Charming Group (NZ) Limited v Singh
[2017] NZHC 1217
•6 June 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-1714 [2017] NZHC 1217
IN THE MATTER of an appeal pursuant to s 72 District
Courts Act
BETWEEN
CHARMING GROUP (NZ) LIMITED Appellant
AND
PRITHI PAL SINGH AND GENDO SINGH AS TRUSTEES OF THE BASRA FAMILY TRUST
Respondent
Hearing: 1 December 2016 Appearances:
BG Hong for Appellant (granted leave to withdraw)
Ms Cheng in person (granted leave to appear for the appellant company)
I Hutcheson for Respondent
Judgment:
6 June 2017
JUDGMENT OF TOOGOOD J
This judgment was delivered by me on 6 June 2017 at 3.30 pm
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Charming Group (NZ) Limited v Singh [2017] NZHC 1217 [6 June 2017]
Introduction
[1] Charming Group (NZ) Limited appeals against the decision of Judge K G Smith in the North Shore District Court entering judgment for Prithi Singh and Gendo Singh (the Singhs/the landlords) as trustees of the Barsa Family Trust.1 It
also appeals against the subsequent judgment of the Court as to costs.2
[2] The essence of the dispute concerns the Singhs’ sale of fixtures, fittings, plant and equipment and other chattels (the disputed property) at restaurant premises which had been leased by a Mr Yeoh and a Ms Li. The disputed property was sold to new tenants3 as part of a sale and purchase of the business by the landlords after termination of the lease.
[3] Charming claims it was the true tenant and that it owned the disputed property and that the landlord had no lawful right to sell them. The Singhs contend that ownership of the disputed property passed to them in accordance with the agreement to lease, and they were lawfully entitled to sell it.
[4] Charming brought five causes of action in the District Court:
(a) The landlord’s seizure of the disputed property was unlawful because it was in breach of the Property Law Act 2007;
(b)Alternatively, it was unlawful for the landlord to seize the belongings in breach of the lease;
(c) The landlord tortiously interfered with goods, committing conversion when it seized the disputed property without legal right;
(d)The landlord in trade engaged in misleading and deceptive conduct when it deceived Charming to give it access and keys to the lease
1 Charming (New Zealand) Ltd v Singh [2016] NZDC 5346 (24 June 2016).
2 Charming (New Zealand) Ltd v Singh [2016] NZDC 5346 (sic) (22 September 2016).
3 Although it might be more strictly correct to refer to the parties as lessors and lessees, I adopt the terms “landlords” and “tenant” or “tenants” as used by the parties and as appears in the District Court’s judgment.
premises on the pretext it wanted to find a replacement tenant, breaching the Fair Trading Act 1986; and
(e) Charming made a unilateral mistake in terms of the Contractual Mistakes Act 1977 by not recording in writing an agreement of which the landlord was aware.
[5] The Singhs denied any breach, and additionally pleaded an affirmative defence that Charming was estopped from:
(a) asserting it was the lawful tenant of the premises;
(b) asserting a legal claim on behalf of the lawful tenants; and
(c) asserting a legal claim to attempt to avoid the contractual provisions existing between the lawful tenants.
[6] Judge Smith held that Charming owned the disputed property. But he found that Charming had either held out Mr Yeoh and Ms Li as the lawful owners of the disputed property or had allowed them to do so; that they had maintained that appearance at relevant times and that the landlords had relied on it to their detriment when negotiating new tenants and dealing with the disputed property. As it would be unconscionable for Charming to go back on these representations, the Judge held that Charming was accordingly estopped from asserting it was the lawful owner and pursuing any corresponding claims. The Judge also held that, even if there had been no such estoppel, all of Charming’s causes of action would have failed.
Factual background
[7] The agreement to lease the premises, dated 26 June 2008, committed the parties to entering into a formal lease using the then current Auckland District Law Society deed of lease form (the ADLS lease). The parties to the agreement were P Singh and G Singh and Mr Yeoh. The premises were to be used as a Japanese takeaway/restaurant, trading under the name Fukuhara Japanese Cuisine. Mr Yeoh and Ms Li were joined in this business by Ms Anette Chi Ying Cheng. Charming
was incorporated later, on 1 August 2008. Ms Li and Ms Cheng are directors of the company.
[8] By way of a deed of nomination dated 26 March 2009, approximately eight months after the incorporation of the company, Mr Yeoh nominated Ms Li as co- tenant. The deed of nomination was signed by Mr Yeoh and Ms Li, but not by the Singhs. Nevertheless, the case proceeded on the understanding that Ms Li was, at all relevant times, a lessee or tenant under the agreement to lease. No formal lease was ever signed but it appears to have been common ground throughout, including in the District Court, that the respective rights and obligations of the parties were governed by the terms of the ADLS lease.
[9] Significantly, the ADLS lease contained the following provision:
31.1 THE Tenant may at any time before and will if required by the Landlord at the end or earlier termination of the term remove all the Tenant’s fixtures, fittings and chattels and make good at the Tenant’s own expense all resulting damage and if not removed within 5 working days after the date of termination ownership of the fixtures, fittings and chattels may at the Landlord’s election pass to the Landlord or the Landlord may in proper and workmanlike manner remove the same from the premises and forward them to a refuse collection centre.
[10] Fukuhara started trading in March 2009 after resource consent was granted. On 20 May 2009, Mr Singh signed a letter in his capacity as landlord to enable a liquor license to be obtained by Charming Group (NZ) Limited trading as Fukuhara.
[11] The restaurant business proved to be unsuccessful financially and by July
2010 the tenants were substantially in arrears of rent. On 28 July 2010, the landlords served a notice of intention to cancel the lease upon Ms Li, who signed a copy acknowledging service that day. The notice was addressed to Mr Yeoh and Ms Li and described them as the lessee. It cited their failure to pay rent and monthly outgoings, and gave them 11 working days to remedy the breach.
[12] The landlords’ representative, Mr Dare, met Ms Li. Ms Li told Mr Dare that they had decided to sell the restaurant business and funds were being arranged to pay the arrears. A payment of $4000 was made towards the outstanding rent on 9 August
2010. Another rent payment was due on 15 August 2010.
[13] Mr Dare and Ms Li met again in mid-August at the Poenamo Hotel. Several possible outcomes were discussed. They included the Singhs taking over the premises while rent liability continued until an incoming tenant was found; the outstanding rent being paid and the business continuing as before; and Ms Li taking over as a new tenant and reaching a new arrangement with the Singhs. No decisions were made at this meeting.
[14] On 16 August 2010, Ms Li told Mr Dare that meetings with potential buyers were going ahead, but in a message on 18 August she said the price had not been accepted by those prospective purchasers.
[15] At a meeting on 20 August 2010, Ms Li handed over the keys to Mr Dare. The parties disagree about why Ms Li did so. There were no notes or subsequent correspondence made by either party recording what had occurred at this meeting.
[16] Ms Li’s evidence was that the handover was intended to give the Singhs physical access so they could combine their resources to identify a replacement tenant to their mutual benefit. Ms Li said that Mr Dare and she agreed that:
(a) both parties had a mutual interest in selling the business to a new tenant;
(b)time would be needed to clear the arrears on the sale of the business as over $160,000 had been invested in improvements to the premises and the purchase of fixtures, fittings and chattels which she did not want to lose; and
(c) if the Singhs found a new tenant that wanted to operate the restaurant, Ms Li would be involved in negotiating the sale of the property to the tenant.
[17] Ms Li said she agreed to joint possession to allow the Singhs to also look for a replacement tenant. Charming argues that this agreement resulted in joint
possession, not the surrendering of the premises and, therefore, that the Singhs had not peaceably re-entered the premises in terms of the lease.
[18] Mr Dare’s evidence was that he told Ms Li that:
(a)
(b)
the premises were now back with the Singhs;
another potential tenant placed no value on the disputed property
leaving Mr Yeoh and Ms Li, as existing tenants, with significant arrears; (c)
the easiest solution would be an existing tenant paying the arrears and
reopening; or alternatively, (d)
Ms Li could find a new tenant and take responsibility for the
liabilities. [19]
Mr
Dare’s view was that Ms Li acknowledged the inevitability and
hopelessness of the business’s situation; that her handing over of the keys demonstrated her recognition that the Singhs were taking possession; and that she was allowing peaceable re-entry.
[20] On 21 August 2010, Ms Li sent the alarm code to Mr Dare via text message. Mr Dare granted Ms Li’s request for permission to remove personal possessions, which she did, although it is unclear what these were. He also moved a freezer, which contained perishable items, into adjacent vacant space.
[21] The Singhs leased the premises to Mio (NZ) Limited, a company incorporated by Mr David Yeo and Mrs Hannah Yeo, who were interested in establishing a Japanese restaurant. The Singhs entered into an agreement for sale and purchase of a business to Mio on 30 August 2010.
[22] The purchase price was $34,000 and the plant, fittings and fixtures (including the disputed property) were addressed in the following way in paragraph 16 of the agreement:
Plant, Fittings and Fixtures
It is an essential term of the agreement that the plant, fittings, and fixtures on the possession date will be the same as it is existing [sic] as at today’s insepetion [sic] of the premises by the purchaser with the vendor.
[23] The Singhs considered that, since ownership of the disputed property had passed to them, they could enter into this agreement by operation of clause 31.1 of the ADLS lease.
[24] In September 2010, Ms Li’s lawyers wrote to the Singh’s lawyers about obtaining access to the premises pursuant to clause 31.1 to remove their fixtures, fittings, and chattels from the premises. Correspondence followed, throughout which the lawyers for the appellant identified and referred to their clients as Yeoh and Li, sometimes alongside the name “Fukuhara Japanese Restaurant”. None of the September correspondence mentioned Charming or disclosed the company’s claim to ownership of the property.
[25] On 17 September 2010, the Singhs’ solicitors reiterated that the lease had been terminated on 20 August 2010 by agreement and peaceable re-entry, and that the tenants had failed to remove their fixtures, fittings and chattels within the five working days after termination provided. On 21 September 2010, the Singhs’ lawyers advised Mr Hong that their clients had entered into an unconditional agreement for the sale of the fixtures, fittings and chattels on the basis ownership had passed to the landlords. This letter invited Mr Hong to provide a compelling argument requiring the landlords to reconsider their position. Mr Hong’s reply claimed that there was nothing in contract, law or equity to support the landlords’ position of a bona fide belief that ownership had passed.
District Court Decision
[26] The Judge found that, while both witnesses were truthful and trying their best to remember events nearly six years old, subsequent events supported Mr Dare’s position. He held that an inspection of the premises in the context of a failed business, which was no longer trading and had substantial debts, followed by a transfer of keys, pointed to peaceable re-entry rather than any informal joint
marketing arrangement. The Judge concluded that the outcome of the meeting on 20
August 2010 was peaceable re-entry by the landlords through their agent and a termination of the agreement to lease.
[27] The Judge then identified that the case raised the following three issues: (a) Who owned the fixtures, fittings and chattels?
(b)If the fixtures, fittings and chattels were owned by Charming, were Ms Li and Mr Yeoh held out as either owning them or entitled to lawful possession of them?
(c) If the fixtures, fittings and chattels were owned by Charming, did the landlords have the lawful right to sell them?
[28] The Judge noted that all or most of Charming’s five causes of action turned
on its claim to ownership and/or possession of the disputed property.
[29] The Judge allowed an oral application by Mr Hutchinson to amend the statement of defence. This broadened the estoppel affirmative defence and added a second affirmative defence of contributory negligence, which more accurately aligned the pleadings with the evidence and were in the interests of justice.
[30] The Judge found, with some reservation, that based on the evidence before him the fixtures, fittings and chattels were in fact owned by Charming. He concluded, however, that Ms Li and Mr Yeoh were unequivocally held out as owning the fixtures, fittings and chattels, based primarily on the dealings between the landlords and Ms Li and Mr Yeoh all occurring without reference to Charming and instead using their personal names.
[31] Turning to whether the landlords had the lawful right to sell the property, the Judge held that Charming was estopped from denying that Ms Li and Mr Yeoh were the lawful owners. Citing Gillies v Keogh4 and National Westminster Finance NZ
Ltd v National Bank of NZ,5 the Judge held that all four elements of estoppel were present:
(a) The Singhs’ belief, created by actions taken by Ms Li and Mr Yeoh personally, that they were the parties entitled to ownership of the fixtures.
(b)Reliance by the Singhs on that belief when making decisions regarding the matter.
(c) The detriment to the Singhs in relying on the belief by entering the agreement for sale, thereby exposing themselves to the claim by Charming.
(d)The ample opportunities for Charming to correct any misunderstanding and not raising the issue of its ownership of the property until years later meant it would be unconscionable for Charming to be permitted to resile from the implied representations.
[32] The Judge also ruled that if required he would have concluded that Charming was estopped from denying that Ms Li and Mr Yeoh had lawful possession at all relevant times.
[33] The Judge held, therefore, that the defendants were entitled to judgment.
[34] While it was not necessary to do so in order to dispose of the case, Judge Smith also considered the merits of Charming’s causes of action. The Judge found that all of the plaintiff’s causes of action would have failed, principally because Charming failed to establish an evidential basis for them. Charming never had a contractual relationship with the Singhs and it did not have possession of the disputed property at relevant times. The Judge also noted that Charming had not properly established their quantum of damages, and that the claims would fail on that basis also.
Grounds of appeal
[35] Charming now appeals on the basis that the Judge’s decision was wrong in
both law and fact. It argues that the Judge:
(a) misinterpreted and failed to correctly apply the provisions of the
Property Law Act and the Fair Trading Act;
(b)failed to properly apply the legal principles asserted by Charming in its claim and those asserted by the landlords in their defence;
(c) failed to properly assess and weigh the evidence; (d) relied upon unreliable evidence;
(e) made improper inferences of fact;
(f) misreported crucial irrefutable documented facts;
(g)took into account irrelevant considerations and failed to take into account relevant considerations; and
(h)had been biased in general against Charming and in favour of the landlords.
[36] Charming also appeals the Judge’s decision to grant the defendants’ application to amend their statement of defence after the close of evidence but before the end of closing submissions. The Judge allowed these amendments in the interests of justice, making the pleadings align with the evidence.
[37] I deal with that issue at once. The Judge was entitled to allow the amendment in the exercise of the Court’s discretion under r 11 of the District Courts Rules 1992 which applied at the time of the hearing.6 Such amendments are conventionally
permitted in light of the evidence given at trial, provided no irremediable injustice arises. No injustice occurred in this case.
Approach on appeal
[38] This is an appeal by way of rehearing. I apply the principles set out by the Supreme Court in Austin, Nicholls7 as explained by the Court of Appeal in Green v Green.8 Those exercising general rights of appeal are entitled to judgment in accordance with the independent opinion of the appellate court. That is so even where that opinion is an assessment of fact and degree and entails a value judgment.
If the appellate court’s opinion is different from the conclusion of the court below, the appeal must be allowed even if it was a conclusion on which reasonable minds might differ. But the appellant bears the onus of persuading the appellate court to reach a different conclusion and must identify the respects in which the judgment under appeal is said to be in error. It is also axiomatic that in determining whether the judgment was wrong the appellate court will take into account any particular advantages enjoyed by the trial court, especially where assessments of credibility and reliability are involved. An appellate court should exercise caution in considering challenges to credibility and reliability findings.
[39] I take into account also the observations of the Court of Appeal in Rae v
International Insurance Brokers (Nelson Marlborough) Ltd9 to similar effect.
Appellant’s submissions
[40] Mr Hong claimed that the entire decision was wrong in fact and in law. He made the following specific points:
(a) The District Court erred in holding that, although Charming owned
the tenants’ belongings, it was estopped by its acquiescence from
asserting its rights as the true owner of the property; none of the
7 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
8 Green v Green [2016] NZCA 486, [2017] 2 NZLR 321 at [27] – [32].
9 Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA) at
199.
events could create an estoppel once the landlord had sold and converted the property by selling it unconditionally.
(b)The Judge erred in law in finding that there could not be any relationship between the landlords and Charming nor any rights in respect of the belongings.
(c) After finding that Charming was the lawful owner of the belongings, the Judge was wrong to hold that the lease did not apply, and the respondent had no rights under the lease.
(d)That as to the second cause of action the court erred in law when it held there was no evidence as to how the tenants had held Charming’s property.
(e) That as to the rest of the causes of action, the court erred at law due to the errors above and gave no reasons as to why the legal propositions submitted by the appellants were not accepted.
Analysis
[41] Compelling features of the evidence and the District Court’s findings are that Charming was never a party to the lease agreement or the deed of nomination; it was not named in the unsigned deed of lease; and it never asserted its status to the landlords or requested an assignment of the deed of lease or a sublease to it. Moreover, Charming never tried to assert its right to ownership of the disputed property during the communications between the respective legal advisers when the termination of the lease was squarely in issue. Mr Singh’s agreement, in his capacity as landlord, that a liquor license could be obtained at the premises for “Charming Group (NZ) Ltd trading as Fukuhara Japanese Restaurant” conferred no rights on Charming under the lease arrangements.
[42] It is clear a decision had been made by Ms Li and Mr Yeoh to sell Fukuhara if they could, but efforts to that end had not been successful by 20 August 2010. The
meeting that day occurred in the context of the Singhs having taken formal steps to cancel the agreement to lease, through the service of notice on Ms Li. Ms Li had obtained alternative employment. Her subsequent giving of the alarm codes to Mr Dare and the removal of personal possessions justified the Judge’s conclusion that there was peaceable re-entry by the landlords, resulting in the termination of the agreement to lease.
[43] The principles of estoppel to be applied to the case were not in dispute and it is not suggested the Judge mis-stated them. I am satisfied that the Judge was entitled to find on the evidence that, while Charming was the true owner of the disputed property, the appellant is estopped from denying that Ms Li and Mr Yeoh were the lawful owners of the disputed property. Given that the Singhs made decisions and acted on the basis of the position as held out to them, it would be unconscionable to find otherwise now, years after the event. That is sufficient to dispose of the substantive appeal.
[44] The appellant could only have succeeded in any of its claims if the Court had been prepared to accept that the actions of Mr Yeoh and Ms Li were attributable to the company, and that, at all relevant times, Charming was the actual lessee or tenant of the premises and in possession of the property at the time the lease was relinquished. There was no evidence to support those propositions and the Judge’s rejection of them were plainly justified.
Costs appeal
[45] On 22 September 2016 the District Court awarded increased costs to the
Singhs. The Judge said:
[39] In Holdfast NZ Limited v Selleys Pty Ltd the Court of Appeal commented, when assessing the appropriate approach to be taken in an uplift in costs in the High Court, that while they are ultimately at the discretion of the Court an increase above the applicable scale of more than 50 percent would be unusual.
[40] I accept the defendant's submission that an uplift is appropriate. The defendants describe the plaintiff's case as a "no stone unturned approach", which is a generous statement to describe unnecessarily complex and, at times, vague propositions in the pleadings that needed to be unravelled and
addressed. The plaintiff pursued five causes of action requiring extensive responses by the defendants to allegations that had no prospect of success. The prolix pleading was supplemented by extensive cross-examination lengthening the hearing and, therefore, the cost of the defendants.
[41] An uplift of 50 percent is appropriate.
[46] The submissions on behalf of Charming on the costs appeal, alleging outrageous conduct on the part of the landlords and a public interest in the causes of action, amply demonstrate the wholly unrealistic approach of the appellant to the case as a whole. On the facts, it was doomed to fail from the outset. The Judge’s analysis of the evidence and the appellant’s pleaded case entitled him to exercise the discretion to award increased costs under r 47C of the Rules. I have upheld the Judge’s views on the substantive case and I am not persuaded he made any error in his approach to costs.
Result
[47] I dismiss both the substantive appeal under CIV 2016-404-1714 and the costs appeal under CIV 2016-404-2588.
Costs
[48] The respondents are entitled to costs and disbursements on both appeals, which shall be calculated on a category 2B basis. If the parties cannot agree on costs, the respondents shall file and serve a costs memorandum by 30 June 2017. The appellant shall file and serve a memorandum in reply by 28 July 2017. Costs shall then be determined on the papers unless the Court directs otherwise.
..............................................
Toogood J
2
1
1