Outdoor Action & Adventure Limited v The New Zealand Transport Agency
[2019] NZHC 123
•24 December 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2018-404-2764
[2019] NZHC 123
UNDER rule 7.53 of the High Court Rules 2016 IN THE MATTER OF
an application for injunction
BETWEEN
OUTDOOR ACTION & ADVENTURE LIMITED
Plaintiff
AND
THE NEW ZEALAND TRANSPORT AGENCY
First Defendant
MINISTER OF LAND INFORMATION
Second Defendant
Hearing: 21 December 2018 Counsel:
R D Butler, J Nedeljkov & I B Kwan-Parsons for Plaintiff J A McMillan & C M Sheard for First Defendant
ENC Lay & K F Gaskell for Second Defendant
Judgment:
24 December 2018
Reasons:
12 February 2019
REASONS JUDGMENT OF DUFFY J
This judgment was delivered by me on 12 February 2019 at 3.30 pm pursuant to
Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Solicitors/counsel:
Anderson Creagh Lai, Auckland R D Butler, Barrister, Auckland Kensington Swan, Auckland
OUTDOOR ACTION & ADVENTURE LIMITED v THE NEW ZEALAND TRANSPORT AGENCY [2019]
NZHC 123 [12 February 2019]
[1] The plaintiff is a tenant of premises situated on land owned by the Crown (the rented premises) and occupies those premises under a lease from the Crown (the lease).
[2] The lease requires all disputes between the landlord and tenant to be resolved by arbitration.1
[3] The plaintiff contends that the Crown and its agent the New Zealand Transport Agency (NZTA) are interfering with the covenant for quiet enjoyment contained in the lease. Accordingly, the plaintiff sought interim relief in this Court against those parties pursuant to the Arbitration Act 1996.2
[4] On 24 December 2018, I refused to grant interim relief to the plaintiff. By that time the scope of the claim for interim relief before me had become reduced to restraint on the Crown and NZTA from proceeding with proposed roadworks on Rosedale Road, which were in the near vicinity of the rented premises. Those roadworks form part of the proposed public work for the Northern Corridor Improvements Project. This project covers the area of State Highway 18 between Albany Highway and Constellation Drive; and State Highway 1 between Upper Harbour Highway and Oteha Valley Road. The project is the northern most link in the western ring route, which is one of the government’s seven Roads of National Significance and is one of the government’s priority transport projects in Auckland.
[5]My reasons now follow.
Facts
[6] The background to this litigation is that the property on which premises stand was previously the subject of an acquisition by the Crown under the Public Works Act 1981.
[7] The plaintiff’s property was acquired as a public work that was required for the Northern Corridor Improvements Project. Discussions between the Crown and the
1 See cl 43 of the lease.
2 See Clause 9 Schedule 1 of the Arbitration Act 1996.
plaintiff on the quantum of compensation to be paid for this acquisition are ongoing. After the acquisition, the Crown and the plaintiff entered into a short-term arrangement which permitted it to remain in occupation of the premises.3 Then on 2 November 2018 this arrangement was substituted by the present lease, which expires in May 2019.
[8] Unlike the earlier arrangement, which expressly excluded the plaintiff from making claims for any disturbance to its rights to occupy the premises, the present lease is a standard Auckland District Law Society lease which expressly includes a covenant for quiet possession. Clause 31.1 of the lease provides that:
The tenant paying the rent and performing and observing all the covenants and agreements expressed and implied in the lease shall quietly hold and enjoy the premises throughout the term without any interruption by the Landlord or any person claiming under the Landlord.
Argument
[9] The plaintiff’s argument in short is that the proposed road works on Rosedale Road will be so disruptive as to be in breach of the covenant of quiet enjoyment. Hence the plaintiff wants the defendants to be restrained from carrying out the proposed road works. Whilst NZTA had not yet begun the proposed roadworks, the plaintiff contends the Court can act to prevent the anticipated breach of the covenant of quiet enjoyment that will necessarily occur once the roadworks begin.4
[10] The plaintiff submits that the fact that the proposed roadworks and their accompanying disruption occurs outside the premises does not preclude a breach of the covenant of quiet enjoyment. In this regard, the plaintiff relies upon Kalmac Property Consultants v Delicious Foods Ltd.5
[11] The roadworks were to be carried out by NZTA. Much of the argument from NZTA focused on whether NZTA was separate from the Crown, and therefore its actions could not full within the scope of the landlord’s liability under cl 31.1 of the
3 Section 45 of the Public Works Act 1981 permits the Crown to grant a lease or tenancy of land that is held for a public work.
4 See Barter Card New Zealand LP Ltd v Lunn [2018] NZHC 1029.
5 Kalmac Property Consultants v Delicious Foods Ltd [1974] 2 NZLR 631 (CA) at 637.
lease. The Crown also argued that given NZTA’s separation from the Crown whatever disturbance NZTA might create by the roadworks did not engage cl 31.1.
[12] NZTA is created by s 93 of the Land Transport Management Act 2003. The objective and functions of NZTA are set out in ss 94 and 95 respectively. NZTA is also a Crown entity under the Crown Entities Act 2004. Under s 7 of the Crown Entities Act NZTA is a Crown agent, which means it must give effect to government policy when directed by the responsible Minister.
[13] NZTA and the Crown essentially argued that the statutory role NZTA has under those statutes is sufficient to separate NZTA and the proposed roadworks from the Crown. Accordingly, there could be no complaint about the proposed roadworks breaching the covenant of quiet possession because the actions of NZTA were outside the Crown’s obligations under the lease. The Crown and NZTA advanced a supplementary argument to the effect that the lease and the covenant for quiet enjoyment should be read against the factual matrix in which the parties came to execute the lease. This was said to be enough to warrant reading down the language of the covenant to exclude disruption caused by the proposed roadworks, because they were the very reason for the acquisition of the premises by the Crown.
Discussion
[14] The matter was before me for interim relief only. I was satisfied that the circumstances were appropriate for the Court to entertain the application.6 The grant of such relief under the Arbitration Act requires the Court to assess whether there is a serious argument to be heard and where the balance of convenience lies. It is generally understood that interim relief in an arbitral context is no more than a matter of the parties’ private interests, and therefore, unlike common law injunctive relief, the Court is constrained from taking account of broader interests beyond the parties.7
[15] I considered the plaintiff had raised a serious question for argument regarding whether the Crown could be restrained from breaching the covenant of quiet
6 See Prince & Partners Trustee Company Limited v Samnic Forest Management Limited [2018] NZHC 2979 at [11] to [15]; Green Acre Franchise Group Ltd v Reube [2014] NZHC 403.
7 Safe Kids in Daily Supervision Ltd v McNeill [2012] 1 NZCR 74 (HC) at [36] and [37].
possession for the lease of premises that it had willingly and knowingly entered into with the plaintiff after having acquired the premises under the Public Works Act for roading purposes.
[16] I acknowledge that the proposed roadworks will not be undertaken by the Crown, but by NZTA. However, NZTA does not own the land on which the proposed roadworks will be done. They will extend the existing roadway. That road and the land on which it rests is not owned by NZTA.
[17] Section 44 of the Government Roading Powers Act 1989 (GRPA) provides that all roads that are not vested in other authorities, such as territorial authorities, are vested in the Crown. Here the proposed roadworks are part of a project to complete one of the government’s seven Roads of National Significance, so there is no question that the project involves a government road. Whilst the topic was not directly addressed by any of the parties, everything pointed to the Crown being the owner of the existing road, as well as the proposed roadworks.
[18] I was referred to s 61(1) of the GRPA which provides that NZTA has “sole control” over state highways:
Sole powers of control for all purposes including construction and maintenance of all state highways under the (Government Roading Powers Act) and any such powers [are] exercisable only pursuant to [that] Act.
[19] However, when s 61 of the GRPA is looked at in its entirety I considered that the reference to “sole powers of control for all purposes…” in s 61(1) must be read in the context of the balance of s 61. When read in this way s 61(1) deals with the authority given to NZTA vis-a-viz persons other than the Crown. Accordingly, the character of the “sole control” which s 61 vests in NZTA is not strong enough to derogate from the Crown’s rights of ownership of the subject land. Further, such reading of s 61 is the only way to read s 61 in a way accords with s 44 and with s 46(5) of the GRPA, which gives the Minister full power of control of all Government roads. In short, I considered the combined effect of s 44 and 46(5) acts to ensure the Crown retains full rights of ownership and control of Government roads, which must include the subject land and roads on which the proposed works were to be done.
[20] Accordingly, despite the degree of separation the relevant legislation may provide between NZTA and the Crown that seemed to me to be only in relation to the statutory functions vested in NZTA, which do not include ownership of Government roads or the land on which those roads are built. In my view NZTA acts as agent for the Crown when it comes constructing roads on land that is vested in the Crown. Whilst NZTA may have responsibility for the management of those roads their ownership is held by the Crown.
[21] If the land on which the proposed roadworks will be carried out is vested in the Crown (which seems is probably the case) then arguably the Crown as owner of that land can control the activities carried out on it, including whether to permit road works to commence or not. The powers vested in the Minister pursuant to s 48 of the GRPA appear to be sufficiently wide to accommodate this. Further, such power may be explained as one of the incidental powers of ownership of land recognised by the common law which, therefore, does not require a statutory basis. Viewed in this way there is a serious argument that the Crown can control whether the proposed roadworks proceed or not, and if they do, when they proceed.
[22] The plaintiff referred me to case-law where a landlord’s interference with the covenant of quiet enjoyment could arise from the landlord permitting such interference to occur on a neighbouring property which the landlord owned.8 Neither the Crown nor NZTA disputed there was close proximity between the premises and the proposed roadworks, nor the effect of the case-law on which the plaintiff relied.
[23] Regarding the subsidiary argument as to whether clause 41 could apply here, whilst there may be room for arguing that the language of clause 41 should be read down to exclude its application to the present circumstances, there is equal force in the argument that the express inclusion of a covenant of quiet enjoyment indicates that both parties to the lease were aware the effect of such a clause, and happy for it to form part of the terms of the lease.
[24] The proposed roadworks and their proximity to the leased premises suggested to me that it was seriously arguable on the facts that the proposed roadworks would be
8 See Kalmac Property Consultants v Delicious Foods Ltd [1974] 2 NZLR 631 (CA).
so disruptive to the plaintiff’s business that there could be a breach of cl 41 if those works proceeded.
[25] Accordingly, I was satisfied that there was a serious question to be tried in relation to the threatened breach of cl 41 of the lease.
[26] However, I was not satisfied that the balance of convenience favoured the granting of interim relief. The evidence established that given the general disruption the roadworks would cause to general traffic flows, the early January 2019 period when many people are on holiday was the best if not the only time for the roadworks to be done. The evidence showed that if they occurred at any other time of the year serious traffic disruption was likely to occur. Thus, if they did not proceed this January they would have to wait until January 2020 to commence. Such delay would cause significant inconvenience to the Crown. This was a weighty factor against the grant of interim relief.
[27] Further, and more importantly, it seemed to me that the plaintiff had failed to show that damages were not an adequate remedy. The plaintiff has occupied the premises for some years. It asserts that the January summer holiday period is when it does its best trading. If that is so it should be borne out by the plaintiff’s trading history and historical financial records. If the roadworks did discourage customers from visiting the premises during January 2019 that should be revealed in reduced sales in comparison to previous years for the same period. Financial experts should be able to examine the plaintiff’s trading records and estimate the extent to which there is a fall- off in sales over January 2019 in comparison with the previous years. There is no reason to doubt that such loss can be established, and if it is the Crown will be able to make good that loss.
[28] There is less of a risk to goodwill in the present circumstances because the premises will only be occupied until May 2019. It will be obvious to potential customers that any present disruption due to roadworks is temporary insofar as the plaintiff will ultimately be leaving the locality for new premises.
[29] Accordingly, I was satisfied that any harm the plaintiff might suffer was financial and able to be remedied by an award of damages. On the other hand, I could see that to delay the proposed roadworks until the lease expired would essentially delay their commencement until January 2020. The Crown as owner of the land on which the road works are to be constructed has a real and significant interest in having them completed as soon as possible. It followed that I found the balance of convenience weighed against interim relief to prevent the proposed roadworks proceeding.
[30] Whilst I rejected the plaintiff’s application for interim relief on the merits, I was also concerned about the jurisdictional basis for granting injunctive relief.
[31] In my view, the Crown as owner of roads and their underlying land can control the activities of persons on its property. This would include the activities of NZTA on government roads where those activities threatened a breach of contractual obligations the Crown owed to third parties.
[32] In general, the threat of a contractual breach may be cured by restraining the potential offender from permitting the breach to occur. However, any restraint on the Crown by injunctive relief is precluded by s 17 of the Crown Proceedings Act 1950.9 The Crown owed the plaintiff the obligation not to interfere with the plaintiff’s quiet enjoyment of the premises. However, any such interference could not be the subject of injunctive relief against the Crown.
[33] The Crown and NZTA had argued that NZTA’s activities in carrying out the proposed roadworks were separate from and independent of the Crown. I had difficulty accepting that argument given the Crown’s ownership of the subject roads on which those works were to be done. However, there was no need to resolve this question. The problem the plaintiff faced was that NZTA was not a party to the lease. If NZTA was entirely independent of the Crown, the Crown’s obligations under the lease did not impact on NZTA, and for this reason no injunction could issue against NZTA. On the other hand, if NZTA was acting as the Crown’s agent in carrying out the proposed roadworks and in doing so NZTA was going to disturb the plaintiff’s
9 See discussion on s 17 of the Crown Proceedings Act in Burrows v Police [2018] NZHC 2088.
quiet enjoyment of the premises to injunct NZTA would effectively be to injunct the Crown. Accordingly, I very much doubted that injunctive relief would be ever available to the plaintiff.
[34]The parties have leave to file memoranda on costs.
Duffy J
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