SAHAR EHSANI INVESTMENT LTD v RETYRED (2020) LTD [2022] NZHC 3213

SAHAR EHSANI INVESTMENT LTD v RETYRED (2020) LTD [2022] NZHC 3213 [2 December 2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2022-404-2080[2022] NZHC 3213BETWEEN SAHAR EHSANI INVESTMENTLIMITEDPlaintiff/ApplicantAND RETYRED (2020) LIMITEDFirst Defendant/First RespondentWARREN GRAEME SINCLAIRSecond Defendant/Second RespondentHearing: 30 November 2022; further materials filed on 30 November 2022Appearances: T J M Ashley for Plaintiff/ApplicantNo appearance by or for Defendants/RespondentsJudgment: 2 December 2022JUDGMENT OF WYLIE J(Application for interim order)This judgment was delivered by Justice WylieOn 2 December 2022 at 10.00 amPursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors/counsel:Daniel Overton and Goulding/S Wroe, T Ashley, AucklandIntroduction[1] The applicant, Sahar Ehsani Investment Ltd (SEIL), owns a property situatedat 177 Dominion Road, Red Hill, Auckland (the property). The property is 8,000square metres in size. It is situated in a commercial zone and it is bordered on threesides by business premises and on the fourth side by Dominion Road.[2] The first respondent, Retyred (2020) Ltd (Retyred), entered into an agreementto lease the property from SEIL on 28 February 2022. Inter alia the parties agreed toenter into a formal lease, to be prepared by SEIL's lawyer and using the AucklandDistrict Law Society's deed of lease form. The lease has not been signed but it isSEIL's submission that Retyred is bound both by the agreement to lease and by thelease which it has agreed to sign.[3] The second defendant, Warren Sinclair, is a guarantor of Retyred's obligationsunder the agreement to lease and the lease. He is the sole director and shareholder ofRetyred.The pleadings[4] SEIL has filed a proceeding alleging:(a) as a first cause of action, that Retyred is in breach of various provisionscontained in the agreement to lease and the lease. It seeks an injunctionordering Retyred and Mr Sinclair to remove all tyres from the property(at their expense) save for:(i) those tyres that are reasonably required to carry on the businessuse permitted by the lease; or(ii) tyres covering an area of 99 m3 or less, unless a resource consentis obtained for the storage of tyres over a greater area.(whichever is the lesser). It also seeks an injunction restraining Retyredfrom storing, collecting and stockpiling tyres at the property, except asnoted above. In the alternative, it seeks damages; and(b) as a second cause of action, that Retyred, through its agents and/oremployees has trespassed on the adjoining property also owned bySEIL. It seeks an injunction restraining any further entry. It also seeksboth general and exemplary damages in this regard.[5] SEIL also sought interim orders, pending the hearing of the substantiveproceeding. These orders were sought by way of interlocutory application on notice.[6] The proceeding was served on Retyred and on Mr Sinclair on 4 November2022. There is an affidavit of service in this regard. No statement of defence to thesubstantive proceeding has been filed. Nor has a notice of opposition to theinterlocutory application for interim orders been filed or served.[7] The interlocutory application for interim orders was called before Muir J in theDuty Judge List on 24 November 2022. He made an "interim interim order" to preventthe further accumulation of tyres on the property pending the determination of SEIL'sinterlocutory application by the Court. A fixture on 30 November 2022 was allocatedfor this purpose.[8] A copy of the Judge's interim interim order was sent to Retyred andMr Sinclair. There has been email correspondence between Retyred's solicitors andMr Sinclair. It is before the Court. Mr Sinclair was clearly aware of the proceedingand he was aware of the hearing on 30 November 2022. Nevertheless, there was noappearance either by or for Retyred or Mr Sinclair.[9] At the hearing on 30 November 2022, I directed that additional materials befiled – namely an affidavit as to SEIL's means to support the undertaking as to damagesalready given and detail of the costs sought. These materials were filed.Analysis[10] In determining an application for interlocutory injunctive relief, the Court mustfirst consider whether there is a serious question to be tried, secondly, consider wherethe balance of convenience lies and thirdly, assess the overall justice of the case.1(a) Breach of the agreement to lease/the lease?Is there a serious question to be tried?[11] I have received three affidavits from Mr Sahar, the principal behind SEIL. Heannexed to his first affidavit a copy of the agreement to lease signed by him and byMr Sinclair on his own behalf and on behalf of Retyred. Clause 4.1 of the secondschedule to the agreement to lease provides that the parties will enter into a formallease using the Auckland District Law Society's deed of lease form and cl 4.3 goes onto provide that, notwithstanding that the lease may not have been executed, the partiesare bound by the terms, covenants and provisions contained in the agreement and inthe lease as if the lease had been duly executed.[12] Relevantly:(a) The first schedule to the agreement to lease records that the businessuse is "Recycling tyres and show home display yard for modular housebusiness". The same narration is contained in cl 13 of the first scheduleto the lease.(b) Clause 16.1 in the second schedule to the lease provides that Retyredshall not without the prior written consent of SEIL use or permit thewhole or any part of the property to be used for any use other than thebusiness use recorded in the lease.(c) Clause 8.2, also in the second schedule to the lease, requires Retyred tokeep the grounds, yards and surfaced areas in a clean and tidy condition.1 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 140 (CA) at 142; andNZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12].(d) Clause 21.1 in the second schedule to the lease obliges Retyred tocomply with all statutes and regulations.(e) Clause 22.1, also in the second schedule to the lease, provides thatRetyred must not bring upon or store on the property, nor allow to bebrought upon or stored within the property, any goods or things of anoffensive, noxious, illegal or dangerous nature, or allow any act or thingto be done which may be or grow to be a nuisance, disturbance orannoyance to the landlord or any other person.[13] Mr Sahar has deposed that since Retyred took possession of the property inMarch 2022, it has used the property for the purposes of stockpiling used tyres. Heestimates that around 6,500 to 7,000 square metres of the property is now covered withtyres. He has annexed photos of the site and the tyres to his affidavit. He has seen noevidence that tyres are being recycled on the property. He is well placed to observeany tyres being recycled because he carries out another business from an adjoiningproperty and is based on the adjoining property. It appears to Mr Sahar that tyres aresimply being dumped on the property; as more tyres arrive, Retyred creates taller pilesof tyres to make space for the dumping of yet further tyres. Mr Sahar has not observedany operating recycling plant on the property. He says that Mr Sinclair has told himrepeatedly that recycling machines are due to be delivered to the property but that nomachines have arrived. He does acknowledge that there was one small machine onthe site for a period but he did not see it working and it was taken away at the beginningof October 2022.[14] The affidavits raise a number of issues:(a) is Retyred complying with the business use specified in the agreementto lease and in the lease? It is arguable that recycling involves theprocessing of used materials into new products or materials for furtheruse. It entails more than simply the storage of the material to berecycled;(b) by stockpiling tyres and not recycling them, is Retyred in breach ofcls 16.1 and 8.2 in the lease?;(c) is Retyred in breach of cl 21.1 of the lease? According to SEIL, thestockpiling of tyres is controlled by the Resource Management(National Environmental Standards for Storing Tyres Outdoors)Regulations 2021. The storage of over 100 cubic metres of used tyresis a restricted discretionary activity which requires resource consent.The regulations set out the matters required to be taken into accountwhen consent is sought, including fire risks and economic effects.Regional and district rules or bylaws may be more stringent than theregulations, but they may not be less stringent.2 While there is noevidence before the Court as to how this national environmentalstandard has been incorporated into the Auckland Unitary Plan,Mr Sahar has deposed that Retyred does not hold a resource consent forthe storage of used tyres. This appears to be acknowledged in an emailwhich Mr Sinclair sent to Mr Sahar on 25 November 2022. Mr Sinclairthere stated: "Can't operate until I have a resource consent"; and(d) is Retyred in breach of cl 22.1 of the lease? Large tyre stockpiles canpose a significant environmental risk in the event of a fire, as tyres canburn quickly with extreme heat and can be difficult to extinguish. Anyfire could result in the release of large volumes of toxic smokecontaining a range of contaminants which could affect the air, land andwater in the general vicinity of the property.3 As noted above, theproperty is in a commercial zone bordered on three sides by otherbusinesses and on the fourth side by Dominion Road. A fire in thestockpile of tyres on the property could pose significant risks tosurrounding businesses (including that operated by Mr Sahar on theadjoining property) and to the surrounding environment.2 Resource Management (National Environmental Standards for Storing Tyres Outdoors)Regulations 2021, reg 15.3 Bay of Plenty Regional Council v Merrie [2021] NZDC 11444 at [26]. See also Waikato RegionalCouncil v Tyre Disposal Ltd DC Tauranga CRI-2006-072-218, 18 December 2006; andCanterbury Regional Council v Annexure Services Ltd [2020] NZDC 16116.[15] Before the proceeding was commenced, an email was sent by Mr Sinclair toSEIL's solicitors. SEIL's solicitors had served a notice of breach on Retyred on6 October 2022. The notice recorded SEIL's view that Retyred was in breach of theagreement to lease and the lease in various ways. In a reply email, Mr Sinclair andRetyred denied any breach. They asserted that the business use involves the recyclingof tyres, which requires that tyres be collected before they can be recycled.[16] SEIL's response is to point to Retyred's failure to take any steps in regard tothe proceeding and to the affidavit evidence filed which, it says, establishes thatRetyred does not have a credible defence, given the number of tyres dumped, theabsence of any recycling machinery on the property and the absence of any resourceconsent for the quantity of tyres stored.[17] Notwithstanding Mr Sinclair's and Retyred's denials, on all issues, I amsatisfied that there is a serious question to be tried – broadly, is Retyred in breach ofboth the agreement to lease and the lease?The balance of convenience[18] I am also satisfied that the balance of convenience favours the grant of theinterim injunction sought. By stockpiling a large number of tyres on the property,Retyred is creating a risk not only to SEIL but also to surrounding property owners.There are potential adverse consequences for third parties. Retyred is also creating arisk to the surrounding environment. Any fire would risk health and safety and couldcause significant environmental damage which could not be readily compensated byway of an award of damages. A mandatory injunction is also appropriate because, onthe materials currently before the Court, it seems that Retyred is in breach of therelevant regulations. Assuming SEIL's arguments in this regard are correct, an orderrequiring Retyred to remove excess stockpiled tyres simply requires it to comply withthe regulations.The overall justice of the case[19] SEIL has given an undertaking as to damages and Mr Sahar has filed anaffidavit confirming that SEIL has the ability to meet that undertaking. In contrast,I have no information as to Retyred's ability to meet any damages award. Mr Saharhas deposed that Retyred failed to pay the rental due on 1 November 2022. That isnot a promising sign.[20] SEIL is not seeking to preclude Retyred from making use of the property inaccordance with the agreement to lease and the lease. Rather, it is seeking that Retyreduse the property in accordance with the agreement to lease and the lease and that itobtain the appropriate resource consent, in the event that it wishes to store more than100 m3 of tyres on the property.[21] In my judgment, the possible prejudice to Retyred by granting an injunction,on grounds that may turn out to be not ultimately supportable, is not outweighed bythe prejudice to the public, third parties and SEIL by declining to make an order untilthe substantive hearing takes place.Result – breach of lease agreement/the lease[22] For the reasons I have set out, I am satisfied that an interim injunction shouldissue, largely in the terms sought by SEIL, in respect of the alleged breaches of thelease.(b) Trespass[23] Mr Sahar has deposed that there has been a trespass onto his adjoining propertyby Retyred or by its servants or agents for the purpose of gaining access to the propertyto dump more tyres on it. A trespass notice has been issued. On the affidavit evidence,there is a serious question to be tried as to whether that notice has been breached. Alsoon the evidence, entry onto the adjoining land occupied by Mr Sahar to gain access tothe property is not necessary. Retyred has independent access to the property fromDominion Road. There does not appear to be any reason precluding the grant of aninjunction to restrain any trespass and the balance of convenience and the interests ofjustice, in my judgment, clearly favour such order being made.Costs[24] SEIL seeks costs from Retyred and Mr Sinclair on a solicitor-client basis.[25] Clause 6.1 of the second schedule to the lease requires Retyred to pay SEIL'slegal costs (as between lawyer and client) of and incidental to the enforcement ofSEIL's rights, remedies and powers under the lease. The amount sought is $17,793.26(inclusive of GST).[26] Notwithstanding that I requested Mr Ashley, who appeared on behalf of SEIL,to file further detail of the costs sought, having given further consideration to the issue,I am not prepared to make a costs order at this stage. Any order should await the finaldetermination of the substantive proceeding. An order under cl 6.1 would only beappropriate if it ultimately transpires that Retyred is in breach of the lease and thatSEIL was required to enforce its rights, remedies and powers. That cannot be assumedat this stage.Result[27] The draft order filed by SEIL is approved, subject to the followingamendments:(a) The expression "99 m3" in para 3(b) is to be amended and substitutedwith "100 m3".(b) Paragraph 3(c) is to be deleted and replaced with the following:Leave is reserved to the defendants to apply to the Court to setaside and/or amend orders (a), (b) and (d). Any application to setaside and/or amend the orders is to be made on not less than threeworking days' notice to the plaintiff.___________________________Wylie J