Neems v G & M Investment Limited

[2015] NZHC 1083

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-2773 [2015] NZHC 1083

BETWEEN

GEOFFREY ALLAN NEEMS & ANOR

Plaintiffs

AND

G & M INVESTMENT LIMITED Defendant

CIV-2014-404-3031

BETWEEN  G & M INVESTMENT LIMITED Plaintiff

ANDWHITI RAYMOND EDMONDS & ORS Defendants

Hearing:	17 March 2015; further submissions 29 April 2015
Appearances:	D Rooke for the applicant R Edmonds appearing in person G Neems appearing in person
Judgment:	20 May 2015

JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 20 May 2015 at 3:00 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

NEEMS v G & M INVESTMENT LIMITED [2015] NZHC 1083 [20 May 2015]

Background

[1]      This  is  a  consolidated  proceeding  in  which  the  owner  of  a  commercial property in Manukau City, G & M Investments Limited (“G&M”), makes an originating application for possession of the property and related orders under the Property Law Act 2007 against the original lessee, the first respondent (“Edmonds”), and a purported sub-lessee of the same property, the second respondent (“Neems”). The other constituent proceeding was an application by Neems for protection from cancellation of the lease to the original lessee and relief against the cancellation of the lease for breach of the covenant to pay rent.

[2]      The matter proceeded by formal proof and this judgment contains the orders which follow the filing of further submissions on behalf of the applicant.

Claim for protection struck out and defendants barred from defending

[3]      During the hearing on 17 March 2015, I made interlocutory orders in relation to the proceedings. The first order struck out the application by Neems for protection and relief against cancellation for want of prosecution.   This brought an end to proceeding CIV-2014-404-2773.   The second and third orders debarred Edmonds and Neems from defending the proceeding that is the subject of this judgment, CIV-

2014-404-3031.  My essential reasoning was set out in a Minute issued at the hearing as follows:1

[2]       At the time of the order for consolidation, Mr Neems and Electron were represented by solicitors who proposed timetable orders seeking a one- day fixture on the basis that:

(a)       The   parties   would   file   affidavits   in   reply   to   the   respective proceedings by 30 January 2015.

(b)      A joint agreed bundle of documents with agreed index was to be filed and served within 20 working days before the hearing.

(c)       A synopsis of argument on behalf of G&M Investments was to be filed and served 14 days before the hearing.

(d)      A synopsis of argument by Mr Neems and Electron was to be filed and served seven days before the hearing.

1      Oral Minute of Toogood J, 17 March 2015.

(e)       Timetable orders in respect of Mr Edmonds in G&M’s proceedings

was to be made upon application by him.

[3]       Mr Edmonds has taken no steps at all in the proceedings, although he  has  told  me  this  morning  that  he  has  turned  up  to  Court  on  three occasions, including today.

[4]       On 12 December 2014, however, Mr Edmonds was served with a copy of the originating application by G&M Investment Limited for possession of the premises; an affidavit in support; a notice of opposition to Mr Neems’s application; and an affidavit in opposition.  He was also given a letter dated 4 December 2014 from Mr Rooke, the solicitor and counsel for G&M  Investment,  explaining  what  had  happened  in  the  proceeding. Mr Edmonds,  however,  did  not  take  legal  advice  or  ask  a  solicitor  to intervene in the proceeding on his behalf, nor did he make any contact with Mr Rooke.  He has not taken any formal step in the proceeding.

[5]       Mr Neems’s solicitors were granted leave to withdraw by an order made by Duffy J on 23 February 2014, on the basis that his former solicitors were to remain as an address for service until such time as the Court was advised by Mr Neems and Electron of a new address. The Judge noted that a one-day fixture for today, 17 March 2015, had been allocated.

[6]       At [6] of the Minute, Duffy J said that if Mr Neems and Electron wanted to have the matter postponed as a result of engaging new legal representation it would be for them to make the necessary application to the Court.

[7]       I  record  that  both  Mr Edmonds  and  Mr Neems  are  here  today thinking that they could take some part in the proceeding.  I have explained to them, however, that on the papers before me it is clear that Mr Edmonds has taken no steps at all to defend the proceedings against him, and that Mr Neems has failed to prosecute his claims despite the timetable orders which were made by consent.

[8]       Accordingly,  under  r  15.2  of  the  High  Court  Rules  I  rule  that

Mr Edmonds will not be permitted to defend the proceeding, CIV 2014-404-

3031.

[9]       Mr Neems  says  that  he  has  tried  to  obtain  legal  advice,  getting assistance through legal aid.   He applied for an adjournment which was refused by Venning J on 5 March 2015, but Mr Neems has taken no other step in the proceeding.

[10]      Mr Neems has explained to me that he is short of funds and that he could not pay any rent for this property at the moment.  But he says that if the property is fully repaired at the landlord’s expense, and he was permitted to remain in possession then he would be able to make a go of the business and pay rent accordingly.

[11]      I am not prepared to allow Mr Neems or Electron to prosecute their claim any further.  Had Mr Neems been determined to do so, he could have taken some step to inform the Court, as Duffy J suggested, that the hearing would have to be postponed while he put his house in order in terms of legal representation – but he has not done that.

[12]      In the proceeding CIV-2014-404-2773, I strike out the claims of Mr Neems and Electron Developments Limited for want of prosecution.   I confirm that Mr Neems also is debarred from defending the proceeding CIV-

2014-404-3031 in which he is named as second respondent.  Both orders are made under r 15.2 of the High Court Rules.

[13]      I will hear the claim CIV-2014-404-3031 by way of formal proof.

Claim CIV-2014-404-301

[4]      Section 251 of the Property Law Act 2007 provides:

251      Powers of court in making order for possession

(1)       On an application to a court for an order for possession of the land comprised in a lease, the court may make the order and cancel the lease.

(2)       If the court makes the order and cancels the lease under subsection

(1), it may also do all or any of the following:

(a)      order the lessee to pay the rent up to the date of cancellation or any later date on which the lessee yields up possession:

(b)      order  the  lessee  to  pay  reasonable  compensation  for  the breach:

(c)      impose on the lessee or the lessor any other conditions that it thinks fit.

(3)       For the purposes of this section, reasonable compensation for the breach of a lease may include reimbursement of the lessor’s reasonable expenses—

(a)      in giving notice of intention to cancel the lease under section

245 or 246; and

(b)      in doing anything else that the lessor has reasonably done in relation to the breach.

Facts

[5]      I  find  the  following  facts  to  have  been  established  on  a  balance  of probabilities by formal proof.  G&M is the owner and landlord of the premises at 5B Jack Conway Avenue, Manukau Auckland.  G&M leased the premises to Edmonds on 20 February 2013 for a term of five years commencing 7 December 2012.

[6]      On 7 February 2014, about 14 months after the commencement of the term of the lease, Edmonds defaulted in the payment of the rent instalments due and has paid nothing since.  On 18 March, Mr Wu, director of G&M, visited the premises in the process  of  attempting  to  collect  unpaid  rent.    During  that  visit,  Mr  Wu  was introduced by Edmonds to Neems.  A week later, Mr Wu visited the premises again and seeing Neems there asked him directly what his relationship was with Edmonds. He was told that Neems had rented the premises and taken a lease from Edmonds. This was news to G&M; it had not been approached to provide its required consent for Edmonds to part with the possession of the premises to Neems.

[7]      Soon after, Mr Wu received a call from Edmonds to seek agreement to sub- lease to Neems.  Mr Wu advised Edmonds that G&M wanted the rental arrears paid and then a new deed of lease to be completed with Neems.  Nothing resulted from this despite various attempts made by Mr Wu to obtain the outstanding rent and take back possession of the premises.

[8]      G&M made an originating application on 28 October to take possession of the land and to recover rent and reasonable costs incurred due to the failure of Edmonds and Neems to pay the agreed rent agreed and outgoings.  G&M was able to re-enter and take possession of the premises on 24 January 2015 and issued a notice of cancellation of the lease on 30 January 2015.

[9]      I accepted as a matter of fact that on 1 April 2014 Neems took over the head lease. Accordingly, I determined that Edmonds is personally liable for arrears of rent and other payments due under the lease, plus penalty interest, up to and including 31

March 2014, and that Neems is personally liable for the arrears from that date forward.

[10]     I now assess the extent of the liability of each of the two respondents, based on the evidence and submissions adduced by the applicant.

[11]     Edmonds  is  liable for arrears  in  rent  for the  period  7  February 2014  to

31 March 2014.  This is a total of $19,166.66, which consists of two months’ rent at

$9,583.22 per month.

[12]     Edmonds is also liable for payment of the Body Corporate Levy calculated at

$13,458.63 for the period of 12 February to 31 March 2014. This figure consists of:

(a)       $803.69 for one month of the 2012/2013 year, the Body Corporate

Levy of which was $9,644.33.

(b)      $11,800.02 for the 2013/2014 year.

(c)       $854.92 for one month of the 2014/2015 year, the Body Corporate

Levy of which was $10,258.99.

[13]     In  addition,  Edmonds  is  liable for Auckland  Council  Rates  calculated  at

$15,040.44 for the period from 12 February 2013 to 31 March 2014 (each rates year is from 1 July to 30 June). This figure consists of:

(a)       $2,976.50  for  five  months  (February  2013  to  June  2013)  of  the

2012/2013 year, the Council Rates of which was $7,143.60.

(b)      $5,468.08  for  nine  months  (July  2013  to  March  2014)  of  the

2013/2015 year, the Council Rates of which was $7,290.78.

[14]     Edmonds is also liable for $9,576.42 reasonable compensation for breach of the lease agreement.  This includes interest on rent arrears, the Body Corporate levy and Auckland Council Rates:

(a)      Interest on rent arrears. The interest on each month’s rent in default is  at  a rate of 14% per annum  from  the due  date to  the date of payment. Edmonds must pay a total of $3,199.53. This figure consists of:

(i)$1,673.55 for failure to pay $9,583.33 in February 2014 (15 months of interest at 14% per annum).

(ii)$1561.98  for  failure  to  pay  $9,583.33  in  March  2014  (14 months of interest at 14% per annum).

(b)Interest  on  the  Body  Corporate  Levy:  the  interest  on  the  levy payments in default is at a rate of 14% per annum from the due date to the date of payment.   Edmonds must pay $3,972.18. This figure consists of:

(i)$253.26 for failure to pay $803.69 for 2012/2013 (27 months of interest at 14% per annum).

(ii)$3,579.34  for  failure  to  pay $11,800.02  for  2013/2014  (26 months of interest at 14% per annum).

(iii)$139.58 for failure to pay $854.92 for 2014/2015 (14 months of interest at 14% per annum).

(c)      Interest on Auckland Council Rates: the interest on the rates in default is at a rate of 14% per annum from the due date to the date of payment.  Edmonds must pay $2404.71. This figure consists of:

(i)$937.44 for failure to pay $2,976.50 for 2012/2013 (27 months of interest at 14% per annum).

(ii)$1,467.27  for  failure  to  pay  $5,468.08  for  2013/2014  (23 months of interest at 14% per annum).

[15]     Neems is liable for arrears in rent for the period 1 April 2014 to 24 January

2014. This is a total of $79,185.80 which consists of:

(a)      $4,683.33, being the balance of rent due on 7 May 2014, for rent payable in the month of May 2014, less 3 payments in cash received on 14, 18 and 22 May.

(b)      $67,083.21 for seven months of unpaid rent between June 2014 and

December 2014.

(c)      $7,419.35, being rent payable in the month of January 2015, less rebate rent from vacating premises on 24 January 2015.

[16]     Neems is also liable for payment of the Body Corporate Levy calculated at

$8,549 for the period of 1 April 2014 to 23 January 2015 (10 months, the levy was

$10,258.99 that year).

[17]     In  addition,  Neems  is  liable  for  Auckland  Council  Rates  calculated  at

$6,595.85 for the period from 1 April 2013 to 23 January 2015 (each rates year is from 1 July to 30 June). This figure consists of:

(a)       $1,822.69  for  three  months  (February  2014  to  June  2014)  of  the

2013/2014 year, the Council Rates of which was $7,290.78.

(b)      $4,773.16  for  nine  months  (July  2014  to  January  2015)  of  the

2014/2015 year, the Council Rates of which was $7,159.74.

[18]     Neems is also liable for $9,576.42 reasonable compensation for breach of the lease agreement.  This includes interest on rent arrears, the Body Corporate levy and Auckland Council Rates:

(a)       Interest on rent arrears. The interest on each month’s rent in default

is  at  a rate of 14% per  annum  from  the due  date to  the date of

payment. Neems must  pay a total  of $7,264.40. This table below

explains how this amount was arrived at:

Due date	Amount owed	Time since due date	Interest accrued
May 2014	$4,693.33	12	$657.07
June 2014	$9,583.33	11	$1,229.86
July 2014	$9,583.33	10	$11,18.05
August 2014	$9,583.33	9	$1,006.24
September 2014	$9,583.33	8	$894.44
October 2014	$9,583.33	7	$782.64
November 2014	$9,583.33	6	$670.83
December 2014	$9,583.33	5	$559.03
January 2014	$7,419.35	4	$346.24
Total			$7,264.40

(b)Interest  on  the  Body  Corporate  Levy:  the  interest  on  the  levy payments in default is at a rate of 14% per annum from the due date to the date of payment. Neems must pay $1,296.60 for failure to pay

$8,549 for 2014/2015 (13 months of interest at 14% per annum).

(c)      Interest on Auckland Council Rates: the interest on the rates in default is at a rate of 14% per annum from the due date to the date of payment. Neems must pay $568.03 This figure consists of:

(i)$233.91 for failure to pay $1,822.69 for 2013/2015 (11 months of interest at 14% per annum).

(ii)$334.12 for failure to pay $4,773.16 for 2014/2015 (7 months of interest at 14% per annum).

[19]     G&M seeks costs which it says are recoverable under clause 6.1 of the Deed of Lease. The clause provides:

The Tenant shall pay the Landlord’s solicitors reasonable costs of and incidental to the preparation of this lease and any variation or renewal of any Deed recording a rent review, the Landlord’s reasonable costs incurred in considering any request by the Tenant for the Landlord’s consent to any matter contemplated by this lease, and the Landlord’s legal costs (as between solicitor and client) of and incidental to the enforcement or attempted enforcement of the Landlord’s rights remedies and powers under this lease.

[20]     Rule 14.6(e) of the High Court Rules provides that the court may order a party to pay indemnity costs if the party claiming costs is entitled to indemnity costs under a contract or deed.  But r 14.6(1)(b), which permits the Court to order payment of costs “reasonably incurred”, requires that indemnity costs are determined with reference to actual costs, but may be less than the actual costs if the Court considers the actual costs were not reasonably incurred.2

[21]     In accordance with the contractual provisions, G&M is entitled to indemnity costs of $37,070.25 for 92.1 hours at a rate of $350 per hour including GST.  This

figure is calculated as follows:

Activity	Hours	Cost
1.          Notice to tenants (3 July 2014 to 17 July 2014)
Attendances to obtain instructions and details	2	$700
Preparation of notice to be sent to each tenant, which included traversing prior correspondence and the assessment of documentation.	2.5	$875
Correspondence with client the lawyer for Neems	0.7	$245
2.          Court proceedings initiated (6 August 2014 – 28 October 2014)
Attendances  to  receive  instructions  from  plaintiff  to  prepare notice of opposition and affidavit in reply to Mr Neem’s application for orders of relief against cancellation.	3.8	$1,330
Preparation of court application, plaintiff ’s affidavit and notice of opposition.	9.6	$3,360

2      Black v ASB [2012] NZCA 384 at [77].

Correspondence  with  and  service  to  Mr  Neem’s  lawyer,  and attempted correspondence with and service to Edmonds.	3.6	$1,260
Telephone attendances	0.9	$315
3.          Continued Court Proceedings (1 December 2014 to 30 January 2015)
Attendances including five meetings for  instructions obtaining information and for checking and signing affidavit on 30 January 2015.	5.6	$1,960
Attendance at site inspection of the premises	2.5	$875
Preparation of affidavit in reply following inspection.	9.8	$3,430
Correspondence with lawyer for Neems, inspectors and plaintiff	16.5	$5,775
Telephone attendances	1.9	$665
4.          Continued Court Proceedings (2 February 2015 to 13 March 2015)
Attendances	0.6	$210
Preparation of: bundle of documents, submissions, cost schedules, preparation of second affidavit of service on Edmonds, and memorandum of Court on Mr Neem’s solicitor application.	18.2	$6,370
Court appearance	2	$700
Correspondence	3.6	$1,050
Telephone attendances	0.4	$140
5.          Court Appearance (17 March 2015)
Preparation of memorandum as to the apportionment of claims, memorandum as to costs, letter to court and filing. Anticipated preparation of court orders for sealing and issue.	6	$2,100
Court appearance (10:00am to 11:30am)	1.5	$525
Correspondence with court to file papers and reply	0.3	$105
Telephone attendances	0.1	$35
Total	92.1 hours	$32,235.00
GST on total at 15%	$4,832.25
TOTAL	$37,070.25

Item	Cost
Photocopying (including bundle)	$166.75
Service fee on notices to two respondents	$333.50
High Court filing fee	$740.00
LIM from Auckland Council	$365.00
Filing fee on without notice application for substituted service	$110.00
Sealing fee on substituted service order	$50.00
Search of title	$10.01
Service fee on Edmonds (first service)	$187.11
Service fee on Edmonds (second service)	$149.50
Binding casebook and items	$34.99
Sealing order	$50
Total	$2,027.86

Incidence of costs

[23]     Mr Rooke has provided the Court with a memorandum apportioning the costs as between the respondents on the basis that all of the applicant’s costs related to Mr Neems’s proceeding, CIV-2014-404-2773, should be met by Mr Neems alone and that the balance of the costs should be apportioned equally between the respondents in CIV-2014-404-3031.

Orders in relation to the property and the sums owed by the respondents

[24]     I make the following orders in relation to the property at 5B Jack Conway

Avenue, Manukau City:

(a)       G&M Investment is permitted to take possession of the premises at

5B Jack Conway Avenue, Manukau City and I direct that Geoffrey

Allan Neems and Whiti Raymond Edmonds, also known as Reginald

Edmonds,   shall   immediately   vacate   the   premises   and   deliver possession to G&M, and not re-enter the premises.

(b)Whiti Raymond Edmonds, also known as Reginald Edmonds, shall pay G&M Investment Limited the sums of $47,665.73 in rent, rates and body corporate fees up to the date of cancellation and $9,576.42 in interest accrued as a result of failure to pay rent, rates and body corporate fees.

(c)      Geoffrey Allan Neems shall pay G&M Investment Limited the sums of $94,330.65 in rent, rates and body corporate fees up to the date of cancellation and $9,129.03 in interest accrued as a result of failure to

pay rent, rates and body corporate fees.

Costs

[25]     Geoffrey Allan Neems shall pay G&M Investment Limited’s costs in the

following sums:

(a)       In   CIV-2014-404-2773,   the   sum   of   $19,159.00   together   with disbursements of $365.00.

(b)In   CIV-2014-404-3031,    the    sum    of    $8,955.62   together    with disbursements of $831.43.

[26]     Whiti  Raymond  Edmonds,  also  known  as  Reginald  Edmonds,  shall  pay G&M Investment Limited’s costs, in CIV-2014-404-3031, in the sum of $8,955.63 together with disbursements of $831.43.

…………………………….

Toogood J