LAND INFORMATION NEW ZEALAND v D SMITH [2023] NZHC 1700

LAND INFORMATION NEW ZEALAND v D SMITH [2023] NZHC 1700 [4 July 2023]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYI TE KŌTI MATUA O AOTEAROAKIRIKIRIROA ROHECIV-2022-419-0349[2023] NZHC 1700UNDER Part 13 of the High Court Rules 2016BETWEEN LAND INFORMATION NEW ZEALANDPlaintiffAND DENNIS SMITHDefendantHearing: 21 June 2023Counsel: GJC Carter for the PlaintiffD Smith in personJudgement: 4 July 2023JUDGMENT OF ASSOCIATE JUDGE BRITTAINThis judgment was delivered by me on 4 July 2023 at 10 am, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors:BVA The Practice, Palmerston NorthIntroduction[1] The plaintiff, Land Information New Zealand (LINZ) administers surplusrailway land in New Zealand, including land at 2A Para Street, Taumarunui (theproperty).[2] The defendant, Dennis Smith, claims a right to occupy the property pursuantto an alleged agreement to lease, based on his dealings with the plaintiff and a formerlessee of the property.[3] LINZ's position is that it has not agreed with Mr Smith that he can occupy theproperty and there is no legal basis for him to do so. LINZ seeks summary judgmentfor possession of the property and a declaration that any other party currentlyoccupying the property is doing so unlawfully.Background[4] The property is Crown land and is administered by LINZ under the NewZealand Railways Corporation Act 1981 (the Act), pursuant to a direction from theMinister for State-Owned Enterprises under s 10A of the Act.[5] On 11 October 2012, LINZ exercised its power in s 33 of the Act to lease theproperty to Graham Mills for a term of 10 years (the Mills lease). The Mills lease hada final termination date of 31 May 2022. The area of the property was delineated inred on a plan attached to the lease, which is appended to this judgment as Appendix A.During the hearing, Mr Smith accepted that the plan accurately depicts the land inquestion, more or less.[6] Clause 4.1 of the Mills lease prohibited Mr Mills from, inter alia, sub-letting,assigning or parting with possession of the property without the prior written consentof the lessor.[7] Clause 8.1 of the Mills lease provided the lessor with a discretion to grant anew lease to the lessee on termination of the lease term.[8] The property included some old buildings. The Mills lease acknowledged thatthe improvements on the land were the property of the lessee. Under cl 9.3, ownershipof any improvements on the land passed to the lessor on expiration of the lease:9.3 No Compensation for BuildingUpon the expiration of the term or sooner termination of this Lease theBuilding shall be deemed to have become and to be the sole andexclusive property of the Lessor without the Lessor being required topay any compensation whatsoever to the Lessee PROVIDED THATnotwithstanding anything contained in this Lease the Lessee shall ifrequired in writing by the Lessor so to do upon the expiration of the termor sooner termination of this Lease at the Lessee's expense and to thesatisfaction of the Lessor remove the Building from the Land and leveloff the surface of the Land and yield up the same to the Lessor clearof all improvements, structures, rubbish and debris. Upon suchdismantling and removal the materials comprised in the Building shallremain the sole and exclusive property of the Lessee.(emphasis in original)[9] "Building" is defined in cl 1.1.2 of the lease to include "any structures,buildings or improvements now or hereafter erected" on the property.[10] LINZ engages Colliers New Zealand Limited (Colliers) to assist withmanagement of the property and other surplus railway land. On 9 May 2019,Mr Smith emailed Colliers, querying whether vacant parts of a different property inŌhura were available for lease. Lara Mead, a property manager at Colliers, respondedby sending Mr Smith a lease application form. The email exchange between Mr Smithand Ms Mead confirms that Mr Smith submitted a completed lease application formfor the Ōhura property, although that document is not in evidence.[11] Colliers and Mr Smith exchanged emails on 23 May 2019. Mr Smith assertsthat during the morning on 23 May 2019, in a telephone discussion with Ms Mead,she confirmed that he could occupy the property leased by Mr Mills, and at the end ofthe Mills lease LINZ would "roll the lease over" to him. Mr Smith argues that LINZis bound by this oral agreement to lease.Legal principlesSummary judgment[12] The Court may give judgment against a defendant if satisfied that the defendanthas no defence to a cause of action in the statement of claim.[13] The leading authority on applications for summary judgment isKrukziener v Hanover Finance Ltd.1 The Court of Appeal set out the followingprinciples:2(a) The question on a summary judgment application is whether thedefendant has no defence to the claim; that is, there is no real questionto be tried. The Court must be left without any real doubt oruncertainty.(b) The onus is on the plaintiff, but where its evidence is sufficient to showthere is no defence, the defendant will have to respond if the applicationis to be defeated.(c) The Court will not normally resolve material conflicts of evidence orassess the credibility of deponents. But it need not accept uncriticallyevidence that is inherently lacking in credibility, as, for example, wherethe evidence is not consistent with undisputed contemporarydocuments or other statements by the same deponent, or is inherentlyimprobable. In the end the Court's assessment of the evidence is amatter of judgment. The Court may take a robust and realistic approachwhere the facts warrant it.[14] The defendant is under an obligation to lay a proper foundation for the defencein the affidavits filed in support of the notice of opposition.31 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162.2 At [26].3 Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 394.[15] It is open to a landowner to seek summary judgment under pt 12 of the HighCourt Rules 2016, on the basis that a defendant is an unlawful occupier of land, asdefined in pt 13 of the High Court Rules, to obtain an order for possession of the land.4Lease by estoppel[16] Mr Smith's correspondence to the Court and his correspondence with LINZreferred to there being a lease by estoppel between himself and LINZ, the consequencebeing that LINZ is estopped from denying Mr Smith's estate. However, that argumentis misguided because this is not a case where, after the grant of a lease, the grantor haspurported to deny the validity of their grant; this is a case where the only question iswhether there has been any grant at all.Formalities required for leases[17] Agreements to lease, other than short-term leases, must comply with theformalities prescribed in s 24 of the Property Law Act 2007. That section providesthat a contract for the disposition of land will be unenforceable unless the contract isin writing and is signed by the party against whom the contract is sought to beenforced.[18] An oral agreement to lease may, however, be saved by the equitable doctrineof part performance which applies to agreements to lease.5 The relevant test,formulated by Tipping J in T A Dellaca Ltd v PDL Industries Ltd, is as follows:61. Was there a sufficient oral agreement such as would have beenenforceable but for [s 24 of the Property Law Act 2007]?2. Has there been part performance of that oral agreement by the doingof something which:(a) clearly amounts to a step in the performance of a contractualobligation or the exercise of a contractual right under the oralcontract; and4 King v Clarke [2022] NZHC 1649.5 Property Law Act 2007, s 26.6 T A Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 (HC) at 109. The phrasing in para 2(b)was amended by Tipping J in Fleming v Beevers [1994] 1 NZLR 385 (CA) at 392.(b) when viewed independently of the oral contract was, on theprobabilities, done on the footing that a contract relating tothe land and [consistent with] that alleged was in existence.3. Do the circumstances in which that part performance took place makeit unconscionable (fraudulent in equity) for the defendant to rely onthe Act?Discussion[19] The issue is whether Mr Smith has an arguable claim to an agreement to leasethe property from 1 June 2022, the day after the expiration of the Mills lease. Theevents of 23 May 2019 form the starting point to this inquiry.[20] Colliers sent Mr Smith an email at 11 am on 23 May 2019, requesting furtherinformation in support of Mr Smith's request for a lease of the Ōhura property:Thank you for your submitting your application and your time to discuss yourplans over the phone the other day.At this point in time, the information you have provided paints a picture of theactivity on the land but it does not get into the details regarding how thisconcept will become a reality. We need to be able to present to LINZ a soundproposal on what is likely to occur and LINZ need to have assurance that theyare entering into an agreement with a party that is adequately funded to carryout the proposed activities. As you can understand, there is a significant riskto the Crown in the event there is insufficient capital/funding or income tocarry out its intended development plan and day to day operations. LINZ donot want to be left liable for improvements on the land if a Lessee was to eitherdefault, be in breach of their Lease or simply walk away.It would be appreciated if you were able to please provide a business case orfeasibility study which outlines a timeline of events, sourcing offunding/capital, ways of generating income and what that is forecasted to beand a clear overview of the day to day business operational activities. Otherexamples of business operations carried out by either Abundant Past Ltd oryourself will also be appreciated.[21] Colliers' email related only to the property at Ōhura and made it clear thatsufficient information was required so that LINZ could consider the application. Onreceipt of that email, it must have been obvious to Mr Smith that LINZ had not agreedto anything in respect of the Ōhura property.[22] Mr Smith responded at 11:38 am as follows:Please email me when you can talk about this.You are asking too much of us at this stage, sorry[.]I wished to speak to the current leaseholder of the old tannery and to share thisinformation with me you asked me for an application to be filled out.Once I had spoken to that person I would then move into the next phase whichwould be to establish what Linz was asking for the t[wo] or three sections.Only if the three sections were available and at reasonable rates then we woulddiscuss with you which option(s) would suit us and which entity I would useto take which land.I perfectly understand Linz's position and have already gone through this withMatt last year, but first things first please. Can you please give me the detailsof the current leaseholder so that we can progress these matters?[23] Mr Smith's email mentioned the property that is now in issue for the first time.Mr Smith requested contact details for the lessee of the property. It can be inferredthat in the time between the emails sent at 11 am and 11.38 am on 23 May 2019, therewas some other communication between Colliers and Mr Smith which raised theproperty that is now in issue. Mr Smith says that this communication was histelephone discussion with Ms Mead, when an oral agreement to lease was formed.[24] Mr Smith's email at 11.38 am is, however, inconsistent with Mr Smith'sproposition that Colliers had committed LINZ to an agreement to lease. In his email,Mr Smith did not reference any oral agreement allowing him to occupy the property,nor mention that LINZ had agreed to grant a lease to him. On the contrary, Mr Smith'semail clearly identified that the next step was for him to talk to the existing lessee ofthe property, and that the "next phase" after that would be to establish what LINZ was"asking for".[25] Later, on 23 May 2019, Ms Mead emailed Mr Smith the contact details for thelessee of the property, Mr Mills. These was no other email that day.[26] In late 2019, LINZ became aware that Mr Smith had occupied the property.Megan McKinstry, a portfolio manager employed by LINZ, gave affidavit evidencethat she received an email from Ruapehu District Council on 5 September 2019,advising that Mr Smith was residing on the property and looking to establish a "minicommunity with small mobile houses".[27] Ms McKinstry immediately sought information from Colliers. Ms Meadresponded by email on 5 September 2019 and advised that Colliers had not providedconsent to Mr Smith to use the property.[28] There is no evidence that LINZ was aware, at the time, of the nature of anyarrangement between Messrs Mills and Smith.[29] On 14 August 2020, Mr Smith sent an email to Colliers, stating:I have been working with Graham [Mills] over the last year or so with theintention that when the time is right, Graham will assign or transfer the leaseover to us. That time is now approaching.I have a meeting with [Ruapehu District Council] the week after next and wishto introduce myself in preparation for Graham's formal approval to enter intonegotiations with you over the current lease, potentially extending it andperhaps looking again at LINZ land at Ohura.I do not actually seek anything from you at this stage but would you be so kindas to phone me when you have a moment? Thanks[.][30] On 22 March 2021, Mr Smith sent an email to Colliers stating:I also advise that the current lessee Graham's previous advice was that he was,"Happy as time passes to assist with your procurement of the lease".I seek a continuation of the existing lease terms unchanged please, asking fora 5+5 or whatever is normal. The purpose for dealing with this prior to theend of the lease is to provide security for my planned investment into theexisting buildings.[31] On 24 March 2021, Colliers responded by emailing an application form for alease of the property. The application form stated:Please note that this application and any further correspondence does not inany way form an agreement with Land Information New Zealand The application is subject in all respects to the Land Information New Zealanddelegate's approval and once all necessary requirements have been completedto the delegate's satisfaction.A legally binding contract will only exist once all the decisions have beenmade and communicated to you and all documentation required to be acceptedand signed as completed by both parties.[32] The email and attachment from Colliers to Mr Smith on 24 March 2021unequivocally relayed that there would be no new lease until LINZ approvedMr Smith's application for a lease. On receipt of that email, there was no protest byMr Smith or assertion by him that he had received assurances from Colliers that hewould be granted a new lease on termination of the Mills lease.[33] There is no evidence that Mr Smith acted to his detriment prior to 24 March2021. Mr Smith says that he was encouraged by Ms Mead's assurances on 23 May2019 to invest time and money into the property from that point on. However, hisemail to Colliers on 22 March 2021 confirms that any investment by him into theproperty was at that stage "planned", rather than made. As Mr Smith said in his email,he wanted security of tenure before investing into the existing buildings.[34] Mr Smith completed and returned the application form, stating the intendeduse of the property asCLUB WAIRUA — A COUNTRY CLUB/COMMUNITY ALONGSIDETHE TINY HOUSE WORKSHOP [35] On 9 September 2021, acting on LINZ's instructions, Colliers servedMr Mills with a notice dated 9 August 2021 in respect of alleged breaches of the Millslease. The issues raised by the notice included rent arrears, and whether Mr Mills hadentered into a sublease or some other arrangement with Mr Smith without LINZ'sconsent.[36] On 11 November 2021, Mr Smith sent an email to Colliers claiming that hehad an arrangement with Mr Mills, as follows:As you know I seek a rollover/renewal of the lease at 2a Para St please, withexisting terms simply rolled over from Graham to myself. I did a deal with [Mr Mills] in which I bought the buildings from him, paidhim the same or similar lease value as he paid you (I chose to pay him weekly)and that he would assist the transfer of his lease to me at the end of the term[.][37] On 4 February 2022, Colliers sent Mr Mills a further notice regarding thealleged unremedied breaches of the Mills lease. Mr Mills responded in a letter toColliers dated 11 February 2022, stating:No sub-leasing has occurred. My business partner Dennis A. Smith currentlyoperates our business, Wairua (NZ) Ltd from premises at 2a Para St In his letter dated 11 February 2022, Mr Mills requested that his lease be "transferred"to Mr Smith.[38] On 22 April 2022, Ms McKinstry sent a letter to Messrs Mills and Smith,advising that given the lease was due to expire on 31 May 2022, LINZ saw little pointin taking enforcement action against Mr Mills and in assessing his request that thelease be assigned to Mr Smith. The letter stated that the primary issue going forwardwas consideration of Mr Smith's application for a new lease on which LINZ's initialview was that it should be declined. The letter reiterated LINZ's position that it hadnot consented to Mr Smith's occupation of the property.[39] At around this time Ms McKinstry obtained information from a website knownas "Club Wairua", which stated that Club Wairua was a "private club" located on theproperty, in a vaccine-free zone, with a particular focus on the construction of tinyhouses and the utilisation of alternative currencies. The website noted that:Land usage for members is pending our LINZ lease (Railway land)renewal/renegotiation, 1 June 2022.[40] Mr Smith sent LINZ an email on 23 April 2022, opining that LINZ's positionwas contrary to his understanding of agreements made. The essence of the argumentconveyed in the email is that Mr Smith had acquired rights in respect of the propertyas a result of his arrangements with the lessee, Mr Mills, and that LINZ had givenimplicit approval to his use of the property and their "commercial relationship".[41] Ms McKinstry sent an letter to Messrs Mills and Smith on 9 May 2022, whichmade it clear that LINZ did not accept the argument put forward byMr Smith. LINZ requested vacant possession of the property on expiration ofthe Mills lease.[42] The parties engaged in further correspondence, which adds nothing to thepositions propounded in May 2022.[43] On 1 June 2022, Ms McKinstry sent a letter to Messrs Mills and Smith,confirming that Mr Smith was required to vacate the property by 1 July 2022.Mr Smith has refused to vacate, and LINZ arranged for a trespass notice to be servedon him on 19 August 2022. Mr Smith continues to occupy the property.[44] I reject Mr Smith's assertion that Colliers committed LINZ to an agreement tolease on 23 May 2019, on the grounds that the assertion is inconsistent andirreconcilable with the exchange of emails between Mr Smith and Ms Mead on23 May 2019, and the subsequent correspondence between the parties. Prior toMr Smith's email to LINZ on 23 April 2022, all other communications from himevidence that Mr Smith understood that he had no legal right to a lease of the propertyfrom 1 June 2022, and that he was negotiating to obtain that lease.[45] LINZ elected not to exercise any rights it may have had against Mr Mills underthe Mills lease. LINZ did not take any action in respect of Mr Smith's occupation ofthe property until 9 May 2022, when LINZ requested vacant possession of the propertyon expiration of the Mills lease. However, even if LINZ acquiesced to Mr Smith'soccupation of the property during the term of the Mills lease, that does not amount toa representation or an agreement that LINZ would grant a new lease to Mr Smith onexpiration of the Mills lease.Conclusion[46] There is no evidentiary basis for an equitable agreement to lease the propertyfrom 1 June 2022. LINZ is entitled to vacant possession to the property.[47] LINZ did not exercise its right under cl 9.3 of the Mills lease to requireMr Mills to remove any buildings from the property on termination of the lease. Thebuildings are now owned by LINZ by virtue of the deeming provision in cl 9.3 of theMills lease.Confidentiality[48] At commencement of the hearing, Mr Smith requested that the Court make"confidentiality orders" in respect of two documents in evidence:(a) the Mills lease; and(b) an email from Colliers to Mr Smith on 23 May 2019, insofar as itdiscloses the contact details for Mr Mills. The email is exhibit DAS-111 attached to the affidavit of Mr Smith affirmed on 20 April 2023.[49] LINZ is a party to the Mills lease and entitled to produce it in evidence. Thereis no basis for a confidentiality order. Regarding the email from Colliers to Mr Smithon 23 May 2019, insofar as it discloses the contact details for Mr Mills, Mr Smith hasno standing to request a confidentiality order.Heading on Court documents[50] The heading on all documents filed in this proceeding should now record theoccupation of the defendant as "beneficiary".Orders[51] There shall be judgment for the plaintiff on the following terms:(a) A declaration that the plaintiff is entitled to possession of the property,being the part of Lot 1 DPS 62706 comprised in Record of TitleIdentifier SA52A/116 delineated in red on the plan appended to thisjudgment as Appendix A.(b) An order that the defendant, together with any other person occupyingthe property, vacate the property within five working days of deliveryof this judgment.(c) The defendant shall pay the plaintiff's costs for all steps in theproceeding on a 2B basis, together with disbursements, as fixed by theRegistrar._____________________________Associate Judge BrittainAppendix A