Terminus Restaurant and Bar Limited v Caples Court Motel 2007 Limited
[2013] NZHC 1812
•18 July 2013
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
CIV-2013-425-000234 [2013] NZHC 1812
BETWEEN TERMINUS RESTAURANT AND BAR LIMITED
Applicant
AND CAPLES COURT MOTEL 2007
LIMITED Respondent
Hearing: Dealt with on the papers
Judgment: 18 July 2013
JUDGMENT OF D GENDALL J
[1] In this proceeding, the applicant which is the fee simple registered proprietor of a motel property known as Caples Court Motel, 20 Stanley Street, Queenstown, situated on all that Certificate of Title OT 381/112 (the property) seeks possession and related orders against the respondent which is the defaulting lessee operator of the motel business.
[2] Service of these proceedings on the defendant took place on 4 June 2013 and proof of service has been filed. There has been no opposition or statement of defence filed by the respondent to the applicant’s claim against it.
[3] The specific orders sought by the applicant on its present originating application are:
(a) An order cancelling the lease between the applicant and the respondent dated 1 June 1993 in respect of the property;
(b) An order giving possession of the premises to the applicant;
TERMINUS RESTAURANT AND BAR LIMITED v CAPLES COURT MOTEL 2007 LIMITED [2013] NZHC
1812 [18 July 2013]
(c) An order directing the respondent to pay to the applicant all rent due up to the date of cancellation or such later date as the respondent yields up possession;
(d)An order directing the respondent to pay outgoings due up to the date of cancellation or such later date as the respondent yields up possession;
(e) An order directing the respondent to pay default interest at the rate of
12.45% per annum on the outstanding rent and outgoings; and
(f) An order directing the respondent to pay the applicant’s legal fees on a solicitor/client basis in respect of these proceedings and in the steps taken by the applicant to enforce its rights and remedies under the
lease.
Facts
[4] The applicant purchased the fee simple estate interest in the property in November 2005 at which time the motel and property were leased to Mr Wayne Perkins. Subsequently the leasehold interest in the property was sold to the respondent.
[5] The property comprises a motel which, I have noted, is known as, and trades under the name, Caples Court Motel.
[6] The provisions of the original 1 June 1993 lease for the property include:
(a) An obligation on the lessee to “duly and punctually” pay the rent “free of any deduction whatsoever” – clause 1.01. Rent is payable in advance at monthly intervals.
(b) The lessee’s obligations to pay the following outgoings:
(i) Rates – clause 1.02;
(ii) Insurance premiums – clause 1.03;
(c) The lessee’s obligation to pay interest on overdue rent or other monies “at the default rate calculated from the due date to the date of payment” – clause 3.04. The default rate is defined in clauses 3.18(c) as meaning the overdraft rate from time to time charged by Westpac Banking Corporation plus a margin of 4% per annum. It appears the Westpac overdraft rate at the operative time was 8.45% per annum. The default rate is therefore 12.45% per annum.
[7] A variation of the lease dated 25 February 2010 was entered into between the parties and extended the term of the lease to 3 June 2019.
[8] The rental under the lease for the current period is $102,450 per annum plus GST, this rent having taken effect from 4 June 2011. Advice of this revised rent was provided by letter to the respondent as lessee on 18 March 2011.
[9] The uncontested evidence before the Court establishes that, for some time now, the lessee has failed to pay the rent in full when due. A schedule of rental payments and defaults from 3 November 2010 is attached as exhibit “JALD 12” to the 22 May 2013 affidavit of John Alexander Lincoln Darling (Mr Darling) filed in this proceeding in support of the present application. That schedule shows that as at
16 April 2013 there were rental arrears owing under the lease amounting to
$55,050.52 (GST inclusive). In particular it is noted that no rental payments were received from the respondent in January, February, March, April or May 2013.
[10] Also annexed to Mr Darling’s affidavit as exhibit “JALD 13” is a schedule of
outgoings payable by the respondent. That schedule indicates that as at 16 April
2013 there is a balance owing by the respondent to the applicant for unpaid outgoings of $15,042.43 (GST inclusive). These outgoings comprise rates and insurance premiums.
[11] Clause 3.6 of the lease enables the applicant, as lessor, to determine the lease and re-enter if rent is unpaid for 14 days or if the respondent, as lessee breaches any other provision of the lease.
[12] On 24 April 2013 a Notice of Intention to Cancel the Lease for breach of the covenants to pay rent and outgoings pursuant to ss 245 and 246 of the Property Law Act 2007 was issued by the applicant. This required payment of the outstanding rent and outgoings within 10 working days after service of the Notice on the respondent, failing which the applicant, as landlord, indicated it could seek to cancel the lease in accordance with s 244 of the Property Law Act 2007.
[13] This Notice of Intention to Cancel the Lease was served on the respondent on
27 April 2013 and an affidavit confirming service has been filed.
[14] There is evidence before the Court that the respondent has not paid the whole or any part of the outstanding rent or the amounts due for outgoings, nor has it entered into any arrangement for payment.
[15] The applicant, therefore, wishes to cancel the lease and obtain possession of the property and seeks, in addition, an order for payment of the outstanding rent, outgoings, interest and costs. The total amount for interest which has accrued up to
22 May 2013 is outlined in a spreadsheet attached as exhibit “JALD 16” to
Mr Darling’s affidavit. It amounts to $7246.86.
[16] Under clause 1.14 of the lease the respondent, as lessee, is liable to pay all costs and expenses of the applicant of and incidental to the exercise or attempted exercise of any powers conferred on the lessor by the lease. Under this provision the applicant seeks recovery of its legal costs and disbursements.
Property Law Act 2007
[17] Sections 244, 245 and 245 of the Property Law Act 2007 apply here and provide:
244 Cancellation of lease for breach of covenant or condition:
general
(1) 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 may—
(a) apply to a court for an order for possession of the land; or
(b) re-enter the land peaceably (and without committing forcible entry under section 91 of the Crimes Act 1961).
(2) However, subsection (1) is subject to sections 245 and 246.
(3) If the lessor applies to a court for an order for possession of land for the purpose of cancelling a lease, the cancellation takes effect—
(a) on the making of the order; or
(b) on any later date that is specified in the order.
245 Cancellation of lease for breach of covenant to pay rent
(1) A lessor may exercise a right to cancel a lease because of a breach of the covenant to pay rent under the lease only if—
(a) the rent has been in arrears for not less than 10 working days; and
(b) the lessor has served on the lessee a notice of intention to cancel the lease; and
(c) at the expiry of the period specified in the notice, the breach has not been remedied.
(2) However, if the lessor believes on reasonable grounds that the lessee has given up possession of the leased premises (whether or not the lessee has actually done so), the lessor does not need to serve a notice of intention to cancel the lease on the lessee but must serve the notice instead on all of the following whose names and addresses are known to the lessor:
(a) any mortgagee or receiver of the leasehold estate or interest: (b) any sublessee of the lease:
(c) any mortgagee or receiver of the estate or interest of a sublessee.
(3) The notice required by subsection (1)(b) or (2) must adequately inform the recipient of all of the following matters:
(a) the nature and extent of the breach complained about: (b) the amount that must be paid to remedy the breach:
(c) the period within which the breach must be remedied (which must not be less than 10 working days after the date of service of the notice):
(d) the consequence that, if the breach is not remedied at the expiry of the period specified in the notice, the lessor may seek to cancel the lease in accordance with section 244:
(e) the right, under section 253, to apply to a court for relief against cancellation of the lease, and the advisability of seeking legal advice on the exercise of that right.
(4) The period for remedying the breach specified under subsection (3)(c) may run concurrently with the period specified in subsection (1)(a) in which the rent must be in arrears before the lessor may exercise any right to cancel the lease.
246 Cancellation of lease for breach of other covenants
(1) A lessor may exercise a right to cancel a lease because of a breach of a covenant or condition of the lease (except the covenant to pay rent) only if—
(a) the lessor has served on the lessee a notice of intention to cancel the lease; and
(b) at the expiry of a period that is reasonable in the circumstances, the breach has not been remedied.
(2) The notice required by subsection (1)(a) must adequately inform the recipient of all of the following matters:
(a) the nature and extent of the breach complained about:
(b) if the lessor considers that the breach is capable of being remedied by the lessee doing or stopping from doing a particular thing, or by the lessee paying reasonable compensation, or both,—
(i) the thing that the lessee must do or stop doing; or
(ii) the amount of compensation that the lessor considers reasonable; and
(c) the consequence that, if the breach is not remedied at the expiry of a period that is reasonable in the circumstances, the lessor may seek to cancel the lease in accordance with section 244:
(d) the effect of section 247(1) and (2):
(e) the right, under section 253, to apply to a court for relief against cancellation of the lease, and the advisability of seeking legal advice on the exercise of that right.
[18] As I have noted above there has been no opposition to the application advanced by the defendant. In addition it is clear from the material before the Court that the respondent, as lessee, for some time has been in breach of the covenants contained in the lease, first, for the payment of rent, and, secondly, for the payment of outgoings. These are outlined at paragraphs [9] and [10] above.
[19] In addition, the evidence confirms that the applicant has served on the respondent a proper Notice of Intention to Cancel the Lease in terms of ss 245 and
246 of the Property Law Act 2007. In this case, the rent and outgoings in question had been in arrears for well in excess of 10 working days, with notice given to remedy the breach and not less than 10 working days allowed. In addition, the consequences if the breach was not remedied and the right to apply for relief against cancellation of the lease were clearly outlined in the Notice.
[20] I am satisfied, therefore, that the provisions of ss 245 and 246 have been satisfied here. It is appropriate therefore to consider s 251 of the Property Law Act
2007 which provides:
251 Powers of court in making order for possession
(1) On an application to a court for an order for possession of the land comprised in a lease, the court may make the order and cancel the lease.
(2) If the court makes the order and cancels the lease under subsection
(1), it may also do all or any of the following:
(a) order the lessee to pay the rent up to the date of cancellation or any later date on which the lessee yields up possession:
(b) order the lessee to pay reasonable compensation for the breach:
(c) impose on the lessee or the lessor any other conditions that it thinks fit.
(3) For the purposes of this section, reasonable compensation for the breach of a lease may include reimbursement of the lessor's reasonable expenses—
(a) in giving notice of intention to cancel the lease under section
245 or 246; and
(b) in doing anything else that the lessor has reasonably done in relation to the breach.
[21] The unopposed orders sought by the applicant in his present application, in my view, are appropriate to be made here. The applicant has satisfied the onus upon it to establish its present claims against the respondent. See also r 15.8 of the High Court Rules insofar as this matter might also include relief sought by way of an order for recovery of land.
The conclusion
[22] The present application therefore succeeds.
[23] This Court hereby orders, pursuant to s 251 of the Property Law Act 2007:
(a) The lease between the applicant and the respondent dated 1 June 1993 in respect of the premises known as Caples Court Motel, 20 Stanley Street, Queenstown, being all the land comprised and described in Certificate of Title OT 381/112 (“the property”) is cancelled.
(b)The applicant has possession of the property and the respondent is to deliver up possession of the property peaceably to the applicant, and do all things necessary to give effect to the applicant’s possession.
(c) The respondent is to pay the applicant the following amounts for rent owing, outgoings and default interest on the outstanding sums to the date of cancellation as follows:
Rental to 4.7.2013 $117,817.56
Received 29,048.50
Balance 88,769.06
Invoices to 4.7.2013 17,830.45
Received - Balance 17,830.45
Penalty interest 9,260.35
Received - Balance 9,260.35
Total arrears 115,859.86
(d) The respondent is to pay the applicant’s legal fees and disbursements
on a solicitor/client basis in accordance with invoices attached to the
2 July 2013 memorandum of counsel for the applicant filed in this matter, totalling in all $7740 plus GST for costs, and $909.42 for disbursements.
[24] Given that the date of cancellation of the lease is to be today, 18 July 2013, and the amount specified for outstanding rental and outgoings outlined above, as I understand it, is calculated only up to 4 July 2013, leave is reserved for the applicant to approach the Court for any further orders regarding payment of rental, outgoings and penalty interest which may be required.
...................................................
D Gendall J
Solicitors:
Ross Dowling Marquet Griffin, P O Box 1144, DX YP80015, Dunedin
Copy to respondent
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