Audio Essentials Limited v Tripathi
[2017] NZHC 2864
•23 November 2017
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV2016-004-000616 [2017] NZHC 2864
BETWEEN AUDIO ESSENTIALS LIMITED
Plaintiff
AND
UMANG TRIPATHI First Defendant
VARUN CHAWALA Second Defendant
VIKAS ROHILLA Third Defendant
Hearing: 13 November 2017 Appearances:
K J Crossland for the Plaintiff
M Norris for the First DefendantJudgment:
23 November 2017
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
23.11.17 at 9:30am, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
AUDIO ESSENTIALS LIMITED v U TRIPATHI U TRIPATHI, V CHAWALAH AND V ROHILLA [2017] NZHC 2864 [23 November 2017]
Background
[1] This claim is about guarantees provided by the defendants for the payment of rent in regard to the lease of a property at 340 Ponsonby Road (the property) by the plaintiff to Yoghurt Story Ponsonby Limited (Yoghurt Story). The defendants agreed with the owners of Yoghurt Story to operate their franchise from the plaintiff’s premises.
[2] Those arrangements were subject to the terms of a deed of lease dated 1 August
2013. By their guarantees the defendants agree to be bound by the lease covenants. The defendants agreed together with Yoghurt Story to pay the plaintiff directly for rent as it became due.
[3] On 29 May 2014, the plaintiff served notices of intention to cancel the lease for failure to pay outgoings totalling $11,616.41. A copy of that notice was delivered to each of the defendants as guarantors. On 14 June 2014 those arrears were paid.
[4] A further notice was served on 25 June 2014 in respect of outgoings totalling
$9,774.58. On 19 September 2014 those arrears were paid.
[5] On 28 October 2014, a further set of notices were served in respect of arrears of rent and outgoings totalling $7,251.08. Those arrears were never paid.
[6] Consequently, on or about 5 December 2014 the plaintiff terminated the lease, and re-entered and took possession of the property.
The plaintiff ’s original claim
[7] The plaintiff claims there was unpaid rent, legal costs and accrued interest, but also that there was an “ongoing liability to the plaintiff for losses… sustained by the plaintiff pending re-letting of the property to a replacement tenant”.
[8] The plaintiff says that on or about 1 September 2015 a new deed of lease for the property was entered into with the replacement tenant, House of Travel.
[9] In addition to the sum of $25,438.74 claimed for rental arrears, outgoings and legal costs to 4 December 2014, the plaintiff claimed the sum of $134,412.47 “through the Property not being able to be re-let until 1 September 2015”.
[10] The plaintiff ’s claim was filed in the Auckland District Court. By his defence filed in that Court, Mr Tripathi admitted he and the other two defendants operated a franchise owned by Yoghurt Story Ponsonby Limited under the name “Yoghurt Story” from the plaintiff’s premises. He also admits executing the lease as a guarantor. His defences included claims of having been forced to sign that guarantee; of the plaintiff’s failure to fix building leaks; and the landlord’s failure to re-let the premises promptly.
Mr Tripathi’s first statement of defence
[11] Regarding his claim of having been forced to sign the lease agreement, he pleads, inter alia:
(a) He had met the directors of Yoghurt Story on or about 20 April 2013 and they advised they had negotiated the rent and outgoings for premises in Ponsonby Road.
(b)He was told by them that he would only have to sign a pre-lease agreement and would not have to sign the lease as a guarantor; that Yoghurt Story would be the tenant and that he would sub-let the premises from that company.
(c) He signed the pre-agreement on 23 May 2013 and was then advised by the Yoghurt Story directors that he could start construction work on the premises.
(d)On 22 July, he paid $74,750 for the construction, shop fit-out and joinery works, and says he invested a further $60,000 as well.
(e) The Yoghurt Story directors told him he would have to pay the rent and outgoings to the plaintiff until the directors had completed a sub-lease for him to sign.
(f) He opened the premises on 15 August 2013 but had not seen any lease agreement but says he was told by the Yoghurt Story directors that they had executed a lease.
(g)On 5 December 2013, he received a copy of an email from the plaintiff to a Yoghurt Story director noting the deed of lease sent to the director on 15 August 2013 had still not been executed; and that email referred to an earlier email from the plaintiff to the director on 30 October 2013 threatening legal action and recovery of the premises.
(h)On 19 December 2013, he says the Yoghurt Story directors “coerced, compelled and pressurised” him to guarantee the lease and threatened that the business would be shut down otherwise, and that is why he signed the lease – as he notes, five months after he paid for his investment.
[12] Mr Tripathi’s other defences include a claim that the plaintiff failed to keep its leased premises in good order and repair and waterproof as by its lease obligations it was bound to if appropriate notice in writing was delivered to the landlord and if the landlord did not within a reasonable time take appropriate steps to remedy the defects notified. He identified three occasions when he gave notice of water leaks which he said affected sales and caused losses, and he says the plaintiff failed to take action when the leaks were reported.
[13] The second additional element of defence focusses upon the plaintiff’s claims for additional costs incurred after the plaintiff re-entered the premises on 5 December
2014. He believes he was not contractually bound to pay those additional costs.
[14] Finally, that statement of defence notes his intention to join Yoghurt Story’s receivers and directors as third parties to the proceeding.
Mr Tripathi’s amended defence and crossclaim/set off
[15] Mr Tripathi’s initial statement of defence was filed in the Auckland District Court on or about 21 September 2016. On 29 May 2017, he filed in that court an amended statement of defence and cross-claim/set off. Because of the counterclaim amounts claimed, the proceeding was transferred to the High Court.
[16] The counterclaim/set off is pleaded as follows:
Negligence
Particulars of loss
The leaking from the ceiling, which the Plaintiff could not stop, led to flooding. This flooding was ongoing and affected sales, as the leaking was dripping onto seats in the retail floor. Of the 15 seats, inside, all were affected but eight were directly affected by the dripping water. The drop-in ice cream sales meant the Defendant was unable to pay the ice cream machine rental payments. This in turn led to repossession of the ice cream machines and this directly affected the Defendant’s ability to pay rent.
Pursuant Contracts (Privity) Act 1982
A cross claim is available under the Contracts (Privity) Act 1982 s 4. The Defendant who is a non-party is entitled to the benefit, which is immunity in this case of the promises made in the contract. The Defendant made direct financial contributions to the Plaintiff’s bank account. The Defendant is able to be sufficiently identified.
Contracts
$ Damages 744,784.00
Opportunity interest (11%) 81,926.24
Total $ 820,710.24
[17] Mr Tripathi also claims that the plaintiff had a duty to keep the leased premises
weathertight and breached that obligation and caused losses to the plaintiff including:
$ Loss of ice cream sales 744,784.00 Aggravated damages from ongoing flooding 74,478.00 Opportunity interest (11%) 81,926.24 Total $901,188.24
Mr Tripathi’s first affidavit dated 29 June 2017
[18] When Mr Tripathi filed and served his counterclaim he also filed an affidavit. That claimed inter alia that:
(a) Mr Siu (director of the plaintiff) deliberately held back the deed of lease for more than four months waiting for the defendants to fully commit financially.
(b)Mr Tripathi did not look for legal advice and signed the deed under extreme duress.
(c) Nothing effective was done to rectify the leaks which leaks are blamed for loss of sales and future revenue and having caused brand damage.
(d)They had to cut and refit tiles themselves because their pleas for repairs fell on deaf ears.
(e) Total sales between 24 August 2013 and 22 September 2013 were
$26,809.84.
The plaintiff ’s reply to amended statement of defence and defence to counterclaim
[19] The plaintiff filed and served a brief reply to that amended statement of defence, and a defence to the counterclaim. At that same time, it also filed its application for summary judgment and an affidavit by Mr Siu, its director in support. It is that application which is for consideration by this judgment.
Application for summary judgment
[20] It seeks that Mr Tripahi’s counterclaim be struck out and for leave to apply for summary judgment on the cause of action pleaded by its statement of claim filed in the District Court. If that leave was granted, then it seeks summary judgment against
Mr Tripathi. It is the plaintiff’s case that Mr Tripathi’s counterclaim cannot succeed and therefore he will have no arguable defence to the plaintiff’s claim.
Summary judgment – plaintiff ’s evidence
[21] The plaintiff’s evidence was provided by the affidavit of Mr Siu its director and shareholder. Mr Siu deposes having graduated from Auckland University with a BCom/LLB and subsequently worked for Simpson Grierson as a lawyer. He has served as an advisory board member for the Bank of New Zealand and has several interests in companies in New Zealand and abroad. His business partner is Dr Wong who has owned multiple surgeries in Auckland since 1987.
[22] The plaintiff is he says a property investment company and owns several properties in Newmarket and Ponsonby. Mr Siu joined the company in 2008. The Ponsonby Road property was purchased in April 2013 shortly after the directors were introduced to the Yoghurt Story franchises and the guarantors (the defendants) who would act, he says, as their franchisees. On 27 May 2013, he received a copy of an agreement to lease offer from Yoghurt Story and from the defendants as guarantors. On 22 June 2013, the plaintiff entered into a finalised agreement to lease the premises to Yoghurt Story. That agreement was signed on behalf of Yoghurt Story and was also signed by the defendants as guarantors. The defendants agreed to guarantee the obligations of Yoghurt Story under the agreement to lease.
[23] Mr Siu said the parties also agreed to execute a formal deed of lease prepared at the tenant’s cost. That document also contained a term that “notwithstanding the lease may not have been signed by all (or any) of the parties, the parties shall be bound by the terms, covenants and provisions of this agreement and the deed of lease, as if the lease had been signed by all parties”.
[24] Mr Siu deposes having received an email on 21 September 2013 from the defendants saying there was a problem with the drainage and that there was a leak into the store. Mr Siu deposes having the following day contacted the property administrator of the body corporate administration to have someone investigate the
matter. The premises in question were part of a property development in the control of a body corporate.
[25] Mr Siu reports that on 25 September 2013 a plumber was contacted to check the problem. The plumber responded on Sunday 29 September saying he had attended the site the week before and reported the leak was caused by a gutter being full of leaves, that the leaves were removed and the leak was fixed. Mr Siu calculates a period of six days was involved from when the complaint was received and the issue was remedied.
[26] Mr Siu says on 22 November 2013 he emailed the tenants and guarantors advising that the plaintiff’s solicitors had sent the deed of lease to be signed on 15
August 2013 and that in October he learned the lease had not been signed. He says he received an email from the franchisor saying that the franchisees (the defendant guarantors) were consulting with lawyers. It was in response to that Mr Siu said that he then required the deed of lease to be signed within 12 working days, and said that the situation was unacceptable and the doors would be locked and legal steps taken if necessary.
[27] When the deed of lease was returned, it was on 19 December 2013 formally executed by the plaintiff. The guarantors had signed the deed of lease and their signatures were witnessed.
[28] Key terms included that all rent was to be paid without deduction, that interest would be payable on monies owing in default, and that the tenant would pay the landlord’s solicitor/client costs of and incidental to the enforcement of the landlord’s rights, remedies and powers. The lease also provided the landlord would not be liable for any loss suffered by the tenant arising from any want of repair or defect unless the landlord shall have received notice in writing of that from the tenant and has not within reasonable time after that taken appropriate steps to remedy the same.
[29] The third schedule to the lease recorded, inter alia, that the guarantor guaranteed payment of the rent and the performance by the tenant of the covenants in the lease; and that as between the guarantor and the landlord the guarantor may be for
all purposes treated as the tenant and the landlord would be under no obligation to take proceedings against the tenant before taking proceedings against the guarantors.
[30] Mr Siu says on 27 April 2014 he emailed the body corporate saying he had received an email from a tenant saying there were water leaks again. He says he requested these be rectified immediately. He asked whether there was a building manager who could be contacted for immediate assistance in the future. The guarantors were cc’d into that email.
[31] On 30 April 2014, he spoke to the building manager and then contacted the guarantors by email with the building manager’s contact details to enable them to contact the building manager directly.
[32] Mr Siu then provides details of correspondence between himself and Mr Tripathi. On 7 May 2014, he confirmed a conversation had with Mr Tripathi when he said “they” were going through a refinancing process. Mr Siu gave them a two-week extension to pay outstanding rent.
[33] On 20 May 2014, he received an email from Mr Tripathi who said he was suicidal and that they were making no money and who blamed the situation on where the store was located, on the machines breaking down, sales dropping, and the lack of supplies. There was Mr Siu says no mention of leaks causing any problems or regarding the condition of the premises. He suggested to the first defendant that he should seek help immediately.
[34] Mr Siu says on 1 July 2014 the tenants made another (their third) complaint about purported leaking issues. Upon his enquiry with the body corporate he was advised a new beam may be needed to be replaced but it would take two weeks to organise. There were discussions that followed and extensions of time were provided for the payment of rent. Mr Siu recounts the exchanges in the months of August and September including when on 9 September he emailed the defendants indicating he would be serving a notice if outstanding rental was not paid. On 14 September, they responded stating Mr Siu had been ignoring the problems with the property. Mr Siu
says he had been told of the leaks on three occasions only and he considers they had been remedied immediately each time.
[35] The defendants’ email stated the leaking problem had been persistent since entering the premises and had still not been resolved. It said they had photographs and recordings of the alleged leaks. Mr Siu says he was surprised by the email for on the three occasions of complaints there had been an immediate response and there had been no feedback to say the leak had not been stopped. Further correspondence between the parties focussed on the arrears of lease payments. On 28 October, a notice was served advising re-entry of the premises would occur the following day. Mr Tripathi’s reply was to seek further time to effect payment. There had not, Mr Siu indicates, been any discussions alleging concerns due to building leaks.
[36] The plaintiff re-entered the premises on 5 December and on 16 December 2014 sent a letter of demand and seeking to arrange a time for Yoghurt Story to collect the items left at the premises.
[37] Mr Siu says a reputable agent was engaged to market the property for rent. It took some time to finalise a new tenant he says and on 1 September 2015 the plaintiff entered into a new lease with a new tenant. He notes there has not since been any complaint by the new tenants regarding the premises.
[38] In defence of the plaintiff’s claim filed in the District Court Mr Tripathi asserted he had been coerced, compelled and pressurised by Yoghurt Story to sign the lease. No reference was made to the plaintiff or Mr Siu putting pressure on him to sign. In fact, Mr Tripathi stated he had never negotiated the lease with the plaintiff. It has not been alleged he says that the plaintiff was the party putting Mr Tripathi under duress. Only with his amended statement of claim has he alleged for the first time that he signed the deed of lease under duress from Mr Siu because he had made threats of legal action and because Mr Siu had an LLB.
Opposition to the summary judgment application
[39] It claims, inter alia:
(a) Insufficient reasoning has been provided on behalf of the plaintiff to show why the defendant’s pleaded causes of action would fail.
(b)That while there was no direct contractual link between the plaintiff and the defendant, in terms of the defendant’s guarantor obligations and relying on the authority of Bowkett v Action Finance1, Mr Tripathi was “owed an immunity, constituting the benefit under s 4 of the Contracts (Privity) Act 1982.
(c) A direct contractual link is not necessary for a claim to succeed where conduct by the plaintiff has fallen short of what a reasonable person would do to protect Mr Tripathi from the foreseeable risk of harm – due to the need for weatherproof repairs and the likelihood of damage resulting otherwise, and because of that failure the losses and stress that may have occurred.
Mr Tripathi’s affidavit in opposition (second affidavit)
[40] That affidavit refers to Mr Tripathi’s relationship to the other two defendants in their connection as directors and shareholders of the company that operated the business at the plaintiff’s premises.
[41] Mr Tripathi pleads that their company liquidation and removal from the Companies Register was a consequence of the plaintiff’s failure to fix leaks at the property. He deposes:
(a) He signed the lease under duress and therefore considers it should be rendered invalid.
(b)The plaintiff failed to provide a weatherproof premise and he cannot ask for something which is not fit for consumption or defective.
1 Bowkett v Action Finance Limited [1992] 1 NZLR 449.
(c) He believes a summary judgment application is intended to prevent the defendants pursuing claims regarding these issues.
[42] Mr Tripathi deposes the defendants signed a pre-lease but that document noted the deed of lease was to be signed off within 12 working days. However, the deed was not received until five – six months later in November 2013 and because they were already fully committed financially to their investment it was too late for them to pull out of the lease.
[43] Mr Tripathi says he would never have signed it because “it was too heavily tilted in favour of the Landlord. Some of the terms are observed to the extent of being inhumane… Almost none of the terms and conditions of the deed of lease were included in the pre-lease document, they are very different from each other”.
[44] He says Mr Siu constantly threatened him with legal action stating he was a lawyer, and having used the initials LLB after his name.
[45] He says he has always claimed to have been under duress when signing the lease.
[46] Regarding the repairs claimed to have been undertaken, Mr Tripathi says the plaintiff repeatedly sent unqualified people to fix the leak which was due to structural issues and for that reason the leak was not properly fixed for more than a year.
[47] There was, he says, no attempt to permanently fix the leak; that it was “after seven to eight months of leak/flooding related business disruptions that caused enough financial damage that we started falling short on the rental payment”.
The Court’s hearing directions
[48] By minute dated 11 August 2017 the Court directed the hearing of this matter on 13 November 2017. At that time directions were made regarding the filing of submissions.
[49] Defendant counsel’s submissions were received on 7 November 2017. The following day there was also filed a further affidavit of Mr Tripathi dated 6 November
2017, in opposition to the summary judgment application.
Mr Tripathi’s affidavit filed on 8 November 2017 without leave
[50] Before noting the objection of Mr Crossland, counsel for the plaintiff to this document being read, the Court should note briefly what it appears to offer by way of evidence.
[51] Mr Tripathi’s late affidavit deposes, inter alia:
(a) That on 22 September 2013 he emailed the plaintiff concerning “a substantial water leak in the premises caused by the rain and loss suffered by me due to closure of store”. He said the plaintiff failed to take action and a further notice was sent on 10 October 2013 via email. When again, he says, there was no action a further notice was sent on
25 April 2014 “with attached pictures”. He said he suffered further losses due to store closure, electric faults and roof board tiles.
(b)He continued to face water leaks throughout the year and “had to close the store for days, this would happen either due to the leaks or damage caused by water to electrical appliances, furniture, unsafe slippery floors or ceiling board tiles”. He said he issued an invoice of loss to the plaintiff but that was never paid. He says that due to the continuous closure of the premises he fell behind with all his obligations including for the lease of yoghurt making machines. Those machines were he says repossessed on 24 June 2014 but about two months later he secured funds to hire new machines.
(c) It was not until 27 September 2014 that the plaintiff finally started repair and structural works to the premises.
(d) A rental agent was not engaged until about three months later.
(e) The sum of $25,438.74 was not owing as at 4 December 2014 for that amount included custom expenses for which he had no obligation to pay.
(f) Other costs are not claimable in terms of the lease conditions, and nor does he accept the calculation of those amounts.
(g)He intends to deliver third party notices upon Yoghurt Story New Zealand Limited and Yoghurt Story Ponsonby Limited which are now in liquidation. He will also join the directors of those companies.
Plaintiff ’s opposition to Mr Tripathi’s second affidavit being read
[52] Mr Crossland for the plaintiff notes that as well as being served with a copy of this affidavit on 5 November 2017 he received an unnumbered bundle of authorities which included further documents headed “Relevant emails A – I”. Mr Crossland notes the affidavit of Mr Tripathi does not contain any exhibits and nor does it refer to the documents identified as “relevant emails A – I” in the unnumbered, un-tabbed bundle of authorities.
[53] The Court has not received that bundle Mr Crossland refers to.
[54] Mr Crossland comments that a review of the documents that were contained in the bundle confirms that the alleged relevant emails identified as “B, C, E, and F are documents not previously exhibited to any of the affidavit evidence deposed by witnesses in this proceeding. Those documents counsel submits are new evidence which Mr Tripathi is trying to adduce into the summary judgment hearing in the back of counsel’s bundle of authorities.
[55] Mr Crossland comments that Mr Tripathi has had sufficient time between the filing of his counterclaim on 31 May 2017 to put relevant documentation forward by way of affidavit evidence.
[56] As counsel notes Mr Tripathi purports to rely on this new evidence in the legal submissions put forward by defendant’s counsel for those documents are referred to in his submissions.
The Court’s ruling about the reading of Mr Tripathi’s 7 November 2017 affidavit
[57] In the Court’s view, leave should not be given for it or for its exhibits to be read. Mr Tripathi’s evidence largely comprises unsupported statements previously given. Also, and as before that evidence is insufficiently verified. It is late and no opportunity was available to the plaintiff to address its contents albeit little change was offered by that new evidence.
Considerations
[58] To succeed on its claim for summary judgment the plaintiff must satisfy the Court that Mr Tripathi has no arguable defence to the claim. Summary judgment is inappropriate where there is a credible dispute of material fact.
[59] If claims of factual dispute arise then the Court must examine the evidence to determine whether a raised dispute passes the threshold of credibility. Genuine conflicts of material fact will not be resolved by the summary judgment process but the Court can reject claims lacking in precision, or which are inconsistent with undisputed contemporary documents, or with other statements by the same deponent, or are inherently improbable.2
[60] Leave to apply for summary judgment can, with leave of the Court, be commenced after the proceedings have been commenced. The granting of leave is a matter for the Court to consider in the circumstances.
[61] In the Court’s view leave to apply should be granted to the plaintiff for it was only after Mr Tripathi filed his counterclaim that his position on duress changed.
2 Eng Mee Yong v Lethcumanan [1980] AC 331 at 341.
[62] The agreement to lease was signed by Mr Tripathi and two others as guarantors. That agreement formed a binding contractual guarantee although it was not executed as a deed.
[63] It had been agreed to formalise the deed of lease within 12 working days. This did not happen. The delays were the responsibility of the owners of Yoghurt Story whose payment obligations were guaranteed by Mr Tripathi and the other two defendants. Yoghurt Story advised Mr Siu that Mr Tripathi and others were obtaining legal advice.
[64] The deed of lease was signed nearly six months later after the agreement to lease has been signed. The signatures of Mr Tripathi and the other defendants were duly witnessed on that deed.
[65] The obligations of Mr Tripathi and other guarantors were clear and the lease provided that as guarantors they would for all purposes be treated as the tenant and were bound by their guarantee and indemnity for the payment of rent. Yoghurt sublet the property to the defendant’s company VUV Limited which is now in liquidation and has been removed from the Companies Register.
[66] Acceptable evidence was that on three occasions notice was given by Yoghurt Story and the defendant guarantors that there was a leak on the property; and that on each occasion the plaintiff arranged repairs within a week. Also, they provided the tenants and guarantors with the building manager’s details so that he could be contacted directly if there were any issues in the future.
[67] There was a history of rental payment default. Eventually the lease was cancelled on the 5 December 2014. When Mr Tripathi filed his original statement of defence on 20 June 2016 he pleaded that the owners of Yoghurt Story had pressurised him to guarantee the lease and that is why he says he signed it. It was not then alleged the plaintiff had put him under duress; indeed, to the contrary he had pleaded that he never negotiated the lease with the plaintiff and it was for that reason that he initially pleaded the contract was void.
[68] When on 29 June 2017 he filed an amended statement of claim and counterclaim Mr Tripathi admitted he signed the deed of lease. He made no mention of Yoghurt Story’s directors putting him under duress but alleged the plaintiff caused him to sign the deed of lease due to threats of legal action. He said he had no legal advice. He blamed the plaintiff for not providing the deed of lease until initial development renovations had been completed and in that result because he was financially committed.
[69] By his amended defence and counterclaim Mr Tripathi claims $826,710.24 in contract, and damages of $901,188.24 in negligence.
[70] The claim for negligence does not plead elements of tort. There is no explanation for the amounts claimed. He continued to maintain the deed of lease was signed under duress.
[71] The Court does not accept there is a reliable claim of duress by the plaintiff. Mr Tripathi’s evidence of duress has changed through the success of documents filed. Initially he says it was due to pressure provided by Yoghurt Story. More recently that it came from Mr Siu of the plaintiff. Regardless there is no suggestion such did compel Mr Tripathi to enter into the contract. Mr Tripathi’s signature to the deed of lease has been properly witnessed.
[72] The Court agrees with Mr Crossland’s assessment that any element of pressure can only focus on Mr Siu’s single email on 22 November 2017 to Yoghurt Story and to the defendants wherein he noted the lease stated that it must be signed within 12 working days after being presented; that the plaintiffs considered the situation was then completely unacceptable - the lease having been sent 4 – 5 months earlier to Yoghurt Story for completion. The email concluded the lease had to be completed [within five days] or the premises would be taken back.
[73] It appears to the Court Mr Siu was simply saying that the plaintiff would exercise its legal rights in circumstances where the guarantors were in breach of the agreement to lease.
[74] It is not an acceptable position to claim that therefore Mr Tripathi signed the deed of lease because he had no choice. There was no illegitimate pressure. The plaintiff was exercising contractual rights in the circumstances where the defendants were in breach of a contract.
[75] There is no suggestion of Mr Tripathi’s freewill having been overborn by improper pressure suggesting his freewill and judgment had been displaced; or of actions so serious that he was left with no reasonable alternative. Indeed, as Mr Tripathi acknowledged he felt compelled to sign because he invested so much money in the setup of the shop.
Conclusions
[76] In the Court’s view the counterclaim cannot succeed. Elements of a contractual or negligent cause of action have not been adequately pleaded, and indeed it does not appear they could be. He has not pleaded who the parties to the contract were or indicated to whom a duty of care is owed. Even if he had done so the claim could not succeed because the parties to the deed of lease are the plaintiff and Yoghurt Story. The defendants’ business VUV Limited sublet the property. There is no privity of contract between the plaintiff and VUV Limited. Mr Tripathi is not a party to the lease or the sublease and the plaintiff owed no contractual duties to Mr Tripathi.
[77] It is Mr Tripathi’s case that clause 11.1 of the deed of lease provides a duty of care to him. That, as earlier noted, held the plaintiff accountable to Yoghurt Story if having received notice in writing from Yoghurt Story the plaintiff did not within a reasonable time take steps to remedy any need for repair.
[78] The clause does not, the Court considers, impose on the plaintiff a tortious duty of care owed to Mr Tripathi who was not the lease tenant but a guarantor of the tenant’s rental payment obligations.
[79] If there is any suggestion of duty of care being owed to tenancy occupants then in this case the claimant would be VUV Limited, the guarantor’s sub-tenant company. However as earlier noted that company is in liquidation and off the Companies
Register. It would need to be restored to the Register for any claim thereafter to be pursued. Ultimately that would require Mr Tripathi and defendants to provide funding to enable any litigation then to be pursued.
[80] Mr Norris on behalf of Mr Tripathi submits there is an arguable case of a duty of care being owed to a guarantor of a tenant’s obligation. It is submitted that as a director of the subtenant, and because he was a guarantor, Mr Tripathi was owed a personal duty of care by the plaintiff. Mr Norris submits a right of set-off arises. Reliance is based on the judgment of Young J in Highgate Holdings Limited v Greer3. In that case His Honour indicated an inclination to agree with the submission that a guarantor was entitled to be subrogated the rights of a tenant because the guarantor paid the rent under the lease. His Honour did not decide the point and indicated his was only a provisional view which in the context of the proceeding did not require resolution.
[81] It is this Court’s view that a guarantor should not be able to plead equitable set off as a defence to an action on a guarantee rather, the appropriate process should require the guarantor to bring instead third party proceedings against the debtor, claiming an indemnity. Also in this case of note, clause 1.1 of the deed of lease precludes any set off for rent.
[82] Any claim of a set off must be closely connected to the principal debt which is guaranteed under a lease and therefore there is no mutuality for set off to apply as the debt Mr Tripathi is trying to set off is owed to a separate legal entity with separate liabilities and responsibilities. The Court agrees that at best Mr Tripathi’s right to subrogation will allow him to step into the shoes of Yoghurt Story to claim a set off. It is not apparent however that Yoghurt Story has suffered any loss.
[83] This Court’s view is that there is no cause of action in tort or contract able to be repleaded. Nor does the evidence sufficiently support any suggestion for repleading. The evidence of Mr Tripathi is unreliable because it is constantly changing. An attempt to produce yet further evidence on the morning of the hearing
was not accepted. The Court does not accept there is proper reason to claim the right
3 CIV 2016-004-616 High Court Wellington.
of set off for the reasons advanced. The evidence shows that the claims that the premises was in need of repair were, appropriately addressed in terms of the lease obligations.
[84] No reliable evidence undermines the plaintiff’s calculation of debt for unpaid rent or for costs incurred until the premises was rented again.
[85] Result
[1] The applications of the plaintiff seek orders:
(a) That Mr Tripathi’s counterclaim dated 29 May 2017 be struck out;
(b)Granting leave to the plaintiff to apply for summary judgment on the cause of action in its statement of claim dated 5 May 2016;
(c) That leave is granted, then summary judgment be entered on the plaintiff’s claim against Mr Tripathi; and
(d)That Mr Tripathi pay the costs and disbursements on the plaintiff’s applications.
[2] The Court orders:
(a) The causes of action raised by Mr Tripathi’s counterclaim dated 29 May
2017 cannot succeed, and that counterclaim is struck out.
(b)The causes of action raised in Mr Tripathi’s counterclaim, and the cause of action raised by the plaintiff’s claim are sufficiently linked such that a finding that Mr Tripathi’s counterclaim cannot succeed means that he has no arguable defence to the plaintiff’s claim.
(c) Mr Tripathi has no defence to the plaintiff’s claim and summary judgment is entered upon the plaintiff’s claim against Mr Tripathi in the amounts sought by the plaintiff’s statement of claim.
(d)Mr Tripathi shall pay costs and disbursements approved by the Court, upon application. Such application is to be served and any response to
it is to be filed and served within two weeks.
Associate Judge Christiansen
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