Stylo Medical Services Limited v Hum Hospitality Limited [2014] NZHC 2428 (3 October 2014)

Last Updated: 28 October 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-004995 [2014] NZHC 2428

BETWEEN	STYLO MEDICAL SERVICES LIMITED Applicant
AND	HUM HOSPITALITY LIMITED Respondent

Hearing:	25 September 2014 (via telephone conference)
Counsel:	R O Parmenter for Applicant S L Abdale for Respondent
Judgment:	3 October 2014

_{JUDGMENT OF WHATA J}

This judgment was delivered by me on 3 October 2014 at 3.00 pm, pursuant to Rule 11.5 of the High Court Rules.

STYLO MEDICAL SERVICES LIMITED v HUM HOSPITALITY LIMITED [2014] NZHC 2428 [3 October

2014]

[1] This is the third leg of a long running dispute between Stylo Medical Services Limited (Stylo) and Hum Hospitality Limited (Hum). Hum leased a run down, dilapidated villa from Stylo on an “as it is” basis. Hum covenanted to rejuvenate the villa in exchange for rent abatement for the first three years of the lease. Some of the agreed works were not completed on time. Stylo sought to cancel the lease for breach of the repair covenant. Ellis J found that Hum had breached the covenant, but

granted relief from cancellation.¹ The Judge hoped that the parties might reach some

agreement as to what was required for the completion of the works.

[2] No agreement was reached. A further application for cancellation for breach of the repair covenant was then placed before me.² I found that there is a genuine dispute about the extent of the works undertaken by Hum. I granted relief from cancellation conditional upon the production of a report by a Court appointed expert specifically assessing whether the requisite works had been completed, whether those works had been completed in a workmanlike manner and if not, what was

required to complete them. An expert has been identified.

[3] A further application for cancellation and possession is now before me for non payment of rent. Hum contends that relief from cancellation should be granted because the building’s foundations have never been fit for purpose and the rent should be abated pending the completion of necessary repairs to the foundations by Stylo.

[4] The central issue is whether I should cancel the lease or grant relief from cancellation because of the claim that the building’s foundations were never fit for purpose and against a backdrop where Hum has undertaken substantial works to

_{rejuvenate the building.}

¹ Stylo Medical Services Ltd v Hum Hospitality Ltd [2013] NZHC 2114 [First Cancellation

_Decision].

² Stylo Medical Services Ltd v Hum Hospitality Ltd [2014] NZHC 1587 [Second Cancellation

Decision].

[5] The immediate background to the lease assumes significance in light of Hum’s claim that, contrary to representations made by Stylo’s director, Dr Ooi, the buildings foundations were not fit for purpose.

[6] Stylo purchased the villa in 2008 located at 123 Grafton Road, Auckland. It was in a state of considerable disrepair. Dr Ooi says that $22,000 was spent on repiling and relevelling the building. He also says that Code of Compliance (CoC) “was issued and said it should last for 50 years”. I could not find a copy of the CoC in the morass of paper filed with the applications, but I assume he is referring to a CoC for the repiling. A resource consent to operate a café was also obtained, apparently at a cost of about $30,000. Dr Ooi then avers:

6. .... Based on the original consent too, only building consent is needed which would not take long at all to get as most of the detail has been submitted for the resource consent and I have full support from the heritage counsellor Ian Grant and heritage architect, Antony Matthews. I mention that the resource consent only lasts for 5 years, so we have lost a good part of that period already.

[7] Stylo, it appears, had no further money to repair the villa and went searching for a tenant. Dr Ooi was introduced to Ms Armitage, director and shareholder of Hum. The best evidence of the outcome of their negotiations are the agreements to lease and the executed lease to which I will now turn.

Agreement to lease No. 1

[8] The first agreement to lease contemplated a rent holiday for a period of

28 months, provided that the tenant was liable for all outgoings. Clause 11 stated that the agreement was conditional on the tenant being entirely satisfied in all respects that the property is suitable for the tenant’s intended use. Clause 12 stipulated that before the tenant could commence business, the tenant was required, at the tenant’s cost to complete among other things repair, if necessary, to the exterior of the building and the roof, fit out all floors by painting, flooring and installation of toilet and kitchen, and any other work that in the tenants opinion is necessary for the tenants business use. All work was to be done in a workmanlike manner and in

accordance with the Building Code. Landlord approval for the fitout was required and the work had to be commenced by 1 March 2011 and completed by 1 July 2011.

[9] The agreement to lease also includes a right of first refusal, affording the tenant 10 working days to purchase the property after receipt of notice from the landlord of its intention to sell.

[10] Clause 11 is of central importance. It states:

11.1 This agreement is conditional upon the Tenant being entirely satisfied in all respects (in the Tenant’s sole judgment) the property is suitable for the Tenant’s intended use following the Tenant undertaking a due and diligent investigation of the property including (but not limited to) an investigation of the building structure, resource and building consents requirement from the local authority, feasibility study of the building layout.

11.2 This condition is for the sole benefit of the tenant and may, at any time prior to this agreement being cancelled, be waived by the Tenant giving written notice of waiver to the Landlord.

[11] Clause 12.7 also reads:

12.7 For the sake of clarity the Tenant acknowledges that the premises are currently in a very poor condition. The Landlord leases the premises to the Tenant as it is. The Landlord gives no guarantee as to whether the premises are fit for the business use of the Tenant. The landlord does not warrant the soundness of the structure, the fitout or the services of the premises either. The Tenant will do all the work necessary to make the premises fit for the tenant’s business use and to comply with the requirements of law and local authority. The tenant will not require the Landlord to do any work or contribute to any work that is required for the premises to be used for the tenant’s business use or to comply with the requirements of law or the local authority.

Agreement to lease No. 2 dated 8 December 2010

[12] There is then the second agreement. The due diligence clause (cl 11 in the earlier lease) is deleted, but cl 12 generally repeats the terms of cl 12 of the first agreement. The dates are changed and there is a reference to a schedule listing the details of the work. The right of first refusal is also included.

[13] As I observed in my previous judgment, cl 46.1 provides the rent holiday, though the length of holiday is extended from 28 to 36 months. Clauses 48.1 to 48.7 deal with tenants’ fitout and other work and effectively replicates the second agreement to lease. Given their significance, I include the operative clauses for present purpose here:

48.1 The Landlord agrees to provide the tenant full access to the premises upon this agreement is declared unconditional.

48.2 Before the commencement of the Tenant’s business the tenant shall, at the tenant’s cost complete the following work:

48.2.1 Repaint and repair (if necessary) the exterior of the building;

48.2.2 Repair the roof (if necessary);

48.2.3 Fence around the balcony;

48.2.4 Landscaping.

48.2.5 fitout all floors by painting, flooring, installation of toilet and kitchen.

48.2.6 any other work that at the Tenant’s opinion is necessary for the Tenant’s business use of the premises.

Details of the work are listed in the attached schedule.

48.3 All work shall be done in a workmanlike manner and according to the New Zealand Building Code. If resource consent and/or building consent are required for any work the Tenant shall at the Tenant’s cost obtain the relevant consent before the work starts. The Tenant shall also obtain Code Compliance certificate for any work that building consent is required.

48.4 The tenant must obtain the Landlord written approval for the fitout work and other work at lease 20 working days prior to the commencement of the work. If resource consent or building consent is required for the work the tenant must obtain the landlord’s written consent at least 10 working days before the Tenant submit the application for the consent to the authority. The tenant shall provide the landlord with plans and specifications and other information necessary for the landlord to approve the work. The landlord shall consider the work fairly and reasonably and shall make a decision within 5 working days after receiving the notice and necessary information from the Tenant for the approval.

48.5 The Tenant must commence the renovation of the building by 1

March 2011. The work listed in above 48.2.1 to 48.2.4 in relationship to everything downstairs, landscaping out the front, all external work on the house, front fencing, etc must be completed by 31 December 2011. All other

work in relation to the gardens out the back and inside upstairs must be completed by 31 December 2012. If any of the work is not completed by the time period stated above the landlord may give the Tenant 20 working days notice to complete the work. If the Tenant fails to complete the work within the notice period the Landlord may terminate this agreement or the deed of lease immediately. If this agreement or the deed of lease is so terminated all the work done by the tenant, except kitchen equipments will belong to the landlord. The landlord has no obligation to pay any compensation.

48.6 At the expiry of the lease term or earlier termination of the lease under this agreement or the deed of lease all work and fitout completed other than the kitchen equipment shall be the property of the landlord.

48.7 For the sake of clarity the Tenant acknowledges that the premises are currently in a very poor condition. The Landlord leases the premises to the Tenant as it is. The Landlord gives no guarantee as to whether the premises are fit for the business use of the Tenant. The landlord does not warrant the soundness of the structure, the fitout or the services of the premises either. The Tenant will do all the work necessary to make the premises fit for the tenant’s business use and to comply with the requirements of law and local authority. The tenant will not require the Landlord to do any work or contribute to any work that is required for the premises to be used for the tenant’s business use or to comply with the requirements of law or the local authority.

[14] Clause 49.1 repeats the right of first refusal.

The previous judgments

[15] The two previous judgments³ concern an alleged breach of the covenant to repair at cl 48. Ellis J proceeded on the basis that a breach had been established. By the time the issue got to me, Hum claimed it had completed all necessary works and also highlighted evidence that it had expended about $650,000 in repair costs. Stylo contends that the amount is more in the order of $100,000.

[16] I was not able to reach a firm conclusion of the scale and standard of the works completed by Hum. But I was satisfied that Hum had made a substantial contribution to the repair of the villa noting that even on the evidence for Stylo, there had been almost $100,000 expended by Hum on the improvement of the premises. I therefore granted relief conditional on the production of a report by a Court appointed expert specifically assessing whether the works specified at cl 48.5

_{have been completed, whether those works have been completed in a workmanlike}

³ First Cancellation Decision, above n 1; Second Cancellation Decision, above n 2.

manner, and if not, what is required to complete those works to that standard. I

recorded that this route to a final outcome was suggested by Ms Abdale.

Process

[17] The present application for cancellation was joined to the earlier proceeding before me at the request of the respondent.⁴ Relief from cancellation was sought, there being no dispute that the rent and other outgoings were due. Given the extensive amount of time already expended on the previous applications I resolved that it was not necessary to engage in a full hearing of the present applications, but I afforded an opportunity to the parties to file submissions, and then to speak to them by way of telephone conference. After hearing from counsel, I granted leave to Ms Abdale to provide references concerning Hum’s claim that the building was

never fit for purpose.

Piles not fit for purpose

[18] With the benefit of the references provided by Ms Abdale, I proceed on the basis that the piles were never and are not in fact fit for purpose of the renovation of the villa to a commercial use standard. This is supported by evidence from experienced builders.

[19] I am less clear on whether there were express (mis)representations as to the fitness of the building for use as commercial premises. The evidence on this is scant. Ms Armitage simply observes:

Misrepresentation

12 We cannot use the building commercially because this requires a Building Warrant of Fitness sign-off. Despite a Code of compliance given us for the re-piling and re-leveling of the entire dwelling and assurances that this had been done prior to signing the lease, it has not been done.

13. Despite our hefty investment into the building, commercial activities require Building Warrant of Fitness Sign-off, the current state of the foundations will not allow this. We notified the landlord of his breeches pertaining to standard of work and hidden faults covered

⁴ Stylo Medical Services Ltd v Hum Hospitality Ltd [2014] NZHC 2029 [Consolidation Decision].

over by deficient building work in early 2012 and the faulty foundations were added to the breeches in late 2012. The landlord has failed to respond in anyway to me, except acknowledging the foundational faults by emailing our engineer asking her who she thought was at fault, an attempt to ready his defence. Our engineer forwarded this email to me and it can be found at EXHIBIT F.

“Based on your assessment, does it mean that

a) The Repiler did not do the job properly and

b) The council inspector did not do his job properly.

As you know I am just a consumer and I have paid both the

Auckland Council the Repiler in full.”

[20] I am satisfied however that both parties proceeded on the basis that piling had been undertaken, and to a suitable standard. That is at least implicit from Dr Ooi’s evidence as recorded by me at [6].

The current application

[21] Stylo seeks an order for cancellation on the basis that:

(a) The lessee is the lessee for the landlord under the lease in respect of the premises;

(b) In terms of the lease the lessee was obliged to pay rental at the rate of

$7,250 plus GST per month commencing 1 February 2014;

(c) The lessee paid a deposit to the lessor, which was applied to the full payment of rental for three months to end of 2014;

(d) The lessee has failed to pay rental due on 1 May, 1 June and 1 July

2014;

(e) In terms of covenant 3.1 and the first schedule of the lease, the lessee is obliged to pay certain outgoings in respect of the premises;

(f) The lessee has failed to pay outgoings due under the lease and an insurance levy of $882.50;

(g) A notice under s 245 of the Act dated 30 May 2014 (the “rented notice”) was served on the lessee on 30 May 2014 requiring, inter alia the payment of the May 2014 rental payment ($8,337.50) and costs ($230) within ten working days after service of the notice;

(h) A notice under s 246 of the Act dated 30 May 2014 (“the outgoings notice”) was served on the lessee on 30 May 2014 requiring, inter alia, the payment of the insurance levy of $882.50 and costs ($230) within ten working days after the service of the notice;

(i) The lessee has not complied with the terms of both notices and the landlord is entitled to the orders sought as a consequence;

(j) Interest – covenant 5.1 and the first schedule provide that the lessee must pay interest at 14 per cent per annum on rent and other monies payable under the lease until the date of payment;

(k) Costs – covenant 6.1 provides the lessee should pay the landlord’s costs (as between solicitor and client) of and incidental to the enforcement or attempted enforcement of the landlord’s rights under the lease.

Hum’s opposition

[22] Hum does not dispute that the rental payment for May and other claimed costs have not been made. The alleged breaches of the lease are therefore not disputed. There also no dispute about notice.

[23] Hum, nevertheless, seeks relief from cancellation. Ms Abdale for Hum, in summary, submits:

(a) The leased premises were untenantable at the commencement of the commercial lease, and the landlord required the tenant (under the lease) to invest (by undertaking works) in the properties. In consideration of this investment, the tenant received a three year

rental holiday, a long lease, and a first right of refusal in the event the landlord wished to sell the property.

(b) The parties are currently engaged in a process of assessing the value of the works undertaken by Hum under the lease for the purposes of resolving whether or not relief from cancellation should be granted for breach of the covenant to repair.

(c) It is relevant to whether relief should be granted that the tenants’ investment is somewhere between $100,000 (as estimated by the landlord’s expert) and $650,000 (as assessed by the tenants’ expert).

(d) Hum agreed to relevant covenants of repair in reliance upon the landlord’s pre-contractual representations and a Code of Compliance that the requisite repiling and relevelling of the structural foundations had been carried out prior to the commencement of the commercial lease.

(e) It was later discovered that the repiling and revelling of the structural foundations had not been undertaken by the landlord to a professional standard and consequently they were unsafe and required remedy by undertaking a complete redo.

(f) The defective foundations were causing continuing ongoing damage to the premises as a whole, making them unsafe and so much so that the Council would not issue a building warrant of fitness meaning that the premises could not be used for business use.

(g) The tenant gave notice to the landlord about this fundamental defect frustrating the contract in 2012.

(h) Clause 40.1 of the lease provides:

A party to this lease shall not be entitled to cancel this lease if, with full knowledge of any repudiation or

misrepresentation or breach of covenant, that party affirmed this lease.

(i) Accordingly, Stylo should not be allowed to cancel the lease given the misrepresentations as to the state of the foundations.

(j) The lease cannot be considered without taking into account pre- contractual representations made by the landlord that induced the tenant to enter the lease. It says that without receiving the landlord’s assurances as to structural matters the tenant would not otherwise have agreed to enter into a lease, with clauses such as cl 48.7 (which I address below at [26]).

Jurisdiction

[24] The Court’s discretion under s 253 of the Property Law Act 2007 (PLA) to grant relief from cancellation is wide but not unfettered. There must be a clearly unjust factor demanding relief. The observations of Hammond J in Studio X v Mobil Oil New Zealand Ltd⁵ provide a helpful frame for assessment and involving, in general terms, assessment of the following factors:⁶

(a) The nature, form and gravity of the breach (though breach of an essential term is not by itself a disqualifying reason);

(b) The conduct of the tenant; (c) The conduct of the landlord;

(d) The ability of the tenant to remedy the breach or breaches;

(e) Proportionality or fairness as between the parties – the outcome should not be disproportionate to the breach or the loss suffered.⁷

⁵ _{Studio X Ltd v Mobil Oil New Zealand Ltd [1996] 2 NZLR 697 (HC).}

⁶ _{At 701.}

⁷ I employed a similar framework in my decision in The Three Sisters Vineyard Ltd v Storey

[2014] NZHC 471, (2014) 15 NZCPR 1.

[25] In cases concerning non payment of rent, relief is likely to be granted if arrears are paid, though subject to such conditions as the Court thinks fit.⁸ It will, however, be a rare case where case where relief against forfeiture is given without rent being paid up or at least secured.⁹

Assessment

Misrepresentation?

[26] Assuming for present purposes that representations as to the quality of the foundations were made, the assumptions of the parties were subsequently expressed in unequivocal terms within the agreements to lease and then lease document itself. That is:

(a) The first agreement to lease contained a comprehensive due diligence clause (albeit for the benefit of the tenant) and an “as it is” clause.

(b) The second agreement to lease retained the “as it is” clause.

(c) Clause 48.7 of the lease then incorporates the same clause. Given its significance, it is worth repeating:

For the sake of clarity the Tenant acknowledges that the premises are currently in a very poor condition. The Landlord leases the premises to the Tenant as it is. The Landlord gives no guarantee as to whether the premises are fit for the business use of the Tenant. The landlord does not warrant the soundness of the structure, the fitout or the services of the premises either. The Tenant will do all the work necessary to make the premises fit for the tenant’s business use and to comply with the requirements of law and local authority. The tenant will not require the Landlord to do any work or contribute to any work that is required for the premises to be used for the tenant’s business use or to comply with the requirements of law or the local authority.

[27] I am unable to reconcile this background, including clause 48.7 with Stylo’s

_{purported reliance on pre-lease representations by Stylo as to fitness of the building.}

⁸ _{Muholland v Waimarie Industries Ltd [2009] NZHC 554; (2009) 10 NZCPR 590 (HC).}

9. T Bennion, D Brown, R Thoman, E Toomey New Zealand Land Law (2^nd ed, Thomson Reuters, Wellington, 2009) at 655, citing Andrew v Horner HC Wellington M459/95, 16 November 1995.

Quite plainly Stylo sought to shift the risk that the premises were not in fact fit for purpose to Hum. Quite plainly Hum assumed that risk. While it is not necessary for me to decide the point with finality at this juncture, to illustrate the mountain that Hum must climb I draw on the following observation of the Court of Appeal in PAE (New Zealand) Ltd v Brosnahan:¹⁰

The parties were agreeing, in unequivocal terms at PAE’s instigation, that what the directors had said and done before the agreement no longer mattered. Effectively, they drew down the curtain of liability, excluding from it all preceding conduct. By this means, they also broke the chain of causation....

[28] By parity of reasoning, clause 12.7 of the agreement to lease and then clause

48.7 of the lease drew down the curtain of liability for preceding conduct.

[29] Ms Abdale nevertheless seeks to rely on cls 26 and 27 of the lease. Clause 26 states:

Total Destruction

26.1 IF the premises or any portion of the building of which the premises may form part shall be destroyed or so damaged

(a) as to render the premises untenantable then the term shall at once terminate; or

(b) in the reasonable opinion of the Landlord as to require demolition or reconstruction, then the Landlord may within

3 months of the date of damage give the Tenant 20 working

days notice to terminate and a fair proportion of the rent and outgoings shall cease to be payable as from the date of damage.

Any termination pursuant to this clause shall be without prejudice to the rights of either party against the other.

Partial Destruction

27.1 IF the premises or any portion of the building of which the premises may form part shall be damaged but not so as to render the premises untenantable and:

(a) the Landlord’s policy or policies of insurance shall not have been invalidated or payment of the policy moneys refused in consequence of some act or default of the Tenant; and

¹⁰ PAE (New Zealand) Ltd v Brosnahan [2009] NZCA 611, (2010) 9 NZBLC 102,862 at [46].

Refer also the discussion in Overton Holdings Ltd v APN New Zealand Ltd [2014] NZHC 1966 at [75]- [83].

(b) all the necessary permits and consents shall be obtainable:

THEN the Landlord shall with all reasonable speed expend all the insurance moneys received by the Landlord in respect of such damage towards repairing such damage or reinstating the premises and/or the building but the Landlord shall not be liable to expend any sum of money greater than the amount of the insurance money received.

[30] I am unable to accept that these clauses assist Hum. Clause 27.1 is not obviously relevant as it primarily relates to use of insurance moneys, which have no obvious application to damage caused by pre-existing poor foundations. In any event, clauses 26 and 27 must be read consistently with to cl 48.7 and the fundamental premise that “the landlord gives no guarantee as to whether the premises are fit for the business use of the tenant” and the stipulation that “the tenant will not require the landlord to do any work or contribute to any work that is required for the premises to be used for the tenant’s business use or to comply with the requirements of law or the local authority.” Taken together, it is tolerably clear that the destruction or damage referred to at clauses 26 and 27 cannot sensibly relate to damage caused by pre-existing poor state of the building.

[31] I have considered whether cl 48.7 only relates to the building’s structure and not to the building’s foundations. But that requires an unduly nuanced reading of a clause which otherwise plainly warns the tenant that it takes the building “as it is”.

[32] Nor do I consider that cl 40.1 (above at [23](h)) assists Stylo. First, there is a paucity of evidence as to the representations made. Ms Armitage acknowledges that the building was derelict when they took up the lease. Second, whatever was said by Stylo’s agents prior to the lease was (as I have said) overtaken by the explicit disclaimer at cl 48.7. Third, I am not satisfied on the evidence before me that Stylo’s agents had “full knowledge” of the alleged misrepresentation. At best they may have assumed that the piling was code compliant. I am prepared to accept that this could constitute an implied representation of suitability, especially in combination with other facts, such as the agreed commercial use purpose of the lease. But it presents as a weak basis for relief from cancellation for non payment of rent in the face of cl 48.7.

[33] Ms Abdale relies by analogy on the Privy Council decision of Hirst v Vousden.¹¹ In that case the Vousdens went into possession of the premises and remained in possession until they were evicted. But for a substantial part of that period the premises were in such a bad state as to be incapable of commercial use for the whole period. Critically, however, unlike the present case, their Lordships observed:¹²

These misfortunes had not been contemplated by either side when the oral agreement was entered into.

[34] By contrast, the present lease records that the tenant acknowledges that the premises are currently in a very poor condition and that the landlord leases the premises to the tenant “as it is”.

[35] Significantly also the Vousdens were willing to pay any arrears found properly due. In that context the Court of Appeal and then the Privy Council accepted that relief from forfeiture, if needed, would have been granted.

[36] Unfortunately, that is not the case here. I am advised from the bar that there is up to $60,000 in rent now owing. There does not appear to be any immediate prospect that rent will be payable. Rather, Ms Abdale seeks a rent abatement pending the repair of what she describes as damage to the building. But that is an untenable position to adopt in a context where cl 48.7 makes it quite plain that the landlord does not accept responsibility as to the fitness of the building.

Unjust enrichment

[37] The residual issue is whether relief should be granted because of the rejuvenation works undertaken by Hum. I accept that Hum has made substantial improvements to the property. The affidavit evidence points to a concerted effort to bring the grand old villa back to life. Ms Armitage has clearly devoted more than three years of her life to a project of some significance to the local community. She describes it as the Grafton Villa Community project and a “Social Enterprise”

_{focused on the wellbeing of the community. She has mobilised various sectors of the}

¹¹ _{Hirst v Vousden [2004] UKPC 24, (2004) 6 NZCPR 135 (NZPCC).}

¹² At [1].

community to support the ongoing repair of the building. As noted it may be that up to $650,000 in repairs have been undertaken. Ms Abdale also emphasised that three months’ rent had been paid in advance.

[38] Balanced against this, a fundamental premise of the lease is that rent will be paid after a three year rent free window and Hum assumed the risk that the building might not be fit for purpose at the expiry of that rent free period. It may be that Hum relied on the CoC and representations by Stylo as to fitness, and this may provide a basis for claim if, for example, the CoC is deficient. But the lease is clear on its terms as to the assumption of risk. The effect of granting relief would be to deprive Stylo of its clear contractual entitlement while (on the evidence before me) an apparently weak claim to misrepresentation is ventilated. It would also mean that the land would in effect lie fallow until Hum’s claims are resolved. In my view that would be an unfair to Stylo, though I accept it has plainly benefited from the

improvements to the villa.¹³

Result

Conditional relief

[39] Given these unusual circumstances of this case, I am only prepared to grant relief from forfeiture and possession on the following condition all outstanding rent (exclusive of interest) and outgoings as at the date of this judgment are paid within

15 working days.

[40] I acknowledge that future compliance with rent payment conditions may be difficult for Hum given the circumstances, and the fact that it is essentially reliant on public support. Ordinarily this might be a reason to decline relief.¹⁴ But there is at least some evidence before me that Hum may have a benefactor able to assist with rent, and I think the just outcome overall is to afford Hum the opportunity to preserve its significant investment in the leasehold by paying the outstanding rental

_{and other outgoings.}

13. Mr Paramenter submitted that the lease does not allow set off. I could not locate the relevant provision in the time available to me, so I do not proceed on that basis.

¹⁴ Muholland, above n 8.

[41] As to the second proceedings, leave is granted to the parties to retrigger the evaluation process in the event that the rental issue is resolved. If this matter does not advance further, costs will lie where they fall to reflect the relative success of both parties on that proceeding.

[42] For avoidance of doubt, nothing in this judgment should be seen to preclude whatever damages claims either party may have against the other, including for interest on non payment of rent, or in terms of the alleged misrepresentations claimed by Hum.

Interest and Costs

[43] Stylo is entitled to its costs in this proceeding. It seeks solicitor/client costs based on the lease terms. It also seeks interest on the rental at the contractual rate. I do not consider that this is the proper outcome in these proceedings. My powers under the PLA do not include general powers to award damages for loss. Rather I have a specific power to require payment of reasonable compensation for the breach, including reimbursement of the lessor’s reasonable expenses.¹⁵ Furthermore, while that the lease terms are clear, the factual matrix is complicated, and Hum’s concerns about the CoC are not completely without merit. In addition Hum has made a

substantial contribution to the improvement of the building and it would be manifestly unjust in these circumstances to award solicitor/client costs and contractual interest at this time. There shall be instead and order for costs on a 2B basis together with disbursements as fixed by the Registrar. I make no other compensatory award.

Orders

[44] Hum has 15 working days to pay all outstanding rental (exclusive of interest)

_{and other outgoings due at the date of this judgment.}

¹⁵ Property Law Act 2007, s 251(2) and (3).

[45] If Hum does not make the abovementioned payment within the specified time frame, there shall be an order in favour of Stylo for the possession of the land comprised in the lease and an order cancelling the lease.

[46] Stylo is entitled to costs on a 2B basis together with disbursements as fixed by the Registrar.

Solicitors:

Legal Vision, Auckland

Winston Wang & Associates, Auckland