JAMES WARD TRUSTEE COMPANY LIMITED AND EUNJI LEE
[2024] NZHC 3033
•17 October 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-3060
[2024] NZHC 3033
BETWEEN JAMES WARD TRUSTEE COMPANY LIMITED
Applicant
AND
EUNJI LEE
Respondent
Hearing: 16 October 2024 Appearances:
L Sheppard for the Applicant
No appearance on behalf of the Respondent
Judgment:
17 October 2024
JUDGMENT OF GORDON J
This judgment was delivered by me
on 17 October 2024 at 12 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
Heimsath Alexander, Auckland
JAMES WARD TRUSTEE COMPANY LTD v LEE [2024] NZHC 3033 [17 October 2024]
[1] The applicant, James Ward Trustee Company Ltd (JWT), and the respondent, Eunji Lee, were respectively lessor and lessee over land located at unit 1110, Scene Three Apartments, 30 Beach Road, Auckland (property).
[2] JWT filed an originating application seeking an order for possession of the land and orders for Ms Lee to pay sums owing under the lease, interest on the sums owing, and damages.1 Since filing, JWT has peaceably re-entered the property and is now no longer seeking an order for possession of the land.
[3] There have been difficulties with effecting service on Ms Lee. On 2 August 2024 this Court made orders dispensing with the requirements for personal service and treating the proceedings as served. Given Ms Lee’s failure to file any documents in opposition or to appear, this matter proceeded by way of formal proof.2
Background
[4] On 20 January 2014, JWT became the registered owner of the superior leasehold title for the entire Scene Three apartment complex. It also took over as lessor for the lease over the property. That lease continues until 1 August 2146.
[5]Under the terms of the lease, Ms Lee was obliged to pay:
(a)quarterly ground rent (cl B(r) and sch A, cl 1);
(b)Auckland Council rates (sch A, cl 13);
(c)recovery costs of JWT arising from or in relation to any default or (attempted) enforcement of JWT’s rights and remedies under the lease (sch A, cl 2(d) and sch C, cl 22(b)); and
(d)interest on any outstanding amounts at five per cent above the average overdraft of three registered banks at the time of default (sch C, cl 22(c)).
1 Property Law Act 2017 [PLA], ss 244(1)(a) and 251.
2 High Court Rules 2016, rr 15.7 and 15.9.
[6] JWT alleged that on 2 February 2022, Ms Lee breached the lease agreement by failing to pay quarterly ground rent of $5,075.89. JWT (through its solicitors) served Ms Lee by way of email with a notice of intention to cancel the lease (default notice)3 on 30 November 2022 and again on 2 February 2023.
[7] On 2 April 2023, Ms Lee responded to JWT’s solicitors advising that she wished to pay the debt, wanted to sell the property, and could only pay $1,000 per month at that time. However, neither regular repayment of the debt nor sale of the property eventuated. On 18 May 2023, the default notice expired without remedy.4
[8] On 26 May 2023, JWT’s solicitors sent a further notice to Ms Lee advising that if she did not pay within 10 working days, JWT intended to cancel the lease. No response was received.
[9]JWT commenced the present proceeding on 19 December 2023.
[10] Maxwell Tredrea, manager at JWT, says in his affidavit that in circumstances where he did not believe that Ms Lee would pay, JWT decided to peaceably re-enter the property to limit Ms Lee’s liability under the lease and, in turn, mitigate their losses.5 On 19 January 2024, after the property had been vacated by Ms Lee, Mr Tredrea attended the premises with JWT’s property manager and affixed a notice of intention to re-take possession to the front door of the property.
[11] The lease was cancelled by peaceable re-entry on 13 March 2024 when JWT entered into a tenancy agreement directly with new tenants and gave them physical access to the property.6
3 PLA, s 245. The default notice has also been served on the mortgagee, ANZ Bank New Zealand Ltd. A representative of the ANZ has advised that ANZ does not intend to take any action.
4 Pursuant to s 245B of the PLA which extended the expiry period of a default notice to 30 working days.
5 Pursuant to s 244(1)(b) of the PLA.
6 JWT has lodged an application to note the re-entry on the property title pursuant to the Land Transfer Act 2017, s 98. The date of cancellation is not affected by the application.
Sums owing
[12] Affidavits filed by Mr Tredrea show that Ms Lee is liable for the following sums as at 13 March 2024 (the date of cancellation):
(a)$34,880.57 in unpaid rent;
(b)$1,779.91 in Auckland Council rates; and
(c)$13,010.29 in recovery costs.
[13] JWT is also claiming interest on the above sums owing pursuant to the terms of the lease. Although the lease sets the interest rate at five per cent above the average overdraft rate of three registered banks at the time of default, JWT does not have records of historical bank overdraft rates to support those calculations. In the absence of those records, I accept the submission of Ms Sheppard, counsel for JWT, that it is appropriate to instead calculate interest in accordance with s 10 of the Money Claims Act 2016. This will be considerably lower than the contractual interest to which JWT would otherwise be entitled.
Relevant law
[14] The application is brought pursuant to ss 244 to 251 of the PLA, which govern the cancellation of a lease.
[15]Section 244 provides:
244 Cancellation of lease for breach of covenant or condition: general
(1)A lessor who wishes to exercise a right to cancel a lease because of a breach by the lessee of a covenant or condition of the lease may—
(a)apply to a court for an order for possession of the land; or
(b)re-enter the land peaceably (and without committing forcible entry under section 91of the Crimes Act 1961).
(2)However, subsection (1) is subject to sections 245 and 246.
(3)If the lessor applies to a court for an order for possession of land for the purpose of cancelling a lease, the cancellation takes effect—
(a)on the making of the order; or
(b)on any later date that is specified in the order.
[16] A lessor may only exercise the s 244(1) right to cancel a lease if a valid default notice has been served under s 245, and the defaults contained in the notice are not remedied within the expiry period (being 30 working days at the time due to the COVID-19 amendment sections, specifically s 245B). Under s 245(3), a valid default notice must adequately inform the recipient of all of the following matters:
(a)the nature and extent of the breach:
(b)the amount that must be paid to remedy the breach:
(c)the period within which the breach must be remedied (which must not be less than 10 working days after the date of service of the notice):
(d)the consequence that, if the breach is not remedied at the expiry of the period specified in the notice, the lessor may seek to cancel the lease in accordance with section 244:
(e)the right, under section 253, to apply to a court for relief against cancellation of the lease, and the advisability of seeking legal advice on the exercise of that right.
[17] Section 251 sets out the powers of a court in making orders for possession. It provides:
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.
Originating application
[18] JWT was required to bring this proceeding by way of originating application because it was originally seeking an order for possession of the land pursuant to s 244(1)(a) of the PLA.
[19] As JWT is no longer seeking an order under s 244, Ms Sheppard has noted that a procedural irregularity has arisen as the remaining claims sought by JWT would usually be made by way of statement of claim as opposed to an originating application. She submits that this proceeding should proceed in its current form pursuant to the Court’s discretion under r 1.5(2)(b) of the High Court Rules 2016. Rule 1.5 relevantly provides:
1.5 Non-compliance with rules
(1)A failure to comply with the requirements of these rules—
(a)must be treated as an irregularity; and
(b)does not nullify—
(i)the proceeding; or
(ii)any step taken in the proceeding; or
(iii)any document, judgment, or order in the proceeding.
(2)Subject to subclauses (3) and (4), the court may, on the ground that there has been a failure to which subclause (1) applies, and on any terms as to costs or otherwise that it thinks just,—
(a)set aside, either wholly or in part,—
(i)the proceeding in which the failure occurred; or
(ii)any step taken in the proceeding in which the failure occurred; or
(iii)any document, judgment, or order in the proceeding in which the failure occurred; or
(b)exercise its powers under these rules to allow any amendments to be made and to make any order dealing with the proceeding generally as it thinks just.
…
[20] I consider it just in the circumstances for the proceedings to continue in the current form despite the procedural irregularity as the issue is procedural only, there is no prejudice to Ms Lee (especially as no response has been received from Ms Lee and the proceedings continue by way of formal proof), and in consideration of the High Court Rules’ objective to secure the just, speedy and inexpensive determination of proceedings.7
Analysis
[21] JWT filed two affidavits from Mr Tredrea, the manager of JWT, dated 19 December 2023 and 10 October 2024, in support of the application. Having read those affidavits I am satisfied that the default notice complied with the requirements of s 245(3) and was served on Ms Lee by way of email.
[22] I am also satisfied that Ms Lee was (and continues to be) in default of her obligations under the terms of the lease in failing to pay the specified ground rent, operating expenses, and rates up to the date of cancellation. Accordingly, JWT is entitled to orders for repayment of the sums owing as sought.
Result and orders
[23]The application is granted.
[24] I order that the respondent pay the applicant the sum of $49,670.77, comprising:
(a)$34,880.57 for unpaid rent up until cancellation of the lease on 13 March 2024;
7 Rule 1.2. See also Roe-Shaw v Body Corporate 81340 [2021] NZHC 2114 at [17].
(b)$1,779.91 for unpaid Auckland Council rates up until cancellation of the lease on 13 March 2024; and
(c)$13,010.29 for recovery costs payable pursuant to Schedule A, clause 2(d) and schedule C, clause 22(b) of the lease.
[25] I further order that the respondent pay the applicant interest on $49,670.77 pursuant to s 10 of the Interest on Money Claims Act 2016 from the due date for payment being $3,374.52 of interest accrued to 16 October 2024 and such further interest accruing at a daily rate of $7.47 from 17 October 2024 until paid.
Gordon J
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