Pakuranga Retail Investments Ltd v Casa Tua Ltd

[2015] NZHC 2319

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-807 [2015] NZHC 2319

BETWEEN

PAKURANGA RETAIL INVESTMENTS

LTD Applicant

AND

CASA TUA LTD Respondent

Hearing:	23 September 2015
Counsel:	D K Wilson for Applicant D J Rooke for Respondent
Judgment:	23 September 2015

JUDGMENT OF BREWER J

Solicitors:           Mike Lucas Law Firm (Auckland) for Applicant

David Rooke (Auckland) for Respondent

PAKURANGA RETAIL INVESTMENTS LTD v CASA TUA LTD [2015] NZHC 2319 [23 September 2015]

[1]      The applicant,  Pakuranga,  is  the owner  of shops  3  and  4  (including  the courtyard area in front of shop 4) at 190 Fisher Parade, Pakuranga, Auckland.  The respondent,  Casa Tua,  leases  those  premises  and  carries  on  business  there as  a restaurateur.

[2]      On 10 April 2015, Pakuranga, by way of originating application, applied for possession of the premises on the ground of failure to pay rent.   Casa Tua filed a notice of opposition.  According to the affidavits of Mr Isherwood for Pakuranga, arrears of rent and operating expenses as at 8 June 2015 totalled $24,940.18.

[3]      It is clear from the notice of opposition and from the affidavit of Mr Austin for Casa Tua sworn  on  22 June 2015 that  it was  the Court’s  ability under the Property Law Act 2007 to grant relief against cancellation of a lease which was looked to.  The notice of opposition advised a proposal to make an arrangement to clear the debt in full within a short time.  Mr Austin, in his affidavit, endorsed the proposal.

[4]      Pakuranga took a responsible position.   Mr Wilson advises that Pakuranga was aware of the exercise by the Court of its jurisdiction to grant relief on conditions such as in the situation in Grant v Hannay.1   So, Pakuranga entered into negotiations with Casa Tua and reached a settlement agreement of the sort that might have been ordered by the Court in granting relief against cancellation of a lease.

[5]      A  copy  of  the  settlement  agreement  is  annexed  to  the  affidavit  of Mr Isherwood sworn on 22 September 2015.  Under the agreement, the application for possession was to be adjourned at the behest of the parties while a payment regime repaid the arrears.  The gist of the settlement agreement was that Casa Tua would keep rental payments and payments of outgoings up to date and in addition pay the arrears by weekly payments of $1,000 each, with the first such payment being on 29 June 2015.

[6]      A condition of the settlement agreement was that Casa Tua provide a signed consent to order for possession which could be used in Court in support of the

1      Grant v Hannay (2010) 11 NZCPR 283.

application for an order for possession in the event of Casa Tua defaulting on the settlement agreement.  The consent to an order for possession was signed on behalf of Casa Tua on 24 June 2015.

[7]      Unfortunately, Casa Tua defaulted on the terms of the settlement agreement. Mr Isherwood deposes in his affidavit of 22 September 2015 that as at 31 August

2015 Casa Tua was in arrears by $10,723.83.  Only six out of 10 weekly payments of

$1,000 had been paid.  Further, the rental and outgoings payments due on 1 August

2015 had not been paid.  The total debt as at 22 September 2015 was $19,515.24. The schedule attached to Mr Isherwood’s affidavit shows a patchy and inconsistent series of payments that have little to do with the settlement agreement.

[8]      Nevertheless, Casa Tua resists the Court granting the order for possession of land.   Mr Rooke for Casa Tua invokes the Court’s jurisdiction under the Property Law Act, notwithstanding the consent to the order for possession of land.  Mr Austin, in an affidavit of 22 September 2015, explains why Casa Tua has been in arrears.  He points, as he did in his previous affidavit, to the winter period being the lowest period of return for the restaurant business.   However, he deposes that Casa Tua’s group functions initiative is looking good  for the whole of September and that further payments can be made.  Casa Tua is looking for a further structure in which to pay the arrears.  In essence, for the Court to order a very similar regime to that agreed back in June by Pakuranga.

[9]      I  did  raise  with  Mr  Rooke  whether  the  settlement  agreement  and  the associated consent to the order for possession of land amount to Casa Tua waiving its rights under the Property Law Act to apply for relief in these circumstances.  I wondered whether estoppel principles apply here.   Mr Rooke has not had time to consider that matter and Mr Wilson does not seek to rely on it.

[10]     Mr  Rooke’s  submission  is  that  the  Court  has  a  continuing  statutory jurisdiction to grant relief and should do so in accordance with equitable principles. One of those principles is that relief should be ordered if granting an order for possession of land with the concurrent cancellation of the lease would not be a proportionate response to the default by the lessee.  In this case, Mr Rooke submits

that  against  an  annual  payments  obligation  of  around $70,000,  to  be  in  arrears between $13,000 and $19,000 is not a great default.  To grant possession and cancel the lease would result in Casa Tua suffering enormous distress.  It has paid hundreds of thousands of dollars to build up its restaurant business.  There is optimism that as the warmer weather approaches, payments at the rate of $1,000 per week could again be made, and to deprive Casa Tua both of its capital resource and of its business over arrears of between $13,000 and $19,000 (depending upon who is correct in their calculations) would be disproportionate.

[11]     Mr Rooke accepts that the case law focuses relief on situations where either arrears of rent have been completely brought up to date or where there is reasonable certainty that they can be.  He accepts that his client has a limited case to make in the circumstances  before  me.    Mr  Rooke  suggested  that  perhaps  a  proportionate response might be to extend the period of possession of land to a defined date to allow Casa Tua to try to sell the business.  That might, Mr Rooke submitted, be a commercially justifiable option.

[12]     As I read the cases, a landlord is not to be deprived of the possession of his land where rent is in arrears unless there is a reasonable certainty that the arrears can be paid within a reasonable period of time.  The arrears in this case cannot be paid within a reasonable period of time and there is no reasonable certainty attaching to the ability of Casa Tua to make the payments it has offered to make.   It has been unable to make those payments in the recent past.  The optimism as to an upturn in business deposed to by Mr Austin in his affidavit of 22 September 2015 repeats the optimism he displayed in his affidavit of 22 June 2015.

[13]     In  my view,  Casa Tua  has  had  its  chance.    It  entered  into  a  settlement agreement on a reasonable basis and provided a consent to the application for order for  possession  of  land  in  the  event  that  it  defaulted  on  the  agreement.    It  has defaulted on the agreement.  There is no basis now for me denying Pakuranga access to its property.

[14]     Mr Wilson has confirmed that all that is sought is the order for possession and the accompanying order for cancellation of the lease.  Pakuranga is not in this proceeding seeking orders for rent and costs.

[15]     Accordingly, I grant the application for the order for possession of premises and direct the immediate cancellation of the lease.  That means that the parties will now have to negotiate the practical handover details.

[16]     I reserve leave for Pakuranga to come back to the Court for further and ancillary orders if there is some difficulty in re-taking possession of the premises.

[17]     Pakuranga is entitled to scale costs on the application, and I award these on a

2B basis.  If there is disagreement as to the calculation of the costs under the scale then that disagreement can be resolved by the Registrar.

Brewer J