Wendco (NZ) Limited v LJCTB Trustees Limited

[2018] NZHC 2827

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-000439 [2018] NZHC 2827

BETWEEN

WENDCO (NZ) LIMITED

Applicant

AND

LJCTB TRUSTEES LIMITED AND CQB TRUSTEES LIMITED Respondents

On the papers
Judgment:	31 October 2018

JUDGMENT OF HINTON J [COSTS AND COMPENSATION]

This judgment was delivered by me on 31 October 2018 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules

…………………………………………………………………… Registrar/Deputy Registrar

Counsel/Solicitors:

Philip Skelton QC, Auckland

Lovegroves, Auckland

Daniel McLellan QC, Auckland

WENDCO (NZ) LTD v LJCTB TRUSTEES LTD AND ANOR [2018] NZHC 2827 [31 October 2018]

[1]      On 31 October 2017, I delivered judgment in the matter of Wendco (NZ) Ltd v LJCTB Trustees Ltd.1   I determined that Wendco (NZ) Ltd (Wendco) was entitled to relief under s 264(2)(a)(i) of the Property Law Act 2007 (the Act).  The effect is that the respondents, LJCTB Trustees Ltd and CQB Trustees Ltd (the Trustees), are obliged to grant to Wendco a renewal of the lease in respect of premises at 570 Hillsborough Road.

[2]      Section 264(2)(b) of the Act entitles the Court to grant a renewal of a lease on any conditions as to compensation it sees fit. My decision that Wendco should receive relief under s 264 was conditional on Wendco compensating the Trustees for the wasted costs expended upon finding a new tenant for the premises. The evidence was that this was estimated at $30,000, but the estimate was unsupported.

[3]      I also provisionally suggested that the Trustees should be entitled to costs on an indemnity basis, despite Wendco having been successful in its application.   I considered this appropriate in light of my finding that Wendco had brought the present circumstances upon itself when it failed to notify the Trustees in time that it wished to renew the lease.  It would be unjust for the Trustees to be put to any expense, when the responsibility for Wendco’s predicament lay solely at its own feet.

[4]      As the exact amount required to compensate the Trustees was uncertain at the time of the original judgment, the orders for renewal of the lease were deferred.

[5]      Memoranda  have  since  been  filed  as  to  both  compensation  and  costs. Originally, two memoranda were filed in this Court by counsel for the Trustees, and a single  memorandum  was  filed  by  counsel  for  Wendco.    The  Trustees’ second memorandum was in response to a number of concerns raised by Wendco regarding the categories and quantum of compensation.

[6]      On 22 June 2018, I issued a Minute outlining issues I had with the memoranda filed by the Trustees and seeking clarification.  A number of the amounts originally claimed, and the basis for claim was still unclear.  I received two further memoranda

1      Wendco (NZ) Ltd v LJCTB Trustees Limited [2017] NZHC 2668.

in response, one from the Trustees and one from Wendco, dated 19 July 2018 and

20 July 2018 respectively.

[7]      This judgment now fixes compensation and costs.

Compensation

[8]      The Trustees seek compensation for three different expenses incurred by them in seeking a new tenant. These are:

(a)Fees payable to Mr Lee, of Commercial Realty, who was principally responsible for procuring a new lease agreement;

(b)Fees payable to the Trustees’ solicitors in relation to securing the prospective new tenant; and

(c)Sums payable to the prospective new tenant under the terms of the new lease.

[9]      I  first  consider  the  fees  payable  to  the  property  manager  Mr  Lee,  of Commercial Realty. The original agreement between the Trustees and Mr Lee was for a commission to be paid on the leasing of the property to the prospective new tenant. This would have been approximately 18 per cent of the annual gross rent, calculated at $28,800. However, under the terms of that agreement, it appeared that nothing was payable unless the agreement was completed. The only reason the agreement was not completed was because of my judgment.  The Trustees say that they have a moral obligation to pay Mr Lee, and will do so irrespective of whether this Court decides that Wendco should bear the cost, or not.  Since the issue of judgment, the Trustees have undertaken to pay Mr Lee on an hourly basis for the work he undertook.  The amount they have settled on, as confirmed in their latest memorandum, is $4,017.39.

[10]     While, as Mr Skelton QC argues, the Trustees were under no legal obligation to Mr Lee at the date of my judgment, I accept that a reasonably-held moral obligation, which the Trustees have undertaken to meet, should be compensated in these circumstances.   I therefore allow the amount claimed by the Trustees for the fees

payable to Mr Lee to be included as a cost associated with obtaining a new tenant, and fix compensation under this head at $4,017.39.

[11]     Turning to consider compensation for fees payable to the Trustees’ solicitors in relation to securing the prospective new tenant, the latest memorandum received from the Trustees claims a sum of $13,106.15.  This is now accepted by Wendco as being appropriate.   I therefore fix the quantum of compensation for the Trustees’ solicitor costs in securing the new tenant at $13,106.15.

[12]     Finally, considering compensation costs payable to the prospective new tenant, the Trustees’ latest memorandum dated 19 July 2018 claims an amount of $8,499.57, broken down into three sums:

(a)$4,000  for  the  costs  of  the  construction  manager  engaged  by  the prospective tenant in obtaining resource consent;

(b)$4,250 for the fees of the prospective tenant’s architect, which were incurred in obtaining resource consent; and

(c)      $249.57 for a pre-application meeting fee with the Auckland Council.

[13]     Under the terms of the lease between the Trustees and the prospective new tenant, the Trustees were required to reimburse the tenant for “all costs properly and reasonably incurred by the tenant in taking steps to obtain any resource consent pursuant to clause 2.2, including (without limitation) any associated consultants and/or professional costs”.  Having considered the invoices provided by the Trustees, I am satisfied that they are all associated with steps to obtain resource consent, are reasonable and were properly incurred.   With one minor exception, the objections previously raised by Wendco have fallen away.

[14]     I note for completeness that my Minute of 22 June 2018 asked the Trustees to confirm whether they had in fact paid the amounts they were claiming in respect of the new tenant’s fees.   This was not answered in the responding memorandum. However, the Trustees did reduce the amount of compensation they originally claimed

in this regard by a significant amount (the original claim being for $19,834), so I proceed on the basis that the amounts now claimed are the amounts they are actually obligated to pay.

[15]     I therefore allow for compensation under this head of $8,499.57.

[16]     Adding those three sums together, the total amount of compensation due to the

Trustees is $25,623.11.

Costs

[17]     As to costs, I remain of the view that Wendco should pay costs to the Trustees on  an  indemnity  basis,  despite  having  been  successful  in  its  application  for  a court-ordered renewal of the lease.   This is because Wendco brought the entire situation upon itself when it refrained from giving notice to renew the lease in an attempt to negotiate a lower annual rental. Moreover, I noted in the judgment that the decision to grant a renewal of the lease in the present circumstance was at the outer limits of when relief will be granted under s 264 of the Act.

[18]     I also place reliance on the decisions of Walsh v Utting and KAM Holdings Ltd v Wanganui Regional Development Trust Board.2  Both decisions were under s 120 of the Property Law Act 1952 (the predecessor section to ss 261 and 264 of the Act) and in both cases the applicants were successful in invoking the jurisdiction of the Court to grant them a renewal of their leases.  In KAM Holdings, McGechan J allowed the Board its renewal, but directed in no uncertain terms that it should be “… at no expense to KAM …”.3  Similarly, in Walsh, Hammond J in allowing the application determined that costs should fall on the applicant, as “… but for the tenant’s dilatoriness this imbroglio would not have arisen at all, and I think they have to take a real measure of

responsibility for that”.4

2      Walsh v Utting [2004] 1 NZLR 402; KAM Holdings Ltd v Wanganui Regional Development Trust

Board HC Wanganui M No. 35/90.

3      At 25-26.

4 At [67].

[19]     In this case, Wendco has to take full responsibility.  It played chicken with the Trustees and lost.   My judgment put Wendco back in as a tenant, but there is no question that should not be at the Trustees’ expense.  I agree with Mr McLellan QC that I have jurisdiction to award costs under s 264(2)(b) of the Act.  I consider a case such as this is in a special category where costs really form part of compensation under s 264. Rule 14.6(1)(b) of the High Court Rules and the principles set out in Bradbury v Westpac Banking Corp to which Mr Skelton QC refers, if they would otherwise impact, do not apply.5

[20]     Therefore, Wendco  should  be  required  to  pay  the  full  legal  costs of the Trustees.  I treat those costs as being $63,392.48 (exclusive of GST) as set out in the second memorandum filed by the Trustees and as detailed in the invoices annexed to the affidavit of Mr Radley.  (I note that the third and final memorandum filed by the Trustees refers to a slightly higher figure, but I assume this is in error.)

Orders

[21]     I therefore make the following orders:

(a)That the Trustees grant a renewal of the lease dated 31 March 2004 to Wendco for Principal Unit C on Unit Plan 324373 (CT NA98455) for a period of eight years from August 2015;

(b)That the lease shall be in all other respects on the same terms and conditions as contained in the Deed of Lease between the parties dated

31 March 2004;

(c)      That  Wendco  pay  compensation  to  the  Trustees  in  the  sum  of

$25,623.11 in respect of costs incurred by the Trustees in securing a potential new tenant and that such sum be paid within five working days of this Court’s order; and

5      Bradbury v Westpac Banking Corp [2009] NZCA 234.

(d)That Wendco pay the Trustees’ costs on an indemnity basis in the sum of $63,392.48, and that such sum be paid within five working days of this Court’s order.

----------------------------------------- Hinton  J