Fitzgerald v Barrett
[2023] NZHC 437
•8 March 2023
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2022-470-83
[2023] NZHC 437
BETWEEN NGAIRE JOAN FITZGERALD and
CAROL FLORENCE SCOTT as trustees of the PM & NJ FITZGERALD FAMILY
TRUST
PlaintiffsAND
RICKY ALLAN BARRETT and GINA MARCELLA McNEILL
Defendants
Hearing: 5 December 2022 Counsel:
LSB Acland and LJ Ingham for the Plaintiffs P Depledge for the Defendants
Judgment:
8 March 2023
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 8 March 2023 at 4.30pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors/Counsel:
Rout Milner Fitchett, Nelson PA Depledge, Hamilton
FITZGERALD v BARRETT [2023] NZHC 437 [8 March 2023]
Introduction
[1] The defendants are currently in possession of a property owned by the plaintiffs in Whangamata. The plaintiffs have applied for summary judgment of their claims for vacant possession and unpaid rent in respect of the property.
[2] The claim for vacant possession relies on the service of a valid notice pursuant to s 210 of the Property Law Act 2007 (PLA). Counsel for the defendants says that s 210 does not apply as the parties agreed on the duration of the term of the lease so the lease is not terminable at will.
[3] The claim for unpaid rent is brought on the basis that there is an enforceable agreement that the defendants pay $2,990 including GST per month and that it is not part of this agreement that the defendants would construct a residential apartment at the property in lieu of paying rent.
[4] The defendants submit that they are entitled to possession in accordance with a sufficient oral agreement relying on the doctrine of part performance with the terms of the oral agreement evidenced in writing both in email correspondence, the unsigned deed of lease and parol evidence in relation to construction of the apartment in lieu of rent. In these circumstances the defendants say it would be unconscionable for the plaintiffs to rely on the requirement for agreements to be in writing under the PLA to avoid the oral agreement applying.
[5] The defendants emphasise that there are clear factual disputes that are not able to be determined in an application for summary judgment.
Issues
[6]The issues for determination are therefore:
(a)Was the lease term agreed?
(b)Did the parties:
(i)have an oral agreement that the defendants would pay $2,990 including GST per month? or
(ii)that the defendants would do construction work at the property in lieu of paying rent?
(c)Has there been part performance of that oral agreement?
(d)Would it be unconscionable to rely on the PLA requirement for writing?
Factual background
[7] The plaintiffs are the owners of a commercial property at 108 Wattle Place, Whangamata as trustees of the PM & NJ Fitzgerald Family Trust. The property is zoned as commercial.
[8] The defendants took possession of the property on or about 22 October 2021. No lease documents have been signed in relation to the premises.
[9] In addition to operating a joinery business from the premises, the defendants live there.
[10] The defendants have completed building work at the property so that it now includes a two bedroom apartment.
[11] The plaintiffs, by their solicitor, gave written notice to the defendants on 7 April 2022 that the lease was to terminate with the lessees required to vacate the premises within 20 working days of service of the notice.
[12]The defendants have refused to vacate the premises.
Summary judgment
[13] The plaintiffs’ application for summary judgment is brought pursuant to r 12.2(1) of the High Court Rules 2016. This rule provides that this Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any cause of action.
[14] The principles applying to such applications are well established by the leading authority, Krukziener v Hanover Finance Ltd:1
The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as, for example, where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
First cause of action: order for delivery of vacant possession
Relevant provisions
[15] Section 210 of the PLA provides for the termination of a lease where no lease term is agreed either expressly or impliedly, or if the lessee remains in the premises with the consent of the lessor following the expiry of the lease term. Section 210 provides:
210 Implied term of lease if no other term agreed
(1)This section applies to a lease if—
(a)the lessee is in possession of the land, although the lessor and the lessee have not agreed, expressly or by implication, on the duration of the term of the lease; or
(b)the lessee remains in possession of the land with the lessor’s consent, although the term of the lease has expired and the lessor and the lessee have not agreed, expressly or by implication, that the lessee may continue in possession for some other period.
(2)A lease to which this section applies—
(a)is terminable at will; and
(b)may be terminated, at any time, by the lessor or the lessee giving not less than 20 working days’ written notice to the other party to the lease.
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
[16] As this is a summary judgment application the defendants only have to show that it is reasonably arguable that the lease term was agreed. If a term was agreed, s 210 would not apply and the plaintiffs could not rely on the notice purportedly given under s 210 to require the defendants to vacate the premises.
Was the lease term agreed?
[17]The plaintiffs plead in their statement of claim at [6] that:
The parties did not agree, expressly or by implication, on the duration of the term of the lease.
[18] The second-named defendant, Gina Marcella McNeill, annexes a draft statement of defence to her affidavit that she says she intends to file in the proceedings. The draft states that the defendants admit paragraph [6] in the statement of claim.
[19] In their draft response to the pleading at [10] of the statement of claim, “[t]hat the defendants remain in possession of the Property after the lease has expired”, the defendants deny the pleading and state that “the lease has not expired”. However, no particulars are given of this denial.
[20] The statement of defence is still in draft and so the defendants may amend this pleading before filing it. I note that a statement of defence is not required to be filed prior to the determination of a summary judgment application. However, the defendants’ evidence and the correspondence annexed to their affidavits do not support the position that a lease term of two years was agreed as counsel for the defendants now contends.
[21]Neither defendant states in their affidavit that such a term was agreed.
[22] The defendants sent a lengthy email to the plaintiffs’ lawyer on 3 May 2022 following service of the purported s 210 notice requiring them to vacate within 20 working days yet did not mention that a two year term had been agreed.
[23] Furthermore, the defendants’ lawyer sent a letter dated 21 July 2022 to the plaintiffs’ lawyer and did not refer to a two year term (or any other term).
[24] Counsel for the defendants refers to a text message from the first named defendant dated 9 December 2021 in which Mr Barrett says:
… oh and the lease agreement will come back all signed etc just as soon as it does (u know what lawyers are like lol) but ultimately that changes nothing as we have a verbal agreement on dates and amounts which all match up with lease agreement so definitely no need to worry there either.
[25] Counsel for the defendants submits that this evidences agreement to the lease term set out in the draft lease. I do not accept this as the text message is discussing the payment of rent and at no point refers to the term or duration of the lease. In light of the evidence already referred to above, that the draft statement of defence says there was no lease term agreed, and in circumstances where the defendants say that they were not prepared to sign the deed of lease because it did not reflect the fact that they were living in the premises, I do not accept that it is reasonably arguable that the 9 December text message is evidence that the defendants did agree to the term as set out in the draft deed. Having not signed the draft deed and after expressly stating that they were not prepared to sign it, the defendants cannot now rely on the unsigned deed to avoid the operation of the s 210 notice.
[26] I therefore conclude that it is not reasonably arguable that a lease term was agreed either expressly or by implication.
[27] As set out above, on 7 April 2022 the first named plaintiff, Ngaire Fitzgerald, personally handed to the defendants a letter written by her lawyers of the same date terminating the lease. The plaintiffs say the letter was a s 210 notice to the defendants that the lease would be terminated on the expiry of 20 working days after the date of service.
[28] Despite this notice, the defendants have remained in possession of the property. The defendants admit receiving the notice. I have now found the notice was validly given under s 210 of the PLA as no lease term was agreed.
[29] The plaintiffs have therefore succeeded in their application for summary judgment on the first cause of action and an order will be made for the defendants to vacate the premises and the plaintiffs to take possession. A possession order will
therefore be able to drafted pursuant to rr 17.80 and 17.81 of the High Court Rules 2016 if necessary.
Second cause of action: payment of rent and outgoings
[30] Section 24 of the Property Law Act 2007 provides that a lease of land is not enforceable by action unless the contract is in writing, or its terms are recorded in writing, and the contract or written record is signed by the party against whom the contract is sought to be enforced. The parties are agreed that the deed of lease is unsigned and therefore the starting position is that the deed of lease is not enforceable.
[31] As discussed below, there is evidence in writing of an oral agreement in a text message sent by one of the defendants, Mr Barrett. Section 26 of the PLA provides that the requirement for writing in s 24 of that Act does not affect the operation of the law relating to part performance. The doctrine of part performance allows a party to rely on an oral agreement in certain circumstances despite the requirement for the contract to be in writing. The defendants sought to rely on this doctrine to allow them to rely on oral evidence that there was an agreement that the construction of the apartment would be in lieu of rent. In my view however, it is actually able to be relied on by the plaintiffs to support their claim for summary judgment on the second cause of action.
Legal principles relating to part performance
[32] In T A Dellaca Ltd v PDL Industries Ltd, Tipping J set out the test for part performance of an oral contract:2
(a)Was there a sufficient oral agreement such as would have been enforceable but for the Act?
(b)Has there been part performance of that oral agreement by the doing of something which:
(i)clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the oral contract; and
(ii)when viewed independently of the oral contract was, on the probabilities, done on the footing that a contract relating to the land and such as that alleged was in existence.
2 T A Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 (HC) at 109.
(c)Do the circumstances in which that part performance took place make it unconscionable (fraudulent in equity) for the defendant to rely on the Act?
Was there a sufficient oral agreement?
[33] The plaintiffs have pleaded the oral terms of the lease in [5] of the statement of claim as follows:
The parties did not agree terms of lease in writing. The oral terms of lease were:
(a)monthly rent of $2,600 plus GST; and
(b)outgoings.
[34] In the draft statement of defence attached to Ms McNeill’s affidavit the defendants plead:
They deny paragraph 5 of the claim and say further:
(a)There is no agreement to the amount of the monthly rental.
[35] The best evidence that there was such an agreement is the contemporaneous evidence as follows:
(a)On 18 October 2021, Mr Barrett (on Ms McNeill’s email address) emailed Ms Fitzgerald, prior to the defendants moving into the premises, proposing 22 October 2021 as the “takeover” date and setting out a quote for the total cost of building the 2 bedroom apartment of
$5950 in materials, with Mr Barrett to supply the labour and Ms Fitzgerald to pay the electrician, plumber and for the gas hob and oven directly. Mr Barrett states in the email that “the dollar value of the materials is roughly the same as 2 months rent.” Two months rent including GST is $5980 at the monthly rental pleaded in the statement of claim, whereas the materials’ cost referred to in the email is $5950. This by itself is clear evidence that the monthly rental was agreed before the defendants moved into the premises (as would be expected) and is consistent with the rental pleaded in the statement of claim.
(b)On 19 October 2021, Ms McNeill emailed Ms Fitzgerald sending through the first invoices from the construction, which she said totalled
$617.21, and saying:
I’m striking while the irons hot here and sending through these first invoices. We will use this money as a bit of a float as such – So, each time we get up to around the $700 mark, I’ll flick them through. Unfortunately, I might be emailing a bit – but this won’t be for too long I’ll assure you of that. …
(c)On 27 October 2021, Ms Fitzgerald replied and said:
You need to put the invoice on as an attachment so I can see it.
Don’t spend any more money until I have spoken to Rick please.
(d)On the same day, the defendants replied saying:
Just wanted to relieve some pressure – we are absolutely blown away by Russell’s invoice! More than double the price quoted seems outrageous.
We really appreciate that it is all up and running and given the amount you’ve been invoiced, we are happy to chip away at materials over time ourselves as we have all the basics in place.
If you’re happy to square up the first invoice from us (I’ll send it back through in the morning) – then we won’t need anything else from here on out.
So sorry for any stress we may have caused – that’s the last thing we wanted!
And, if there’s anything we can do for you at our end, please let us know.
Thanks
Gina and Rick
(e)The draft agreement to lease was given to the defendants in November 2021 and records the monthly rent as $2,600 excluding GST per month ($2,990).
(f)A text message was sent by Mr Barrett on 9 December 2021 at 11:01am to Ms Fitzgerald confirming they had an oral agreement that the rental amount was as per the draft agreement to lease. The text message is again important contemporaneous evidence of the agreement as
pleaded. The defendants’ affidavits do not propose another meaning for the message:
Hi Ngaire
First of all I’m so sorry for giving any unnecessary stress and worry … I was going to call you as I know you prefer to talk rather than txt however it’s really important to me I quickly clear any doubt u may have in writing … ok so cutting to the chase I want to let you know all arrears and rent etc will be paid up to date on or by the 22 of December … so that’s 3 months in total paid this December 22nd … I guess ultimately throwing the idea of 2 months rent this month and 2 next was only a hey how do u feel about this and certainly wasn’t intended to raise any worry or doubt ,,, it may very well be all paid up before the 22nd but let’s just say 22nd at the latest … also as a bit of piece of mind for you in the future Ngaire if for some reason we did say have a quiet month or I dunno run short we would simply just request a withdrawal from our fixed term deposit (savings) which just has a 30 day release on it but I would definitely let you know in advance if rent was going to be late due to funds being released but I’m not at all planning on that ever happening lol … oh and good news I just this week took on Whangamata woodworks kitchen installations and it would seem they are going to contact me to do all there installations which is something I’m super excited about … I think you know Clive the owner he said he knows you haha … oh and the lease agreement will come back all signed etc just as soon as it does (u know what lawyers are like lol) but ultimately that changes nothing as we have a verbal agreement on dates and amounts which all match up with the lease agreement so definitely no need to worry there either … just like you Ngaire my word is good
… I really hope this clears up any worry’s u may have … if there anything I can do let me know and if you absolutely need the arrears prior to the 22nd let me know n I’ll put a little pressure on outstanding invoices etc … thanks again for the
opportunity I won’t let ya down .
(emphasis added)
(g)On 23 December 2021 the defendants paid $5,980 which is equal to two payments of $2,990 (not three months as promised in the text above).
(h)On 24 January 2022 Ms McNeill emailed the plaintiffs (Ms Fitzgerald) that payment of $5,980 “should be with you today”. The payment was not made despite the plaintiffs’ attempts to chase the defendants for it.
(i)On 25 January 2022 Ms Fitzgerald emailed that there was “no rent in the bank”. Ms Fitzgerald emphasised that she “could not manage the Trust commitments without regular payments of rent”.
(j)On 26 January 2022 Ms McNeill said she completely understood and that it should be in Ms Fitzgerald’s account by the end of the day (referring to arrangements that had been made with MSD).
(k)On 28 January 2022 Ms Fitzgerald emailed that she still had not received any rent.
(l)On 31 January 2022 Ms McNeill replied and said to give her until “the end of the day tomorrow (with today being a public holiday) to try and figure out what’s happened.” Ms McNeill then continues:
We will be paying weekly rent as of this Friday – so please be assured that after this, the rent will roll in weekly on an ap [automatic payment].
[36] At no time in the correspondence did either of the defendants assert that the defendants were not obliged to pay rent of $2990 per month or that there was an agreement to do construction work in lieu of rent.
[37] The defendants’ affidavit evidence is even equivocal on this point. Ms McNeill says for example that the agreement was to “construct accommodation in lieu of rent or pay for materials and to live at the premises” (emphasis added) and refers to a telephone conversation with Ms Fitzgerald where she explained that “it was not possible to swap the rent for the cost of materials”.
[38] Nor does Mr Barrett state in his affidavit there was any agreement that construction of the apartment in the premises was in lieu of rent. Instead, Mr Barrett’s evidence is that he offered to “absorb the cost of [his] labour and also cover costs to build and install the kitchen” and Ms Fitzgerald “suggested her contribution [would]
be for her to cover the cost of materials”. Mr Barrett does not state in his affidavit that the defendants were not obliged to pay monthly rent.
[39] The first requirement from T A Dellaca v PDL Industries Ltd, that there is a sufficient oral agreement that would have been enforceable but for the Act, is satisfied. The correspondence between the parties clearly evidences an oral agreement to pay monthly rent of $2990 including GST and not for the defendants to construct the accommodation in lieu of rent.
Has there been part performance of that oral agreement?
[40] In T A Dellaca v PDL Industries Ltd Tipping J held that once an oral agreement is found, the doctrine of part performance requires something that clearly amounts to a step in the performance of the contractual obligation or the exercise of a contractual right under the oral contract that when viewed independently of the oral contract is done on the footing that a contract relating to the land is in existence as alleged.
[41] In Fleming v Beevers Tipping J explained the test for part performance further saying:3
The other concept behind the doctrine of part performance is an important but subsidiary one. It concerns proof. The acts of part performance are treated for probative purposes as a satisfactory substitute for the statutory requirement of writing. It is the concept of substitute proof which led to the need for the acts of part performance, of themselves, without reference to the evidence of the oral contract, to point to the probability of a contract relating to the land and consistent with that alleged.
[42] Here, the emails of 18 and 19 October 2021 referred to above provide evidence that the oral agreement was reached prior to the defendants taking possession on 22 October 2021 such that the taking of possession would be a step in part performance. In addition, the payment of the rent on 23 December 2021 was clearly a step in part performance.
3 Fleming v Beevers [1994] 1 NZLR 385 (CA) at 393–394.
[43] Previous cases have held that a “sufficient act of part performance” may include the lessee entering into possession of the premises;4 the lessor permitting continued occupation and accepting rent;5 and the lessee paying rent, entering into possession and spending money on the premises.6
Would it be unconscionable for the defendants to rely on the PLA requirement for writing?
[44] The final requirement for the doctrine of part performance is that the circumstances in which the part performance took place would make it unconscionable for the defendants to rely on the PLA requirement for the contract to be in writing.
[45] The only rent that the defendants had paid at the time of the hearing is $5980 on 23 December 2021. The outstanding rent at that time was $35,880. The defendants allege that the construction work they have completed amounts to $33,430 yet the receipts in evidence only amount to $618.06 and appear to be the original receipts sent through by Ms McNeill on 19 October 2021 prior to the defendants moving in. These receipts are also just prior to Ms Fitzgerald saying “Don’t spend any more money until I have spoken to [Mr Barrett]” and then the reply email from Ms McNeill and Mr Barrett saying:
We really appreciate that it is all up and running and given the amount you’ve been invoiced, we are happy to chip away at materials over time ourselves as we have all the basics in place.
If you’re happy to square up the first invoice from us (I’ll send it back through in the morning) – then we won’t need anything else from here on out.
So sorry for any stress we may have caused – that’s the last thing we wanted! (emphasis added)
[46] In these circumstances it would clearly be unconscionable for the defendants to be able to rely on the PLA requirement for writing. The plaintiffs are therefore able to enforce the oral lease agreed between the parties and recover the unpaid rent. I make an order below for the unpaid rent as at the time of the hearing but reserve leave to apply for further orders in relation to unpaid rent since the hearing.
4 Plimmer v Mayor of Wellington (1884) 9 App Cas 699.
5 Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281 (CA).
6 Hirst v Vousden CA 25/02, 20 June 2002 at [21]–[22].
Result
[47] The plaintiffs have succeeded in their application for summary judgment in respect of both the first and second causes of action. An order to immediately vacate the premises will be difficult for the defendants given they run their business from the premises and live there. However the defendants must have been aware of the risk that an order to immediately vacate would be made. In the circumstances I allow the defendants three working days to vacate the premises. I therefore order:
(a)The defendants are to deliver vacant possession of the property to the plaintiffs within three working days of this judgment.
(b)The defendants are to pay to the plaintiffs $35,880 in unpaid rent.
(c)Leave is reserved to the plaintiffs to apply for a further order in respect of unpaid rent from 22 December 2022 to the date of vacation of the premises.
Costs
[48] The plaintiffs seek indemnity costs in their written submissions but I did not hear from the parties on costs. I ask counsel to confer as costs ought to be able to be agreed. If that is not possible memoranda may be filed of no more than five pages excluding schedules, on behalf of the plaintiffs within 20 working days of this judgment and the defendants within a further 10 working days.
Associate Judge Sussock
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