Boxstars International Limited v Full Module Properties Limited

[2013] NZHC 2313

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-004131 [2013] NZHC 2313

UNDER

the Property Law Act 2007

IN THE MATTER

of an application pursuant to s 253 of the Act for relief against cancellation of a lease

BETWEEN

BOXSTARS INTERNATIONAL LIMITED

Plaintiff

AND

FULL MODULE PROPERTIES LIMITED

Defendant

Hearing:	5 September 2013
Appearances:	D G Hurd for Plaintiff M Kan and C J H Fraser for Defendant
Judgment:	5 September 2013

ORAL JUDGMENT OF VENNING J

Solicitors:           Kelly Flavell Law, Auckland

Michael Kan Law Limited, Auckland

Copy to:            D Hurd, Auckland

BOXSTARS INTERNATIONAL LTD v FULL MODULE PROPERTIES LTD [2013] NZHC 2313 [5 September

2013]

[1]      Boxstars International Limited (Boxstars) seeks relief against cancellation of a lease it says it holds from Full Module Properties Limited (FMP).  The matter has come before me this afternoon as Duty Judge on an urgent basis because FMP has issued a notice of cancellation which expires as at the end of the day.  Boxstars seeks interim relief.  The application is being heard on a Pickwick basis.  Mr Kan and Mr Fraser appeared at short notice on behalf of the defendant.

Background

[2]      I take the background from Mr Hurd’s helpful summary in his memorandum. I preface my adoption of that on the basis of course that is Boxstars’ case and FMP is yet to be heard in full on the matter.

[3]      FMP owns a property at 295 Ti Rakau Drive, Howick.  The principals of Boxstars, Mr and Mrs Kinsella, were interested in taking a lease of part of the premises to run a gymnasium and fitness centre.  They initially agreed to take a lease of unit 7.  However, at FMP’s request it was agreed that instead of unit 7, Boxstars would occupy unit 8.  The parties then engaged in a long and protracted process to finalise the terms of the lease.  Boxstars considered a substantial amount of building work was required to be undertaken to render unit 8 suitable for the gymnasium business.  At the end of the work a code compliance certificate would be required. FMP was to obtain the code compliance certificate.  The fundamental problem which has led to the issue before the Court is that a code compliance certificate has apparently still not been obtained.

[4]      The parties continued to negotiate the terms of lease and appeared to have agreed on the term and rental, the rental being $40,300 per annum plus GST and outgoings.  They were, however, at odds as to how to deal with the lack of the code compliance certificate.  In his affidavit in support of the application for relief Mr Kinsella says that there was a meeting of the parties in December 2012 at which it was agreed that rental would become payable seven days after the issue of a code compliance certificate.  Following a further meeting in early February 2013 Mr and Mrs Kinsella understood a compliance certificate would be issued shortly.  On that

basis Boxstars paid rental for January, February and March 2013.  However, as noted as yet there is still no code compliance certificate.

[5]      There were further discussions between the parties during the course of 2013 but no satisfactory resolution was reached.  Boxstars raised a number of concerns about the state of the premises.  Boxstars takes the position that the agreement concluded in December 2012 included the term that it would not be required to pay rental  until  the  code  compliance  certificate  issued.     They  have  remained  in possession.   No rental has been paid since 1 April this year.   FMP considers that there is no concluded lease agreement and gave notice of cancellation.

[6]      While Mr Kan advised FMP’s position was that there was no concluded lease agreement, in the notice of breach of lease reference is made by FMP to a lease dated

22 March 2011.  Boxstars does not accept a lease was concluded on that date in relation to unit 8.  As noted its position is that an agreement to lease was concluded in December 2012.

[7]      So the position before the Court is that Boxstars is in possession of premises owned by FMP.  It has paid no rental since 1 April.  It says, however, that it holds the premises under the agreement to lease reached in December 2012 pursuant to which it is not obliged to pay rental until seven days after the code compliance certificate has issued for the premises.  This, despite the fact that it has been able to remain in the premises since taking occupation and, on Mr Kinsella’s evidence, in the last 11 months has generated sales of just under $300,000 in running the gymnasium business. The position is to say the least somewhat unusual.

[8]      However, on the information before the Court, there being only the evidence of Mr Kinsella at present, I accept there is an arguable case for a lease concluded on the terms he sets out.  The balance of convenience clearly favours maintaining Boxstars in possession so that it may continue running its business in the meantime. The principals of Boxstars, through the company, have invested over $120,000 into the business, including fit-out of the premises.   That would be entirely lost if the lease was terminated quite apart from the loss of business profits.

[9]      Against that, it is necessary to balance the interests of FMP.  FMP should be no worse off by the delay before this application for relief against forfeiture can be heard.  To protect FMP’s position I propose to require Boxstars to secure the rental as from 1 September 2013 until the matter is resolved.

Result/orders

[10]     For those reasons I make an interim order, pending final determination of the plaintiff’s application for relief against cancellation of the lease between Boxstars and FMP of the premises at Unit 8, 295 Ti Rakau Drive, Auckland, restraining the defendant by itself, its servants, agents or otherwise howsoever from:

(a)       taking any steps or attempting to take any steps to cancel the lease;

(b)taking  any  steps  or  attempting  to  take  any  steps  to  re-enter  the premises;  or

(c)       otherwise interfering in any way with the plaintiff’s possession and

enjoyment of the premises pursuant to the lease.

[11]     The order is on condition that Boxstars is to pay into its solicitor’s trust account, Kelly Flavell Law, the sum of $3,358.35 plus GST by 12 September 2013. That sum is to be held by the solicitors in the name of both Boxstars and FMP.  It is not to be withdrawn from the solicitor’s trust account without the written authority of both parties or further order of the Court.  Boxstars is also to make payment of the same sum in the same way to the solicitor’s trust account on 1 October 2013.

Timetable

[12]     I fix a timetable for the hearing of the application for relief against forfeiture as follows:

(a)       notice of opposition and affidavits in opposition to be filed and served by 20 September 2013;

(b)      any affidavits in reply to be filed and served by 27 September 2013;

(c)       the case will be heard as a half day fixture at 10.00 am on 10 October

2013.

[13]     Mr Kan has indicated that FMP may make an application for possession.  If

FMP wishes to do so, any such application is to be filed and served on 20 September

2013. A notice of opposition to that by Boxstars is to be filed and served by 27

September 2013.

Costs

[14]     I reserve the issue of costs on the present application.

Venning J