Lessee's $1.15m bank guarantee duty does not hinge on premises' suitability, ruling finds
The High Court has refused an airport tenant leave to appeal, finding that a bank guaranteeing its rent would not step into any security held by the landlord.
In 3i Southern Cross Limited v Christchurch International Airport Limited [2026] NZHC 2781, handed down on 11 September 2026, the court rejected the tenant's challenge to a July ruling refusing to convert its case into an ordinary proceeding to allow discovery and cross-examination.
3i Southern Cross Limited (Southern Cross) took over the lease of a Christchurch warehouse after the previous tenant went into liquidation. The landlord, Christchurch International Airport Limited (the airport), required a $1.15 million bank guarantee as a condition of the transfer. Southern Cross did not provide it. When the airport gave notice in March 2026 of its intention to cancel the lease, Southern Cross applied for relief against forfeiture.
Southern Cross argued that building defects impeded its ability to obtain the guarantee. It claimed that the lease, expressly or impliedly, required the building to be fit to receive one. The airport relied on the building's code compliance certificate and warrant of fitness, as well as lease clauses on entire agreement and excluding any warranty of suitability.
Seeking leave, Southern Cross relied on s. 53B of the Property Law Act 2007, which entitles a guarantor who pays another's debt to the creditor's securities. It argued that the Personal Property Securities Act 1999 (PPSA) deems a lease of more than one year a security interest.
The court found no arguable error of law. It held that the PPSA did not apply because the leased premises were not personal property. "The lease of a commercial building does not secure payment of the rent under that lease. The lease creates that obligation," the court said.
Accepting UK authority cited by the airport, the court found that a landlord's remedies, such as forfeiture by re-entry, were not securities that passed to a guarantor who paid rent arrears. The airport held no security that a paying bank could take over.
The court said that the guarantee obligation did not depend on the premises being suitable. It accepted the airport's submission that the airport was "holding Southern Cross to the contract it made."
The court noted that Southern Cross had recently defaulted on an undertaking to pay rent on time, though only by a number of days. It had also filed the leave application one day late, although the court extended time. The court said that the conversion bid and the leave application both had "the appearance of an attempt to delay the dispute being heard."
