Leeann Yare Limited v Carlton Gore Road Limited
[2020] NZHC 1853
•29 July 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-000329
[2020] NZHC 1853
BETWEEN LEEANN YARE LIMITED
Applicant
AND
CARLTON GORE ROAD LIMITED
Respondent
Hearing: 20, 21 and 23 July 2020 Appearances:
S A Grant for Applicant
H Thompson for Respondent
Judgment:
29 July 2020
JUDGMENT OF WYLIE J
[Reasons for ruling]
This judgment was delivered by Justice Wylie On 29 July 2020 at 10.00 am
Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors/counsel:
Daniel Overton Goulding/S Grant, Auckland McMahon Butterworth Thompson, Auckland
LEEANN YARE LTD v CARLTON GORE ROAD LTD [2020] NZHC 1853 [29 July 2020]
Introduction
[1] I heard evidence in relation to this matter on 20 and 21 July 2020. Because the allocated time had run out, and after consultation with counsel, I directed that closing submissions should be presented on Thursday 23 July 2020.
[2] On the afternoon of Wednesday 22 July 2020, the Registry received an application from Mrs Grant, acting for the applicant, asking me to treat the originating application filed by the applicant and dated 10 July 2019, and the respondent’s notice of opposition dated 16 August 2019, as a statement of claim and statement of defence respectively.
[3] The respondent through its counsel, Mr Thompson, filed a memorandum opposing this application on the same afternoon.
[4] I heard from counsel in relation to this application on the morning of 23 July 2020. I gave an oral ruling declining the application. I indicated that my reasons for that ruling would follow. I now set out those reasons.
Procedural background
[5] On 27 May 2016, the respondent as landlord, and the applicant as tenant, entered into an agreement to lease a premises situated in Carlton Gore Road, Newmarket, Auckland. The lease was to be for a term of four years. It contained rights of renewal. It was due to finally expire at the end of July 2024. Annual rental was $126,800 plus GST. The applicant agreed to pay the rental by equal monthly payments in advance. The parties also agreed to enter into a formal lease, using the then current Auckland District Law Society deed of lease form. In the event, no formal lease was ever executed, but both parties accepted that they were bound by the terms of the standard lease form. Inter alia, it provided that the respondent was to keep and maintain the premises in good order and repair and weatherproof.
[6] It was common ground that the building leaked and that the applicant complained to the respondent about the leaks. The extent of the leaks and the adequacy of the respondent’s attempts to fix them were in issue.
[7] It was also common ground there was a meeting between representatives of the parties on 22 February 2017. The extent of the agreement reached at that meeting was however in dispute. The applicant said that the respondent agreed that no rental was to be paid until all leaks were repaired and that that never happened. The respondent said that it agreed to defer payment of 50 per cent of the arrears then outstanding until repairs were completed to louvres in a tower on the roof, that that work was finally completed some months later, and that rental was otherwise payable in full from 1 March 2017. There was no dispute that further rental was paid by the applicant after the meeting, but that the rental fixed in the lease was not paid in full. In the event the respondent issued a notice of default under the lease, and it attempted to re-enter the premises.
[8] On 26 February 2019, the applicant applied by way of originating application pursuant to s 253 of the Property Law Act 2007 seeking relief against the respondent’s proposed cancellation of the lease. One of the orders sought was an order that the respondent should pay to the applicant losses and damages said to have arisen due to the alleged failure by the respondent to properly maintain the exterior of the premises, and in particular, the roof.
[9] Shortly thereafter, on 6 March 2019, the applicant sought an interim injunction to restrain the respondent from re-entering the premises.
[10] The respondent filed a notice of opposition to the originating application on 7 March 2019. Inter alia it asserted that the applicant had not pleaded particulars, nor provided evidence, of its alleged losses, and that the applicant had made no effort to quantify them. The respondent also filed a notice of opposition to the interim injunction application.
[11] After hearing the application for an interim injunction, Peters J granted the same on 28 March 2019.1
1 Leeann Yare Ltd v Carlton Gore Road Ltd [2019] NZHC 613.
[12] Shortly thereafter, the respondent sold its interest in the premises to a developer. The applicant continued to occupy the premises under fresh arrangements it had reached with the new owner.
[13] The outstanding originating application seeking relief against cancellation came before Gault J in the Mentions List on 15 April 2019. The applicant was proposing timetable orders and seeking a hearing. The respondent was asserting that the application was moot, given that it had sold the property. Further, it was asserting that an originating application was not the appropriate vehicle to deal with the factual disputes between the parties. It also noted that the lease provided for any dispute to be arbitrated. It requested that the originating application should be struck out. Gault J noted as follows:
It is not appropriate for me to determine whether the originating application is moot, much less strike it out, on the basis of memoranda filed for a mention in the Duty Judge’s list. On the basis of the limited review possible in this mention, it may be that the applicant’s proposed amendments and the change of circumstances make it more appropriate to file a statement of claim, but that is for the applicant to consider, at least in the first instance. The matter may or may not still be an application for relief against cancellation of the lease in terms of ss 253 and 256 of the Property Law Act 2007, which is suitable to proceed by way of originating application. I note Ms Grant’s argument that it remains appropriate for that course.
The Judge put in place in timetable, requiring the applicant to file either an amended application for relief and further evidence in support, or alternatively, a statement of claim, by 8 May 2019.
[14] The applicant delayed, but ultimately, after protest by the respondent, it filed an amended originating application on 10 July 2019. Inter alia it there sought that the respondent should pay to it the losses it said it had incurred as a result of damaged stock and business interruption. It alleged that the respondent’s failure to keep the premises watertight entitled it both to a rebate of the rental and to damages. It said that:
[t]he Court has jurisdiction under s 256 of the Property Law Act … to grant the relief sought on any conditions (if any) as to expenses, damages, compensation or any other relevant matters as it thinks fit.
It asserted that a fair rental abatement would be 50 per cent, and further that it had suffered stock damage and business interruption because the premises were not weathertight, and because of the respondent’s wrongful purported re-entry into the premises. The application was made in reliance on ss 253, 245 and 256 of the Property Law Act.
[15] The respondent filed a notice of opposition on 16 August 2019, opposing the making of the orders sought by the applicant. Inter alia, it asserted as follows:
[t]he respondent admits that the Court has jurisdiction under s 256 of the [Property Law Act] to grant relief on any conditions as to expenses, damages, compensation or any other relevant matters that it thinks fit but it says further that the discretion is limited in the manner identified in Arthur Devine Ltd v Highgate on Broadway Ltd.2
[16] In the event, and as directed by the Court, the parties filed a joint memorandum in relation to set the originating application down for trial. It was dated 19 August 2019. It noted as follows:
3.The issues are, broadly:
…
(b)Did the Respondent breach its repair and maintenance obligations?
(c)If so, what remedies are available in the proceeding?
…
The memorandum also noted that opening submissions would traverse the scope of the respondent’s repair and maintenance obligations and “… the extent of the court’s remedial jurisdiction under s 256 of the [Property Law Act] …”
[17] Hinton J directed the Registrar to set the amended originating application down for hearing. Unfortunately, the hearing was delayed because of the COVID-19 crisis. It finally came before me on 20 July 2020.
2 Arthur Devine Ltd v Highgate on Broadway Ltd [2011] 13 NZCPR 276 (HC).
[18] In the course of his opening, Mr Thompson, for the respondent, asserted that the damages claimed by the applicant could not be recovered under s 256 of the Property Law Act. He argued that s 256 limited the Court’s jurisdiction when dealing with an application for relief against cancellation. He submitted that the Court can only impose conditions requiring a lessee to pay expenses incurred, or damages suffered by, or compensation payable to, a lessor when the lessee has breached the lease and is seeking relief against cancellation. He also argued that in any event, the originating application seeking relief against cancellation of the lease was moot, given that the respondent no longer has an interest in the leased premises. He noted evidence which had been given by the applicant’s witnesses that the subsequent arrangements made between the applicant and the purchaser had come to an end, that the lease was no longer on foot, and that the leased premises had been demolished.
Submissions
[19] Mrs Grant noted that the applicant had signalled in both its original and amended originating applications that damages would be sought from the respondent for its alleged breach of the lease in failing to keep the premises weathertight, and that both counsel, in the joint memorandum dated 19 August 2019, had recorded that the issues between them included whether or not the respondent was in breach of its repair and maintenance obligations. She argued that both parties had prepared on the basis that the damages (if any) payable by the one party to the other would be determined by the Court, and that the respondent was aware throughout that the quantum of damages for breach of the weathertight provision in the lease was in issue. She referred to r 1.9 of the High Court Rules 2016 and submitted that it gave the Court jurisdiction to make the amendment sought. She argued that the amendment was necessary to enable the real issue between the parties to be determined, and she referred to the need for a just, speedy and inexpensive resolution of the proceedings, pursuant r 1.2.
[20] Mr Thompson argued that whether or not the applicant could obtain damages through an originating application seeking relief against cancellation has been in issue from the outset. He referred to the joint memorandum dated 19 August 2019, and noted it also recorded that what remedies were available was a matter in issue, and
further that it identified that opening submissions would deal with the extent of the Court’s remedial jurisdiction under s 256 of the Property Law Act. He argued that there would be clear prejudice to the respondent if the application were granted. He submitted that the respondent has throughout run its case on the basis that the applicant could not, as a matter of law, become liable for the damages claimed by it as a condition of any successful application for relief against forfeiture, and he submitted that the application would close down that argument. He further submitted that the respondent was entitled to assume that it was facing a case under ss 253 and 256 of the Property Law Act, and that if the application is granted, it would have to face a very different case.
Analysis
[21]Relevantly, r 1.9 provides as follows:
1.9 Amendment of defects and errors
…
(2) The court may, at any stage of a proceeding, make, either on its own initiative or on the application of a party to the proceedings, any amendments to any pleading or the procedure in the proceeding that are necessary for determining the real controversy between the parties.
[22] As is clear from the rule, determination of the real controversy is the fundamental yardstick for all amendments under r 1.9.3 However, where an amendment would cause prejudice to the other party and/or lacks particularity, it can be declined.4 Inter alia, an amendment may be declined where it is proposed at a very late stage by a party who has consistently pursued a course of action inconsistent with the proposed amendment.5 Amendments may also be refused after the evidence has been completed,6 and amendments which would require defendants to meet an entirely different case from that pleaded, or which might necessitate further evidence, can be declined.7 The modern trend however is in favour of allowing amendments, provided
3 And see, Kirton v Prospecdev Holdings Ltd [1990] 2 PRNZ 412 (HC).
4 Young v De Lautour Partners [1992] 6 PRNZ 148 (HC).
5 Sanders v Anderson [1968] NZLR 172 (SC).
6 Thurlow v Queens Park Golf Club Inc [1974] 2 NZLR 743 (SC).
7 Tewsley St Properties Ltd v Wright Stevenson Properties Ltd [1993] 7 PRNZ 58 (HC).
that there is no demonstrable injustice to the other party or parties.8 There are three formidable hurdles –granting the amendment must be in the interests of justice, it must not significantly prejudice the other party or parties and that it must not cause significant delay.9
[23] Here the amendment proposed was bald. It sought to treat the amended originating application as a statement of claim, and the notice of opposition as a statement of defence. There was an immediate difficulty. Neither document complied with the applicable rules. By way of example, the amended notice of originating application did not give particulars of the applicant’s cause or causes of action. There were no sufficient particulars to enable the respondent to be fairly informed of the case it had to meet. Indeed, I note that one of the heads of damage claimed by the applicant was first put forward in the course of oral evidence given by the applicant’s principle, Leeann Yare. The respondent did not refer in its notice of opposition to affirmative defences available to it, for example, failure to mitigate. As a result, there was little or no evidence in this regard.
[24] There were other difficulties. There has been no discovery. While it would have been possible to obtain discovery in the context of the originating application, any discovery ordered would have extended only to matters properly the subject of that application. I doubt that it would have extended to a claim for damages for breach of the lease by the respondent and in any event, the Court would likely have adopted a conservative approach to any application.10 Because there had been no discovery, various witnesses, notably Mrs Yare as well as Mr Dargaville for the respondent, were unable to refer to documents they said existed, but which were not in the common bundle.
[25] Mrs Grant did suggest that the proceedings could be adjourned so that the applicant could file a complying statement of claim, the respondent could file a complying statement of defence, and discovery could be attended to. This would
8 Elders Pastoral Ltd v Marr [1987] 2 PRNZ 383 (CA).
9 At 385.
10 Rule 19.10; And see, Commissioner of Inland Revenue v Elementary Solutions Ltd [2017] NZHC 2411 at [37].
undoubtedly have entailed further delay and probably required that further evidence be presented.
[26] Further, if the amendment were to be made as proposed, the respondent would be required to meet a very different case. It was a fundamental part of its argument that the Court did not have jurisdiction to order it as landlord to pay compensation in the course of granting the applicant relief against forfeiture. It expressly raised this argument in its notice of opposition and at the case management conference in April 2019. It cited authority for its argument. When the invitation to proceed by way of statement of claim was rejected by the applicant, the respondent had no choice but to proceed with the matter on the basis adopted by the applicant. It did so on the basis that it was not significantly at risk of a condition requiring it to pay compensation under s 256 of the Property Law Act. As a result, Mr Thompson’s cross-examination of the applicant’s witnesses in regard to the damages claimed was relatively limited. No expert evidence was called and mitigation issues were not explored – for example in relation to an insurance policy against loss held by the tenant.
[27] The applicant was given the opportunity from an early stage in the proceedings to proceed by way of statement of claim. While there can be no criticism of its original decision to seek relief against cancellation by way of originating application,11 it was aware of the respondent’s argument that it could not recover compensation or damages for the alleged breach of the lease by way of originating application and an order under s 256 of the Property Law Act. The applicant was also aware of the respondent’s argument that there was no point in pursuing relief against forfeiture, given that the respondent no longer had an interest in the premises, the lease has been terminated and the leased premises no longer existed. The applicant was given the option of proceeding by way of a statement of claim. It declined to do so. It cannot now expect the respondent to bear the consequences of its very belated change of mind.
[28] I acknowledge that r 1.2 seeks to secure the just, speedy and inexpensive determination of any proceeding. Nevertheless, the ultimate aim of all Court
11 This was required by r 19.2(s).
proceedings is to ensure that justice is done, even though that may not be the quickest or cheapest solution.
[29] In my view, and for the reasons I have set out, allowing the amendment would not be in the interests of justice. It would significantly prejudice the respondent, and it would be likely to cause further delay, while proper pleadings were sorted out, while discovery was attended to and to give the parties the opportunity to call further evidence.
[30]Accordingly, I declined to allow the amendment sought.
Addendum
[31] After I gave my oral ruling declining to allow the amendment, I asked Mrs Grant whether she would like an adjournment to discuss the matter with her client. She took advantage of that opportunity.
[32] When we resumed in Court, Mrs Grant advised me that her client needed the opportunity to seek independent advice. She requested that I should further adjourn the matter, to enable that advice to be obtained. Mr Thompson did not object. Accordingly, I adjourned the hearing until 10.00 am on Friday 21 August 2020, to give the applicant and any new counsel appointed, the opportunity to consider the applicant’s options.
Wylie J
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