Sale 33 Limited v M D Designer International Limited
[2015] NZHC 3029
•2 December 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-2353 [2015] NZHC 3029
BETWEEN SALE 33 LIMITED
Plaintiff
AND
M D DESIGNER INTERNATIONAL LIMITED
First Defendant
AND
MARIA SIMPSON Second Defendant
AND
DAVID JOHN GRAEME COX Third Defendant
Hearing: 23 November 2015 Appearances:
B Gustafson for the Plaintiff
M Kilman and R Butler for the DefendantsJudgment:
2 December 2015
JUDGMENT OF THOMAS J
This judgment was delivered by me on 2 December 2015 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
Solicitors:
Lowndes Jordan, Auckland.
Anderson Creagh Lai Limited, Auckland.
SALE 33 LIMITED v M D DESIGNER INTERNATIONAL LIMITED & ORS [2015] NZHC 3029 [2
December 2015]
[1] The plaintiff has applied for an interim injunction seeking orders that the first and third defendants cease operating a brothel, escort service or any other prostitution related activity from the apartment leased by the first defendant from the plaintiff at 33 Sale Street, Auckland (the Apartment).
[2] The defendants oppose the application.
Background
[3] The plaintiff owns all of the building at 33 Sale Street, Auckland (the Building). The Apartment is a five bedroom loft style apartment. It is the only residential unit in the Building. There are four other tenants, including a restaurant located on the ground level (the Restaurant).
[4] Pursuant to a document described as a Residential Tenancy Agreement (the Agreement), the plaintiff leased the Apartment to the first defendant, M D Designer International Ltd (the Company), for a term of one year from 23 July 2015.
[5] The second defendant, Maria Simpson, became a director of the Company on
13 August 2015 and is now its sole shareholder and director. The third defendant, David Cox, was, until 13 August 2015, the sole shareholder and director of the Company. Although he is a party to the substantive proceedings, he is not subject to the orders sought in the interim injunction application.
[6] Maria Simpson is married to David Simpson who is a former solicitor and an undischarged bankrupt. He forwarded the application for the tenancy of the Apartment to the real estate agents acting for the plaintiff. The applicant is shown as the Company and the email address is that of Mr Simpson.
[7] In his email attaching the application, Mr Simpson said:
Please find attached an application for 33 Sale Street. By way of background, M D Designer International Limited is a company owned by John Cox, solicitor. The company’s business is legal consultancy and fashion modelling and styling. We provide consultancy services to the company and the tenancy is part of a corporate package.
[8] The occupancy details in the application stated that those intending to reside in the Apartment were Maria and David Simpson and two children.
[9] The application was signed by Mr Cox.
[10] The Company took position of the Apartment on 31 July 2015.
[11] The plaintiff says that Mr and Mrs Simpson are currently operating a brothel from the Apartment and the plaintiff ’s property manager has received complaints from other tenants in the Building.
Pleadings
[12] The plaintiff’s statement of claim includes two causes of action. The first claim is under the Fair Trading Act 1986 (the FTA) and claims that the application for the tenancy and accompanying email were misleading and deceptive for reasons including that the email stated the Company’s business was legal consultancy, fashion modelling and styling; that the only tenants would be Mr and Mrs Simpson and two children; that it was always intended that a brothel would be operated from the Apartment and this was not disclosed.
[13] The plaintiff claims that the misleading conduct encouraged and caused it to grant the lease to the Company and, had the misleading conduct not occurred, then it would not have granted the lease. The lease and operation of a brothel from the Apartment is causing damage and loss to the plaintiff because the Building is being devalued by having a brothel operate from the Apartment; future tenants of the Apartment would be less inclined to rent it if it has previously been used as a brothel; future tenants of other parts of the Building are less likely to rent those premises or pay a premium for them; and current tenants of the Building, whose quiet enjoyment is being disturbed by operation of the brothel, may sue the plaintiff for nuisance emanating from the common areas or seek to cancel existing leases for breach.
[14] The second cause of action is in nuisance, claiming that the operation of a brothel from the Apartment is creating a nuisance which disturbs the plaintiff’s quiet
enjoyment of the Building and, in particular, the common areas of the entrance way, lift and stairwell. The particulars say that other tenants have complained about people smoking in the stairwell; Police have been called to disputes; prostitutes and their clients are approaching the Restaurant’s patrons; loud music comes from the Apartment; a number of prostitutes and their clients are using the common areas; signage advertising the brothel has been placed in the Building’s entrance way; and prostitutes are using the Building’s entrance way to meet their clients.
[15] The claimed nuisance is causing the plaintiff loss claimed in similar terms to that claimed in respect of the breach of the FTA.
[16] As well as the injunction, the plaintiff seeks compensation and interest in respect of both causes of action.
[17] The defendants deny both the breach of the FTA and nuisance. They oppose the application for the injunction on the basis that jurisdiction lies with the Residential Tenancy Tribunal1 (the Tribunal); there is no seriously arguable case in respect of either cause of action; damages would be an adequate remedy; and, in any event, the plaintiff does not come to the Court with clean hands.
Jurisdiction
[18] Mr Gustafson, appearing for the plaintiff, submitted that the High Court was the appropriate forum given that the claim was under the FTA and the Tribunal has no jurisdiction to deal with claims under the FTA.
[19] In support of that proposition, he referred to the case of Fava v Zaghloul.2 In that case, the High Court held that the Tribunal has no jurisdiction under the FTA. Venning J pointed out that s 39 of the FTA provides for the jurisdiction of the Disputes Tribunal (the tribunal established under the Disputes Tribunal Act 1988), but makes no reference to the Tribunal established under the Residential Tenancies
Act 1986 (the Act) to deal with claims under the FTA.
1 Established under the Residential Tenancies Act 1986.
2 Fava v Zaghloul HC Auckland CIV-2005-404-6818, 28 April 2006.
[20] Mr Butler, appearing for the defendants, submitted that it is not entirely clear that the Tribunal does not have jurisdiction in a claim pursuant to the FTA. He referred to s 78(h) of the Act which, in his submission, was sufficiently widely worded as to suggest the Tribunal did indeed have jurisdiction.
[21] Section 78 of the Act provides:
78 Orders of Tribunal
(1) Without limiting the generality of section 77 or the nature or extent of orders that the Tribunal may make in the exercise of its jurisdiction, the Tribunal may, in respect of any claim within its jurisdiction, make 1 or more of the following orders:
(a) an order in the nature of a declaration, whether as to the status for the purposes of this Act of any premises or of any agreement or purported agreement, or as to the rights or obligations of any party, or otherwise:
(b) an order that a party yield possession of any premises to any other party:
(c) an order that a party deliver any specific chattels to any other party: (d) an order that a party pay money to any other party:
(e) a work order:
(f) where it appears to the Tribunal that an agreement between the parties, or any term of any such agreement, is harsh or unconscionable, or that any power conferred by an agreement between them has been exercised in a harsh or unconscionable manner, an order varying the agreement, or setting it aside (either wholly or in part):
(g) where it appears to the Tribunal that an agreement between the parties has been induced by fraud, misrepresentation, or mistake, or that any writing purporting to express the agreement between the parties does not accord with their true agreement, an order varying, or setting aside, the agreement or the writing (either wholly or in part):
(h) any other order that the High Court or a District Court may make under any enactment or rule of law relating to contracts:
(i) an order dismissing an application.
[22] While I accept that the wording of s 78(h) is extremely wide, I concur with the observations of Venning J in the Fava decision. The fact that the Disputes Tribunal is specifically given jurisdiction whereas the Tribunal is not, underscores
that conclusion. The date of assent of the Act and the FTA was the same, being
17 December 1986. The Act came into force on 1 February 1987 and the FTA on
1 March 1987. That, in my assessment, emphasises that if the Tribunal were intended to have jurisdiction under the FTA, the FTA would specifically have so provided.
[23] I do accept, however, Mr Butler’s submission that, in the circumstances of this case, that is not the end of the matter. Simply because one cause of action is under the FTA does not preclude the Tribunal having jurisdiction over the remainder of the claim, particularly given the wide powers of the Tribunal. Section 78(1)(g) of the Act specifically gives the Tribunal jurisdiction if it appears that an agreement between the parties have been induced by fraud or misrepresentation. Arguably, therefore, the plaintiff could have brought the proceedings under the Act and the relief sought by the plaintiff could have been granted, if considered appropriate,
pursuant to the Act.3
[24] In any event, there is also a question as to the power of the Court to grant an injunction pursuant to the FTA in the circumstances of this case. Injunctions under the FTA are covered by s 41 which provides:
41 Injunctions may be granted by court for contravention of Part 1, Part 2, Part 3, and Part 4
(1) The court may, on the application of the Commission or any other person, grant an injunction restraining a person from engaging in conduct that constitutes or would constitute any of the following—
(a) a contravention of any of the provisions of Parts 1 to 4: (b) any attempt to contravene such a provision:
(c) aiding, abetting, counselling, or procuring any other person to contravene such a provision:
(d) inducing, or attempting to induce, any other person, whether by threats, promises or otherwise, to contravene such a provision:
(e) being in any way directly or indirectly, knowingly concerned in, or party to, the contravention by any other person of such a provision:
(f) conspiring with any other person to contravene such a provision.
3 Section 79. The Tribunal has jurisdiction to make interim orders of a mandatory or prohibitory nature.
(2) The court may at any time rescind or vary an injunction granted under this section.
(3) Where an application is made to the court under this section for the grant of an injunction restraining a person from engaging in conduct of a particular kind the court may,—
(a) if it is satisfied that the person has engaged in conduct of that kind, grant an injunction restraining the person from engaging in conduct of that kind; or
(b) if in the opinion of the court it is desirable to do so, grant an interim injunction restraining the person from engaging in conduct of that kind,—
whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of that kind.
(4) Where an application is made to the court under this section for the grant of an injunction restraining a person from engaging in conduct of a particular kind, the court may,—
(a) if it appears to the court that, in the event that an injunction is not granted, it is likely that the person will engage in conduct of that kind, grant an injunction restraining the person from engaging in conduct of that kind; or
(b) if in the opinion of the court it is desirable to do so, grant an interim injunction restraining the person from engaging in conduct of that kind,—
whether or not the person has previously engaged in conduct of that kind and whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind.
(5) If the Commission applies to the court for the grant of an interim injunction, the court must not, as a condition of granting an interim injunction, require the Commission to give an undertaking as to damages.
(6) However, in determining the Commission’s application for the grant of an interim injunction, the court must not take into account that the Commission is not required to give an undertaking as to damages.
[25] A plain reading of that section suggests that, as is relevant to this case and the claim, a Court may grant an injunction restraining a person from engaging in conduct which would constitute misleading and deceptive conduct. What the plaintiff seeks here is an injunction requiring the defendants to cease operating a brothel or prostitution services from the Apartment. In other words, the injunction sought is not directed at any offending there may have been against the FTA specifically.
[26] In Mr Gustafson’s submission, the jurisdiction of s 41 includes the ability for the Court to grant an injunction to ameliorate the effects of any such misleading conduct. In this regard, he referred to, but was unable to cite from, Gault on Commercial Law. Having read the commentary on s 41, I am not satisfied such an approach would be correct given the wording of s 41 which says that there must be
conduct which constitutes a contravention of any provision of Parts 1 to 5.4 Section
41 therefore cannot be interpreted that broadly; the granting of an injunction must specifically correlate with the contravening conduct under the FTA rather than the ancillary effects of it.
The Act
[27] In any event, the plaintiff says that Mrs Simpson and Mr Cox are not tenants of the plaintiff and, therefore, there is not a residential tenancy between the plaintiff and those defendants.
[28] Section 2 of the Act sets out the relevant definitions as follows:
2 Interpretation
commercial premises means premises that are not residential premises.
residential premises means any premises used or intended for occupation by any person as a place of residence.
tenancy, in relation to any residential premises, means the right to occupy the premises (whether exclusively or otherwise) in consideration for rent; and includes any tenancy of residential premises implied or created by any enactment; and, where appropriate, also includes a former tenancy.
tenancy agreement, in relation to any residential premises, means any express or implied agreement under which any person, for rent, grants or agrees to grant to any other person a tenancy of the premises; and, where appropriate, includes a former tenancy agreement and any variation of a tenancy agreement.
tenant, in relation to any residential premises that are the subject of a tenancy agreement, means the grantee of a tenancy of the premises under the agreement; and, where appropriate, includes—
(a) a prospective tenant; and
(b) a former tenant; and
4 See also s 41(1)(b)-(f) attempting, aiding, abetting, inducing, conspiring or being in any way knowingly concerned in such a contravention.
(c) a lawful successor in title of a tenant to the premises; and
(d) the personal representative of a deceased tenant; and
(e) an agent of a tenant
[29] Furthermore, s 2(3) of the Act provides:
For the purposes of this Act, where any premises that are subject to a legal or an equitable lease are used for both commercial and residential purposes, the premises shall be deemed to be residential premises unless it is proved that the premises were let principally for purposes other than residential purposes.
[30] Mrs Simpson is clearly a tenant. She has the right to occupy as was made plain in the application. She is also an agent of the Company. The injunction is not sought against Mr Cox and therefore, whether or not he is a tenant, is irrelevant to these proceedings.
[31] Section 82 of the Act provides that no other Court or body has originating jurisdiction in respect of any matter within the jurisdiction of the Tribunal.
[32] The Act applies to every tenancy for residential purposes, except as specifically provided.5 Interestingly, the Act allows parties to contract into the provisions of the Act in jurisdiction of the Tribunal.6
[33] Importantly, s 10 relates to the onus of proof and provides:
10 Onus of proof
Where, in any proceedings before the Tribunal, any party contends that this Act does not apply in respect of any tenancy of any residential premises, it shall be for that party to establish the facts upon which it is contended that this Act does not apply.
[34] Pursuant to s 77 of the Act, the Tribunal has jurisdiction to determine whether any premises are or were residential premises to which the Act applied.
[35] Relevant to the plaintiff’s claim are the tenants’ responsibilities which are set
out in s 40 and include the obligation to ensure the premises are occupied principally
5 Section 4.
6 Section 8.
for residential purposes;7 ensuring the premises are not used for any unlawful purpose;8 and ensuring that no interference is caused or permitted to the reasonable peace, comfort or privacy of the landlord’s other tenants.
[36] Mr Gustafson referred to a number of cases9 to the effect that it is the substance of any agreement rather than its form which determines the use and that this needs to be considered on a continuing and overall basis. He said that it is the High Court which is the appropriate forum to determine jurisdiction rather than the Tribunal.10
[37] As endorsed by the Court of Appeal in Jack v Jack, the true test is for what purpose is the premises principally used.11 That is a question of degree.
[38] In this case, the plaintiff relies on the fact that the Apartment has five bedrooms but is occupied only by Mr and Mrs Simpson and, occasionally, two children. In Mr Gustafson’s submission, this emphasises the predominately commercial use of the Apartment, in particular, given that three commercial enterprises are run from the Apartment; being the legal consultancy business, a modelling agency and the brothel.
[39] Mr Gustafson then referred to the affidavit of Hamish Williams, a private investigator, who surveyed the Building on at least five evenings and identified four women who he considered were likely to be prostitutes and a total of 13 potential clients. On one of those nights, Mrs Simpson was not present. On one other evening, he observed eight potential clients being greeted by Mrs Simpson and then escorted up to the Apartment.
[40] In Mr Gustafson’s submission, it is appropriate to assume that Mr and
Mrs Simpson share one bedroom, leaving four other bedrooms and ensuites available
7 Section 40(1)(b).
8 Section 40(2)(b). Prostitution is no longer illegal under the Prostitution Reform Act 2003. The
Building is located in an area designated under the District plan as an entertainment area and a brothel can legally be operated there. There is no requirement for licensing of a brothel.
9 Watson v Williams [2012] NZHC 3199 and Radionov v Nicolaou DC Lower Hutt 979/00, 8
February 2001.
10 Auckland District Council v Attorney-General [1993] 2 NZLR 129 (CA).
11 Jack v Jack [1987] 1 NZLR 205 (CA).
to be used for commercial premises. In his submission, it would be logical to infer that the lounge of the Apartment is also used by the brothel because the affidavit evidence of Mr Simpson was that, quite often, the Apartment is used as a place to meet clients but the business is transacted elsewhere.
[41] Mr Gustafson referred to the evidence from Mr Simpson that the two other businesses operate a few hours a day only and much of the modelling and legal consultancy occurs off the premises. This means there is a strong case to say that, as a result of the brothel, the Apartment is predominantly commercial in use, he said. He submitted that Mr Simpson’s evidence was scant on details of the various businesses for example, their turnover and the number of escorts employed. Mr Gustafson submitted that the failure to adduce evidence, which would be helpful to the Court in determining the predominant use, should be weighed against the defendants’ position that the use is predominantly for residential purposes.
[42] The difficulty with this approach is that the alleged predominate commercial use of the Apartment has not been pleaded. As such, it is perhaps unsurprising that the issue is not addressed in the defendants’ evidence.
[43] In support of the predominate use of the Apartment, I note that the Agreement itself is headed “Residential Tenancy Agreement” and the parties agreed that the provisions of the Act would apply. In correspondence between the parties, there is reference to a residential lease or residential tenancy agreement. The statement of claim also refers to a residential tenancy agreement.
[44] Notwithstanding the plaintiff’s submission, it is clear on the face of it that the Apartment was let principally for use as a residential premise and therefore, on the face of it, the Act applies.12
[45] I agree with the submission from the defendants that Parliament intended disputes such as the present one to be dealt with by the Tribunal. The parties saw themselves as being bound by a residential tenancy agreement and the Tribunal has the jurisdiction to deal with applications for the relief sought by the plaintiff. The
orders sought under the FTA could equally have been sought under s 78(1) of the
Act.
[46] It cannot have been Parliament’s intention, when enacting the Act, to allow a landlord to circumvent the otherwise applicable code of the Act by tailoring its pleaded cause of action to be outside the jurisdiction of the Tribunal. I accept that to allow this approach would undermine the purpose of the Act, being to establish a Tribunal to determine tenancy disputes expeditiously and the Tribunal’s clear jurisdiction for tenancy disputes.
[47] The Company previously applied to the Tribunal for urgent interim orders including a declaration that its use of the Apartment was lawful. A hearing took place and viva voce evidence was given, including as to use. The decision has not yet been delivered by the Tribunal. The Tribunal, therefore, is already seized of this issue, has heard evidence and is best placed to make the factual finding on actual use of the Apartment.
Conclusion
[48] For the reasons given, I am not satisfied that this Court has jurisdiction. The appropriate forum for the dispute is the Tribunal. This is particularly so given that the injunctive relief, as sought by the plaintiff, is not available pursuant to the FTA.
Is there a serious question to be tried?
[49] In case I am wrong about the question of jurisdiction, I will nevertheless consider the application for the injunction in accordance with the well established tests.13
[50] I have already addressed in large part the claim under the FTA.
[51] As far as the claim of nuisance is concerned, the plaintiff relies on the affidavit from the private investigator, referred to above, the affidavit from the property manager and the affidavit from the owner and operator of the restaurant.
[52] The property manager says that, on or around 4 or 5 August 2015, she received complaints from other tenants of the Building about people from the Apartment smoking in the stairwell and loud music coming from the Apartment. She took this matter up with Mr Simpson who told her his children had turned the stereo up and, to the best of his knowledge, he did not believe any tenant or guest of the Apartment smoked in the stairwell.
[53] On 10 August, she was contacted by the Restaurant’s management and informed that the Police had been called to a disturbance at the Apartment over the weekend. Following that, Mr Simpson sent a bunch of flowers to the plaintiff saying:
Sincerest apologies for the disturbance at the apartment the other night. We have apologised to [the Restaurant] and rest assured it won’t happen again. We really love being here and promise to be model tenants from now on.
[54] Mr Cox sent an email to the agent confirming Mr and Mrs Simpson’s apologies but saying the incident was not of their making. He denied that there was a brothel operating from the Apartment and said he had discussed this with Mr Simpson.
[55] Following that, the plaintiff engaged a private investigator. The allegations about brothel use of the Apartment continued to be put and continued to be denied.
[56] There was a dispute about a sign Mr Simpson had erected at the entrance to the Building which said “The Firm” on the basis that it did not comply with the Building’s signage rules and had not been approved. Eventually, it was removed.
[57] The plaintiff’s lawyers wrote to Mr Cox requesting an undertaking that the brothel cease operation. The defendants’ lawyers declined to give that undertaking, noting that the Apartment was the principal place of residence of Mr and Mrs Simpson; the plaintiff was aware that commercial activities would be conducted from the Apartment and consented; there was no illegal activity conducted at the Apartment (saying it was not used as a brothel but any agency work was, in any event, not an illegal activity); and that there was no evidence that activities
carried out by the defendants disturbed, annoyed or caused a nuisance to any neighbours.
[58] The property manager expresses concerned that future tenants of the Apartment would be less inclined to rent it if a brothel has operated from it for a year. Her concern is on the basis of her experience that tenants are less likely to rent or pay a premium for other parts of the Building if the Apartment has been used as a brothel.
[59] The property manager also comments that the quiet enjoyment of other tenants of the Building is being disturbed by the brothel and they may sue the plaintiff for nuisance emanating from the common areas or seek to cancel existing leases for breach. The concerns include the Police being called; patrons entering and exiting the Building; complaints as to smoking in the stairwell; loud music; signage; and prostitutes using the entrance way.
[60] Despite this, however, there is evidence of one callout to the Police only and the sad reality is that domestic incidents can occur in any residential premises. The complaint as to loud music appears to have been on one occasion only and, apart from the restaurant operator, there is no evidence from any other tenants of the Building. Even if they did not wish to become involved in these proceedings, there is no evidence of complaints by them to the plaintiff, citing a breach of their quiet enjoyment covenants or any threat to withhold rent or to cancel their leases.
[61] The affidavit from the sole director and shareholder of the Restaurant notes the domestic incident on 8 August and an incident on 27 August when a woman from the Apartment, whom he considered to be under the influence of drugs and/or alcohol, came into the Restaurant asking for rice. On 30 September, when he arrived at the Restaurant, he discovered the emergency release had been activated on the emergency exit door in the foyer of the Building and that it had been open all night. He considers it most likely activated by someone leaving the Building who was not used to an after-hours exit button and its location. He observed men leaving the Apartment, frequently unaccompanied, through the stairwell. He notes the Restaurant shares the stairwell with the Apartment. In this regard, however, I note
this is not the main customer entrance to the Restaurant and the stairwell seems to be used by the Restaurant for storage and delivery of its supplies.
[62] He says:
I am concerned that the operation of this escort and massage business from the building and the associated clientele will negatively affect the acclaimed dining experience for which the restaurant is renowned.
Analysis
[63] I accept there is a serious question to be tried in respect of misrepresentation. Whether this is properly classified as a breach of the FTA is a different issue. Whether the defendants were “in trade” in relation to their representations to the plaintiff and in applying for the tenancy of the Apartment is open to debate. I accept it is arguable, although, given that the FTA is primarily focused on consumer protection, there is at least an issue to be explored as to whether the defendants were in trade in making their application. It may well be that the plaintiff has other
avenues for relief.14
[64] It is patently clear that the plaintiff’s concern is the use of the Apartment as a brothel and that is what the application is designed to stop. The injunctive relief is not directed at the nuisance which is claimed – for example, loitering and smoking in the stairwell, but use of the Apartment for a brothel. While this might perhaps be understandable, there is nothing in the Agreement which restricts the type of commercial activity which could be conducted out of the Apartment.15
[65] Save for the Restaurant operator, there is no evidence from any of the other tenants of the Building. Some of the alleged disturbances have not been repeated (domestic incident, loud music). The prospect of visitors to the Apartment, whether male or female, exists within other commercial uses and the residential use of the Apartment. I accept that the emergency exit door being open all night is undesirable
but it is just as much in the interest of the defendants to ensure that the Building is
14 For example, under the Contractual Remedies Act 1979, if it contends that use of the premises was an essential term of the bargain.
15 I accept this might well be because of the information provided at the time of the application for the tenancy. The continued denials that the Apartment was used as a brothel or escort business supports the inference of intentional non-disclosure.
secure at night as the Restaurant owner and plaintiff. The Restaurant operator is concerned at a negative effect on his restaurant but does not, in terms, say that any such negative effect has arisen.
[66] There is, therefore, no evidence of damage to the Restaurant’s business or to
the landlord.
[67] The plaintiffs rely on the case of Norden v Blueport Enterprises Ltd where
Elias J, as she then was, said:16
In cases where premises are used, in breach of a covenant of the lease, for an immoral or illegal purpose, the activities of the lessee are considered by the court to cast a “stigma” on the premises which is irremediable: Rugby School (Governors) v Tannahill [1935] 1 KB 87; Hoffman v Feinberg [1949] Ch
245; British Petroleum Pension Trust Ltd v Behrendt [1985] 2 EGLR 87;
Glass v Kencakes Ltd [1966] 1 QB 611.
[68] That comment, however, was made prior to the Prostitution Reform Act
2003.17 Legalisation of prostitution unquestionably weakens any stigma cast on premises used for that purpose. While it might well be understandable that there are concerns about a brothel being operated from the premises, it is not illegal and there is nothing in the Agreement in this case to preclude it.
[69] The circumstances of that case were, in any event, much more serious than those suggested by the evidence in this case. The tenant had cancelled its lease on the basis the lessors had derogated from grant and were in breach of the quiet enjoyment covenant in consenting to the assignment of the lease of the floor above to a tenant who used the premises as a brothel. The Court held that, because there had been substantial interruption which prevented the lessee from enjoying its premises for the very purpose for which they had been leased, the derogation was also a breach of the covenant of quiet enjoyment.
[70] For these reasons, I am not satisfied there is indeed a serious question to be tried.
16 Norden v Blueport Enterprises Ltd [1996] 3 NZLR 450 (HC) at 477.
17 Crimes Act 1961, s 147 previously made brothel keeping an offence with a maximum penalty of
five years’ imprisonment.
Balance of convenience and overall justice
[71] The Agreement terminates on 2 August 2016.
[72] Given the absence of evidence of loss or damage, I do not consider there is any injustice in permitting the status quo to continue. My decision is based on the evidence presently before the Court. As observed above, the use to which premises are put is not necessarily static and is a question of degree. Furthermore, any further instances of nuisance attributable to use of the Apartment as a brothel and any impact on the other occupants of the Building might be to the extent that another application in the appropriate forum would be warranted.
[73] I am not satisfied that damages would not be an adequate remedy. Damage to the plaintiff in respect of the value of the Building or ability to re-let the Apartment as a result of use of the Apartment for a brothel has already been suffered.
[74] Both sides accuse the other of not coming to the Court with “clean hands”. I
do not propose to take that issue any further.
[75] Given the other conclusions I have reached, the overall justice of the case does not favour the grant of the injunction.
[76] For the reasons given, the application is dismissed. If costs cannot be agreed, memoranda are required, from the defendant within 21 days and from the plaintiff seven days thereafter.
[77] The Registrar is to allocate a case management conference in relation to the substantive proceeding.
Thomas J
2