RIPOSARE LIMITED V HILTON HC WHA CIV-2011-488-360

RIPOSARE LIMITED V HILTON HC WHA CIV-2011-488-360 16 November 2011IN THE HIGH COURT OF NEW ZEALANDWHANGAREI REGISTRYCIV-2011-488-360UNDER ss 244, 245 and 246 of the Property LawAct 2007IN THE MATTER OF an Agreement to Lease dated 16 September2010BETWEEN RIPOSARE LIMITED AS TRUSTEE OFDI LUSSO FAMILY TRUSTPlaintiffAND EARL FORRESTER HILTONDefendantHearing: 10 November 2011Appearances: P Cogswell for PlaintiffDefendant in personJudgment: 16 November 2011 at 4:00 PMJUDGMENT OF PETERS JThis judgment was delivered by Justice Peterson 16 November 2011 at am/pmpursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate: ...................................Solicitors: Cogswell & Jaduram, P O Box 6343, Wellesley Street, Auckland 1141email: paul@cogswelljaduram.co.nzCopy for: E F Hilton, 888 Takahiwai Road, RuakakaIntroduction[1] The plaintiff is the registered proprietor of 6 Rathbone Street, Whangarei. Pursuant to an Agreement to Lease dated 16 September 2010 ("agreement"), theplaintiff agreed to grant and the defendant agreed to take a lease of premises("premises"), described in the first schedule of the agreement as:The first floor at 6 Rathbone Street, Whangarei together with the shared use of the covered driveway adjacent to the premises.[2] The plaintiff seeks an order for possession of the premises, together with related orders. The defendant opposes the making of the orders.[3] Although I have said that the defendant agreed to take a lease of the premises, there is an issue in the proceeding as to whether the defendant is the tenant or whether the Mangawhati Maori Committee is the tenant. I address this issue below.Statutory provisions[4] The statutory provisions which govern the plaintiff's application are ss 243 to 251 inclusive of the Property Law Act 2007 ("the Act").[5] A lessor who wishes to exercise a right to cancel a lease for breach of a covenant or condition of that lease may apply to the Court for an order for possession of the land.1 An agreement to lease is a "lease" for these purposes.2 On making an order for possession, the Court may itself cancel the lease and, if it does so, it may make particular consequential orders including an order that the tenant, or lessee, pay arrears of rent.3[6] A lessor who seeks an order for possession must first comply with s 245 or s 246 of the Act.1 Property Law Act 2007, s 244(1).2 Ibid, s 4.3 Ibid, ss 251(1) and (2).[7] Section 245 is concerned with a lessor who wishes to exercise a right to cancel because of a breach of a covenant to pay rent and s 246 with a lessor who wishes to exercise a right to cancel for breach of any other covenant or condition. In this case, the plaintiff submits that it has complied with both ss 245 and 246.Tenant[8] On its face, the agreement records that the defendant is the tenant. However, when executing the agreement, the defendant signed "E F Hilton on behalf Mangawhati Maori Committee".[9] Notwithstanding this addition, the plaintiff's case is that the defendant is the tenant. The defendant's case is that the Mangawhati Maori Committee is the tenant. The Committee is not a party to the proceedings and, as the plaintiff submitted, there is no evidence before me regarding the entity, and how and when it may have been constituted.[10] Mr Greenfield of the plaintiff company gave evidence on the issue of the identity of the tenant. Mr Greenfield states that he understood from the agents engaged on the letting, L J Hooker in Whangarei, that the defendant was to be the tenant. Mr Greenfield's evidence is that the plaintiff executed the agreement first and that the agreement was then given to the defendant. When the defendant returned the agreement, there was no alteration to the part of the form which records who is the tenant, that is, the defendant continued to be shown as the tenant. However, in the space for the tenant to sign the agreement, the defendant had signedand added the words "on behalf Mangawhati Maori Committee". Mr Greenfield'sevidence is to the effect that the plaintiff did not consider the addition of the words to which I have referred in any way affected who was the tenant for the purposes of the agreement and that the defendant took possession of the premises at the time he returned the agreement.[11] Mr K M Andrews, formerly of L J Hooker, has sworn an affidavit that he had the majority of the dealings with the defendant on behalf of L J Hooker.[12] Mr Andrews gives evidence that at no time in the negotiations did the defendant state that a committee would be the tenant, including when Mr Andrews showed the premises to the defendant and when Mr Andrews and the defendant discussed the terms of the agreement. Mr Andrews says in his affidavit that, over the years, L J Hooker has dealt with many clubs, societies and non-profit organisations and that invariably any person who represents such an organisation identifies themselves as such. In such circumstances, Mr Andrews' evidence is that the agent'spractice has always been to obtain confirmation that the person holds the necessary authority from the organisation and to take such steps as are necessary to satisfy themselves on this issue.[13] Mr Haselden, also of L J Hooker, gave evidence that he answered the first telephone enquiry from the defendant about the premises, that the defendant said that he was looking for space to conduct yoga classes and that there was no mention of his doing so on behalf of any organisation. On the contrary, Mr Haselden'srecollection is that the defendant said that he was looking for premises.[14] On the basis of the evidence before me, I am satisfied that the defendant is the tenant for the purposes of the agreement.Section 245 Property Law Act 2007[15] A lessor may proceed under s 245(1) of the Act if:(a) Rent has been in arrears for not less than 10 working days.(b) The lessor has served on the lessee a notice of intention to cancel the lease for breach of the covenant to pay rent. The notice must meet the requirements of s 245(3) of the Act. One requirement is that the notice must inform the lessee of the period within which the breach must be remedied, which period must not be less than 10 working days after service of the notice.(c) The breach has not been remedied at the expiry of the period specified in the notice.[16] On 21 April 2011, the plaintiff served a notice under each of ss 245 and 246 of the Act.[17] I have reservations as to the validity of the notice served under s 245 for two reasons.[18] The first reason is that the notice is not confined to arrears of rent but includes other sums. Some of those other sums appear to fall within the list of outgoings that the defendant agreed to pay, but others, although they might be recoverable under different contractual provisions, do not. "Legal fees relating tolease in the sum of $449.76" may fall into that latter category.[19] A lessor may only proceed under s 245 for a breach of a covenant to pay rent. As I read s 245, the agreement and the lease document proffered to the defendant (to which I refer below), rent means the rent due under the lease and not other sums the tenant may be liable to pay. That said, a notice might not be invalidated simply because it refers to sums due for rent and otherwise.[20] The second reservation I have regarding the notice is that it purports to require the breach to be remedied "within" 10 working days, whereas s 245(3) provides that the period allowed to remedy the breach must be not less than 10 working days. "Within" 10 working days is a period less than 10 working days, and for this reason I consider the plaintiff has not or may not have complied with s 245.[21] I add that I did not hear submissions on these points and my comments are subject to that qualification. I would have sought submissions if I had thought thesepoints might be fatal to the plaintiff's case, but I take the view that they are not.Section 246 Property Law Act 2007[22] As I have said, on 21 April 2011 the plaintiff also served a notice under s 246(1) of the Act.[23] A lessor may proceed under s 246(1) if they have served on the lessee a notice of intention to cancel the lease for breach of a covenant or condition, not being a covenant to pay rent, and the breach has not been remedied at the expiry of a period that is "reasonable in the circumstances". Amongst other things, s 246(2) requires the lessor to specify in the notice the period in which the lessee is to remedy the breach.[24] The plaintiff complained of two breaches in the notice given under s 246. These were:(a) the defendant's failure to enter into a deed of lease; and(b) the defendant's operation of commercial stalls in an access way to the rear of the building at 6 Rathbone Street ("access way"), and the obstruction thereby caused to others, including dominant tenements in the exercise of rights of way over the access way.[25] The notice required the defendant to remedy these breaches within 10 working days of the date of service of the notice. No point has been taken that this period was not "reasonable in the circumstances".[26] For the following reasons, I am satisfied that the defendant was in breach of relevant covenants or conditions at the time the notice was served, and that those breaches had not been remedied at the expiry of the period referred to in the notice. Indeed, I am satisfied that they have not been remedied to date.[27] First, it was a term of the agreement that the lessee would "enter into a formal lease with the [plaintiff] using the then current edition of the Auckland District Law Society Deed of Lease form, amended in accordance with the provisions of [the] agreement". The agreement also provides that the parties are bound by the terms of that form of lease, even though it has not been executed.44 Agreement to Lease dated 16 September 2010, cl 4.1 and cl 4.3[28] The effect of Mr Greenfield's evidence is that the defendant had been in receipt of a draft deed of lease in the required form since January 2011, and that the defendant refused to execute the document but would not say why. Mr Greenfield confirmed that remained the position in an affidavit sworn on 3 November 2011.[29] In a notice of opposition filed on 12 October 2011, the defendant said that thetenant was "willing to sign substantial lease, but lease offered significantly different". In an affidavit sworn on the same date, the defendant deposed that thetenant was "willing to sign a long term lease, but when it was presented with the landlord's option of a lease it desired to negotiate a more favourable alternative".[30] The obligation under clause 4.1 of the agreement is clear. The defendant was in breach of that obligation at the time the notice was served, and the defendant had not remedied the breach within the period specified in the notice.[31] The plaintiff's case on the second matter complained of in the notice is as follows. Shortly after taking possession of the premises, the defendant commenced operating stalls in the access way, from which he was selling items such as sunglasses, DVDs and the like. Despite written requests that he stop doing so, the defendant continued, and continues, to operate his stalls.[32] The defendant does not dispute this but takes the position that he is entitled to do so. That is because the access way is the driveway referred to in the clause of the agreement which defines the premises and the defendant has the "shared use" of that area. The defendant states in his affidavit that he discussed with L J Hooker his intention to use the access way for the purposes of a commercial operation and that this was seen "in a positive light".[33] The plaintiff dismisses that suggestion. The access way is subject to three rights of way, pedestrians and vehicles use the area to go to and fro surroundingbusinesses, some of which are retail, and the defendant's stalls impede them. In addition, the access way is a designated fire egress which the Whangarei Fire Department insists be kept clear.[34] I am satisfied that the defendant's operation of the stalls constitutes a breach of the agreement and of the lease, and that the breach was occurring at the time the notice was served under s 246 and had not been remedied on expiry of the notice.[35] First, the agreement provides that the tenant shall have the "shared use" of the covered driveway. The use is "shared", and the area is described as a"driveway".[36] Secondly, it is a special condition of the agreement that, in consultation with"owners of the dominant tenement", the defendant is responsible for a gate across the access way, which is expressed to lead to parking at the rear of the premises, and that the access way is to be open between 8:30 am and 5:30 pm, Monday to Friday. I consider that provision underlines that the area is for access.[37] Thirdly, the terms of the lease entitle the defendant to use the premises for hospitality only and retail falls outside that permitted use.Grounds of opposition[38] The defendant filed a notice of opposition to the application and also swore an affidavit. In addition, there is an affidavit for the defendant from Leata Mani, to which is annexed documents as to various treaty claims before the Treaty of Waitangi. I accept the plaintiff's submission that these documents are not relevant to the matters in issue between the parties.[39] I have addressed several of the grounds of opposition but the other grounds are as follows.[40] The first ground concerns a dispute resolution provision in the agreement. There is such a provision and it is common ground that the plaintiff has not complied with its requirements. Mr Greenfield's evidence is that it would be pointless to do so, because the defendant simply refuses to discuss any matter which Mr Greenfield raises with him. Whatever the relevance of the defendant's conduct, the defendant has not himself referred the matter to dispute resolution nor applied for a stay of theplaintiff's application whilst the dispute resolution process is undertaken. Accordingly, I do not consider the fact of the dispute resolution clause in the agreement precludes the plaintiff's application.[41] The second ground is based on s 41 of the Maori Community Development Act 1962. This provision could be relevant to the matters in issue only if I first took the view that the Mangawhati Maori Committee was the tenant under the agreement. I am satisfied that the defendant is the tenant and, accordingly, it is not necessary for me to consider this point further.[42] The third ground of opposition states that the rent is up to date. Whether ornot that was correct as at the date of the notice of opposition, a lessor's acceptance ofrent after service of a notice does not affect their right to seek an order for possession.5 I note also Mr Greenfield's evidence that, as at 2 November 2011, the arrears of rent under the lease were $3,971.85.Result[43] I make an order for possession of the premises described in the agreement to lease between the parties dated 16 September 2010.[44] I cancel the agreement to lease between the plaintiff and the defendant dated 16 September 2010, with immediate effect.[45] In submission, the plaintiff sought an order that the defendant pay the rent up to the date of cancellation. There is no application for such an order in the originating application.[46] As for costs, in submission, counsel for the plaintiff sought an order for costs in accordance with the contractual arrangements between the parties. However, the originating application did not put the defendant on notice that costs would be sought on that basis. Given that, it would seem to me that an order for costs on a 2B basis would be appropriate.5 Property Law Act 2007, s 250.[47] I am willing to receive submissions on both the matter of arrears of rent and costs. Any submissions on behalf of the plaintiff should be filed and served by 4 pm on Friday, 25 November 2011 and any response from the defendant by 4 pm on Friday, 9 December 2011...................................................................PETERS J