in the high court of new zealand auckland · pdf filethe relevant decision is dated 9 april...
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ANDERSON v FM CUSTODIANS LTD and ANOR [2013] NZHC 2423 [17 September 2013]
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2013-404-001985
[2013] NZHC 2423
UNDER
Section 119 of the Residential Tenancies
Act 1986
IN THE MATTER OF
an appeal from the decision of the
District Court on 9 April 2013 in CIV-
2012-092-0214
BETWEEN
IAN ANDERSON and
NORMA ANDERSON
Appellants
AND
FM CUSTODIANS LIMITED
First Respondent
AND
GHUZNEE HOLDINGS LIMITED
Second Respondent
Hearing:
11 June 2013
[Final Submissions Received on 9 July 2013]
Counsel:
D R Bigio and N Taefi for the Appellants
H P Holland for the Respondents
Judgment:
17 September 2013
JUDGMENT OF DUFFY J
This judgment was delivered by Justice Duffy
on 17 September 2013 at 1.30 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Counsel: D R Bigio, Auckland
N Taefi, Auckland
H P Holland, Auckland
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[1] The appellants, Mr and Mrs Anderson, who are occupiers of the subject
property, are appealing against a District Court decision to uphold a
Tenancy Tribunal order for possession that deprives the appellants of their
occupancy of the property.
Background
[2] The subject property is a townhouse known as Unit Q of 40 Linnet Place,
Mangere (“Unit Q”). Unit Q was the manager’s unit in a retirement housing facility
that was known as Culverden Retirement Village (“the village”). This village was
run by Culverden Retirement Village Limited (“the company”), of which Mr and
Mrs Anderson were the directors.
[3] Planning consent for the village was granted by the Manukau City Council
under ss 67 and 72 of the Town and Country Planning Act 1977 on 29 May 1989.
According to ss 365(a) and 383 of the Resource Management Act 1991 (the RMA),
consents granted under Part 4 of the Town and Country Planning Act are deemed to
be a resource consent (in particular, a land use consent) granted under the RMA on
the same conditions. Accordingly, the consent can be enforced under s 14 of the
RMA. I shall therefore refer to this consent as a resource consent.
[4] On 11 May 1992, the company granted a first registered mortgage over
Unit Q to Halliwells Securities Ltd (Halliwells), who transferred the mortgage to
FM Custodians Ltd on 5 January 2005. This mortgage was discharged and the
company granted a new first mortgage, with FM Custodians Ltd being registered as
mortgagee.
[5] On 1 April 2011, the company defaulted under the mortgage and, on
8 November 2011, FM Custodians Ltd requested that Mr and Mrs Anderson pay rent
on Unit Q. On 21 June 2012, Unit Q was sold under mortgagee sale by
FM Custodians Ltd to Ghuznee Holdings Ltd. Ghuznee Holdings Ltd sought a
possession order. However, Mr and Mrs Anderson refused to vacate Unit Q on the
basis that they have a deed of life interest dated 30 October 2002 that they entered
into with the company. This deed was not registered against the certificate of title,
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nor was there a caveat indicating this interest. Thus, there was nothing on the
certificate of title to alert Ghuznee Holdings Ltd to the existence of the life interest.
Adjudicator’s decision
[6] There was an initial order of the Tenancy Tribunal (the Tribunal) about
whether the Tribunal had jurisdiction to hear this case, but a rehearing was granted
on the basis that no notification was given to Mr Anderson. For present purposes,
the relevant adjudicator’s decision to consider is the second one, by B Harvey.
[7] The issues before the Tribunal were:
(a) Was the Tribunal’s jurisdiction excluded by s 5(1) of the Residential
Tenancies Act 1986 (“the RT Act”)?
(b) Was there a tenancy agreement between the company and Mr and
Mrs Anderson that binds Ghuznee Holdings Ltd?
(c) Does the Tribunal have jurisdiction under s 65 of the RT Act?
(d) Did FM Custodians Ltd consent to the deed of life interest?
[8] As to issue (a), the Tribunal found that because Mr and Mrs Anderson were
living in Unit Q and were not residing there in their capacity as managers of the
village, Unit Q could be considered as residential premises. Jurisdiction could not be
excluded under s 5(1)(l) regarding the Retirement Villages Act 2003 because the
village was not registered under the RT Act. Although the resource consent was
granted for housing the elderly, together with a manager’s residence, with no
approval for residential use of the premises, since the company was placed into
liquidation Unit Q has been used only as a private residence. Therefore, the Tribunal
concluded that jurisdiction was not excluded by any grounds under s 5(1) of the
RT Act.
[9] As to issue (b), the Tribunal found that there was no landlord and tenant
relationship between the company and Mr and Mrs Anderson, and that even though
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they were paying an administration fee to the company, this was not in the nature of
rent.
[10] As to issue (c), s 65 provides for the eviction of anyone who is in the
premises otherwise than pursuant to any right of occupation granted by anyone
having lawful authority to grant that right. The Adjudicator found that the Tribunal
has jurisdiction to inquire into whether the right of occupation granted to Mr and
Mrs Anderson had been given by any person having lawful authority to grant that
right. He rejected Mr and Mrs Anderson’s contention that this issue should be
determined by a Court of general jurisdiction, finding that otherwise the Tribunal
would be prohibited from applying s 65.
[11] As to issue (d), the Tribunal found that the evidence established that
FM Custodians Ltd was not aware of the existence of the deed, as Mr and
Mrs Anderson did not register it against the title, nor lodge a caveat.
[12] For these reasons, the Tribunal declared that it had jurisdiction to hear the
application for possession of the premises under s 65 of the RT Act. It declared that
Ghuznee Holdings Ltd was granted possession of Unit Q.
District Court’s decision
[13] Mr and Mrs Anderson appealed the Tribunal’s decision to the District Court.
The relevant decision is dated 9 April 2013 by Judge Sharp.
[14] The grounds of appeal were that the Adjudicator erred by finding that the
Tribunal had jurisdiction to determine whether the appellants had an enforceable life
interest; by deciding that jurisdiction was not excluded under s 5(1) of the RT Act;
by determining that the premises occupied by the appellants were residential
premises; and by finding that the appellants do not have an enforceable life interest.
[15] Judge Sharp first found that the Tribunal was correct in finding that the
premises were residential, as there was clear evidence that at the time of the hearing,
the premises were not commercial, because the retirement village was by then
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defunct. Even though the resource consent did not provide for residential use other
than as a retirement village, the Judge found that the resource consent was irrelevant
to the actual use to which the unit was being put.
[16] Judge Sharp briefly dealt with the argument that s 77(5) excludes the
Tribunal’s jurisdiction as it does not allow the Tribunal to require the Andersons to
incur expenditure in excess of $50,000. The Andersons’ argument was that as a
result of losing possession of Unit Q, the Andersons would have to spend at least
$50,000 to obtain replacement accommodation. Judge Sharp considered those
consequences to be in no way “required” by the Tribunal, so that this ground of
appeal failed.
[17] Judge Sharp then considered the argument that the Tribunal could not
consider the question of whether there was an enforceable life interest. She found
that although the Tribunal could not create legal rights or obligations, in order for the
Tribunal to determine whether a person was entitled to possession of any residential
premises, it needs to be able to delve into the evidence to make a finding of law as to
whether that person was a squatter, trespasser or somebody occupying pursuant to a
right of occupation. The Judge concluded that it cannot be right that the Tribunal
may inquire into whether someone is a squatter or a trespasser, but not into the third
category of s 65. So this ground of appeal failed.
[18] Judge Sharp finally considered the life interest issue. Judge Sharp found that
there was no knowledge or consent of the deed by FM Custodians Ltd.
FM Custodians Ltd was therefore able to pass good title to Ghuznee, pursuant to
s 105 of the Land Transfer Act 1952, free of unregistered encumbrances.
Grounds of appeal
[19] The appellants identify five grounds of appeal, which they say show that
Judge Sharp erred in law by:
(a) Finding that the Tribunal has jurisdiction to determine whether the
appellants have an enforceable life interest in Unit Q;
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(b) Finding that the premises are residential premises in terms of the
RT Act in circumstances where the second respondent’s intended use
of the premises as residential is unlawful in terms of its resource
consent;
(c) Finding that the resource consent in respect of the premises is
irrelevant to the actual use to which the unit was being put at the time
of the hearing;
(d) Finding that even if the deed of life interest had been effective
initially, the Tribunal’s decision in relation to the mortgagees not
consenting to it could stand on its own; and
(e) Failing to consider that the first respondent could be bound by a prior
mortgagee’s consent to the appellants’ life interest.
Appellants’ submissions
[20] Mr and Mrs Anderson first argue that under s 65 of the RT Act, the Tribunal
does not have jurisdiction to determine whether or not they have a valid life interest,
as the Tribunal has no expertise in this area. They submit that s 65 cannot be used
where the issue is not whether the right of occupation was granted by a person with
lawful authority to do so, but is whether the life interest deed is enforceable against a
third party.
[21] Mr and Mrs Anderson then refer to the resource consent for Unit Q, which
provides for the use of the property as “housing for the elderly development together
with a communal recreation building and manager’s residence”. They argue that the
resource consent for Unit Q is not only indicative of the nature and intended use of
the property, but that it restricts the use to which the premises can lawfully be put.
The respondents cannot lawfully use this property as a residential rental property.
[22] Mr and Mrs Anderson further submit that Judge Sharp made an error in law
by relying on s 105 of the Land Transfer Act when the provision under which the
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respondents applied for relief was s 65. In this submission, the appellants refer to the
fact that Halliwells had consented to the deed of life interest.
Respondents’ submissions
[23] The respondents submit that under the definition of “residential premises” in
the RT Act, it is the actual use of the premises as a place of residence that matters,
rather than what the resource consent says.
[24] The respondents argue that whether the Tribunal and the District Court were
right or wrong to find that Halliwells had consented to the life interest is not relevant
because the relevant mortgage was with FM Custodians Ltd. Relying on the
Supreme Court’s decision in Cashmere Capital v Carroll [2010] NZSC 123, [2010]
1 NZLR 577, they contend that the appellants have failed to establish that the
mortgagee consented to the unregistered life interest in Unit Q, so, under s 105 of the
Land Transfer Act, any such interest that might exist is not binding on them. They
also contend that in any event, the question of the whether there was consent to the
unregistered life interest is a factual issue that should not be dealt with in the appeal
to this Court.
[25] Finally, the respondents submit that ground of appeal (e) is misguided, as the
prior mortgagee’s consent is irrelevant, given that FM Custodians Ltd took out a
fresh mortgage. It is only FM Custodians Ltd’s consent that is relevant.
[26] The respondents make other points in response to the appellants’
submissions. In particular, they say that s 65 was not just enacted for the benefit of
tenants. Also, the Tribunal has the expertise to interpret its own Act, including s 65.
There is no reason for it to decline jurisdiction just because someone asserts a lawful
right to occupy.
Additional submissions
[27] As a result of questions during an exchange between bench and bar, the
respondents were given leave to file further submissions, and the appellants had the
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opportunity to respond to those. Those submissions were made: (a) to address case
law that the respondents had already referred to, but did not have copies of in Court;
and (b) to address the relevance of the Human Rights Act 1993 and the bar it places
on discrimination on the ground of age in relation to the argument that Unit Q was a
residential tenancy subject to the RT Act. The concern here was that s 12 of the
RT Act declares discrimination, as defined in the Human Rights Act, to be an
unlawful act.
[28] The resource consent for the village, which includes Unit Q, restricts
occupation to persons over the age of 55 years. This means that if the unit it to be
occupied in conformity with the resource consent, it cannot be let to anyone under
the age of 55 years, and all occupants must be above that age. Consequently,
potential tenants under this age, including persons with children, would be excluded.
This seemed to me to suggest that the legal restrictions on the use of all units in the
village might place them outside the jurisdiction of the RT Act, otherwise their
tenanted occupation would necessarily lead either to breaches of s 12 of that Act or
the resource consent. I will return to this point later in the judgment.
[29] As it happens, the parties now dispute whether they have strayed beyond the
permitted boundaries of the opportunity to file further submissions. My concern was
to ensure that, as a matter of procedural fairness, they had an opportunity to address
an issue that troubled me. I see no need to rule on the issue of whether the additional
submissions go beyond this as, insofar as they might, it will not be germane to my
decision.
Approach to appeal
[30] This appeal was brought under s 119 of the RT Act, which states:
119 Appeal on questions of law to High Court
(1) Any party to an appeal under section 117 of this Act who is
dissatisfied with the decision of the District Court Judge as being
erroneous in point of law may appeal to the High Court on that
question of law.
(2) Every appeal under this section shall be dealt with in accordance
with the High Court Rules.
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[31] It is clear from the wording of this section that this Court can only be
concerned with questions of law, so the approach identified in Austin, Nichols & Co
Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 does not apply. The
later reference in s 119(2) to the application of the High Court Rules, which would
include the rule in Part 20 that appeals to this Court are to be by way of rehearing,
cannot override the clear language of s 119(1). The procedural rules on appeals to
this Court must be tailored to meet the clear language of s 119(1).
[32] For an appeal on a question of law, the approach is that which was applied in
Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721 at [24]-[27], and
later confirmed in Vodafone New Zealand Ltd v Telecom New Zealand Ltd [2011]
NZSC 138, [2012] 3 NZLR 153 at [5]-[55]. In short, this Court is not to substitute
its own views for that of the lower Court; instead the Court must consider whether
the decisions under appeal reveal a misinterpretation and/or misapplication of the
statutory powers in the RT Act, and if not, whether what has been decided is so
misconceived that it is an unlawful decision: see Vodafone New Zealand Ltd at [50].
The respondents have argued that a substantial part of the appellants’ argument relies
on allegations of factual errors in the decisions below. The respondents are correct
that, unlike with general appeals, the right of appeal in this case does not allow
argument based on factual error. However, as was recognised in Vodafone
New Zealand Ltd and in Bryson, there are the rare occasions where “an ultimate
conclusion of a fact finding body can sometimes be so insupportable – so clearly
untenable – as to amount to an error of law, because proper application of the law
requires a different answer”: see Vodafone New Zealand Ltd at [52]. The
Supreme Court drew these principles from the well known case of
Edwards (Inspector of Taxes) v Bairstow [1956] AC 14 (HL) where the House of
Lords set out the limited circumstances in which an appellant on an appeal on a point
of law could raise questions challenging a decision-maker’s findings of fact. These
were (at [52] of Vodafone New Zealand Ltd):
a state of affairs “in which there is no evidence to support the
determination”, or “one in which the evidence is inconsistent with and
contradictory of the determination”, or “one in which the true and only
reasonable conclusion contradicts the determination”.
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[33] However, the Supreme Court in Vodafone New Zealand Ltd recognised that a
court should be slow to reach the view that the decision under appeal is based on an
untenable conclusion on the facts (at [53]):
Some caution is, however, required of the appeal court in assessing whether
the decision-maker has reached an untenable conclusion on the facts. In
Bryson this Court took notice of the observation by Lord Donaldson MR in
Piggott Brothers & Co Ltd v Jackson [[1992] ICR 85 (CA) at 92] that:
It does not matter whether, with whatever degree of certainty, the
appellate court considers it would have reached a different
conclusion. What matters is whether the decision under appeal was
a permissible option.
[34] Thus, while the bar is set high, it is possible to challenge factual findings that
come within the limited range of circumstances where this has been permitted.
Discussion
[35] Grounds of appeal one, two and three raise legal questions that go to the
jurisdiction of the Tribunal. The key question in relation to all three grounds is
whether Unit Q can properly be characterised as “residential premises” under the
RT Act, because if it cannot, that Act has no application. This means that the
Tribunal would have no jurisdiction to make a possession order under s 65.
[36] However, ground of appeal one can be viewed as doing no more than to raise
a question about whether the Tribunal has jurisdiction to determine if the interest of a
party before it amounts to a residential life tenancy, which is a more general question
of law that incorporates part of the appellants’ argument. I propose to approach
ground one in this way. This leaves the question of whether Unit Q is a residential
tenancy to be dealt with as part of ground of appeal two. As the question of the
effect, if any, that the resource consent has on the status of Unit Q as residential
premises arises under grounds two and three, I shall deal with these grounds
together. Grounds four and five overlap each other and, for this reason, I will deal
with them together as well.
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Ground of appeal one
[37] The question under this ground, then, is whether it was an error for the
District Court to find that the Tribunal has jurisdiction to determine whether the
appellants have an enforceable life interest in Unit Q? A life interest in land can be
characterised as a fixed term tenancy. In Ziki Investments (Properties) Ltd v
McDonald [2008] 3 NZLR 417 (HC), Asher J found that a life interest in a dwelling-
house that was not registered under s 115 of the Land Transfer Act came within the
definition of a fixed term tenancy under the RT Act, and so the Tribunal had
jurisdiction to make determinations regarding that tenancy. I find the reasoning of
Asher J in this regard persuasive, and concur with it.
[38] It follows that when a party resisting the application of s 65(1) asserts that no
possession order should be made because it has an unregistered life interest in the
subject residential property, the Tribunal has jurisdiction to determine if the claimed
interest is a fixed term tenancy. Depending on whether the Tribunal finds the
claimed interest to be a fixed term tenancy that is either current or extinguished, it
may in the latter case go on to make the order.
[39] I am satisfied that, in principle, once the appellants alleged they held a life
interest in Unit Q, this of itself could not exclude the Tribunal’s jurisdiction to
determine if there were grounds for making an order under s 65. Section 77 gives
the Tribunal a broad jurisdiction, which includes the authority to examine if the
nature of the appellants’ interest was a fixed term tenancy of residential premises. A
decision-making body like the Tribunal will always have the authority to determine
if the matter before it properly comes within its jurisdiction.
[40] As it turned out, the Tribunal decided that the particular interest that the
appellants held under the deed of life interest could not be characterised as a fixed
term tenancy in terms of the RT Act because such tenancies entailed payment of rent,
and under the deed of life interest, there was no obligation on the appellants to pay
rent. The definitions of “fixed term tenancy” and “tenancy” in s 2 of the RT Act
make this clear. Whilst “rent” has a broad definition in s 2, the Tribunal found that it
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did not extend to cover payment of what was no more than an administration fee of
$75 per week for outgoings and services listed in the second schedule to the deed.
[41] I agree with the Tribunal that the service fee could not be construed as rent.
The services and outgoings the company was required to provide under the deed
would not have been less than $75 per week, and so the payment of $75 was in the
nature of a contribution to actual costs, rather than consideration that was paid in
return for enjoying the right to occupy Unit Q. Thus, whatever else the appellants’
life interest might be, it is not a fixed term tenancy under the RT Act.
[42] It follows that on ground of appeal one, I find there was no error of law.
Grounds of appeal two and three
[43] The Tribunal and the District Court characterised Unit Q as residential
premises on two bases: (a) because the second respondents intend to let Unit Q as
residential premises; and (b) because Unit Q is presently being used as residential
premises by the appellants. Grounds of appeal two and three cover both bases.
Ground of appeal two queries whether it was an error to find that the premises are
residential premises under the RT Act in circumstances where the second
respondent’s intended use of the premises as residential is unlawful in terms of its
resource consent. Ground of appeal three queries whether the resource consent in
respect of the premises is irrelevant to the actual use to which the unit was being put
at the time of the hearing. Both the Tribunal and the District Court viewed the
resource consent restricting the age of the occupants and potential occupants of the
premises as having no effect on the status of the premises under the RT Act. The key
issue here is the effect, if any, that the resource consent has on whether Unit Q can
be characterised as “residential premises” under the RT Act.
[44] The Tribunal can only make possession orders for residential premises. Its
authority to make these orders is to be found in s 65:
65 Eviction of squatters
(1) Where, on the application of any person entitled to possession of any
residential premises, the Tribunal is satisfied that any other person is
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in possession of the premises as a squatter or trespasser, or otherwise
than pursuant to any right of occupation granted to that person by
any person having lawful authority to grant that right to that other
person, the Tribunal shall make a possession order granting
possession of the premises to the applicant.
(2) Nothing in subsection (1) of this section shall limit or affect the
provisions of the Trespass Act 1980, or any other remedy that may
be available to the person lawfully entitled to possession of the
premises.
(3) To avoid doubt, the Tribunal has jurisdiction under this section even
though the premises are not subject to a tenancy agreement.
(emphasis added)
[45] Secondary to the question of whether Unit Q is within the RT Act’s
jurisdiction is the question of whether the appellants are in possession of Unit Q
through a right of occupation granted by someone with lawful authority to make
such a grant. The answer to this latter question will be determined by whether the
respondents are bound by the unregistered life interest that the appellants claim.
Accordingly, I will deal with the latter question when I make determinations on
grounds of appeal four and five.
[46] The appellants’ argument in relation to grounds of appeal two and three
hinges on the contention that they occupy non-residential premises under a lawful
and enforceable deed of life interest. The respondents’ counter-argument is that the
appellants are persons in possession of residential premises otherwise than pursuant
to any right of occupation granted to them by a person having lawful authority to
make that grant.
[47] I have been unable to find any authority on the question of whether premises
that are part of a defunct unregistered retirement village, and which are the subject of
a deed of life interest can be characterised as “residential premises” for the purposes
of the RT Act. Cashmere Capital Ltd v Carroll is a case with similar circumstances:
an unregistered village was unable to meet its mortgage payments and the mortgagee
had taken possession of the secured realty. The mortgagee sought vacant possession
of the security. The occupants of the retirement village, who held lifetime rights of
occupancy of their individual units from the now defunct operate of the retirement
village, claimed that the mortgagee was obliged to recognise their interests. The
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Supreme Court determined the competing claims by reference to s 105 of the
Land Transfer Act. Nowhere in the judgment, or in those of the lower courts is there
anything to suggest that s 65 of the RT Act was thought to be applicable. It may be
that the application of that Act never came to anyone’s mind but, on the other hand,
perhaps the unavailability of that Act to the task at hand was recognised by all.
[48] To see whether the RT Act does apply to circumstances like the present
requires an assessment of this scheme and purpose. In this regard, the provisions
that might be understood to draw Unit Q within the scope of that Act need to take
their “meaning from the relevant context and purposes of the Act”: see Vu v Ministry
of Fisheries [2010] NZSC 162, [2011] 3 NZLR 1 at [10].
[49] According to s 2(1) of the RT Act, “residential premises means any premises
used or intended for occupation by any person as a place of residence”.
“[C]ommercial premises” are defined as premises that are not residential premises.
Section 2 does not identify any other type of premises. In cases where premises
have both residential and commercial uses, s 2(3) provides:
For the purposes of this Act, where any premises that are subject to a legal or
an equitable lease are used for both commercial and residential purposes, the
premises shall be deemed to be residential premises unless it is proved that
the premises were let principally for purposes other than residential
purposes.
[50] Section 4 provides that the RT Act is generally to apply to every tenancy for
residential purposes except as specifically provided. Section 5 excludes from the
RT Act’s cover a series of expressly defined arrangements that include occupancy.
None of the s 5 exclusions apply here.
[51] Section 77 gives the Tribunal the jurisdiction to determine if any premises are
“residential premises”.
[52] The disputed relationship here is between the mortgagee/transferee of the
mortgagee sale and the appellants, which only arose after the company defaulted on
the mortgage. After that, the retirement village became defunct and by the time of
the proceedings, the only use that was being made of the land was the appellants
using Unit Q as a residence. Practically speaking, this fits the definition of
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“residential premises” in s 2, as does the intention of the second respondent to let
Unit Q and the other units in the village as residential premises. However, this literal
interpretation of “residential premises” would lead to a troubling conundrum.
[53] The resource consent requires that none of the units in the village be occupied
by persons under the age of 55 years. The age restriction was originally proposed to
be registered as a restricted covenant on the certificates of titles of the unit titles
associated with the village. That does not seem to have occurred. The title for
Unit Q does not record a restrictive covenant. I have not seen copies of the other
certificates of title for the other units. However, everyone accepted at the hearing
that the resource consent imposing the age requirement exists. It is referred to in a
valuer’s report that was in evidence before the Tribunal and the District Court. The
application for resource consent dated 25 October 1988 that was made to the
Manukau City Council was made on the basis that occupancy would be restricted to
persons aged 55 years and over was in evidence, as was that Council’s grant of
consent dated 29 May 1989, which I was told incorporated the terms of the
application. The strongest evidence of the age restriction imposed by the consent is
to be found in a letter from the Auckland Council, dated 6 May 2013, which makes it
clear that the resource consent condition imposing the age restriction is still in force.
Furthermore, the letter states that occupants of the units who were aged under 55
years have been required to vacate the units. The letter goes on to record that some
of the affected tenants have found difficulty obtaining alternative accommodation.
Neither the Tribunal nor the District Court made any finding in relation to the
resource consent as they each found it to be irrelevant.
[54] The appellants are over 55 years, so at the moment their occupation does not
breach the resource consent. However, in principal, the only way that the units,
including Unit Q, can be lawfully occupied in terms of the resource consent is if
persons under the age of 55 years are excluded. Yet to exclude persons on that
ground would be a clear breach of s 12 of the RT Act, which prohibits discrimination
on the grounds set out in the Human Rights Act 1993, one of which includes the age
of the tenants or potential tenants (see ss 21(i) and 53 of that Act). Section 12(1) of
the RT Act deems such discrimination to be an unlawful act. Section 109 provides
for the consequences of the commission of acts that the RT Act deems unlawful.
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[55] The Auckland Council letter of 6 May 2013 evidences the practical outcome
already of discrimination in contravention of s 12, namely that occupants under the
age of 55 have been required to vacate units at the village. The use of the units in the
village for general residential purposes has struck at a fundamental tenet of the RT
Act, which in part serves as a protection against discrimination. Indeed, the
discrimination against the age of the occupants of residential units existed in this
Act’s predecessor, the Rent Appeal Act 1973, s 24 of which made it an offence to
refuse to let residential premises on the ground that they would be occupied by
children. Parliament has thus shown a long-standing abhorrence of discrimination of
tenants on the grounds of age.
[56] The appellants occupy what was the manager’s unit. There is nothing in the
resource consent to suggest that the manager of the village also had to be under the
age of 55 years, and I find it hard to see how the occupancy of that unit would also
initially have been subject to an age restriction. However, once the unit ceased to be
occupied by the manager of the village, I can see no reason why it would not also
become subject to the same age restrictions as the other units in the village when it
comes to their general occupation. In this regard, I read the evidence relating to the
age restriction in the resource consent as applying to all units that were to be
occupied by persons other than the manager of the village.
[57] As matters presently stand, I cannot see how Unit Q, or any other unit in the
village for that matter can be lawfully used as residential premises by any person and
still meet the requirements of the resource consent. This would be a reason for
finding that until the resource consent is varied to remove the age restriction, the
premises could not be let as residential premises. However, the fact remains that the
appellants are already occupants of Unit Q. The respondents want to remove them.
They have chosen to rely on the Residential Tenancies Act to achieve this end.
However, should a unit in a defunct retirement village be viewed as residential
premises simply to provide the basis for authority under s 65?
[58] I have trouble seeing Unit Q as residential premises that come under the
RT Act for the purposes of s 65 when, in principle, the residential occupation of
those premises must either breach s 12 or the resource consent. I do not see the age
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of the present occupants, who are aged over 55 years old, as offering any solution
because to rely on this factor would mean that whether the premises were seen as
residential or not rested on no more than the age of the current occupants. I consider
that more than this is required. Furthermore, such an approach does not assist with
answering ground of appeal two, which is based on the second respondent’s intended
use of the premises bringing them within the meaning of “residential premises” in
s 2.
[59] The respondents are not without other remedies. Section 105 of the
Land Transfer Act provides that in the context of a mortgagee sale, mortgagee and
the purchaser take clear title free of any estates or interests other than those
contained in instruments having priority over the mortgage, or to which the
mortgagee is bound by reason of having giving his consent. Thus, the respondents
could bring proceedings in this Court for possession of Unit Q.
[60] At the core of the questions raised by these two grounds of appeal is the
question of whether the definition of “residential premises” in s 2 should be read
literally to mean any premises that are in fact used or intended to be used by any
person as residential, notwithstanding any law to the contrary, or whether the
purpose of the legislation is better achieved by adopting a constrained meaning of
“residential premises” that requires the use or intended use of such premises to be
otherwise lawful. On the latter view, because Unit Q could not be lawfully occupied
by any person as a residence, but only by persons over 55 years of age, it would fall
outside the definition of residential premises in s 2. This would mean the Tribunal
had no jurisdiction to make the orders under s 65. The respondents would have to
bring proceedings in this Court relying on s 105 of the Land Transfer Act to regain
possession of Unit Q.
[61] The long title of the Residential Tenancies Act shows that it was intended “to
reform and restate the law relating to residential tenancies, to define the rights and
obligations of landlords and tenants of residential properties, to establish a tribunal to
determine expeditiously disputes arising between landlords and tenants …”. In
Ziki Investments, at [52], Asher J referred to the RT Act’s long title as reflecting:
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... the intention expressed by the Minister of Housing when introducing the
Bill that it would replace the “law of the jungle in tenancy relations with
firm, fair, and readily enforceable rules governing the behaviour of both
parties. It clearly defines the rights and responsibilities both of landlords and
of tenants.”: (1985) New Zealand Parliamentary Debates 6896
(Hon PB Goff).
[62] At [53], Asher J referred to an earlier decision of this Court in Anquetil v
North Canterbury Nassella Tussock Board HC Christchurch AP93/89, 30 October
1989, in which the view was expressed that the RT Act was designed to protect
tenants, although Asher J considered that it served a dual purpose of protecting both
landlord and tenant:
The purpose of the Act was also considered in Anquetil v North Canterbury
Nassella Tussock Board HC CHCH AP93/89 30 October 1989, where
Holland J stated:
There cannot be the slightest doubt that the Residential Tenancies
Act was designed substantially to protect tenants and any cases of
ambiguity should be interpreted in that light.
With respect to that view, I consider it is clear that the drafters of the Act
sought to protect both the landlord and the tenant by fair and readily
enforceable rules, and not just the tenant. The Court should strive to find a
solution that is fair to both a reasonable landlord and a reasonable tenant,
rather than to the tenant alone.
[63] Then at [54], Asher J drew support for his view of the RT Act’s scheme and
purpose from the presence of s 85, which, particularly at s 85(1), eschews a
formalistic approach to the application of the RT Act’s provisions:
85 Manner in which jurisdiction is to be exercised
(1) Subject to the provisions of this Act and of any regulations made
under this Act, the Tribunal shall exercise its jurisdiction in a manner
that is most likely to ensure the fair and expeditious resolution of
disputes between landlords and tenants of residential premises to
which this Act applies.
(2) The Tribunal shall determine each dispute according to the general
principles of the law relating to the matter and the substantial merits
and justice of the case, but shall not be bound to give effect to strict
legal rights or obligations or to legal forms or technicalities.
(emphasis added)
[64] Against this background, I consider that the question of whether the RT Act
should be interpreted as only applying to residential premises that can be lawfully
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used as such by any person is finely balanced. On the one hand, legislation which
seeks to find fair and reasonable solutions for tenants and landlords should be
interpreted in a way that best meets that objective. Thus, to remove its application
from circumstances where a tenant is unfortunate enough to find himself or herself
occupying premises that should not be used for a residential purpose under some
other law may deprive someone in need of the assistance and protection that the
RT Act is intended to provide. Seen in this light, there is much to be said for finding
that the RT Act should apply to any premises that are factually used or intended to be
used for a residential purpose.
[65] On the other hand, a literal interpretation of “residential premises” would
invoke the full application of the RT Act, as it is hard to see how the RT Act could be
understood to apply in some respects but not in others. Thus, this interpretation
would give a measure of legitimacy to letting arrangements and transactions that are
illegal under other enactments. It would allow landlords who let premises as
residential in contravention of other enactments, such as the Resource Management
Act, to be able to use remedies provided by the RT Act against those tenants. It
would also mean that if any of the former tenants in the village, who were given
notice terminating their tenancies on the ground they were under 55 years old (see
[53] and [55]), had complained to the Tribunal that this amounted to age
discrimination under s 12, the Tribunal would have either had to rule against this
discrimination in the face of the Council’s requirement for compliance with the
resource consent, or to tolerate this breach of s 12. These unsatisfactory outcomes
demonstrate how unworkable it would be if the RT Act were to be interpreted in a
way that saw it being applied to any situation where premises were factually in use
as residential premises and no regard was paid to their legally permitted use.
[66] If the meaning of “residential premises” is read in a way that requires the use
of such premises to be lawful in terms of not contravening other enactments that
preclude their use for residential purposes, the overall purposes and policy objectives
of the RT Act remain intact. There is no prospect of landlords seeking to use the
provisions of this Act in circumstances where the subject premises are not a
permitted residential use. It needs to be remembered that there is usually good
reason why premises do not meet consent standards for residential use. In this case
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for example, the application for resource consent noted that there was a “limited
amount of outdoor courtyard space”, and went on to note the age restriction and the
use of the units as a retirement village, which presumably meant that persons of the
target age group had no need of the requisite amount of outdoor space required for
general residential use. In other cases, the buildings themselves may not comply
with the building standards for residential buildings (for example, if redundant
warehouses or offices were to be used for residential purposes). I see no reason why
persons who let buildings that cannot lawfully be used for residential
accommodation should be able to rely on the RT Act. Indeed, I think such outcomes
would be inimical to the purpose and policy of this legislation.
[67] There is no risk that constraining the scope of the RT Act would create a
group of essentially second-class tenancies, by reason of falling outside the cover of
this Act. Section 137 provides for prohibited transactions in a broad way. It
prohibits transactions that have the effect, either directly or indirectly, of defeating,
evading, or preventing the operation of any of the provisions of the RT Act, and
provides remedies for recovery of money paid under such transactions:
137 Prohibited transactions
(1) No person shall—
(a) Enter into any transaction, or make any contract or
arrangement, purporting to do, whether presently or at some
future time or upon the happening of any event or
contingency, anything that contravenes or will contravene
any of the provisions of this Act; or
(b) Enter into any transaction or make any contract or
arrangement, whether orally or in writing, or do anything,
for the purpose of or having the effect of, in any way,
whether directly or indirectly, defeating, evading, or
preventing the operation of any of the provisions of this Act.
(2) Requiring any person to enter into any transaction, or to make any
contract or arrangement, in contravention of subsection (1) of this
section is hereby declared to be an unlawful act.
(3) Subject to subsection (4) of this section, any provision of any
transaction, contract, or arrangement entered into in contravention of
subsection (1) of this section that would have the effect of, in any
way, whether directly or indirectly, defeating, evading, or preventing
the operation of any of the provisions of this Act shall be of no
effect.
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(4) All money paid and the value of any other consideration for the
tenancy provided by the tenant (not being rent lawfully recoverable
by the landlord) or, where the transaction takes the form of an option
to purchase the premises to which the transaction relates, by the
person on whom the option to purchase is conferred, shall be
recoverable as a debt due to the tenant or prospective purchaser by
the landlord.
[68] I consider, therefore, that the answer to concerns about the prospect of
residential tenancies for premises that cannot lawfully be used as such occurring
outside the cover of the RT Act is that, under ss 137(1) and (3) they would be likely
to be viewed as an arrangement that either directly or indirectly had the effect of
defeating, evading or preventing the operation of the RT Act. Therefore, they would
be prohibited by s 137, and so the full range of penalties and powers in s 137 would
be available to stop such arrangements.
[69] I am satisfied, therefore, that the purposes and policy of the RT Act will not
be jeopardised by reading the definition of “residential premises” in a way that
recognises the influence the resource consent in this case has on the use of the
subject premises. I also consider that this interpretation is consistent with the
general public interest of ensuring that illegal conduct is not profitable.
[70] For all of the above reasons, I find that the context and purpose of the RT Act
requires the meaning of residential premises in ss 2 and 65 to be read as referring to
premises that may be lawfully used for residential purposes by any person. Section
65 in my view was never intended to provide a remedy for persons in the position of
the respondents to remove the occupants of a unit in a defunct retirement village.
[71] The respondents referred me to case law where this Court had considered
attempts to resist the exercise of either s 65 of the RT Act, or the provisions of the
Land Transfer Act entitling either a mortgagee or bona fide purchaser for value to
take possession of land. In Chmielowski v Fort Braggs Properties Limited HC
Auckland CIV-2005-404-4618, 15 December 2005, the plaintiff argued that s 65 of
the RT Act was trumped by the Treaty of Waitangi and Māori customary law.
Similar reliance on the Treaty of Waitangi and Māori customary law was advanced in
Rewi v Hannah HC Whangarei CIV-2009-488-501, 13 August 2009 as a bar to a
purchaser of non-residential land exercising his rights to possession under the
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Land Transfer Act. These cases are distinguishable from the present case as unlike
here, they did not involve the Court being asked to resolve a potential conflict
between two enactments of equal status in the legislative hierarchy. I have also
considered the excerpts from the texts on land law and on residential tenancies to
which the respondents referred me. None of them deal with the issue of concern in
this case. I considered Kahi v Lucas [1996] BCL 1235, 23 September 1996, and
Main v Main [2007] NZCA 306, which are authorities referred to in
David Grinlinton Residential Tenancies Law and Practice (4th
ed, LexisNexis,
Wellington 2012) at 2.7.3(b) with a view to seeing whether in the discussion therein
on recognition of mixed use tenancies (residential and commercial) there was any
reference to a requirement that the residential use be lawful. There was not. In
Kahi, the Court’s description of the premises suggests that the part that was
considered to be residential was legally capable of such use. In Main v Main, where
the Court of Appeal upheld the finding the premises were not residential, this was
based on a factual assessment of their use.
[72] The legal concerns that are addressed in this appeal regarding the proper
interpretation of “residential premises” in the RT Act do not appear to have been
addressed before. Counsel did not refer me to any case on point and I have been
unable to find any.
[73] It follows that in relation to ground of appeal two, I find that the second
respondent’s intended use of the premises cannot bring them within the definition of
“residential premises” because the resource consent makes it unlawful for any person
to use these premises as residential premises. The findings of the Tribunal and the
District Court were in error in this regard.
[74] In relation to ground of appeal three, I find that it was an error of law to find
that the resource consent was irrelevant to the actual use to which the hearing was
being put at the time of the hearing.
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Grounds of appeal four and five
[75] Grounds of appeal four and five raise questions about the extent to which a
mortgagee in possession, and a purchaser of a mortgagee sale, can be bound by the
type of life interest claimed by the appellants when it comes to the exercise of s 65.
[76] The answers to the questions in grounds of appeal two and three dispose of
this appeal. However, the resolution of the competing interests of the appellants and
the respondents in terms of whether the right legal test was applied in determining
the question of whether respondents are bound by the interest the appellants claim in
Unit Q is important in itself.
[77] Section 58 of the RT Act provides circumstances where a mortgagee or other
person becomes entitled to possession of tenanted residential premises.
Section 58(1)(a) provides that the tenancy shall continue, notwithstanding this event;
under s 58(1)(b), the mortgagee, or other person is deemed to have acquired the
landlord’s interest; and under s 58(1)(c), the mortgagee, or person in possession has
the same rights as the landlord had under the tenancy agreement. Section 58(1)(d)
provides that in relation to the ability to terminate a fixed term tenancy, the
mortgagee, or other person in possession, has the same rights of termination as does
a landlord of a periodic tenancy, which is a tenancy of indefinite duration that is
terminable by the giving of notice under s 50. This means that unlike the landlord
who entered into the fixed term tenancy, a mortgagee, or other person in possession,
will not be bound by the full term of the fixed tenancy and can instead end it by
giving the requisite period of notice. However, the effect of subsection (d) is
counterbalanced by subsection (e), which provides that (d) shall not apply where the
mortgagee or other person is bound by the tenancy or consented in writing to its
creation.
[78] Section 58(2) provides that subs 1 shall apply, notwithstanding anything to
the contrary in the Property Law Act 2007, or the former legislation (where
relevant), or the Land Transfer Act
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[79] In Ziki Investments, Asher J found that the effect of s 58(2) of the RT Act is to
trump the indefeasibility provisions of the Land Transfer Act. Accordingly, when the
contest is between a mortgagee, or other person entitled to possession, and a tenant
under a fixed term tenancy, the competing interests are to be resolved in accordance
with s 58, and not by s 105 of the Land Transfer Act: see [55]-[62] of
Ziki Investments. At [56], Asher J said:
On this interpretation, “bound” therefore means “bound” under law or
equity, putting to one side the doctrine of indefeasibility of title contained in
the Land Transfer Act.
[80] However, in this case, there is no fixed term tenancy, which means that s 58
of the RT Act and the reasoning of Asher J in Ziki Investments are not applicable.
There is nothing else in the RT Act that would exclude the operation of s 105 of the
Land Transfer Act. Accordingly, I consider that the Tribunal and the District Court
were right to assess the competing claims of the parties’ rights in terms of s 105 of
the Land Transfer Act when it came to determining the legal consequences of the
mortgagee sale. The appellants’ inability to show that they held an instrument
having priority over the mortgage, or by reason of the consent of the mortgagee
means that under s 105, any rights of occupation that they may have had were
extinguished. However, whilst the enquiry under s 105 of the Land Transfer Act was
the correct approach because Unit Q is not “residential premises” (for the reasons
given in relation to grounds of appeal two and three), the appellants have succeeded
in establishing there is an error of law raised in grounds four and five.
General comment
[81] The appellants have succeeded on grounds of appeal two and three. Their
success in grounds of appeal four and five follows their success on the earlier
grounds of appeal. However, the determination I have made on those grounds of
appeal rests on the resource consent restricting the age of the occupants of units in
the village. Because this consent was seen as irrelevant in the Tribunal and in the
District Court, it was not the subject of careful examination. It may be that the
factual position regarding the consent is not as presented to me.
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[82] Under r 20.19(1)(b)(i) of the High Court Rules, after hearing an appeal, the
Court may direct the decision-maker to rehear the proceedings.
[83] As I have found in ground of appeal one that the Tribunal has jurisdiction to
determine if a claim is within its jurisdiction, it can proceed to hear and determine if
the resource consent is as restrictive as the available evidence shows it to be. If it is,
that will remove any further prospect of the Tribunal making a possession order
under s 65.
[84] For this reason, I propose to deliver this judgment as an interim judgment. In
terms of what happens next, I can simply set aside the orders that followed the
decisions of the Tribunal and District Court, or, in addition, send the matter back to
the Tribunal to be reheard and reconsidered in accordance with the law as I have
found it to be. I consider that before I decide which outcome to adopt, the parties
should have the opportunity of being heard.
[85] It is appropriate that I refer to an issue that arose in the course of the hearing
regarding fresh evidence filed by the appellants. An affidavit sworn on 6 June 2003
by Mr Anderson was filed in this Court for this appeal. The appellants made no
written application before the hearing to adduce fresh evidence on appeal. I have not
read the affidavit carefully, but the impression I gained from it is that Mr Anderson
purported to give evidence which related to the nature of the resource consent. I
doubt that he is competent to give evidence on this topic, as it may require an
expression of expert opinion. The respondents opposed the Court taking any fresh
evidence into account.
[86] I accept that the evidence given by Mr Anderson in his affidavit of 6 June
2013 is objectionable and inadmissible for the reasons I have already referred to.
However, in this affidavit, Mr Anderson refers to the letter from the Auckland
City Council dated 6 May 2013, which sets out the Council’s views on the
application of the resource consent. The letter could not have been produced at the
earlier hearings in the Tribunal and the District Court, as it did not then exist. I
consider that the letter is in the nature of updating evidence, which the Court on
appeal is more likely to admit. It is cogent and material, as it confirms the other
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evidence on the effect of the resource consent. Accordingly, I have decided to admit
this letter, which is annexed as exhibit “C” to Mr Anderson’s recently filed affidavit;
it is the one piece of new evidence that I have taken into account. Apart from this
letter, the views I have reached have been based solely on the factual positions as
outlined in the decisions of the Tribunal and the District Court, as well as evidence
that was before them, which was contained in the two common bundles that were
prepared for this appeal.
[87] I direct that the appellants have 15 working days to file submissions on
whether or not this matter should be sent back to the Tribunal for rehearing.
[88] The respondents have 15 working days from receipt of the appellants’
submissions to file their submissions in response.
[89] The appellants then have five working days from receipt of the respondents’
submissions to file any submissions in reply.
Result
[90] The appellants have established the existence of an error of law in grounds of
appeal two to five.
[91] The parties have leave to file memoranda on costs.
Duffy J