Sahar Ehsani Investment Limited v Retyred (2020) Limited

[2023] NZHC 2258

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2022-404-2080

[2023] NZHC 2258

UNDER

The Contempt of Court Act 2019

BETWEEN

SAHAR EHSANI INVESTMENT LIMITED

Plaintiff

AND

RETYRED (2020) LIMITED

First Defendant

WARREN GRAEME SINCLAIR

Second Defendant

On the papers

Counsel:

S Wroe and T Ashley for the plaintiff

R Lane and W Williams for the defendants

Judgment:

21 August 2023

JUDGMENT OF CAMPBELL J

[Formal proof]

This judgment was delivered by me on 21 August 2023 at 11.00 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

SAHAR EHSANI INVESTMENT LIMITED v RETYRED (2020) LIMITED [2023] NZHC 2258 [21 August

2023]

[1]    The plaintiff, Sahar Ehsani Investment Ltd (SEIL), commenced this proceeding on 27 October 2022. At that time, it applied for interim injunctions against the defendants. The defendants took no steps to oppose the application. The Court granted interim injunctions on 2 December 2022.

[2]    On 21 December 2022, SEIL filed an application seeking orders for contempt of court, alleging the defendants had failed to comply with the interim injunctions. The defendants filed a notice of opposition to the contempt application on 27 January 2023. That was the defendants’ first step in the proceeding. Directions were made for the contempt application to be heard on 1 May 2023.

[3]    In March 2023, the defendants not having filed a defence, SEIL requested, and the Court directed, that the proceeding be listed for formal proof at the same time    as the hearing of the contempt application.

[4]    SEIL filed affidavits and synopses for the hearing. Then, on 28 April 2023 (the working day before the hearing), the defendants applied for an adjournment of the formal proof hearing, a stay of the proceeding, leave to file a statement of defence and a variation of the terms of the interim injunctions.

[5]    At the hearing on 1 May 2023, it was agreed I should determine the defendants’ application to stay the proceeding and their application for leave to file a defence. If  I granted either application, I would not proceed to consider formal proof. If I declined both their applications, I would proceed to deal with formal proof (in a separate judgment, most likely on the papers).

[6]In a judgment dated 16 June 2023, I declined the defendants’ applications for

a stay of the proceeding and for leave to file a statement of defence.1

[7]This judgment deals with formal proof of SEIL’s claim. I have decided I can

deal with that on the papers.

1      Sahar Ehsani Investment Ltd v Sinclair [2023] NZHC 1515.

SEIL’s substantive claims

[8]    The background to the proceeding, and SEIL’s claims, are described in my judgment of 16 June 2023. I do not repeat that here, other than to summarise SEIL’s substantive claims, of which there are two:

(a)SEIL’s main claim, against both defendants, is that the first defendant, Retyred (2020) Ltd (Retyred) has dumped and stored large quantities of used tyres at the leased premises. SEIL says Retyred did this without SEIL’s consent (in breach of cl 16.1 of the deed of lease) and that it has covered almost the whole of the premises with piles of tyres that are   a fire risk and nuisance (in breach of cl 22.1). SEIL says the quantity of tyres exceeds 100 cubic metres without a resource consent (in breach of cl 21.1). Finally, SEIL says the storing of the tyres means Retyred has not kept the grounds clean and tidy (in breach of cl 8.2). SEIL says second defendant, Mr Sinclair is liable as guarantor for Retyred’s breaches.

(b)SEIL’s second claim is against Retyred alone, in trespass. SEIL pleads that Retyred’s agents have, at various times since the commencement of the lease, used a driveway that is part of SEIL’s neighbouring property (at 179 Dominion Road) to access the premises.  SEIL says  it has informed both defendants on many occasions that Retyred has no right to use the driveway to access the premises and that in October 2022 it served a trespass notice on Retyred warning that further use  of the driveway would be a trespass. SEIL alleges that Retyred’s employees and agents have continued to use the driveway.

The defendants are liable on these claims

[9]    In my earlier judgment, I found that the defendants had no grounds of defence to SEIL’s claims.2 They are therefore liable on the claims. The only remaining issues are remedies and costs.

2 At [58].

Remedy against defendants for breaches of the lease

[10]   The primary remedy that SEIL sought in its statement of claim was an injunction requiring the defendants to remove almost all of the tyres from the premises. As an alternative, SEIL sought damages in an amount  to cover SEIL for the cost    of removing the tyres.

[11]   By the time of the formal proof hearing, SEIL was of the view that the defendants were unlikely to comply with any injunction to remove the tyres. SEIL therefore said it preferred an award of damages. That remains its position.

[12]   SEIL filed an affidavit from an expert, Ms van Eeden, assessing the cost of repair (to remove the tyres and to remediate the premises) as $1,731,855.15.

[13]Shortly after my earlier judgment, I issued a minute on 29 June 2023. I said:

[14]    Having considered the plaintiff’s submissions for formal proof dated 28 April 2023, I need to hear further from the plaintiff on the damages sought for the breaches of the lease (as an alternative to an injunction). The usual measure of damages for such breaches during the currency of the lease is the diminution in value of the reversion: Hinde, McMorland and Sim 11.126 and 11.223; McGregor on Damages 28-049 and 28-086. Damages assessed by the cost of repair (or in this case removal) are not usually available except where the lessor has actually done that work: McGregor on Damages 28-052. In this case the plaintiff has not removed the tyres.

[14]   In response, SEIL filed further expert evidence in the form of an affidavit from an expert valuer, Mr Davidson.   Mr Davidson opined that the value of the land       is diminished by $2,700,000 by the presence of the tyres.

[15]   I find Mr Davidson’s affidavit to be of limited assistance. This is not because of any issue with his qualifications or methodology. Rather, it is because he appears to have been asked the  wrong question.  The relevant question is the loss in value   of the reversion. The reversion is the lessor’s interest in the land subject to the lease. Mr Davidson has valued the land (both on “as is” and “clean” assumptions) on the basis of vacant possession.

[16]   This does not mean that I ignore his evidence altogether. I acknowledge it is some evidence of the diminution in value of the reversion.

[17]   In any event, SEIL seeks only the lower amount of the estimated cost of repair, rather than the diminution in value of the reversion.

[18]   Mr Ashley, counsel for SEIL, has filed brief written submissions in support  of an award of damages for the cost of repair.  He submits that there is authority that a court can award damages calculated by reference to the cost  of repair where that  is the relief sought by the plaintiff and it is less than the diminution in value of the reversion, citing Culworth Estates Ltd v Society of Licensed Victuallers.3 Mr Ashley acknowledges that that was a case where the lease had come to an end, but submits the principles are the same.

[19]   It usually does make a difference that the lease has not yet come to an end. Among other things, this is because of increased uncertainty as to whether the repairs will ever be effected and because of the time value of money. Coleridge J pointed this out some time ago:4

In estimating the damages in cases where the lease has a long time to run, it is not fair to take the amount that would be necessary to put the premises into repair as the measure of damages; for in such cases, when the damages are awarded to the landlord he is not bound to expend them on repairs, neither can he do so without the tenant’s permission to enter on the premises. The true question therefore is – to what extent is the reversion injured by the non-repair of the premises? If the lease had ninety-nine years to run it could not make much difference in the value of the reversion whether the premises were now in repair or not. This lease, however, will expire in about six years.

[20]   In the present case, the lease has less than four years to run. Unlike the lease before Coleridge J, SEIL does have the right to enter the premises and carry out repairs. If SEIL does so, the cost of repair is recoverable under the lease (that is, as a debt rather than damages). It also appears that SEIL could take action to bring the lease  to an early end, there being evidence that Retyred has not paid rent for some time.

[21]   Mr Ashley also submits that loss and assessment of damages are questions of fact. I accept that. Diminution in the value of the reversion is merely the usual measure of loss during the currency of the lease. The learned author of McGregor on Damages suggests that, where the end of the term is very near, the diminution in value

3      Culworth Estates Ltd v Society of Licensed Victuallers (1991) 62 P & CR 211 (EWCA).

4      Doe d Worcester School Trustees v Rowlands (1841) 9 C & P 734 at 739.

of the reversion may well be calculated by the cost of repairs, so that the cost of repairs, with a discount for immediate payment, may be the appropriate measure.5

[22]   I intend to follow that course here. I consider it likely, notwithstanding that SEIL has not as yet either effected the repairs itself or brought the lease to an early end, that these things are likely to happen well before the full term expires. I discount the estimated cost of repairs by five per cent to allow for the fact that repairs will not be effected immediately. I will therefore award damages of $1,645,262.39.

Remedies against first defendant for trespass

[23]   SEIL seeks several remedies for the trespass. First, it seeks an injunction restraining any agent or employee of Retyred from entering onto a driveway that is part of SEIL’s neighbouring property (at 179 Dominion Road) or any part of that property. I agree with Mr Ashley, there is no reason why such an injunction should not be granted.

[24]   SEIL seeks general damages in the sum of $10,000. Mr Ashley acknowledges there is no evidence of specific loss. Although vehicles were damaged in one of the trespasses, SEIL is not the owner of those vehicles.

[25]   Here, the trespass was repeated. It is clear from the evidence  that, although  it did not cause direct pecuniary loss, it caused disruption to SEIL’s business, including in the form of lost management time. I consider an award of general damages of

$5,000 is appropriate to reflect this.

[26]   SEIL also seeks exemplary damages.  There is a high bar for such damages.   I am satisfied that Retyred cleared that bar by some margin. In late September 2022, Retyred started to use the driveway on SEIL’s neighbouring property to access the rear of the premises with trucks carrying tyres. Mr Sahar (of SEIL) asked Retyred’s employees to stop. They refused. On 11 October 2022, SEIL served a trespass notice on Retyred warning Retyred to stay off the driveway. The next day, Retyred’s employees used the driveway again. SEIL then chained the access from that driveway

5      James Edelman McGregor on Damages (21st ed, Sweet & Maxwell, London, 2021) at [28-51]. Damages on that basis were awarded in Conquest v Ebbetts [1896] AC 490.

to the premises. Three days later, Retyred’s employees used the driveway again and cut the chain to gain access to the premises. In the process, they moved and damaged one of his vehicles. For the most part, the behaviour of Retyred’s employees in the course of the trespass was threatening.

[27]   Given the repeated and high-handed manner of the trespasses, an award of exemplary damages of $20,000 is appropriate.

Costs

[28]   SEIL is entitled to costs. It seeks costs on a solicitor-client basis, relying on  cl 6.1 of the lease. I award solicitor-client costs. I do not require any apportionment for the trespass claim. The costs are to include those on the interlocutory applications that were determined by Wylie J on 2 December 2022.

Result

[29]   On SEIL’s first cause of action, I award damages against the first and second defendants in the sum of $1,645,262.39.

[30]On SEIL’s second cause of action:

(a)I grant an injunction restraining any agent or employee of the first defendant from entering onto a driveway that is part of SEIL’s neighbouring property (at 179 Dominion Road) or any part of that property.

(b)Against the first defendant, I award general damages of $5,000 and exemplary damages of $20,000.

[31]   SEIL is entitled to costs from the first and second defendants on a solicitor- client basis, including for the interlocutory applications that were determined by Wylie J on 2 December 2022.

Campbell J