Sahar Ehsani Investment Limited v Retyred (2020) Limited
[2022] NZHC 3213
•2 December 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-2080
[2022] NZHC 3213
BETWEEN SAHAR EHSANI INVESTMENT LIMITED
Plaintiff/Applicant
AND
RETYRED (2020) LIMITED
First Defendant/First Respondent
WARREN GRAEME SINCLAIR
Second Defendant/Second Respondent
Hearing: 30 November 2022; further materials filed on 30 November 2022 Appearances:
T J M Ashley for Plaintiff/Applicant
No appearance by or for Defendants/Respondents
Judgment:
2 December 2022
JUDGMENT OF WYLIE J
(Application for interim order)
This judgment was delivered by Justice Wylie On 2 December 2022 at 10.00 am
Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors/counsel:
Daniel Overton and Goulding/S Wroe, T Ashley, Auckland
SAHAR EHSANI INVESTMENT LTD v RETYRED (2020) LTD [2022] NZHC 3213 [2 December 2022]
Introduction
[1] The applicant, Sahar Ehsani Investment Ltd (SEIL), owns a property situated at 177 Dominion Road, Red Hill, Auckland (the property). The property is 8,000 square metres in size. It is situated in a commercial zone and it is bordered on three sides by business premises and on the fourth side by Dominion Road.
[2] The first respondent, Retyred (2020) Ltd (Retyred), entered into an agreement to lease the property from SEIL on 28 February 2022. Inter alia the parties agreed to enter into a formal lease, to be prepared by SEIL’s lawyer and using the Auckland District Law Society’s deed of lease form. The lease has not been signed but it is SEIL’s submission that Retyred is bound both by the agreement to lease and by the lease which it has agreed to sign.
[3] The second defendant, Warren Sinclair, is a guarantor of Retyred’s obligations under the agreement to lease and the lease. He is the sole director and shareholder of Retyred.
The pleadings
[4]SEIL has filed a proceeding alleging:
(a)as a first cause of action, that Retyred is in breach of various provisions contained in the agreement to lease and the lease. It seeks an injunction ordering Retyred and Mr Sinclair to remove all tyres from the property (at their expense) save for:
(i)those tyres that are reasonably required to carry on the business use permitted by the lease; or
(ii)tyres covering an area of 99 m3 or less, unless a resource consent is obtained for the storage of tyres over a greater area.
(whichever is the lesser). It also seeks an injunction restraining Retyred from storing, collecting and stockpiling tyres at the property, except as noted above. In the alternative, it seeks damages; and
(b)as a second cause of action, that Retyred, through its agents and/or employees has trespassed on the adjoining property also owned by SEIL. It seeks an injunction restraining any further entry. It also seeks both general and exemplary damages in this regard.
[5] SEIL also sought interim orders, pending the hearing of the substantive proceeding. These orders were sought by way of interlocutory application on notice.
[6] The proceeding was served on Retyred and on Mr Sinclair on 4 November 2022. There is an affidavit of service in this regard. No statement of defence to the substantive proceeding has been filed. Nor has a notice of opposition to the interlocutory application for interim orders been filed or served.
[7] The interlocutory application for interim orders was called before Muir J in the Duty Judge List on 24 November 2022. He made an “interim interim order” to prevent the further accumulation of tyres on the property pending the determination of SEIL’s interlocutory application by the Court. A fixture on 30 November 2022 was allocated for this purpose.
[8] A copy of the Judge’s interim interim order was sent to Retyred and Mr Sinclair. There has been email correspondence between Retyred’s solicitors and Mr Sinclair. It is before the Court. Mr Sinclair was clearly aware of the proceeding and he was aware of the hearing on 30 November 2022. Nevertheless, there was no appearance either by or for Retyred or Mr Sinclair.
[9] At the hearing on 30 November 2022, I directed that additional materials be filed – namely an affidavit as to SEIL’s means to support the undertaking as to damages already given and detail of the costs sought. These materials were filed.
Analysis
[10] In determining an application for interlocutory injunctive relief, the Court must first consider whether there is a serious question to be tried, secondly, consider where the balance of convenience lies and thirdly, assess the overall justice of the case.1
(a)Breach of the agreement to lease/the lease?
Is there a serious question to be tried?
[11] I have received three affidavits from Mr Sahar, the principal behind SEIL. He annexed to his first affidavit a copy of the agreement to lease signed by him and by Mr Sinclair on his own behalf and on behalf of Retyred. Clause 4.1 of the second schedule to the agreement to lease provides that the parties will enter into a formal lease using the Auckland District Law Society’s deed of lease form and cl 4.3 goes on to provide that, notwithstanding that the lease may not have been executed, the parties are bound by the terms, covenants and provisions contained in the agreement and in the lease as if the lease had been duly executed.
[12]Relevantly:
(a)The first schedule to the agreement to lease records that the business use is “Recycling tyres and show home display yard for modular house business”. The same narration is contained in cl 13 of the first schedule to the lease.
(b)Clause 16.1 in the second schedule to the lease provides that Retyred shall not without the prior written consent of SEIL use or permit the whole or any part of the property to be used for any use other than the business use recorded in the lease.
(c)Clause 8.2, also in the second schedule to the lease, requires Retyred to keep the grounds, yards and surfaced areas in a clean and tidy condition.
1 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 140 (CA) at 142; and
NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12].
(d)Clause 21.1 in the second schedule to the lease obliges Retyred to comply with all statutes and regulations.
(e)Clause 22.1, also in the second schedule to the lease, provides that Retyred must not bring upon or store on the property, nor allow to be brought upon or stored within the property, any goods or things of an offensive, noxious, illegal or dangerous nature, or allow any act or thing to be done which may be or grow to be a nuisance, disturbance or annoyance to the landlord or any other person.
[13] Mr Sahar has deposed that since Retyred took possession of the property in March 2022, it has used the property for the purposes of stockpiling used tyres. He estimates that around 6,500 to 7,000 square metres of the property is now covered with tyres. He has annexed photos of the site and the tyres to his affidavit. He has seen no evidence that tyres are being recycled on the property. He is well placed to observe any tyres being recycled because he carries out another business from an adjoining property and is based on the adjoining property. It appears to Mr Sahar that tyres are simply being dumped on the property; as more tyres arrive, Retyred creates taller piles of tyres to make space for the dumping of yet further tyres. Mr Sahar has not observed any operating recycling plant on the property. He says that Mr Sinclair has told him repeatedly that recycling machines are due to be delivered to the property but that no machines have arrived. He does acknowledge that there was one small machine on the site for a period but he did not see it working and it was taken away at the beginning of October 2022.
[14]The affidavits raise a number of issues:
(a)is Retyred complying with the business use specified in the agreement to lease and in the lease? It is arguable that recycling involves the processing of used materials into new products or materials for further use. It entails more than simply the storage of the material to be recycled;
(b)by stockpiling tyres and not recycling them, is Retyred in breach of cls 16.1 and 8.2 in the lease?;
(c)is Retyred in breach of cl 21.1 of the lease? According to SEIL, the stockpiling of tyres is controlled by the Resource Management (National Environmental Standards for Storing Tyres Outdoors) Regulations 2021. The storage of over 100 cubic metres of used tyres is a restricted discretionary activity which requires resource consent. The regulations set out the matters required to be taken into account when consent is sought, including fire risks and economic effects. Regional and district rules or bylaws may be more stringent than the regulations, but they may not be less stringent.2 While there is no evidence before the Court as to how this national environmental standard has been incorporated into the Auckland Unitary Plan, Mr Sahar has deposed that Retyred does not hold a resource consent for the storage of used tyres. This appears to be acknowledged in an email which Mr Sinclair sent to Mr Sahar on 25 November 2022. Mr Sinclair there stated: “Can’t operate until I have a resource consent”; and
(d)is Retyred in breach of cl 22.1 of the lease? Large tyre stockpiles can pose a significant environmental risk in the event of a fire, as tyres can burn quickly with extreme heat and can be difficult to extinguish. Any fire could result in the release of large volumes of toxic smoke containing a range of contaminants which could affect the air, land and water in the general vicinity of the property.3 As noted above, the property is in a commercial zone bordered on three sides by other businesses and on the fourth side by Dominion Road. A fire in the stockpile of tyres on the property could pose significant risks to surrounding businesses (including that operated by Mr Sahar on the adjoining property) and to the surrounding environment.
2 Resource Management (National Environmental Standards for Storing Tyres Outdoors) Regulations 2021, reg 15.
3 Bay of Plenty Regional Council v Merrie [2021] NZDC 11444 at [26]. See also Waikato Regional Council v Tyre Disposal Ltd DC Tauranga CRI-2006-072-218, 18 December 2006; and Canterbury Regional Council v Annexure Services Ltd [2020] NZDC 16116.
[15] Before the proceeding was commenced, an email was sent by Mr Sinclair to SEIL’s solicitors. SEIL’s solicitors had served a notice of breach on Retyred on 6 October 2022. The notice recorded SEIL’s view that Retyred was in breach of the agreement to lease and the lease in various ways. In a reply email, Mr Sinclair and Retyred denied any breach. They asserted that the business use involves the recycling of tyres, which requires that tyres be collected before they can be recycled.
[16] SEIL’s response is to point to Retyred’s failure to take any steps in regard to the proceeding and to the affidavit evidence filed which, it says, establishes that Retyred does not have a credible defence, given the number of tyres dumped, the absence of any recycling machinery on the property and the absence of any resource consent for the quantity of tyres stored.
[17] Notwithstanding Mr Sinclair’s and Retyred’s denials, on all issues, I am satisfied that there is a serious question to be tried – broadly, is Retyred in breach of both the agreement to lease and the lease?
The balance of convenience
[18] I am also satisfied that the balance of convenience favours the grant of the interim injunction sought. By stockpiling a large number of tyres on the property, Retyred is creating a risk not only to SEIL but also to surrounding property owners. There are potential adverse consequences for third parties. Retyred is also creating a risk to the surrounding environment. Any fire would risk health and safety and could cause significant environmental damage which could not be readily compensated by way of an award of damages. A mandatory injunction is also appropriate because, on the materials currently before the Court, it seems that Retyred is in breach of the relevant regulations. Assuming SEIL’s arguments in this regard are correct, an order requiring Retyred to remove excess stockpiled tyres simply requires it to comply with the regulations.
The overall justice of the case
[19] SEIL has given an undertaking as to damages and Mr Sahar has filed an affidavit confirming that SEIL has the ability to meet that undertaking. In contrast,
I have no information as to Retyred’s ability to meet any damages award. Mr Sahar has deposed that Retyred failed to pay the rental due on 1 November 2022. That is not a promising sign.
[20] SEIL is not seeking to preclude Retyred from making use of the property in accordance with the agreement to lease and the lease. Rather, it is seeking that Retyred use the property in accordance with the agreement to lease and the lease and that it obtain the appropriate resource consent, in the event that it wishes to store more than 100 m3 of tyres on the property.
[21] In my judgment, the possible prejudice to Retyred by granting an injunction, on grounds that may turn out to be not ultimately supportable, is not outweighed by the prejudice to the public, third parties and SEIL by declining to make an order until the substantive hearing takes place.
Result – breach of lease agreement/the lease
[22] For the reasons I have set out, I am satisfied that an interim injunction should issue, largely in the terms sought by SEIL, in respect of the alleged breaches of the lease.
(b)Trespass
[23] Mr Sahar has deposed that there has been a trespass onto his adjoining property by Retyred or by its servants or agents for the purpose of gaining access to the property to dump more tyres on it. A trespass notice has been issued. On the affidavit evidence, there is a serious question to be tried as to whether that notice has been breached. Also on the evidence, entry onto the adjoining land occupied by Mr Sahar to gain access to the property is not necessary. Retyred has independent access to the property from Dominion Road. There does not appear to be any reason precluding the grant of an injunction to restrain any trespass and the balance of convenience and the interests of justice, in my judgment, clearly favour such order being made.
Costs
[24]SEIL seeks costs from Retyred and Mr Sinclair on a solicitor-client basis.
[25] Clause 6.1 of the second schedule to the lease requires Retyred to pay SEIL’s legal costs (as between lawyer and client) of and incidental to the enforcement of SEIL’s rights, remedies and powers under the lease. The amount sought is $17,793.26 (inclusive of GST).
[26] Notwithstanding that I requested Mr Ashley, who appeared on behalf of SEIL, to file further detail of the costs sought, having given further consideration to the issue, I am not prepared to make a costs order at this stage. Any order should await the final determination of the substantive proceeding. An order under cl 6.1 would only be appropriate if it ultimately transpires that Retyred is in breach of the lease and that SEIL was required to enforce its rights, remedies and powers. That cannot be assumed at this stage.
Result
[27] The draft order filed by SEIL is approved, subject to the following amendments:
(a)The expression “99 m3” in para 3(b) is to be amended and substituted with “100 m3”.
(b)Paragraph 3(c) is to be deleted and replaced with the following:
Leave is reserved to the defendants to apply to the Court to set aside and/or amend orders (a), (b) and (d). Any application to set aside and/or amend the orders is to be made on not less than three working days’ notice to the plaintiff.
Wylie J
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