Ladies Mile Motor Company Limited v Zhan [2018] NZHC 152 (15 February 2018)

Last Updated: 9 March 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-1114 [2018] NZHC 152

IN THE MATTER AND	of the Property Law Act 2007, s 261 to s 264
IN THE MATTER	of an application for relief against refusal to enter into renewal of a lease
BETWEEN	LADIES MILE MOTOR COMPANY LIMITED Applicant
AND	SHU XIAN ZHAN AND ARTHUR LOO Respondents

Hearing:	9 February 2018
Appearances:	D K Wilson for the Applicant J A Wickes for the Respondents
Judgment:	15 February 2018

JUDGMENT OF WOODHOUSE J (Adjournment : Pleadings)

This judgment was delivered by me on 15 February 2018 at 1:30 p.m. pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar

..........................................

Counsel / Solicitors:

Mr D K Wilson, Barrister, Auckland

Mr P Wong (applicant’s instructing solicitor), Wong and Bong Law Office Ltd, Solicitors, Highland

Park, Auckland

Ms J A Wickes, Loo & Koo, Solicitors, Newmarket, Auckland

LADIES MILE MOTOR COMPANY LTD v ZHAN AND LOO [2018] NZHC 152 [15 February 2018]

[1] A commercial lease was entered into in 2011 between the applicant as lessee and Peter and Cheryl Letica, the former registered proprietors of the fee simple, as lessors. The fee simple estate was transferred to the respondents in February 2017. Neither the lease, nor a renewal for 3 years in 2014, were registered against the title under the Land Transfer Act 1952.

[2] The primary issues arising on the applicant’s originating application were:

(a) Whether Mr and Mrs Letica and the applicant entered into a deed of renewal of the lease for a term of 3 years from 1 January 2017.

(b) If there was no renewal, whether the applicant is entitled to an order pursuant to ss 261 to 264 of the Property Law Act 2007 granting relief against the refusal by the respondents to enter into a renewal of the lease for 3 years from 1 January 2017.

[3] At the hearing on 9 February an issue arose as to whether the respondents are entitled to argue that, even if there was a renewal of the lease binding on Mr and Mrs Letica, the respondents, as purchasers of the fee simple from Mr and Mrs Letica, took title free of any lease to the applicant. I will refer to this as the “indefeasibility argument”.

[4] The first notice of the indefeasibility argument was in Ms Wickes’ submissions for the respondents. The legal position of most relevance is summarised in Hinde on Commercial Leases as follows:¹

[U]nder the Land Transfer system, a lessee who holds under an agreement to lease or under an unregistered lease has an equitable interest only which can be defeated by the registration without fraud of an adverse instrument which was given for valuable consideration.

_{The authority cited is Harris v Fitzmaurice.}²

¹ G W Hinde Hinde on Commercial Leases (2015, LexisNexis, 3^rd ed) at [11.044(a)]. And see

Hinde, McMorland & Sim Land Law in New Zealand (loose-leaf ed, LexisNexis) at [11.044(a)].

2. Harris v Fitzmaurice [1956] NZLR 975. This is one of the cases cited by Ms Wickes in her submissions.

[5] For the applicant, Mr Wilson did not seek to challenge the legal proposition summarised in Professor Hinde’s text. But he submitted that the respondents should not be permitted to maintain the indefeasibility argument because it had not been pleaded by them and no notice of an intention to advance the argument was given until the respondents’ submissions were received immediately before the hearing.

[6] Mr Wilson further submitted that the indefeasibility argument could not be properly and fairly addressed at the hearing. The applicant had proceeded on the basis that the only issues were those recorded above, because the respondents’ notice of opposition had not indicated there were any other material issues. In consequence, the applicant came to court content to argue the issues on the affidavits without cross- examination, and without any interlocutory steps having been taken on behalf of the applicant in respect of the respondents’ knowledge and conduct on acquiring title to the fee simple. Mr Wilson said that, had there been a proper pleading by the respondents, or at least adequate notice of the indefeasibility argument, the applicant at the least would have sought discovery of documents relating to the dealings between the respondents as purchasers and Mr and Mrs Letica as vendors, and notice to cross- examine deponents would have been given.

[7] I accept Mr Wilson’s submission to the essential effect that it would be unfair to the applicant to determine the indefeasibility argument in the context of the present hearing. It can be accepted that, had there been earlier notice, the applicant would have taken pre-trial steps, such as discovery and notice to cross-examine, and possibly interrogatories. But I am not satisfied that it would be fair to the respondents to refuse to allow them to maintain the argument. The indefeasibility point is plainly arguable. It would be wrong to dismiss it without considering it because of a failure to give sufficient notice unless not dismissing it peremptorily would result in relevant prejudice to the applicant. Not dismissing it peremptorily would not result in relevant and material prejudice to the applicant. Nor did Mr Wilson argue that an adjournment would result in material prejudice to the applicant. Importantly, the applicant remains in occupation of the premises subject to the lease in issue.

[8] The applicant’s fall-back position was that the proceeding should be adjourned to enable the indefeasibility point to be adequately pleaded, investigated through appropriate interlocutory steps, and then subjected to a full hearing with cross- examination. I am satisfied that that is the fair way of dealing with the difficulty.

Result

[9] I make the following orders and directions:

(a) The proceeding is adjourned.

(b) Counsel are to confer and endeavour to reach agreement on the most appropriate means of putting all issues before the Court, being the issues raised for the applicant in the originating application (which also requires amendment), the indefeasibility point, and any other issues requiring determination. For that purpose it would appear to be appropriate for the applicant to file a statement of claim and for the respondents to file a statement of defence with affirmative defences or a counterclaim or both.

(c) Counsel are also to confer on interlocutory steps that may be necessary and the most suitable way of putting all evidence before the Court.

(d) Not later than 9 March 2018 joint or separate memoranda are to be filed recording the proposals in respect of the preceding matters, and any other proposals necessary to advance all matters to a new hearing.

(e) The memoranda are to be referred to me for directions.

(f) The memorandum, or separate memoranda, should also address the question of costs in respect of the proceeding up to the hearing on 9

February. My provisional view is that costs should lie where they fall

_{and, if neither party seeks costs, there will be an order to that effect.}

Woodhouse J