James Ward Trustee Company v Chen

[2024] NZHC 1005

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-278

[2024] NZHC 1005

UNDER

the Property Law Act 2007

IN THE MATTER

of an application under section 244(1)(a) for an order for possession of the land for the purpose of cancelling a lease

BETWEEN

JAMES WARD TRUSTEE COMPANY

Applicant

AND

FENG CHUN CHEN

Respondent

Hearing:	10 April 2024
Appearances:	L A Sheppard for the applicant No appearance for the respondent
Judgment:	30 April 2024

REASONS JUDGMENT OF ROBINSON J

This judgment was delivered by me on 30 April 2024 at 2:00 pm pursuant to Rule 11.5 of the High Court Rules

…………………………………………………………………… Registrar/Deputy Registrar

Solicitors:
Heimsath Alexander, Auckland

Copy to: F C Chen (the respondent)

JAMES WARD TRUSTEE COMPANY v CHEN [2024] NZHC 1005 [30 April 2024]

Introduction

[1]                 On 10 April 2024, I entered judgment in favour of the applicant with reasons to follow. These are the reasons.

Background

[2]                 The applicant, James Ward Trustee Company Limited (JWT), applied under s 244(1)(a) of the Property Law Act 2007 (the Act) for orders for possession of land. The application concerned a leasehold property at Unit 1608, Scene Three Apartments, 30 Beach Road, Auckland (the apartment).

[3]                 JWT holds a superior leasehold title over the entire Scene Three apartment complex. JWT granted Mr Chen a registered leasehold interest in the apartment.

[4]                 Under the terms of the lease Mr Chen was obliged to pay JWT quarterly ground rent of $6,897.61. These payments were due on 2 February, 2 May, 2 August and 2 November. Mr Chen was also obliged to pay operating expenses on demand and Auckland Council rates.

[5]                 JWT alleged that Mr Chen was in breach of his obligations to pay the ground rent, operating expenses and rates. JWT alleged that Mr Chen had failed to pay his operating costs in full since December 2020 and ground rent in full since 2 May 2021.

Default notices

[6]                 On 6 May 2021, JWT issued a default notice under s 246 of the Act demanding payment of the unpaid operating expenses, as well as recovery costs. The default notice was emailed to Mr Chen twice, but no response was received.

[7]                 On 25 November 2021, JWT issued another default notice under s 245 of the Act demanding payment of the unpaid rent and recovery costs. This was emailed to Mr Chen’s last known email addresses, [redacted] and [redacted], but no response was received. JWT also served the mortgagee, Westpac New Zealand Limited.

[8]                 On 17 February 2022, a debt collection agency engaged by JWT emailed the notice to Mr Chen again. JWT has submitted evidence showing that this email was opened by [redacted] at 4:54 pm that day, but again no response was received.

[9]                 On 15 November 2022, Mr Chen responded to JWT via his New Zealand power of attorney. He stated that he was overseas and asked JWT to provide a statement of arrears. JWT did so. However, Mr Chen has yet to pay any of the sums owing under the lease.

Costs owing

[10]Affidavits filed by JWT show that Mr Chen is liable for the following sums:

(a)$20,091.12 in recovery costs;

(b)$75,873.71 in ground rent;

(c)$27,596.81 in operating expenses; and

(d)$5,570.39 in Auckland Council rates.

[11]             The above sums are inclusive of interest, calculated with reference to s 10 of the Interest on Money Claims Act 2016. The original lease agreement stated that interest on any outstanding amounts was payable at five per cent above the average overdraft of three registered banks at the time of default, with the identity of those banks to be determined by JWT. JWT does not have the records of historical bank overdraft rates from 2021 to support this calculation. I accepted counsel’s submission that it is appropriate in the present circumstances that interest be calculated in accordance with s 10. This will be considerably lower than the contractual interest to which JWT would otherwise be entitled.

Procedural history

[12]             JWT filed proceedings in February 2023. The matter was not called for some time as JWT was unable to serve proceedings on Mr Chen, who is believed to be residing in China.

[13]             In December 2023, van Bohemen J made orders for substituted service by way of email, the delivery of documents to Unit 1608 and the advertising of proceedings in the Public Notices section of the New Zealand Herald. JWT then sought judgment by way of formal proof. On 23 February 2024, Woolford J issued a minute confirming that service had been undertaken and setting down a formal proof hearing. That formal proof hearing proceeded before me on 10 April 2024.

Section 245

[14]Under s 245(1) of the Act:

A lessor may exercise a right to cancel a lease because of a breach of the covenant to pay rent under the lease only if—

(a)the rent has been in arrears for not less than 10 working days; and

(b)the lessor has served on the lessee a notice of intention to cancel the lease; and

(c)at the expiry of the period specified in the notice, the breach has not been remedied.

Analysis

[15]             JWT filed two affidavits of service from Mr Jordan Quintal and Ms Jeannette Stewart. Having read those affidavits, as well as Woolford J’s minute of 3 February 2024, I was satisfied that valid service of the default notice occurred on 15 December 2023 in accordance with the 12 December 2023 minute of van Bohemen J. For completeness, I note and accept JWT’s evidence showing that the 25 November 2021 email containing the default notice was opened by someone using one of Mr Chen’s last known email addresses.1

[16]             I was also satisfied that Mr Chen was (and continues to be) in default of his obligations under the terms of the lease in failing to pay the specified ground rent, operating expenses and rates. I was therefore satisfied that JWT is entitled to exercise their right to cancel the lease under s 245 of the Act.

1      See Kupe Trustee Company Ltd v Cao [2022] NZHC 3069 at [10].

Result

[17]For these reasons I made the following orders:

(a)the applicant is granted possession of the land described as Apartment 1608, Scene Three, 30 Beach Road, Auckland 1010 recorded in the record of title 274480 (North Auckland) (Land);

(b)the registered lease 6863612.19 is cancelled;

(c)the respondent pays the applicant the sum of $137,190.29, comprising:

(i)ground rent of $75,873.71, owing as at the date of this order;

(ii)operating expenses of $27,596.81, owing as at the date of this order;

(iii)Auckland Council rates of $5,570.39, owing as at the date of this order;

(iv)costs, expenses and disbursements of $20,019.12, pursuant to schedule A, clause 2(d) and schedule C, clause 22(b) of the Lease; and

(v)interest on $129,132.03 pursuant to s 10 of the Interest on Money Claims Act 2016 from the due date for payment until paid, including $8,058.26 of interest accrued to 10 April 2024 and such further interest accruing at a daily rate of $20.82.

Robinson J