Tempest Litigation Funders Ltd v Yin
[2021] NZHC 614
•25 March 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-1376
[2021] NZHC 614
BETWEEN TEMPEST LITIGATION FUNDERS LIMITED
PlaintiffAND
WEN FEN ZHANG
First Defendant
TENG MA
Second DefendantTIAN TIAN
Third DefendantXIANG ZOU
Fourth Defendant…/cont
Hearing: 24 March 2021 Appearances:
W van Roosmalen for the Plaintiff
No appearance by or on behalf of the Fifth Defendant
Judgment:
25 March 2021
JUDGMENT OF GORDON J
This judgment was delivered by me
on 25 March 2021 at 10.30 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Adam Stevenson Botterill, Auckland Counsel: W van Roosmalen, Auckland
TEMPEST LITIGATION FUNDERS LTD v YIN [2021] NZHC 614 [25 March 2021]
KELLY YIN
Fifth Defendant
SHUANG QIN
Sixth Defendant
DANIEL OVERTON GOULDING LAWYERS
Seventh Defendant
Introduction
[1] The plaintiff, Tempest Litigation Funders Ltd (Tempest) seeks judgment on a formal proof basis against the fifth defendant, Kelly Yin, for sums said to be owing pursuant to a lease of a commercial property at 4 Clemow Drive, Mt Wellington (the premises).
[2] Ms Yin was served with the notice of proceeding, statement of claim, list of documents and initial disclosure on 2 November 2020. Ms Yin has not filed or served a statement of defence. Hence, the formal proof hearing.
Background
[3] Paul and Shirley Coleman (landlords) were the owners of the premises at all relevant times. On or around 18 September 2012, the landlords entered into a Deed of Lease (lease) with Raister Ltd (Raister). The lease is a standard Law Society Fifth Edition 2008 lease. The first defendant, Wen Fen Zhang,1 is recorded on the lease as guarantor.
[4] On or around 30 September 2014, Raister assigned the lease to MTZJ Ltd (MTZJ) pursuant to a Deed of Assignment of Lease dated 30 September 2014. The second defendant, Teng Ma, is recorded on the Deed of Assignment of Lease as the guarantor of the assignee, MTZJ.
[5] On 1 August 2016, MTZJ assigned the lease to Shineton Trading Ltd (now in liquidation) (Shineton) pursuant to a Deed of Assignment of Lease which is dated simply July 2016. The third defendant, Tian Tian, and the fourth defendant, Xiang Zou, are recorded on the Deed of Assignment of Lease as the guarantors of the assignee.
[6] It is alleged that on 5 December 2017 the landlords provided instructions to the seventh defendant, the law firm Daniel Overton Goulding Lawyers (Daniel Overton), that the new tenants, under the July/August 2016 assignment would be required to
1 The name on the lease is Wen Feng Zhang (a different spelling from the name recorded in the proceeding).
provide personal guarantees in respect of the lease. It is also alleged that on 6 December 2017, Daniel Overton wrote to Wong & Bong, Lawyers, whom it is alleged were the solicitors for Ms Yin and the sixth defendant, Shuang Qin, requiring that they provide personal guarantees on the lease.
[7] On 22 December 2017, the shareholdings and directorships of Shineton were amended on the Company Register. Tian Tian was removed as a shareholder and the new shareholders were Ms Yin and Shuang Qin. The Company Register also records that Ms Yin was appointed a director of Shineton on 22 December 2017. The other director is recorded as Xiang Zou (the fourth defendant) with the date of appointment as 18 July 2016.
[8] Tempest says this transfer of shareholdings (and change of directorship to Ms Yin) was a deemed assignment of the lease to Ms Yin and Shuang Qin by the operation of cl 34.3 of the lease. That clause appears under the heading “Assignment or Subletting” and reads as follows:
34.3 Where any Tenant is a company which is not listed on the main board of a public stock exchange then any change in the legal or beneficial ownership of its shares or issue of new capital whereby in either case there is a change in the effective management or control of the company is deemed to be an assignment of this lease.
[9] Tempest says that on or about April 2018, Shineton defaulted on and breached the lease by non-payment of rent, rates, and by failing to maintain the premises.
[10] On 11 June 2019, the landlord assigned to Tempest all rights, title, and interest in the amount said to be owing (the debt) under the lease pursuant to a Deed of Assignment dated 11 June 2019.
[11] On 27 September 2019, Shineton was placed into liquidation by order of the High Court at Auckland. Digby Noyce of Auckland was appointed liquidator.
[12] Tempest says that as at 31 December 2019, the total amount owing to the landlords as a result of the alleged default on and breaches of the lease, is at least
$133,227.49 (the debt). Tempest says this is made up of the following:
(a)Non payment of rent in the sum of $106,140.12; and
(b)Other costs and losses incurred by the landlords due to damage and the tenants’ failure to maintain the premises in the sum of $27,087.37.
Previous Applications
[13] On 15 December 2019, Tempest filed a memorandum of counsel in support of an application for default judgment against Ms Yin seeking to recover the sum of
$333,227.49 from Ms Yin. That amount was said to be made up of $133,227.49 for breach of the lease and $200,000 for the loss on the eventual sale of the premises. Counsel submitted that Tempest’s claim against Ms Yin was for a liquidated demand. The application for entry of judgment as a liquidated demand was declined by Venning J for the following reason:
[7] The pleading that $200,000 is due to the premises being sold vacant is contrary to counsel’s memorandum which suggests that the amount relates to non-payment of rent, rates, body corporate fees and water rates, non-repair of damage and failure to maintain the premises. The claim for $200,000 in the statement of claim is a claim for loss of good will. It is an unquantified claim and does not satisfy the requirements of r 15.7 for the entry of judgment by default.
[14] Tempest applied again by way of a memorandum of counsel dated 15 January 2021, this time limiting the claim to $133,277.49 for breach of the lease. The new application was refused by Edwards J who said:
[4] There is no breakdown of the sum sought, nor how it has been calculated. On the information before me, I am not satisfied that all of the sums claimed are in fact liquidated sums. It also appears that demands made on the first to sixth defendants for the outstanding sums ranged between
$88,338.19 and $133,227.49 (see para 3.3 of the statement of claim). That suggests that some or all of the total claimed may not be liquidated sums.
[15] Edwards J noted that Tempest might apply for the matter to be set down for a formal proof where it would be necessary to file affidavit evidence establishing the claim and the quantification of the sums sought.
[16] For completeness, I note that in the applications determined by Venning J and Edwards J, Tempest advanced its case on the basis that Ms Yin was a guarantor. It does not proceed on that basis in this formal proof hearing.
Summary of amounts claimed
[17] Tempest has now filed an affidavit from Damien Grant, the sole director of Tempest, sworn 18 March 2021, which annexes copies of receipts, quotes for damage to the premises, rates notices, body corporate levy and rubbish collection and cleaning. Relying on the receipts and quotes and a schedule summarising the additional non- payment of rent, the total claimed loss of $146,826.41 (which excludes interest) is claimed under the following categories:
Item
Sum
Rental arrears (8/18-4/19)
$106,140.55
Security grille repair
$20,650.55
Council Rates (up to 28/5/19)
$1,512.39
Body Corporate levies (1/9/19)
$11,829.67
Water levies (1/10/19)
$680.46
Auto door repair (21/5/19)
$508.60
Rubbish collection (29/5/19)
$205.00
Labour for repair to property
$5,299.20
Total
$146,826.41
Discussion
[18] I accept that the assignment to MTZJ and then the assignment from MTZJ to Shineton operated to assign the lease. In other words, the terms of the lease continued to apply.
[19] I also accept that cl 34.3 of the lease operated to assign the lease to Ms Yin. First, it is not suggested that Shineton was listed on the Stock Exchange. Second, on 22 December 2017, Tian Tian was removed as a shareholder having held 100 shares. The new shareholders were Ms Yin and Shuang Qin, each being allocated 50 shares. On the same day, Ms Yin was appointed a director. The other director at that time was Xiang Zou, who had been appointed on 18 July 2016. Those two changes, namely the
change of shareholders and the director appointment resulted in a “change in the legal or beneficial ownership of its shares … whereby in either case there is a change in the effective management or control of the company …”. The lease was therefore assigned to Ms Yin by operation of cl 34.3 of the lease.
[20]Ms Yin as an assignee is therefore liable under the terms of the lease.
[21]The next issue is whether the individual sums can be claimed under the lease.
[22] I first note that the various items set out in the table above, being alleged defaults or expenses, all arose after 22 December 2017. I refer to each in turn:
(a)Rental arrears: cl 29.1 of the lease has the heading “Essentiality of Payments”. The clause then states:
Failure to pay rent or other monies payable hereunder on the due date shall be a breach going to the essence of the Tenant’s obligations under the lease. The Tenant shall compensate the landlord and the landlord shall be entitled to recover damages from the Tenant for such breach.
Mr Grant gives evidence of the amounts owing at various dates under the lease. I accept the amount of $106,140.55 for rental arrears is properly claimed;
(b)Security grille repair: cl 45.4 of the lease provides:
The Tenant shall in entering into the lease also take responsibility for the maintenance and repair of the electric security doors and shutters
…
There is a quote from All Steel Security Ltd, dated 10 December 2018, to replace a damaged intercept roller shutter on the security grille at the main entrance ($6,519.00) and for the replacement of a damaged intercept roller shutter on security grilles on the windows ($11,438.00). The total, including GST, is $20,650.55. The difficulty with this claim is that there is no evidence that the quote was accepted and the work was undertaken. At the hearing Mr van Roosmalen, for Tempest,
advised the Court that the work was not in fact undertaken. He therefore withdrew the claim for this item;
(c)Council rates ($1.512.39); Body Corporate levies ($11,829.67); water levies ($680.46) and rubbish collection ($205.00).
I will deal with the claim for these four items together as the same issue arises. Clause 3.1 of the lease provides that:
The Tenant shall pay the outgoings properly and reasonably incurred in respect of the property which is specified in the first schedule.
The first schedule records, by reference to cl 3.1, that the proportion of outgoings is 100 per cent. However, there is no definition of outgoings. At the hearing Mr van Roosmalen was not able to point to any basis in the documentation for these claims and he withdrew them;
(d)Auto door repair ($508.60): There is an invoice on the letterhead of Autodor dated 21 May 2019 addressed to Mr Coleman with the work described as:
Service call to main entry. Repair auto door mode pad to allow pad to work. Replaced keypad unit, showed owners how to use – all okay.
Clause 45.4 of the lease provides that:
The Tenant shall in entering into the lease also take responsibility for the maintenance and repair of the electric security doors and shutters
…
There is a lack of sufficient detail to enable the Court to understand whether the repair to the auto door mode to “main entry” falls within tenant’s responsibility for the maintenance and repair of the electric security doors and shutters. There is no evidence as to the layout of the site and whether the “main entry” services a number of premises or just the premises under consideration. For the above reasons Mr van Roosmalen also withdrew this claim;
(e)Labour for repair to property ($5,299.20): There is an itemised invoice which records the work as – plastering damaged walls and ceiling, painting of damaged walls and ceilings, cleaning and unblocking of toilets, replacement of flooring in kitchen, cleaning and clearing of gardens, full cleaning of all floors and clearing out of loft area and removal of junk ready to dump.
Clause 8.1 of the lease requires the tenant to maintain the premises. Additionally, cl 45.4 places an obligation on the tenants to keep the garden areas in a proper and good condition. I am satisfied that the labour for repairs falls within cl 8.1 and additionally, for the garden, under cl 45.4.
[23] In summary then, Tempest has established a claim in the sum of $111,439.75. This is made up of $106,140.55 for rental arrears and $5,299.20 for labour for repair to the premises.
Result
[24] I give judgment in favour of Tempest against the fifth defendant, Kelly Yin, in the sum of $111,439.75.
[25] I award interest on the judgment sum as prescribed by the Interest on Money Claims Act 2016 from the date of judgment until the judgment sum is paid.
Costs
[26] Mr van Roosmalen also seeks costs. He has not, however, filed any submissions or a schedule of costs sought. I will reserve costs and consider them separately. Tempest is to file a memorandum setting out costs sought. The memorandum should be no more than three pages. I will consider costs on the papers.
Gordon J
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