Whitley v Stewart St Properties Ltd

JurisdictionNew Zealand
CourtHigh Court
JudgeBREWER J
Judgment Date25 November 2011
Neutral Citation[2011] NZHC 1699
Docket NumberCIV-2011-404-6621

[2011] NZHC 1699

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-6621

Between
Kevin John Whitley
Applicant
and
Stewart St Properties Ltd
First Respondent

and

The Boomerang Inn Ltd
Second Respondent

and

Bonnie Dawn Johnson
Third Respondent

and

Fm Custodians Ltd
Fourth Respondent
Counsel:

R B Hucker for Applicant

B D Johnson (Third Respondent) and H A Smith in person

Interlocutory application for review of order — restaurant and motel complex — companies in receivership — receivers obtained order to take exclusive possession of premises — interim injunction obtained by people residing in complex who claimed rights to occupy the property — whether it was necessary in the overall interests of justice to vary the order to take account of any legal rights of those who might clearly be affected by the order.

At issue was whether it was necessary in the overall interests of justice to vary the original order to take into account any legal rights of the occupants.

Held: If the RTA applied to the occupants' living situations then the occupants were entitled to have their tenancies determined by the Tenancy Tribunal (“the Tribunal”). The Tribunal had jurisdiction if there was an arguable case that any of the occupants were tenants or service tenants under the RTA, but not if the occupants were service occupants or merely resided there on a casual basis.

The principles of tenancies and service occupiers were discussed in Street v Mountford and the test was whether the “servant” required the premises he or she occupied in order to better perform his or her duties as a servant. Fatac Ltd (in liq) v Commissioner of Inland Revenue endorsed this approach. A service occupancy therefore arose where occupation of a residence was a necessary aspect of employment and was an employment matter not a tenancy situation. A tenancy and service tenancy were both defined in s2 RTA (interpretation) and a landlord was required to give a minimum 14 days' notice to terminate a service tenancy if the contract for service had been terminated.

The various living situations did not come within s5(1)(k) RTA (RTA excluded in certain cases) which provided an exception for motels and temporary lodging. Although the Inn was a motel, the occupants were living there on a relatively permanent basis as staff rather than guests. There was no evidence of written tenancy agreements. Of the two occupants who appeared, one was clearly a service occupancy and there was nothing to suggest that there was any kind of contract for service underlying a service tenancy for the other. It was not possible to determine the tenancy status of the occupiers who didn't appear and it was best left to the Tribunal to determine.

Interim injunction lifted. Original order varied so it was subject to the determination of the Tribunal on application by any of the occupants that did not appear.

JUDGMENT OF BREWER J

This judgment was delivered by me on 25 November 2011 at 10:00 am pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Introduction
1

This litigation concerns the operation of a restaurant and motel complex called the Ramarama Country Inn. Generally speaking, the Inn consists of a block containing reception facilities for the motel plus bar and restaurant facilities. There is a front motel block containing 12 motel units on two levels. There is a rear block containing another 12 units over two stories, but not all of those are inhabitable. In addition, in the grounds of the complex are a number of other accommodation units referred to as cabins.

2

The first respondent owns the complex itself. The second respondent has a lease of the complex and operates its business. Both are in receivership. The receiver has obtained an order to take exclusive possession of the Ramarama Country Inn. He has been stopped, however, by an interim injunction obtained by people residing at the complex who claim rights to occupy the property. I am now asked to resolve the matter.

Background
3

The applicant is an accountant applying in his capacity as receiver of the first and second respondents pursuant to general security agreements dated 9 June 2009 and as receiver of income pursuant to a memorandum of mortgage dated 25 August 2009 granted by the first respondent to the fourth respondent and registered under mortgage no. 8162488.2.

4

By without notice application for leave to commence proceeding by way of originating application dated 17 October 2011, the applicant applied for the following order (among others):

The Applicant as receiver and the receiver of income of STEWART ST PROPERTIES LTD and the receiver of THE BOOMERANG INN LTD is entitled to exclusive possession of that land contained and described in Certificate of Title NA35A/1476 and all of the chattels, goods and/or other personal property required for the operation of the business of THE BOOMERANG INN LIMITED to the exclusion of all other persons.

5

On 18 October 2011, White J granted the application for this order. His Honour also made other orders contained within the application directing service on the third respondent and reserving leave to her to apply to set aside the order on 48 hours' notice. Leave was granted similarly to any third and/or non-party claiming to be affected by the order to apply also.

6

On 21 October 2011 Heath J, by telephone, heard an urgent application to vary the orders made by White J. The fact galvanising counsel in this regard was that having sealed the orders made by White J, the applicant attempted to enforce them only to encounter a number of people claiming prior legal rights to occupy the property concerned. The first respondent and the second respondent immediately sought orders to exclude from the scope of White J's orders tenancies arising from fixed term leases to individuals. An affidavit from one of the parties concerned, Mr Smith, identified 11 other persons said to have residential tenancies on fixed terms.

7

Heath J decided that a variation of White J's order on these terms was not appropriate at that point. However, Heath J held that there is a seriously arguable case that tenancies of the type described by Mr Smith could fall within the Residential Tenancies Act 1986 and issued an injunction, pending further order of the Court, to prevent steps being taken to eject any of the named persons from the premises. Heath J also made an order joining the 12 named “tenants” as parties to the proceeding.

8

The case came before me on 11 November 2011. Mr Smith and Ms Johnson (the third respondent) appeared personally. There was no appearance by or for the other 10 named “tenants”, although Mr Smith made the point that he could be considered as their representative. That cannot be the case in any formal sense because Mr Smith is not a lawyer, but in the general sense the issues he raises are common to all of the people in his position.

9

What I have to decide is whether, and to what extent, it is necessary to vary the order of White J to take into account the legal rights, if any, of Mr Smith and Ms Johnson or anyone else who might clearly be affected by the order.

10

An interlocutory application for variation of order dated 20 October 2011 filed by Richard Allen, solicitors, on behalf of the first and second respondents, was abandoned. The interlocutory application dated 28 October 2011 filed by Ms Johnson in person is one of the matters I have to determine. However, I will consider the respondents' position as broadly as I can in the overall interests of justice.

The occupants
(a) Ms Johnson
11

Ms Johnson is the sole director and shareholder of both the first respondent and the second respondent. She described herself as the manager and overall proprietor for both the respondent companies. She held the sale of liquor license for the property and the general manager's certificate, and lived and worked at the complex fulltime.

12

Ms Johnson maintains that there is a lease between her and the second respondent for the unit she occupied over the restaurant complex. However, she was unable to give me any details, saying that it was locked in her office to which she can no longer gain access.

13

Ms Johnson told me that she does not dispute that the applicant is entitled to the income of the property. However, she did take issue with the way in which the applicant went about securing it. In her submission, he should have put an accountant into the business to see how it was run. Ms Johnson expressed her fear that because the applicant does not understand how the business is run, he will allow it to fail and there will be nothing left but a liquidation. For very genuine and human reasons, Ms Johnson opposes the loss of any of the employees and defends their occupation of the complex.

(b) Mr Smith
14

Mr Smith advised me that he occupies a unit in the rear motel block. He has resided at the unit since August of this year. He does not have a written tenancy agreement and he does not pay rent. He characterised his occupation of the unit as being casual and not permanent. 1 He gives value for his occupation of the unit by advising and assisting Ms Johnson, particularly in relation to the commercial problems she has been and is now facing.

(c) Other occupants
15

Ms Johnson, at my request, listed the occupants of the complex and explained the basis for their residence there. Although not admitted as evidence in this proceeding, I accept her statements as submission and relevant background information. Her descriptions were not challenged by any other party.

16

Ms Johnson explained that some of the occupants reside at the motel as a condition of their employment. These include the restaurant chef, who must stay on- site because a significant part of the client base of the motel and restaurant are truck drivers who come and go (and need to be fed) at odd hours....

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