LEEANN YARE LTD v CARLTON GORE ROAD LTD [2020] NZHC 1853

LEEANN YARE LTD v CARLTON GORE ROAD LTD [2020] NZHC 1853 [29 July 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-000329[2020] NZHC 1853BETWEEN LEEANN YARE LIMITEDApplicantAND CARLTON GORE ROAD LIMITEDRespondentHearing: 20, 21 and 23 July 2020Appearances: S A Grant for ApplicantH Thompson for RespondentJudgment: 29 July 2020JUDGMENT OF WYLIE J[Reasons for ruling]This judgment was delivered by Justice WylieOn 29 July 2020 at 10.00 amPursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors/counsel:Daniel Overton Goulding/S Grant, AucklandMcMahon Butterworth Thompson, AucklandIntroduction[1] I heard evidence in relation to this matter on 20 and 21 July 2020. Because theallocated time had run out, and after consultation with counsel, I directed that closingsubmissions should be presented on Thursday 23 July 2020.[2] On the afternoon of Wednesday 22 July 2020, the Registry received anapplication from Mrs Grant, acting for the applicant, asking me to treat the originatingapplication filed by the applicant and dated 10 July 2019, and the respondent's noticeof opposition dated 16 August 2019, as a statement of claim and statement of defencerespectively.[3] The respondent through its counsel, Mr Thompson, filed a memorandumopposing this application on the same afternoon.[4] I heard from counsel in relation to this application on the morning of 23 July2020. I gave an oral ruling declining the application. I indicated that my reasons forthat ruling would follow. I now set out those reasons.Procedural background[5] On 27 May 2016, the respondent as landlord, and the applicant as tenant,entered into an agreement to lease a premises situated in Carlton Gore Road,Newmarket, Auckland. The lease was to be for a term of four years. It containedrights of renewal. It was due to finally expire at the end of July 2024. Annual rentalwas $126,800 plus GST. The applicant agreed to pay the rental by equal monthlypayments in advance. The parties also agreed to enter into a formal lease, using thethen current Auckland District Law Society deed of lease form. In the event, no formallease was ever executed, but both parties accepted that they were bound by the termsof the standard lease form. Inter alia, it provided that the respondent was to keep andmaintain the premises in good order and repair and weatherproof.[6] It was common ground that the building leaked and that the applicantcomplained to the respondent about the leaks. The extent of the leaks and the adequacyof the respondent's attempts to fix them were in issue.[7] It was also common ground there was a meeting between representatives of theparties on 22 February 2017. The extent of the agreement reached at that meeting washowever in dispute. The applicant said that the respondent agreed that no rental wasto be paid until all leaks were repaired and that that never happened. The respondentsaid that it agreed to defer payment of 50 per cent of the arrears then outstanding untilrepairs were completed to louvres in a tower on the roof, that that work was finallycompleted some months later, and that rental was otherwise payable in full from 1March 2017. There was no dispute that further rental was paid by the applicant afterthe meeting, but that the rental fixed in the lease was not paid in full. In the event therespondent issued a notice of default under the lease, and it attempted to re-enter thepremises.[8] On 26 February 2019, the applicant applied by way of originating applicationpursuant to s 253 of the Property Law Act 2007 seeking relief against the respondent'sproposed cancellation of the lease. One of the orders sought was an order that therespondent should pay to the applicant losses and damages said to have arisen due tothe alleged failure by the respondent to properly maintain the exterior of the premises,and in particular, the roof.[9] Shortly thereafter, on 6 March 2019, the applicant sought an interim injunctionto restrain the respondent from re-entering the premises.[10] The respondent filed a notice of opposition to the originating application on 7March 2019. Inter alia it asserted that the applicant had not pleaded particulars, norprovided evidence, of its alleged losses, and that the applicant had made no effort toquantify them. The respondent also filed a notice of opposition to the interiminjunction application.[11] After hearing the application for an interim injunction, Peters J granted thesame on 28 March 2019.11 Leeann Yare Ltd v Carlton Gore Road Ltd [2019] NZHC 613.[12] Shortly thereafter, the respondent sold its interest in the premises to adeveloper. The applicant continued to occupy the premises under fresh arrangementsit had reached with the new owner.[13] The outstanding originating application seeking relief against cancellationcame before Gault J in the Mentions List on 15 April 2019. The applicant wasproposing timetable orders and seeking a hearing. The respondent was asserting thatthe application was moot, given that it had sold the property. Further, it was assertingthat an originating application was not the appropriate vehicle to deal with the factualdisputes between the parties. It also noted that the lease provided for any dispute tobe arbitrated. It requested that the originating application should be struck out. GaultJ noted as follows:It is not appropriate for me to determine whether the originating application ismoot, much less strike it out, on the basis of memoranda filed for a mentionin the Duty Judge's list. On the basis of the limited review possible in thismention, it may be that the applicant's proposed amendments and the changeof circumstances make it more appropriate to file a statement of claim, butthat is for the applicant to consider, at least in the first instance. The mattermay or may not still be an application for relief against cancellation of thelease in terms of ss 253 and 256 of the Property Law Act 2007, which issuitable to proceed by way of originating application. I note Ms Grant'sargument that it remains appropriate for that course.The Judge put in place in timetable, requiring the applicant to file either an amendedapplication for relief and further evidence in support, or alternatively, a statement ofclaim, by 8 May 2019.[14] The applicant delayed, but ultimately, after protest by the respondent, it filedan amended originating application on 10 July 2019. Inter alia it there sought that therespondent should pay to it the losses it said it had incurred as a result of damagedstock and business interruption. It alleged that the respondent's failure to keep thepremises watertight entitled it both to a rebate of the rental and to damages. It saidthat:[t]he Court has jurisdiction under s 256 of the Property Law Act to grantthe relief sought on any conditions (if any) as to expenses, damages,compensation or any other relevant matters as it thinks fit.It asserted that a fair rental abatement would be 50 per cent, and further that it hadsuffered stock damage and business interruption because the premises were notweathertight, and because of the respondent's wrongful purported re-entry into thepremises. The application was made in reliance on ss 253, 245 and 256 of the PropertyLaw Act.[15] The respondent filed a notice of opposition on 16 August 2019, opposing themaking of the orders sought by the applicant. Inter alia, it asserted as follows:[t]he respondent admits that the Court has jurisdiction under s 256 of the[Property Law Act] to grant relief on any conditions as to expenses, damages,compensation or any other relevant matters that it thinks fit but it says furtherthat the discretion is limited in the manner identified in Arthur Devine Ltd vHighgate on Broadway Ltd.2[16] In the event, and as directed by the Court, the parties filed a joint memorandumin relation to set the originating application down for trial. It was dated 19 August2019. It noted as follows:3. The issues are, broadly:(b) Did the Respondent breach its repair and maintenanceobligations?(c) If so, what remedies are available in the proceeding?The memorandum also noted that opening submissions would traverse the scope ofthe respondent's repair and maintenance obligations and " the extent of the court'sremedial jurisdiction under s 256 of the [Property Law Act] "[17] Hinton J directed the Registrar to set the amended originating application downfor hearing. Unfortunately, the hearing was delayed because of the COVID-19 crisis.It finally came before me on 20 July 2020.2 Arthur Devine Ltd v Highgate on Broadway Ltd [2011] 13 NZCPR 276 (HC).[18] In the course of his opening, Mr Thompson, for the respondent, asserted thatthe damages claimed by the applicant could not be recovered under s 256 of theProperty Law Act. He argued that s 256 limited the Court's jurisdiction when dealingwith an application for relief against cancellation. He submitted that the Court canonly impose conditions requiring a lessee to pay expenses incurred, or damagessuffered by, or compensation payable to, a lessor when the lessee has breached thelease and is seeking relief against cancellation. He also argued that in any event, theoriginating application seeking relief against cancellation of the lease was moot, giventhat the respondent no longer has an interest in the leased premises. He noted evidencewhich had been given by the applicant's witnesses that the subsequent arrangementsmade between the applicant and the purchaser had come to an end, that the lease wasno longer on foot, and that the leased premises had been demolished.Submissions[19] Mrs Grant noted that the applicant had signalled in both its original andamended originating applications that damages would be sought from the respondentfor its alleged breach of the lease in failing to keep the premises weathertight, and thatboth counsel, in the joint memorandum dated 19 August 2019, had recorded that theissues between them included whether or not the respondent was in breach of its repairand maintenance obligations. She argued that both parties had prepared on the basisthat the damages (if any) payable by the one party to the other would be determinedby the Court, and that the respondent was aware throughout that the quantum ofdamages for breach of the weathertight provision in the lease was in issue. Shereferred to r 1.9 of the High Court Rules 2016 and submitted that it gave the Courtjurisdiction to make the amendment sought. She argued that the amendment wasnecessary to enable the real issue between the parties to be determined, and shereferred to the need for a just, speedy and inexpensive resolution of the proceedings,pursuant r 1.2.[20] Mr Thompson argued that whether or not the applicant could obtain damagesthrough an originating application seeking relief against cancellation has been in issuefrom the outset. He referred to the joint memorandum dated 19 August 2019, andnoted it also recorded that what remedies were available was a matter in issue, andfurther that it identified that opening submissions would deal with the extent of theCourt's remedial jurisdiction under s 256 of the Property Law Act. He argued thatthere would be clear prejudice to the respondent if the application were granted. Hesubmitted that the respondent has throughout run its case on the basis that the applicantcould not, as a matter of law, become liable for the damages claimed by it as acondition of any successful application for relief against forfeiture, and he submittedthat the application would close down that argument. He further submitted that therespondent was entitled to assume that it was facing a case under ss 253 and 256 ofthe Property Law Act, and that if the application is granted, it would have to face avery different case.Analysis[21] Relevantly, r 1.9 provides as follows:1.9 Amendment of defects and errors(2) The court may, at any stage of a proceeding, make, either on its owninitiative or on the application of a party to the proceedings, anyamendments to any pleading or the procedure in the proceeding thatare necessary for determining the real controversy between theparties.[22] As is clear from the rule, determination of the real controversy is thefundamental yardstick for all amendments under r 1.9.3 However, where anamendment would cause prejudice to the other party and/or lacks particularity, it canbe declined.4 Inter alia, an amendment may be declined where it is proposed at a verylate stage by a party who has consistently pursued a course of action inconsistent withthe proposed amendment.5 Amendments may also be refused after the evidence hasbeen completed,6 and amendments which would require defendants to meet an entirelydifferent case from that pleaded, or which might necessitate further evidence, can bedeclined.7 The modern trend however is in favour of allowing amendments, provided3 And see, Kirton v Prospecdev Holdings Ltd [1990] 2 PRNZ 412 (HC).4 Young v De Lautour Partners [1992] 6 PRNZ 148 (HC).5 Sanders v Anderson [1968] NZLR 172 (SC).6 Thurlow v Queens Park Golf Club Inc [1974] 2 NZLR 743 (SC).7 Tewsley St Properties Ltd v Wright Stevenson Properties Ltd [1993] 7 PRNZ 58 (HC).that there is no demonstrable injustice to the other party or parties.8 There are threeformidable hurdles –granting the amendment must be in the interests of justice, it mustnot significantly prejudice the other party or parties and that it must not causesignificant delay.9[23] Here the amendment proposed was bald. It sought to treat the amendedoriginating application as a statement of claim, and the notice of opposition as astatement of defence. There was an immediate difficulty. Neither document compliedwith the applicable rules. By way of example, the amended notice of originatingapplication did not give particulars of the applicant's cause or causes of action. Therewere no sufficient particulars to enable the respondent to be fairly informed of the caseit had to meet. Indeed, I note that one of the heads of damage claimed by the applicantwas first put forward in the course of oral evidence given by the applicant's principle,Leeann Yare. The respondent did not refer in its notice of opposition to affirmativedefences available to it, for example, failure to mitigate. As a result, there was littleor no evidence in this regard.[24] There were other difficulties. There has been no discovery. While it wouldhave been possible to obtain discovery in the context of the originating application,any discovery ordered would have extended only to matters properly the subject ofthat application. I doubt that it would have extended to a claim for damages for breachof the lease by the respondent and in any event, the Court would likely have adopteda conservative approach to any application.10 Because there had been no discovery,various witnesses, notably Mrs Yare as well as Mr Dargaville for the respondent, wereunable to refer to documents they said existed, but which were not in the commonbundle.[25] Mrs Grant did suggest that the proceedings could be adjourned so that theapplicant could file a complying statement of claim, the respondent could file acomplying statement of defence, and discovery could be attended to. This would8 Elders Pastoral Ltd v Marr [1987] 2 PRNZ 383 (CA).9 At 385.10 Rule 19.10; And see, Commissioner of Inland Revenue v Elementary Solutions Ltd [2017] NZHC2411 at [37].undoubtedly have entailed further delay and probably required that further evidencebe presented.[26] Further, if the amendment were to be made as proposed, the respondent wouldbe required to meet a very different case. It was a fundamental part of its argumentthat the Court did not have jurisdiction to order it as landlord to pay compensation inthe course of granting the applicant relief against forfeiture. It expressly raised thisargument in its notice of opposition and at the case management conference in April2019. It cited authority for its argument. When the invitation to proceed by way ofstatement of claim was rejected by the applicant, the respondent had no choice but toproceed with the matter on the basis adopted by the applicant. It did so on the basisthat it was not significantly at risk of a condition requiring it to pay compensationunder s 256 of the Property Law Act. As a result, Mr Thompson's cross-examinationof the applicant's witnesses in regard to the damages claimed was relatively limited.No expert evidence was called and mitigation issues were not explored – for examplein relation to an insurance policy against loss held by the tenant.[27] The applicant was given the opportunity from an early stage in the proceedingsto proceed by way of statement of claim. While there can be no criticism of its originaldecision to seek relief against cancellation by way of originating application,11 it wasaware of the respondent's argument that it could not recover compensation or damagesfor the alleged breach of the lease by way of originating application and an order unders 256 of the Property Law Act. The applicant was also aware of the respondent'sargument that there was no point in pursuing relief against forfeiture, given that therespondent no longer had an interest in the premises, the lease has been terminated andthe leased premises no longer existed. The applicant was given the option ofproceeding by way of a statement of claim. It declined to do so. It cannot now expectthe respondent to bear the consequences of its very belated change of mind.[28] I acknowledge that r 1.2 seeks to secure the just, speedy and inexpensivedetermination of any proceeding. Nevertheless, the ultimate aim of all Court11 This was required by r 19.2(s).proceedings is to ensure that justice is done, even though that may not be the quickestor cheapest solution.[29] In my view, and for the reasons I have set out, allowing the amendment wouldnot be in the interests of justice. It would significantly prejudice the respondent, andit would be likely to cause further delay, while proper pleadings were sorted out, whilediscovery was attended to and to give the parties the opportunity to call furtherevidence.[30] Accordingly, I declined to allow the amendment sought.Addendum[31] After I gave my oral ruling declining to allow the amendment, I askedMrs Grant whether she would like an adjournment to discuss the matter with herclient. She took advantage of that opportunity.[32] When we resumed in Court, Mrs Grant advised me that her client needed theopportunity to seek independent advice. She requested that I should further adjournthe matter, to enable that advice to be obtained. Mr Thompson did not object.Accordingly, I adjourned the hearing until 10.00 am on Friday 21 August 2020, togive the applicant and any new counsel appointed, the opportunity to consider theapplicant's options.____________________________Wylie J