With its Christchurch site lease expiring in August 2016, Fletcher Steel and landlord Gama Foundation were poles apart on Fletcher’s contractual obligations for end-of-lease repairs and reinstatement. Fletcher chose to simply vacate the site it had occupied for four decades, leading to a legal dispute over liability for end-of-lease costs.
Gama Corporation is a non-profit philanthropic charity set up by Grant and Marilyn Nelson. The Court of Appeal was told representatives of Gama and Fletcher Steel met in the year before Fletcher’s planned site departure, achieving limited agreement on required repairs. Little of even this work was done before Fletcher departed. Repair work would have disrupted Fletcher’s daily on-site operations.
Gama subsequently carried out the work, at a cost of $1.75 million. Fletcher reimbursed $900,000 of this cost, accepting it was a lease liability. It refused to pay the balance, saying Gama was trying to have Fletcher pay for reinstatement beyond lease requirements.
The two went to arbitration, as required by their lease. The arbitrator required Fletcher to pay a further $320,000 saying this covered work Fletcher should also have carried out. Fletcher paid the extra.
Gama Foundation sued, claiming the arbitrator got it wrong. Gama said it was entitled to the full $1.75 million. By failing to reinstate, Fletcher was in breach of the lease and the full $1.75 million was recoverable as costs incurred in mitigating the breach of contract, it said.
The Court of Appeal said the arbitrator got it right. As tenant, Fletcher was liable to pay only for the reasonable cost of repair and reinstatement work which it should have carried out.
Gama Foundation v. Fletcher Steel Ltd – Court of Appeal (15.06.23)
23.090