Enviro Waste Services Ltd v Remediation (NZ) Ltd
[2021] NZHC 3270
•1 December 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-001225
[2021] NZHC 3270
IN THE MATTER OF an originating application under Part 19 of the High Court Rules BETWEEN
ENVIRO WASTE SERVICES LIMITED
Applicant
AND
REMEDIATION (NZ) LIMITED
Respondent
Hearing: 22 November 2021 Appearances:
G Williams and T Lindsay for Applicant J Maassen and D Brabant for Respondent
Judgment:
1 December 2021
JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie On 1 December 2021 at 2.00 pm
Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors/counsel:
Lindsay & Francis/G Williams, Auckland Willis Legal, Napier/J Maassen, Wellington
ENVIRO WASTE SERVICES LTD v REMEDIATION (NZ) LTD [2021] NZHC 3270 [1 December 2021]
Introduction
[1] The applicant, Enviro Waste Services Ltd (“ESL”), has filed an originating application pursuant to s 251 of the Property Law Act 2007 seeking an order for possession of that part of the property situated at 75-81 Truman Lane, Mt Maunganui (the “Te Maunga property”) as is occupied by the respondent, Remediation (NZ) Ltd (“Revital”).1 In the alternative, ESL seeks an order for possession under the inherent jurisdiction of the Court.
[2] The originating application is opposed by Revital. It has filed a number of competing applications:
(a)on 26 July 2021, it sought a stay of ESL’s originating application and an order requiring the provision of an unredacted copy of the lease of the Te Maunga property between ESL and the Tauranga City Council (the “TCC”); and
(b)on 29 September 2021, it sought that ESL file a statement of claim and that ESL’s originating application be consolidated with separate proceedings it has filed.
[3] Revital also gave notice that it required ESL’s witnesses for cross-examination. ESL then filed an application seeking to set aside this notice.
Background
[4] In 2017, the TCC granted a lease of the Te Maunga property to Revital. The lease commenced on 1 June 2017. It had a final expiry date of 30 June 2018 and there was no right of renewal. However, on 30 January 2018 the lease was varied and the term was extended to 29 February 2020. There was a further variation on 28 November 2019 extending the term for a further 12 months to 28 February 2021.
1 Remediation (NZ) Ltd trades as Revital Fertiliser and it is referred to in this judgment as “Revital”.
[5] Revital’s core business involves the composting of organic waste into compost and vermicast. It used the Te Maunga property to carry out its green and food waste processing operations in the Tauranga area.
[6] The TCC and an adjoining council – the Western Bay of Plenty District Council (the “WBPDC”) – were proposing to put out for tender the various contracts for their refuse and waste collection and processing services. ESL and Revital became aware of this and there were preliminary discussions between them as to how they might provide the green and food waste processing services that, amongst other things, the TCC and the WBPDC were proposing to put out to tender.
[7] In late 2019, the TCC and the WBPDC released their joint request for proposals in relation to multiple refuse and waste collection and processing services. As part of the request, the TCC put up for tender the lease of a number of properties it owned in its area which were used for waste collection and recycling. The leases put up for tender included the lease of the Te Maunga property. The request for proposals did not however require that green and food waste be processed at the Te Maunga property. Rather, it recorded that the TCC and the WBPDC would be offering a kerbside food waste collection service and noted:
This material could be processed at the existing organic processing facility at Te Maunga or it could be consolidated at the site and bulk hauled to a different processing facility.
[8] ESL proposed responding to the request for proposals by tendering for all contracts on offer as well as for the lease of the Te Maunga property. It proposed to subcontract the provision of particular services to various subcontractors, including Revital.
[9] There were a number of further discussions and negotiations between ESL and Revital and, on 11 February 2020, both companies signed a letter of intent relating to the provision of services for the processing of green and food waste as required by the TCC and the WBPDC in the request for proposals documentation. The letter of intent recorded that ESL would be submitting a tender in response to the request for proposals, that ESL and Revital had agreed that the tender submission would provide for Revital to provide some of the services and that ESL and Revital would need to
enter into a more detailed agreement in relation to the provision of these services. ESL and Revital also agreed that ESL … “may require that Revital enter into a Deed of Lease with either ESL or [the TCC] in order to be able to comply with the Service Agreement”.2
[10] ESL submitted a tender. While the tender was said to be a tender by ESL alone, it also identified various parties to the proposal. It noted that ESL proposed a joint proposal, via exclusive service contracts, with three service providers, including Revital. It noted that ESL and Revital had no commercial investments in each other but they had signed a letter of intent for an exclusive contract for the provision of food and green waste processing services.
[11] ESL was the successful tenderer and it was awarded the various contracts including the contract for the processing of food and green waste on 7 August 2020.
[12] On 16 November 2020, ESL entered into a lease of the Te Maunga property with the TCC. The lease granted possession to ESL to begin from 1 March 2021.
[13] On 23 November 2020, the TCC sent Revital a notice of termination, confirming termination of the lease effective on the final expiry date – 28 February 2021. Further, on 2 December 2020, Revital was informed by the TCC that it had granted a lease of the Te Maunga property to ESL and that that lease was due to commence on 1 March 2021.
[14] Revital did not vacate the Te Maunga property as at 28 February 2021. Rather, it remained in possession as from 1 March 2021 with the consent of ESL while it and ESL continued their negotiations over the provision of the green and food waste processing services.
[15] The letter of intent recorded that it commenced on the last day of signing by the parties and that, unless otherwise agreed, it expired on the … “failure by the parties to execute the Services Agreement within 6 months of the Award Date” … by the TCC
2 There is a dispute between the parties as to the nature of the letter of intent. ESL says that it is nothing more than an agreement to agree. Revital says that it is a joint venture agreement and that it and ESL became joint venture partners when it was signed.
and the WBPDC. ESL and Revital were unable to reach a concluded agreement and they did not execute a services agreement between them within six months of the award date.
[16] ESL decided that it wanted Revital to vacate the Te Maunga property. Accordingly, on 24 May 2021, it wrote to Revital’s solicitors giving Revital 20 working days’ notice to vacate. The 20 working days’ notice expired on 22 June 2021 but Revital did not leave. Rather:
(a)Revital filed proceedings against ESL in this Court under number CIV- 2021-404-1140 on 22 June 2021, alleging breach of fiduciary duty, misleading conduct contrary to s 9 of the Fair Trading Act 1986 and breach of the letter of intent. It sought declarations, an account of profits, damages and costs, injunctive relief and, in respect of the letter of intent, specific performance. Although these proceedings were filed on 22 June 2021, they were not served until 7 July 2021; and
(b)On 5 July 2021, ESL filed an application for leave to file its originating application seeking possession of the Te Maunga property. Leave was granted on 7 July 2021 and the originating application was filed and served shortly thereafter.
[17] There was an assertion by Revital that service of the notice by ESL was ineffective because it had been served not on Revital but rather on its solicitors. Out of caution, ESL served a further notice to vacate the Te Maunga property to Revital on 28 September 2021. The second notice expired on 26 October 2021. Revital again refused to vacate.
The competing interlocutory applications
[18] Against this background, I deal first with Revital’s application that ESL file a statement of claim and then with its applications for a stay and for consolidation. Its application for an ancillary order in relation to the provision of the lease between the TDC and ESL has been resolved by agreement and is no longer a live issue. I then deal with ESL’s application seeking to set aside the notices requiring cross-
examination and then finally, with the originating application seeking possession of the Te Maunga property. There is considerable overlap between the various applications.
(a) Revital’s interlocutory application seeking that ESL should file a statement of claim
(i)Submissions
[19] Central to Revital’s application that ESL should file a statement of claim pursuant to r 19.5A of the High Court Rules 2016 is its assertion that ESL’s proceedings were inappropriately commenced by way of originating application. It pointed out that ESL’s ex-parte application for lease under r 19.5 to commence the proceeding by way of originating application was made on the basis that ESL was entitled to possession of the Te Maunga property under s 251 of the Property Law Act. It was noted that s 251 is not one of the provisions referred to in r 19.2. It was further argued that s 251 does not apply and that Revital’s right to continue in occupation arises pursuant to the arrangements made between it and ESL, primarily contained in the letter of intent and the fiduciary and other duties that flow from that relationship. It argued that its relationship with ESL goes beyond that of lessor/lessee and that the matter was unsuitable for the originating application procedure. It submitted that there are a large number of factual issues in dispute and that it is not in the interests of justice for the matter to proceed as an originating application. Rather, it was said that ESL should be directed to file a statement of claim pursuant to r 19.5A and to consolidate its proceedings with Revital’s proceedings.
[20] ESL asserted that the proceedings were properly commenced by way of originating application and that the threshold for requiring it to file a statement of claim and originating application proceedings is high. It submitted that Revital has to establish that the filing of a statement of claim is both necessary and proportionate having regard to the nature of the proceedings and that Revital is unable to get over this threshold. It submitted that its application is a straightforward application for relief under the Property Law Act, that the law is settled and straightforward and that the issues are narrow and easily defined. In its submission, the question for the Court is straightforward – is ESL entitled to an order for possession of the property as against
Revital? – and it noted that Revital does not dispute the material facts on which the claim to possession is based.
(ii)Analysis
[21] Part 13 of the High Court Rules puts in place a summary procedure for the recovery of land. It requires a statement of claim and supporting affidavit but does not provide any other machinery provisions by which a speedy judgment can be obtained. It has been observed that the procedure is summary and is equivalent to the summary judgment procedure;3 nevertheless, the rules contained in Part 13 confer little benefit and it appears that they have been largely ignored in practice.4
[22] Generally, a proceeding must be commenced by filing a statement of claim,5 but there is an express exception for, amongst other things, proceedings commenced by originating application.
[23] Part 19 of the Rules deals with originating applications. An originating application is designed to provide a relatively speedy and inexpensive mechanism for the miscellany of applications which need to be made to the Court under specific statutory provisions.6 Relevantly, rr 19.2 to 19.4 (inclusive) set out proceedings which must be brought by way of originating application. Rule 19.2(s) refers to various specific provisions in the Property Law Act. It does not refer to ss 210 and 251 on which ESL relies. That however is not the end of the matter. Rule 19.5 provides that the Court can, “in the interests of justice”, permit any proceeding not mentioned in rr
19.2 to 19.4 to be commenced by originating application. It further provides that the Court’s permission can be sought without notice.
[24] In the present case, ESL applied without notice for leave to commence its proceedings by way of originating application. Its application was accompanied by a draft originating application and a memorandum from counsel. As noted above, the application was granted by Lang J on 7 July 2021.7
3 Terry v Calvert [1990] 3 PRNZ 63 (HC).
4 Inner City Properties Ltd v Mercury Energy Ltd [1998] 12 PRNZ 490 (HC).
5 High Court Rules 2016, r 5.25(1).
6 Manchester Securities v Body Corporate 172108 [2015] NZCA 29 at [15].
7 Enviro Waste Services Ltd v Remediation (NZ) Ltd HC Auckland CIV-2021-404-1225, minute dated 7 July 2021.
[25] Revital has not sought to appeal Lang J’s decision. Nor has it requested that he should recall the same. Its application that the Court should direct that ESL file a statement of claim does not however directly put Lang J’s ruling in issue.
[26] The originating application procedure is generally inappropriate where the factual issues are wide-ranging and in dispute, where there are multiple parties and discovery is required, in cases involving determinations of substantive rights involving the application of common law doctrines as opposed to statutory tests or where there is the possibility of cross claims or counterclaims.8
[27] Despite Revital’s protestations, I am not persuaded that the exchange of a statement of claim and a statement of defence are needed to better define the issues outstanding between Revital and ESL in relation to possession of the Te Maunga property. The factual issues raised by ESL in its claim for possession are neither wide- ranging nor complicated. There is no dispute that:
(a)the TCC and Revital were parties to a deed of lease of the Te Maunga property which ultimately expired on 28 February 2021;
(b)the TCC sent a notice of termination of the lease to Revital on 23 November 2020, recording that the lease expired on 28 February 2021;
(c)the TCC and ESL entered into a deed of lease of the Te Maunga property on 16 November 2020 and pursuant to that deed, ESL was granted possession as from 1 March 2021;
(d)after 28 February 2021, Revital remained in possession of the premises with ESL’s consent;
(e)on 24 May 2021, ESL gave notice to Revital requiring it to vacate the property as from 22 June 2021;
(f)Revital did not vacate by 22 June 2021;
8 Hong Kong and Shanghai Banking Cor Ltd v Erceg (2010) 20 PRNZ 652 (HC) at [25]; and see Andrew Beck and others McGechan on Procedure (online ed, Thomson Reuters) at [HR 19.5.01].
(g)further notice was given by ESL to Revital on 28 September 2021 requiring Revital to vacate as from 26 October 2021;
(h)Revital did not vacate by 26 October 2021; and
(i)Revital has not paid any rental to either the TCC or ESL since 1 March 2021.
[28] I accept that there is something of an overlap between the allegations made by Revital in its proceedings and the order sought by ESL in its originating application but, in my view, there is nothing in Revital’s proceedings that requires the Court to direct that ESL file a statement of claim. I note as follows:
(a)The originating application and the affidavits filed clearly define the basis of ESL’s application and the order sought. Revital has filed a comprehensive notice of opposition (albeit that it no longer pursues a number of the assertions in its notice of opposition) as well as comprehensive affidavits dealing with the matter. It is abundantly clear that Revital understands the nature of the arguments made by ESL that it is required to address.
(b)There is no suggestion by Revital that there is likely to be further documentation in relation to the claim for possession which might assist the Court or have a bearing on the matter.
(c)Revital does not directly seek possession of the Te Maunga property in its statement of claim. While it does seek specific performance of the letter of intent as noted above in [9], the letter of intent did not require that ESL offer a lease of the Te Maunga property to Revital. Moreover, the orthodox position is that specific performance will not be ordered where damages are available and adequate9 and there is nothing to suggest that damages are either unavailable or inadequate in this case.
9 See for example Forest Holdings (NZ) Ltd v Sheung [2021] NZCA 608 at [32]-[34].
(d)ESL has been paying rental to the TCC since 1 March 2021. Revital has paid nothing either to the TCC or to ESL.
(e)Requiring ESL to file a statement of claim would prejudice it and be likely to cause further delay. The evidence filed to date suggests that ESL is under contractual obligations to the TCC and the WBPDC and that it cannot proceed with its plans to provide the services it has agreed to provide without possession of the Te Maunga property.
[29] The discretion to require that a statement of claim be filed should only be exercised in cases where it is both necessary and proportionate having regard to the nature of the proceeding.10 Here there is, in my view, no necessity and requiring a statement of claim would be disproportionate.
[30]Revital’s application that ESL file a statement of claim is declined.
(b) Revital’s interlocutory application for consolidation
(i)Submissions
[31] Revital submitted that ESL’s originating application should not proceed in isolation from its proceedings and in a way that determines its claims or cuts across them. It referred to r 10.12 and argued that almost every element of that rule is met in the present case. It submitted that there are inefficiencies in having two parallel proceedings and that there is also a very real risk of inconsistent findings. It was argued that both proceedings turn on the interpretation of the letter of intent and the nature of the parties’ relationship and submitted that it would suffer unfair prejudice if the originating application is heard before its proceedings.
[32] ESL in response submitted that Revital cannot show any proper basis on which its application for consolidation should be granted and put it to me that the consolidation application is nothing more than an attempt by Revital to delay the hearing of its application for possession of the Te Maunga property. It pointed out that
10 Commissioner of Police v Li [2018] NZHC 292; Auckland Council v Mawhinney [2018] NZHC 2342; Commissioner of Police v Borlase [2020] NZHC 3103 at [18]; Commissioner of Police v Doyle [2021] NZHC 1209 at [5].
its originating application proceedings are ready to be heard and determined but that Revital’s proceedings are at an early stage and will not be heard until mid-2023. It also argued that the issues for determination in its proceedings and in Revital’s proceedings are different. It submitted that they are separate disputes and that any suggestion that consolidation will save money for the parties and time for the Court is misconceived. It argued that granting the consolidation application would exacerbate the harm and prejudice already caused to it by Revital’s continued possession of the Te Maunga property.
(ii)Analysis
[33] Rule 10.12 permits the Court, in respect of two or more proceedings and in any of the circumstances stipulated, to order consolidation. At least one of the situations set out in the rule must be engaged. There is then a very wide discretion.11
[34] I accept that the rule is engaged. The rights to relief claimed in both proceedings arise out of the same series of events or transactions. I am not however persuaded that it is in the interests of justice to order consolidation.
[35] First, if consolidation is ordered, ESL will have to wait until mid-2023 for its possession application to be determined. In the interim, it will have to pay rental to the TCC and its ability to fulfil its contractual obligations to the TCC and the WBPDC will be compromised.
[36] Secondly, ESL’s originating application was ready to be and was heard on 22 November 2021 and the Court can give a decision on it. The two proceedings are not at a similar stage.12
[37] Thirdly, the issues raised by the two sets of proceedings are not the same. ESL’s originating application seeks possession of the Te Maunga property. Revital’s proceedings are much more wide-ranging; they allege a joint venture, the breach of fiduciary and statutory duties and breach of contract. They do not directly seek possession of the Te Maunga property.
11 Regan v Gill [2011] NZCA 607 at [10].
12 Action Media Ltd (in liq) v Mitchell [2014] NZHC 3143 at [15].
[38] Fourthly, if it ultimately transpires that ESL has breached the letter of intent and/or breached fiduciary duties it owed to Revital, then prima facie damages will be the appropriate remedy. Dealing with the claim to possession separately from Revital’s proceedings does not run a risk of inconsistent findings. Making or refusing an order for possession on the originating application is not dispositive of Revital’s claims that the letter of intent has been breached, that ESL has breached fiduciary duties owed by it or that ESL has breached the Fair Trading Act.
[39] Fifthly, the Courts generally recognise in possession claims that the starting point is that the registered proprietor, lawful tenant or lessee is entitled to exclude all other persons from the property and that it is insufficient for a party against whom an order for possession is sought to merely assert that it has a future right of possession.13 Revital is asserting no more than a future right to occupy the Te Maunga site.
[40] Accordingly, I decline Revital’s application that the proceedings should be consolidated.
(c) Revital’s interlocutory application for a stay
(i)Submissions
[41] Revital seeks to invoke r 15.1. It argued that if an order is made on ESL’s application for possession, it will pre-empt the hearing of its proceedings and effectively make them redundant, causing it inappropriate and unreasonable detriment. It argued that the right to possession of the Te Maunga property cannot fairly be determined in isolation without recourse to the matters pleaded by it in its proceedings, and that accordingly the originating application proceedings should be stayed.
[42] ESL argued that Revital’s application was both misplaced and unjustified. It argued that r 15.1 is not engaged. It noted that Revital’s proceedings do not directly seek possession of the Te Maunga property. It was said that Revital does not have any present right to occupy the Te Maunga property. Again, ESL reiterated that Revital is simply claiming a future right of possession and it argued that Revital cannot contend
13 Kelly v Green HC Tauranga CIV-2009-470-426, 27 January 2010; Palmerston North City Council v Birch [2012] NZHC 2979.
that the Court, in anticipation of a future order, should now make orders which grant a present right to possession. It noted that the primary relief sought by Revital in its proceedings is pecuniary – damages and an account of profits. It acknowledged that Revital seeks specific performance as a remedy for the alleged breach of the letter of intent, but it repeated that the letter of intent did not require ESL to grant any sublease of the Te Maunga property to Revital. It summarised its position by saying that Revital cannot claim a stay to protect a future possessory right which it does not assert and does not have.
(ii)Analysis
[43] Rule 15.1 provides that a Court can strike out all or part of a pleading if it discloses no reasonably arguable cause of action, is likely to cause prejudice or delay, is frivolous or vexatious or is otherwise an abuse of the process of the Court. The rule goes on to provide that instead of striking out all or part of a pleading, the Court may stay all or part of the proceeding on such conditions as it considered just.
[44] I agree with ESL’s submission that, prima facia, Revital’s application for a stay does not engage r 15.1. Revital does not allege that ESL does not have a reasonably arguable case for possession; nor does it say that ESL’s application is frivolous or vexatious. Revital cannot say that ESL’s application is an abuse of the process of the Court – it was commenced with the leave of the Court. Rather, it appears that Revital is asserting that ESL’s originating application is likely to cause prejudice or delay to it.
[45] For the reasons I have already set out, in my judgement, ESL’s application does not make Revital’s proceedings redundant. ESL is seeking immediate possession of the Te Maunga property and its claim is limited to possession of the property. In contrast, Revital’s claims in its proceedings are much more wide-ranging. Revital does not specifically seek possession of the property, although it does seek specific performance of the letter of intent. However, as already noted, the letter of intent did not oblige ESL to lease the Te Maunga property to Revital. Rather, it provided that ESL might require Revital to enter into a lease with either the TCC or it. At its highest, Revital is contending that it has an expectation that the Te Maunga property might be leased to it at some stage in the future. It is not asserting a present right to possession.
If it turns out that ESL has breached the letter of intent, then Revital will be entitled to damages. Dealing with ESL’s originating application now does not pre-empt or determine Revital’s proceedings. Further, it cannot be argued that Revital’s proceedings will be delayed if the originating application is dealt with now. They are at an early stage.
[46] There is a risk of prejudice not only to ESL but also to third parties, in particular the TCC and the WBPDC. Revital’s continued occupation of the Te Maunga property is, on the evidence, causing ESL difficulties in fulfilling its contractual obligations to those entities. It has agreed with the TCC and the WBPDC that it will undertake development of the Te Maunga property within a specified timeframe so that it can process large amounts of green and food waste locally. This concern has become pressing because, on the evidence, on 12 October 2021, the TCC confirmed to ESL that the Te Maunga property needs to be upgraded. This triggered contractual obligations to complete the upgrade within 24 months. If Revital’s stay application is granted, it is likely to make it impossible for ESL to comply with its contractual obligations, with the result that ESL would be in breach of its contracts with the TCC and WBPDC. This would have serious consequences both from a reputational and commercial perspective for ESL. Its contracts with the TCC and WBPDC could be terminated. This has implications for ESL as well as for the TCC, the WBPDC and their ratepayers.
[47] It is noteworthy that Revital has not provided any undertaking as to damages to support its application for a stay. If the Court is satisfied that ESL has a prima facia right of possession, then the effect of Revital’s application for a stay is effectively an application for a stay of enforcement. It is doubtful whether a stay of enforcement would be available to Revital under r 17.29.
[48] In my judgement, Revital has not established that a stay should be granted in this case. Rather, relevant considerations tell against the grant of a stay. Accordingly, I decline Revital’s application for a stay of the originating application until its proceedings are heard.
(d) ESL’s interlocutory application to set aside the notices requiring ESL’s deponents to appear for cross-examination
[49] ESL filed evidence from four deponents – Mark McKenzie, Glen Jones, James Rutter, all of whom are employed by it, and from Sam Fellows, who is the Manager of the Sustainability and Waste Division at the TCC. Revital gave notice that it wished to cross-examine all four deponents. It initially asserted the cross-examination would take up to three or perhaps four days. In response, ESL filed an application seeking to set aside Revital’s notices requiring cross-examination.
(i)Submissions
[50] ESL argued that because Revital sought to cross-examine its witnesses for the purposes of an interlocutory application, it had to make an application to cross- examine under r 7.38 and establish that there are “special circumstances” justifying that course. It was argued that Revital was seeking to cross-examine ESL’s witnesses not on their evidence in support of the originating application, but rather on their evidence in support of their opposition to Revital’s interlocutory applications and/or on the matters raised by Revital in its proceedings.
[51] Revital argued that it was entitled to issue the notice of cross-examination in regard the originating application under r 9.74. It advised that it was seeking to cross- examine the witnesses only in relation ESL’s originating application and that cross- examination in regard to that issue would be relatively confined.
[52] I heard this application at the start of the hearing and gave an oral ruling declining ESL’s application to set aside the notices requiring ESL’s deponents to present for cross-examination. I now briefly set out my reasons for that ruling.
(ii)Analysis
[53] The originating application procedure does not preclude the giving of viva voce evidence or cross-examination. Rather, r 19.14 provides that r 9.74 applies to a proceeding commenced by way of originating application. Rule 9.74 provides that a party desiring to cross-examine a person who has sworn or affirmed an affidavit on behalf of an opposite party may serve on that opposite party a notice in writing
requiring the production of that person for cross-examination before the Court at the trial. There is no requirement in r 9.74 that the party desiring to cross-examine first obtain leave before serving notice requiring the production of the deponent called by the other party. Nor does the party seeking to cross-examine have to establish special circumstances.
[54] The rule relied on by ESL – r 7.28 – relates only to interlocutory applications and an originating application is not an interlocutory application. An interlocutory application is, pursuant to r 1.3, an application under r 7.19 or r 7.41. ESL’s originating application was not made under either of those rules.
[55] Accordingly, I declined ESL’s application to set aside the notices requiring it provide its deponents for cross-examination.
ESL’s originating application
(i)Submissions
[56] ESL argued that it has the right to possession of the Te Maunga property pursuant to its lease with the TCC. It noted that Revital does not challenge the validity of its lease. It acknowledged that, between 1 March 2021 and 22 June 2021, Revital remained in possession of the Te Maunga property with its consent. It said that this was an implied tenancy at will and it was entitled to and has terminated that tenancy without notice. Alternatively, it argued that Revital remained in possession as a prospective sub-lessee from it as sub-lessor, whilst the parties negotiated a sublease, and that s 210 of the Property Law Act applies. As an alternative, it sought an order cancelling the sublease and requiring that Revital grant possession pursuant to s 251 of the Act.
[57] ESL referred to Revital’s submissions, noting that it argues that the letter of intent applies. ESL noted that Revital does not assert that the letter of intent granted it a lease of the premises. It argued that Revital cannot claim that it has any present right to possession of the Te Maunga property by virtue of its as yet undetermined claim based upon alleged breaches of the letter of intent. ESL submitted that only it has a present right of occupation as the TCC’s lessee and that Revital cannot seek to preclude it from taking possession of the Te Maunga property to protect a future right
which Revital does not assert and does not have. It argued that the letter of intent was simply an agreement to agree and as such unenforceable. It argued that Revital had no right under the letter of intent to a sublease and that the letter of intent provided simply that ESL might require Revital to enter into a deed of lease of the Te Maunga property. It further noted that the letter of intent expired when the parties failed to execute the services agreement within six months of the award date and that there was no agreement to extend that period.
[58] In short, ESL argued that it has a better right to possession than Revital and that its application for possession ought to be granted.
[59] Revital, for its part, argued that the basis for ESL’s originating application is muddled. It said that the letter of intent was the governing instrument determining the parties’ relationship and providing for its right to continue in occupation of the Te Maunga property. It argued that under the partially implemented joint venture agreement and the parties’ successful tender, it has possessory rights to the property unaffected by cancellation.
[60] Revital submitted that s 251 of the Property Law Act does not apply because there is no lease between it and ESL, and that accordingly there was no breach of any lease permitting ESL to cancel the arrangements in place. It acknowledged that the provision in the letter of intent that ESL might require that Revital enter into a deed of lease with either it or the TCC was expressed in discretionary terms and that a lease was not an essential requirement for the performance of the services agreement. Nevertheless, it argued that the services agreement could only be performed by conferring “proprietary rights,” for example as an exclusive licensee. It argued that ESL had to provide it with sufficient security of occupation so that it can perform the services agreement.
[61] Revital also denied the application of s 210 of the Property Law Act. It asserted that ESL’s arguments in this regard assume that the letter of intent did not exist or that it has ended. It submitted that the parties were negotiating the lease as an aspect of negotiating a final services agreement but that the terms of the agreement were insufficiently certain to render it a lease for the purpose of s 210.
[62] In summary, it argued that the letter of intent and other communications formed an enforceable joint venture agreement which ESL did not fully perform. It said that ESL’s obligations subsist and that it requires ESL to complete their performance, including by ensuring that Revital maintains occupation of the Te Maunga property so that it can continue to process green and food waste. In the alternative, it argued that the letter of intent and other related communications forming the joint venture agreement created fiduciary duties and that ESL holds the lease from the TCC for the Te Maunga property to advance the purposes of the joint venture. It argued that ESL is seeking to use its breaches of the joint venture agreement to defeat its equitable obligations.
(ii)Analysis
[63] At common law, actions for the recovery of land turned on the right to possession. The object of an action for possession was not to enquire whether the title to possession asserted by the defendant is an absolute title which is good against all the world. Rather, the question was whether the plaintiff was able to prove a title which was relatively better than that of the defendant. Therefore, at common law, the plaintiff in an action for the recovery of possession of land did not need to prove a better right to possession than anyone else. It sufficed if the plaintiff could show a better right to possession than that of the defendant.14
[64] To determine who is entitled to possession, it is necessary to consider the competing claims of the parties.
[65] In its notice of opposition, Revital asserted that it remains in lawful possession of the Te Maunga site under its lease with the TCC because it had the right to extend that lease and that it remains in lawful possession on the basis of an implied licence to occupy created by a “collateral contract” with the TCC. This claim was not pursued at the hearing before me. Nor did Revital seek to argue that it is entitled to hold over pursuant to its now expired lease with the TCC. In my view, it is clear that Revital has no ongoing rights pursuant to its former lease with the TCC. That lease expired on 28 February 2021 and the TCC gave notice of expiry to Revital.
14 See DW McMorland and others Hinde McMorland & Sim Land Law in New Zealand (online ed, LexisNexis) at [7.003] and cases cited at n 5.
[66] The TCC has entered into a lease with ESL, giving ESL exclusive possession of the Te Maunga property as from 1 March 2021. In the normal course, ESL would be entitled to the exclusive possession of the property as from that date and it would be entitled to seek an order that Revital yield up possession of the property, for the simple reason that Revital has no right to continue in occupation.
[67] However, ESL consented to Revital remaining in occupation after 1 March 2021, while the parties endeavoured to negotiate a services agreement pursuant to which Revital would subcontract to ESL the provisions of green and food waste processing services, which ESL in turn would provide to the TCC and the WBPDC. As Mr McKenzie explained in cross-examination, while the parties were negotiating, it made sense for ESL to allow Revital to remain in possession of the Te Maunga property, notwithstanding that its lease with the TCC entitled it to exclusive possession
– “we were allowing Revital to remain on site whilst they closed out a number of things for us”.
[68] The question, it seems to me, becomes what is the effect of ESL allowing Revital to remain in occupation?
[69] Revital did not have a sublease from ESL. On the evidence, Revital was simply occupying the site. It follows that I agree with Revital that s 251 of the Property Law Act cannot apply. The section provides that the Court can, on application, make an order for possession of land comprised in a lease and cancel the lease. The word “lease” is defined in the Act, somewhat unhelpfully, to mean a lease, whether registered or unregistered. It includes a short-term lease and an agreement to lease. There are three essential elements of a valid lease:
(a)the lessee must be given the legal right of exclusive possession of the premises;
(b)the term must be for a definite period in the sense that it must have a certain time for commencement and a certain time for ending; and
(c)the lease must be created in the appropriate form.15
[70] In the present case, the evidence, including that of Mr McKenzie when cross- examined, establishes that Revital did not have the legal right of exclusive possession of the Te Maunga property. There was no definite term and no appropriate form.
[71] A lease is defined to include a short-term lease. A short-term lease is an unregistered lease that has a term that commences not later than 20 working days after the date of the contract to lease and that is for a term of one year or less, or a periodic tenancy for periods of one year or less or a statutory tenancy. While a short-term lease can be made orally, it must have a term that commences not later than 20 working days after the date of the contract to lease. Here, there was no contract to lease.
[72] A short-term lease can also comprise a statutory tenancy and a statutory tenancy is a lease that is terminable at will under s 210 of the Property Law Act. I address this issue further below, but prima facie, there was no statutory tenancy because there was no lease.
[73] Accordingly, in my judgement, s 251 is not engaged because there was no lease between ESL and Revital.
[74] Were the arrangements between Revital and ESL a tenancy at will or a statutory tenancy? Was there a licence?
[75] A tenancy at will comes into being whenever a person occupies land as tenant with the consent of the owner on the terms that either party may determine the tenancy at any time.16 A tenancy at will can be created either expressly or by implication. The classic situation in which a tenancy at will is recognised is when a party is allowed to continue in possession while negotiations for a new lease take place.17 A tenancy at will is also created where the purchaser is given possession of property before completion of a purchase and is not entitled to possession by virtue of the purchase contract. A tenancy at will protects the interests of the occupier during a period of
15 Hinde McMorland & Sim, above n 14, at [11.004].
16 Neil Campbell QC and others Principles of Land Law in New Zealand (3rd ed, vol 2, LexisNexis, Wellington, 2020) at [11.022]; Hinde McMorland & Sim, above n 14, at [11.022].
17 Javad v Aqil [1991] 1 WLR 1007 (CA) at 1019.
transition.18 No notice to quit is necessary to determine a tenancy at will.19 It can be determined by either party on demand.20
[76] As already noted, a statutory tenancy is a lease that is terminable at will on the giving of not less than 20 working days’ notice under s 210 of the Act.
[77] A licence is a permission given by one person to another allowing the other to do something which would otherwise be unlawful.21 Here, Revital cannot contend that it had a contractual licence from ESL. A contractual licence is a licence given for valuable consideration, and here no consideration has been given by Revital. Any licence held by Revital is at best a bare licence, which is revocable at will by the licensor unless the licensee can establish a grant of an interest in the land, an agreement for valuable consideration which is specifically enforceable or conduct raising an equity in their favour.22 None of these situations apply.
[78] While it is arguable that there was a bare licence, in my judgement, on the facts, a tenancy at will was created when ESL permitted Revital to remain in possession of the Te Maunga property. A tenancy at will best accords with the facts in this case – Revital was allowed to remain in possession of the Te Maunga property while it and ESL sought to agree a services agreement for the provision of food and green waste processing services, which might have been able to take place on the property. While Revital remained on the Te Maunga property, it had a right of exclusive possession.
[79] As is noted in one of the leading texts on land law in this country, the effect of s 210 on tenancies at will is in doubt. The predecessor section was s 105 of the now repealed Property Law Act 1952. Two conflicting views were expressed in relation to the operation of that earlier section.
(a)First, it was said that the effect of the section was to substitute one definite uniform rule for the determination of all indefinite tenancies
18 Heslop v Burns [1974] 1 WLR 1241 (CA) at 1253.
19 Crane v Morris [1965] 1 WLR 1104 (CA).
20 Errington v Errington [1952] 1 KB 290 (CA) at 296; King v King [2012] QCA 39.
21 See Hinde McMorland & Sim, above n 14 at [18.001].
22 Ibid at [18.015].
with the result that there is no such thing as a tenancy at will in New Zealand.
(b)In the alternative, it was contended that s 105 applied only in cases in which a tenancy from year to year would have been implied at common law.23
[80] The interpretation of s 105 of the Property Law Act 1952 was considered by the Court of Appeal in Baikie v Fullerton-Smith.24 In that case, the owners of a property re-entered when the tenancy agreement was terminated for non-payment of rent. The former tenant was however permitted to remain in occupation pending the execution of a new tenancy agreement. That did not happen because the terms of the new agreement could not be settled between the parties. Ultimately, the former tenant was ejected. One of the arguments put forward on behalf of the former tenant was that when he was readmitted to the premises he became a tenant at will at common law and that in New Zealand, a tenant at will was entitled to one month’s notice under s
105. It was held however that the former tenant, when he was allowed back into possession, became a licensee and not a tenant. North J, after reviewing the authorities, commented on the scope of s 105. He said:25
For myself, I am not prepared to accept the view that a prospective lessee let into possession prior to the signing of a contract for a lease for a term automatically becomes, in New Zealand, a monthly tenant, though I agree that if a rent is paid, the character of the tenancy may change and what began as a tenancy at will may become a periodic tenancy, determinable on the execution of the lease contracted for …
Neither of the other Judges dealt with the issue. Insofar as I am aware, the observations made by North J have not been expressly overruled by subsequent Court of Appeal or higher authority.26
[81] As has been observed, it remains open, at least to the Court of Appeal, to hold that s 210 has no application to a tenancy at will at common law, but that it does apply
23 Ibid at [11.023] and cases cited at n 2.
24 Baikie v Fullerton-Smith [1961] NZLR 901 (CA).
25 At 916.
26 Other aspects of the decision were not followed by the Court of Appeal in Fatac Ltd v Commissioner of Inland Revenue [2002] 3 NZLR 648 (CA) when distinguishing between a tenant and a licensee.
if the tenancy at will is changed into a periodic tenancy by the payment of rent. If North J’s interpretation of the section is adopted, it follows that tenants let into possession pending negotiations for a lease would not fall within the scope of s 210 and would not be entitled to 20 working days’ notice to quit.27
[82] In the present case, it is common ground that no rental has been paid by Revital to either ESL or the TCC since 1 March 2021. This suggests that Revital is a tenant at will and not a statutory tenant entitled to the benefit of s 210.
[83] In any event, the exact nature of the arrangement between ESL and Revital makes little or no difference in the present case. ESL has clearly indicated to Revital that it requires it to vacate the Te Maunga property.
(a)If the arrangement was a tenancy at will, then that tenancy has been appropriately determined;
(b)If the arrangement created a statutory tenancy, then pursuant to s 210(2), it was terminable at will by ESL giving not less than 20 working days’ written notice to Revital. Here, the requisite 20 working days’ notice has been given by ESL to Revital on two separate occasions;
(c)If the arrangement was a licence, it was a bare licence which could be revoked at any time by ESL. ESL has clearly communicated the determination of the licence to Revital.
[84] It is not necessary for me to reach a finding in regard to Revital’s claim that it is entitled to possession pursuant to the letter of intent as a joint venture partner. Indeed, it is preferable that I do not do so. Revital’s claim will fall to be determined in the context of its proceedings. Suffice it to say that any claim Revital may be able to make pursuant to the letter of intent does not confer a better title than that presently enjoyed by ESL pursuant to its lease with the TCC.
27 Hinde, McMorland & Sim, above n 14, at [11.023].
(iii)Result
[85] Accordingly, I make an order granting ESL possession of those parts of the Te Maunga property at 75 and 81 Truman Lane, Mt Maunganui, comprised in part of records of title SA 19A/1130 and SA 19A/1129, as are currently occupied by Revital. Revital is required to vacate the premises in a proper and orderly manner and deliver up to ESL vacant possession of the Te Maunga property no later than 14 days after the date of delivery of this judgment. Paragraphs (a), (b) and (c) of the draft order filed by ESL on 26 November 2021 pursuant to a request made by me at the hearing are approved.
Costs
[86] ESL as the successful party is entitled to its costs and reasonable disbursements.
[87] ESL has sought costs on a 2B basis, with allowance for second counsel. I do not know whether Revital opposes an application for costs in these terms. If it does not oppose, than I anticipate that counsel will be able to reach agreement on the appropriate award of costs without the need for any orders from the Court. If Revital does oppose, then I direct as follows:
(a)within 10 working days of the date of this judgment, ESL is to file and serve a memorandum seeking costs and disbursements;
(b)within a further 10 working days Revital is to file and serve a memorandum in reply;
(c)memoranda are not to exceed five pages.
I will then deal with the issue of costs and disbursements on the papers, unless I require the assistance of counsel.
Wylie J
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