Candler v Rand Saver Automobiles Limited

[2019] NZHC 2179

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-680

[2019] NZHC 2179

UNDER

Section 244 of the Property Law Act 2007

IN THE MATTER OF

5/26 Hillside Road, Wairau Valley, Auckland

BETWEEN

TREVOR DOUGLAS CANDLER

Applicant

AND

RAND SAVER AUTOMOBILES LIMITED

Respondent

Hearing:	27 June 2019
Appearances:	S E Wroe & E Karamchandani for Applicant J P Hickey for Respondent
Judgment:	2 September 2019

JUDGMENT OF PAUL DAVISON J

This judgment was delivered by me on 2 September 2019 at 4:30 pm Pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Pidgeon Law, Auckland Hickey Law, Auckland

CANDLER v RAND SAVER AUTOMOBILES LTD [2019] NZHC 2179 [2 September 2019]

Introduction

[1]                 In this proceeding the applicant originally sought an order for possession of leased commercial premises. Since the hearing the respondent has vacated the premises, and the applicant now seeks an order pursuant to s 251(2) of the Property Law Act 2007 (the Act) directing the respondent to pay the outstanding rent up to the date it vacated the premises together with reasonable compensation for breach of the lease.

Background

[2]                 By originating application dated 16 April 2019 Trevor Douglas Candler (the applicant) applied for an order for possession of the premises situated at 5/26 Hillside Road, Wairau Valley, Auckland, that he had leased to Rand Saver Automobiles Limited (the respondent) by agreement to lease dated 16 May 2017 (the lease agreement). Mr Eugene Van Rooyen (Mr Van Rooyen), who is a director and shareholder of the respondent, executed the lease agreement as sole guarantor of the respondent’s obligations under the agreement.

[3]                 On 27 December 2018 the applicant, by his solicitor Joanna Pidgeon, gave notice to the respondent and Mr Van Rooyen of his intention to cancel the lease for non-payment of rent and operating expenses totalling $16,883.71. On 4 March 2019 the applicant gave notice to the respondent of cancellation of the lease, stating that the total amount due for unpaid rent, operating expenses and solicitor client costs incurred by the applicant was $19,048.91. On 16 April 2019 the applicant filed the present application seeking an order for possession of the premises and ancillary orders for the payment by the respondent of outstanding rent, operating expenses, interest and legal costs.

[4]                 Following service of the application, and there being no notice of opposition filed, the application was set down as a formal proof hearing on 27 June 2019. On the morning of the hearing the respondent filed a notice of opposition and appeared by counsel at the hearing. Mr Hickey, appearing for the respondent, sought an adjournment of the matter. In support of the application for an adjournment Mr Hickey said that the respondent acknowledged that rental and operating expenses were

outstanding, but said that his client disputed the outstanding amount. He said that nevertheless the respondent would be in a position to pay $9,439 towards the arrears early the following week. Ms Wroe for the applicant opposed the adjournment. Ms Wroe submitted that the respondent had ignored the notice given in December 2018 of intention to cancel the lease, and had similarly ignored the notice of cancellation of the lease and had failed to file a notice of opposition until the morning of the hearing.

[5]                 After hearing submissions from both counsel, I declined the respondent’s application to adjourn the hearing.

[6]                 Having dismissed the application for an adjournment of the hearing, the matter proceeded with Ms Wroe for the applicant making submissions in support of the application for an order for possession and detailing the composition of the arrears of rent, operating expenses, the basis of the calculation of interest charges and the claim for solicitor-client legal costs, as set out in the applicant’s supporting affidavits.

[7]                 In his submissions, Mr Hickey made an oral application for relief against forfeiture principally on the basis that the applicant had not notified the respondent of the outstanding operating expenses sum for a period of time, resulting in the respondent being prejudiced by being unable to pay the significant sum at short notice. Mr Hickey also submitted that certain rental payments made by the respondent had not been credited promptly although he accepted that they were subsequently taken into account by the applicant.

[8]                 At the conclusion of the hearing I reserved judgment and directed the applicant to file a detailed schedule setting out dates when rent and operating expense payments had fallen due, and when any payments were made including any credits given to the respondent. On 2 July 2019 counsel for the applicant filed a memorandum attaching one schedule listing the unpaid rent, operating expenses and legal costs, and a second schedule covering the period 23 October 2018 to 27 June 2019, detailing the information.

[9]  By further memorandum dated 25 July 2019 Ms Wroe advised that the respondent had vacated the premises on 22 July 2019. Accordingly, the applicant no

longer pursues his application for an order for possession of the premises, but maintains his application for ancillary orders to be made against the respondent for outstanding rental, outgoings, interest and costs.

[10]             The application is supported by affidavits sworn by the applicant himself and several additional affidavits, including affidavits by the property manager, Ms Catherine Goodwin of Goodwin Realty Ltd, and the applicant’s solicitor Ms Joanna Pidgeon. In his affidavit the applicant states that he entered into an agreement to lease with the respondent dated 16 May 2017 which he has exhibited as an attachment to his affidavit. The agreement to lease is for a term of two years commencing 15 May 2017 and expiring 14 May 2019 with one right of renewal for a further period of two years provided that the lessee had made less than one late payment and that any such default was less than 30 days outstanding during the initial two year term of the lease.

[11]             The annual rental for the first two year term of the lease is $34,800 per annum (excluding GST) payable monthly in advance.

[12]The agreement to lease further provided:

7)The tenant shall enter into a formal Deed of Lease with the Landlord to be prepared by the Landlord’s solicitor at the cost of the Tenant, using the 6th edition Auckland District Law Society Deed of Lease form amended in accordance with the provisions of this Agreement (“Lease”) and its annexures including the appended standard Landlord variations.

8)Notwithstanding that the Deed of 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 is duly executed.

[13]             Pursuant to paragraph 5.1 of the Second Schedule of the Auckland District Law Society Deed of Lease 6th edition (ADLS Lease), interest on unpaid rental is payable on demand in the event of default continuing for 10 days following due date. The Second Schedule provides for a default interest rate unless a contrary intention appears in the lease or elsewhere. In the agreement to lease the default interest rate is specified as being “5% above the Landlord’s bank overdraft rate at the time of default”.1

1      Agreement to Lease, para 13.

[14]Two affidavits in support of the application were sworn by Ms Goodwin..

[15]             In Ms Goodwin’s first affidavit sworn on 15 April 2019, she explains that her company took over management of the Hillside Road property in October 2018 at a time when the respondent was already in arrears. She says that following an initial telephone conversation between herself and Mr Van Rooyen, he proposed to reduce the outstanding arrears by payments of $1,000 a month to be applied towards arrears of operating expenses and rent. In a letter dated 23 November 2018, sent by Ms Goodwin to the respondent and Mr Van Rooyen, Goodwin Realty advised that payment of the November rent invoice was due on 15 November 2018, and said that if it remained unpaid as at 27 November, the applicant would exercise enforcement remedies under the lease.

[16]             In her second affidavit sworn on 20 June 2019, Ms Goodwin updated the position as regards outstanding rent and operating expenses under the lease agreement. Attached to Ms Goodwin’s affidavit is a statement detailing the rental and operating expenses and the payments received.

[17]             Ms Goodwin attached a schedule to her second affidavit detailing the composition of a total sum claimed of $43,291.30. The single credit recorded in the schedule is for $500 received on 15 March 2019 which was credited against the rent due that month. The updated schedule prepared by Ms Goodwin attached to Ms Wroe’s memorandum of 2 July 2019, details the composition of a total sum of

$46,949.58 claimed as outstanding for rent, operating expenses, and the applicant’s solicitor-client legal fees.

[18]             The total of rental claimed in the schedule is $11,600, the operating expenses claimed total $14,088.87 and the solicitors’ fees claimed are $21,260.70.

[19]Clause 6.1 of the ADLS Lease provides:

Costs

…The Tenant shall pay… the Landlord’s legal costs (as between lawyer and client) of and incidental to the enforcement of the Landlord’s rights remedies and powers under this lease.

[20]             The solicitors’ costs detailed in the updating schedule prepared by Ms Goodwin correspond to fee invoices issued by the applicant’s solicitors Pidgeon Law. The fee invoices are for professional attendances in connection with enforcement of the applicant’s rights, remedies and powers under the lease in relation to the cancellation of the lease, attempts at peaceable re-entry of the premises and engaging counsel in relation to the application for the order for possession and related attendances. The fee invoices are annexed to the affidavit by Ms Joanna Pidgeon filed in support of the application. I am satisfied that the amounts claimed in the schedule and the solicitors’ fees do relate to costs incurred in connection with the enforcement of the applicant’s rights, remedies and powers under the lease pursuant to cl 6.1.

Section 251 of the Act provides:

251     Powers of court in making order for possession

(1)On an application to a court for an order for possession of the land comprised in a lease, the court may make the order and cancel the lease.

(2)If the court makes the order and cancels the lease under subsection (1), it may also do all or any of the following:

(a)order the lessee to pay the rent up to the date of cancellation or any later date on which the lessee yields up possession:

(b)order the lessee to pay reasonable compensation for the breach:

(c)impose on the lessee or the lessor any other conditions that it thinks fit.

(3)For the purposes of this section, reasonable compensation for the breach of a lease may include reimbursement of the lessor’s reasonable expenses—

(a)in giving notice of intention to cancel the lease under section 245 or 246; and

(b)in doing anything else that the lessor has reasonably done in relation to the breach.

[21]             I am satisfied that the solicitors’ fees as detailed in the schedule annexed to Ms Goodwin’s second affidavit, and as updated by the schedule attached to Ms Wroe’s memorandum of 2 July 2019, relate to steps that were reasonable for the applicant to have taken in relation to the respondent’s breaches of the lease agreement.

[22]             I am also satisfied by the evidence of Ms Goodwin as contained in her affidavits that the schedule annexed to her second affidavit and subsequently updated, correctly sets out the amount of unpaid rent and the amount of unpaid operating expenses relating to the premises.

[23]             Accordingly, I find that under the terms of the lease agreement into which the terms of the ADLS Lease are incorporated, the respondent is liable to pay the applicant the total sum of $46,949.58 and I enter judgment for the applicant against the respondent for that sum.

[24]             The applicant also claims interest totalling $1,369.10 as calculated in a schedule annexed to Ms Pidgeon’s affidavit. The interest rate applied to the outstanding amounts due under the lease agreement is 24.5 percent, being 5 percent above the applicant’s bank overdraft interest rate at the time of the default pursuant to clause 13 of the lease agreement. Apart from the use of that interest rate for the purpose of the interest calculation, the only evidence of the applicant’s bank overdraft interest rate is his statement in his affidavit that his overdraft rate is 19.5 percent. I do not consider that the applicant has discharged the onus of proving his overdraft interest rate. The applicant has failed to support his evidence with any documentary material and in my view more than a mere assertion of his overdraft interest rate is required. I accordingly disallow that part of the applicant’s claim.

Result

[25]I enter judgment for the applicant against the respondent in the sum of

$46,949.58.

[26]             The applicant is entitled to costs and I direct the applicant to file and serve a costs memorandum (not exceeding three pages in length) within 10 working days from the date delivery of this judgment. The respondent is to file and serve a costs memorandum within 7 working days from receipt of service of the applicant’s costs memorandum. Following filing of the costs memoranda, I shall determine costs on the papers.

Paul Davison J