Road Runner 2012 Limited v Memelink
[2022] NZHC 346
•2 March 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2021-485-548
[2022] NZHC 346
UNDER the District Court Act 2016 IN THE MATTER OF
an appeal against a decision of the District Court at Hutt Valley
BETWEEN
ROAD RUNNER 2012 LIMITED
First Appellant
SUNTHIR NGUON
Second AppellantAND
HARRY MEMELINK and CISCA
FORSTER as trustees of the Link Trust No. 1
Respondents
Hearing (by VMR): 24 February 2022 Counsel:
J J Pietras and S D Balloch for the Appellants D G Livingston for the Respondents
Judgment:
2 March 2022
JUDGMENT OF GWYN J
[1]This is an appeal from a decision of the District Court on 27 August 2021.1
[2] The case arises out of the lease of a café at Unit 3, 408 Wakefield Street, Lower Hutt (the premises). Road Runner 2012 Limited (the first appellant) was the tenant at the property and Sunthir Nguon (the second appellant) is the sole director and shareholder of Road Runner and was a guarantor under the deed of lease of the
1 Memelink and Cisca Forster as trustees of the Link Trust No. 1 v Road Runner 2012 Limited
[2021] NZDC 17246.
ROAD RUNNER 2012 LIMITED v MEMELINK [2022] NZHC 346 [2 March 2022]
premises. The respondents are the current trustees of the Link Trust No. 1, the registered proprietors of the premises. The premises are one of six units owned by Mr Memelink in the 14-unit building.
Background
[3] The appellants rented the premises from 14 June 2014 until 22 December 2019 under a deed of lease (a standard ADLS commercial lease) (the Lease).
[4] The Lease stated that the initial term would be for six months, and the parties would have further discussions about a possible extension or renewal. After negotiation, the parties agreed to fix the rent at $360.00 plus GST per week.
[5] The appellants say that in around late 2017, Mr Memelink, for the respondents, began to demand that they pay increased rent and repay outgoings at $180.00 plus GST per month from the commencement of the lease. The appellants denied they were liable for any increased rent or outgoings and a complete breakdown of the landlord-tenant relationship resulted.
[6] On 14 August 2019, the respondents filed a Notice of Claim in the Disputes Tribunal, seeking compensation of $10,471.13 for alleged rental arrears and outgoings.
[7] On 16 November 2019, the appellants gave one month’s notice to terminate the periodic tenancy and vacated the premises on 22 December 2019.
[8] On 23 January 2020, the respondents elected to increase their claim beyond the monetary jurisdiction of the Disputes Tribunal. The claim was then transferred to the Hutt Valley District Court.
[9] On 3 July 2020, the respondents filed a Statement of Claim in the District Court seeking, amongst other things, outgoings in the sum of $12,411.00.
[10] On 14 July 2020, the appellants filed a statement of defence and subsequently filed a dual application for strike-out/summary judgment.
[11] On 22 January 2021, Judge Harrop struck out the statement of claim on the grounds that it disclosed no arguable cause of action against the appellants.
[12] On 8 March 2021, the respondents filed an amended statement of claim, alleging various breaches of the Lease. It sought outgoings in the following amounts:
First cause of action – breach of lease
(a)$39,852.78, comprising 100 per cent of the Body Corporate levies attributable to the Premises;
(b)$7,684.60 for Hutt City Council rates;
(c)$5,382 for missing rental payments between 26 December 2014 and 22 December 2019;
(d)$14,450 including GST to make good the premises;
(e)$12,164.50 to replace chattels removed from the premises;
(f)$883.78 to clean the kitchen extraction systems;
(g)interest on the outstanding amounts payable at 18% per annum; and
(h)indemnity costs.
Second cause of action – part performance
(i)$6,642.13 for outgoings levied on the Premises from 22 December 2019 to 12 December 2020;
(j)$18,369 plus GST for rent for the period between 22 December 2019 and 12 December 2020;
(k)$1,280.76 for rates;
(l)interest on the outstanding amounts payable at 18% per annum; and
(m)indemnity costs.
[13] The appellants defended the claim and a short trial was heard in the District Court at Hutt Valley on 30 June 2021. Judge Tuohy issued his reserved decision on 27 August 2021 (the judgment). In the final paragraph of the judgment the Judge concluded:2
[57] There will be judgment for the landlord for outstanding rent of $3,726. All other heads of the landlord’s claim are not made out. If costs are sought by either party, memoranda are to be filed within 14 days.
The lease
[14] The focus of the case before this Court is the outgoings that were payable under the Lease. This question was canvassed in some detail in the Judgment.3
[15] Clause 3, Second Schedule of the Deed of Lease is the relevant clause and provides as follows:
Outgoings
3.1 The Tenant shall pay the outgoings properly and reasonably incurred in respect of the property, which are specified in the First Schedule. Where any outgoing is not separately assessed or levied in respect of the premises, then the Tenant shall pay such proportion of it as is specified in the First Schedule or if no proportion is specified, then such fair proportion as shall be agreed or failing agreement determined by arbitration.
[16]The standard list of “Outgoings (clause 3)” is set out at page 5:
OUTGOINGS
(clause 3)
1.Rates or levies payable to any local or territorial authority.
2.Charges for water gas electricity telecommunications and other utilities or services, including line charges.
3.Rubbish collection and recycling charges.
2 At [57].
3 At [21]-[37].
4.New Zealand Fire Service charges and the maintenance charges in respect of all fire detection and fire fighting equipment.
5.Any insurance excess (but not exceeding $2,000) in respect of a claim and insurance premiums and related valuation fees (subject to subclause 23.2).
6.Service contract charges for air conditioning, lifts, other building services and security services.
7.Cleaning maintenance and repair charges including charges for repainting, decorative repairs and the maintenance and repair of building services to the extent that such charges do not comprise part of the cost of a service maintenance contract, but excluding charges for structural repairs to the building (minor repairs to the roof of the building shall not be a structural repair), repairs due to defects in design or construction, inherent defects in the building and renewal or replacement of building services.
8.The provisioning of toilets and other shared facilities .
9.The cost of maintenance of lawns, gardens and planted areas including the plant hire and replacement, and the cost of repair of fences.
10.Yard and car parking area maintenance and repair charges but excluding charges for repaving or resealing.
11.Body Corporate charges for any insurance premiums under any insurance policy affected by the Body Corporate and related valuation fees and reasonable management administration expenses.
12.Management expenses (subject to subclause 3.7).
13.The costs incurred and payable by the Landlord in supplying to the territorial authority a building warrant of fitness and obtaining reports as required by section 108 and 110 of the Building Act 20043 but excluding the costs of upgrading or other work to make the building comply with the Building Act 2004.
[17]Paragraph 12 of the First Schedule states:
12. PROPORTION OF OUTGOINGS (subclause 3.1): $180 plus GST per
month being insurance…… %
(the underlined words are recorded in handwriting)
[18] The portion of the Judgment dealing with outgoings largely focused on paragraph 12. The Judge found that the format of the Lease assumed that the entry in the blank space would be a percentage not a figure, both because it specifically referred to a proportion of outgoings and because beside the blank space was a % sign.
Judge Tuohy also found that the % sign had been crossed out, almost certainly by Mr Memelink’s ex-fiancé, Ms Kirsten Smith, when she filled out the Deed of Lease. 4
[19] The Judge did not accept the appellants’ evidence that paragraph 12 was filled in after Mr Nguon had signed the Lease, but he concluded:5
[34] The idea that Paragraph 12 could be used by the landlord to charge insurance premiums to the tenant on the basis that the landlord was the insurer is specious. Apart from the fact that the tenant did not agree to that, there was no policy of insurance with the landlord in existence and the landlord plainly was not and would never have been legally permitted to act as an insurer in New Zealand. The landlord is not entitled to a monthly payment for insurance cover which never existed.
[20] The Judge noted that the landlord sought orders that the tenant is liable to pay a fair proportion of outgoings determined by an arbitrator – “presumably the order sought is in in the nature of a declaration based upon cl 3.1.”6
[21] Judge Tuohy was not prepared to make such an order, saying “The particular outgoings in respect of which the order is sought are not specified. The fixing of a fair proportion applies only to outgoings which are not separately assessed or levied. The effect of the handwritten entry in Paragraph 12 and the crossing out of the % sign in unclear in relation to cl 3.1 generally. It could be interpreted as indicating an intention that the only outgoing which is payable by the tenant is for insurance. I am not satisfied that there is still room for the fixing of a fair proportion of any particular outgoing.”
[22]The Judge then went on to say:
[37] I make it clear, though, that my finding that the landlord is unable to recover outgoings pursuant to Paragraph 12 for business insurance which never existed is not intended to amount to a finding that the landlord is unable to recover any outgoings from the defendants. It will be for the parties to consider their positions about that in the light of this judgment. If the landlord wishes to seek recovery of other outgoings pursuant to cl 3.1, a further case management conference will need to be held so that the Court can address any issues on the basis of more coherent pleadings and evidence.
4 At [23].
5 At [34].
6 At [35].
Grounds of appeal
[23] The appellants do not appeal the finding in relation to the outstanding rent. Rather, they challenge [37] of the judgment, on three grounds:
(a)The Respondents, having had their case and knowing those matters were in issue and failing to prove them ought not to have been invited by the Judge to re-litigate.
(b)The learned Judge had no jurisdiction under the District Court Rules 2014 to order a final judgment on all issues, but then allow the Respondents to replead their case and produce new evidence in respect of the outgoings issue at a separate trial.
(c)In the alternative, if jurisdiction exists, the learned Judge failed to apply the correct legal test when ordering a split trial under Rule 10.21.
[24] The appellants seek an order quashing the Judge’s ruling at [37] of the judgment and declaring that the District Court proceedings are now at an end.
Appellants’ submissions
[25] The appellants submit that the Judge had full evidence and submissions before him in relation to the respondents’ claims for outgoings. The Judge determined the respondents’ claim in respect of the only outgoing – “insurance” – specified at paragraph 12 of the First Schedule. That claim, for $180.00 plus GST per month was rejected.
[26] No other of the standard outgoings listed under the heading “Outgoings (clause 3)”, at page 5, has been separately assessed or levied in respect of the unit occupied by the appellants. Nor have the parties agreed on any figure in respect of any particular category of outgoings, nor have they been determined by arbitration. In any event, the list of outgoings at page 5 does not include body corporate levies.
Rule in Henderson v Henderson; res judicata
[27] The appellants’ first ground of appeal is that the District Court proceedings were res judicata and therefore to enable the respondents to continue with their claim in relation to outgoings would be an abuse of process. The appellants rely on Henderson v Henderson, where the English Court of Chancery said:7
…where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case , and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of a matter which might have been brought forward as part of the subject in contest, but which was not brought forward only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.
[28] The appellants say that the respondents here “could and should” have pleaded why the Lease entitled them to recover outgoings from the appellants. That was especially so given:
(a)The original statement of claim in the District Court had been struck out and the respondents had prepared and filed an amended claim filed.
(b)The respondents were on notice that the pleadings and evidence relating to the outgoings issue were inherently defective.
(c)The respondents had given no reasonable explanation as to why they did not raise a proper claim for outgoings in the District Court proceeding.
(d)The respondents failed to prove their claim for outgoings on two separate occasions. They are not entitled to a “third bite at the cherry”. They also express a concern that they will be caught up in
7 Henderson v Henderson [1843] 3 HARE 100, 67 ER 313 (CH) at 319 para 115.
Mr Memelink’s separate dispute with the Body Corporate about the levies payable for all of the six units he owns in the building.
[29] On that basis, the appellants say that any further claim by the respondents for outgoings is res judicata and an abuse of process.
No jurisdiction
[30] The appeal is also advanced on the basis that the Judge had no jurisdiction under the District Court Rules 2014 (the Rules) to issue a final judgment, but then provide the respondents with another opportunity to relitigate the claim for outgoings.
[31]Rule 11.2 of the District Court Rules states:
11.2Types of judgment
A judgment may—
(a)be interim; or
(b)be final; or
(c)deal with any question or issue; or
(d)order any accounts, inquiries, acts, or steps that the court considers necessary.
[32] The appellants say that Judge Tuohy’s decision was an ordinary, final judgment, that gave reasons for rejecting all of the respondents’ claims, except for the successful claim for rent arrears. It was not an interim judgment. The appellants contrast that with the situation in Mainzeal Property Construction Limited (in liquidation) v Yan,8 where Cooke J issued an interim judgment because there were potentially further residual matters to be decided by the Court before the judgment was finalised.
[33] The appellants say that in this case, the Judge allowed the respondents to produce further evidence and closing submissions even after the short trial (but before judgment) but even after receipt of that further evidence and closing submissions, the Judge dismissed the respondents’ claim for outgoings.
8 Mainzeal Property Construction Limited (in liquidation) v Yan [2019] NZHC 163 at [6]-[7].
[34] Having done so, the Judge nevertheless invited the respondents to relitigate their claim for outgoings on the basis of more coherent pleadings and evidence. The appellants say that by doing so the District Court Judge might be seen as having ordered a split trial on the issue of outgoings.
[35] The appellants refer to rr 10.12 and 10.21 of the District Court Rules. Rule 10.12 provides:
10.12 Court may order separate trials
When justice requires, the court may order separate trials of causes of action, and it may also direct the sequence of the separate trials and make any supplementary order that is just.
[36]Rule 10.21 provides:
10.21Orders for decision
The court may, whether or not the decision will dispose of the proceeding, make orders for—
(a)the decision of any question separately from any other question, before, at, or after any trial or further trial in the proceeding; and
(b)the formulation of the question for decision and, if thought necessary, the statement of a case.
[37] Rule 10.12 is directed at causes of action within pleadings, whereas r 10.21 is directed at separate questions outside the pleadings or within the pleadings but relating only to part of or one of the elements of a cause of action or outside the cause of action altogether.9 The appellants’ submission is that r 10.21 is more likely to apply but that, in any event, the relevant procedural requirements for either rule were not met.
Respondents’ submissions
[38]The respondents note that the issues that were before the District Court were:
(a)unpaid rent;
(b)unpaid outgoings and whether outgoings could be recovered;
9 Turners & Growers Ltd v Zespri Group Ltd HC Auckland CIV-2009-404-4392, 5 May 2010, at [7].
(c)compensation for damage to the premises and its chattels;
(d)the relevant period for rent and outgoings;
(e)what payments by the tenant went toward which obligations; and
(f)whether there was a shortfall in rent or outgoings.
[39] The respondents accept the principle that litigation should not be brought piecemeal but say that they are not proposing to relitigate a matter that has been decided, nor proposing to bring new causes of action that should have been brought before the decision was decided.
[40] The respondents say the judgment is interim not final. In particular, it leaves for further consideration the question of liability for outgoings, that having been only partially addressed by the Judge’s findings in relation to insurance. The question of the outgoings in relation to body corporate levies, claimed as $46,494.91, is yet to be determined. Hence the reference to a further case management conference to confirm the pleadings and evidence for the recovery of the outgoings. The matter is not res judicata.
[41]Mr Livingston makes a distinction between:
(a)parties advancing arguments and evidence, and the Court determining the issues which it can safely determine, but holding that it wants further input from the parties before it decides a remaining issue; and
(b)a Court deciding a case, but then the losing party deciding that it would like to raise the same issue under new arguments.
[42] In his submission, this case falls under (a) because the Court has not dismissed the claim for outgoings.
[43] The respondents say the judgment was an interim judgment. Nowhere in the judgment does it say it is a “final” decision and the opposite is indicated by the request
for a case management conference on the outgoings issue. The word “final” is not included in the title of the decision.
[44] Mr Livingston says that the Court had jurisdiction to release an interim decision and to order any accounts, enquiries, acts or steps that the Court may consider necessary. He relies on a number of decisions, in the District Court, High Court and Environment Court, where interim and then final decisions were released in what are submitted were similar circumstances.
[45] The respondents also rely on the District Court’s inherent power to manage its proceedings as it sees fit.10 If Judge Tuohy did not exercise the power under r 11.2 of the District Court Rules to issue an interim judgment, he exercised an inherent power to manage the proceedings as he saw fit.
[46] The respondents say that this is not a case of the decision amounting to an order for a split trial. All that has occurred is an invitation to a case management conference where the respondents may wish to clarify their evidence and pleadings before the issue of outgoings is decided. There has been no order for further hearing time, or even the filing of further evidence. All that is required is a clarification of how sub-cl 3.1 of the Lease ought to operate, with reference to the evidence already filed.
Discussion
Was the judgment interim or final?
[47] The judgment is headed “Reserve Judgment of Judge C N Tuohy”. It is not labelled “final” but in my view to do label it in that way would be unusual. Nor is it labelled “interim” as one might expect if that was indeed the Judge’s intention.
[48] The final paragraph of the judgment says:11 “There will be judgment for the landlord for outstanding rent of $3,726. All other heads of the landlord’s claim are not
10 Siemer v Solicitor-General [2013] NZSC 68, [2013] 3 NZLR 441 at [113].
11 At [57].
made out.” On its face, the last sentence must necessarily encompass the respondents’ claims for outgoings.12
[49] There is no cross-reference between that concluding paragraph and [37] where the Judge said: “It will be for the parties to consider their positions about that in the light of this judgment. If the landlord wishes to seek recovery of other outgoings pursuant to cl 3.1, a further case management conference will need to be held so that the Court can address any issues on the basis of more coherent pleadings and evidence.”
[50] Mr Livingston invited me to reconcile the two paragraphs by reading [57] as “All other heads of the landlord’s claim are not yet made out.”
[51] Although it is not uncommon for a court to release an interim decision and seek further information before issuing a final judgment, this tends to happen where the Court has made a decision but further calculation of quantum is required. In such cases the interim decisions are all clearly labelled as such.13
[52] The portion of the judgment dealing with outgoings is focused on paragraph 12 of the First Schedule and, as Mr Livingston submitted, the Court reached no legal conclusions about how cl 3.1 of the Lease was to be interpreted and applied in respect of other outgoings, such as the Body Corporate levies. However, the Judge did have before him evidence about the outgoings – the transcript shows quite lengthy discussions between the Judge and Mr Memelink on this issue – and Mr Pietras advised that the parties had made full submissions to the Judge on how cl 3.1 was to be interpreted.
[53] The final paragraph of the judgment also directs the parties to file costs memoranda if they are not able to agree costs. In the normal course, that would not be appropriate until a final judgment had been issued.
12 Above at [12].
13 Worksafe New Zealand v Newco Logistics Limited [2020] NZDC 15118; Wire v ACC [2017] NZACC 115; Elvins v Southern District Health Board [2021] NZHC 1092; and The Canyon Vineyard Ltd v Central Otago District Council [2021] NZEnvC 136.
[54] The judgment is, on its face, final, both as to liability and costs. This is not a case where the Judge has made a finding about liability for outgoings and simply directed the respondents to go away and prepare a calculation of what is owing, by reference to that finding. Mr Livingston’s suggestion that both liability for and quantum of outgoings could be ascertained on the basis of evidence and submissions already filed seems to support the appellants’ submission that the matter is res judicata.
[55] The respondents initially commenced their claim in the Disputes Tribunal but they increased the amount of the claim and it was transferred to the District Court. Their first statement of claim in the District Court was struck out.14 The respondents filed an amended statement of claim and it was this claim that was considered by Judge Tuohy at the short trial on 30 June 2021. The judgment issued following that trial is a final judgment and the doctrine of res judicata applies.
[56] To allow the respondents to reframe and rerun their case on outgoings at this stage of the litigation would be contrary to the rule in Henderson v Henderson, which has been consistently followed in New Zealand.15
[57] I agree with the appellants that the Judge has not purported to order the hearing of a separate question. The issue of body corporate levies is not a preliminary question; nor is it a separation of liability and quantum. This was not a split trial under r 10.21 nor was it a separate trial under r 10.12
[58] If, at [37], the Judge was intending to invite the respondents to reframe and rerun their case in relation to outgoings, he has not done so by agreement of the parties. He did not do so before finalising a judgment, as he did with other issues where he adjourned and provided an opportunity for the parties to provide further information.
14 Memelink v Road Runner 2012 Limited [2021] NZDC 1085.
15 See, for example, Kim Dotcom v District Court at North Shore [2018] NZCA 442; Faloon v Planning Tribunal at Wellington [2020] NZCA 170 at [19]-[20]; and Craig & Others v Stringer [2020] NZCA 260 at [14]-[15].
Result
[59] I uphold the appellants’ appeal against the Judge’s conclusion at [37] of the judgment that the respondents can continue with their claim in respect of outgoings. I find that the judgment is a final judgment16 on the respondents’ claim against the appellants under the Lease, including on the issue of outgoings payable by the appellants to the respondents.
Costs
[60] I have upheld the appellants’ appeal and, in the normal course, costs would follow the event. However, this is a relatively unusual case and in the particular circumstances my preliminary view is that costs should lie where they fall. I emphasise that this is not a reflection on the merits or conduct of the appellants’ case. If counsel take a different view they should file a memorandum within seven working days of the date of this judgment.
Gwyn J
Solicitors:
Thomas Dewar Sziranyi Letts, Lower Hutt Livingston & Livingston, Wellington
16 Subject to any rights of appeal.
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