Top International Limited v Liew t/a Liew & Associates

[2012] NZHC 1295

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2011-404-004737 [2012] NZHC 1295

BETWEEN  TOP INTERNATIONAL LIMITED Plaintiff

ANDWILLIAM SIN VUI LIEW TRADING AS LIEW & ASSOCIATES

Defendant

Hearing:         9 December 2011

Counsel:         P J McPherson/G J Luen for plaintiff

R B Hucker/D L Lang Siu for defendant

Judgment:      11 June 2012

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 11 June 2012 at 2.30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

Hesketh Henry, Private Bag 92093, Auckland 1142

Hucker & Associates, P O Box 3843, Shortland Street, Auckland 1140

TOP INTERNATIONAL LIMITED V WILLIAM SIN VUI LIEW TRADING AS LIEW & ASSOCIATES HC AK CIV 2011-404-004737 [11 June 2012]

[1]      The plaintiff, Top  International  Limited, was the owner of a commercial building at 48 Greys Avenue between October 2003 and May 2007.

[2]      The defendant is the principal of an accounting practice.   The defendant signed a lease of the sixth floor of the building and seven car parks, and occupied part of those premises between August 2005 and May 2007 (when the plaintiff sold the building).

[3]      The plaintiff seeks summary judgment for the rent which it alleges is due by

the underlying lease, for the whole of the period of the defendant’s occupancy.

[4]      The plaintiff explains that the claim is only being made now because there has been a dispute over the ownership of its shares between its former managing director,  Paul  Chen,  and  its  present  shareholder (Limin Yang) and  sole director (Jasmine Liu) (the shareholding dispute). Documents regarding the building (including this lease) have only recently become available, following judgment in Limin  Yang’s  favour  in  respect  of  the  shareholding  dispute  (Ms  Liu  having

transferred her shareholding to Mrs Yang in 2004).[1]

[1] Yang v Chen [2011] NZCCLR 13.

[5]      The  defendant  contends  that  he  moved  his  accounting  practice  into  the building in August 2005 under an agreement with the plaintiff’s managing director at that time (Paul Chen) that he did not have to pay rent, and he signed the deed of lease relying on a representation that it would not alter the arrangement.  In addition to this primary contention, the defendant contends that he has various other defences by way of set-off or counterclaim.

Background circumstances

[6]      This   dispute   has   its   genesis   in   extensive   and   complicated   business arrangements between two families of Chinese descent: one comprising Mr Guiting Liu, his wife Mrs Limin Yang, and their daughter Ms Jasmine Liu; and the other comprising  Mr  Paul  Chen  and  his  wife  Mrs  Amanda  Chen.    The  following

background  is  mostly taken  from  the  judgment  of  this  Court  in  respect  of  the shareholding dispute.

[7]      The families became acquainted in 2003.  Mr and Mrs Chen had resided in New Zealand for some years, but Ms Yang and Ms Liu had only recently taken up residence here (Mr Liu came to New Zealand from time to time but was principally resident in China).  The Yang/Liu family was looking for investment and business opportunities  in  New  Zealand.     The  Chen   family  had  substantial   property investments here, and the Yang/Liu family asked Mr Chen to take a role in the management of their investments.

[8]      The plaintiff, Top International Limited (Top), was incorporated in 2003 with Mrs Yang as majority shareholder and Ms Liu as minority shareholder.   Top proceeded to acquire properties owned by Chen family interests, and in late 2003 acquired the Greys Avenue property.  Top acquired further properties in 2004, and in

2005 the two families’ interests became involved in yet further commercial transactions  supported  in  part  by security over Top’s  assets.    By 2006  the two families’ interests were significantly intertwined.

[9]      In 2006 Mr Liu ran into problems with Chinese authorities and was arrested. He was later convicted and imprisoned.  This caused Mrs Yang considerable distress. She decided that she needed a break from management of her investments. She arranged to transfer the shares in Top to Mr Chen, leaving the day-to-day running of Top and other companies, and her investments, in his hands.   The terms of this transfer became the subject of dispute, ultimately leading to litigation in this Court

and the judgment that the shares in Top were beneficially owned by Mrs Yang.[2]

[2] Ibid.

[10]     Mr Chen managed Top’s affairs on a day-to-day basis from at least late 2004, and had effective control of the company from 2006.

[11]     The defendant, Mr Liew, is Mrs Chen’s brother (and Mrs Chen worked in his accounting firm).  Mr Liew was a shareholder, with Mr and Mrs Chen, in LACA Ltd, which owned one of the properties transferred to Top in 2003.

Circumstances surrounding occupancy of Greys Avenue

[12]     Mr Liew’s accounting firm occupied some 275m2  of level 6 of the Greys Avenue building,  and  had  the use of  at  least  six  carparks in  the basement.   A valuation report prepared in December 2004 refers to Mr Liew’s firm occupying the premises from October 2003, but the present claim is only in respect of the period from 14 August 2005 onwards.  The report refers to the balance of that floor (some

225m2) being leased by a company in which Mr Chen had an interest, Heard Park

Ltd.  The evidence is that Mr Chen also had an office on this level, and ran Top’s

business from it.

[13]     Mr Liew says that he had an agreement with Mr Chen that he could occupy the premises rent-free, and that Mr Chen told him that the lease was wanted for other purposes, assuring him that he would not be required to pay rent notwithstanding execution of the lease.  He claims that there were several benefits for Top from the rent-free arrangement.   First, Top and Heard Park Ltd had the use of some of the floor.  Secondly, in addition to making it easier for his firm to carry out accounting work for Top (and other entities used in the families’ joint enterprises), the presence of his firm gave Top prestige within the Chinese community in which Top conducted business.  Thirdly, the arrangement also recognised the fact that he had provided Top with rent-free accommodation in other premises.

[14]     It is common ground that Mr Liew executed a deed of lease in respect of the premises his firm occupied (although it is dated 14 August 2005, Mr Liew contends that  it  was  executed  in  2006).    The  schedule  to  the  lease  describes  the  leased premises as “level 6” and “7 carparks”, states the term as 3 years and the commencement date as 14 August 2005, and stipulates that the annual rent payable is

$75,000 per annum.  Notwithstanding the description of the leased premises as level

6, it is clear from the evidence that the stipulated annual rent was market rent only for the 275m2 area that the firm occupied rather than for the whole floor:

(a)      Valuation reports in 2004 and 2006 identified the total area of the floor as 500m2, and market rent as $215 per m2  (per annum), and market rent for carparks as $50 per week.

(b)On that basis, market rent for the space occupied by Mr Liew’s firm was  $74,725  ($59,125  for  the  floor  space  and  $15,600  for  six carparks).

[15]     It is also clear from Top’s evidence, and not contested by Mr Liew, that Mr Liew did not pay any rent for the premises for the whole of the period from the commencement of the lease (14 August 2005) until vacating the premises on 28 May

2007.

The opposing contentions and issue for determination

[16]     Top relies on the deed of lease dated 14 August 2005, and the accepted fact that Mr Liew did not make any payment in respect of the rent payable under that lease.  It contends that this constitutes a prima facie case, and that Mr Liew has not put forward a sufficient evidential basis for any of the matters that he claims give him an arguable defence to its claim for rent payable under the lease.

[17]     Mr Liew claims that it was never the intention of the parties that he would be required to pay rent.  His primary contention is that Mr Chen represented to him that that would remain the arrangement notwithstanding his signature of the deed of lease, and Top is estopped from resiling from that and requiring him to pay rent. However, in the alternative he advances various matters which he claims offset any liability to pay the rent.

[18]     The fundamental question in this case is whether Mr Liew has provided a sufficient evidential basis for the defences he raises.  Mr Liew acknowledges that he signed the deed of lease (although, as stated at paragraph [14] above, he contends that this was in 2006 rather than the date of the document, 14 August 2005).   He advanced the following defences in his notice of opposition (as modified in his counsel’s written argument):

(a)      The intention of the parties (arising out of an agreement with Top’s managing director, Mr Chen, before, and confirmed over, the period of occupancy) was that Mr Liew’s firm could occupy the premises

rent-free, and the deed of lease ought to be rectified to reflect that agreement.

(b)Top, through Mr Chen,  had  assured  Mr Liew that his firm could occupy the premises rent-free notwithstanding entry into the lease, and Top was estopped from claiming rent in terms of the lease as Mr Liew had acted on that assurance to his detriment.

(c)      Top, again through Mr Chen, had agreed for valuable consideration to forbear from claiming rent.

(d)In the alternative, if Mr Liew is liable for rent under the lease, he is also entitled to rent from Top or to damages (for interference with his right to exclusive possession) or to a restitutionary payment for that part of level 6 that Top occupied, and to a set-off in respect of such amount.

(e)      As a further alternative, Top has failed to pay him $200,000 for his interest in the property at 73 Khyber Pass Road that was transferred to Top in late 2003 (which interest arose out of his minority shareholding in the property owner, LACA Ltd), and Mr Liew was entitled to set that sum off against any rent payable.

[19]     In his submissions (both written and oral) counsel for Mr Liew did not pursue rectification of the deed of lease (no doubt taking into account the difficulty Mr Liew faces in law in seeking to contradict the later written agreement).  Instead, counsel focussed Mr Liew’s case on Mr Chen’s alleged representation that Top would refrain or forbear from claiming rent under the lease.

[20]     In addition, counsel for Mr Liew advanced two further grounds that had not been expressly raised in the notice of opposition.   The first was that Top had not given evidence as to what happened to the deed of lease when Top sold the building on 29 May 2007.  Counsel argued that Top had failed to show that it retained any entitlement  to  rent,  and  that  discovery  of  the  terms  on  which  the  lease  was

surrendered was potentially relevant to the terms of Mr Liew’s occupancy.   The second  matter  concerned  the  quantum  of  the  claim,  in  particular  the  claim  for interest.  Counsel argued that Top had not made demand for penalty interest ahead of issue of this proceeding, and could not therefore claim penalty interest at least up to that point, under the terms of the lease.

[21]     Counsel for Top argued that none of these matters gave Mr Liew arguable grounds for defence.  He submitted that Mr Liew had not put forward a sufficient evidential basis either for any agreement that he could occupy the premises rent-free, or to establish the legal requirements for an estoppel.  He also submitted that there was no evidentiary basis for the various matters put forward by way of set-off but argued that, in any event, they were excluded by a clause in the lease.  He argued that there was no need to deny summary judgment on the added ground that the terms of surrender or termination of the lease had to be investigated – Mr Liew would have knowledge of those terms and could have given evidence of them if they were relevant.   Lastly, he relied on the terms of the lease for Top’s entitlement to penalty interest and to an award of solicitor/client costs.

[22]     In summary, the issue for determination on this application is whether Mr

Liew has provided a sufficient evidential basis for his contentions that:

(a)      There  was  an  agreement  between  him  and  Top  that  no  rent  was payable, that Mr Chen represented that the execution of the deed of lease would not alter that arrangement, and that Top cannot resile from that representation; and

(b)Top owes him money which he is able to set-off against any money he may owe to Top.

Principles for summary judgment

[23]     There is no dispute between counsel as to the principles that the Court applies when  determining  whether  to  grant  summary  judgment.     The  principles  are

succinctly summarised in the following passage from the decision of the Court of

Appeal in Krukziener v  Hanover Finance Ltd:[3]

[3] Krukziener v Hanover Finance Ltd [2010] NZCA 307, (2008) 19 PRNZ 162 at [26].

The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR

1; (1986) 1 PRNZ 183 (CA), at p 3; p 185. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its

evidence is sufficient to show there is no defence, the defendant will have to

respond if the application is to be defeated: MacLean v Stewart (1997) 11

PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [1979] 3 WLR 373 (PC), at p

341; p 381. In the end the Court’s assessment of the evidence is a matter of

judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[24]     Although the plaintiff carries the overall onus of showing there is no defence, if the plaintiff provides clear proof of its entitlement – for example, by producing a contract which entitles it to the relief being claimed – the defendant must establish a satisfactory factual basis for any defence that it advances:[4]

[4] Auckett v Falvey HC Wellington CP296/86, 20 August 1986; see also McLean v Stewart (1997) 11 PRNZ 66 at 69.

On a summary judgment application, the onus is on the plaintiff to show that there is no defence.  On the present facts, the plaintiffs are able to pass an evidential onus to the defendants by exhibiting the contract which, on its face, entitles them to the remedy they now seek.  The defendants are then in the position of having to demonstrate a tenable  defence.   However,  the overall position concerning onus on the application is that at the end of the day the question is whether the plaintiffs have satisfied the Court as to the absence of a defence.

Preliminary issue

[25]     As already mentioned, this proceeding follows litigation as to the entitlement to the shares in Top.  Mr Liew seeks leave to rely on a record of the evidence given by Mrs Yang in that earlier proceeding that Top “permitted Liew & Associates to

move their accounting practice into the building on a rent-free basis”.[5]   Counsel for

[5] Yang v Chen at [45].

Mr Liew submitted that the Judge’s record of the evidence of Mrs Yang should be

taken into account in this application as:

(a)      it is consistent with Mr Liew’s evidence of the arrangements between him and Top (his contention that Mrs Yang and Mr Chen were in agreement that he was not to be charged rent); and

(b)it  is  inconsistent  with  Mrs  Yang’s  evidence  in  this  proceeding (although he noted that her evidence has been translated, and there is no evidence as to the accuracy of the translation).

[26]     Counsel  for  Top  submitted  that  Mr  Liew  could  not  rely  on  it  in  this application.   He argued that it was clear from the judgment that the passage was merely part of the Judge’s summary of Mrs Yang’s evidence, and is neither a record of a concession by Mrs Yang nor a finding of fact.  He argued that it could not help on the present application – Mr Liew was not a party to the other proceeding, and the basis on which Mr Liew’s firm occupied Greys Avenue was not an issue for the Court in that proceeding.  He argued that, even if it had been a finding of fact in the

earlier  case,  it  is  not  admissible  in  this  proceeding.[6]    He  also  addressed  the

[6] Relying on s 50(1) of the Evidence Act 2006, and the view of that provision in APN New Zealand

Ltd v Simunovich Fisheries Ltd [2009] NZSC 93, [2010] 1 NZLR 315 at [33].

possibility that Mr Liew might wish to introduce the evidence given by Mrs Yang (as distinct from simply relying on the reference in the judgment), and submitted that it was not relevant as it was addressed to entirely different matters (that is, who was the rightful owner of the shares in Top; the arrangements with respect to the occupancy of 48 Greys Avenue were not in issue in that case).

[27]     I accept that the terms on which Mr Liew’s firm occupied Greys Avenue was not a fact in issue in the earlier proceeding, and that the passage in the judgment relied upon by Mr Liew was not a finding of fact in any event.  I am not persuaded that, in determining this application, I should treat the Judge’s record either as a concession by Mrs Yang in corroboration of Mr Liew’s evidence in this proceeding as to the occupancy arrangement, or as an inconsistent statement.  Mrs Yang was not

a party to the arrangements (Mr Liew’s dealings were all with Mr Chen).  No words

are specifically attributed to her, and the reference to Liew & Associates being “permitted to move in” on a rent-free basis is equivocal as to what happened later. These may be matters to address at trial, if the evidence is put before the Court.

Is promissory estoppel arguable?

[28]     The  elements  of  promissory  estoppel  were  summarised  by  the  Court  of

Appeal in Krukziener v Hanover Finance Ltd:[7]

[7] At [37]-[38].

Promissory estoppel was traditionally concerned with promises to refrain from exercising pre-existing contractual rights: Ajayi, (T/A Colony Carrier Co) v R T Briscoe (Nigeria) Ltd [1964] 3 All ER 556; [1964] 1 WLR 1326 (PC). The promise had to be clear and unequivocal: Woodhouse AC Israel Cocoa SA v Nigerian Produce Marketing Co Ltd [1972] AC 741; [1972] 2

All ER 271 (HL), at p 768; p 291. The legal rights were suspended, and might be resumed on giving notice, so long as the promisee could resume its

former position: Motor Oil Hellas (Corinth) Refineries SA v Shipping Corp

of India (The “Kanchenjunga”) [1990] 1 Lloyd’s Rep 391 (HL), at p 399.

Following the decisions of the High Court of Australia in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; (1988) 76 ALR 513 (HCA) and Commonwealth of Australia v Verwayen (1990) 170 CLR 394; (1990)

95 ALR 321 (HCA), promissory estoppel is no longer confined to promises affecting pre-existing rights. However, the departure from a voluntary

promise is not unconscionable in itself, even if detriment results. Rather,

equity responds to the defendant creating or encouraging an assumption in the plaintiff, and its knowledge that the plaintiff will rely on the assumption to its detriment. The plaintiff must have been led to believe that the promise would affect or result in legal relations; thus a promise made in negotiations that are subject to contract will not lead to an estoppel: Waltons Stores at p

406; p 525 and p 422; p 537. Lastly, equity does not intervene to satisfy the promise, but to avoid the detriment. These requirements in the current authorities, as the High Court recognised, are seen as necessary to preserve the law of contract as the principal mechanism for the enforcement of promises.

[29]     To succeed with this defence, therefore, Mr Liew needs to show an evidential basis for:

(a)       A promise by Top that led Mr Liew to believe that Top would not seek payment of the rent stated in the deed of lease; and

(b)Reliance  by  Mr  Liew  on  that  representation  or  promise,  to  his detriment.

[30]     The Court must also be satisfied that it would be unconscionable to allow Top to resile from the promise or representation in the circumstances of the case.

i.        The promise or representation

[31]     It has to be said at the outset that the evidence put forward by Mr Liew as to the promise or representation by Top is far from compelling.   In his affidavit in opposition, after claiming that both Mrs Yang and Mr Chen were in agreement (according to the judgment in the dispute over shareholding) that Liew & Associates was not to be charged rent for the space it occupied, Mr Liew states:

7.        I had several discussions with Paul Chen both prior to and over the time the premises were occupied as to the premises from which Top International  Limited  and/or  Heard  Park  Limited  would  operate.    Paul always reiterated to me that no rental would be payable in respect of the premises at 48 Greys Ave by Liew & Associates....

8.        ....Top International Limited never provided exclusive possession of the floor to the accounting practice.  It was only on the basis that I was not incurring any obligation to make payment of the rent that I was agreeable to the suggestion by Paul  on  behalf of Top  International  Limited that Top International Limited operated from the same floor as Liew & Associates in the Top International building....

13.      It was always made to clear to me as outlined above by the director, at the time (Paul Chen), of Top International Limited that the company agreed that no rental was payable notwithstanding the entry into the formal Deed of Lease....

[32]     Counsel for Top took issue with this evidence.  He argued that it was neither clear nor unambiguous, and was blatantly insufficient in the face of a signed deed of lease.  There is merit to that submission.  The promise is vague both as to its timing and its terms.  If that was the totality of the evidence at trial, Mr Liew’s case would be likely to fail on this point.  Counsel for Top argued that Mr Liew was unlikely to do any better at trial: Mr Chen is living in China and cannot be compelled to give evidence, and has been unwilling to provide Mr Liew with an affidavit (notwithstanding that he is Mr Liew’s brother-in-law).  That may well be so, but in that event the case will turn on the credibility of Mr Liew (and his evidence will

need to be considered in context) as the only other person capable of giving direct evidence on the point.  It is also possible that evidence that Mrs Yang gave in the shareholding dispute could be introduced at trial, although there remain a number of technical issues in that respect.

[33]     Mr  Liew’s  somewhat  “thin”  evidence  may  be  more  persuasive  if  the contextual evidence supports his contentions that this was part of relatively informal inter-family dealings, including Liew & Associates having provided Top with rent- free accommodation in other premises, and that there was a benefit to Top in having the accountancy firm adjoining its premises.   Conversely, it may be discredited if there is evidence in discovery that some rental for level 6 was accrued in Top’s accounts (an unattributed document was prepared about the time of Top’s early 2004 first accounts which suggests someone anticipated Liew & Associates paying an amount of $39,000 pa for rent from May 2004).

[34]     The various explanations given by Mr Liew for signing the lease also require exploration in trial.  On their face they appear to be contradictory or implausible:

(a)      Mr Liew’s statement that the lease was put in place for Mrs Yang’s benefit (as guarantor of Top’s bank borrowing) suggests that the lease was intended to have binding effect, at least in the circumstances of a call on the guarantee.

(b)A further  statement  that  it  was  put  in  place  to  help  produce  an increased valuation (based on discounted cash flow) raises the spectre of an improper commercial practice (if rent was not being claimed), although Mr Liew’s evidence does not go so far as to say whether such a valuation was obtained or the purpose for it.

(c)      The last explanation given by Mr Liew was that the lease was put into place around the time that Top started marketing the building for sale, and that the lease was signed to bring the building’s leasing level over

50% so that any sale that eventuated could be zero rated for GST

purposes.    Again, there may be a question as to whether this is a legitimate practice, but that is not an issue for the present application.

[35]     However, the point for now is that the purpose of the lease needs further investigation.  The same goes for the unanswered questions as to the fate of the lease at the time of sale.  Mr Liew’s willingness to vacate the premises is consistent with his  contention  that  this  was  an  inter-family  arrangement  (quite  apart  from  the separate point as to whether Top retained the right to sue under the lease following the apparent surrender).

[36]     Ultimately the question will be whether the Court accepts that Top, through Mr Chen, promised that it would not seek payment of rent notwithstanding signature of the deed of lease.  Context will be important, discovery may assist, and there will need to be findings on Mr Liew’s contentions as to the purpose or purposes for entering into the lease.  Although the evidence is thin, I am not persuaded that it is appropriate to dismiss it for the purposes of this summary judgment application.

[37]     Counsel  for  Top  argued  that  there  was  an  inconsistency  in  Mr  Liew’s evidence as to the nature of the underlying agreement (whether the premises were to be provided rent-free, or whether they were to be provided rent-free as long as some part of them was offered back to Top).   I accept that the terms of the underlying agreement have not been clearly spelt out in the evidence, but this does not alter my overall view that this is a point for trial.

ii.       Conduct and reliance

[38]     In his evidence, Mr Liew advanced two matters by way of reliance on the representation and detriment flowing from that.  First, he says that he would have vacated the premises “had it ever been suggested that rental was to be paid”. Secondly, he contends that he allowed Top and Mr Chen’s company, Heard Park Limited, to occupy part of the floor, also on a rent-free basis.

[39]     In his submissions, counsel for Mr Liew took that evidence a step further, and argued  that  as  Mr  Liew  had  not  paid  rent  (in  reliance  on  the  promise  or

representation), he had suffered a significant detriment in that he was vulnerable to a substantial claim which he would be unable to meet.

[40]     In response, counsel for Top submitted that Mr Liew had failed to show both reliance  and  that  any  reliance  was  reasonable.     He  argued  that  even  if  a representation was made, it was not reasonable to rely on such an informal communication to override clear contractual rights.[8]

[8] Relying on Travel Agents Association of NZ Inc v NCR (NZ) Ltd (1991) ANZ ConvR 553 (HC);

Sterns Trading Pty Ltd v Shteinman [1988] NSW ConvR 55-414 (NSWSC) at 57,797.

[41]     He further argued that Mr Liew had failed to give evidence of any matters which met the requirements for detriment (time, effort or money spent in reliance on the expectation which would not have been spent if it had not been made, or opportunities forgone which might have provided a benefit or avoided a detriment).[9]

[9] Smyth v Wadland (2007) 26 FRNZ 255 (HC) at [134].

He referred principally to Mr Liew’s evidence that he would have vacated the premises if it had been suggested that rent was to be paid, and argued that there could be no detriment unless Mr Liew had forgone an opportunity to take other premises without payment of rent.   Secondly, counsel argued that there was no detriment if all that eventuated was that the underlying contractual position applied.

[42]     I accept the submission of counsel for Top that reliance must be assessed objectively having  regard  to  the belief or  expectation  raised  by the  promise or representation and the circumstances of the case.[10]   I also accept that in commercial transactions it would be difficult for a party to show reasonable reliance on the basis of an informal and equivocal communication.   However, in the present case, Mr Liew says that Mr Chen made statements which led him to the belief that Top would

[10] Commonwealth of Australia v Verwayen (1990) 170 CLR 394 (HCA).

not call on him to pay rent, even though he had signed the deed of lease.  I would regard that as an implausible proposition in an arm’s length transaction, but I cannot dismiss  the possibility completely in  the circumstances  of this  case,  and  in  the context of a summary judgment application.  If Mr Liew can persuade the Court at trial  that  Mr  Chen  made  the  promise  or  representation  for  Top,  I  accept  the

possibility that it could have been reasonable for Mr Liew to rely on it.

[43]     Similarly, in terms of a summary judgment application, I can accept that if Mr Liew relied on the promise or representation, he has done so to his detriment.  He could have declined to sign the deed of lease and found alternative premises that were more convenient or on better terms.   More significantly, however, he would have known to make provision for rent on a regular basis, rather than be met (as he is now) with a substantial claim which he will have difficulty meeting.

iii. Unconscionablility

[44]     Counsel for Top submitted that there was nothing unconscionable in requiring a commercial accounting firm to pay rental for property of which it had the use, and in  respect  of  which  if  signed  a  deed  of  lease  for  rental  at  market  rate.    The submission is a fair one in normal circumstances.  However, I am not prepared to rule, for the purposes of a summary application, that it could not be unconscionable in the circumstances of this case.   The matter needs to be decided in relation to findings of fact in the case.

Forbearance

[45]     I will deal briefly with the question of forbearance.  I am uncertain whether counsel for Mr Liew was maintaining this as a separate ground for defence but, if so, I understood that it was on the basis of an agreement to forbear from claiming the rent.  Again, as I understand it, this was on the basis that Mr Liew agreed to Top having the use of premises on level 6 as consideration.

[46]     I consider it highly unlikely that the evidence will support any consideration for such an agreement.  The evidence available from the valuation report indicates that the rent under the deed of lease was market rental for the part of level 6 that Mr Liew’s firm occupied.   It is a matter of interpretation to be decided in context, whether the reference in the lease to level 6 was intended to represent the whole floor, or simply the part of level 6 that the firm occupied.  In circumstances where the firm was already in occupation, it is difficult to see that the parties intended that the lease would apply to the whole floor, but it is not a matter that I can determine on this application.   However, if the lease does not extend to the whole floor, there

cannot be any consideration for an agreement to forbear.   As the owner of the building, Top is entitled to use any part that has not been let.

The claims to set-off

i.        Availability generally

[47]     Mr Liew contends that, in the event that he is found to have a liability for rent, he is entitled to various set-offs against Top’s entitlement to rent.

[48]     Top disputes the various claims, but says that in any event Mr Liew cannot raise set-offs against its entitlement to rent because clause 1.1 of the lease prohibits any set-off against rent.

[49]     Clause 1.1 reads:

THE Tenant shall pay the annual rent by equal monthly payments in advance (or as varied pursuant to any rent review) on the rent payment dates.  The first monthly payment (together with rent calculated on a daily basis for any period from the commencement date of the term to the first rent payment date) shall be payable on the first rent payment date.  All rent shall be paid without any deductions or set-off by direct payment to the Landlord or as the Landlord may direct.

[50]     In Grant v NZMC Ltd the Court of Appeal found that the words “free and clear of exchange or any deduction whatsoever” (in without express reference to sett- off)  did  not  preclude  the  right  to  equitable  set-off  in  the  summary  judgment context.[11]   In Browns Real Estate Ltd v Grand Lakes Properties Ltd, the Court of Appeal had to consider the same point in the context of a clause which required a lessee to pay “free of any deduction, withholding, set-off or reduction on any account”, and found that that clause precluded set-off.[12]     Counsel for  Mr Liew argued that the decision in Browns Real Estate Ltd could be distinguished on the grounds that the clause in this case did not include the phrase “on any account”.  I do

[11] Grant v NZMC Ltd (1989) 1 NZLR 8 (CA) at 13.

[12] Browns Real Estate Ltd v Grand Lakes Properties Ltd [2010] NZCA 425, (2010) 20 PRNZ 141 at [5] and [14].

not accept that submission. The critical factor is the reference to set-off. The present

clause states explicitly “without any deductions or set-off”.  If Top is not estopped,

Mr Liew must pursue any claims independently.  He cannot claim the set-off.

ii.       Set-offs in respect of use of part of level 6

[51]     In view of the finding on clause 1.1, there is no need for me to address Mr Liew’s claims arising out of the shared use of level 6 of the building.  However, I note that the claims can only be advanced if Mr Liew succeeded in his contention that the lease was in respect of the whole of level 6.  I have already stated that that is a matter of interpretation of the lease.

iii.      Set-off in respect of interest in 73 Khyber Pass Road

[52]     Even if this claim is not precluded by clause 1.1, I will not accept that Mr Liew has an arguable claim for set-off in respect of the $200,000 he contends is due to him for his interest in 73 Khyber Pass Road, on the evidence before the Court. The property was owned by LACA Ltd.  In my view he would need to prove that there was an agreement between all parties, as part of the transfer to Top, that he was to be paid the money direct rather than receive it by way of distribution from LACA Ltd.  He has not even asserted such an agreement.  Furthermore, I do not consider that such a claim would meet the test laid down in Grant v NZMC Ltd that to qualify for an equitable set-off the claims must be closely connected and interdependent.

The claim to penalty interest

[53]     I do not accept Mr Liew’s contention that there is an arguable dispute as to whether Top is entitled to the penalty interest it claims.   Whilst I accept that the interest does not become due until demand is made, once demand is made the amount payable is calculated by reference to the terms of the lease.  Top’s claim is clearly pleaded in terms of the lease.  This point will of course only become relevant if Mr Liew does not succeed on his estoppel arguments.

Decision

[54]     As I have already stated, the essential issue in this case is whether Mr Liew has established a sufficient evidentiary basis for an arguable defence to Top’s claim for rent under the deed of lease.

[55]     Although there is little direct evidence other than Mr Liew’s assertions, I consider that he has shown a sufficient evidential basis for an arguable defence in promissory estoppel.   Discovery may either support or negate that claim, and Mr Liew may be able to obtain support for it from Top’s former managing director, Mr Chen, if the matter goes to trial.   Failing that, the defence will stand or fall on whether Mr Liew can satisfy the Court, to the requisite level of certainty, that all the elements of promissory estoppel are present.   By a slight margin Mr Liew has satisfied me that this is a proper issue for trial, after the parties have undertaken discovery.

[56]     Top’s application for summary judgment is dismissed.  Mr Liew is to file and serve his statement of defence by 29 June 2012.

[57]     The Registrar is to allocate a case management conference as soon as the statement of defence is filed.  Counsel are to confer as to discovery (in accordance with the recent amendments to the High Court Rules) so as to be in a position to inform  the  Court  on  agreements  as  to  discovery  in  the  memoranda  for  the conference.

[58]     In accordance with the Court’s usual practice, costs on the application are reserved and will be addressed following final determination of the claim.

Associate Judge Abbott