Nuttall Properties Limited v Corcoran

[2023] NZHC 2522

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-562

[2023] NZHC 2522

BETWEEN

NUTTALL PROPERTIES LIMITED

Plaintiff

AND

MICHAEL DENIS CORCORAN

Defendant

Hearing:

31 August 2023

Appearances:

C M Hanafin for Plaintiff

No appearance for Defendant

Judgment:

8 September 2023

JUDGMENT OF ASSOCIATE JUDGE LESTER

NUTTALL PROPERTIES LIMITED v CORCORAN [2023] NZHC 2522 [8 September 2023]

[1]    Nuttall Properties Limited (Nuttall) is the owner  of  an  industrial  site  at 314 Port Hills Road, Christchurch. The defendant, Michael Corcoran (Mr Corcoran) is the sole shareholder and director of ERP Group Limited (in liquidation) (ERP).

[2]    Nuttall’s site is made up of three Areas being Areas A, B and C. Area B consists of a large warehouse building and a small yard space. ERP leased Area B.

[3]    ERP ran a waste disposal company and required the premises to store waste bales until they could be disposed of in a soon to be developed waste to energy plant (with whom ERP allegedly had a supply contract).

Timeline

[4]A brief timeline is as follows:

§   25 March 2021: Nuttall’s real estate agent emails Mr Corcoran an Agreement to lease Area B (the Agreement).1 Mr Corcoran is named as guarantor on the first  page  of  the  Agreement  which  he  signed  both  as director of ERP (as tenant) and as personal guarantor. However, at some point the guarantor section of the Agreement has been crossed out but not initialled.

§    29 March 2021: Mr Corcoran by email confirms that he stands behind any deal that he makes.

§    29 March 2021: Agreement signed by Nuttall.

§    30 March 2021: Lease commencement date. ERP starts moving bales of waste into the warehouse located on Area B. Lease term is 10 months.

1      The Agreement required the tenant to enter a formal lease on the Auckland District Law Society form. Notwithstanding that, here a lease was not completed. The Agreement provided the parties were bound by the ADLS terms as if the lease had been completed.

§    November 2021: Nuttall’s insurance company advises that insurance over Area B would lapse unless all waste bales stored at Area B are removed by 29 January 2022 (the expiry date of the lease).

§    2 December 2021: While not strictly necessary, Nuttall gives ERP notice it is to vacate Area B with all bales removed by the expiry of the lease.

§    11 January 2022: Mr Corcoran contacts the real estate agent for Nuttall saying he could not vacate the building by 30 January 2022 and hoped to extend the lease.

§    26 January 2022:   It was clear by this time that Mr Corcoran was not in   a position to move the thousands of bales out of Area B before the expiry of the lease.

§    26 January 2022: Nuttall agrees to Mr Corcoran moving the bales from Area B onto an adjacent outside yard area known as Area A. Area A was not part of ERP’s lease.

§    26 January 2022 – 4 April 2022:  Mr Corcoran relocates the bales to  Area A.

§    1 May 2022: ERP placed in liquidation.

[5]    In blunt terms, Mr Corcoran walked away from the problem created by the thousands of waste bales being left on Area A upon the liquidation of ERP. Some idea of the scale of the problem created by Mr Corcoran and his company, from the abandonment of the bales, is gained  from  the  fact  that  Nuttall,  between December 2022 and July 2023, incurred the cost of $2,831,007.90 (including GST) in removing the bales.

[6]    As noted, ERP is in liquidation. The liquidator has disclaimed the lease. As at the date of liquidation, ERP owed Nuttall rental of $53,859.62 (including GST) for outstanding rent and outgoings in relation to Area B.

[7]    Nuttall sued Mr Corcoran under his Guarantee for unpaid rent, in trespass for the cost of removing the bales, and for loss of rent on Area A while the bales were temporarily located there.

Guarantee

[8]    As noted, the unusual feature of this case is that while Mr Corcoran understood he had to provide a guarantee (he is named as guarantor and signed as guarantor on the  Agreement)  for  reasons  that  are  unexplained,   the   guarantee   section   of the Agreement had a line drawn through it. How that came to happen is unknown. The apparent deletion of the guarantee clause was not initialled.

[9]    Nuttall seeks the Agreement be rectified to reinstate the deleted guarantee clause, saying the agreement between the parties was that Mr Corcoran would provide a guarantee and that if the uninitialed line through the guarantee clause deprives the guarantee of effect,  that  would  mean  the  written  Agreement  does  not  reflect  the agreement of the parties.

[10]   As noted, after Mr Corcoran signed the guarantee he provided an email to Nuttall saying that he personally stood behind any deal that he made. At no time has Mr Corcoran asserted he is not liable under the guarantee or that the line through the guarantee clause in the Agreement reflected the true agreement between the parties.

[11]   I am satisfied it is appropriate that the Agreement be rectified (if that is necessary) so as to reinstate the guarantee clause that Mr Corcoran guarantees to Nuttall the obligations of ERP under the lease.2 Accordingly, there is an order in terms of the first cause of action in the amended statement of claim, that is, the rectification cause of action.

[12]   With the rectification of the Agreement to record the guarantee Mr Corcoran agreed to give, Nuttall seeks judgment under the guarantee for the unpaid obligations owed by ERP. The guarantee extends to all the obligations of ERP under the

2      I say if such is necessary as, without knowing when and why a line was drawn through the guarantee clause and whether the line has any contractual effect, cannot be finally resolved.

Agreement; those obligations include rent and outgoings which, as at liquidation, totalled $53,859.62.

[13]   Accordingly, there is judgment against Mr Corcoran in the sum of $53,859.62 together with interest at the Agreement’s default rate of four per cent above the BNZ’s trading bill rate from the date of liquidation until payment, together with costs on     a solicitor-client basis pursuant to the Agreement.

Trespass

[14]   The terms upon which ERP was entitled to move bales of waste onto Area A was addressed to Mr Corcoran personally. The email was unequivocal stating:

We are not in any way agreeing to a lease of that area, or giving you or ERP any rights to keep those items there beyond the expiry of your lease. For avoidance of doubt, the requirement to vacate all areas of land we own from the expiry of your lease still applies, and we require that you remove all your items entirely from the land as an urgent matter. We are just agreeing to this temporary relocation as an urgent interim measure to mitigate health and safety risks identified by the insurers, and to reduce the potential harm that might otherwise be suffered as a result of ERP’s activities and breaches of the lease. We reserve all potential rights and remedies in relation to these matters, including to pursue them for any losses costs or damages we suffer.

[15]   What is clear from Nuttall’s email to Mr Corcoran is that ERP was not being given any formal right to store the bales on Area A. The email recorded, for the avoidance of doubt, the requirement to vacate all areas of land owned by Nuttalls from the expiry of the lease still applies.

[16]   The relocation of the bales was done personally by Mr Corcoran.3 Given just relocating the bales from Area B to Area A took until 4 April 2022, it is clear beyond any doubt that Mr Corcoran must have known he had no possible way of complying with the condition attaching to the above consent, that is, that all bales had to be removed from Areas A and B of Nuttall’s land by 29 January 2022.

[17]   Nuttall submits that Mr Corcoran was the tortfeasor in this case.   It  was    Mr Corcoran who personally caused the bales to be moved to Area A in circumstances

3      It seems Mr Corcoran may have had assistance at times from another person but if so, they were acting under Mr Corcoran’s direction.

where Mr Corcoran was on notice that he and ERP had no legal right to move and store them there after 29 January 2022. The reality is that any permission ERP had to move bales to Area A in the short time between the consent of 26 January 2022 and the expiry of the lease on 29 January 2022, was conditional upon all bales being removed from all of Nuttall’s land by the expiry of the lease. It was also clear beyond doubt that Mr Corcoran could never meet that condition. Indeed, the condition made it inevitable that a trespass would occur. Be that as it may, Mr Corcoran cannot rely on a consent subject to a condition which he knew he could never satisfy. In any event, this issue can only be relevant to what must be a very small number of bales out of the thousands eventually moved by ERP pursuant to the 26 January 2022 consent as opposed to those moved after the consent had expired. Clearly, the consent could not be relied on after the expiry of the lease, given the consent was subject to the condition that all bales be removed by the expiry of the lease. Again, this highlights that the condition could never be complied with by Mr Corcoran but again, that is a matter for him. Mr Corcoran simply did not have the resources to remove the bales.

[18]   I am satisfied that Mr Corcoran is liable in trespass as he personally moved the bales onto Area A after the conditional consent came to an end or at a time when he knew beyond any shadow of a doubt that he and/or ERP could never comply with the conditional consent.

[19]   It is uncontested that Nuttall is the owner of Area A. Mr Corcoran moved the bales onto Area A and abandoned them, having no legal right to move them there after the expiration of the lease or, he shifted a very limited number at a time when it could not be heard to assert that he had consent when the consent was subject to a condition he knew he could never satisfy.

[20]   This is not a negligence case where traditionally “assumption of responsibility” is required to lift the corporate veil.4 Company directors who have committed intentional wrongs can be liable for their wrongs. That is so when a director has

4      Stephen Todd (ed) Todd on Torts (9th ed, Thomson Reuters, Wellington, 2023) at [5.8.2].

committed a wrong in their capacity as a natural person even though the wrong also attaches to the company procured to commit the wrong by that director.5

[21]   In the circumstances of this case, Mr Corcoran could not assert he is somehow acting only as director of ERP. He knew ERP did not have consent to relocate the bales after the expiry of the lease – the 26 January 2022 email being clear that at the expiry of the lease, all of Nuttall’s land had to be vacated yet he continued to do so. It would be a rogue’s charter if directors could intentionally commit torts such as trespass and then shelter behind the assertion they were only acting as directors of their company in doing so.

Damages for trespass

[22]   Nuttall incurred $2,831,007.90 (including GST) for the removal costs. This amount has actually been paid out by Nuttall. Nuttall had every incentive to achieve the removal of the bales at the lowest possible cost.

[23]   I am satisfied that Mr Corcoran does not have a defence to this aspect of Nuttall’s claim which is in trespass.

[24]   Accordingly, there is judgment against Mr Corcoran in terms of the third cause of action.

[25]   A further aspect of Nuttall’s claim is that Nuttall was unable to gain rental income from Area A until the bales were removed. That loss is a further $92,288.70. This claim is expressed to be plus GST. If Nuttall wishes to seal judgment for a plus GST figure, I will need to receive submissions in respect of why this damages    claim should be plus GST. If Nuttall does not wish to pursue GST on this aspect of the claim, Nuttall may seal judgment for the GST exclusive amount.

Nuttall is entitled to costs on a 2B basis in respect of this aspect of its claim given the solicitor/client costs clause in the lease does not apply to this cause of action. Counsel may elect to simply claim 2B costs for the proceeding as a whole to avoid the costs

5      Winchester International (NZ) Ltd v Cropmark Seeds Ltd, CA 226/04, 5 December 2005 at [52]-[57].

of providing details to support the indemnity costs award on the first cause of action and given the size of the judgment as a whole. If counsel seek indemnity costs on the first cause of action, a memorandum setting out the relationship between the two costs claims, is to be filed within five working days.

Associate Judge Lester

Solicitors:
MDS Law, Christchurch (for Plaintiff)