Archive | Leases

Appeal Court takes none of 5 claimed lease renewals seriously

Published 13 July 2006


The Court of Appeal has dismissed Mission Bay Pharmacy Ltd’s claim that a new lease entitled it to stay in its shop until September 2011 and affirmed a 14-month-old High Court order to leave, taking with it all partitions, fixtures, fittings & signage.



The Appeal Court decision was awaited to determine the outcome of landlord Drive Holdings Ltd’s application in the Auckland High Court to have the pharmacy company wound up.


The Appeal Court’s reasons were delivered by Justice Robert Chambers on 29 June and the liquidation application was due back for hearing on Monday 10 July at 2.15pm. The company was placed in liquidation at noon that day, with Geoffrey Hatten (Markham MRI) appointed liquidator.


The Appeal Court ordered Mission Bay Pharmacy (Bhaskar Musuku) to pay Drive’s appeal costs on an indemnity basis, in accordance with the lease.


Justice Chambers said Drive Holdings (Darryl Henry & Haydn Staples) told Mission Bay Pharmacy on 12 January 2005 it required vacant possession when the lease terminated on 30 April. But in February Mission Bay Pharmacy told Drive it didn’t intend to deliver up vacant possession because the parties had entered into a binding agreement to enter into a new lease.


Drive said there was no such agreement and began High Court proceedings to get vacant possession, including using the summary judgment procedure.


That application went to court on 27 April 2005 and Justice Mark Cooper ruled on 27 May that there was no new lease agreement.


Justice Chambers said Mission Bay counsel Gregory Thwaite submitted a new agreement had been entered into on one or other of 5 dates – an oral agreement on 20 November 2003 or a written agreement the same day,, and agreements on 16 August 2004, 1 September 2004 & 6 October 2004.


“The mere fact that Mr Thwaite had to pitch the argument with so many possible agreements is, of course, not a good sign for Mission Bay: how can there be a sufficiently certain agreement if the party alleging it is so uncertain as to when it was made? Further, as Mr Thwaite acknowledged, the terms of the agreement would be different depending on which date one plumped for.”


Backtracking, Justice Chambers said the parties had been in dispute over various matters since 2001, with Mr Musuku complaining frequently over redevelopment work by Drive’s parent company, Retail Holdings Ltd. In February 202 he sought $150,000 compensation for business disruption & breach of the covenant of quiet enjoyment.


Mr Henry wrote back that this claim had to be dealt with under the existing lease before any further discussion on potential extension of the shop. When the final rent review came up in 2003, Mr Henry made on offer to settle the dispute and grant Mission Bay a new 6-year lease term from 1 October 2003. Mr Musuku made a counter-proposal, and another member of the Musuku family said agreement was reached at a 20 November meeting at Drive’s office. Justice Cooper dismissed any oral agreement at that meeting, saying both sides were insisting on formal agreements being written.


Justice Cooper dismissed as specious Mr Thwaite’s arguments that a document written later that day was binding, especially as it was headed “without prejudice” and said at the foot it wasn’t legally binding.


On 30 July 2004 Mr Musuku applied to Auckland City Council for consent to convert 2 residential units at 9 Patteson Avenue – next to the shop he rented from Drive – into “health care services including doctors’ surgeries & a pharmacy”. Mr Musuku had owned the adjoining property for 2 years but said nothing to Drive about this application.


When Drive opposed the application later that year, Mission Bay’s counsel told the commissioners Mr Musuku was seeking to move the pharmacy next door and they could expect Drive to be annoyed at losing a tenant.


Justice Chambers recorded: “It is certainly of great significance that Mission Bay’s assertions that it had entered into an agreement to lease with Drive surfaced only after the commissioners turned down the resource consent application. We confidently draw the inference that, had the resource consent been granted, there would have been no suggestion on Mission Bay’s part that it was already contractually committed to rent Drive’s premises until 2011.”


Both courts rejected Mission Bay’s third & fourth claimed agreements, and Justice Chambers accepted Drive’s position that the fifth one hadn’t been advanced in the High Court.


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Attribution: Judgment, public notice, High Court hearings, story written by Bob Dey for this website.

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