Marphona Trustees Limited v NYX Limited
[2019] NZHC 2923
•8 November 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-000604
[2019] NZHC 2923
IN THE MATTER of an Application pursuant to the Property Law Act 2007, section 251 seeking an order for possession BETWEEN
MARPHONA TRUSTEES LIMITED
Plaintiff/Applicant
AND
NYX LIMITED
First Defendant/Respondent
AND
JOSEPH ANTOINE AZOURI
Second Defendant/Respondent
Hearing: 7 October 2019 (further submissions received 25 October 2019) Appearances:
P M Webb for Plaintiff/Applicant
A Tobeck for First Defendant/Respondent Second Defendant, J A Azouri, In Person
Judgment:
8 November 2019
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 8 November 2019 at 2.30 pm pursuant to Rule 11.5 of the High Court Rules
Solicitors:
Rice Craig, Auckland (Counsel: P M Webb, Denham Bramwell, Manukau) Insight Legal (Graham O’Brien) (Counsel: A Tobeck, Barrister, Otautau)
J A Azouri (in person), Papakura
MARPHONA TRUSTEES LTD v NYX LTD and AZOURI [2019] NZHC 2923 [8 November 2019]
Introduction
[1] Marphona Trustees Limited (Marphona) seeks summary judgment against NYX Ltd (NYX) for:
(a)a declaration that an agreement to lease in respect of premises at 37 O’Shannessey Street, Papakura is cancelled;
(b)possession of the premises;
(c)judgment against NYX for sums representing unpaid rent and the cost of repairs to make good the premises upon termination of the agreement to lease; and
(d)judgment against the guarantor of NYX’s obligations under the agreement to lease, Joseph Azouri (Mr Azouri), for unpaid rent.
Background
[2] Pionam Properties Ltd (Pionam) owned premises at 37 O’Shannessey Street, Papakura. On 21 January 2015, Pionam and NYX entered into a written agreement to lease pursuant to which NYX was to lease the premises and operate as a licensed entertainment and gaming machine venue. The agreement to lease provided:
(a)the term of the lease was 2 years;
(b)renewal dates at two-yearly intervals for a period up to 12 years;
(c)rent in the sum of $24,000 + GST per annum;
(d)a rent holiday for the first three-months of the lease;
(e)rent reviews to take place on renewal dates;
(f)default interest at 14% per annum running from the date of the default;
(g)NYX to be liable for all outgoings;
(h)a formal lease to be executed using the then current ADLS Deed of Lease form which was to be binding on the parties notwithstanding that it may not have been executed;
(i)the agreement to lease was conditional on NYX obtaining a liquor licence and transfer of a gaming site licence for 18 gaming machines on satisfactory terms; and
(j)Mr Azouri’s personal guarantee that NYX would meet its obligations under the agreement to lease, which was limited to the first two-year term.
[3] Mr Azouri is the sole director of NYX. The agreement to lease was signed by Mr Azouri as director of NYX and as guarantor.
[4] The conditions in [2(i)] above were satisfied. The agreement to lease became unconditional and commenced from 19 March 2015.
[5] A formal lease was not executed but the agreed form of ADLS Deed of Lease (the Lease) was attached to the agreement to lease. The parties agreed to be bound by its terms. Under the Lease, NYX was required to give written notice of its intention to renew the Lease at least three calendar-months before the end of the term.1 The Lease also provided that if Pionam permitted NYX to remain in occupation of the premises upon the expiration of the term, the occupation “shall be a periodic tenancy only terminable by at least 20 working days notice” with the tenancy terminating on the expiry of the notice.2
[6] In August 2015, Pionam sold the premises to Marphona. Pionam and Marphona were related companies. Robert Pulman (who shall feature later in this judgment) was a director of both. Pionam was on 6 January 2016 removed from the New Zealand Companies Register.
1 Clause 32.1.
2 Clause 36.1.
[7] The term of NYX’s lease expired on 19 March 2017. NYX did not give written notice of its intention to renew but was permitted to remain in occupation of the premises.
[8] Around December 2018, the gaming machines which operated from the premises were disabled as a result, it appears, of concerns about NYX’s failure to account for gaming machine proceeds.
[9] On or around 1 February 2019, Rice Craig, purporting to act on behalf of Pionam, issued a notice to NYX and Mr Azouri under 210(2) of the Property Law Act 2007 (the first notice), giving 20 working days’ notice of Pionam’s intention to “terminate the Lease” and re-enter the premises.
[10] On around 7 February 2019, Marphona instructed Conroy Security Ltd to re- enter the premises, which it did. Thereafter, the premises were monitored on a 24- hour basis. The 24-hour monitoring ceased on 23 February 2019. It appears NYX could open for business on certain days with Conroy Security Ltd providing on-site security on Marphona’s instructions.
[11] On 28 February 2019, NYX’s solicitors, Insight Legal, wrote to Rice Craig objecting to the first notice on grounds that included that NYX was not a statutory tenant under s 210 of the Property Law Act 2007 and that Pionam had been removed from the Companies Register. No objection was taken on the basis that Pionam was no longer the landlord. This may be explained by Mr Azouri’s evidence that NYX was not informed of any assignment of rights from Pionam to Marphona.
[12] On a date between 1 and 4 March 2019, Rice Craig issued another notice to NYX and Mr Azouri (the second notice), this time on behalf of Marphona. The second notice read:
TERMINATION OF TENANCY AT WILL
PURSUANT TO SECTION 210(2) OF THE PROPERTY LAW ACT 2007
TAKE NOTICE that the Landlord, MARPHONA TRUSTEES LIMITED,
does pursuant to the Property Law Act, Section 210(2), hereby give notice of its intention within twenty (20) working days, running from the date of service of this notice, to terminate the Lease and re-enter the premises situated at
37 O’Shannessey Street, Papakura, which pursuant to the Agreement to Lease, dated 21 January 2015, having expired on or before 21 January 2017, is occupied as a tenancy at will.
Dated this 1st day of March 2019
[13] NYX never paid any rent for its occupation of the premises. It may not have paid outgoings either. Demand for payment of the rent was made, it would appear for the first time, in a letter from Rice Craig to Insight Legal dated 4 March 2019.
[14] On 26 March 2019, a builder, Stephen Brown, inspected the premises for Marphona and found damage.
[15] On a date which is likely to have been 28 March 2019, Conroy Security Ltd, acting on Marphona’s instructions, re-entered the premises, changed the front lock and card pad entry code and posted notices that it had terminated NYX’s tenancy.
[16] On 29 March 2019, Mr Azouri barricaded himself inside the premises. Marphona made unsuccessful attempts to remove him. On 3 April 2019, Marphona issued a trespass notice to Mr Azouri but it could not be served upon him.
[17] On 4 April 2019, Mr Pulman saw that NYX had advertised that it would be open for business. Marphona did not wish it to do so and commenced this proceeding on 5 April 2019.
[18] On 8 April 2019, Marphona obtained an interim order granting it possession of the premises. The interim order was executed and remains in force.
Summary judgment principles
[19] The relevant principles are not in dispute. Under r 12.2(1) of the High Court Rules 2016, the plaintiff must satisfy the Court that the defendant has no defence to a cause of action in the statement of claim or to a part of any such cause of action.
[20] In Krukziener v Hanover Finance Ltd, the Court of Appeal succinctly stated the relevant principles, as follows:3
The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. 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: MacLean v Stewart (1997) 11 PRNZ 66 (CA). 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 inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). 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: Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA).
[21] Mr Webb referred to National Bank v Loomes as authority that a plaintiff’s onus requires it to prove both factual and legal matters.4 In Loomes, the plaintiff could not draw to the Court’s attention a clause in a guarantee negating the principle that a variation of the contract between debtor and creditor which could prejudice the surety will discharge a guarantee. Barker J noted that it was not incumbent upon him painstakingly to peruse the guarantee to identify such a clause, and while, had the matter been fully argued, it might have been possible for the plaintiff to obtain summary judgment it had failed to discharge the onus upon it.5 Those comments are apposite in this case.
Claim for possession
The statement of claim
[22] Generally, the statement of claim is an unsatisfactory pleading. It comfbines all the claims against both defendants in one cause of action. It contains both conflicting allegations and insufficient detail of the basis for claims made.
3 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
4 National Bank of New Zealand Ltd v Loomes (1989) 2 PRNZ 211.
5 At 214.
[23] Specifically, in respect to claims for a declaration that the agreement to lease is cancelled and an order for possession of the premises, Marphona pleads that from
19 March 2017, NYX occupied the premises under a tenancy terminable on 20 working days’ notice pursuant to s 210 of the Property Law Act 2007. It alleges that on 4 March 2019, Marphona’s solicitors, Rice Craig, gave notice to NYX’s and Mr Azouri’s solicitors, to terminate “the Lease” pursuant to s 210(2) of the Property Law Act 2007, and on 28 March 2019 Marphona peacefully re-entered the premises and expressed an intention to “terminate the tenancy.” Marphona also pleads that on 2 April 2019, Rice Craig gave notice (to whom is not stated, and the letter is not in evidence) terminating the “Agreement to Lease” and demanding payments of various sums.
[24] It is not clear whether it is being alleged that the agreement to lease, the Lease or a statutory tenancy was terminated. It is not clear whether such termination occurred on 28 March 2019 or 2 April 2019. Furthermore, it is not clear why Marphona would seek a declaration that the agreement to lease was cancelled when it pleads that it expired on 19 March 2017.
Marphona’s submissions
[25] Marphona argued that it acquired the premises and the benefit of Pionam’s rights under the agreement to lease and to enforce Mr Azouri’s guarantee.6 When NYX did not renew its lease, the lease expired. NYX remained in occupation of the premises from 19 March 2017 as a statutory tenant at will under s 210 of the Property Law Act 2007. Marphona gave notice to NYX of its intention to terminate NYX’s tenancy and terminated by re-entry.
[26] NYX argued that the directors of Marphona and NYX, Mr Pulman and Mr Azouri respectively, had agreed to a renewal of NYX’s lease. Marphona was not a tenant at will under s 210 and there is a factual dispute as to whether a renewal was agreed making the claim unsuitable for summary judgment.
6 Property Law Act 2007, ss 232-233.
Further submissions
[27] When considering my decision, I identified two issues that counsel had not addressed. First, whether from 19 March 2017 NYX was holding over under cl 36.1 of the Lease. Second, whether Marphona had entered the premises before the expiration of 20 working days from the date of service of the second notice. I received further submissions from counsel on these matters.
[28] For Marphona, Mr Webb submitted that both s 210 and cl 36.1 require 20 working days’ notice to be given to terminate a tenancy so that it was moot whether s 210 or cl 36.1 applied. The evidence established, he submitted, that NYX had been served with the second notice on 1 March 2019. Contrary to what is pleaded in the statement of claim, Mr Webb advanced a new argument that NYX’s tenancy was terminated on 8 April 2019, when the Court granted Marphona possession.
[29] For NYX, Mr Tobeck submitted that NYX was holding over under an express periodic tenancy pursuant to cl 36.1 and the second notice, which was expressly issued under s 210, was void and of no effect. Marphona had re-entered the premises on 28 March 2019, which was within 20 working days of service of the second notice and unlawful.
Discussion
Was there a renewal?
[30] NYX did not give written notice of its intention to renew the lease. Whilst Mr Azouri says the lease was renewed in discussions between him and Mr Pulman, he gives no detail of the content of the discussions, when they occurred or in what circumstances. There is no record of any such discussions occurring at all. Mr Pulman says there was no agreement to renew NYX’s lease and I can find nothing in the circumstances to suggest Mr Azouri’s evidence might be correct.
[31] Whilst the Court will not normally resolve disputed questions of fact on a summary judgment application, the evidence of the renewal is so lacking in detail and
unsupported by contemporary documents or circumstances that I am satisfied I can safely find that Mr Pulman did not agree to a renewal of the lease.
[32] In any event, to be enforceable there would need to be sufficient written record of the agreement Mr Azouri says was made and there is none.7 NYX has done nothing that amounts to an act of part performance either.8 All it did was to remain in occupation of the premises without paying any rent (or it appears outgoings). The continuance of occupation, without more, is not sufficient.9
Does s 210 apply?
[33] I do not accept Marphona’s reliance upon s 210. Section 210 states that it will apply only if, “the lessor and the lessee have not agreed, expressly or by implication, that the lessee may continue in occupation for some period.”10 Clause 36.1 of the Lease provides:
If the Landlord permits the tenant to remain in occupation of the premises after the expiration … of the term, the occupation shall be a periodic tenancy only terminable by at least 20 working days notice given at any time with the tenancy terminating on the expiry of the notice at the rent then payable and otherwise on the same covenants and agreements (so far as applicable to a periodic tenancy) as expressed or implied under this lease.
[34] NYX remained in occupation of the premises following expiry of the two-year term and this was permitted by Marphona. There was agreement under cl 36.1 that NYX would remain in occupation under a tenancy terminable by at least 20 working days’ notice. It follows that cl 36.1 applies and that from 19 March 2017 NYX was holding over under a periodic tenancy terminable on not less than 20 working days’ notice.
7 Property Law Act 2007, s 24.
8 Mahoe Buildings Ltd v Fair Investments Ltd (1993) 2 NZ ConvC 191,687; [1994] 1 NZLR 281 (CA).
9 Tod v McGrail (1899) 18 NZLR 568.
10 Property Law Act 2007, s 210(1)(b) and Jackson v Blagojevich High Court, Hamilton CP19/96, 25/6/1997.
Can Marphona rely on the second notice?
[35] Marphona’s reliance upon s 210 is misplaced. In addition, its claim is presented on the basis that NYX’s tenancy was terminated by it taking possession of the premises by re-entry or by Court order. In my view, once a valid notice (whether under cl 36.1 or s 210) is served a tenancy will come to an end automatically upon expiry of the notice.11
[36] There is no requirement that a notice to terminate under cl 36.1 (or s 210 for that matter) must follow a particular wording. It has been held, however, that notices to quit must be clear in their terms. Whilst errors in a notice will not necessarily invalidate it, the general rule is that the notice must be quite clear to a reasonable lessee reading it and the lessee cannot be misled by it.12
[37] Mr Webb submits it is of no practical importance that the second notice was issued under s 210 and not cl 36.1 because the required period of notice in both cases is the same. I accept that submission as far as the period of notice is concerned only. I have not received submissions that address the broader issue of whether there is any practical distinction, in law, between a tenancy created under cl 36.1 of the Lease and a statutory tenancy under s 210 which may have implications in this case. In that respect, I am in a similar position to Barker J in Loomes.
Did Marphona commit trespass?
[38] In the statement of claim, Marphona pleads that the second notice was served on 4 March 2019. In his affidavit, Mr Pulman says that the notice was served on 1 March 2019. Which date is correct is not clear. I note that 1 March 2019 fell on a Friday. If the second notice was affixed to the premises after 5pm it would be deemed to be served on the following Monday; that is on 4 March 2019, consistent with the statement of claim.13 On this basis, assuming the second notice was valid, NYX was entitled to remain in occupation until 2 April 2019.
11 Halsbury’s Laws of England (5th ed, 2016) vol 62 Landlord and Tenant at [224].
12 JCD Corry Laws of New Zealand Lessor and Lessee at [122] citing Concept Products Ltd v McKay
[1984] 1 NZLR 560.
13 Clause 47.1(p) of the Lease.
[39] The statement of claim pleads that Marphona re-entered the premises on 28 March 2019. There is conflicting evidence from Mr Conroy that on 29 March 2019 the front door lock and key pad entry code were changed, and notices of termination attached to the premises doors. Whether this occurred on 28 or 29 March 2019, it was within 20 working days of the service of the second notice.
[40] It is certainly arguable that Marphona committed a trespass when it purported to re-enter on 28 or 29 March 2019. Trespass is actionable per se and will sound in damages. For present purposes, however, of greater significance is that to avoid a conclusion that Marphona had acted unlawfully it now advances an argument, contrary to its statement of claim, that NYX’s tenancy came to an end by Court order on 8 April 2019.
Application to this case
[41] Marphona’s claim proceeds on incorrect bases in so far as it relies upon s 210 and presumes that termination of NYX’s tenancy required it to take possession of the premises. It has not satisfied me that it can be of no consequence that the second notice was issued on an incorrect basis. When the possibility that it may have entered the premises early (and thereby committed trespass) Marphona advanced a new case that the tenancy was terminated by Court order, and not in the manner pleaded.
[42] It may well be that properly presented Marphona will be able to make out its case for possession. In a summary judgment context, however, it has the onus of proving that NYX has no defence to the claim it has chosen to advance. It would not be correct that summary judgment be entered on a claim that has not been pleaded, particularly when a proper pleading may well have given rise to other issues or lines of enquiry.14
[43] Marphona has, therefore, not satisfied me that NYX has no defence to this aspect of its claim.
14 National Bank of New Zealand Ltd v Loomes, above n 4, at 214.
The claim for the rent
[44] In respect of the claim for rent, the pleading is only that NYX and Mr Azouri owe:
The outstanding balance of unpaid rent owing in the sum of $72,000 plus GST.
[45] There is no detail of the periods for which the rent was unpaid nor any attempt to differentiate between the liabilities of NYX and Mr Azouri, which are not coterminous.
[46] At the hearing, Marphona claimed that NYX owes rent for the period 19 June 2015 to 7 April 2019 of $104,936. and that Mr Azouri’s liability under his guarantee amounts to $48,300. NYX and Mr Azouri accepted the arithmetic but not their liability to make payment of those sums.
[47] There is no dispute that the rent was not paid. NYX’s defence is that no rent was payable until a final Code Compliance Certificate (the Certificate) for work done on the premises had been obtained. As no Certificate was obtained, rent was not payable. Mr Tobeck again argued that there is a factual dispute that makes this claim unsuitable for summary judgment.
[48] Mr Azouri’s evidence is that there was an agreement between NYX and Pionam that no rent would be paid until a Certificate was issued. He alleges that there have been problems obtaining the Certificate due to delays caused by Marphona. Mr Pulman denies any such agreement and says that obtaining the Certificate was NYX’s responsibility.
[49] Mr Webb accepted, for present purposes, that, if established, an agreement that rent would not be paid pending issue of the Certificate would be enforceable and preclude recovery of the rent by Marphona. He argued that the Court can be satisfied no such agreement was made because Mr Azouri’s evidence lacked detail, there is no written evidence of the agreement, there is no logical connection between the issue of a Certificate and the payment of rent (as the premises had been fully operational as a bar and gaming machine venue without interruption throughout the entire time), and
that Mr Pulman, who is an experienced businessman, would not make such an agreement. These are forceful submissions, but I am unable to accept them.
[50] Mr Azouri says the issue of the Certificate was important to NYX as its liquor and gaming site licences were dependant on having it and, although the evidence is scant, it does appear that the parties discussed this as needing attention. It is referred to in emailed minutes of a meeting sent by Marphona’s builder to Mr Pulman and Mr Azouri on 19 July 2017.
[51] Mr Azouri supports his evidence of the agreement by noting that the proceeds from the gaming machines on site were substantial and were distributed to trusts with which Mr Pulman was associated. The significant cash flow going to these trusts explains why Pionam and Marphona might forgo the rent.
[52] Most importantly, however, it is a feature of this case that no rent (or outgoings) was ever paid by NYX for the four years it was in occupation of the premises. It is even more startling that Marphona did not demand the rent until 4 March 2019. There must have been a compelling reason for that, yet Mr Pulman offers no explanation for it.
[53] Consistent with Mr Azouri’s evidence, Marphona’s decision to terminate NYX’s tenancy appears to have been a direct response to the gaming machines being disabled. There is an email from Mr Pulman to Mr Azouri of 22 January 2019 when Mr Pulman wrote that that unless the venue was “back up and running” by Friday 25 January 2019, “we will ask the landlord to find another venue operator.” In another email of 26 January 2019, Mr Pulman wrote to Mr Azouri stating, “From the Gaming Machine perspective we ask that you vacate the premises forthwith.” It appears that it was not until he sent the 26 January 2019 email that Mr Pulman ever raised the issue of the rent.
[54] I am unable to discount Mr Azouri’s evidence of an agreement that rent would not be paid pending issue of the Certificate. There is a factual dispute I am not able to resolve on this application.
[55] Marphona has failed to satisfy me that it is entitled to summary judgment for the rent.
The cost of repairs
[56]In respect of the claim for repair costs, the entire pleading is:
The premises have been damaged extensively and have not been rendered up in good repair, the costs of which remediation are in the sum of $39,080.80 plus GST.
[57] This pleading does not explain the basis of the claim, nor does it particularise what damage has been done. Details of the alleged damage are set out in an affidavit of Mr Brown, but that is not a substitute for a proper pleading.
[58] There is certainly evidence of damage and that the premises were in an unsanitary condition. However, it has not been proven to my satisfaction how the damage was caused, who is responsible to pay the cost of the repairs or what those costs are going to be.
[59] As I have noted, there is no pleading as to the terms of the Lease (or any other basis) that Marphona relies upon to support this claim. When I raised this with Mr Webb he referred me to cls 8.1, 9.1, 10.1 20.4, 22.1 and 27.1 of the Lease, all of which, he said, might apply to this aspect of the claim. When I came to examine those provisions, their application is not straight-forward, and it is not appropriate that the Court sift through them in search of a proper basis for the claim.
[60] The evidence did not satisfy me that Marphona is not insured for at least some of the damage so that NYX will not be liable for the cost to make good.15 Mr Azouri says that some damage was caused in a burglary. There is evidence that the premises were burgled on 12 January 2019. The burglary was reported to the Police. It was reported to Mr Pulman. Some of the damage for which Marphona claims may conceivably have been caused in the burglary. In an email of 22 January 2019, when notifying Mr Pulman of the burglary, Mr Azouri asked Mr Pulman to send someone
15 Property Law Act 2007, ss 268 and 269.
to assess the damage for the insurance claim. In his response, Mr Pulman did not dispute the availability of insurance. In a follow up email of 25 January 2019, Mr Azouri asked Mr Pulman about the insurance claim. Mr Pulman’s reply did not respond to that query.
[61] Mr Azouri also claims that some of the damage is fair, wear and tear for which NYX is not liable. Some of what is claimed as damage might fall into this category.
[62] The evidence as to the state of the premises and the cost of repairs is contained in the affidavit of Stephen Brown. In so far as Mr Brown assesses the cost of repairs, he is giving evidence as an expert. His evidence does comply with sch 4 of the High Court Rules 2016. Furthermore, he provides only bare estimates for the cost of repairs with no detail as to how these costs have been assessed. The Court cannot rely on estimates.
[63] Marphona has failed to prove it is entitled to summary judgment for the cost of repairs.
The guarantee
[64] As I have found that NYX has an arguable defence to Marphona’s claim for rent, it follows that Mr Azouri has an arguable defence to the claim against him under the guarantee. It is unnecessary for me to deal with an additional defence he raised that the guarantee is unenforceable because the solicitors who advised him also advised Pionam.
Result
[65]Marphona’s application for summary judgment is dismissed.
[66] It is usual to reserve costs, but if any party wishes to seek costs they may file and serve a memorandum within 14 days, with 7 days for any reply. It should not be thought I am encouraging that.
[67] The Case Management Officer should set the case down for a first case management conference on a suitable date.
[68] I should be clear that nothing in this ruling affects the order of the Court of 8 April 2019 granting interim possession of the premises to Marphona.
O G Paulsen Associate Judge
0
0