Kree NZ Ltd v Kang Trust Ltd - [2023] NZHC 2229

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-2429

[2023] NZHC 2229

IN THE MATTER OF an application for relief under ss 261, 264 and 253 of the Property Law Act 2007

BETWEEN

KREE NZ LTD

Applicant

AND

KANG TRUST LTD

Respondent

Hearing: On the papers

Counsel:

E J Taia for Applicant A Ho for Respondent

Judgment:

17 August 2023

JUDGMENT OF LANG J

[Costs]

This judgment was delivered by Justice Lang On 17 August 2023 at 2.00 pm
Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar

Date:…………………………

Solicitors/counsel:
Franklin Law, Pukekohe
Chen Sandhu/Crimson Legal, Auckland

KREE NZ LTD v KANG TRUST LTD [2023] NZHC 2229 [17 August 2023]

[1] Kree NZ Ltd (Kree) is the lessee under a lease of commercial premises owned by Kang Trust Ltd (Kang). Kree failed to give notice of its intention to renew the lease within the time required under the lease. This prompted it to file the present proceeding, in which Kree sought an order granting it relief under ss 261 and 264 of the Property Law Act 2007.

[2] The application was set down for hearing on 19 July 2023. On 7 July 2023 counsel filed a joint memorandum confirming that Kang had agreed to grant Kree a renewal of the lease from 1 April 2022. The fixture was accordingly vacated and the proceeding came to an end other than in relation to the issue of costs.

[3] The parties have been unable to reach agreement regarding that issue. The file has therefore been referred to me as Duty Judge to determine costs on the basis of the memoranda filed by counsel.

Background

[4] The lease originally commenced on 1 April 2016. It required the tenant to pay both rental and operating expenses (Opex). The lease was for a term of two years with five rights of renewal of two years each. This meant the lease would finally expire on 31 March 2028. If the tenant wished to renew the lease, it was obliged to give the lessor notice of its intention to do so at least three months prior to expiry of the current term of the lease.

[5] Kang became the owner of the premises, and the lessor under the lease, in April 2017. Kree took an assignment of the lease in August 2020. Under the deed of assignment, the parties agreed to extend the term of the lease until 2036.

[6] The lease was next due to expire on 31 March 2022. Kree failed to give Kang the required notice of its intention to renew the lease for a further two-year period. On 4 May 2022 Kang’s solicitors advised Kree’s solicitors that the lease had come to an end and that Kree now occupied the premises on a monthly tenancy. They also advised that Kang proposed to cancel the monthly tenancy unless Kree agreed to enter into a new lease on specified terms and conditions.

[7]…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NZHC 2229
Decision Date: 17 August 2023

CaseChat Overview and Summary

Kree NZ Ltd, the tenant of commercial premises leased by Kang Trust Ltd, sought relief against forfeiture after failing to give timely notice of its intention to renew the lease. Kang initially opposed the application but eventually agreed to grant a new lease. The court had to determine the issue of costs, as the parties had been unable to reach an agreement. Kang argued it was entitled to indemnity costs under the lease, a claim the court rejected as the proceedings did not engage the landlord's rights under the lease. Both parties claimed entitlement to costs under the High Court Rules 2016, and the court considered the principles governing the award of costs. Lang J found that Kree was the successful party as it achieved the desired outcome. However, the court noted that while traditionally tenants who apply for relief against forfeiture may still be required to pay costs to the lessor, recent authority suggests a more nuanced approach may be required. Lang J concluded that Kree was justified in filing the proceeding to protect its position, and that Kang had taken advantage of Kree's error to negotiate more favourable terms. Lang J also found that Kang's argument about Kree's failure to pay operating expenses did not unnecessarily contribute to the cost of the proceeding. Lang J ordered that Kree is entitled to an award of costs on a category 2B basis together with disbursements as fixed by the registrar.

Kang Trust Ltd is ordered to pay Kree NZ Ltd's costs of and incidental to the proceeding on a category 2B basis, together with disbursements as fixed by the Registrar.

Orders