Wendco (NZ) Limited v LJCTB Trustees Limited
[2017] NZHC 2668
•31 October 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2017-404-000439 [2017] NZHC 2668
BETWEEN WENDCO (NZ) LIMITED
Applicant
AND
LJCTB TRUSTEES LIMITED AND CQB TRUSTEES LIMITED
Respondents
Hearing: 3 July 2017 Appearances:
P Skelton QC and S Jeffs for the Applicant
D McLellan QC and C Hollings for the RespondentsJudgment:
31 October 2017
JUDGMENT OF HINTON J
This judgment was delivered by me on 31 October 2017 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 [2017] NZHC 2668 [31 October 2017]
Introduction
[1] Wendco (NZ) Ltd (“Wendy’s”) seeks relief against its lessors’ refusal to enter into a renewal of Wendy’s lease in respect of unit title premises at 570 Hillsborough Road, Lynfield. Wendy’s applies pursuant to s 261 and s 264 of the Property Law Act
2007 (“the Act”), for the Court to exercise its discretion to grant a renewal of the lease. The basis for the application is that Wendy’s (and other third parties) will otherwise suffer significant prejudice.
Background
[2] Wendy’s owns and operates the Wendy’s Hamburgers restaurants in New Zealand. Wendy’s operates 23 restaurants, one of which is situated in Lynfield and is the subject of this dispute.
[3] On 31 March 2004, Wendy’s entered into a deed of lease (“the lease”) for the unit title premises at 570 Hillsborough Road, Lynfield, with Hillfield Development Limited (“Hillfield”). The lease commenced on 5 August 2003 for an initial period of
12 years, with two rights of renewal: one for a further eight years, and the next for a further four years. The final expiry date is 4 August 2027. The annual rent recorded in the First Schedule of the lease is $155,000 plus GST per annum. There is also a ratchet clause providing that on renewal, the rent will not reduce below that value.
[4] Wendy’s says it invested approximately $1,000,000 on “construction and fit out” and pre-opening costs of the Wendy’s restaurant on the Lynfield site.
[5] On 20 April 2004, Hillfield transferred the land and the lease to LJCTB Trustees Ltd and CQB Trustees Ltd (together, “the trustees”), such that the trustees are the lessor. The director of the trustees is Mrs Laura Bakker. Mr Bakker, her husband, passed away during this proceeding before he could swear an affidavit, but I assume he was also a director of the trustees.
[6] The initial term of the lease was set to expire on 5 August 2015. Under the terms of the lease, Wendy’s was required to notify the trustees of its intention to renew the lease three months before the expiry date, ie by 5 May 2015.
[7] On 30 April 2015, just over three months prior to the expiry date, the Chief Executive of Wendy’s, Danielle Lendich, wrote to the trustees’ property manager, John Lee, saying that the lease was due to expire on 5 August 2015 and that Wendy’s was considering renewing it. In that letter, Ms Lendich explained that nearby road changes in connection with the Waterview Tunnel had negatively impacted the restaurant’s business because there was less traffic on Hillsborough Road. Ms Lendich asked Mr Lee whether the trustees would renew the lease on the basis of four two-year renewal periods or, alternatively, with rent reduced to $100,000 per annum.
[8] On 7 May 2015, Mr Lee said that he would give the proposal to the trustees. On 30 June 2015 Mr Lee got back to Ms Lendich, advising that the trustees had commissioned a valuation of the property. On 6 July 2015, Mr Lee informed
Ms Lendich that based on the results of the valuation, annual rent would increase to
$166,250 per annum from 5 August 2015 and that he had “not yet received advice” of Wendy’s position regarding the renewal of the lease. In reply to a further letter from Ms Lendich, Mr Lee suggested on 29 July 2015 that if Wendy’s disagreed with the rent proposal, it could establish its own valuation and then enter into discussion to reach an agreeable solution.
[9] The expiry date of 5 August 2015 came and went. Wendy’s continued to operate the restaurant and pay rent and outgoings as before. On 14 August 2015,
Mr Lee, observing that the parties differed as to the appropriate rent, asked whether Ms Lendich would be prepared to renew the lease under the existing terms. He said that he “would like to think that” a compromise could be reached. Several days later, on 17 August 2015, Mr Lee referred Ms Lendich to the rent dispute mechanisms in the lease, adding that Wendy’s had been a good tenant.
[10] In an email dated 30 October 2015, Ms Lendich said that Wendy’s was at that time a month-to-month tenant. Matters continued into 2016. Mr Lee stated on 24 May
2016 that Wendy’s had become a month-to-month tenant and that the parties were at an impasse. On 21 June 2016, Wendy’s said they needed a viable business and suggested that Mr Lee revisit the options. Further correspondence followed.
[11] On 1 February 2017, the trustees, through their solicitors, sent notice to Wendy’s that they were terminating the “periodic tenancy arrangement”. Forty days’ notice was given.
[12] On 8 February 2017, Mr Lee asked to arrange a meeting to discuss the outcome of the fixtures and fittings in the building. Mr Lee explained that there were other plans for the property.
[13] On 14 February 2017, Wendy’s, through its solicitors, disputed that the trustees were entitled to terminate the tenancy arrangement, and invited discussion to see whether agreement for renewal of the lease could be reached. Wendy’s said it would seek relief pursuant to s 261 of the Property Law Act 2007 if the trustees pursued a termination of the tenancy.
[14] Correspondence continued between the parties. On 8 March 2017, Wendy’s notified the respondents of its intention to renew the lease. The trustees refused to accept the renewal. Wendy’s filed its application for relief on 17 March 2017.
Relief against forfeiture
[15] Wendy’s seeks an order for relief against the trustees’ refusal to enter into renewal of the lease. It relies on the relevant provisions in the Act, in particular:
261Relief against lessor’s refusal to enter into renewal or sell reversion to lessee
(1) This section applies to a lease if—
(a) the lessor has covenanted in writing with the lessee that, —
(i) on the expiry of the term of the lease, the lessor will extend the term of the lease, renew the lease, or enter into a new lease of all or part of the premises to the lessee; or
…
(b) the obligation of the lessor referred to in paragraph (a) is conditional on —
…
(ii) the lessee giving notice, within a specified time or in a specified manner, of the intention to exercise the right to require an extension or a renewal of the lease or the entering into of a new lease or the transfer or assignment of the reversion; and
(c) the lessee is in breach of the condition, covenant, or agreement, or has failed to give the notice within the specified time or in the specified manner; and
(d) the lessor has refused to extend or renew the lease, or enter into a new lease, or transfer or assign the reversion, as the case may be.
(2) If this section applies to a lease, any of the following persons may apply to a court in accordance with section 262 for relief under section
264:
(a) the lessee:
…
264 Relief court may grant on application
(1) On an application under section 261, the court may grant relief against the refusal of the lessor to extend or renew the lease, or enter into a new lease, or transfer or assign the reversion, as the case may be.
(2) In particular, the court may —
(a) do either of the following:
(i) order the lessor to extend or renew the lease or enter into a new lease with the lessee, mortgagee, or receiver; or
(ii) order the lessor specifically to perform the lessor’s covenant or agreement to transfer or assign the reversion, and to execute all necessary assurances for that purpose; and
(b) grant relief under paragraph (a)(i) or (ii) on any conditions (if any) as to expenses, damages, compensation, or any other relevant matters that the court thinks fit.
(3) The fact that the lessor may have made a disposition to a person, other than the lessee, mortgagee, or receiver, that would be prejudicially affected by the grant of relief to the lessee, mortgagee, or receiver under this section does not affect the power of the court to grant that relief, but in that case the court may do all or any of the following:
(a) cancel or postpone that estate or interest:
(b) assess the damages or compensation to be paid to any person prejudicially affected by that cancellation or postponement:
(c) order any damages or compensation to be paid by the lessor or by the lessee, mortgagee, or receiver, or partly by the lessor and partly by the lessee, mortgagee, or receiver in the proportions that the court determines.
…
[16] Wendy’s satisfies the criteria under s 261, and may therefore seek relief under s 264.1
[17] The principles pertaining to the exercise of discretion under s 264 are well-established. Section 264 is a “remedial measure” that confers a “very wide jurisdiction to do equity in relieving against refusals by lessors to renew leases”.2 The legislature’s intention was to enable the Court to do what it thinks fit in accordance with the justice of the particular application.3 The underlying rationale for the Court’s equitable discretion is to protect the lessee from a lessor taking commercial advantage of their inadvertent mistake, where to do so would have a disproportionate effect on the lessee. As Somers J explained in Weatherall Jewellers Ltd v J Hendry and Son Ltd:4
The principle animating s 120 of the Property Law Act 1952 is no doubt similar to that which promoted the provisions of s 118 about relief against forfeiture, that is to say, to prevent one man from forfeiting what in fair dealing belongs to someone else by taking advantage of a breach from which he is not commensurably and irreparably damaged.
[18] In Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd, Asher J listed seven key factors relevant to the exercise of discretion under s 264. They are:5
(a) Reasons for the failure to give notice, e.g. whether the failure to renew was inadvertent.
(b) Whether the cause of default was due to any action of the landlord.
1 Relief under s 264 can be sought after expiry of the Lease’s initial term, see Twin Peaks Coffee Co
Ltd v Broadway Developments 1986 Ltd (2010) 12 NZCPR 49 (HC) at [44]-[55].
2 Vince Bevan Ltd v Findgard Nominees Ltd [1973] 2 NZLR 290 (CA) at 297. Turner P was referring to s 120 of the now-repealed Property Law Act 1952, which is mirrored by the current s 264. The same approach has been taken in respect of s 264: see Sibrad Company Ltd v Kanters (2008) 9 NZCPR 356 (HC) at [14], [17]-[20]; Transform Minerals Ltd v Gordon Wright & Sons
Ltd (2010) 8 NZCPR 558 (HC) at [16]-[18].
3 Vince Bevan Ltd v Findgard Nominees Ltd, above n 2, at 299.
4 Weatherall Jewellers Ltd v J Hendry & Son Ltd CA135/83, 11 September 1984 at 3 per Somers J.
5 Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd (2005) 7 NZCPR 48 (HC) at [29].
The second part of (f) above refers to the lessor’s understanding of the lessee’s intentions regarding whether to renew the lease.
(c) The lessee’s conduct, in particular whether it has complied with all conditions and covenants and has been a good tenant.
(d) The prejudice to the lessee if the relief is not granted.
(e) The prejudice to the lessor if the relief is not granted.
(f) The lessor’s motivation for the refusal to renew and understanding of the lessee’s intentions.
(g) The interests of third parties and how they may be affected by any order.
[19] None of the listed factors is necessarily determinative of the application.6
All relevant factors must be weighed and considered in light of the particular circumstances in which they arise. As stated by the Court of Appeal in Vince Bevan Ltd v Findgard Nominees Ltd, the Court must do what it thinks fit in accordance with the justice of the particular application.7 However, it is seldom the case that relief is granted for a wilful default.
[20] Wendy’s contends it would be just for the Court to grant a renewal of the lease for a period of eight years from 5 August 2015, on the following grounds:
(a) The circumstances relating to Wendy’s failure to give notice were such that it would have been abundantly clear to the trustees that Wendy’s had no intention of vacating the premises.
(b)The trustees’ conduct contributed to Wendy’s belief that it would be allowed to renew the lease once appropriate terms had been agreed.
(c) Wendy’s is a good tenant and it has a stable relationship with the trustees as landlord.
(d) Wendy’s will face great prejudice if the lease is not renewed.
(e) The trustees will suffer little prejudice if the lease is renewed.
6 See Sibrad Company Ltd v Kanters, above n 2, at [20].
7 Vince Bevan Ltd v Findgard Nominees Ltd, above n 2, at 299.
(f) Failure to renew the lease will have a detrimental effect on third parties, namely Wendy’s employees.
Circumstances relating to Wendy’s failure to give notice and the trustees’ conduct - ([20(a)-(b]) above)
[21] The crux of Wendy’s submission on this point is that it did not give notice of an intention to renew because it believed the parties were simply negotiating what the annual rent would be, and that the trustees would allow Wendy’s to renew the lease once appropriate terms had been agreed.
[22] Wendy’s submits in relation to its own conduct, that at no point did it indicate a wish to vacate the premises. It says it would have been apparent to the trustees that Wendy’s had made a substantial investment in the premises and was only half-way through a 24-year lease. Negotiations were ongoing. Wendy’s continued to satisfy its obligations under the lease. As a result of all of these factors, Wendy’s submits it would have been clear to the trustees that the only issue was over the terms upon which the lease would be renewed, not whether the lease would be renewed at all.
[23] Wendy’s also submits that the trustees gave it the impression that the lease would be renewed once the terms of renewal had been agreed, on the basis that Mr Lee allowed negotiations to continue for over 22 months in a “leisurely” manner; Wendy’s was allowed to remain in possession of the premises and the respondents did not at any point suggest they would not agree to Wendy’s renewing the lease.
[24] The trustees, on the other hand, say the correct construction of events is that Wendy’s failure to give notice was wilful and deliberate, and designed to secure a lease on more advantageous terms. Wendy’s only purported to give notice to renew the lease after the trustees had given notice of termination, which occurred 19 months after the renewal date. Wendy’s had tried to persuade the trustees to accept a shorter-term lease and/or lower rental terms by exploiting the de-valuation of the property caused by having a month-to-month tenant in occupancy. Wendy’s had an apparent appreciation of the pressure it could exert over the trustees by refusing or failing to renew the lease.
[25] The trustees rely on Twin Peaks Coffee Company Ltd v Broadway Developments 1986 Ltd and Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd, pointing out that in both cases a distinction was drawn between an inadvertent failure to renew a lease, and the lessee keeping their options open. The Court in both cases, in finding the lessees acted inadvertently, pointed out that the lessees had nothing to gain from failing to give notice.8
[26] The trustees note the approach under s 120 of the Property Law Act 1952 in KAM Holdings Ltd v Wanganui Regional Development Trust Board, where McGechan J held that “when a lessee deliberately refrains from renewal, in pursuit of ulterior benefit, it cannot expect much sympathy from a Court if its plan backfires”.9 In that case, relief was granted to the lessee Board. However, the trustees submit that there were particular countervailing considerations that are not present here, such as the fact the Board was performing a community function in training and employing Maori youth and there was little prejudice to the landlord.
[27] I accept that a wilful and deliberate failure to give notice to renew when required, points against allowing the lease to be renewed. Having reviewed the correspondence between Ms Lendich and Mr Lee, it is clear Wendy’s was seeking to secure better terms for itself than were provided for under the lease. The reduction in annual rent sought by Wendy’s was contrary to the ratchet clause in the lease because it was less than the original stipulated rent. Wendy’s is a sophisticated commercial lessee. It is clear from Ms Lendich’s letter of 30 April 2015 that she was well aware when the first term of the lease was due to expire. In an email dated 30 October 2015, after the lease expiry date, she said that Wendy’s was at that time a month-to-month tenant. Wendy’s was fully aware of the status of the lease during the course of the negotiation. Wendy’s also took a hard-line approach to its negotiation, and overall appears to have held to its position that it would only accept a renewal if it either received shorter lease periods, or the rent was reduced to $100,000 per annum. This
is clearly not a situation where the lessee failed to give notice of an intention to renew
8 Twin Peaks Coffee Company Ltd v Broadway Developments 1986 Ltd, above n 1, at [80];
Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd, above n 5, at [31].
9 KAM Holdings Ltd v Wanganui Regional Development Trust Board HC Wanganui M35/90,
31 October 1990 at 25.
due to oversight. It deliberately refrained from doing so while seeking to negotiate better contractual terms. Wendy’s had something to gain by failing to give notice.
[28] I also do not consider Wendy’s submission that the negotiations were over terms rather than whether to renew at all is supported by the facts. Ms Lendich’s letter to Mr Lee, dated 30 April 2015, says that Wendy’s was “determining whether to renew” the lease, and the two alternative options for the lease were offered. On
14 August 2015, after Mr Lee indicated the rent would increase, Ms Lendich emailed
Mr Lee and wrote:
We do not accept any proposed rental increase and any increase would likely drive our decision not to renew the lease.
[29] Ms Lendich in later correspondence continued in this fashion. I consider that it would have appeared to Mr Lee and the trustees that Wendy’s was conducting negotiations on the basis of whether to renew the lease at all. This is reinforced by a letter from Mr Lee, dated 15 October 2015, where he wrote “[a]s it stands now where do you see yourself as a tenant and as to your position in relation to the current lease?” In further correspondence from Mr Lee, dated 27 October 2015 and 24 May 2016, he sought similar clarification from Wendy’s.10 Mr Lee was evidently trying to ascertain whether Wendy’s was seriously considering not renewing the lease, or whether the issue was on what terms the lease would be renewed.
[30] While there was ongoing correspondence, and the parties were to a large extent talking past each other, the fact remains that Wendy’s did not give notice of its intention to renew the lease because it was trying to secure better contractual terms. This factor therefore favours refusing Wendy’s application for renewal because the circumstances where the lease lapsed were of Wendy’s own making. However, the reason for the failure to give notice is not necessarily determinative. There are other relevant considerations that may yet tip the balance in favour of ordering a renewal of
the lease.
10 In the 27 October 2015 email, Mr Lee wrote, “Before we can even contemplate considering your requests we must know how you see yourself as a tenant and your position in relation to the current lease.” In the email dated 24 May 2016, Mr Lee wrote, “What I really need to know is what you see in the future for Lynfield.”
[31] On that basis, I now turn to the further relevant considerations.
Wendy’s conduct as a tenant and its relationship with the trustees
[32] Wendy’s submits that it has been a good tenant, it is financially secure and it can meet its obligations as they fall due. Wendy’s says it has met its obligations under the lease for 13 years, and Mr Lee himself described Wendy’s as a “good tenant” in his email on 17 August 2015.
[33] The trustees submit that over the term of the lease there have been persistent disputes or breaches by Wendy’s over the quantum of apportioned operating expenses. They say that, while these issues involved small amounts, they have caused ongoing inconvenience and stress to the Bakkers. The trustees refer to Sibrad Company Ltd v Kanters, where it was held that the lessee’s poor conduct alone can justify the Court declining relief under s 264.11 On the basis of Sibrad, the trustees submit that this factor supports the Court not exercising its discretion to renew the lease.
[34] In a later submission in relation to prejudice, the trustees also state that they have had to pay increased property management and accountancy fees since 2009 due to continual disputes with Wendy’s over accounting for outgoings.
[35] Ms Lendich says the disputes over operating expenses are due to calculation errors or insufficient information.
[36] While there are clearly identified issues that have arisen between the parties which would indicate that Mr Lee’s email was perhaps an overstatement, these issues at worst show Wendy’s to be a difficult or pedantic tenant, not a bad one. The limited number of issues, which are relatively minor in nature, and which have arisen in the context of a long-term commercial relationship, support the view that Wendy’s is an
acceptable tenant.
11 Sibrad Company Ltd v Kanters, above n 2, at [72].
[37] It is hard to get past Mr Lee himself encouraging Wendy’s to renew and describing Wendy’s as a good tenant, despite “problems in the past”, at the very point the lease was due for renewal.
[38] I conclude that Wendy’s is a difficult but good tenant, in the sense relevant to this application.
[39] I consider that, insofar as the relationship between the parties in the future is concerned, Wendy’s conduct as a tenant does not mean the trustees will be prejudiced if the Court exercises its discretion to renew the lease. None of the issues discussed by the trustees raises any concern that Wendy’s is unable to pay its outgoings or rent, is otherwise unable to comply with its obligations under the lease, or will act in any way as a bad tenant.
[40] I also note that Mr Lee, who wrote the email saying Wendy’s is a good tenant, appears to conduct all matters in connection with the lease on behalf of the trustees. He is an intermediary in that relationship, which shields the elderly trustee director.
Prejudice to the parties and the detrimental effect on third parties
[41] Wendy’s submits that it will suffer significant prejudice if the lease is not renewed. It says it will lose its initial investment in the premises in the sum of about
$1,000,000, plus additional sums expended over the years on maintenance. It also submits that it will suffer consequential losses such as weakened bargaining power and higher average costs across its suppliers if it loses the restaurant. There will also be a loss of custom and location goodwill because Wendy’s will most likely be unable to relocate to another local site, which would enable it to preserve the goodwill. Wendy’s also submits that there will be brand damage as competitors and customers will view the restaurant closure as reflecting (wrongly) financial failings on the part of Wendy’s, which will harm its other restaurants. There will also be wasted costs in removing, moving and storing fixtures from the restaurant. Wendy’s acknowledges that the trustees have offered to waive these costs, but submits that it will still have external costs that cannot be waived (such as storage costs). Third parties would also
be affected. Ms Lendich says 24 part-time staff would be made redundant if the lease is not renewed and it is very likely many will not be redeployed.
[42] In terms of the capital investment, the actual value will be materially less after some 12 years of use. I also note that whatever the downside is to Wendy’s, it was prepared to gamble over it. However, I accept there is force in the submission regarding prejudice to Wendy’s overall, and to third parties.
[43] Wendy’s submits that the trustees will not suffer prejudice if the lease is renewed. This is because the respondents want a long-term and stable tenant, and Wendy’s has been such a tenant, and will continue to be if the lease is renewed. Wendy’s says there will be no prejudice in relation to the tenant with whom the trustees have entered into a lease arrangement, because that lease is conditional on vacant possession. The condition will not be satisfied if the Court grants relief.
[44] The trustees submit that they have suffered serious prejudice because of
Wendy’s tenancy.
[45] They state that they have spent $30,000 on obtaining a new tenant, and this expenditure will be wasted if the renewal of the lease is permitted. I agree that any such expenditure is a source of prejudice for the trustees, but it is a form of prejudice that can be addressed.
[46] The trustees rely on the various disputes with Wendy’s over the years, to which I referred earlier, as a source of prejudice. I have already dealt with this point in the previous section regarding the relationship between the trustees and Wendy’s. I consider Wendy’s is an acceptable tenant.
[47] The trustees also refer to other “special circumstances” which mean that renewing the lease will cause real prejudice. These circumstances are personal to Mrs Bakker and her family, namely that Mrs Bakker is elderly, recently widowed, and she has two adult daughters with special needs because they are blind. Mrs Bakker wishes to leave her daughters in a financially secure position with long-term tenants in their investment property. The lease has not been an easy or smooth relationship when
looked at from Mrs Bakker’s perspective, and the trustees submit that it can be inferred that Mrs Bakker would want a new tenant who is not only commercially secure, but one with whom she is likely to have an easier time.
[48] I do not consider that Mrs Bakker’s personal circumstances are relevant to assessing prejudice in this context. Asher J in Bedford Investments Ltd v Alder & Co Ltd considered that the personal circumstances of the principal of the lessor company had no particular relevance.12 I agree. The matter should be approached on the basis of assessing the inconvenience to or burden on any lessor. I have already noted that from a lessor’s perspective, the relationship with Wendy’s has not been smooth or easy, but it is an acceptable tenant. I do not consider that any material prejudice arises in this regard, for the reasons given earlier. There is nothing to indicate that Wendy’s will not be a stable, reliable, long-term tenant.
Conclusion
[49] Keeping in mind the circumstances relating to Wendy’s failure to give notice, and the various forms of prejudice the parties claim they will suffer, I consider that it is appropriate to order renewal of the lease on conditions. Weighing the relative prejudice of the parties, Wendy’s, including its staff, will suffer prejudice that cannot be addressed if a renewal is not granted, whereas the prejudice to the trustees can be substantially corrected. The sum Wendy’s has invested in the business is considerable, even after taking into account the likely significant depreciation since the original investment. The other consequences that Wendy’s will likely suffer are also material, in particular the potential harm to Wendy’s employees.
[50] The main prejudice the trustees would suffer on a renewal of the lease is the wasted time and costs in locating a new tenant. This can be addressed. Under s 264(2)(b) of the Act, I may order that the lease be renewed on any conditions I consider fit. Such conditions may include compensation. I consider that making an order that Wendy’s compensate the trustees for their costs in securing a new tenant is appropriate here because these are circumstances which Wendy’s brought on itself. It
would not be appropriate for the trustees to be put to any expense as a result of Wendy’s
12 Bedford Investments Ltd v Alder & Co Ltd (2006) 7 NZCPR 420 (HC) at [35].
failure to notify the trustees in time that it wished to renew the lease. The renewal of the lease will therefore be accompanied by the condition that Wendy’s is to compensate the trustees for the costs associated with obtaining a new tenant.
[51] These circumstances are at the outer limits of when relief will be granted under s 264 of the Act. However, weighing all of the relevant considerations, I am prepared to exercise my discretion to order a renewal of the lease on the condition that Wendy’s pays the trustees compensation.
[52] As to costs, I note the case of Walsh v Utting where indemnity costs were awarded to the Landlord in circumstances where the tenant appeared to deliberately hold off renewing the lease as part of a negotiation strategy with the landlord.13
Hammond J, when ordering indemnity costs in that case, stated that the short reason for the award of costs was that “but for the tenants dilatoriness this imbroglio would not have arisen at all, and I think they have to take a real measure of responsibility for that.”14 While that case was decided when the previous 1952 legislation was in force, my preliminary view is that indemnity costs are appropriate here as well, consistent with the approach I have taken to compensation. Wendy’s did not seek that the issue of costs be deferred, but I will allow the parties the opportunity to file submissions before ruling on the point.
[53] The trustees are to file a memorandum as to the form of appropriate orders and as to costs, within 14 days, together with an affidavit providing reasonable documentary support for their stated costs of $30,000 in relation to the new tenant. Wendy’s is to file a memorandum in reply within seven days of the trustees’
memorandum.
13 Walsh v Utting [2004] 1 NZLR 402 (HC).
14 At [67].
---------------------------------------------------- Hinton J
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