MOUNTFORT, MOUNTFORT AND FOSTER v CHEAM [2021] NZHC 1535

MOUNTFORT, MOUNTFORT AND FOSTER v CHEAM [2021] NZHC 1535 [25 June 2021]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV 2021-404-386[2021] NZHC 1535UNDER Sections 244 and 251 of the Property LawAct 2007BETWEEN SIMON RHYS MOUNTFORT,CATHERINE ANNE MOUNTFORT ANDPAUL KENNETH FOSTERApplicantsAND SOKUNTHEA (RACHEAL) CHEAMRespondentHearing: 20 May 2021Appearances: J Long and G S A Morrison for the ApplicantsM Robson for the RespondentJudgment: 25 June 2021JUDGMENT OF CAMPBELL JThis judgment was delivered by me on 25 June 2021 at 4:00 pm pursuant to Rule 11.5of the High Court RulesRegistrar/Deputy RegistrarIntroduction[1] The applicants own commercial premises in Ellerslie. They lease thosepremises to the respondent (Ms Cheam) under a deed of lease dated 1 October 2015.Ms Cheam operates a bakery from the premises.[2] From March 2020 Ms Cheam's business was affected by the lockdowns andother measures imposed by the government in response to the COVID-19 pandemic.In June 2020 the parties agreed to a reduction of the rent payable by Ms Cheam underthe lease. That agreement covered the period until 31 October 2020.[3] The applicants allege that Ms Cheam failed to pay all the rent that was due on1 October 2020 and 1 November 2020. Based on those alleged shortfalls, on 17December 2020 the applicants served on Ms Cheam a notice under the Property LawAct 2007 (PLA) of their intention to cancel the lease.[4] Ms Cheam has, on two grounds, refused to pay the amount the applicants allegeis outstanding. First, the amount is based (in part) on a rent increase of 3.5 per centfrom 1 April 2020. Ms Cheam disputes that increase. Secondly, Ms Cheam says thatin October and November 2020 she was entitled to an abatement of rent for the effectsof the government's COVID-19 restrictions.[5] The applicants apply under s 244 of the PL A for an order for possession (andtherefore cancellation), based on Ms Cheam's failure to comply with the PLA notice.Ms Cheam resists the application. She says there was no shortfall in her rent payments,the PLA notice was therefore invalid, and the applicants thus have no right to cancelthe lease. Alternatively, she applies under s 253 of the PLA for relief againstcancellation.[6] Two issues arise. The first is whether Ms Cheam failed to pay all the rent dueon 1 October 2020 and 1 November 2020. If Ms Cheam did fail to pay all the rent,the second issue is whether I should grant Ms Cheam relief against cancellation. Todetermine those issues, I first must set out the background.Background[7] Although the deed of lease is dated 1 October 2015, the term of the leasecommenced on 1 April 2014. Ms Cheam is obliged to pay rent by monthly paymentsin advance on the first day of each month.[8] Between November 2019 and March 2020, Ms Cheam was often late in payingher rent. The applicants did not take any action, as Ms Cheam eventually paid.[9] On 9 March 2020, Ms Cheam emailed the first-named applicant, MrMountfort. She said she had spoken to her accountant to discuss her position "in termsof continuing the lease or to cease it completely". She told Mr Mountfort that in 2019she had "lost 400 customers coming to Ellerslie due to the fact the ANZ had movedall of their contact centre staff to Sylvia Park". She noted that her business would beaffected by COVID-19. She concluded: "The sooner we can get this lease out of theway, the better for all of us."[10] On 25 March 2020, New Zealand was placed into a COVID-19 Alert Level 4lockdown. That lockdown lasted until 27 April 2020. During that lockdown MsCheam was unable to access the premises to carry on her business.[11] The applicants say that, on 1 April 2020, the rent payable under the leaseincreased by 3.5 per cent. The applicants say this was a fixed and automatic increase.Ms Cheam disputes the increase.[12] After the lockdown was imposed, Ms Cheam did not pay any rent until 24 June2020. The applicants initially made demands on Ms Cheam for unpaid rent. MsCheam responded by relying on cl 27.5 of the second schedule of the lease. Clause27.5, which I will examine later, provides for an abatement of rent when the tenantcannot access the premises as a result of certain emergencies.[13] After some correspondence and negotiation, in June 2020 the parties agreed toa reduction in the rent for the period 1 April to 31 October 2020 (the June 2020agreement). For that period, the parties agreed the monthly rent would be based onthe pre-1 April 2020 monthly rent (that is, before the 3.5 per cent increase asserted bythe applicants). Moreover, Ms Cheam would only have to pay the followingpercentages of that monthly rent:(a) No rent for April 2020.(b) 40 per cent for May 2020.(c) 50 per cent for June 2020.(d) 60 per cent for July 2020.(e) 70 per cent for August 2020.(f) 80 per cent for September 2020.(g) 90 per cent for October 2020.[14] As can be seen, the parties had agreed a graduated scheme, lasting until 31October 2020. There was no agreed reduction beyond that date. Ms Cheam, in heraffidavit filed in opposition to the application, said she agreed that the payments in theJune 2020 agreement were to allow her to "slowly build back towards paying fullrental until 01 November 2020".[15] The applicants incurred legal costs of $2,357.50 enforcing their right to recoverrent (including issuing a letter of demand). On 30 June 2020, the applicants' lawyersinvoiced Ms Cheam for that amount.[16] Auckland returned to Alert Level 3 from 12 to 30 August 2020. During thattime, Ms Cheam was able to access the premises and operate her business, albeit at areduced level. The parties agreed to a further reduction in rent. They agreed that MsCheam would pay, for the month of September 2020, 50 per cent of the pre-1 April2020 monthly rent (rather than the 80 per cent in the June 2020 agreement).[17] Ms Cheam's payment for October 2020 was less than the amount the partieshad agreed in the June 2020 agreement. The shortfall was $1,940.26.[18] On 21 October 2020, the applicants' property manager, Bayleys, sent a letterto Ms Cheam. Bayleys set out the amounts payable each month from April to October2020 according to the June 2020 agreement. Bayleys noted the shortfall in MsCheam's October 2020 rent payment, and asked her to pay by 30 October 2020. Theletter also said that, from 1 November 2020, Ms Cheam was required to pay 100 percent of the rent, at the post-1 April 2020 rate (that is, with the asserted 3.5 per centincrease).[19] Ms Cheam responded to Bayleys' letter on 30 October 2020. She said sheunderstood that the parties would meet each month while the effects of COVID-19were still at play, to assess and review "what would be a fair rent based on my abilityto pay". She said that the parties had not set a date as to when the contract could returnto pre-COVID-19 terms. She denied she was in arrears for the 1 October 2020 rent.[20] The next rent was payable on 1 November 2020. Ms Cheam paid that rent twodays late. Her payment was $2,166.63 less than the post-1 April 2020 monthly rent.[21] Though Ms Cheam did not explain this at the time, for October 2020 she hadpaid 60 per cent, and for November 2020 she had paid 70 per cent, of the pre-1 April2020 monthly rent. She was treating the further agreement to reduce the rent forSeptember 2020 (to 50 per cent) as "resetting" the graduated scheme. Over the nextthree months her monthly rent payments were 80 per cent, 90 per cent and then 100per cent of the pre-1 April 2020 monthly rent.[22] On 10 November 2020, Bayleys wrote to Ms Cheam about the rent outstandingfor October and November 2020. Bayleys again set out the amounts payable eachmonth from April to October 2020 according to the June 2020 agreement, and statedthat from 1 November 2020 Ms Cheam was required to pay 100 per cent of the rent atthe post-1 April 2020 rate.[23] Ms Cheam's solicitor responded to that letter on 17 November 2020. He saidthat Ms Cheam accepted the amounts set out in the 10 November 2020 letter as beingthe amounts to which the parties had agreed "to August 2020". He referred to COVID-19 restrictions that applied from 12 August to 7 October 2020. He asserted that undercl 27.5 of the lease Ms Cheam was entitled to further abatements of rent for thoserestrictions.[24] There was further correspondence between the parties' representatives. Noresolution was achieved. On 17 December 2020, the applicants served a PLA noticeon Ms Cheam. The notice claimed that Ms Cheam was in breach of the lease in tworespects:(a) She had failed to pay rent of $4,106.89 (being the shortfalls asserted bythe applicants for October and November 2020).(b) She had failed to pay the legal costs for which she had been invoicedon 30 June 2020, in the sum of $2,357.50.[25] The PLA notice expired without Ms Cheam making any payment of the rent orcosts specified in the notice. Ms Cheam has continued to refuse to pay any of thoseamounts.[26] Moreover, Ms Cheam has continued to pay rent based on the pre-1 April 2020monthly rent. She disputes that the rent increased by 3.5 per cent on 1 April 2020. Inaddition, Ms Cheam paid only a portion of the pre-1 April 2020 monthly rent for themonths of December 2020 (80 per cent), January 2021 (90 per cent), and March 2021(75 per cent). For those months she asserts an entitlement to abatements of rent undercl 27.5, based on COVID-19 restrictions.[27] On 23 February 2021, the applicants attempted to re-enter the premisespeaceably. They say that Ms Cheam interfered with their attempt. Ms Cheam deniesthis. She says the applicants had no entitlement to re-enter, peaceably or otherwise.[28] Having failed to re-enter the premises, the applicants filed this application forpossession on 8 March 2021.The parties' respective cases[29] Under cl 28.1(a) of the lease the applicants are entitled to cancel the lease ifthe rent has been in arrears 10 working days after any rent payment date. Thatentitlement is subject to Ms Cheam having failed to remedy that breach after serviceof a notice in accordance with s 245 of the PLA.[30] The applicants' application for possession is based on the rent payable on 1October 2020 and 1 November 2020 being in arrears for 10 working days, and MsCheam failing to remedy that breach after service of the PLA notice on 17 December2020. The applicants say that the rent payable on 1 October 2020 was the reducedamount that had been agreed in the June 2020 agreement, and that the rent payable on1 November 2020 was the post-1 April monthly rent, without any reduction.[31] Ms Cheam has, in her notice of opposition, raised several grounds for herrefusal to pay the shortfalls claimed by the applicants for the October 2020 andNovember 2020 rent. First, for November 2020 the shortfall is based (in part) on therent having automatically increased by 3.5 per cent from 1 April 2020. Ms Cheamdisputes that increase. Secondly, Ms Cheam says that for each month she is entitledto a further abatement of rent under cl 27.5 for the ongoing effects of the government'sCOVID-19 restrictions. Thirdly, Ms Cheam says the applicants are estopped fromclaiming the lease is cancelled.[32] There is no dispute that, apart from the three grounds raised by Ms Cheam, thePLA notice was valid. So, if the applicants overcome those three grounds, they areentitled to cancel the lease.[33] In that event, Ms Cheam says that the Court should grant her relief againstcancellation under s 253 of the PLA. The applicants oppose any relief, primarily onthe ground there are serious concerns about Ms Cheam's ongoing ability to pay rent.The issues[34] The issues are:(a) Did Ms Cheam fail to pay all the rent due on 1 October 2020 and 1November 2020? This raises two sub-issues:(i) Did the rent increase by 3.5 per cent from 1 April 2020?(ii) In October and November 2020 was Ms Cheam entitled to anabatement of rent for the ongoing effects of the government'sCOVID-19 restrictions?(b) Are the applicants estopped from cancelling the lease?(c) If the applicants are entitled to cancel the lease, should Ms Cheam begranted relief against cancellation?Did Ms Cheam fail to pay all the rent due on 1 October 2020 and 1 November2020?Did the rent increase by 3.5 per cent from 1 April 2020?[35] Whether the rent increased by 3.5 per cent from 1 April 2020 depends on theterms of the lease.[36] The lease is in the Auckland District Law Society's (ADLS) standard form fora deed of lease, sixth edition 2012 (2). It is for a term of 10 years commencing 1 April2014, with two rights of renewal of five years each. The renewal dates are therefore1 April 2024 and 1 April 2029.[37] Clause 11 of the first schedule specifies rent review dates:[38] The ADLS standard form of lease provides for market rent reviews (governedby cls 2.1 to 2.4 of the second schedule) and CPI rent reviews (governed by cls 2.5and 2.6). Clause 11 of the first schedule indicates that there are to be fixed rent reviewsinstead of CPI rent reviews. That is reflected in the second schedule, where standardcls 2.5 and 2.6 have been struck out, and the following bespoke cl 2.5 has been added:[39] Despite the clarity of these provisions, Ms Cheam's position was that the 3.5per cent increase under cl 2.5 was not automatic. She said that it could be "challengedby the tenant". Mr Robson, counsel for Ms Cheam, described the applicants as having"unilaterally imposed" the 3.5 per cent increase. He submitted that the fixed rentreview under cl 2.5 was subject to determination in accordance with cls 2.1 to 2.4.[40] I reject that submission. The effect of cl 2.5 is clear. Every two years from thecommencement date the rent "shall increase" by 3.5 per cent. The increase ismandatory, and does not depend on either party taking any steps. In short, an increaseof rent under cl 2.5 is automatic. Moreover, the increase is not subject to adetermination of market rent under cls 2.1 to 2.4. Clauses 2.1 to 2.4 apply only tomarket rent reviews, which occur (in accordance with cl 11 of the first schedule) onlyon renewal dates.[41] I conclude that the rent increased by 3.5 per cent on 1 April 2020.In October and November 2020 was Ms Cheam entitled to an abatement of rent forthe ongoing effects of the government's COVID-19 restrictions?[42] Ms Cheam says that in October and November 2020 she was entitled to anabatement of rent under cl 27.5. This provides:No Access in Emergency27.5 If there is an emergency and the Tenant is unable to gain access to thepremises to fully conduct the Tenant's business from the premisesbecause of reasons of safety of the public or property or the need toprevent reduce or overcome any hazard, harm or loss that may beassociated with the emergency including:(a) a prohibited or restricted access cordon applying to thepremises; or(b) prohibition on the use of the premises pending the completionof structural engineering or other reports and appropriatecertifications required by any competent authority that thepremises are fit for use; or(c) restriction on occupation of the premises by any competentauthority.then a fair proportion of the rent and outgoings shall cease to bepayable for the period commencing on the date when the Tenantbecame unable to gain access to the premises to fully conduct theTenant's business from the premises until the inability ceases.[43] The lease defines "emergency" in cl 47.1(d). It includes an epidemic. It iscommon ground that the COVID-19 pandemic falls within the definition.[44] Clause 27.5 applies if there is an emergency and "the Tenant is unable to gainaccess to the premises to fully conduct the Tenant's business from the premises"because of the reasons set out in the clause. The key issue is whether Ms Cheam was,during October or November 2020, unable to gain access to the premises to fullyconduct her business from those premises.[45] As to the meaning of "the Tenant is unable to gain access to the premises tofully conduct the Tenant's business from the premises", Mr Morrison, for theapplicants, referred me to a decision of Associate Judge Bell on cl 27.5, Coffee CultureFranchises Ltd v Home Straight Park Trustees Ltd.1 His Honour said that under alease the tenant has the right to occupy the premises and the right to allow and barentry to others. To operate a business from leased premises, the tenant must haveaccess for itself, and also for its staff, suppliers, and customers. He thereforeconcluded cl 27.5 could be triggered if the tenant's customers were unable to gainaccess to the premises.21 Coffee Culture Franchises Ltd v Home Straight Park Trustees Ltd [2021] NZHC 577.2 At [28].[46] Mr Morrison told me the applicants therefore conceded that cl 27.5 would betriggered not only if Ms Cheam was unable to gain access to the premises, but also ifMs Cheam's customers were unable to do so. I will proceed on that basis, withoutdeciding whether the concession is correct.[47] In March 2020, the New Zealand government introduced a 4-tier Alert Levelsystem to help address the COVID-19 pandemic. I will summarise the restrictionsplaced on businesses under those Alert Levels, as relevant to Ms Cheam's business.[48] Under Alert level 1, Ms Cheam had to display a QR code at her business. Therewere no other restrictions.3 Under Alert Level 2, there were additional restrictions.4Restaurants and cafes could not have more than 100 customers at any one time.Customers generally had to be seated. There had to be one metre between tables, withonly one worker serving any table. Under Alert Level 3, Ms Cheam's businesses couldoperate, but customers could not come onto her premises. Under Alert Level 4, allbusinesses had to close, except for essential services. Ms Cheam's business, not beingan essential service, had to close during Alert Level 4.[49] The applicants accept that during Alert Levels 3 and 4, Ms Cheam is unable toaccess her premises to fully conduct her business, and so cl 27.5 is triggered. But theydo not accept that cl 27.5 is triggered under Alert Levels 1 and 2. The applicants pointout that in October 2020, Auckland was at Alert Level 2 for seven days and at AlertLevel 1 for the balance of the month. Throughout November 2020, Auckland was atAlert Level 1.[50] Ms Cheam has a wider view of cl 27.5 She says that it is not just about access,but requires consideration of whether "because of Covid-19 restrictions and effects ontrading patterns the ability to fully conduct my business has been restored". Ms Cheamcomplains that the applicants "were not willing to consider the ongoing effects ofCovid-19".3 COVID-19 Public Health Response (Alert Level Requirements) Order 2020, cl 8 (as from 7October 2020).4 COVID-19 Public Health Response (Alert Level Requirements) Order 2020, cls 12 and 19 (asfrom 23 September 2020 to 7 October 2020).[51] Ms Cheam addressed the effects of COVID-19, and Alert Levels 1 and 2, inher affidavits. She does not say that any of the restrictions that applied under AlertLevels 1 and 2 (such as the need to display a QR code, the 100-customer limit, or therequirement that customers be seated) had any effect on her ability to access herpremises to fully conduct her business.5 Rather, her evidence is that the level ofcustom or trade was affected by the wider effects of the COVID-19 pandemic. Forexample, she said that "even with Alert Level 2 the streets did not return to the busylevel of pre Covid-19 restrictions"; "for some of my regular customers the move toworking from home has become permanent"; and "even with being in Alert Level 1 Ihave elderly customers from the nearby retirement village who have advised that theywill only return when they had a vaccine".[52] None of that amounts to Ms Cheam, or her customers, being unable to accessher premises. Fewer customers are choosing to come to her business, even under AlertLevels 1 and 2, but not because of any restriction on access. Ms Cheam captured thisin her first affidavit, saying:Covid-19 restrictions were not just about access. It was also the greatlyreduced number of customers even when alert levels were lowered.[53] Indeed. But cl 27.5 is about access. It is not triggered merely by a generaldownturn in custom caused by the pandemic. I reject Ms Cheam's argument to thateffect.[54] I conclude that cl 27.5 did not apply during either October or November 2020.Ms Cheam was not entitled to an abatement of rent under that clause for either month.Are the applicants estopped from cancelling the lease?[55] In her notice of opposition Ms Cheam asserted that the applicants wereestopped from cancelling the lease.5 Ms Cheam said very little about the detail of her business. It would be most unlikely for a bakeryto be affected by, for example, a 100-customer limit. If there had been such an effect, I expect MsCheam would have said so in her affidavits. She did not.[56] Mr Robson addressed estoppel only briefly in his written submissions, and notat all in his oral submissions. In his written submissions, he said that Ms Cheam hadcontinued to maintain that cl 27.5 applied, while the applicants had ignored cl 27.5.That does not come close to establishing an estoppel.[57] Mr Morrison took me to the letter Bayleys sent to Ms Cheam dated 21 October2020. The letter records the rent reductions that had been agreed in the June 2020agreement, and the further rent reduction agreed for September 2020. Bayleys toldMs Cheam that the applicants had declined her request for a further abatement of rent.Bayleys also told Ms Cheam that from 1 November 2020 she was required to pay 100per cent of the monthly rent at the reviewed rate (that is, including the 3.5 per centincrease that occurred on 1 April 2020).[58] The applicants made their position clear to Ms Cheam (and my earlier findingsmean that their position was justified). There is no basis for finding that the applicantswere estopped from claiming that Ms Cheam was liable to pay the full rent for Octoberand November 2020, or from cancelling the lease when Ms Cheam failed to remedyher underpayment of that rent following service of the PLA notice.Conclusion on applicants' entitlement to cancel the lease[59] Given the findings above, I conclude that the applicants are entitled topossession and therefore to cancel the lease. I now turn to consider whether Ms Cheamshould be granted relief against cancellation.Should Ms Cheam be granted relief against cancellation?[60] Section 253 of the PLA allows Ms Cheam to apply for relief against thecancellation of the lease.Legal principles[61] The Court's power to grant relief against cancellation is discretionary. If reliefis granted, the Court may grant the relief on any conditions (including as to expenses,damages, compensation, or any other relevant matters) that it thinks fit.6[62] Where the lessee's breach consists solely of a failure to pay rent, there is apresumptive right to relief on payment of the arrears and costs. It is only in exceptionalcircumstances that relief will be denied where the arrears and costs are paid.7[63] One category of exceptional circumstances is where the lessee is hopelesslyinsolvent.8 Mere suspicion of insolvency is not enough.9 The Court needs to besatisfied that there is no realistic chance the next rental commitments can be met.10The mere fact that the lessee has been a poor payer in the past is not, without more, aground for refusing relief against cancellation.11[64] Mr Morrison submitted that it is well-established that for the Court to grantrelief against cancellation for non-payment of rent, either the money needs to havebeen paid, or there needs to be a "high degree of certainty" that it will be paid.12 I donot accept that submission. It is contrary to the approach that I have set out in theprevious paragraph, which is well supported by the cases I have cited.[65] If relief is granted, it is invariably on the condition that any arrears and costsbe paid within a time specified by the Court.136 Section 256(1).7 Gill v Lewis [1956] 2 QB 1; Mulholland v Waimarie Industries Ltd (2009) 10 NZCPR 590 (HC)at [23](1).8 Inner City Businessmen's Club Ltd v James Kirkpatrick Ltd [1975] 2 NZLR 636; Mulholland vWaimarie Industries Ltd (2009) 10 NZCPR 590 (HC) at [23](3).9 Guardsman Restaurant (Christchurch) Ltd v Victoria Square Estates Ltd (1987) 13 NZCPR 668;Mulholland v Waimarie Industries Ltd (2009) 10 NZCPR 590 (HC) at [23](4).10 QT Hospitality Ltd v Oxford Holdings Ltd (2007) 8 NZCPR 817 (HC) at [19].11 QT Hospitality Ltd v Oxford Holdings Ltd (2007) 8 NZCPR 817 (HC) at [11]-[17], and the casesthere cited.12 Mr Morrison primarily cited Stylo Medical Services Ltd v Hum Hospitality Ltd [2020] NZHC 2969at [34].13 Barton Thompson & Co Ltd v Stapling Machines Ltd [1966] Ch 499 at 510. For an example, seeGuardsman Restaurant (Christchurch) Ltd v Victoria Square Estates Ltd (1987) 13 NZCPR 668.The parties' positions[66] In her affidavits, Ms Cheam said she is not in any financial difficulty, and thereis no basis for any concern about her ongoing ability to pay rent. At the hearing, MrRobson told me that if relief were granted, Ms Cheam was willing to pay whateverwas determined to be owing.[67] The applicants opposed the grant of any relief. They said there is no "highdegree of certainty" that Ms Cheam will pay the arrears and costs. They also said thatMs Cheam's claim about her ongoing ability to pay rent is contradicted by thestatements made on her behalf by her solicitor.14 In a letter of 15 February 2021, MsCheam's solicitor said she had been trading at a loss since the first lockdown, that bothparties needed to come to a fair modification of the lease, and that if a reasonable rentalcould not be struck Ms Cheam "faces having to close her business".Events after the hearing[68] I heard this application on 20 May 2021. On 16 June 2021, the applicants fileda memorandum advising that Ms Cheam had not made any payment towards themonthly rent that was payable on 1 June 2021. Counsel advised that the applicantshad sought an explanation from Ms Cheam, but had not received any response (orpayment).[69] On 17 June 2021, Mr Robson filed a memorandum advising that Ms Cheamhad paid the rent for June 2021 that day. (As it turned out, Ms Cheam had paid rent atthe pre-1 April 2020 rate.) By way of explanation for the rent being 16 days late, MrRobson stated that Ms Cheam advised she "had been waiting for the decision of theCourt before paying the rent". Mr Robson also informed me that Ms Cheam advisedthat once the Court had made its decision "she will enter discussions with theApplicant on payments due according to the decision of the Court".[70] Ms Cheam's approach to her obligations under the lease, as reflected in MrRobson's memorandum, is of serious concern. That she was waiting for my decision14 Mr Morrison also relied on some other statements by Ms Cheam, but I regard them as equivocal.did not give her any justification to withhold rent that was payable. The payments thatare due under the lease, particularly once they are determined by this Court, are not amatter of mere discussion with the applicants. They are a matter of legal obligation.Decision[71] Ms Cheam's failure to pay rent has arisen from a dispute over the amount ofrent payable under the lease. In such cases the fact that the lessee has not, at the timeof the hearing, paid the disputed amount of rent should not, in itself, stand in the wayof relief being granted (on condition that the rent, and other arrears, are paid).However, relief should be refused if I am satisfied that there is no realistic chance thearrears, or the next rent commitments, can or will be met.[72] I am of the view that relief should be granted (on the conditions set out below).I am not satisfied that there is no realistic chance of Ms Cheam paying the arrears. MsCheam has paid late in the past, but that in itself is not a reason for refusing relief. Itake into account that Ms Cheam has said she faces closing her business if a rentreduction is not agreed, and it is, as I have noted, of concern that Ms Cheam seems toregard, even after a Court hearing, her legal obligations as mere starting positions in anegotiation. But, rather than refusing relief, I prefer to address those matters throughappropriate conditions.[73] I grant relief to Ms Cheam against cancellation of the lease on the followingconditions:(a) Ms Cheam must pay to the applicants, by 5.00pm on 9 July 2021:(i) All arrears of rent, calculated in accordance with this judgment,subject only to [74] below.(ii) The costs of $2,357.50 for which Ms Cheam was invoiced on30 June 2020.(iii) The costs of $582.50 for the PLA notice dated 14 December2020.(iv) The costs of $5,964.75 for which Ms Cheam was invoiced on23 February 2021.(b) Ms Cheam must pay to the applicants, within ten working days of theapplicants providing her with a calculation of the interest (at a rate of12 per cent per annum) that is payable by her under cl 5.1 of the lease,the interest as calculated. If Ms Cheam disputes the amount calculatedby the applicants, she must still pay that amount to the applicants, but Iwill then resolve the dispute on receipt of memoranda from the parties.(c) Ms Cheam must pay to the applicants, within ten working days of costsbeing agreed between the parties or determined by this Court, the costsof this proceeding, in accordance with [78] below.(d) Ms Cheam must pay to the applicants, on or before the due date eachmonth, the monthly rent payable under the lease, calculated inaccordance with this judgment.(e) If Ms Cheam fails to comply with any of these conditions, theapplicants are entitled to apply, on five working days' notice, for anorder for possession of the premises and cancellation of the lease.[74] Condition (a) is subject to one qualification. In March 2021, Auckland was atAlert Level 3 for about a week. The applicants accept that cl 27.5 applied for thatperiod. Ms Cheam paid only 75 per cent of the pre-1 April 2020 monthly rent forMarch 2021. That reflected her view that (i) the rent had not increased by 3.5 per centon 1 April 2020 and (ii) she was entitled to an abatement of rent under cl 27.5. BecauseMs Cheam was wrong about the 3.5 per cent increase, she must, as part of the conditionin [73(a)(i)], pay to the applicants for the March 2021 rent 75 per cent of the amountby which the monthly rent increased on 1 April 2020. As to the abatement to whichMs Cheam is entitled under cl 27.5 for March 2021, if the parties cannot agree theymay file memoranda.[75] The applicants also sought costs, under cl 6.1 of the lease, for their solicitors'invoice dated 24 February 2021 and for the invoice dated 2 March 2021 fromAuckland Investigations. It appears these costs arose from the applicants' attempt tore-enter the premises. I have not allowed for these costs in the conditions above. Itshould have been apparent to the applicants that a Court application was necessary.Costs of the proceeding[76] The applicants have succeeded in establishing that they are entitled to cancelthe lease. Ms Cheam has succeeded in her application for relief. However, she wasseeking an indulgence, and the usual rule is that a party seeking an indulgence, evenwhen successful, should pay costs to the other party. There is no reason the usual ruleshould not apply. In the circumstances, it was reasonable for the applicants to opposeMs Cheam's application for relief.[77] The applicants are therefore entitled to recover from Ms Cheam their costs ofthis proceeding. The applicants seek indemnity costs under cl 6.1 of the lease. Clause6.1 obliges Ms Cheam to pay the applicants' legal costs, "as between lawyer andclient", of and incidental to the enforcement of the applicants' rights and powers underthe lease.[78] I find that the applicants' costs of this proceeding (including, for the avoidanceof any doubt, the costs of opposing Ms Cheam's application for relief) are all "of andincidental to the enforcement of" the applicants' rights under the lease. In accordancewith r 14.6, Ms Cheam is to pay to the applicants the actual costs and disbursementsthat they reasonably incurred in this proceeding. If that amount cannot be agreed, theparties may file memoranda: the applicants by 9 July 2021, Ms Cheam by 16 July2021.Result[79] I find that the applicants are entitled to possession of the premises, andtherefore to cancel the lease.[80] I grant Ms Cheam relief against cancellation, on the conditions set out at [73].[81] Ms Cheam is to pay costs to the applicants, as set out at [78].______________________Campbell J