Somerfield Investments Limited v Sinful Coffee Limited
[2021] NZHC 2806
•20 October 2021
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE
CIV-2021-442-13
[2021] NZHC 2806
BETWEEN SOMERFIELD INVESTMENTS LIMITED
Plaintiff
AND
SINFUL COFFEE LIMITED
First Defendant
LISA BUCHANAN
Second Defendant
Hearing: 25 August 2021 (by VMR) Appearances:
K W Clay for plaintiff
S R Thompson for defendants
Judgment:
20 October 2021
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
Introduction and background
[1] This is an application by the plaintiff, Somerfield Investments, for summary judgment against the defendants, Sinful Coffee Ltd and Lisa Buchanan. Somerfield contends that it has a claim following the expiration of the term of a lease pursuant to which it let premises in Richmond to Sinful. The obligations of Sinful under that lease were guaranteed by Ms Buchanan, who is the sole director and shareholder of Sinful.
[2] Somerfield’s application was supported by an affidavit sworn by its director, Euan Saunders, in which Mr Saunders described the dealings between the parties in terms which are not, insofar as they go, in dispute.
SOMERFIELD INVESTMENTS LIMITED v SINFUL COFFEE LIMITED [2021] NZHC 2806
[20 October 2021]
[3] In early 2017 the parties entered into the lease and guarantee. The initial term of the lease was for two years commencing on 1 September 2016. It contained a right of renewal for a second term of two years commencing on 1 September 2018, which was exercised. The final expiry date of the lease was 31 August 2020. Rental was agreed. Additionally, it was agreed that Somerfield was entitled to pass on to Sinful the cost of certain outgoings. It was also agreed that Sinful would pay Somerfield’s legal costs of, and incidental to, its enforcement of its rights under the lease. As already said, Sinful’s obligations under the lease were guaranteed by Ms Buchanan.
[4] For reasons which are irrelevant for present purposes, the lease came to an end before 31 August 2020. After that date, Somerfield carried out certain work on the premises. This was all said to be directed at returning the property to the state in which it had been at the commencement of the lease. This work involved:
(a)the removal of fixtures and fittings;
(b)associated remedial work; and
(c)repainting.
[5]Somerfield commenced the current proceeding on 17 March 2021, claiming:
(a)unpaid rent from 14 May 2020 until the conclusion of the lease on 31 August 2020;
(b)reimbursement for the costs of the work carried out on the premises; and
(c)interest and costs.
[6] Sinful entered a notice of opposition on 1 June 2021. This was supported by an affidavit sworn by Ms Buchanan in her dual capacities as the director of the company and guarantor.
[7] A fact that had not been raised in Mr Saunders’ original affidavit but which emerged from Ms Buchanan’s affidavit was that the premises were originally owned and leased to Sinful by the trustees of the M J & V A Saunders Family Trust. There was some connection between the Trust and Somerfield, but that connection is irrelevant; the trustees of the Trust on the one hand and Somerfield on the other are distinct entities. Sinful entered into this earlier lease with the trustees in mid-2013. The trustees assigned the lease to Somerfield about three years later. A dispute then arose between Somerfield and Sinful, which was resolved in due course. Somerfield and Sinful then entered into the lease at the centre of this proceeding. Importantly, all of the work that was carried out by or for Sinful on the property (installation of fittings and fixtures and repainting) was done pursuant to the old arrangement between Sinful and the original trustee landlords, long before Somerfield appeared on the scene or, as I understand it, even existed.
[8] The original return date on Somerfield’s application was 4 June 2021. When the case was called on that date Somerfield sought summary judgment in respect of the outstanding rental component of its claim. In an oral interim judgment that day I granted Somerfield summary judgment against both Sinful and Ms Buchanan in respect of the rental claim of $10,228.85 and adjourned all other aspects of the claim. That judgment was entered on the basis of admissions made on behalf of both defendants in their affidavit evidence in support of their notice of opposition.
[9] I also issued directions on 4 June 2021 in relation to the setting down and hearing of the balance of Somerfield’s claim, which was ultimately heard (by VMR) on 25 August 2021.
[10] Following my interim judgment the remaining components of the claim were for:
(a)the costs of repair and maintenance works done on the property;
(b)interest to 28 February 2021 on the rent and outgoings in respect of which I have already given summary judgment, amounting to
$1,828.56;
(c)interest on (a), (b) and the principal claim of $10,228.85, from 1 March 2021 until the date of judgment in this proceeding; and
(d)solicitor-client costs.
Maintenance and Repair Costs
[11] The affidavit evidence includes full details of the repair and maintenance costs claimed by Sinful:
Details
Company
$
Removal of rangehood and splashback and related work
Best and West
933.80
Repainting exterior and interior
Pro Colour Painting
15,672.78
Remediation and reinstatement of premises
Scott Construction Ltd
7,235.26
Remedial works – electrical invoice
Scott Construction Ltd
535.65
Erecting scaffolding and netting
Alphies Limited t/a Roof Edge Solutions and Safety Web NZ
2,343.26
TOTAL
$26,720.75
[12] For Somerfield Mr Clay submitted that the company was entitled to recover those amounts under sub-clauses 20.1 and 20.4 of cl 20 of the lease, which provide:
20.1 The Tenant shall neither make nor allow to be made any alterations or additions to any part of the premises or alter the external appearance of the building without first producing to the Landlord on every occasion plans and specifications and obtaining the written consent of the Landlord (not to be unreasonably or arbitrarily withheld or delayed) for that purpose. If the Landlord authorises any alterations or additions which are made before the commencement date or during the term of this lease the Tenant will at the Tenant’s own expense if required by the Landlord no later than the end or earlier termination of the term reinstate the premises. Ownership of the alterations or additions that are not removed by the end or earlier terminations of the lease may at the Landlord’s election pass to the Landlord without compensation to the Tenant. If the tenant fails to reinstate then any costs incurred by the Landlord in reinstating the premises whether in whole or in part, within 6 months of the end or earlier termination of the term shall be recoverable from the Tenant.
…
20.4 The cost of making good resulting damage and the cost of removal of the Tenant’s chattels shall be recoverable from the Tenant and the Landlord shall not be liable to pay any compensation nor be liable for any loss suffered by the Tenant.
[13] Mr Clay submitted that the cost of the work covered by the invoices identified earlier was recoverable under one or either of those sub-clauses.
[14]I do not accept that submission.
[15] It is by no means obvious to me that Somerfield can rely on sub-cl 20.1 in recovering any of these costs against Sinful. The prohibition in the first sentence of the clause on the tenant carrying out any alterations or additions without consent cannot apply retrospectively to alterations or additions carried out under an earlier lease involving a different landlord. Nor can Somerfield as the landlord under the subsequent lease be said to have authorised any alterations or additions under the earlier lease.
[16] In short it appears to me to be arguable, at very least, that cl 20.1 has no application here. The relevant lease was entered into in early 2017 between Somerfield and Sinful when all relevant “alterations and additions” in respect of which Somerfield now claims had been completed. Effectively, Somerfield leased the premises to Sinful inclusive of the same.
[17] I also have difficulty seeing how sub-cl 20.4 can apply. The first sentence of that subclause faces the same difficulty as that which arises under the earlier sub-clause. Otherwise, this is a standard clause entitling the landlord to remove chattels left behind by a tenant and recover the cost of doing so. None of the costs claimed by Somerfield relate to such an exercise.
[18] This being a summary judgment application, the Court needs to be satisfied that Somerfield can demonstrate that Sinful — and therefore Ms Buchanan — has no arguable defence. I am far from satisfied that that is the position in relation to this aspect of the claim.
Interest
[19] Interest in respect of the unpaid rental (in respect of which it will be recalled judgment has already been entered) is dealt with in cls 5.1 and 5.2, and in cl 12 of the First Schedule to the lease, which provide:
5.1If the Tenant defaults in payment of the rent or other moneys payable under this lease for 10 working days then the Tenant shall pay on demand interest at the default interest rate on the moneys unpaid from the due date for payment to the date of payment.
5.2Unless a contrary intention appears on the front page or elsewhere in this lease the default interest rate is equivalent to the interest rate charged by the Inland Revenue Department on unpaid tax under the Tax Administration Act 1994 during the period for which the default interest is payable, plus 5 per cent per annum.
…
First Schedule:
12 DEFAULT INTEREST RATE: 5% per annum above the Landlord’s bank’s business overdraft rate (subclause 5.1).
[20] There is no real dispute that in respect of the outstanding rental Somerville is entitled to charge interest at this (now surprisingly high) rate. Somerfield included in the evidence in support of its claim a letter from its bank confirming that its Unarranged Overdraft Interest rate was 22.5%. An interest rate of 27.5% is therefore consistent with the terms of the lease agreement between Somerfield and Sinful. The interest owed to 28 February 2021 is therefore calculated at $1,828.56. I am satisfied that Somerfield is entitled to summary judgment for that amount.
[21] Somerville also claims a second head of interest, that is on its entire claim except for solicitor and client costs. It does so at the same interest rate of 27.5%. As I have determined that Somerville is not entitled to summary judgment in respect of the repair and maintenance works done on the property, this interest rate applies only to the principal sum in which I have already granted summary judgment ($10,228.85) and the interest to 28 February 2021 on that sum ($1,828.56), totalling $12,057.41. The date of this judgment being 20 October 2021, 27.5% interest on that sum is therefore $2,125.42.
[22]I therefore calculate the total interest to be $3,953.98 ($1,828.56 + $2,125.42).
Costs
[23]Costs are provided for in cl 48 which provides:
48.0 Costs
The Tenant shall pay the Landlord’s Solicitors’ reasonable costs of and incidental to the preparation of this Lease and any variation or renewal or any Deed recording a rent review, the Landlord’s reasonable costs incurred in considering any request by the Tenant for the Landlord’s consent to any matter contemplated by this Lease, and the Landlord’s legal costs (as between solicitor and client) of and incidental to the enforcement or attempted enforcement of the Landlord’s rights remedies and powers under this Lease.
[24] Again, there is no doubt that Somerville is entitled to claim indemnity costs in connection with this proceeding, even although it has only been successful in respect of the majority of its claim. Some of the costs will have been incurred in respect of the aspects of Somerfield’s claim which I have not accepted, but those costs are not severable from the costs incurred in respect of the proceeding as a whole.
[25]The evidence is that Somerfield’s solicitor and client costs amount to
$11,645.44. The details of those costs are set out as follows:
Date
Details
Company
$
16 March 2021
Disbursements for Nelson High Court Filing Fee
Cameron & Co
1,100.00
26 March 2021
For receiving instructions, correspondence, drafting proceeding, advising, and incidental matters
K W Clay
4,370.00
8 April 2021
For serving documents on Ms Buchanan
Avon Investigations
241.50
8 April 2021
For serving documents on Sinful
Avon Investigations
218.50
29 April 2021
For professional services in respect of attending to Sinful’s tenancy for the period July 2020 to April 2021
Cameron & Co
4,611.44
27 May 2021
For correspondence, advising, preparation of memorandum, reporting, and incidental matters
K W Clay
1,104.00
TOTAL
$11,645.44
[26] I have no basis for concluding that its actual costs are anything other than reasonable.
Summary of conclusions
[27] For those reasons, I enter summary judgment in favour of Somerville jointly against both defendants in the sum of $15,599.42 made up as follows:
(a) Interest of $3,953.98; and (b) Costs of $11,645.44.
[28] I dismiss the application for summary judgment in respect of Somerville’s claim for repair and maintenance costs totalling $26,720.75.
Next steps
[29] The Registrar is to arrange a case management teleconference as soon as conveniently possible.
[30] At that conference I would expect to make directions to set the remaining component of Somerville’s claim down for trial and make all necessary pre-trial directions.
Associate Judge Johnston
Solicitors:
Cameron & Co, Christchurch for plaintiff Pitt & Moore, Nelson for defendants
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