JOY TRADING COMPANY LIMITED V RAINGER PROPERTY LIMITED HC AK CIV-2011-404-3107

JOY TRADING COMPANY LIMITED V RAINGER PROPERTY LIMITED HC AK CIV-2011-404-3107 30 May 2011IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2011-404-3107BETWEEN JOY TRADING COMPANY LIMITEDApplicantAND RAINGER PROPERTY LIMITEDRespondentHearing: 30 May 2011Counsel: G Stringer for the ApplicantC Anderson for the RespondentJudgment: 30 May 2011ORAL JUDGMENT OF WOODHOUSE JSolicitors: Mr G Stringer, Inder Lynch, Solicitors, Papakura, Auckland Ms C Anderson, Neilsons, Solicitors, Onehunga, Auckland[1] The applicant, Joy Trading, entered into a lease of premises in Papakura from the respondent, Rainger Property. Joy Trading failed to give notice of renewal in terms of the lease. Rainger Property has entered into an agreement to lease to a new tenant with that lease due to commence on 1 June 2011; that is to say, this coming Wednesday.[2] Last Friday, 27 May 2011, Joy Trading filed an application for an interim injunction to restrain Rainger Property from, in effect, bringing the lease to an end pending hearing of an application by Joy Trading for relief under s 261 of the Property Law Act 2007.[3] The application filed on Friday was without notice although it was served on the respondent. The respondent filed a memorandum on Friday indicatingopposition and the matter was adjourned to today's Duty Judge List.[4] It is unnecessary to set out a detailed background. For present purposes it issufficient to indicate that Joy Trading's lease was entered into on 5 March 2010. Itwas for an initial term of one year, expiring on 28 February 2011. There were rights of renewal for periods of two years, so there was a right of renewal of two years from 1 March 2011. Joy Trading, as lessee, was required to give written notice of renewal at least three months before the expiry date, which means that notice was required to have been given by 31 December 2010 at the latest. That did not happen.[5] There is an affidavit in support of the application from Mr Surjit Singh, one of the directors and shareholders of Joy Trading. There is an affidavit in opposition from Mr Brian Rainger, a director and shareholder of Rainger Property. Both affidavits indicate that there were discussions and written communication between, at least, late January 2011 through to April 2011 relating broadly to the question as to whether Joy Trading wished to renew its lease. At the earlier stages, at least, it isclear from Mr Raigner's evidence that Rainger Property wanted Joy Trading torenew its lease and was happy to grant a renewal, notwithstanding the fact that the formal time for renewal had passed.[6] There is an issue between the parties as to precisely what was agreed. It is plain enough from the evidence for Joy Trading that Joy Trading was not willing to commit itself at the outset to a formal renewal. There is a difference between Mr Singh and Mr Rainger as to what was understood from the agreement, or understanding, that was reached apparently at a meeting in February 2011. Because this is an application for an interim injunction and I am proceeding on the basis of affidavits without cross-examination, and affidavits which have no doubt been prepared with some haste, I can only express conclusions on a tentative basis. In these circumstances, and with that caveat, I am of the view that there is an indication, at least, of some misunderstanding or ambiguity. This arises from the correspondence which commenced, for present purposes, with a letter from Rainger Property of 23 February 2011. Mr Rainger, who wrote on behalf of RaingerProperty, referred to a meeting with Mr and Mrs Singh "concerning the future ofyour business". The letter continued:At the present time your lease expires 1st March 2011 and your [sic] wish to trade on a calendar month basis at the same rental as discussed at the meeting.[7] Mr Singh confirms, in essence, that it was agreed that in the meantime they would effectively be operating as a tenant on a month to month basis but that he had not understood that that would prevent Joy Trading from renewing the lease for a longer term.[8] Mr Rainger says that following the letter of 23 February there were some further telephone conversations during which he pressed Mr Singh to formally renew the lease, and that did not happen.[9] There was a further letter from Rainger Property of 15 April as follows:We wish to confirm that Joy Trading Co Ltd Lease expired on the 28thFebruary 2011. We have advised you that we require a Lease for 2 years or more, as to date you have not responded.We have a future tenant who is happy to take a long lease in a different trade, if this client confirms that they wish to proceed we will give you in writing 4weeks to vacate 15 O'Shannessey Street, Papakura.Chattels: We enclose schedule 4, Joy Trading Co Ltd, chattels to all be removed from the Shop.Schedule 5 enclosed is Rainger Property Ltd.We hope this clearly defines our position.Wishing you all the best.[10] Mr Singh replied by e-mail dated 19 April 2011 as follows:Tried to get hold of you on Saturday morning at your mobile twice but in vain. Received your letter stating the Expiry of Lease of 15 O'ShannesseySt Papakura. We already have discussed that I am struggling to pay rent as it appears too much, and you had declined to make any amendment in reducing rent. I had told you about my helplessness in signing any fixed term papers at least for a while. So we both discussed/agreed from March 11 onwards it be month to month base tenancy for a while. No question of me not responding to you. As the matter has already been discussed/agreed and settled. And there is no [sic] any pending rent. The rent is being paid in advance since the start of the lease. For example – We had started in March 10 that was the rent free month but paid rent for April. And in April the rent for May was paid, in May for June in June for July, in July for August, in August for September, in Sept for Oct, in Oct for Nov, in Nov for Dec, in Dec for Jan 11, in Jan 11 for Feb 11, in Feb 11 for March, in March for April. The March 11 rent was paid on 28th of Feb 11. As our fixed lease term is finished. We entered into month to month base tenancy. The rent for April was paid in 31st of March 11.Now in April we will pay for May before the start of May. To our understanding there is no pending rent. Rest if/when we leave each other it be as per the signed papers and agreed terms with due intimation. I do hope it clears doubt of any sort.[11] On 28 April 2011 Rainger Property entered into an agreement to lease the premises to Roseland Pharmacy Limited. The agreement records that the lease is to commence on 1 June 2011. The stipulated business use is a retail pharmacy.[12] There appear to have been no written communications between Joy Trading and Rainger Property between the e-mail from Mr Singh of 19 April 2011 and 28 April 2011 when Rainger Property entered into the agreement with Roseland Pharmacy. However, the evidence overall, as it presently stands, indicates that Mr and Mrs Singh were aware of the steps being taken by Rainger Property to secure a new tenant. This includes the evidence from Mr Migounoff, a real estate agent whospoke to Mrs Singh some time after Rainger Property's letter of 15 April to confirmthat the letter had been received. Mrs Singh confirmed that it had been. Mr Migounoff says that he told Mrs Singh that they needed to talk to their lawyer.[13] Rainger Property wrote again to Mr and Mrs Singh and Joy Trading on 29April 2011. In this letter advice was given that Rainger Property had "a client" whowished to take a lease. Notice was given to vacate the premises by 30 May 2011.[14] Mr Singh responded by letter which appears to have been received by Mr Rainger on or about 10 May. This letter is as follows:In response to your letter. We are willing to countinue [sic] our lease as per lease agreement.We are promoting our business to the neighbourhood.We are getting the required growth but is bit slow due to the conditions of the New Zealand economy.We would expect no change to lease till 1st March 2013.Please take this note as confirmation to carry on as per lease document.[15] Mr Rainger replied by letter dated 10 May as follows:We received your letter today 10th May 2011 (Your letter was not dated.) Re your expired Lease agreement. We have been requesting Surjit that you renew your Lease since February 2011, we told you we had interested parties who were happy to take a two year lease and you declined that option, you now say in your letter received 10 May 2011 quote your letter (we are now willing to continue our Lease as per Lease agreement) unquote.Surjit, there is NO Lease Agreement; you have been advised many times in writing by me. Your Lease expired on the 28th February 2011, unfortunately it is too late and we request once again that you vacate by the 30th May 2011 removing all your chattels.Our Lawyer has forwarded you a letter advising you to vacate by the end of May 2011.[16] Joy Trading consulted solicitors following that. There was a letter from Joy Trading's solicitors on 24 May to Rainger Property's solicitors and, as I have noted, the application for interim relief followed on 27 May.[17] The business that Joy Trading has been operating is a pizza shop. The evidence as it stands is that Mr and Mrs Singh have invested all of their savings in the business. Both of them, it appears, work long hours in the business and have been working hard to try and make it profitable. In addition to their work in the business Mr Singh has been working part time for Fisher and Paykel.Serious question[18] In considering whether there is a serious question to be tried the central consideration is whether Joy Trading has a sufficiently arguable case for renewal pursuant to ss 261 and 264 of the Property Law Act 2007.[19] That question turns in part on the dealings between the parties between approximately the end of January through to mid April 2011.[20] As the evidence presently stands, and as I have already indicated, there is some basis for arguing that there may have been a misunderstanding between the parties or, putting it another way, they may have been somewhat at cross-purposes. In saying that I am not intending to imply that there can be any significant criticism of Rainger Property in a general sense in respect of its dealings with its tenant.[21] Both parties corresponded on their own behalf and the terms of that correspondence are certainly not crystal clear. There are clear limits on the ability of the parties in oral evidence to seek to explain what they were intending to say in their letters, but there is a basis upon which the recipient of a letter can express his or her understanding. And that, in this case, may be influenced to an extent by the sophistication or lack of sophistication of the recipient. I am here referring in particular to the question as to whether Mr and Mrs Singh may be reasonably unsophisticated in relation to the matters at issue and notwithstanding efforts on the part of Mr Rainger to educate them (if I may put the matter that way). From theapplicant's perspective, in the light of the evidence as it stands, Mr Singh, who is essentially responsible for the negotiations for Joy Trading, understood that he could in effect have his cake and eat it; that is to say, that in the meantime there could be a tenancy on a month to month basis whilst preserving the opportunity to effectively enter into a new lease, or renew the old lease, for a further term of two years.[22] The matter that I have just referred to is one only of the factors that the Court will have to consider on a substantive application but this matter certainly provides a basis for reasonable argument on behalf of Joy Trading.[23] Other considerations were helpfully summarised in a decision of Asher J inPonsonby Mall.1 That case, and others referred to me by counsel,2 was concerned with the substantive application for relief rather than, as here, an application for an interim injunction. Some of the matters that Asher J referred to are matters which would generally be brought into account at this stage when considering the balance of convenience. And I will deal with those matters under that heading. Both counsel addressed a number of the matters referred to in Ponsonby Mall. There are certainly arguments both ways, as is often the case. But the arguments in favour of Rainger Property are not sufficient to persuade me at this stage that there is not a serious argument on the case advanced by Joy Trading on its application for relief. And in that regard I do consider it is important to bear in mind that the statutory provisions are expressly designed to enable a party to seek relief notwithstanding the fact that the formal lease may have expired, and notwithstanding the fact that the lessor may have entered into a new lease. The latter point is expressly dealt with in s 264(3) of the Property Law Act.Balance of convenience[24] When the matter was first called this morning counsel indicated that theywere confident that the substantive application could be dealt with in a half day. Idid express some reservations about that, but based on that estimate a fixture hasbeen allocated for the substantive application for a half day on 17 June 2011. Whenconsidering the balance of convenience this early fixture for the substantiveapplication is a material consideration in favour of granting the interim relief.[25] There is no substantial evidence before the Court of likely losses to Rainger Property if an interim injunction is granted and the substantive relief in the end is not obtained by Joy Trading. In making that observation I do not intend any particular criticism of Rainger Property. It has been subject to very tight time constraints in filing its response. But the fact of the matter is that there is no substantial evidence of likely loss. The only quantified sum which might be part of a loss is commission1 Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd (2005) 7 NZCPR 48 at [29]2 Koo v Tuatara House Ltd HC Auckland, M1578-IM02, 19 December 2002, Baragwanath J; Walsh vUtting [2004] 1 NZLR 402; MFT Properties Ltd v Country Club Apartments Ltd HC Auckland, CIV-2010-404-005913, 13 April 2011, Woolford Jof $4,600 paid to the real estate agent who secured the new tenant. If Rainger Property is restrained, but Joy Trading does not ultimately succeed, it does not follow that that commission will be a wasted expense. It is more likely that it will not be. There is also the question of potential losses arising from the inability of Rainger Property to grant possession to the new tenant. If that is prevented for a limited period of time it also does not necessarily follow that there will be any significant loss arising from delay in granting possession. There is at present no evidence from the new tenant. There is also a question as to whether the new tenant would be able peremptorily to cancel the agreement to lease between now and determination of the application for substantive relief. I have weighed these considerations against the evidence that Joy Trading does not have assets of any significant value. In that regard there is an affidavit from a friend of Mr and Mrs Singh offering some financial support.[26] It is also relevant to note that, if some losses are sustained by Rainger Property because of its commitment to the third party, Roseland Pharmacy, it may be that the Court, on the substantive application, if relief is granted, would grant relief subject to a condition that those losses are reimbursed.[27] If Rainger Property is not in the interim restrained from re-entering and granting possession to the new tenant there does appear to be, at the least, a material risk that that would result in the end of Joy Trading's business. In a technical sense Joy Trading is entitled to remove any assets it owns and relocate the business. But in a practical sense that may be of no avail to it in seeking to preserve a business which Mr and Mrs Singh have, on the basis of the present evidence, been struggling to establish in the present location. It is also at least possible that if there is no interim restraint that will have material bearing against the grant of the substantive relief that is sought, and notwithstanding the provisions of s 264(3).[28] In seeking to assess the matter on a broad overall basis in my judgment interim relief in this reasonably short period of time (and allowing for further time that may be needed for a reserved judgment) is warranted.[29] Consequently there will be orders in terms of paragraph 1 of the interlocutory application dated 27 May 2011.Timetable orders[30] Affidavits for the applicant in reply to the current affidavits for the respondent are to be filed and served by this coming Friday, 3 June 2011.[31] Any further affidavits for the respondent, including supplementary affidavits from existing deponents, are to be filed and served by Tuesday, 7 June 2011.[32] The applicant has leave to file further affidavits strictly in response to the additional affidavits for the respondent just referred to, but they must be filed and served by Friday, 10 June 2011.[33] The applicant is to file comprehensive submissions together with a bundle of relevant documents and a bundle of authorities by 2:00 pm on Tuesday, 14 June2011. Counsel are to confer on authorities and documents. It is anticipated thatthere will not be a large number of documents.[34] Submissions for the respondent are to be filed and served by 5:00 pm on Wednesday, 15 June 2011, but if that time frame is unduly tight the respondent has leave to file and serve them as soon as possible the next day.[35] The fixture of a half day on Friday, 17 June 2011 is confirmed.[36] Both counsel responsibly recognise that in order to dispose of this matter in a half day there will need to be tight time limits on cross-examination and on oralsubmissions. Any cross-examination will require leave of the trial Judge. Counselaccept that if there is leave to cross-examine this will in turn require strict limits onthe length of cross-examination and it is anticipated that if there is cross-examinationit is likely in any event to be very limited._____________________________________ Peter Woodhouse J