To v Chand
[2023] NZHC 2459
•4 September 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-001035
[2023] NZHC 2459
UNDER Section 244 of the Property Law Act 2007 IN THE MATTER
of 209 Airfield Road, Takanini, Auckland
BETWEEN
KIM TO
Applicant
AND
LALIT CHAND
Respondent
Hearing: 27 July 2023 Appearances:
N C King for Applicant Respondent in person
Judgment:
4 September 2023
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 4 September 2023 at 12 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………..
Counsel/Solicitors: N C King, Auckland
Sinisa Law, Auckland Copy to: Respondent
TO v CHAND [2023] NZHC 2459 [4 September 2023]
[1]Kim To applies for orders under the Property Law Act 2007 (PLA):
(a)cancelling the lease of the property 209 Airfield Road, Takanini (the Property) to Lalit Chand, the respondent, from the date of the order, for failure to comply with the terms of the lease;
(b)directing Mr Chand to pay reasonable compensation for remedying breaches of the lease, in particular, the costs of removing soil and other material stored on the property in breach of the terms of the lease.
[2] By way of damages Ms To seeks $6,000 for arrears in rent and $184,000 for the costs of removing the soil and other material.
[3] Ms To brings the proceeding as agent for Tuan Tran, the owner of the Property. According to an affidavit affirmed by Vinh Hgoc Nguyen on 12 May 2023, Ms To is the sister of Mr Tran and the wife of Mr Nguyen. Mr Nguyen states that Mr Tran authorised Ms To and Mr Nguyen “to carry out all processes” relating to the Property. Mr Nguyen provides a copy of a letter dated 15 June 2020 from Mr Tran to this effect.1
[4] Mr Chand does not dispute that the lease has been cancelled but says his liability for rent ceased on 31 March 2023. Mr Chand says he intended to remove the soil and other material from the Property but says he had insufficient time to do so before being required to leave the Property.
Lease Agreement
[5] On 2 April 2022, Ms To, as “the Landlord” and Mr Chand as “the Tenant” executed a lease agreement (the Lease Agreement) for the Property. Although the Lease Agreement records that Ms To signed as “the Landlord”, I am satisfied that Mr Nguyen signed on behalf of his wife. I reach that conclusion after comparing the signature on the Lease Agreement with the signatures on Mr Nguyen’s affidavits and other documents in evidence, including notices made under the Property Law Act. The same distinctive signature appears on the Lease Agreement and these documents.
1 It appears from Mr Nguyen’s affidavit and Mr Tran’s letter that Ms To’s full name is Thi Kim To.
[6] It appears that the negotiations over the lease were conducted by Mr Nguyen and Mr Chand. It is common ground that English is not the first language of Ms To, Mr Nguyen or Mr Chand.
[7] The Lease was headed “FARM LEASE AGREEMENT” and appears to be a standard-form agreement downloaded from an American website.
[8]At the top of the Lease Agreement is a disclaimer in the following terms:
Disclaimer: This Agreement has been prepared for general information purposes only and is intended to provide a starting point for farmers, as they develop Agreements for use in their business. Persons relying on such information do so entirely at their own risk. Since it is impossible to cover all legal contingencies and provisions in every situation, please consult with a legal professional to ensure that the Agreement accurately reflects the arrangements and relationship between the concerned parties.
[9]The Recital to the Lease Agreement states:
Background
Landlord is the owner of property located at 209 Airfield Road, Takanini New Zealand/Auckland comprising [04]2 acres (the “Property”), which is described in more detail in Exhibit A. Landlord and Tenant desire that Tenant lease the Property for agricultural use on the terms set out in this Agreement.
[10]Relevant clauses of the Lease Agreement are:
1.1 Lease. Landlord leases to Tenant the Property for the use set forth in Section 2.1.
1.2 Term. Tenant has the right to use the property for [4] year, starting on [02/04/2022] and ending on [02/04/2026] (“Term”) MAY BE EXTEND
1.3 Rent. Tenant will pay Landlord rent in the amount of $500 / WEEK
(“Rent”) for use of the Property during the Term.
2.1 Tenant Use. Tenant may use the Property only for the purpose
Storage Machinery and concrete crushed to resell / Not allow for place any soil or any thing similar under ground
2.3 Maintenance Tenant will maintain the Property in a good and organised condition, including, without limitation, free from trash, debris and unused equipment.
2 Italics are used to denote words or figures entered in handwriting.
2.6 Storage Tenant may store on the Property farming equipment and other personal property used for normal farming operations on the Property. Tenant may not store any materials that may be hazardous or that may cause damage to the Property (other than fuel for equipment), or that are not used for such farming operations. …
6.1 Termination by Landlord. Landlord may terminate this Agreement if:
(a) Tenant fails to make a rent payment within [three] days of when payment due; (b) Tenant abandons or vacates the Property for [fifteen] consecutive days; or (c) Tenant breach any other provision of this Agreement and the breach continues for more than [fifteen] days after Tenant receives written notice of the breach from Landlord, it being understood that if the breach cannot by its nature be cured within such - day period, then Tenant will have an additional reasonable period (which shall not in any case exceed 30 days) to cure the breach. Such a termination will be effective [ten] days after delivery by Landlord to Tenant of a notice of termination. Tenant must then leave, quit and surrender the Property to Landlord, but Tenant will remain liable for damages to the extent permitted by law … .
6.2 Termination by Tenant. Tenant my terminate this Agreement at any time. Such termination will be effective [60] days after delivery by Tenant to Landlord of a notice of termination. Tenant may also terminate this Agreement upon … (b) a material breach of this Agreement by Landlord. Such termination will be effective [15] days after delivery by Tenant to Landlord of a notice of termination.
6.4 Surrender of the Property. Upon termination of this Agreement, Tenant will at Tenant’s expense surrender the Property in good order and condition, reasonable wear and tear excepted, and will remove all of Tenant’s personal property. …
7.1 Entire Agreement. This Agreement, together with its exhibits, is the entire agreement between Tenant and Landlord and supersedes all prior or contemporaneous written or oral agreements. …
7.7 Governing Law; Jurisdiction. The Agreement will be governed by California Law. Tenant and Landlord consent to the exclusive jurisdiction of the state and federal courts for [Property located], 209 Airfield Road, Takanini
What happened?
[11] The following summary is drawn from affidavits affirmed by Mr Nguyen and Mr Chand and their respective attached exhibits.
[12] Mr Chand’s affidavit was sworn on 17 July 2023, 10 days before the hearing set down for 27 July 2023. Mr Chand did not serve his affidavit on Ms To, with the consequence that Mr King, Ms To’s counsel, only became aware of the affidavit at the hearing. As a further consequence, Ms To and Mr Nguyen had no opportunity to reply to Mr Chand’s affidavit.
[13] Mr Chand says he was persuaded to enter into the lease by Mr Nguyen and was offered financial inducements for that purpose, but these never eventuated.3 At the hearing, Mr Chand said that, prior to signing the Lease Agreement, he was shown a neighbouring property on which soil and concrete had been stored and was told he could use the Property in the same way. However, there is no documentary evidence to support these claims.
[14] After signing the Lease Agreement, Mr Chand moved pieces of broken concrete and also quantities of soil and clay onto the Property. The concrete was the base material for the concrete crushing envisaged in cl 2.1 of the Agreement. Mr Chand says the soil was for use in potting mix. Mr Chand also moved a screening machine and a crusher plant onto the Property.
[15] Mr Nguyen says Mr Chand accumulated clay, soil and concrete on the Property in quantities that suggested the Property was being used to dump waste. Mr Chand says his business was to re-cycle these materials, but his activities were curtailed by the weather.
[16] I infer from the correspondence that there were discussions on site prior to formal action being taken and that Mr Nguyen may have prevented trucks bringing material to the Property from entering the Property.
1st PLA Notice
[17] On 17 October 2022, Mr Chand was served with a notice, which was said to be made under s 246 of the PLA (1st PLA Notice), and which alleged that Mr Chand was in breach of the Lease Agreement by:
(a)storing and accumulating soil on the Property;
3 Mr Chand refers in his affidavit to discussions with “Mr To”. However, it is apparent from the correspondence exhibited to the affidavits of Mr Nguyen and Mr Chand that Mr Nguyen has been the primary contact for Mr Chand in discussions concerning the property. For the purposes of this account, therefore, I assume that Mr Nguyen was Mr Chand’s interlocutory rather than Ms To.
(b)mixing soil and polystyrene on the Property and allowing the accumulation of soil and construction debris to damage the Property; and
(c)continuing to receive soil and concrete on the Property without removing soil and concrete that had already been delivered.
[18] The 1st PLA Notice advised that, unless Mr Chand remedied these breaches within 25 working days of receipt of the 1st PLA Notice, the Lessor intended to exercise their rights under s 244 of the PLA to re-enter and take possession of the Property, cancel the Lease Agreement and terminate the tenancy.
[19] The 1st PLA Notice appeared to have been signed by “KIM TO authorised agent”. However, it was issued by Mr Nguyen, as he states in his first affidavit, and bears Mr Nguyen’s signature.
[20] The 1st PLA Notice appears to have been prepared by a solicitor and contained standard language drawn from ss 246 and 247 of the PLA advising Mr Chand of his rights under ss 247 and 253 of the PLA to offer an amount in compensation and to apply for relief against cancellation of the lease, and recommending that he seek legal advice.
Response to 1st PLA Notice
[21] By letter dated 16 November 2022, Mr Deep Purusram of Victorian Lawyers, who was acting on behalf of Mr Chand, disputed the validity and accuracy of the 1st PLA Notice. The letter said the activities in the first and third alleged breaches were provided for in the Lease Agreement and that the Landlord was aware from the outset that Mr Chand’s activities included soil accumulation and storage. The letter denied the second alleged breach and asked for evidence.
[22] The letter said the 1st PLA Notice should be withdrawn and the Landlord and their representatives should not access the Property except with the written consent of Mr Chand and for purposes allowed under the Lease Agreement and the PLA. The
letter also noted various deficiencies and irregularities in the Lease Agreement and proposed that the parties execute a new lease under the ADLS format.
[23] Mr Nguyen says that he met on site with Mr Chand and his lawyer (not Mr Purusram) before and after receipt of Mr Purusram’s letter and that Mr Chand undertook not to accumulate more soil and concrete on the Property. However, there is no correspondence to support that position.
[24] However, it appears from emails exhibited to Mr Chand’s affidavit that Mr King and Mr Purusram met at the Property on 22 November 2022. In an email dated 23 November 2022, Mr Purusram recorded his understanding that the 1st PLA Notice was withdrawn and that he was to prepare a draft lease by the end of the following week so there was a proper lease in place for both parties’ interests. It appears there was no reply to Mr Purusram’s email.
[25] On 4 December 2022, Mr Purusram sent Mr King a further email noting the absence of a reply and expressing the view that the 1st PLA Notice was of no effect.
[26] It appears no further action was taken in relation to the 1st PLA Notice or in response to Mr Purusram’s suggestion that the parties should execute a new lease.
Trespass Notice
[27] On 17 December 2022, Mr Chand purported to issue a trespass notice on Ms To by service on her cell-phone. It seems likely that Mr Nguyen was the intended recipient. Whether he received the trespass notice is not in evidence.
2nd PLA Notice
[28] On 20 December 2022, Mr Chand was served with a second notice also said to be made under s 246 of the PLA (2nd PLA Notice). The notice was issued by Mr Nguyen even though it was purportedly made by “KIM TO authorised agent”. It bears Mr Nguyen’s signature and was clearly drafted by someone who is not a lawyer and for whom English is not their first language, even though it repeated passages from the 1st PLA notice.
[29] The 2nd PLA Notice alleged that Mr Chand was in breach of the covenants in cls 2.1 and 2.3 of the Lease Agreement and alleged essentially the same breaches alleged in the 1st PLA Notice. The 2nd PLA Notice contained additional allegations that Mr Chand had not crushed any concrete on site since the date of the 1st PLA Notice but had continued to receive more “spoiled, soil mixing with Grass” as well as asphalt debris.
[30] The 2nd PLA Notice purported to require Mr Chand to remedy the alleged breaches within 10 working days of the notice, failing which the Lessor would exercise its rights to re-enter and take possession of the Property, cancel the Lease Agreement and terminate the tenancy.
[31] The 2nd PLA notice repeated the language in the 1st PLA Notice advising Mr Chand of his rights under ss 247 and 253 of the PLA and recommending that he obtain legal advice.
Response to 2nd PLA Notice
[32] In an email dated 4 January 2023, Mr Chand disputed the validity and accuracy of the 2nd PLA Notice in language clearly taken from Mr Purusram’s letter of 16 November 2022. Mr Chand also alleged that the Lessor had breached the Lease Agreement in various respects, including by entering the Property without permission, operating Mr Chand’s equipment without permission and chasing away trucks bringing concrete and stone for crushing.
[33] Mr Nguyen replied the same day. Mr Nguyen’s reply annotated Mr Chand’s email to record Mr Nguyen’s disagreement with Mr Chand on the points made in the email. Mr Nguyen advised that the gates to the Property would be locked on 11 January 2023 and that Mr Chand would not be allowed on site from that date.
[34] Despite the terms of the 2nd PLA Notice and the above exchange of emails, it appears no further action was taken in relation to the 2nd PLA Notice.
Purported agreement on way forward
[35] On 20 February 2023, Mr Nguyen and Mr Chand exchanged emails. Mr Chand said that, because of the weather in Auckland and the cyclone, he had not been able to do much screening of topsoil.4 He said his business was recycling concrete, soil and clay. He said he considered things would improve when the weather was dry and that people would take the top soil and clay when it was dry. In reply, Mr Nguyen said he was not interested about people buying or taking topsoil and clay and that it was illegal to tip the topsoil and clay because it was not provided for in the lease.
[36] It appears that Mr Nguyen and Mr Chand met on site later on 20 February 2023. Mr Nguyen says it was agreed that Mr Chand would crush all concrete on site within two weeks and that, if that happened the lease would be extended to allow removal of asphalt, soil and clay from the Property. However, Mr Nguyen says that when he visited the site on 6 March 2023, the concrete was not crushed. As a consequence, he issued a further notice of intention to cancel the lease (3rd PLA Notice) the following day, on 7 March 2023.
3rd PLA Notice
[37] It appears that Mr Nguyen prepared the 3rd PLA Notice which was also said to be made under s 246 of the PLA. The 3rd PLA Notice referred to the same covenants in the Lease Agreement as the 2nd PLA Notice and alleged the same breaches. It also referred to the meeting and the alleged agreement reached on 20 February 2023. It alleged that, despite that agreement, only one eighth of the concrete on site had been crushed and that over the past year only three truckloads of concrete had been crushed. It further alleged that around 30 truckloads of concrete had been tipped on the site and that many hundreds of truckloads of soil, clay and rock debris had been tipped on site in breach of cl 2.1.
[38] The 3rd PLA Notice stated that the Lessee had until 21 March 2023 to remove all material such as clay, soil, landfill spoil and rock debris that had been tipped on
4 Auckland suffered severe wet weather on 27 January 2023; a state of emergency was declared in Auckland that day. Cyclone Gabrielle hit the northern and eastern regions of the North Island of New Zealand from 12 to 14 February 2023.
site. It said further that, if the material was removed by that date “the lessor will consider to prepare and sign the new lease agreement”. However, if the material was not removed by that date the lessor would terminate the lease and lock the gates and would get contractors “to come and remove it”.5 The 3rd PLA Notice also stated that the Lessor would claim all the costs of removal and recorded that the costs of removing the clay, soil and spoil had been quoted at $161,600 plus GST and that there would be additional costs for removing the concrete and asphalt debris.
[39] The 3rd PLA Notice repeated the language in the 1st PLA Notice advising Mr Chand of his rights under ss 247 and 253 of the PLA and recommending that he obtain legal advice.
[40]It appears that enclosed with the 3rd PLA Notice were :
(a)A quote dated 20 December 2022 from Dynamic Transport Solutions Ltd stating that the cost of removing 320 loads of clay, topsoil and demolished concrete at a unit price of $500 would be $160,000 plus GST, resulting in a total cost of $184,000;
(b)An email from Summit NZ estimating the cost of removing 320 loads of material at a unit price of $350 for tipping fee and truck ($112,000 plus GST) and $130 for a 15 tonne digger ($41,600 plus GST) was
$161,600 plus GST.6
Response to 3rd PLA Notice
[41] In a letter dated 17 March 2023 and addressed to Mr Tran at 209 Airfield Road, Mr Rajendra Chaudhry of Chaudhry Legal responded to the 3rd PLA Notice on behalf of Mr Chand. The letter stated that it was written on a without prejudice save as to costs basis.7
5 It is apparent that the “it” referred to was the clay, soil, landfill spoil and rock debris said to have been tipped onto the Property.
6 There is an error in this calculation: $112,000 + $41,600 = $153,600.
7 Despite the basis on which the letter was written, both Mr Chand and Mr Nguyen exhibited copies of Mr Chaudhry’s letter with their affidavits and no claim to privilege in the letter was asserted at the hearing.
[42] The letter set out various provisions of the Lease Agreement. It said Mr Chand had not received any notice of breach in accordance with cl 6(c) of the Lease Agreement.8 It noted that, under the clause, Mr Chand had 15 days from receipt of such a notice to cure the breach and a further 30 days if the alleged breach could not be cured within the 15 day period. The letter asserted that, by seeking to cancel the Lease Agreement under s 246 of the PLA, Mr Tran was in breach of the Lease Agreement and that Mr Chand would hold Mr Tran liable for all losses incurred and all future losses incurred for wrongful cancellation.
[43] The letter also referred to ss 244 and 246 of the PLA and to the trespass notice issued on 17 December 2022. The letter alleged that the two weeks provided for remedying the alleged defects was unreasonable. It also said that Mr Chand would oppose any application to re-enter the Property made under s 244 of the PLA for various reasons including that Mr Tran had breached cl 6 (c) of the Lease Agreement and Mr Chand denied any breach of the Lease Agreement.
[44] The letter asked that Mr Tran immediately withdraw the 3rd PLA Notice and allow Mr Chand “to address any issues that you may have and as per the notice 45 days from 7 March 2023.” The letter did not dispute the factual maters alleged in the 3rd PLA Notice.
[45]There is no evidence of any reply to this letter.
Notice of Termination of Lease
[46] On 25 March 2023, in a notice purported to be made by Ms To but evidently signed by Mr Nguyen, Mr Chand was served with a Notice of Termination of Lease. The Notice of Termination asserted that:
(a)Mr Chand had failed to comply with the 3rd PLA Notice;
8 It is apparent that the letter was referring to cl 6.1(c) of the Lease Agreement.
(b)In accordance with cl 6.1 of the Lease Agreement, notice was given to Mr Chand of termination of the lease at 209 Airfield Road, Takanini,
Auckland; and
(c)Mr Chand was to vacate the property 10 days after delivery of the Notice.
Mr Chand vacates the Property
[47] By 31 March 2023, Mr Chand removed all his equipment from the Property and ceased using or going to the Property. However, the concrete, soil, clay and other material that Mr Chand had brought to the Property remained on site.
Proceeding commences
[48] By originating application dated 24 May 2023, Ms To commenced the present proceeding.
4th PLA Notice
[49] By notice dated 1 June 2023, Mr King, as solicitor for the Lessor, gave Mr Chand a further notice of intention to cancel the lease (4th PLA Notice). The notice alleged that Mr Chand was in arrears of rent due under the Lease Agreement on 31 April 2023 [sic] and 31 May 2023 and required Mr Chand to remedy the breach within 10 working days of the notice.
Minute of Woolford J
[50] The application was called before Woolford J on 26 June 2023. Mr Chand was not represented at the call.
[51] By minute dated 26 June 2023, Woolford J adjourned the application to a hearing on 27 July 2023 and recorded that, by that time, the Court would need to be satisfied as to:9
9 To v Chand HC Auckland CIV 2023-404-1035, 26 June 2023 (Minute of Woolford J).
(a)the applicant’s lawful authority to act on behalf of the registered proprietor of the Property;
(b)the validity of the Lease Agreement;
(c)the meaning of cl 2.1 of the Lease Agreement;
(d)the validity of the various PLA Notices and the notice of termination of lease;
(e)whether the claim for damages or reasonable compensation should be dealt with in the same application or should be the subject of separate proceedings; and
(f)whether the quote of $184,000 for the removal of clay, topsoil and demolished concrete was reasonable.
Property Law Act 2007
[52]The PLA relevantly provides as follows:
6 Attorney or agent may act
(1)Anything that must or may be done by or to a person under this Act may be done by or to the person’s attorney or agent if it is within the attorney’s or agent’s authority.
(2)This section applies subject to sections 12, 353, and 359.
12 Attorney executing deed
An attorney executing a deed must be appointed by deed.
206 Application of Part
(1)This Part (except sections 208 to 215 and 217 to 224) applies to every lease or sublease of land that is made before, on, or after 1 January 2008.
(2)Sections 208 to 215 and 217 to 224 apply to every lease or sublease of land that comes into operation on or after 1 January 2008.
218 Covenants, conditions, and powers implied in all leases
(1)Every lease contains the implied covenants, conditions, and powers set out in Part 2 of Schedule 3.
(2) …
243Sections 244 to 264 to be code
(1)A lease may be cancelled only in accordance with sections 244 to 252.
(2)Any relief against any of the following things may be given only in exercise of the powers conferred by sections 253 to 264:
(a)the actual or proposed cancellation of a lease; or
(b)the refusal to extend or renew a lease; or
(c)the refusal to enter into a new lease; or
(d)the refusal to transfer or assign the reversion expectant on a lease.
(3)Any term expressed or implied in a lease or in any other instrument has no effect if it—
(a)provides that the lease is automatically cancelled by breach of a covenant or condition of the lease; or
(b)is otherwise inconsistent with this section or with sections 244 to 264; or
(c)has the purpose or effect of avoiding the need for compliance with this section or with sections 244 to 264.
244Cancellation 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.
246Cancellation 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.
247Defects that do not invalidate notice of intention to cancel lease
(1)The notice required by section 246(1)(a) is not invalid merely because the lessor—
(a)may not have specified that the breach is capable of being remedied by the payment of reasonable compensation; or
(b)may have specified an amount of compensation that is unreasonable; or
(c)may have specified that the breach would be capable of being remedied by the payment of reasonable compensation, but without specifying the amount that the lessor considers reasonable.
(2)None of the matters set out in subsection (1)(a) to (c) prevents a lessee from offering an amount that the lessee considers to be reasonable compensation for the breach.
(3)For the purposes of this section and section 246(2)(b), reasonable compensation for the breach may include reimbursement of the lessor’s reasonable expenses—
(a)in giving the notice required by section 246(1)(a); and
(b)in doing anything else that the lessor has reasonably done in relation to the breach.
251Powers 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.
252Effect of sections 244 to 251
(1)Sections 244 to 251 do not prevent a lessor from claiming damages for—
(a)the breach of a lease; or
(b)the breach of any other duty to the lessor that the lessee may be under independently of the lease.
(2)Sections 244 to 251 also do not affect the amount that the lessor may claim by way of damages.
253Relief against cancellation of lease for breach of covenant or condition
(1)All or any of the following persons may apply to a court for relief against the cancellation, or proposed cancellation, of a lease on the ground of a breach of a covenant or condition of the lease:
(a)the lessee:
(b)a mortgagee of the leasehold estate or interest:
(c)a receiver appointed in respect of the leasehold estate or interest:
(d)if 2 or more persons are entitled to the leasehold estate or interest as joint tenants, 1 or more of those persons on behalf of the other joint tenants.
(2) …
[53]In addition, sch 3 pt 2 provides:
12 Power to cancel lease for non-payment of rent or other breach
(1)The lessor may cancel the lease in accordance with section 244 if—
(a)any rent is unpaid for 15 working days after the due date for payment (whether or not a demand for payment has been made to the lessee by written notice signed by the lessor or the lessor’s agent); or
(b)the lessee has failed, for a period of 15 working days, to observe or perform any other covenant, condition, or stipulation on the part of the lessee expressed or implied in the lease.
(2) …
Submissions on behalf of Ms To
[54]In response to the issues raised by Woolford J, Mr King submits that:
(a)Because the Lease Agreement is not a deed, the applicant (presumably Ms To) had lawful authority to act on behalf of the registered proprietor of the Property; that is, Mr Tran.
(b)The Lease Agreement contains the terms necessary to form a lease and was a lease.
(c)Clause 2.1 of the Lease Agreement permitted Mr Chand to use the Property to store machinery and to crush concrete but accumulating soil on the Property was not a specific use authorised by the Lease Agreement. In accumulating soil and other debris on the Property, Mr Chand was in breach of cl 2.3 of the Lease Agreement, which entitled him to cancel the lease in accordance with s 244 of the PLA.
(d)The PLA Notices were all valid. The applicant allowed 45 days from 7 March 2023, the date of the 3rd PLA Notice, and no action was taken by the Tenant to remedy the breaches of the Lease. In any event, the rent has been unpaid for 15 working days, thereby entitling the applicant to cancel the Lease in accordance with cl 12 of sch 3 of the PLA.
(e)Section 251 of the PLA permits the Court to make orders for payment of rent and for payment of reasonable compensation when making orders for possession of the Property and cancelling the lease.
(f)The quotation of $184,000 provided for the removal of clay, topsoil and demolished concrete has not been challenged by Mr Chand.
Submissions by Mr Chand
[55] Mr Chand did not file written submissions. However, at the hearing he spoke to his affidavit and its exhibits and gave his account of the circumstances in which the Lease Agreement was signed. It was clear that, when referring to the Landlord, Mr Chand was meaning Mr Nguyen, who apparently signed the Lease Agreement on behalf of Ms To and who was a regular presence at the Property.
[56] Mr Chand said that, prior to signing the Lease Agreement, the Landlord showed him a neighbour’s property at 199 Airfield Road which was used for stone crushing and soil preparation and he was told he could do the same at 209 Airfield Road. Mr Chand said the same in his affidavit. He believed, therefore, that he was entitled to use the Property as he had and that this was provided for in the Lease Agreement. In effect, Mr Chand says cl 2.1 of the Lease Agreement did not preclude
him from storing soil, clay and other materials on the Property and, to the extent the clause may be inconsistent with that position, it was varied by the oral understanding he reached with Mr Nguyen prior to signing the Lease Agreement.
[57] Mr Chand said he believed Mr Nguyen had breached the Lease by coming onto the property without permission, refusing entry to trucks bringing material to the site, directing him on how to use his equipment and threatening to bring contractors onto the site to remove Mr Chand’s materials. In his affidavit, Mr Chand said he had been working towards bringing injunction proceedings against Mr Nguyen.
[58] Mr Chand accepted, however, that the lease had been terminated. He said he removed his equipment from the Property following receipt of the 3rd PLA Notice and had left the site by the end of March 2023. Mr Chand said he had paid rent up until the end of March and saw no reason why he should pay any further rent from that date. In response to my question, Mr Chand said he accepted he had a responsibility to remove the soil and other material from the site. He said he would have removed the material himself but there had been insufficient time to do so before he was required to leave the site.
Questions for consideration
[59] Having regard to the requirements of the PLA, the issues identified by Woolford J in his minute of 26 June 2023, and the evidence before the Court, the following questions require consideration:
(a)Are Ms To and Mr Nguyen valid agents for Mr Tran, the registered proprietor of the Property?
(b)Is the Lease Agreement a valid agreement to lease?
(c)If so, did Mr Chand breach the Lease Agreement?
(d)Were the PLA Notices validly issued?
(e)Was the Lease Agreement validly terminated?
(f)If the Lease was terminated, what are the Tenant’s on-going responsibilities under the Lease Agreement?
(g)Should an order be made under s 244 cancelling the lease?
(h)Should damages or reasonable compensation be ordered?
Analysis
Are Ms To and Mr Nguyen valid agents for Mr Tran?
[60] As Mr King submits, it is clear from s 6 of the PLA that, except in the circumstances provided for in ss 12, 353 and 359 of the PLA (which do not apply in the present case), an agent may act for a principal in relation to anything that must or may be done under the PLA.
[61] In the present case, there is the curious situation that Mr Nguyen effectively acted as agent for Ms To in her dealings with the Property as agent for Mr Tran. However, since there is evidence that Mr Tran authorised both Ms To and Mr Nguyen to act on his behalf in relation to the Property, and because Mr Chand has dealt principally with Mr Nguyen in relation to the Property as agent for the Landlord, I do not consider that anything turns on the fact that Mr Nguyen signed the Lease agreement and the PLA notices on behalf of Ms To. I am satisfied that Ms To and Mr Nguyen are both valid agents for Mr Tran in relation to the Property, including in relation to the Lease Agreement.
Is the Lease Agreement a valid agreement to lease?
[62] I am satisfied that, notwithstanding its peculiarities, the Lease Agreement is a valid agreement to lease. It is in writing and there is certainty as to its parties, the property that is subject to the lease, the lease term and the rental payable. As discussed below, there is some question about the uses permitted under the Lease Agreement. However, that question is a matter of interpretation and does not go to the validity of the Lease.
[63] I am also satisfied that despite the terms of cl 7.7, the parties did not intend the Lease Agreement to be governed by the law of California. That would also have been inconsistent with s 206 of the PLA, which applies Part 4 of the PLA to all leases made in New Zealand after 1 January 2008.
[64] I am satisfied that the parties, who did not take legal advice when concluding the Lease Agreement, did not understand the meaning of cl 7.7 and had no intention of trying to exclude the application of New Zealand law to the Lease Agreement. In any event, and irrespective of the parties’ intention, it is clear that the PLA applies to the Lease Agreement.
Did Mr Chand breach the Lease Agreement?
[65] This question is concerned principally with the interpretation of cl 2.1 of the Lease Agreement.
[66] The introductory words of the clause make it clear that the Property was to be used only for uses specifically authorised under the clause. The only uses specifically authorised are “Storage Machinery and Concrete crushed to resell”. It is implicit in those words that concrete that was to be crushed could be brought onto and stored on the Property. However, there is no basis for inferring or implying that the storage of soil, clay or other material on site was authorised under the clause, regardless of the meaning of the following words: “Not allow for place any soil or any thing similar under ground.”
[67] I consider it unlikely that these words were intended to prohibit storage of soil and other material “under” the ground but not “on” the ground. I consider it more likely that the use of “under” was an error by a person for whom English was not their first language and that some other preposition such as “upon” had been intended. However, even if “under” was intended, that does not mean storage of soil, clay or other material on the ground was permitted. Those uses are not part of or incidental to the authorised uses of storage of machinery and the crushing of concrete for resale.
[68] I do not give any weight to Mr Chand’s claim that he had been told he could use the Property in the same way as the property at 199 Airfield Road was said to have
been used. There is no documentary evidence to support that claim. To the extent the uses of the property at 199 Airfield Road went beyond the storage of machinery and the crushing of concrete for resale, the claim is inconsistent with the express language of cl 2.1. Importantly, that language (Storage Machinery and Concrete crushed to resell) was not part of the standard form document that had been downloaded. It had been specifically included in the Lease Agreement in typed and bolded script. It was clearly intended to be binding on the parties.
[69] As the Supreme Court said in Firm PI 1 Ltd v Zurich Australian Insurance Ltd,10 and reaffirmed in Bathurst Resources Ltd v L & M Coal Holdings Ltd:11
[63] While context is a necessary element of the interpretive process and the focus is on interpreting the document rather than particular words, the text remains centrally important. If the language at issue, construed in the context of the contract as a whole, has an ordinary and natural meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant. But the wider context may point to some interpretation other than the most obvious one and may also assist in determining the meaning intended in cases of ambiguity or uncertainty.
[70] On the basis of the ordinary and natural meaning of the language in cl 2.1, and having regard to the fact that language was specifically included in the clause when the Lease Agreement was prepared, I am satisfied that:
(a)the only uses of the Property authorised under the Lease Agreement were the storage of machinery and the crushing of concrete for resale; and
(b)the storage of soil, clay and other materials on the Property were not permitted under the Lease Agreement.
[71] It follows that, in storing soil, clay and other materials on the Property, Mr Chand breached the Lease.
10 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432.
11 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [43].
Were the PLA Notices and the Notice of Termination of Lease validly issued?
[72] Because no action was taken in consequence of the 1st PLA Notice or the 2nd PLA Notice, I consider this question principally in relation to the 3rd PLA Notice.
[73] Although Mr Nguyen prepared the 3rd PLA Notice and included various extraneous material in it, I am satisfied that, with one exception, the 3rd PLA Notice met the requirements of s 246. In terms of s 246(2), the 3rd PLA Notice adequately informed Mr Chand:
(a)of the nature and extent of his breach of the Lease Agreement – namely, the storage of clay, soil, landfill spoil and rock debris on site;
(b)of the thing that Mr Chand had to do – namely the removal of the clay, soil, landfill spoil and rock debris, including clay that had been compacted into the ground;
(c)of the consequence that the lease would be cancelled if clay, soil, landfill spoil and rock debris was not removed by 21 March 2023;
(d)of the effect of s 247 and of his right under s 253 to apply for relief against cancellation and of the advisability of seeking legal advice.
[74] The exception is whether the period of two weeks to remove the clay, soil, landfill spoil and rock debris was reasonable in the circumstances. Since, according to Mr Nguyen’s estimate, there are several hundred truckloads of material stored on the Property, a two-week period to undertake that task would not seem reasonable in the circumstances. That point was made by Mr Chaudhry in his letter of 17 March 2023, both in relation to cl 6.1 of the Lease Agreement and in relation to s 246.
[75] Although Mr King submits that Ms To / Mr Nguyen waited 45 days after service of the 3rd PLA Notice before bringing the current application, that overlooks the Notice of Termination of Lease that Mr Nguyen, on behalf of Ms To, served on Mr Chand on 25 March 2023. That Notice purported to terminate the Lease in accordance with cl 6.1 of the Lease Agreement and advised that the termination was
effective and that Mr Chand had to vacate the property 10 days after delivery of the Notice. Assuming the notice was delivered on 25 March 2023, the message to Mr Chand was that the Lease Agreement was at an end and he had to vacate the Property by 4 April 2023.
[76] In these circumstances, a challenge by Mr Chand to the validity of the 3rd PLA Notice based on the lack of reasonable time to remedy the breach might well have succeeded. However, despite Mr Chaudhry’s letter, Mr Chand did not take that point but instead vacated the property in accordance with the Notice of Termination of Lease. I conclude that, in so doing, Mr Chand accepted Mr Nguyen’s cancellation of the Lease Agreement, regardless of any challenge he could have made to the validity of the 3rd PLA Notice.
[77] Given these circumstances, I am satisfied that validity of the 3rd PLA Notice was not challenged and should be accepted as valid.
Was the Lease Agreement validly terminated?
[78] The Notice of Termination of Lease was purportedly issued in accordance with cl 6.1 of the Lease Agreement. Under that clause, the Landlord was required to give Mr Chand 15 days to remedy the breach or, if it was understood that the breach, by its nature, could not be cured within 15 days, an additional reasonable period of up to 30 days; that is, a total of 45 days.
[79] In serving the Notice of Termination of Lease on 25 March 2023 and in providing that Mr Chand had to vacate the Property 10 days after service, Mr Nguyen effectively gave Mr Chand 27 days from the date of the 3rd PLA Notice to remedy the breach. As discussed above, given the amount of material that Mr Nguyen says has to be removed, I am satisfied that the breach could not have been remedied in 27 days. For that reason, the Notice of Termination of Lease was not in accordance with the Lease and could have been challenged on that basis.
[80] The Notice of Termination of Lease could also have been challenged as being in breach of s 243 of the PLA because, in effect, Mr Nguyen was asserting a right to cancel the Lease Agreement and to re-enter the Property without an order under s 244.
[81] However, by vacating the Property, Mr Chand accepted the cancellation of the Lease Agreement, despite any challenge he might have made to the validity of the Notice of Termination of Lease. In these circumstances, I am satisfied that the Lease Agreement has been terminated at the initiative of the Landlord.
If the Lease was terminated, what are the Tenant’s on-going responsibilities under the Lease Agreement?
[82]Under cl 6.2 of the Lease Agreement:
(a)if Mr Chand had terminated the lease at his own initiative, he would have been required to give the Landlord 60 days’ notice and would have been liable for the rent until the notice of termination was effective; and
(b)if he had terminated the lease because of Mr Nguyen’s breach of cl 6.1, he would have been required to give the Landlord 15 days’ notice and would have been liable for the rent until the notice of termination was effective.
[83] However, for the reasons already discussed, the Lease Agreement was effectively terminated by the Landlord under the Notice of Termination of Lease and was effective on 4 April 2023.
[84] Clause 6.1 imposes no continuing liability for rent upon a notice of termination by the Landlord becoming effective. Therefore, Mr Chand has no liability for rent beyond 4 April 2023. Since he had already paid rent up to 31 March 2023 and given that the Notice of Termination of Lease was not in accordance with the Lease and could have been challenged on that basis, I consider it would be inequitable to hold Mr Chand responsible for four days’ rent.
[85] However, it is clear that, in accordance with cl 6.4 of the Lease Agreement, Mr Chand had a duty to surrender the Property in good order and condition, reasonable wear and tear excepted, and to remove all of his property – as Mr Chand accepted at the hearing. In addition, under cl 6.1, Mr Chand remains liable for damages which, in the present case, must include the costs of removing the clay, soil, landfill spoil and
rock debris, including clay that had been compacted into the ground, that Mr Chand brought to the property.
Should an order be made under s 244 cancelling the lease?
[86] As I have found already, Mr Chand has breached the Lease Agreement by storing soil, clay and other materials on the Property in breach of its terms.
[87] As discussed above, the Lease Agreement has already been terminated by Mr Chand’s acceptance of the Notice of Termination of Lease. However, I accept that there is value in making an order cancelling the Lease Agreement so that it is clear that Ms To, as agent for Mr Tran, may take possession of the land. In accordance with s 244(3), of the PLA, that order cannot take effect earlier than the date of the order, despite the earlier termination of the Lease Agreement.
Should damages or reasonable compensation be ordered?
[88] As Mr King says, it is clear from s 251 that that the Court has power to order payment of rent and to order reasonable compensation for the breach of the Lease.
[89] For the reasons already discussed, I do not consider it appropriate to make an order requiring Mr Chand to pay rent.
[90] I accept, however, that it would be appropriate to make an order requiring Mr Chand to pay reasonable compensation for the costs of removing the clay, soil, landfill spoil and rock debris, including clay that had been compacted into the ground, that Mr Chand brought to the property. However, I am not satisfied that I have an adequate basis for ordering Mr Chand to pay the sum of $184,000 sought by Ms To and Mr Nguyen.
[91] It appears that the quote for $184,000 and the separate estimate for $161,600 were based on Mr Nguyen’s estimate of the number of loads required to remove the material – 320 truckloads. There is no independent evidence to establish that this estimate of quantity is realistic or reasonable. Nor is there any evidence that
Mr Nguyen has any professional experience or capability to undertake such an assessment.
[92] Given these factors and the fact that Mr Nguyen was directly involved in the events that led to the cancellation of the Lease Agreement and went frequently to the Property to the point that Mr Chand felt the need to take out a trespass notice against him, I am not confident that Mr Nguyen has the necessary expertise or objectivity to provide a reliable estimate of the quantity of material that has to be removed.
[93] Accordingly, I decline to make any order that Mr Chand pay damages or reasonable compensation for breach of the Lease Agreement. I reserve leave, however, for Ms To to apply for such an order upon production of reliable independent evidence of the quantity of material to be removed and the cost of its removal. Mr Chand may, of course, file evidence in reply, including evidence of any losses incurred in having to vacate the premises under a more compressed time period than provided for in the Lease Agreement.
Result
[94]In accordance with ss 244 and 251 of the Property Law Act 2007, I order that:
(a)The Lease Agreement dated 2 April 2022 between Kim To and Lalit Chand for the property at 209 Airfield Road, Takanini, Auckland (the Property) is cancelled; and
(b)Kim To, as agent for Tuan Tran, has possession of the Property from the date of this Order.
[95] Leave is reserved to Ms To to apply for an order for compensation for the costs of removing the clay, soil, landfill spoil and rock debris, including clay that had been compacted into the ground, that Mr Chand brought or arranged to be brought to the property, upon production of reliable independent evidence establishing the quantity of material to be removed and the cost of removing that material.
Costs
[96] As the substantially successful party, Ms To is entitled to costs, calculated on a 2B basis. If the parties are unable to agree costs, they may file memoranda of no more than four pages.
G J van Bohemen J
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