Food court exit sparks legal fight

A landlord who bought three commercial units at a food court in Newmarket, Auckland, tried to sue the seller after one of the tenants abandoned the property.

Auckland-based firm Three Five, owned by Mark and Jennie Engel, took the action in the High Court at Auckland under the Contract and Commercial Law Act and the Fair Trading Act.

The Engels, via Three Five, bought the commercial property for $750,000 in the food court area of the Rialto Centre at the end of June 2017 from Napolian Liquor.

Two of the units were tenanted. One was leased to Turkish food operator Alex Enterprises, which quit the premises in July 2017.

Initially Three Five pursued Alex Enterprises, which said it cancelled the lease on unit 51 because it had been misled about the income able to be generated. Three Five was unable to lease the unit and a year later sold the property for $700,000.

Three Five and Mark Engel then sought damages from the seller of the property, Napolian.

In court evidence, Mark Engel said he was put onto the property by his ANZ account manager, who provided him with Napolian’s agent’s information memorandum about the rent payable on the units.

He claimed the information was false and Alex Enterprises had put Napolian on notice about the inability to generate income in early June 2017.

Engel said he was unaware of any prospect that Alex Enterprises would cancel the lease.

Napolian’s lawyer told the court that Alex Enterprises gave no notice of cancellation, and was paying full rent. The result, Justice Pheroze Jagose said in his ruling, was that Three Five ‘‘has no admissible evidence of the ‘falsity’ ’’.

He concluded that the way the tenancy was represented in the information memorandum was true, and Engel had failed to inquire into the prospects of the tenancies despite claiming to have extensive experience with commercial properties.

The evidence was unclear about when Engel was given the information by his ANZ account manager, meaning it might not be possible to blame Napolian for making representations at all, Justice Jagose said.

He dismissed the claims against Napolian, concluding that Three Five should have made inquiries about the tenancies.