STYLO MEDICAL SERVICES LIMITED v HUM HOSPITALITY LIMITED [2018] NZHC 642

STYLO MEDICAL SERVICES LIMITED v HUM HOSPITALITY LIMITED [2018] NZHC 642 [11 April 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-600[2018] NZHC 642UNDER the Property Law Act 2007IN THE MATTER OF an application under section 261 for reliefagainst refusal to renew a leaseBETWEEN STYLO MEDICAL SERVICES LIMITEDPlaintiffAND HUM HOSPITALITY LIMITEDDefendantHearing: 20 October 2017Counsel: R O Parmenter for plaintiffM Eastwick-Field and C E Grenfell for defendantJudgment: 11 April 2018JUDGMENT OF KATZ JThis judgment was delivered by me on 11 April 2018 at 11:00amPursuant to Rule 11.5 High Court RulesRegistrar/Deputy RegistrarSolicitors: Russell McVeagh, AucklandWinston Wang & AssociatesCounsel: R O Parmenter, Barrister, AucklandIntroduction[1] In these proceedings Hum Hospitality Limited ("Hum") seeks relief againstStylo Medical Services Limited's ("Stylo") refusal to renew its lease.[2] In 2008, Stylo purchased a large, but derelict, two-storied villa on GraftonRoad, Auckland, adjacent to the Grafton Bridge ("Property"). Stylo's sole director isShen Tat Ooi, a medical practitioner. Mr Ooi initially planned to turn the Propertyinto a medical clinic. He was unable to do so for various reasons, including a lack offunds. Mr Ooi accordingly decided to lease the Property to a third party, on terms thatrequired the tenant to renovate the Property in exchange for an initial rental holiday.[3] On 22 January 2011, Stylo entered into a lease ("Lease") with Hum as tenant.Hum and its associated entity, the Falling Apple Charitable Trust ("Trust"), togetherform what their founder, Rosanne Armitage, describes as a social enterprise concernedwith serving the community and promoting culture, art, music, education, health,sustainability and well-being in the community.[4] The Lease is a long-term one, comprising an initial term of six years, followedby two rights of renewal of eight years each, with a final expiry date of 31 January2033. Hum was responsible for bringing the Property up to a habitable state. Inexchange, it was provided with an initial three-year rent-free period. After that,annual rent at the rate of $87,000 per annum plus GST was payable, increasing to$100,000 per annum plus GST on 1 December 2015, and $120,000 per annum plusGST on 1 December 2016.[5] The Lease requires Hum to give "written notice to renew the lease at least3 calendar months before the end of the term". Although Hum wished to continue inoccupation of the Property, it overlooked giving a renewal notice within the requiredtimeframe. As a result, Stylo, which has been keen to terminate Hum's tenancy forsome time (it has brought legal proceedings seeking to evict Hum from the site on fourprevious occasions) now seeks an order for possession of the Property.[6] Hum opposes Stylo's application and seeks relief against forfeiture fornon-renewal of the Lease, pursuant to section 261 of the Property Law Act 2007("Act"). It is common ground that if Hum's application for relief is successful, thenStylo's summary judgment application for an order for possession must fail. I willtherefore focus on Hum's relief application first.Applicable law[7] Sections 261 and 264 of the Act relevantly provide that where there is a rightof renewal in a lease and the lessee has failed to give notice of its intention to exercisethat right within the specified time, the Court may grant relief to the lessee, includingby ordering the renewal of the lease.[8] Section 264 of the Act replaced s 120 of the Property Law Act 1952, but wasnot intended to substantively alter the law in relation to relief against forfeiture fornon-renewal.1 In the leading case on s 120 of the 1952 Act, Vince Bevan Ltdv Findgard Nominees Ltd, Turner P said:2 I think that this section in the Property Law Act, enacted as a remedialmeasure, should be construed as conferring upon the Court a very widejurisdiction to do equity in relieving against refusals by lessors to renewleases. In my opinion it would stultify the intention of the Legislature toconstrue this section so strictly. All its provisions seem to me to indicate thatParliament intended that it should be applied largely.[9] A similar view was expressed by McCarthy J in the same case:3The President in the judgment just delivered remarks on the remedial characterof ss 120 and 121. I would also emphasise that. I agree that we should notview these sections narrowly, neither in the jurisdiction conferred nor in therelief to be granted. The obvious final intention of the Legislature was to placethe Court in a position to do what it thinks fit in accordance with the justice ofthe particular application.[10] The same view has been taken of the provisions of s 264 of the Act.41 Sibrad Co Ltd v Kanters (2008) 9 NZCPR 356 (HC) at [14].2 Vince Bevan Ltd v Findgard Nominees Ltd [1973] 2 NZLR 290 at 297 to 298 (CA).3 At 299.4 Sibrad Co Ltd v Kanters, above n 1, at [14] and [17]–[20]. See also Transform Minerals Ltd vGordon Wright & Sons Ltd (2010) 12 NZCPR 558 (HC) at [16]–[18].[11] Ultimately, the Court must try to balance the rights of the lessor and the lessee.5In Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd, Asher J set out anumber of factors relevant to the exercise of the Court's discretion, namely:6(a) whether the failure to renew the lease 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 been a good tenant);(d) the prejudice to the lessee if relief is not granted;(e) the prejudice to the lessor if relief is granted;(f) the lessor's motivation for the refusal to renew and understanding ofthe lessee's intentions; and(g) the interests of third parties and how they may be affected by any order.[12] I will consider each factor in turn.Was the failure to renew the Lease inadvertent?[13] Hum was required to give its renewal notice by 1 November 2016. It failed todo so. Hum appears to have been first alerted to the issue when it received an emailfrom Stylo on 14 February 2017, after the expiry of the initial term.[14] Ms Armitage's evidence is that Hum's failure to provide formal noticerenewing the Lease was inadvertent and that the need to renew the Lease simplyslipped her mind. Hum submitted that its general conduct, however, was clearlyconsistent with an intention to renew the Lease and that Stylo must have realised that.5 Weatherall Jewellers Ltd v J Hendry and Son Ltd CA135/83, 11 September 1984 at 8 perRichardson J; KAM Holdings Ltd v Wanganui Regional Development Trust Board HC WanganuiM35/90, 31 October 1990; Timberco (1999) Ltd v Sarvee Acquisitions Ltd (2005) 7 NZCPR 429(HC) at [22]; Sibrad Co Ltd v Kanters, above n 1, at [18]; Saisatnam Ltd v Brandons TrusteeCompany Ltd [2017] NZHC 538, (2017) 18 NZCPR 215 at [89]–[98].6 Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd (2005) 7 NZCPR 48 (HC) at [29].[15] Stylo did not challenge Ms Armitage's evidence that the failure to renew theLease was inadvertent, and I am satisfied that it was.Was the failure to give notice of renewal due to any action of Stylo?[16] There is nothing to suggest that Stylo was in any way responsible for Hum'sfailure to give notice of renewal.Is Hum a bad tenant?[17] Although it advances a number of subsidiary arguments, Stylo's key argumentas to why Hum's application for relief should be declined is that Hum has been a badtenant during the initial term of the Lease. In particular, Mr Parmenter, for Stylo,submitted that:(a) Hum was contractually bound to install a restaurant facility in theProperty during the initial term and had failed to do so;(b) Hum has had solvency issues and had frequently been late with thepayment of rent and outgoings; and(c) Hum has previously improperly used the premises for boardinghouse/guest accommodation, resulting in cancellation of Stylo'sinsurance.[18] Hum denies that it has been a bad tenant. It acknowledges that it has not beena perfect tenant, but says that the issues Stylo identifies are historical and do not justifyHum now being denied the relief it seeks. Although rent and outgoings havesometimes been paid late in the past, Ms Eastwick-Field, for Hum, submitted that theother criticisms levelled at Hum lack substance. Hum's rent and outgoings paymentsare now up to date and there are no unresolved breaches of the Lease. To the extentthat previous (in Hum's submission, minor) breaches of the Lease have occurred,those breaches must be seen in the context of a sustained attempt by Stylo to removeHum as lessee, including through a multiplicity of previous Court proceedings.[19] Ms Eastwick-Field submitted that Stylo's approach of constantly seeking courtintervention to resolve matters between the parties has been unconstructive and hascaused considerable difficulties for Hum. Hum's view is that Stylo is attempting todrive it out of the Property and is seizing any excuse to do so, including trying to "burnit off" with litigation. Ms Eastwick-Field noted that in Stylo Medical Services Ltd vHum Hospitality,7 Whata J observed that it if Stylo wished to continue with its litigiousapproach to rent issues, close scrutiny would need to be given to the appropriatenessof costs on the applications, particularly where any rental default has been very short.The restaurant issue[20] Stylo submitted that Hum is a bad tenant because it has not complied with allthe conditions and covenants of the Lease. Specifically, Stylo says that Hum hasbreached an obligation in the Lease to install and operate a "Café, Bar and Restaurant"from the premises by 31 December 2011. If the Court finds that there is no suchexpress obligation in the Lease, then Stylo submitted that such a term should beimplied, or the Lease should be rectified to include such a term.[21] The starting point must be the relevant provisions of the Lease. Clause 16.1 ofthe Second Schedule provides:Business Use16.1 THE Tenant shall not without the prior written consent of theLandlord use or permit the whole or any part of the premises to beused for any use other than the business use. The Landlord's consentshall not be unreasonably or arbitrarily withheld or delayed in respectof any proposed use:(a) not in substantial competition with the business of any otheroccupant of the property which might be affected by the use;(b) reasonably suitable for the premises; and(c) complying with the requirements of the Resource ManagementAct 1991, or any other statutory provisions relating to resourcemanagement.7 Stylo Medical Services Ltd v Hum Hospitality Ltd [2015] NZHC 1150 at [31].The First Schedule specifies the relevant "Business Use" as being "Café, Bar andRestaurant".[22] Mr Parmenter relied on cl 48 of the Lease as founding the obligation to installa restaurant. It relevantly provides:Tenant's Fit-out and other work48.1 The Landlord agrees to provide the tenant full access to the premisesupon this agreement is declared unconditional.48.2 Before the commencement of the Tenant's business the tenant shall,at the tenant's cost complete the following work:48.2.1 Repaint and repair (if necessary) the exterior of the building;48.2.2 Repair the roof (if necessary);48.2.3 Fence around the balcony;48.2.4 Landscaping48.2.5 fitout all floors by painting, flooring and installation of toiletand kitchen.48.2.6 any other work that at the Tenant's opinion is necessary forthe Tenant's business use of the premises.Details of the work are listed in the attached schedule.48.5 The tenant must commence the renovation of the building by 1 March2011. The work listed in above 48.2.1 to 48.2.4 in relationship toeverything downstairs, landscaping out the front, all external work onthe house, front fencing, etc must be completed by 31 December2011. All other work in relation to the gardens out the back and insideupstairs must be completed by 31 December 2012. If any of the workis not completed by the time period stated above the landlord may givethe Tenant 20 working days notice to complete the work[23] A "Check-List for Fit-Out on Grafton Road" that is annexed to the Lease underthe heading "Addition to Schedule" includes several references that are consistent witha restaurant being installed on the premises, namely "Kitchen to health and safetyrequirements", "Architect — amendment to plans for restaurant suitability on site"and "Airconditioning — Air circulation for main restaurant areas".[24] Mr Parmenter submitted that the relevant clauses would convey to a reasonableperson, having all the background knowledge that would reasonably have beenavailable to the parties at the time the Lease was entered into, that Hum was requiredto install a "Café, Bar and Restaurant" in the Property by 31 December 2011. Heacknowledged that the drafting of the Lease is somewhat problematic in that,interpreted literally, the work listed at cls 48.2.5 and 48.2.6 "falls into a void" and doesnot specifically require completion by either 31 December 2011 or 31 December 2012.Mr Parmenter submitted that the reference to cl 48.2.4 in cl 48.5 should therefore berectified to read 48.2.6 instead of 48.2.4. Such an alteration, he submitted, is consistentwith pre-contractual email correspondence between the parties that envisaged thatPhase 1 of the renovations would focus on "everything downstairs, landscaping outthe front, all external work on the house, front fencing etc ready for opening" whilePhase 2 would focus on the "gardens out the back and inside upstairs".[25] Mr Parmenter also relied on Mr Ooi's evidence that he had obtained a resourceconsent for a restaurant following his purchase of the property, but that becauseinstalling a restaurant was beyond his resources, he decided that "I would havesomeone put in a restaurant in return for a period of no rent or other inducements".Mr Ooi's evidence as to why it was (and is) important to him that a restaurant beinstalled is that:The benefit for Stylo was that the capital value of the property would increaseby virtue of the restaurant's installation and the rental would increase as thecapital value increased.[26] Ms Eastwick-Field, on the other hand, submitted that the Lease does notimpose an obligation on Hum to install a café, bar and restaurant by 31 December2011, or at all. Hum's position is that although a café, bar and restaurant is a permittedbusiness use of the premises, it is not a mandatory use. Ms Eastwick-Field furthersubmitted that while the Lease does impose, at cl 48, certain obligations on Hum inadvance of it commencing its business, they do not include the installation of a café,bar and restaurant.[27] Ms Armitage's evidence on the issue is that:Speaking to the "Business Use" field in the first schedule, I put the words"Restaurant, Café and Bar" in the "Business Use" terms of the lease.However, I was able to place any necessary definition of our "use" I saw fitand there was certainly no discussion at the time that it was imperative to havea restaurant installed onsite. During lease negotiations we went into detailover our expected use of the site. Prior to signing the lease, we had permissionfrom Mr Ooi to use the property in various different forms (including formarket days, art galas, music events, and workshops) under the umbrella ofits native residential capacity. None of these were to be commercially drivenactivities. Instead, they were to be activities that we would provide as acommunity service within the framework of its "residential capacity" (withinthe District Plan they are known as Ancillary activities). It did not seemrelevant or appropriate to list all of these and other activities under the words"Business Use" in the lease.[28] Ms Eastwick-Field submitted that even if there was an obligation on Hum toinstall a restaurant (which is denied), the Lease does not contain a timeframe withinwhich it must be installed. She noted Ms Armitage's evidence that it remains a featureof Hum's plans for the Property to install a restaurant/café serving organic, local,wholesome food, while people enjoy poetry evenings, workshops or other activities.Hum's position, however, is that work on establishing a restaurant has been affectedby Stylo's pre-contractual misrepresentation that repiling and releveling of thefoundations had been undertaken. (This issue is apparently the subject of separatelitigation). Ms Armitage further says that progressing plans for a restaurant has alsobeen delayed due to the volume of litigation that Stylo has commenced against Hum,which has required extensive time and management resources.[29] The issue of whether the Lease requires the installation of a restaurant is notclear cut. The fact that the specified "Business Use" is "Café, Bar and Restaurant"and that cl 16.1 of the Second Schedule provides that "The Tenant shall not withoutthe prior written consent of the Landlord use or permit the whole or any part of thepremises to be used for any use other than the business use", tends to support Stylo'sinterpretation. However, if installation of a restaurant is required, the time by whichthis was to occur is unclear. Indeed, this is one of the reasons that Mr Parmentersought rectification of the Lease.[30] On the other hand, as set out at [21] above, Stylo cannot unreasonably orarbitrarily withhold or delay its consent to any proposed use of the Property that isreasonably suitable for the premises, and which complies with the ResourceManagement Act 1991. This degree of flexibility in the Lease tends to supportMs Armitage's evidence that the use of the property as a restaurant/café was notcritical to Mr Ooi at the time the Lease was negotiated and that while installation of arestaurant was permitted, it was not mandatory. There is also force in Ms Eastwick-Field's submission that it would be harsh to penalise a tenant for failing to complywith a lease provision that is so unclear that the landlord feels compelled to seekrectification in respect of it.[31] I also have reservations regarding Mr Ooi's evidence that having a restaurantoperate from the Property was of critical importance to him at the time the Lease wasnegotiated. The reasons given for that position are far from compelling. In particular,there is no evidence to support Mr Ooi's contention that having a restaurant installedin the premises would result in a higher market rent being able to be charged at thenext rent review. It could well be that other potential uses of the premises, such asmedical uses (given the proximity to Auckland City Hospital) could command a higherrental.[32] Ms Armitage was not cross-examined on her evidence that she had discussedHum's intended use of the site with Mr Ooi and that, during lease negotiations, shewent into detail regarding Hum's expected use of the site and had permission from MrOoi to use the property for various non-commercially-driven activities, includingmarket days, art galas, music events and workshops. If her evidence is correct, thenthe submission that Hum has been a "bad tenant" (for not installing a restaurant) losesmuch of its force. Rather, Hum has used the Property in exactly the way that itinformed Mr Ooi that it would at the outset of the Lease.[33] There are separate proceedings on foot to determine the issue of whether theLease requires Hum to install a "Café, bar and restaurant". Any substantivedetermination of that issue will have to await the outcome of those proceedings, giventhat the issue appears to turn, at least in part, on disputed facts. It is not appropriate toattempt to determine the issue in the context of the present proceedings, which arelimited in scope. There has been no cross-examination of either Ms Armitage or MrOoi. Although Stylo gave notice in advance of the hearing that it intended to cross-examine Ms Armitage, it ultimately elected not to do so. I am therefore not in aposition to determine issues of credibility or to resolve any seriously disputed facts.This case therefore differs from a number of other s 261 cases where witnesses werecross-examined and the Court was accordingly in a position to resolve disputed factualissues.8[34] Ultimately, I have not been persuaded that Hum is a bad tenant due to its failureto install a restaurant on the Property. It is not clear whether the Lease imposes suchan obligation on Hum at all. If it does, it is not clear what the timeframe is forperformance of that obligation. Further, there may (or may not) be merit in Hum'sargument that it has been unable to perform any such obligation as a result ofmisrepresentations or other misconduct on the part of Stylo. Finally, and perhaps mostsignificantly for present purposes, there is no evidence that the failure to install arestaurant has caused any material prejudice to Stylo.[35] If Stylo is able to prove, in its separate proceedings, that Hum has materiallybreached the Lease by failing to install a restaurant on the premises, then it will beable to seek appropriate relief for the breach at that time. It would be premature,however, to effectively determine the issue in Stylo's favour in the context of thesemuch more limited proceedings, and on the basis of disputed affidavit evidence.8 See for example Sibrad Co Ltd v Kanters, above n 1; and Transform Minerals Ltd v Gordon Wright& Sons Ltd, above n 4.Solvency and payment of rent and outgoings[36] A further reason why Stylo says that Hum is a bad tenant relates to Hum'ssolvency. In particular, Stylo submitted that:(a) Ms Armitage had misrepresented her financial wherewithal from thebeginning of the Lease negotiations; and(b) Hum's current financial status is poor and there is therefore a real riskthat Hum will default in its rent and opex payments if the Lease isrenewed.[37] Hum acknowledged that there have been times in the past when its rent andopex payments have been late, but it has provided evidence that its rent and outgoingsare currently paid up. Ms Eastwick-Field further submitted that the lateness of someprevious payments must be seen in the following context:(a) Hum is principally reliant on fundraising, donations, and volunteers tomeet its rental payments (with some rental income).(b) Due to the approach that Stylo has adopted, including repeatedlitigation and other attempts to remove Hum as a tenant (including inone instance seeking cancellation of the Lease when a rent paymentwas one day late),9 Ms Armitage has been distracted from engaging inthe necessary fundraising activities.[38] It is simply not possible, in the absence of oral evidence or cross-examination,to determine what misrepresentations may have been made (by either party) duringthe Lease negotiations. Nor does focussing on what was or was not said a number ofyears ago particularly assist me in determining whether Hum is a bad tenant now.Rather, the focus must be on the second issue raised by Mr Parmenter, namely theassertion that Hum's current financial status is poor and there is therefore a real riskthat it will default in its rent and opex payments if the Lease is renewed.9 Stylo Medical Services Ltd v Hum Hospitality Ltd [2014] NZHC 2723 at [4].[39] It is well-recognised that it would be inequitable to place a landlord in theposition where immediate defaults by the tenant in paying rent would follow thegranting of relief.10 On the evidence before the Court, however, I have not beenpersuaded that such an outcome is likely here. Hum has provided evidence to theeffect that it is not insolvent and is in a position to meet its financial obligations. Thedeponents of the relevant affidavits (Ms Armitage and Mr James Kidd (an accountantand an advisor to Hum)) were not cross-examined on their evidence. Given Hum'shistory, the prospect of future defaults obviously cannot be entirely excluded. If theyarise, Stylo will be able to pursue its legal remedies at that time. On the evidencecurrently before the Court, however, there does not appear to be an imminent risk ofdefault in the event that relief is granted.Misuse of premises/insurance issues[40] Stylo further submitted that Hum is a bad tenant because it has misused thepremises in the past, by operating a boarding house or visitor accommodation inbreach of the Lease. This is said to have resulted in an abatement notice from theCouncil and the grant of an injunction by the High Court. In addition, Stylo'sinsurance cover was jeopardised.[41] In response, Ms Armitage deposed that Hum is not operating, and has neveroperated, a boarding house. Further, Hum is compliant with a notice to fix issued byAuckland Council under the Building Act 2004. Hum further submitted (and I accept)that there is no evidence before the Court that Stylo's insurance cover is currently atany risk.[42] Sibrad Co Ltd v Kanters11 is one of the few cases in which the Court has notgranted a tenant relief, on the basis of "bad behaviour". In that case, the lessor livedin immediate proximity to the land leased by lessee. Contact with the lessee'semployees was inevitable. The lessee was found to have committed four significantbreaches of the lease, which were, in part, unremedied. In addition, the lessee's10 QT Hospitality Ltd v Oxford Holdings Ltd HC Invercargill CIV-2007-425-178, 11 May 2007at [16].11 Sibrad Co Ltd v Kanters, above n 1.attitude showed a lack of willingness to rectify some breaches, and there was anelement of nuisance, disturbance and damage caused to the lessor's adjacent land.[43] In Transform Minerals Ltd v Gordon Wright & Sons Ltd, while the lessee hadbeen dilatory in performance of its payment obligations under the lease, the Court didnot consider this problem would persist.12 The Court was not persuaded that certainongoing problems in relation to reinstatement of land supported a finding that thelessee was a bad tenant and that it should be denied a renewal of the lease on thataccount.[44] I accept Hum's submission that this case is far removed from the facts ofSibrad. Hum's past breaches appear to have been relatively minor and they have nowbeen rectified. Hum's position is closer to that of the lessee in Transform Mineralsthan the lessee in Sibrad.Relative prejudice to Hum and Stylo[45] The next relevant factor is the relative prejudice to the parties. This requiresme to consider both the prejudice to Hum if the Lease is not renewed, and the prejudiceto Stylo if it is.[46] Hum submitted that it will face significant prejudice if the Lease is notrenewed. In particular, it would lose the benefit of its significant investment in theProperty. The long-term nature of the Lease, the rent-free period, and the obligationon Hum to make the Property habitable were key features of the arrangement reachedbetween the parties. Hum submitted that it was only during the renewed terms thatHum expected to generate sufficient income from its business on site and to receive areturn on its investment in repairs and refurbishment. Further, if the Lease was not tobe renewed, Hum would also lose any benefit it has under the right of first refusalunder cl 49.1 of the Lease.12 Transform Minerals Ltd v Gordon Wright & Sons Ltd, above n 4, at [59].[47] Stylo submitted that, by this stage in the life of the Lease, it expected to havea fully renovated building and surrounds, with a functioning restaurant on site. Dr Ooideposed that:Stylo has about NZD3.6 million of bank debt, supported by my guarantee. Myretirement depends on having a security at Grafton Road, which will supportsuch a level of debt[C]urrently, there is nothing more than an old housewhich is being used as a doss house. It is worth land value only, really, but itis a heritage building and Stylo cannot realise its value until such time as thereis a vibrant refurbished property with a viable restaurant in it, and where therestaurant pays rental according to the vision I had for the place.[48] Mr Parmenter submitted that the prejudice to the lessor from the granting ofrelief, then, is that Stylo's reversion — on 31 January 2033 or sooner (if Hum fails)— will be of the same relative value as the day Stylo entered into the Lease. Stylowill have lost the value of the rent concession, the costs of the resource consent itobtained for the installation of a restaurant, and the time lost in achieving Mr Ooi'svision of the Property being able to support the level of debt he has secured over it.[49] These arguments are predicated to a significant degree on Stylo being correctthat Hum was obliged to install a restaurant in the premises. For the reasons I haveoutlined above, however, I have concluded that determination of that issue is beyondthe scope of these proceedings.[50] In any event, there is no evidence before me as to how (or if) having arestaurant installed in the premises would affect the market rent for the Propertybetween now and 2033. Nor is there any evidence to the effect that if a restaurant hadbeen installed by, say, 2014, the Property would be more valuable 20 years later, in2033, than it would otherwise be. Even if a restaurant was the best use of the Propertynow (and there is no evidence before me that that is the case), it cannot necessarily beassumed that that would still be the case in 20 years.[51] Ultimately, if Stylo succeeds in proving that Hum is or was obliged to install arestaurant on the premises, and has breached that obligation, then Stylo will be entitledto either specific performance or damages. In that event, when the Property reverts toStylo in 2033 (if the Lease runs for the full term), it will either have a restaurant in it,or it will have been appropriately compensated for Hum's failure to install such arestaurant.[52] Reading between the lines of Mr Ooi's affidavit, it appears that his real concernmay be that if the Lease is renewed he will lose out on the commercial opportunity tolease the Property now to a third party, or possibly sell it (without Hum having a rightof first refusal). Those "lost" opportunities, however, are essentially part of thebargain that Mr Ooi entered into when he agreed to a long-term lease of the Propertyto Hum. The very nature of a lease is that for the period in which it is in effect, thelessor is denied the right to take possession of the land it has leased.13 It does notappear that renewal of the Lease will cause any undue or improper prejudice to Stylo.Rather, Stylo (and Hum) will simply be required to adhere to and perform the termsof the bargain that they freely entered into at the outset of the Lease.[53] Turning now to the prejudice to Hum, Ms Eastwick-Field submitted that thiscase is analagous to some extent to Ponsonby Mall Trust Ltd v New Zealand FoodIndustries Ltd. In that case relief was granted because a failure to grant relief wouldhave caused the lessee's business to be "damaged and possibly lost".14 Similarly, inTransform Minerals Ltd v Gordon Wright & Sons Ltd, the Court held that a failure togrant relief would "limit the scope and flexibility" of the lessee's mining operation,and would mean that the significant sums it had spent to enable it to exploit the mineralreserves on the leased land would go to waste.15[54] Hum submitted that its position is similar to the lessee's in Transform MineralsLtd. On its expert's evidence, Hum's total investment in the Property is valued at$694,000. Mr Bruce Nixon, Stylo's expert, estimated the value of Hum's investmentmuch lower, at $94,253 (plus GST). Given the wide disparity in the parties' expertevidence, the Court appointed a quantity surveyor, Mr Patrick Hanlon, (at the requestof Stylo) to provide an expert opinion on the issue. Mr Hanlon estimates the overallvalue of works undertaken by Hum to be $298,000, excluding GST. Given that noneof the experts have been cross-examined, the appropriate course in my view is to rely13 Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd, above n 6, at [47].14 Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd, above n 6, at [41] and [69]–[70].15 Transform Minerals Ltd v Gordon Wright & Sons Ltd, above n 4.on Mr Hanlon's evidence for present purposes, given his independence from bothparties.[55] Hum has likely already received at least some value for its investment inmaking the Property habitable, by way of an initial rent holiday. I note, however, thatHum would have had limited use of the building during a significant portion of therent holiday period, as the remedial works were being undertaken. I therefore acceptHum's submission that it has not yet reached a position where it has received full valuefor its significant investment in the Property, and that it will only be during therenewed term that Hum will generate sufficient income from its business on site toreceive a return on its investment in repairs and refurbishment.[56] Overall, I am satisfied that significant prejudice would be caused to Hum if theLease is not renewed, and that this outweighs any prejudice to Stylo that would arisefrom renewal of the Lease. Hum has committed significant resources to the Propertyon the basis that it was entering into a long-term lease with rights of renewal throughto 2033. It would be materially prejudiced if the Lease was not renewed at this earlystage, due to its oversight in giving notice of renewal.Stylo's motivations and Hum's intentions[57] The next relevant factor is Stylo's motivation for refusing to renew the Leaseand Hum's intentions.[58] The lessor's motivations are not entirely clear. There can be no doubt that itwants to rid itself of Hum as a tenant (as evidenced by the multiplicity of proceedingsStylo has filed). That may be (as Stylo claims) due to Hum's conduct, including itsprevious rental defaults and its failure to install a restaurant. On the other hand, Stylo'sdetermined attempts to force Hum off the Property may be motivated by other factors.For example, Stylo may now regret the terms of the bargain it previously entered intowith Hum, and may believe that it can now secure a more advantageous commercialbargain elsewhere. Stylo's motives are not sufficiently clear that they can factor intothe present analysis.[59] As for Hum's intentions, it appears to be determined to stay in the Property, atleast for now, and pursue the vision of a vibrant community space that it says has beenits aim from the outset of the Lease.[60] Overall, a consideration of Stylo's motivations and Hum's intentions do littleto assist me in determining whether or not Hum should be granted the relief it seeks.Interests of third parties[61] The effect of relief not being granted on third parties can be a factor in decidingwhether to award relief.16[62] Hum submitted that it has third party interests it seeks to protect as a convenorof a social enterprise. A number of third party entities operate out of the Property.Hum submitted that the refusal to renew will not only extinguish Hum's interest in thepremises but also those in the community that Hum seeks to benefit.[63] I give this factor relatively little weight. While there may be some short-terminconvenience to third parties, there is nothing to prevent Hum continuing its activitiesfrom a new venue, if that became necessary.Summary and conclusion[64] It is not in dispute that Hum's failure to provide formal notice renewing theLease was entirely inadvertent. The need to renew the Lease simply slippedMs Armitage's mind. Hum's general conduct, however, was clearly consistent withan intention to renew the Lease and Stylo must have realised that.[65] There are separate proceedings on foot to determine the issue of whether theLease requires Hum to install a "Café, bar and restaurant" in the Property. Anysubstantive determination of that issue will have to await the outcome of thoseproceedings, given that the issue appears to turn, at least in part, on disputed facts. Ihave not been persuaded, however, that Hum is a bad tenant due to its failure to installa restaurant in the premises. It is not clear whether the Lease does impose such an16 Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd, above n 6, at [63].obligation on Hum. If it does, it is not clear what the timeframe is for performance ofthat obligation. Further, there may (or may not) be merit in Hum's argument that ithas been unable to perform any such obligation as a result of misrepresentations orother misconduct on the part of Stylo. Finally, and perhaps most significantly forpresent purposes, there is no evidence that the failure to install a restaurant has causedany material prejudice to Stylo.[66] As with any tenant, there can be no guarantee that Hum will never default onits rent obligations during the renewed term. However, there is no evidence that Humis insolvent and there does not appear to be an imminent risk of default in the eventthat relief is granted. As for other historical breaches of the Lease, some of them arein dispute. The ones that are admitted are relatively minor and have now beenrectified. Hum's position is therefore closer to that of the lessee in Transform Mineralsthan the lessee in Sibrad.[67] Finally, and significantly, I am satisfied that significant prejudice would becaused to Hum if the Lease is not renewed. This significantly outweighs anylegitimate prejudice to Stylo that would result from renewal of the Lease. Hum hascommitted significant resources to the renovation of the Property, on the basis that itwas entering into a long-term lease with rights of renewal through to 2033. It wouldbe materially prejudiced if the Lease was not renewed at this stage due to a simpleoversight on its part in not giving notice of renewal.[68] Taking all of these matters into account, I am satisfied that it is in the interestsof justice to grant Hum's application for relief. It necessarily follows that Stylo'ssummary judgment application for recovery of the Property must be declined.Result[69] I order that Stylo is required to enter into a new lease with Hum for a furtherterm of eight years from 1 February 2017 (plus one further right of renewal for eightyears) and otherwise upon, and subject to, the covenants and agreements in the Lease.[70] Stylo's application for recovery of the Property is dismissed.[71] Given Hum's success, costs would normally follow the event. However, as Ihave not heard full submissions on costs, leave is reserved to file memoranda if costscannot be agreed between counsel. Any memorandum on behalf of Hum is to be filedby 27 April 2018. Any response from Stylo is to be filed by 4 May 2018. A decisionon costs will then be made on the papers.____________________________Katz J