Bush Inn Shopping Centre Limited v Big Daddys Limited

[2025] NZHC 2377

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2025-409-132

[2025] NZHC 2377

BETWEEN

BUSH INN SHOPPING CENTRE LIMITED

Plaintiff

AND

BIG DADDYS LIMITED

Defendant

Hearing:	18 August 2025
Appearances:	M K Prendergast for Plaintiff R A Hearn for Defendant
Judgment:	20 August 2025

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 20 August 2025 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

BUSH INN SHOPPING CENTRE LIMITED v BIG DADDYS LIMITED [2025] NZHC 2377 [20 August 2025]

[1]    The plaintiff (Bush Inn) has filed an application to put the defendant company (BDL) into liquidation on the ground that BDL is insolvent and unable to pay its debts.1 Bush Inn contends it is a creditor of BDL in respect to liquidated damages, unpaid rent, default interest and occupational costs owing under BDL’s lease of premises from Bush Inn at the Bush Inn Shopping Centre.

[2]    BDL has applied for orders restraining advertising and for a stay and/or dismissal of the proceeding under r 31.11 of the High Court Rules 2016 (the Rules). An interim order restraining advertising pending further order was made by consent by Associate Judge Lester on 11 June 2025. BDL’s application for a final order and stay is opposed.

[3]    There has been useful cooperation between counsel. They agree that the application can be resolved on determination of a single issue. The issue is whether BDL has shown a genuine and substantial dispute that its lease has been surrendered. It is the agreed position that if BDL has not done so this application must necessarily fail, the interim restraint on advertising lifted, and the case listed to be called in the next available liquidation list for hearing.

The law

[4]Rule 31.11 of the Rules provides:

31.11   Power to stay liquidation proceedings

(1)If an application for putting a company into liquidation is made under rule 31.3, the defendant company, or, with the leave of the court, any creditor or shareholder of that company or the Registrar of Companies, may, within 5 working days after the date of the service of the statement of claim on the defendant company, apply to the court—

(a)for an order restraining publication of an advertisement required by rule 31.9 or any other information relating to that statement of claim; and

(b)for an order staying any further proceedings in relation to the liquidation.

1      Companies Act 1993, s 241.

(2)The court must treat an application under subclause (1) as if it were an application for an interim injunction and, if it makes the order sought, it may do so on whatever terms the court thinks just.

(3)The inherent jurisdiction of the court is not limited by this rule.

[5]There is no dispute as to the applicable principles, which were summarised in

Yan v Mainzeal Property & Construction Ltd (in rec & liq):2

(a)The Court has the power to consider disputed debts in the context of an opposed liquidation proceeding or on applications for orders restraining advertising and staying proceedings.

(b)A liquidation order will not be made where there is a genuine and substantial dispute as to the existence of a debt such that it would be an abuse of the process of the Court to order a liquidation.

(c)In such circumstances, the dispute, if genuine and substantially disputed, should be resolved through action commenced in the ordinary way and not in the Companies Court.

(d)The assessment of whether there is a genuine and substantial dispute is made on the material before the Court at the time and not on the hypothesis that some other material, which has not been produced might, nonetheless be available.

(e)The governing consideration is whether proceeding with an application savours of unfairness or undue pressure.

(f)The Court may have regard to a debtor’s counter arguments — but a genuine and substantial dispute is one that is “real and not fanciful or insubstantial”. The grounds of the dispute must be “clear and persuasive”. Material, short of proof, is required to support the claim that the debt is disputed.

2      Yan v Mainzeal Property & Construction Ltd (in rec & liq) [2014] NZCA 190 at [61]. See also

Waikato Motors Ltd v West End Property Developments Ltd [2019] NZHC 865 at [5]–[6].

Factual background

[6]    On 23 February 2020 Bush Inn entered into an agreement to lease (the lease) with BDL and Hardeep Singh as guarantor for shop T8 at the Bush Inn Shopping Centre. The lease provided for a six-year term commencing 17 March 2021. It also contemplated that a formal lease would be entered into in the latest version of the Property Council Retail Lease with agreed amendments.

[7]    BDL struggled to meet its obligations under the lease to pay rent and other occupancy costs. In November 2022 Bush Inn served on BDL a statutory demand in respect to unpaid rent and other costs under the lease which was not satisfied. In January 2023 Bush Inn commenced liquidation proceedings against BDL that were ultimately settled on the basis of a deed of settlement dated 10 March 2023, which included agreement to extend the term of the lease to 17 March 2030.

[8]    In April 2024 Bush Inn served another statutory demand upon BDL, again for payment of rent and other occupancy costs. That demand was also not satisfied. In July 2024 Bush Inn commenced a second proceeding to liquidate BDL. Subsequently that application was settled by payment of the amount owing to Bush Inn, including rent and occupancy costs to the end of November 2024. The proceeding was discontinued with leave of the Court on 28 November 2024.

[9]    However, somewhat earlier, on what appears to have been 7 or 8 September 2024, BDL removed all of its stock and equipment from the premises without notice to Bush Inn and has since then failed to open the premises for trade. BDL’s director, Mr Singh, deals with what he says happened in a most terse fashion in his affidavit, saying:

After I removed the fitout, one of the mall’s employees rang me and told me I had to return the keys. I did that in late September or very early October, from recollection. I have not had access to the premises from that time. I took it that the lease was over.

[10]   For Bush Inn, its Associate Property Manager, Hamish Turnbull, says that  Mr Singh’s assertion that its staff had requested BDL to return its keys to the premises is not correct. He says in early September 2024 he contacted Mr Singh and asked for a copy of the keys to undertake routine maintenance to the HVAC system, which was

necessary as the premises had been abandoned. He says Mr Singh provided the keys and confirmed that it was fine for Bush Inn’s contractors to access the premises for this maintenance, which was completed on 11 September 2024.

[11]In his reply affidavit, Mr Singh responds to Mr Turnbull’s evidence and says:

(a)when BDL vacated the premises it was going to look for a tenant to sublet or assign the lease;

(b)Mr Turnbull had asked about getting access to the premises for the air- conditioning but then called him back and said he did not need access;

(c)about two weeks after that he got a call to say he had to return the keys which had nothing to do with the air-conditioning “as far as I knew”, and that he thought they wanted the keys back because “they had accepted the fact that we had vacated the lease” and “[f]rom that point I have never been offered the chance to resume possession of the premises and can’t given I don’t have the keys”; and

(d)“I, or my lawyers, have consistently stated that to Bush Inn since late last year that the lease was surrendered when I was required to hand back the keys”.

[12]   As noted, at the time BDL vacated the premises Bush Inn’s second application to liquidate BDL was before the High Court and was not settled until 28 November 2024, almost three months later. Relevantly, Bush Inn agreed to withdraw its liquidation application only upon BDL making payment of $170,436, being amounts owing under the lease up to the end of November 2024.

[13]   On 27 November 2024 an email from BDL’s counsel, Mr Hearn, to Bush Inn’s then counsel, Mr Riach, noted that Mr Singh had managed to borrow funds from a friend to pay the debt and that the payment was being made “without admission of liability” and “the company’s rights are otherwise reserved in all respects”.

[14]   On 4 December 2024 Bush Inn issued an invoice to BDL for liquidated damages under the lease in respect to its failure to keep the premises open for retail trade in an amount of $124,713.94.   The due date for payment of the invoice was     4 January 2025. When it was not paid, on 9 January 2025 Bush Inn issued a further statutory demand which was served on 11 January 2025.

[15]   On 27 January 2025, BDL filed an application to set aside the statutory demand but purported to withdraw the application on 18 March 2025. On 21 March 2025 Bush Inn filed this proceeding for an order putting BDL into liquidation. On 17 April 2025 BDL filed this application.

BDL’s submission

[16]To summarise, the position for BDL is:

(a)the premises were vacated on 7 or 8 September 2024;

(b)BDL was looking to sublet the premises or assign the lease;

(c)after BDL vacated the premises Mr Singh was asked by Mr Turnbull to return the keys to allow access for HVAC servicing but was then told by Mr Turnbull that access could be obtained by other means and he did not need a key;

(d)Mr Singh received a call from another unidentified Bush Inn employee in late September or early October requiring the return of the keys without further explanation; and

(e)he returned the keys and has not had access to the premises from that time.

[17]   Mr Hearn submits that the question arising is whether there was some unequivocal act which has the effect of raising an estoppel against Bush Inn from asserting that the lease is still extant. He says express words of surrender are not required, and the assessment is an objective one and does not depend on the intentions

of the parties. Mr Hearn submits the requirement by Bush Inn for the keys to be returned, in circumstances where it was not apparent there was any need for the landlord to have them, is sufficient.

[18]   BDL further submits that the payment made to resolve the liquidation proceedings in November 2024, including as it did payment of rent and other occupancy costs up to the end of November 2024, cannot be taken as recognition that the lease continued as the payment was made without admission of liability and reserving BDL’s rights.

[19]   Mr Hearn also argues that the fact Bush Inn continued to claim rent after the issue of surrender was raised cannot undo Bush Inn’s actions in late September/early October of demanding and accepting the return of the keys nor its continuing retention of them.

[20]   Mr Hearn submits there is a conflict of evidence between Mr Singh and     Mr Turnbull as to when and why the keys were returned, and Mr Turnbull’s evidence relates to an earlier discussion which Mr Singh has explained in his affidavit.

[21]   Mr Hearn argues that, viewed objectively, it was not unreasonable for BDL to conclude that Bush Inn saw little chance of BDL continuing to meet its ongoing obligations and thought it better to ask for the keys to be returned, accept a surrender of the lease and find alternative paying tenants than to sit on its hands in the hope it could recover increasingly large arrears.

Surrender by operation of law

[22]   Both parties accept as an accurate statement of the law the following passage in Hinde McMorland & Sim Land Law in New Zealand:3

Surrender by operation of law, or implied surrender as it is sometimes called, “operates where the owner of a particular estate, such as a tenant for years, is a party to some transaction that would not be valid if his estate continued to

3      DW McMorland and others Hinde McMorland & Sim Land Law in New Zealand (online ed, LexisNexis) at [11.261(c)] (footnotes omitted), cited in Frema Properties Ltd v Shelf Company No 5 Ltd [2020] NZHC 1994 at [19]. See also Goertzen v All Traffic Management Services Ltd [2016] NZHC 2162, (2016) 18 NZCPR 309 at [28].

exist”. The doctrine is based upon estoppel: the circumstances must be such that it would be inequitable for the parties to rely on the fact that no formal surrender was executed or lease surrender instrument registered. Express words of surrender are not required provided the conduct of the parties is inconsistent with the continuance of the lease. Although a surrender by operation of law does not depend upon the subjective intention of the parties, it does require “some unequivocal act which has the effect of estopping the parties from asserting that the lease is still extant”. Inaction on the part of the landlord, for example not demanding rent, will not of itself constitute an unequivocal act giving rise to an estoppel.

[23]   In Artworld Financial Corporation v Safaryan, Dyson LJ approved the following propositions derived from the authorities as summarised by the Judge in the lower court:4

(1)The issue of whether there has been a surrender by operation of law after a tenant’s abandonment of the leased premises must be determined by evaluating the effect of the landlord’s conduct as a whole (cf London Borough of Brent v Sharma (1992) 25 HLR 257 at

259) …

(2)The test is whether the landlord’s conduct is ‘so’ inconsistent (Oastler v Henderson 1877 2 QBD 575 at 577) with the continuation of the tenant’s lease that it could only be justified as being lawful on the basis that the landlord has accepted the tenant’s implied offer to give back possession, and has taken possession of the premises beneficially for himself.

(3)Accepting back the keys without more will always be equivocal. As a matter of practicality and common sense, one party has to hold the keys to prevent an absurd situation in which they are passed back and forth because neither party wants to risk it being suggested that it has made an admission by holding them.

(4)Any act of the landlord which is consistent with its rights under the lease, such as entering the premises to inspect or to repair them, will not in itself give rise to a surrender because, by definition, it is not inconsistent with the lease continuing.

(5)Any further act of the landlord which amounts to protecting or preserving the property, such as taking security measures or doing necessary repairs, will not in itself give rise to a surrender because such self-help, necessary to preserve the landlord’s interest in the value of his property, is a reasonable response to the tenant’s evinced intention not to perform the obligations of the tenancy: cf McDougall’s Catering Foods Ltd v BSE Trading Ltd 1998 P & CR 312; Relvok Properties Ltd v Dixon (1972) 25 P & CR 1, at p 7.

(6)Similarly, any act of the landlord which amounts to the landlord’s performing the tenant’s covenants under the lease, such as keeping the garden tidy, would not necessarily amount to a resumption of

4      Artworld Financial Corporation v Safaryan [2009] EWCA Civ 303 at [29].

possession as it is not inconsistent with holding the defaulting tenant to performing the lease.

(7)Any further act of the landlord referable to the landlord’s seeking to re-let the premises will not necessarily give rise to a surrender by operation of law, as it is no more than what the landlord might reasonably be expected to do in the circumstance for the potential benefit of all parties: Oastler v Henderson (above). The landlord must be entitled to seek to mitigate the damage caused in reality (even if not yet technically in law so long as the lease remains extant) by the tenant’s abandoning the lease, by seeking to obtain another tenant, without thereby losing his rights against the original tenant if he is unable to do so.

(8)However, if the landlord goes further and uses the premises for his own benefit beyond the totally trivial -- and certainly, in my judgment, if such use amounts to occupation of the premises -- then he re-takes possession of the premises inconsistently with the continuance of the lease. This will give rise to a surrender by operation of law, since it is only on the basis of having accepted such a surrender that the landlord’s acts would be lawful.

[24]   In Megarry & Wade: The Law of Real Property the authors consider particular circumstances that may amount to a surrender of a lease, including where the landlord accepts the tenant giving up possession of the property. It is said that a clear case of surrender by operation of law will arise where:5

(a)the tenant gives up possession of the premises; and

(b)the landlord accepts it.

...

The acceptance of the tenant’s giving up possession estops the landlord from asserting that the lease continues even though the tenant’s act may be in breach of its terms. Acceptance will not be inferred merely because the landlord enters the premises and take steps to secure them. Abandonment of the premises by the tenant without more (even if rent is unpaid) is not a surrender, because the landlord may wish the tenant’s liability to continue. Nor is the delivery of the key of the premises to the landlord enough by itself. Even if the landlord accepts it, it must be shown that the landlord did so with the intention of determining the tenancy and not merely because there was no alternative, e.g. because the tenant has left the country. The test is whether the landlord’s conduct is so inconsistent with the continuance of the tenancy “that it can only be justified as lawful on the basis that the landlord has accepted the tenant’s implied offer to give back possession and that he has taken possession of the premises beneficially for himself”. What is normally required to satisfy this test is evidence the landlord entered into “profitable occupation”, in effect

5      Robert Megarry Megarry and Wade: The Law of Real Property (10th ed, Thomson Reuters, London, 2024) at [17-088].

taking the premises over and treating them as his or her own, typically by re- letting them.

[25]   There are several authorities referred to in Megarry & Wade in support of the principle that delivery of the keys of the premises to a landlord following abandonment of the premises by the tenant will not, without more, amount to a surrender.6

[26]   In Oastler v Henderson, the plaintiffs leased premises to the defendant for seven years from March 1868. In August 1868 the defendant went to America, leaving the key with the agent with instructions to let the premises. The agent shortly thereafter handed the keys to the plaintiffs who tried to let the premises. In 1870 the plaintiffs allowed some of their workmen to occupy part of the premises and in 1872 succeeded in letting the whole of them. It was held that the plaintiffs were not estopped from maintaining their action for rent as the facts did not support an acceptance of a surrender of the lease before they re-let the premises in 1872.

[27]In Proudreed Ltd v Microgen Holdings plc, Schiemann LJ said:7

While the taking of keys by a landlord, certainly if coupled with other acts, can evidence the taking of possession by a landlord, in the present case there were no such other acts evidencing an intention to resume possession by the landlords prior to the grant of a new lease. Everything which was done was perfectly explicable in the context of a situation in which there was no intention to accept a surrender until after the grant of a new lease which was thought to be imminent. No one was led to believe that this was not the situation, nor is there any evidence that in fact anyone believed this was not the situation.

[28]   In New Zealand Land Law the authors note that the lessee’s act of vacating premises or giving back the means of control is the usual starting point for surrender by operation of law but in respect to the lessor’s actions the context is all important.8 They note some actions of the lessor are recognised as equivocal, including changing of the locks, intermittently using the premises for its own purposes, or dealing with subtenants. It is also noted that silence in response to the tenant vacating the premises

6      Oastler v Henderson (1877) 2 QBD 575, [1874–80] All ER Rep Ext 1738; Proudreed Ltd v Microgen Holdings plc [1996] 1 EGLR 89, (1995) 72 P & CR 388; Laine v Cadwallader [2000] EWCA Civ 526.

7      Proudreed Ltd v Microgen Holdings plc, above n 6, at 91.

8      Elizabeth Toomey (ed) New Zealand Land Law (3rd ed, Thomson Reuters, Wellington, 2017) at 763.

will not amount to a surrender as “the mere announcement by the lessee that he proposes to vacate cannot amount to a determination”.9

My analysis

[29]   I have no hesitation in finding that BDL has not established an arguable case that the lease has been surrendered. At its highest its case is no more than it vacated the premises without giving any notice to Bush Inn of its intentions and at some stage it was asked for the keys of the premises without explanation.

[30]   Mr Singh’s evidence is notable for its brevity and lack of supporting evidence, and is implausible. As one example, he fails to mention in his first affidavit the request from Mr Turnbull for the keys. In his second affidavit he says the keys were requested on a second occasion but by an unidentified person who apparently provided no explanation for the request on a date in late September or early October. It is surprising that Mr Singh would not ask what the keys were required for in circumstances where that was a matter of great importance to BDL. It is also surprising that, absent any explanation for the request, he would assume the lease was over.

[31]   Even if I accept Mr Singh’s evidence at face value, a request to return the keys in the circumstances as they existed was not an unequivocal act by Bush Inn inconsistent with the continuation of BDL’s lease, nor do I consider it could ever have been understood by Mr Singh to be such for several reasons.

[32]   First, in an email of 10 September 2024 Tracey Preston of Bush Inn wrote to BDL’s counsel:

The Centre Managers at Bush Inn have advised us that your client has, over the weekend and yesterday, removed all of its stock and fixtures from the tenancy. I’ve attached photos of the current condition of the premises just for your reference. Can you advise your client’s intention with regards to the same? Your client has requested the Landlord’s view as to the possibility of sublease or early termination but nothing has yet been agreed and your client’s actions over the weekend are concerning to the Landlord.

9      Māori Trustee v Prentice [1992] 3 NZLR 344 at 352.

[33]   This email sent at the time BDL vacated the premises is a clear statement that the lease remained on foot.

[34]   Second, even on Mr Singh’s evidence the request for the return of the keys was not accompanied by any statement as to the reason they were required. I do not accept Mr Hearn’s submission that it was reasonable for BDL to assume the lease was being surrendered “where there was no apparent need for the landlord to have them”. As the authorities establish, any request for the keys without more is inherently equivocal. There could be a multitude of reasons Bush Inn might require access to the premises in circumstances where they had been abandoned. One such reason, as Mr Turnbull explained, was because access was required so HVAC maintenance could be undertaken, which work, he says, was completed on 11 September 2024.

[35]   Third, further context is that it was only in September 2024 that BDL had agreed to extend the lease through to 2030. It is entirely fanciful that Bush Inn would charitably agree to the immediate release of BDL’s obligations under the lease with several years to run in what appears to be a depressed market, and simply give up any recourse to BDL and Mr Singh as guarantor with no discussion or agreement as to compensation for resulting losses.

[36]   Fourth, there is the fact that during the period that Mr Singh says the keys were requested Bush Inn was pursuing liquidation proceedings against BDL, in respect to the settlement of which it was requiring payment of rent and other costs consistent with the continuation of the lease.

[37]   Fifth, there is no suggestion that Bush Inn was taking any other steps that might be regarded as inconsistent with continuance of the lease, such as occupying the premises, re-letting them, or even advertising them for lease.

[38]   Sixth, not only was Bush Inn requiring performance by BDL of its lease obligations, but BDL agreed to continue to pay the rent and other lease payments to resolve the liquidation proceedings in late November 2024.

[39]   I do not accept Mr Hearn’s argument that nothing should be taken from this because BDL paid without admission of liability and reserving its rights. There is nothing in writing to suggest that BDL had at any prior stage raised as an issue that the lease had been surrendered. Furthermore, Mr Singh’s evidence, only raised in reply to Mr Turnbull’s affidavit, that he “or my lawyers” consistently stated the lease was surrendered is unsupported by any evidence from BDL’s lawyers, and there is no reference to any such assertion in any of the email correspondence.

[40]   The evidence is clear that since BDL vacated the premises Bush Inn’s consistent position is that BDL continues to be bound by the terms of the lease. It is not arguable that Bush Inn has done anything that could be taken by BDL as an acceptance of the surrender of the lease. It follows that BDL’s application to restrain advertising and for a stay of this proceeding must be dismissed.

Result

[41]   The application is dismissed but at the request of counsel the restraint on advertising shall remain until 3.30pm on 22 August 2025 to give BDL an opportunity to reach a resolution with Bush Inn.

[42]   The case shall be called in the liquidation list at 10.00 am on 4 September 2025.

[43]   Bush Inn is entitled to costs on this application on a 2B basis plus reasonable disbursements.

O G Paulsen Associate Judge

Solicitors:

Ganson Management Ltd, Auckland Corcoran French, Christchurch