Queensgate Centre Limited v Pearl Worldand Jewellery House Limited HC Auckland CIV 2007-092-5489

[2008] NZHC 2363

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2007-092-5489

BETWEEN  QUEENSGATE CENTRE LIMITED Plaintiff

ANDPEARL WORLD AND JEWELLERY HOUSE LIMITED

First Defendant

ANDLIN (LILY) ZHONG Second Defendant

Hearing:         30 May 2008

Counsel:S J W Devoy & W J R Kiewik  for Plaintiff No Appearance on behalf of First Defendant No appearance on behalf of Second Defendant

Judgment:      30 May 2008

JUDGMENT OF ASSOCIATE JUDGE ROBINSON

This judgment was delivered by me on 4 June 2008 at 12 pm pursuant to Rule 540(4) of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Simpson Grierson, Private Bag 92518, Auckland

Wadsworth Ray, Solicitors PO Box 26-301, Epsom, Auckland

QUEENSGATE CENTRE LIMITED V PEARL WORLD AND JEWELLERY HOUSE LIMITED AND ANOR HC AK CIV 2007-092-5489  30 May 2008

[1]     The plaintiff is the owner of Westfield Riccarton, a shopping centre in Christchurch. In April 2005 the first defendant Pearl World and Jewellery House Limited entered into an agreement to lease premises at the Westfield Riccarton shopping centre. The agreement provided for a five year lease with a rent commencing at $136,750 per annum with a requirement that the first defendant pay specified contributions towards the outgoings and operating expenses with a requirement that the first and second defendants execute a lease in the form accompanying the agreement to lease.

[2]      The second defendant executed a guarantee in the following form:

I/We confirm my/our request that the Lessor lease the Premises to the Lessee and in consideration of the Lessor agreeing to do so I/we unconditionally and  irrevocably  guarantee  to  the  Lessor  the  obligations  of  the  Lessee pursuant to the attached Agreement and undertake to execute the Lease in the time period referred to in the attached Agreement.

The agreement to lease also contained the following provision with regard to the guarantor:

In consideration of the Lessor at the request of the Guarantor entering into this Agreement with the Lessee the Guarantor (and if more than one, each of them jointly and severally) hereby acknowledge(s) and guarantee(s) to the Lessor the due and punctual payment of rent and the performance by the lessee of all the convenants, conditions, agreements, declarations and provisions to be observed by the Lessee under the Lease. Should the Lease at any time be assigned to a company then additional personal guarantees will be required.

The Guarantor agrees that the Guarantor’s liability and obligations to the Lessor will not be affected or diminished by any indulgence, release, postponement or allowance of time granted by the Lessor to the Lessee or by any assignment of the interest of the Lessee or other alteration in the terms of this Agreement or the Lease or any other thing whatsoever whereby the Guarantor as a surety or sureties only would have been so released shall release prejudice or affect the Guarantor’s liability as Guarantor (including the disclaimer of the Lease by any liquidator of the Lessee).

The Guarantor agrees that as between the Guarantor and the Lessor the Guarantor may for all purposes be treated as lessee and the Lessor shall be under no obligation to take proceedings against the Lessee before taking proceedings against the Guarantor.

[3]      Following execution of the agreement to lease, the first defendant entered into possession of the premises and commenced business. The first defendant fitted out the premises and commenced paying rent. However, the formal deed of lease was never executed.

[4]      Rent was paid until May 2007. No rent has been paid since that date.

[5]      In October 2007 the plaintiff commenced these proceedings in the District Court for recovery of unpaid rent and other outgoings. The defendants opposed the proceedings  on  the  basis  that  the  agreements  to  lease  were  not  executed  in accordance with the Company’s Act,  and the terms of the deeds of lease  were uncertain. They also contested the calculation relating to the amounts outstanding.

[6]      On 1 January 2008 in breach of the lease the first defendant removed its stock from the premises and ceased trading. As a result on 25 January 2008 the plaintiff exercised its right to cancel the lease by peaceful re-entry.

[7]      Following the re-entry the plaintiff gave written notice to the first defendant to remove all partitions, additions, fixtures and fittings installed in, and any chattels left in the premises by the first defendant and to make good any damage to the premises caused by such removal. As the first defendant failed to comply with that request the plaintiff has carried out the reinstatement works at a cost of $54,405.

[8]      Following those breaches of the agreement to lease the plaintiff amended its claim to include those further losses. As a consequence the plaintiffs claim exceeded the jurisdiction of the District Court and the proceedings were removed into the High Court.

[9]      The first defendant is now in liquidation. Consequently the plaintiff does not proceed with its application for summary judgment against the first defendant.

[10]     Since these proceedings have been removed into the High Court the second defendant has taken no steps to oppose the application for summary judgment.

[11]     The defendants did file a notice of opposition to summary judgment in the District Court. In that notice of opposition it was claimed that the agreement for lease had not been properly executed, there was no certainty as to the terms of the formal deed of lease to be executed by the parties, and although it was acknowledged that rent had not been paid, it was claimed that there was uncertainty as to the amounts due and owing. No affidavit has been filed by either defendant in opposition to the application for summary judgment.

[12]     At a judicial telephone conference on 22 April 2008 the court observed that the second defendant had cancelled her instructions to her solicitors and was now representing herself. Although she had been advised of the date of the telephone conference she had not provided a telephone number for contact.

[13]     The plaintiff has provided further evidence as to the amounts due and owing by the first defendant in respect of the lease. Those amounts include arrears of rent totalling $145,203.76 up to the 25 January 2008 and loss of rent from cancellation to the rent commencement date of the new tenant  totalling $104,967.66.  The  new tenant will commence paying rent on 13 July 2008. In addition there is a claim for the reinstatement costs of $54,405 with interest of $22,141.67 and solicitors costs totalling $30,912.51.

[14]     Although the first and second defendants did not execute the deed of lease the agreement to lease they executed included a provision that they should execute the deed of lease. The evidence of the plaintiff is that when it supplied the agreement to lease the first and second defendants were supplied with the form of deed of lease that was to be executed by them.

[15]     The agreement for lease was executed by the second defendant as director of the first defendant and as guarantor. I am satisfied that having regard to the rule in Turquands case (Royal British Bank v Turquand (1856) 6 E & B 327; 119 ER 886) and the provisions contained in section 180(1)(b) of the Company’s Act 1993, the first defendant is bound by the terms of the agreement to lease.

[16]     I am also satisfied that having regard to the doctrine in Walsh v Lonsdale (1882) 21 CHD9 and Inglis v Clarence Holdings Limited [1997] 1 NZLR 268 that the first defendant is bound by the terms of the deed of lease notwithstanding the fact that it has not been executed. The first defendant entered into possession having agreed to enter into the deed of lease and has paid rent for some time in terms of that arrangement.

[17]     The deed of lease contains provision for interest to be paid as calculated by the plaintiff together with outgoings, reinstatement costs and fees. Clearly the second defendant has guaranteed such payments. In the circumstances therefore there will be judgment in favour of the plaintiff against the second defendant for the following

amounts:

a)	Unpaid rent to the date of cancellation of the lease on 21 January 2008	$145,203.76
b)	Damages from the date of cancellation (25 January 2008) to 30 May 2008	$104,967.66
c)	Reinstatement costs	$54,405.00
d)	Interest at the Specified Rate in	$22,141.67
e)	with the Lease to 30 May 2008 Solicitor-client costs in accordance with	$30,912.51
f)	the Lease to 30 May 2008 Costs of sealing judgment	$    320.00

Associate Judge Robinson