Jo v Johnston HC Christchurch CIV 2009-409-741
[2010] NZHC 2019
•16 November 2010
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2009-409-741
BETWEEN NAMGEUN JO AND SOON HEE KWON Plaintiffs
ANDBERNARD JOHNSTON First Defendant
ANDSOUTHERN HOSPITALITY LIMITED Second Defendant
ANDMAINTENANCE UNLIMITED LIMITED Third Party
Hearing: 11 November 2010
Appearances: Mr S J Shamy for plaintiffs
Mr J C D Guest for second defendant
Judgment: 16 November 2010 at 2 pm
JUDGMENT OF LANG J
[on application by second defendant for leave to apply
for summary judgment against plaintiffs]
This judgment was delivered by me on 16 November 2010 at 2 pm, pursuant to Rule
11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors / Counsel:
Mr S J Shamy, Christchurch Addington Law, Christchurch Downie Stewart, Dunedin
JO AND ANOR V SOUTHERN HOSPITALITY LTD HC CHCH CIV-2009-409-741 16 November 2010
[1] The plaintiffs are the trustees of the SY Trust. In that capacity they own a commercial building situated in central Christchurch. In 2005 they decided to modify the ground floor of the building in order to create a food court.
[2] The second defendant, Southern Hospitality Limited, was responsible for installing an internal and external ventilation ducting unit for the new food court. The modifications were carried out, but problems soon arose when the plaintiffs discovered that the appropriate resource consents had not been issued for the modifications that had been carried out. The problems escalated when the tenants moved out of the food court because of problems with the ventilation system. In this proceeding the plaintiffs seek to recover from the defendants the losses that they suffered as a consequence of the problems that arose when the food court was modified.
[3] Southern Hospitality has applied for leave to apply for summary judgment against the plaintiffs. It seeks to argue a narrow point. It contends that it never entered into a contract with the plaintiffs. It maintains that it entered into a contract with a company called Stranges Food Court Limited. As a result, it contends that the plaintiffs have no ability to sue them as a result of any alleged breaches of the contract. The only entity that could sue on the contract is Stranges Food Court Limited.
The requirement for leave
[4] Southern Hospitality may require leave to apply for summary judgment because the proceeding commenced on 16 April 2009. A defendant may only apply for summary judgment against the plaintiff as of right where it does so within the time permitted for the filing of a statement of defence. That period expired in May
2009. The issue is clouded somewhat by the fact that the plaintiffs filed an amended statement of claim on 19 July 2010. The High Court Rules do not prescribe the time within which a defendant must file a statement of defence to an amended statement of claim. It is therefore arguable that Southern Hospitality does not require leave to file its application for summary judgment.
[5] I propose to determine the issue of leave by considering the merits of the application for summary judgment. If I conclude that Southern Hospitality is entitled to summary judgment, I will grant leave. If I do not, leave will be refused.
Relevant principles
[6] There is no dispute regarding the principles to be applied in relation to an application for summary judgment by a defendant. They are now well established through decisions of the Court of Appeal such as Pemberton v Chappell [1987] 1
NZLR 1 (CA); Grant v New Zealand Motor Corporation Ltd [1989] 1 NZLR 8 (CA)
and Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR
298 (CA).
[7] In determining a defendant’s application for summary judgment the Court is required to apply the following general principles:
a) The defendant must establish that it has a complete answer to all of the claims that the plaintiff brings against it. It is not possible to enter summary judgment in respect of some of the claims, leaving the balance to be determined at trial.
b)It is generally not possible to determine disputed issues of fact based on affidavit evidence alone, particularly when issues of credibility arise. Issues of law, on the other hand, may be determined on an application for summary judgment even if they are of a complex nature.
c) Although the Court should adopt a robust approach, summary judgment may nevertheless be inappropriate where the ultimate determination turns on a judgment that can only properly be reached after a full hearing of all the evidence.
Who were the parties to the contract?
[8] The documents that the parties signed at the time that they entered into the contract are obviously important in this context. The most significant of these is the
quotation that led to the formation of the contract. Southern Hospitality issued a quotation to Stranges Food Court Limited, and Mr Jo accepted that quotation by signing it in his capacity as director of “Strange Food Court”. This document strongly suggests that the contract was between Southern Hospitality and Stranges Food Court.
[9] At or about the same time as it accepted the quotation, Stranges Food Court Limited completed a written application to open a monthly credit account with Southern Hospitality. Mr Jo signed that form as a director of Stranges Food Court Limited, and he also provided within it a personal guarantee in respect of the company’s indebtedness. Under the section “For office use only” is a notation that Southern Hospitality approved a credit limit of $2000 to Stranges Food Court Limited.
[10] It is difficult to ascertain whether the application to open a monthly credit account was related to the ducting contract, because the ducting contract did not require Stranges Food Court Limited to obtain credit from Southern Hospitality on a monthly basis. Rather, it was required to pay a total sum of approximately $39,700 for the work that Southern Hospitality was to carry out under the contract. It was required to pay that sum by way of a payment of $13,231 “on confirmation of order”, together with a further payment of $26,463 “before delivery on the agreed date 18/05/2007”. There is therefore no obvious connection between the ducting contract and the application to open a monthly credit account.
[11] The subsequent actions of the parties are also slightly equivocal. Acting no doubt on the basis that it was in a contractual relationship with Stranges Food Court Limited, Southern Hospitality issued its invoices for the work done pursuant to the contract in the name of that company. Stranges Food Court Limited did not pay any of the invoices that Southern Hospitality issued. Instead, the SY Trust issued two cheques totalling $16,984 and SY Enterprises Limited provided Southern Hospitality with a third cheque for the sum of $13,231.66. Mr Jo deposes that the SY Trust claimed back the GST in respect of all of the payments that were made to Southern Hospitality.
[12] When monies were left owing to Southern Hospitality under the contract, it issued a statutory demand against Stranges Food Court Limited. Mr Jo responded to the statutory demand by writing a letter to Southern Hospitality. He commenced that letter by saying “We want you to change the notice to be sent to SY Enterprise Ltd; director Namgeun Jo; and PO Box 40028 Christchurch”. Mr Jo signed that letter as a director of both Stranges Food Court Limited and SY Enterprise Limited. Precisely how SY Enterprise fits into the equation is at this point unknown.
[13] I consider, however, that the critical contractual documents are the quotation and the acceptance. The only parties to that document were Stranges Food Court Limited and Southern Hospitality. For present purposes, therefore, they must be regarded as the parties to the contract.
[14] That conclusion is not, however, necessarily determinative of the present application. The plaintiffs argue that when Stranges Food Court Limited entered into the ducting contract, it was acting as their agent. They say that they are entitled to sue on the contract as the principal on whose behalf Stranges Food Court Limited acted as agent.
Is it arguable that Stranges Food Court Limited was acting as the agent of the plaintiffs?
[15] The starting point is the manner in which the plaintiffs have pleaded their claim.
[16] The amended statement of claim, dated 19 July 2010, contains the following pleading:
14.On or about 5 April 2007 the plaintiffs, through their agent, Stranges Food Court Limited, entered into an agreement with the second defendant.
[17] In an affidavit sworn in opposition to the present application, Mr Jo confirms that he and his wife, Soon Hee Kwon, are the trustees of the SY Trust. They own the building that is the subject of this proceeding in that capacity. Mr Jo says that he met with Mr Davies, a director of Southern Hospitality, at the time that the
modifications to the building were being discussed. He says that from the outset, Mr Davies knew that Mr Jo was the owner of the building. He says that at two subsequent meetings with Mr Davies, he told Mr Davies that the name of the food court would be “Stranges Foodcourt”. He says that at the time that the plans for the development of the food court were being finalised, the trustees decided that they would use Stranges Food Court Limited (then called Zylas Café Limited) as a “management type company” for their dealings with Southern Hospitality. He says that throughout his discussions with Mr Davies, he made it clear that, through the trust, he was the owner of the building and that arrangements were made through Stranges Food Court Limited as a matter of convenience for management purposes.
[18] In expanding this he says:
12.Stranges Food Court Limited/ Zylas Café Limited was intended by me to manage the food court and its tenants generally, not to be the contracting party for the purpose of the building work. I am certainly clear in my understanding that the plaintiffs were the true contracting party with the second defendant.
[19] Mr Davies acknowledges that he knew, or at least understood, that Mr Jo owned the building, possibly with other people. He says, however, that that was of little interest to him. What he needed to know was the name of the person or company that Southern Hospitality would be contracting with. He says that he addressed the quotation to Stranges Food Court Limited because Mr Jo had told him that that was the entity with whom he was contracting.
[20] The fact that Mr Davies believed that he was dealing only with Stranges Food Court Limited does not provide a complete answer to the plaintiffs’ claim. It is open to the plaintiffs to prove, as they have currently pleaded, that Stranges Food Court Limited was acting at all material times as their duly authorised agent in its dealings with Southern Hospitality.
[21] It is well established that an undisclosed principal may sue, and be sued upon, a contract entered into on its behalf by an agent acting within the scope of the agent’s actual authority. In Diamond Stud Limited v New Zealand Bloodstock Finance Limited [2010] NZCA 423, the Court of Appeal recently cited with approval (at [15])
the following passage from the opinion of the Privy Council in Siu Yin Kwan v
Eastern Insurance Co Limited [1994] 2 AC 199 (PC) at 207:
[For present purposes the law can be summarised shortly as follows.] (1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal’s behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against this principal. (5) The terms of the contract may, expressly or by implication, exclude the principal’s right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.
[22] It therefore does not necessarily matter whether or not Southern Hospitality knew of the existence of the plaintiffs. As the above passage makes clear, Stranges Food Court Limited would undoubtedly remain liable to Southern Hospitality for any breach of the terms of the contract even if it acted as the plaintiffs’ agent when it entered into the contract. The fact that it may have entered into the contract as the plaintiffs’ agent would not provide a defence to a claim by Southern Hospitality. Conversely, Stranges Food Court Limited could also sue under the contract in respect of any breach by Southern Hospitality. Those facts do not, however, affect the ability of an undisclosed principal to sue on a contract that a duly authorised agent has entered into on its behalf.
[23] Southern Hospitality submits that the claim that Stranges Food Court Limited was acting as the plaintiff’s duly authorised agent flies in the face of the key contractual documents. It contends that the plaintiffs’ claim is so inherently improbable and lacking in credibility that it should be disregarded. It relies upon the well-known passage from the advice of the Privy Council in Eng Mee Yong v Letchumanan [1980] AC 331 where Lord Diplock said at 341:
Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however unequivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be …
[24] The fact that the key contractual documents do not disclose the involvement of the plaintiffs does not advance the case for Southern Hospitality to any material degree. The non-disclosure of the identity of the principal in key contractual documents will generally be a feature of any case involving an undisclosed principal.
[25] Counsel for Southern Hospitality also argued that it was significant that Mr Jo did not disclose that Stranges Food Court Limited was acting as the agent of the plaintiffs when he signed the application to open a monthly credit account. He submitted that, in effect, Mr Jo was guaranteeing his own obligation when he signed the guarantee in that document. For the reasons that I have already given, however, I am not sure whether there is any relationship between the ducting contract and the application to open a monthly credit account.
[26] The fact that Stranges Food Court Limited obtained a monthly credit limit of
$2000 may instead be consistent with the possibility that it was going to be involved in an ongoing trading relationship with Southern Hospitality in the future. As counsel for the plaintiffs pointed out during the hearing, Southern Hospitality’s logo on the application to open a monthly credit account contains the words “For all your catering equipment supplies”. Until the relationship between the application and the ducting contract is clarified, it is not possible to say that the application casts doubt upon the plaintiffs’ claim.
[27] Moreover, there is no dispute that the plaintiffs are the owners of the building. Mr Davies also accepts that he knew, or understood, that Mr Jo was an owner at the time that he and Mr Jo signed the contract. Mr Jo signed the contract in his capacity as a director of Stranges Food Court. Given the fact that the contract related to the modification of the building, it is a reasonable inference that Mr Jo, in his capacity as an owner of the building, must have authorised Stranges Food Court Limited to enter into the contract with Southern Hospitality Limited.
[28] There are several ways in which he could have provided Stranges Food Court Limited with that authority. The owners may, for example, have entered into a formal lease with Stranges Food Court Limited. That may have provided Stranges Food Court Limited with the necessary authority to engage a contractor to assist in
modifying the building notwithstanding the fact that the building was owned by somebody else. Alternatively, the owners may have appointed Stranges Food Court Limited to act as their agent for a variety of purposes, including the modification and management of the building.
[29] Mr Jo’s evidence on this point is that that is what happened. He says that he and his wife, as owners of the building, decided to manage the building through the medium of the company. He signed the contract with Southern Hospitality on that basis.
[30] The plaintiffs also say with reference to the fifth point made by the Privy Council in the passage from Kwan set out above at [21], that there is nothing in the ducting contract that excludes their right to sue, and their liability to be sued under the contract. They argue that Southern Hospitality’s sole concern under the contract was that it should be paid for the work that it carried out. So long as that occurred, it had no interest in the identity of the entity making the payments.
[31] I accept that his proposition is arguable. It is likely that the plaintiffs regarded Southern Hospitality as performing an essential role under the contract, because it was solely responsible for carrying out the work under the contract. Presumably the plaintiffs relied, at least in part, upon Southern Hospitality’s expertise in its field when it accepted the quotation for the ducting work. The identity and role of the party for whom the work was being performed may not, on the other hand, have been an essential feature of the contract so far as Southern Hospitality was concerned. The party’s principal obligation was to ensure that Southern Hospitality was paid for the work that it carried out. Moreover, it remains responsible for meeting that obligation notwithstanding the possibility that it may only have been acting as the agent of the plaintiffs when it entered into the contract.
[32] The plaintiffs also point to the fact that Stranges Food Court Limited never contributed to the three payments that Southern Hospitality received for the work that it carried out pursuant to the ducting contract. Although SY Enterprise Limited made one of those payments, the other two payments were made from the Trust’s bank account. The plaintiffs also rely upon the fact that the trust claimed the GST
input credits in relation to those payments. Taken together, I accept that these factors support the proposition that, although Stranges Food Court Limited was a party to the written contract with Southern Hospitality, the plaintiffs may have used that company as their agent.
[33] Whether or not that is what actually occurred is a matter that can only be determined at trial. For present purposes, however, I have concluded that the plaintiffs’ claim is not so lacking in credibility that summary judgment must be entered against them.
[34] I am therefore satisfied that there is an arguable factual and legal basis for the plaintiffs’ claim against Southern Hospitality.
Result
[35] The application for leave to apply for summary judgment is accordingly dismissed.
Costs
[36] The plaintiffs are entitled to costs on the application on a Category 2B basis together with disbursements as fixed by the Registrar.
Next event
[37] The next event in this proceeding is a case management conference that is to be held by way of telephone conference on 24 November 2010 at 12.30 pm. Directions in relation to that conference were given by Associate Judge Osborne in his minute dated 14 September 2010.
Lang J
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