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High Court of New Zealand Decisions |
Last Updated: 2 July 2012
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV-2012-454-000180 [2012] NZHC 1526
BETWEEN PALMERSTON NORTH COSMOPOLITAN CLUB Applicant
AND PALMERSTON NORTH SQUASH CLUB INCORPORATED
First Respondent
AND PALMERSTON NORTH BOWLS CLUB INCORPORATED
Second Respondent
Hearing: 21 June 2012
Counsel: J W Maasen and A J Kirk for Applicant
D M Hughes and L M Van for First and Second Respondents
Judgment: 29 June 2012
In accordance with r 11.5 I direct the Registrar to endorse this judgment with the delivery time of 4.00pm on the 29th day of June 2012.
RESERVED JUDGMENT OF COLLINS J
Introduction
[1] The applicant (Cosmopolitan Club) seeks an order restraining the respondents (Squash Club) and (Bowls Club) from cancelling its lease. The application is opposed.
[2] The Cosmopolitan Club asks that restraining orders be made under ss 253 and 256 of the Property Law Act 2007 (PLA) pending the determination of a number
of complex issues between the parties and others that are the focus of a parallel
PALMERSTON NORTH COSMOPOLITAN CLUB V PALMERSTON NORTH SQUASH CLUB INCORPORATED HC PMN CIV-2012-454-000180 [29 June 2012]
proceeding that has been commenced in the Palmerston North High Court
(substantive proceeding).1
Background
[3] Caution is required when summarising the background to this case. There are a number of live factual and legal issues raised in the substantive proceeding. Accordingly this Court will give a general overview of the dispute, recognising that in due course a number of contentious issues will need to be resolved as part of the substantive proceeding.
[4] The Cosmopolitan Club has a proud history. It was established in 1888 and is registered as a not for profit Friendly Society under s 11 of the Friendly Societies and Credit Unions Act 1982. For years the Cosmopolitan Club was based in premises it owned in Pitt Street, Palmerston North. In 2010 the Cosmopolitan Club moved into new premises which are now occupied by the Cosmopolitan Club and the Squash Club. Access to these premises is from Linton Street, Palmerston North.
[5] The Squash and Bowls Clubs are successful Palmerston North sports clubs. The Squash Club was established in 1936. In 2006 the Squash Club hosted the World Junior Men’s Championship. Four years later the Squash Club hosted the World Women’s Championship. Currently the Squash Club enjoys the benefits of a multi court and bar and social facility which forms part of the complex that is also occupied by the Cosmopolitan Club. The Bowls Club also has a very proud history. It was formed in 1889 and currently operates from its clubrooms which can be accessed from Ferguson Street, Palmerston North. The Bowls Club has three greens which are immediately next to the complex occupied by the Cosmopolitan and Squash Clubs.
[6] From June 2004 to June 2005 a series of discussions took place between the three clubs. It is not appropriate at this juncture to determine precisely what was
agreed to at this time. Suffice to say that the “Club Palmerston” concept emerged
1 Palmerston North Cosmopolitan Club v Palmerston North Squash Club Inc & Palmerston North
Bowls Inc & Ors HC Palmerston North CIV-2011-454-000370.
which envisaged the Cosmopolitan Club selling its Pitt Street premises and the construction of a comprehensive sport and recreation facility that would benefit the members of all three clubs. The new facility was to be constructed on land owned by the Squash and Bowls Clubs with access from Linton Street.
[7] During this establishment phase the clubs: (1) incorporated “Club Palmerston”;
(2) established steering committees; and
(3) entered into a lease to enable the Cosmopolitan Club to construct its new facility (the lease).
[8] The lease was executed on 1 March 2006. For present purposes it is sufficient to note:
(1) The lease is for a term of 25 years.
(2) The rent is for $100 per annum plus GST.
(3) The rent is reviewable on six months’ notice by the landlords (Squash
and Bowls Clubs).
(4) The landlords are provided with a right to re-enter in the event of insolvency, bankruptcy or liquidation of the Cosmopolitan Club.
[9] In addition to the lease, the Squash Club granted to the Cosmopolitan Club a licence for carpark space and an access way to the Cosmopolitan Club’s portion of the “Club Palmerston” facility. This licence was granted on 27 November 2007. On its face, it appears that licence terminated on 1 December 2010. There are, however, a number of issues as to whether or not that licence has been extended.
[10] Many of the arrangements relating to the establishment of “Club Palmerston”
have to be determined through an analysis of the recollection of witnesses and a
number of documents. There was no formal agreement that records the specific
basis upon which the three clubs created “Club Palmerston”.
[11] The financial arrangements which underpinned the creation of “Club Palmerston” require particularly careful analysis. For present purposes it is sufficient to record that it was thought approximately $3 million was going to be required to create the new facility.
[12] The Cosmopolitan Club believes that it has made the following financial contributions to “Club Palmerston”:
(1) Approximately $600,000 which had come from the sale of its Pitt
Street building.
(2) $850,000 which it borrowed from the Bank of New Zealand (BNZ).
The Squash and Bowls Clubs are guarantors of that loan.
(3) Approximately $260,000 which was funded by way of a loan from the Bowls Club to the Cosmopolitan Club. The Cosmopolitan Club says that loan has now been repaid.
(4) Approximately $150,000 which the Cosmopolitan Club borrowed from the Central Energy Trust and which it says it has repaid.
(5) Approximately $104,000 which the Cosmopolitan Club says it spent in improving the Linton Street carpark.
(6) Other financial contributions which it says brings its total financial contribution close to $2.5 million.
[13] Of particular concern is the BNZ loan. That loan agreement was executed on
16 May 2006. The guarantees from the Squash and Bowls Clubs were executed on
17 and 18 May 2006.
[14] One of the many areas of dispute between the parties concerns how the Cosmopolitan Club came to be in default of the BNZ loan. The Cosmopolitan Club says that the Squash and Bowls Clubs refused to renew their guarantees for the loan. The Cosmopolitan Club believes this was done deliberately to force the BNZ to take action against the Cosmopolitan Club and that this is part of a strategy designed to engineer the insolvency of the Cosmopolitan Club.
[15] On the other hand, the Squash and Bowls Clubs say that the Cosmopolitan Club’s loan from the BNZ was split into two facilities and that one of those facilities, the Committed Cash Advance facility, fell due for repayment on 21 July 2011. The Squash and Bowls Clubs say that when that facility was not repaid, the Cosmopolitan Club was in default to the BNZ and has been in default since 21 July
2011.
[16] For reasons which need not be traversed in this proceeding, the plans for “Club Palmerston” began to disintegrate during the course of 2010 and 2011. The relationship between the three clubs has deteriorated to an alarming degree. The three clubs have now reverted to autonomous entities, each with their own clubhouse, bar and social facilities all within metres of each other.
[17] On 1 February 2012 the BNZ formally demanded that the Cosmopolitan Club repay the Committed Cash Advance facility. That has not been done.
[18] On 5 March 2012 the Squash and Bowls Clubs gave formal notice to the Cosmopolitan Club of their intention to cancel the lease. The cited ground is a breach of cl 29.1(d) of the lease which provides:
The landlord may re-enter the premises at the time or at any time thereafter
...
(d) in the event of the insolvency, bankruptcy or liquidation of the tenant.
[19] The gravamen of the argument advanced by the Squash and Bowls Clubs is that they are entitled to give notice of an intention to cancel the lease because the Cosmopolitan Club has failed to repay the BNZ loan because the Cosmopolitan Club is insolvent.
Is there is a serious question to be tried?
[20] In the third cause of action pleaded in the substantive proceeding the Cosmopolitan Club seeks an injunction against the Squash and Bowls Clubs to prevent them interfering with the Cosmopolitan Club’s rights to quiet enjoyment of its benefits under the lease. In support of that cause of action the Cosmopolitan Club:
(1) Relies upon the doctrine of promissory estoppel.
(2) Seeks a continuation of the lease with restitution to the Cosmpolitan Club of the benefits conferred upon the Squash and Bowls Clubs by the Cosmopolitan Club’s expenditure on their land. In support of this submission the Cosmopolitan Club says:
(a) that it is not in dispute that a significant benefit has been conferred on the Squash and Bowls Clubs by the Cosmopolitan Club’s expenditure;
(b) the Cosmopolitan Club’s expenditure was not a gift to
the Squash and Bowls Clubs; and
(c) the expenditure by the Cosmopolitan Club was part of a common enterprise that has not come into fruition, namely “a merged umbrella entity owning and operating the entire facility”.
[21] In addition, the Cosmopolitan Club pleads that it is not insolvent. Its arguments in support of this submission are:
(1) That the loan from the BNZ was not a legally valid loan. Section 51 of the Friendly Societies and Credit Unions Act 1982 is relied upon to support this argument. That section provides:
51 Borrowing powers, overdrafts
(1) Except as provided in this Act and notwithstanding anything to the contrary in the rules of a society or branch, no registered society or branch shall be entitled to borrow money nor shall any person lend money to any registered society or branch.
If the effect of s 51 Friendly Societies and Credit Unions Act 1982 is that the BNZ loan could never have been lawfully entered into then, it is said on behalf of the Cosmopolitan Club that it cannot be required to repay the loan.
(2) In any event the Cosmopolitan Club argues that aside from not meeting what it says is an invalid demand from the BNZ, it is meeting all of its debts and obligations. In particular it has paid interest and principal on the BNZ loan and paid its rent.
[22] The Cosmopolitan Club also argues that it is entitled to relief against cancellation of the lease pursuant to the principles set out in Studio X Ltd v Mobil Oil Ltd.2 In that case it was explained that the factors which might count in favour of relief against cancellation include:
(1) whether the tenant’s breach was advertent;
(2) the conduct of the landlord(s); (3) the gravity of the breach; and
(4) the proportionality of the effect of granting relief upon the landlord(s)
compared to the effect of cancellation upon the tenant.
[23] In support of this part of its argument the Cosmopolitan Club says:
(1) The purported breach of the lease by the Cosmopolitan Club was deliberately engineered by the Squash and Bowls Clubs.
(2) That the Squash and Bowls Clubs are attempting to abuse their position in order to get the benefit of the Cosmopolitan Club’s expenditure on their land.
(3) That the purported breach is of no consequence and that the
Cosmopolitan Club continues to meet all covenants under the lease.
(4) That the proportionality arguments strongly favour the granting of relief.
[24] The Cosmopolitan Club also argues that the notice of intention to cancel is invalid. It bases this submission on the following points:
(1) The Cosmopolitan Club says the notice of intention to cancel is ultra vires and inconsistent with the PLA.
(2) That the notice of intention to cancel gave the Cosmopolitan Club just nine days to remedy the breach. The Cosmopolitan Club says this was not “a reasonable period” within the meaning of s 246(1) PLA.
(3) The Cosmopolitan Club says the notice of intention to cancel was part of an unconscionable attempt by the Squash and Bowls Clubs to get the benefit of $2.5 million worth of expenditure undertaken by the Cosmopolitan Club on the land belonging to the Squash and Bowls Clubs.
[25] In his helpful submissions Mr Hughes, counsel for the Squash and Bowls Clubs, took issue with the arguments advanced on behalf of the Cosmopolitan Club. Mr Hughes’ submissions were:
(1) The Cosmopolitan Club is “hopelessly insolvent”.3 Mr Hughes submitted that the evidence presented to the Court demonstrated beyond any doubt:
(a) the Cosmpolitan Club’s accounts were grossly
defective;
(b) that by any analysis the Cosmpolitan Club cannot pay its debts; and
(c) that the liabilities of the Cosmopolitan Club greatly exceed its assets.
(2) Secondly, Mr Hughes submitted that the application for relief by the Cosmopolitan Club was misconceived and/or premature. He submitted that cancellation under the PLA can only be effected by:
(a) the lessors obtaining an order for possession; or
(b) the lessors effecting peaceable entry.
Mr Hughes said that as neither step had been taken by the lessors, cancellation of the lease had not been effected.
(3) Thirdly, Mr Hughes submitted that s 256 of the PLA does not entitle the Cosmopolitan Club to an injunction against the lessors. He submitted the only way in which the Cosmopolitan Club can get an injunction is by applying for an injunction in accordance with the High Court Rules and that rr 7.53 and 7.54 require the Cosmopolitan Club to provide an undertaking as to damages. It was submitted on behalf of the Squash and Bowls Clubs that absent an undertaking as to damages an interim injunction cannot be issued.
[26] In summary, the Squash and Bowls Clubs contended that there is no arguable case to be tried as the lessors have issued a valid notice and are entitled to cancel the lease if they wish.
Analysis
[27] In assessing whether or not there is a serious question to be tried the Court must avoid determining the outcome of the litigation. Suffice for present purposes for the Court to note that the fact the Cosmopolitan Club has made significant financial investments in the property owned by the Squash and Bowls Clubs raises issues that will require careful analysis in the substantive hearing. In my assessment, this aspect of the Cosmopolitan Club’s claim does raise a serious issue to be tried.
[28] The Cosmopolitan Club is relying on the principle of promissory estoppel in its third cause of action in the substantive proceeding. Arguably, there is now one single doctrine of equitable estoppel which is based upon the concept of unconscionability. In National Westminster Finance New Zealand ltd v National Bank of New Zealand Ltd, Tipping J said:4
The decisions of this Court in Wham-O MFG Co v Lincoln Industries [1984]
1 NZLR 641 and Gillies v Keogh [1989] 2 NZLR 327 have emphasised the element of unconscionability which runs through all manifestations of estoppel. The broad rationale of estoppel, and this is not a test in itself, is to prevent a party from going back on his word (whether express or implied) when it would be unconscionable to do so.
[29] To establish an estoppel three elements are required:5
(1) Encouragement of an expectation or belief by a promissor. There must however, be clear words or conduct by one party which created a belief or expectation in the other;
(2) Reliance by the promisee on that belief; and
(3) Detriment to the promisee as a result of reliance on that promise. The party to whom the representation or promise was made must have relied on it to such an extent that it would in inequitable (or
unconscionable) to allow the promissor to go back on his or her word
4 National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 (CA) at
549.
– i.e. the reliance must be to the detriment of the promisee or have led the promisee to alter their position.
[30] Whilst this Court must refrain from commenting in detail on the evidence to support each of these limbs, there is sufficient evidence to establish that there is a serious case to be tried in relation to the third cause of action pleaded in the substantive proceeding.
[31] I am also satisfied that the Cosmopolitan Club has raised a serious question on whether or not in the circumstances of this case it is entitled to relief of a more permanent nature against cancellation of the lease in accordance with the factors set out in Studio X Ltd v Mobil Oil Ltd. That is to say, there is in my assessment a serious question raised to support the proposition that the Cosmopolitan Club is entitled to relief because:
(1) Its breach may have been inadvertent.
(2) The conduct of the Squash and Bowls Clubs may have contributed
significantly to the Cosmopolitan Club’s breaches.
(3) The breach may, when all circumstances are evaluated, prove not to be a serious breach.
(4) The effect of granting relief is of little or no comparative consequence to the Squash and Bowls Clubs whereas not granting relief could have a serious impact on the Cosmopolitan Club.
[32] Having concluded that two of the grounds which the Cosmopolitan Club advances to support its claim that there is a serious question to be tried have merit, it is unnecessary for me to comment on the remaining two grounds advanced by the Cosmopolitan Club in support of this limb of the case.
[33] It is however appropriate to explore two aspects of the arguments advanced by the Squash and Bowls Clubs concerning the issue of whether or not injunctive relief can be granted.
Injunctive relief under the PLA
[34] The Squash and Bowls Clubs argue that injunctive relief cannot be obtained under s 256 PLA. They submit that on an ordinary reading of s 256 PLA, the injunction referred to is an injunction against the tenant from repeating a breach of the terms of a lease.
[35] The relevant portions of ss 253 and 256 PLA provide:
253 Relief 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:
...
(3) Relief may be sought in—
(a) a proceeding brought by the lessor for an order for possession of the land; or
(b) a proceeding brought for the purpose of seeking the relief.
(4) A proceeding referred to in subsection (3)(b) must be brought—
(a) before an order for possession of the land is made in a proceeding referred to in subsection (3)(a);
...
256 Powers of court on application for relief
(1) In determining an application for relief against the cancellation, or proposed cancellation, of a lease, under section 253, a court may grant—
(a) the relief sought on any conditions (if any) as to expenses, damages, compensation, or any other relevant matters that it thinks fit; and
(b) an injunction restraining any similar breach in the future.
(2) The court may grant relief against the cancellation, or proposed cancellation, of a lease even though—
(a) the cancellation is for a breach of an essential term of the lease; or
(b) the breach is not capable of being remedied.
[36] The authorities under ss 253 and 256 establish that interim relief can be sought pending resolution of substantive proceedings for relief against forfeiture. Where that is done, it appears to be in the form of an interim injunction for possession, preventing the landlord from acting inconsistently with the lease. In
Treka Developments Ltd v Lehman Jackson Ltd,6 a decision before the PLA, Thorp J
noted:
I am also of the opinion, which was accepted for the purposes of these proceedings [an application for an interim injunction] ..., that on an application for injunctive relief (as distinct from a substantive application for relief against forfeiture) the Court is entitled and empowered to impose conditions on the grant of relief if by so doing it can avoid the risk of substantial detriment to the landlord.
[37] An interim injunction pending the hearing of an application for relief against forfeiture was also granted in Black Trading Ltd v Chandra7, Sky Holdings Ltd v Rockfield Land Ltd8 and Maydanoz NZ Ltd v Poppelwell.9
[38] However, there are also two decisions where it appears interim relief was granted pursuant to s 256, rather than an interim injunction per se.
[39] In Riccarton Club Incorporated v Majestic Investments Ltd10 the Court referred to an application for an interim injunction but then granted interim relief pursuant to ss 253 and 256 PLA. The applicant sought relief from cancellation – an order restraining the defendant from taking any further steps to cancel until final determination of the matters through arbitration. Chisholm J granted “an interim order pursuant to s 253 and s 256 of the Property Law Act granting the plaintiff relief against the defendant’s cancellation of the lease. In other words, the defendant is to
immediately allow the plaintiff to resume occupancy of the leased premises. Unless
6 Treka Developments Ltd v Lehman Jackson Ltd HC Auckland CP13871/88, 28 June 1988 at 3.
7 Black Trading Ltd v Chandra HC Auckland CIV-2008-404-7202, 5 November 2008.
8 Sky Holdings Ltd v Rockfield Land Ltd HC Auckland CIV-2003-404-5939, 18 December 2003.
9 Maydanoz NZ Ltd v Poppelwell HC Auckland CIV-2011-404-8144, 22 December 2011.
10 Riccarton Club Inc v Majestic Investments Ltd HC Christchurch CIV-2011-409-1553, 16 August
2011.
authorised by the Court the defendant is not to take any further steps to cancel the lease on the strength of the notices that have already been issued”. These orders came with conditions. No undertaking as to damages was required to be made.
[40] In Emery v Andrews11 substantive specific performance proceedings were to be heard (for settlement of an agreement for sale and purchase). The agreement had a long term settlement provision and a licence to occupy was granted in the meantime. The respondents did not settle, and the applicants therefore cancelled the agreement. The respondents remained in possession. The applicant sought an order for possession on the grounds the agreement was cancelled and the occupation fees were not paid. The Court granted an application for relief against forfeiture – possession of the property would not affect the parties’ rights under the agreement as the ultimate outcome of that issue was not dependent upon physical possession. Relief and possession was granted on the conditions that the occupation fees in arrears be paid, and be paid in the future.
[41] Most decisions granting relief under s 256 are of a permanent, rather than interim nature. They do not appear to “injunct” the landlord. Rather, they reinstate or confirm possession for the lessee upon certain conditions, for example, that all arrears are paid now and in the future; a declaration as to wrongful cancellation; or maintenance work to be carried out. If the conditions are not satisfied then the lessor is usually then entitled to cancel. In Arthur Devine Ltd v Highgate on Broadway Ltd
the Court said: 12
In the usual class of case falling within s 256, where the Court has granted relief against cancellation following a breach of the lease by the lesee, the expectation would be that the conditions on which relief would be granted would be conditions for the benefit of the lessor, because the lesee has, in that usual case, been granted an indulgence or its breach of lease, for which the lessor ought to be compensated. However, s 256 is not in its terms limited to conditions favouring the lessor. As I have noted, s 255(2) contemplates that an application for relief under s 253 may occur in circumstances where the validity of the cancellation is disputed, because the lessee does not accept there has been a breach of the lease. That might suggest the Court has the power, in an application under s 253 to determine there was no breach of the lease justifying cancellation and that the
11 Emery v Andrews HC Auckland CIV-2011-404-2903, 8 July 2011.
12 Arthur Devine Ltd v Highgate on Broadway Ltd HC Blenheim CIV-2011-406-185, 10 November
2011 at [31].
cancellation was wrongful. If the Court does have such a power, conditions favouring the lessee might be seen as appropriate under s 256.
[42] In my assessment there is force in the respondent’s argument that an interim injunction is the appropriate mechanism to obtain interim relief pending resolution of the substantive hearing. This would mean the usual principles for an interim injunction would apply. Despite the wide discretion under s 256 and the two authorities appearing to grant some kind of interim relief (i.e. relief pending determination of substantive disputes) I consider the authorities granting an interim injunction pending a substantive hearing for relief from forfeiture are more analogous.
[43] I note, that if an “injunction” is granted under the Court’s wide discretion in s 256 then no undertaking to damages would appear to be required.
Undertaking as to damages
[44] Mr Hughes submitted that if an interim injunction is to be issued, it is first necessary for the Cosmopolitan Club to give an undertaking as to damages. The Squash and Bowls Clubs argue that an undertaking as to damages as set out in r 7.54 of the High Court Rules is mandatory. There are now several conflicting authorities on this issue.
[45] In Sanson v Energy Products Wylie J said:13
An undertaking as to damages is required when an applicant seeks an interim injunction – r 7.54. It is a mandatory requirement and when there is a likelihood of financial detriment to a respondent, an applicant has an obligation to provide the Court with sufficient information to enable the Court to assess the worth of the undertaking ... . If there is no information to support an undertaking, then this is likely to be an important factor in assessing the balance of convenience.
[46] In Craig v Hannah Allan J said:14
The injunction proceeding is tainted by a number of procedural defects. ... Second, the applicants have failed to file and serve an undertaking as to
13 Sanson v Energy Products HC Auckland CIV-2009-404-5464, 4 December 2009 at [40].
14 Craig v Hannah HC Whangarei CIV-2009-488-575, 16 September 2009 at [37]-[38].
damages, as is required by r 7.54. The Court has no power to grant an injunction in the absence of such an undertaking. It would ordinarily not do so even where an undertaking has been filed, unless satisfied that an applicant is able to pay the damages which a Court might later award in the event that an interim injunction is granted but the opposing party later succeeds at trial.
These are threshold procedural issues which effectively preclude the Court
from considering the applicant’s argument on the merits.
[47] However, earlier in 2008 Allan J had said in costs decision Knight v
European Language Academy (NZ) Ltd :15
I place little weight on the failure of the plaintiff to file an undertaking as to damages. The Court has a discretion to permit the late filing of such an undertaking, and to dispense with an undertaking altogether in an appropriate case. Alternatively, an interim injunction could have been granted on the condition that an undertaking as to damages is given ...
[48] I note this passage was cited in Munhwa Broadcasting Corp v Young
International 2009 Ltd.16
[49] Dobson J in A v Fairfax New Zealand Ltd said:17
The terms of High Court Rule 7.54 appear to be mandatory in that an applicant for an interlocutory injunction must file such an undertaking. The Memorandum filed in support of A’s application referred to authority acknowledging that the Court nonetheless has a discretion.18 Quite properly, the Memorandum also acknowledged authority to the contrary effect in a decision of the same Judge, which found that the Court has no power to grant an injunction in the absence of such an undertaking.19
Although it is only likely to be exercised in narrow circumstances, I am satisfied that the Court does have a discretion to dispense with the requirement notwithstanding the apparently mandatory terms of the rule.
The Memorandum of Counsel for A argues the prospect of the media suffering significant damages is relatively remote. It is unnecessary to express any view on whether, on any application to rescind or vary these orders, the discretion would continue to be exercised in A’s favour. It is sufficient at this stage to acknowledge that the Court has jurisdiction to
15 Knight v European Language Academy (NZ) Ltd HC Auckland CIV-2008-404-2411,
14 November 2008 at [20].
16 Munhwa Broadcasting Corp v Young International 2009 Ltd HC Auckland CIV-2010-404-203,
17 December 2010.
18 Knight v European Language Academy (NZ) Ltd HC Auckland CIV-2008-404-2411,
14 November 2008 at [10].
19 Craig v Hannah HC Whangarei CIV-2009-488-575, 16 September 2009.
dispense with such an undertaking and to find that the overall merits of the case for at least a holding form of interim relief are sufficient to outweigh the concerns for the interests of the defendants arising from the absence of such an undertaking. It is a further matter that would be open for argument on any application to vary or rescind the orders made.
[50] Ellis J relied on the decision of Dobson J in JJC v Fairfax New Zealand Ltd
and said:20
Lastly, and in relation to the application for an order dispensing with the usual requirement in r 7.54 that an undertaking as to damages in relation to the interim injunction be provided, counsel referred me to the judgment in A v Fairfax NZ Ltd and more particularly to the addendum to that judgment (which is dated the following day) in which Dobson J noted, in circumstances not dissimilar to the present:
“Although it is only likely to be exercised in narrow circumstances, I am satisfied that the Court does have a discretion to dispense with the requirement notwithstanding the apparently mandatory terms of the rules.”
In that case, his Honour was persuaded to dispense with the requirement because the plaintiff did not have the means to honour such an undertaking and the prospect of the media suffering significant damages was relatively remote. In my view, the same factors are at play here.
[51] In that case, an interim injunction was sought to prevent publication of photographs of a six year old boy, whose mother had been killed by his father. The statement of claim pleaded breach of privacy.
[52] It therefore appears from the preponderance of the authorities that an undertaking as to damages, under HCR 7.54, can be dispensed with in appropriate cases – namely, where the respondent is unlikely to suffer significant damages and the plaintiff does not have the means for honouring such an undertaking.
Balance of convenience
[53] Notwithstanding Mr Hughes’ submissions to the contrary, the balance of convenience strongly favours the granting of relief. Failure to grant relief may have the effect of preventing the Cosmopolitan Club from pursuing its arguments in the
substantive proceeding. As there are at least two grounds of argument advanced by
the Cosmopolitan Club that raise serious questions to be tried it would be inappropriate to effectively deny the Cosmopolitan Club the opportunity to have its arguments fully and properly tested.
Overall interests of justice
[54] This litigation is generating considerable anxiety in Palmerston North. The dispute was described as being “like a cancer on the community” by Mr Maasen, counsel for the Cosmopolitan Club. Very serious allegations have been made about the conduct and motives of those who are seen to be the driving forces behind the positions taken by the Squash and Bowls Clubs. The Cosmopolitan Club feels very aggrieved by the conduct of the other two clubs. These issues need to be properly vented, examined and resolved. There is a real risk that may not be done properly unless the status quo is preserved. The Court will do all it can to accommodate a judicial settlement conference as soon as one can be organised by the Court in order to assist the parties to resolve this most unfortunate dispute.
Relief and Conclusion
[55] In the unusual circumstances presented by this case the Court issues an interim injunction preserving the status quo by directing that the Cosmopolitan Club is entitled to continue to occupy its premises without interference from the Squash and Bowls Clubs until further order of this Court on the condition that the Cosmopolitan Club give an undertaking to pay:
(1) rent pursuant to the lease on the premises; and
(2) rent on the carpark pursuant to the terms of the original licence.
[56] The Court reasons that as the sums involved in relation to the rent are comparatively small no injustice is created by requiring an undertaking that those sums will be paid.
[57] Costs are reserved.
D B Collins J
Solicitors:
Cooper Rapley, Palmerston North for Applicant
Kensington Swan, Auckland for First and Second Respondents
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