Chandra v Prasad [2014] NZHC 1509 (1 July 2014)

Last Updated: 18 August 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-5152 [2014] NZHC 1509

BETWEEN	SURESH CHANDRA AND SUNITA BEN PATEL Applicants
AND	SNEH PRASAD Respondent
AND	HINDU NIWAS LIMITED Interested Party

Hearing:	30 June 2014
Appearances:	D E Smythe for Applicant J Anderson for Respondent & Interested Party
Judgment:	1 July 2014

_{JUDGMENT OF KEANE J}

This judgment was delivered by me on 1 July 2014 at 5pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Parshotam & Co., Auckland

Patel Nand Legal, Auckland

CHANDRA AND PATEL v PRASAD [2014] NZHC 1509 [1 July 2014]

[1] The Rachna Trust, which serves the purposes of Vinod Kumar, the president of the Hindu Council of New Zealand, and whose trustees are his brother and sister, owns land at Bukem Place, Mangere; a cluster of four addresses, each with its own certificate of title.

[2] All of this land is leased to the Jack’s Trust, under a lease entered into in May

2011, but the Jack’s Trust has only ever had exclusive possession of 10 Bukem Place, where it has a respite centre housing 62 – 70 residents called the Hindu Niwas. The first three year term of the lease will expire on 14 November 2014, and under five rights of renewal the lease could extend until 2029, but the Rachna Trust now seeks an order cancelling the lease on two grounds.

[3] The first ground is that in December 2012 the Rachna Trust gave the Jack’s Trust nine months notice to vacate the ‘buildings’ at 10 Bukem Place, the respite centre, by ‘July/August’ 2013, because it intended to demolish those buildings. By failing to comply with that notice, it contends, the Jack’s Trust is in breach of clause

49.1 of the lease. The second ground is that the Jack’s Trust has only paid rent at the rate applying for the first six months of the lease, $3,200 a week, including GST. In breach of clause 48.1 it has not paid the weekly rate applying since 14 February

2012, $5,200 plus GST. Arrears now exceed $400,000.

[4] The Jack’s Trust opposes the application, contending firstly that the nine month notice to vacate 10 Bukem Place lacks efficacy on two bases. One is that the purported notice given in December 2012 is neither plain nor unambiguous. The other is that the Rachna Trust had agreed not to issue such a notice, or not to rely on such a notice once issued, unless and until it had assisted the Jack’s Trust to find other premises.

[5] Secondly, the Jack’s Trust contends that, despite the letter of the lease, it has never been liable to pay rent above the initial rate, as is evident from the fact that the Rachna Trust did not pursue arrears at the increased rate until 14 October 2013, when it issued a notice to cancel the lease, after the Jack’s Trust denied the efficacy of the nine month notice to vacate. Until then, it contends, the Rachna Trust waived rent at the higher rate or is estopped now from claiming it as arrears.

[6] On these grounds the Jack’s Trust cross applies for relief against cancellation, as does its sub-lessee, Hindu Niwas Limited; and these applications, like the application for possession made by the Rachna Trust to which they respond, must be resolved under the code in the Property Law Act 2006, governing the cancellation of leases. Section 251 confers the ability to make an order for cancellation having

regard to a wide array of factors.¹ Section 256 confers an equally wide ability to

grant relief from cancellation on terms.

[7] There is, however, this difficulty. What orders are proper must be decided having regard to a wide highly detailed body of affidavit evidence, which is untested, in which Mr Kumar and Mr Chavan, especially, differ markedly. I am unable to decide the issues of credibility inherent in that conflict. To decide what orders are proper I can only safely rely on the terms of the lease, set against the contemporary correspondence.

The refusal to vacate ground

[8] In its application for an order cancelling the lease the Rachna Trust relies principally on the Jack’s Trust failure to pay rent. But it also contends that the lease had already expired on 14 September 2013 as a result of a notice to vacate, given under clause 49.1 on 14 December 2012. That is plainly incorrect.

[9] It is certainly implicit in clause 49.1 that the Rachna Trust has the ability to require the Jack’s Trust to vacate any building on the leased land, if the Rachna Trust wished to demolish that building. Clause 49.1 gives the Rachna Trust the ability to serve a notice on the Jack’s Trust with that effect:

The Landlord will give 9 (nine) months, notice to vacate in the event any of the building(s) is going to be demolished.

[10] It is also evident that in his email to Mr Chavan, dated 14 December 2012, Mr Kumar intended to give the Jack’s Trust notice to vacate the respite centre within

_{nine months. He said this:}

¹ Studio X Ltd v Mobil Oil New Zealand Ltd [1996] 2 NZLR 697 (HC); Grant v Hannay & Tapper

HC Auckland CIV-2009-404-007248, 17 March 2010.

Please note that we will require to start to demolish Block B (HN) in July/August. As I mentioned several times about helping you find another premises or business.

As usual still here to help but place will be required by than. Sooner we build, sooner I will be able to build the recreation centre.

[11] The efficacy of that email, and whether it gives the Rachna Trust any basis for an order for cancellation on its present application, however, involves a number of issues, the first of which is whether it did constitute sufficient notice under clause 49.1 On 19 September 2013 Mr Chavan’s solicitors contended that this notice was defective, because amongst other things, it did not give a date to vacate.

[12] A further issue that the Jack’s Trust now raises is whether the notice is inconsistent with an undertaking it had from the Rachna Trust not to issue, or not to rely on, such a notice until it had assisted the Jack’s Trust to relocate. In the 19

September 2013 letter Mr Chavan’s solicitors said that he and Mr Kumar had been discussing where the Jack’s Trust might relocate to. Two possibilities had been identified. The Jack’s Trust was then willing, on that basis, to vacate by 14

November 2014.

[13] At the hearing itself two further issues emerged, the first of which was whether, if the 14 December 2012 email gave effective notice to vacate, the failure by the Jack’s Trust to comply constituted a breach entitling the Rachna Trust to cancel the lease. The notice was to vacate a ‘building’ on one only of the four parcels of land the subject of the lease. The second issue was more immediate.

[14] To apply for an order cancelling the lease under s 244, relying on the Jack’s Trust failure to comply with the notice, the Rachna Trust had first to comply with s 246. It had first to serve on the Jack’s Trust a notice of intention to cancel on that ground, identifying ‘the nature and extent of the breach complained of ’, allowing time for that breach to be remedied.

[15] The notice, which the Rachna Trust served on the Jack’s Trust on 14 October

2013, did not rely on that alleged breach. It was a notice given under s 245(1)(b), for the purpose of an order under that section, for breach of the covenant to pay rent. That is the only basis on which the Rachna Trust is entitled to an order.

The failure to pay rent ground

[16] On the face of the lease, the Jack’s Trust is in breach of its covenant to pay rent. The rent that the Jack’s Trust has paid from the outset, the initial rent, $3,200 including GST, increased after six months. On 14 February 2012 it became $5,200 plus GST. As to that there is and can be no issue. The lease is plain.

[17] I accept also that this initial rent may have been at a concessionary rate to assist Mr Chavan to launch his business and may only enable the Rachna Trust to recoup its overheads for all the land leased; even perhaps only its overheads for the respite centre. But that cannot be decisive. The picture is more complicated.

[18] The respite centre, the Hindu Niwas, was opened on 16 May 2010 and first managed by the Hindi Social Services Foundation, which initially employed Mr Chavan. Within a short space of time, with Mr Kumar’s evident support, Mr Chavan assumed personal control. To enter into the lease he settled the Jack’s Trust. To manage the respite centre he incorporated Hindu Niwas Limited.

[19] Mr Kumar’s then intent appears to have been to ensure that this enterprise was viable. Why then the lease extended to the three other addresses at Bukem Place, beyond the respite centre, is less than clear. Before the lease was entered into, as appears from the correspondence, Mr Kumar envisaged that the initial rent payable was for the respite centre only, and was only to increase to the higher rate on a date when the Jack’s Trust took possession of block D, 30 Bukem Place; a point on which the Jack’s Trust relies in seeking relief.

[20] In the lease, as executed, however, that link ceased to be made and, on the face of it, the Jack’s Trust obtained a right to possession all four properties, but subject to a higher rent after six months. Yet the Jack’s Trust appears never to have enjoyed exclusive possession of the properties beyond the respite centre, or perhaps any possession at all. It is also surprising that after 14 February 2012 the Rachna Trust did not pursue that higher rate until it issued its notice to cancel in October

2013, when the apparent arrears were already extremely high.

[21] It is conceivable, I put it no higher, that at the date of that notice the higher rate had been waived, or the Rachna Trust had become estopped from claiming that higher rate as arrears. As against that, the Rachna Trust may be able to assert that, once the notice was issued, any waiver became spent and any estoppel ceased.

[22] I cannot on this application resolve that issue definitively. Nor do I need to. The Rachna Trust can pursue the Jack’s Trust in debt if it chooses. On the face of the lease document the Jack’s Trust is in breach of its covenant to pay rent and on that basis alone, I consider, the Rachna Trust is entitled to an order for cancellation. But the possibility that there may have been a waiver or an estoppel is relevant to the issue of relief.

Conclusion

[23] The Rachna Trust is, I consider, entitled to an order for possession but, I consider also, the Jack’s Trust, and the sub-lessee Hindu Niwas Limited, are entitled to a measure of relief.

[24] Apart from the issue whether the lease rate is the actual agreed rate, which I cannot resolve, the respite centre residents will have to be re-housed, a concern which the Rachna Trust shares. Conversely, the Rachna Trust is not to be denied possession indefinitely and last year Mr Chavan assured Mr Kumar that the Jack’s Trust only needed to retain possession until the end of the first term of the lease, 14

November 2014.

[25] That date, fortuitously, seems to me to strike a fair balance between the opposed interests of the two trusts. I grant both applications and make an order cancelling the lease as from 14 November 2011 in the formal terms I have settled with counsel. As each party gains and loses something by this order, I make no order

_{as to costs.}

P.J. Keane J