Freight Direct (NZ) Limited v Unity One Limited

[2024] NZHC 59

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-2007

[2024] NZHC 59

UNDER

Part 19 of the High Court Rules and Part 4, subpart 6 of the Property Law Act 2007

IN THE MATTER

of a notice of intention to cancel lease, refusal to renew lease and forceable re-entry in breach of s 91 of the Crimes Act 1961

BETWEEN

FREIGHT DIRECT (NZ) LIMITED

Plaintiff

AND

UNITY ONE LIMITED

Defendant

Hearing:	On the papers
Counsel:	DG Collecutt for the Plaintiff T Johnson for the Defendant
Judgment:	2 February 2024

COSTS JUDGMENT OF BECROFT J

This judgment was delivered by me on 2 February 2024 at 11am pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Patel Nand Legal, Auckland Martelli McKegg, Auckland

DG Collecutt, Auckland

FREIGHT DIRECT (NZ) LTD v UNITY ONE LTD [2024] NZHC 59 [2 February 2024]

What this application is all about

[1]                 This is a civil costs application. The substantive issues between the parties arose in the context of an agreement by Unity One Limited (the landlord) to lease to Freight Direct (NZ) Limited (the tenant) a commercial property at 89A Station Road, Penrose (the premises). The tenant stored goods at the premises in connection with its freight transport business.

[2]                 In mid-2022, some months before the lease expiry date of 15 October 2022, significant differences emerged between the parties. The tenant said it attempted to renew its lease. The landlord said the renewal was not carried out correctly and repudiated it. The tenant says that in response to that repudiation, it cancelled the lease. Thereafter allegations and counter-allegations continued.

[3]                 The tenant issued proceedings by way of originating application on 18 October 2022.

[4]                 On 13 June 2023, the tenant and landlord filed a joint memorandum confirming that a substantive hearing was not required. The plaintiff/tenant claimed it had obtained what it sought in issuing the proceedings without having to proceed to a hearing. The only outstanding issue was said to be costs.

[5]The costs application came before me on the papers on 13 June 2023.

[6]In a minute, of same date, I noted:

[1]        This matter and the issue of costs came before me today as Duty Judge.

[2]        The costs issue cannot be considered until the plaintiff reduces its costs submissions to a succinct three-page argument, as directed by Moore J, in his Minute of 16 November 2022, at paragraph [6(c)].

[3]        The plaintiff should at least provide a schedule of costs sought with a proposed final amount, showing both costs and disbursements.

[4]        This is to be done within 10 working days from the date of this Minute.

[5]        Much of the self-evident disagreement as to costs is caused by a sharp disagreement as to the facts and circumstances: e.g. alleged cancellation of lease by the plaintiff versus alleged repudiation of renewal by the defendant;

whether the defendant’s re-entry of the property constituted an offence under s 91 of the Crimes Act 1961; etc.

[6]        As there was no hearing, these facts remain unresolved, and it is difficult if not inappropriate for the Court to do so.

[7]        The parties are directed to discuss together whether any agreement on the facts, even the basic facts can be reached. That might lead the way to agreement as to costs, said thus far to be impossible.

[8]        That approach is surely preferable to the Court attempting to make some sort of factual findings without any briefs of evidence, enabling it to do so.

[9]        A joint memorandum is to be filed by counsel as to the matters set out in paragraph [5] to [8] above.

[7]                 The parties are still unable to agree on the facts. There is no agreement as to costs. There are still allegations and counter-allegations being made by the parties.

The disputed incidents

[8]The key steps in the dispute cannot be agreed.

[9]                 The chronology below shows how deep the divisions are. It also suggests that any resolution by this Court would be impossible without a hearing on the facts and cross-examination of the parties.

[10]              I set out below a table containing the agreed and disputed background facts provided by the parties, which I have added to (in italics). The purpose of this table is to show that every step since the tenant’s disputed exercise of its right of renewal is disputed.

Date	Event
10/9/19	Agreement to lease to plaintiff for 3 years from 15/10/19 with 3 year right of renewal. The lease was to expire on 15 October 2022. By virtue of 32.1 of the Deed of Lease the tenant was required to give the landlord written notice of renewal at least three calendar months before the end of the term. Provided the tenant is not in breach of the lease at this time, the landlord was obliged to grant a new lease.
11/8/22	Plaintiff’s (disputed) exercise of right of renewal. The tenant wrote to the landlord on 11 August 2022, in a letter curiously headed “Notice of Intention to Cancel Lease – 89 Station Road, Penrose, Auckland”. It seems that the landlord had prematurely

issued a Property Law Act 2007 notice. In that letter the tenant’s lawyers, at [14] stated:

“The renewal date under the First Schedule of the Agreement to lease is 15 October 2022. Our client instructs us to confirm

its position to exercise its right of renewal of the Lease on the renewal date by way of a Deed”.

16/8/22

Defendant’s (disputed) repudiation of the right of renewal. The landlord’s lawyers amongst other things wrote that the renewal of lease was not compliant with cl 32(1) of the Deed of Lease. It provides no reason for that conclusion.

2/9/22

Plaintiff’s (disputed) acceptance of repudiation and cancellation of the renewal of the lease. The tenant’s lawyers advised that the tenant would not renew the lease and the renewal is withdrawn. As far as I can see the tenant cancelled the lease.

2/9/22

Plaintiff seeks defendant’s agreement to the plaintiff remaining in the property until 31/1/23 on the basis that the lease would be extended to that date (rejected by the defendant).

27/9/22

The tenant’s lawyers wrote to the landlord’s lawyers confirming the cancellation of the renewal of lease. The letter also proposed that tenant continue to pay for the occupation of the premises until 31 January 2022.

12/10/22

Plaintiff’s warning that any attempt to enter the property without a court order or arbitrator’s award will be considered forcible entry.

15/10/22

Defendant obtained possession of the property and changes the locks, although plaintiff’s security guard was on site.

Dispute was to whether this was forcible entry, whether there was a breach of the peace, and whether the defendant’s obtaining of possession was legally effective.

18/10/22

Proceedings issued.

26/10/22

Interim arrangement in relation to supervised access to the premises confirmed to court.

11/11/22

Defendant entered into agreement to lease the premises to Sky City to 31 January 2022 (including full Opex).

Plaintiff entered into agreement with Sky City to pay the costs of the premises and use the premises.

15/11/22

Court advised that hearing is no longer required.

What the parties seek

[11]              The plaintiff/tenant seeks costs at the 2B scale of $14,263. This seems to be largely on the basis of the wrongful refusal to accept the notice of renewal together with the alleged unjustifiable forcible entry under s 91 of the Crimes Act 1961.

[12]The defendant/landlord seeks costs of $9,082 together with disbursements of

$15,575 – totalling $24,657. From the landlord’s point of view the lease provides the landlord with a contractual indemnity. Where a landlord is put into a position of enforcing or defending its rights under a default, it must be compensated with an award of indemnity costs.

[13]There is absolutely no agreement on any aspect of this case.

Legal position

[14]              Costs are at the discretion of the Court. Usually, costs will follow the result. Here, at least legally, there is no result. A hearing was not required. The parties reached what appeared to be a pragmatic and effective settlement.

[15]              A meaningful decision as to who is entitled to costs in this case would require the sort of full hearing that the parties have agreed is not required.

[16]              In the absence of such a hearing, I would be left to make a decision on the merits on the basis of incomplete paperwork without hearing evidence or cross- examination. This is precisely the difficulty I pointed to in my minute to the parties. The fact that they cannot agree as to the key issues simply reinforces how difficult it would be to make a meaningful decision as to the facts.

Conclusion

[17]              That being the case, after a careful analysis of all the file and documentation, in my view my only option is to conclude that costs should lie where they fall.

[18]              This case may not be on all fours with Conqra Asbestos Solutions Ltd v Warehouse World Ltd,1 but the following point articulated by Harvey J stands, “a costs proceeding is not intended to provide a platform for ventilation of arguments on the substantive proceedings, had they continued.”2 In this case, the parties have reached a pragmatic solution. In seeking costs, they are now requiring the Court to make the very substantive findings that, by consent, they had agreed were not required.

[19]              In this situation any costs finding would be artificial and unsatisfactory. I decline to take the matter any further. Both parties, in a sense, have what they want. The tenant had occupation of the premises until 31 January 2023 or thereabouts. The landlord has a new tenant.

[20]Justice is served by me declining to make a ruling as to costs.

Becroft J

1      Conqra Asbestos Solutions Ltd v Warehouse World Ltd [2022] NZHC 321.

2 At [21].