SAMSON CORPORATION LIMITED v FERNANDEZ [2015] NZHC 1235

SAMSON CORPORATION LIMITED v FERNANDEZ [2015] NZHC 1235 [4 June 2015]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2013-404-004365[2015] NZHC 1235BETWEEN SAMSON CORPORATION LIMITEDPlaintiffAND MARIANO FERNANDEZDefendantHearing: 4 June 2015Appearances: B Pamatatau for the PlaintiffNo appearance by or on behalf of the DefendantJudgment: 4 June 2015FORMAL PROOF JUDGMENT OF WOOLFORD JSolicitors: Kevin McDonald & Associates, TakapunaCounsel: Bruce Pamatatau, Auckland[1] Samson Corporation Limited owns a commercial property at 253 Karangahape Road, Auckland (the premises). On 12 September 2000, it leased the premises to Club Havana Limited (Club Havana). On 18 September 2002, the lease was assigned to Ibiza Limited (Ibiza) with the consent of all parties. On or about 30 June 2010, the lease was renewed for a period of 10 years commencing 1 August 2010.[2] In terms of the lease, Ibiza was required to pay rent, operating expenses, rates, insurance premiums as well as water, gas and electricity supplied to the premises. At the conclusion of the lease, it was also required to reinstate the premises to the same good, clean and tidy order, repair and condition as it was in at the commencement date.[3] Pursuant to a written guarantee and indemnity dated 12 September 2000, the defendant agreed, in consideration for the plaintiff entering into the lease with Club Havana, to guarantee the due and punctual payment of all monies owing by Club Havana to the plaintiff and indemnified the plaintiff against all losses, costs and other expenses it may suffer as a result of Club Havana failing to make due and punctual payment of all monies owing by it to the plaintiff. The guarantee remained in place when the lease was assigned to Ibiza and on or about 30 June 2010, when the lease was renewed, the defendant agreed to extend his guarantee on the same terms as the existing guarantee to cover the term of the renewal.[4] In early 2013, Ibiza defaulted in terms of the lease in that it failed to pay rent and operating expenses totalling $13,362.48 due at the end of January. A noticeunder ss 245 and 246 of the Property Law Act 2007 was sent to Ibiza's registeredoffice and to the defendant on 13 February 2013. The lease was terminated amicably, resulting in the plaintiff re-entering the premises in late February 2013.[5] On 1 March 2013, the plaintiff wrote to the defendant setting out a range of problems with the premises and requiring him to make good within five working days in accordance with the terms of the lease. The email from the plaintiff advised the defendant that if the work required was not completed by 8 March 2013, theplaintiff would undertake the work on behalf of Ibiza and send through an invoice for those costs.[6] After correspondence with the defendant's solicitor, the plaintiff advised thesolicitor that it would complete reinstatement of the premises due to the defendant'sfailure to do so. The plaintiff then instructed contractors to visit the premises, take photographs and set out a scope of works that was required to be completed to make good.[7] On 19 June 2013, the plaintiff wrote to the defendant's solicitor advising himthat the upstairs part of the premises had been leased, but the ground floor part of the premises was still vacant. The plaintiff further advised the solicitor that reinstatement had been completed and enclosed a copy of the invoices setting out those costs together with a spreadsheet showing the amount outstanding in terms of the lease.[8] On 10 July 2013, the plaintiff again wrote to the defendant's solicitor, thistime advising him that both the upstairs and ground floor of the premises had been leased. Once again, the plaintiff enclosed copies of the invoices and a spreadsheet showing the amount outstanding in terms of the lease.[9] On 27 September 2013, the plaintiff issued the current proceedings against the defendant as guarantor of the lease to Ibiza claiming a total of $423,608.70. Initially, the defendant denied liability. He accepted that he was a guarantor of the lease, but maintained that he had several affirmative defences based on unreasonable refusal to consent to requests to assign the lease, waiver of the right to have the premises restored as the plaintiff consented to substantial renovation work and a failure to mitigate, essentially based on the alleged unreasonable refusal to allow Ibiza to assign the lease.[10] Accordingly, at a case management conference before Associate Judge Sargisson on 20 March 2014, Her Honour recorded the following as a preliminary summary of the issues:(a) Was the lessee significantly in arrears of rental and outgoings and reinstatement costs on re-entry pursuant to the provisions of the lease?(b) Did the plaintiff consent to the lessee carrying out substantial work/improvements to the premises during the term of the lease, thereby deriving significant betterment? If so, did the plaintiff thereby waive any right to require the reinstatement of the premises to the condition of the premises prior to the consented work being carried out?(c) Did the plaintiff wrongfully withhold consent to requests made by thelessee for the assignment of the lease to purchasers of the lessee'sbusiness carried on at the premises?[11] After initially indicating that the defendant would defend the proceedings, thedefendant's solicitor advised the Court by memorandum dated 6 August 2014 that the defendant was impecunious and unable to take any further steps in the proceeding as his business had collapsed and he was unemployed and had no assets.The defendant's solicitor told the Court he had advised the defendant as to the likely consequences of not defending the proceedings, and that the defendant accepted theinevitable outcome. The defendant's solicitor sought leave to withdraw from theproceedings and noted an expectation that counsel for the plaintiff would appear on 29 August 2014 to request a formal proof hearing and that any such application would be unopposed. There is, accordingly, no appearance by or on behalf of the defendant.[12] Accordingly, on 29 August 2014, Associate Judge Sargisson made an unless order as follows:If the defendant fails to comply with the direction to file an affidavit of documents, the time for which is extended to 12 September 2014, he will be deemed barred from defending the proceeding.The Registrar is requested to allocate a hearing for the purpose of formal proof after 17 September 2014 if the defendant has failed to file his affidavit of documents on time.[13] The defendant has indeed failed to file an affidavit of documents and is, accordingly, barred from defending the proceeding. The proceeding comes before me on 4 June 2015 as a formal proof hearing. For the purposes of the formal proof hearing, the plaintiff has filed an affidavit from Daniel Peter Friedlander, a director of the plaintiff, setting out the background as well as providing full information about the need for reinstatement and the reinstatement costs. Photographs are annexed to Mr Friedlander's affidavit showing the premises as it was left by Ibiza,during demolition and repairs, and also after the work had been completed. Invoices are annexed in respect of each of the claimed items.[14] Notwithstanding that the defendant is barred from defending the proceedings, Mr Friedlander addresses the issue initially raised by the defendant relating to a possible assignment of the lease. He states that the plaintiff was willing to consent to an assignment of the lease, but was never provided with satisfactory financial information about the proposed assignee. In any event, Ibiza could have applied to Court for consent to an assignment of the lease if it thought the plaintiff was unreasonably withholding consent.[15] While the defendant initially asserted that the plaintiff had waived any right to require the reinstatement of the premises because of its consent to substantial work undertaken by Club Havana and/or Ibiza during the term of the lease, he has chosen not to file any evidence. In those circumstances, the plaintiff is not requiredto disprove the defendant's initial assertion, but is entitled to rely on the specificprovision in the lease requiring reinstatement.[16] In all the circumstances, I am satisfied on the uncontradicted evidence of the plaintiff, that it has suffered loss in the sum of $423,608.70 up to 5 August 2013, made up as follows:Details Amount TotalOutstanding operating expenses $732.18Outstanding rent at 28 February 2013 $8,016.67Outstanding rent from 1 March 2013 to 31 July2013$40,083.31Outstanding rates, insurance, water $11,358.83Make good costs $305,065.33Subtotal $365,256.32GST $54,788.44Total $420,044.76Interest on $365,256.32 to 5 August 2013 $3,563.91[17] I am also satisfied that despite demand being made on the defendant for the payment of the amount outstanding in terms of the lease, the defendant has neglected or refused to make payment of the outstanding amounts.[18] Accordingly, there will be judgment in favour of the plaintiff against the defendant in the sum of $423,608.70, together with interest on the sum of $365,256.32 at a rate of $150.11 per day from 6 August 2013 to the date of payment.[19] The plaintiff is also entitled to costs and disbursements as set out in a memorandum as to judgment filed today by counsel for the plaintiff. Orders accordingly..Woolford J