Tan v Lighter Quay Hotel Management Ltd HC Auckland CIV 2010-404-4042

[2010] NZHC 1200

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2010-404-4042

BETWEEN  POH KOK TAN AND PEI SIANG JUDY CHEN & ORS

Applicants

ANDLIGHTER QUAY HOTEL MANAGEMENT LTD Respondent

CIV 2010-404-4342

AND BETWEEN            COLIN JEE FAI LOW & ORS Applicants

ANDLIGHTER QUAY HOTEL MANAGEMENT LTD Respondent

Hearing:         14 July 2010

Counsel:         P G Skelton for Applicants

A Horne and A Simkiss for Respondent

Judgment:      14 July 2010

(ORAL) JUDGMENT OF HEATH J

Solicitors:

Anderson Creagh Lai, PO Box 1206-740, Auckland 1143

Minter Ellison, PO Box 3798, Auckland Shieff Angland, PO Box 2180, Auckland Counsel:

P G Skelton, PO Box 4314, Shortland Street, Auckland

TAN & ORS V LIGHTER QUAY HOTEL MANAGEMENT LTD HC AK CIV 2010-404-4042  14 July 2010

[1]      There  are  two  proceedings  before  the  Court.     Both  seek  orders  for cancellation of leases and possession of land.   The applications are brought under s 244 of the Property Law Act 2007 (the Act).   They relate to units in the Westin Hotel that operates near the Viaduct Basin, in Auckland.

[2]      In one proceeding,[1] 75 applicants, each owners of units in the hotel complex have sought the orders.   Three of the applicants do not wish to proceed and seek leave to discontinue.   Leave is granted for the third, fourth and seventy-fifth applicants to discontinue, meaning that those claims are to be considered in relation to the remaining 72 applicants.

[1] CIV 2010-404-4042

[3]      In the other proceeding,[2] there are 17 applicants.  The same issues arise and the applicants have the same standing as owners of the units.

[2] CIV 2010-404-4342

[4]     The respondent, Lighter Quay Hotel Management Ltd (the management company), operates the Westin Hotel, under arrangements with the Westin chain. On that basis, the management company entered into leases so that units owned by individual owners could be used as hotel rooms, in return for a specified rent.

[5]      At  the  time  notices  were  issued  under  s 245  of  the  Act,  the  amount outstanding to all of the applicants totalled approximately $2,800,000 and $975,000 in  each  proceeding  respectively.    Details  of  the  amounts  owing  are  set  out  in Schedule 2 to each application.  It is unnecessary to go through those details at this stage.

[6]      Notices under s 245 of the Act were served between 10 and 12 May 2010 in respect of the proceeding in which 75 applicants were originally named and on 23

June 2010 in respect of the other proceeding.  The proceedings followed the expiry of the relevant notices.

[7]      Section 244 of the Act entitles a lessor who wishes to exercise a right to cancel a lease because of a breach by the lessee of a covenant or condition of the

lease, to apply to a Court for an order for possession of the land.[3]   That provision is subject to s 245, in the case of breach of a covenant to pay rent.[4]   The right to cancel only arises after the formal steps required by s 245 of the Act have been completed in relation to such a breach.[5]

[3] Property Law Act 2007, s 244(1).

[4] Ibid, s 244(2).

[5] Ibid, s 245(1).

[8]      The proceedings, in addition to being served on the management company, have been served on secured creditors and receivers of the company, the latter of whom were appointed by one of the secured creditors on 30 June 2010.

[9]     There is also, in effect, an order appointing interim liquidators of the management  company;  that  order  was  made  at  4.50pm  on  30  June  2010,  by Associate  Judge  Bell.    The  application  to  have  liquidators  appointed  and  the company placed in liquidation is due to be called before the Associate Judge in about

15 minutes time.

[10]     No steps were taken by the management company or any party served to oppose the application.   Nevertheless, the receivers, at the eleventh hour, filed a memorandum last night seeking to adjourn the proceeding for four weeks, claiming that the opportunity to negotiate a restructuring of the business would be lost if an adjournment were not granted.  The receivers currently have the benefit of an order made by Hugh Williams J absolving them from personal liability in respect of the issues raised concerning the leases.  That order enures until 11 August 2010.

[11]     I have heard from Mr Horne this morning, in support of the adjournment application.  I have declined to grant an adjournment.  My reasons for doing so may be stated shortly:

a)        First, the receivers were served with the proceeding on 6 July, but no steps were taken until yesterday evening.

b)Second,   while   the   current   applicants   support   the   liquidation application, they are not the plaintiff and their wishes in relation to an adjournment of that application are likely to be given less weight than the plaintiff in that proceeding.

c)       Third, the opportunity to restructure the business will not be lost.  It is in the interests of all concerned, the hotel chain, the management company and the owners of the units, to come to a commercial compromise to limit losses to each.

[12]     While Mr Horne submits, in support of the application to adjourn, that losses will result to the applicants in this proceeding because they will no longer have the benefit of their share of revenue from the hotel operations, it is clear that the owners have not had that benefit in any event; and it is for them to determine whether they wish to take that risk.

[13]     Being satisfied that the formal requirements of the Act have been complied with, I have reached the conclusion that it is appropriate for an order for possession to be made.

[14]     I agree with Mr Skelton, however, that the time for the order to take effect should be deferred to allow for negotiations to be undertaken.   As Mr Skelton acknowledged this morning, it would make sense for that time to take effect contemporaneously with the end of the time during which the receivers have been given personal protection from liability, namely 11 August 2010.

[15]     In  those  circumstances,  I  make  the  following  orders,  which  are  largely reflected in the draft order submitted by Mr Skelton to the Court:

a)       With  effect  from  11  August  2010,  leases  between  each  of  the remaining   applicants   and   the   respondent   in   each   proceeding, particulars of which will be set out in Schedule 1 to the order, are hereby cancelled.   Schedule 1 will reflect the Schedule of the same number presently attached to each originating application.

b)With effect from 11 August 2010, each of the remaining applicants in each proceeding is hereby granted possession of the land comprised in their lease.

c)       Under   the   compensation   provisions   of   s 251   of   the   Act,   the respondent shall pay to the remaining applicants in each proceeding the rent and outgoings that the respondent is liable to pay under the leases up to 11 August 2010 but the quantum of those payments is

reserved for further consideration by the Court.[6]

[6] See para [15](f) below.

d)       The respondent shall pay each of the remaining applicants the sum of

$750 for costs of and incidental to the drafting and service of the s

245 notice.

e)       One set of costs are awarded in favour of the remaining applications on each of the applications in the sum of $6480, together with disbursements and $440.

f)        The proceeding shall be listed for mention in the Duty Judge List at

10am on 6 September 2010 for timetabling directions to be made, in the event that there are any disputes as to quantum of rent and outgoings to be paid.   I anticipate, however, that if the company is placed in liquidation, those matters may be dealt with better under the proof of claim process in the Companies Act 1993.   Alternatively consideration could be given to a quantum trial before an Associate Judge.

[16]     To avoid any difficulties with the intervention of a possible liquidation, I

confirm that these orders were made at 11.40am today.

[17]     Following the orders I have made, I heard counsel on whether any orders as to confidentiality should be made to protect the ability of affected parties to negotiate a commercial solution, having reatd to the need to ensure the Westin Hotel continues

to operate viably, particularly having regard to the undoubted benefits of the 2011

Rugby World Cup.

[18]     It  is  very  likely  that  an  order  will  be  made  later  today  placing  the management company into liquidation.  If anything, reporting of that order without more, may confuse members of the public into believing wrongly that the Westin Hotel cannot continue in a viable sense.

[19]     Responsible reporting of the proceedings this morning, in conjunction with a report of any liquidation order made, would need to make it clear that all parties are concerned to secure the ongoing viability and that all parties have an incentive to ensure that is done.  A report of that type, in the context of the owners of the units obtaining orders for cancellation of the leases and possession of land so that they may control their own destiny, is much more likely to have public benefits than any dire consequences.

[20]     The law is clear.  Unless there are very strong countervailing circumstances, proceedings in open Court should be permitted to be published.  I can see no such countervailing circumstance sand  decline to make any order as sought.    I have confidence that any report of today’s hearing will provide the appropriate balance, in

the manner I have indicated.

P R Heath J