Land Information New Zealand v Smith
[2023] NZHC 1700
•4 July 2023
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2022-419-0349
[2023] NZHC 1700
UNDER Part 13 of the High Court Rules 2016 BETWEEN
LAND INFORMATION NEW ZEALAND
Plaintiff
AND
DENNIS SMITH
Defendant
Hearing: 21 June 2023 Counsel:
GJC Carter for the Plaintiff D Smith in person
Judgement:
4 July 2023
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 4 July 2023 at 10 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
BVA The Practice, Palmerston North
LAND INFORMATION NEW ZEALAND v D SMITH [2023] NZHC 1700 [4 July 2023]
Introduction
[1] The plaintiff, Land Information New Zealand (LINZ) administers surplus railway land in New Zealand, including land at 2A Para Street, Taumarunui (the property).
[2] The defendant, Dennis Smith, claims a right to occupy the property pursuant to an alleged agreement to lease, based on his dealings with the plaintiff and a former lessee of the property.
[3] LINZ’s position is that it has not agreed with Mr Smith that he can occupy the property and there is no legal basis for him to do so. LINZ seeks summary judgment for possession of the property and a declaration that any other party currently occupying the property is doing so unlawfully.
Background
[4] The property is Crown land and is administered by LINZ under the New Zealand Railways Corporation Act 1981 (the Act), pursuant to a direction from the Minister for State-Owned Enterprises under s 10A of the Act.
[5] On 11 October 2012, LINZ exercised its power in s 33 of the Act to lease the property to Graham Mills for a term of 10 years (the Mills lease). The Mills lease had a final termination date of 31 May 2022. The area of the property was delineated in red on a plan attached to the lease, which is appended to this judgment as Appendix A. During the hearing, Mr Smith accepted that the plan accurately depicts the land in question, more or less.
[6] Clause 4.1 of the Mills lease prohibited Mr Mills from, inter alia, sub-letting, assigning or parting with possession of the property without the prior written consent of the lessor.
[7] Clause 8.1 of the Mills lease provided the lessor with a discretion to grant a new lease to the lessee on termination of the lease term.
[8] The property included some old buildings. The Mills lease acknowledged that the improvements on the land were the property of the lessee. Under cl 9.3, ownership of any improvements on the land passed to the lessor on expiration of the lease:
9.3 No Compensation for Building
Upon the expiration of the term or sooner termination of this Lease the Building shall be deemed to have become and to be the sole and exclusive property of the Lessor without the Lessor being required to pay any compensation whatsoever to the Lessee PROVIDED THAT notwithstanding anything contained in this Lease the Lessee shall if required in writing by the Lessor so to do upon the expiration of the term or sooner termination of this Lease at the Lessee's expense and to the satisfaction of the Lessor remove the Building from the Land and level off the surface of the Land and yield up the same to the Lessor clear of all improvements, structures, rubbish and debris. Upon such dismantling and removal the materials comprised in the Building shall remain the sole and exclusive property of the Lessee.
(emphasis in original)
[9] “Building” is defined in cl 1.1.2 of the lease to include “any structures, buildings or improvements now or hereafter erected” on the property.
[10] LINZ engages Colliers New Zealand Limited (Colliers) to assist with management of the property and other surplus railway land. On 9 May 2019, Mr Smith emailed Colliers, querying whether vacant parts of a different property in Ōhura were available for lease. Lara Mead, a property manager at Colliers, responded by sending Mr Smith a lease application form. The email exchange between Mr Smith and Ms Mead confirms that Mr Smith submitted a completed lease application form for the Ōhura property, although that document is not in evidence.
[11] Colliers and Mr Smith exchanged emails on 23 May 2019. Mr Smith asserts that during the morning on 23 May 2019, in a telephone discussion with Ms Mead, she confirmed that he could occupy the property leased by Mr Mills, and at the end of the Mills lease LINZ would “roll the lease over” to him. Mr Smith argues that LINZ is bound by this oral agreement to lease.
Legal principles
Summary judgment
[12] The Court may give judgment against a defendant if satisfied that the defendant has no defence to a cause of action in the statement of claim.
[13] The leading authority on applications for summary judgment is Krukziener v Hanover Finance Ltd.1 The Court of Appeal set out the following principles:2
(a)The question on a summary judgment application is whether the defendant has no defence to the claim; that is, there is no real question to be tried. The Court must be left without any real doubt or uncertainty.
(b)The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated.
(c)The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as, for example, where the evidence is not consistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.
[14] The defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the notice of opposition.3
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162.
2 At [26].
3 Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 394.
[15] It is open to a landowner to seek summary judgment under pt 12 of the High Court Rules 2016, on the basis that a defendant is an unlawful occupier of land, as defined in pt 13 of the High Court Rules, to obtain an order for possession of the land.4
Lease by estoppel
[16] Mr Smith’s correspondence to the Court and his correspondence with LINZ referred to there being a lease by estoppel between himself and LINZ, the consequence being that LINZ is estopped from denying Mr Smith’s estate. However, that argument is misguided because this is not a case where, after the grant of a lease, the grantor has purported to deny the validity of their grant; this is a case where the only question is whether there has been any grant at all.
Formalities required for leases
[17] Agreements to lease, other than short-term leases, must comply with the formalities prescribed in s 24 of the Property Law Act 2007. That section provides that a contract for the disposition of land will be unenforceable unless the contract is in writing and is signed by the party against whom the contract is sought to be enforced.
[18] An oral agreement to lease may, however, be saved by the equitable doctrine of part performance which applies to agreements to lease.5 The relevant test, formulated by Tipping J in T A Dellaca Ltd v PDL Industries Ltd, is as follows:6
1.Was there a sufficient oral agreement such as would have been enforceable but for [s 24 of the Property Law Act 2007]?
2.Has there been part performance of that oral agreement by the doing of something which:
(a)clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the oral contract; and
4 King v Clarke [2022] NZHC 1649.
5 Property Law Act 2007, s 26.
6 T A Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 (HC) at 109. The phrasing in para 2(b) was amended by Tipping J in Fleming v Beevers [1994] 1 NZLR 385 (CA) at 392.
(b)when viewed independently of the oral contract was, on the probabilities, done on the footing that a contract relating to the land and [consistent with] that alleged was in existence.
3.Do the circumstances in which that part performance took place make it unconscionable (fraudulent in equity) for the defendant to rely on the Act?
Discussion
[19] The issue is whether Mr Smith has an arguable claim to an agreement to lease the property from 1 June 2022, the day after the expiration of the Mills lease. The events of 23 May 2019 form the starting point to this inquiry.
[20] Colliers sent Mr Smith an email at 11 am on 23 May 2019, requesting further information in support of Mr Smith’s request for a lease of the Ōhura property:
Thank you for your submitting your application and your time to discuss your plans over the phone the other day.
At this point in time, the information you have provided paints a picture of the activity on the land but it does not get into the details regarding how this concept will become a reality. We need to be able to present to LINZ a sound proposal on what is likely to occur and LINZ need to have assurance that they are entering into an agreement with a party that is adequately funded to carry out the proposed activities. As you can understand, there is a significant risk to the Crown in the event there is insufficient capital/funding or income to carry out its intended development plan and day to day operations. LINZ do not want to be left liable for improvements on the land if a Lessee was to either default, be in breach of their Lease or simply walk away.
It would be appreciated if you were able to please provide a business case or feasibility study which outlines a timeline of events, sourcing of funding/capital, ways of generating income and what that is forecasted to be and a clear overview of the day to day business operational activities. Other examples of business operations carried out by either Abundant Past Ltd or yourself will also be appreciated.
[21] Colliers’ email related only to the property at Ōhura and made it clear that sufficient information was required so that LINZ could consider the application. On receipt of that email, it must have been obvious to Mr Smith that LINZ had not agreed to anything in respect of the Ōhura property.
[22]Mr Smith responded at 11:38 am as follows:
Please email me when you can talk about this.
You are asking too much of us at this stage, sorry[.]
I wished to speak to the current leaseholder of the old tannery and to share this information with me you asked me for an application to be filled out.
Once I had spoken to that person I would then move into the next phase which would be to establish what Linz was asking for the t[wo] or three sections.
Only if the three sections were available and at reasonable rates then we would discuss with you which option(s) would suit us and which entity I would use to take which land.
I perfectly understand Linz's position and have already gone through this with Matt last year, but first things first please. Can you please give me the details of the current leaseholder so that we can progress these matters?
[23] Mr Smith’s email mentioned the property that is now in issue for the first time. Mr Smith requested contact details for the lessee of the property. It can be inferred that in the time between the emails sent at 11 am and 11.38 am on 23 May 2019, there was some other communication between Colliers and Mr Smith which raised the property that is now in issue. Mr Smith says that this communication was his telephone discussion with Ms Mead, when an oral agreement to lease was formed.
[24] Mr Smith’s email at 11.38 am is, however, inconsistent with Mr Smith’s proposition that Colliers had committed LINZ to an agreement to lease. In his email, Mr Smith did not reference any oral agreement allowing him to occupy the property, nor mention that LINZ had agreed to grant a lease to him. On the contrary, Mr Smith’s email clearly identified that the next step was for him to talk to the existing lessee of the property, and that the “next phase” after that would be to establish what LINZ was “asking for”.
[25] Later, on 23 May 2019, Ms Mead emailed Mr Smith the contact details for the lessee of the property, Mr Mills. These was no other email that day.
[26] In late 2019, LINZ became aware that Mr Smith had occupied the property. Megan McKinstry, a portfolio manager employed by LINZ, gave affidavit evidence that she received an email from Ruapehu District Council on 5 September 2019, advising that Mr Smith was residing on the property and looking to establish a “mini community with small mobile houses”.
[27] Ms McKinstry immediately sought information from Colliers. Ms Mead responded by email on 5 September 2019 and advised that Colliers had not provided consent to Mr Smith to use the property.
[28] There is no evidence that LINZ was aware, at the time, of the nature of any arrangement between Messrs Mills and Smith.
[29]On 14 August 2020, Mr Smith sent an email to Colliers, stating:
I have been working with Graham [Mills] over the last year or so with the intention that when the time is right, Graham will assign or transfer the lease over to us. That time is now approaching.
I have a meeting with [Ruapehu District Council] the week after next and wish to introduce myself in preparation for Graham’s formal approval to enter into negotiations with you over the current lease, potentially extending it and perhaps looking again at LINZ land at Ohura.
I do not actually seek anything from you at this stage but would you be so kind as to phone me when you have a moment? Thanks[.]
[30]On 22 March 2021, Mr Smith sent an email to Colliers stating:
I also advise that the current lessee Graham’s previous advice was that he was, “Happy as time passes to assist with your procurement of the lease”.
I seek a continuation of the existing lease terms unchanged please, asking for a 5+5 or whatever is normal. The purpose for dealing with this prior to the end of the lease is to provide security for my planned investment into the existing buildings.
[31] On 24 March 2021, Colliers responded by emailing an application form for a lease of the property. The application form stated:
Please note that this application and any further correspondence does not in any way form an agreement with Land Information New Zealand …
The application is subject in all respects to the Land Information New Zealand delegate’s approval and once all necessary requirements have been completed to the delegate’s satisfaction.
A legally binding contract will only exist once all the decisions have been made and communicated to you and all documentation required to be accepted and signed as completed by both parties.
[32] The email and attachment from Colliers to Mr Smith on 24 March 2021 unequivocally relayed that there would be no new lease until LINZ approved
Mr Smith’s application for a lease. On receipt of that email, there was no protest by Mr Smith or assertion by him that he had received assurances from Colliers that he would be granted a new lease on termination of the Mills lease.
[33] There is no evidence that Mr Smith acted to his detriment prior to 24 March 2021. Mr Smith says that he was encouraged by Ms Mead’s assurances on 23 May 2019 to invest time and money into the property from that point on. However, his email to Colliers on 22 March 2021 confirms that any investment by him into the property was at that stage “planned”, rather than made. As Mr Smith said in his email, he wanted security of tenure before investing into the existing buildings.
[34] Mr Smith completed and returned the application form, stating the intended use of the property as
CLUB WAIRUA — A COUNTRY CLUB/COMMUNITY ALONGSIDE THE TINY HOUSE WORKSHOP …
[35] On 9 September 2021, acting on LINZ’s instructions, Colliers served Mr Mills with a notice dated 9 August 2021 in respect of alleged breaches of the Mills lease. The issues raised by the notice included rent arrears, and whether Mr Mills had entered into a sublease or some other arrangement with Mr Smith without LINZ’s consent.
[36] On 11 November 2021, Mr Smith sent an email to Colliers claiming that he had an arrangement with Mr Mills, as follows:
As you know I seek a rollover/renewal of the lease at 2a Para St please, with existing terms simply rolled over from Graham to myself.
… I did a deal with [Mr Mills] in which I bought the buildings from him, paid him the same or similar lease value as he paid you (I chose to pay him weekly) and that he would assist the transfer of his lease to me at the end of the term[.]
[37] On 4 February 2022, Colliers sent Mr Mills a further notice regarding the alleged unremedied breaches of the Mills lease. Mr Mills responded in a letter to Colliers dated 11 February 2022, stating:
No sub-leasing has occurred. My business partner Dennis A. Smith currently operates our business, Wairua (NZ) Ltd from premises at 2a Para St …
In his letter dated 11 February 2022, Mr Mills requested that his lease be “transferred” to Mr Smith.
[38] On 22 April 2022, Ms McKinstry sent a letter to Messrs Mills and Smith, advising that given the lease was due to expire on 31 May 2022, LINZ saw little point in taking enforcement action against Mr Mills and in assessing his request that the lease be assigned to Mr Smith. The letter stated that the primary issue going forward was consideration of Mr Smith’s application for a new lease on which LINZ’s initial view was that it should be declined. The letter reiterated LINZ’s position that it had not consented to Mr Smith’s occupation of the property.
[39] At around this time Ms McKinstry obtained information from a website known as “Club Wairua”, which stated that Club Wairua was a “private club” located on the property, in a vaccine-free zone, with a particular focus on the construction of tiny houses and the utilisation of alternative currencies. The website noted that:
Land usage for members is pending our LINZ lease (Railway land) renewal/renegotiation, 1 June 2022.
[40] Mr Smith sent LINZ an email on 23 April 2022, opining that LINZ’s position was contrary to his understanding of agreements made. The essence of the argument conveyed in the email is that Mr Smith had acquired rights in respect of the property as a result of his arrangements with the lessee, Mr Mills, and that LINZ had given implicit approval to his use of the property and their “commercial relationship”.
[41] Ms McKinstry sent an letter to Messrs Mills and Smith on 9 May 2022, which made it clear that LINZ did not accept the argument put forward by Mr Smith. LINZ requested vacant possession of the property on expiration of the Mills lease.
[42] The parties engaged in further correspondence, which adds nothing to the positions propounded in May 2022.
[43] On 1 June 2022, Ms McKinstry sent a letter to Messrs Mills and Smith, confirming that Mr Smith was required to vacate the property by 1 July 2022.
Mr Smith has refused to vacate, and LINZ arranged for a trespass notice to be served on him on 19 August 2022. Mr Smith continues to occupy the property.
[44] I reject Mr Smith’s assertion that Colliers committed LINZ to an agreement to lease on 23 May 2019, on the grounds that the assertion is inconsistent and irreconcilable with the exchange of emails between Mr Smith and Ms Mead on 23 May 2019, and the subsequent correspondence between the parties. Prior to Mr Smith’s email to LINZ on 23 April 2022, all other communications from him evidence that Mr Smith understood that he had no legal right to a lease of the property from 1 June 2022, and that he was negotiating to obtain that lease.
[45] LINZ elected not to exercise any rights it may have had against Mr Mills under the Mills lease. LINZ did not take any action in respect of Mr Smith’s occupation of the property until 9 May 2022, when LINZ requested vacant possession of the property on expiration of the Mills lease. However, even if LINZ acquiesced to Mr Smith’s occupation of the property during the term of the Mills lease, that does not amount to a representation or an agreement that LINZ would grant a new lease to Mr Smith on expiration of the Mills lease.
Conclusion
[46] There is no evidentiary basis for an equitable agreement to lease the property from 1 June 2022. LINZ is entitled to vacant possession to the property.
[47] LINZ did not exercise its right under cl 9.3 of the Mills lease to require Mr Mills to remove any buildings from the property on termination of the lease. The buildings are now owned by LINZ by virtue of the deeming provision in cl 9.3 of the Mills lease.
Confidentiality
[48] At commencement of the hearing, Mr Smith requested that the Court make “confidentiality orders” in respect of two documents in evidence:
(a)the Mills lease; and
(b)an email from Colliers to Mr Smith on 23 May 2019, insofar as it discloses the contact details for Mr Mills. The email is exhibit DAS- 111 attached to the affidavit of Mr Smith affirmed on 20 April 2023.
[49] LINZ is a party to the Mills lease and entitled to produce it in evidence. There is no basis for a confidentiality order. Regarding the email from Colliers to Mr Smith on 23 May 2019, insofar as it discloses the contact details for Mr Mills, Mr Smith has no standing to request a confidentiality order.
Heading on Court documents
[50] The heading on all documents filed in this proceeding should now record the occupation of the defendant as “beneficiary”.
Orders
[51]There shall be judgment for the plaintiff on the following terms:
(a)A declaration that the plaintiff is entitled to possession of the property, being the part of Lot 1 DPS 62706 comprised in Record of Title Identifier SA52A/116 delineated in red on the plan appended to this judgment as Appendix A.
(b)An order that the defendant, together with any other person occupying the property, vacate the property within five working days of delivery of this judgment.
(c)The defendant shall pay the plaintiff’s costs for all steps in the proceeding on a 2B basis, together with disbursements, as fixed by the Registrar.
Associate Judge Brittain
Appendix A
3