Cazna Avenue Nominees Ltd v The University of Auckland

• Jurisdiction: New Zealand
• Judge: Andrews J
• Judgment Date: 27 February 2014
• Neutral Citation: [2014] NZHC 303
• Docket Number: CIV 2012-404-005209
• Court: High Court
• Date: 27 February 2014

BETWEEN

Cazna Avenue Nominees Limited

Plaintiff

and

The University of Auckland

Defendant

[2014] NZHC 303

CIV 2012-404-005209

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Claim for damages for breach of a lease agreement by not removing all fixtures and failing to reinstate the property following the termination of the defendant's lease — building had been sold to the plaintiff prior to the lease expiring — agreement for sale had purported to assign to plaintiff the right to negotiate the ‘make good' requirements — vendor submitted building was later sold at a loss because of the defendant's failure to reinstate – whether the reinstatement obligations were assigned to the plaintiff under the sale agreement or s130 Property Law Act 1952 (assignment of debts and things in action) – whether plaintiff had standing to sue — whether a term should be implied that the plaintiff was required to provide notice of the requirement to reinstate within a reasonable time before the lease expired – what was the appropriate measure of damages.

Appearances:

R J Hollyman and A J Holmes for Plaintiff

D J Neutze and J Jeffries for Defendant

(RESERVED) JUDGMENT OF Andrews J

Andrews J

Contents

Introduction	[1]
Background facts
The Deed of Lease..	[3]
The sale of the property to Cazna..	[6]
Expiry of the lease..	[9]
Does Cazna have standing to enforce the reinstatement obligations?..	[15]
Assignment under cl 15 of the sale agreement and s 130 of the Property Law Act 1952	..[17]
(a) Was there an absolute assignment?	[20]
(b) Was written notice of the assignment given to the University?	[30]
(c) Conclusion as to whether the reinstatement obligations were assigned to Cazna under cl 15 of the sale agreement..	[33]
Equitable assignment.	[35]
Did Cazna require the University to reinstate the property?	.[38]
Was Cazna required to provide notice of the requirement to reinstate within a reasonable time before the lease expired?..	[41]
Does the University need to plead an implied term?	.[43]
Should the University be given leave to amend its statement of defence?	..[45]
Should a “reasonable time” term be implied?	..[48]
What did Cazna require the University to dO'	[54]
Was the work Cazna required the University to do within the terms of the lease?	.[60]
(a) The partitions	..[61]
(b) Carpet	..[63]
(c) Painting	..[65]
(d) Betterment?	..[67]
(e) Conclusion as to whether reinstatement work was within the terms of the lease	[69]
What is the appropriate measure of damages?	..[70]
Quantum	.[77]
Interest	..[81]
Result	.[86]

Introduction

1 The plaintiff, Cazna Avenue Nominees Ltd (“Cazna”) has sued the University of Auckland (“the University”) claiming damages following the termination of the University's lease of the building at 55 Anzac Avenue, Auckland (“the property”). Cazna claims that the University has breached the lease agreement by not removing all fixtures and failing to reinstate the property. The University claims that it has not breached the lease agreement. It further claims that, in any event, Cazna has no right under the lease to enforce the terms of the lease and to sue the University.

2 The following issues must be determined:

• (a) Does Cazna have standing to enforce the terms of the lease by requiring the University to reinstate the property?

• (b) In the event that Cazna can require the University to reinstate:

  • (i) Did Cazna require the University to reinstate?

  • (ii) What was the University required to dO'

  • (iii) Did the University fail to do what it was required to dO'

• (c) If Cazna establishes that the University has breached the lease agreement:

  • (i) What is the appropriate measure of damages?

  • (ii) What quantum of damages must the University pay? and

  • (iii) Is Cazna entitled to receive interest on the judgment sum, and if so, for what period?

Background facts

The Deed of Lease

3 On 30 June 2000, the University entered into an agreement to lease the first to fourth floors of the property from New Bay Holdings Ltd (“New Bay”). Under the Deed of Lease (“the lease”) between New Bay and the University, signed by the parties on 11 December 2000, the University leased the property for a term of six years commencing on 1 September 2000, with a right to renew the lease for two further terms of three years.

4 The lease set out the University's obligations relating to what it, as tenant, had to do once the lease ended. Of relevance to this proceeding are the obligations relating to reinstating the property, at cls 10.1, 21, 22.1, and 33 (“the reinstatement obligations”):

10.1 The tenant shall (subject to any maintenance covenant by the Landlord) in a proper and workmanlike manner and to the reasonable requirements

(a) Maintain the premises

Keep and maintain the interior of the premises including the Landlord's fixtures and fittings in the same clean order repair and condition as they were in at the commencement of this Lease and will at the end or termination of the term quietly yield up the same in the like clean order repair and condition. In each case the Tenant shall not be liable for fair wear and tear arising from reasonable use or damage by fire, earthquake, flood, storm, Act of God, inevitable accident or any risk against which the Landlord is insured unless the insurance monies are rendered irrecoverable in consequence of any act or default of the Tenant or the Tenant's agents, employees, contractors or invitees

…

(c) Painting

Paint and decorate those parts of the interior of the premises which have previously been painted and decorated when the same reasonably require repainting and redecoration.

(d) Floor coverings

Keep all floor coverings in the premises clean and replace all worn or damaged floor coverings with floor coverings of a similar quality when reasonably required by the Landlord.

(e) Make good defects

Make good any damage to the property caused by improper, careless or abnormal use by the Tenant or those for whom the Tenant is responsible.

21 Signage

The Tenant shall not affix paint or exhibit or commit to be affixed painted or exhibited any name, sign, name-plate, signboard or advertisement of any description on or to the exterior of the building or appurtenances thereof without the prior approval in writing of the Landlord bus such approval shall not be unreasonably or arbitrarily withheld in respect of signage describing the Tenant's business. If approved the signage shall be approved in a substantial and proper manner so as not to cause damage to the building or any person and the tenant shall at the end or sooner determination of the term remove the signage and make good any damage occasioned thereby.

…

22.1 Additions and alterations

The Tenant shall neither make nor allow to be made any alterations or additions to any part of the premises without first procuring to the Landlord on every occasion, plans and specifications and obtain the written consent of the Landlord (Not to be unreasonably or arbitrarily withheld) for that purpose. If the Landlord shall authorise any alterations or additions the Tenant will at the Tenant's own expense if required by the Landlord at the end of the term reinstate the premises….

…

33 Removal of fixtures

The Tenant not being in breach may at any time for and will if required by the Landlord at the end or earlier termination of the term remove all the Tenant's fixtures and fittings and make good at the Tenant's own expense any resulting damage and if not removed within seven (7) days of the Landlord's request ownership of the Tenant's fixtures and fittings passes to the Landlord.

5 With the consent of New Bay, the University fitted out the property specifically for use as an educational facility, catering for teaching in education and music. The fit-out included numerous non-commercial elements, such as a terraced lecture theatre, small sound studios, rubberised linoleum flooring, sound-proof walls and glazed panels, and sound theatres. There were also several features, designed primarily for academic teaching.

The sale of the property to Cazna

6 In May 2006 the University decided not to renew the lease and approached New Bay to see if New Bay was interested in purchasing components of the University's fit-out. New Bay rejected this offer. However the University and New Bay agreed to extend the lease on a month-by-month basis. During this period, the University was made aware that New Bay was looking to sell the property.

7 On 5 October 2006, New Bay entered into an agreement for sale and purchase of the property with Solomon Properties Ltd and/or nominee (“the sale agreement”). By a deed of nomination dated 31 October 2006, Solomon Properties Ltd nominated Cazna as the purchaser under the sale agreement. Following the payment of the deposit, the sale then became unconditional on the same day.

8 The terms of the sale agreement included, at cl 15, a provision relating to the University's reinstatement obligations:

15 University of Auckland (“University”)

15.1 The parties acknowledge that the University's lease will terminate on 30 November 2006. As soon as practicable after this agreement has been entered into, the Vendor will provide to the Purchaser full and accurate copies of the University's lease, together with copies of all relevant deeds and any material correspondence.

15.2 The Vendor authorises the Purchaser to negotiate with the University in relation to the University's obligations to reinstate and to redecorate the premises prior to termination of the lease and in relation to the University's fit out and any other termination...