmerston North Squash Club Inc [2012] NZHC 1526at [36].2 Pike River Coal Ltd (In Rec) v O'Malley Farming Ltd (HC Wellington CIV-2011-418-66,14 October 2011).3 Studio X Ltd v Mobil Oil NZ Ltd [1996] 2 NZLR 687 (HC) at 701.provides guidance as to the exercise of the Court's discretion, to which this judgmentreturns.[24] On the evidence, Mr Tobin submits that it is relevant that the first Property LawAct Notice complained of the transfer of an interest in Detour from Mr Collins toMs Houghton, and that Star Five always knew of Ms Houghton's role. No formalconsent was ever given to the transfer of shares and control to Ms Houghton. Mr Tobinsays that that position was simply reversed in 2016 and Mr Collins took back controland ownership.[25] Mr Collins says that he did not think about clause 33.3 of the lease whenMs Houghton became involved in Detour, by oversight. He thinks Mr Spary, who isthe principal of Star Five, did not think of it either.[26] Mr Collins says that he assumed the second Property Law Act Notice wasabout the original change in ownership and control, which is odd because it was aboutreversion to Mr Collins. Mr Collins could not be surprised by Star Five's actionsbecause when he told Mr Spary he was purchasing Ms Houghton out and returningDetour's ownership to the time of the lease being entered, Mr Spary simply said thatStar Five would cancel the lease, but did not say why. His attitude was clear.[27] The cancellation of the lease followed the day after Detour's solicitors wroteto ask for the lessor's consent. Mr Tobin says the breach of clause 33.3 by notobtaining the consent of the lessor is trivial, and has not caused any inconvenience,uncertainty, or loss.[28] Mr Tobin places emphasis on the evidence that the legal ownership and controlof Detour has simply returned to its original setting, and the Court should otherwiseview cancellation in the context of Star Five having wanted to get rid of Detour forsome time. There is the evidence from Mr Collins of this, that Mr Spary told him hewanted to bring the lease to an end. There is other evidence that Mr Spary said hewanted to commence a hospitality venture at the premises.[29] Berry & Co wrote to Star Five's solicitors on 18 October 2016 warningStar Five that it had instructions to apply for relief against cancellation of the lease,and Mr Spary must have known cancellation would be contested, and he knew thatwhen the lease with Happy Travels was entered on 3 November 2016.[30] No lasting damage is said to be caused to Star Five, nor Happy Travels. Thejudgment of Gilbert J is cited by Mr Russell in Wood Bay Enterprises Ltd v Wise,4where a new tenancy agreement had been entered after Wood Bay had not met itsobligations. A third party had moved into the premises, and Gilbert J said that WoodBay had brought the position on itself. Gilbert J recognised the disruption andinconvenience to an innocent third party. Mr Tobin distinguishes Wood Bay becausein that case the lessee's financial position was weak and when the new lease wasentered it was still in default.[31] In Warnocks (1992) Ltd v Queensgate Centre Ltd,5 Heron J held that receiverswho maintained occupation and paid rent under a lease at Queensgate had tried hardto remedy lessee default, while honouring rental obligations, and that Queensgate hadambushed the lessee by entering a new arrangement with Hallensteins. Mr Tobinanalogises the case because he says that Detour made consistent and conscientiousefforts to remedy the breach of clause 33.3, while honouring other obligations underthe lease, including rent.[32] In another case, Curreen v Hodgson,6 a tenant was in default for a small sumand the landlord entered with what the court regarded as "at least extraordinary haste"new tenancies. Mr Tobin says the same occurred here, and Detour moved swiftly toseek relief. Detour is said to be in a strong financial position, unlike Wood Bay, andthere is no prejudice to Happy Travels according to Mr Tobin, because there is "noevidence" to that effect.[33] The test of proportionality is submitted to favour Detour because the evidenceis that the shop at 17 Rees Street is very important to Detour's clothing business, it4 Wood Bay Enterprises Ltd v Wise [2012] NZHC 1136.5 Warnocks (1992) Ltd v Queensgate Centre Ltd [1993] 2 NZLR 236 (HC).6 Curreen v Hodgson (1999) ANZ ConvR 500 (HC).spent $250,000 on improvements, and has $600,000 worth of stock to sell. The issueof other premises being available to Detour was in dispute at the hearing, and hasremained in dispute since. I refer to this further. There may be alternative premisesavailable to Detour but no certainty of that, and probably not of the quality of17 Rees Street, for this sort of retail business. It is submitted there will be adisproportionate impact on Detour if the interim relief sought is not ordered.[34] Mr Tobin puts it that a serious question has been raised because return ofcontrol and management to Mr Collins was simply a reversion to the original positionand otherwise withholding of the lessor's consent was not justified and the lessor was,in effect, programmed to refuse consent. As to the balance of convenience, he says ifDetour cannot regain possession, it would mean that Detour is brought to its knees.The substantive proceeding would be rendered nugatory. The status quo should bepreserved, and the evidence is that the undertaking as to damages would be met.[35] Mr Tobin says that Detour has invested heavily in the lease in terms of keymoney and fit-out, and any disruption to Happy Travels cannot match that to Detourif it cannot regain possession.For Star Five[36] Mr Russell submits that Star Five was entitled to cancel the lease and peaceablyre-enter. He says that Detour's actions, through Mr Collins, constitute a disregard forthe terms of the lease which counts against it, and it fails at the first hurdle for interimrelief because there is no serious question to be tried.[37] Mr Russell adds to Mr Tobin's chronology by saying that the first transfer ofshares, without the lessor's consent, was made on 21 July 2014 from Mr Collins to MsHoughton, and she was appointed director on 1 September 2014. These events werenot advised to the lessor until 5 December 2014.[38] Detour's financial accounts were provided in May 2015, which confirmedMs Houghton's financial interest after the effective assignment of the lease inJuly 2014.[39] Mr Russell concentrates on the change in effective management and control on18 July 2016. Detour does not say that the landlord responded unlawfully by assertingbreach, but that that this was a trivial breach, which Mr Russell contests. He says thatit is serious, but I do not agree with his submission that there is no legal distinctionbetween a trivial breach or a non-trivial breach of the lease, as that may well bedeterminative or influential in the result. A notice may rely on various degrees ofbreach which is what I take Mr Russell to mean.[40] The second Property Law Act Notice of 27 September 2016 set out the stepsrequired to remedy the breach. This has the feature that the lessor's consent wasrequired to rectify the breach and not to act unreasonably in deciding whether to giveconsent. The lessee was already in breach because it had not sought consent for thetransfer of interest and control from Ms Houghton to Mr Collins. The lessor set itsown timing for consent to be given. The consent had to be obtained by 5 pm on18 October 2016 so it was clear that Detour had to make the case for consent, to whichthere could have been no unreasonable refusal. The request for consent by Detour wasmade on the morning of 18 October 2016, without explaining fully its financialposition in Mr Collin's hands or that of a possible new entrant into the affairs ofDetour, Mr Ball. Thus, Mr Russell says that Star Five had nothing really to considerin relation to the request, other than the knowledge that Mr Collins for Detour hadearlier been in default in his arrangements with Ms Houghton by not seeking thelessor's consent to those, and after July 2016 in default under the lease by delayedpayment of rent.[41] The ability to meet the financial obligations imposed under the lease is a factorin the consent of a lessor, so the Supreme Court has held in Greymouth Gas KaimiroLtd v GXL Royalties Ltd.7 Mr Russell submits that Detour failed comprehensively inthe way in which it sought the consent, which was slipshod and where the lessor wasnot compelled to give a consent under accepted principles and in refusing consent wasnot acting unreasonably.7 Greymouth Gas Kaimiro Ltd v GXL Royalties Ltd [2011] 1 NZLR 289 at 293.[42] Applying the principles set out in Studio X Ltd, Mr Russell submits thatDetour's breach was, if not deliberate, reckless. The background was the earlier failureto obtain consent to the transfer of interest and control to Ms Houghton in July 2014and Mr Collins simply ignored the need for consent in 2016. It is also not at all clearthat this was simply a return to the original interest of Mr Collins as shareholder anddirector because plainly a Mr Ball was expected to be involved in some major way.Mr Russell puts it that this was a deliberate disregard for the lease in again failing toseek and gain the lessor's informed consent but that position had not been formalised.It was certainly relevant if Mr Ball was going to back Detour, even if not by a formallegal arrangement.[43] Mr Russell submits that Detour simply failed, in the hands of Mr Collins, torecognise its obligations to present its application in an orthodox way, if it did have agood basis to seek the lessor's consent. Mr Collins says that Detour was in afinancially stable position, but there was no evidence on which the lessor could rely.Detour was balance sheet insolvent in 2013 and 2014 and cash flow insolvent fromOctober 2014, but the position appeared to have been rectified by the date of thepurported cancellation.[44] While Mr Russell has to bow to the inevitable and recognise that it is clear thatMr Spary did not want Detour as a lessee, for whatever reason, he submits this is notenough to count against Star Five given the failure of Detour to provide theinformation necessary, if it expected and warranted consent.[45] There is evidence of other default by Detour, particularly since Mr Collins tookback control of the company in July 2016, and there is evidence which indicates agood deal of crossfire between Mr Collins and Ms Houghton. It seems Ms Houghtonenabled resolution of the dispute with Beaver Liquor Ltd ("BLL") as to key moneywhich had not been paid by Detour as it had contracted to do, and made other paymentsinto the company, which seems to have kept it going. So Mr Russell says on the onehand Ms Houghton's role was accepted by Star Five, who did not act further on thefirst Notice, but the reversion to Mr Collins raised a completely new issue of Detour'sfinancial credibility, in his hands. The lessor had reason not to agree to the transfer toMr Collins, according to Mr Russell.[46] Happy Travels entered a lease and opened for business on 1 December 2016.The nature of the lease is a little experimental, but it is there for five months at least,and then it can exercise its rights to take a longer term. I asked Mr Russell to makeenquiries with Happy Travels' principals in Australia, and they confirmed they areopen for business, staff are in place, and to repeat, Happy Travels was not aware of thedispute. It has acted in good faith. As there is no evidence before the Court, primarilyI expect because they were not served, I am not prepared to make assumptions otherthan that its lawful business will be disrupted in some way, without the ability tofurther measure that.[47] As to the balance of convenience, Mr Russell recognises Detour needs to sellits seasonal stock and recover its fit-out, but on the other hand Happy Travels wouldbe affected. He submits that Detour's ability to meet any damages is not proven,notwithstanding an undertaking.[48] Happy Travels may be entitled to bring proceedings against Star Five for notdisclosing the dispute when entering a lease, but this does not influence the court toany extent because Star Five could have addressed this when entering arrangementswith Happy Travels.[49] Mr Russell says this whole situation has developed because of Detour's failureto comply with its obligations and so it has caused its own inconvenience and any loss.Mr Russell emphasises that the Notice gave 21 days to respond, and only on the lastday did a response come which was bereft of information for Star Five to make aninformed decision. Some nine days later, after cancellation, the premises werepeaceably re-entered. The correspondence shows that Detour's solicitors wereaccommodating and helpful, wanting only the opportunity to remove property toprotect Detour's position, while reserving its position at law.[50] Proceedings were not commenced until 8 November 2016. Mr Russell saysthat Star Five did not have to wait for Detour's litigation response and it could get onwith entering a new lease.[51] Mr Collins says that Detour can meet an award of damages, but there is nothingmuch to support that. The story of this lease, the casual approach to obligations, withsome default in payment but not that much, means there should have been fullerinformation given to assess Detour's ability to meet the undertaking. Mr Russell saysthat while a matter for inference, the idea that Detour's stock value of $600,000 wouldbe lost does not fit with turnover estimated of $1,000,000 for 2016/2017. I haveconsidered Mr Russell's argument in this regard, but I do not think the Court shouldreach any such conclusion. It would clearly be at least more difficult for Detour to sellits stock other than from its base of two plus years.Alternative retail space[52] Mr Spary said there are other tenancies to which Detour can turn, provided itcan get its fit-out from the premises, although it would lose the key money invested.In his prepared submissions, Mr Russell said there was no evidence that Detour hadclosely considered moving to other premises, and it could trade online, or at atemporary location, so it can still trade in some way. It is said that goes to the balanceof convenience and the overall justice lies with Star Five because Detour has acted insuch as way so as to bring the current position on itself. Mr Russell says that Detourhas wilfully disregarded its obligations.[53] Before I address disposition, I refer to the plethora of contesting evidenceregarding Detour's ability to relocate. Mr Ball is in discussions with Mr Collins aboutbuying into Detour to set up an online shop. Discussions were not fully concluded asof 9 December 2016. He is said to have a lot of money and is willing to invest and toexpand Detour's business online, and this is seen as an advantage by Mr Collins. Heseems to have communicated with Mr Patterson, who is involved with Mr Spary.Some of the text exchanges between Mr Patterson and Mr Ball are a little unsettlingand are not expressed in language one would expect in a responsible commercialdealing. Mr Collins has made some financial arrangements with Mr Ball which wouldsomehow link to his "buy in" into Detour. In short, Mr Collins said that an agreementhas been reached whereby he expects Mr Ball to buy in to Detour, to set up an onlineretail facility.[54] Mr Spary approached Skyline, whose property manager Mr Dennison hassworn an affidavit. Mr Dennison says that Skyline do not have sites to lease and thatwhen Mr Spary says otherwise, he is wrong. He says there was a "for lease" sign inthe window of premises upstairs in the building occupied by Detour, but it is not forlease and Skyline has no access to that property. Mr Spary says he was mistaken. Inthe end, I do not know whether other premises are available, but it is clear that primeleased space is at a premium in Queenstown.Discussion[55] The first question is whether there is a serious question to be tried, whichcomprehends whether there was a breach of the lease in the re-transfer of interest andcontrol to Mr Collins, without consent of the lessor, whether it was unreasonablywithheld, and whether relief might be ordered under s 253 of the PropertyLaw Act 2007.[56] I recognise there is first a question whether this was a transfer of interest andcontrol for which consent of the lessor was required. The merits of that question seemto lie with Star Five in that there had been the earlier transfer of interest and control toMs Houghton without consent, which settled down after the initial reaction by StarFive, and she was apparently accepted in that position, scarcely surprising given herfinancial contributions to the company and to the resolution of the issue over keymoney. Star Five, in my view, would be estopped from arguing that it had not givenconsent to her interest and control. That position was set up by Detour's own actions,in failing to seek a consent as it was required to do and was then reversed followingthe seemingly acrimonious dispute between Mr Collins and Ms Houghton at apersonal and corporate level.[57] The evidence, such as it is, indicates there was some financial stress on Detour,given default in meeting obligations under the lease from the time Mr Collins againtook control, and again he ignored the obligation to get Star Five's consent.[58] It is a fact that getting the consent of the lessor was not promising as Star Fiveplainly did not want Detour as a lessee on the evidence to date. This leaves Detour toargue unreasonably withheld consent. But Detour did not respond with anypromptitude to the Notice given, as its limited reply came only on the day before theNotice expired. However, there clearly is an issue as to whether the lessor addressedthe question of consent reasonably, and what the Court might regard as relevant todiscretionary relief.[59] In the mix is the surprisingly lax response or adherence to obligations heldunder the lease by Detour. In 2014 the issue first arose regarding Ms Houghton'sinterest. The first Notice was issued in 2015, and a little over a year later the sameissue arose, again without the lessee addressing its obligations. When it did so, late inthe piece and in response to the second Notice, it provided very little on which thelessor was able to make a (reasonable) decision. Viewed from the lessor's perspective,here was a defaulting lessee, late in several payments of rent, making arrangementswhich were a reversal to the original position, but in circumstances where the lesseehad introduced Ms Houghton, and having achieved acceptance of that by the lessor,could in my view only revert to Mr Collins with the lessor's consent. Once again, theinterest and control in the company changed and it required consent. It needed to beaddressed in the appropriate way. Whether Mr Ball would have fitted the bill isuncertain. But there is certainly enough here for the lessor to be on guard about thearrangements proposed between Mr Collins and Mr Ball.[60] It is a curious feature of the case that the lessor asserts default, wants the lesseeout, and then has to consider the response to the Notice and itself respond by a certaindate. This gives the Court pause.[61] On the other hand, the lessee at all times seems to have taken the most casualview of its obligations, and slowly and inadequately responded to the Notice. If it haddone what it should have done and provided information sufficient for the lessor tomake a proper decision, then its argument could well have been that there was no goodreason for consent to be withheld. It is not in that position, but perhaps could do betterin substantive proceedings.[62] There is a serious question to be tried, in particular whether the lessor wouldnot and did not truly consider consent, and whether relief might be granted. It is not astrong case for Detour on the evidence to date.[63] As there is a serious question to be tried, considerations of the balance ofconvenience and the interests of justice apply. Were it not for the Court's enquiries onthe day of hearing, the interest of Happy Travels in my view would pre-empt anyinterim relief. The Court is not likely to make an order against an innocent party whohas entered arrangements lawfully, and without any notice of the dispute. I am notprepared to assume that Happy Travels, having committed itself to a short lease only,would not choose to become a long term lessee, nor can I make any judgment as to thedegree of disruption that would be caused it, as these are issues which primarily shouldhave been addressed by Detour, but that cuts against Star Five too as it could haveprovided information about Happy Travel's position.[64] Were it not for the limited information made available to the Court, I wouldknow nothing about Happy Travels except that it entered a lease and is in occupation.I consider its interest is an important factor in disposition, based on the balance ofconvenience, and the Court's reluctance to make an order which could affect itsposition, without it being heard, or even knowing, of the underlying dispute when itentered into the lease.[65] I do recognise that on the balance of convenience and in the interests of justice,it is relevant that Detour, over a short period of time, has put a lot of money into thebusiness, and it stands to lose a good deal from its loss of these premises. I wouldconsider that influential, but for the extent of apparent default, by Detour, itsunsatisfactory response to the Notice, and the interest of Happy Travels.[66] There is a large amount of stock to be sold. On the evidence I cannot determinewhether there is an alternative outlet, and there is no evidence of an equivalent outletavailablebut the Court is aware that there are various means of disposing of stock,including online, pop-up stores and possibly, but not certainly, other leaseholdpremises. I am conscious that not to grant relief may well be a final position, thatDetour may not take the proceedings further and it could lose significantly as theresult.[67] I do not regard the balance of convenience and the justice of the case as entirelystraightforward. The fact is that Detour is in a poor litigation and commercial position,but largely by its own default. It may lose heavily, and that is in its favour whenseeking interim relief, but not decisive.[68] This judgment is reached in the setting of an interim application. If theproceedings reach trial, then they would need to do so urgently given the potentialeffect on Happy Travels and for Detour to have a commercial life in Rees Street. Thereis only a short period before a renewal decision will need to be made by Happy Travels.[69] At a substantive trial, Detour would seek relief which would first turn onwhether it was in breach, which I have found is probably the case by the test on aninterim basis, and then whether it can make a case that despite its default and inaction,it should have relief in the discretion of the Court after full evidential exploration.There would still be significant issues with which the Court would grapple. Detourhas itself only been in occupation of the premises for a short while and although therehas been some default in meeting the strict obligations for payment under the lease, itis now up to date. It seems that Ms Houghton assisted financially and in various ways.Now, Mr Collins contemplates Mr Ball's involvement, and the outcome of that isobviously relevant to any substantive judgment. There would also be the need forDetour to demonstrate that it was worthy of consent by the lessor under the proposedcontrol and ownership. The issue would be whether consent was withheldunreasonably or relief otherwise be granted. The fact that the consent is sought afterthe event is another relevant factor, but is not an absolute bar to Detour's success.[70] The strongest point for Detour is the amount of money that it has put into theinvestment, which will be lost, and in particular the key money, together with lossesattributable to being kept out of the premises should it not obtain relief. It otherwiseheld a long lease, or the potential for such, and it would have expected to haverecovered key money, even if it did not trade at a profit. However, those are issueswhich require much fuller examination than in this interim setting. Detour has putitself in this position, and by this judgment bears the consequences, at least on aninterim basis. Happy Travels should be able to continue its occupation, at least in theshort term. If this matter is to come back to the Court, Detour will have to moveswiftly to seek an urgent hearing within a period which does not affect Happy Travels'future position, or seriously jeopardise it.Disposition[71] I reach these conclusions. There is a serious issue to be tried, but not stronglyin favour of Detour. The balance of convenience and justice of the case favours thestatus quo being the arrangements entered between Star Five and Happy Travels whichhas the undoubted right to occupation. There is doubt as to the value of theundertaking given by Detour. The position thus overall favours Star Five and theinterim relief sought is refused but this judgment imposes a condition which reflectsthe application for alternative relief that the lessor must take all practical andreasonable steps to allow recovery of the fit-out by Detour, and should secure theco-operation of Happy Travels to do so. If there is any doubt about this, which thereshould not be, then the issue may be referred back to the Court through the Registry,as a matter of urgency by teleconference. If the lessor does not meet this condition orHappy Travels does not co-operate, the Court would as a matter of urgency look tofurther protect the fit-out interest of Detour.[72] Costs are reserved.Nicholas Davidson JSolicitors:Berry & Co, QueenstownLane Neave, Christchurchcc: CounselDean Tobin, Dunedin