Parkhurst Corporation Limited v Bisht
[2021] NZHC 2888
•29 October 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-000948
[2021] NZHC 2888
BETWEEN PARKHURST CORPORATION LIMITED
Appellant
AND
MADHAN SINGH BISHT
Respondent
Hearing: 10 August 2021 Appearances:
A Shinkarenko and T Zaseev for the Appellant S Raju for the Respondent
Judgment:
29 October 2021
JUDGMENT OF WALKER J
This judgment was delivered by me on 29 October 2021 at 10 am Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
PARKHURST v BISHT [2021] NZHC 2888 [29 October 2021]
Introduction
[1] This appeal concerns damages awarded for ‘loss of a chance’ following a landlord’s unlawful entry of commercial premises. The landlord-tenant relationship between the appellant, Parkhurst Corporation Limited (Parkhurst) and the respondent Madhan Singh Bisht foundered in early 2017. Mr Bisht’s company, Imaxx Café & Bistro Ltd, was running a restaurant from the leased premises. Parkhurst had become frustrated by Mr Bisht’s consistently late and/or deficient payment of rent and outgoings. It made various demands for the sums due. On 14 February 2017, Parkhurst re-entered and took possession of the leased premises by changing the locks. It had not served a valid notice upon Mr Bisht prior to re-entering but contended that Mr Bisht had given up possession of the premises.1
[2] Mr Bisht issued proceedings in the District Court against Parkhurst for breach of the lease.2 He was largely successful although, for reasons which will emerge, not on his principal claim to damages. The Judge delivered an interim judgment in which she found the re-entry unlawful and liability for breach. She dismissed all the conventional claims for damages but allowed for supplementary submissions on damages for loss of a chance. Ultimately, Mr Bisht was awarded $66,360.93 plus interest and costs under that measure.
[3] Parkhurst accepts that the re-entry was unlawful but argues on appeal that the Judge erred in two main respects: first in her assessment of loss of a chance and secondly, by rejecting Parkhurst’s affirmative defence that Mr Bisht failed to mitigate his losses.
Background
[4] On 11 May 2015, Parkhurst and Mr Bisht signed a formal Deed of Lease (the lease) for premises at 167 Parkhurst Road, Parakai (the premises). The material terms were:
(a)The lease was to commence on 11 August 2015.
1 Relying on s 245(2) of the Property Law Act 2007.
2 See Bisht v Parkhurst Corp Ltd [2021] NZDC 7242 [District Court decision].
(b)It was for a term of 18 years with rights of renewal exercisable every two years: the first two year term was to end on 11 August 2017 and the final expiry date was 11 August 2033.
(c)The monthly rental was $2,383.33 plus GST ($2,740.83 including GST) payable on the 11th day of each month.
(d)Under clause 3.1, Mr Bisht was required to pay a fair proportion of outgoings as agreed or determined by arbitration.
(e)Mr Bisht received a 12 week “rent holiday”; the first monthly rental payment was due on 11 September 2015.
(f)There were two special conditions in the sixth schedule:
(i)The first read “[t]he lease will contain a standard demolition clause: i.e in the case of a total purchase of Parkhurst Property”.
(ii)The second read “[t]he lease’s [sic] will spend up to and from
$80,000–$100,000 on renovations to upgrade the premise”.
[5] Mr Bisht took possession of the premises in May 2015 and began renovations.3 They took longer than he anticipated. He estimated that he spent in excess of
$180,000, including chattels for the restaurant’s operation. The renovation cost was vigorously contested at trial. Based on the notes of evidence, most of the supplementary evidence and cross-examination dwelt on invoices purporting to represent the renovation cost.
[6] Rent was paid late from the commencement of the lease. Mr Bisht accepts that he fell behind on payments under the lease as they began to fall due on 11 September 2015 due to the expense of the unexpectedly prolonged renovations. He claimed to be experiencing cashflow problems. For the first eight months of the lease, Mr Bisht
3 This appears to be during the ‘rent holiday’ although the formal term had not commenced.
did not pay the GST portion of the rent (paying $2,383.33 instead of $2,740.83 per month).
[7] The Judge determined that Mr Bisht failed to pay any money towards outgoings for the entire 21 month duration of the lease, other than a one-off payment of $1,800 following a meeting in November 2016 to discuss the arrears. The Judge was satisfied from the evidence that the outgoings were payable and not objected to until the proceedings were issued.4
[8] The issues came to a head. The directors of Parkhurst asserted that demands to clear the arrears were sent to Mr Bisht on 7 June 2016, 21 September 2016 and 18 November 2016. An invoice dated 14 February 2017 for arrears of $21,129.67 was issued. Mr Bisht denied receiving the letters of demand.
[9] On the night of 13 February 2017, witnesses observed what they thought were Mr Bisht’s “agent(s) and/or employee(s)” loading furniture and stock out of the premises. The directors of Parkhurst concluded that Mr Bisht was abandoning the premises.
[10] On 14 February 2017, after taking legal advice, Parkhurst re-entered the premises. They took the view that equipment was missing and that Mr Bisht was “gutting the place”. They arranged for a lock-smith to change the locks. At the time, the restaurant was not operating. It had not been open since December 2016. Rent for December and January had been paid but rent due on 11 February 2017 had not been paid.
[11] Mr Bisht arrived to find the locks changed. A series of letters between the parties’ respective legal advisors followed. There was no resolution.
[12]On 31 August 2017, Mr Bisht issued proceedings in the District Court.
4 District Court decision, above n 2, at [112].
District Court decision
[13] Judge P A Cunningham issued an interim judgment on 15 February 2021 and the final judgment on 27 April 2021. For present purposes, it is the final judgment which is at issue.
[14] The Judge found that although the landlord had grounds to issue Mr Bisht with a notice under s 245 of the Property Law Act 2007 (the Act), it plainly failed to do so. The directors of Parkhurst had no reasonable grounds on which to believe that Mr Bisht had already given up possession of the premises.5 The re-entry was therefore unlawful.6
[15] Mr Bisht’s statement of claim sought damages of $190,033.98 said to represent the cost of renovating and upgrading the premises. He also sought damages for the loss of his business/loss of opportunity and for the stress, shame and embarrassment caused by the sudden closure of his business, interest and costs.
[16] The Judge noted that the focus at trial was on compensation for the cost of renovating the premises. She referred to 140 pages of invoices, credit notes and statements said to relate to expenditure on the renovation and fit out of the restaurant. Those invoices were variously made out to Imaxx Café & Bistro, Imaxx Café & Bistro Ltd, Curry Leaf (Mr Bisht’s other restaurant) as well as businesses associated with Mr Bisht’s brother (Kajol Cuisine Ltd).7
[17] During the hearing, with leave of the Judge, the invoices were organised into a schedule and produced as an exhibit. This involved recalculation of expenses. I interpolate here that Mr Shinkarenko mounted a strenuous opposition to this during the trial, having sought source documents and financial documents for the claimed expenses over the course of the proceedings. He submitted that parties who do not disclose documents relevant to a transaction leave themselves vulnerable to an adverse
5 See District Court decision, above n 2, at [29] and [42]. The Judge observed that the wording of s 245(2) requires that the lessor believe the lessee has actually given up possession, and it is not enough that they thought the lessee was in the process of doing so.
6 At [42].
7 At [50].
finding on the facts at the hearing.8 The Judge nonetheless ruled to allow Mr Bisht to lead oral evidence, including in relation to nine invoices on the basis that if any embarrassment or difficulty was caused to Parkhurst leading to adjournment of the trial, Mr Bisht could expect an award of costs against him.
[18]The schedule totalled over $190,000 but there was proof of payment of only
$59,934.04. The Judge concluded that it was unknown whether the produced invoices had been paid by Mr Bisht personally from his own finances or through another legal entity, or a mixture of the two. Some amounts were also paid for by Mr Bisht’s brother or a company associated with him, as he held active accounts with suppliers. Both Mr Bisht and his brother gave evidence that Mr Bisht repaid him later but were at odds as to how much had been repaid.9
[19] The unsatisfactory state of the evidence created problems for the damages claim. While Mr Bisht was the lessee and the plaintiff, he did not own the Imaxx Café & Bistro business. A company bearing that name, Imaxx Café & Bistro Ltd, owned the business. Although Mr Bisht is the sole shareholder and director, the problem was accordingly one of legal personalities. The Judge held that the claimant should be Imaxx Café & Bistro Ltd which was not a party to the proceeding.10
[20] The Judge identified other issues with this head of claim. Mr Bisht had been contractually bound to spend at least $80,000 and up to $100,000. He had also received some benefit from this expenditure by trading for just over a year from the premises. Further, the total amount spent by Mr Bisht (or his entities) included the cost of chattels which should not have formed part of the claim and for which there was no evidence of value.
[21] The first head of damages failed for lack of proof and because the proper claimant was the company owning the business rather than Mr Bisht personally.
8 See Mo v Tamaki Homes Ltd [2019] NZHC 3032 at [31]–[32].
9 Mr Bisht’s brother, Mr Gulab Bisht, thought the amount he was repaid was around $70,000. Mr Madhan Bisht thought it was less, $45,000 or $50,000.
10 At [51].
[22] The damages claim for loss of the restaurant business faced the same obstacles. There was no valuation evidence and no other reference points such as an offer or offers indicating how much potential purchasers were prepared to pay for the business. This claim also failed.
[23] Faced with inadequate evidence and a lack of submission on the loss of opportunity damages, the Judge asked for further submissions, limited to this aspect of the claim. These were duly filed.
[24] Mr Raju’s further submissions relied on Benton v Miller & Poulgrain (a firm) and Ingram v Patcroft Properties Ltd.11 Mr Raju urged the Judge to take a broad assessment. He submitted that the loss of opportunity was:
(a)Loss of a chance to recover the renovation cost over the term of the lease.
(b)Loss of a chance to ‘sell’ the remainder of the lease (with or without the restaurant business).
(c)Loss of a chance to continue with or derive the full benefit from the remainder of the lease.
(d)Loss of a chance to sell the business.
[25] Mr Shinkarenko’s submissions in response highlighted pleading and evidential deficiencies in the claim for loss of a chance damages. He submitted:
Having failed in establishing causation and quantum of losses using [a] traditional approach, the plaintiff invites the Court to disregard the constraints identified and already ruled on by Your Honour in the interim judgment, circumvent the orthodox approach to proving losses and instead award a more beneficial measure of damages on a purely speculative and hypothetical basis.
[26]The final judgment identified five key issues:12
11 Benton v Miller & Poulgrain (a firm) [2005] 1 NZLR 66 (CA); and Ingram v Patcroft Properties Ltd (2009) 10 NZCPR 426 (HC).
12 District Court decision, above n 2, at [86].
(a)Did Mr Bisht suffer loss because of the unlawful entry by Parkhurst? This had two components:
(i)Can Mr Bisht prove he suffered loss?
(ii)Did Parkhurst cause that loss?
(b)Was Mr Bisht under a duty to mitigate his losses by applying for relief against forfeiture?
(c)Can Mr Bisht claim losses incurred by Imaxx Café & Bistro Ltd as his own losses?
(d)What is the value of Mr Bisht’s loss?
(e)Is Parkhurst entitled to judgment in respect of the arrears of
$22,129.67?
[27] The Judge accepted that Mr Bisht was either going to sell the restaurant business (including the lease) or continue to operate it but change the menu to a “fusion” style. As he was prevented from carrying out either option due to the unlawful re-entry, the Judge considered causation “well and truly established”.13 She found that Mr Bisht had lost the chance to sell the lease (with or without the business).
[28] The Judge rejected Parkhurst’s arguments that the requirement for consent to an assignment of the lease was a contingency to be factored in and that he may not have renewed the lease in August 2017. Neither were hurdles to the claim since Parkhurst was not entitled to refuse consent unreasonably and the lease required the landlord to renew the lease so long as certain conditions were met.14
[29] The Judge observed that she could not be sure whether Mr Bisht would have made the business profitable if he had continued, noting that no expert witness was
13 At [88].
14 This included that the tenant give three months’ notice that they wished to renew the lease and was subject to the right of the landlord to review the rent.
called to give valuation evidence of either the business or the value of the lease.15 In view of the gap in the evidence, she assessed loss broadly on the basis that the value of the lease lay in the fact it had over 16 years yet to run (given the renewal provisions) and came with a high class restaurant fitout. Mr Bisht had lost the opportunity to either sell or benefit from that value:16
The premises are currently operated by directors of Parkhurst as a restaurant and café. There was no evidence as to how well or otherwise the business is doing, except to say that as at the hearing date, this restaurant business had been operating for two years and two months. That fact alone infers it is a worthwhile [sic] running it as a restaurant. My impression of Mr Peter and Mr Robin Williams was that they are both successful businessmen, they would have done all they could to ensure this restaurant runs well. They were able to set up in premises renovated and fitted out to a high standard.
[30] This loss was “real” and “not speculative” in the Judge’s assessment. As it had come about through Parkhurst’s wrongful re-entry of the premises, the Judge found that Parkhurst caused Mr Bisht’s loss.
[31] With respect to Mr Bisht’s failure to mitigate his losses, the essential argument from Parkhurst was that Mr Bisht failed to meet with the landlord and failed to apply for relief against forfeiture. The Judge was unpersuaded by any of the mitigation arguments. She found that Mr Bisht was plainly upset following Parkhurst’s re-entry to the premises; his initial reaction was that the lease had been determined and that he would sue; his request for the return of the chattels inside the restaurant was unlawfully refused by Parkhurst, and he commenced proceedings only six and a half months later. For these reasons there was no failure to mitigate.
[32]As to the value of the lost chance, the Judge referred to the principle that:17
… to avoid an injustice a court may disregard the separate legal personalities of different companies or those of a company and its shareholders/managing directors where the separate legal entities were immaterial to the party that might otherwise be liable for damages, relying on Esso Petroleum Co Ltd v Mardon.
15 At [91].
16 At [95] (emphasis added).
17 At [62] and [103] citing Ingram v Patcroft Properties Ltd (2009) 10 NZCPR 426 (HC) at [82] in turn citing Esso Petroleum Co Ltd v Mardon [1976] QB 801 (CA). The Judge noted that Esso had not been referenced before the further submissions had been provided.
[33] The Judge was satisfied that any losses the company sustained as a result of the wrongful re-entry were in effect losses suffered by Mr Bisht given he was the sole shareholder.
[34] Describing the assessment of the value or amount of the loss as a difficult issue, the Judge rejected the business appraisal as no more than Mr Bisht’s subjective assessment of the value of the business.18 She estimated the value of the wrongfully retained chattels relying on the book value of chattels in the Imaxx company accounts for the year ended 31 March 2017. These exceeded the amounts owed to the landlord under the lease.19 The net difference was $11,360.93. This sum was therefore owed by Parkhurst to Mr Bisht.
[35] The Judge relied upon the following matters which she described as “reliable facts and figures”:
(a)The lease (with two-yearly renewals) had over 16 years to run.
(b)The renovation and fitout was to a high standard.
(c)The directors of Parkhurst were able to walk in and run another restaurant from the same premises since August 2018.
(d)The cost to renovate the premises was in excess of $100,000.
(e)Mr Bisht’s current account in Imaxx Café & Bistro Ltd was $62,878 as at 31 March 2017 and $111,591 in 2018.
(f)The book value for the physical assets of the Imaxx Café & Bistro Ltd was $33,490 as at [31] March 2017.20
[36] She started with the sum owed in the accounts to Mr Bisht from Imaxx Café & Bistro Ltd, less $7,878 to account for the fact that Mr Bisht ran the restaurant business for just over a year and had the use of the premises for 18 months. This came to
$55,000 which, with the sum in [34] above, resulted in judgment in favour of Mr Bisht for $66,360.93 plus interest and costs.
18 District Court decision, above n 2, at [106].
19 At [108].
20 The judgment refers to a date of 3 March 2017 which I assume is a typographical error.
Submissions
Parkhurst’s case
[37] Broadly, Parkhurst advances its appeal on two grounds. First, it argues that the Judge erred in her application of the relevant test for loss of a chance damages which it submits were never properly pleaded, quantified or supported by evidence.21 Secondly, it contends that the Judge erred in relying on the distinguishable Court of Appeal decision in Governors Ltd v Anderson to reject the mitigation defence.22
[38]In support of those broad propositions, Mr Shinkarenko submitted:
(a)four types of lost opportunity were argued for the first time in supplementary submissions after conclusion of the evidence;
(b)the Judge conflated the three distinct types of lost chance;
(c)there was no proper evaluation of the possibilities and contingencies before concluding that the chance to sell the lease was “real”;
(d)the Judge engaged in a speculative assessment without evidence of quantum and value of the lost chance to either sell the lease and/or the business or continuing to trade;
(e)there was no evidence as to quantum to enable the Judge to make a safe assessment; and
(f)the affirmative defence was not adequately assessed as the legal principles were not correctly applied.
21 Referring to the decisions in Powerbeat Canada Ltd v Powerbeat International Ltd [2002] 1 NZLR 820 (HC) at [196] and McLean v Marshall [2014] NZHC 1624, [2014] NZCCLR 31 at [47].
22 Governors Ltd v Anderson CA94/04, 16 August 2005 at [24].
Mr Bisht’s case
[39] Mr Bisht supports the judgment and argues that the Judge’s approach was correct in substance. His counsel, Mr Raju, submits that having found causation well and truly established and then assessing the “intrinsically linked” contingencies, the Judge correctly accepted that all of the contingent circumstances were within Mr Bisht’s control meaning his loss was real and substantial. Further, Mr Raju submits that it was justifiable to use the company accounts as a starting point.
[40] With respect to mitigation, Mr Bisht argues that the Judge was correct to dismiss Parkhurst’s affirmative defence; that the duty to mitigate could not have required Mr Bisht to comply with Parkhurst’s conditions to meet or require him to apply for relief against forfeiture before making a claim for damages.
Legal principles
[41] There is a general right of appeal under s 124 of the District Court Act 2016. On a general appeal the appellate court has the responsibility of arriving at an assessment of the merits of the case however the appellant has the onus of satisfying the court that it should differ from the original decision.23
[42] This appeal concerns only the remedial aspects of the judgment. The Court of Appeal in Geostel Vision Ltd v Oraka Technologies Ltd referred to the orthodoxy that, because determining damages is essentially a question of fact, a trial judge’ assessment will only be disturbed on appeal if there has been some error of principle or the amount of the damages awarded was so high or so small as to make it, in the court’s judgment, an erroneous assessment.24 While Oraka involved the assessment of a reasonable licence fee for breach of copyright by way of damages, it stands for the broader proposition that the approach in Austin, Nichols & Co Inc v Stichting Lodestar does not permit the appellate court to conduct the damages assessment “afresh”.
23 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [5].
24 See Geostel Vision Ltd v Oraka Technologies Ltd [2020] NZCA 256, (2020) 152 IPR 500 at [78]– [83].
Analysis
Loss of a chance damages
[43] Loss of a chance is a well-recognised head of damage involving an inherently difficult evaluation. The fact that an assessment is difficult because of the nature of the damage is not a reason for awarding no damages.25 Loss of a chance was expressed in these terms by Richmond P in Schilling v Kidd Garrett Ltd:26
Since Chaplin v Hicks, the loss of an opportunity, to which a person is entitled by contract, to obtain or retain employment or some profitable connection is recognized as a proper head of damage for breach of contract.
[44] Loss of a chance in the quantification of damages is different from loss of a chance as a form of identifiable head of loss. In the latter, the law treats the loss of a chance of a favourable outcome as damage which is compensated for in itself.27 It comes into play before the court reaches the compensation stage. In the former, the loss of a chance doctrine is not engaged at all.28 In quantification, assessment of chances involves matters of evaluation rather than determinations of fact.
[45] I am not persuaded that the losses claimed by Mr Bisht under this head are properly characterised as loss of a chance damages. If I am wrong on that, I consider that the elements required for loss of a chance damages were not made out and that the Judge fell into error because of the way in which the case proceeded. I set out my reasons.
[46] Loss of the value of the business and/or recovery of the reliance expenditure incurred are orthodox remedial responses in these circumstances. Mr Bisht was unsuccessful on both measures in the interim judgment for lack of proof and as the shareholder of the company which owned the business.29 Mr Bisht’s remaining claim for damages after the issue of the interim judgment was argued solely on the basis it was a claim for loss of a chance or opportunity.
25 James Edelman (ed) McGregor on Damages (21st ed, Sweet & Maxwell, London, 2021) at [10- 002] citing Chaplin v Hicks [1911] 2 KB 786 (CA).
26 Schilling v Kidd Garrett Ltd [1977] 1 NZLR 243 (CA) at 248–249 (citations omitted).
27 Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572 at [36] per Lord Hoffman.
28 Edelman, above n 25, at [10.48].
29 There was no cross-appeal.
[47] An alternative head of claim in circumstances of wrongful cancellation of a lease is damages for the value of the unexpired term. This was not pleaded. It is generally calculated as the rental value of the premises less the contractual rent under the lease.30 It is not a loss of chance head of damages because it is not prospective or hypothetical; the event triggering a remedial response, namely cancellation of the lease, has occurred. There may however be uncertainty about quantum because of future contingencies. Recovery requires evidence of the rental value. None was available. This was one of a number of evidential problems which beset the proceedings.
[48] Nonetheless, in reaching a conclusion that “the chance lost by Mr Bisht was real”, the Judge assumed value in the unexpired term based on the number of renewals and the fitout. I infer that the conclusion as to quality of fitout was based on the Judge’s own assessment of photographs in evidence and Peter William’s acknowledgement of improvements made by Mr Bisht.31 She also took into account the operation of a restaurant from the premises by Parkhurst’s directors since August 2018, inferring from this that it was worthwhile running the premises as a restaurant. This was after the first term of the lease would have expired and the premises remained vacant for the period from February 2017 to August 2018. This could have been seen as indicative of a lack of value in the lease but was not explored in the evidence. There was no evidence about the restaurant run by Parkhurst interests and no evidence about attempts to re-tenant the property in the intervening period because those matters were not relevant to the pleaded case.
[49] The focus of the trial was on recouping the renovation expenditure. It was not apparent by the pleading that there was a claim for loss of a chance as a stand-alone head of damage. The prayer for relief in the statement of claim was expressed in these terms:
(a) Judgment in the sum of $190,033.98 being the actual loss suffered by the plaintiff in renovating and upgrading the premises at his expense foregone following the defendant’s breach;32
30 Edelman, above n 25, at [28-015].
31 District Court decision, above n 2, at [95]. Mr Williams is a director of Parkhurst.
32 This was later reduced in Mr Bisht’s brief of evidence to $183,122.04.
(b) Damages for the loss of the plaintiff’s business/loss of opportunity as the Court deems fit;
…
[50] This informed the approach at trial. Parkhurst was entitled to rely on the pleaded case. The Court of Appeal emphasises the importance of pleadings in Yan v Mainzeal Property and Construction Ltd (In Liq).33 Parkhurst has been disadvantaged by the evolution of the case.
[51] Supplementary submissions on Mr Bisht’s behalf claimed four lost chances in the alternative but, in reality, they are variations on a common theme. In my view, the loss of a chance to recover the renovation costs is another way of describing a loss of profits claim. The loss of a chance to sell the remainder of the lease is another way of claiming the value of the lease. The loss of a chance to sell the business similarly describes a claim to the value of the business. And, all of these are illustrations of an inability to derive the full benefit from the remainder of the lease.
[52] Recasting these damages as loss of a chance damages strikes me as an ingenious attempt to resurrect the heads of damages which failed for want of proof and avoid the evidential deficiencies in the case by diluting the level of proof required. The contracted for benefit in a lease is not the chance or opportunity to profit in the future but the present entitlement of quiet enjoyment of the premises.
[53] This distinguishes the line of cases beginning with the seminal case of Chaplin v Hicks.34 There the claimant bargained for the chance to be chosen in a competition. In cases such as Benton, a loss of a chance analysis was adopted in respect of the uncertainty of how a third party would have acted in a case of negligent advice.35 Neither line of authority has any factual similarity.
[54]Notwithstanding that, I turn to the loss of chance analysis.
33 Yan v Mainzeal Property and Construction Ltd (In Liq) [2021] NZCA 99 at [494].
34 Chaplin, above n 25.
35 Benton, above n 11.
[55] I accept that the Judge did not precisely follow the methodology adopted by authorities such as McLean v Marshall. In that case, the Court summarised the relevant principles in the following terms:36
(i)the innocent plaintiff must establish that it did, or would have, sought the claimed lost opportunity.
(ii)as a result of the breach the plaintiff lost a real and substantial, and not merely a speculative chance of obtaining the opportunity which would have conferred a benefit.
(iii)the plaintiff suffered loss (which can be measured in monetary terms).
[56] However, the Judge’s approach was not a departure of substance. With respect to the first limb the Judge made a factual finding that “Mr Bisht was either going to sell the restaurant business (including the lease), or he was going to continue to operate it but … change the menu to a fusion style”.37 I read this as a statement of Mr Bisht’s intention rather than indicating achievement of that intention. It is a finding which accords with common sense. The Judge determined that Mr Bisht had already spent a considerable amount of money renovating the premises to a “high standard”.38 That is a finding of fact which I am not inclined to re-examine. The precise expenditure was not established, but the Judge accepted that Mr Bisht (or a party associated with him) spent “far more” than the $80,000 to $100,000 he was contractually obliged to spend under the agreement.39 She also accepted Mr Bisht’s evidence that he had been trying to sell the business and that Mr Peter Williams, a director of Parkhurst, was aware of that plan.40 I do not disturb the Judge’s conclusion that the first limb of the test is met.
[57] The Judge then addressed the second and third limbs, whether the lost opportunity to do either was “real and substantial” and whether Mr Bisht suffered loss.41 I find no material error therefore in the structure of the approach to a claim based on loss of a chance.
36 McLean, above n 21, at [47] referring to Powerbeat, above n 21, at [196].
37 District Court decision, above n 2, at [88].
38 At [96].
39 At [37].
40 At [34].
41 At [88]–[97] and [103]–[111].
[58] But, even on a loss of a chance analysis, finding that Mr Bisht had the right to assign the lease, was trying to find a buyer and that re-entry caused loss is only the beginning of the matter. The crux is whether Mr Bisht was denied a “real and substantial” opportunity by Parkhurst’s re-entry. This means, a real and substantial chance of successfully negotiating an assignment of the lease or sale of the business which would confer a benefit on him. To discharge this onus Mr Bisht must prove:42
… a chain of causation that continues up to the point when there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities.
[59]Here I respectfully depart from the Judge’s evaluation.
[60] Relevant contingencies plainly reduce the value of a lost opportunity, and hence warrant discussion when assessing quantum.43 But they also have a role to play in establishing whether the opportunity is real and substantial. If the opportunity allegedly lost was contingent upon a number of variables, particularly where those variables were not within the plaintiff’s control, the “real and substantial” threshold may not be met.44 I accept that the Judge did not directly engage with the relevant contingencies before concluding that the opportunity lost by Mr Bisht to sell the restaurant, assign the lease or rebrand was real and substantial.
[61]Those contingencies were:
(a)Parkhurst could have re-entered lawfully for non-payment of the lease and would have been justified in doing so. In such circumstances Mr Bisht would have had no say in terms of recovery of any of the money spent on renovations;
(b)but for the re-entry, the restaurant business may have been put into liquidation and there was a proper evidential basis to treat this as a very
42 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 368 as cited in Sutcliffe v Tarr (No 2)
[2018] NZCA 135, [2018] NZAR 696 at [34].
43 Powerbeat, above n 21, at [199].
44 See, for example, the identification of contingencies in McLean, above n 21, at [49(c)].
real possibility. The business stopped trading and Mr Bisht closed the restaurant some two or three months before the re-entry;
(c)the business was unprofitable and running at a loss from the outset and long before the eviction;
(d)the business could have been deemed insolvent under s 4 of the Companies Act 1993;
(e)Mr Bisht may or may not have renewed the lease and no evidence was led on this issue;45
(f)the landlords may or may not have given their consent to any of the proposed assignees on any proposed sale; and
(g)the business may have been sold in a year’s time or in a month. It may have been sold for profit or for loss. But in the absence of proper valuation evidence the Court was asked to speculate on the timing of the sale and/or the outcome of such a sale.
[62] There was no independent valuation evidence. The Judge rightly put to one side the business appraisal presented by Mr Bisht as an unreliable document, having been created by him for a specific unrelated purpose. The evidence of prospective purchasers for the business was general and vague. There was no evidence of an offer, merely evidence from Mr Bisht of inquiry and early discussions with prospective purchasers. There was no evidence of discussion about price.
[63] There are further complications as well. Even if a prospective purchaser had been inclined to make an offer, Parkhurst was still required to consent to assignment of the lease. Although clause 33.1 of the lease provides that the landlord’s consent to assignment cannot be unreasonably withheld, there were potentially valid grounds upon which Parkhurst could have withheld consent from one of the two parties referred
45 I do not accept however that in the event that he chose not to renew the lease past its first term, then he would have been required to strip the premises under the demolition clause. That clause is only engaged if Parkhurst sold the whole property/complex.
to by Mr Bisht. The Judge expressly acknowledged this. She noted that because one prospective purchaser wanted to turn the premises into an Irish pub, and Parkhurst (or an entity associated with its directors) already ran a bar only a few doors down, they may have been entitled to refuse consent on this basis. While this objection plainly would not apply to every prospective purchaser, it nevertheless presented a hurdle to one of the two purchasers that in fact appeared to be interested. Parkhurst argues, and I accept, that it was equally open to the Court and entirely plausible to view the lease as a liability to Mr Bisht or a negative obligation.
[64] As to the lost opportunity to recover the cost of renovations, this claim must fail for the same evidential reasons that the Judge dismissed the first head of damages. Mr Bisht was contractually bound to spend at least $80,000 and up to $100,000. The precise figure he spent over that threshold is disputed by the parties. The Judge accepted that it was “far more” than $100,000.46 However, the evidence supporting that expenditure was fragmented with invoices variously made out to Imaxx Café & Bistro, Imaxx Café & Bistro Ltd, Curry Leaf (Mr Bisht’s other restaurant) as well as businesses associated with Mr Bisht’s brother (Kajol Cuisine Ltd).47 It was unknown whether the invoices had been paid by Mr Bisht personally from his own finances or by another legal entity, or a mixture of the two. Certain amounts were also said to have been paid for by Mr Bisht’s brother or a company associated with him, with Mr Bisht repaying him later.48 It seems to me that precise evidence must have been obtainable but it was not before the Court. There is simply not enough evidence upon which to establish the requisite causation let alone an assessment of quantum.
[65] With respect to Mr Bisht losing the opportunity to derive full benefit from the lease, the Judge noted that clause 32.1 required the landlord to renew the lease so long as certain conditions were met.49 Likewise, she observed that Mr Bisht’s experience in running restaurants and financial support from his brother weighed in his favour should he wish to do so.50 However, no clear evidence was produced at the hearing to
46 District Court decision, above n 2, at [37].
47 At [50].
48 The precise amount he was repaid is unclear, perhaps between $45,000 and $50,000 all the way up to $70,000.
49 At [90].
50 At [107].
show that Mr Bisht actually intended to renew the lease. By contrast, the Judge found that in fact Mr Bisht’s primary aim prior to re-entry was to sell the business, not to continue with the lease.51
[66] The Judge found that Parkhurst had valid grounds to issue Mr Bisht notice under s 245 for non-payment of rent.52 That eventuality was very real given that Mr Bisht had been late in paying rent since the very commencement of the lease and entirely deficient in his payment of outgoings.
[67] Accordingly, I consider the Judge erred in determining that Mr Bisht was deprived of a “real and substantial” chance to derive full benefit from the lease in circumstances where there was no evidence of the value of the lease; slim evidence of interest by prospective purchasers and the evidence which was presented showed that the business was not only not flourishing but running at a loss. Indeed, had there been such a real and substantial chance of selling the business, one might have expected Mr Bisht to seek relief against cancellation to preserve that opportunity.
[68] I also consider there is an error of principle in that the financial records are neither a logical nor a reliable starting point to assess loss of a chance damages even on a broad brush approach. Resorting to the shareholder advances to anchor the quantum assessment illustrates the fundamental problem with the damages claim. While the Court may resolve evidential uncertainties in a manner which is generous to a claimant when the defendant’s wrongdoing created the uncertainty, there is no logical connection between those advances and the loss of a chance claimed by Mr Bisht.53
[69] I do not accept Mr Raju’s submission that Parkhurst is not entitled to argue the unreliability of the accounts because of the manner in which the accounts were put to Mr Bisht at trial. The thrust of Mr Shinkarenko’s cross-examination was directed at the unreliability of the invoices produced in support of the renovation cost claim because that was the focus of the pleaded case. The company accounts for Imaxx Café
51 At [91].
52 At [37].
53 See One Step (Support) Ltd v Morris-Garner [2018] UKSC 20, [2019] AC 649.
& Bistro Ltd were not relied on by Mr Bisht at trial. They were not referred to in his brief of evidence. Mr Shinkarenko submitted that the accounts were only disclosed following a request for particular discovery. Mr Raju did not challenge this submission. The accounts were put to Mr Bisht in cross-examination to challenge his assertion of profitability, to challenge the purported renovation costs and to show that the turnover figures in the business appraisal were inflated. This is not the same thing as accepting the accuracy or reliability of the financial accounts; rather the gist was highlighting inconsistencies.
[70] There was no reason, on the pleaded case, to cross-examine Mr Bisht on the shareholder advances in the accounts as these formed no part of Mr Bisht’s case at trial. Mr Shinkarenko submits that they were not even referred to in support of the claim for lost opportunity in the supplementary submissions filed.
[71] There is therefore no evidence upon which the Court could reliably anchor its assessment of the quantum of Mr Bisht’s claim. By contrast, in Powerbeat Canada Ltd v Powerbeat International Ltd, for example, both parties tendered valuation evidence from expert witnesses in support of their respective positions.54 While proof is not required on the balance of probabilities, the Court is required to undertake an “informed estimation” of the loss.55 That was not possible on the evidence before the Court although the Judge did the best she could to address what she perceived as the inequities of the situation.
[72] On this basis, damages for loss of a chance, as advanced on Mr Bisht’s behalf, are not available. The allegedly lost opportunities are too speculative to allow a money value to be placed on them. I allow the appeal.
Failure to mitigate
[73] Given my finding above, it is not necessary to deal with the arguments about failure to mitigate losses. However, I record for completeness that I consider this issue to be more nuanced than it appears at first sight.
54 See Powerbeat, above n 21, at [213]–[216] and [219]–[222].
55 At [197]. See also Sellars, above n 42, at 368.
[74] It is not a universal proposition that there is no reason why a wronged party in an unlawful re-entry case should seek injunctive relief before claiming damages. I do not read Governors Ltd v Anderson as suggesting otherwise.56 The contrary proposition is also not valid—that it is imperative that a plaintiff should first endeavour to obtain relief before claiming damages. Rather, it is a question of fact and degree in the total circumstances of each case.57 As stated in Burrows, Finn & Todd on the Law of Contract in New Zealand:58
The law does not allow a plaintiff to recover damages to compensate for loss which would not have been suffered if he or she had taken reasonable steps to mitigate the loss. Whether the plaintiff has failed to take a reasonable opportunity of mitigation is a question of fact dependent upon the particular circumstances of each case. The burden of proving such failure rests upon the defendant.
[75] However, where the claim is for the loss of an opportunity or chance rather than one of the more orthodox heads of damages, it is quite possible that a failure to seek relief against forfeiture is particularly important since it preserves the very ‘opportunity’ sought to be compensated for and removes the uncertainty element.
Other sums held due to Mr Bisht
[76] No argument was directed at the Judge’s finding as to the sum owed by Mr Bisht to Parkhurst for outgoings and the sum owed by Parkhurst to Mr Bisht for the wrongful retention of chattels. I am not prepared to disturb the Judge’s finding in this regard.
Result
[77]The appeal is allowed against the award of damages for loss of a chance.
56 See Anderson, above n 22, at [23]. The factual circumstances in that case were not on all fours. The tenant had applied to the Court for injunctive relief on two prior occasions and it was the delay in commencing a claim for damages on which attention was focused. The Court held that the High Court was in error in determining that the landlords were not responsible (on mitigation principles) for any damage arising after the expiry of one month from the time of the second re- entry.
57 At [23].
58 Jeremy Finn, Stephen Todd and Matthew Barber Burrows Finn & Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at [21.2.4(a)] (footnotes omitted).
[78]I quash the judgment of $66,360.93 awarded in the District Court.
[79]I substitute an award to Mr Bisht against Parkhurst in the sum of $11,360.93.
[80] The appellant is entitled to 2B costs and disbursements in this Court. Mr Bisht remains the successful party in the District Court albeit for a reduced sum so my provisional view is that he remains entitled to costs in that Court. However, I remit the question of costs to the District Court in case there are matters of which I am unaware such as offers made on a without prejudice save as to costs basis.
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Walker J
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