Aronui Ko Huiarau Trust Board v Edwards
[2013] NZHC 662
•28 March 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2012-404-2731 [2013] NZHC 662
BETWEEN ARONUI KO HUIARAU TRUST BOARD Plaintiff
ANDMARION AGNES EDWARDS AND ANOR
Defendants
Hearing: 21 November 2012
Counsel: S O McAnally for Plaintiff
G J Kohler for Defendants
Judgment: 28 March 2013
JUDGMENT OF KEANE J
This judgment was delivered by on 28 March 2013 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Date:
Solicitors:
Keegan Alexander, Auckland
Schnauer & Co., Auckland
Counsel:
G J Kohler, Auckland
ARONUI KO HUIARAU TRUST BOARD V MARION AGNES EDWARDS AND ANOR HC AK CIV 2012-
404-2731 [28 March 2013]
[1] Aronui Ko Huiarau Trust Board is a charitable trust engaged in tertiary education, which trades as Aronui Technical Trading Centre. Marion and Aaron Edwards are the trustees of a trust, the Kaahu Trust, which is also engaged in tertiary education.
[2] On 11 October 2011 Mr and Mrs Edwards, as trustees, entered into an agreement for sale and purchase under which Te Kaahu Trust purchased a four storey commercial building in Park Avenue, Otahuhu, subject to the then existing tenancies. According to the agreement, the ground floor was then held on a monthly tenancy by Ngawini Puru, trading as Aronui Technical Trading Centre. She is an Aronui trustee.
[3] Under the agreement Te Kaahu Trust became entitled to possession on settlement date, 12 December 2011. At that date the ground floor, then fitted out as a training kitchen and restaurant and an administration area, was locked off and not in use. Te Kaahu took possession understanding, it says, any monthly tenancy to have been terminated or surrendered. On 15 December 2011 Te Kaahu contends, just to be certain, it issued Aronui with a notice to quit.
[4] Aronui accepts that as at 12 December 2011 it had been locked out since November, but inexplicably so. It had paid rent to the end of November and the operating expenses to the end of December. On 4 November 2011 the solicitors for Aronui’s landlord, Kumi Limited, wrote to say that it had sold to KC Trading and Importing Limited to whom Aronui was from then on to pay rent. On 13 December
2011 KC 's solicitors wrote to say that it had on-sold and asked Aronui to pay rent to
Te Kaahu.
[5] On 4, 17 and 20 January 2012 at meetings between the two trusts, Aronui asserted its monthly tenancy and Te Kaahu asserted that any tenancy had been terminated or surrendered. Aronui had a 24 week course about to begin on 23
January 2012, funded by the Tertiary Education Commission, and they agreed in principle that Aronui might use the facility for that purpose but then negotiate a fresh tenancy. They remained at arm's length as to the kitchen equipment. Aronui contended that it belonged to it, Te Kaahu that it was a fixture that had passed to it with title.
[6] On 23 January 2012, Aronui contends, Te Kaahu repudiated its tenancy. Its students were turned away at the door. Te Kaahu denies this. It contends that Aronui had said already that it did not want to pursue a further tenancy, but a class area was set up for Aronui's students that day. Aronui and Te Kaahu then fell into frank dispute and when, on 27 March 2012, Aronui went with Maori wardens and police to collect the kitchen equipment Te Kaahu denied access.
[7] Aronui contends that once Te Kaahu repudiated the tenancy that gave it a right to cancel, which it exercised, and it now seeks summary judgment against Te Kaahu on two bases. First, as to the kitchen equipment, in two causes of action relying on conversion and on detinue, it seeks $75,042 special damages, $25,000 exemplary damages and indemnity costs. In a third cause of action, alleging repudiation, it seeks $196,049 special damages, the funding it contends that it was then likely to lose, and exemplary damages and indemnity costs.
[8] Under all three causes of action the first issue is whether at the date Te Kaahu took possession, 12 December 2011, Aronui remained a tenant, and whether that tenancy survived any notice to quit from Te Kaahu until 23 January 2012, when Aronui claims Te Kaahu repudiated giving it the right to cancel. What counts finally is whether Aronui is able to establish that at the times material it held a short-term lease under the Property Law Act 2007.
[9] As to all three causes of action, Te Kaahu puts in issue whether Aronui was ever the tenant. It contends that as at the date of the agreement for sale and purchase,
11 October 2011, the tenancy lay with Mrs Puru. It contends that on possession date,
12 December 2011, the tenancy had been terminated or surrendered.
[10] As to the first two causes of action in conversion and detinue, the specific issues are whether Aronui can prove that the kitchen equipment belonged to it at the date Te Kaahu took possession, whether that equipment remained its property or passed to Te Kaahu as a fixture and whether, in any event, Te Kaahu ever denied Aronui's claim or only looked to Aronui to prove it. As to the third cause of action, Te Kaahu contends that, even if the tenancy still subsisted on possession date, it
ceased on or before 23 January 2012 as the result of the issue on 15 December 2011 of a notice to quit. It denies that it ever repudiated.
[11] Aronui accepts that Te Kaahu is able to contest each of its damages claims and that quantum can only be established on a full hearing of evidence. It seeks summary judgment only as to liability, but even there Te Kaahu contends, a full hearing of evidence is essential.
Further developments
[12] On 21 December 2012 I invited Aronui and Te Kaahu to make further submissions on three issues arising under the Property Law Act 2007, which I received in late January 2013. Then on 8 March 2013 there was a further development. Te Kaahu advised that it needed to sell the building.
[13] To prevent the sale becoming complicated by this case, Te Kaahu then offered to relinquish the disputed kitchen equipment to Aronui, to be held until this case was resolved. On 18 March 2013 Aronui declined that offer, content to rely on its claim for damages under its first two causes of action in conversion and detinue. Aronui's present application must be resolved on that basis.
Summary judgment
[14] Rule 12.2 of the High Court Rules enables this Court to give summary judgment if the plaintiff establishes that the defendant has no defence to a cause of action in the statement of claim or a particular part of it. In Krukzeiner v Hanover Finance Ltd the Court of Appeal said:1
The question on a summary judgment is whether the defendant has no defence to the claim; that is there is no real question to be tried. The court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated.
(citations omitted)
1 Krukzeiner v Hanover Finance Ltd (2008) 19 PRNZ 162 (CA), at 169.
[15] Where, as here, there is a conflict of evidence concerning issues that matter, that may or may not be fatal. As the Court continued to say:
The court will not normally resolve material conflicts of evidence or assess the credibility of the deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as, for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent or is inherently improbable. In the end the court’s assessment of the evidence is a matter of judgment. The court may take a robust and realistic approach when the facts warrant it.
(citations omitted)
Short-term lease
[16] Aronui's claim depends, in the first instance and finally, on whether on the date Te Kaahu took possession, 12 December 2011, Aronui held, and then retained until 23 January 2012, a 'short-term lease' under the Property Law Act 2007.
[17] A short-term lease, which may be oral or in writing,2 is as defined by s 207 a lease or a periodic tenancy for less than one year, or a 'statutory tenancy', 'a lease that is terminable at will under s 210'. Section 210 governs those leases where the lessee is in possession for a term not agreed or remains so with consent for a period not agreed after the lease has expired.3 Such a lease is terminable at will on not less than
20 working days written notice.4
[18] A 'periodic tenancy', constituting a short-term lease, is a tenancy for 'periods of 1 year or less' and can only be a periodic tenancy at common law that 'continues from week to week, from month to month, from quarter to quarter, or from year to year, as the case may be, indefinitely until it is determined by a valid notice to quit'.5
The tenancy here in issue can only be a short-term lease in this sense and calls for
one month's notice.
2 Property Law Act 2007, s 208.
3 Section 210(1).
4 Section 210(2).
5 Hinde McMorland & Sim Land Law in New Zealand (looseleaf ed, LexisNexis) at [11.016].
[19] A short-term lease is a ‘lease’ in the fullest sense and can be, therefore, 'a lease of property, whether registered or unregistered'.6 ‘Property' is equally widely defined. It is ‘everything that is capable of being owned, whether it is real or personal property, and whether it is tangible or intangible property'. It includes 'any estate or interest in property'.7 A short-term lease, moreover, gives the lessee a legal interest in the land subject always to the Land Transfer Act 1952,8 and 'land' is equally widely defined. It includes 'all estates and interests, whether freehold or chattel, in real property'.9 There can be no issue that a monthly tenancy for the
ground floor of a building qualifies.10
[20] A short-term lease, in existence at the date that the lessor sells the leased property, confers on the new owner the benefit of the lessee’s covenants, which run with the reversion, and all the rights and remedies of the lessor.11 Conversely, the
new owner assumes the burden of the lessor's covenants.12
Tenancy at possession date
[21] According to the agreement for sale and purchase, dated 11 October 2011, under which Te Kaahu purchased, the ground floor was held on a monthly tenancy by Mrs Puru trading as Aronui Technical Training Centre and that raises the first issue on this application. Aronui contends that it was the tenant.
[22] There is no issue that in 2009 either Aronui, which had owned the whole building between 1990 - 2004, or Mrs Puru, took a sub-lease from the then lessee, Mahi Mahi. Nor that when Mahi Mahi quit in January 2011 Mrs Puru, or Aronui, took a tenancy from the owner, Kumi Limited. Nor that this was to be the subject of a lease, prepared but never executed, which recorded that the monthly rent was to be
$4,000 plus GST, plus a share of operating expenses.
6 Property Law Act, s 4.
7 Section 4.
8 Section 209(1) and (2).
9 Section 4.
10 Hinde, McMorland & Sim, above 5, at [11.001] and [11.005].
11 Property Law Act, ss 232 and 233.
12 Section 231.
[23] This draft deed, like Te Kahu's agreement for sale and purchase, identified as the tenant Mrs Puru, trading as the Centre. But in an email to Mrs Puru, dated 2
March 2011, David Short, a Kumi shareholder and the solicitor, who had prepared the draft deed, confirmed that Aronui was to be the tenant. He said this:
Could you please, as indicated, change the tenant on the front of the lease and appropriately throughout to Aronui Ko Huiarau Trust Board and sign and return the documents to me.
[24] The next issue is, therefore, whether Aronui's tenancy subsisted not just at the date of the agreement for sale and purchase, 11 October 2011, but on possession date, 12 December 2011, and here too the evidence is largely undisputed.
[25] Between 2009 - 2011, Aronui says, it installed on the ground floor a training kitchen and restaurant with an administration area, it ran a pilot program between 23
January - 7 July 2011, and it intended to run its first subsidised 24 week course on 23
January 2012. In mid November 2011, however, the course manager, Mrs Puru's daughter Judith Wanakore, found Aronui had been locked out without notice and before Aronui pursued that with Kumi Ms Wanakore died later in the month.
[26] As to why Aronui was locked out, the evidence is again undisputed. Te Kaahu says that it understood from the agent who acted on the sale, Brian Ferguson, that Aronui's tenure was at an end and that the kitchen, fitted out as it was, was a fixture that was to pass to Te Kaahu with possession. By then Aronui also understood that Te Kaahu had been given some such assurance. It was an assurance with no basis in fact.
[27] It is not disputed that on 4 November 2011 Aronui had made the last rental payment, $13,800, to cover the period 1 September - 30 November 2011. Nor that operating expenses had been paid up to 31 December 2011, $6,740.30. Nor that, so far as to Te Kaahu's two predecessors in title were concerned, Aronui was still at possession date a monthly tenant whose rent was up to date.
[28] On 25 November 2011 Mr Short's firm wrote to Mrs Puru to say that Kumi
Limited had sold to KC Trading & Importing Limited, that settlement was on 6
December 2011, and that Aronui was to pay all rent due 'as from 1 December 2011 to
KC Trading & Importing Limited in accordance with their instructions'. On 13
December 2011 Baker Law, acting for KC Trading & Importing Limited 'the landlord of the property you are tenanting at the above address', wrote to Mrs Puru to say that the property had been sold that day and that she was to 'pay all rent due as from today to the Kaahu Trust in accordance with their instructions'.
[29] These letters throw into relief whether by notice on 15 December 2011 Te
Kaahu then gave a notice to Aronui validly determining the tenancy.
Notice to quit
[30] On 15 December 2011 Aaron Edwards, a director and trustee of Te Kaahu Trust, says that he wrote to Aronui Technical Training Centre giving one month's notice that the tenancy was at an end:
To whom it may concern:
This letter is to inform you of the change of ownership for 16-20 Park
Avenue, Otahuhu from Kumi Ltd to the new owner Kaahu Trust Ltd. This letter serves as a one month notice to vacate the property.
If you have any problems or questions please feel free to contact Brian
Ferguson, F Squared Realty, ph: [ ] .
[31] Mr Edwards says that he obtained the Centre's address from a business card and confirmed it on Aronui’s website. He posted the letter to Aronui's Papakura box number. Aronui, however, denies ever receiving this letter and contends that it is a late invention, which Te Kaahu is unable to prove was ever duly served.
Service rules
[32] To determine Aronui's monthly tenancy, a periodic tenancy and a short term lease, Te Kaahu had to comply with section 354(2) of the Property Law Act 2007. It says that such notice 'is adequately given or served when it is given to, or served on', the 'person', here Aronui, in accord with s 353(1). That in turn says that notice will not be 'adequately given or served unless it is given to, or served on' a body
corporate as Aronui is,13 'in a manner in which it could be given or served if the body corporate were a company'.14
[33] Service on a charitable trust board is deemed to be effected when a notice is left at the registered office or is sent by registered post to that office.15 Service of a notice on a company, by contrast, may be effected 'by posting it to the company's registered office or address for service or delivering it to a box at a document exchange which the company using at the time'.16
[34] For the purpose of this application I will assume that the rule relating to service on registered charitable boards is displaced by the rules set out in the 2007
Act. But the issue of fact remains.
Related conclusions
[35] Service by ordinary post is a means of service incapable of being proved by independent record and so what must still be resolved is whether the notice Mr Edwards speaks of was ever served or is a late invention. That will turn on whether and when Te Kaahu relied on the notice in the January discussions. As to that there is conflict.
[36] On 20 January 2012 the notice was referred to by the agent, Mr Ferguson, if not by Mr Edwards. If that were the first time it was referred to that could be consistent with late invention, especially as the letter did not at first figure in later exchanges between the lawyers. But Mr Edwards says he raised it on 4 January
2012, when he and Mrs Puru happened to meet for the first time.
[37] On 4 January, it is undisputed, when Mrs Puru went to the facility and Mr
Edwards happened to be working there, they did debate Te Kaahu's right to the kitchen equipment, which she says she found him removing to a truck outside the
13 Charitable Trusts Act 1957, s 13.
14 Property Law Act 2007, s 353(1)(d).
15 Charitable Trusts Act 1957, s 18.
16 Companies Act 1993, s 388(1)(b).
facility. That seems implausible. They do agree that whatever he was then doing he then stopped.
[38] Mr Edwards accepts that Mrs Puru spoke about Aronui's imminent course on
'about 20 January', which suggests she was then unaware of any notice. But, he says, he then told her about the notice. And, when she said that Aronui had applied for training funding, to be approved by site inspection in February 2012, he suggested that Aronui either negotiate a new tenancy or run its course elsewhere.
[39] Mrs Puru denies that Mr Edwards said anything of the sort and whether or not he did so is critical to Aronui's claim, especially to its third cause of action. That is an issue that cannot be resolved on affidavit evidence alone. Further issues of credibility arise under Aronui's other heads of claim. I begin with the claim to the kitchen equipment.
Kitchen equipment
[40] Unless a lessor and lessee agree otherwise, a lessee may remove 'any trade ... fixture (except a lessor's fixture) that the lessee has affixed to the premises either while still in lawful possession, or within a reasonable time after'.17 A lessee, once lawful possession has ceased, is entitled to access for that purpose.18
[41] That right is subject to duties to cause as little damage as possible and to make good any damage caused and to compensate the lessor for any related losses.19
These duties carry also correlative rights of access within a reasonable time after lawful possession has ceased. What matters is what fixtures a lessee may remove.
[42] A lessee may not remove any fixtures affixed by the lessee, or a former lessee, or a sub-lessee, which are 'lessor's fixtures': any 'chattel that has been affixed
to the premises (for example a fence erected on the land), in such a manner that it
17 Property Law Act, s 266(1).
18 Section 266(4).
19 Section 266(3).
becomes part of the structure of a building or otherwise becomes integral to the
land’.20
[43] As to whether the fixtures in question have been so affixed as to become 'part of the structure' is to be decided as it was under the common law.21 And, moreover, the onus of establishing that the fixture in question is not a lessor's fixture lies with the lessee.22
[44] To counter the evidence for Te Kaahu given by Mr Ferguson that the disputed items were firmly fixed in place in the kitchen, Aronui is only able to rely on photographs. They do not establish whether or to what extent the items were fixed in place. Most, like the benches and stoves, appear free standing, though some must have electricity, gas or water connections. Most appear able to be removed without damage to the fabric. The exceptions may be a range hood and walk-in chiller. The fact that these items can be removed relatively easily, I consider also, is confirmed by Te Kaahu's offer to pass them to Aronui until this case is complete.
[45] In the absence of more definitive evidence, however, I am unable to conclude to the civil standard that the kitchen equipment does constitute trade fixtures and not lessor's fixtures and Aronui will have to make out its case on evidence; a burden it accepts it cannot avoid to obtain the damages it claims, which Te Kaahu completely disputes.
[46] To be complete, I should also say this. To prove its right to damages Aronui need not, to my mind, establish by invoice that it purchased the kitchen equipment. There is no credible basis for assuming that the equipment ever belonged to Kumi. Kumi never claimed it. Nor did it purport to give title to the equipment to KC. Nor is it mentioned in the agreement for sale and purchase under which Te Kaahu purchased. Aronui's evidence by itself ought to suffice.
[47] As to whether Te Kaahu is able to assert that it was entitled to retain possession until it established Aronui's right, that seems to me more evenly poised. It
20 Section 266(5).
21 Hinde, McMorland & Sim, above n 5, at [6.043].
22 Lockwood Buildings Ltd v Trust Bank Canterbury Ltd [1995] 1 NZLR 22 (CA) at 28.
turns on how the items are to be classified and that is the very issue to be resolved under Aronui's first two causes of action.23
Repudiation and cancellation
[48] Aronui's third cause of action, which relies on Te Kaahu having repudiated on
23 January 2012, and asserts a correlative right to cancel and claim damages, assumes that the notice to quit was never given or never duly served. There is also a distinct issue whether before 23 January Mrs Puru told Mrs Edwards that Aronui did not want to use the facility any longer.
[49] I do not regard this further issue as complicating. Mrs Edwards' evidence does not reconcile easily with the wider evidence as to the meetings held before 23
January or with what was then agreed in principle. The fact that Aronui's students arrived on 23 January 2012 and that there was then a dispute also speaks for itself. The ultimate issue as to the third cause of action may be rather one of law.
[50] Aronui seeks damages on the basis that it had the right to cancel under the Contractual Remedies Act 1979, relying on high authority.24 But all the cases on which Aronui relies, so far as I am aware, concern a lessee's remedies as they were, while the Property Law Act 1952 was still in force.
[51] The power to cancel a lease is now codified by the Property Law Act 2007.25
Under the Act only a lessor has the right to cancel.26 A lessee only has the right to apply for relief against forfeiture.27 The right to cancel under the Contractual Remedies Act 1979 may remain, but as to that there is debate.28 That is not an issue I
need to resolve on this present application.
23 Cynthia Hawes 'Interference with Goods' in Stephen Todd (ed) The Law of Torts in New Zealand
(5th ed, Brookers, Wellington, 2009) 539 at [12.3.01] and [12.4.01].
24 Ingram v Patcroft Properties Ltd [2011] NZSC 49, 3 NZLR 433 at 442.
25 Property Law Act, s 243(1).
26 Sections 244 - 246.
27 Section 253.
28 Hinde McMorland & Sim Land Law in New Zealand (looseleaf ed, LexisNexis) at [11.249] and
[11.250].
Conclusions
[52] Te Kaahu's notified defences to Aronui's application for summary judgment as to liability are arguable and are only able to be resolved on a hearing of evidence. Aronui's application for summary judgment is therefore declined and the case will have to be set down for complete hearing on the evidence.
[53] Te Kaahu is entitled to costs at scale 2B and disbursements as fixed by the Registrar. If there is any issue of principle arising as to costs, which cannot be resolved by the Registrar, Te Kaahu is to file and serve a memorandum and Aronui is
to reply within the succeeding 10 working days.
P.J. Keane J
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