Detour Clothing Ltd v Star Five Ltd - [2017] NZHC 1172

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV 2016-425-122 [2017] NZHC 1172

BETWEEN
DETOUR CLOTHING LTD

Plaintiff

AND

STAR FIVE LTD Defendant

Hearing: 24 May 2017

Counsel:

D R Tobin and A Holland for Applicant
B M Russell for Respondent

Judgment:

31 May 2017

JUDGMENT OF HEATH J

This judgment was delivered by me on 31 May at 4.00pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
Berry & Co, Queenstown
Lane Neave, Christchurch

DETOUR CLOTHING LTD v STAR FIVE LTD [2017] NZHC 1172 [31 May 2017]

CONTENTS

The application  [1] Background  [3] The first Property Law Act Notice  [11] The second Property Law Act Notice  [23] The “relief against cancellation” proceedings  [36] Analysis
(a)      Legal principles  [39]
(b)      Clause 33 of the Lease  [45] (c)      Proportionality: The balancing exercise  [56] Result  [77]

The application

[1] Detour Clothing Ltd applies for relief against cancellation of a lease (the Lease). Cancellation was effected following an alleged breach of the Lease caused by Detour Clothing’s failure to obtain consent to an effective change in its management structure.1 The application is made under s 253 of the Property Law Act 2007 (the Act). The Court’s powers on such an application are set out in s 256.2

[2] The application is opposed by the landlord, Star Five Ltd. It contends that cancellation of the Lease was justified on the information available to it at the relevant time. Further, it asserts that the wider range of considerations that can be taken into account on an application of this type do not justify the relief sought. It is
accepted that this Court has a wide discretion to grant relief.3

Background

[3] Since 1988, Detour Clothing has operated a business in Queenstown which involves the sale of fashionable apparel for both men and women. In 2014, it was keen to secure a prestigious location from which it could trade. It located a shop at
17 Rees Street, owned by Star Five. Those premises are in a street that runs parallel

to Lake Wakatipu, in the area between Queenstown Mall and Shotover Street.

1      See cl 33.3 of the Lease, set out at para [46] below.
2      Sections 253 and 256 of the Property Law Act 2007 are set out at para [39] below.
3      Studio X Ltd v Mobil Oil NZ Ltd [1996] 2 NZLR 697 (HC), at 701, set out at para [42] below.

[4] On 4 February 2014, in order to procure a lease, Detour Clothing entered into two interdependent agreements. The first was with the existing tenant, Beaver Liquor Ltd. This concerned the payment of “key money”. The second was the Lease, the counterparty to which was Star Five. Both Star Five and Beaver Liquor are companies owned by family interests associated with the director of Star Five, Mr Alastair Spary. While Mr Spary has described himself as “an advisor” to Beaver
Liquor, there is evidence that he exercises decision-making functions on its behalf.4

[5] In consideration…

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: [2017] NZHC 1172
Decision Date: 31 May 2017

CaseChat Overview and Summary

Detour Clothing Ltd applied to the High Court for relief against the cancellation of a lease, which was cancelled by Star Five Ltd for a breach of a covenant to obtain consent to a change in management. The application was brought under s 253 of the Property Law Act 2007. Star Five opposed the application. The High Court was required to determine whether the cancellation was justified and if the Court should grant relief against cancellation. In considering the application, the Court took into account a broad range of factors, including the circumstances of the breach, the financial position of the tenant, and the position of third parties. The Court also considered the effect of the cancellation on the tenant and the landlord. The Court held that the cancellation was justified but that relief should be granted to the tenant on terms. The Court ordered that the tenant pay $50,000 to the landlord in compensation for unnecessary costs and expenses incurred by the landlord as a result of the tenant’s conduct. If the payment was made by the due date, the order would require the landlord to transfer vacant possession of the premises to the tenant.

Orders