Radio Tarana (NZ) Ltd v Moir HC Auckland Cp152-Sw02
[2002] NZHC 702
•4 July 2002
NOT
IN THE HIGH COURT OF NEW ZEALAND RECOMMENDED
AUCKLAND REGISTRY CP 152-SW02
BETWEEN RADIO TARANA (NZ) LTD
Plaintiff
A N D ROSS SPENCER MOIR
Defendant
Hearing: 3 July 2002
Counsel:Paul Chambers for Plaintiff
Mark Vickerman for Defendant
Judgment: 4 July 2002
JUDGMENT OF HARRISON J
SOLICITORS
Richard S Wood (Auckland) for Plaintiff
Keegan Alexander (Auckland) for Defendant
Introduction
On 2 May 2002 I made an order granting the plaintiff, Radio Tarana (NZ) Ltd ("RTL"), an interim injunction ex parte on these terms:
An injunction do issue, pending further order of this Court, directing the defendant by its officers, employees and agents to allow the plaintiff to re-enter premises owned by the defendant at 608 Dominion Road, Auckland and to conduct its business there in accordance with the terms and conditions contained in the deed of lease dated 4 June 1998, on conditions that:
(a)The plaintiff pays forthwith into Court the sum of $7500 by way of security for its undertaking as to damages dated 1 May 2002, the order to lie in Court until satisfaction of this condition;
(b)The plaintiff pays rental to the defendant of $2275 per month plus GST with effect from 1 May 2002, the first such payment to be made by 5 p.m. on 6 May 2002 and no later than 5 p.m. on the first day of the months following.
In brief summary, the defendant, Mr Ross Moir, owns the premises at 608 Dominion Road, Auckland. On 4 June 1998 he entered into a lease with RTL for a term of three years, expiring on 31 May 2001, with one right of renewal for the same term. RTL has since operated a cinema business in a theatre in the building, showing Indian films.
On 22 April 2002 Mr Moir re-entered. RTL applied to this Court for relief. Its application was clearly founded on the premise that the original lease was still in existence. Its statement of claim omitted any reference to the fact that the lease had expired nearly a year earlier; nor did it allege renewal in the interim. RTL's tenure could only have been lawful at the date of the re-entry if either the parties had agreed to renew (clause 35) or it was in possession as a monthly tenant pursuant to a holding over provision (clause 38). In the latter event, of course, the tenancy is terminable by one month's written notice.
Nevertheless, when giving judgment on 2 May 2002 I found that there was a serious question for trial. I identified it in these terms:
On this basis and on very limited argument, I have reached a provisional conclusion that there is a serious question for trial —namely, whether or not Mr Moir acted in breach of clause 38 when reentering the premises on 22 April 2002. Alternatively, RTL may argue at a substantive hearing, as forecast by Mr Chambers, that Mr Moir has affirmed renewal for the full term or by his conduct is estopped from denying the existence of a renewed term until 31 May 2004. On its face this argument may seem ambitious. But, nevertheless, Mr Chambers believes that he has a proper basis for advancing it.
On 27 April 2002, prior to RTL's application for interim relief, Mr Moir had entered into a lease with a third party for a term of two years commencing on 1 May
He has now applied to rescind the injunction. The parties have filed voluminous affidavits. Regrettably their effect has been to confuse rather than enlighten argument on the substantive issues for determination.
Mr Moir's application was set down for hearing yesterday. However, I placed the onus on RTL, given that it had obtained its original relief ex parte, to satisfy me that the injunction should remain. I treated the hearing as RTL's application on notice.
In opening Mr Paul Chambers, RTL's counsel, formally acknowledged that (a) the original lease between the parties expired on 31 May 2001; (b) if the lease was not renewed, RTL remained in possession under a monthly tenancy; and (c) if the legal relationship was one of a monthly tenancy, Mr Moir served a valid notice to quit on RTL on 15 May 2002, whereby the tenancy was validly terminated on 17 June 2002. Mr Chambers then addressed submissions for the purpose of establishing an arguable case that, either, the lease was renewed on or before 31 May 2001 or Mr Moir had affirmed the existence of a renewed term until 31 May 2004 or by his conduct was estopped from denying its existence. I shall deal with those arguments separately.
Arguable Case
(a) Renewal
Clause 35 of the lease materially provides:
IF the Tenant has not been in breach of this lease and has given to the Landlord written notice to renew the lease at least three (3) calendar months before the end of the term then the Landlord will at the cost of the Tenant renew the lease for the next further term from the renewal date as follows:
(a)The annual rent shall be agreed upon or failing agreement shall be determined in accordance with clause 2.2 but such annual rent shall not be less than the rent payable during the period of twelve (12) months immediately preceding the renewal date.
(b)Such annual rent shall be subject to review during the further term on the review dates or if no dates are specified then after the lapse of the equivalent periods of time as are provided herein for rent reviews.
(c)The renewed lease shall otherwise be upon and subject to the covenants and agreements herein expressed and implied except that the term of this lease plus all further terms shall expire on or before the final expiry date.
(d)Pending the determination of the renewal rent the Tenant shall pay the rent proposed by the Landlord provided that the rent is
substantiated by a registered valuer's report. Upon
determination an appropriate adjustment shall be made.To support his proposition of renewal, Mr Chambers relied on a letter from RTL to Mr Moir dated 3 October 2000. The material parts are as follows:
Thank you for your phone call discussing our disputes etc. As you want to sort this matter out once an (sic) for all, we wish to offer you $12,500 for the entire settlement on Arrears/Rental. Our reason are well known to you and we can highlight them as
Dispute on light
Council closed Cinema (2 months — we suffered major loss)
Fiji Coup Crisis
Video Piracy
Downturn in business
Reduced screenings etc.However, we don't want to highlight these any further as we should resolve this matter. This will be paid directly into your account on an instalment of $250.00 per week until fully settled.
Also as the movie business is down and we have reduced our screenings to 4-5 screenings in the weekends, we suggest our rental be reduced to $250.00 a week. This will keep us going for the time being and if business does improve, we will discuss this with you and even pay more at that time. In light of the blockbuster releases and anticipated upturn, we can review in February 01...
We are sorry but this suggestion is better than going bust, closing down where nobody gains. We are also wanting to renew the lease next year as we anticipate the new Parallel Importing Bill and the Crimes Act Amendments to be introduced next year in May will assist our business.
[Emphasis added]
RTL did not produce this letter at the hearing on 1 May 2002. Its managing director, Mr Khan, explained RTL's omission on the basis that it was not in possession of a copy. Mr Moir wrote these words on the original:
You pay rental as per lease. No offers.
His entry is noted as made on 20 October 2000. Mr Moir says that he then faxed a copy of the letter, including his handwritten notation, back to RTL. The company denies receipt.
Leaving aside disputes over receipt, it is remarkable that, prior to Mr Moir's production of this letter in support of his application to set aside the injunction on 21 May 2002, RTL had never asserted the existence of an agreement to renew. In any event, I do not construe the letter as "written notice to renew the lease" within the purview of clause 35. In my judgment it can only be construed as a statement of RTL's future intention; no other interpretation is arguable.
This conclusion is supported by a number of factors:
[a] First, neither RTL's letter nor any of the subsequent correspondence
between the parties raise the critical issue of agreement about the rental payable for the renewed term. Mr Chambers explained this omission away on the basis that in June 1999, according to Mr Khan's affidavit, the parties had agreed that RTL should not be liable to pay any rental whatsoever until further notice. In his original affidavit
sworn on 30 April 2002, which reads more like a legal submission than the evidence of a lay person, Mr Khan asserted that on 28 September 2000 the parties had verbally confirmed this agreement, allowing RTL "to continue to trade rent free until further notice". Mr Chambers was unable to explain away the inconsistency between this allegation and RTL's offer on 3 October 2000 to pay $12,500 to settle rental arrears and future rental of $250 weekly, reviewable in February 2001. I agree with Mr Mark Vickerman, Mr Moir's counsel, that it also defies commercial sense that in either June 1999 or October 2000 Mr Moir would bind himself to renew, on 31 May 2001, for a term of three years, rent free, unless the parties agreed to the contrary;
[b]Second, there is no evidence that RTL understood or believed Mr Moir had accepted its letter as constituting a notice of intention to renew. I have already referred to its failure to allege prior to 21 May 2002 that the parties had agreed to renew. All Mr Moir's
correspondence, largely unanswered, is to the contrary. Moreover, it is plain from his earlier correspondence that by 3 October 2000 Mr Moir's patience with RTL was wearing thin. His letter to RTL dated 18 August 2000 noted, among other things, that "the rent dates back [i.e. was in arrears] for some 26 months", before concluding:I want my rent paid no talks, so post it today, 18th Aug 2000 as you said you would.
These words are hardly consistent with an antecedent agreement of the type alleged by Mr Khan that RTL was excused from liability to pay rent until further notice, both during the current and any renewed term;
[c]Third, as Mr Vickerman pointed out, on 22 April 2002 — the day of re-entry — RTL sent Mr Moir a handwritten proposal for a lease of the premises to another party for a term of three years, renewable for a
term of the same duration, on the basis that the proposed lessee would pay rental of three months in advance.
Alternatively, even if it gave valid written notice, RTL would not have been entitled to renew if, at 31 May 2001, it had been in breach of the lease. This is the other condition precedent to renewal. On the evidence set out above, I am satisfied that RTL does not have an arguable case that it had performed its obligations under the lease on or before that date. As noted, the essence of its case is the existence of agreements between the parties in June 1999 and September 2000, allegedly absolving it from paying rent until further notice.
On its own, this allegation challenges plausibility. However, when read against contemporaneous correspondence, including its own, it defies belief. If RTL is correct, it is hardly likely that Mr Moir would write to RTL on 14 September 1999, within a few months of the alleged original agreement, to suspend the tenant's fundamental obligation to pay rent, demanding outstanding rental of $22,504; or that on 3 February 2000 he would make a further written demand for the sum of $30,161; or that on 18 August he should further demand payment of outstanding rent arrears totalling 26 months.
In any event, in argument Mr Chambers acknowledged that the lease obliged RTL to pay insurance and outgoings. On 20 February 2001 Mr Moir made written demand on RTL for payment of outstanding insurance premiums from 22 February 1999 to 22 August 2000 in an amount exceeding $3500. Mr Chambers acknowledged that RTL has never satisfied this obligation. Its failure constituted an independent breach of the lease. On this ground alone it would not have been entitled to a renewal.
So, in summary, I am satisfied that RTL's proposition that it gave valid written notice of renewal is not arguable. The brief statement in its letter dated 3 October 2000 was no more than an expression of future intention. It never took any subsequent steps to perfect or convert that intention into an affirmative notice within the terms of clause 35 or to reach agreement with Mr Moir on the amount of renewed rental. Additionally or alternatively, RTL could never sustain an argument
of an entitlement to a renewal owing to its breaches of its fundamental contractual obligations to pay rent and insurances.
(b) Affirmation or Estoppel
After some deliberation, Mr Chambers orally formulated his proposition on affirmation or estoppel in these terms:
The premises were closed in 1999 due to council requirements. Opus was instructed by Mr Moir to prepare a report in support of an application for building consent. He then became involved in a dispute with Opus over the costs of complying with council requirements. He sought compensation from Opus in terms of loss of revenue and trade on his part and on RTL's part as lessee. Documents held by Opus may support a proposition that Mr Moir may have relied upon the existence of the term of the lease to 31 May 2004 [i.e. a renewed term of three years] being in existence between the parties.
I need only recite that submission to record my conclusion that it does not approach an arguable basis for holding that Mr Moir has affirmed renewal of the lease for the full term of three years from 31 May 2001 or by his conduct is estopped from denying its existence.
In argument Mr Chambers did not rely upon a statement in Mr Moir's letter to RTL dated 20 February 2002 demanding "rent from 1 June 1998 til (sic) end Feb.02 = 45 months ... $89,605 rent ...". When read in context, I am satisfied that this was no more than a demand for outstanding rental due under the original lease together with all arrears due on a monthly tenancy. It is not evidence of an agreement to renew. Additionally, there is no evidence that RTL relied on Mr Moir's demands to its detriment. To the contrary, it simply continued its course of refusing to pay rent.
Decision
Accordingly, for the reasons set out above, I am satisfied that the order made in paragraph 18 of my judgment dated 2 May 2002 should be set aside. I formally
dismiss RTL's application for interim relief and discharge the injunction issued on that date. I record also that, in terms of his notice to quit dated 15 May 2002, Mr Moir is entitled to re-enter and take immediate possession of the premises.
[21] I order RTL to pay Mr Moir costs on this application according to scale 2B High Court Rules.
Rhys Harrison J
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