Parktrust Limited and Westwatertrust Limited v BW Herbert (1994) Limited HC Auckland CIV 2009-404-7430

[2010] NZHC 669

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-007430

BETWEEN  PARKTRUST LIMITED AND WESTWATERTRUST LIMITED Plaintiffs

ANDBW HERBERT (1994) LIMITED First Defendant

ANDBLAKE WILLIAM HERBERT Second Defendant

Hearing:         3 May 2010

Counsel:         P McKendrick for plaintiffs

RE Lawn for defendants

Judgment:      5 May 2010 at 4:30pm

RESERVED JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for summary judgment]

This judgment was delivered by me on 5 May 2010 at 4:30pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Glaister Ennor, PO Box 63, Auckland for plaintiffs

Kumeu-Huapai Law Centre, PO Box 122, Kumeu for defendants

PARKTRUST LTD AND WESTWATERTRUST LTD V BW HERBERT (1994) LTD HC AK CIV 2009-404-

007430  5 May 2010

[1]      The plaintiffs apply for summary judgment.   In the course of submissions counsel reached agreement on the parts of the claim that should be considered for the summary judgment application.  Those parts are:

a)        The claim for unpaid rent in the sum of $43,107.38, inclusive of GST;

b)The claim for unpaid operating expenses in the sum of $8,043.12, inclusive of GST; and

c)        The claim for damages to put the premises back into a tenantable condition in the sum of $1,054.68, inclusive of GST.

[2]      Counsel’s agreement extended to the position that the figures which make up the above claims are accepted for the purposes of this summary judgment application as being correct.

[3]      The  part  of  the  claim  not  suitable  for  summary judgment,  and  therefore requiring further direction, is the claim for damages for loss of a bargain, expressed at this stage as the rent due for the balance of the term of the lease.

[4]      I shall refer to the agreement reached in relation to interest and costs, which agreement is dependent on my conclusion in relation to the matters referred to in [1] of this judgment.   The agreement, however, means that the arithmetic is, in fact, agreed to.  I am grateful to counsel for the constructive approach both have adopted on these matters.

[5]      Before considering the specific matters advanced in opposition it is helpful to briefly summarise  the  background  facts  and  the  law  generally in  relation  to  an application for summary judgment.  This I now do.

[6]      This proceeding concerns an office/warehouse  premise at 4 Cherry Lane, Glenfield, Auckland, in respect of which the plaintiffs were at all material times the lessors.  The second defendant is a director of the first defendant.

[7]      The plaintiffs’ property manager, Dianne Rice, has managed the premises since 17 January 1991.  The premises became vacant on 21 April 2008 when the then tenant vacated the premises.

[8]      Ms Rice  instructed  Jones  Lang,  on  behalf  of  the  plaintiffs,  to  lease  the premises following the departure of the previous tenant.  A sign was placed in the window of the premises and outside on the grass.  It simply advertised the premises as “for lease”.  Nothing else was stated by the real estate agents.

[9]      The second defendant was introduced to the premises.  An agreement to lease was signed on 8 May 2008.  Access to the premises was given to Mr Herbert and his company on 10 May 2008.   The term of the lease was provided to commence on

1 June 2008 for six years at a monthly rental of $7,500 plus certain outgoings.  A

formal  deed  of  lease  which  followed  the  agreement  to  lease  was  executed  on

12 November  2008.    The  first  defendant  fell  into  arrears  in  November 2008  in payment of the rent.  The first defendant was the tenant under the deed of lease and the second defendant was the guarantor of the first defendant’s obligations under the lease.   The plaintiffs served a notice under the Property Law Act 2007, s 245 for outstanding rent on 7 May 2009.   The first defendant abandoned the premises on

24 June 2009.  The plaintiffs formally cancelled the lease on 26 June 2009.

[10]     When the second defendant inspected the premises he saw a building warrant of fitness.  He did not take a copy of it.  He said that on citing it he assumed that the building was safe and that the building was represented to be safe and in compliance with the terms of the building warrant of fitness.

[11]     An affidavit filed by the plaintiffs by Mr JA Bell, the general manager of

Compass New Zealand Ltd, explained the position in relation to the warrant of

fitness for the subject property.  I need not review the matters raised.  Suffice to say that he confirmed that the compliance schedule for the warrant of fitness for the subject building was in place for the period 5 December 2007 to 5 December 2008. Nothing in the warrant of fitness would support a claim of misrepresentation.

[12]     The plaintiffs now claim unpaid rent for the period effectively ending 30 June

2009, the unpaid operating expenses for that period and certain damages.   As mentioned, the balance of the claim will have to be dealt with outside the summary judgment application.

The grounds of opposition

[13]     The original notice of opposition was amended and filed some five working days before the fixture.  Although Mr McKendrick did not consent, he confirmed to me that if I granted leave to file the documents late that he would still wish to proceed with the application for summary judgment.  I need not record further in this judgment  the  discussion  with  counsel.    Suffice  to  say,  that  Court  of  Appeal confirmed that amendments to proceedings were possible in a summary judgment

application in Cegami Investments Ltd v AMP Financial Corporation (NZ) Ltd.[1]     In

Retail Trading Services Ltd v Morris[2] reference was made to the three hurdles which an applicant for an amendment must pass before the amendment will be granted. Because of the position that was adopted by Mr McKendrick, which was helpful to the resolution of the case, that part of this case dealing with the amendment need not be explored further other than to record that I formally granted leave to file the amended notice of opposition and affidavits in opposition, but on the understanding that the plaintiffs could file affidavits in reply.  All of which has occurred.

[1] Cegami Investments Ltd v AMP Financial Corporation (NZ) Ltd [1990] 2 NZLR 308.

[2] Retail Trading Services Ltd v Morris (1997) 11 PRNZ 164 at 166.

[14]     The amended notice of opposition is a lengthy document.   However, the grounds in opposition to the application for summary judgment in the areas that I identified in [1] as being available for summary judgment reduce to the following:

a)       Both defendants claim that the premises were misrepresented to them as being premises properly available as commercial premises.  From this I take they intend that the representation was that the premises were suitable for use as commercial premises and, in particular, for use as a plumbing and hardware merchant store;

b)       The first defendant cancelled the lease; and

c)       As an alternative to the ground that there had been a misrepresentation inducing entry into the contract both by the first defendant and the contract of guarantee by the second defendant, the conduct of the plaintiffs,  its  servants  or  agents,  amounted  to  misleading  conduct under the Fair Trading Act 1986.

[15]     Rule 12.2, as did its predecessor r 136, requires that a plaintiff satisfies the court that the defendant has no defence.  The obligations imposed by the rule have been examined by a number of authorities.

[16]     In Pemberton v Chappell[3] the Court of Appeal said as follows:

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.

[3] Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA).

[17]     The Court added at 4:

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.

...

[18]     And further at 4:

Where the only arguable defence is a question of law which is clear cut and does not require findings of disputed facts or the ascertainment of further facts, the Court should normally decide it on the application of summary judgment, just as it will do on an application to strike out a claim or defence before trial on the ground that it raises no cause of action or no defence.

[19]     The Court also commented on the position where a defence is not evident on a plaintiff’s pleading and said at 3:

If a defence is not evident on the plaintiff's pleading I am of 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]     That position was further reinforced in Australian Guarantee Corporation

(New Zealand) Ltd v McBeth[4] where the court said:

[4] Australian Guarantee Corporation (New Zealand) Ltd v McBeth [1992] 3 NZLR 54 at 59 (CA).

Although the onus is upon the plaintiff there is upon the defendant a need to provide some evidential foundation for the defences which are raised. If not, the  plaintiff's  verification stands  unchallenged  and ought  to  be  accepted unless it is patently wrong

“No  defence  means  ‘no bona  fide  defence,  no  reasonable ground for defence and no fairly arguable defence’.”

[21]     Hypothetical  possibilities  in  vague  terms,  unsupported  by  any  positive assertion or corroborative documents advanced by defendants will not frustrate the obligation on a plaintiff to discharge the onus of proof: SH Lock (NZ) Ltd v Oremland.[5]

[5] SH Lock (NZ) Ltd v Oremland HC AK CP641/86 19 August 1986.

[22]     The Court of Appeal in Tilialo v Contractors Bonding Limited:[6]  raised a caution and said:

The Courts must of course be alert to the possibility of injustice in cases in which some material facts to establish a defence are not capable of proof without interlocutory procedures such as discovery and interrogatories.  That does not mean that defendants are to be allowed to speculate on possible defences which might emerge but for which no realistic evidential basis is put forward.

[6] Tilialo v Contractors Bonding Limited CA50/93 15 April 1994 at 7.

[23]     A Court is not required to accept uncritically any or every disputed fact: Eng Mee Yong v Letchumanan.[7]   However the court will not reject even dubious affidavit evidence, even though there must be suspicion as to the good faith of the deponent, if

there is an essential core of complaint that supports a defence.   In essence, the inquiry is whether or not the person’s assertion passes the threshold of credibility: Pemberton v Chappell[8]; Orrell v Midas Interior Designs[9].

[7] Eng Mee Yong v Letchumanan [1980] AC 331 at 341.

[8] Pemberton v Chappell, above n 3.

[9] Midas Interior Designs (1991) 4 PRNZ 608 at 613. 

[24]     In Tilialo v Contractors Bonding Limited[10] it was observed:

Drawing the line between mere assertions of possible defences and material which sufficiently raises an arguable defence so that the defendant should not be denied the opportunity to employ interlocutory procedures and have a trial is a matter of judgment.  Views may well differ.

[10] Tilialo v Contractors Bonding Limited, above at n6, at 8

[25]     The  authorities  have  also  referred  to  a  residual  discretion  as  to  whether judgment should be entered.  Although it is difficult:[11]

[11] Pemberton v Chappell, above n3, at 5 per Casey J.

To conceive of circumstances where the Court should not give judgment for the plaintiff … It can only be a discretion of the most residual kind.

The discretion was the subject of comment in Waipa District Council v Electricity

Corporation of New Zealand.[12]

[12] Waipa District Council v Electricity Corporation of New Zealand [1992] 3 NZLR 298 at 303.

[26]     Before leaving the subject the rule permits of the entry of summary judgment in respect of part of a claim as was confirmed in Australian Guarantee Corporation (New Zealand) Ltd v McBeth.[13]

The claim and the notice of opposition analysed

[13] Australian Guarantee Corporation (New Zealand) Ltd v McBeth [1992] 3 NZLR 54 at 59 (CA).

[27]     The first matter that requires investigation in this case is whether there was any conduct that might amount to a representation as to the condition of the premises which are subject to the lease.   In my view there is nothing in the evidence that would support the existence of such a representation.  My reasons for coming to that conclusion are these:

a)       Nothing  can  be  implied  from  the  real  estate  sign  advertising  the premises “for lease”.  That simple form of words does not imply or suggest suitability of the premises for any particular purpose.  It has long been held that there is no general duty to disclose defects of quality  in  the  case  of  a  contract  for  the  sale  of  land:  Walters  v

Morgan[14]   and  authorities  referred  to  in  Law  of  Contract  in  New

[14] Walters v Morgan (1861) 3 de GF & J 718 at 723-724. 

Zealand;[15]

[15] Burrows Finn & Todd, Law of Contract in New Zealand (3rd ed, LexisNexis, Wellington, 2007) at

309.

b)The lease agreement contains an express no warranty stipulation in clause 39.1 in the following form:

No warranty or representation expressed or implied has been or is made by the landlord that the premises are now suitable or will remain suitable or adequate for use by the tenant or that any use of the premises by the tenant will comply with the by-laws or ordinances or other requirements of any authority having jurisdiction.

c)        The Property Law Act 2007, s 281 provides:

…

(2)       A covenant is not implied as a matter of law in the instrument or lease unless the covenant is implied by this Act or by another enactment.

The representation is not implied by the Property Law Act 2007. Counsel were able to point to no specific legislation which implied any covenants in a lease in respect of the complaints that are made in this proceeding;

d)No specific issues were raised that were not attended to promptly concerning either the mezzanine floor or the electrics of the building which  are  the  primary  areas  of  complaint  now  raised  by  the defendants;

e)        At common law there is no implied warranty that leased premises are

fit for a particular purpose, nor is there any duty on the lessor to disclose any defects in the state of repair of the premises before the lease is granted: Saunders v Pawley;[16] and

f)        No  notification  as  required  by  the  lease  was  given  in  respect  of matters not corrected by the plaintiffs, by the defendants.

[16] Saunders v Pawley (1886) 2 TLR 590.

[28]     The defendants’ case fails on the first and fundamental ground advanced in opposition.  There is, in this matter, simply no factual foundation for the proposition that there was some representation made by the plaintiffs as to the fitness of the premises for the use to which the first defendant would put them to.  That being the case, there is, in fact, no defence to the claim for the unpaid rent of $43,107.38, or for damages for the unpaid operating expenses in the sum of $8,043.12, or for the damages  to  put  the  premises  back  into  a  tenantable  condition.     There  will accordingly be judgment for those sums together with interest at the contract rate in respect of those sums of $6,432.12 calculated from 1 July 2009 to the date of hearing of this application.  In addition, the plaintiffs are entitled to interest on the damages to put the premises back into tenantable condition from the date of service of the proceedings, that is 1 January 2010, to the date of hearing of $52.46.

[29]     The claim for damages for loss of the bargain cannot be resolved in this summary judgment application.  That is, essentially, because a lengthy period is still to run in respect of the lease and there will, clearly, need to be a consideration of the plaintiffs/lessors’ duty to mitigate the loss.  I do not have, before me, evidence as to what an appropriate market rental might be, or what is a reasonable time to allow to find a replacement tenant for the premises.  Those matters, in any event, are more appropriate for determination at trial.   Before leaving the issue, at the request of counsel, I am deferring calling a case management conference for approximately four months so that counsel have the opportunity of discussing settlement.

[30]   Counsel were also agreed that costs, although the lease provides for solicitor/client costs, could be entered on a 2B basis.   I have incorporated that agreement in the orders that I now make.

Judgment and orders

[31]     I enter judgment against both defendants for $57,635.08 together with costs calculated on a 2B basis plus disbursements as fixed by the Registrar.

[32]     A  case  management  conference  by  telephone  for  the  purpose  of  giving directions for the balance of this claim shall be held at 11:45am on 7 September

2010.  The following matters will be addressed:

a)        The pleadings;

b)        Any outstanding interlocutory order or direction required;

c)        Settlement;

d)Trial duration, the fixing of a trial date and the making of any special trial directions that are required.

Counsel  shall  file  and  serve  memoranda  dealing  with  these  items  two working days before the conference.

JA Faire

Associate Judge