Midland Properties (NZ) Limited v A
[2021] NZHC 1791
•15 July 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2019-409-724
[2021] NZHC 1791
BETWEEN MIDLAND PROPERTIES (NZ) LIMITED
Plaintiff
AND
[A]
Defendant
Hearing: 5 July 2021 Appearances:
A D Marsh for Plaintiff
D M Woodbridge for Defendant
Judgment:
15 July 2021
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 15 July 2021 at 4.00 pm Pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar 15 July 2021
MIDLAND PROPERTIES (NZ) LIMITED v [A] [2021] NZHC 1791 [15 July 2021]
[1] The plaintiff seeks leave, which is opposed, to bring an application for summary judgment in this proceeding.
[2] A statement of claim was filed in December 2019 and served by way of substituted service in March 2020.
[3] As the defendant took no steps, in July 2020 the plaintiff sought entry of judgment by default and judgment was entered against the defendant by the Registrar. The plaintiff then lodged charging orders against the defendant’s property which prompted the defendant to apply to have the judgment set aside.
[4] The application to have the default judgment set aside was heard by me on 19 February 2021. In a judgment dated 26 February 2021 (subsequently re-issued in a redacted form on 29 March 2021), the default judgment was set aside on the grounds that it was irregularly obtained.1
[5] The plaintiff seeks judgment against the defendant as the guarantor of the lease obligations of a company which was the tenant of a commercial building in Christchurch. The tenant company went into liquidation on 14 May 2019. The liquidators disclaimed the lease in August 2019 with the liquidators keeping the rent current through to disclaimer. As noted, these proceedings were commenced at the end of 2019.
[6] The default judgment was set aside as judgment was entered for a sum greater than the amount claimed in the statement of claim contrary to r 15.7 of the High Court Rules 2016 (the Rules). Rental arrears had continued to accrue for which the plaintiff sought judgment but for which no such claim was made in the statement of claim.
[7] In early May 2021, the plaintiff filed an application for summary judgment but overlooked the need to first apply for leave pursuant to r 12.4(2). The application for leave was duly filed.
1 Midland Properties (NZ) Ltd v [A] [2021] NZHC 295.
Relevant principles
[8] Mr Marsh, counsel for the plaintiff, refers to Tip Top Ice Cream Co Ltd v Polarland Ltd, where the Court noted there are no specific guidelines in relation to an application for leave to bring a summary judgment application.2 In Tip Top, three factors were identified as assisting in the consideration of a discretion:3
(a)Has the delay been satisfactorily explained?
(b)Are the merits of the applicant’s case for relief particularly strong so as to justify determination at a summary judgment hearing?
(c)Is there any risk of miscarriage of justice by determining the application at a summary judgment hearing.
[9] McGechan on Procedure notes that r 12.4(2) provides no guidelines for the granting of leave.4 However, the above factors provide a structure against which to consider the application.
Delay
[10] While there has been delay, I consider it has been satisfactorily explained. The original time loss was due to the defendant not filing a defence. Further delay occurred as a result of the defendant’s successful application to have the judgment set aside.
[11] The delay of a little over two months between the release of the decision setting the default judgment aside and the filing of the application for summary judgment is not unreasonable. This is because of the need for the plaintiff to consider the implications of the judgment setting aside the default judgment and the need for the affidavits in support of the application for summary judgment to be prepared, filed and served.
2 Tip Top Ice Cream Co Ltd v Polarland Ltd (2002) 7 NZBLC 103,564 (HC) at [27].
3 At [28].
4 Andrew Beck and others (eds) McGechan on Procedure (online ed, Thomson Reuters) at [HR12.4.01A].
[12]I do not consider this factor stands against leave being granted.
The merits
[13] It is fair to say the main focus of counsels’ submissions was on the merits of the application.
[14] This is not a claim for accrued rental – it is a claim for damages, being the shortfall arising from the rental at which the plaintiff has been able to re-let part of the premises.
[15] As a claim for damages, Mr Woodbridge, counsel for the defendant, says the issue of mitigation of damages is not a suitable one for summary judgment. The plaintiff has filed evidence as to the efforts undertaken to re-let. As yet, no evidence in reply has been led on that issue.
[16] Mr Woodbridge submitted the real focus was on whether the plaintiff/landlord had reduced the asking rental sufficiently as any rent recovered was to the guarantor’s benefit.
[17] The issue will be whether the plaintiff/landlord acted reasonably in attempting to re-let the property. What is reasonable for a landlord to do in terms of dropping the rental, adjusting the required terms, being prepared to take temporary tenants and the like will depend on the nature of the premises and the prevailing market.
[18] Mr Woodbridge, in his written submissions, acknowledged there is affidavit evidence concerning the plaintiff’s attempt to re-tenant the property but submits that the plaintiff’s position needs to be subject to cross-examination with an emphasis on the rental sought and whether a tenancy could have been obtained at a highly discounted rental.
[19] Mr Woodbridge submits that, as the defendant was not the tenant, he had no power himself to re-tenant the property. Mr Woodbridge says that for the guarantor’s case to be properly advanced the landlord’s evidence needs to be properly tested.
[20] On the material presently before me I am not satisfied that the mitigation of damages point should stand in the way of leave. If the defendant can produce authority for the proposition that a landlord’s obligation to mitigate losses means they are obliged to reduce the rent in increments until the market responds, that may present issues for the plaintiff, but such is ultimately a matter that can be argued at a summary judgment hearing.
[21] The second main point on the merits concerns the execution of the Agreement to Lease. The Agreement to Lease is dated 5 July 2018. There are amendments to the First Schedule to the Agreement to Lease which sets out the lease term, rights of renewal and annual rental. The amendments have been initialled on behalf of the plaintiff and bear the initials of someone I was told was the CEO of the tenant company. The amendments have not been initialled by the defendant. Assuming that upon the timeline of the drafting of the amendment and their initialling of the Agreement to Lease being examined, it is confirmed that the defendant signed the guarantee before the amendments were made, the effect (if any) of those amendments on the defendant’s obligations as guarantor will be a matter for legal submission at summary judgment.
[22] Other matters were referred to by Mr Woodbridge, including possible reliance on s 24 of the Property Law Act 2007 but he appropriately acknowledged that such would raise a point that could be dealt with at summary judgment.
Possibility of miscarriage
[23] I do not see a possibility of a miscarriage of justice in this case. Mr Woodbridge, in addressing this factor, referred to the fact that if leave was granted the defendant would have been involved in three opposed applications when the focus should be on having the substantive hearing. Of course, the first of the three hearings was brought about through the defendant’s failure to file a defence. The second, that is this application for leave, was dealt with promptly and only required a hearing time of less than one hour. I have put the plaintiff on notice that if it pursues summary judgment and is unsuccessful then such may make it harder for the plaintiff to resist an award of costs if the defendant succeeds on one of the matters relied on to oppose
leave. Mr Marsh, counsel for the plaintiff, acknowledged that in those circumstances it would be harder for the plaintiff to resist costs.
[24] At the end of the day, I am satisfied this is an appropriate case for leave to be given to the plaintiff to bring an application for summary judgment and I grant leave accordingly.
[25] As I noted at the outset, the plaintiff has already filed its application and the defendant has filed a notice of opposition and affidavit.
[26] Any affidavits from the plaintiff, strictly in reply, are to be filed within 15 working days. There will be a hearing before me of the summary judgment application on Tuesday 14 September 2021 at 10 am.
[27] Plaintiff’s submissions are to be filed 10 working days prior to the hearing (that is by Tuesday 31 August 2021).
[28] The defendant’s submissions are to be filed five working days prior to the hearing (that is by Tuesday 7 September 2021).
[29]The plaintiff is to take responsibility for a common bundle.
[30]Costs on this application are reserved.
Associate Judge Lester
Solicitors:
Evans Henderson Woodbridge, Marton Kearneys, Christchurch
Copy to counsel:
A Marsh, Barrister, Christchurch
0