Freehold Properties (Investments) LLP v Bridgeway Projects Limited HC Auckland CIV 2009-404-7660

[2010] NZHC 652

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-007660

BETWEEN  FREEHOLD PROPERTIES (INVESTMENTS) LLP Plaintiff

AND  BRIDGEWAY PROJECTS LIMITED First Defendant

AND  ALLAN DONALD WEBSTER Second Defendant

Hearing:         4 May 2010

Counsel:         SC Price and NWS Jones for plaintiff

SH Barter for defendants

Judgment:      4 May 2010 at 3:00pm

RESERVED JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for summary judgment]

This judgment was delivered by me on 6 May 2010 at 3:00pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           MinterEllisonRuddWatts, PO Box 3798, Auckland for plaintiff

Barter & Co, PO Box 197, Albany Village for defendants

FREEHOLD PROPERTIES (INVESTMENTS) LLP V BRIDGEWAY PROJECTS LTD HC AK CIV 2009-404-

007660  4 May 2010

[1]      The plaintiff applies for summary judgment.  An amended statement of claim and verifying affidavit was served on 29 April 2010.  The effect of the amendment is to bring up-to-date the amounts for rent and OPEX costs and interest claimed pursuant to a lease.   In Retail Trading Services Ltd v Morris[1]  it was noted that in Cegami Investments Ltd v AMP Financial Corporation (NZ) Ltd[2]  it was confirmed that amendments to proceedings were possible in the summary judgment procedure.

[1] Retail Trading Services Ltd v Morris (1997) 11 PRNZ 164.

[2] Cegami Investments Ltd v AMP Financial Corporation (NZ) Ltd [1990] 2 NZLR 308 (CA).

In addition, the three hurdles which an applicant for amendment must meet before an amendment is granted were noted, namely:

a)        That the amendment is in the interests of justice;

b)        That it will not significantly prejudice the defendant; and c)   That it will not cause significant delay.

Those principles were extracted from Elders Pastoral Ltd v Marr.[3]

[3] Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 (CA) at 385.

[2]      Subject to Mr Barter checking with his client as to the figures introduced by the amendment, there is, in fact, no prejudice to that defendants by the amendment proposed.   The matter was clarified for me at a telephone conference held with counsel on 6 May 2010.  The figures contained in the amended statement of claim, I was advised, are correct as at 4 May 2010, the date of hearing.  I should record the comment made at the time, namely, that if subsequent payments are made, and one is alleged to have been made on 5 May 2010, the position can be dealt with under r 11.28 dealing with the satisfaction of a judgment.

[3]      When I take these matters into account, I am satisfied that the amendment is in the interests of justice, that there is no prejudice to the defendants and, obviously, it will not cause delay.  Accordingly, the amendment is granted.

[4]      At all material times the plaintiff was the landlord and the first defendant was the tenant of a property at 308 Barton Street, Hamilton, under a lease, the term of which  commenced  on  1 July  2003.    The  second  defendant  is  the  director  and shareholder of the first defendant company and is the guarantor under the lease.

[5]      The term of the lease was six years, eight months and ten days.  The lease terminates on 11 March 2010.  There are no rights of renewal.

[6]      From its commencement the rental under the lease was $68,500 per annum plus GST.  The tenant was also required to pay OPEX costs.  The lease contains a provision requiring interest to be paid on any sums overdue at the rate of 12 per cent per annum.

[7]      The lease provided for two-yearly rent reviews.  The review dates were fixed at the first days of July.  The particular review date that is relevant for the purposes of this judgment is the review date of 1 July 2007.

[8]      On 10 October 2007 the plaintiff’s agent wrote to the first defendant.   It referred to the rent review under the lease.  It proposed a rent increase to $104,780 per annum plus GST.  It recorded that if no objection was received to the new rent within 28 days of the date of the letter, time being strictly of the essence, the tenant would be deemed to have accepted the new rent.

[9]      On 15 October 2007 the first defendant wrote to the plaintiff’s agent.   It disputed the increased rent claim and went on to state that “the rental you propose is utterly preposterous and will be vigorously disputed”.

[10]     On 29 November 2007 the plaintiff produced a valuation.  It made an offer at a reduced figure of $96,720 plus GST.  The defendants did not accept the offer.  In early 2008 summary judgment proceedings were brought in the district court.  The actual sum that was claimed in those proceedings represented some unpaid interest and costs.   I do not regard the proceeding as having any particular bearing on the

matter that I am required to determine in this proceeding.  The court was not asked in the proceeding to rule  on the appropriate rent  payable under the lease in those proceedings.

[11]     On  17 November  2008  the  plaintiff  issued  an  invoice  for  the  amount  of

$44,975.65.   The invoice was clearly incorrect if it was intended to rely on the

10 October 2007 notice.  That is for two reasons:

a)       It claimed an increase for a period longer than was able to be claimed in terms of the notice that had been given; and

b)It did not claim rent based on the notice.  Rather it claimed rent based on the rate contained in the 29 November 2007 letter.  That was a rent at a rate less than contained in the October 2007 notice.

[12]     The plaintiff now claims:

a)       $117,618.97, being rental arrears calculated at the sum due based on the 10 October 2007 notice;

b)        $16,640.33 for OPEX costs; and

c)        $20,662.15 for interest on the sums claimed as at 29 April 2010.

[13]     The figure claimed of $117,618.97 contains within it a sum of $21,235.05 which is the unpaid rent before any review is applied from 10 October 2007 down to the present time.  Mr Barter properly acknowledged that there could be no defence to the payment of that sum, together with the outstanding OPEX costs in the sum of

$37,878.38.  The contest is in respect of the balance of the rental arrears claimed and in respect of any interest that might attach to it.

The opposition

[14]     Regrettably,  as  happens  too  frequently,  the  notice  of  opposition  did  not comply with r 7.24(2) of the High Court Rules in that it did not provide a clear statement  of  the  grounds  of  opposition  relied  upon.    Neither  did  it  refer  to enactments or principles of law or judicial decisions which the defendant wished to rely upon.  However, at the commencement of the hearing Mr Barter confirmed to me that the grounds of opposition reduced to three matters, namely:

a)       The defendants’ letter of 15 October 2007 is in fact a notice in terms of the lease disputing the increased rent claimed by the plaintiff and thereby bringing into operation the procedure set out in clause 2.2 of the lease;

b)Alternatively, the defendants’ letter of 15 October 2007 is a valid counter-notice; and

c)       The plaintiff’s subsequent actions amount to a waiver of its right to rely on the notice of 10 October 2007.

The court’s approach to a plaintiff’s summary judgment application

[15]     Rule 12.2 of the High Court Rules requires that a plaintiff satisfy the court that the defendant has no defence.  The obligations imposed by the rule have been examined by a number of authorities.

[16]     In Pemberton v Chappell[4] the Court of Appeal said as follows:

In this context the words "no defence" have reference to the absence of any real question to be tried.   That notion has been expressed in a variety of ways,  as  for  example,  no  bona  fide  defence,  no  reasonable  ground  of defence, no fairly arguable defence.

[4] Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA).

[17]     The Court added at 4:

Satisfaction here indicates that the Court is confident, sure, convinced, is persuaded to the point of belief, is left without any real doubt or uncertainty.

...

[18]     And further at 4:

Where the only arguable defence is a question of law which is clear cut and does not require findings of disputed facts or the ascertainment of further facts, the Court should normally decide it on the application of summary judgment, just as it will do on an application to strike out a claim or defence before trial on the ground that it raises no cause of action or no defence.

[19]     The Court also commented on the position where a defence is not evident on a plaintiff’s pleading and said at 3:

If a defence is not evident on the plaintiff's pleading I am of opinion that if the defendant wishes to resist summary judgment he must file an affidavit raising an issue of fact or law and give reasonable particulars of the matters which he claims ought to be put in issue. In this way a fair and just balance will be struck between a plaintiff's right to have his case proceed to judgment without tendentious delay and a defendant's right to put forward a real defence.

[20]     That position was further reinforced in Australian Guarantee Corporation

(New Zealand) Ltd v McBeth[5] where the court said:

[5] Australian Guarantee Corporation (New Zealand) Ltd v McBeth [1992] 3 NZLR 54 at 59 (CA).

Although the onus is upon the plaintiff there is upon the defendant a need to provide some evidential foundation for the defences which are raised. If not, the  plaintiff's  verification stands  unchallenged  and ought  to  be  accepted unless it is patently wrong

“No  defence  means  ‘no bona  fide  defence,  no  reasonable ground for defence and no fairly arguable defence’.”

[21]     Hypothetical  possibilities  in  vague  terms,  unsupported  by  any  positive assertion or corroborative documents advanced by defendants will not frustrate the obligation on a plaintiff to discharge the onus of proof: SH Lock (NZ) Ltd v Oremland.[6]

[6] SH Lock (NZ) Ltd v Oremland HC AK CP641/86 19 August 1986.

[22]     The Court of Appeal in Tilialo v Contractors Bonding Limited:[7]  raised a caution and said:

The Courts must of course be alert to the possibility of injustice in cases in which some material facts to establish a defence are not capable of proof without interlocutory procedures such as discovery and interrogatories.  That does not mean that defendants are to be allowed to speculate on possible defences which might emerge but for which no realistic evidential basis is put forward.

[7] Tilialo v Contractors Bonding Limited CA50/93 15 April 1994 at 7.

[23]     A Court is not required to accept uncritically any or every disputed fact: Eng Mee Yong v Letchumanan.[8]   However the court will not reject even dubious affidavit evidence, even though there must be suspicion as to the good faith of the deponent, if there is an essential core of complaint that supports a defence.   In essence, the inquiry is whether or not the person’s assertion passes the threshold of credibility: Pemberton v Chappell[9]; Orrell v Midas Interior Designs.[10]

[8] Eng Mee Yong v Letchumanan [1980] AC 331 at 341.

[9] Pemberton v Chappell, above n 3.

[10] Midas Interior Designs (1991) 4 PRNZ 608 at 613.

[24]     In Tilialo v Contractors Bonding Limited[11] it was observed:

Drawing the line between mere assertions of possible defences and material which sufficiently raises an arguable defence so that the defendant should not be denied the opportunity to employ interlocutory procedures and have a trial is a matter of judgment.  Views may well differ.

[11] Tilialo v Contractors Bonding Limited, above at n6, at 8

[25]     The  authorities  have  also  referred  to  a  residual  discretion  as  to  whether judgment should be entered.  Although it is difficult:[12]

[12] Pemberton v Chappell, above n3, at 5 per Casey J.

To conceive of circumstances where the Court should not give judgment for the plaintiff … It can only be a discretion of the most residual kind.

The discretion was the subject of comment in Waipa District Council v Electricity

Corporation of New Zealand.[13]

[13] Waipa District Council v Electricity Corporation of New Zealand [1992] 3 NZLR 298 at 303.

[26]     Before leaving the subject the rule permits of the entry of summary judgment in respect of part of a claim as was confirmed in Australian Guarantee Corporation (New Zealand) Ltd v McBeth.[14]

The plaintiff’s case

[14] Australian Guarantee Corporation (New Zealand) Ltd v McBeth [1992] 3 NZLR 54 at 59 (CA).

[27]     The plaintiff’s case can simply be stated.   The plaintiff claims outstanding rent  and  OPEX  costs  and  interest,  all  of  which  have  been  calculated  as  a consequence of the notice given by the letter of 10 October 2007.

[28]     The notice relies on the rent review provisions of the deed of lease which were the fourth edition of the Auckland District Law Society form of deed of lease. The rent review provision, clauses 2.1 and following provide as follows:

Rent Review

2.1      THE annual rent payable as from each rent review date shall be determined as follows:

(a)Either party may not earlier than 3 months prior to a rent review date and not later than the next rent review date give written notice to the other part specifying the annual rent proposed as the current market rent as at the relevant rent review date.

(b)       If  the  party  receiving  the  notice  (“the  Recipient”)  gives written notice to the party giving the notice (“the Initiator”) within  1  month  after  service  of  the  Initiator’s  notice disputing the annual rent proposed and specifying the annual rent proposed by the Recipient as the current market rent, then the new rent shall be determined in accordance with clause 2.2.

(c)       If the Recipient fails to give such notice (time being of the essence) the Recipient shall be deemed to have accepted the annual  rent  specified  in  the  Initiator’s  notice  and  the extension of time for commencing arbitration proceedings contained in the Arbitration Act 1996 shall not apply.

(d)Notwithstanding  any  other  provision  of  this  clause,  the annual rent payable as from the relevant rent review date shall not be less than the annual rent payable as at the commencement date of the then current lease term.

(e)The annual rent agreed, determined or imposed pursuant to this clause shall be the annual rent payable as from the relevant rent review date, or the date of service of the Initiator’s notice if such notice is served later than 3 months after the relevant rent review date but subject to clause 2.3 and 2.4.

(f)       The rent review option of either party may be recorded in a

Deed.

[29]     The plaintiff’s case is that the defendants’ response of 15 October did not satisfy one of the two requirements of any notice disputing the landlord’s notice seeking an increase of rent.  In particular, it did not, in terms of clause 2.1(b) specify the annual rent proposed by the defendants as the current market rent.   The consequence  of  the  failure  to  do  that  is  that  the procedure  for  determining the appropriate rent in the case of a dispute, set out in clause 2.2 of the lease, could not be brought into play.

[30]     There  is  no  question  that  a  plain  reading  of  the  defendants’  notice  of

15 October makes no reference to any annual rent being proposed by the defendants as the current market rent at the time the plaintiff’s notice was given.  That being the case, the plaintiff submits that the sums claimed are now due and owing.

The grounds of opposition analysed

[31]     The requirement of clause 2.1(b) is clear.   The party receiving the notice must, within one month of service of (in this case the landlord’s) notice, service a notice which:

a)        Disputes the annual rent proposed by the landlord; and b)      Specifies the annual rent that is proposed by the tenant.

[32]     The defendants’ notice makes no reference to any proposed rent.

[33]     Mr Barter   referred   me   to   Amalgamated   Estates   Ltd   v   Joystretch Manufacturing Ltd[15] and to Sheridan v Blaircourt Investments Ltd.[16]   Mr Price drew attention to the fact that in each of those cases the notice that was required to be issued by the tenant was not required to state a proposed alternative rent.  The cases, therefore, simply do not address the specific point which is raised in this application.

[15] Amalgamated Estates Ltd v Joystretch Manufacturing Ltd [1981] 1 EGLR 96.

[16] Sheridan v Blaircourt Investments Ltd (1984) 270 EG 1290.

[34]     When I look at the plain wording of clause 2.1 of the deed of lease, I reach the conclusion that what the tenant defendant provided in this case simply was not a notice for the purposes of clause 2.1(b).  Without specifying a proposed alternative rent, whatever it be, the rent determination provision, clause 2.2, is thwarted.  There is no basis for ascertaining precisely what the competing parties are saying about a proposed rent review.

[35]     Mr Barter  also  raised  the  question  of  whether  the  plaintiff’s  notice  had complied with the terms of the lease because it specified a rent effective from 1 July

2007.  It is clear, from the wording of clause 2.1(a) and (e) that rent could only be claimed at the increased rate in respect of the notice from the date of service of the notice.   Be that as it may, the notice, although in error in what it was claiming, covers the very matters that are referred to in clause 2.1(a).  There is no reason on this point for questioning the validity of the notice as a notice.

[36]     The next question that requires a consideration is whether the defendants’ letter of 15 October 2007 is a valid counter-notice.  Once again, the letter makes no reference  to  a  proposed  annual  rent.    There  is  simply  no  foundation  for  the proposition that it represents a notice for the purpose of clause 2.1(a) which would call for any response from the landlord.

[37]     The defendants’ further submission is that the plaintiff has waived its right to rely on the strict terms of the lease for the following reasons:

a)       The plaintiff failed in its notice of 10 October 2007 to require the defendants to provide an alternative rent figure if the defendants disputed the plaintiff’s notice;

b)The fact that on 29 November 2007 the plaintiff provided a valuation and made an offer of a reduced figure for rent at $96,720, plus GST, based on that valuation;

c)       The fact that the plaintiff issued district court proceedings alleging rent at the initial rent figure of $68,500 subsequent to the giving of the October 2007 notice; and

d)The fact that on 17 November 2008 the plaintiff issued an invoice for unpaid rent based on the figure contained in the 29 November 2007 letter, thereby indicating that that was the figure it considered appropriate for rent.

[38]     One of these grounds can be dismissed quite quickly.   The district court proceedings, in fact, when one considers the statement of claim, was seeking to recover a sum for interest and solicitor’s costs.   It was common ground between counsel that those proceedings did not proceed to a judgment on the sums claimed as a payment was made.   This matter, accordingly, does not assist resolution of the current questions.

[39]     I  shall  first  consider,  then,  whether  the  circumstances  indicate  that  the plaintiff has waived compliance with clause 2.1(b) of the lease in respect of the need to nominate an alternative rental.

[40]     Mr Barter, in his submissions, observed that waiver is a term used in many senses, but generally denoting the abandonment of a right.  It is commonly used to describe the process whereby one party unilaterally decides to forego the benefit of a provision in a contract.  That will often occur when the party otherwise entitled to insist on adherence to a stipulation does some act inconsistent with the continued insistence on compliance with the stipulation.

[41]     There is nothing arising from the matters raised by Mr Barter which indicates that the plaintiff has formally dispensed with the requirement on the defendants to give them notice of an alternative market rent to that which the plaintiff specified in its notice of 10 October 2007.  Indeed, quite the contrary has occurred by virtue of the fact that no formal steps after the two letters were exchanged was entered into to proceed to an arbitration in accordance with clause 2.2 of the lease.   In addition, when I consider the offer of 29 November 2007, there is nothing in it to suggest an

abandonment of the formal notice given on 10 October 2007.  I reach conclusion that there is simply no foundation for the proposition that the plaintiff has waived formal compliance with the form of notice that is to be given to it pursuant to clause 2.1(b).

[42]     The invoice issued on 17 November 2008, on its face, would appear to be contrary to the position advanced by the plaintiff because it seeks payment of a lesser sum.  Payment, however, was not made in respect of that invoice.  There is nothing in the document to suggest that the plaintiff is not insisting on compliance with its

10 October 2007 notice.

[43]     For the avoidance of doubt, I add a comment on whether there is any basis for  a  finding  that  there  is  a  promissory  estoppels.    I  cannot  find  any  specific evidence, in the material put before me, which supports the proposition that the plaintiff has indicated it will not enforce the rights which it has under the lease. Further, there is no evidence that there has been any specific acting in reliance on such a promise or change of position as a result of it on the defendants’ part.

[44]     I accept the plaintiff’s position that this is a relatively straightforward case. The plaintiff lessor gave a notice requiring a rent review and nominated the new rent to apply.  The defendants did not respond with a notice in accordance with the lease. As a consequence, no action was embarked upon to have a disputed rent determination completed pursuant to clause 2.2 of the lease.  Such a determination is, in fact, unnecessary when one accepts that there has been no proper notice by the tenant given in this case.  That is because, pursuant to clause 2.1(c) of the lease, the rent which is due and payable by the first defendant tenant is that which is specified in the plaintiff’s notice of 10 October 2007.

Conclusions

[45]     I am satisfied that the sum due for rent arrears is $117,618.97, the sum due for OPEX is $16,640.33 and the outstanding contract interest due to 29 April 2010 is

$20,662.15.

[46]     Contractual interest is also due at the rate of 12 per cent per annum.   A precise calculation was not available to me.  For that reason, I reserve the question of interest.  I invite counsel to agree on the appropriate figure.  In the event that there is no agreement I have made provision for the filing of memoranda to deal with that issue.

[47]     Costs are sought by the plaintiff on a solicitor/client basis.   The material required to enable me to make a proper assessment of that issue was not available. When the matter was discussed with counsel an indication was given that they would first meet with a view to endeavouring to agree the figure but, in the event that agreement could not be reached, memoranda and further evidence, if required, would be filed and served appropriately.  That is the reason for the directions in relation to costs which appear at the conclusion of this judgment.

Judgment

[48]     I enter judgment for $154,921.45 being the unpaid rent due, plus the unpaid

OPEX costs, plus contractual interest to 29 April 2010.

[49]     I reserve the question of further interest and costs.  If counsel cannot agree memoranda in support, opposition and reply on this issue shall be filed at seven-day intervals.   If solicitor/client costs are pursued,  I refer  counsel to Crown Money Corporation Ltd v Grasmere Estate Trustco Ltd & Anor[17] which sets out the material

[17] Crown Money Corporation Ltd v Grasmere Estate Trustco Ltd & Anor HC AK CIV 2008-404-

3801 21 November 2008

which the court requires to determine the issue of solicitor/client costs.

JA Faire

Associate Judge