WERESZCZYNSKI v JUNXING ZHANG [2016] NZHC 1397

WERESZCZYNSKI v JUNXING ZHANG [2016] NZHC 1397 [24 June 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2015-404-3039[2016] NZHC 1397BETWEEN ANDREW ZGYMUNTWERESZCZYNSKI AND CHRISTINEANNE WERESZCZYNSKIPlaintiffsAND JUNXING ZHANGDefendantHearing: 25 May 2016Appearances: Mr L Herzog for PlaintiffsMr E J Werry for DefendantJudgment: 24 June 2016JUDGMENT OF ASSOCIATE JUDGE J P DOOGUEThis judgment was delivered by me on24.06.16 at 4 pm, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate[1] The plaintiffs, Mr and Mrs Wereszczynski, have filed an application for summary judgment. The substantive proceedings allege that the defendant, Mr Zhang, is the guarantor of certain lease payments that were required from acompany, General Sports Ltd ("the company"), of which the defendant was adirector and shareholder. The company entered into a deed of lease on 22 June 2011 which leased to it a cafe and driving range facility in west Auckland for a period of five years commencing on 1 June 2011. The business did not prosper. Apparently, the cafe had already been out of operation for some time before the company took over the facility.[2] In order to assist the company to establish itself, the plaintiffs agreed to accept a reduced rent for the initial period of the lease. Specifically, special condition 57 of the deed of lease provided:57. The parties specifically record that the previous Tenant Shine Golf Limited had an arrangement with the Landlord for a reduced rental for the Cafe and Driving Range, due to the premises not being in operation forseveral months prior to them taking over the Lease. Accordingly, theLandlord and Tenant have agreed a rental reduction from commencement of the lease for June, July, August, September and October, 22 weeks lessone day to $830 plus GST per week, to help establish the cafe and undertake refurbishment and redecoration of the premises.[3] The standard rate, from which the above represented a deduction, was to be $5330 per month plus GST or $1230 plus GST per week.[4] It is accepted that the defendant did not bring the rent payments back up to the standard rate after the period of reduced rental came to an end on 1 November 2011.[5] The matters which are in dispute in the summary judgment application have been refined and reduced in scope as a result of a conference which Toogood J conducted on 28 April 2016. Later that day, the Judge issued a minute in which he noted that the defendant claimed he was entitled to continue paying rent at the lower figure because, he said, the plaintiffs had agreed that the reduced rental shouldcontinue to apply "until the business got better".[6] Mr Werry appeared for the defendant and sensibly agreed that, subject to disputes about liability, the total unpaid rental under the deed of lease came to $95,657.14 together with GST of $14,348.57 and interest totalling $37,997.10 for a grand total of $148,002.81 inclusive of GST.[7] The plaintiffs also claim that amounts are owing in regard to chattels, repair costs and outgoings. The claim in regard to chattels arises from cl 63 of the deed oflease. That clause authorised the company to use the plaintiffs' chattels as part of itsbusiness, on terms that the company would return them at the expiry of the lease in the same condition in which they were received and with all wear and tear rectified or, if unable to be rectified, that substituted chattels would be provided to the plaintiffs. This claim totals $44,000 from which there is to be deducted a bond, but with the addition back of GST the claim comes to $27,600. The defendant disputes this claim in its entirety.[8] In reply, the defendant says that a golf simulator kiosk which was part of the driving range business and which the company was entitled to use during the course of the lease was not in proper working order. The defendant says that this also givesrise to defences in respect of the plaintiffs' claims.Summary judgment principles and authorities[9] The relevant principles to be applied in a summary judgment application were summarised in the following terms in Krukziener v Hanover Finance Limited:1[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 1at 3. 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 331at 341. In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162.approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).The dispute concerning rent[10] The lease agreement contained a provision, special condition 57, which agreed that the company would pay a reduced rent for the months of June – October 2011. The new amount would be $830 plus GST per week.[11] The defendant says that an agreement was reached which actually extended the period for which reduced rent would be payable. He says that around August or September 2012: we agreed to keep the rent that reduced rate of $830 per week plus GSTuntil the business got better[.][12] The principal arguments which the plaintiffs advance to the contrary are that the supposed agreement is not particularised. It is not corroborated by any supporting evidence such as contemporary documentation. Further, it is contrary to a statement of rental arrears which the plaintiffs sent to the defendant on 28 March 2012 and which showed that the plaintiffs were calculating rent at the full rate payable under the lease. The plaintiffs apparently invite the inference to be drawn that any alleged agreement is inconsistent with their actions at the time, namely the decision to charge rent at the standard rate.[13] The defendant's position is that he never received the email which theplaintiffs say they sent to him containing the statement of arrears. He notes that theemail was sent to the email address "mike@topgolf.co.nz" and says that theplaintiffs own the domain of that email address. He further says that he had his ownemail address, "mike@shinegolf.co.nz", and he rarely used the former email address.[14] The question of whose evidence is correct concerning the email addresses assumed some importance in this case and I will consider that issue next.The dispute about email addresses[15] The plaintiffs sought to rebut the defendant's evidence by showing that onother occasions, emails which they sent to the disputed email address were apparently received by the defendant. Mr Wereszczynski for example points to an exchange of emails which occurred on 4 April 2012 concerning a matter unrelated to the rent, namely some invoices incurred in relation to the liquor licensing status of the cafe which was part of the leasehold premises. At 10:12 am Mr Wereszczynski sent an email to mike@topgolf.co.nz asking when the defendant would be able to make payment of the invoice. He also asked whether the defendant had organised the monthly alarm tests that were required to be carried out. At 11:16 am, the defendant sent from the email address mike@topgolf.co.nz his reply:Hi AndrewI can pay at any time that I need to make sure your opinions. If everything clear I will take over General Sports then I will pay Liquor Licence and $5000 bond.I never heard about monthly Alarm test. I will ask Brian about the check.[16] Mr Wereszczynski also gave more general evidence about the question of theemail addresses. He said he didn't even know about the personal email addresswhich the defendant deposes that he generally used, mike@shinegolf.co.nz. He says his records show that the defendant himself activated the email address mike@topgolf.co.nz and that he received some 60-70 email exchanges frommike@topgolf.co.nz. Mr Wereszczynski's affidavit includes an email frommike@topgolf.co.nz dated 28 March 2012 in which the defendant made a statement informing Mr Wereszczynski about the correct email address to use for the co- director of the company.[17] There was another exchange about work email addresses of other persons which was conducted between Mr Wereszczynski and the defendant on 18 April 2012 in the course of which Mr Wereszczynski sent an email to the disputed email address and received a response. There are a number of emails of a similar kind which do not need to be recited in detail and which the defendant does not deny were actually sent and received using the disputed email address. The plaintiffs emphasisenot just the fact that the disputed email address was used for communications between Mr Wereszczynski and the defendant, but also say that it is of significance that successful email communication was being conducted through that address at around about the time when the plaintiffs sent the statement of arrears which the defendant says he never received.[18] The affirmation in reply which the defendant has filed repeats his earlier evidence that the main email address for the business was info@top.golf.co.nz. He says:I do not accept after December 2012 all emails between Mr W and me were via the mike@topgolf.co.nz address. I accept they may have been some, butnot all. I believe there were a number of emails using the "info" addressrather than the "mike" address, but for the reasons below I have not beenable to verify it.[19] In relation to the emails that Mr Wereszczynski annexed concerning the liquor licensing invoices, the defendant says that:It was not about his claim for rent arrears. I knew from the work Mr W had been doing for the business that he was owed money in respect of the liquor licence work. I had not seen any invoice from them, that is best as I can remember he sent me a text message to my cell phone telling me the amount to pay.[20] The defendant says as well:Mr Wereszczynski has exhibited a few emails between us where I have been using the [disputed] email address. I do not deny I used that email address some of the time, but it was not as often as the [info] address. I repeat I did not receive or open the email dated 28th of March 2012 or the email 2 April2012 and note the 2 April 2012 email Has no transmission details.[21] The rest of his affidavit is taken up with reciting how he has sought to obtain consent to have an IT person check the domain address @topgolf.co.nz and to carry out other enquiries on his behalf.Conclusions on question about email addresses[22] In discussing the principles which are applicable to resolving summary judgment applications, I noted the principle that disputed questions of fact are not generally suitable for resolution at the summary judgment stage. That said, wherethere is reason to believe that the statements are inconsistent with the surrounding circumstances and contemporary documents, the position may be clear enough for the court to make a choice between two conflicting accounts given in evidence.[23] I notice that in this particular case, there has been a substantial shift on thepart of the defendant from asserting that he only "rarely used" the disputed emailaddress to a position where he does not expressly refute that he participated in some 60-70 email exchanges with Mr Wereszczynski using the address mike@topgolf.co.nz.[24] He does not deny that the emails that Mr Wereszczynski has produced were actually sent to the disputed address, limiting himself to the new point that the 2 April 2012 email had no transmission details. The position there would seem to be that:(a) he expresses scepticism that the email was ever sent (refer the remark about the lack of transmission details being endorsed on the exhibited copy); and(b) in any case he did not see the email - presumably because he did not use the disputed email address.[25] It is clear that the defendant has put forward evidence which is not correct concerning the emails generally, and about the email of 28 March 2012 in particular. I will refer to this issue further below.[26] The problem with the evidence is that the defendant was too ambitious in his denials in the first place in stating that he rarely used the disputed email address. On the evidence before the court, which is no longer disputed, the conclusion must be that that claim can no longer be viewed as supported by the evidence. The position which the defendant must take is either that Mr Wereszczynski actually drafted the email but did not send it; that the plaintiffs actually sent the email but it did not get through; or that the defendant did not happen to notice that he had received the email of 28 March 2012 which set out the rental arrears.Did the defendant receive the statement of arrears by email?[27] The period during which the company, as lessee, was permitted by the lease to make reduced rental payments ended on 1 November 2011. From that point, absent some other arrangement being entered into, the obligation of the lessee was to pay full rent. Approximately four months later the lessors wrote to the defendant drawing to his attention that arrears of unpaid rent were increasing.[28] During this time, the company was actually paying the rent at the reduced level. There would have been no arrears if the company was in fact entitled to pay rent to that level rather than the full rental figure stated in the lease. The statement that arrears were arising was therefore quite inconsistent with the plaintiffs accepting that the company was entitled to pay the lower level of rent even after 1 November 2011.[29] The case for the defendant is that approximately nine months after 1 November 2011 the plaintiffs said that the reduced rent arrangement would continue to have effect - presumably retrospectively back to 1 November 2011.[30] In these circumstances the question is whether the court ought to believe the plaintiffs or whether it should accept that there is doubt about the question of whether the company actually received the email.[31] The plaintiffs have given the usual affidavit in this case asserting that there is no defence. Mr Wereszczynski has also given evidence negativing the suggested defence which the defendant puts forward. The first question is whether the court can, exceptionally, in the circumstances of the summary judgment application, attempt to resolve the disputed question of fact about whether the email containing the statement of arrears was actually sent to the defendant in his capacity as director of the company.[32] It is implicit in the evidence which the plaintiffs have given that Mr Wereszczynski actually sent the email. It is further implicit in his evidence thatthe email was never returned or "bounced". Copies of the relevant documents indicate that the correct email address was used. An incorrect email address couldhave been one of the reasons why an email which the plaintiffs intended to send and attempted to send was not received by the defendant.[33] Mr Werry referred me to the fact that the defendant attempted to obtain access for an IT specialist to look at the site from which the emails emanated to find out if there had been a fault. Given that the evidence of the plaintiffs excludes the possibility of there having been a missed delivery from any cause, and given that there is no evidence available to suggest that an enquiry was justified to see if the email system actually malfunctioned in the case of the arrears statement, I do not consider that the complaints of the defendant have a proper foundation. If through expert or other evidence it could have been established that a fault of this kind could not be ruled out in this case and called for further investigation, then I would accept that it would be unfair and wrong for the court to proceed on the summary judgment application and that instead the proceeding ought to be tried in the usual way and an opportunity given to the defendant by way of enlisting the assistance of an IT expert to establish that a fault in the system had resulted in the email not reaching him. However, the court also needs to take a realistic and robust view of the evidence. There is no evidence that other emails failed to get through. The only supposition the court can come to is that the 60 or 70 emails that the plaintiffs sent actually got through to the defendant. There is no explanation available as to why this particular email, which represents a real stumbling block to the defendant in making out an arguable defence, did not actually reach him.[34] I conclude that in the circumstances of this case there is no reasonably arguable defence which can be put forward which involves the proposition that the defendant did not receive the email in question.Significance of receipt of 28 March 2012 email[35] The email which the plaintiffs sent on 28 March 2012 ("the arrears email")predated by some five or six months the alleged arrangement which the defendant claims the parties entered into and which resulted in the company being permitted to pay rent at reduced rates. There is of course an inconsistency between the terms of the arrears email which assumed that full rent would be paid and the allegedarrangement entered into in August or September 2012 allowing for a reduced rate to be paid.[36] The arrears email is not in its terms necessarily inconsistent with the parties coming to a reduced rate agreement some months after the email was sent. The plaintiffs may have changed their minds, for example.[37] There can be little doubt that at least up until August or September 2012, when the defendant said the amended arrangement was entered into, rent was properly payable at the full lease rate. As I have noted, it is possible that the plaintiffs, of course, later reversed their position and agreed to revert to the reduced rental rate arrangement. It would be expected that some evidence giving reasons for that change of circumstances could be put forward.Is it reasonably arguable that the parties came to a reduced rent agreement of the kind that the defendant alleges?[38] The arrangement which the defendant says the parties entered into in August or September 2012 is entirely unconfirmed by any contemporaneous document. It is also vague and unparticularised. It would seem to involve the plaintiff forgiving the difference between the lower rate and higher rate rental charges that had accrued since November 2011. It also apparently contemplated, according to the defendant, that the lower rate would operate from August or September 2012 onward. The defendant does not however address the question of the distinction between any accrued rental to the date of the agreement and the future arrangement from August or September 2012 onward.[39] Because of the lack of particulars that are offered and an entire absence of any explanation as to why the plaintiffs may have reversed their position, I consider that the supposed arrangement is one of those which falls within the well-known category of Eng Mee Yong v Letchumanan:2Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further2 Eng Mee Yong v Letchumanan [1980] AC 331 (PC).investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.[40] I do not consider therefore that the defendant has laid a sufficient evidential foundation for the amended rental arrangement which he puts forward by way of defence. The lack of precision about the alleged agreement would mean that there would not be present the required degree of certainty for a contractual arrangement to come into being.[41] There are also other difficulties with the arrangements. If it is alleged that the parties entered into an agreement varying the contract, then the variation itself would have to be supported by consideration.3 It could be argued that there is no consideration for the accrued arrears being forgone. As to the future performance of the agreement, it could be said that because the lessor would receive less under the lease than they had in the past, the arrangement would not be supported by consideration.[42] On the other hand, there is some support for the view that as long as a practical benefit has been secured by the party to whom consideration must be passed and which consideration results from the variation to the contract reflecting the practical situation which the parties find themselves in, then that may suffice.4[43] Mr Werry for the defendant put forward just such an argument. However, there is no evidence to support the existence of such a practical benefit. It would seem that the company was unable to make a success of the driving range/café business. That does not necessarily mean that the plaintiffs were stuck with the defendant because no one else would be able to derive a viable business from the site. I agree that there are some indications that the plaintiffs themselves, who had apparently previously operated the business, had not been able to make a complete success of it because the cafe element of the operation had been inactive for some3 NZ Needle Manufacturers Limited v Taylor [1975] 2 NZLR 33 (SC). See also the discussion in Burrows, Finn and Todd Law of Contract in New Zealand (5th ed, LexisNexis, Wellington, 2016) at 126 and the reference to Her Majesty's Attorney General for England and Wales v R[2002] 2 NZLR 91 (CA) at 109.4 Teat v Willcocks [2013] NZCA 162, [2014] 3 NZLR 129.time before the company acquired the lease. There is no evidence that such considerations were raised in discussions as a factor contributing to the reduction of the rent. It should not be overlooked either that the plaintiffs had the comfort of guarantees from the defendant and possibly from Mr Zheng, the former director who departed the business in April 2012.[44] However, by a narrow margin, I would accept that it is at least arguable that the plaintiffs might have been prepared to accept such an arrangement on the basis that it was better for them to have a tenant in place even if an unsatisfactory one, rather than take the chance that if they insisted on the rent being paid at leasehold levels, they would end up in a position where they would need to terminate the lease and look for an alternative lessee.[45] A further matter that it is necessary to briefly address arose in the submissions that Mr Werry made concerning the level of the rentals that were actually paid. He pointed out that around about the time that the defendant says the arrangement was entered into for reduced rental, August or September 2012, the company initiated a small increase in the amount paid by adding $20 to what was in effect the reduced rental level previously paid. Mr Werry saw significance in this. He said the coincidence of timing between the increase in the rental by $20 and the alleged discussions to accept a reduced rental until business conditions improved lent corroboration to the argument which the defendant puts forward. I do not agree. It is a neutral factor. The arrangement that the defendant alleges was entered into did not say anything about increasing the amount of rental actually being paid. The arrangement struck was, purportedly, that the reduced rental levels would continue.[46] The conclusions that I have come to concerning the lack of particularisation are fatal at an evidential level. Such a vague arrangement is inherently unbelievable. The lack of precision though also affects the question of whether the court can reasonably conclude that the defendant has an arguable defence that the plaintiffs agreed to a contractual variation. That is because the law requires that a party propounding the contract must be able to demonstrate certainty of the terms of the asserted agreement and that is not possible in the circumstances of this case. The lack of certainty affects not just the issue of arrears but also future rent levels. It isimpossible to attribute any certainty to the supposed contractual variation thatreduced rent would be accepted until "the business got better".[47] The main problem with any analysis of the arrangements as amounting to a variation of the contract is the inherent uncertainty in what the defendant says was agreed to. To agree to a reduced rental until the business improves is inherently uncertain and would not be contractually enforceable, in my judgment.Waiver?[48] The alternative analysis that requires to be considered is whether there was in fact an effective waiver in this case with the lessors waiving the right to the full rental charges and accepting in their place the rent at the level fixed by special condition 57, referred to earlier in this judgment.[49] The first requirement for an effective waiver is that the waiver must have arisen from a clear unequivocal representation that the contractual entitlements of the lessors would not be fully enforced and a lower rental would be accepted. There must be an unambiguous representation.5[50] The extent of a waiver of contractual rights in this case, if it exists, is reasonably clear because purportedly the lessors agreed that rent would revert to the special introductory rent fixed by special condition 57 of the deed of lease. How long the forbearance would continue is another matter that would need to be the subject of a clear representation. Unless that element were present, it would be impossible to say whether the waiver period had expired at any given point so that lessee was now required to pay full contractual rental. It would seem to be inconsistent with that principle to measure the duration of the waiver by having regard to some formula fixing the term, for example, as being until the parties further agreed to resume the original rental level. That would amount to something different from the unilateral process of a waiver.5 Halsbury's Laws of England (5th ed, 2012) vol 22 Contract at [590].[51] The authors of The Law of Contract in New Zealand note that:6First, as in promissory estoppel, a waiver requires a clear, unequivocal, representation. This may be by conduct as well as words.[52] In Watson v Healy Lands Limited Woodhouse J reviewed the authorities.7 He noted that waiver is to be found not in what the waiving party may have thought or intended but the impression created upon the mind of the other party by their statements. The Judge recorded his conclusion that there must be an unambiguous representation arising as the result of a positive and intentional act done by the representor with the knowledge of all the material circumstances and secondly the other party must show that relying upon that representation he/she has carried out the new arrangement.8 Woodhouse J went on to say:9Both these elements are implicit in the classic statement of Bowen LJ inBirmingham and District Land Co Limited v London and Northern Railway Co (1888) 40 CHD 268. He said "If persons who have contractual rightsagainst others induced by their conduct those against whom they have such rights to believe that such rights will either not be enforced or will kept in suspense or abeyance for some particular time, those persons will not be allowed by a Court of Equity to enforce the rights until such time has elapsed, without at all events placing the parties in the same position as theywere before".[53] The judgment went on to note that the last part of that quote (about the parties resuming their position) was a statement of the High Trees case principle.10 Butwhat is clear from the judgment is that the Judge viewed the "classic statement" ofBowen LJ as establishing the key elements of a waiver as well. In other words, the judgment in Watson v Healy Land Limited adopts the dictim of Bowen LJ as being expressive of the requirements of waiver and also covering the additional element required for promissory estoppel.[54] The representation in this case is not unambiguous. The lack of clarity about the supposed waiver means that it would never be clear at any particular time whether the circumstances that had to be in existence to justify the continuance of the waiver were in fact in existence. The parties themselves would not know what6 Burrows, Finn and Todd, above n 3, at [14.3.2].7 Watson v Healy Lands Limited [1965] NZLR 511 (SC).8 At 514.9 At 514.10 Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130.their rights were. Worse, a court called upon to rule on the question of whether the waiver took effect and if so, for how long, would be faced with the challenge of giving effect to what the purported waiver actually meant. What was to be the extent of improvement of the business that the plaintiffs would need to demonstrate in order to show that the period of the waiver had come to an end, for example? For those reasons, the defence of waiver fails.Conclusion on rental payments[55] The result is that the company, of which the defendant was a director, has no defence in the form of an entitlement to pay a lesser rental than that which was fixed by the lease and the first schedule. Nor would the company have any entitlement to contest payment of the outgoings or interest. The result is that there is no arguable defence with regard to those matters and therefore the plaintiffs are entitled to judgment in regard to those two items of claim.[56] Apart from establishing liability, though, it is necessary for the plaintiffs to demonstrate the quantum for which judgment should be entered under those headings. That issue will be considered later in this judgment.Claim in regard to chattels[57] The other elements of the plaintiffs' claim include, as I have mentioned, theclaim for reinstatement or replacement of the chattels.[58] The claim comprises a series of rounded figures. For example, the list of chattels includes the following items:Skope Fridge Freezer $2000Skope Fridge Freezer $2000Dishwasher $1000[59] The lease did not contain any pre-estimate of loss which the plaintiffs would be entitled to claim once the lease had come to an end. The plaintiffs would have to prove in each of the cases of chattels in respect of which a claim was made that the chattel was of nil or reduced value, or was no longer retained in the business, andthen produce evidence showing what it would cost to repair, or if that was not applicable, replace the item in question. There has been no attempt to do this. As a result, the plaintiffs have failed to establish that the defendant has breached the contract requiring him to leave in place chattels of essentially the same standard as those that were in place at the commencement of the lease. I accept that it is quite likely that some of the chattels would be correctly identified as not satisfying the standard required by the contract, given that the lease was entered into in June 2011. Naturally, chattels such as refrigerators and dishwashers have a finite service life. That consideration does not, though, excuse the plaintiffs from establishing that the company owes unsatisfied obligations to them which give rise to liability under the contract. As well, the plaintiffs have failed to demonstrate what losses that they have suffered as a result of any breach of the contractual term. The plaintiffs have not, therefore, established any right to summary judgment under this head of claim.Cross-claim[60] The defendant claims that the plaintiffs as lessors were in breach of the lease by failing to supply or maintain an electronic golf simulator in working condition.[61] While the issue is not expressed in such terms, I understand that the defendant claims that the company has an equitable set-off available to it arising from the failure of the lessors to provide a properly functioning golf simulator.[62] The obligations of the parties in regard to the chattels which were owned by the lessors are to be found in cl 63. Mention has already been made of this clause inthe context of the plaintiffs' claim in regard to the chattels. The clause provides:The Tenant is using the Landlord's chattels to run the business. Thesechattels will be used on a daily basis and the cost of these chattels are not taken into account in the rental of the premises. Accordingly the Tenant shall be bound to return those chattels to the Landlord in the condition which they are received by the Tenant. All wear and tear must be rectified by the Tenant or if unable to be rectified a substitute chattel of the same type/description and value is to be provided to the Landlord by the Tenant at the expiry of this Lease.[63] There was included in the list of chattels the following:12. Range Golf Simulation Booth:13. Simulation booth14. Canvass screen15. Laser enclosure16. SOYD 15" Touch screen monitor SOYD17. Hitachi ceiling Projector To be replaced and agreed with new tenant18. ATC Computer – DVD – Keyboard19. Golf fairway mat.[64] Clause 63 of the lease not only imposes liability on the tenant to maintain the chattels but also recognises its right to use the chattels. The golf simulator is expressly recorded as being one of those chattels. But there is reference in the contract to the need for that item to be replaced. The obligation to replace is not clear because it does not say who is to replace the item. The inclusion of the itemwithin the definition of landlord's chattels would, in my view, presumptively mean inthe absence of evidence to the contrary that it was the landlord who was to replace what was apparently a defective item. It is common ground that that was never done.[65] The entitlement to an equitable set-off was described in Grant v NZMC Limited where Somers J stated:11Equity would restrain an action or execution of judgment at law or allow a set-off where it would be inequitable or unconscionable to allow the plaintiff to proceed without bringing to account some claim by the defendant which was sufficiently linked to that made by the plaintiff. That equitable right was not limited to liquidated cross-claims but extended to unliquidated claims for damages: Lord Cawdor v Lewis (1835) 1 Y & C Ex 427; Piggott v Williams(1821) 6 Madd 95.The present case is concerned with what is still called the equitable right to set-off. That is because the claims of Mr and Mrs Grant are to set-off an unliquidated claim which was not permitted at law and because the common law right of set-off against rent was limited to money outlaid on repairs which the landlord, in breach of covenant, had failed to carry out or to sums outlaid at the landlord's request: see generally 42 Halsbury's Laws of England (4th ed) paras 417 and 462. In equity set-off against rent was allowed, provided its conditions of set-off were met: see Beasley v Darcy(1800) 2 Sch & Lef 403n; O'Connor v Spaight (1804) 1 Sch & Lef 305;11 Grant v NZMC Limited [1989] 1 NZLR 8 (CA) at 11–12.British Anzani (Felixstowe) Ltd v International Marine Management (UK) Ltd [1980] QB 137.The locus classicus about equitable set-off before the Judicature Acts isRawson v Samuel (1841) Cr & Ph 161 in which Lord Cottenham LC said:"We speak familiarly of equitable set-off, as distinguished from the set-off at law; but it will be found that this equitable set-off exists in cases where the party seeking the benefit of it can shew some equitable ground for being protected against his adversary's demand. . . .Several cases were cited in support of the injunction; but in every one of them, except Williams v Davies, it will be found that the equity of the bill impeached the title to the demand" (ibid, 178- 179).(The exception, Williams v Davies (1829) 2 Sim 461, was a case for which Lord Cottenham could find no ground save the existence of cross demands which was not enough.)When Lord Cottenham referred to the equity of the bill of the defendant impeaching the title to the demand he was explaining his earlier statement that the party seeking to set-off must show "some equitable ground for being protected against his adversary's demand", by pointing to the nature of the equity which had to be shown. A plaintiff pursuing his action at common law would not be restrained from doing so unless there was such a connection between the defendant's cross-claim and the plaintiff's claim that it would be inequitable to allow the plaintiff to have judgment without bringing the cross-claim into account. That inequity would arise where the cross-claim called the plaintiff's own claim into question.[66] The right to set-off extends to unliquidated claims.12[67] Beyond raising the possibility of some type of cross-claim arising out of the non-repair of the electronics simulator, the defendant has done little to mount a case for an equitable set-off.[68] It is necessary in the context of a summary judgment for the defendant to show that there is some basis upon which the court can conclude that the defendant has a reasonably arguable defence to the claim which the plaintiffs bring.[69] In the case of an equitable set-off, the circumstances must be present which justify the court coming to the view that it would be inequitable for the plaintiffs to be able to proceed to judgment without the cross-claim of the defendant being12 At 11.permitted to proceed. It is a requirement of the doctrine that the party putting it forward can demonstrate that the cross-claim impeaches the claim of the plaintiffs. If, for example, the lessors in this case had so grievously breached their obligations, perhaps, for example, by violation of the covenant for quiet enjoyment so that it totally excluded the lessee from the premises resulting in a complete loss of income and therefore the means to pay the rent, it would be likely that the defendant had a defence by way of an equitable set-off to the claim for rent and that the claim and the cross-claim ought to both go to trial.[70] However, there is no evidence of probative value in this case regarding the effect of the loss of the use of the electronic simulator in financial terms. If the device, when in working order, had the potential to derive gross income of, say, $100 a week, then it could hardly be said that the loss of that income disabled the defendant from paying significant amounts of rent which it owed to the plaintiffs –the plaintiffs here asserting that unpaid rent, before the addition of outgoings and interest, totalled approximately $94,000. If the other items are added, the total shortfall covering the period from 11 June 2011 to 31 of December 2015 was approximately $160,000. The loss of income for 3 ½ years from the absence of the golf simulator could hardly be pointed to as the explanation for why the defendant was unable to pay the rent. In that sense, it would seem most unlikely that equity would have recognised that there was an injustice in permitting the plaintiffs to proceed without the defendant similarly being able to advance his claim. The facts upon which the defendant based his claim for equitable set-off would not, in other words, impeach the claim which the plaintiffs bring in its entirety. There would not be present the required injustice referred to in the decision in Grant v NZMC. The plaintiffs would at least be entitled to judgment for liability in regard to the rent even though there may have been a requirement for issues of quantum to be deferred for additional evidence to be adduced. In circumstances where there might only be a minor cross-claim against a substantial claim, it is hardly likely that equity (the source of the doctrine of equitable set-off) would have recognised that an injunction ought to be issued to restrain the plaintiffs from proceeding with their claim at common law in its entirety.[71] The conclusion I come to is that it is not enough for the defendant to demonstrate that he might have a claim of indeterminate value, but likely to be for small amounts only, and putting that forward as a basis for an equitable set-off which would require the court to recognise a reasonable basis for an arguable defence. While the defendant has not taken steps to particularise his claim or show what the quantum might reasonably be considered to be, I am satisfied that the claim is not asubstantial one which must halt the plaintiffs' claim on the basis that there would bea substantial risk of injustice to the defendant.Quantum[72] Following the hearing of this matter, counsel have sensibly conferred on the question of quantum. They have agreed (in the case of Mr Werry without prejudice to whether his client is liable or not) that if judgment is to be entered for rental arrears and default interest together with GST the amount of judgment is to be $148,002.81.[73] Because I have determined that the defendant does not have a reasonably arguable defence, the plaintiffs are entitled to judgment and judgment will be entered for the amount stated in the previous paragraph.Costs[1] Applying the principle in r 14.2(a) of the High Court Rules, which essentially states that costs are to follow the event, the plaintiffs in this case having succeeded on their summary judgment application are entitled to costs. There is no dispute that the lease agreement contains a cost-charging provision which entitles the plaintiffs to their actual solicitor and client costs and disbursements relating to steps which they have taken to enforce their claim for rental.[2] I would suggest that counsel confer on this issue as well. If agreement cannot be reached concerning costs, it will be necessary for the proceeding to be listed in a Chambers list for there to be a discussion as to how this matter is to progress. I understand that at this point, no evidence has been filed on behalf of the plaintiffs verifying the amount of costs which the plaintiffs seek in the proceeding. It will benecessary to hear from counsel about how that aspect of the matter is to be progressed. I reserve leave to either party to seek directions including a direction that the proceeding is to be called in a Chambers list._____________J.P. DoogueAssociate Judge