Monaco Management Limited v Boutle HC Nelson CIV-2011-442-314

[2011] NZHC 1778

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV-2011-442-314

BETWEEN  MONACO MANAGEMENT LIMITED Appellant

ANDTIM BOUTLE Respondent

Hearing:         13 October 2011

Counsel:         A D Marsh for Appellant

G J Praat for Respondent

Judgment:      16 November 2011 at 4:00 PM

I direct the Registrar to endorse this judgment with a delivery time of 4pm on the

16th day of November 2011.

RESERVED JUDGMENT OF MACKENZIE J

[1]      This is an appeal from a judgment of Judge Tuohy in the District Court at Nelson delivered on 14 June 2011.  In it, the Judge dismissed the appellant’s claim against the respondent for a declaration that the respondent was liable to pay certain hotel outgoings.

[2]      The  appellant  is  a  hotel  management  company,  and  operates  the  Hotel Monaco in Nelson.  The hotel consists of 18 units in a development under the Unit Titles Act  1972.    It  is  part  of  a  wider  development,  including  other  unit  title developments, which are operated separately from the hotel.  The broad structure of the  hotel’s  operation  is  that  the  appellant  is  the  lessee  of  the  18 units  that  are operated as the hotel.   The respondent is the owner of one of the units and consequently one of the lessors to the appellant.  The rent payable is not a fixed sum. Rather, the rent payable to each of the unit owners as lessor is a proportionate part of

the gross revenue from the hotel business, less certain specified deductions.  Some

MONACO MANAGEMENT LIMITED V BOUTLE HC NEL CIV-2011-442-314 16 November 2011

outgoings, for services that are necessary for the operation of the hotel, such as the supply of gas and electricity, do not form part of the rent calculation, because under the lease they are the responsibility of the lessor.  The terms of that responsibility are at the heart of this appeal.  There is provision in the lease for the appellant to manage the payment of these outgoings on behalf of the lessors, and to deduct any amounts paid by the appellant for these outgoings from the rental payments due to the lessors. Until November 2008, the appellant managed the collection and payment of the outgoings  in  that  way.    More  recently,  the  revenue  from  the  hotel  has  been insufficient to provide a rental stream for the unit owners, from which payment of outgoings could be deducted.   The appellant has ceased management of these outgoings.  The appellant is therefore dependent, for the continued supply of gas and electricity from the suppliers, on payment by the lessors, through the body corporate, of the suppliers’ charges.

[3]      The appellant initially sought summary judgment in the District Court on its claim for a declaration that the respondent is liable to pay, directly to the relevant unity companies, all outstanding amounts owing by the appellant for gas and electricity in respect of supplies to the Monaco Hotel, and an order for specific performance requiring him to pay such amounts.  Summary judgment was refused in a judgment delivered by Judge Tuohy on 4 March 2010.   The matter subsequently came for trial before Judge Tuohy on 24 March 2011.   The appellant claimed the relief that had been sought at the summary judgment stage or, in the alternative, a declaration  that  the  respondent  is  liable  to  pay  a  proportionate  share  of  the outstanding charges for gas and electricity, with a consequential order for specific performance.   In his judgment delivered on 14 June 2011, Judge Tuohy dismissed both the claim and the alternative claim.

[4]      In his reasons for judgment on both the summary judgment application dated

4 March 2010 and the substantive proceeding dated 14 June 2011, Judge Tuohy has set out the relevant contractual provisions, and the reasons for his decision.   His analysis is careful and comprehensive, and I agree with both the conclusion to which he came and his reasons for reaching these conclusions.  In those circumstances, I can express my own reasons quite briefly.

[5]      The appellant’s claim is based upon cl 2.1 of the lease which states:

2.1The Lessor will be responsible for the payment of all Outgoings in respect of the Hotel Monaco which are specified in the third Schedule.

[6]      The relevant parts of the Third Schedule are set out in full below:

Outgoings to be Paid by the Lessor Direct

1.        Rates or levies payable to any territorial or local authority.

Outgoings to be Paid by the Lessor as Part of the Amounts it pays to the

Body Corporate

These will include, but not limited to the following:

2.Charges for water, gas electricity, telephones and other utilities or services.

[7]      Counsel for the appellant submits that correct interpretation of the lease is that, as sought by the appellant in its primary claim, in the absence of payment (whether by the body corporate or by all unit holders together) the respondent is liable to pay all outstanding power and gas bills with no apportionment.  He submits that the lease explicitly provides for the respondent lessor to be “responsible for payment of all outgoings in respect of the Hotel Monaco”.

[8]      That  submission  is  not  correct.    The  clause  does  not  provide  for  the respondent to be responsible for payment of all outgoings in respect of the Hotel Monaco.  It provides for him to be responsible for the payment of all outgoings in respect of the Hotel Monaco which are specified in the Third Schedule.  The extent of the liability is determined by the Third Schedule.  The outgoings that are to be paid by the lessor for, inter alia, gas and electricity, are those that it pays to the body corporate.    The  respondent’s  liability  extends  only  to  such  proportion  of  the outgoings as he may be required to pay under the rules of the body corporate.  The rules are not directly in issue in this appeal.  It is however clear that, in broad terms, the respondent’s liability under the rules is to a proportionate share of the outgoings.

[9]      For these reasons, the appellant’s primary claim must fail and it was rightly

rejected by the Judge.

[10]     The alternative claim raises a different question, which is whether, if the body corporate does not require the respondent to pay his share of the gas and electricity charges, cl 2.1 of the lease creates an obligation on the lessor, enforceable at the suit of the lessee, to make payment of that share.

[11]     I consider that it does not.  The outgoings to be paid by the lessor are those specified in the words in bold:   “outgoings to be paid by the lessor as part of the amounts it pays to the body corporate”.   The appellant’s interpretation involves reading words into that provision so that it reads something like “outgoings to be paid by the lessor as part of the amounts it pays, or could be required to pay, to the body corporate”.  I do not consider that the clause can properly be interpreted as if those words  were there.   The way in  which  cl 2.1  and  the Third Schedule are structured   necessarily  requires   that,   for   the   appellant   to   have   contractually enforceable rights that will ensure that the payment to gas and electricity suppliers are made, there be some contractual arrangement between the appellant and the body corporate under which the body corporate is obliged both to collect outgoings from the unit owners, and to pay the outgoings to the appropriate suppliers.  It appears that there is no such arrangement in place.   That deficiency cannot be corrected by placing a strained interpretation, contrary to the plain words of the provisions, on the terms of the lease.

[12]     The circumstances do not fall within the test for the implication of terms in a contract in BP Refinery (Western Port) Pty Ltd v Shire of Hastings.[1]     I do not consider that it can be said that the term is a necessary one. As I have noted, the way this contract is constructed requires, for the protection that the appellant seeks, that there be obligations on the body corporate.  The lack of such obligations cannot be cured by implying a term into this contract which will impose on the lessor an obligation to pay electricity and gas suppliers under contracts of supply to which the

lessor is not a party.

[1] BP Refinery (Western Port) Pty Ltd v Shire of Hastings [1977] 16 ALR 363 (PC) at 376.

[13]     For these reasons the appeal is dismissed.  The respondent is entitled to costs which I fix on a 2B basis.

“A D MacKenzie J”

Solicitors:           Saunders Robinson Brown, Christchurch, for Appellant

Knapps Lawyers, Nelson, for Respondent