Hornby Land Limited v Container Transport & Storage 2002 Limited (in receivership)

[2024] NZHC 3318

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2024-409-173

[2024] NZHC 3318

UNDER

the Property Law Act 2007 and the High Court Rules 2016

BETWEEN

HORNBY LAND LIMITED

Plaintiff

AND

CONTAINER TRANSPORT & STORAGE 2002 LIMITED (IN RECEIVERSHIP)

First Defendant

SHANE THOMAS ALLISON, MICHELLE ISABEL ALLISON, SHIRLEY DAYRELL ALLISON and THOMAS HUGH ALLISON

Second Defendants

Hearing:

4 November 2024

Appearances:

N P Tetziaff for Plaintiff

No appearance for defendants

Judgment:

8 November 2024

JUDGMENT OF ASSOCIATE JUDGE LESTER

HORNBY LAND LIMITED v CONTAINER TRANSPORT & STORAGE 2002 LIMITED (IN RECEIVERSHIP) [2024] NZHC 3318 [8 November 2024].

[1]    The plaintiff, Hornby Land Limited (Hornby) owns a property in Hornby, Christchurch which it leased to Container Transport & Storage 2002 Limited (in receivership) (the company), pursuant to a ground lease dated 20 December 2013.

[2]    Hornby seeks judgment for arrears of rent, outgoings and legal costs pursuant to a solicitor-client costs clause in the lease. Hornby is also seeking damages for breach of a covenant which I address below.

[3]    Hornby, in late 2022, took steps to cancel the lease due to the company’s default. The appropriate notices under the Property Law Act 2007 were issued but not remedied. Hornby originally also sought orders confirming the cancellation of the lease and an order for vacant possession against the company. These orders have been overtaken by the receivership of the company. Hornby’s counsel confirms the receivers of the company have consented to the cancellation of the lease and have given possession of the property to Hornby and thus the causes of action concerning the status of lease and possession of the premises are no longer relevant save in relation to costs. Accordingly, the claims for unpaid rent, outgoings and legal costs and for damages remain to be dealt with.

[4]    The lease recorded that if the company undertook any development work on the site it had to first obtain Hornby’s consent if that work would require a resource consent. Hornby alleges that, consistent with that express obligation, there was an implied obligation that the company would also apply for any necessary resource consent and be responsible for the costs of the intended work.

[5]    Schedule 4 of the lease required that approximately 5,000m2 at the rear of the premises was to be bunded by the company within two years of the lease commencing. The company duly constructed the bund but did not apply for resource consent to do so, or obtain Hornby’s approval for the plans.

[6]    After the construction of the bund, the local authority advised Hornby that the bund required a resource consent as it far exceeded the maximum height for earthworks under the District Plan.

[7]    Hornby called upon the company to meet the costs related to the resource consent but the company refused to do so. Hornby has incurred costs in relation to the bund and the consenting process of $129,510.21 (including interest) for which it seeks damages for breach of the covenant along with the outstanding rent and outgoings of

$66,002.83, outstanding interest on the rent and outgoings of $41,578.78, interest on the bund payments and unpaid legal costs. These figures are fixed as at the date the claim was issued in early 2024. I note the $129,510.21 includes interest of $11,799.45. The costs for which judgment can be sought on damages is $117,710.76. I deal with interest on the damages claim below.

[8]    With the company going into receivership on 12 September 2024, the receiver advised counsel previously acting for the company that the company’s instructions were withdrawn. Counsel has sought leave to withdraw as counsel on the record for the company, which is granted.

[9]    The same counsel also acted for the guarantors, but advised the Court shortly before the hearing that while he remained instructed, his clients would not be taking any steps to defend the proceeding. A timetable for the filing of papers in opposition was made, which originally contemplated the possibility of a protest to jurisdiction, which did not eventuate.    A hearing for the anticipated protest was scheduled for    4 November 2024 but with the protest not being filed and with neither defendant taking any active steps, that hearing date was used for the unopposed application for summary judgment.

The damages claim

[10]   The lease is a ground lease only and while the lease contemplates that the company could undertake improvements on site, Hornby had to consent to what was proposed. Clause 12.1 provides:

12.1Subject to clause 12.3, where the Lessee intends to develop, replace  or construct any Lessee’s Improvements on any part of the Land and such works require resource consent, the Lessee must first obtain the Lessor’s prior written consent to such works (such consent not to be unreasonably or arbitrarily withheld or delayed).

[11]   It is clear that a resource consent was required for the works undertaken by the company. The company therefore breached cl 12.1 and I am satisfied that Hornby has demonstrated the company does not have a reasonably arguable defence in respect of the costs Hornby incurred in relation to dealing with the lack of consent for the bund. This is a claim for damages arising from the company not complying with cl 12.1. No dispute has been raised that a resource consent was in fact required or with the reasonableness of any of the steps taken by Hornby to deal with that issue or with the quantum of this claim.

[12]   The balance of the claim for unpaid rent and outgoings is straightforward in that it is not disputed that the rent and outgoings were not paid.

[13]   As to the guarantors’ liability, they have all signed a guarantee in wide enough terms to cover the amounts subject to this proceeding.

[14]Accordingly, judgment is entered against each defendant as follows:

(a)Outstanding rent and outgoings $66,002.83 together with judgment for all unpaid rent after 25 February 2024 to the date of cancellation of the lease being 24 September 2024 along with judgment for liability for outgoings from 25 February 2024 to 25 September 2024.

(b)Council and contractor invoices relating to the bund of $117,710.76. Leave is reserved for Hornby to seek judgment for further Council and contractor invoices arising after 25 February 2024, such application to be on notice.

(c)Interest at the default rate under the lease of 10 per cent per annum in relation to outstanding rent and  outgoings  totalling  $41,578.78  to 24 February 2024 and further interest at the contractual rate through to the date of judgment.

(d)Interest on  $117,710.26  pursuant  to  the  Interest  on  Money  Claims Act 2016 until judgment in (b) is paid.

(e)Interest on the total of (a) and (c) from the date of judgment at the contractual rate of 10 per cent per annum until paid.

Costs

[15]   Hornby has the benefit of a solicitor-client costs clause. There is an award of costs on a solicitor-client basis in respect of the proceeding. Counsel is to file and serve a memorandum with the usual supporting material 10 working days.

Associate Judge Lester

Solicitors:

Smith and Partners, Auckland