Cornwell Park Trust Board Inc v Chen - [2014] NZHC 2465

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-008 [2014] NZHC 2465

BETWEEN
THE CORNWALL PARK TRUST BOARD INC

Applicant

AND

YOUNG XIN CHEN Respondent

Hearing: 19 - 23 May 2014

Appearances:

M Casey QC, JGH Hannan and L May for the Applicant
J A Wickes for the Respondent

Judgment:

8 October 2014

RESERVED JUDGMENT OF ELLIS J

This judgment was delivered by me on Wednesday 8 October 2014 at 9.30 am pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:………………………….

Counsel/Solicitors:
M E Casey QC, Barrister, Auckland
JGH Hannan, DLA Phillips Fox, Auckland
L May, DLA Phillips Fox, Auckland
J A Wickes, Loo & Koo, Auckland

THE CORNWALL PARK TRUST BOARD INC v CHEN [2014] NZHC 2465 [8 October 2014]

[1] This judgment concerns the consequences of the termination of a “Glasgow”

lease relating to land owned by the Cornwall Park Trust Board and situated at 21

Maungakiekie Avenue, Epsom, Auckland. The Board owns a number of other properties in that area, all of which are subject to similar leases.

[2] In broad terms, Glasgow leases are perpetually renewable, long-term, ground leases. The particular lease for 21 Maungakiekie Avenue had a term of 21 years which commenced on 30 March 1988 and expired on 29 March 2009. There is a single dwelling on the property.1

[3] The leasehold interest in the Maungakiekie Avenue property, together with the house that was situated there, was purchased by the defendant, Mrs Chen, in December 2005 for $450,000. At that point the term had less than four years to run. The annual rent (which had been set in 1988) was $8,300.

[4] Notwithstanding the expiry of the lease on 29 March 2009, Mrs Chen remained in possession of the property until November 2011. In the intervening period, a rent review occurred which resulted in a 900 per cent increase in the annual ground rent.

[5] Presently in dispute is Mrs Chen’s liability to pay:

(a) the new “upset” rent of $73,750 per annum, for the period during which she occupied the Maungakiekie Avenue property following the expiration date; and

(b)the cost of repairs to the house on the property that have been undertaken by the Board since her departure.

1 As permitted by cl 4 of the memorandum of lease.

The lease

[6] Glasgow leases such as the lease presently at issue have historically proved fertile grounds for litigation. Their history and operation have been the subject of a number of inquiries.2

[7] In Mandic v The Cornwall Park Trust Board (Inc) the Supreme Court noted that:3

[25] Long-term ground leases (usually of 14 or 21 years) renewable in perpetuity with rent calculated either by an assessment of fair or market rent (or some similar concept) or, as in this case, as a percentage of a sum established pursuant to stipulated valuation exercises, are referred to as Glasgow leases. They were mainly put in place in the 19th and early 20th centuries. A Glasgow lease is, in economic substance,…

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 2465
Decision Date: 8 October 2014

CaseChat Overview and Summary

The case before the court was Cornwell Park Trust Board Inc v Chen [2014] NZHC 2465. The High Court was asked to determine whether the defendant, Mrs Chen, was liable to pay backdated rent at an increased rate following the expiration of her lease and whether she was liable to pay the costs of repairs to the property. The lease in question was a Glasgow lease, which is a perpetually renewable, long-term, ground lease. The lease term had expired, and a rent review had resulted in a 900 per cent increase in the annual ground rent. The court found that Mrs Chen was not liable to pay the backdated rent at the upset level, as the lease did not support such a claim when properly interpreted. The court also found that Mrs Chen was liable to pay damages for breach of the repair covenants in the lease. The court awarded damages in the sum of $119,327.19, together with interest on that amount. The court suggested that costs should lie where they fall, but either party could file memoranda if they disagreed.

Orders