Dotcom v The Old Church Limited
[2024] NZHC 1385
•31 May 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-1349
[2024] NZHC 1385
BETWEEN KIM DOTCOM
Appellant
AND
THE OLD CHURCH LIMITED
Respondent
Hearing: 9 April 2024 Appearances:
Further submissions completed:
S L Cogan for the Appellant
J G Donkin for the Respondent
23 April 2024
Judgment:
31 May 2024
JUDGMENT OF POWELL J
This judgment was delivered by me on 31 May 2024 at 11.00 am.
Pursuant to R 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors:
S L Cogan, Auckland J G Donkin, Auckland
KIM DOTCOM v THE OLD CHURCH LIMITED [2024] NZHC 1385 [31 May 2024]
[1]The appellant, Kim Dotcom, has appealed a judgment of Judge M-E Sharp:1
(a)finding him liable for $207,988, being the costs of remediating an apartment where he had been a tenant; and
(b)dismissing his counterclaim seeking damages from the landlord for breach of quiet enjoyment.
[2] The respondent, The Old Church Limited (“OCL”), as the owner of the apartment rented for two years by Mr Dotcom, had sought $304,000 for reinstatement. By the end of the hearing, OCL accepted it could only prove loss to a maximum of
$171,140.47.2 In her Honour’s judgment, Judge Sharp accepted that Mr Dotcom had damaged the apartment by making various unauthorised alterations, or otherwise damaged the apartment to a degree that exceeded fair wear and tear. The District Court found that Mr Dotcom was not however required to compensate OCL for the cost of reinstating the “consented alterations” and, when this cost was deducted, it meant that OCL could only prove remediation costs of $102,191.69.3 Despite this, the District Court found that this figure was “much less than OCL actually spent” and “the amount OCL has proved it spent only represents a part of the damage”.4 As a result, Judge Sharp assessed OCL’s loss by using the evidence of OCL’s quantity surveyor as to the estimated cost of the works as if they had been carried out, less the quantity surveyor’s estimate of the costs of the consented works. This resulted in the Court ultimately finding that OCL was entitled to damages of $207,988 plus interest.5
[3] The District Court went on to dismiss Mr Dotcom’s counterclaim, finding that OCL had not breached Mr Dotcom’s right to quiet enjoyment, despite a “glaring omission” by OCL which meant that, while OCL was required to give third-party rights of access to the apartment to Docklands, Mr Dotcom’s right to quiet enjoyment was not to be breached.6
1 The Old Church Ltd v Dotcom [2023] NZDC 8085 [the Judgment] at [77].
2 At [45].
3 At [47].
4 At [47]–[48].
5 At [49].
6 At [67].
Background
[4] Judge Sharp succinctly set out the background to the dispute in the following terms:
[1] From April 2013 until February 2021 [OCL] was the registered owner of a leasehold interest in Apartment 64, Shed 24, Princes Wharf, Auckland (the apartment). On 1 September 2015 the parties signed a tenancy agreement (the Tenancy Agreement) for the apartment commencing 15 November 2015 and expiring 14 November 2017.
[2] The rental was $27,000 a month or [$648,000] in total for the whole term which [Mr Dotcom] agreed to pre-pay on or before 15 November 2015.
[3] Clause 3 of the Tenancy Agreement also included a refurbishment clause. By virtue of Clause 4.1 the parties agreed that (except for s 23 of the Residential Tenancies Act 1986 (the Act)) all provisions of the Act were deemed to apply to the tenancy.
[4] Prior to his moving into the apartment the parties agreed that [Mr Dotcom] could make some changes to it. Exactly what was agreed and on what terms has been an issue in the proceedings.
[5] The High Court duly agreed to release the funds required to enable [Mr Dotcom] to pay rent for the term of the tenancy. They were paid to OCL and [Mr Dotcom] in December 2015
[6] Simultaneously, the parties entered into a conditional agreement for sale and purchase of the apartment. [Mr Dotcom] moved into the apartment around December 2015.
[7] On 13 October 2017 the agreement for sale and purchase of the apartment became unconditional; 15 November 2017 was nominated as the settlement date. There were a number of extensions to the settlement date requested by [Mr Dotcom] and agreed by OCL. In addition, on 14 December 2017 the parties agreed the tenancy would be extended from 15 November 2017 to 31 January 2018 with the rental for that period payable in advance by [Mr Dotcom]. The sale of the apartment never settled because on 24 January 2018 [Mr Dotcom] notified OCL that he no longer intended to settle the purchase of the apartment or extend the tenancy. On 31 January 2018 he vacated the apartment. On 1 February 2018 OCL retook possession of it.
[8] OCL claims that during the tenancy [Mr Dotcom] damaged the apartment in a manner that exceeded fair wear and tear and failed to reinstate previously agreed alterations, contrary to what it says was a variation of the tenancy agreement. Old Church Limited’s costs in remedying the damage caused by [Mr Dotcom] are said to be $304,000 excluding GST. Its lawyer Mr Donkin acknowledges that he can only prove that OCL spent $171,140.47. It is that sum plus interest and costs that OCL now claims from [Mr Dotcom] who has in turn counterclaimed, seeking damages estimated before trial at
$25,000 plus GST, alleging that OCL breached its obligation to provide quiet enjoyment during the tenancy.
[9] Previously [Mr Dotcom] also counterclaimed for breach of the tenancy agreement alleging that the roof above the apartment was not weatherproof. However, I apprehend that he no longer pursues this cause of action.
The appeal
[5] Mr Dotcom’s appeal is broken into six heads which both parties used as the framework for their submissions on appeal. The six heads were as follows:
(a)Condition of the apartment at the beginning of the tenancy.
(b)Unreasonable withholding of consent.
(c)Damage/fair wear and tear.
(d)Loss (if any) suffered by OCL.
(e)Mitigation.
(f)Counterclaim/breach of quiet enjoyment.
[6]I deal with each of the six heads in turn.
Condition of the apartment at the beginning of the tenancy
[7] On behalf of Mr Dotcom, Mr Cogan submitted that Judge Sharp erred in finding that at the commencement of the tenancy the apartment was “in very good condition”.7 In Mr Cogan’s submissions, Judge Sharp’s conclusion was based on marketing materials that were prepared sometime before the start of the tenancy and stood in stark contrast to some of the photos taken following the conclusion of the tenancy, which showed remediation underway.
[8] As Mr Cogan noted, the tenancy agreement contained an acknowledgement from OCL that “the apartment was in need of refurbishment” and provided a
7 At [15]–[20].
mechanism for OCL to pay for and carry out refurbishment to the value of $48,000, at the direction of Mr Dotcom.
Discussion
[9] Whether or not the marketing material in the photographs accurately reflected the condition of the apartment at the beginning of the tenancy, it is difficult to see that anything turns on this for the purpose of the appeal. With the possible exception of the carpet, it is clear that most of the refurbishment undertaken at the direction of Mr Dotcom at the outset of the tenancy involved changes to tailor the apartment to Mr Dotcom’s particular aesthetic tastes, rather than improving the condition of the apartment. Those changes, to which OCL contributed $48,000 pursuant to cl 3.2 of the tenancy agreement, included new carpet, and were accepted by Judge Sharp to be alterations to which OCL had consented.8 In contrast, subsequent alterations undertaken by Mr Dotcom did not come within cl 3.2, nor was permission otherwise given by OCL. In addition to those unapproved/unconsented changes made by Mr Dotcom there were also a range of damages which Judge Sharp accepted were not caused by fair wear and tear.9 As a result, and given the nature of the damage considered by Judge Sharp, it is clear that none of Judge Sharp’s conclusions on this issue relied upon the apartment being in any particular condition at the beginning of the tenancy.
Unreasonable withholding of consent
[10] Although, as noted, the District Court determined that a number of the renovations undertaken were consented to by OCL and were not therefore subject to any reinstatement obligation on Mr Dotcom, there were a range of other alterations made by Mr Dotcom for which no consent was sought. With regard to that category, Judge Sharp concluded that the unconsented alterations constituted damage and stood to be considered with the actual damage to the apartment in excess of fair wear and tear.
8 At [21].
9 At [23] and [31].
[11] On this issue, Mr Cogan submitted that Judge Sharp had erred in concluding that, to the extent that her Honour found that the renovations were unconsented, it was “unnecessary to determine whether, had [Mr Dotcom] sought approval from OCL, it would have been unreasonable for OCL to withhold its consent”.10 In Mr Cogan’s submission, the Court erred by finding that “any issue as to the reasonableness or otherwise of [OCL’s] consent would only come into play when and if consent was sought”. In Mr Cogan’s submission, if OCL could not have reasonably refused its consent to the renovations, the renovations could not constitute “damage” and there was no loss to OCL.
Discussion
[12] There is no merit in this aspect of the appeal. This is because any unconsented alterations (as opposed to actual damage) fell outside the terms of cl 3.2 of the tenancy agreement and, as a result, stood to be considered pursuant to the Residential Tenancies Act 1986 (“the Act”).
[13] While cl 3 of the tenancy agreement envisaged “refurbishment” of the apartment, the clause was limited in scope. It did not provide a wholesale mechanism to permit alterations without first obtaining the consent of OCL. Specifically, cl 3 of the tenancy agreement provided:
3.Refurbishment
3.1Prior to the Commencement Date, the landlord will grant the tenant and its consultants, contractors and advisers reasonable access to the premises for the purpose of undertaking measurements, obtaining quotes and preparing plans for refurbishment works to be undertaken following the Commencement Date and for determining which furniture and other chattel items the tenant wishes to be retained in the premises.
3.2The landlord agrees that the premises are in need of refurbishment. Accordingly the landlord agrees that it shall pay for refurbishment works to the premises as directed by the tenant from time to time during the term of the tenancy provided that the landlord’s obligations under this clause shall be limited to the landlord incurring a maximum of $48,000 (plus GST) in respect of such refurbishment works. Any refurbishment works which the tenant directs the landlord to undertake shall be as approved by the landlord and such approval shall not be unreasonably or arbitrarily withheld.
10 At [25].
[14] Although it is not disputed that, in practice, Mr Dotcom undertook the refurbishment pursuant to cl 3.2 and was then reimbursed by OCL, it is clear that the approval not being unreasonably or arbitrarily withheld related only to the works that Mr Dotcom could direct OCL to undertake, which were those undertaken up to the total value of $48,000. Regardless as to who actually undertook the work, the way the clause was drafted necessarily required Mr Dotcom to engage with OCL prior to the work being completed. There is no way to read that part of cl 3.2, or indeed the wider clause, as authorising Mr Dotcom to undertake further alterations without first seeking consent from OCL. It is not, contrary to Mr Cogan’s submission, analogous to a situation where consent has not been sought for an assignee of a lease. The two situations are not in any way comparable. In the case of an unconsented assignment, there has been no physical change to the leased premises and, in any event, even if the new assignee is not suitable, the original tenant will in any event generally remain liable.
[15] Instead, as the Act is deemed to apply to the tenancy agreement as a result of cl 4, it is clear that alterations for which consent was not sought or given stand to be considered in terms of the Act.
[16] Having considered the supplementary submissions filed by the parties since the hearing of the appeal, I accept that loss suffered by a landlord as a result of unconsented alterations is recoverable to the extent that it amounts to a breach of a tenant’s covenant to not intentionally or carelessly cause damage to the premises.11
[17] Likewise, any unconsented alterations breach s 42(1) of the Act, which expressly prohibits a tenant making any renovation, alteration, or addition of or to the premises except:
(a)in accordance with the tenancy agreement; or
(b)with the prior written consent of the landlord.
[18] I also accept Mr Donkin’s submission for OCL that a tenant cannot intentionally damage a premises by undertaking unconsented alterations and then
11 Residential Tenancy Act 1986 (“RTA”), s 40(2)(a).
argue that there is no loss to the landlord because the tenant somehow “improved” the premises. That submission disregards the landlord’s legal rights as the owner of the property, as recognised in the Act.12
[19] Taken together, I am satisfied there was no error in the District Court concluding that unconsented alterations should be treated as damage to the apartment.
Damage/fair wear and tear
[20] The focus of this part of Mr Cogan’s written and/or oral submissions was on Judge Sharp’s conclusions that damage to the following items was not the result of fair wear and tear:
(a)cracked toilet cisterns in two bathrooms;
(b)damaged towel rails;
(c)broken exterior roller blinds on the western deck;
(d)damaged curtains; and
(e)broken light fittings and powerpoints.
[21] With regard to these items, Mr Cogan submitted that the onus of showing these items were not fair wear and tear was on OCL and that Judge Sharp erred by finding OCL had discharged this onus. In Mr Cogan’s submission, these were all items that were in day-to-day use and have a limited useful life, after which they wear out and eventually fail. In Mr Cogan’s submission, the fact that each of the items listed failed is not by itself evidence of intentional or careless damage by Mr Dotcom, and there was no evidence of any intentional or careless conduct on the part of Mr Dotcom.
12 I note that, in his supplementary submissions, Mr Cogan raised the issue of betterment for the first time. As Mr Donkin noted, this issue was not raised in the District Court, it beyond the scope of the leave given to file additional submissions, and it is not appropriate to raise on appeal.
Discussion
[22] As Mr Cogan acknowledged, OCL had obtained expert evidence from a quantity surveyor, John Rennie. In his evidence, Mr Rennie had considered the meaning of fair wear and tear and stated:
In my opinion, none of the recorded damage can be said to arise from “reasonable use” of the apartment. The damage recorded is a combination of unconsented alterations or actual physical damage to the apartment. The instances of holes in the wall, gouges in the wallpaper/paintwork, holes in the doors, snapped plants, broken light switches and light fittings, cracked toilet cisterns, towel racks removed from the wall are all things that I consider to be damage and go far beyond the sort of “wear and tear” that is to be expected from every day, reasonable use of a property.
[23] While I acknowledge that Mr Rennie’s opinion was unchallenged by any evidence called by Mr Dotcom, and, overall, it does not appear to be challenged in relation to clear incidents of actual damage,13 his conclusions are open to question in relation to the specific matters identified at [20] above.
[24] The problem is that Mr Rennie’s firm was not instructed until after the remediation of the apartment had already been substantially completed. This meant that Mr Rennie was entirely reliant on the photos taken by Blake Hill on behalf of OCL to determine that the damage to these specific items was not caused by fair wear and tear.
[25] Blake Hill’s photographs are not comprehensive. There is a single close-up photograph of the “broken exterior roller blinds” and there is a single photograph of each of the toilet cisterns said to be cracked. There is a photo of a single detached towel rail and several photographs of individual light fittings, light switches, and power points in various stages of disrepair.
[26] The photos taken by Blake Hill do not provide a clear photographic record of every light fitting, light switch, or power point in the apartment. On the contrary, other than the limited explanation by Blake Hill in respect of the subject of the particular photographs, there was no quantification provided by either Blake Hill or Mr Rennie
13 For example, in relation to the other items listed at [31] of the Judgment, including all of the matters referred to by Mr Rennie.
as to exactly how many of the light fittings, light switches, or power points were present in the apartment, how many did not work, and how many of those were damaged, rather than ceasing to work as a result of fair wear and tear.
[27] With the exception of the two toilet cisterns that Mr Rennie specifically addressed in cross-examination by noting that he had “never really seen a toilet cistern crack” as a result of fair wear and tear, and with respect to the other four categories identified by Mr Cogan and dismissed at the hearing, I conclude that the photographs provided by Blake Hill provided an insufficient basis for Mr Rennie to reach his conclusion that, in each case, the damage was caused by Mr Dotcom, rather than having occurred as a result of fair wear and tear. On the contrary those photographs show only:
(a)one broken power point and one partially covered in paint;
(b)one light switch removed and one taped over;
(c)three lights on the same frame not working and one light removed from the ceiling; and
(d)a single towel rail apparently removed from the wall.
[28] The single photo of the “broken exterior roller blinds” is likewise a close-up shot that does not show the nature of any damage or give any indication how it was caused.
[29] The evidence adduced on behalf of OCL does not advance the issue any further. Karen and Paul Hill, the directors of OCL, were not in New Zealand when Mr Dotcom vacated the apartment. They relied on Paul Hill’s son, Blake Hill, first to inspect, and then to ensure that works were carried out. It was as part of that process that Blake Hill took the photographs relied upon by Mr Rennie. Blake Hill’s evidence about the scope of the damage and what repairs were done is, like his photographs, in no way comprehensive. His brief of evidence provided only a summary of the work undertaken. Explaining this, Blake Hill noted:
While I obtained and kept the estimates that were collated in the CONQA reports, between us we have not been able to find all of the records from the period during which the remedial works were undertaken. Unfortunately, this has meant that it has not been possible to reconstruct exactly what was undertaken by us and what was undertaken by the trades. I understand that this is why Karen and Paul engaged Maynard Marks to assist with reconstructing what was required to reinstate the Apartment.
[Emphasis added]
[30] The result, as Mr Cogan submitted, is that there is no evidence as to whether all the light fittings, light switches, and power points were damaged, or even whether all had been replaced. Likewise, there is no indication as to the nature of the damage to the towel rails or the exterior roller blinds, noting that, in relation to the blinds, there is not even an invoice showing the nature of the work carried out — only a bank statement showing that payment had been made to Lidgard Sails.
[31] Given this position, I am satisfied that the evidence was insufficient for the District Court to conclude that the damage to those four categories of items was not the result of fair wear and tear overall, notwithstanding the instances of specific damage noted in some of the photographs. As a result, this aspect of the appeal must be allowed and an adjustment made to OCL’s claim against Mr Dotcom, by deducting the amounts allowed for the replacement of light fittings, light switches, power points, the towel rails, and the exterior blinds. The amount of the deduction will be determined following the filing of further submissions by the parties.
Loss (if any) suffered by OCL
[32] This ground was, in many ways, the primary ground of appeal by Mr Dotcom. In Mr Cogan’s submission, as OCL was not able to show that it had expended more than $171,140.47, that figure represented the maximum amount of any judgment against Mr Dotcom. When the consented alterations were deducted from this amount, this meant that the total remediation cost recoverable against Mr Dotcom was a maximum of $102,191.69.14 In Mr Cogan’s submission, it was not open for Judge Sharp to use Mr Rennie’s evidence of the estimated value of the repairs (a total
14 From which the adjustments noted in the previous section are now noted to be deducted.
of $304,000) before deducting the cost of restoring the consented alterations ($96,012) to get to the total of $207,988 damages awarded against Mr Dotcom.
[33]Mr Cogan indeed went further and submitted that even the figure of
$102,191.69 was overstated given that, in many cases, only the invoice was available and there was no proof that the invoices had been paid.
[34]In response, Mr Donkin submitted:
7.6 That it must have cost OCL in excess of $171,140.47 to remediate the Apartment is supported by the unchallenged expert evidence of Mr Rennie and Patrick Hanlon.
…
7.8In summary, OCL’s case at trial was that:
a. the Apartment was damaged;
b. an independent expert, Mr Rennie, determined the necessary scope of works to remedy that damage;
c. OCL’s factual witnesses all confirmed that the scope of works identified by Mr Rennie was undertaken by OCL;
d. OCL produced supporting documentary records to support at least
$171,140.47 of expenditure on those works, but this did not reflect all of its expenditure;
e. an independent expert, Mr Hanlon, assessed the cost of the remedial works undertaken by OCL to be $304,000;
f. OCL confirmed that it spent “at least this to get everything done”.
7.9There was no challenge to this evidence by way of cross-examination, nor was any evidence produced by Mr Dotcom that disputed the works actually undertaken by OCL or the cost.
7.10Accordingly, there was a proper evidential basis upon which Judge Sharp could accept the scope of works produced by Mr Rennie and the costings of the same by Mr Hanlon. From there, her Honour deducted the costs of those works that represented the Agreed Alterations only and which was not otherwise damage for which Mr Dotcom was liable. This resulted in total losses to OCL of $207,988.
…
[35] In the alternative, Mr Donkin submitted that, if Judge Sharp’s approach was not accepted, there was no basis to further reduce the amount claimed by OCL once
the cost of restoring the approved alterations had been deducted. In particular, Mr Donkin submitted that the totality of the evidence before Judge Sharp included not only the invoices received by OCL but confirmation from the OCL witnesses that the work had been carried out and the invoice paid by OCL.
Discussion
[36] Having considered the issue, I do not consider it was open to Judge Sharp to use Mr Rennie’s report as a substitute for a failure to prove the claimed expenditure. It is clear that the approach taken by Judge Sharp caught the parties by surprise, given that, in closing submissions, Mr Donkin had confirmed that the maximum amount claimed by OCL was a figure of $171,140.47 and this was in fact recorded in the judgment, given Judge Sharp noted:15
[OCL’s] lawyer, Mr Donkin acknowledges that he can only prove that OCL spent $171,140.47. It is that sum plus interest and costs that OCL now claims from [Mr Dotcom] …
[37] As Mr Cogan submitted, the explanations provided by OCL for its lack of records as to the costs of the remediation do not satisfactorily explain why those records were not available. There is no suggestion that OCL approached any of the contractors to obtain copies of invoices or receipts, still less is there an explanation as to why, if payments were made by credit card, copies of the credit card records could not be obtained. It appears that the property leased by Mr Dotcom was in fact the sole asset of OCL and the absence of records of expenditure raises a real issue as to what work was done and whether payment was in fact made.
[38] In those circumstances, Mr Rennie’s report, other than providing a check on the reasonableness of the expenditure, cannot assist OCL in terms of providing proof that the expenditure was actually incurred. As previously noted, Mr Rennie did not see the apartment prior to remediation and, indeed, as the methodology section of his evidence in the District Court makes clear, Mr Rennie did not consider the work actually undertaken, given that he was not provided with any of the invoices tendered in the course of reinstatement. Instead, Mr Rennie based his assessment on the damage
15 At [8].
identified in the statement of claim and two budget estimates prepared by BHQ Quantity Surveyors, dated 12 February 2020 and prepared by Patrick Hanlon, a quantity surveyor. Mr Hanlon’s budget estimates were also partially retrospective, given that much of the reinstatement had taken place in 2018, although Mr Hanlon also identified further work to be completed in 2020.
[39] Likewise for the reasons noted in the previous section, it is clear that none of Karen Hill, Paul Hill, or Blake Hill’s evidence provides a sufficient basis for concluding that the actual amounts spent on repairing actual damage amounted to double the figure that is supported by any proof, particularly given Blake Hill’s acknowledgement that “it has not been possible to reconstruct exactly what was undertaken by us and what was undertaken by the trades.”
[40] I therefore conclude that, once the cost of restoring the consented alterations was removed in the evidence before the District Court, the maximum amount of damages payable by Mr Dotcom to OCL could not be greater than $102,191.69, less the other deductions to be determined, as noted in the previous section.
[41] I likewise conclude that, in the circumstances of this case, and in particular, in the context of the very poor record keeping apparent and the vague recollections of witnesses, the mere presence of invoices in the absence of the evidence of payment does not provide a sufficient foundation to conclude that the amounts claimed were actually expended. The fact that OCL was not able to produce evidence of expenditure from either bank or credit card records is significant and, in those circumstances, I conclude that a bare assertion of payment is clearly insufficient.
[42] As with the previous section, I will determine the exact amount of the deductions following the receipt of further submissions on the issue.
Mitigation
[43] Although the issue of mitigation formed part of Mr Dotcom’s case in the District Court, Mr Cogan acknowledged in the hearing before me that, although he took issue with the approach taken by Judge Sharp, mitigation did not have to be
considered on appeal, in light of the other issues raised. As a result, nothing turns on this issue in the appeal and no further comment is required to be made.
Counterclaim — Quiet Enjoyment
[44] Mr Cogan submitted that the District Court erred by finding that there had been no breach of Mr Dotcom’s right to quiet enjoyment and thereby erred in dismissing the counterclaim. The basis for the counterclaim was s 38 of the Act which, as noted, was deemed to be part of the tenancy agreement by cl 4 of that agreement. Section 38 provides:
38 Quiet enjoyment
(1)The tenant shall be entitled to have quiet enjoyment of the premises without interruption by the landlord or any person claiming by, through, or under the landlord or having superior title to that of the landlord.
(2)The landlord shall not cause or permit any interference with the reasonable peace, comfort, or privacy of the tenant in the use of the premises by the tenant.
(3)Contravention of subsection (2) in circumstances that amount to harassment of the tenant is hereby declared to be an unlawful act.
(3A) Without limiting the generality of subsection (3), the landlord commits an unlawful act under that subsection if the landlord enters the premises purportedly under section 48(2B) without any reasonable cause to believe that the tenant has abandoned the premises.
(4)In this section premises includes facilities.
[45] In Mr Cogan’s submission, Mr Dotcom’s quiet enjoyment was interrupted by Docklands, the head lessor, when it attempted to gain access to the apartment. Initially, this access was sought to undertake repair work to the deck to prevent leaking elsewhere in the building, although Docklands subsequently raised the prospect of requiring access to the apartment for further remedial work, but this was never actioned. In Mr Cogan’s submission, Docklands was “a person claiming by, through, or under the landlord or having superior title to that of the landlord” for the purposes of s 38(1) of the Act and the actions taken by Docklands interfered with the reasonable peace, comfort, or privacy of Mr Dotcom’s use of the premises.
[46] Mr Cogan submits that the District Court erred in several respects in finding that there had been no breach of Mr Dotcom’s right to quiet enjoyment. First, Mr Cogan submits that the District Court erred by minimising the breach of Mr Dotcom’s right to quiet enjoyment as, contrary to that Court’s finding that the breach was not substantial, the scale and scope of the works proposed by Docklands were far greater and more invasive than the Court found. Further, Mr Cogan submits that Mr Dotcom’s response to Dockland’s “request” was not unreasonable as there was no legal requirement for Mr Dotcom to comply with the requests made by Docklands. Finally, Mr Cogan submits that the District Court took a series of irrelevant considerations into account in determining that Mr Dotcom had responded to Dockland’s requests “unreasonably”, including, for example, Mr Dotcom’s reputation as a “seasoned litigant.” Mr Cogan submits that the loss suffered by Mr Dotcom in relation to this ground amounts to $150,000.
Discussion
[47] I acknowledge that there is some strength in Mr Cogan’s submissions. I accept that, in a context where Mr Dotcom had paid effective rental of $600,000 in advance for his two-year tenancy of the apartment,16 he was not under any legal obligation to provide access to Docklands. As a result, I consider that the extent to which Mr Dotcom may or may not have inflamed the situation with Docklands or otherwise enjoyed the sparring that ensued, was irrelevant.
[48] However, as Mr Donkin submitted, it is ultimately clear that there was no interference with Mr Dotcom’s tenancy to the level required. Apart from a few emails directly involving Mr Dotcom, there was, as a matter of fact, only very limited correspondence on the issue and most of this was between the lawyers for the respective parties. At no stage was there any suggestion of any physical or other intimidation by Dockland’s towards Mr Dotcom. In those circumstances, I am satisfied that there was no breach of quiet enjoyment in terms of s 38 or, indeed, the common law.
16 The rental was $648,000 but $48,000 was for the “refurbishment” detailed above, see [8].
[49] The covenant of quiet enjoyment, as Mr Donkin observed, “confers on the tenant the right of possession during the term and impliedly promises not to interfere with the tenant’s exercise and use of the right of possession during the term.”17 A breach of the covenant generally requires an actual, physical interference with the land, but, if the interference is not physical, it must be “sufficiently serious”.18 As put in Howard v Maitland, it is not enough for a lessee to be disturbed in his mind — his possession of the property must be disturbed.19 As such, the threshold for a breach of quiet enjoyment is relatively high.
[50] Even if I am wrong and the threshold was met, I am satisfied that, even with regard to the circumstances of this tenancy and the particular circumstances of Mr Dotcom, any interference was not substantial. As emphasised by Moore J,20 and noted by Mr Donkin, substantiality is an essential element in determining whether quiet enjoyment has been breached.21 Consequently, as substantiality is lacking in this case, so too is the merit of the counterclaim.
[51] I therefore conclude that Judge Sharp correctly dismissed the counterclaim brought by Mr Dotcom against OCL and I dismiss that part of the appeal.
Decision
[52] The appeal is allowed in part with regard to the claims for damage/fair wear and tear and loss (if any) as submitted by OCL and detailed above. The appeal is otherwise dismissed.
[53] Further submissions in terms of the matters identified at [30] and [41] above, and in particular the appropriate amounts to be deducted under each heading, are to be filed:
(a)on behalf of Mr Dotcom by 14 June 2024; and
17 Kenny v Preen [1963] 1 QB 499.
18 Southwark London Borough Council v Mills [2001] 1 AC 1 at 5 and 23.
19 Howard v Maitland (1883) 11 QBD 695 at 702–703.
20 JNJ Holdings Limited v Kent Sing Trading Company Limited [2017] NZHC 3274 at [312].
21 Fruitful Endeavours Ltd v Chancery Ltd (2005) 5 NZ ConvC 194,116 (HC) at [21].
(b)on behalf of OCL by 1 July 2024.
[54] Unless I form a view that a further hearing is required, I will then determine the remaining issues on the papers.
[55] Both sides have achieved a measure of success in respect to the appeal and my preliminary view is costs should lie where they fall. Should either party seek costs, memoranda seeking costs are to be filed by 21 June 2024 and memoranda in response are to be filed by 8 July 2024. I will then determine any costs issue on the papers.
Powell J
0
1
0