Stylo Medical Services Limited v Hum Hospitality Limited [2014] NZHC 2723 (3 November 2014)

Last Updated: 12 November 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-004995 [2014] NZHC 2723

BETWEEN	STYLO MEDICAL SERVICES LIMITED Applicant
AND	HUM HOSPITALITY LIMITED Respondent

Hearing:	(On Papers)
Counsel:	R O Parmenter for Applicant S L Abdale for Respondent
Judgment:	3 November 2014

_{JUDGMENT OF WHATA J}

This judgment was delivered by me on 3 November 2014 at 2.30 pm, pursuant to Rule 11.5 of the High Court Rules.

STYLO MEDICAL SERVICES LIMITED v HUM HOSPITALITY LIMITED [2014] NZHC 2723 [3 November

2014]

[1] Some disputes are beyond common sense resolution. This, it appears, is one of them. In my judgment dated 3 October 2014 I made the following order: ¹

[44] Hum has 15 working days to pay all outstanding rental (exclusive of interest) and other outgoings due at the date of this judgment.

[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.

[2] The rent and other outgoings ($53,995.50) were transferred into Stylo’s account by about 12.35 pm on the 16^th working day. Ms Abdale made an oral application for extension of the time within which to make payment under r 1.19 of the High Court Rules. Mr Parmenter responded that r 1.19 does not avail Hum. He contends that non-compliance with my judgment means that an order must now be granted to cancel the underlying lease.

[3] The critical issue for me to determine is whether I have jurisdiction to extend the time for payment of the rental. If I have jurisdiction, I am in little doubt that time should be extended. Cancellation would be grossly disproportionate to the purported non compliance with my order.

The immediate background

[4] I am advised by Ms Abdale that attempts were made by Hum to make the requisite payment on the 15^th working day but could not do so because of banking transfer difficulties. She says that Hum was in direct communication with Stylo about the difficulties with the transfer between the banks and would look to effect transfer between solicitors. Hum’s solicitors also gave an undertaking to the effect that on receipt of the monies they would transfer them to Stylo’s lawyers. The monies were not, however, transferred on the 15^th working day but were transferred on the 16^th working day.

[5] Ms Abdale originally sought that I do not implement my judgment. However, following memorandum from Mr Parmenter, diverted course and instead

¹ Stylo Medical Services Ltd v Hum Hospitality Ltd [2014] NZHC 2428 [Third Cancellation

Decision].

seeks an extension of time under r 1.19. She also contends that Hum did not receive notice of my order until 7 October in which case the order has been complied with.

[6] Mr Parmenter indicated that he has now filed orders for sealing. Accordingly, this is a matter that must be dealt with urgently and, having conferred briefly with counsel, I afforded them an opportunity to provide written submissions dealing with authority on my jurisdiction under r 1.19.

[7] I then issued a minute to the parties expressing my tentative view that I enjoyed inherent jurisdiction to extend the time within which to pay the rental, citing among other authorities Champtaloup v Northern Districts Aero Club Inc,² R v Bloomsbury and Marylebone County Court, ex parte Villerwest Ltd,³ and Samuels v

_{Linzi Dresses Limited.}⁴ _{I invited Mr Parmenter to respond to my minute and he has}

now done so. He maintains (in short) that:

(a) There is no jurisdiction to reverse a judgment of this Court, except by way of the recall process or on appeal; and

(b) The jurisdiction to extend time relates to interlocutory orders only.

[8] Mr Parmenter sought to drive home his point by positing a series of (I

assume) rhetorical questions:

Is that not the essence of the problem? If the Court adjudges that the lease will be cancelled if arrears are not paid within 15 working days, where is the certainty if it is open to the judgment debtor to approach the Court to seek a change of decision? Indeed, why should this sort of situation be limited to 1 day late or 3 days late? Why should there be a difference for the situation where the tenant turns up a week late and then says: “The bank has agreed; you’ll have your money next week”? As Your Honour expressed during the conference, the landlord would have its money, so, essentially, what can be the complaint? The complaint is that the landlord has been granted a remedy in a fully-considered judgment and should not have to surrender that remedy.

² _{Champataloup v Northern Districts Aero Club Inc [1980] 1 NZLR 673 (SC) at 676.}

3. R v Bloomsbury and Marylebone County Court, ex parte Villerwest Ltd [1976] 1 All ER 897 (CA).

⁴ Samuels v Linzi Dresses Limited [1980] 1 All ER 803 (CA).

The underlying proceedings

[9] I propose to address both whether I have specific jurisdiction under r 1.19 and/or inherent jurisdiction to extend time to make the rental payment. It is necessary first to explain what I in fact did do in the underlying proceedings – the third in a succession of proceedings seeking cancellation of a lease. The second proceeding is still in train and was momentarily overtaken by and then joined to this one.

[10] Stylo and Hum are lessor and lessee respectively of a once dilapidated yet grand old villa in Grafton. Stylo had no money to repair the villa, but Hum agreed to restore it in exchange for being granted a rent free period. Hum was obliged to undertake certain specified repairs and did not do so within the required time. Relief from cancellation was granted by this Court pursuant to s 253 of the Property Law

Act 2007 to afford Hum the opportunity to comply.⁵ Stylo was dissatisfied with

subsequent progress and sought another order for cancellation. The Court granted further relief from cancellation on the basis that there was a genuine dispute as to the scope of the works undertaken by Hum.⁶ A process was envisaged whereby an independent assessment was to be undertaken of the works done at Hum’s expense. An independent expert has been identified, but that process was overtaken by a further application for cancellation for non payment of rent. The rent had not been paid, but, in light of the evidence of the substantial improvements undertaken to the property by Hum, I granted conditional relief from cancellation.⁷ Hum had 15 working days to pay the rent. I also said:

[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.

⁵ Stylo Medical Services Ltd v Hum Hospitality Ltd [2013] NZHC 2114 [First Cancellation

_Decision].

⁶ Stylo Medical Services Ltd v Hum Hospitality Ltd [2014] NZHC 1587 [Second Cancellation

_Decision].

⁷ Third Cancellation decision, above n 1.

Rule 1.19

[11] Rule 1.19 states:

1.19 Extending and shortening time

(1) The court may, in its discretion, extend or shorten the time appointed by these rules, or fixed by any order, for doing any act or taking any proceeding or any step in a proceeding, on such terms (if any) as the court thinks just.

(2) The court may order an extension of time although the application for the extension is not made until after the expiration of the time appointed or fixed.

[12] The rule provides a broad power to extend the time to comply with self executory orders, that is orders directing a party to take a step in a proceeding by a specified date. As McGechan observes:⁸

The rule confers an unfettered discretion to extend and shorten time: Caltex

Oil (NZ) Ltd v Hughes (1986) 1 PRNZ 235.

[13] I initially formed the view however that r 1.19 was limited to self executory orders in the conduct of the litigation. In this regard, I have been unable to find any authority where the rule applied in circumstances not concerning procedural non compliance.

[14] Ms Abdale cited Spicers Paper (NZ) Limited v BPK & GA Buckley Limited⁹ in support of the proposition that r 1.19 nevertheless applies to final orders of the Court. In that case Spicers Paper was to be added as a plaintiff in a winding up proceeding on the condition that it file and serve its pleadings within a specified time. It failed to comply with that condition and the proceedings were dismissed on the original plaintiff ’s motion. The Court nevertheless accepted that there may be jurisdiction under the then equivalent rule to enlarge the time within which Spicers Paper might comply with the condition. It appeared to doubt the argument that as

_{the proceedings were dismissed there was nothing to enlarge. Rather, the Court}

⁸ _{McGechan on Procedure (online looseleaf ed, Brookers) at [HR1.19.01].}

⁹ Spicers Paper (NZ) Ltd v BPK & GA Buckley Ltd (1993) 6 PRNZ 16 (HC).

suggested, without finally deciding the matter, that a final order to comply with a specified time was the “doing of an act” arising from the proceeding. I broadly agree with this dicta, but the order in that case was directed to the filing of pleadings and thus was concerned with procedural non compliance.

[15] It is also perhaps not insignificant that the rule does not refer expressly to “judgment”. This is to be compared for example with r 1.17 dealing with calculating periods of time, which specifically provides:

1.17 Calculating periods of time

(1) A period of time fixed by the rules or by a judgment, order, or direction or by a document in a proceeding must be calculated in accordance with this rule and rule 1.18.

...

(Emphasis added)

[16] This suggests, though not very strongly, that r 1.19 is directed to ameliorating any injustice caused by procedural non compliance, rather than an order arising from the determination of the substantive dispute.

[17] But on reflection, it seems to me that the ambit of r 1.19 depends whether the order furthered the objective of the High Court rules to:¹⁰

... secure the just, speedy, and inexpensive determination of any proceeding or interlocutory application.

(Emphasis added)

[18] I have the distinct benefit of understanding the full purpose of the order in this case. It was designed, like an unless order, to bring finality to the current proceedings. The grant of relief also had the effect of preserving the second proceedings. Taken together, I am of the view that the order was both procedural and substantive in character. It appears then that r 1.19 provides a proper basis for extension of time in this case. However, I prefer to make no final determination on this, as I consider that the answer more squarely lies in the Court’s inherent

_{jurisdiction.}

¹⁰ High Court Rules, r 1.2.

[19] The powers conferred by the High Court Rules are in addition to and not in substitution of the powers arising out of the inherent jurisdiction of the Court. As stated in Champtaloup,¹¹ a case cited by Ms Abdale, the power to extend time to comply with Court orders, whether under the rules or pursuant to the Court’s inherent jurisdiction, is driven by the underlying principle that the Court’s processes are not to be abused or lead to serious injustice.

[20] Most relevant to this case, the High Court in Champtaloup cited with approval the following passage by Roskill LJ in R v Bloomsbury:¹²

But the powers of the court are by no means always limited to what is expressly stated in the rules of practice applicable to that court. The High Court, and indeed the Supreme Court, has an inherent jurisdiction, and so, in my judgment, has the county court. A good illustration of the inherent jurisdiction of the court is afforded by what Farwell LJ said in Keymer v Reddy ([1912] 1 KB 215 at 221) in the passage to which Lord Denning MR had already referred. I do not doubt that a county court judge has an inherent jurisdiction, for it is necessary for him to possess it in order to do justice between the parties, to extend the time, whether before or after it has expired for complying with such an order as paying into court arrears of rent or the like, within the time originally limited.

[21] The Court in Bloomsbury was also dismissive of concerns about finality,

aptly captured by the following oft cited quote from Lord Denning’s judgment:¹³

Suppose a man is on his way to the court in time with the money in his pocket. Then he is run down in an accident, or he is robbed of it. Or suppose that his cheque has been held up at the bank for a short time. Has the court no power to enlarge the time in such a case? Every court has inherent power to control its own procedure, even though there is nothing in the rules about it.

[22] His Lordship also stated:¹⁴

I have one further observation to make. It is about Whisker v Hancock. It seems there to be suggested that if a condition is not fulfilled the action ceases to exist, as though no extension of time can be granted. I do not agree with that line of reasoning. Even though the action may be said to cease to

¹¹ _{Champtaloup, above n 2, at 676.}

¹² _{R v Bloomsbury, above n 3, at 901.}

¹³ _{At 900.}

¹⁴ At 900.

exist, the Court always has a power to bring it to life again by extending the time.

[23] This reasoning was subsequently endorsed by the English Court of Appeal in Samuels v Linzi Dresses Limited¹⁵ in dealing with unless orders which in turn was approved by our Court of Appeal in Champtaloup.¹⁶ Australian jurisprudence dealing with self executory orders has similarly approved this reasoning.¹⁷

[24] The common thread through the authorities is that this Court retains a broad jurisdiction to enlarge the time to comply with any procedural or substantive self executory order imposed as part of the grant of relief from the strict enforcement of legal rights. It is a longstanding exception to the general rule of finality and reflects, I think, the Court’s deep-seated dislike of its equitable jurisdiction being undermined by time limits in fact imposed by the Court (as opposed to statute or by operation of

law¹⁸).

[25] Notably, Bloomsbury involved remarkably similar facts to the present case. The tenants (including a subtenant) in that case did not make payment of rental within the time specified in a Court order. The Court order went on to state that failing compliance with that order, a previous order for possession (obtained in the absence of the tenants) was to stand. The tenants did not pay within time and applied for, and obtained, an extension of time to comply with the Court’s order. The Divisional Court set aside the order extending time on the basis that the first order was final and conclusive between the parties. The Divisional Court also rejected the application of the rules to extend time, because the time for paying money was not fixed by the rules. The Court of Appeal nevertheless overturned this decision, affirming that the County Court possessed inherent jurisdiction “to enlarge any time

_{which a judge has ordered”.}¹⁹

¹⁵ _{Samuels, above n 4. See also Masefield v Alexander [1995] 2 FCR 663 (CA) at 667-668.}

¹⁶ _{Champtaloup, above n 2.}

¹⁷ FAI General Insurance Co Ltd v Southern Cross Exploration NL [1998] HCA 13, (1988) 165

_{CLR 268[1988] HCA 13; , (1988) 77 ALR 411.}

18. See for example Middleton v Middleton [1994] 3 All ER 236 (CA) at 243, dealing with time limits prescribed by regulation.

¹⁹ R v Bloomsbury, above n 3, at 900.

[26] I therefore also reject Mr Parmenter’s submission that the order in Bloomsbury was interlocutory. Like this case, if the tenants paid within time, the landlord was disentitled to possession. Also, like this case, the landlord was entitled to possession when the tenants failed to pay on time. I see nothing in the fact that the tenants were required to pay into Court, rather than to the lessor directly. In reality, the Court’s final self executory order was enlarged to achieve justice between the parties.

[27] Accordingly, by parity of reasoning, I consider that I have inherent jurisdiction to extend the time within which to comply with my order so as to do justice between the parties.

Statutory authority

[28] I am nevertheless mindful that the genesis of my discretion to grant relief is now codified by s 243 of the Property Law Act 2007 (PLA). Regrettably, I have not heard full argument on this point given the urgent manner in which this matter has come before me. In any event, I have considered whether the scheme of the PLA precludes the exercise of inherent jurisdiction to extend time. The Act contemplates that relief from cancellation may be granted until an order for possession is made.²⁰

This brings into focus the timing of my order. In a literal sense my order for

possession sparked into life at the expiry of the 15 day working period. It could be said that I am functus officio after that point. But jurisdiction to grant relief remains true to its equitable origins. As noted in Hinde McMorland and Sim,²¹ citing Gill v Lewis:²²

...[S]ave in exceptional circumstances, the function of the Court in exercising this ... jurisdiction is to grant relief when all that is due for rent and costs has been paid up ...

[29] I find it difficult to conceive then that Parliament, in codifying the law of cancellation, intended to deprive this Court of its broad discretion to do right by

²⁰ _{Property Law Act 2007, s 253(4).}

²¹ Hinde McMorland and Sim Land Law in New Zealand (online looseleaf ed, LexisNexis) at

_[11.243(b)].

²² Gill v Lewis [1956] EWCA Civ 2; [1956] 2 QB 1, [1956] 1 All ER 8544 (CA) at 13.852.

lessees who comply in substance with an order of this Court granting relief from cancellation.

[30] Furthermore, latent within Mr Parmenter’s submission is a misunderstanding of the success achieved by the parties and the injustice arising from strict adherence to the terms of my order. Hum was successful in achieving relief from cancellation subject to payment of the rent within 15 working days. The timing aspect was only ancillary to the primary grant of relief, designed to bring an end to the proceedings. In many respects it was arbitrary.

[31] Indeed, the underlying premise of the judgment was that Hum had established a proper basis for relief in terms of s 253 of the PLA, including by establishing that it had undertaken significant improvements to the lessor’s property (at an estimated cost of between $100,000 to $650,000). In short, the underlying lis was effectively resolved in Hum’s favour – cancellation was avoided.²³ Yet a corollary of not extending the time for compliance by one day would be to deprive Hum of this success, the leasehold and the benefits of its improvements to the property.

[32] By contrast, I cannot see how Stylo is materially prejudiced by the very short delay in terms of payment of the rent arrears. This, in many respects, presents as a more compelling case for exercise of inherent jurisdiction than in the unless order context, because unlike the unless order cases, Hum has already established a proper basis for substantive relief.

A subsidiary issue

[33] In submissions Ms Abdale raised the argument that because Hum had not received notice of my order until 7 October, payment was made in fact made within the 15 working days prescribed. She further submits that there is no non-compliance and therefore no order is able to be sealed. Given where I have got to, I do not

_{consider it necessary to resolve this issue.}

23. Third Cancellation Decision, above n 1. Costs were however awarded to Stylo on the basis that relief is an indulgence.

Outcome

[34] I have inherent jurisdiction to the extend time within which to comply with the self executory order to pay rent. It is premised on the Court’s power to regulate its processes to achieve justice between the parties, including the ability to vary an order to take a step designed to bring finality to a proceeding and to preserve another related proceeding. Moreover, while intricacies of jurisdiction to extend time may be a source of enlightened debate, in reality the non compliance here was de minimis and the consequences of strict adherence to it would be entirely disproportionate to the objective of the time constraint. There shall be an order extending the time for payment of the rental by one working day.

[35] Stylo is entitled to its costs on this aspect of the matter on a 2B basis together with disbursements as fixed by the Registrar. While Stylo has not succeeded in its opposition, the extension of time is a further indulgence arising from Hum’s non- compliance.

The second proceeding

[36] I propose now to retrigger the process envisaged by the second proceedings. Unless there is any objection (to be filed within three working days), I propose to issue a minute containing my directions to the independent expert.

Solicitors:

Legal Vision, Auckland

Winston Wang & Associates, Auckland