All Metals Trading Company Limited v Eagle Wire Products Limited

[2013] NZHC 2198

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-004152 [2013] NZHC 2198

BETWEEN

ALL METALS TRADING COMPANY

LIMITED Plaintiff

AND

EAGLE WIRE PRODUCTS LIMITED Defendant

CIV-2012-404-004154

BETWEEN  ALL METALS TRADING COMPANY LIMITED

Plaintiff

ANDTAWIL HOLDINGS LIMITED Defendant

Hearing:	5 June 2013
Appearances:	P Dalkie for the Plaintiff AHJ Commons for the Defendants
Judgment:	28 August 2013

RESERVED JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Wednesday, 28 August 2013 at 11.30 am pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Counsel/Solicitors:

P Dalkie, Barrister, Auckland

AHJ Commons, Barrister, Auckland

ALL METALS TRADING COMPANY LIMITED v EAGLE WIRE PRODUCTS LIMITED [2013] NZHC 2198 [28 August 2013]

Introduction

[1]      Wire By Design Limited (Wire by Design) was a tenant of the plaintiff’s

premises at 7-9 Alfred Street, Onehunga, pursuant to an agreement to lease dated 1

December 2010.  The defendants were named in the agreement to lease as two of three guarantors.  When Wire By Design went into receivership and liquidation on 9

May 2012, it owed the plaintiff $405,577.01 for unpaid rent and outgoings.

[2]      The plaintiff served statutory demands upon the defendants to recover the debt owing by Wire By Design.   The statutory demands remained unpaid.   The plaintiff therefore filed applications for their liquidation.  The defendants responded with applications for leave to file statements of defence out of time and to stay the liquidation proceedings.   Associate Judge Christiansen dismissed the defendants’ application for a stay of the liquidation proceedings.1   He did this on the basis that it could not be genuinely disputed that the defendants were liable as guarantors to pay Wire By Design’s debt.

[3]      The defendants now apply for review of the decision of Associate Judge Christiansen dated 6 March 2013.  The approach to an application for review of an Associate Judge’s decision is, essentially, appellate.2   An applicant has the burden of persuading the Court that the decision was wrong – that it rested on unsupportable findings of fact and/or applied wrong principles of law.3   The High Court’s role in a review of an Associate Judge’s decision is to make its own assessment as to whether the original decision was wrong.4

Factual background

[4]      Wire By Design was incorporated on 4 November 2010, for the purpose of purchasing the business and assets of Faulkner Collins Limited (Faulkner Collins), a wire and tube manufacturing company.  The business and assets of Faulkner Collins

were purchased by Wire By Design on 22 November 2010.  Faulkner Collins then

1      All Metals Trading Company Ltd v Eagle Wire Products Ltd [2013] NZHC 425.

2      High Court Rules, r 2.3(4).

3      Andrew  Beck  and  Others  McGechan  on  Procedure  (online  looseleaf  ed,  Brookers)  at

[HRPt2.3.02(1)(a)].

4      Burmeister v O’Brien [2008] 3 NZLR 842 (HC) at [29].

went into receivership on 23 November 2010 and liquidation on 24 November 2010. Wire By Design continued to operate from leased premises formerly occupied by Faulkner Collins at 146 Stoddard Road, Mt Roskill, up to 15 December 2010.  The lease was however terminated by the Crown from 16 December 2010, using its compulsory powers as the land was required for a motorway extension. Accordingly, the production plant and equipment was relocated to the plaintiff’s premises at 7-9

Alfred Street, Onehunga, which had been leased by Wire By Design in accordance with the agreement to lease dated 1 December 2010.

[5]      The agreement to lease was in a standard form approved by the Auckland District Law Society.  The landlord was All Metals Trading Company Limited (All Metals) while the tenant was Wire By Design.   The guarantors were Eagle Wire Products Limited (Eagle Wire), Tawil Holdings Limited (Tawil) and Hadley John Wright.  One of the two directors of All Metals, Simon Nils Westgaard, signed the agreement to lease as the landlord, while Mr Wright signed as both the tenant and the guarantor.  Mr Wright is the sole director of Wire By Design, Eagle Wire and Tawil as well as being one of the guarantors personally.  Although there is provision for signature on behalf of the landlord, the tenant and the guarantor, there is no provision in the standard form for witnesses to the signatures, nor is there any direction to specify the capacity in which a person was signing.

[6]      The agreement to lease envisaged  that  a formal deed  of lease would  be entered into between the parties.  Clause 4 of the agreement to lease stated:

4.0      Lease

4.1The Tenant shall enter into a formal lease with the Landlord to be prepared by the Landlord’s solicitor at the cost of the Tenant, using the then current edition of the Auckland District Law Society Deed of Lease form amended in accordance with the provisions of this Agreement (“Lease”).

4.2Unless otherwise set out in the Third Schedule, it is agreed that the Landlord’s fixtures, fittings and chattels contained in the premises as more particularly described in the Third Schedule are in a good state of repair.

4.3Notwithstanding that the Lease may not have been executed, the parties shall be bound by the terms, covenants and provisions contained in this Agreement and in the Lease as if the Lease had been duly executed.

[7]      A deed of lease was sent by the plaintiff’s solicitors to Wire By Design’s solicitors but Wire By Design refused to execute it.   Nonetheless, cl 4.3 of the agreement to lease incorporated the terms of the deed of lease “as if the Lease had been duly executed”.

[8]      There  are  two  provisions  in  the deed  of lease  which  are of importance. Firstly, cl 1.1 states in part:

1.1...All rent shall be paid without any deductions or set-off by direct payment to the Landlord or as the Landlord may direct.

Secondly, as to removal of the tenant’s fixtures, fittings and chattels, cl 31 provides:

31.1THE Tenant may at any time before and will if required by the Landlord at the end or earlier termination of the term remove all the Tenant’s fixtures fittings and chattels and make good at the Tenant’s own expense all resulting damage and if not removed within 5 working days after the date of termination ownership of the fixtures fittings and chattels may at the Landlord’s election pass to the Landlord or the Landlord may in a proper and workmanlike manner remove the same from the premises and forward them to a refuse collection centre.

31.2The cost of making good resulting damage and the cost of removal shall be recoverable from the Tenant and the Landlord shall not be liable to pay any compensation nor be liable for any loss suffered by the Tenant.

[9]      The agreement to lease dated 1 December 2010, was the fourth version of the agreement.  There were three earlier versions in August, September and November

2010.  In each case the landlord was All Metals.  However, the tenant changed twice. It was originally Eagle Wire, then Faulkner Collins, before the final version of the agreement inserted a new company, Wire By Design, as tenant.  In the latter three versions, Eagle Wire, Tawil and Mr Wright (limited to 12 months rent and outgoings) were named as guarantor, while the first version named Faulkner Collins, Tawil and Mr Wright (limited to 6 months rent and outgoings) as guarantor.   Mr Wright had signed each version of the agreement both as tenant and as guarantor.  In addition, there was an option to purchase the premises associated with each agreement to lease.    This  too  was  signed  by Mr Wright  variously on  behalf  of  Eagle Wire, Faulkner Collins and Tawil.   Set out below is a table showing details of the four different versions of the agreement to lease and the associated option to purchase:

Date	August 2010	30 September 2010	16 November 2010	1 December 2010
Landlord	All Metals	All Metals	All Metals	All Metals
Tenant	Eagle Wire	Faulkner Collins	Faulkner Collins	Wire By Design
Guarantor	Faulkner Collins, Tawil and Mr Wright (limited to 6   mos   rent   & outgoings)	Eagle Wire,   Tawil and Mr Wright (limited to 12 mos rent & outgoings)	Eagle Wire,    Tawil and Mr Wright (limited to 12 mos rent & outgoings)	Eagle Wire, Tawil and Mr Wright (limited to 12 mos rent & outgoings)
Signed  by  the Landlord	Mr Westgaard	Mr Westgaard	Mr Westgaard	Mr Westgaard
Signed  by  the Tenant	Mr Wright	Mr Wright	Mr Wright	Mr Wright
Signed  by  the Guarantor	Mr Wright	Mr Wright	Mr Wright	Mr Wright
Option         to purchase	Eagle  Wire (signed by Mr Wright on behalf of Eagle Wire)	Faulkner Collins (signed by Mr Wright on behalf of Faulkner Collins)	Faulkner Collins (signed by Mr Wright on behalf of Faulkner Collins)	Tawil (signed by Mr Wright on behalf of Tawil)

[10]     The common denominator in respect of the four companies with whom the plaintiff was dealing was Mr Wright, who is the sole director of all of them.  The four  companies  are  all  ultimately  controlled  by  Wrights  Investments  Limited (Wrights Investments), of which Mr Wright is again the sole director.  Set out below

is a table of the companies of which Mr Wright is the sole director:5

Wrights Investments	Tawil Holdings	Eagle Wire	Faulkner Collins	Wire By Design
Incorporated	5 Nov 2001	30       Oct 2008	23 Dec 1954	15 May 1931	4    Nov     2010 (incorporated  for purpose           of purchasing business & assets of        Faulkner Collins)
Sole Director	Mr Wright	Mr Wright	Mr Wright	Mr Wright	Mr Wright
Shareholder	Mr Wright, Mrs Wright & Mr Hibbell as trustees of HLF Family Trust (100 shares)	Wrights Investments (433,869  – 58.26%   of 743,869 shares)	Tawil Holdings (54,560 shares)	Tawil Holdings (20,000 shares)	Tawil     Holdings (1 share)
Status	Registered	Registered	Receivership (7  Aug  2013) Liquidation (7 Aug 2013)	Receivership (23 Nov 2010) Liquidation (24 Nov 2010)	Receivership (9 May 2012) Liquidation (9 May 2012)

5      Geoffrey Michael Revill was also a director of Tawil Holdings Limited from its incorporation until 1 May 2011.

[11]     Four months after the agreement to lease, on 1 April 2011, Wire By Design executed a general security agreement in favour of Wrights Investments.  Mr Wright annexes a director’s resolution to his affidavit sworn on 12 September 2012, which is in the following terms:

WELTAI INVESTMENTS LIMITED TAWIL HOLDINGS LIMITED WRIGHTS INVESTMENTS LIMITED WIRE BY DESIGN LIMITED

EAGLE WIRE PRODUCTS LIMITED

RESOLUTION OF DIRECTORS OF EACH OF THE ABOVE COMPANIES.

Hadley Wright having declared his interest as a director and also a shareholder of Weltai Investments Limited (“Weltai”); and Tawil Holdings Limited (“Tawil”); and a director of Wire By Design Limited; and Eagle Wire Products Limited; RESOLVED as directors resolutions that:

1.        Weltai sell the advance it originally made to Tawil in December

2008, for the sum of $508,830; and

2.Wrights Investments Limited (“Wrights Investments”) purchase that advance from Weltai for $508,830;

3.Weltai, Wrights Investments and Tawil enter into a new Deed of Assignment of Loan Advance and Associated Securities; Re- documentation of Loan Advance document, to record the assignment of the loan and the subsequent amendment of its terms.

4.Eagle Wire Products Limited and Wire By Design Limited provide guarantees to Wrights Investments of the loan to Tawil which it has purchased; and

5.        Wire By Design Limited grant a new General Security Agreement to

Wrights Investments in support of its new guarantee obligations;

6.That  all  companies  involved  in  this  transaction  instruct  their accountants to prepare accounts which accord with the financial treatment of the assignment of loan transaction described in clause 1 of the Deed of Assignment document; and take any other consequential steps necessary to implement the overall transaction for the assignment of the loan and its associated securities; and the taking of new guarantees and a new GSA by Wrights Investments.

[12]     On 26 July 2011, the Commissioner of Inland Revenue filed an application to place Wire By Design into liquidation because it had not met its taxation liabilities.

[13]     On 26 September 2011, the plaintiff’s solicitors wrote to the solicitors acting for Wire By Design enclosing a draft deed of lease and general security agreements over Wire By Design, Eagle Wire and Tawil which were required to be signed in terms of the agreement to lease dated 1 December 2010.   At this stage, Wire By Design was also in breach of its obligations to pay rent and outgoings to the plaintiff. Wire By Design refused to sign the deed of lease or the general security agreement despite having signed a general security agreement in favour of its controlling shareholder, Wrights Investments, on 1 April 2011.

[14]     When Wire By Design went into receivership and liquidation on 9 May 2012, the plaintiff’s solicitors negotiated a limited license to occupy the premises with the solicitors acting for the receiver of Wire By Design.   The terms agreed were as follows:

1.The tenancy runs from 9 May 2012 to the date the premises are vacated at a weekly rent/fee of $6,000 plus GST.

2.At the end of the tenancy the premises (yard and building) will be left in a good, clean and tidy condition.

3.Before any fixed items of equipment/chattels are removed you will obtain written consent.  Consent will not be unreasonably withheld if the removal of the item will cause no damage to the premises or arrangements  are  in  place  to  make-good/reinstate  on  the  terms agreed in your email today.

4.The  make-good/reinstatement  obligation  will  include  the  plastic coating machine but not the flue which our client accepts will remain intact but the end from which the machine is received will be put in a tidy finished condition.

5.Access will be subject to a reservation to our client and its agents to enter and inspect the premises at any time and to show the premises to prospective tenants and to put up signage.

6.        Either party shall give 10 working days written notice to vacate.

7.You will keep us appraised of progress with the Receivership and in particular we are to be advised as soon as you become aware of any matters that may delay or prejudice payment to our client.

8.While we do not require a formal tenancy/occupation agreement, the terms of occupation except to the extent modified in herein will be on generally accepted terms in a commercial occupation license prepared by lawyers in Auckland.

[15]     The purpose of the license to occupy was to enable the receiver, who had been appointed by Wrights Investments, to take steps to sell Wire By Design’s plant and equipment. The receiver guaranteed the rental payment of $6,000 per week only to the extent of the secured assets to be sold, on the basis that the plaintiff would be paid in priority to all other claims on those assets.

[16]     In accordance with the terms of the license to occupy, 10 working days notice of vacation of the premises was given on Friday 27 July 2012, which expired on Friday 10 August 2012.  The receiver ceased to occupy the premises on or about that date and the plaintiff resumed occupation of its premises.

[17]     After  the  plaintiff  filed  applications  to  liquidate  Eagle  Wire  and  Tawil, counsel  acting for the defendants  wrote to  the solicitors  acting for the plaintiff inviting them to withdraw its applications on two bases:

(a)      The agreement to lease appeared to have been drafted on the basis that Eagle Wire, Tawil and Mr Wright would each be guarantors of Wire By Design’s obligations.  However, the agreement was only signed by a  single  guarantor,  being  Mr Wright.    There  was  no  evidence  to suggest that Eagle Wire or Tawil executed the agreement to lease in any capacity.   It followed that there was no agreement on behalf of Eagle Wire or Tawil to guarantee Wire By Design’s obligations pursuant to the agreement to lease.

(b)In the course of the premises being fitted out for Wire By Design’s tenancy,  significant  works  were  undertaken  in  relation  to  both  a factory  fit  out  and  an  electrical  fit  out.    These  fit  outs  were  the property of Wire By Design and were secured by the general security agreement executed in favour of Wrights Investments to the extent that those fit outs remained at the premises.  It was apparent that the fit outs had been treated by the plaintiff as its property and had been dealt with as part of the premises available to be leased to the new tenant.   That was a denial by the plaintiff of the interest or title of Wire By Design, which amounted to conversion.   The measure of

damages for conversion was generally the value of the goods themselves.  To the extent that any of the fit outs had been removed, conversion was also found.   The value of the factory fit out was

$741,571, which exceeded the amount of the unpaid rent and outgoings.

[18]     In his affidavit sworn on 23 November 2012, Mr Wright states that, following discussion and agreement with the receiver of Wire By Design, he confirms that to the extent that may be necessary in relation to the factory fit out, the receiver of Wire By Design and/or Wrights Investments assigns to Eagle Wire/Tawil interest in the same, sufficient to offset the current claims by All Metals against them.

Decision of Associate Judge Christiansen

[19]     Associate   Judge   Christiansen   noted   that   there   were   two   issues   for determination:

(a)       Whether Eagle Wire and Tawil guaranteed Wire By Design’s debt to

the plaintiff.

(b)If they had, whether there was available to them a right of set off due to the plaintiff converting Wire by Design’s property in the factory and electrical fit outs when the plaintiff resumed control of the premises on Wire By Design’s liquidation.

[20]     As to the first issue, the Judge noted Mr Wright’s evidence that he signed the agreement to lease as a guarantor only in his name and in his personal capacity and not on behalf of Eagle Wire or Tawil.  The Judge then referred to the case of Vuletic v Contributory Mortgage Nominees Ltd,6  which was relied upon by counsel for the defendants.   Counsel submitted on the basis of Vuletic that there is a presumption that if a person signs a document without identifying that he does so on behalf of a

company, then he signs for himself alone and not for a company.

6      Vuletic v Contributory Mortgage Nominees Ltd (2006) 7 NZCPR 552 (CA).

[21]   The Judge commented however that there was a need for an objective assessment of the factual circumstances and there may be proper reason for being wary of Mr Wright’s contention that he only signed for himself and not on behalf of Eagle Wire and Tawil.   The Judge then noted the four different versions of the agreement to lease, the first of which was noted as commencing on 16 August 2010. He  then  referred  to  the  evidence  of  one  of  the  directors  of  the  plaintiff, Mr Westgaard, who stated that Mr Wright asked him to change the tenant from Eagle Wire, as specified in the first agreement to lease, to Faulkner Collins as specified in the second agreement to lease.  Mr Westgaard agreed to this, provided Eagle Wire and Tawil became guarantors along with Mr Wright.  This evidence was not disputed and it could therefore be assumed that Mr Wright had authority to offer Eagle Wire as a guarantor.  The Judge also noted that on 1 December 2010, Mr Wright signed an option to purchase the premises on behalf of Tawil.   This option to purchase accompanied the fourth and final version of the agreement to lease.

[22]     The Judge then referred to the lack of any notation made by Mr Wright that he was signing only for himself and not for Eagle Wire or Tawil.  The agreement to lease also provided that the three guarantors were jointly and severally liable.  The Judge found that in this case there was no evidence to show that when signing as a guarantor, Mr Wright was entering into a personal commitment only, in contrast to those occasions when he signed in his capacity as the sole director of the companies concerned.   The Judge  stated  that  in  this  case  there was  sufficient  evidence  to conclude that Mr Wright did sign in his capacity as the sole director of the tenant and

as the sole director of the guarantors, Eagle Wire and Tawil.7   He did this just as he

clearly  did   so  when   signing  options  for  purchase  of  the  premises,  which accompanied the agreements to lease.

[23]     As to the second issue of conversion, the Judge commented that when the premises  were  vacated  on  or  about  10 August  2012,  the  receiver  removed  the chattels she chose to take.  Mr Westgaard, for the plaintiff, confirmed that in relation to the factory fit out, if it was not taken by the receiver, the plaintiff either disposed

of it as rubbish or retained it.

7      There was however at that time a second director of Tawil Holdings Limited, Geoffrey Michael

Revill, who resigned with effect from 1 May 2011.

[24]     The Judge noted that while Wire By Design was now in liquidation, it was clear that the lease had ended on 9 May 2012.  In accordance with the agreement to lease, the parties agreed to be bound by the standard terms of the Fifth Edition of the Auckland District Law Society Deed of Lease, clause 31.1 of which provided for disposal of a tenant’s chattels upon termination of the lease.  The Judge noted that, on the same day, Wrights Investments appointed a receiver to act in its interests pursuant to a general security agreement held by Wrights Investments over the fit outs.  The receiver vacated the premises on or about 12 August 2012, by which time the receiver had by auction arranged for the sale of items subject to Wrights Investments’ security.  The Judge assumed that the receiver had by then satisfied she had attended to her obligations on behalf of Wrights Investments.  The Judge noted that the defendants’ claims in conversion were premised upon evidence of the value of the fit outs as provided by records of the actual cost to install them.  He noted, however, that the evidence did not clearly identify a proper value for the property comprised in the fit outs and which, if any, was not sold or otherwise disposed of by the receiver.

[25]     The Judge concluded that whatever factory or electrical fit out was retained by the plaintiff was properly acquired by it pursuant to the provisions of cl 31.1 of the standard deed of lease and notwithstanding the arrangements with the receiver, the plaintiff was always entitled to retain as its property the fixtures, fittings and chattels which the receiver did not retain on behalf of Wrights Investments.   The Judge was of the view that the unsold surplus had already become the plaintiff’s property  and  if  there  was  an  issue  regarding  the  extent  to  which  the  receiver recovered property on behalf of Wrights Investments, then that was a matter between the receiver and Wrights Investments.

[26]     The Judge also found that there was no reliable evidence of the value of the factory fit out property which was not recovered on behalf of Wrights Investments. In light of the fact that it could be assumed that the receiver believed she recovered as much as she could on behalf of Wrights Investments, then it must also be assumed that what was left was of far less value than the amount for which the plaintiff now seeks to recover by way of unpaid rent.

[27]     The  application  for  a  stay  of  the  liquidation  proceedings  was  therefore refused on the basis that Eagle Wire and Tawil were unable to satisfy Associate Judge Christiansen that they had a strong prima facie case disclosing the existence of a genuine dispute between the parties.

Discussion

Guarantee

[28]     Mr Wright states that he signed the agreement to lease as guarantor only in his name and in his personal capacity.  He states that he did not intend and, in any event, was not authorised to execute the agreement to lease on behalf of either Eagle Wire or Tawil as guarantor.  He confirms that no company resolutions were executed by Eagle Wire or Tawil in relation to providing a guarantee under the agreement to lease.

[29]     Mr Wright does not however provide evidence of his authorisation or any company resolutions in relation to his signature of the four versions of the agreement to lease as a tenant in the name of Eagle Wire, Faulkner Collins (x 2) or Wire By Design.   He also does not provide evidence of his authorisation or any company resolutions in relation to his signature of the four versions of the options to purchase in the name of Eagle Wire, Faulkner Collins (x 2) or Tawil.  He was however the sole director of each company, except Tawil.

[30]     There is no suggestion that Wire By Design was not bound by Mr Wright’s signature as tenant, notwithstanding the absence of evidence of his authorisation or any company resolution.

[31]     Mr Wright acknowledges that the agreement to lease anticipated that a deed of lease would be executed.  He states that that did not occur because the plaintiff’s solicitors required that in addition to the lease, a general security agreement should be executed by Eagle Wire and Tawil.   That requirement was however not novel. The agreement to lease signed by Mr Wright, on behalf of Wire By Design as tenant, required it.  Clause 8.1 provided:

8.1      The parties agree as follows:

...

(ii)      The obligations of the Tenant and the guarantees of Eagle Wire Products Limited and Tawil Holdings Limited shall be secured by a General Security Agreement over those companies present and after acquired personal property.

[32]     This  was  never  done.    However,  instead  of  granting  a  general  security agreement to the plaintiff landlord, the tenant, Wire By Design, granted a general security agreement to Wrights Investments, its controlling shareholder on 1 April

2011.  Counsel was unable to advise me whether any money changed hands at the time and did not explain how Wire By Design, which was only incorporated on 4

November 2010, benefited from providing a guarantee to Wrights Investments of the loan to Tawil it had purchased.   It appears to me that Mr Wright entered these arrangements at a time when he was, or should have been, aware that Wire By Design  was  obliged  to  grant  the  plaintiff  a  general  security agreement  over  its property in accordance with the agreement he had signed on 1 December 2010, on behalf of Wire By Design as tenant.

[33]     Although Mr Wright states that Eagle Wire and Tawil were not in a position to and had not agreed to provide general security agreements over their assets, those companies were also required by cl 8.1 to grant the plaintiff general security agreements over their present and after acquired property.

[34]    I am of the view that in the particular circumstances of this case, any presumption that Mr Wright signed as guarantor in his personal capacity only is displaced.  He led Mr Westgaard to understand he had the ability to commit Eagle Wire, Tawil, Faulkner Collins and Wire By Design to binding legal obligations.  He signed four different versions of the agreement to lease and associated options to purchase in exactly the same way whether he was signing for himself or on behalf of one of the companies of which he was a director.  Mr Westgaard had agreed with Mr Wright that the name of a newly incorporated company, Wire By Design, could be  entered  into  the  agreement  to  lease  as  tenant  only  on  the  basis  that  he (Mr Wright), Eagle Wire and Tawil guaranteed the lease.  There is no evidence that Mr Wright advised Mr Westgaard when he signed the agreement to lease in front of

him as tenant and guarantor, that he was signing as guarantor only in his personal capacity and not on behalf of Eagle Wire and Tawil.  In my view, Mr Wright had an obligation to do so if that was in fact the case because of the course of his previous dealings with Mr Westgaard.

[35]     The defendants have therefore not met the burden of persuading me that Associate Judge Christiansen was wrong to conclude that Mr Wright signed the agreement to lease as guarantor not only in his personal capacity but also on behalf of Eagle Wire and Tawil.

Conversion

[36]     It is accepted that the lease was terminated in terms of cl 28.1(d) of the deed of lease when Wire by Design went into liquidation on 9 May 2012 and the plaintiff re-entered the premises.  The plaintiff then negotiated a separate licence to occupy the premises with the receiver of Wire by Design which itself expired on 10 August

2012.

[37]     It is also accepted that the factory fit out and electrical fit out were the property of Wire by Design.  The fit outs clearly come within the meaning of the words “fixtures, fittings and chattels” in terms of cl 31.1.  Clause 31.1 permitted the tenant to remove all its fixtures, fittings and chattels at any time before termination of the lease.  It also obliged the tenant to remove all its fixtures, fittings and chattels if required by the landlord at the end or earlier termination of the lease.  Clause 31.1 also provided that if not removed within five working days after the date of termination, ownership of the fixtures, fittings, and chattels may at the landlord’s election pass to the landlord or they may be removed and taken to a refuse collection centre.

[38]     The key question is whether cl 31.1 continued to operate after termination of the lease to regulate what would happen to Wire by Design’s fixtures, fittings and chattels.

[39]     The defendants accept that had Wire By Design vacated the premises and not removed its fixtures, fittings and chattels within five working days, the plaintiff

“might assert” cl 31.1 in support of taking both the factory fit out and the electrical fit out.  However, they say that is not what occurred.  On 9 May 2012, the receiver took possession and control of Wire By Design’s assets and commenced occupation of the premises that day, on terms later agreed with the plaintiff.   The defendants submit that the licence to occupy the premises negotiated between the plaintiff and the receiver of Wire By Design specifically excluded the terms of the previous lease, including cl 31.1.

[40]     With respect, I disagree.  The termination of the lease under cl 28.1(d) was specifically without prejudice to the rights of either party against the other.   The parties to the licence to occupy were different to the parties to the lease.  While the receiver of Wire By Design did not adopt or novate the lease, the license to occupy could and did co-exist with the residual provisions of the lease which had been terminated. As the solicitor for the receiver stated in an e-mail dated 18 June 2012:

...the licence cannot be based on previous lease terms as this interim arrangement is mere storage and display for sale (different purpose and most terms do not apply) by an entity different from the previous lessee, and the two must not be confused.

[41]     The receiver could not and did not seek to modify or change the contractual relationship between the plaintiff and Wire By Design in the form of the lease. Instead, she entered into a completely new agreement with the plaintiff which did not incorporate any of the provisions of the lease, including cl 31.1.   The license to occupy did not “exclude” the terms of the previous lease, including cl 31.1, as the word “exclude” is used by the defendants to mean “no longer of any effect”.  Clause

31.1 was still in effect between the parties to the lease.

[42]     The defendants say that when the receiver ceased occupying the premises on or about 10 August 2012, the factory fit out and the electrical fit out was still in place.  They also submit that there was no provision in the licence to occupy that then allowed the plaintiff to take possession on ownership of the fixtures, fittings and chattels owned by Wire By Design.  I agree that there was no provision in the licence to occupy.  There was however a specific provision in the lease that allowed it to do so and that was cl 31.1.

[43]     I am therefore of the view that the plaintiff did not convert the fit outs when it either assumed provision and ownership of the fit outs or removed them from the premises and forwarded them to a refuse collection centre.

[44]     Following the termination of the licence to occupy, the plaintiff allowed the Crown to remove the electrical fit out on the basis of a specific security deed entered into between the Crown and Wire By Design in December 2010.  This was part of the arrangements made when the Crown compulsorily acquired the land formerly leased by Faulkner Collins.

[45]     In these proceedings, the defendants claim that the specific security deed was not valid because it was not in accordance with the Agreement for Compensation Pursuant to the Public Works Act 1981.  This agreement was entered into between the Crown and Wire By Design in December 2010.  The defendants submit that the receiver of Wire By Design is therefore allowed to raise a set-off, cross claim or counter claim against the amount claimed by the plaintiff in terms of unpaid rent. As noted earlier, the receiver of Wire By Design and Wrights Investments have agreed to the extent that may be necessary in relation to the electrical fit out, to assign to the defendants interest in the same sufficient to meet the current claim by the plaintiff against them.

[46]     The difficulty for the defendants is cl 1.1 of the deed of lease, which provides that all rent shall be paid “without any deductions or set-off” by direct payment to the plaintiff.   Again, the defendants claim that the licence to occupy specifically excluded cl 1.1.  I am of the view however that it did not specifically exclude cl 1.1. It is true that the licence to occupy did not incorporate cl 1.1 but that is quite different to excluding it.  In my view, the plaintiff and Wire By Design specifically contracted out of the right of set-off through cl 1.1.

[47]     The defendants  have  also  not  filed a  counter  claim  against  the  plaintiff. Instead, Wire By Design has issued proceedings against the Crown claiming that the Agreement   for   Compensation   Pursuant   to   the   Public   Works   Act   1981   is unenforceable because of undue influence brought to bear by the Crown on Wire By Design.  It is also said to be an unconscionable bargain having been executed as a

result of duress.  Rectification of the agreement is sought.  Finally, Wire By Design seeks an order that the Crown can claim no more than $306,000 (plus GST) for betterment for the electrical fit out at the plaintiff’s premises.

[48]     Associate Judge Christiansen noted that proceedings against the Crown were speculative but if they were successful then Wire By Design would be certain of payment in due course.

[49]     Finally, the defendants claim that Wrights Investments still has a registered security over the fit out.  Even if cl 31.1 does apply, they argue that the plaintiff’s possession of the fit out is therefore subject to Wright Investments’ secured interest in that property.  I am however of the view that this claim lacks substance.  Firstly, Wrights  Investments  has  already exercised  its  power under the  general  security agreement exercised by Wire By Design in its favour by appointing a receiver.  The receiver then set out to secure and sell whatever she could of Wire By Design’s assets, including its fixtures, fittings and chattels in the plaintiff’s premises.  For this purpose, the receiver had access to the premises for approximately three months pursuant to the licence to occupy.   The plaintiff permitted the receiver to remove both large and fixed items of equipment/chattels subject to consent, which was not to be unreasonably withheld.

[50]     Secondly, the defendants have not provided any credible evidence of the value of the fit outs which remain after both Wrights Investments and the Crown exercised  their rights  pursuant  to  their respective security interests.   They have provided evidence of the cost of both the factory fit out and the electrical fit out but those figures are meaningless given the exercise of their security rights by Wrights Investments and the Crown.

[51]     In conclusion, the defendants have not persuaded me that Associate Judge Christiansen’s decision was wrong in that it rested on unsupportable findings of fact and/or applied wrong principles of law.  I agree with the Judge that the defendants have not established a strong prima facie case for the existence of a genuine dispute on substantial grounds or shown that there were clear and persuasive grounds for a stay. The defendant’s application for review is dismissed.

[52]     The plaintiff is entitled to costs on a 2B basis.

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Woolford J