SIBRAD COMPANY LTD V KANTERS & ORS HC HAM CIV 2008-419-440

SIBRAD COMPANY LTD V KANTERS & ORS HC HAM CIV 2008-419-440 28 May 2008IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY CIV 2008-419-440BETWEEN SIBRAD COMPANY LIMITED Applicant AND STEVEN JAMES KANTERS, ELIZABETH ANNE KANTERS AND HENRY ELISARA EDWARDS Respondents Hearing: 12 May 2008 Appearances: M Talbot and M Duggal for Applicant C Light for Respondents Judgment: 28 May 2008 at 4:30 pmJUDGMENT OF ASHER JThis judgment was delivered by me on 28 May 2008 at 4:30 pm pursuant to Rule 540(4) of the High Court Rules .. Registrar/Deputy Registrar .. DateSolicitors: McCaw Lewis Chapman, PO Box 9348, Hamilton Stace Hammond, PO Box 19-101, HamiltonTable of ContentsParagraph NumberIntroduction [1]Background [2]The approach to this application [10]Using land for non-permitted use and misrepresentation as to intended use[23]Failure to obtain soil fertility tests at the commencement of the lease[38]Use of the land in excess of that leased to Sibrad [42]Nuisance, disturbance or damage [53]Conclusion as to breaches of the lease [58]Prejudice to the parties [66]General conclusion [72]Result [73]Introduction[1] Sibrad Company Limited ("Sibrad") leases 45 acres of rural land from Steven and Elizabeth Kanters ("the Kanters") of Cambridge. The lease was for the term of one year, with two further rights of renewal. This proceeding arises from the fact that Sibrad inadvertently neglected to give notice of renewal not less than six months prior to the expiration date of the first year. Notice was given late. The Kanters are now refusing to renew. Sibrad seeks a Court order that the Kanters renew the lease under the relief against forfeiture jurisdiction of ss 261-264 of the Property Law Act 2007. The Kanters oppose that application and say that Sibrad has breached the lease and has not been a good tenant, and that they will be prejudiced if the relief is granted.Background[2] The Kanters, and Henry Elisara Edwards as trustees of the Danbey Family Trust ("the Danbey Trustees"), own a farm at 573 Tirau Road, RD4, Cambridge ("the Tirau Road farm"). The farm is in two titles, being lots 1 and 2 of deposited plan 379796. Lot 2 is a small homestead block of 0.8690 hectares and lot 2 constitutes the balance of the farm, being 21.8350 hectares. [3] On 9 June 2007 the Kanters entered into a deed of lease of rural land with Sibrad, the guarantor being Dominic Adrian Russo. The third trustee, Mr Edwards, was not a signatory, but both parties accept the lease as binding. [4] Gabrielle Anne Barnett is the sole shareholder and director of Sibrad. Mr Russo is the farm manager for Sibrad. He and Ms Barnett are in a long-term relationship and are described as partners. Ms Barnett is the owner of a nearby farm on Cox Road, Rotoorangi ("the Rotoorangi farm"). Mr Russo's legal interest in that farm is unclear, but he describes it in affidavits as "our farm". [5] There were discussions between Mr Russo and the Kanters leading up to the signing of the lease. Neither Mr Edwards, the other Danbey Trustee, or Ms Barnettwere involved. Those discussions are referred to in more detail later in the judgment. The deed of lease was drawn up without legal advice. The document is in a standard form of contract with various written insertions. Various handwritten insertions were made into the schedules attached to the lease and some clauses were deleted or added to. It is common ground that the Kanters did the drafting. The date for giving notice of renewal under clause 5.2 of the lease was six months prior to the expiration date. This was 31 November 2007, as the lease expires on 31 May 2008. Sibrad did not give notice of renewal by 31 November 2007. [6] During the term of the lease a dispute developed between the Danbey Trustees and Mr Russo. It first manifested itself in a letter sent by the Danbey Trustees to Sibrad on 24 December 2007. A number of allegations were made by the Danbey Trustees, some of which have not been pursued, in particular an allegation that Mr Russo executed the lease without authority to do so. A response was sent on 11 January 2008 by Sibrad, signed by Ms Barnett, denying the various allegations. At about this time Sibrad realised it had failed to give notice of renewal and forwarded the notice of renewal by an undated letter left in the Kanters' letterbox which the Danbey Trustees say was received on or about 19 January 2008, almost two months late. [7] On 4 February 2008 the Danbey Trustees sent two letters to Sibrad. The first letter declined to renew the lease. The second letter set out a detailed answer to the points made by Sibrad in its letter of 11 January 2008. Sibrad then instructed lawyers and McCaw Lewis Chapman wrote to the Danbey Trustees on their behalf on 4 March 2008. The Danbey Trustees instructed lawyers to respond and these exchanges in due course led to this proceeding being filed on 14 April 2008. [8] The matters at issue between the parties are not particularly easy to define, as the allegations made by the Danbey Trustees against Sibrad have been numerous, and not all have been the subject of submissions in this hearing. [9] The four essential breaches of lease and acts of wrongdoing alleged by the Danbey Trustees are:(i) breach of the permitted use clause by farming bulls and not dairy stock; (ii) breach of a specific clause requiring fertiliser tests; (iii) use of areas of the Danbey Trust land that are not leased to Sibrad; and (iv) nuisance, disturbance or damage to landlord and neighbours, and using land in a noxious or offensive manner.The approach to this application[10] Section 261(1) provides that if a lessee fails to give notice within a specified time or in a specified manner to renew a lease (s 261(1)) the lessee (s 261)(2)) may make an application under s 262 of the Act within three months (s 262(b)) of being informed that the lessor refuses to renew the lease (s 263(a) and (b)). Section 264(1) states that the Court may grant relief against the refusal to renew the lease, and may order the lessor to renew the lease (s 264(2)(a)(i)) and may grant relief on any conditions as to expenses, damages, compensation, or any other relevant matters that the Court thinks fit (s 264(2)(b)). If the lessor has made a disposition to a person other than the lessee, mortgagor or receiver, and that person could be prejudicially affected by the grant of relief, the Court still may grant relief. In such a situation the Court may cancel or postpone the estate or lease, assess damages or compensation to be paid to the person prejudicially affected by the cancellation or postponement, or order damages or compensation to be paid by the lessor or by the lessee (s 264(3)). [11] These sections replace s 120 of the Property Law Act 1952. The Court has the same broad unfettered discretion to grant relief that existed previously. [12] Neither counsel sought to argue that it made any difference in this case whether relief was sought under the 1952 Act or the new Act. It would appear that the effect of s 367(3) and (4) of the Property Law Act 2007 is that the Property LawAct 1952 continues to have effect in respect of this proceeding. Section 367(3) provides:367 Existing matters, proceedings, and instruments (3) No alteration in the law made by this Act affects— (a) a right, interest, title, immunity, or duty, or a status or capacity, existing under the law so altered and immediately before 1 January 2008; or (b) the validity, invalidity, effect, or consequences of— (i) an instrument of the kind to which this Act applies and that came into operation before 1 January 2008; or (ii) anything done or suffered before that date.[13] The right to seek relief in terms of s 261 requires not only the expiry of the time within which the notice of renewal should have been given, but also under s 261(d) a refusal by the lessor to renew the lease. This did not occur until after 1 January 2008, so it could be arguable that the right to seek relief is not a right or capacity existing on 1 January 2008 in terms of s 367(3). [14] However, there undoubtedly was an issue as to the consequences of a lease that come into operation before 1 January 2008, and something done or suffered before 1 January 2008, namely the failure to renew the lease, even if Sibrad was not aware of it. It seems therefore that s 120 of the 1952 Act may still apply. However, s 367 provides that "no alteration in the law" made by the Act affects the earlier rights. Sections 261-264 do not in substance alter the law in relation to relief against forfeiture for non-renewal. The correct position is therefore that it is ss 261-264 of the 2007 Act rather than s 120 of the 1952 Act, which should be applied. However, nothing turns on the point. The Danbey Trustees did not argue that there was any error in the proceeding being filed under the new Act. [15] The Court's discretion to grant relief against forfeiture arising from a failure to renew is different from the Court's inherent jurisdiction to grant relief where there has been a failure to pay rent. If, after a failure to pay rent, rent and costs are paidup, the Court will generally disregard any other causes of complaint that the landlord may have against the tenants: Gill v Lewis [1956] 2 QB1. [16] A distinction must also be drawn between restrictions on relief against forfeiture for breach of a term of the lease, and relief sought for a failure to renew. Different sections under the Property Law Act 1952 (s 118) and under the 2007 Act (s 253) apply when relief is sought against forfeiture for breach. In a s 118 or s 253 application for relief, the nature of the breach is directly relevant, as it is that which has given rise to the right to forfeit: Studio X v Mobil Oil NZ Limited [1996] 3 NZLR 697. However, when the relief sought is from a failure to renew, issues of breach do not give rise to the right to forfeit and so are not directly in issue. [17] Nevertheless, the discretion under s 120 is broad, as it is equally under s 264 of the 2007 Act. It was described by Turner P in Vince Bevan Limited v Findgard Nominees Limited [1973] 2 NZLR 290 at 297-298, quoted in Weatherall Jewellers Limited v J Hendry & Son Limited CA135/83 11 September 1984 (CA):This section enacted as a remedial measure, should be construed as conferring upon the court a very wide jurisdiction to do equity in relieving against refusals by lessors to renew leases. In my opinion it would stultify the intention of the Legislature to construe this section so strictly. All its provisions seem to me to indicate that Parliament intended that it should be applied largely.[18] In Weatherall Jewellers Limited Richardson J described the discretion as follows at p8:Clearly the court has to do justice as between lessor and lessee having regard to all the circumstances of the case and so having regard to the relative prejudice occasioned to the lessor or lessee by the grant or refusal of relief and by any terms imposed under subs (5).[19] In Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd HC AK CIV- 2005-404-3631 5 December 2005, I endeavoured to summarise some of the relevant factors to be taken into account by a Court in exercising this discretion, with reference to relevant authorities, as follows:(a) Reasons for the failure to give notice, e.g: Whether the failure to renew was inadvertent.(b) Whether the cause of the default was due to any action of the landlord. (c) The lessee's conduct, in particular whether it has complied with all conditions and covenants and has been a good tenant. (d) The prejudice to the lessee if the relief is not granted. (e) The prejudice to the lessor if the relief is granted. (f) The lessor's motivation for the refusal to renew and understanding of the lessee's intentions. (g) The interests of third parties and how they may be affected by any order.[20] Thus it has been held that the lessee's conduct, in particular whether it is compliant with covenants and conditions and has been a good tenant, can be relevant: Woottons Auto Accessories Ltd v Epsom Dry Cleaners Ltd (1982) 1 NZCPR 504, 507. Breaches of lease by the lessee, and prejudice to the lessor if the relief is granted are clearly relevant matters. It is not sufficient for an applicant to simply explain the failure to renew as innocent and inadvertent, and then to expect relief. If that were the position, the Act would say so. Rather there is a broad discretion, and where there are breaches of lease by the lessee, the extent to which they affect the lessor can be considered. So can bad behaviour by a lessee and consequent bad feeling between landlord and tenant, as these can give rise to real prejudice to a lessor if a renewal is forced. [21] In Besseling & Bracegirdle v Bali Restaurant Limited (1981) 1 NZCPR 294 at 299 the extent of the breaches by a lessee were considered in assessing a claim for relief for failure to renew, as they were in RD 1 Limited v Mabel Bush Holdings Limited HC INV CIV-2004-425-309 9 September 2004 John Hansen J at [28]-[35] and Hawkes Bay Commercials Limited v Mayfair Equities Limited CP34/01 HC NP 18 December 2001 Master Thomson at [6]. I refer to these authorities because in them breaches by the lessee were considered as relevant to the exercise of the s 120 discretion. However, in no case that has been put to me has relief against a failure to renew actually been declined because of breaches of lease or bad behaviour by a tenant. Nevertheless I am satisfied that the Court may decline relief for this reason.[22] It is the essential submission of Mr Light for the respondent that Sibrad should not get relief because it has not been a good tenant and has breached the lease in a number of different ways. He submits that the burden is on Sibrad, which it cannot discharge because of its serious and continuing breaches of the lease agreement, and that it is a factor that the Danbey Trustees live on the property and Sibrad's behaviour directly affects their use and enjoyment of it. It is necessary therefore to consider the allegations of misconduct and breaches of the lease.Using land for non-permitted use and misrepresentation as to intended use[23] The permitted use of the land stated at clause 1.12 of the reference schedule in the lease, is "Dairy plus beef grazing and growing of maize and other approved crops." Clause 10.1 of the lease provides that the tenant should only use the land, for the "purposes stated". [24] Ms Duggal for Sibrad argued that, given that the permitted use includes different types of farming use, being dairy, beef grazing and the growing of certain crops, there is no breach of the lease, so long as one of the three types of use is taking place. She submitted that the various stated uses were alternatives. [25] Mr Light for the Danbey Trustees on the other hand argued that the use of the land had to be primarily for dairy stock. The use of the land predominantly for beef grazing with the use of the land for dairy purposes being at best very limited, was a breach of the lease. He also argued that Mr Russo had misrepresented his intentions to the Kanters when he said that he had a dairy farm, and gave the misleading impression that he intended to use the land primarily for dairy cattle. [26] The starting point to interpretation is the natural and ordinary meaning of the words used. Here the word "plus" after the word "dairy" may mean that dairy is the predominant use, with other uses being ancillary, or it may mean "and," with all uses being equal, or "or" with them being alternative. In the New Zealand Oxford Dictionary the word "plus" is stated to mean "with the addition of". Consistent with this, the natural meaning on the plain words, is that the use of the word "plus" makes dairy use the predominant use, with the others stated being extras, ancillary to thatprimary use. However, given some lack of clarity, I will consider the clauses against the factual background to the contract. [27] There is no need to set out the well known formulation of Lord Hoffman inInvestors Compensation Scheme Limited v West Bromwich Building Society Limited[1998] 1 WLR 896 at 912-913, adopted by the New Zealand Court of Appeal in Boat Park Limited v Hutchinson [1999] 2 NZLR 74 at 81-82. A commonsense purposive approach must be adopted. It is relevant to consider the commercial purpose of the contract. There is a conflict in the evidence of Mr Kanters and Mr Russo as to the nature of that purpose. [28] Mr Kanters' personal understanding, and details of negotiations and earlier drafts are irrelevant to the interpretation issue: Investors Compensation at 912. However the details of the negotiations are relevant to the misrepresentation claim, and I consider them on that basis. [29] Mr Kanters gave evidence that he had been told by Mr Russo in the negotiations that led up to the lease that the Rotoorangi farm was a dairy farm, that his daughter ran a dairy farm, and that Mr Russo required the leased land to raise dairy heifers for the home farm. The permitted use in the lease had originally referred to just "dairy heifer grazing" but at Mr Russo's request it was extended to include the reference to beef grazing and the growing of crops. Mr Kanters asserted that Mr Russo had said that he wanted the change in order to bring a few bulls on to the property. Mr Kanters said that when he asked if this was to service dairy heifers, the response from Mr Russo was "Yeah, yeah, yeah." [30] The Kanters have since learnt that the Rotoorangi farm was not and is not a dairy farm. Mr Kanters claims that no dairy heifers have been introduced to the property, only bull steers and beef heifers, the majority being bulls. Mr Kanters claims that he was misled by Mr Russo as to his true intentions. They would not have entered into the lease with a bull/beef farmer rather than a dairy farmer, because bulls are much harder than dairy heifers on pasture, fences, tanks and other farm chattels. A neighbour, Mr Dennis Tribe, has supported the Kanters by deposing in an affidavit that Mr Russo also approached him about leasing land. Hesays that Mr Russo told him that his daughter was a dairy farmer, and that he would be grazing her dairy heifers on the property. [31] Mr Russo denied any misrepresentation and gave a different account of the discussion with the Kanters. He asserts that he sought the change in the wording of the permitted use specifically to allow Sibrad to graze bulls, and that he told the Kanters that Sibrad intended to bring red Hereford bulls onto the land. He accepted that the Rotoorangi farm is presently a drystock farm. He stated that he never told the Kanters that it was a dairy farm. He deposes that he did tell them that it was the intention to convert the Rotoorangi farm into a dairy farm and that if that were done the leased land would have been used as an adjunct to a dairy farm. He said that the intention is still to convert the Rotoorangi farm into a dairy unit, but it is dependent on purchasing an adjoining block of land, and to date efforts to purchase this land have been unsuccessful. He states that his daughter and her partner are farm managers of a different dairy farm, and that is what he referred to when he mentioned his daughter. [32] I heard Mr Russo's evidence, and do not think that he positively stated to Mr Kanters that he was running a dairy farm at Rotoorangi. Such a lie would have been easily found out, and indeed would have been inconsistent with his wish to amend the permitted use to include beef stock. I am also not satisfied that he deliberately lied about his intention to stock the farm with dairy heifers. Indeed his version of what he said is in part supported by Mr Tribe. Mr Tribe does not say that he was told by Mr Russo that he had a dairy farm, but rather that his daughter ran a dairy farm, which indeed was true. However, Mr Tribe does say that he thought Mr Russo wanted to graze dairy heifers, and I am satisfied that the Kanters also gained this general impression from what Mr Russo said. Having heard Mr Kanters give evidence, while his exact recollection of what was said may be imprecise, I have no doubt that the discussion with Mr Russo resulted in an understanding that the grazing of dairy heifers would be the predominant use. [33] It is, of course, acceptable to take into account post-contract conduct in certain circumstances, and Ms Duggal has made the point that the Kanters did not make any formal objection for approximately six months to the fact that thepredominant livestock being grazed were red Hereford bulls. However the delay in complaining can be seen in the context that it would have taken some time for the Kanters to realise that the Rotoorangi farm was being used exclusively for bull farming, and that the leased land was essentially an adjunct to that farm. The fact that bulls were the predominant use initially would not have been seen as showing that long term, the grazing would be primarily of bulls. By the end of the year when the position was clear, a complaint was made. [34] The misrepresentation allegation requires the Danbey Trust to prove that Mr Russo deliberately misled the Kanters as to his intention. I do not find that allegation established on the balance of probabilities. [35] However, I do find it established that the commercial purpose of the contract in terms of what the land was to be used for, was that it would be used predominantly for grazing dairy cattle. This was the background to the re-drafted clause. There was provision for specified alternative uses, but the grazing of dairy cattle was to be the predominant use. In the phrase "dairy plus beef grazing and growing of maize and other approved crops", the word "plus" means "with the addition of" rather than "and" or "or". [36] I have heard evidence from both Mr Russo and Mr Kanters on the topic of whether the grazing of dairy cattle has in fact been the predominant use with other uses being additional. I am satisfied, having heard that evidence, that although some limited grazing of dairy heifers has taken place, by far the major use of the land for almost a year-and-a-half now, has been the grazing of beef stock. That is a breach of the permitted use clause. [37] The breach of use was a serious breach. I accept Mr Kanters' evidence that he would never have considered leasing the property to Mr Russo if he had realised that the grazing would not be primarily of dairy stock. There was considerable evidence adduced as to the difference between the grazing of beef stock and dairy stock. I am satisfied that bulls are much harder on pasture and the related fences, races, gates and troughs. This use gave rise to other specific breaches of the lease to which I willrefer. It made the prospect of Sibrad as a tenant far less attractive. I conclude that there was a breach of the permitted use clause, and that this was a serious breach.Failure to obtain soil fertility tests at the commencement of the lease[38] Clause 8.4 of the lease provides for the application of fertiliser. It is to be read with clause 1.8 of the reference schedule, which makes it a term of the lease that Sibrad would obtain soil tests to establish fertility levels at the commencement of the lease. The handwritten part of clause 1.8 reads "soil tests to be done and leased land to be kept at that level or better." It is implicit that the tests would be done at the outset. No soil tests were done at the outset. [39] This was undoubtedly a breach of lease and accepted to be so by Mr Russo. He and Ms Barnett say that it was a matter that was overlooked. Mr Russo claimed that soil tests were arranged in February 2008 which Mr Russo asserts show that there has been adequate application of fertiliser, and that the levels are comparable to a dairy farm unit. [40] Mr Kanters in his affidavit denied that the soil tests that Mr Russo allegedly carried out in fact relate to the leased land. Mr Russo has not answered this assertion. I consider Mr Kanters to be correct, as the analysis Mr Russo produced appears to be of a block described as the "Karapiro Block 2 Maize". Sibrad's failure to remedy the breach which could easily be remedied, indicates a distinctly casual attitude to its contractual obligations. [41] Thus there is an ongoing breach of this clause. The obligation to obtain the soil tests was important. It provided a measure against which later fertiliser levels could be gauged. The opportunity to have such a measure is now lost. The Kanters perceive that their pasture has been allowed to deteriorate during the Sibrad lease, but have nothing to measure their perception against. The expert retained by Sibrad, Mr John Sweeney, did not do fertiliser tests, and just recorded what he was told by Sibrad, in his report. Clause 11.6 of the lease describes clause 8.4 as an essential term. I conclude that this has been a serious breach of lease.Use of the land in excess of that leased to Sibrad[42] The reference schedule defines the land that is leased. It reads, showing the handwritten insertions in italics, as follows:1.1 The Land (Clause 2.1)45 acres of the land situated at 573 Tirau Road, RD4, Cambridgeand legally described as 21.0385 hectares more or less being Lot 2 on DP 379796.[43] It is clear that Sibrad is in fact using approximately 49 acres of land rather than the leased 45 acres. Sibrad has offered to pay for the extra land being used, or to arbitrate the issue of what 4 acres should be excluded and not used. The Danbey Trustees say that they have designated the 4 acres to be excluded, and that this is being ignored by Sibrad. [44] The background to this aspect of the dispute is not straightforward. Mr Russo in his affidavit said that he understood clause 1.1 of the Reference Schedule to allow all the land owned by the Kanters to be used by Sibrad, save for the Kanters' house located on Lot 1, the cottage and the surrounding area, and an area in the gully planted in pines. His subjective understanding is irrelevant, but he says that it was also agreed that Sibrad was to graze six animals for the Kanters on the land. The Kanters agree on the last point. The Kanters say that the correct area of the land in Lot 2 is 21.8350 hectares, (which is undoubtedly correct), and that Mrs Kanters inadvertently wrote 21.0385 hectares into the lease agreement. The Kanters say that there are approximately 54 acres in the farm block, being 21.8350 hectares and that the area specifically cannot include Lot 1, which is their house block. They said that they estimated that there was an area planted in pines of five acres. This meant that there was four acres not covered by the lease of Lot 2. They say that this is why there is a specific reference to "45 acres" of the land. However, they said that they advised Mr Russo that if he stocked six stock units for them that he could use all the land. They say that this was agreed between them and Mr Russo.[45] Mr Russo in his affidavit in reply said that Sibrad took "no notice" of the area of land in the certificate of title, and that he thought the area of land was correctly described in the lease. [46] The actual intentions of the parties as to what the lease meant are not relevant. The factual background and context is relevant, including the ancillary agreement as to the grazing of six of the Kanters' stock. Mr Russo and the Kanters agreed that six of the Kanters' animals would be grazed by Sibrad in exchange for all the land being used. The parties did not cross-examine the various witnesses on this issue. It is necessary to construe the provisions of the lease objectively against that factual background and in that context, putting to one side subjective statements as to their understanding. [47] I cannot reconcile Mr Russo's acknowledgment in his first affidavit that the condition on which Sibrad could use all the trust land was that they graze six animals for the Kanters, with his claim that he could use all of Lot 2 except the area in pines. It is also inconsistent with the unambiguous phraseology of the term relating to the area of land, and the statement that it is only "45 acres" of the described land. Sibrad's counsel Ms Duggal accepted that the land that could be used was 45 acres. There was no pleading of rectification or mistake. I also gained the impression from Mr Russo in the witness box that he was not the sort of farm manager who would be unlikely not to know and understand the relationship between acres and hectares. [48] I am satisfied that the lease was not intended to include all the land save for the area in pines and Lot 1. That is signified very clearly by the fact that it is only "45 acres of" Lot 2, which is stated to be leased, whereas the entire area is slightly over 54 acres. The area in pines is considerably less than the nine acres of Lot 2 that are not included, and therefore it must follow that an undefined four acres of the land was not included in the lease. This unsatisfactory situation was resolved at the time to the satisfaction of Mr Russo and the Kanters by the agreement that the six stock units would be grazed. [49] In the letter of 24 December 2007 the Kanters terminated the stock grazing arrangement and asked for their stock to be returned. Given the breakdown of trustbetween the parties this was unsurprising. The informal licence to Sibrad to use the extra four acres at that point ended, and Sibrad could only use the leased 45 acres. The Kanters then unilaterally specified an area which would constitute the four acres not included in the lease, which was an area of land in two paddocks close to the homestead. They have told Sibrad not to use that land. However, Sibrad has continued to use that land, and indeed continue to use all the land at the present time. [50] It is difficult to blame one party more than the other for this uncertain situation, which has arisen because of the breakdown of the relationship between the parties. I am not attracted to a suggestion that the contra proferentum rule of interpretation should apply against the Danbey Trust. Both sides were involved directly in the drafting of the lease. The fact is that the parties both left an undefined part of the land unleased, on the basis of an oral arrangement as to the grazing of the six stock units. Now that that arrangement has come to an end there is no specific mechanism in the lease to resolve the issue and define what land Sibrad can use. There are, however, general dispute resolution provisions in the lease. The Kanters have unilaterally designated the four acres which are excluded, which is not in itself determinative. In the meantime Sibrad is continuing to use all the land in Lot 2. [51] The farming of all the land by Sibrad without an attempt to exclude any is a breach of the lease. It seems from Mr Russo's affidavit that Sibrad intends to continue to use all the land should the Court order a renewal of lease, although he does indicate a willingness to take the matter of the area leased to mediation and arbitration. Sibrad has made no effort to voluntarily exclude an area of four acres from the land it uses. [52] This position demonstrates an intractable attitude on the part of Sibrad to a problem that requires give and take. I do not think that the offer to go to arbitration in itself, without any steps in the meantime to exclude some of the land from what was being grazed to limit it to 45 acres can be viewed as an excuse for Sibrad's position. The grazing of all the land without excluding the four acres is a serious breach of the lease. Nevertheless I acknowledge that the underlying problem of the lack of definition of the four acres not to be used is the responsibility of both parties,and that if this was the only matter at issue between the parties I would have had some sympathy for the position of Sibrad.Nuisance, disturbance or damage[53] Clause 10.4 (c) reads that the tenant shall not:"Do or permit to be done on the land anything which in the opinion of the landlord may become a nuisance, disturbance or obstruction or cause damage whether to the landlord or to neighbouring owners or occupants nor use the land in any noisy, noxious or offensive manner."[54] The Kanters gave evidence as to how destructive the bulls have been. They have given evidence of damage to pastures, fences and gates, and large holes dug in the paddocks known as 'bull holes'. There was also evidence that Sibrad's bulls have broken out of the property and gone on to neighbouring properties where they have grazed and caused damage. Sibrad has left the plastic wrap for silage on the paddocks after the silage has been removed. Photographs were produced showing this. The wraps are plastic and can be dangerous to livestock. [55] These allegations were denied or minimised by Mr Russo in his affidavit, and there was no cross-examination on the specific points. The allegations were supported to an extent by a neighbour, Mr Tribe. Other neighbours, including Mr Vernon Kruger who owns another nearby property that is also leased by Sibrad, filed affidavits stating that they were happy with their leasing experience with Sibrad. A registered agricultural consultant, Mr John Sweeney, has filed an affidavit to which he attached a report. The report was prepared in April 2008 and deals mainly with issues relating to the health of stock. It did not deal with most of the Kanters' detailed allegations, and suffers from being prepared only recently after the dispute had arisen, and when litigation was in contemplation. Farm management practices may well have been improved shortly before he did his report. [56] I am of the view that there were consistent minor breaches by Sibrad of clause 10.4(c). There have also been other minor breaches of clause 8.1 and 8.2(a) of the lease which required the tenant to keep the land in good repair and keep all races, crossings and culverts, gateways and trough surrounds in good maintenanceand order (clause 8.2(a)). I am satisfied that a culvert was damaged, a loading race was damaged and not repaired and that there has been damage to fences and gates. This arises at least in part from the fact that bulls have been the predominant livestock on the land. These individual breaches in themselves are not serious, but taken as a whole they are symptoms of the serious breach as to use. [57] There is also an allegation of over-stocking. However, Mr Sweeney's report in April states that there appears to have been no over-stocking. I am not satisfied that the problems to the pasture and with the stock that the Kanters have referred to were not just the result of the drought that has afflicted the Waikato. I conclude that there has not been over-stocking on the land by Sibrad in breach of clause 8.5, or indeed a failure to maintain hedges or maintain water reticulation as has been alleged.Conclusion as to breaches of the lease[58] I conclude that there have been four significant breaches of the lease. [59] First, there has been a failure to graze predominantly dairy cattle. [60] Secondly, there has been a failure to have fertiliser levels checked at the outset, which has meant that there is no measure against which present fertiliser levels can be gauged. Further, that breach has not been remedied despite the fact that it was brought to Sibrad's attention in December 2007. Fertiliser levels are still unknown. [61] Thirdly, there has been a breach of the lease in that Sibrad has grazed more than the 45 acres of land leased. In fact it has been grazing approximately 49 acres of the land since the arrangement to graze the Danbey Trust's six beasts came to an end. [62] Fourthly, Sibrad has breached conditions of the lease requiring the pasture, the farm and the fences and culverts to be properly maintained.[63] Sibrad was given notice of the breaches in the Kanters' letters of 24 December 2007 and 4 February 2008. It is relevant that under the lease, if the landlord gives notice of a breach, and it is unremedied for seven days, the landlord may re-enter and determine the lease, (clause 11.4(b), (h) and (i)). The Danbey Trustees have not done this, but the right to determine the lease exists, further indicating the seriousness of the breaches. [64] Sibrad has breached the lease in four respects, all of them significant, although the difficulty as to the area leased arises from the breakdown of the arrangement to graze the Kanters' cattle. However, in defiance of the term as to area, Sibrad is using the whole area, which is more than the leased area of 45 acres. [65] There has been a complete breakdown in communication between the Kanters and Mr Russo. I accept the Kanters' evidence that Mr Russo has become hostile and abusive. I have no doubt that the Kanters also have become abrupt and unfriendly. However, Mr Russo does not deny abusing Mr Kanters in a situation where his children were possibly within hearing distance. His stance as I perceived it in the witness box, showed ongoing anger towards them. While through solicitors' letters there have been offers of arbitration, I consider his attitude to have become hostile and unconciliatory. There is little excuse for this, given that Sibrad is in breach of the lease.Prejudice to the parties[66] In his affidavit in reply filed shortly before the hearing Mr Russo deposed as to the financial losses to Sibrad should relief not be granted. This was not reply material, but rather new evidence. Mr Russo claimed that the stock would have to be sold at a significant loss, given the fact that the plan was to raise them to a greater weight and sell them later in the year. He claimed that he would almost certainly have to make two of Sibrad's staff redundant, and that if the lease was not renewed maize could not be grown on the neighbouring Kruger land. [67] While it must be that Sibrad will suffer some losses if the lease is not renewed, the claims by Mr Russo are exaggerated. Sibrad has the Rootarangi farm,and it may be able to juggle stock until a replacement block is found. Mr Kanters filed an affidavit in reply. He pointed out that higher prices were available for the stock than those indicated by Mr Russo. He also pointed out that it would be most surprising if two staff had to be made redundant, given that no more than seven hours of work were required on the leased farm each week. [68] While I accept that Sibrad will suffer some losses if the lease is not renewed, I am not satisfied that it will suffer any irreparable harm. Making the best assessment I can, given a lack of any precise figures, I would be surprised if the losses exceeded $40,000. They could be much less if replacement pasture is found. [69] There is significant prejudice to the Kanters if the lease is renewed. The parties would face the immediate problem of having to identify the four acres of land that are presently part of the land being used by Sibrad, but which are undefined and not part of the leased land. Given the hostility that exists between the parties it is difficult to see how this would be done without some sort of formal arbitration. Even if there were a formal arbitration, it would be very difficult for the arbitrator to find a rational basis for determining what land should be excluded from the lease, as there are no indications given in the lease as to how this could be done. The arbitrator would have to decide what would be the most convenient land to exclude, but would face the problem of measuring the quality of the land to be excluded on a fair basis, and in the face of intractable hostility between the parties. [70] Sibrad has been a bad tenant of the Danbey Trust. It has breached the lease in a number of significant respects. When the Kanters complained in December 2007 about the breaches nothing changed. Mr Russo disagreed with them. The breaches of lease as to fertiliser tests, area used and general maintenance, are likely to continue, although the management of the stock has improved. [71] This lease is different from many in that the Kanters live with their children on two acres in immediate proximity to the land leased by Sibrad. Contact with Sibrad's employees is inevitable. It is clear from the evidence that there are close relationships with neighbours, and the bulls escaping is causing them concern. I am satisfied that there is a particular prejudice to the Danbey Trustees as landlords, inhaving a hostile and uncooperative tenant who is breaching the lease. The lifestyle and pleasure of occupation of their property will be significantly diminished while Sibrad is the tenant.General conclusion[72] I consider that the breaches of lease are sufficiently serious, and the breakdown of relations caused by Sibrad's conduct so severe, that the discretion to grant relief against forfeiture should not be exercised. To grant such relief would be to tie these two parties together for another year-and-a-half when they need to communicate on the issue of area, but they are not communicating and are hostile, and the lessee is committing ongoing serious breaches of the lease, and does not remedy those breaches.Result[73] This application for relief against forfeiture is declined. [74] Clause 6.6 of the lease provides:6.6 Tenant to pay Landlord's costs In addition to the rental and other moneys reserved by this Lease the Tenant shall pay: (b) all costs, charges and expenses for which the Landlord shall become liable in consequence of or in connection with any breach or default by the Tenant in the performance of any of the covenants in this Lease.Mr Light sought an order that indemnity costs be paid as the costs in defending this application are expenses consequent on a breach or default by the tenant in the performance of any of the covenants in the lease. [75] However, this relief against forfeiture application does not arise from a breach or default by the tenant in performance of a covenant. There is no covenantto renew. Renewal is a right at the tenant's option, and not an obligation. It is the application for relief which has given rise to the legal expenses, and not the breaches of lease by Sibrad. I conclude that clause 6.6 is not relevant to the issue of costs. [76] The Danbey Trustees having successfully opposed the application, I hold that the applicant pay the respondents' costs on a 2B basis, and disbursements as fixed by the Registrar... Asher J