Zhu v Get Funkd Hutt Limited HC Wellington CIV 2010-485-1447

[2010] NZHC 2242

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2010-485-1447

UNDER  the Property Law Act 2007

BETWEEN  WAN PENG ZHU, XUE JING XIE AND XUE ZHENG ZHU

Applicants

ANDGET FUNKD HUTT LIMITED Respondent

Hearing:         13 December 2010

Counsel:         M Taylor for applicants

J Grace for respondent

Judgment:      13 December 2010

RESERVED JUDGMENT OF DOBSON J

[1]      These proceedings were commenced by way of originating application, seeking possession of leased premises pursuant to ss 244 and 251 of the Property Law Act 2007, together with orders for the cancellation of the lease and for payment of the outstanding rent.

[2]      On the papers, all forms of relief were resisted because of breaches alleged against the applicants (the lessors) of their obligation under the lease to maintain the premises in a watertight condition.

[3]      However, when the matter was called this morning, Mr Grace, who has only recently been instructed for the respondent (the lessee), indicated that the lessee would not oppose the application for cancellation of the lease and for orders facilitating the

orderly hand-back of possession of the premises to the lessors.

ZHU & ORS v GET FUNKD HUTT LIMITED HC WN CIV-2010-485-1447 13 December 2010

[4]      Mr Grace  did  resist  the  application  for  judgment  for  the  extent  of  rental outstanding.  He submitted that there was a tenable set-off for 35 per cent of the rental throughout the period in which the premises had not been watertight.  This submission was made on the basis of an affidavit from the principal of the respondent business, Ms Nation, to the effect that leaks in the premises had adversely affected revenue from her hairdressing business by 35 per cent.

[5]      Mr Grace submitted that the appropriate course was to direct the transfer into the District Court of the part of the proceedings relating to the quantum of the lessors’ claim, given the lessee’s claim for a set-off reflecting the entitlement to an abatement of rent to reflect the lessors’ breach of obligation to provide watertight premises.

[6]      That  course  was  opposed  by  Mr Taylor.    He  submitted  that  there  was  no sufficient basis on which to recognise a set-off, and that in any event the terms of the lease precluded any set-off being raised as justification for non-payment of any part of the rent.  In this regard (as in others) he relied on the recent judgment of Ellis J in Grant v  Hannay.1      In  that  case,  a  lease  in  the  same  form  had  been  in  issue  in  similar proceedings.  The judgment confirms the enforceability of the lease on its terms so as to preclude a lessee raising a set-off which is claimed to justify a reduction in rental.

[7]      I agree with Mr Taylor that there is an insufficient basis to resist judgment for the extent of rental outstanding.   However, that position on the terms of the lease in the present proceedings cannot in any way preclude the pursuit of claims by the lessee, or any guarantors of the lessee’s obligations under the lease, for abatement of some portion of the rent that could not properly be charged in whatever circumstances they might be able subsequently to make out.

[8]      I also heard exchanges from counsel on the appropriate terms for an order for possession, given the provision in clause 31.1 of the lease, which affords the lessee a period of five working days after the date of termination to remove all of the lessee’s fixtures, fittings and chattels.  Eventually, counsel agreed that the appropriate order is one for immediate return of possession of the premises to the lessors, subject to the

entitlement of the lessee to have a period of five working days for removal of chattels.

1      Grant v Hannay HC Auckland CIV-2009-404-007248, 17 March 2010.

[9]      Accordingly, these proceedings are determined on the following basis:

(a)       There is an order cancelling the lease between the parties dated 25 March

2009, to take effect forthwith.

(b)The lessee is ordered to facilitate the immediate reversion of possession of the premises to the lessors, and in doing so is to advise the lessors of any codes for alarms to the premises, and to make available a set of any keys to the premises that are different from those issued to the lessee by the lessors at the outset of the lease.

(c)      The reversion of possession is subject to the lessee’s right to remove over the five following working days (ie Tuesday, 14 December 2010 to Monday, 20 December 2010 inclusive) all lessee’s chattels in the premises.

(d)There is to be judgment in favour of the lessors for the present extent of arrears of rental of $26,940.40. That sum is to bear interest at 12 per cent per annum from Monday, 20 December 2010.

(e)      This judgment, which is enforceable on its terms, does not preclude any counterclaims for abatement of the rental charged on account of breach of the lessors’ obligations to retain the premises in a watertight condition.

[10]     Mr Taylor also sought costs.  The lessors are entitled to costs on commencement of  the  proceedings  and  preparation  for  the  hearing.    However,  given  Mr Grace’s initiatives, all issues were readily resolved in half an hour’s argument.   I accordingly order costs in the sum of $3,500, together with filing fees and any other usual disbursements.

Dobson J

Solicitors:

David Booth, Wellington for applicants

Jefferies Raizis, Wellington for respondent