Auckland Council v Cosdo Equity Ltd - [2014] NZHC 1900

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-001849 [2014] NZHC 1900

UNDER
Part 19 of the High Court Rules and s 253

of the Property Law Act 2007

IN THE MATTER OF

relief against cancellation of lease

BETWEEN

AUCKLAND COUNCIL Applicant

AND

COSDO EQUITY LIMITED Respondent

Hearing: 6 and 8 August 2014

Counsel:

D T Broadmore for the Applicant
R M Dillon and T A Hwang for the Respondent

Judgment:

12 August 2014

JUDGMENT OF DUFFY J

This judgment was delivered by Justice Duffy on 12 August 2014 at 4.30 pm, pursuant to
r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date:

Solicitors: Buddle Findlay, Auckland
Queen City Law, Auckland

AUCKLAND COUNCIL v COSDO EQUITY LTD [2014] NZHC 1900 [12 August 2014]

[1] The applicant, (“the Council”) in this originating application, seeks relief against a proposed cancellation of its lease of commercial premises by the respondent, (“Cosdo”). The Council has exercised a right under the lease to abate rent and is refusing to pay rent at the agreed amount. Cosdo contends that it is entitled to cancel the lease for non-payment of the agreed rent. Under s 256 of the Property Law Act 2007 (“the Act”), the Court has discretion to grant relief against cancellation or proposed cancellation, subject to conditions that it sees fit. The issue for this Court to determine is whether to grant the Council the relief that it seeks and, if so, on what conditions.

Background

[2] The Council and Cosdo are parties to a lease of premises at levels two to eight, and the basement of a commercial building on 360 Queen Street, Auckland (“the premises”). The lease is to expire on 31 August 2014. It will not be renewed.

[3] In 2013, the Council began to complain to Cosdo about the inadequacy and poor quality of the premises’ air-conditioning. The Council claims that under the lease, Cosdo as the lessor has an obligation to use best endeavours to maintain the air-conditioning and ventilation system, and that if the Council’s business is disturbed for more than 24 hours by the failure to provide proper maintenance, the rental payable is abated proportionally.

[4] The Council says that between 8 February 2013 and 3 June 2014, its business was regularly and significantly disturbed by Cosdo’s failure to carry out its maintenance obligations of the air-conditioning. This alleged failure has resulted in the Council claiming that it is entitled to abate rent under clause B5 of the lease, as Cosdo has not used its best endeavours to provide and maintain the air conditioning. The value of rent abatement that the Council has withheld from Cosdo is
$159,723.50, including GST. By the Council’s calculations this leaves the sum of

$3,019 owing in rent. The Council accepts that it should pay this amount of rent but as of the date of hearing it had not done so.

[5] On 21 July 2014, Cosdo served on the Council a notice that rent was outstanding and that if…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2014] NZHC 1900
Decision Date: 12 August 2014

CaseChat Overview and Summary

The case of Auckland Council v Cosdo Equity Ltd involved the Auckland Council, the applicant, seeking relief against the cancellation of its lease of commercial premises by Cosdo Equity Ltd, the respondent. The Council had exercised its right under the lease to abate rent due to alleged inadequacies in the air-conditioning system and was refusing to pay the agreed amount of rent. Cosdo contended that it was entitled to cancel the lease for non-payment of the agreed rent, and pursuant to s 256 of the Property Law Act 2007, the Court had discretion to grant relief against cancellation or proposed cancellation, subject to conditions that it saw fit. The central issue for the Court to determine was whether to grant the Council the relief it sought and, if so, on what conditions. The Court held that the originating application procedure was not well suited for contested applications where particularised pleadings and interlocutory steps might be required. The Court also held that the lease expressly provided that rent may be abated in certain circumstances, and the key question was whether the present circumstances qualified under that provision. The Court concluded that the Council had established a serious case to be argued for an entitlement to a rental abatement, and it was not an issue that had simply arisen in the last days of the life of the lease. The Court granted relief against cancellation on the terms that the Council would pay a sum of money that was equivalent to the abated rent it considered it was entitled to withhold from Cosdo to the trust account of Meredith Connell, the balance of the unpaid rent was to be paid directly to Cosdo forthwith, the substantial dispute between Cosdo and the Council was to be determined by arbitration in accordance with the terms set out in clause C4 of the lease, and any costs arising from the payment to Meredith Connell’s trust account were initially to be borne by the Council, but ultimately were to be borne by the party who in the arbitral process failed to establish an entitlement to those funds.

Orders