Cloudy Bay Business Park Limited as Trustee of the Cloudy Bay Business Park Trust v George HC Wellington CIV 2008-485-1227

[2008] NZHC 2568

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2008-485-1227

BETWEEN  CLOUDY BAY BUSINESS PARK LIMITED AS TRUSTEE OF THE CLOUDY BAY BUSINESS PARK TRUST

Plaintiff

ANDCHRISTOPHER ROY BRENT GEORGE Defendant

Hearing:         4 September 2008

Appearances: M Reddy - Counsel for Plaintiff

P.S.J. Withnall & J.A. Kean - Counsel for Defendant

Judgment:      11 September 2008 at 3.30 pm

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 11 September  2008 at

3.30 p.m. pursuant to r 540(4) of the High Court Rules 1985.

Solicitors:           Gibson Sheat, PO Box 2966, Wellington

Thompson Vodanovich, Solicitors, PO Box 25100, Wellington 6146

CLOUDY BAY BUSINESS PARK LIMITED AS TRUSTEE OF THE CLOUDY BAY BUSINESS PARK TRUST V CHRISTOPHER ROY BRENT GEORGE HC WN CIV 2008-485-1227  11 September 2008

Introduction

[1]      Before the Court is an application by the plaintiff for summary judgment against the defendant to enforce a debt said to be due from the defendant pursuant to his guarantee of certain leases.  These leases were from the plaintiff as landlord to a company formed by the defendant Home Restaurant Limited (“the lessee”) as tenant relating to restaurant and bar premises in Wellington.   The leases were each personally guaranteed to a limited extent by the defendant.

[2]      The application is opposed by the defendant.

Background Facts

[3]      The plaintiff is the trustee of a Trust known as the Cloudy Bay Business Park Trust (“the Trust”) and is the owner of a recently developed retail and apartment complex at Herd Street, Wellington (“the Herd Street Development”).

[4]      In May 2007 the plaintiff entered into three lease agreements with the lessee of premises on the ground floor of the Herd Street Development to enable the lessee to establish and run a restaurant/bar business known as the Herd Street Brassiere.

[5]      These leases were each for 12 years from 2 May 2007 at annual rentals which totalled $157,737.00 plus GST.   In addition, the leases provided for the lessee to meet certain outgoings and for the defendant to provide a limited guarantee of the obligations of the lessee under the leases.  That limitation meant that the maximum liability of  the  defendant  under  those  guarantees  was  limited  to  an  amount  not exceeding the equivalent of 12 months rental and operating expenses.

[6]      Subsequently on 11 September 2007 the plaintiff and the lessee varied the original agreements to lease and entered into new amended agreements.   Those amended agreements, however, incorporated the terms of the original leases.   The obligations  of  the  lessee  under  the  amended  lease  agreements  were  similarly

guaranteed by the defendant subject to the limitation of his liability noted at para. [5]

above.

[7]      The lessee began operating the Herd Street Brassiere business from the leased premises in about June 2007 but the operation met with difficulties.  Around 23 or

24 December 2007 the lessee closed the Herd Street Brassiere, laid off its staff and vacated the premises.   There seems little argument that by doing so it effectively repudiated the leases.

[8]      The plaintiff then went back into possession of the leased premises and, on 5

February 2008, it was successful in re-letting the premises but on less favourable terms.

[9]      The plaintiff as lessor then made demands on the lessee for outstanding rental costs and damages on its wrongful repudiation of the leases.  These demands were not met.   Further, demands were then issued by the plaintiff to the defendant as guarantor for those rental and outgoing arrears and for other costs.  Those demands also were not met.

[10]     On 12 June 2008, the present proceedings including a summary judgment application were issued by the plaintiff.

[11]     In  opposing  the  summary judgment  application,  it  is  significant  that  the defendant does not dispute the validity of the guarantees nor that monies are owing under these guarantees of the respective leases. He does note, however, that his liability under these guarantees is limited to 12 months rental and outgoings under each lease.

[12]     Instead, in his notice of opposition to the present application the defendant advances the following specific grounds of defence (and no others):

“(a)     The parties had an arrangement to develop property, including the property at Herd St, that amounted to a joint venture;

(b)      The common goal of the joint venture was to develop property to make a profit, to be divided in unequal shares;

(c)      The Defendant had trust and confidence in the Plaintiff and entities controlled by Michael Mahoney, and relied upon the Plaintiff’s expertise;

(d)       The  Plaintiff  owed  fiduciary  obligations  including  loyalty  to  the

Defendant;

(e)      The Defendant signed the guarantee at the urging of the Plaintiff and in furtherence of their common goal;

(f)       In pursuing the Defendant under the guarantee, before accounting to the  Defendant  for  profits  from  the  property  developments,  the Plaintiff is in breach of its fiduciary obligations to the Defendant;

(g)      If it is found that the Defendant owes money to the Plaintiff, the amount owing under the guarantee is limited to 12 months rental and operating expenses;

(h)      Appearing in the affidavit of Christopher Roy Brent George also filed herein.

[13]     Effectively  therefore  the  sole  defence  advanced  is  that  through  various company vehicles the defendant and Mr Michael Mahoney (“Mr Mahoney”) who is the sole director of the plaintiff and a trustee of the Trust, were parties to a joint venture to develop not only the Herd Street Development but also an earlier property in Blenheim, that the relationship was inherently fiduciary and thereby gave rise to obligations of loyalty and trust and that consequently Mr Mahoney and the plaintiff are required to account to the defendant for his share of the substantial profits made from these developments which (in part) they have not done.

[14]     Furthermore, the defendant contends that Mr Mahoney and the plaintiff are required to so account to the defendant for his share of these joint venture profits

before any steps are taken first to recover monies owing by the defendant in connection with the ventures and secondly, in particular to enforce his guarantee of the leases of the Herd Street Brassiere.

[15]     In his affidavit dated 22 July 2008 the defendant outlines what he says is this wider relationship between the parties here.  In summary he maintains:

a)       In 2003 Mr Mahoney proposed that he and the defendant develop a former  meat  works  site  in  Blenheim  (“the  Cloudy  Bay Development”).  The defendant was to provide quantity surveying and project management services for this development and Mr Mahoney was to take care of sales, marketing and the financial arrangements for the venture.

b)The defendant says he agreed to this arrangement and in furtherance of what he described as a “gentleman’s agreement” Mr Mahoney and the defendant completed the Cloudy Bay Development.

c)       The defendant says that so far as the Cloudy Bay Development was concerned, for his work he was to receive a monthly fee of $16,000 plus GST along with 20% of any profit from the venture with the remaining 80% of the profit going to Mr Mahoney or his interests.

d)The Cloudy Bay Development was successful.  The defendant says he received his agreed monthly fee for his work but he is still owed a portion of his share of the profit.  He deposes that on 23 December

2007 he was told by Mr Mahoney that the Cloudy Bay Development had made a profit of $4,000,000.00 which meant his 20% share was

$800,000.00.

e)        To   date   the   defendant   says   he   has   been   paid   approximately

$420,500.00 plus GST towards his share of this profit.  This was in total payments made on 31 January 2004 ($250,000.00), in or around

March 2004 ($58,000.00), on 30 April 2004 ($150,000.00) and at other times (amounting to various sums totalling $15,000.00).

f)        The defendant claims that he is still owed the sum of approximately

$379,500.00 plus GST from the Cloudy Bay Development but Mr Mahoney and the plaintiff have yet to properly account to him for that figure.

g)       Subsequently, the defendant and Mr Mahoney entered into a new joint venture relationship with respect to the Herd Street Development in Wellington.  He claims that the same arrangements which existed for the   Cloudy   Bay   Development   applied   to   the   Herd   Street Development.   He was to receive $16,000.00 per month for his quantity surveying and project management services together with

20% of the ultimate profit on the development.

h)The Herd Street Development commenced and then it struck some difficulties, not the least of which was a failure to attract tenants to the retail space which was necessary if the venture was to succeed.

i)In  order  to  attract  other  tenants,  the  defendant  and  Mr  Mahoney decided that they would each take on some of the retail space themselves.  Mr Mahoney opened a Movenpick icecream outlet and the defendant decided to set up the Herd Street Brassiere.

j)Mr Mahoney was in charge of the documentation for the leases of these two businesses. The defendant says he signed lease documents and personal guarantees for the Herd Street Brassiere business at Mr Mahoney’s urging.

k)The defendant maintains that he has never received his 20% share of the profits from the completed Herd Street Development although he mentions that Mr Mahoney on earlier occasions estimated the profit on   the   development   would   be   likely   to   amount   to   around

$8,000,000.00.   The defendant deposes that he does not know the amount of this profit nor has Mr Mahoney provided him with any accounting regarding the Herd Street development.

l)The defendant goes on to argue that in his view it is not in keeping with the overall joint venture relationship which he had with Mr Mahoney and his company for the plaintiff now to be suing him under this guarantee.  The defendant submits that the relationship between the parties was a joint venture in the sense outlined by the Supreme Court in Chirnside v Fay [2007] 1 NZLR 433. This necessarily gives rise to fiduciary obligations involving trust and confidence and it is improper here for Mr Mahoney and the plaintiff to “cherry pick” one aspect of their relationship by suing the defendant under his personal guarantee of the lease without first accounting to him for the profit arising from both the Cloudy Bay and the Herd Street joint venture developments.

m)By  choosing  to  take  the  present  step  to  enforce  the  defendant’s liability under the guarantee before accounting to the defendant for profits from the property developments, he contends that both Mr Mahoney and the plaintiff have placed themselves in a position where their fiduciary duties of loyalty and trust to the defendant as a joint venture partner conflict with their own interests.

[16]     Effectively therefore  the  defence  advanced  here  by  the  defendant  to  the plaintiff’s summary judgment claim is one of counter claim or set off.

Counsel’s Arguments and My Decision

[17]     The jurisdiction to grant summary judgment is found in r 136 (1) of the High

Court Rules, which states:

“(1)     The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a claim in the statement of claim or to a particular part of any such claim.”

[18]     Therefore, the onus is on the plaintiff to satisfy the Court that the defendant has no defence to the claim. In Pemberton v Chappell [1987] 1 NZLR 1 Somers J said (at 3):

“At the end of the day Rule 136 requires that the plaintiff “satisfies the Court that a defendant has no defence”. In this context the words “no defence”

have reference to the absence of any real question to be tried. That notion

has been expressed in a variety of ways, as for example no bona fide defence, no reasonable ground of defence, no fairly arguable defence. … On this the plaintiff is to satisfy the Court; he has the persuasive burden. Satisfaction here indicates that the Court is confident, sure, convinced, is persuaded to

the point of belief, is left without any real doubt or uncertainty.

…

Where the defence raises questions of fact upon which the outcome of the case may turn it will not often be right to enter summary judgment. There may however be cases in which the Court can be confident – that is to say,

satisfied – that the defendant’s statements as to matters of fact are baseless.”

[19]     However, if the plaintiff’s case shows prima facie no defence, the defendant may have an evidential burden to raise a defence. Thus, Somers J continued in Pemberton v Chappell (at 3):

“If a defence is not evident on the plaintiff’s pleading, I am of the opinion that if the defendant wishes to resist summary judgment, he must file an affidavit raising an issue of fact or law and give reasonable particulars of the matters which he claims ought to be put in issue. In this way a fair and just balance will be struck between a plaintiff’s right to have his case proceed to judgment without tendentious delay and a defendant’s right to put forward a real defence.”

[20]     But real issues of credibility will not be determined on summary judgment applications  because  the  determination  of  such  issues  requires  examination  and cross-examination of witnesses, and this is not possible under the summary judgment procedure: Busch v Dive & Marine Tours Ltd HC AK CP1587/86 19 February 1987; McGechan on Procedure at HR136.03.

[21]     Thus McGechan on Procedure comments at HR136.08:

“It is well established that as a general rule in determining summary judgment applications the Court will refrain from attempting to resolve genuine conflicts of evidence or to assess the credibility of the parties’ statements in their affidavits. However, the object of the procedure would be thwarted if spurious defences or plainly contrived factual conflicts were permitted to prevent judgment being obtained, especially in the context of the structure of rule 136 where the onus is on the applicant…”.

[22]     And, the Court in Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84,

85-86 makes it clear that the Judge is entitled to take a robust approach to cases involving summary judgment, and to dismiss defences which do not stand up to scrutiny:

“… the need for judicial caution has to be balanced, when considering a summary judgment application, with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case.  In the end it can only be a matter of judgment on the particular facts.”

[23]      Ultimately the test is as stated by McGechan on Procedure at HR136.06:

“The Court must be satisfied there is no defence. In Towers v R & W Hellaby Ltd (1987) 3 NZCLC 100,064 Thorp J said that the critical question under r.136 will generally be whether the Court is satisfied that the plaintiff’s case is unanswerable and the Court will not reach that conclusion if it can see an arguable defence.”

[24]     As  I have indicated at para.  [11]  above,  in  the  present  case  there  is  no suggestion advanced by the defendant that he did not enter into the lease guarantee in favour of the plaintiff nor does he in any way challenge the validity or enforceability of this guarantee.   There is no real claim by the defendant that the guarantee was entered into by duress or undue influence.

[25]     The defence advanced in this case relates to what counsel for the defendant describes as an “overlayer” of other obligations on the part of the plaintiff of an equitable or fiduciary nature.  The defendant contends there is a larger context to be considered here outside the lease and guarantee document.   As I have noted, the defendant essentially argues that the plaintiff has “cherry-picked” the defendant’s lease guarantee obligation as one aspect of the much wider joint venture relationship between the parties and ignored what he describes as the plaintiff’s prior obligation to the defendant to account for profits on their property development arrangements.

[26]     Before me Mr Withnall for the defendant contended that this defence is not a set off argument but effectively is a counter claim under the parties’ joint venture relationship.

[27]     I will turn to consider the joint venture argument shortly.  First, however, in considering the defendant’s liability under the guarantee, for the purposes of the present application, both parties seem to accept that, given the strict terms of the guarantee itself, this liability is limited to 12 months rent and outgoings under each lease.

[28]     As I have noted at para. [5] above, the total annual rentals under the lease are

$157,737.00 plus GST.

[29]     As to outgoings, Mr Mahoney in his first affidavit sworn 11 June 2008 at paras. 28.2, 28.3, 42.2, 42.3, 56.2 and 56.3 does provide certain particulars of what are described as “arrears of rates” and “body corporate levy arrears” for each of the leases.   These amounts total $4,787.51 plus GST.   They are stated as being arrears “as at 24 December 2007”.

[30]     Given that each of the leases in question commenced in June 2007, it is likely that this $4,787.51 plus GST amount relates to rates and body corporate levies for the approximate 6 month period up to the date the lessee vacated the premises in December 2007.

[31]     This amount, however, is the only firm evidence which I understand is before the Court regarding unpaid lease outgoings.

[32]     Given this, and the fact that the present application before the Court is one for summary  judgment,  under  the  circumstances  here  the  amount  for  which  any summary judgment might be granted in favour of the plaintiff in my view must be limited to the 12 months rent amount noted above and this $4,787.51 plus GST amount for outgoings.

[33]     On its face, the total amount for which summary judgment might therefore be given here is $162,524.51 plus GST.   This represents the 12 months outstanding rental under the leases ($157,737.00 plus GST) and the only amount noted in Mr Mahoney’s evidence on account of outgoings under the lease ($4,787.51 plus GST).

[34] The plaintiffs’ pleaded losses in its statement of claim far exceed these amounts. They include amongst other things, claims for difficulties it experienced in re-letting the premises. But given the 12 month limitation in the guarantee documents I am satisfied that if it is appropriate at this point to grant summary judgment at all, then on the material before the Court this must be limited to the amounts noted at para. [33] above.

[35]     I turn now, however, to the defendant’s argument that it has a counter claim against the plaintiff which would exceed the amount of the plaintiff’s total claim and certainly exceed this claim to $162,524.51 plus GST.

[36]     As to the counter claim, McGechan on Procedure at para. HR141.10 deals with this aspect and states:

“HR141.10    Counterclaim

In Pemberton v Chappell [1987] 1 NZLR 1; (1986) 1 PRNZ 183, Casey J commented that a counterclaim is not a defence and that it was always open to the defendant in that case to bring a counterclaim notwithstanding the application for summary judgment and that he might have had no defence to the claim.”

[37]     Although  as  I  have  noted  earlier,  before  me  counsel  for  the  defendant confirmed that the defence here is not a set off argument but rather is a counter claim, it is useful to consider briefly this aspect given the general cross-claim nature of a set off.

[38]     On this McGechan on Procedure at para:  HR141.09(2) deals with set off in a summary judgment context and states:

“141.09         Set-Off

(2)      Summary judgment context

In   Roberts   Family   Investments   Ltd   v   Total   Fitness   Centre (Wellington) Ltd [1989] 1 NZLR 15; (1988) 1 PRNZ 88, at p 21; p 92, McGechan J gave extensive consideration to the principles governing set-off and counterclaims in the summary judgment context.

In Grant v NZMC Ltd [1989] 1 NZLR 8 (CA), Somers J, delivering the judgment of the Court of Appeal, said (pp 12, 13):

“The principle is, we think, clear. The defendant may set-off a cross- claim which so affects the plaintiff’s claim that it would be unjust to allow the plaintiff to have judgment without bringing the cross-claim to account. The link must be such that the two are interdependent: judgment on one cannot fairly be given without regard to the other; the defendant’s claim calls into question or impeaches the plaintiff’s demand. It is neither necessary, nor decisive, that claim and cross- claim arise out of the same contract.”

In that case the Court set aside the summary judgment because the defendants’ cross-claim qualified as a set-off and being clearly arguable prevented the entry of judgment summarily.

Similarly in Edmonds v Westland Bank Ltd [1991] 2 NZLR 655 (CA), summary judgment was set aside, as an arguable defence was raised by way of cross-claim against the bank that by its interference in the sale of a hotel the receiver became its agent making it liable for any alleged negligence which, either by the receiver or the bank, resulted in a sale at less than the hotel’s true market value. As the cross-claim arose out of the same contract, ie the debenture between the bank and the appellants as principal debtors, it would have been unjust for the bank  to  have  judgment  without  bringing  the   cross-claim   into account.”

[39]     As Grant v NZMC Limited notes, the link between a defendant’s cross-claim and the plaintiff’s claim itself must be such that the two are interdependent.   The defendant’s claim is to call into question or impeach the plaintiff’s demand.

[40]     But in the present case, in my view, the alleged cross-claim advanced by the defendant does not fit into this category.  It is not a claim relating to the lease or, in my view, in any way affecting the defendant’s guarantee.  If at all, it relates to what I see as a separate contract or relationship.

[41]     The   lease   of   the   Herd   Street   Brassiere   on   the   defendant’s   own acknowledgement  is  an  entirely  separate  legal  arrangement  entered  into  by  the parties, just as the lease of the Movenpick icecream outlet to Mr Mahoney’s interests is also a separate arrangement.

[42]     In part to illustrate this, the defendant acknowledges in his affidavit that he and Mr Mahoney’s interests at some point during the Herd Street Development each took a penthouse apartment in the development at a price of $2 million dollars.  The defendant subsequently sold his apartment for $3.2 million dollars and retained the

$1.2 million dollar profit himself (although he says during 2007 he put this amount into the Herd Street Brassiere business).  Throughout as I understand the position,

this apartment transaction was considered to be entirely separate from the joint venture relationship between plaintiff and defendant and as I see it the lease of the Herd Street Brassiere business would have a similar character.

[43]     For these reasons I reject any claim by the defendant to a set off or cross- claim here which would provide a valid defence to the plaintiff’s summary judgment application.

[44]     That does not end this matter, however.  In McGechan on Procedure at para: HR142.02 the learned authors note:

“In cases where the defendant has a counter claim which cannot be classified as a set off, the question arises as to whether the Court should stay execution of the summary judgment pending resolution of the counterclaim.   The defendant should therefore apply for a stay at the time of filing the counterclaim:   Roberts Family Investments Limited v Total Fitness Centre (Wellington) Limited [1989] 1 NZLR 15 ….

The  decision  to  grant  a  stay  rests  essentially on  whether  it  would  be  a miscarriage of justice to allow execution of the plaintiff’s judgment – see NZ Apple & Pear Marketing Board v Wallis (1990) 4 PRNZ 713, where there was a possibility of the defendant being declared bankrupt before the counterclaim could be heard.”

[45]     In the present case the grounds advanced by the defendant in its notice of opposition as I have noted above effectively amount to a counter claim against the plaintiff.

[46]   To summarise the defendant’s contention, it is that the parties had an arrangement to develop the Cloudy Bay property and the Herd Street Development that amounted to a joint venture and the defendant is owed monies by way of a share of profits under those joint venture arrangements.   On this, in his 22 July 2008 affidavit  the  plaintiff  sets  out  at  considerable  length  his  position  regarding  the

alleged joint venture arrangements for the two developments.  These occupy some 3

½ pages of close type – paras. 4-22 inclusive of the affidavit.

[47]     In particular, as I have noted at para. [15] above the defendant argues that on the  Cloudy  Bay  Development  he  was  entitled  to  a  20%  share  of  the  profits amounting to some $800,000.00. To repeat his contention, to date the defendant says he has been paid only approximately $420,500.00 plus GST.   These payments he deposes comprised $250,000.00 on 31 January 2004, $58,000.00 in March 2004,

$150,000.00 in 30 April 2004 and $15,000.00 in various smaller amounts from time to time.

[48]     The defendant maintains that he is still owed approximately $379,500.00 plus GST from the Cloudy Bay Development and a substantial but unquantified figure from the Herd Street Development but the defendant has yet to properly account to him for those amounts.

[49]     Mr Mahoney had a direct opportunity to respond to this evidence from the defendant when he filed his subsequent affidavit dated 27 August 2008.   That affidavit runs to a little over 1 page and contains only 9 paragraphs.   In it, Mr Mahoney purports  to  deal  with  the  defendant’s  comments  in  his  22  July 2008 affidavit.  It is useful to set out Mr Mahoney’s specific responses to the allegations of the defendant first that a joint venture existed and secondly that he still awaits his outstanding share of joint venture profits.

[50]     Mr Mahoney addresses these aspects as follows: “Joint Venture

3.There has never been a joint venture between the Plaintiff and the Defendant.  The Plaintiff in this matter is CBBP.  The Defendant also seems to think that he and I had a joint venture.   There has never been a joint venture between the Defendant and I.

4.        The 3 contracts do not provide for counterclaim or set-off.

Relationship Between Plaintiff & Defendant

5.        I am not personally a party to these proceedings.

6.In response to the suggestion that the Plaintiff or I owed fiduciary obligations to the Defendant, the Defendant signed 3 valid Personal Guarantees in favour of the Plaintiff.  He has not disputed signing the Guarantees.  The signing of the Guarantees was very much an arms length transaction.  The Guarantees have now only been questioned, much later, at the time of receiving the Defendant’s Affidavit in Opposition.”

[51]     In his affidavit, Mr Mahoney makes no reference to the claims made at para.

9 of the defendant’s affidavit that he is still owed some $379,500.00 from the Cloudy Bay Development and that in 2004 he received in total approximately $420,500.00 plus  GST  as  his  share  of  profit  from  the  development.    In  my  view  this  is  a significant oversight on the part of Mr Mahoney.

[52]     Further, Mr Mahoney does not specifically address the detailed arguments put forward by the defendant that the Herd Street Development was a joint venture on similar terms to the Cloudy Bay Development nor the defendant’s claim that he needed therefore to be provided with an account of profits and payment of any share due to him but that this had not occurred.

[53]     Mr Mahoney’s affidavit is effectively silent on these matters.   He simply asserts that there has “never been a joint venture between the Defendant and I.”

[54]     In the face of the detailed allegations made in the defendant’s 22 July 2008 affidavit, this bland assertion, in my view, must raise issues.

[55]     As I have noted, before me Mr Withnall for the defendant placed some reliance on the Supreme Court decision in Chirnside v Fay. This held that under the circumstances prevailing in that case a joint venture existed and that this was a relationship giving rise to fiduciary duties of loyalty and trust between the parties. Accordingly, in that case, Mr Chirnside was required to account to Mr Fay for his share of the profit he derived from the venture.

[56]     Mr Withnall contended that the present situation between the plaintiff and the defendant has considerable similarities to that which prevailed in Chirnside v Fay.

[57]     In   the  present   case  it   is   clear   however   that   there   was   no   written documentation between the plaintiff and the defendant setting out the terms of the alleged joint venture arrangement.  Indeed the defendant in his affidavit describes the joint venture as a “gentleman’s’ agreement” both for the Cloudy Bay Development and the Herd Street Development.

[58]     Given the magnitude of each of these multi-million dollar developments, it does seem somewhat surprising that the parties did not choose to reduce their arrangements to writing.

[59]     Notwithstanding   this   fact,   there   is   before   the   Court,   however,   the uncontradicted affidavit evidence of the defendant that, so far as the Cloudy Bay Development was concerned in 2004, he was paid some $420,500.00 plus GST in various lump sum payments, payments which he maintains represented a part of his share of the joint venture profit.   Neither the plaintiff, nor Mr Mahoney in his affidavit, give any other explanation here for these payments.

[60]     The defendants claim to a $379,500.00 plus GST balance profit share on that development together with his claim to a share in the Herd Street Development profit, in my view require further exploration.  When fully and properly considered these claims may well constitute a valid counter claim on the part of the defendant against the plaintiff.

[61]     Although strictly speaking before me the defendant did not apply for a stay of execution of any summary judgment order that may be made pending resolution of this counter claim, in my view it is appropriate here to take such a course.

[62]     As I see the position, it would be a miscarriage of justice in the present case to allow the plaintiff to execute any summary judgment to be granted against the defendant (e.g. by having him declared bankrupt) before his alleged counter claim could be fully heard – NZ Apple and Pear Marketing Board v Wallis.

[63]     Rule 142(2) High Court Rules clearly envisages that an approach such as this is often appropriate.  It provides:

“2.If it appears to the Court on an application for judgment under r 136 or r 137 that the defendant has a counter claim that ought to be tried, the Court –

(a)       May give judgment for the amount that appears just on any terms it thinks fit …”  (emphasis added)

[64]     That approach is confirmed in the decision of Roberts Family Investments Limited v Total Fitness Centre (Wellington) Limited [1989] 1NZCR 15 where McGechan J states at page 92:

“Rather than give an immediately enforceable judgment to the plaintiff on the plaintiff’s (summary judgment) claim, perhaps allowing the plaintiff to bankrupt the defendant before the latter’s counter claim can be brought to judgment and off set, the Court may and commonly does grant the plaintiff summary judgment accompanied by stay of execution of such judgment pending resolution of the counter claim, or occasionally dismisses the summary judgment application, directing trial of both claim and counter claim.”

[65]     On this see also McGechan on Procedure para. HR142.01.

Conclusion

[66]     For the reasons I have outlined above, I am satisfied that the plaintiff has satisfied the onus upon it here to show that the defendant has no defence to its claim for summary judgment under the limited lease guarantee.   That said, the present application largely succeeds and an order for summary judgment against the defendant for the sum of $162,524.51 plus GST representing the 12 months outstanding rental ($157,737.00 plus GST) and an amount on the evidence before the Court for outgoings ($4,787.51 plus GST) will follow.

[67]     A further order is to be made, however, staying execution of this summary judgment pending proper resolution of the defendant’s counter-claim against the plaintiff.

[68]     Orders are now made therefore as follows:

a)       An order for summary judgment is made in this proceeding in favour of the plaintiff against the defendant in the sum of $162,524.51 plus GST, subject to paras. [68] (b) and (c) below.

b)Execution of this order is stayed pending further order of this Court once the defendant’s counter-claim against the plaintiff is properly resolved.

c)        This stay is conditional upon the following:

(i)The defendant within 10 working days  of  the date of  this judgment issuing proceedings against the plaintiff in terms of his counter-claim; and

(ii)The defendant then taking all reasonable steps to pursue and prosecute this counter-claim to completion with all due expedition; and

(iii)Leave is reserved for the plaintiff to approach the Court at any time on 48 hours notice to apply to have the stay lifted or to seek any further orders or directions that may be appropriate in the event that the plaintiff considers the defendant is failing to comply with these conditions.

Costs

[69]     As to costs, the plaintiff has effectively succeeded in its summary judgment application and is entitled to an order of costs in the usual way.  Costs are therefore

awarded on this summary judgment application to the plaintiff on a Category 2B

basis together with disbursements (if any) as approved by the Registrar.

‘Associate Judge D.I. Gendall’