Grant v Hannay HC Auckland CIV 2009-404-7248
[2010] NZHC 325
•17 March 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2009-404-007248
IN THE MATTER OF the Property Law Act 2007
BETWEEN ANTHONY FREDERICK GRANT AND LEWIS THOMAS GRANT
Applicants
AND FELICITY HANNAY AND CHARLOTTE TAPPER Respondents
Hearing: 11 March 2010
Counsel: S Grant for the Applicants
P Finnigan for the Respondents
Judgment: 17 March 2010
RESERVED JUDGMENT OF ELLIS J
This judgment was delivered by me on 17 March 2010
at 3.30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors: Barrie Hopkins, PO Box 106027, Auckland 1143
Howard Smith & Co, PO Box 5386, Auckland 1141
Counsel: S Grant, PO Box 4338, Auckland 1140
P Finnigan, PO Box 2697, Auckland 1140
GRANT V HANNAY & ANOR HC AK CIV 2009-404-007248 17 March 2010
[1] The applicants seek orders under s 244 of the Property Law Act 2007 (“the Act”) for immediate cancellation of a lease between them and the respondents in relation to the restaurant premises at 39 Palm Road, Waiheke Island, possession of that property, and payment of all rent arrears, interest and outgoings. The orders are sought on the grounds that the respondents have breached the covenants in the lease to pay rent and outgoings, with the result that a total of nearly $50,000 is presently said to be outstanding.
[2] It is not in dispute that the pre-requisites of s 245 of the Act have been met: the rent has been in arrears for more than 10 working days, the lessor has served on the lessee a notice of intention to cancel the lease, and at the expiry of the period specified in the notice, the breach had not been remedied.
The Respondents’ Opposition and Cross-application
[3] Initially the respondents’ opposition to the application, as set out in their notice dated 3 December 2009, was essentially that they have set-offs and counterclaims in relation to alleged breaches by the applicants of (in particular) the landlord’s covenant of maintenance and repair. Those set-offs and/or counterclaims were said to operate to reduce or eliminate any amounts mathematically owing to the applicants by way of rent. The respondents otherwise admit that the applicants’ calculation of the outstanding rent and outgoings is correct and those amounts are owing, apart from the alleged liability for an increase in the rent charged since a rent review that occurred in October 2007.
[4] At the hearing before me, however, counsel for the respondents, Mr Finnigan, accepted that any argument as to counterclaim and set-off in relation to the rent owing was precluded by the terms of the lease, clause 1.1 of which relevantly provides:
The Tenant shall pay the annual rent by equal monthly payments in advance (or as varied pursuant to any rent review) on the rent payment dates. ... All rent shall be paid without any deductions or set-off by direct payment to the Landlord or as the Landlord may direct.
[5] In my view that concession was properly made for the reasons made clear by
Venning J in the following passage from Gielens v Broadway Developments Ltd:[1]
[1] Gielens v Broadway Developments Ltd (2008) 9 NZCPR 857 (HC).
[14] The short point is whether Ms Gielens is prevented from setting-off any claims she may have against Broadway against Broadway’s claim in relation to the rent and outgoings.
[15] It is not enough for Ms Gielens if the claims she seeks to raise can only be raised as counterclaims. At law a counterclaim is not a defence to an application for summary judgment for rental under a guarantee. Only set-off can constitute a defence. In Grant v NZMC Limited [1989] 1 NZLR 8 the Court of Appeal confirmed:
The effect of the distinction between set-off and counterclaim is well understood. A counterclaim is a cross-action which may have no connection at all with the subject-matter of the claim, see eg Stumorev Campbell & Co [1892] 1 QB 314, and is not confined to money claims. It is not of itself a defence to the claim although under RR 534 and 535 of the High Court Rules, where claim and counterclaim arise out of the same matter (McPhee v Wright, Stephenson & Co (1901) 19 NZLR 321), one judgment only is given in favour of the party who on a balance is entitled to recover. Set-off affords a defence to an action wholly or in part depending upon the amount and is by its very nature limited to money claims. When a set-off is established by judgment it will pro tanto extinguish the plaintiff's claim: Briscoe v Hill (1842) 10 M & W 735, 738; Re Hiram Maxim Lamp Company [1903] 1 Ch 70, 74. [W]hile the difference between the effect of set-off and counterclaim is clear enough it is suggested that the test for deciding whether a cross-claim is one or the other is uncertain.
[16] As noted, on the other hand, an equitable set-off can defeat a claim for summary judgment. Again, as the Court of Appeal said in Grant:
The principle is, we think, clear. The defendant may set-off a cross- claim which so affects the plaintiff's claim that it would be unjust to allow the plaintiff to have judgment without bringing the cross-claim
to account. The link must be such that the two are in effect interdependent: judgment on one cannot fairly be given without regard to the other; the defendant's claim calls into question or impeaches the plaintiff's demand. It is neither necessary, nor decisive, that claim and cross-claim arise out of the same contract.
[17] However, a party may contract out of an equitable right to set-off. As the
Court of Appeal acknowledged in Grant in the following passage:
That set-off may be contractually excluded was assumed to be the case by Viscount Dilhorne in Modern Engineering (Bristol) Ltd v Gilbert-Ash (Northern) Ltd [1974] AC 689 at p 712. In the same case Lord Salmon at p 723 said:
"There is nothing to prevent them [sc the parties to a building contract] from extinguishing, curtailing or enlarging the ordinary rights of set off, provided they do so expressly or by clear implication."
The extinction of a claim by a term of the contract was the primary ground upon which Lord Wilberforce based his judgment in Aries Tanker Corporation v Total Transport Ltd [1977] 1 WLR 185, at p
188. We are content to accept those opinions as applicable to a case of equitable set-off; statutory rights to set-off may stand differently.
[18] In Grant the Court of Appeal concluded that the wording of the relevant clause was not sufficient to exclude the equitable set-off claimed. It provided only that the rent was to be paid without deduction. The wording in the present case, however, is different. No doubt the drafters amended it after the decision in Grant. It provides at clause 1.1 Rent:
THE Tenant shall pay the annual rent by equal monthly payments in advance (or as varied pursuant to any rent review) on the rent payment dates. The first monthly payment (together with rent calculated on a daily basis for any period from the commencement date of the term to the first rent payment date) shall be payable on the first rent payment date. All rent shall be paid without any deductions or set-off by direct payment to the Landlord or as the Landlord may direct. (emphasis added)
[19] Mr Twist submitted that the clause was not “express enough” to exclude set-off for misrepresentation. I disagree. The clause is quite clear. It could not be more express. Rent is to be paid without deduction or set-off. The Court of Appeal in Grant were prepared to accept that an express clause could exclude the right to claim a set-off in relation to misrepresentation.
[20] The present clause is sufficient to exclude the right of set-off by the tenant Constant Trendz. Any claims Constant Trendz may have for breach of lease are excluded from set-off. Ms Gielens cannot take advantage of or rely on any claims the company had under the lease to resist the claim for rent.
[6] The rent clause in the lease between the applicants and the respondents in the present case is identical to the one considered here by Venning J.
[7] Because of the obvious difficulties that this presented to the respondents in terms of their original grounds of opposition, Mr Finnigan advanced their position before me on two slightly different bases, namely that:
a) The portion of the rent claimed for the period from mid-July to late September 2009 should be abated due to the inability of the respondents to use the premises during that time for the purposes of their restaurant because of the repairs that were being undertaken by
the applicants. Mr Finnigan said that such an abatement would not be
a matter of set-off or counterclaim but rather would have the effect that no rent for the relevant period could be said to be owing at all; and
b) The existence of good arguable claims by the respondents for breach
of other covenants in the lease was a matter that the Court should take into account (as going against granting the application) when exercising its discretion under s 251 of the Act. This argument was also advanced as constituting the basis for the respondents’ application under s 253 of the Act for relief against cancellation.
[8] Mr Finnigan further submitted that even if the Court were to make an order
for cancellation, there should be a stay under r 17.29 on the grounds that if the judgment were executed a miscarriage of justice would eventuate.
[9] As I have mentioned earlier, the respondents also deny owing that portion of the rent that represents the post-2007 increase.
Evidence
[10] The application under s 244 was quite properly commenced by way of originating application. It followed from this that all the evidence before me was by way of affidavit. Most of the affidavits filed (and there were many) were concerned with matters relating to the respondents’ counterclaims, namely the factual foundation for the allegations that the applicants have breached the covenants of quiet enjoyment and maintenance and repair under the lease.
[11] Mrs Grant and Mr Finnigan accepted that it was neither possible nor necessary for me to resolve the issues raised by those affidavits in this judgment; the counterclaims were not before me for determination. I also record my agreement with Mr Finnigan that any such resolution would almost inevitably require the deponents to be cross-examined, in light of the conflicting account of the facts advanced by them. In addition I record my agreement with Mrs Grant’s submission
that the proper forum for the resolution of those issues is, in any event, before an arbitrator in terms of clause 45 of the lease.
[12] Because the existence and merits of the respondents’ complaints nonetheless remain relevant to the basis on which Mr Finnigan advanced their defence to the
s 244 application, he took me through the evidentiary basis for the key allegations made by the respondents. Mrs Grant also addressed aspects of the evidence with me.
[13] I am prepared to accept for the purposes of this judgment that the respondents have an arguable case for breach of the quiet enjoyment and/or maintenance and repair covenants and that, similarly, they have an arguable case in relation to certain losses they say they have suffered as a result of the alleged breaches. That said, however, it seems to me indisputable on the basis of the evidence before me that the applicants have, on a number of occasions, taken steps to address the respondents’ concerns about the repair of the premises. So even if I were to take a preliminary view of the evidence that was most favourable to the respondents I would not be prepared to assume that any breaches by the applicants of the lease were either advertent or egregious.
[14] The issue before me is whether the existence of the disputes and the fact that the respondents have an arguable case can make any difference to the decisions required of me under s 244 or s 253.
Discussion
[15] I have set out the bases on which the respondents’ now oppose the s 244
application in paragraph [7] above. I will address each of their contentions in turn.
Liability for Amount of Post-October 2007 Rent Increase
[16] On 17 October 2007 the applicants initiated a rent review in terms of clause
2.1(a) of the lease. They proposed an increase of $3,293 plus GST per annum
(approximately $500 per month) and, although not obliged by the lease to do so, explained that the basis for the increase was:
a) to provide a return to the applicants on $15,000 they had outlaid on replacing certain chattels (kitchen equipment); and
b) to take account of a recent valuation of the property.
[17] Ms Hannay responded by email on 6 November 2007. She asked for a copy
of the valuation report and said that the lease did not provide for separate payment
for plant and chattels. It was, however, accepted by Mr Finnigan that this email did not constitute notice of a dispute in terms of clause 2.1(b) and further that no such notice was ever given. In the absence of such a notified dispute the applicants were
of the view that they were entitled to give effect to their proposal to increase the rent.
[18] Mr Finnigan nonetheless submitted that the rent increase (which the applicants then treated as having been accepted) was unlawful because it was imposed on a flawed basis, namely:
a) The valuation report that was never disclosed to the respondents and thus constituted “hearsay”; and
b) A mistaken belief that the lease encompassed chattels.
[19] I accept Mrs Grant’s submission that the first contention is irrelevant. There was no obligation either under the lease or more generally to inform the respondents
of the basis for the proposed increase, let alone disclose the valuation report (which had been provided on a confidential basis). If the respondents wished to challenge the proposal then the lease clearly prescribed the way in which they were to do that. They did not avail themselves of that process.
[20] The same observation applies equally to the second contention. I also accept, however, Mrs Grant’s further submission that the lease (and therefore the rent) does
in any event cover chattels, as is made clear by the fact that the lease expressly incorporates and confers a right to use “[t]he landlord’s fixtures and fittings and the Landlord’s chattels described in the fourth schedule.”
[21] Accordingly I hold that the respondents were obliged to pay rent in the increased amount and that they have, since November 2007, been in breach of that obligation.
Abatement
[22] The essence of Mr Finnigan’s argument on this point was that there was a claim for abatement in terms of the rent owing for the period between mid July to late September 2009 and that the existence of that claim raised the prospect of no rent at all being owed for that period. The way in which this argument was advanced before me was that a successful claim for abatement would mean that clause 1.1 in the lease was not in effect engaged at all and the prohibition on set-off did not apply. The rent would be treated as if it had never been owing and accordingly there could be no arrears for that period.
[23] There are a number of difficulties with this submission. First and most fundamentally, I do not consider that a claim for abatement is available, as a matter
of law, to the respondents here. In that respect I accept Mrs Grant’s submission that the absence of any reference in the lease to the possibility of abatement is necessarily fatal. The lease makes specific provision for how issues of repair are to be dealt with, and abatement is not one of them.
[24] Mrs Grant’s position is supportedby authority. For example in
Clarence Ltd v Cox[2] Tompkins J said at 192,754:
There are obvious difficulties with this approach. In the absence of an express provision in the lease for abatement of rent, usually where there has been damage by fire or other risks 'for which the property is insured, none will be implied: Hewett v Quick Dispatch (1940) 67 LILRep 130. The only basis upon which the rent payable under the lease could be "rebated" is if there were some valid claim for damages by the respondents against the appellant that could be set-off against the rent. The law does not permit an adjustment of a contractual liability to pay rent simply because the Judge thinks “it is fair" to do so.
[2] Clarence Ltd v Cox (1998) 3 NZConvC 192,748 (HC).
[25] As this passage makes clear, in the absence of an express provision in the lease, any claim for abatement would have to be founded in a claim for damages, which could then be off-set against the claim for rent. While it is of course open to the respondents separately to pursue such a claim, clause 1.1 of the lease necessarily prevents them from setting-off such a claim against their obligation to pay rent.
[26] Even if I am wrong in this, I am unable to see how any (limited) abatement could materially avail the respondents in the context of the present application. That
is because, as Mr Finnigan made clear, any such abatement would relate only to the period of approximately three months in 2009 when substantial repairs were being undertaken at the restaurant premises. Thus the remaining arrears, for other periods, would continue to be outstanding and would prima facie constitute a sufficient basis upon which cancellation and possession could be ordered in terms of s 251.
[27] In light of those two legal conclusions, it seems to me to be unnecessary to consider what are disputed factual issues concerning whether and to what extent the respondents would have been open for business during the July – September 2009 period in any event.
Alleged Breaches of Covenants by the Respondents
[28] As I have said, Mr Finnigan submitted that notwithstanding the terms of clause 1.1, the existence and strength of the claims by the respondents for breach of the covenants of quiet enjoyment and repair and maintenance were relevant to the exercise of my discretions under ss 251 and 253. He relied inter alia on the cases of Sibrad Company Ltd v Kanters,[3] Studio X Ltd v Mobil Oil New Zealand Ltd,[4] and
[3] Sibrad Company Ltd v Kanters (2008) 9 NZCPR 356 (HC).
[4] Studio X Ltd v Mobil Oil New Zealand Ltd [1996] 2 NZLR 697 (HC).
Hyman v Rose[5] which established that a wide range of factors was relevant to the
[5] Hyman v Rose [1912] AC 623 (HL).
exercise of the Court’s discretion to grant relief in re-entry/forfeiture cases under
s 118(2) of the Property Law Act 1952.
[29] Section 118 relevantly provided:
(2) Where a lessor is proceeding by action or otherwise to enforce such a right of re-entry or forfeiture, or has re-entered without action, the lessee may, in the lessor's action (if any), or in any action brought by himself, or by proceeding otherwise instituted, apply to the Court for relief; and the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the circumstances of the case, may grant or refuse relief, as it thinks fit; and
in case of relief may grant the same on such terms (if any) as to costs, expenses, damages, compensation, penalty, or otherwise, including the
granting of an injunction to restrain any like breach in the future, as the
Court in the circumstances of each case thinks fit.
[30] This aspect of s 118 has been said to confer “a wide discretion” on the Court:
Hyman v Rose at 631.
[31] Section 118 has been replaced by ss 244 – 264 of the Act. The new sections constitute a statutory code in relation to the cancellation of leases (the term “cancellation” now being used instead of “forfeiture”): s 243. While s 118 expressly did not apply to cases involving re-entry or forfeiture for non-payment of rent (these being dealt with by the law of equity) such cases are now included within the general right of a lessor to cancel under s 245 (subject to the specific notice requirements in s 245), the general powers of the court to make orders for possession under s 251 and the general discretion to grant relief from cancellation provided by s 253. Sections 251 and 253 provide:
251 Powers of court in making order for possession
(1) On an application to a court for an order for possession of the land comprised in a lease, the court may make the order and cancel the lease.
(2) If the court makes the order and cancels the lease under subsection (1),
it may also do all or any of the following:
(a)order the lessee to pay the rent up to the date of cancellation or any later date on which the lessee yields up possession:
(b) order the lessee to pay reasonable compensation for the breach:
(c)impose on the lessee or the lessor any other conditions that it thinks fit.
(3) For the purposes of this section, reasonable compensation for the breach
of a lease may include reimbursement of the lessor's reasonable expenses—
(a) in giving notice of intention to cancel the lease under section 245
or 246; and
(b)in doing anything else that the lessor has reasonably done in relation to the breach.
253 Relief against cancellation of lease for breach of covenant or condition
(1) All or any of the following persons may apply to a court for relief against the cancellation, or proposed cancellation, of a lease on the ground of a breach of a covenant or condition of the lease:
(a) the lessee:
(b) a mortgagee of the leasehold estate or interest:
(c) a receiver appointed in respect of the leasehold estate or interest:
(d) if 2 or more persons are entitled to the leasehold estate or interest
as joint tenants, 1 or more of those persons on behalf of the other joint tenants.
(2) If an application made in accordance with subsection (1)(d) is not made by all of the joint tenants, the application must be served on every joint tenant who is not already a party, unless the court orders otherwise.
(3) Relief may be sought in—
(a)a proceeding brought by the lessor for an order for possession of the land; or
(b) a proceeding brought for the purpose of seeking the relief. (4) A proceeding referred to in subsection (3)(b) must be brought—
(a)before an order for possession of the land is made in a proceeding referred to in subsection (3)(a); or
(b)if the lessor has peaceably re-entered the land, not later than 3 months after the date on which the lessor peaceably re-entered the land.
(5) Subsection (4)(b) is subject to section 254.
[32] Apart from the extension of the lease cancellation provisions to include cases involving breaches of the covenant to pay rent there is no other apparent legislative intent either to alter or narrow the ambit of the Court’s powers and discretions in respect of cancellations under these sections which are, if anything, more general in
their terms. I therefore accept that the cases cited by Mr Finnigan in relation to the exercise of the s 118 discretion continue to have relevance in relation to the discretions under ss 251 and 253.
[33] An inclusive list of the factors relevant to the exercise of the Court’s power under s 118 to cancel was set out by Hammond J in Studio X (at 701) as follows:
• Whether the breach was advertent or deliberately committed. In such
a case there are sound reasons why in the normal case relief should not be given: why should a lessor be compelled to remain in a relation of neighbourhood with a person in deliberate breach of his obligations?
•Conversely, whether the breach was caused by inadvertence or was entirely beyond the tenant's control.
•Whether the breach involves an immoral/illegal use. It must be wrong in principle for a lessor to be forced into improper or illegal relations, possibly even exposing the lessor himself to some form of legal sanction.
•Whether a tenant has made or will make good the breach of the covenant and is able and willing to fulfil his obligations in the future.
• The conduct of the landlord.
• The personal qualifications of the tenant.
• The financial position of the tenant.
•Sometimes the position of third parties has had to be considered. For instance the position of a contracting purchaser of the interest.
• The gravity of the breach.
• Whether a breach has occasioned lasting damage to a landlord.
•There is a proportionality concern. Under this head there has to be concern whether whatever damage is said to have been sustained by the landlord can truly be said to be proportionate to the advantages she will obtain if relief is not granted. Generally speaking, and at a greater level of abstraction, there has to be a concern with keeping an even hand. After all a lease is both an interest in land and a contract and a Court ought not to estreat an entire interest of that character simply because (for instance) the tenant fails to repair (at a cost of $50) a window the tenant's son happened to put a cricket ball through.
[34] Mr Finnigan relied particularly on the fourth factor identified by Hammond J.
He said that in the present case the existence of the (alleged) breach of covenant by
the applicants meant that the “conduct of the landlord” militated against the exercise
of my s 251 discretion to cancel the lease or, equally, favoured the granting the respondents relief under s 253.
[35] As I have said I am prepared to accept for present purposes that the respondents have an arguable case in relation to the breaches they allege but not, on the untested evidence before me, that any such breaches were either deliberate or flagrant. It seems to me that the highest that the respondents could put their case is that the applicants were sometimes slow to initiate and complete repairs and that, even once completed, the repairs did not remedy all the defects and difficulties with the premises that the respondents had identified. The applicants would, however, vigorously dispute both of those contentions.
[36] In addition, it seems to me that a number of the other factors listed by Hammond J as being relevant to the Court’s discretion actively militate against its exercise in the respondents’ favour.
[37] First, it is plain from the evidence I have seen that the respondents have, at least since 2007, breached the lease by consistently making late rental payments or, more latterly, by making no rental payments at all. While it may be that the reason the respondents have withheld rent is, on some occasions, (I certainly do not accept
on all) to motivate the applicants to undertake repairs, it is quite clear that as a matter
of law the obligation to pay rent is a strict one and exists notwithstanding any breach
by a lessor of the covenant to repair: Chatfield v Elmstone Resthouse Ltd.[6]
[6] Chatfield v Elmstone Resthouse Ltd [1975]2 NZLR 269 at 275 (SC).
[38] Secondly, the respondents have (still) not made good their default, even so
far as the undisputed debt is concerned. While Ms Hannay has very recently indicated her willingness to pay most of the outstanding rent into an interest bearing trust account, she has not in fact done so, and the reality is that the rent is owed now
to the applicants. Any concern by the respondents that, once paid, the money will somehow be dissipated and will not be available to effect future repairs or to pay any damages arising from the respondents’ counterclaims is not well founded;
Mr Anthony Grant has deposed that the applicants have resources from which they
could meet any damages award and has also indicated his willingness to give a personal undertaking in that respect.
[39] Lastly, I consider that the breach here by the respondents is serious; as Mrs Grant submitted, the Essentiality of Payments clause (clause 30.1) underscores the importance of the obligation, as does the clause 1.1 prohibition on set-off itself. As noted above the respondents have rarely paid their rent on time over the last two years and there is now the equivalent of over a year’s rent outstanding. They have never paid that proportion of the rent owing that relates to the 2007 increase. It cannot fairly be said that to permit cancellation would be a disproportionate response.
[40] For these reasons I consider that the applicants’ application for cancellation
of the lease, for possession and for the payment of all rent arrears should prima facie succeed.
[41] In terms of whether relief from cancellation under s 253 should nonetheless
be granted to the respondents, the relevant cases and principles (derived from earlier decisions made under the Court’s previous equitable jurisdiction to order relief from forfeiture) have recently been summarised by French J in Mulholland v Waimarie Industries Ltd[7] (a s 253 case) at [23] as follows:
[7] Mulholland v Waimarie Industries Ltd HC Christchurch CIV-2009-409-707, 15 May 2009.
1. Where the breach consists solely of a failure to pay rent, there is a presumptive right to relief on payment of the arrears and costs. It is only
in exceptional circumstances that relief is to be denied if the debt is paid
in full (Gill & Anor v Lewis & Anor [1956] 2 QB 1; Yoo v Dominion
Income Property Fund Limited HC Auckland CIV-2005-404-003239, 13July 2005, Venning J; Eason; Treka Developments Limited v Leeman
Jackson Limited HC Auckland CP13871/88, Thorpe J).
2. This is because it is inequitable that the benefit of the lease should be lost
to a tenant who has restored to the landlord all that the landlord is entitled
to under the lease. The ability to forfeit the lease and take possession is regarded by the Court as security for payment (Endeavour Lodge Motel
Limited v Langford & Gavin HC Auckland CP3/98, 24 August 1998,
Elias J).
3. Where, however, it is clear the tenant is hopelessly insolvent, the Court will not grant relief as a general rule (Inner City Businessmen’s Club Limited v James Kirkpatrick Limited [1975] 2 NZLR 636).
4. Mere suspicion of insolvency is not enough to outweigh the presumptive right to relief on payment of rental and costs (Guardsman Restaurant (Christchurch) Limited v Victoria Square Estates Limited & Another HC Christchurch M399/87, 11 December 1987, Tipping J).
[42] Her Honour then went on to note:
[24] In many of the cases, the Court can be seen to be balancing the two principles first that relief will normally be given if arrears and costs are paid and secondly that an insolvent tenant should not be foisted onto a landlord.
[25] In this case, the tenant comes seeking relief without having paid the arrears.
[43] In the present case, the applicants have not strongly contended that the respondents are insolvent or at risk of becoming so (although one of their affidavits contains speculation about this). Ms Hannay has stated in her affidavit that she is able to pay and would be able to procure a loan to cover the arrears.
[44] Accordingly, and on the basis of the authorities noted above, I am prepared to grant contingent relief under s 253. The conditions I impose under s 256 of the Act are as follows:
a) That the respondents pay to the applicants by 4 pm on Friday 2 April
2010 all arrears of rental owing under the lease as at that date together with interest, including the arrears relating to the post October 2007 rent increase together with interest;
b)That the respondents shall ensure, from the date of this judgment until the expiry or termination of the lease, that the rent payable under the lease is not (without the prior consent of the applicants) in arrears by any more than 10 working days.
[45] In the event that the respondents fail to satisfy either of these conditions, the applicants will be entitled to judgment for:
a) cancellation of the lease;
b) possession of the premises at 39 Palm Road and
c) the full amount of rental arrears owing by the respondents at the date
of judgment, together with interest at the relevant rate.
[46] Any such judgment is to be subject to the further conditions under s 251(3)
that:
a) the respondents are to yield possession peaceably and to disarm the alarm system and cooperate in having the control of that system transferred to the applicants;
b)the respondents are to remove their chattels only when a representative of the applicants is present for the purposes of agreeing which chattels belong to the respondents and which belong to the applicants.
Application for Stay of Execution
[47] In light of my conclusions above it is not necessary for me now to consider whether the judgment for cancellation should be stayed under r 17.29. Lest the payment of arrears I have ordered not be made, however, I record that I would not order such a stay. That is because it cannot be said that if such a judgment were to
be executed a “substantial miscarriage of justice” would eventuate.
[48] In Econotek Construction Ltd v Kale[8]the defendant sought a stay on the grounds that a substantial miscarriage of justice would result if the plaintiff’s summary judgment were executed against him because he had a counterclaim that he had been unable to pursue at the hearing of the summary judgment application. This argument was rejected by Tompkins J who said at 8:
[8] Econotek Construction Ltd v Kale HC Gisborne CP8/87, 7 January 1988
.
A miscarriage of justice can hardly be said to result where the defendant is required to pay to the plaintiff an amount that is owing to it, and the defendant will be free to pursue his claims against the plaintiff in then normal way.
[49] Subsequent cases make it clear that the apparent strength of a counterclaim may be a relevant factor when considering whether judgment should be stayed in such circumstances. But even accepting for the sake of argument that the respondents’ counterclaim here is strong, it seems to me that there can be no prejudice to them (let alone the likelihood of a substantial miscarriage of justice) here. All that is being required of them is that they pay the arrears of rent that they (largely) accept is owed by them; as I have said above there is no evidence to suggest (and in fact there is evidence to the contrary) that the applicants would not be able to meet any future award of damages that might be awarded as a result of the counterclaim.
Costs
[50] The applicants have effectively succeeded. The respondents are ordered to pay 2B costs to the applicants on or before 2 April 2010.
Rebecca Ellis J
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