Singh v Fitzpatrick

[2021] NZHC 1249

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-2303

[2021] NZHC 1249

UNDER

Section 124 of the District Court Act 2016

IN THE MATTER

of an appeal of a judgment in the District Court

BETWEEN

KAMAN SINGH

First Appellant

SURKANDA ENTERPRISES LIMITED
Second Appellant

AND

GARY PAUL FITZPATRICK as

Administrator of the ESTATE OF SATISH SHETTY

First Respondent

SHAMIANA ENTERPRISES LIMITED
Second Respondent

…/cont

Hearing:

28 April 2021

Appearances:

T Aherne for Appellants in CIV-2020-404-2303 and Respondents in CIV-2020-404-2304

L Meys for Respondents in CIV-2020-404-2303 and Appellants in CIV-2020-404-2304

Judgment:

31 May 2021

JUDGMENT OF GORDON J

This judgment was delivered by me on 31 May 2021 at 3 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

SINGH v FITZPATRICK [2021] NZHC 1249 [31 May 2021]

SHAMIANA LIMITED

Third Respondent

CIV-2020-404-2304

IN THE MATTER            of an appeal of the District Court’s

judgment in CIV-2017-090-000295

BETWEEN  GARY PAUL FITZPATRICK as

Administrator of the ESTATE OF SATISH SHETTY

First Appellant

SHAMIANA ENTERPRISES LIMITED
Second Appellant

SHAMIANA LIMITED
Third Appellant

AND  KAMAN SINGH

First Respondent

SURKANDA ENTERPRISES LIMITED
Second Respondent

Solicitors:           Aherne Legal, Auckland

Neilsons Lawyers, Auckland

[1]    These appeals are about the repayment of bonds in the nature of franchise fees in the context of a contractual dispute.  The first appellant in the 2303 appeal,  Kaman Singh, said he paid the bonds in order to operate three restaurants owned and controlled by the Shamiana Group. The second and third respondents, Shamiana Enterprises Ltd and Shamiana Ltd, were part of the Shamiana Group. Satish Shetty was the ultimate owner of the companies in the Shamiana Group.

[2]    In the District Court, Judge Cunningham found that the licence agreements for two of the three restaurants were between Shamiana Enterprises Ltd and Shamiana Ltd, both as licensors, and the second appellant, Surkanda Enterprises Ltd (Surkanda) as licensee.1 Mr Singh owned and operated Surkanda.

[3]    The Judge found in favour of Surkanda in determining that the bonds for these two restaurants were refundable. However, the Judge made deductions from the amount to be refunded in relation to one of the restaurants for unpaid licence fees, general damages and (agreed) rent arrears.

[4]    The appellants say the Judge was wrong in relation to her finding as to the contracting parties for those two restaurants. They say the parties to the two agreements were Mr Singh and Mr Shetty personally. They further say the Judge should not have made deductions for unpaid licence fees and should not have awarded general damages to the respondents.

[5]    In relation to the third restaurant, the Judge found that the parties to the licence agreement were another company owned by Mr Shetty, Amigo Brothers Ltd (Amigo Brothers), as licensor and Surkanda Holdings Ltd (Surkanda Holdings), a second company set up by Mr Singh. Although the Judge found the bond was repayable, no relief was ordered as Surkanda Holdings was not a party to the proceeding.

[6]    Amigo Brothers was similarly not a party until the Judge joined it in her reserved decision after a second amended statement of defence was filed together with the respondents’ closing submissions filed simultaneously with those of the appellants sometime after the hearing of evidence was completed. The appellants say the Judge

1      Singh v Shetty [2020] NZDC 19703.

was wrong in her finding as to the identity of the parties to the licence agreement. As with the other two restaurants, they say the parties were Mr Singh and Mr Shetty personally. The appellants also say the Judge was wrong to join Amigo Brothers as a defendant and to grant leave for the second amended statement of defence to be filed.

[7]    Finally, the appellants also say the Judge erred in failing to award general damages to Mr Singh.

[8]    The respondents accept that the Judge erred in adding Amigo Brothers and in giving leave to file the second amended statement of defence. The respondents otherwise generally seek to uphold the Judge in relation to her findings in relation to the parties to the licence agreements.

[9]    The respondents have filed their own appeal (the 2304 appeal). Although their position in the District Court was that the bonds for the three restaurants were not refundable, on appeal they do not challenge the Judge’s decision on that point. They appeal on the basis on that:

(a)the Judge was wrong to admit transcripts of the recordings made by Mr Singh of two conversations he had with Mr Shetty (leave is required as this part of the appeal is out of time);

(b)the Judge was wrong to find accord and satisfaction in relation to the cancellation of the agreements for two of the restaurants; and

(c)(Agreeing with the appellants) the Judge was wrong to join Amigo Brothers as a party.

[10]   Throughout the judgment, I will use the term “appellants” to refer to Mr Singh and Surkanda, being the appellants in the 2303 appeal. I will use the term “respondents” to refer to Mr Shetty, Shamiana Enterprises Ltd and Shamiana Limited. To avoid confusion, I will continue to use those terms even when discussing the 2304 appeal. I will also use the terms appellants and respondents when referring to the parties in the District Court.

[11]   Mr Shetty died on 28 May 2019 before the hearing in the District Court. Accordingly,  the  first  appellant  is  in  fact  the  administrator   of   his   estate, Gary Fitzpatrick. However, when referring to the respondents collectively, I intend that reference to include Mr Shetty rather than Mr Fitzpatrick.

[12]   There were two affidavits sworn by Mr Shetty on interlocutory matters which were included as part of the evidence at the hearing. Mr Shetty’s son, Hamish Shetty, gave evidence. Although he had worked for his father and was able to give general evidence about the operation of the Shamiana Restaurants, he was not familiar with the particular agreements in this case.

Background

[13]   Between May 2004 and October 2008, Mr Singh worked as a chef and later a manager for Mr Shetty in different branches of Mr Shetty’s Shamiana restaurants in Auckland and Wellington. From around 2010 onwards, the owners of the Shamiana restaurants entered into agreements with different individuals to run their restaurants under what were effectively franchise agreements.

[14]   Around February 2012, Mr Singh met with Mr Shetty to discuss Mr Singh taking over the operation of the existing Shamiana franchise at Nelson. Mr Singh paid a $70,000 bond and he began operating the Nelson franchise. In the Judge’s summary in the “Background” section of the judgment she states there was no written agreement. However, in his evidence at the hearing, Mr Singh refers to the Nelson agreement saying, “the agreement he had given me to the Nelson one” and “I didn’t read for [sic] the Nelson one as well”. Under the arrangement (whether written or oral), Surkanda paid the rental for the lease of the restaurant premises and the operating expenses (OPEX) together with a weekly fee which the Judge referred to as a “franchise fee”.2

[15]   Mr Singh’s evidence was that while he was operating the Nelson restaurant, Mr Shetty offered him the franchise for Shamiana in Hamilton (Shamiana Hamilton).

2      Confusingly, in the evidence, the weekly franchise fee for all the restaurants is often referred to as “rent”.

The bond was $200,000.  Mr Singh’s evidence was that he was only required to raise

$130,000 for the Hamilton bond as Mr Shetty agreed to transfer the $70,000 Nelson bond to make up the total of $200,000. That latter point was initially disputed in the District Court. But under cross-examination, Hamish Shetty accepted it was possible his father would have agreed to the transfer of the $70,000 Nelson bond to make up the $200,000 for Shamiana Hamilton.   Mr Singh’s evidence was that he paid the

$130,000 in three separate instalments in August 2012.

[16]   Mr Singh’s evidence was that in February 2013, Mr Shetty gave him an agreement to sign for Shamiana Hamilton. Mr Singh said by that time he had already been running the business for a few months. The agreement is described as a Licence Agreement. It is dated 5 February 2013 and records Shamiana Ltd or Shamiana Enterprises Ltd as the licensor and Surkanda, as the licensee, with Mr Singh as the guarantor. The premises are identified.

[17]The bond is recorded as $200,000 and there is a weekly licence fee payment of

$2,000 including GST. As well, the licensee is required to pay the rental for the premises payable by the licensor pursuant to the lease of the premises and a share of the OPEX payable by the licensor pursuant to the lease. The dates for the commencement and end of the agreement were left blank in the clause regarding the term of the agreement.

[18]   Mr Singh’s position was that the dates were left blank because he had agreed with Mr Shetty that the agreement could be ended at any time as occurred with the Nelson restaurant. That was not accepted by the respondents. Their position was that the end date for the licence agreement was the end date for the lease of the premises. Mr Singh’s position was that he was never given any details of the Hamilton lease.

[19]   Mr Singh’s evidence was that between 2013 and 2014, the Hamilton business was so good that he took on another business in the Shamiana Group in New Plymouth. This was a Mexican restaurant called Chilando, in a food court. Its operation commenced in July 2014. Mr Singh paid part of the bond on 24 July 2014 (it is not clear if this was before or after Chilando opened) and the balance in separate payments from 20 August 2014. Mr Singh’s evidence was that the amount of bond

paid was $50,000, although he accepted he had agreed to pay $100,000. There was no written agreement in relation to Chilando. The weekly licence fee was $1,000.

[20]   Mr Singh also took over another Shamiana restaurant in the food court in New Plymouth. The bond was $100,000 but Mr Singh paid only $80,000 of that sum. Shamiana New Plymouth (Shamiana NP) opened in December 2014. Mr Singh’s evidence was that by that time the business of Chilando was suffering because of a kebab food business that had set up next door to Chilando in the food court. His evidence was that by December 2014, he knew he had to get out of Chilando because it was losing customers to the kebab shop next door. He said that he had been hoping that Shamiana would be profitable enough to make up for some of his losses from Chilando, but Chilando was losing so much business he could not afford the losses. That was part of the reason why, rather than paying the bond of $100,000 for Shamiana NP, he paid only $80,000. Mr Singh said he told Mr Shetty he could not afford the balance.

[21]   Mr Singh said by mid-February 2015, because of his struggles to make Chilando profitable, he decided to give Chilando back to Mr Shetty. His evidence was that Mr Shetty was angry about this and said if Mr Singh wanted to give back Chilando, he had to  give  back  all  of  the  businesses.  Then  in  a  phone  call  on 24 February 2015, Mr Singh said Mr Shetty told him he wanted Mr Singh to keep Shamiana Hamilton but that if Mr Singh wanted to give back Chilando he had to give back Shamiana NP as well. This was to be from 28 February 2015. Mr Singh recorded that phone conversation. Mr Shetty said he did not have enough money at the time to repay the bond(s). The Shamiana Group then took over the running of the two New Plymouth restaurants until two new franchisees were found.

[22]   Mr Singh’s brief of evidence states that at the start of February 2015, Mr Shetty gave him a written agreement. However, in his evidence at the hearing, Mr Singh said he was the one who asked for an agreement in writing as he wished to have evidence he had paid the bond for Shamiana NP. He said he was given the agreement after he “quit” Shamiana and Chilando. He said he went to Mr Shetty’s office in Henderson in March 2015 to get the agreement.

[23]   There is a licence agreement dated 4 February 2015 between Shamiana Ltd or Shamiana Enterprises Ltd as the licensor and Surkanda as the licensee with Mr Singh as the guarantor. The agreement does not identify the premises. The bond amount is stated to be $100,000 (although Mr Singh had in fact only paid $80,000) and the weekly  licence  fee  is  $2,500  including  GST.  The  term  is  stated  to  be  from  15 December 2015 (the evidence for the respondents was that this was an error and should have been 2014) until the expiry of the term of the lease.

[24]   Mr Singh’s evidence was that throughout 2015 and 2016, he repeatedly asked Mr Shetty for repayment of his bonds as Mr Singh was struggling financially. He said Mr Shetty would tell him that he did not have the money to give him at that time.

[25]   Mr Singh said that in early March 2016, Mr Shetty agreed to reduce the “rent”3 for Shamiana Hamilton to take some pressure off him. There was evidence that showed the payments reduced from  $2000  a  week  to  $1,250  a  week.  He  said Mr Shetty asked him to go to  Australia  to  run  some  restaurants  for  him  there. Mr Singh says he was so desperate for his bond money for Chilando and Shamiana NP to be repaid, he told him he would go if Mr Shetty gave him back his money. The bond was not returned so Mr Singh said he did not go to Australia. The respondents’ position was that Mr Shetty had agreed to reduce the weekly franchise payment for Shamiana Hamilton if Mr Singh agreed to go to Australia. But Mr Singh did not go there. At around the same time there were discussions between the two men about Mr Singh taking on a Shamiana restaurant in Christchurch with a bond of $70,000 but that did not eventuate.

[26]   Mr Singh recorded a discussion he had with Mr Shetty on 8 April 2016. He said that during that conversation, Mr Shetty said, for the first time, that the bond money was not refundable. He therefore issued the proceeding in relation to the two New Plymouth restaurants.

[27]   On 21 April 2016, Mr Singh’s lawyer wrote to the lawyers acting for the respondents asking for the return of the bonds. On 6 May 2018, the lawyers acting for

3      It seems this was the weekly licence fee. The parties appeared to use the term “rent” when they were referring to the weekly licence fee.

the respondents wrote to Mr Singh alleging that he had breached his licence agreement for Shamiana NP and sought payment of $2,500 per week since February 2015. Rent said to be owing for Shamiana Hamilton was also sought. It appears that the lawyers intended to refer to licence fees rather than rent.

[28]   On 19 May 2016, the lawyers for the respondents confirmed that the bonds for the two New Plymouth restaurants had been forfeited and they said there was still money outstanding for Shamiana NP and Shamiana Hamilton.

[29]   Mr Singh said that by September 2017, his money was so low that he could not afford to keep running Shamiana Hamilton in its low season. On 11 December 2017, Mr Singh gave notice by way of email from his lawyer that he was no longer in a position to operate Shamiana Hamilton and that he intended to cease trading at the end of January 2018. He sought return of the $200,000 bond.

[30]   The Shamiana Group took back control  of running  Shamiana Hamilton on 31 January 2018, at the same time reserving all rights to claim licence fees and outstanding rent.

[31]   There are three causes of action in the amended statement of claim. The first alleges breach of contract being the failure by the respondents to repay the Chilando bond of $50,000 and the Shamiana NP bond of $80,000. The appellants sought judgment from the respondents for $130,000 together with general damages of

$20,000 for Mr Singh for stress and inconvenience arising out of Mr Shetty’s refusal to repay the  bonds.  The  appellants  also  sought  interest  on  the  $130,000  from 24 February 2015, being the date of alleged acceptance of the termination of the licence agreements for the two New Plymouth restaurants.

[32]   The second cause of action  was  based  on  alleged  misrepresentation  by  Mr Shetty as to profitability of the restaurants. The appellants sought the same relief as in the first cause of action. There are no issues on appeal in relation to this cause of action.

[33]   The third cause of action was for constructive breach of contract and pleads a breach while Shamiana Hamilton was still operating. The appellants pleaded that the respondents breached the licensing agreement by failing to repay the bonds for the two New Plymouth restaurants and therefore constructively breached the contract for Shamiana Hamilton. The appellants claimed that the respondents’ breach rendered the appellants incapable of continuing to perform the Shamiana Hamilton agreement. Judgment for $130,000 (being the total bond for the two New Plymouth restaurants) and $200,000 for Shamiana Hamilton was sought, along with the same general damages and interest as in the first and second causes of action.

[34]   The respondents counter-claimed in the amended statement of defence pleading breach of contract for the three restaurants, seeking:

(a)Damages for Shamiana Hamilton for licence fees and rental in the sum of $107,780;

(b)Damages for unpaid licence fees and rental in the sum of $366,300.00 for Chilando; and

(c)Damages for unpaid licence fees and rental in the sum of $815,000.00 (as at the date of the filing of the counterclaim) for Shamiana NP.

[35]The respondents also sought general damages.

Decision of District Court Judge

[36]The Judge identified the following as the issues that needed to be decided: 4

(a)Who were the parties to each of the three contracts for Shamiana Hamilton, Chilando and Shamiana NP?

(b)Was the franchisee in each of the three contracts entitled to terminate the franchise agreement at the time they came to an end?

4      Singh v Shetty, above n 1, at [38].

(c)If not, were the appellants (or one of them) liable to the respondents for on-going payments as sought in the counterclaim? and

(d)Was it a term of each of the three contracts in (a) above that the bond was refundable and if so, how much was refundable?

Parties to agreements

[37]   On the first issue, for Shamiana Hamilton, the Judge referred to evidence which contradicted the appellants’ position that the agreement was a personal one5 and alternatively evidence that supported that position.6 However, she considered the best evidence was the written agreement of 5 February 2013, which states that the licensor is Shamiana Enterprises Ltd or Shamiana Ltd. The Judge noted that neither company was crossed out so she could not be sure which company was the licensor and she said it could have been both. The Judge said, in her view, that when Mr Shetty was talking to Mr Singh pre-contract, he was doing so in his capacity as a director or representative of the two Shamiana companies.7 The Judge referred to Mr Singh’s evidence that he ran Shamiana Hamilton through his company Surkanda. This company is recorded as the licensee on the 5 February 2013 agreement. The Judge found as a fact in relation to Shamiana Hamilton the contracting parties were Shamiana Enterprises Ltd and Shamiana Ltd as licensor and Surkanda as licensee.

[38]   In relation to Chilando, the Judge referred to Mr Singh’s evidence that he set up Surkanda Holdings to run Chilando. The Judge also referred to payments of part of the bond in July and September 2014 which were made to a bank account in the name of Amigo Brothers. There were also other bank statements, which evidenced weekly franchise fees and other contractual payments to Amigo Brothers. The Judge was satisfied that Amigo Brothers was the licensor and Surkanda Holdings the licensee.

[39]   For Shamiana NP, the Judge referred to the written agreement of 4 February 2015. The Judge found that this was the contract for Shamiana NP and the contracting

5      Singh v Shetty, above n 1, at [41]–[45] and [47].

6 At [46].

7 At [48].

parties were Shamiana Ltd and/or Shamiana Enterprises Ltd as licensor and Surkanda as licensee.

Termination of agreements

[40]   On the second issue, namely whether the franchisee was entitled to terminate the licence agreements at the time they came to an end, the Judge found in relation to Chilando that because it was a new business there could have been no representations specific to the history of its trading.8 The Judge therefore found that there was no specific representation made by Mr Shetty or Amigo Brothers that would have entitled Mr Singh or Surkanda Holdings to cancel the Chilando agreement for misrepresentation.

[41]   The Judge went on to say that given there was no written agreement, if it was necessary this would be a case where she would imply a term as to a reasonable notice period into the agreement. However, the Judge said it was not necessary to do so for the following reasons:9

[76]      When Mr Singh told Mr Satish Shetty he wanted to stop trading by the end of February, Mr Shetty had no option but to take back control of Chilando N.P. But he insisted that he take back Shamiana N.P at the same time. Thus Mr Singh’s companies were required to give up both shops. Shamiana N.P was profitable according to Mr Singh.

[77]      I am satisfied that this amounts to an accord and satisfaction, whereby a party agrees to receive less than it is entitled to provided there is consideration. Surkanda Holdings Ltd was able to get out of their contractual obligations in relation to Chilando N.P. because Surkanda Enterprises Ltd agreed to forego their contractual right to continue to operate Shamiana N.P. Both Surkanda companies were connected to Mr Singh. I am satisfied that there was an agreement that the parties’ obligations under the two contracts were mutually discharged.

[42]   As far as Shamiana Hamilton was concerned, the Judge noted that the written agreement of 4 February 2013 did not have a termination date. She noted the appellants’ position that Mr Singh was entitled to cancel because Shamiana Hamilton was unprofitable. Counsel for the appellants also submitted that it was possible to imply a reasonable notice term. The Judge recorded the respondents’ position that

8      Singh v Shetty, above n 1, at [73].

9      At [76]–[77].

Surkanda was contractually bound to keep operating Shamiana Hamilton until the expiry of the lease, notwithstanding there was no termination date in the licence agreement.10 The Judge determined that it was a suitable case where the Court should imply a term as to what is reasonable notice. She found that the six weeks’ notice given by Mr Singh was too short and that a reasonable notice period would be six months.11

Counterclaim for ongoing payments

[43]   On the issue of whether the appellants were liable for ongoing payments as sought in the counterclaim, the Judge said that she had already dealt with this issue for the two New Plymouth restaurants at [77] (set out above in [41] above). In other words, there was no liability.

[44]In relation to Shamiana Hamilton, the Judge stated:12

… As I have not been told when the Hamilton lease expired I am not able to grant the defendants relief on the basis that the second plaintiff should have given six months’ notice. The proper measure of damages payable is unclear.

…

[45]   The Judge appears to be saying that although she had determined that six months’ notice was a reasonable period of time, because the Hamilton lease might have expired before the end of that six month period (in which case, on the respondents’ argument that would bring the licensing agreement to an end), she was not in a position to award a counterclaim amount for rent, licence fees and OPEX for a six month period.

Were the bonds refundable, and if so, how much was refundable?

[46]   Finally, on the fourth issue as to whether the bonds paid by the appellants were refundable, the Judge noted that neither of the written agreements states whether the bond is refundable or not.13 The Judge referred to the two conversations between

10     The judgment Shetty v Singh, above n 1, refers at [80] to there being no termination date in the “lease document”. Clearly this is an error. It should state: “the licence agreement”.

11     At [91]–[93].

12 At [94].

13 At [96].

Mr Singh  and  Mr  Shetty  recorded  by  Mr  Singh.  In  the  first  conversation  on 24 February 2015, the transcript refers to Mr Shetty saying that, “I will not give any money now” and that, “I cannot give anything at this moment. I have no money as of now”.

[47]   In the second conversation on 8 April 2016, the transcript records Mr Shetty saying he was going to return the money for Shamiana Hamilton. Again, he says, “I do not have money now”. Further on in that conversation, the two men talk specifically  about  whether  the  bonds  were  refundable.  The  transcript  records Mr Shetty saying, in relation to Shamiana NP, “First, you agree for non-refundable, then you started crying”. Mr Singh responds, “No one will accept on non-refundable basis”. Mr Shetty says, “I gave it to Manish on non-refundable basis”. Mr Singh responds that Mr Shetty returned the money to Manish. Mr Shetty says that Manish was taking his other shop and he was adjusting his money there.

[48]   The Judge referred to Mr Shetty’s affidavit of 7 June 2018 in which he deposed that the amounts paid to him by Mr Singh were non-refundable deposits. She also referred to the evidence of Hamish Shetty that bonds are not refundable and that they are a payment to compensate the licensor for the cost of establishing a shop or restaurant.

[49]   The Judge said she was not persuaded that what Mr Shetty is recorded as having said in the two conversations supported the appellants’ case to the extent they contended it did.14

[50]   The Judge referred to legal definitions of a bond, which she said contemplated that a bond is held as security for the performance of the bond payer’s obligations under a contract. If those obligations are performed the bond is repayable. The Judge referred to cl 7.3 of the licence agreements which provided that if the licence is terminated for certain reasons, then the licensee shall forfeit all financial interest in the licence. The Judge said by implication it could be argued that if the agreement is

14     Singh v Shetty, above n 1, at [106].

terminated for any other reason, then the licensee does have a right to seek compensation or return of the bond.15

[51]   The Judge did not accept the respondents’ submission that the bond was a contribution for fit-out costs and equipment, nor that it was a form of liquidated damages clause of a penalty for the appellants’ breach of agreement; nor that the respondents suffered any actual loss as a result of the appellants’ or Surkanda Holdings ceasing to operate the three restaurants. The Judge concluded that the bonds were refundable, based on the following three matters: the evidence did not establish whether the bond was refundable or not; the meaning of a bond in law as it is generally understood; and if the bond is able to be forfeited to the licensor, as provided for under the contract, then it followed it was able to be refunded in other circumstances.

[52]   The implications for the two New Plymouth restaurants were that the respondents were not entitled to anything because of the accord and satisfaction finding, but the appellants were entitled to be refunded the bonds. The Judge found, on the evidence, that $50,000 was paid as a bond for Chilando and $80,000 for Shamiana NP.

[53]   The Judge said it appeared from the evidence that money for the bonds came from a Surkanda account or from cash deposited by Mr Singh. She noted her finding that Mr Singh was not a party to any of the agreements. She concluded that the

$80,000 for Shamiana NP was payable by the second and/or third respondents.16 But

Amigo Brothers was the entity that was liable to pay the $50,000 in relation to Chilando.

[54]The appellants accepted that there were rent arrears in relation to Chilando of

$10,191.44. This amount was to be deducted from the $50,000 bond for Chilando. The Judge therefore found that a total of $39,808.56 would be payable by Amigo Brothers to Surkanda Holdings if it were a party to the proceeding.

15 Singh v Shetty, above n 1, at [120].

16 The Judge says Shamiana Hamilton at [140] but she must mean New Plymouth because her discussion is under the heading “The two New Plymouth restaurants” and refers to the payments relevant to Shamiana NP.

[55]   For Shamiana NP, taking into account an over-payment made by Surkanda and the value of stock, the Judge added $4,874.24 to the $80,000 bond for Shamiana NP, making the repayment to Surkanda the sum of $84,874.24.

[56]   As far as Shamiana Hamilton was concerned, the Judge held that the second or third defendants were liable to Surkanda for $200,000.

[57]   However, the appellants accepted there were rent arrears and unpaid licence fees for December 2017 and January 2018 of $28,066.61. Additionally, the Judge found that the reduction in the weekly licence fee for Shamiana Hamilton was not made on a permanent basis. She deducted the sum of $70,500 (being $750 per week from 17 March 2016 until the end of December 2017) from the $200,000 bond. When that sum was added to the agreed deduction of $28,066.61 and the $10,000 general damages to the defendants, then the sum payable by the second and third defendants to Surkanda was $91,433.39.

[58]   The Judge awarded interest under the Interest on Money Claims Act 2016 from the date of the second amended statement of claim of 13 September 2017 until the date of judgment.

Grounds of appeal

[59]The grounds of the 2303 appeal are as follows:

(a)The Judge erred in law and fact when she reached a conclusion which was not available on the evidence as to the identity of the contracting parties;

(b)The Judge erred in law and fact when she found there was insufficient notice given in respect of Hamilton, when the notice period was agreed between the parties as evidenced in writing and therefore the agreement was mutually discharged;

(c)The Judge erred in law and fact when she failed to resolve a direct conflict on an issue of significance between the parties and between the

written evidence produced by the appellant that there had been a licence fee reduction17 and the denial of any reduction by the respondents; and the Judge reached a conclusion not available on the evidence when she found there had been a licence fee reduction but for a certain period of time which was neither pleaded, argued nor evidenced by any party;

(d)The Judge reached a conclusion not available on the evidence in finding that the respondents incurred any loss in respect of any of the businesses at issue in the proceeding; and

(e)The Judge erred in law and fact in failing to find that interest was payable to the appellants from the date of breach.

[60]   Although it was not part of the notice of appeal, the appellants also argued that the Judge erred in failing to consider Mr Singh’s claim for general damages.

Approach on appeal

[61]   The approach on appeal, including where trial evidence is involved, is conveniently set out in Huang v Jiang as follows:18

The approach on appeal is well settled. In Austin, Nichols & Co Inc v Stichting Lodestar (Austin, Nichols), the Supreme Court held that those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgment. If the appellate court’s opinion is different from the conclusion of the court below, the appeal must be allowed even if it was a conclusion on which reasonable minds might differ. Austin, Nichols reaffirms the appellate court’s obligation to form its own independent judgment on the merits of an appeal by way of re-hearing. But as noted by this Court in Green v Green, two fundamentals remain constant:

[30]      First, it is still axiomatic that the appellant bears the onus of persuading the appellate court to reach a different conclusion. Of necessity, in discharging that onus the appellant must identify the respects in which the judgment under appeal is said to be in error.

[31]      Second, it is also axiomatic that in determining whether the judgment was wrong the appellate court will take into account any

17 The notice of appeal refers to a “rent reduction” (continuing the confusion that existed in the evidence between the weekly licence fee and the rental payable for the premises). It is apparent that the appellants are referring to a licence fee reduction.

18 Huang v Jiang [2018] NZCA 209 at [20].

particular advantages enjoyed by the trial court. The advantages possessed by a trial judge in determining questions of fact are obvious, especially where assessments of credibility and reliability are involved. The trial judge gets to see and hear the witnesses, and is able to evaluate the strength of the evidence as it progressively unfolds within the context of the trial as a whole…

(citations omitted)

[62]I will follow that approach.

Will say statement of Satish Shetty prepared for judicial settlement conference

[63]   There are two preliminary matters. The first is the admissibility of a will say statement made by Mr Shetty for the purpose of a judicial settlement conference in the District Court. Ms Aherne seeks its admission. She says that the respondents have waived privilege over documents filed for the judicial settlement conference, by referring to a memorandum of counsel for the respondents prepared for the judicial settlement conference.

[64]   Mr Meys opposes the admission of Mr Shetty’s will say statement. He refers to the background as follows: one of the considerations for the Judge in determining the admissibility of the two conversations between Mr Shetty and Mr Singh, recorded by Mr Singh, was whether the appellants had notice that the respondents objected to the admissibility of the recordings. The oral ruling of the Judge of 24 August 2020, includes the following:

[3] In support of his objection to those transcripts becoming part of the evidence, Mr Meys says that he was told by Mr Bowler who was previously counsel, that he had told Ms Aherne, counsel for the plaintiffs, that he objected to the admissibility of the conversations. That was around the time of a proposed settlement conference which did not proceed.

[65]   Mr Meys filed a memorandum in this Court, dated 3 February 2021, in support of the respondents’ application for leave to appeal the Judge’s ruling on the admissibility of the transcripts of the conversations. Annexed to Mr Meys’ memorandum is a copy of the memorandum of former counsel for the respondents, dated 26 January 2018, for the judicial settlement conference of 2 February 2018. The memorandum states that while the respondents had not been provided with copies and/or transcripts of the recording, they nevertheless objected to them being relied on.

[66]   Mr Meys’ position is that the disclosure of the memorandum was simply for the purpose of establishing that the appellants had been given notice of the respondents’ objection. That disclosure did not constitute a waiver of other documents filed for the judicial settlement conference and, in particular, Mr Shetty’s statement.

[67]   Both the High Court Rules 2016 and the District Court Rules 2014 contain provisions which prohibit the disclosure of statements made during a settlement conference.19 The memorandum of counsel for the respondents prepared for the settlement conference would not have been admissible in the hearing in the District Court. It should not have been produced in this Court. In any event it was unnecessary for the respondents to do so as the Judge accepted advice from counsel that he had been told by former counsel that he had advised Ms Aherne that there was an objection to the admissibility of the conversations.

[68]   Even if the memorandum of counsel were properly produced in this Court, production would not have constituted a waiver of privilege, either express or implied in Mr Shetty’s will say statement.

[69]Section 65 of the Evidence Act concerns waiver of privilege. It provides:

65       Waiver

(1)A person who has a privilege conferred by any of sections 54 to 60 and 64 may waive that privilege either expressly or impliedly.

(2)A person who has a privilege waives the privilege if that person, or anyone with the authority of that person, voluntarily produces or discloses, or consents to the production or disclosure of, any significant part of the privileged communication, information, opinion, or document in circumstances that are inconsistent with a claim of confidentiality.

(3)A person who has a privilege waives the privilege if the person—

(a)acts so as to put the privileged communication, information, opinion, or document in issue in a proceeding; or

19 Rule 7.79(6) of the High Court Rules provides that parties must not disclose in Court any statement made in a settlement conference. Rule 7.79(7) provides that r 7.79 must be read with subpart 8 of part 2 of the Evidence Act 2006 (privilege). Rule 7.3(4) of the District Court Rules provides that will say statements and the memorandum identifying the issues are not admissible at any trial of the proceeding.

(b)institutes a civil proceeding against a person who is in possession of the privileged communication, information, opinion, or document the effect of which is to put the privileged matter in issue in the proceeding.

(4)A person who has a privilege in respect of a communication, information, opinion, or document that has been disclosed to another person does not waive the privilege if the disclosure occurred involuntarily or mistakenly or otherwise without the consent of the person who has the privilege.

(5)A privilege conferred by section 57 (which relates to settlement negotiations or mediation) may be waived only by all the persons who have that privilege.

[70]   Counsel’s memorandum relates to whether the appellants had notice of an objection to the admissibility of recorded conversations. Its disclosure does not waive privilege either expressly or impliedly over a separate document (a will say statement), which is concerned with the substance of the dispute between the parties.20 In other words the respondents, by producing counsel’s memorandum in this Court, did not act so as to put the will say statement in issue in the appeal.

[71]   Accordingly, the will say statement of Mr Shetty is not admissible in this appeal.21 I also put to one side the memorandum of counsel for the respondents filed for the judicial settlement conference.

Admissibility of transcripts of recorded conversations

[72]   I turn to the second preliminary issue. The respondents seek leave to appeal the decision of the District Court Judge admitting the transcripts of the recordings of two conversations between Mr Singh and Mr Shetty. The recordings were made by Mr Singh and the transcripts were prepared by him.

[73]   Leave is required, because the ruling admitting the transcripts was an oral ruling given on 26 August 2020 during the course of the hearing. The appeal was filed on 26 November 2020. An appeal must be filed within 20 working days of the date of

20     Astrazeneca Ltd v Commerce Commission (2008) 12 TCLR 116 (HC) at [40]–[42]; The Minister of Education v Reidy McKenzie Limited [2016] NZCA 326 at [12]–[13]; and Body Corporate 169791 v Auckland City Council (HC) CIV-2004-404-5225, 8 and 9 October, 14 November 2007 at [72], and [82]–[83].

21 The appellants would also have to address the issue of fresh evidence even if there had been a waiver of privilege.

the decision appealed from.22 The last day would have been 23 September 2020. The application for leave to appeal out of time was filed subsequently on 16 February 2021.23

[74]   Associated with the application for leave to appeal out of time is an application on behalf of the respondents seeking to admit fresh evidence on appeal, namely an affidavit of an independent interpreter who has translated both conversations between Mr Singh and Mr Shetty. The interpreter annexes to his affidavit his translated transcript of the two recordings.

[75]   Before determining the merits of the application, I refer to the substance of the Judge’s ruling.

[76]   The Judge noted Mr Meys’ advice to the Court that he had been told by former counsel for the respondents that he had advised Ms Aherne that he objected to the admissibility of the conversations. The Judge recorded that was around the time of the proposed settlement conference.

[77]   On the first issue raised by Mr Meys, namely that s 135 of the Evidence Act, required the recording to be played at trial, the Judge noted that Mr Meys had “come back” from that submission having considered s 315(4) which requires that if a transcript is offered, the recording must be played if the recording is available and the Judge so directs.

[78]   As to the second issue, Mr Meys raised the argument that the translation was not certified by a certified translator and that when giving evidence, Mr Singh had said on a number of occasions that he did not understand. The Judge recorded Mr Meys’ submission that Mr Singh’s English was not that good and therefore the transcript was not reliable.

[79]   The Judge rejected the submission that Mr Singh’s evidence was not sufficiently reliable. She noted that when she had rephrased questions in simple

22     High Court Rules, r 20.4(2)(b).

23     The application for leave to appeal out of time was filed as a consequence of counsel for the appellants pointing out that the notice of appeal, on this aspect, was out of time.

language after Mr Singh had indicated he had not understood a question, she said he understood the question straight away. The Judge also noted that the transcripts themselves do not have complex propositions. She said they were generally very short sentences, and the two men were talking about the business arrangements which both of them would have known about. She rejected the proposition that there was anything inherently unreliable about Mr Singh’s translation.

[80]   The Judge further noted that the respondents had had over two years to formally object to the admissibility of the translations. They were in possession of the transcripts prior to Mr Shetty’s death and counsel accordingly had time to show the translations to him.

[81]   For all those reasons, the Judge disallowed the objection to the admissibility of the transcripts, and they were accordingly admitted as part of the evidence.

[82]   In this Court, Mr Meys accepts that the oral ruling now appealed was given during the trial on 26 August 2020. It was a full ruling which incorporated the Judge’s reasons. The typed-up ruling was provided on 9 September 2020.

[83]   He submits, however, that the appellants have suffered no prejudice from what he describes as a technical delay of approximately one month (I note that the delay is in the order of 45 days). Mr Meys submits that as the appellants have filed their own appeal, they still would have been awaiting an appeal hearing on their appeal whether or not a separate notice of appeal by the respondents against the oral ruling had been filed earlier. Mr Meys submits all the appeals would have been consolidated (as they have been) for a single hearing in any event.

[84]Ms Aherne opposes the application for leave to appeal out of time.

[85]   Rule 24.4 of the High Court Rules gives the Court a discretion to extend time. An extension of time is an indulgence and it cannot be expected that an extension will be granted as a matter of course. A proper explanation should be provided as to the circumstances surrounding the failure to appeal in time.24

24     Commissioner of Inland Revenue v Dick (2000) 19 NZTC 15,849, (2000) 14PRNZ 378 (HC).

[86]The considerations affecting the discretion to extend time for appealing are:

(a)the length of the delay and the reasons for it;

(b)the parties’ conduct; the extent of the prejudice caused by the delay;

(c)the prospective merits of the appeal; and

(d)whether the appeal raises any issue of public importance.25 Where there has been only a short delay which is properly explained, leave is likely to be granted in the absence of prejudice.26

[87]The relevant background in this case is:

(a)The two audio recordings were sent to the respondents by email on  26 September 2017;

(b)Copies of the transcripts of those two recordings were provided to former counsel for the respondents on 2 February 2018 at the time the parties met to attend the judicial settlement conference;

(c)Subsequently, on 15 February 2018, counsel for the appellants forwarded a draft proposed joint memorandum for filing in advance of the case management conference. The covering email records that the joint memorandum includes proposals including that “your client agrees to the transcripts of the recordings already provided to you”;

(d)The joint memorandum contained the following:

5.9 The parties will file a common bundle containing the two relevant agreements, one email dated 23 February 2015 two transcripts of recorded conversations and respective details of quantum claimed by the plaintiffs and the defendants in their counterclaim.

(emphasis added).

25     My Noodle Ltd v Queenstown Lakes District Council [2009] NZCA 224, (2009) 19 PRNZ 518.

26     Whaanga v Smith [2013] NZCA 606, (2013) 21 PRNZ 655 .

(e)Counsel for the respondents signed the joint memorandum and consent directions were made by a District Court Judge on 22 February 2018. While the Judge did not make a particular direction in relation to the filing of the transcripts, she noted that a joint memorandum had been filed. There were no submissions made on behalf of the respondents at the conference (Ms Aherne appeared on behalf of both parties);

(f)The transcripts prepared by Mr Singh were before the Court prior to the hearing before Judge Cunningham:

(i)The respondents applied to transfer the proceedings to the High Court. The transcripts are referred to in the judgment of Davison J;27

(ii)In the hearing before the late Judge Christiansen on 20 January 2020, witnesses were cross-examined on the transcripts.28 The respondents’ closing submissions refer to the audio recordings.

[88]   I consider it can be inferred that despite the initial objection recorded in the memorandum of counsel for the respondents dated 26 January 2018, the respondents then agreed to Mr Singh’s transcripts being part of the evidence by signing the joint memorandum of 16 February 2018. I consider it can be inferred that the respondents turned their mind by then to the issue of admissibility of the documents and agreed to them while Mr Shetty was alive. The respondents offer no explanation for the objection being made in August 2020, having regard to the agreement on 16 February 2018.

[89]   I accept Ms Aherne’s submission that the application lacks any substantive merit. It is essentially an application for leave to appeal the refusal of the Judge to overturn a consent order, which followed a joint memorandum pursuant to which the respondents agreed the transcript should be admitted into the common bundle.

27     Singh v Surkanda Enterprises Ltd [2019] NZHC 438 at [21].

28     Judge Christiansen sadly died before delivering his ruling. A new hearing was therefore required.

[90]   Also, I accept Ms Aherne’s submission that the appellants shaped their evidence on the basis of the agreed admission of the transcripts into evidence and that the Judge properly assessed the issue of the reliability of the transcripts.

[91]For all those reasons, I refuse the application for leave to appeal out of time.

[92]   I turn to the application by the respondents to admit the affidavit of the independent interpreter, affirmed 18 March 2021, annexing the interpreter’s translation of the two conversations between Mr Singh and Mr Shetty. There was no formal application for leave to file fresh evidence. Mr Meys made an oral application at the hearing. Ms Aherne opposed the application.

[93]   A party to an appeal may adduce further evidence only with the leave of the Court.29 The Court may grant leave only if there are special reasons for hearing the evidence.30 An example of a special reason is that the evidence relates to matters that have arisen after the date of the decision appealed against and that are, or may be, relevant to the determination of the appeal.31

[94]In B v A,32 the Court summarised the principles as follows:

[25]      The relevant principles governing the receipt of further evidence are straightforward:

(a)the Court can receive further evidence if it thinks that the interests of justice require it to do so;

(b)it is wrong to allow an appellant to bolster his or her case with additional evidence that was available at the lower Court hearing, but not adduced because of the particular view of the case being taken at the time;

(c)admitting further evidence on appeal is exceptional rather than routine. A change of heart about how a case should have been run will not suffice. The prospect of further evidence triggering a substantial re-litigation before the appellate Court of the substantive case will count against admitting the further evidence;

29     High Court Rules 2016, r 20.16.

30     Rule 20.16(3).

31     Rule 20.16(3).

32     B v A [2020] NZHC 580.

(d)generally, the further evidence must be fresh, credible and cogent;

(e)evidence will not be regarded as fresh if it could, with reasonable diligence, have been produced at the trial;

(f)the absence of freshness is not an absolute disqualification. When the further evidence is not fresh, it will not generally be admitted unless the circumstances are exceptional and the grounds compelling. In addition, the further evidence needs to pass the tests of credibility and cogency;

(g)the interests of justice require the parties to put their best case forward at trial, in order to avoid wasting the Court’s limited time and resources. A high value is placed on finality when the parties have been afforded the opportunity and failed to take it; and

(h)the standard to be met is “rightly high”.

[95]   In this case, it would have been open to the respondents from the outset in the District Court to have the conversations transcribed by an independent interpreter. There is no explanation as to why they did not do so. The appellants advanced their case in the District Court on the basis of the transcripts prepared by Mr Singh. He has had no opportunity to respond in evidence to the alternative translations. For that reason, the admission of the evidence would be contrary to the interests of justice. Accordingly, I refuse the application to admit the affidavit of the interpreter.

Identity of contracting parties – appeal ground A

[96]   Ms Aherne for the appellants made general submissions covering all three restaurants and some specific submissions in relation to Chilando. She submits:

(a)the relationship between Mr Singh and Mr Shetty was a personal one;

(b)there was no written employment agreement when Mr Singh worked for Mr Shetty;

(c)the lack of any evidence from the respondents such as head leases or bank statements shows that Mr Singh could not have known who owned the businesses other than Mr Shetty;

(d)there was no evidence to show that the appellants were ever made aware of the company structure, and there was frequent use of trading names used by the respondents;

(e)the Colliers’ invoices for rental for the premises referred to by the Judge in relation to Chilando and Shamiana NP were received three months and 11 months after Mr Singh had commenced running the respective businesses, and in any event do not state the identity of the head lessee;

(f)the Judge placed undue weight on Hamish Shetty’s evidence that, at the end of the day, for each restaurant there is a printout from the till with the day’s takings which shows the name of the company which owns that restaurant, and this would have informed Mr Singh, when he was managing Shamiana restaurants, of the fact that it was not Mr Shetty personally who owned the restaurants. Ms Aherne says this was never put to Mr Singh in cross-examination but in any even there was no evidence as to what name the respondents had programmed into the eftpos system;

(g)in his affidavits, Mr Shetty referred to Mr Singh entering into a licence agreement “with me” to operate “three of my restaurants”. There were other references in the affidavits to “my restaurants” and Mr Singh paying deposits “to me”;

(h)Mr Singh said he had no idea of the identity of the account holder into which he paid the bonds. He said he was just given the account number; and

(i)the owner of only one of the payee bank accounts was Shamiana Ltd, no payments were therefore made to Shamiana Enterprises Ltd, and the owners of the other accounts are unknown.

[97]   Ms Aherne therefore submits that all agreements were entered into personally between Mr Singh and Mr Shetty. In the alternative, she submits even if there had

been an undisclosed principal, Mr Shetty (and now his estate) remains personally liable.

Shamiana Hamilton

[98]   Ms Aherne’s submissions ignore the existence of the licence agreement of     5 February 2013. While the Judge referred to certain parts of the evidence now criticised in Ms Aherne’s submissions set out in [96] above, the Judge stated that the licence agreement was the best evidence, saying:

[48]      The best evidence is the written agreement, dated 5 February 2013, which states the licensor is Shamiana Enterprises Ltd or Shamiana Ltd. As neither company name is crossed out I cannot be sure which company it was, and indeed it could have been both. This agreement was signed less than three months after Mr Singh started operating Shamiana Hamilton. It is clear that the licensor is not Mr Satish Shetty. In my view when Mr Satish Shetty was talking to Mr Singh pre contract, he was doing so in his capacity as a director or representative of the two Shamiana companies.

[49]      Mr Singh gave evidence that he ran the Shamiana Hamilton business through the company Surkanda Enterprises Ltd. This company is the licensee on the written agreement dated 5 February 2013.

[99]   On Mr Singh’s side of the contractual arrangement, there is no dispute that the restaurants were operated by  limited  liability  Surkanda  companies  rather  than  Mr Singh trading in his personal capacity. There is the following in the notes of evidence:

Q Before you started operating the Shamiana restaurants and before you signed the licence agreements, you set up companies for the purpose of being the business, the holding company for operating the Shamiana Restaurant business, didn’t you?

A        My company.

Q        Yes, you set up some companies? A        Yeah, I opened – like I have to.

THE COURT:

Q        Let’s use the name.

A        Surkanda Enterprise Ltd, Ma’am.

QAnd you set that up so you could run the businesses that you were   getting from Mr Shetty?

A        Yes, Maam.

CROSS-EXAMINATION CONTINUES: MR MEYS

QAnd you even actually also set up Surkanda Holdings Ltd as well,   didn’t you?

A        Yes, under Chilando.

Q        And why did you do that? A        Why I did that?

Q        Yes.

ABecause I have to run like another company.   If I want to open my    own business I have to open the company first.

Q      You could have operated them in your own name, couldn’t you? A Can we do? I have no idea, Ma’am. I have no idea.

[100]  The above evidence provides a basis for the view that Mr Singh was acting as a director of his company, Surkanda, when he paid the licence fee for Shamiana Hamilton. From his evidence that he needed to have a company to open a business, he can be taken as knowing that Mr Shetty (despite his references to “my” restaurants) was also acting in his capacity as director of the Shamiana companies when the payment of bonds was discussed and then paid.

[101]  As far as the bank accounts into which the bond payments were made, and Mr Singh’s knowledge of the holders of those accounts, this is of very limited relevance. Hamish Shetty said, in answer to a question regarding seemingly irrelevant transactions in the Shamiana NP bank account that “my Dad sort of paid here and there and everywhere”. He was asked if he meant robbed Peter to pay Paul. He answered: “Yeah, transferred to here, paid to there. It was very messy is the best word”. But in any event Mr Singh had some knowledge of the identity of the account holder for the accounts into which he made the bond payments in August 2012. He said “I think it Shamiana Enterprise or Shamiana Ltd or something”.

[102]  But as I have said, given the evidence of the “messy” way in which Mr Shetty arranged for payments into the accounts of his various companies, the identity of the holders of the accounts which received the bond payments is of limited relevance.

[103]  As to the payor, Mr Singh was acting as a director of his company. Surkanda was the party to the agreement which included an obligation to pay a licence fee, so the source of the money for the licence fee is also irrelevant.

[104]  For all the above reasons, the Judge was correct in finding that the contracting parties to Shamiana Hamilton were Shamiana Enterprises Ltd and Shamiana Ltd as licensor and Surkanda as the licensee. It is therefore the two licensor companies that are liable for the repayment of the Shamiana Hamilton bond to Surkanda.

[105]  Any argument as to an undisclosed principal does not arise where Mr Singh can be taken as knowing that Mr Shetty was acting as a director of his companies.

Chilando

[106]  Before addressing the issue of the identity of the parties to the Chilando agreement, it is convenient at this point to address the Judge’s decision granting leave to the respondents to file a second amended statement of defence and joining Amigo Brothers as a party.

[107]It was the Judge who suggested joinder. The judgment records:

[34]   Although Amigo Brothers was never a party to the claim, at the end   of the hearing I raised with counsel whether it should be. In closing submissions Mr Meys sought the joinder of Amigo Brothers as a defendant and the joinder of Surkanda Holdings Ltd as a third plaintiff. Ms Aherne stated she did not. This was on the basis that all contractual arrangements were between the plaintiffs and Mr Satish Shetty personally.

…

[146]    Mr Meys applied to join [Amigo Brothers] as a fourth defendant. I make an order joining Amigo Brothers Ltd as a fourth defendant. Despite Mr Meys’ agreement to join Surkanda Holdings Ltd as an additional party, I am unable to do so without the agreement of that company.

[147]    Because the pleading dated 4 September 2020 includes Amigo Brothers as a party, the Court accepts this document for filing;

[108]  The second amended statement of claim pleaded that the agreement for Chilando was between Amigo Brothers and Surkanda Holdings.

[109]  As Ms Aherne notes, the Judge gives no reasons for giving leave for the amended pleading to be filed, other than that as referred to in the paragraphs set out in

[107] above.

[110]  In this Court, both parties agreed the Judge erred in joining Amigo Brothers, but for slightly different reasons. Mr Meys says the respondents’ application for joinder of Amigo Brothers was conditional, subject to the appellants consenting to the joinder of Surkanda Holdings and that, further, the respondents expressly opposed the joinder of Amigo Brothers if the appellants opposed the joinder of Surkanda Holdings. Mr Meys says that the Judge erred in joining Amigo Brothers despite the appellants refusing to consent to the joinder of Surkanda Holdings.

[111]  The closing submissions for the respondents in the District Court state that the respondents only needed to add Amigo Brothers for purposes of the counterclaim, because if the appellants did not join Surkanda Holdings in respect of the Chilando claim, then no order could be made in relation to the appellants’ claim for the bond on that restaurant. The submissions went on to say, however, it was accepted that if Amigo Brothers were added as a party for purposes of the Chilando restaurant, then it would also be fair to join Surkanda Holdings for the appellants’ claim. The respondents opposed the joinder of Surkanda Holdings but not Amigo Brothers.

[112]  Mr Meys says it was not to the respondents’ benefit to join Amigo Brothers as a defendant, unless Surkanda Holdings was also joined as a plaintiff. Mr Meys therefore submits the District Court Judge’s unilateral joinder of Amigo Brothers as a defendant after the trial, with neither parties’ consent, was an error of law.

[113]  Ms Aherne submits it was not open on the facts, nor necessary for the Judge to find there was a separate entity, Amigo Brothers, to whom the bonds were paid and from whom they were repayable. The closing submissions for the appellants in the District Court state: “Should any application for joinder of Amigo Brothers or any other defendant company be made, the plaintiffs object to any joinder”.

[114]In Heyer v Heyer,33 the Court said:

In this case the judge, having given what he no doubt thought was a helpful indication, was then faced with having to decide an application as the impartial judge effectively to follow up on his indication by amending the pleadings to introduce the point he had suggested.

When such a thing happens the judge must bear in mind that the point he thought of was not necessarily a good point especially if it has not occurred to the parties themselves, but he has to be satisfied that it is in the interests of both parties to accede to the amendment and that it is proper in the exercise of his discretion to permit the amendment.

[115]  In this case, the respondents’ consent to joinder was conditional (and that condition was not satisfied) and the appellants opposed joinder.

[116]  In the circumstances, the Judge should not have joined Amigo Brothers. It was after the evidence had closed and both parties opposed. It follows that the Judge should not have given leave to the respondents to file a second amended statement of defence. It was filed for the purpose of joining Amigo Brothers.

[117]  However, it does not follow, as Ms Aherne suggests it does, that the absence of Amigo Brothers and Surkanda Holdings as parties prevented the Judge from finding on the facts (if there was available evidence) that the parties to the Chilando agreement were Amigo Brothers and Surkanda Holdings. I now turn to that issue.

[118]  Ms Aherne submits, in conjunction with her submission regarding joinder of Amigo Brothers, that the appellants never had the opportunity to consider nor consent to the joinder of any other plaintiff. She says this has prejudiced the appellants significantly since the Judge effectively removed a part of the appellants’ claim based on the absence of Surkanda Holdings as a plaintiff. Ms Aherne further submits there was no evidential basis upon which the Judge could have found that the licence fee payments were paid by or were repayable to Surkanda Holdings. The bank accounts for Surkanda Holdings were held with the ASB. None of the deposits making up the total of $120,000 for the two New Plymouth restaurants combined was from an ASB account (other than the Surkanda Enterprises ASB account). Ms Aherne submits there

33     Heyer v Heyer [2012] EWCA (CIV 257) at [37] or [39].

was therefore no evidential basis to hold that the bonds were paid by, nor repayable to Surkanda Holdings.

[119]  Mr Singh’s evidence was that he set up Surkanda Holdings to be the licensee for Chilando. He said in evidence which I have already set out but repeat here:

Q And you even actually also set up Surkanda Holdings Limited as well, didn’t you?

A        Yes, under Chilando.

Q        And why did you do that? A        Why I did that?

Q        Yes.

ABecause I have to run like another company.   If I want to open my    own business I have to open the company first.

[120]He repeated that evidence saying:

Q        Mr Singh you said earlier that you set up separate companies for each of the restaurants that you managed for the defendants, right?

A        Yep.

Q        So, Surkanda Enterprises Ltd and Surkanda Holdings Ltd?

AYep.  Surkanda Enterprise I was running Hamilton and New Plymouth was under Surkanda Enterprise, only Surkanda Holdings was Chilando.

[121]  Surkanda Holdings was incorporated with the Companies Office on 12 June 2014. The first payment towards the bond for the Chilando restaurant of $7,000 was on 24 July 2014. The balance of the $50,000 was paid from 20 August 2014, after Chilando had started operating. The notation for the payment in the Surkanda Enterprises Ltd bank account against the payment is “Amigo Bro”. There is an additional handwritten word “Chilando” beside the payment. It is not clear when the handwritten notation was added but there is no dispute that this payment was part of the bond for Chilando.

[122]  The fact that the first payment towards the bond was made by Surkanda Enterprises rather detracts from the appellants’ argument that as Mr Singh was the

source of the funds for the bonds, the licence agreements were personal agreements between he and Mr Shetty.

[123]  Payments of the weekly licence fee made from the Surkanda Holdings’ bank account commenced (at least as far as is apparent from the documents available to the Court) on 18 July 2014. The first payment is for $2,000. The others that follow are for $1,000. The payments are recorded as “rent” but it is tolerably clear that these are the weekly licence fees and the identification as rent is part of the looseness of language referred to earlier in this judgment, where the weekly licence fees are referred to as rent. The entries record that the transfers are to “Amigo Bro”.

[124]  Mr Singh confirmed in his evidence that he checked the invoices for rent and OPEX under the lease. They were all made out by Colliers for Amigo Brothers, T/a – Chilando.

[125]  Hamish Shetty’s evidence was that licensees would usually be asked to put the reference name of the licensor company on their weekly payments.

[126]  On the other side of the contractual arrangement, the evidence establishes that Amigo Brothers was set up to be the licensee for Chilando. It was a newly set up restaurant that had not previously been operated prior to Surkanda Holdings becoming the licensee in 2014. There was also evidence that the lease for Chilando was taken out by Amigo Brothers in 2014.

[127]  I do not accept that the absence of Surkanda Holdings as a party can be laid at the door of anyone else other than the appellants. The involvement of Surkanda Holdings as the operator of Chilando was within their knowledge. The appellants should have included Surkanda Holdings as a party to the proceeding from the outset.

[128]  Despite the absence of Surkanda Holdings and Amigo Brothers as parties, it was open on the evidence for the Judge to find that they were the licensee and licensor respectively of Chilando. Accordingly the Judge was correct to decide any repayment of the licence fee would be by Amigo Brothers to Surkanda Holdings. Mr Singh was acting  in  his  capacity  as  the  director  of  Surkanda  Holdings  when  he  made the

arrangements with Mr Shetty, who was similarly acting as a director of his company, Amigo Brothers.

Shamiana New Plymouth

[129]  Mr Meys refers to the licence agreement dated 4 February 2015 between Shamiana Ltd and Shamiana Enterprises Ltd as licensor and Surkanda Enterprises as the licensee. Mr Meys submits that although the premises are not identified, it is clear that this agreement relates to Shamiana NP.

[130]  Mr Singh accepted that the agreement related to Shamiana NP although he says it was signed in March 2015 after he had “given up” both Chilando and Shamiana NP. He further accepted the agreement was between Surkanda and Shamiana Ltd. He said he did not read the agreement before signing it but trusted it would be the same as the licence agreement for Shamiana Hamilton.

[131]  Ms Aherne refers to the source of the licence fee payments. None of the payments came from Surkanda Enterprises’ account. They were sourced from ANZ or BNZ accounts (Mr Singh’s accounts), with an additional sum of $10,000 cash given directly to Mr Shetty by Mr Singh. There is nothing in the evidence to indicate that in making the arrangements for the licence fee for this restaurant the two men were not similarly acting as the directors of their respective companies (as they were with the other two restaurants).

[132]  The Judge did not err in finding the licence agreements were between Shamiana Enterprises Ltd and/or Shamiana Holdings Ltd and Surkanda rather than personal agreements between Mr Singh and Mr Shetty. It follows that Shamiana Enterprises Ltd and Shamiana Holdings Ltd are liable to repay the bond to Surkanda.

Notice period for Shamiana Hamilton – appeal ground B

[133]  The appellants submit the Judge erred when she found there was insufficient notice given in respect of Shamiana Hamilton when, they say, the notice period was agreed between the parties and therefore the agreement was mutually discharged on Mr Singh giving notice to Mr Shetty.

[134]  Ms Aherne refers to the fact that there was no notice period provided for in the licence agreement for Shamiana Hamilton. She also notes the oral evidence given by Hamish Shetty when questioned about his expectation that there would have been at least 12 months’ notice. On being asked on what basis Mr Singh should have known that he was to give 12 months’ notice, Hamish Shetty responded: “I can’t say that he would have known”.

[135]  Ms Aherne submits that any finding that the notice period was too short is based  on  contradictory  evidence   from   the   respondents.   She   refers   to Hamish Shetty’s evidence that many former employees were keen to become franchisees. He said that if it became known that a new shop was on the horizon, word would get around within a very short space of time. Ms Aherne submits this is inconsistent with his evidence that 12 months’ notice would be reasonable because it takes time to find another licensee to take the business over.

[136]  This point is of academic interest only in relation to Shamiana Hamilton. Although the Judge held that she could imply a term that six months’ notice, being a reasonable notice period, was required, in the end she did not make any deductions from the $200,000 paid as the bond for Shamiana Hamilton on account of insufficient notice. The Judge referred to the respondents’ case that the expiry date of the licence agreement could be determined as a matter of construction by the term of the lease. But she said she could not grant the respondents any relief as she did not know when the Hamilton lease expired. As set out in [45], I took the Judge as meaning that the Hamilton lease might well have expired prior to the conclusion of the six-month period, which is why she could not grant relief for that time period.

[137]  The deductions made from the Shamiana Hamilton bond were for: what the Judge found were underpaid licence fees, in the amount of $70,500 (this is a separate point which I address in the next section of this judgment); rent arrears and unpaid licence fees of $28,066.61 for December 2017 and January 2018, which the appellants accepted needed to be taken into account; and general damages of $10,000 which I will consider under a later ground of appeal.

[138]  The Judge’s finding in regard to the six-month notice period has no practical consequence for the appellants as she did not make any deduction for it.

[139]  It is therefore not necessary to consider this point in relation to Shamiana Hamilton, which is the subject of this appeal ground. It will be necessary to consider the issue of notice, however, in relation to Chilando and Shamiana NP in connection with the respondents’ appeal and their accord and satisfaction argument.

Deduction of unpaid licence fees for Shamiana Hamilton – appeal ground C

[140]  Ms Aherne submits that the Judge reached a conclusion not available on the evidence when she found that there had been a rent (i.e. licence fee) reduction for Shamiana Hamilton but for a certain period of time.

[141]  The judgment, confusingly, refers to a reduction in rent for Shamiana Hamilton, whereas the reduction was in respect of the weekly licence fee. The judgment perpetuates the confusion in the evidence where the parties referred to the licence fee frequently as “rent”. At the hearing it was agreed that the references to “rent”, at least in relation to this part of the appeal, should properly be read as references to the weekly licence fee.

[142]The Judge said:

[144]    Mr Satish Shetty reduced the rent [i.e. the licence fee] for Hamilton by $750 per week from March 2016. This continued until 25 December 2017. It is agreed that it was to take financial pressure off Mr Singh. At no time did Mr Singh’s evidence establish that the reduction was permanent. The evidence was that this reduction was made in the context that Mr Singh was going to work for Mr Shetty’s Australian restaurants. That did not happen. In a letter dated 6 May 2016 from the defendants’ lawyers to the plaintiffs’ lawyers the $750 per week was claimed as owing and increasing with each week. I am not satisfied that there was ever any agreement that this reduction was to be a permanent variation to the written contractual amount of $2,000 per week.

[145]    It follows that $750 per week from 17 March 2016 until the end of December 2017 in the amount of $70,500 is payable to the second defendant,

Shamiana Enterprises Ltd. …

[143]  Ms Aherne submits there was no evidence before the Court that there was a rent reduction i.e. licence fee reduction but that it was limited in time. Mr Meys says

that the respondents’ position in the District Court had been, in pleadings and by reference to correspondence, that there was no agreement on licence fee reduction.

[144]  In this Court, the respondents do not disagree with the findings and conclusion of the Judge as set out in [144] and [145] of the Judge’s decision. Mr Meys submits that strong evidence of a formal waiver of a licensor’s entitlements would be required to override the terms of a written licence agreement. He says after the appellants received written notice of demand in relation to the contract sum of $2,000 per week in a letter from the respondents’ lawyers dated 6 May 2016, the appellants cannot argue that the respondents continued to waive their right to the licence fee to assist the appellants with financial pressures.

[145]  In my view, it was open to the Judge to find, as she did in [144], that the reduction was made in the context that Mr Singh was going to work for Mr Shetty’s Australian restaurant and that did not happen. The transcript of the recorded conversation of 8 April 2016, records Mr Shetty telling Mr Singh he had paid less rent (i.e. licence fee). Mr Singh responds that Mr Shetty had said that was okay. Mr Shetty then replies that he said that because Mr Singh was going to go to Australia. Mr Shetty repeats that, saying because Mr Singh had agreed to go to Australia, that was the reason he reduced the rent (i.e. licence fee). Otherwise, he would not have done so. Mr Singh says that he was still saying he would go, he never refused to go. To that Mr Shetty says, “You were going to go on 1 April”. Mr Shetty then adjusts that and says, “It was not even in April but in March”. Mr Singh refers to the Australian restaurant as opening in mid-March.

[146]  Ms Aherne refers to Mr Singh’s evidence that he had in fact been to Australia for a month in December 2015. However, the transcript of the conversation indicates that the reduction in the licence fee was to operate from March 2016 on the basis of Mr Singh going to Australia in March or April of 2016. Mr Singh’s time in Australia for one month in the previous year is therefore irrelevant. There are also the letters of both 6 May 2016 and 19 May 2016 where the respondents’ lawyers note that the additional $750 per week was owing.

[147]  I therefore conclude the Judge did not err on this issue. The reduction in the weekly licence fee between Shamiana Hamilton and Surkanda Enterprises Ltd was a temporary arrangement.

General damages awarded to respondents for Shamiana Hamilton – appeal ground D

[148]  The Judge awarded $10,000 general damages for disruption to business as a result of what she found was inadequate notice of termination for Shamiana Hamilton.

[149]The Judge said:

[143] The $10,000 payment to the counter-claim plaintiffs is an amount I award doing the best I can do in the absence of evidence as to loss. It is on the basis that notice was given in mid-December, a busy time of year for any business. There would inevitably be some effort in taking back control of the business and reorganising another way of operating the business either with Surkanda Enterprises Ltd taking back the operation of it or finding a suitable franchisee to take it over.

[150]  It will be recalled that the Judge said, at [94], that because she had not been told when the Hamilton lease expired, she was not able to grant the respondents relief on the basis that Surkanda should have given six months’ notice. As earlier surmised in [45] above, I understood the Judge to be saying, having regard to the respondents’ submission that the licence agreement came to an end when the premises lease expired, and not knowing when the lease expired, she was not able to grant the respondents’ relief on the basis of a six month notice period.

[151]  The Judge appears to have instead considered an award of general damages, rather than specific damages.

[152]  The Judge’s basis for the award was that notice was given in mid-December which she says was a busy time of the year for any business. She also refers to there being some effort in taking back control of the business or finding a suitable franchisee to take it over.

[153]  However, finding that mid-December was a busy time of the year was directly contradictory to the Judge’s own findings:34

… Business was slow over that time (December and January). Mr Hamish Shetty gave evidence that it is normal for their shops in shopping malls to be down in takings over the summer months because people are on holidays.

[154]In Watts v Morrow, the English Court of Appeal held that:35

A contract-breaker is not in general liable for any distress, frustration, anxiety, displeasure, vexation, tension or aggravation which his breach of contract may cause to the innocent party ... But the rule is not absolute. Where the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation, damages will be awarded if the fruit of the contract is not provided or if the contrary result is procured instead.

[155]  Even if general damages were available in the context of an alleged breach of what was a commercial contract, the respondents would be required to demonstrate that they suffered considerable distress and anxiety or inconvenience. The respondents did not provide such an evidential basis.

[156]  The Judge was therefore wrong to award $10,000 as general damages to the respondents.

Interest was payable to the appellants from the date of breach – appeal ground E

[157]  It is logical to consider this ground of appeal after a consideration of the respondents’ appeal on the Judge’s decision on accord and satisfaction in relation to the cancellation of the agreements for the two New Plymouth restaurants.

General damages not considered for Mr Singh

[158]  Although not a ground of appeal in the notice of appeal, it was clearly signalled in Ms Aherne’s submissions of 3 March 2020 that she sought to argue that the Judge failed to consider the general damages claimed by Mr Singh in the sum of $20,000 for stress and inconvenience arising out of Mr Shetty’s refusal to repay the bond despite being aware of the financial difficulties this was causing to Mr Singh and his family.

34     Singh v Shetty, above n 1, at [68].

35     Watts v Morrow [1991] 1 WLR 1421 (CA) at 1439–1141.

[159]  I will proceed to determine this new ground of appeal. The respondents had three weeks’ notice of the ground prior to the filing date for their submissions.

[160]  In both of the recorded conversations  between  Mr  Singh  and  Mr Shetty, Mr Singh refers to the dire financial consequences he is experiencing because his bonds had not been repaid.

[161]  The Judge found that from at least 2016 (if not 2015) Mr Singh had conveyed to Mr Shetty that he was under financial pressure. Mr Singh referred to a bank loan that he was required to repay. He had to return money he had borrowed from others, he was under “so much tension, very badly stressed. I was in a very bad fix”.

[162]  On appeal, under r 20.19, the Court may make any decision it thinks should have been made and may make any order the Court thinks just.36 It is therefore open to this Court to determine whether general damages should have been awarded to  Mr Singh, and if so the quantum, in the absence of the District Court considering this claim.

[163]  The current view in New Zealand regarding general damages to remedy disruption, inconvenience, distress and anxiety is that the Court can grant general damages for distress and anxiety where the object of the contract was to provide pleasure, relaxation, peace of mind. It is an exception, rather than the rule.37 In this case, while the Court accepts that Mr Singh was distressed, general damages are not available for this distress and anxiety. The bond payments were made in a commercial context where Mr Singh and Mr Shetty were the ultimate owners of the respective companies that were parties to the licence agreements. This circumstance does not involve Mr Singh’s personal life such as the construction of his home or the breach of a personal contract between himself and another party.

[164]  Rather, the respondents’ failure to repay the bonds occurred in connection with a commercial agreement. It is the kind of agreement referred to in Burrows, Finn and

36     High Court Rules, rr 20.19(1)(a) and 20.19(1)(c).

37     Finn, Todd and Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis NZ Limited, Wellington, 2018) at 865 [Burrows].

Todd on the Law of Contract in New Zealand as an “ordinary commercial contract”.38 Mr Singh did not sign the licence agreements in his personal capacity. Rather, he avoided liability and signed the agreement as Surkanda Enterprises and Surkanda Holdings. He also did not sign the contract for a purpose other than commercial gain.

[165]For the above reasons general damages are not available to Mr Singh.

Respondents’ appeal – accord and satisfaction

[166]  The difficulty that the Court faces in addressing this part of the respondents’ appeal is that it is being asked to bring some rigour to a contractual arrangement as negotiated by Mr Singh and Mr Shetty for their respective companies in a way that can only be described as loose and informal.

[167]  The respondents’ position is that Mr Singh was not entitled to cancel the agreements for Chilando or Shamiana NP. They say that the term of each of those two agreements coincided with the term of the lease for the respective premises. In the alternative, the respondents submit that if the licence agreements did not apply until the end of the lease for each restaurant, then a reasonable notice period would have been required for either party to terminate the agreements. The respondents had argued for 12 months in the District Court but submit that the Judge’s decision to imply a six-month notice period was within the range open to her and does not constitute a material error of fact or law. The respondents submit that the plaintiffs’ claim that they could walk away from the agreements, while in breach of the licence agreements (not having paid the full amount of the bond for each and with rental payments owing) bears no resemblance to commercial reality.

[168]  Ms Aherne submits that for the two New Plymouth restaurants there were no relevant written agreements, no notice period was provided for, and no end date of the agreements had been provided for. She said the parties agreed to the end date between themselves by a series of communications. Those communications were: a conversation between Mr Singh and Mr Shetty on 17 February 2015 referred to in a

38     At 865.

follow up email from Mr Singh to Mr Shetty on 23 February 2015 and the telephone conversation on 24 February 2015.

[169]  Ms Aherne therefore submits there was no room to imply a reasonable notice period, there was no variation or new agreement (accord) to satisfy. She says there was a discharge by mutual agreement which was based on the existing terms.

[170]  Both the appellants and respondents submit that the Judge was wrong to find accord and satisfaction. It was not argued by the parties and the Judge did not call for submissions on the issue. Ms Aherne notes that in the paragraph where the Judge finds there was accord and satisfaction, the Judge also refers to there being an agreement that the two contracts were mutually discharged. She also notes that the appellants have never denied that there were arrears of rent for the last month of Chilando and the last month of Hamilton and they should be deducted from the two bonds.

[171]  There is no written agreement for Chilando and Mr Singh’s evidence is that the written agreement for Shamiana NP was only signed after he had  given  notice to Mr Shetty that he wished to give up Chilando and after the telephone conversation on 24 February 2015, in which Mr Shetty said Mr Singh would also need to give up Shamiana NP. As noted, Mr Singh’s evidence was he only signed the agreement so that he would have a record of the amount of the bond paid. There was no evidence to contradict Mr Singh’s evidence. Although that does seem somewhat unusual, it also seems that the arrangements were, as I have said, loose and informal. Lawyers were not involved.

[172]  I do not accept the respondents’ proposition that the term of the licence agreement was tied to the terms of a lease. There was no evidence of the leases before the Court. Mr Singh said he had never seen the leases.

[173]  The question then becomes whether the two New Plymouth agreements were discharged by accord and satisfaction as the Judge found, or whether they were discharged by mutual agreement as Ms Aherne submits or whether the Court can imply a reasonable notice period of six months.

[174]  Mr Singh’s evidence, which was supported by the transcript of the telephone conversation on 24 February 2015, was that Mr Shetty said if Mr Singh was to give up Chilando he would need to give up both Chilando and Shamiana NP. The transcript records Mr Singh saying that Chilando was a disaster for him. Mr Shetty says, “he cannot leave just one shop”. Mr Singh asks if he has to give up all three. The conversation then proceeds:

Mr Shetty        No. If you want to give up Chilando you have to give up both. Mr Singh  The ones here and the one in Hamilton?

Mr Shetty        No, not the one at Hamilton.

Mr Singh        Okay then. I will give up both here. Mr Shetty  But I will not give any money now.

Mr Singh        I have to give money to those from whom I have taken money.

Mr ShettyI cannot give anything at this moment. I have no money as of now.

[175]  The two men then go on to discuss the number of staff Mr Singh had employed and what their roles were. Mr Shetty says he will retain only one of those staff members. He then says he will decide after meeting the staff members, and says he will come there in a day or two and tell Mr Singh what he wants to do regarding    Mr Singh’s staff.

[176]Does this constitute accord and satisfaction? Burrows, Finn and Todd says:39

An agreement to release an obligation, if supported by the necessary consideration, is called accord and satisfaction. This has been judicially defined as follows:

Accord and satisfaction is the means of a release from an obligation, whether arising under contract or tort, by means of any valuable consideration, not being the actual performance of the obligation itself. The accord is the agreement by which the obligation is discharged. The satisfaction is the consideration which makes the agreement operative.

[177]  What the Judge did not determine was whether Surkanda Enterprises, in agreeing to forgo its contractual right to continue to operate Shamiana NP was in fact

39     Burrows, above n 37, at 762, citing British Russian Gazette Ltd v Associated Newspapers Ltd

[1933] 2 KB 616 at 643–644.

valuable consideration. In taking over that restaurant, while on the one hand the respondents earned money from operating the business themselves until a new franchisee was installed, on the other hand it lost the weekly licence fees. The Judge did not calculate the difference between those two. That would have been required in order  to  determine  whether  the  consideration  was  “valuable”  and   benefited   Mr Shetty’s company. It was therefore not open to the Judge to find accord and satisfaction.

[178]  However, I consider there was evidence sufficient to support a bilateral discharge, or, in other words, as Ms Aherne submits, discharge by mutual agreement. What has been created by agreement may be extinguished by agreement. An agreement by the parties to an existing contract to extinguish the rights and obligations that have been created, is itself a binding contract.40 A bilateral discharge occurs when the contract to be extinguished is either wholly or partly executory in that both parties have obligations which have not yet been fully performed.41

[179]  There is of course the question whether there was the requisite intention to discharge. It must be shown that both parties understood the consequences of the arrangement and that they intended to terminate the contract. Burrows refers to the case of McKee v McMoran, where assent to the question “If I give you your money back, will that be satisfactory?” was held to be insufficient to establish that the addressee was agreeing to relinquish his right of action.42

[180]  In this case, Mr Shetty made it clear that if Mr Singh wished to give up Chilando he would have to give up Shamiana NP as well. Mr Singh agreed, saying he would give up both. This agreement is consistent with the earlier agreement between Mr Singh and Mr Shetty in relation to Shamiana Nelson. Mr Singh’s evidence was that while he was running Nelson, Mr Shetty offered him Shamiana Hamilton. They both agreed that Mr Singh would leave Shamiana Nelson to take over Shamiana Hamilton.

40     Burrows, above n 37, at 759.

41     At 759.

42     McKee v McMorran (1992) 5 TCLR 221 at 237.

[181]  The evidence is sufficient to support a finding that the two New Plymouth licence agreements were discharged by mutual agreement. In those circumstances, it would not have been open to the Court to imply a reasonable notice period.

[182]  There is a separate question as to the date by which the bonds needed to be repaid which I will consider in the context of the claim by the appellants for interest on the judgment sum.

Interest

[183]The Judge’s decision in the District Court on interest is as follows:

[150] The plaintiffs are entitled to interest under the Money Claims Act from the date of the second amended statement of claim, 13 September 2017, until the date of judgment. In making this decision I have taken into account the fact that the bonds from the New Plymouth shops have been outstanding since early 2015. The Hamilton shop claim was not quantified until early 2018. I also take into account that through no fault of any party this case had to be reheard. This was a second hearing. The first hearing took place in January 2020 but unfortunately the Judge died before he was able to publish his decision.

[184]  The appellants did not file any written submissions on this appeal ground but say that interest should run from 28 February 2015 for the bonds for the two New Plymouth restaurants, and from 31 January 2018 for the bond for Shamiana Hamilton (deducting the admitted arrears owed by Surkanda).

[185]  Mr Meys submits that even if no reasonable notice period was required, it cannot be reasonable to imply a term that the bond monies were expected to be refunded instantly. He submits that at least three months would be commercially reasonable for the return of bond money after what he refers to as a “unilateral termination”.

[186]  The Interest on Money Claims Act relates to claims commenced after 1 January 2018.43 The initial statement of claim by Mr Singh was filed on 6 March 2017. The Interest on Money Claims Act does not apply to the interest claim here. Clause 1 of

43     Judicature Act 1908, s 2.

Schedule 1 of the Interest on Money Claims Act provides the previous regime under s 87 of the Judicature Act 1908 applies.

[187]  As the Judge reached her decision under the wrong statute, this Court will need to undertake the exercise afresh.

[188]  Under s 87(1) of the Judicature Act, a Court has a discretion to order interest. The discretion is to be exercised as the justice of the case requires.44 The basic approach is that a defendant, which has had the use of money which should have been available to the plaintiff, should compensate the plaintiff.45

[189]  If the Court makes an interest order, it cannot exceed the prescribed rate.46 At all relevant times in this proceeding, the prescribed rate was five per cent per annum.47

[190]  Section 87(2) provides the period during which interest is calculated is from “the period between the date as from which the interest became payable and the date of the judgment”. However, there is no fixed rule for the commencement date for interest.48 Generally justice may require interest to run from the date the cause of action arose down to judgment.49

[191]  I accept Mr Meys’ submission that in the absence of agreement as to the date on which the bonds should be returned, it would not be commercially reasonable to imply a term that the bond monies were to be repaid immediately. I accept that a period of three months would be commercially reasonable. The appellants should have had the use of the bond money after a period of three months.

[192]  For Shamiana NP and Chilando, the date for the commencement of the payment of interest is 1 June 2015 (being three months from 28 February 2015). For

44 Grace v Orion New Zealand Limited [2021] NZHC 705 at [414].

45    Worldwide NZ LLC v NZ Venue and Event Management Ltd [2014] NZSC 108, [2015] 1 NZLR 1 at [23] citing Day v Mead [1987] 2 NZLR 443 (CA) at [452] to [453] and per Somers J at [463] to [464].

46     Section 87(3).

47     The Judicature (Prescribed Rate of Interest) Order 2011.

48     Wilson & Horton Ltd v Attorney-General [1997] 2 NZLR 513 (CA) at [530].

49     Day v Mead, above n 45, at [463].

Shamiana Hamilton, the date for the commencement of interest is 1 May 2018 (being three months from 31 January 2018).

[193]  In each case the interest is to be calculated up to the date of judgment, but for each there is to be a deduction of a period of seven months to take account of the fact that there was an initial hearing in January 2020. Because of the death of the Judge before a judgment issued, a further hearing, which took place from 23–26 August 2020, was required.

[194]  Interest is to be calculated on the basis of simple interest.50 Having regard to external interest rates over the period I set the rate at 3 per cent per annum.

Result

[195]  The 2303 appeal is allowed in limited part as set out in the judgment. In summary the Judge erred: in awarding general damages to the second and third respondents; in her approach to the award of interest; in joining Amigo Brothers as a party; and in giving leave to the respondents to file a second amended statement of defence. However there is no practical consequence as regards the two latter points. The appeal is otherwise dismissed.

[196]  I quash the Judge’s orders awarding general damages to the second and third respondents and her order awarding interest to the second appellant.

[197]The practical consequence of my decision is that:

(a)The second and third respondents are ordered to pay the second appellant:

(i)For Shamiana NP, $84,874.24 (being the bond of $80,000 plus

$4,874.24 for stock and overpayment to Shamiana); and

50 Judicature Act 1908, s 87(1). This follows my approach in Reid v Castleton-Reid [2020] NZHC 2313 at [217]. See also General Communications v Development Finance Corporation of New Zealand Ltd [1990] 3 NZLR 406 (CA) at 436 and Rama v Millar [1996] 1 NZLR 257 (PC) at 262.

(ii)For Shamiana Hamilton, $101,433.39 (being the bond of

$200,000 less $28,066.61 for agreed rent arrears, and $70,500 for underpaid licence fees).

[198]  I award interest on the above sums to be calculated as set out in [192] to [194] above.

[199]  The 2304 appeal is allowed to the extent that Judge was wrong to determine there was accord and satisfaction in relation to the two New Plymouth restaurants and the Judge was wrong to join Amigo Brothers as a party. However, neither finding affects the ultimate outcome. The application for leave to appeal the Judge’s decision regarding transcripts is refused.

Costs

[200]  Costs are reserved. If the parties can agree on costs, I direct a joint memorandum be filed within 20 days of this judgment.

[201]  If costs cannot be agreed, the appellants are to file and serve their costs memorandum within five working days of the date for the joint memorandum. The respondents are to file and serve their costs memorandum within five working days of the date of service of the appellants’ costs memorandum. Memoranda should not exceed five pages (excluding attachments). I will determine costs on the papers.

Gordon J