Godzone (2011) Limited v Chew

[2012] NZHC 2082

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-003290 [2012] NZHC 2082

UNDER  the Property Law Act 2007

IN THE MATTER OF     an originating application for relief against proposed cancellation of a lease pursuant to s 253 of the Property Law Act 2007

BETWEEN  GODZONE (2011) LIMITED Applicant

ANDTHENG HOK CHEW AND WAI LOONG ANDREW FONG AS TRUSTEES OF THE CAROL CHEW FAMILY TRUST Respondents

Hearing:         16 August 2012

Counsel:         C P Merrick for the Applicant

J A Wickes for the Respondents

Judgment:      16 August 2012

(ORAL) JUDGMENT OF WOODHOUSE J

Solicitors:

Mr N A Speir, Rice Craig, Solicitors, Papakura

Mr A Loo, Loo & Koo, Solicitors, Auckland

Counsel:
Mr C P Merrick, Barrister, Auckland

Ms J A Wickes, Loo & Koo, Solicitors, Auckland

GODZONE (2011) LIMITED V CHEW AND FONG AS TRUSTEES OF THE CAROL CHEW FAMILY TRUST HC AK CIV-2012-404-003290 [16 August 2012]

[1]      The  applicant  is  the  tenant  of  four  floors  of  a  commercial  building  in Auckland. The respondent landlord issued a notice under the Property Law Act 2007 (the Act) for non-payment of rent and other sums said to be due under the lease.  The tenant has applied under s 253 of the Act for relief against cancellation.

[2]      The application was made on 8 June 2012.  On 20 June 2012 an interim order was made by this Court restraining the landlord from taking any steps to cancel. Since then the following payments have been made by the tenant in respect of some of the sums claimed in the Property Law Act notice:

(a)       On 29 June 2012 the tenant paid arrears of rent of $81,458.37.

(b)On  6  July  2012  the  tenant  paid  the  landlord  $44,174.34  for outstanding charges for water services.  This was in accordance with a further direction of the Court made on 5 July that this particular sum be paid by 6 July.  (On that date the Court also extended the interim order restraining the landlord.)

[3]      There was a claim by the landlord for $19,494.33 for insurance contributions said to be due from the tenant.  It is now accepted by the landlord that the tenant’s liability was in fact met by a payment made to a real estate agent in January 2012. This is therefore no longer in issue although the landlord, perhaps with some justification, notes that it would have materially assisted if the landlord had been directly told that this payment had been made, and certainly by the time the Property Law Act notice was issued.

[4]      There are four remaining claims by the landlord which have not been met by the tenant.   Having heard from both counsel  on these particular claims, and in respect  of  which  there  was  agreement  as  to  the legal  principles  although  some differences as to what directions should then follow, I deal with these four items in the next paragraphs.

[5]      The landlord claims $10,708.80 for work on the lift in the building.   The tenant contends that there is a properly founded dispute as to whether the tenant has any liability for this particular sum.  Ms Wickes responsibly acknowledged that this is an item in dispute, as opposed to an undoubted liability of the tenant.  Outstanding disputes have been referred to arbitration and it is accepted that this is a matter that will be resolved by the arbitrator.  Accordingly, payment of this sum is not required at this date.

[6]      The  next  item  is  $2,443.75  for  sinking  fund  contributions  due  from  the tenant.  This represents the total outstanding for five months (with the sinking fund contributions required to be paid in conjunction with the monthly rental payments). The tenant contends that the landlord has failed to meet its obligations properly to maintain  the  building  and  to  effect  necessary  repairs.    This  is  a  matter  firmly disputed by the landlord.   Questions in this regard will also be dealt with in the arbitration.  However, I am satisfied that this is an item which should nevertheless be paid by the tenant as a condition of an order granting relief against cancellation.  It could be argued that the tenant may have a right of equitable set off in respect of the landlord’s obligations to repair against the liability for the sinking fund contribution. On the other hand, it is the contributions to the sinking fund that the landlord relies on, at least in part, to meet its obligations.   In addition, the lease has some considerable time to run; the current term does not expire until December 2013 and there are rights of renewal.  It is to be expected that the current disputes in relation to maintenance will have been resolved before expiry of the current term and there will be ample opportunity to address any entitlement the tenant may have in respect of these matters.  Consequently I will make a direction that this sum be paid.

[7]      The third item is a claim of $8,907.62 for penalty interest.  This is less than the amount claimed in the Property Law Act notice.  It is a sum the parties agree is the correctly calculated sum for penalty interest on the sums that it is agreed were not paid on due date and should have been paid.   Mr Merrick quite properly acknowledged for the tenant that it is difficult to resist the proposition that the tenant has liability, at least to an extent.  He submitted that the tenant was prepared to pay this sum into a trust account pending determination of the arbitration.   In my judgment this is a sum which comes in the same category as the liability for rent and

the other principal amounts that have already been paid.  In addition, in relation to rent, there is a no set off provision in the lease. Consequently this sum must also be paid as a condition of an order for relief.

[8]      The remaining claim is for legal costs on the Property Law Act notice of

$550.  Although there were some issues as to the validity of the notice, these have not been pursued. This sum should also be paid.

[9]      I accordingly make an order granting the applicant relief against cancellation of the lease with this order made on the condition that the tenant is to pay the three sums referred to above, totalling $11,901.37, by 4:00 pm on Friday, 24 August 2012. Payment is to be made into the landlord’s bank account, being the bank account as advised by the landlord’s solicitors to the tenant’s solicitors.  To avoid any further issues it would be advisable for the tenant to make this payment well before 4:00 pm on Friday, 24 August 2012.

[10]     The landlord has sought costs on the application for relief.  Costs are sought on a 2B basis.  Ms Wickes submitted, in essence, that the payments that have now been made by the tenant should have been made long ago and that the payments that have in fact been made were made very belatedly.  Mr Merrick opposes costs.  He points to evidence in affidavits that the tenant tried to engage with the landlord in respect of the tenant’s concerns and that when the tenant commenced arbitration proceedings this was resisted by the landlord.

[11]     What  the  tenant  seeks  is  relief  against  the  consequences  of  the  tenant’s admitted defaults.   In the normal course, although an order for relief is made, the landlord would be entitled to costs.  Also, I consider there is some weight in Ms Wickes’ submissions.  If the landlord was in fact unwilling to engage with the tenant to address the problems raised by the tenant, then the tenant should have commenced the arbitration proceedings, in accordance with the lease, at a much earlier date.  To the  extent  that  there  may  have  been  default  by  the  landlord  in  respect  of  its obligations under the lease, these are matters more properly dealt with in the arbitration proceedings.

[12]     For these reasons I am satisfied that the landlord is entitled to costs on a 2B basis in respect of the opposition to the application and the various hearings.   I would anticipate that counsel would be able to agree on the quantum.

[13]     It is appropriate to record that the tenant must obviously continue to meet its obligations under the lease in respect of the various payments which have been in contention, apart from the lift maintenance item.

[14]     I thank both counsel for their helpful and constructive submissions.

Woodhouse J