Greenhalgh v Justus Holdings Limited
[2015] NZHC 153
•9 February 2015
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2014-488-165 [2015] NZHC 153
BETWEEN AUDREY EDITH GREENHALGH
Plaintiff
AND
JUSTUS HOLDINGS LIMITED First Defendant
BRUCE CLARK MURRAY and CHRISTINE ANNE MURRAY Second Defendants
Hearing: 9 February 2015 at 2:15pm Appearances:
P Cogswell for Plaintiff
D M Grindle for Second Defendants
No appearance for First DefendantJudgment:
9 February 2015
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Cogswell Law, Auckland, for the Plaintiff
Webb Ross McNab Kilpatrick Ltd, Whangarei, for Defendant
GREENHALGH v JUSTUS HOLDINGS LIMITED [2015] NZHC 153 [9 February 2015]
[1] Mrs Greenhalgh, the plaintiff as landlady, sues the second defendants as guarantors of Justus Holdings Ltd, tenant of premises at 1-5 Commerce Street, Whangarei. Mrs Greenhalgh has already obtained summary judgment, without opposition, against Justus Holdings Ltd. Mr and Mrs Murray were directors and shareholders of Justus Holdings Ltd. They are sued as guarantors of the lease. In their notice of opposition, Mr and Mrs Murray contend that the original lease came to an end on 30 November 2007 and their obligations as guarantors expired then. They admit that Justus Holdings Ltd remained in occupation of the premises until
2014. They say that their liability as guarantors does not extend to that additional occupation of the premises.
[2] The plaintiff applied for summary judgment. The principles for plaintiffs’ summary judgment applications are well established. The Court of Appeal set them out succinctly in Krukziener v Hanover Finance Ltd.1 It is not necessary to repeat them.
[3] Mrs Greenhalgh and her late husband owned the premises at 1-5 Commerce Street, Whangarei. Her husband has now died and she is sole owner by survivorship. In October 2005 she and her husband granted a lease of the premises to Justus Holdings Ltd. Mr and Mrs Murray, as directors of the company, guaranteed it. The deed of lease is in the Auckland District Law Society form.2 The initial term was for two years. The commencement date was 1 December 2005 with two rights of renewal for two years each. The final expiry date was 30 November 2011. The annual rent was $110,000 per annum plus GST, a monthly rental payable in advance
of $9,166.66. The tenant was to pay 100 per cent of the outgoings. The lease provides for interest payable in default at 12 per cent per annum. It also contains a provision under which the landlord can recover costs enforcing the lease.
[4] Clause 34 is a renewal provision. That provides for a renewal upon the tenant giving the landlord written notice at least three calendar months before the
end of the term.
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162, at [26].
2 Auckland District Law Society Deed of Lease (4th ed. 2002(2)).
[5] Clause 38.1 is a holding over provision:
Holding over
38.1IF the landlord permits the Tenant to remain in occupation of the premises after the expiration or sooner determination of the term, such occupation shall be a monthly tenancy only terminable by one month’s written notice at the rent then payable and otherwise on the same covenants and agreements (so far as applicable to a monthly tenancy) as herein expressed or implied.
[6] The deed of lease also contains a guarantee. Mr and Mrs Murray signed the deed of lease, including the guarantee, as guarantors, as well as directors of Justus Holdings Ltd. The guarantee includes these provisions:
IN CONSIDERATION of the Landlord entering into the lease at the
Guarantor’s request the Guarantor:
(a) guarantees payment of the rent the and the performance by the
Tenant of the covenants in the lease …
THE GUARANTOR covenants with the Landlord that:
1.NO release delay or other indulgence given by the Landlord to the Tenant or to the Tenant’s successors or assigns or any other thing whereby the Guarantor would have been released had the Guarantor been merely a surety shall release prejudice or affect the liability of the Guarantor as a guarantor or as indemnifier. …
...
4.AN assignment of the lease and any rent review in accordance with the lease shall not release the Guarantor from liability.
5.SHOULD there be more than one Guarantor their liability under this guarantee shall be joint and several.
6. THE Guarantee shall extend to any holding over by the Tenant.
…
GUARANTORS
…
8.THE Guarantors agree that nothing which will release the Guarantors as surety in any way releases the Guarantors from liability under this Deed and further the Guarantors will be liable under this guarantee as if they executed this agreement as the Tenant and not merely as surety and no waiver, indulgence or other things done by the Landlord which would otherwise avoid this Guarantee
shall in any way avoid, amend or vary the Guarantor’s obligations
hereunder.
[7] Justus Holdings Ltd remained in occupation of the premises until 2014. On
4 July 2015 Mrs Greenhalgh gave notice to Justus Holdings Ltd and Mr and Mrs Murray of termination of a monthly tenancy. It is her case that Justus Holdings Ltd was holding over on a monthly tenancy following the expiry of the lease on
30 November 2007. Justus Holdings Ltd vacated the premises on 4 August 2014.
[8] Backtracking, it is necessary to refer to changes that were made at the expiry of the initial term. There is no evidence that Justus Holdings Ltd gave a notice to renew the lease under clause 34. There is however undisputed evidence that the basis on which Justus Holdings Ltd was to occupy the premises after 1 December
2007 was to change. Mrs Greenhalgh contends that the terms on which the parties continued to occupy were in part recorded in a deed prepared by her lawyers. That deed is called a Deed of Variation and Renewal of Lease. That deed was not, however, signed by any of the parties. For the Murrays, Mr Grindle takes the point that there is no clear evidence that the continued occupation of the premises after
1 December 2007 was on the particular terms recorded in that unsigned deed.
[9] Nevertheless it is undisputed that from 1 December 2007 the area that Justus Holdings Ltd occupied was reduced and the amount of rent to be paid was reduced. The new rent was fixed at $83,364 per annum, payable in advance by equal calendar monthly instalments of $6,947.08. The outgoings were also adjusted. Justus Holdings Ltd was required to pay 75 per cent of the rates, and 66.67 per cent of the insurance. Other provisions in the draft unsigned deed are not to be taken to be necessarily agreed.
[10] There is no clear evidence whether the draft deed was prepared before or after 1 December 2007. Mrs Greenhalgh does say in her affidavit that the new rent and the adjusted outgoings were paid by Justus Holdings Ltd from 1 December
2007. The Murrays do not take issue with that statement.
[11] Mr and Mrs Murray have deposed as to the changes made. Mr Murray says that there were discussions in September 2007. He says that the intention was for
the existing lease to be replaced by a further lease over a reduced area. He recalls that the variation of lease, a copy of which is attached to Mrs Greenhalgh’s affidavit, was sent to himself and his solicitors, but he notes that the variation was never signed. He says that matters were stalled because of the health of Mrs Greenhalgh’s husband.
[12] The case for the Murrays is that the original lease entered into in 2005 came to an end on 30 November 2007. While there were new arrangements made, under which Justus Holdings Ltd continued to occupy the premises, the guarantee given in the October 2005 lease came to an end and their obligations as guarantors therefore expired. They had no responsibility for payment of the company’s rent after
30 November 2007.
[13] Against that, Mrs Greenhalgh’s case is that there was a holding over in terms
of clause 38.1 of the original lease.
[14] Clause 38.1 provides that if a tenant holds over after the expiry of the term, the occupation is a monthly tenancy, terminable by one month’s notice on either side. The tenancy is said to be on the same covenants and agreements so far as applicable to a monthly tenancy as in the original lease. Mr and Mrs Murray say that clause
38.1 cannot apply because the occupation of the premises by Justus Holdings Ltd after 1 December 2007 was on terms that are different from those provided in the original lease. The point being taken is that there can be a holding over under clause
38.1 only if the original terms are adhered to.
[15] Given Mrs Greenhalgh’s evidence as to the time when the reduced rental was paid by Justus Holdings Ltd, it appears that the variation took effect upon the expiry of the original term and start of the period after 1 December 2007. Under clause
38.1 the parties are free to enter into binding arrangements to apply during the holding over period that may adjust the original covenants and agreement set out in the original lease. To develop the point further, if during the original term the parties had entered into a variation agreement to adjust their covenants during that period, the variation would be binding on the parties up to the expiry of the original term. If the parties do not make any new agreement, those variations as agreed would
continue to bind the parties during any holding over period. Equally, it is open to the parties during any holding over period also to enter into an agreement to adjust the original covenants and agreements to apply during the holding over. Thus, any holding over period would be subject to such agreed variations as the parties agreed to. If parties can competently enter into binding variations both before and after the expiry of the original term, it seems to me to be equally open to the parties to enter into an agreement to vary their original obligations to take effect upon the start of any holding over period.
[16] In the end, the question comes down to the terms of the guarantee. The guarantee I am relying on is the guarantee in Schedule 3 to the original lease. The draft deed prepared by Mrs Greenhalgh’s lawyers also contains a guarantee but of course, for summary judgment purposes, that is not binding on Mr and Mrs Murray, because there is not a signed memorandum that satisfies the requirements of s 2 of the Contracts Enforcement Act 1956. The guarantee in the original lease contains an express provision that the guarantee applies to any holding over by the tenant.
[17] For good measure, Mr Cogswell submitted that the decision of Paterson J in Macaulay v Wesley College Trust Board is clear authority.3 That was also a case of a lease in the Auckland District Law Society form. It had a guarantee in terms similar to the guarantee in this case, but it did not contain clause 6 (the holding over provision) found in the guarantee in this case. Notwithstanding that absence, Paterson J held that as the guarantor in that case had guaranteed payment of the covenants under the lease, and as the lease provided for payment during any holding over period, then the guarantor had guaranteed the tenants’ obligations during any
holding over period. Because we now have clause 6 in the guarantee, that makes the matter even clearer.
[18] I also note that Mr and Mrs Murray acknowledge having negotiated the new arrangements on behalf of Justus Holdings Ltd with the landlords. That means that if there were any other provisions under suretyship law that would discharge them by
reason of the variation to agreement, they cannot take advantage of that because they
3 Macaulay v Wesley College Trust Board (1999) 8 NZCPR 194 (HC).
negotiated the arrangements themselves. They cannot claim to be discharged because of the variation to the original agreement.
[19] When the company vacated the premises there were arrears in rent. The company did not dispute its liability to pay that rent. I have found that the guarantee given by Mr and Mrs Murray continued to apply during the holding over period up until Justus Holdings Ltd vacated the premises on 4 August 2014. I therefore find that the Murrays are equally liable with their company for unpaid rent.
[20] I give judgment in favour of the plaintiff against Mr and Mrs Murray for
$82,013 plus interest at the default interest rate of 12 per cent from 19 September
2014 to 9 February 2015, that sum to be calculated by the plaintiff.
[21] Costs will be on a solicitor-client basis, exclusive of GST, plus disbursements. Mr Cogswell should send copies of a costs memorandum to Mr Grindle to give him the opportunity to comment. The judgment will be sealed once costs have been finalised.
………………………………….
Associate Judge R M Bell
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