Anderson v FM Custodians Limited [2013] NZHC 2423 (17 September 2013)

Last Updated: 17 September 2013

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-001985 [2013] NZHC 2423

UNDER Section 119 of the Residential Tenancies

Act 1986

IN THE MATTER OF an appeal from the decision of the

District Court on 9 April 2013 in CIV-

2012-092-0214

BETWEEN IAN ANDERSON and NORMA ANDERSON Appellants

AND FM CUSTODIANS LIMITED First Respondent

AND GHUZNEE HOLDINGS LIMITED Second Respondent

Hearing: 11 June 2013

[Final Submissions Received on 9 July 2013]

Counsel: D R Bigio and N Taefi for the Appellants

H P Holland for the Respondents

Judgment: 17 September 2013

_{JUDGMENT OF DUFFY J}

This judgment was delivered by Justice Duffy on 17 September 2013 at 1.30 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Counsel: D R Bigio, Auckland

N Taefi, Auckland

_{H P Holland, Auckland}

ANDERSON v FM CUSTODIANS LTD and ANOR [2013] NZHC 2423 [17 September 2013]

[1] The appellants, Mr and Mrs Anderson, who are occupiers of the subject property, are appealing against a District Court decision to uphold a Tenancy Tribunal order for possession that deprives the appellants of their occupancy of the property.

Background

[2] The subject property is a townhouse known as Unit Q of 40 Linnet Place, Mangere (“Unit Q”). Unit Q was the manager’s unit in a retirement housing facility that was known as Culverden Retirement Village (“the village”). This village was run by Culverden Retirement Village Limited (“the company”), of which Mr and Mrs Anderson were the directors.

[3] Planning consent for the village was granted by the Manukau City Council under ss 67 and 72 of the Town and Country Planning Act 1977 on 29 May 1989. According to ss 365(a) and 383 of the Resource Management Act 1991 (the RMA), consents granted under Part 4 of the Town and Country Planning Act are deemed to be a resource consent (in particular, a land use consent) granted under the RMA on the same conditions. Accordingly, the consent can be enforced under s 14 of the RMA. I shall therefore refer to this consent as a resource consent.

[4] On 11 May 1992, the company granted a first registered mortgage over Unit Q to Halliwells Securities Ltd (Halliwells), who transferred the mortgage to FM Custodians Ltd on 5 January 2005. This mortgage was discharged and the company granted a new first mortgage, with FM Custodians Ltd being registered as mortgagee.

[5] On 1 April 2011, the company defaulted under the mortgage and, on

8 November 2011, FM Custodians Ltd requested that Mr and Mrs Anderson pay rent on Unit Q. On 21 June 2012, Unit Q was sold under mortgagee sale by FM Custodians Ltd to Ghuznee Holdings Ltd. Ghuznee Holdings Ltd sought a possession order. However, Mr and Mrs Anderson refused to vacate Unit Q on the basis that they have a deed of life interest dated 30 October 2002 that they entered into with the company. This deed was not registered against the certificate of title,

nor was there a caveat indicating this interest. Thus, there was nothing on the certificate of title to alert Ghuznee Holdings Ltd to the existence of the life interest.

Adjudicator’s decision

[6] There was an initial order of the Tenancy Tribunal (the Tribunal) about whether the Tribunal had jurisdiction to hear this case, but a rehearing was granted on the basis that no notification was given to Mr Anderson. For present purposes, the relevant adjudicator’s decision to consider is the second one, by B Harvey.

[7] The issues before the Tribunal were:

(a) Was the Tribunal’s jurisdiction excluded by s 5(1) of the Residential

Tenancies Act 1986 (“the RT Act”)?

(b) Was there a tenancy agreement between the company and Mr and

Mrs Anderson that binds Ghuznee Holdings Ltd?

(c) Does the Tribunal have jurisdiction under s 65 of the RT Act? (d) Did FM Custodians Ltd consent to the deed of life interest?

[8] As to issue (a), the Tribunal found that because Mr and Mrs Anderson were living in Unit Q and were not residing there in their capacity as managers of the village, Unit Q could be considered as residential premises. Jurisdiction could not be excluded under s 5(1)(l) regarding the Retirement Villages Act 2003 because the village was not registered under the RT Act. Although the resource consent was granted for housing the elderly, together with a manager’s residence, with no approval for residential use of the premises, since the company was placed into liquidation Unit Q has been used only as a private residence. Therefore, the Tribunal concluded that jurisdiction was not excluded by any grounds under s 5(1) of the RT Act.

[9] As to issue (b), the Tribunal found that there was no landlord and tenant relationship between the company and Mr and Mrs Anderson, and that even though

they were paying an administration fee to the company, this was not in the nature of rent.

[10] As to issue (c), s 65 provides for the eviction of anyone who is in the premises otherwise than pursuant to any right of occupation granted by anyone having lawful authority to grant that right. The Adjudicator found that the Tribunal has jurisdiction to inquire into whether the right of occupation granted to Mr and Mrs Anderson had been given by any person having lawful authority to grant that right. He rejected Mr and Mrs Anderson’s contention that this issue should be determined by a Court of general jurisdiction, finding that otherwise the Tribunal would be prohibited from applying s 65.

[11] As to issue (d), the Tribunal found that the evidence established that FM Custodians Ltd was not aware of the existence of the deed, as Mr and Mrs Anderson did not register it against the title, nor lodge a caveat.

[12] For these reasons, the Tribunal declared that it had jurisdiction to hear the application for possession of the premises under s 65 of the RT Act. It declared that Ghuznee Holdings Ltd was granted possession of Unit Q.

District Court’s decision

[13] Mr and Mrs Anderson appealed the Tribunal’s decision to the District Court.

The relevant decision is dated 9 April 2013 by Judge Sharp.

[14] The grounds of appeal were that the Adjudicator erred by finding that the Tribunal had jurisdiction to determine whether the appellants had an enforceable life interest; by deciding that jurisdiction was not excluded under s 5(1) of the RT Act; by determining that the premises occupied by the appellants were residential premises; and by finding that the appellants do not have an enforceable life interest.

[15] Judge Sharp first found that the Tribunal was correct in finding that the premises were residential, as there was clear evidence that at the time of the hearing, the premises were not commercial, because the retirement village was by then

defunct. Even though the resource consent did not provide for residential use other than as a retirement village, the Judge found that the resource consent was irrelevant to the actual use to which the unit was being put.

[16] Judge Sharp briefly dealt with the argument that s 77(5) excludes the Tribunal’s jurisdiction as it does not allow the Tribunal to require the Andersons to incur expenditure in excess of $50,000. The Andersons’ argument was that as a result of losing possession of Unit Q, the Andersons would have to spend at least

$50,000 to obtain replacement accommodation. Judge Sharp considered those consequences to be in no way “required” by the Tribunal, so that this ground of appeal failed.

[17] Judge Sharp then considered the argument that the Tribunal could not consider the question of whether there was an enforceable life interest. She found that although the Tribunal could not create legal rights or obligations, in order for the Tribunal to determine whether a person was entitled to possession of any residential premises, it needs to be able to delve into the evidence to make a finding of law as to whether that person was a squatter, trespasser or somebody occupying pursuant to a right of occupation. The Judge concluded that it cannot be right that the Tribunal may inquire into whether someone is a squatter or a trespasser, but not into the third category of s 65. So this ground of appeal failed.

[18] Judge Sharp finally considered the life interest issue. Judge Sharp found that there was no knowledge or consent of the deed by FM Custodians Ltd. FM Custodians Ltd was therefore able to pass good title to Ghuznee, pursuant to s 105 of the Land Transfer Act 1952, free of unregistered encumbrances.

Grounds of appeal

[19] The appellants identify five grounds of appeal, which they say show that

Judge Sharp erred in law by:

(a) Finding that the Tribunal has jurisdiction to determine whether the appellants have an enforceable life interest in Unit Q;

(b) Finding that the premises are residential premises in terms of the RT Act in circumstances where the second respondent’s intended use of the premises as residential is unlawful in terms of its resource consent;

(c) Finding that the resource consent in respect of the premises is irrelevant to the actual use to which the unit was being put at the time of the hearing;

(d) Finding that even if the deed of life interest had been effective initially, the Tribunal’s decision in relation to the mortgagees not consenting to it could stand on its own; and

(e) Failing to consider that the first respondent could be bound by a prior

mortgagee’s consent to the appellants’ life interest.

Appellants’ submissions

[20] Mr and Mrs Anderson first argue that under s 65 of the RT Act, the Tribunal does not have jurisdiction to determine whether or not they have a valid life interest, as the Tribunal has no expertise in this area. They submit that s 65 cannot be used where the issue is not whether the right of occupation was granted by a person with lawful authority to do so, but is whether the life interest deed is enforceable against a third party.

[21] Mr and Mrs Anderson then refer to the resource consent for Unit Q, which provides for the use of the property as “housing for the elderly development together with a communal recreation building and manager’s residence”. They argue that the resource consent for Unit Q is not only indicative of the nature and intended use of the property, but that it restricts the use to which the premises can lawfully be put. The respondents cannot lawfully use this property as a residential rental property.

[22] Mr and Mrs Anderson further submit that Judge Sharp made an error in law by relying on s 105 of the Land Transfer Act when the provision under which the

respondents applied for relief was s 65. In this submission, the appellants refer to the fact that Halliwells had consented to the deed of life interest.

Respondents’ submissions

[23] The respondents submit that under the definition of “residential premises” in the RT Act, it is the actual use of the premises as a place of residence that matters, rather than what the resource consent says.

[24] The respondents argue that whether the Tribunal and the District Court were right or wrong to find that Halliwells had consented to the life interest is not relevant because the relevant mortgage was with FM Custodians Ltd. Relying on the Supreme Court’s decision in Cashmere Capital v Carroll [2010] NZSC 123, [2010]

1 NZLR 577, they contend that the appellants have failed to establish that the mortgagee consented to the unregistered life interest in Unit Q, so, under s 105 of the Land Transfer Act, any such interest that might exist is not binding on them. They also contend that in any event, the question of the whether there was consent to the unregistered life interest is a factual issue that should not be dealt with in the appeal to this Court.

[25] Finally, the respondents submit that ground of appeal (e) is misguided, as the prior mortgagee’s consent is irrelevant, given that FM Custodians Ltd took out a fresh mortgage. It is only FM Custodians Ltd’s consent that is relevant.

[26] The respondents make other points in response to the appellants’ submissions. In particular, they say that s 65 was not just enacted for the benefit of tenants. Also, the Tribunal has the expertise to interpret its own Act, including s 65. There is no reason for it to decline jurisdiction just because someone asserts a lawful right to occupy.

Additional submissions

[27] As a result of questions during an exchange between bench and bar, the respondents were given leave to file further submissions, and the appellants had the

opportunity to respond to those. Those submissions were made: (a) to address case law that the respondents had already referred to, but did not have copies of in Court; and (b) to address the relevance of the Human Rights Act 1993 and the bar it places on discrimination on the ground of age in relation to the argument that Unit Q was a residential tenancy subject to the RT Act. The concern here was that s 12 of the RT Act declares discrimination, as defined in the Human Rights Act, to be an unlawful act.

[28] The resource consent for the village, which includes Unit Q, restricts occupation to persons over the age of 55 years. This means that if the unit it to be occupied in conformity with the resource consent, it cannot be let to anyone under the age of 55 years, and all occupants must be above that age. Consequently, potential tenants under this age, including persons with children, would be excluded. This seemed to me to suggest that the legal restrictions on the use of all units in the village might place them outside the jurisdiction of the RT Act, otherwise their tenanted occupation would necessarily lead either to breaches of s 12 of that Act or the resource consent. I will return to this point later in the judgment.

[29] As it happens, the parties now dispute whether they have strayed beyond the permitted boundaries of the opportunity to file further submissions. My concern was to ensure that, as a matter of procedural fairness, they had an opportunity to address an issue that troubled me. I see no need to rule on the issue of whether the additional submissions go beyond this as, insofar as they might, it will not be germane to my decision.

Approach to appeal

[30] This appeal was brought under s 119 of the RT Act, which states:

119 Appeal on questions of law to High Court

(1) Any party to an appeal under section 117 of this Act who is dissatisfied with the decision of the District Court Judge as being erroneous in point of law may appeal to the High Court on that question of law.

(2) Every appeal under this section shall be dealt with in accordance with the High Court Rules.

[31] It is clear from the wording of this section that this Court can only be concerned with questions of law, so the approach identified in Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 does not apply. The later reference in s 119(2) to the application of the High Court Rules, which would include the rule in Part 20 that appeals to this Court are to be by way of rehearing, cannot override the clear language of s 119(1). The procedural rules on appeals to this Court must be tailored to meet the clear language of s 119(1).

[32] For an appeal on a question of law, the approach is that which was applied in Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721 at [24]- [27], and later confirmed in Vodafone New Zealand Ltd v Telecom New Zealand Ltd [2011] NZSC 138, [2012] 3 NZLR 153 at [5]- [55]. In short, this Court is not to substitute its own views for that of the lower Court; instead the Court must consider whether the decisions under appeal reveal a misinterpretation and/or misapplication of the statutory powers in the RT Act, and if not, whether what has been decided is so misconceived that it is an unlawful decision: see Vodafone New Zealand Ltd at [50]. The respondents have argued that a substantial part of the appellants’ argument relies on allegations of factual errors in the decisions below. The respondents are correct that, unlike with general appeals, the right of appeal in this case does not allow argument based on factual error. However, as was recognised in Vodafone New Zealand Ltd and in Bryson, there are the rare occasions where “an ultimate conclusion of a fact finding body can sometimes be so insupportable – so clearly untenable – as to amount to an error of law, because proper application of the law requires a different answer”: see Vodafone New Zealand Ltd at [52]. The Supreme Court drew these principles from the well known case of Edwards (Inspector of Taxes) v Bairstow [1955] UKHL 3; [1956] AC 14 (HL) where the House of Lords set out the limited circumstances in which an appellant on an appeal on a point of law could raise questions challenging a decision-maker’s findings of fact. These were (at [52] of Vodafone New Zealand Ltd):

a state of affairs “in which there is no evidence to support the determination”, or “one in which the evidence is inconsistent with and contradictory of the determination”, or “one in which the true and only reasonable conclusion contradicts the determination”.

[33] However, the Supreme Court in Vodafone New Zealand Ltd recognised that a court should be slow to reach the view that the decision under appeal is based on an untenable conclusion on the facts (at [53]):

Some caution is, however, required of the appeal court in assessing whether the decision-maker has reached an untenable conclusion on the facts. In Bryson this Court took notice of the observation by Lord Donaldson MR in Piggott Brothers & Co Ltd v Jackson [[1992] ICR 85 (CA) at 92] that:

It does not matter whether, with whatever degree of certainty, the appellate court considers it would have reached a different conclusion. What matters is whether the decision under appeal was a permissible option.

[34] Thus, while the bar is set high, it is possible to challenge factual findings that come within the limited range of circumstances where this has been permitted.

Discussion

[35] Grounds of appeal one, two and three raise legal questions that go to the jurisdiction of the Tribunal. The key question in relation to all three grounds is whether Unit Q can properly be characterised as “residential premises” under the RT Act, because if it cannot, that Act has no application. This means that the Tribunal would have no jurisdiction to make a possession order under s 65.

[36] However, ground of appeal one can be viewed as doing no more than to raise a question about whether the Tribunal has jurisdiction to determine if the interest of a party before it amounts to a residential life tenancy, which is a more general question of law that incorporates part of the appellants’ argument. I propose to approach ground one in this way. This leaves the question of whether Unit Q is a residential tenancy to be dealt with as part of ground of appeal two. As the question of the effect, if any, that the resource consent has on the status of Unit Q as residential premises arises under grounds two and three, I shall deal with these grounds together. Grounds four and five overlap each other and, for this reason, I will deal with them together as well.

Ground of appeal one

[37] The question under this ground, then, is whether it was an error for the District Court to find that the Tribunal has jurisdiction to determine whether the appellants have an enforceable life interest in Unit Q? A life interest in land can be characterised as a fixed term tenancy. In Ziki Investments (Properties) Ltd v McDonald [2008] 3 NZLR 417 (HC), Asher J found that a life interest in a dwelling- house that was not registered under s 115 of the Land Transfer Act came within the definition of a fixed term tenancy under the RT Act, and so the Tribunal had jurisdiction to make determinations regarding that tenancy. I find the reasoning of Asher J in this regard persuasive, and concur with it.

[38] It follows that when a party resisting the application of s 65(1) asserts that no possession order should be made because it has an unregistered life interest in the subject residential property, the Tribunal has jurisdiction to determine if the claimed interest is a fixed term tenancy. Depending on whether the Tribunal finds the claimed interest to be a fixed term tenancy that is either current or extinguished, it may in the latter case go on to make the order.

[39] I am satisfied that, in principle, once the appellants alleged they held a life interest in Unit Q, this of itself could not exclude the Tribunal’s jurisdiction to determine if there were grounds for making an order under s 65. Section 77 gives the Tribunal a broad jurisdiction, which includes the authority to examine if the nature of the appellants’ interest was a fixed term tenancy of residential premises. A decision-making body like the Tribunal will always have the authority to determine if the matter before it properly comes within its jurisdiction.

[40] As it turned out, the Tribunal decided that the particular interest that the appellants held under the deed of life interest could not be characterised as a fixed term tenancy in terms of the RT Act because such tenancies entailed payment of rent, and under the deed of life interest, there was no obligation on the appellants to pay rent. The definitions of “fixed term tenancy” and “tenancy” in s 2 of the RT Act make this clear. Whilst “rent” has a broad definition in s 2, the Tribunal found that it

did not extend to cover payment of what was no more than an administration fee of

$75 per week for outgoings and services listed in the second schedule to the deed.

[41] I agree with the Tribunal that the service fee could not be construed as rent. The services and outgoings the company was required to provide under the deed would not have been less than $75 per week, and so the payment of $75 was in the nature of a contribution to actual costs, rather than consideration that was paid in return for enjoying the right to occupy Unit Q. Thus, whatever else the appellants’ life interest might be, it is not a fixed term tenancy under the RT Act.

[42] It follows that on ground of appeal one, I find there was no error of law.

Grounds of appeal two and three

[43] The Tribunal and the District Court characterised Unit Q as residential premises on two bases: (a) because the second respondents intend to let Unit Q as residential premises; and (b) because Unit Q is presently being used as residential premises by the appellants. Grounds of appeal two and three cover both bases. Ground of appeal two queries whether it was an error to find that the premises are residential premises under the RT Act in circumstances where the second respondent’s intended use of the premises as residential is unlawful in terms of its resource consent. Ground of appeal three queries whether the resource consent in respect of the premises is irrelevant to the actual use to which the unit was being put at the time of the hearing. Both the Tribunal and the District Court viewed the resource consent restricting the age of the occupants and potential occupants of the premises as having no effect on the status of the premises under the RT Act. The key issue here is the effect, if any, that the resource consent has on whether Unit Q can be characterised as “residential premises” under the RT Act.

[44] The Tribunal can only make possession orders for residential premises. Its authority to make these orders is to be found in s 65:

65 Eviction of squatters

(1) Where, on the application of any person entitled to possession of any residential premises, the Tribunal is satisfied that any other person is

in possession of the premises as a squatter or trespasser, or otherwise than pursuant to any right of occupation granted to that person by any person having lawful authority to grant that right to that other person, the Tribunal shall make a possession order granting possession of the premises to the applicant.

(2) Nothing in subsection (1) of this section shall limit or affect the provisions of the Trespass Act 1980, or any other remedy that may be available to the person lawfully entitled to possession of the premises.

(3) To avoid doubt, the Tribunal has jurisdiction under this section even though the premises are not subject to a tenancy agreement.

(emphasis added)

[45] Secondary to the question of whether Unit Q is within the RT Act’s jurisdiction is the question of whether the appellants are in possession of Unit Q through a right of occupation granted by someone with lawful authority to make such a grant. The answer to this latter question will be determined by whether the respondents are bound by the unregistered life interest that the appellants claim. Accordingly, I will deal with the latter question when I make determinations on grounds of appeal four and five.

[46] The appellants’ argument in relation to grounds of appeal two and three hinges on the contention that they occupy non-residential premises under a lawful and enforceable deed of life interest. The respondents’ counter-argument is that the appellants are persons in possession of residential premises otherwise than pursuant to any right of occupation granted to them by a person having lawful authority to make that grant.

[47] I have been unable to find any authority on the question of whether premises that are part of a defunct unregistered retirement village, and which are the subject of a deed of life interest can be characterised as “residential premises” for the purposes of the RT Act. Cashmere Capital Ltd v Carroll is a case with similar circumstances: an unregistered village was unable to meet its mortgage payments and the mortgagee had taken possession of the secured realty. The mortgagee sought vacant possession of the security. The occupants of the retirement village, who held lifetime rights of occupancy of their individual units from the now defunct operate of the retirement village, claimed that the mortgagee was obliged to recognise their interests. The

Supreme Court determined the competing claims by reference to s 105 of the Land Transfer Act. Nowhere in the judgment, or in those of the lower courts is there anything to suggest that s 65 of the RT Act was thought to be applicable. It may be that the application of that Act never came to anyone’s mind but, on the other hand, perhaps the unavailability of that Act to the task at hand was recognised by all.

[48] To see whether the RT Act does apply to circumstances like the present requires an assessment of this scheme and purpose. In this regard, the provisions that might be understood to draw Unit Q within the scope of that Act need to take their “meaning from the relevant context and purposes of the Act”: see Vu v Ministry of Fisheries [2010] NZSC 162, [2011] 3 NZLR 1 at [10].

[49] According to s 2(1) of the RT Act, “residential premises means any premises used or intended for occupation by any person as a place of residence”. “[C]ommercial premises” are defined as premises that are not residential premises. Section 2 does not identify any other type of premises. In cases where premises have both residential and commercial uses, s 2(3) provides:

For the purposes of this Act, where any premises that are subject to a legal or an equitable lease are used for both commercial and residential purposes, the premises shall be deemed to be residential premises unless it is proved that the premises were let principally for purposes other than residential purposes.

[50] Section 4 provides that the RT Act is generally to apply to every tenancy for residential purposes except as specifically provided. Section 5 excludes from the RT Act’s cover a series of expressly defined arrangements that include occupancy. None of the s 5 exclusions apply here.

[51] Section 77 gives the Tribunal the jurisdiction to determine if any premises are

“residential premises”.

[52] The disputed relationship here is between the mortgagee/transferee of the mortgagee sale and the appellants, which only arose after the company defaulted on the mortgage. After that, the retirement village became defunct and by the time of the proceedings, the only use that was being made of the land was the appellants using Unit Q as a residence. Practically speaking, this fits the definition of

“residential premises” in s 2, as does the intention of the second respondent to let Unit Q and the other units in the village as residential premises. However, this literal interpretation of “residential premises” would lead to a troubling conundrum.

[53] The resource consent requires that none of the units in the village be occupied by persons under the age of 55 years. The age restriction was originally proposed to be registered as a restricted covenant on the certificates of titles of the unit titles associated with the village. That does not seem to have occurred. The title for Unit Q does not record a restrictive covenant. I have not seen copies of the other certificates of title for the other units. However, everyone accepted at the hearing that the resource consent imposing the age requirement exists. It is referred to in a valuer’s report that was in evidence before the Tribunal and the District Court. The application for resource consent dated 25 October 1988 that was made to the Manukau City Council was made on the basis that occupancy would be restricted to persons aged 55 years and over was in evidence, as was that Council’s grant of consent dated 29 May 1989, which I was told incorporated the terms of the application. The strongest evidence of the age restriction imposed by the consent is to be found in a letter from the Auckland Council, dated 6 May 2013, which makes it clear that the resource consent condition imposing the age restriction is still in force. Furthermore, the letter states that occupants of the units who were aged under 55 years have been required to vacate the units. The letter goes on to record that some of the affected tenants have found difficulty obtaining alternative accommodation. Neither the Tribunal nor the District Court made any finding in relation to the resource consent as they each found it to be irrelevant.

[54] The appellants are over 55 years, so at the moment their occupation does not breach the resource consent. However, in principal, the only way that the units, including Unit Q, can be lawfully occupied in terms of the resource consent is if persons under the age of 55 years are excluded. Yet to exclude persons on that ground would be a clear breach of s 12 of the RT Act, which prohibits discrimination on the grounds set out in the Human Rights Act 1993, one of which includes the age of the tenants or potential tenants (see ss 21(i) and 53 of that Act). Section 12(1) of the RT Act deems such discrimination to be an unlawful act. Section 109 provides for the consequences of the commission of acts that the RT Act deems unlawful.

[55] The Auckland Council letter of 6 May 2013 evidences the practical outcome already of discrimination in contravention of s 12, namely that occupants under the age of 55 have been required to vacate units at the village. The use of the units in the village for general residential purposes has struck at a fundamental tenet of the RT Act, which in part serves as a protection against discrimination. Indeed, the discrimination against the age of the occupants of residential units existed in this Act’s predecessor, the Rent Appeal Act 1973, s 24 of which made it an offence to refuse to let residential premises on the ground that they would be occupied by children. Parliament has thus shown a long-standing abhorrence of discrimination of tenants on the grounds of age.

[56] The appellants occupy what was the manager’s unit. There is nothing in the resource consent to suggest that the manager of the village also had to be under the age of 55 years, and I find it hard to see how the occupancy of that unit would also initially have been subject to an age restriction. However, once the unit ceased to be occupied by the manager of the village, I can see no reason why it would not also become subject to the same age restrictions as the other units in the village when it comes to their general occupation. In this regard, I read the evidence relating to the age restriction in the resource consent as applying to all units that were to be occupied by persons other than the manager of the village.

[57] As matters presently stand, I cannot see how Unit Q, or any other unit in the village for that matter can be lawfully used as residential premises by any person and still meet the requirements of the resource consent. This would be a reason for finding that until the resource consent is varied to remove the age restriction, the premises could not be let as residential premises. However, the fact remains that the appellants are already occupants of Unit Q. The respondents want to remove them. They have chosen to rely on the Residential Tenancies Act to achieve this end. However, should a unit in a defunct retirement village be viewed as residential premises simply to provide the basis for authority under s 65?

[58] I have trouble seeing Unit Q as residential premises that come under the RT Act for the purposes of s 65 when, in principle, the residential occupation of those premises must either breach s 12 or the resource consent. I do not see the age

of the present occupants, who are aged over 55 years old, as offering any solution because to rely on this factor would mean that whether the premises were seen as residential or not rested on no more than the age of the current occupants. I consider that more than this is required. Furthermore, such an approach does not assist with answering ground of appeal two, which is based on the second respondent’s intended use of the premises bringing them within the meaning of “residential premises” in s 2.

[59] The respondents are not without other remedies. Section 105 of the Land Transfer Act provides that in the context of a mortgagee sale, mortgagee and the purchaser take clear title free of any estates or interests other than those contained in instruments having priority over the mortgage, or to which the mortgagee is bound by reason of having giving his consent. Thus, the respondents could bring proceedings in this Court for possession of Unit Q.

[60] At the core of the questions raised by these two grounds of appeal is the question of whether the definition of “residential premises” in s 2 should be read literally to mean any premises that are in fact used or intended to be used by any person as residential, notwithstanding any law to the contrary, or whether the purpose of the legislation is better achieved by adopting a constrained meaning of “residential premises” that requires the use or intended use of such premises to be otherwise lawful. On the latter view, because Unit Q could not be lawfully occupied by any person as a residence, but only by persons over 55 years of age, it would fall outside the definition of residential premises in s 2. This would mean the Tribunal had no jurisdiction to make the orders under s 65. The respondents would have to bring proceedings in this Court relying on s 105 of the Land Transfer Act to regain possession of Unit Q.

[61] The long title of the Residential Tenancies Act shows that it was intended “to reform and restate the law relating to residential tenancies, to define the rights and obligations of landlords and tenants of residential properties, to establish a tribunal to determine expeditiously disputes arising between landlords and tenants ...”. In Ziki Investments, at [52], Asher J referred to the RT Act’s long title as reflecting:

... the intention expressed by the Minister of Housing when introducing the Bill that it would replace the “law of the jungle in tenancy relations with firm, fair, and readily enforceable rules governing the behaviour of both parties. It clearly defines the rights and responsibilities both of landlords and of tenants.”: (1985) New Zealand Parliamentary Debates 6896 (Hon PB Goff).

[62] At [53], Asher J referred to an earlier decision of this Court in Anquetil v

North Canterbury Nassella Tussock Board HC Christchurch AP93/89, 30 October

1989, in which the view was expressed that the RT Act was designed to protect tenants, although Asher J considered that it served a dual purpose of protecting both landlord and tenant:

The purpose of the Act was also considered in Anquetil v North Canterbury Nassella Tussock Board HC CHCH AP93/89 30 October 1989, where Holland J stated:

There cannot be the slightest doubt that the Residential Tenancies Act was designed substantially to protect tenants and any cases of ambiguity should be interpreted in that light.

With respect to that view, I consider it is clear that the drafters of the Act sought to protect both the landlord and the tenant by fair and readily enforceable rules, and not just the tenant. The Court should strive to find a solution that is fair to both a reasonable landlord and a reasonable tenant, rather than to the tenant alone.

[63] Then at [54], Asher J drew support for his view of the RT Act’s scheme and purpose from the presence of s 85, which, particularly at s 85(1), eschews a formalistic approach to the application of the RT Act’s provisions:

85 Manner in which jurisdiction is to be exercised

(1) Subject to the provisions of this Act and of any regulations made under this Act, the Tribunal shall exercise its jurisdiction in a manner that is most likely to ensure the fair and expeditious resolution of disputes between landlords and tenants of residential premises to which this Act applies.

(2) The Tribunal shall determine each dispute according to the general principles of the law relating to the matter and the substantial merits and justice of the case, but shall not be bound to give effect to strict legal rights or obligations or to legal forms or technicalities.

(emphasis added)

[64] Against this background, I consider that the question of whether the RT Act should be interpreted as only applying to residential premises that can be lawfully

used as such by any person is finely balanced. On the one hand, legislation which seeks to find fair and reasonable solutions for tenants and landlords should be interpreted in a way that best meets that objective. Thus, to remove its application from circumstances where a tenant is unfortunate enough to find himself or herself occupying premises that should not be used for a residential purpose under some other law may deprive someone in need of the assistance and protection that the RT Act is intended to provide. Seen in this light, there is much to be said for finding that the RT Act should apply to any premises that are factually used or intended to be used for a residential purpose.

[65] On the other hand, a literal interpretation of “residential premises” would invoke the full application of the RT Act, as it is hard to see how the RT Act could be understood to apply in some respects but not in others. Thus, this interpretation would give a measure of legitimacy to letting arrangements and transactions that are illegal under other enactments. It would allow landlords who let premises as residential in contravention of other enactments, such as the Resource Management Act, to be able to use remedies provided by the RT Act against those tenants. It would also mean that if any of the former tenants in the village, who were given notice terminating their tenancies on the ground they were under 55 years old (see [53] and [55]), had complained to the Tribunal that this amounted to age discrimination under s 12, the Tribunal would have either had to rule against this discrimination in the face of the Council’s requirement for compliance with the resource consent, or to tolerate this breach of s 12. These unsatisfactory outcomes demonstrate how unworkable it would be if the RT Act were to be interpreted in a way that saw it being applied to any situation where premises were factually in use as residential premises and no regard was paid to their legally permitted use.

[66] If the meaning of “residential premises” is read in a way that requires the use of such premises to be lawful in terms of not contravening other enactments that preclude their use for residential purposes, the overall purposes and policy objectives of the RT Act remain intact. There is no prospect of landlords seeking to use the provisions of this Act in circumstances where the subject premises are not a permitted residential use. It needs to be remembered that there is usually good reason why premises do not meet consent standards for residential use. In this case

for example, the application for resource consent noted that there was a “limited amount of outdoor courtyard space”, and went on to note the age restriction and the use of the units as a retirement village, which presumably meant that persons of the target age group had no need of the requisite amount of outdoor space required for general residential use. In other cases, the buildings themselves may not comply with the building standards for residential buildings (for example, if redundant warehouses or offices were to be used for residential purposes). I see no reason why persons who let buildings that cannot lawfully be used for residential accommodation should be able to rely on the RT Act. Indeed, I think such outcomes would be inimical to the purpose and policy of this legislation.

[67] There is no risk that constraining the scope of the RT Act would create a group of essentially second-class tenancies, by reason of falling outside the cover of this Act. Section 137 provides for prohibited transactions in a broad way. It prohibits transactions that have the effect, either directly or indirectly, of defeating, evading, or preventing the operation of any of the provisions of the RT Act, and provides remedies for recovery of money paid under such transactions:

137 Prohibited transactions

(1) No person shall—

(a) Enter into any transaction, or make any contract or arrangement, purporting to do, whether presently or at some future time or upon the happening of any event or contingency, anything that contravenes or will contravene any of the provisions of this Act; or

(b) Enter into any transaction or make any contract or arrangement, whether orally or in writing, or do anything, for the purpose of or having the effect of, in any way, whether directly or indirectly, defeating, evading, or preventing the operation of any of the provisions of this Act.

(2) Requiring any person to enter into any transaction, or to make any contract or arrangement, in contravention of subsection (1) of this section is hereby declared to be an unlawful act.

(3) Subject to subsection (4) of this section, any provision of any transaction, contract, or arrangement entered into in contravention of subsection (1) of this section that would have the effect of, in any way, whether directly or indirectly, defeating, evading, or preventing the operation of any of the provisions of this Act shall be of no effect.

(4) All money paid and the value of any other consideration for the tenancy provided by the tenant (not being rent lawfully recoverable by the landlord) or, where the transaction takes the form of an option to purchase the premises to which the transaction relates, by the person on whom the option to purchase is conferred, shall be recoverable as a debt due to the tenant or prospective purchaser by the landlord.

[68] I consider, therefore, that the answer to concerns about the prospect of residential tenancies for premises that cannot lawfully be used as such occurring outside the cover of the RT Act is that, under ss 137(1) and (3) they would be likely to be viewed as an arrangement that either directly or indirectly had the effect of defeating, evading or preventing the operation of the RT Act. Therefore, they would be prohibited by s 137, and so the full range of penalties and powers in s 137 would be available to stop such arrangements.

[69] I am satisfied, therefore, that the purposes and policy of the RT Act will not be jeopardised by reading the definition of “residential premises” in a way that recognises the influence the resource consent in this case has on the use of the subject premises. I also consider that this interpretation is consistent with the general public interest of ensuring that illegal conduct is not profitable.

[70] For all of the above reasons, I find that the context and purpose of the RT Act requires the meaning of residential premises in ss 2 and 65 to be read as referring to premises that may be lawfully used for residential purposes by any person. Section

65 in my view was never intended to provide a remedy for persons in the position of the respondents to remove the occupants of a unit in a defunct retirement village.

[71] The respondents referred me to case law where this Court had considered attempts to resist the exercise of either s 65 of the RT Act, or the provisions of the Land Transfer Act entitling either a mortgagee or bona fide purchaser for value to take possession of land. In Chmielowski v Fort Braggs Properties Limited HC Auckland CIV-2005-404-4618, 15 December 2005, the plaintiff argued that s 65 of the RT Act was trumped by the Treaty of Waitangi and Māori customary law. Similar reliance on the Treaty of Waitangi and Māori customary law was advanced in Rewi v Hannah HC Whangarei CIV-2009-488-501, 13 August 2009 as a bar to a purchaser of non-residential land exercising his rights to possession under the

Land Transfer Act. These cases are distinguishable from the present case as unlike here, they did not involve the Court being asked to resolve a potential conflict between two enactments of equal status in the legislative hierarchy. I have also considered the excerpts from the texts on land law and on residential tenancies to which the respondents referred me. None of them deal with the issue of concern in this case. I considered Kahi v Lucas [1996] BCL 1235, 23 September 1996, and Main v Main [2007] NZCA 306, which are authorities referred to in

David Grinlinton Residential Tenancies Law and Practice (4th ed, LexisNexis,

Wellington 2012) at 2.7.3(b) with a view to seeing whether in the discussion therein on recognition of mixed use tenancies (residential and commercial) there was any reference to a requirement that the residential use be lawful. There was not. In Kahi, the Court’s description of the premises suggests that the part that was considered to be residential was legally capable of such use. In Main v Main, where the Court of Appeal upheld the finding the premises were not residential, this was based on a factual assessment of their use.

[72] The legal concerns that are addressed in this appeal regarding the proper interpretation of “residential premises” in the RT Act do not appear to have been addressed before. Counsel did not refer me to any case on point and I have been unable to find any.

[73] It follows that in relation to ground of appeal two, I find that the second respondent’s intended use of the premises cannot bring them within the definition of “residential premises” because the resource consent makes it unlawful for any person to use these premises as residential premises. The findings of the Tribunal and the District Court were in error in this regard.

[74] In relation to ground of appeal three, I find that it was an error of law to find that the resource consent was irrelevant to the actual use to which the hearing was being put at the time of the hearing.

Grounds of appeal four and five

[75] Grounds of appeal four and five raise questions about the extent to which a mortgagee in possession, and a purchaser of a mortgagee sale, can be bound by the type of life interest claimed by the appellants when it comes to the exercise of s 65.

[76] The answers to the questions in grounds of appeal two and three dispose of this appeal. However, the resolution of the competing interests of the appellants and the respondents in terms of whether the right legal test was applied in determining the question of whether respondents are bound by the interest the appellants claim in Unit Q is important in itself.

[77] Section 58 of the RT Act provides circumstances where a mortgagee or other person becomes entitled to possession of tenanted residential premises. Section 58(1)(a) provides that the tenancy shall continue, notwithstanding this event; under s 58(1)(b), the mortgagee, or other person is deemed to have acquired the landlord’s interest; and under s 58(1)(c), the mortgagee, or person in possession has the same rights as the landlord had under the tenancy agreement. Section 58(1)(d) provides that in relation to the ability to terminate a fixed term tenancy, the mortgagee, or other person in possession, has the same rights of termination as does a landlord of a periodic tenancy, which is a tenancy of indefinite duration that is terminable by the giving of notice under s 50. This means that unlike the landlord who entered into the fixed term tenancy, a mortgagee, or other person in possession, will not be bound by the full term of the fixed tenancy and can instead end it by giving the requisite period of notice. However, the effect of subsection (d) is counterbalanced by subsection (e), which provides that (d) shall not apply where the mortgagee or other person is bound by the tenancy or consented in writing to its creation.

[78] Section 58(2) provides that subs 1 shall apply, notwithstanding anything to the contrary in the Property Law Act 2007, or the former legislation (where relevant), or the Land Transfer Act

[79] In Ziki Investments, Asher J found that the effect of s 58(2) of the RT Act is to trump the indefeasibility provisions of the Land Transfer Act. Accordingly, when the contest is between a mortgagee, or other person entitled to possession, and a tenant under a fixed term tenancy, the competing interests are to be resolved in accordance with s 58, and not by s 105 of the Land Transfer Act: see [55]-[62] of Ziki Investments. At [56], Asher J said:

On this interpretation, “bound” therefore means “bound” under law or equity, putting to one side the doctrine of indefeasibility of title contained in the Land Transfer Act.

[80] However, in this case, there is no fixed term tenancy, which means that s 58 of the RT Act and the reasoning of Asher J in Ziki Investments are not applicable. There is nothing else in the RT Act that would exclude the operation of s 105 of the Land Transfer Act. Accordingly, I consider that the Tribunal and the District Court were right to assess the competing claims of the parties’ rights in terms of s 105 of the Land Transfer Act when it came to determining the legal consequences of the mortgagee sale. The appellants’ inability to show that they held an instrument having priority over the mortgage, or by reason of the consent of the mortgagee means that under s 105, any rights of occupation that they may have had were extinguished. However, whilst the enquiry under s 105 of the Land Transfer Act was the correct approach because Unit Q is not “residential premises” (for the reasons given in relation to grounds of appeal two and three), the appellants have succeeded in establishing there is an error of law raised in grounds four and five.

General comment

[81] The appellants have succeeded on grounds of appeal two and three. Their success in grounds of appeal four and five follows their success on the earlier grounds of appeal. However, the determination I have made on those grounds of appeal rests on the resource consent restricting the age of the occupants of units in the village. Because this consent was seen as irrelevant in the Tribunal and in the District Court, it was not the subject of careful examination. It may be that the factual position regarding the consent is not as presented to me.

[82] Under r 20.19(1)(b)(i) of the High Court Rules, after hearing an appeal, the

Court may direct the decision-maker to rehear the proceedings.

[83] As I have found in ground of appeal one that the Tribunal has jurisdiction to determine if a claim is within its jurisdiction, it can proceed to hear and determine if the resource consent is as restrictive as the available evidence shows it to be. If it is, that will remove any further prospect of the Tribunal making a possession order under s 65.

[84] For this reason, I propose to deliver this judgment as an interim judgment. In terms of what happens next, I can simply set aside the orders that followed the decisions of the Tribunal and District Court, or, in addition, send the matter back to the Tribunal to be reheard and reconsidered in accordance with the law as I have found it to be. I consider that before I decide which outcome to adopt, the parties should have the opportunity of being heard.

[85] It is appropriate that I refer to an issue that arose in the course of the hearing regarding fresh evidence filed by the appellants. An affidavit sworn on 6 June 2003 by Mr Anderson was filed in this Court for this appeal. The appellants made no written application before the hearing to adduce fresh evidence on appeal. I have not read the affidavit carefully, but the impression I gained from it is that Mr Anderson purported to give evidence which related to the nature of the resource consent. I doubt that he is competent to give evidence on this topic, as it may require an expression of expert opinion. The respondents opposed the Court taking any fresh evidence into account.

[86] I accept that the evidence given by Mr Anderson in his affidavit of 6 June

2013 is objectionable and inadmissible for the reasons I have already referred to. However, in this affidavit, Mr Anderson refers to the letter from the Auckland City Council dated 6 May 2013, which sets out the Council’s views on the application of the resource consent. The letter could not have been produced at the earlier hearings in the Tribunal and the District Court, as it did not then exist. I consider that the letter is in the nature of updating evidence, which the Court on appeal is more likely to admit. It is cogent and material, as it confirms the other

evidence on the effect of the resource consent. Accordingly, I have decided to admit this letter, which is annexed as exhibit “C” to Mr Anderson’s recently filed affidavit; it is the one piece of new evidence that I have taken into account. Apart from this letter, the views I have reached have been based solely on the factual positions as outlined in the decisions of the Tribunal and the District Court, as well as evidence that was before them, which was contained in the two common bundles that were prepared for this appeal.

[87] I direct that the appellants have 15 working days to file submissions on whether or not this matter should be sent back to the Tribunal for rehearing.

[88] The respondents have 15 working days from receipt of the appellants’

submissions to file their submissions in response.

[89] The appellants then have five working days from receipt of the respondents’

submissions to file any submissions in reply.

Result

[90] The appellants have established the existence of an error of law in grounds of appeal two to five.

[91] The parties have leave to file memoranda on costs.

Duffy J