Aladdins Motor Inn Limited v Bowcorp Holdings Limited
[2013] NZHC 2302
•6 September 2013
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV 2011-454-000412
[2013] NZHC 2302
BETWEEN ALADDINS MOTOR INN LIMITED
Applicant
AND
BOWCORP HOLDINGS LIMITED
Respondent
| Hearing: | 5 September 2013 |
Appearances: | J McGuire for the Applicant |
Judgment: | 6 September 2013 |
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
06.09.13 at 4:30pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
ALADDINS MOTOR INN LIMITED v BOWCORP HOLDINGS LIMITED [2013] NZHC 2302 [6 September 2013]
[1] The applicant (Aladdins) applies for an order setting aside a statutory demand served on 22 November 2011.
[2] Aladdins was the lessee and Bowcorp the lessor of motel premises in Palmerston North. Earlier on 14 June 2011 Bowcorp issued a statutory demand for the amounts owed to it under the lease. Aladdins applied to set the demand aside on grounds that:
(a)Aladdins had a counterclaim, set off or cross-demand that exceeded the amount of the demand;
(b)It was just and equitable that the demand be set aside in all of the circumstances.
[3] In response Bowcorp relied upon a clause of the parties’ lease which precluded the setting up of any alleged counterclaim, set off or cross demand. The issue raised upon that statutory demand was whether the lease clause operated to hold Aladdins liable to make lease payments notwithstanding the claims raised against Bowcorp.
[4] By its decision dated 16 December 2011 the Court concluded that the lease clause was clear that disputes were to be settled by way of arbitration and where matters were submitted to arbitration, payment of rent must continue. The application upon that setting aside application was dismissed.
[5] Five days later Bowcorp issued another statutory demand for the further amounts that had gone unpaid since the June demand had issued. Aladdins appealed the Court’s decision of 16 December 2011 and as well filed its current application to set aside the December demand.
[6] By its decision dated 14 November 2012 the Court of Appeal confirmed that the lease clause required disputes to be settled by arbitration and where matters were referred to arbitration, payment of rent must continue. The Court of Appeal also concluded that no good reason had been advanced by Aladdins to suggest the High
Court was wrong in not exercising the residual discretion available under s 290(4)(c) to set aside the demand.
[7] By the applicants’ amended application to set aside the December statutory demand Aladdins challenged the legitimacy/validity of the lease cancellation and re- entry process.
[8] As well there is a fresh counterclaim relating to the value of chattels that Bowcorp took possession of upon re-entry of the leased premises. In that regard Aladdins says there is a material misstatement in the amount demanded in the December demand.
[9] As to the latter claim it must fail for the same reason that claims of set off or counterclaim were previously rejected. Those are matters which are properly subject for reference to arbitration. The requirement for payment of rent subsists notwithstanding there is a dispute about claims of the value of chattels taken over by Bowcorp when re-entry was affected.
[10] Also it does seem that the parties have previously agreed about the value of those chattels which agreed value was taken into account and identified accordingly in the calculation which comprised the December demand.
[11] The primary target of this setting aside application concerns the process by which Bowcorp affected re-entry. However, clearly this too is a matter of a dispute which ought to be referred to arbitration and no counterclaim or set off or cross demand will prevent Bowcorp’s entitlement to the payment which is identified as due by the December demand.
[12] The Court considers in any respect that the validity of the re-entry process cannot be challenged.
[13] Notice had issued pursuant to ss 245 and 246 of the Property Law Act 2007 (even though the reference to s 245 in the heading of the notice was clearly inadvertently omitted).
[14] The notice warned of the extent of rent unpaid and provided details of breaches of other covenants. It warned that there may be cancellation and re-entry of the leased premises if the default continued.
[15] Aladdins failed to remedy the breaches and subsequently were served on 5 October 2011 with notice of re-entry. That notice clearly indicated that the lease was being cancelled and contemporaneously re-entry was being affected.
[16] Mr McGuire submits that re-entry and cancellation are two distinct events and ought to occur independently of each other. That submission is not correct. Moreover it is clear that Aladdins’ representatives were compliant with the requirement to vacate – even if they may have been reluctant to do so.
[17] Mr McGuire submits a Court order was required in the circumstances. That submission also is not correct. Cancellation of a lease can occur upon peaceable re- entry of the land – as clearly occurred in this case.
[18] Mr McGuire submits that clause 3.5 of the lease required cancellation of the lease to be independent of re-entry of the repossess premises. That submission is not correct for that clause clearly contemplates the two events occurring contemporaneously.
[19] For the applicants it is argued that because the lease in question was a registered lease such was not cancelled by re-entry until the notice of cancellation was noted on the certificate of title.
[20] The Court does not accept that submission either. Unless there is clear agreement to the contrary, then requirements for registration of a cancellation of lease do not interfere with contracts and equities between parties themselves. Rather requirements for registration are to permit other parties to deal with persons who appear as registered proprietors.
[21] In this case the parties’ lease clearly permits Bowcorp to act as it did by delivery of notice of demand and by subsequent delivery of notice of cancellation and re-entry.
Conclusions
[22] To the extent that the amended setting aside application identifies issues concerning chattels, those clearly must be resolved pursuant to the terms of the lease by which no right of counterclaim set off or cross demand shall delay an obligation to pay rent, insurance, rates and operating costs.
[23] Therefore there is nothing in principle raised by this new objection that has not already been determined by prior Court decisions affecting the parties.
[24] The claim of the invalidity of the cancellation of the lease provides some novelty but is in reality also a claim about lease terms. The Property Law Act 2007 provides a code to govern the process by which parties seek to enforce their contractual rights. There is no requirement for recourse to court order where appropriate notices have been served and re-entry has been affected peacefully, as occurred in this case.
[25] Regardless this issue too is one which gives rise to a counterclaim and in as much as it does it is not a dispute which affects concurrent obligations to pay rent.
Other considerations
[26] Matters raised upon the December demand appear for the first time in the amended setting aside application nearly two years after the premises were re- entered. Aladdins have taken no steps meanwhile to refer the matter to arbitration, as the lease required.
[27] Furthermore it is clear from s 290 of the Companies Act 1993 that the applicant bears an onus to prove there is a substantial dispute about whether or not the statutory demand debt is owed. That onus has not been satisfied in this case.
Aladdins’ counterclaims and set off claims are inadequately supported by reliable evidence or calculations of sums of money involved.
Judgment
[28] The setting aside application is dismissed.
[29] As permitted by the lease Aladdins is liable, and the Court directs it to pay all of the respondent’s reasonable legal costs as between solicitor and client of Bowcorp and/or incidental to them enforcement or the attempted enforcement by Bowcorp of its lessor rights, remedies and powers, including the costs upon this application. In the event of a disagreement about the extent of those costs payable by Aladdins, the matter is to be referred to the Court for determination upon the papers.
[30] The time for compliance with the statutory demand is extended until 4:00pm on 27 September 2013.
[31] The matter is adjourned for call in the liquidation list at 10:00am on 3 October 2013 for consideration of the making of an order pursuant to s 291(1)(b) of the Companies Act 1993.
Associate Judge Christiansen
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