Patel v Shah - [2020] NZHC 3235

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-2363

[2020] NZHC 3235

UNDER Section 253 of the Property Law Act 2007

IN THE MATTER

of an application for an order preventing the proposed cancellation of a sublease

BETWEEN

NIMESH PATEL and PRITI PATEL

Plaintiffs

AND

BHAVNA SHAH and MINU SHAH

Defendants

Hearing: 7 December 2020

Appearances:

K P McDonald for the plaintiffs M M Gunawan for the defendants

Date of judgment:

8 December 2020

JUDGMENT OF PALMER J

This judgment was delivered by me on Tuesday 8 December 2020 at 4.00pm.
Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Solicitors:
Kevin McDonald & Associates, Auckland Patel Nand Legal, Auckland

PATEL v SHAH [2020] NZHC 3235 [8 December 2020]

Context

[1] In 2016, the Patels entered a management agreement with the Shahs in relation to a dairy in Lake Road, Takapuna, Auckland. They have been working there, and living in the flat above the shop with their young son, since then. They say the management fee/rental terms of the agreement are exploitative. On receiving legal advice they have stopped paying rent to manage the business. There is a dispute about whether the agreement is a licence or a lease.

[2] The Shahs lease the dairy from the owners, the trustees of the Thompson Commercial Trust, who were apparently not told about the agreement with the Patels but have recently found out about it. The owners are now in dispute with the Shahs, alleging the Shahs are in breach of the head lease for illegally sub-leasing the dairy. The owners are requiring the Shahs to fulfil maintenance and repair obligations. The owners have served a notice on the Shahs under s 246 of the Property Law Act 2007 (PLA). The owners apparently have a good relationship with the Patels and have agreed to lease the premises to them, subject to cancellation of the lease between the owners and the Shahs.

[3] The Shahs have issued a notice cancelling the agreement, relying on the non- payment of rent. The Shahs have requested the Patels to undertake maintenance and repair obligations and have given the Patels until 9 December 2020 (tomorrow) to complete them or the management agreement will terminate.

Application and submissions

[4] In the Duty Judge list yesterday Mr McDonald, for the Patels, sought interim orders under ss 253 and 256(1) of the PLA, preventing the Shahs from cancelling the management agreement and taking possession of the dairy. He submits the orders are a holding measure to prevent the Patels being thrown out into the street. He submits the agreement is clearly a sub-lease because the Patels have exclusive possession of the dairy.1 He submits the orders would have no effect on the owners’ rights who know about the application and whose dispute is with the Shahs. He submits the Patels

1 Factac Ltd (in liq) v Commissioner of Inland Revenue [2002] 3 NZLR 648 (CA).

do not…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Patel v Shah

Details

AGLC: Patel v Shah [2020] NZHC 3235
Case: [2020] NZHC 3235
Decision Date: 8 December 2020

CaseChat Overview and Summary

In the case of Patel v Shah, the plaintiffs, Nimesh Patel and Priti Patel, sought interim orders to prevent the defendants, Bhavna Shah and Minu Shah, from cancelling a management agreement that allowed the plaintiffs to manage and reside in a dairy business in Takapuna, Auckland. The defendants issued a notice cancelling the management agreement, citing the plaintiffs' non-payment of rent as the basis for cancellation. The plaintiffs argued that the agreement constituted a sub-lease, as they had exclusive possession of the dairy, and sought an order to prevent the defendants from cancelling the agreement and taking possession of the dairy. The defendants opposed the application, asserting that the terms of the management agreement required adherence to the lease terms and that damages would be an adequate remedy for the plaintiffs.

The court was required to determine whether there was a serious question to be tried regarding whether the management agreement was a sub-lease and whether interim orders should be granted to prevent the cancellation of the agreement. The court considered the balance of convenience, the adequacy of damages, and the overall justice of the situation in determining whether to grant the interim orders.

The court found that there was a serious question to be tried regarding the nature of the management agreement, and that the plaintiffs would suffer significant prejudice if the agreement were to be cancelled. The court considered that the equity of the situation appeared to lie with the plaintiffs, as the alleged breach of the agreement appeared to be the responsibility of the defendants. The court also noted that the wording of the interim orders would not inhibit the defendants' access to the property for the purpose of maintenance and repairs. The court granted interim orders under sections 253 and 256(1) of the Property Law Act 2007, and/or under rule 7.53 of the High Court Rules 2016, restraining the defendants from cancelling the management agreement and attempting to re-enter the property to do so. The interim orders remain in force pending further order of the Court. The proceedings are to be called in the Duty List in the week of 8 February 2021, for an update to the Court on their status. Costs are reserved.

Orders