Lewis Holdings Limited v Steel & Tube Holdings Limited
[2015] NZHC 2189
•11 September 2015
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2013-485-6104 [2015] NZHC 2189
UNDER Part 18 of the High Court Rules IN THE MATTER
of ss 271(1)(a) and 272(1) of the
Companies Act 1993BETWEEN
LEWIS HOLDINGS LIMITED First plaintiff
BORIS VAN DELDEN and PERI MICAELA FINNIGAN
Second plaintiffs
AND
STEEL & TUBE HOLDINGS LIMITED Defendant
Hearing: 23-25 June 2015 Counsel:
K J Crossland and J S Langston for Plaintiffs
S A Barker and P J Niven for DefendantJudgment:
11 September 2015
FINAL JUDGMENT OF MACKENZIE J
I direct that the delivery time of this judgment is
2 pm on the 11th day of September 2015
Solicitors: Shieff Angland, Auckland, for Plaintiffs.
Buddle Findlay, Wellington, for Defendant
LEWIS HOLDINGS LIMITED v STEEL & TUBE HOLDINGS LIMITED [2015] NZHC 2189 [11 September
2015]
Table of Contents
Introduction [1] The Law [4] Was there a market? [21] Possible mitigation measures [57] Calculation of loss [73] Costs [93] Result [101]
Introduction
[1] In my judgment delivered on 18 December 2014, I directed that the plaintiffs’ application under s 307 of the Companies Act 1993 be set down for further hearing to consider the quantum of damages payable as a result of the disclaimer of the lease from Lewis Holdings Limited (Lewis) of the property at 15 Fisher Crescent, Mt Wellington, Auckland.1 I heard further evidence and submissions. This judgment now determines the quantum of Lewis’ claim.
[2] In [123] to [127] of my interim judgment, I discussed the law relating to the measure of damages for disclaimer of a lease by a liquidator. I then noted:
[128] The starting point is therefore that the prima facie measure of Lewis’ loss is the difference between the present value of the rent until 2030, less the amount which Lewis could have obtained, in June 2013, if it had let the property on similar terms, that is, a perpetually renewable ground lease.
[3] I was not, on the evidence available, able to calculate damages by reference to that measure of damages. I must now re-examine that issue, in the light of all the evidence, including that adduced at the further hearing.
The Law
[4] It is necessary to expand on my discussion of the law as to the measure of damages. Counsel for Steel & Tube Holdings Limited (STH) submits that limiting consideration to the rental which could be obtained from letting the property on a
perpetually renewable ground lease is too narrow. He submits that in principle the
1 Lewis Holdings Ltd v Steel & Tube Holdings Ltd [2014] NZHC 3311, [2015] 2 NZLR 831.
second limb of the normal measure of loss is not confined in all cases to an exact comparison of the contract, rent and market rental value of the property. Rather the underlying principle is intended to capture the income earning potential of the land that has reverted back to the lessor as a consequence of the breach. Mr Barker refers in particular to Lamson Store Service Co Ltd v Russell Wilkins & Sons Ltd,2 and Gigi
Entertainment Pty Ltd v Schmidt.3 He submits that the normal measure of loss
values the benefit of the reversion to the lessor on the basis of the income earning potential of the land when it was received by the lessor. In ordinary circumstances this would involve a re-letting on the same or similar basis as the disclaimed or repudiated lease. However, if the lease disclaimed cannot be replicated in the market but the land is lettable on a different basis, then that alternative rental value is income derived or capable of being derived from exploitation of the land itself by the lessor. The land has a market rental value and that has to be brought into account in the second limb of the normal measure of loss or else the lessor will be over- compensated.
[5] Mr Crossland submits that in the cases relied upon by STH the claimant had failed to take sufficient steps to ascertain whether there was an available market on the same or similar terms to the repudiated lease. He submits that none of the cases addressed circumstances where there is no available market to replace the repudiated lease. Mr Crossland refers, by way of analogy, to the general measure of damages in the cases of repudiation of a charter party. He cites recent UK High Court decisions which address the situation where, at the date of termination of the charter party, there is no market for the unexpired period of the charter party, but where a market
for the then unexpired period revives at a later date.4 Lewis accordingly submits
that, if there is no market for a perpetually renewable ground lease, the ability to earn income off the land through some other means is addressed through mitigation.
[6] I do not consider that the cases go so far as Mr Barker submits. The normal measure of damages is the difference between the rents and other payments which
2 Lamson Store Service Co Ltd v Russell Wilkins & Sons Ltd [1906] HCA 87, (1906) 4 CLR 672.
3 Gigi Entertainment Pty Ltd v Schmidt [2013] NSWCA 287.
4 See Glory Wealth Shipping Pty Ltd v Korea Line Corporation [2011] EWHC 1819 (Comm), [2012] 1 All ER (Comm) 402; and Golden Straight Corporation v Nippon Yusen Kubishka Kaisha (The Golden Victory) [2007] UKHL 12, [2007] 2 AC 353.
the landlord would have received in future but for the disclaimer and the rents and other sums which the disclaimer will enable him to receive by re-letting.5 In Williams v K R Meates & Co Ltd,6 the Court of Appeal addressed two related questions: what is the measure of damages, and who bears the onus of proof? The tenant had repudiated a lease and the landlord after some time re-let the premises at a higher rent to a company which soon failed. It sued for damages, claiming the
balance of rent for the whole term. North P did not accept the proposition in the Court below that the prima facie measure of damages was the full amount of the unpaid rent under the lease, and that the onus lay on the tenant to prove circumstances which would justify a mitigation in the prima facie measure of damages. Citing the then current edition of what is now McGregor on Damages,7
North P said:8
It will be observed that the learned editor of this edition describes the “normal measure” to be the difference between the contractual rent reserved by the lease and the rental value of the premises at the time of breach. There is, in my opinion, no doubt that this is correct, …
[7] He then went onto discuss the burden of proof. In doing so he reviewed several authorities and a further passage from McGregor on Damages and said: 9
It will be observed then that the burden of proof of mitigating circumstances falls on a defendant only after the plaintiff has established “the normal measure of damages.” It is not in dispute that the appellant did not lead evidence to show what rent he could have obtained in May 1966 from a tenant given the same conditions of occupancy apart from rent.
[8] The Australian authorities on which Mr Barker relies for his wider proposition, that the normal measure of loss is not confined in all cases to an exact comparison of the contract rent and market rental value of the property, but extends to capture the income earning potential of the land that it has reverted back to the lessor as a consequence of the breach, do not on my analysis of them fully support that proposition. In Lamson Store Service Co Ltd v Russell Wilkins & Sons Ltd
Griffiths CJ said:10
5 In re Park Air Services [2000] 2 AC 172 (HL(E)) at [183].
6 Williams v K F Meates & Co Ltd (1971) 1 NZCPR 594 (CA).
7 Harvey McGregor QC McGregor on Damages (19th ed, Sweet & Maxwell, London 2014).
8 Williams v K F Meates & Co Ltd, above n 6, at 597-598.
9 At 599.
10 Lamson Store Service Co Ltd v Russell Wilkins & Sons Ltd, above n 2, at 684.
In the ordinary case of a demise for a term of years with an express covenant to pay the rent, if the lessee unequivocally repudiates the lease and abandons the land, the lessor may at his option bring an immediate action for breach of covenant, in which he will be entitled to recover the full amount of the agreed rent for the whole term, less such sum as a jury may think he is likely to derive as profits from the use of the land during the residue of the term: Buchanan v. Byrnes (1). This is the ordinary rule of damages. Can it then be said that in such a case the parties are not competent to stipulate that no deduction shall be made for acceleration of payment? I do not think so.
[9] The comment about “the ordinary rule of damages” was incidental to the real question in that case, namely whether a contractual stipulation that on repudiation the entire rent for the balance of the term would be payable was void as a penalty. The case cited by Griffiths CJ, Buchanan v Byrnes, an earlier decision of his own, was concerned with a different issue.11 There, the landlord, on the repudiation of the lease for a hotel, had carried on the business himself. The market rent of the premises was not in issue.
[10] The broader proposition for which Mr Barker contends is contrary to the enunciation of the rule as to damages in Williams v K F Meates & Co Ltd.12
Applying the principles as enunciated in Williams v K F Meates & Co Ltd, and Re Park Air Services,13 I take as the normal measure of damages the difference between the rents and other payments which Lewis would have received in the future but for the disclaimer and the rents and other sums which the disclaimer will enable it to receive by re-letting. The onus of proof on both limbs of that enquiry is on Lewis.
[11] The particular difficulty in applying this formulation in this case relates to the availability or otherwise of a market. That is the conundrum which I addressed in the interim judgment.14
[12] My reference to a lack of market requires some elaboration, to consider what the available market must be. The objective of an award of damages is to place the plaintiff in the position it would have been in if the contract had been performed. In the case of a repudiation or disclaimer of a lease, the normal measure is designed to
achieve that by putting the plaintiff in the position where it has a lease to replace that
11 Buchanan v Byrnes (1906) 3 CLR 740.
12 Williams v K F Meates & Co Ltd, above n 6.
13 Re Park Air Services, above n 5.
14 Lewis Holdings Ltd v Steel & Tube Holdings Ltd, above n 1, at [135].
which was disclaimed, and a money sum to compensate for any shortfall in the rent. That suggests that the relevant market will be the market in which the lessor can re- let the premises on substantially the same terms as those of the disclaimed lease. Practical realities will mean that there does not have to be an exact equivalence. However the underlying principle suggests that the lessor should not be required to enter into a lease which is materially different, to the lessor’s disadvantage, from the disclaimed lease. In this case, the disclaimed lease is a Glasgow lease, a perpetually renewable ground lease. A conventional lease for a term of years is materially different. That is why in the interim judgment I referred to a perpetually renewable
ground lease as a lease on similar terms.15
[13] However, in case that is too strict an approach, I need to consider the possibility that a lease for a term of years might be an appropriate alternative.
[14] If that is so, then I consider that at a minimum the lease must be for a term which extends to the expiry of the term of the current renewal, in 2030. If the market rent for the second limb of the calculation were calculated by reference to a lease for a term of say five years, that would compensate the lessor only for a short part of the term. An assumption would have to be made that on the expiry of that lease the property could again be let, and so on until 2030. Damages must be fixed once and for all. It is not open to the Court to adopt a “wait and see” approach under which damages would be reassessed if the assumptions on which an award was made proved to be wrong. That weighs heavily against the proposition that a market for a shorter term lease is relevant.
[15] For these reasons, I consider that if a conventional lease for a term of years, rather than a ground lease, is used for the purpose of assessing the normal measure of damages, there must be an available market for a term of years which will provide sufficient assurance now that the rental to be received under the replacement lease will replace the rental under the disclaimed lease until 2030.
[16] The possibility that there is not an available market in which the property can be re-let is not addressed in any of the cases concerning leases to which counsel
15 At [128].
referred. Mr Crossland has however referred to a line of authority in relation to a situation where a similar measure of damages is applied, in which the non- availability of the market has been considered. That is the ship chartering industry. In that industry, the measure of damages is very similar to that in issue here. In Koch Marine Inc v D’Amica Societa di Navigazione ARL (The Elena D’Amico)
Robert Goff J said:16
But as in other cases, there is, I consider, a normal measure of recovery in cases of premature wrongful repudiation of a time charter by the owners, and that normal measure is that, if there is at the time of the termination of the charter-party an available market for the chartering in of a substitute vessel, the damages will generally be assessed on the basis of the difference between the contract rate for the balance of the charter-party period and the market rate for the chartering in of a substitute vessel for that period.
[17] In Glory Wealth Shipping Pte Ltd v Korea Line Corporation (The Wren),17
Blair J noted that Goff J’s statement of principle is explicitly concerned with the case where there is an available market at the time of the termination of the charter party. He addressed several authorities dealing with the situation where there is no such market. In Tharros Shipping Co Ltd v Bias Shipping Ltd (No 2) (The Griparion)
there was no market for re-chartering the vessel until it was repaired.18 The normal
measure of recovery was said to be only a prima facie rule and such prima facie rules are only, at bottom, rules of thumb relating to causation and mitigation. In Dalwood Marine Co v Nordana Line A/S (“The Elbrus”), no relevant market existed when the charter party ended.19 It was held that in circumstances where there is no available market, the measure of damages is the sum which would put the owner in the same financial position as if the charter had been performed.
[18] Blair J expressed his view about the correct measure of damages when there is no available market in these terms:20
16 Koch Marine Inc v D’Amica Socreta di Navizazione ARL (Elena D’Amico) [1980] 1 Lloyd’s
Represent 75 (QB).
17 Glory Wealth Shipping Pte Ltd v Korea Line Corporation (The Wren) [2011] EWHC 1819, [2012] 1 All ER 402 at [20].
18 Tharros Shipping Co Ltd v Bias Shipping Ltd (No 2) (The Griparion) [1994] 1 Lloyd’s Rep 533
(QB).
19 Dalwood Marine Co v Nordana Line A/S (“The Elbrus”) [2009] EWHC 3394, [2010] 2 All
ER 802.
20 Glory Wealth Shipping Pte Ltd v Korea Line Corporation (The Wren), above n 17.
31.The question for decision is as to the correct measure of damages for a charterer's repudiation of a time charter where there is, at the date of the termination of the charter, no market for the unexpired period and a market for then the unexpired period only revives at a much later date. For the above reasons, in such a case my view is that damages are to be assessed by reference to the actual loss of the owner. Assessment of such damages is subject to the usual rules, including the principle that where the owner has unreasonably failed to mitigate its losses, it may not claim its self-induced loss. The revival of the market is obviously relevant in that regard. Mitigation apart, the revival of the market at a later date may be a factor to take into account in calculating future loss if damages fall to be assessed before the end of the contractual period, but the revival of a market for the then unexpired period of the charter does not in itself provide the correct measure of damages.
[19] The charterparty cases are not exactly comparable to the present case. In that industry, the market is for fixtures which are generally short term, and the market can change over short time frames. Here the market under consideration is for a long term lease. But that difference does not affect the general statement of principle, namely that in the absence of a market for a replacement lease at the time of termination, the measure is the actual loss to the owner, subject to the duty to mitigate.
[20] Applying that statement of principle to the issues confronting me, I consider that the correct measure of damages is the market rental for the property, on a lease for the unexpired term. The onus of establishing the measure of damages rests on Lewis. If Lewis establishes that there is no available market, so that this measure cannot be applied, the damages are to be assessed by reference to Lewis’ actual loss. That actual loss will be the rental for the unexpired term of the lease, but subject to deduction if Lewis has unreasonably failed to mitigate its loss, the onus on mitigation is on STH.
Was there a market?
[21] I must make factual findings as to whether there was, at the date of repudiation, an available market in which Lewis could have re-let 15 Fisher Crescent, either on a perpetually renewable ground lease similar to the Stube Industries Ltd (Stube) lease, or on conventional lease terms for a term of years extending up to or beyond the next renewal date for the Stube lease, in 2030.
[22] I expressed my initial assessment, in the light of the evidence then available, in my interim judgment.21 I said:
[129] There is no evidence from which the market rental could be assessed for such a lease. Mr Colcord’s evidence was that it would be difficult to let the property on a basis replicating the previous lease, namely a perpetually renewable ground lease. He considered that the 21 year frequency of rent reviews would possibly be a difficulty because more modern ground leases have more frequent rent reviews, such as five years. I asked Mr Colcord whether he had undertaken any work to consider whether a permanently renewable ground lease with either 21-year or five-year renewals and reviews would be a marketable proposition and if so, what level of rental might be achieved, or what level of incentive would be necessary to achieve a similar level of rental to that in the disclaimed lease. He had done no work along those lines, but thought that a lessee entering into such a long term lease would very likely require an incentive. A lessee would want to undertake a development on the land, either as an owner/occupier or for subleasing. It might seek a 12 month rental holiday, to give time for that development. He also said, in response to a question from me, that a party looking to undertake a development appropriate for this land would prefer to own the freehold, not the lessee’s interest under a perpetually renewable ground lease with either 21 or five-year reviews. Such a party would be looking for a higher return on the amount invested in the development if the property were held under a ground lease than if it were held under a freehold title. He said that lessee’s interests generally sell, on a yield basis, at approximately 1.5 per cent to two per cent above the yield on an equivalent freehold interest, because of the risk of ground rent rises.
[130] I then asked Mr Colcord about the attractiveness of the site for a lessee on a lease with a three to five-year term with one or two rights of renewal. Mr Colcord said that a lessee of the property on those terms would use it for a purpose that did not require a large investment of capital, such as a storage yard. His off the cuff estimate, given in response to my question, was that the hurdle rate, to make the use of the property for such a purpose viable, would be likely to be somewhere in the region of $15 or $20 per square metre. The rent order of the disclaimed lease was $26 per square metre.
[23] Mr Colcord gave further evidence at the quantum hearing. He described the issues which he had been asked by the solicitors for STH to address on the question raised in [129] of the interim judgment, as follows:
(a) To confirm if I consider there to be a market for vacant unimproved industrial land subject to a ground lease on different terms and conditions to the disclaimed lease. Buddle Findlay has asked that I confirm what those terms and conditions would be, and under such a lease, what would the rental value of the subject land be.
21 Lewis Holdings Ltd v Steel & Tube Holdings Ltd, above n 1.
(b) Discuss any incentives that a prudent lessor may offer to assist or enhance the ground lessee in entering into the perpetually renewable ground lease in accordance with these different terms and conditions.
(c) Calculate the present value of the ground rent under this lease for the remainder of the term of the disclaimed lease.
[24] Mr Colcord confirms his earlier evidence that it would have been difficult for Lewis to successfully re-lease the land under an identical form of Glasgow lease to that of the Stube lease. His opinion is that an alternative form of lease that Lewis could have offered to the market following disclaimer would very likely have been a
20 year perpetually renewable ground lease with rent reviews at five yearly intervals. He says that such a ground lease is now common in the Auckland market, and is the form of lease currently used by one of the larger ground lessors in the Auckland market. The rent reviews are fixed at 6.5 per cent of the unimproved freehold land value, reflecting more frequent rent reviews than under the disclaimed Glasgow lease. His opinion is that this more modern form of ground lease is the likely form that Lewis could have considered and one which, in his view, would have resulted in a tenant being secured for the land. In support of his opinion that there is a market for vacant industrial land to be leased on a perpetual basis, with interim reviews throughout the lease term, Mr Colcord refers to the table in the valuation used to fix the 2009 rent under the disclaimed lease (the Darroch Report), and to a similar table in his second affidavit at page 3.22. He also refers to eight “new ground leases to new or sitting tenants” under this more modern form of lease.
[25] The examples of ground leases in the Auckland region were a number of properties where ground lessees had entered into a perpetually renewable ground lease in about 2005 or 2006, developed improvements on those sites, then sublet the land and let the buildings. The ground lessor had subsequently, in about 2011, sold the freehold subject to the ground lease.
[26] Under cross-examination Mr Colcord said that he was not aware of any parties willing to take assignments of ground lessee interests from sitting tenants in Auckland for bare industrial land. In response to the proposition that there are no tenants prepared to sign ground leases under the modern 20 year lease for bare industrial land in Auckland, he said that there had been no such opportunities where
there have been vacant sites offered for lease under the modern form of lease to the open market that he was aware of.
[27] Mr Smithies does not agree with Mr Colcord’s view about the availability of a market for a ground lease with five or seven year reviews. Mr Smithies says that since June 2013 there has been no general lessee demand for industrial ground leases, though land with special attributes such a location close to or within Auckland airport or seaport does attract reasonable demand. He expresses the opinion that the lack of lessee demand has resulted in a shortage of lessor interests for sale and he is not aware of any lessor interests in ground leases offered on the market in Auckland since June 2013. The most recent sales to which he refers were in November 2010 and September 2011. His opinion is that the option to continue the ground lease with a new tenant was a very remote possibility.
[28] Mr Smithies disagrees with Mr Colcord’s view that there is an active market for a 20 year renewable lease with five or seven year reviews. He believes that the leases which have been entered into on this basis have been leases to captive tenants, and that none of the examples given by Mr Colcord are leases of vacant industrial land, or new ground leases to new tenants. He does not agree with Mr Colcord’s description of the lease to which he refers as an alternative form of ground lease but says that it is rather a variation to provide for more frequent rent reviews, favouring the lessor. He does not agree with Mr Colcord’s view that a prudent lessee would prefer to have a lease with five or seven year reviews rather than a 21 year review. He expresses the opinion that any move to shorten the review periods has been driven by lessors rather than lessees. He does not agree with the suggestion that a lease of industrial land with five or seven year reviews would be more attractive to a lessee than one with 21 year reviews. He maintains the view that there is no general demand for ground leases of industrial land.
[29] When Mr Smithies’ evidence that more frequent rent reviews favour lessors as opposed to lessees was put to Mr Colcord, he said that greater frequency gives certainty and that shortening review periods provides benefit not only to the lessor but also to the lessee.
[30] I am not persuaded by Mr Colcord’s view that more frequent rent reviews would make a perpetually renewable ground lease of the property more attractive to a potential lessee. The essential feature of such a lease, for present purposes, is that the rental is set as a fixed percentage of the value of the land, without reference to the improvements. Ownership of the improvements, in economic terms if not strictly speaking in legal terms, lies with the lessee. In an environment of generally rising land values, more frequent rent reviews would lead to more frequent rent rises.
[31] The rent as a percentage of the land value would be lower with a five or seven year review. In the Darroch Report, the valuer described the traditional approach, that is, assessing the underlying land value and applying a rental rate of return to derive the ground rental. He said that the rental percentage has tended to remain reasonably stable over the years and has been historically related to low-risk investment yields. For the 21 year term of that rent review, the valuer applied a
7.5 per cent rate of return. He said that the percentage varies with the term of the rent review and typically stands at 6.0-6.5 per cent for a five year term, and 6.5-
6.75 per cent for a seven year term. That lower percentage rate would be advantageous to the lessee in the initial years of the lease, but that advantage would likely be eroded and overtaken on the first and subsequent reviews. A lease which provides more frequent reviews seems likely to result overall in a significant financial disadvantage to the tenant, in an environment of generally increasing land values. The fact that rental rises would be smoother under the more frequent reviews seems unlikely to be seen as a significant advantage to a commercial lessee occupying industrial land.
[32] I add that I do not attach weight to Mr Colcord’s reliance on the Darroch Report to support his opinion that there is a market for ground leases in Auckland. That report was prepared for a rent review, on the usual hypothetical willing lessee/willing lessor basis. It does not address the issue of whether there would have been an actual willing lessee.
[33] I find that the properties and transactions on which Mr Colcord relies to support his opinion are not sufficiently comparable to the present property to enable
the conclusion to be drawn that there was, at the date of disclaimer, an available market for a ground lease of this property.
[34] On the further expert evidence, I find no reason to review my conclusion that, when the lease was disclaimed, there was no market for Lewis to be able to let
15 Fisher Crescent under a perpetually renewable ground lease, whether with a
21 year or shorter rent review period. I discuss in more detail the factual evidence which leads me to that conclusion.
[35] The nature of the site is relevant. This is now essentially bare land, suitable only for use as a storage yard or similar. It has a history of contamination. Any potential ground lessee would have to be someone with a wish to develop a site, and one who would prefer to do so as a ground lessee rather than as a freehold owner.
[36] The best evidence in this case as to whether or not there is a market into which Lewis could have re-let the property under a Glasgow lease is the evidence of STH’s efforts to sell its lessee’s interest, and of Lewis’ efforts to deal with the property after disclaimer. I addressed STH’s efforts in the interim judgment, from a
different perspective.22 I now re-examine the evidence from the perspective of the
light it casts on the existence or otherwise of a market.
[37] The metallisation plant closed, and the sublease referred to in the interim judgment terminated, in 2003.23 After further remediation work, STH investigated its options, including selling its leasehold interest.24 These efforts to sell the lessee’s interest are directly relevant to whether there was a market for that interest, whether by assignment by STH or by a new lease from Lewis. Mr Anastasiadis, Mr Joubert
and Mr Jenkins were responsible for that. They gave evidence at the first hearing, mainly directed to the issues addressed in the interim judgment. The evidence on the present issue is principally contained in the documents.
[38] In April 2003, STH entered into a sole agency agreement with C B Richard
Ellis (Agency) Ltd (CBRE). That firm obtained an offer of $500,000, which STH’s
22 At [43]-[47] and [55].
23 At [5].
24 At [6].
valuers advised was within range. There were negotiations with the prospective purchaser. At that stage, there was still a building on the property. The sale did not proceed. The reasons are not clear from the documents but the deal seems to have foundered over contamination issues.
[39] In May 2004 a further offer was obtained, through Colliers International NZ Ltd (Colliers), for $450,000. There was still a building on the land. The offer was declined by STH, because it was considering developing the property itself once cleanup was completed. The proposed purchaser made a further offer of $525,000, later increased to $560,000. That did not proceed.
[40] In 2007, STH looked at options, including redevelopment and sale. Mr Jenkins asked Mr Wither in November 2007 if he was aware of any clients who may be interested in acquiring the leasehold. Mr Wither replied that “I strongly suspect this is very hard to sell”, and said that Lewis would not consent to an assignment in the then state of decontamination efforts. In May 2008, Lewis offered STH a surrender of the ground lease, for nil consideration. Mr Jenkins’ internal report on that said that STH’s valuers, Tse Valuations, described that as a “cheeky offer”, and that the lessee’s interest was worth between $200,000 and $400,000. The valuers were asked to assemble market evidence to confirm that. The subsequent report from Mr Tonks of Tse Valuations noted uncertainty in the market and a potential significant rent increase in 2009. Mr Tonks said:
Having considered the current state of the market, we would unfortunately have to concur with advice received from local marketing agents that your Lessee’s interest has little if any realisable value.
[41] In November 2008, Mr Jenkins recommended marketing the lessee’s interest on the basis that any offer will be seriously considered. There is no documentation which suggests that any offer was received.
[42] After the lease was renewed in 2009, STH continued to investigate options. In August 2010, Jones Lang La Salle proposed an active marketing plan. That plan was not accepted by STH, but it was willing to discuss if the agent could come up with a deal. There is no evidence that anything eventuated.
[43] An email from an agent at Colliers to STH dated 17 April 2013 describes the situation in these terms:
We are working hard Michael. Selling leasehold interests though is massively challenging and you must make the business aware of that. The agent fraternity is not exactly enamored when I am calling them with the opportunity, simply we haven’t seen such a sale in yrs in our market, freefold greenfield sites are even very challenging. Given you are my top client these days we will push as hard as we can but we are gonna need some serious luck to get the leasehold away. Your lessor isn’t in a hurry to develop the site either even if we have a good tenant wanting a building constructed.
[44] The decision to liquidate Stube was a direct result of the inability to sell the leasehold interest. The relevant STH board paper recorded that Colliers had been engaged in February 2013 to explore options for exiting the lease, including subletting or assigning, and no viable opportunities had been identified. The paper said that Stube had “made significant but unsuccessful efforts to exit Stube from the Fisher Crescent lease”. Stube was placed into liquidation by shareholders resolution on 4 June 2013.
[45] There is further evidence of the lack of an available market in Lewis’s efforts to market the property after the disclaimer. Mr Milford-Cottam, the Senior Development Manager of Quadrant, described its attempts to re-let the property in his evidence at the first hearing. It had been listed as being available for a design build and leaseback development with a number of real estate agents, including Colliers, Bayleys, CBRE, Knight Frank and Barfoot Commercial. Four firm enquiries proceeded to a stage where Quadrant put forward a proposal for a design build, and at the time of the first hearing one had proceeded to a point where this property was the preferred option. In his supplementary evidence in chief he was asked:
Q. … What, if any, efforts were made by you and your colleagues to
re-let the subject property on a perpetual basis?
A. We obviously had inquiry from the market though real estate agents and other people. At most of the – through the process of most of the inquiries we did canvass the opportunity to create a new ground lease, um, we on, probably on four or five occasions attempted to do that. Each time after discussion those opportunities didn’t proceed.
[46] At the time of the second hearing the possibility of a design build and leaseback development on the property had advanced. I address that later.
[47] On the evidence, I find that, on the balance of probabilities, Lewis has established that at the date of disclaimer, there was no available market for it to re-let the property under a perpetually renewable ground lease, whether with 21 year or shorter rent review intervals.
[48] The next factual issue I consider is whether the property could have been re- let not as a ground lease, but on a more conventional finite lease term, for the balance of the term of the disclaimed lease to 2030. The state of the property is relevant to that issue. Mr Chand describes its current state. The site is being used for a storage yard, and the existing pavement is in a state of disrepair. Compaction and other works to upgrade the pavement would be needed to allow more of the site to be used as a yard and to improve its suitability for that purpose. The property has secure perimeter fencing which needs some minor work.
[49] The current state of the property means that the only feasible use of the land by a tenant under a conventional lease would be as a storage yard, or for some similar purpose which did not require significant expenditure to make the site suitable.
[50] For the plaintiff, Mr Smithies expressed his opinion on the use of the land for short term use for yard space, and the rent which could be obtained. His opinion is that the opportunity exists in Auckland for the use of industrial land as yard space. Such leases are usually for short periods of three to five years with rights of renewal for possibly a total period of 10 to 12 years. There are numerous sites in the Mt Wellington and adjacent industrial areas for such purposes and, except in specialised areas near infrastructure such as airports or ports, tenants are generally not prepared to pay rent that would be regarded as a full market rent based on the freehold worth of the land. He does not regard such a lease as an appropriate medium-term use for this site.
[51] Mr Colcord defined the scope of his evidence on this aspect at the resumed hearing as being to provide a rental value calculation for the land in its current unimproved state, or the basis of a short term lease of say three years with renewals for yard storage or similar and allowing for any necessary incentives, and to calculate the present value of the rental under this form of lease for the remaining term of the disclaimed lease. Mr Colcord’s opinion is that the property would have a rental value as yard space. He assesses the rental value for the purpose at $20 per square metre for the metalled level area and $15 per square metre for the secondary area, a total of about $125,000 per annum.
[52] Mr Colcord has made a calculation of the net present value (NPV) to Lewis of letting the property for the remainder of the term as yard space. His calculation assumes a rent from June 2013 at $124,960 per annum, with the rent increasing at three yearly review periods by 2.5 per cent per annum to 2030. He makes an allowance of the loss of two quarters’ rent in 2013, and one quarter rent in each of
2019 and 2026, to reflect vacancies while the property is re-let. He applies a discount rate of nine per cent to these cash flows.
[53] I am satisfied that this methodology is not appropriate for the issue which confronts me. It makes insufficient allowance for the risks and contingencies which would face Lewis if the market rent for the balance of the term was to be an assumed letting of the property as a yard for 17 years. That would be dependent on several renewals, or new leases, in that period. The uncertainties involved lead me to the conclusion that this is not a market rent for the normal measure of damages. If the matter is viewed from the perspective of mitigation, the onus is on the defendant to establish the feasibility of the calculation. Mr Colcord’s methodology is based on assumptions. I am not satisfied that there is an adequate evidential foundation for the assumptions he has used in the calculation.
[54] Again, the efforts of both STH before disclaimer and Lewis post disclaimer to let the property are of assistance in assessing the availability of a market, and the likely rental, for a lease as yard space. In July 2008, STH entered into a licence to occupy with Carr and Haslam Ltd for a monthly licence fee of $1,000 per month. That is not a reliable indicator of the full rental value for a term of years, since it was
terminable on one month’s notice. It is however relevant that in the remaining five years before the lease was disclaimed, there is no evidence that any more profitable possibility was available. In a report dated 17 May 2013 to STH, Colliers noted that “the fall back position of leasing the site to a yard user remains an option although even those tenants are very scarce currently”. After the disclaimer, Lewis advertised the property as a yard, and has had the property continuously listed since November 2013. Carr and Haslam Ltd has been the only party to show interest, and has continued in occupation.
[55] I find that, on the balance of probabilities, it is most unlikely that Lewis could, on the disclaimer in 2013, have entered into a lease of the land in its present condition for a period of 17 years, up to 2030, the end of the term of the disclaimed lease. I consider it improbable that a tenant intending to use the property for any of the limited purposes to which it is suited would be prepared to commit to a term of that length. Even the prospects of an initial short term, with successive rights of renewal to that date, is in my assessment unlikely.
[56] For these reasons, I find that Lewis has discharged the onus on it to establish, on the balance of probabilities, that there was no available market at the date of disclaimer to which the normal measure of damages can be applied.
Possible mitigation measures
[57] In my interim judgment I rejected the proposition that the return on a development on the land is a relevant mitigation possibility.25 I should amplify my reasons for that conclusion. The first and most important rule of mitigation is that a claimant must take all reasonable steps to mitigate the loss consequent on the defendant’s wrong. A claimant cannot recover damages for any such loss which could thus have been avoided but which the claimant has failed, through unreasonable action or mitigation, to avoid.26 There are two further aspects of the rule about mitigation. Where a claimant does take steps to mitigate loss and these steps are unsuccessful, the claimant can recover any further loss incurred.
Conversely, where these steps are successful, the defendant is entitled to the resulting
25 At [141].
26 McGregor on Damages, above n 7, at [9-004].
benefit. At the first hearing, there was contested evidence about the likely best development for the land, and the return which could be made on that. I considered that approach imposed on Lewis too high a duty to mitigate. The duty to avoid the loss of rental did not make it incumbent on Lewis to undertake a multimillion dollar redevelopment of the land. The large cost involved in a redevelopment means that this is not a reasonable step which Lewis is required to take, with these consequences. There would also be the further difficulty to which I adverted, of isolating the return on the base land from the return on the total development. Only the return on the bare land could be relevant for mitigation.
[58] My rejection of redevelopment as a reasonable step required by the duty to mitigate does not, however, mean that Lewis can simply hold the land unused and recover rent until 2030. I address this aspect later.
[59] I addressed the possibility of assessing damages by considering the return which Lewis could achieve by selling the land and investing the proceeds in some other form of income producing asset.27 I postulated the possible purchase of another ground leased property or a bond. I now discuss those two possibilities, in the light of the further evidence.
[60] The first possibility, the sale of 15 Fisher Crescent and the purchase of a substitute ground leased property, is dependent on the existence of an available market. This possibility is not the usual measure of damages, and must in my view be examined through the lens of mitigation, not that of calculation of the damage flowing from the loss.
[61] Mr Colcord was instructed to express his opinion as to the likely market for lessor’s interests for perpetually renewable ground leases in Auckland. He says that lessor’s interests are rarely offered to the market as single investments. Ownership is tightly held. He says that from about the beginning of 2011 to mid 2013, there were
13 lessor interest sales in Auckland, the majority of which have been industrial property. Since mid 2013 there have been only two lessor interest sales in Auckland.
The small number of sales is a reflection of lack of supply, rather than lack of demand.
[62] In the light of that evidence, I am satisfied on the balance of probabilities that there is not a ready market for lessor’s interests such that Lewis could, within a reasonable period after the disclaimer, have sold the freehold of 15 Fisher Crescent and purchased the freehold of another property subject to a perpetually renewable ground lease. This postulated means of mitigation is not, on the facts as I find them, available.
[63] Even if it were potentially available, I do not consider that Lewis could reasonably be required to adopt this approach. It requires Lewis to take steps which go beyond the bounds of its duty to mitigate its loss. It is not reasonable to require a landowner to take the step of selling the land, to mitigate the loss of rent from that land.
[64] The second possibility, purchase of a bond, was the subject of much evidence at the quantum hearing, mostly directed to issues of calculation of the NPV of an investment in a bond. I do not propose to discuss that evidence in detail. The overall effect of it is to persuade me that an investment in a bond is not an appropriate proxy for Lewis’ investment in its lessor’s interests in 15 Fisher Crescent to use in calculating the measure of Lewis’s loss or the quantum of its duty to mitigate that loss. There are essentially two factors which have led me to that conclusion.
[65] The first is that there is a significant difference in economic terms between a perpetual lease and a bond. The Supreme Court in Mandic v Cornwall Park Trust Board noted that a Glasgow lease is, in economic substance, a bond which is revalorised every 14 or 21 years and secured against the demised land.28 That is so, but that general proposition needs closer examination for its application to the issue in this case.
[66] The manner of revalorisation of a perpetually renewable lease on a rent review is materially different from the revalorisation of a bond on maturity. On the maturity of a bond, the investor receives back the same nominal amount as originally invested. The entire nominal dollar return on the bond is received by means of the periodic interest payments. Under the economic substance of a Glasgow lease, the investor’s nominal dollar return has two components. One is the periodic rent payments. The second is the nominal dollar difference in value of the freehold interest in the land at the beginning and end of the rent review period. The original investment in the Glasgow lease is the freehold value of the unimproved land. At each review date, the lessor receives back either the then freehold value of the unimproved land (if the lease is not renewed) or rent for the ensuing term based on
that value (if the lease is renewed).29
[67] That difference in economic substance makes a bond an inappropriate comparator for present purposes. Much of the disagreement in the evidence turns on the way in which that difference in the nature of the return on the two forms of investment is to be reflected in the calculation of the NPV of the investments. The interest payments under a bond and the rent payments under a Glasgow lease are sufficiently similar that, assuming the risk to be equal, the same discount rate can be applied to both. The difference in the value of the land at the start and end of a Glasgow lease is however quite dissimilar, and requires different treatment. I question whether the same discount rate could be used. That difference leads me to the very firm conclusion that a bond is not, as I had postulated in the interim
judgment, a sufficiently close equivalent measure to be useful for present purposes.30
[68] The second factor that has led me to the conclusion that sale of the freehold interest and investment of the proceeds in a bond is not an appropriate measure of damage, or mode of mitigation, for present purposes is that, as with possible investment in another ground lease, it goes beyond the scope of the duty to mitigate.
[69] In the interim judgment, at [136] to [138], I discussed the feasibility of assessing the question of possible mitigation by valuing the acceleration of the
29 There should, in NPV terms, be little material difference between those two possibilities.
30 Lewis Holdings Ltd v Steel & Tube Holdings Ltd, above n 1, at [143].
reversion. I raised several issues which I saw with that. I referred to the conceptual differences between the present value of the rent and the reversion under the lease, and to current market value of the land. I suggested that it may be necessary to assess the present value of the future cash flow which could be derived from the land.
[70] Much of the evidence at the quantum hearing was directed, in one form or another, to that possibility. I deal with the issue, at a broad conceptual level, in the light of that evidence, which I do not discuss in detail.
[71] In theory, the current market value of the land should represent the present value of the best use which could be made of the land. But that is too theoretical to be useful in the present context. In assessing the current market value, valuers take into account sales and other evidence about comparable properties. So, to the extent that the current market value may represent the present value of the best use, the figure assessed has regard to the best use not only of this land, but also of comparable properties. It implicitly assumes that this land can be as efficiently used as the land with which it is compared. My conclusion that there is no market for a lease of this land calls that assumption into serious question. The current market value of this property is therefore not sufficiently connected to the income stream derivable from this land to be used as a proxy for the present value of that income stream.
[72] In the end, I consider that any method of calculation which attempts to value the acceleration of the reversion in the way I had postulated in the interim judgment is too problematic to form a proper basis for calculation of damages.
Calculation of loss
[73] Given the difficulties which I have discussed with all of the alternatives I have considered, I propose to adopt a simpler approach, from first principles. I must necessarily assess the question of damages on a very broad brush basis, as I now
describe. The difficulty of assessing damages does not relieve STH of the obligation. As Vaughan Williams LJ said in Chapman v Hicks:31
… the fact that damages cannot be assessed with certainty does not relieve the wrong-doer of the necessity of paying damages …
[74] As Devlin J said in Biggin v Permanite Limited, where precise evidence is
not obtainable “the Court must do the best that it can”.32
[75] I start with the proposition that as a result of the disclaimer, Lewis lost the rental stream under the lease until 2030. It also lost the benefit of the lessee’s liability to pay rates on the property. The evidence does not enable me to make an exact calculation of that benefit. I treat it as offset by the rental obtained from the arrangement with Carr and Haslam Ltd. That very rough equivalence is sufficient for present purposes.
[76] I next take the proposition that it is most likely that Lewis will in fact take steps to use or deal with the land in a way which would be inconsistent with its ability to recover that rental stream for the full period. I have rejected the proposition that Lewis is under a duty to mitigate its loss by undertaking a redevelopment of the land. But, as I have earlier noted, that does not mean that Lewis can obtain damages as if the land remains unused until 2030. Its duty to mitigate may require it to take some steps to put the land to profitable use, even though the duty to mitigate may not dictate what those steps must be. To view the matter another way, the likelihood of the land being used at some point between now and 2030 is a contingency which must be assessed in determining the extent of Lewis’ loss.
[77] Approaching the problem in this way means that I must make an assessment of when it is likely that Lewis will make use of the land in some other way. Because this is unknown, and requires assumptions to be made, I assess it in two alternative
ways, as a cross-check.
31 Chaplin v Hicks [1911] 2 KB 786 (CA) at 792.
32 Biggin v Permanite Limited [1951] 1 KB 422 at 438.
[78] The first is to approach the issue as the quantification of a contingency. To do that, I take the NPV of the rental stream to 2030, and discount that by a percentage to reflect the fact that, at some unknown point, Lewis is likely to use the land in a way which is inconsistent with the continued receipt of that rent. The second is to make an assessment of a date when Lewis is likely to take such steps, and to award as damages the actual rent for the period until then.
[79] In calculating the NPV of the rental stream, Mr Sheppard opines that a discount rate of 6.5 per cent is appropriate. Mr Colcord considers that 9 per cent is appropriate. At 6.5 per cent, the NPV of the rental stream is (in round figures)
$2 million, at 9 per cent it is $1.75 million. The rental flow to 2030 under the disclaimed lease, if it had continued, was low risk. The risk was somewhat higher than for a more usual ground lease, on which there are improvements that provide a measure of de facto security. But the lessee covenant was, for the reasons I gave in the interim judgment, broadly equivalent to a covenant from STH, a well established listed company.
[80] Allowance must be made for the fact that, following disclaimer, the unencumbered freehold is immediately available to Lewis for the balance of the term of the lease until 2030. I have held that there is no market in which Lewis could re-let the property. But in assessing what is reasonable by way of mitigation, or what is likely to happen to the land as a contingency, some allowance must be made to reflect the likelihood that Lewis will use the land at some point. The most likely way it will do this is by redeveloping the land. I have held that any return it could make by doing so is not to be taken into account as reducing its loss. But to develop the land is to make use of it in a way which is inconsistent with the continuation of the lease. Some allowance off the rental otherwise receivable should be made to reflect this possibility.
[81] Mr Sheppard has attempted to address this issue by valuing the reversion, as I postulated in the interim judgment. He values what he describes as the loss mitigation by taking the market value of the unencumbered freehold of the land as at the date of disclaimer and deducting from it the value of the land subject to the lease at that date. He quantifies that difference at $330,000. From that figure of $330,000,
he deducts the notional cost of selling the land, which he put at four per cent. He says that if the Court wishes to adopt this approach, the value of the mitigation option is $317,000. This, in his opinion, represents the net present value of all additional mitigation options available to Lewis over the period to 2030.
[82] I do not consider it is appropriate to value the mitigation opportunity in that way. I have, at [72], abandoned any attempt to value the acceleration of the reversion. I need not consider whether Mr Sheppard’s method is an appropriate way of valuing the reversion, since I do not adopt that methodology.
[83] The first method I use, albeit very inexact, is to treat as a contingency the likelihood that Lewis will take steps which will preclude the continuation of the rent for the remainder of the term. That is the usual approach, in fixing damages once and for all at the date on which the liability accrued, when later events may affect the question of damages. In Davie v Taylor Lord Reid said:33
You can prove that a past event happened, but you cannot prove that a future event will happen and I do not think that the law is so foolish as to suppose that you can. All that you can do is to evaluate the chance. Sometimes it is virtually 100 per cent: sometimes virtually nil. But often it is somewhere in between. And if it is somewhere in between I do not see much difference between a probability of 51 per cent, and a probability of 49 per cent.
[84] I apply that dictum to the slightly different issue in this case, which is not whether, but when, Lewis’ use of the land will disentitle it to the ongoing rental stream.
[85] Counsel for STH submits that if I conclude that a completed development or a finalised agreement may be relevant to the question of mitigation, I should follow the authorities which dealt with the valuation of contingent claims in a liquidation. I do not consider that is appropriate. Lewis’ claim is not a contingent claim. The problem which confronts me is how to quantify its actual claim. In doing so, I must put a value on the contingency I have described, so as to be able to assess damages at
the date of disclaimer. That does not make it a contingent claim.
33 Davie v Taylor [1974] AC 207 at 213.
[86] Approaching the matter in this way, one end of the spectrum is that the lease is immediately replaced. The discount for the contingency is 100 per cent. The other end is that the lease is not replaced until 2030. The discount for that contingency is zero per cent. I can do no better than assess the contingency that Lewis will be able to replace the rental stream, probably at some reasonably early point, at 50 per cent. In making that assessment of the contingency, I take into account that the NPV of each payment in the rental stream diminishes, so that most of the NPV will accrue from payments early in the term, and much less from them later. The percentage I adopt for the contingency thus implicitly assumes that the time when Lewis will make other use of the land is considerably earlier than halfway between the date of disclaimer and 2030. The NPV of the rental stream, as I have described at [79], is in the range of $1.75 million to $2 million. Applying this percentage reduces the range to between $875,000 to $1 million.
[87] The second method I use is to make the best assessment I can, from the evidence, of a likely actual date on which Lewis will be able to replace the rental stream.
[88] Lewis has been in negotiation to enter into a design lease and build contract to develop the site. Those negotiations are ongoing. The likelihood of an agreement being reached needs to be assessed. Allowance must also be made for the possibility that agreement with the present proposed tenant will not be reached, so that Lewis must start again. The assessment needs to be made having regard to what it is reasonable to expect Lewis to do, having regard to its duty to mitigate its loss. Making the best assessment I can, I allow six months from now as the likely time for agreement.
[89] If Lewis had to develop the property on the expiry of the lease, it would have to carry the construction period without income. It might therefore be thought that damages for lost rental should end at that point when agreement is reached since the land will be used by Lewis from that time to complete the development. I do not consider that is appropriate. In assessing what Lewis has lost, it is more appropriate, in my view, to look to the point at which it will be able to obtain an income to replace the lost rental stream. Bearing in mind that I am considering the issue from
the perspective of mitigation, I consider it appropriate to allow Lewis recovery of the rental stream until it can be replaced, that is, after the work has been completed.
[90] I therefore consider what I should allow for the period of construction after agreement is reached. In the confidential documents produced at the quantum hearing, there is a letter dated 31 October 2014 from Quadrant to the prospective lessee. The time to completion, after agreement is reached, was described as follows: “a 12-13 month total period to completion is achievable but will be tight due to Auckland Council’s approval timeframes”. I allow 14 months from agreement for the work to be completed.
[91] That gives a notional completion date in April 2017. On that basis, Lewis will be without rental for a total period of 46 months from June 2013. The face value of the rental for that period is about $750,000. This amount is less than the range assessed by my first method of calculation. I consider the second method of calculation is preferable, and I adopt it. The outcome on both methods is sufficiently close, bearing in mind the imprecision implicit in both methods, to give me a level of confidence in the figure I adopt.
[92] I need to consider whether to discount that figure of $750,000 to its NPV at June 2013 and allow interest from that date, or whether to award the full face value of the rental over the period. I consider the latter course is preferable. Lewis has, on the methodology I have adopted, already lost the rental stream from the date of disclaimer to now, a period of two years and three months. That loss should carry interest. It has not yet suffered the loss of rental for the remainder of the period I have assessed. An award of the face value of the rental, without interest to the date of judgment, will broadly equate the interest component which would otherwise apply. In adopting this approach, I also take into account that there can be no precision in the calculation, and that the sum derived by this method is less than the sum assessed by my alternative method.
Costs
[93] At the hearing I directed that the parties should file written submissions on costs, on the basis that I would not look at these submissions until I had reached a conclusion on the substantive issues. I have now considered those submissions.
[94] On the quantum I have fixed, the parties’ positions are as follows:
(a) Lewis seeks “scale costs on a hybrid basis” plus disbursements;
(b)STH submits that it should pay scale costs on a 2B basis and disbursements (excluding the expert fees of Mr Sheppard).
[95] Counsel submits that aspects of the case were complex and are more appropriately placed in category 3, and that certain steps took longer than what is allowed for in band B and are more appropriate in band C.
[96] The categorisation of proceedings under r 14.3 of the High Court Rules envisages a single category for a proceeding. There will often be different levels of complexity involved in different aspects. I consider that, overall, category 2 is appropriate in this case.
[97] Rule 14.5 does envisage a separate assessment of the band for each step. Having regard to the principle in r 14.2(g) that so far as possible the determination of costs should be predictable and expeditious, it is common practice to apply the same banding to all steps. I do not think it is appropriate to single out certain steps as justifying band C. There may be other steps with would justify band A. An analysis of each step would be needed. I do not regard that as appropriate in this case. I adopt band B for all steps. Counsel for Lewis quantifies scale costs on a 2B basis at
$123,580.50. If there is an issue about any item I expect the parties to resolve it.
[98] Lewis’s claim for disbursement is quantified at $226,251.25. The claim includes several items which I cannot, without further information, determine as falling within or outside the description of an expense incurred for the purposes of the proceeding, and reasonably necessary for the conduct of the proceeding, in terms
of r 14.12. Counsel for STH should have an opportunity to make submissions on them.
[99] One point I must decide is the submission that Mr Sheppard’s costs should not be recoverable as he was not qualified professionally or by experience to value real property interests such as Lewis’ interest in the lease. I find that Mr Sheppard’s qualifications and experience do qualify him to give the evidence he did, so that the claim for his expenses should not be disallowed on that ground.
[100] So that disbursements can be finalised, I will give a direction under r 14.22, rather than under the somewhat narrower powers of the Registrar under r 14.12(4). In doing so, I express the hope that the parties may be able to agree on this last issue between them, to avoid the need for that.
Result
[101] For the reasons I have given, I determine that the amount of Lewis’s claim in
the liquidation of Stube consequent upon the liquidator’s disclaimer of the lease of
15 Fisher Crescent is $750,000, plus interest on that sum from the date of this judgment at the rate prescribed under s 87 of the Judicature Act 1908.
[102] I award costs to the plaintiffs jointly, on a 2B basis, plus disbursements. I
direct under r 14.22 that the Registrar ascertain what amount should be allowed in
respect of witnesses’ expenses and other disbursements.
A D MacKenzie J
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