DEPARTMENT OF CHILD, YOUTH & FAMILY SERVICES V HONK LAND LTD HC AK CIV 2005-404-5525

DEPARTMENT OF CHILD, YOUTH & FAMILY SERVICES V HONK LAND LTD HC AK CIV 2005-404- 5525 27 April 2006IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2005-404-5525BETWEEN DEPARTMENT OF CHILD, YOUTH AND FAMILY SERVICES Plaintiff AND HONK LAND LIMITED Defendant Hearing: 21 April 2006 Counsel: R Luxford for plaintiff K McDonald for defendant Judgment: 27 April 2006 at 11:00JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for summary judgment]Solicitors: Kensington Swan, PO Box 10 246, Wellington for plaintiff K McDonald, PO Box 331 065, Takapuna for defendantThe application for summary judgment[1] The plaintiff pleads four causes of action against the defendant. The plaintiff seeks summary judgment in the respect of the first, second or third, which are pleaded in the alternative, and the fourth cause of action. [2] The plaintiff's first cause of action seeks summary judgment for $175,000 plus GST, plus interest and two incidental matters that will be referred to later. The claim is based on clause 9.5 of an agreement to lease which requires the defendant to contribute up to $175,000 plus GST to certain approved works. [3] The plaintiff's second cause of action alleges breach by the defendant of the defendant's warranty contained in clause 10 of an agreement to lease. The plaintiff alleges it incurred certain costs and suffered a three-month delay in commencing full occupation of the premises referred to in the agreement to lease. It seeks a total sum of $91,877 for this cause of action. [4] The plaintiff's third cause of action alleges that the same sum as claimed under the second cause of action is due to it for a breach of the covenant to repair contained in clause 9.3 of the draft lease attached to the agreement to lease. In short, the second and third causes of action are two alternative bases which justify, the plaintiff says, the amount the plaintiff alleges is due to it. [5] The plaintiff's fourth cause of action claims general damages for $20,000 for an alleged breach by the defendant of clause 26 of the draft lease attached to the agreement to lease. Clause 26 is the quiet enjoyment clause.The notice of opposition[6] The defendant opposes summary judgment. It says, in respect of: a) The first cause of action, that it has an equitable set-off or counterclaim which exceeds the plaintiff's claim;b) The second or third cause of action, that it did not give the warranty which is the basis for the plaintiff's claim; c) The fourth cause of action, that it did not breach the covenant on which the plaintiff bases this cause of action. It says quantum is in issue in respect of the second, third and fourth causes of action. [7] The defendant claims it is entitled to recover from the plaintiff: a) $80,159.63 in costs it incurred in upgrading the airconditioning in the premises covered by the agreement to lease; and b) $70,382 being the unpaid balance of costs which the defendant had to pay for damage caused to the subject building by the plaintiff's servants or agents.Background[8] The defendant purchased a large commercial building at 19-21 Como Street, Takapuna, Auckland in 2002. This building also fronts on to Anzac Street in Takapuna. The building was partially tenanted when the defendant purchased it. One of the building's larger tenants was Telecom. Telecom had decided not to renew its lease and progressively moved its staff out of the building. As space became available in the building the defendant sought suitable replacement tenants. The building was constructed in the late 1980s. It has expansive views of North Shore, the City and the Waitemata Harbour. At the time of purchase of the building it had limitations in relation to the airconditioning that was operating. The airconditioning for the ground floor and for levels 1 to 4 only operated to cool air. No facility was provided in the airconditioning for air to be heated in these areas. For other levels in the building the airconditioning system does provide heating. [9] In April 2004, the plaintiff became interested in leasing space in the building. At that time levels 8, 9 and 10 were on the market. Mr Webb, who is employed bythe defendant as a property consultant, put forward the possibility that the plaintiff lease space on the ground floor and on the first and second floors. [10] A meeting was arranged. The real estate agent instructed by the defendant apparently attended as did representatives of the plaintiff. [11] The ground floor of the building is divided approximately in half. One half of the ground floor has access from Como Street. The other half of the ground floor is accessible from Anzac Street. The entire ground floor was not available to lease. Portions of it had been already leased to other tenants. [12] An agreement to lease was executed. It is dated 23 August 2004. It refers to the premises as at 64 Anzac Street and 19/21 Como Street, Takapuna, Auckland. It describes the premises as:Ground floor, 64 Anzac Street and part ground floor 19/21 Como Street, together with levels one and two 19/21 Como Street, Takapuna comprising the following floor areas.For the purposes of this judgment there is no need to go into further detail of the areas leased. [13] A further development occurred. The parties signed a variation agreement dated 22 September 2004. In it the premises are described as:Ground floor [not including café] and levels 1, 2, and 3 Como Street. Building, comprising 1742.7sq m (13,730 sq ft) subject to the final BOMA measurement, together with 25 carparks.The document contains the following:First right of refusal; the landlord agrees to grant to the tenant a first right of refusal to take a new lease of the entire ground floor, Anzac Street building, or any part thereof upon the expiry of the leases to White Cross, in March 2007 or at such earlier time dictated by the termination or surrender of the subleases by White Cross.[14] The variation contract refers to a commencement date of 1 November 2004. The agreement to lease provides for a commencement date of 1 October 2004 or thedate of occupation by the tenant or its contractors for the purposes of fit out, whichever is the later.The lease documents[15] Mr McDonald advised the Court that the defendant now acknowledged that the documents which bind the parties are the following: a) The agreement to lease dated 23 August 2004; b) The document entitled Operating Procedures and Building Regulations;c) The document entitled Public Sector Standard Lease;d) The document entitled Office Accommodation (Energy Using Services Performance Brief) referred to in the papers as the "Energy Brief". I proceed on the basis advised to the Court by Mr McDonald and therefore need not examine those parts of the defendant's affidavit which assert a contrary position in relation to the contract documents.The Courts approach on a summary judgment application by the plaintiff[16] The principles applicable when summary judgment is sought are well- established. Rule 136 of the High Court Rules requires that the plaintiff satisfy the Court that the defendant has no defence. That was explained by the Court of Appeal in Pemberton v Chappell [1987] 1 NZLR 1 at 3 as follows:In this context the words "no defence" have reference to the absence of any real question to be tried. That notion has been expressed in a variety of ways, as for example, no bona fide defence, no reasonable ground of defence, no fairly arguable defence.[17] The Court added at 4:Satisfaction here indicates that the Court is confident, sure, convinced, is persuaded to the point of belief, is left without any real doubt or uncertainty. ...[18] And, further, at 4:Where the only arguable defence is a question of law which is clearcut and does not require findings of disputed facts or the ascertainment of further facts, the Court should normally decide it on the application for summary judgment, just as it will do on an application to strike out a claim or defence before trial on the ground that it raises no cause of action or no defence.[19] The Court also commented on the position where a defence is not evident on a plaintiff's pleading and said at 3:If a defence is not evident on a plaintiff's pleading I am of the opinion that if the defendant wishes to resist summary judgment he must file an affidavit in answer raising an issue of fact or law and give reasonable particulars of the matter which is claimed ought to be in issue. In this way a fair and just balance will be struck between the plaintiff's right to have the case proceed to judgment without tedious delay and the defendant's right to put forward a real defence.[20] That position was further reinforced in AGC (New Zealand) Ltd v McBeth[1992] 3 NZLR 54 at 59 where the Court said:Although the onus is upon the plaintiff there is upon the defendant a need to provide some evidential foundation for the defences which are raised. If not, the plaintiff's verification stands unchallenged and ought to be accepted unless it is patently wrong.In the same case, the Court of Appeal recognised that summary judgment may be given in respect of a particular part of a claim both as to liability and as to quantum. The Court observed that the word "claim" is to be distinguished from the phrase "cause of action". [21] Hypothetical possibilities in vague terms, unsupported by any positive assertion or positive documents advanced by a defendant will not frustrate the obligations on a plaintiff to discharge the onus of proof: SH Lock (NZ) Ltd v Oremland HC AK CP641-86 19 August 1986. [22] A Court is not required to accept uncritically any or every disputed fact: Eng Mee Yong v Letchumanan [1980] AC 331 at 341. However, the Court will not rejecteven dubious affidavit evidence even though there must be suspicion of good faith of the deponent if there is an essential core of complaint that might support a defence. In essence the inquiry is whether or not the assertion made passes the threshold of credibility: Pemberton v Chappell, Orrell v Midas Interior Design Group Ltd (1991) 4 PRNZ 608 at 613 (CA). [23] Rule 136 does create a residual discretion although as expressed by Casey J in Pemberton v Chappell at 5 it is difficult to conceive:Of circumstances where the Court should not give judgment for the plaintiff It can only be a discretion of the most residual kind.[24] The discretion was the subject of comment in Jowada Holdings Ltd v Cullen Investments Ltd CA 248/02 5 June 2003 at [30]. [25] Rule 136 permits the Court to enter judgment for the whole or part of a claim. In Australian Guarantee Corporation New Zealand Ltd v McBeth [1992] 3 NZLR 54 at 61 the Court of Appeal said:We think this is to place too much emphasis on the cause of action and not on the claim or particular part of such claim which are the very words of RR 136 and 137. We see no reason to prevent judgment being given for an amount which is indisputably due and owing but which is only part of the claim and therefore not the whole of the relief sought under the particular cause of action.Part payment by defendant[26] Part way through the hearing of this application, Mr McDonald received instructions from his client that a payment had been made in respect of this claim by the defendant to the plaintiff. No detail was available to Mr McDonald. He requested authority to file a memorandum covering the position. I reserve leave for that to happen but indicated that judgment was likely to be issued by the end of the following week after the hearing. [27] On 26 April 2006 counsel filed a joint memorandum. It advised that $50,000 was paid to the plaintiff by the defendant in cleared funds on 21 April 2006. Bothcounsel confirmed that that payment must be taken into account in respect of any judgment that I find should be entered. I proceed accordingly.The plaintiff's interlocutory application in respect of certain parts of the evidence contained in the affidavit of PM Webb[28] This application was filed out of a concern which counsel for the plaintiff had concerning specifically the following areas in Mr Webb's affidavit: a) Discussions in respect of the airconditioning in the building at 19/21 Como Street, Takapuna which were alleged to have occurred during a building inspection meeting on 6 August; b) Correspondence between Mr Webb and the defendant's real estate agent; and c) Pre-contractual discussions implied by Mr Webb in relation to the functionality of the airconditioning unit. [29] The application was not argued separately because the issues, in fact, can be dealt with in this summary judgment. By and large, the answers to the matters raised by the plaintiff in the interlocutory application, can be given simply by applying the guidance given by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98 at 114-115 and which was adopted by the New Zealand Court of Appeal in Boat Park Ltd v Hutchinson [1999] 2 NZLR 74 at 82 as to the approach that the Court must take in interpreting a contract document in light of the background facts. Accordingly, there is no need to rule on a point-by-point basis on the objection taken. I will simply deal with the issues that are raised under each cause of action and the set-off defence and make appropriate reference to evidence which should not be considered.The plaintiff's first cause of action[30] Clause 9.5 of the agreement to lease provides:The landlord agrees to contribute towards the cost of the approved works, up to a maximum of $175,000 plus GST, to the tenant within three days of the landlord or the landlord's solicitors receiving copies of invoices in relation to the approved works.[31] Mr McDonald acknowledged that the works that were carried out were approved by the defendant. Miss Ward, the defendant's consultant and property manager, acknowledged that in early June 2005 the defendant received a letter from the plaintiff enclosing an invoice for $175,000. Mr Pugh, in his affidavit in support advised that the total costs of the fit out were in excess of $545,000. He said that on 1 June the plaintiff sent an invoice for $175,000 plus GST to the defendant but received no response. He said that the plaintiff's solicitors sent a letter to the defendant's solicitors noting that the invoice had been unpaid. They received a response that the invoice had not been received. The letter was re-sent both apparently by ordinary post and by facsimile on 28 June. Still there remained no response. [32] Ms Luxford submitted that I should proceed on the basis of the second advice, that is the 28 June letter. In light of Ms Ward's acknowledgement, on behalf of the defendant, that approach is entirely proper. [33] The result, then, is that the only basis for opposing judgment on the first cause of action could be if I find that there is a set-off. Both counsel acknowledged that if the general circumstances advanced by the defendant for the two areas of set- off claimed are sustainable, they would genuinely fall within the ambit of equitable set-off when the principle in Grant v NZMC Ltd [1989] 1 NZLR 8 is applied. I therefore consider the precise basis advanced by the defendant for the claim of set- off. [34] The first claim is in respect of the sum of $80,159.63. It is said to be the costs which the defendant incurred in upgrading the airconditioning in the premises covered by the agreement to lease. The agreement to lease imposes no obligation on the plaintiff, as tenant, to upgrade the airconditioning. The airconditioning remains the landlord's chattel in accordance with the terms of the agreement to lease. I invited Mr McDonald to specify the basis for this claim. He submitted that it was based on an agreement between the plaintiff and the defendant. When I asked him tospecify who made the agreement and what the source of it was, he referred to a series of correspondence. The correspondence begins with a letter from the plaintiff's solicitors dated 31 May 2005. It effectively ends with the defendant's solicitor's letter of 15 June 2006. Nowhere in that correspondence can I find a basis for the proposition that the plaintiff has agreed to pay for the airconditioning upgrade. Mr McDonald could point me to no specific passage from the correspondence from which such an agreement might be found to exist. In addition, I have carefully considered Mr Webb's evidence on this point. That throws no light on evidence which might ground a legal basis for this aspect of the claim of set-off. It is common ground that the plaintiff alleged that it was the defendant's responsibility to upgrade the airconditioning in respect of the areas which the plaintiff was occupying. Further, the plaintiff obtained a quote for this work to be done. The plaintiff notified the defendant of that quotation. The defendant considered it could do the work more cheaply and took over responsibility for it. The defendant, however, before undertaking the work, did not secure a promise to pay from the plaintiff tenant, nor has counsel been able to point to any specific legal basis upon which liability for this work could be sheeted home to the plaintiff. [35] Accordingly, I conclude that there is no foundation for a defence of set-off in respect of the airconditioning work of $80,159.63. [36] The second aspect to the claim of set-off is entirely different. Here the defendant claims that the plaintiff's servants or agents or, more particularly, contractors, have damaged the premises and that the cost to repair that damage is $70,382.08 inclusive of GST. [37] The quantification of this aspect of the set-off is set out in the affidavit of Candy Tauber, who is employed by the defendant as a property manager. The claim involves the following: a) The cost of repairing the walkway which was quoted by Constructions Building Projects Limited at $69,030 inclusive of GST. The quote has been annexed. There is no evidence questioning the specific basis for that quotation;b) A claim for repairs to the roof in respect of which an invoice from Auckland Property Restoration Limited in the sum of $762.75 was produced; c) Some work relating to the electrical aspect of the building for which an account of $114.58 was issued; d) An account for a commercial cleaner to clean certain parts of the building in the sum of $165.93 was produced. A further cleaning account in the sum of $1,237.50 was produced. The total of those accounts is some $71,310.76. The plaintiff has, in fact, paid $928.68. The plaintiff complains that, in respect of the damage to the walkway which was the principal sum claimed, that matter had not been raised prior to the issue of proceedings. In short, the Court was advised by the plaintiff that the plaintiff could not determine, at this point in time, where fault lay. [38] When the onus of proof is applied to this aspect of the set-off, I reach the conclusion that the plaintiff has not proved that the defendant does not have a set-off defence by virtue of the claim for damages of $70,382.08. That is, primarily because there has been an acknowledgement of responsibility for some of the costs of preparing damaged work. [39] Accordingly, a sum of $70,382.08 must be deducted from the amount that I have found that was otherwise due under the first cause of action. [40] I have earlier, in this judgment, referred to the fact that there are consequential claims that are added to the first cause of action. A claim for interest is made. A claim for solicitor/client costs is also made. [41] So far as the claim for interest is concerned, I am not able, at this stage on the information before me, to reach a conclusion as to an appropriate basis for calculating interest on the net figure that is due. It seems to me, in the circumstances, therefore, that the question of interest on whatever sum is found to bedue on the first cause of action should be determined based on the whole sum that is due and after consideration of the matters at trial. For that reason, I expressly rule that this judgment does not cover the question of interest on the sum on which judgment is entered on the first cause of action so that that matter can be determined at trial. [42] I reach the same conclusion in respect of the claim for solicitor/client costs. The precise basis upon which liability for costs on a solicitor/client basis as claimed, however, was not made out in any event. [43] In summary, therefore, the plaintiff is entitled to summary judgment on the first cause of action calculated as follows: $175,000.00 plus 21,875.00 (GST) minus 70,382.08 ___________ = $126,492.92 ========== From that sum, $50,000 must be deducted having regard to the payment made on 21 April 2006 as advised in counsel's joint memorandum. The amount, then, that may be the subject of judgment on the first cause of action is therefore $76,492.92. Claims for interest and solicitor/client costs are matters that would have to be determined at trial.The plaintiff's second and third causes of action[44] I deal with these two causes of action together. Here the plaintiff claims $91,877. The principal claim, however, is a claim that the plaintiff should be reimbursed for rent while the airconditioning works were being carried out. It is claimed that some three months rent has been paid during this time for a sum of $76,575.[45] I need not analyse the balance of the claim that is sought because Ms Luxford, in my view, quite properly in submissions, acknowledged that there was insufficient proof to sustain the claim for summary judgment in respect of them. [46] There is a common problem, in my view, that can really only be resolved at trial with respect to the claim made in both the second and third causes of action. It concerns a question of causation and, possibly, also remoteness. These questions are often unsuitable for determination in a summary judgment context. The Court of Appeal in Bernard v Space 2000 Ltd 15 PRNZ 338 at [23] and [24] emphasised this position. [47] A further problem exists with both causes of action. They are dependent upon a finding that the intention of the agreement to lease was that an obligation is imposed on the plaintiff to install and airconditioning unit which has both cooling and heating components. One cannot determine simply from reading the documentation whether the reference to airconditioning was intended to include both components. This can be illustrated quite simply by referring to the Office Accommodation Energy Using Service Performance brief where, in paragraph 3, there is contained the following:Where heating and cooling are provided they should preferably be controlled by the same sensor.[48] Apart from a reference to the need to maintain an indoor temperature between 20 oC and 23oC for 97.5% of the time, there is no express reference in the documentation requiring a heating component in the airconditioning. [49] I purposely do not review some of the evidence which is challenged by the plaintiff and which is sought to be advanced by the defendant in relation to what was said. What is important, however, is that I simply record the legal position in relation to the ascertainment of the meaning to be given to a legal document. [50] In considering what meaning does the document convey to the reasonable person having the background facts, it is helpful that I set out a summary that Lord Hoffmann gave in Investors Compensation Scheme Ltd v West BromwichBuilding Society [1998] 1 All ER 98, 114-115 which was adopted by the New Zealand Court of Appeal in Boat Park Ltd v Hutchinson [1999] 2 NZLR 74, 82:The principles may be summarised as follows. (1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. (2) The background was famously referred to by Lord Wilberforce as the 'matrix of fact', but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man. (3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them. (4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax (see Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 3 All ER 352, [1997] 2 WLR 945). (5) The 'rule' that words should be given their 'natural and ordinary meaning' reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said inAntaios Cia Naviera SA v Salen Rederierna AB, The Antaios [1984] 3 All ER 229 at 233, [1985] AC 191 at 201:'. . . if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.'"[51] For all the above reasons, I conclude that the second and third causes of action are not suitable for summary judgment. The plaintiff cannot establish that there is no defence to the claim on either alternative basis. It is a matter that should proceed to trial and be determined in the ordinary way. [52] The fourth cause of action is a claim for general damages for the breach of the covenant of quite enjoyment. The claim is made because of a direction given by officers of the defendant that the plaintiff's contractors remove themselves from the building. The evidence appears to be that this state of affairs existed for a period of approximately two days. The fact that the claim under this cause of action is for general damages and for damages that are not specified simply reinforces the fact that this cause of action is not suitable for summary judgment. I note that Master Williams QC, as he then was, in Growers Foods Ltd v PG & SE Ballantyne Ltd HC NA CP 8-91 2 July 1991 came to the same conclusion at page 20 of the judgment in that decision. [53] Accordingly, I conclude that summary judgment is not appropriate in respect of the fourth cause of action.Judgment[54] For the reasons set out in this judgment, I enter summary judgment for part of the claim against the defendant in the sum of $76,492.92. I emphasise that that is entered in respect of part of the first cause of action. The remaining part of the first cause of action and the second, third and fourth causes of action, and the set-off defence must proceed to trial in the ordinary way. [55] The defendant must now comply with r 142A in respect of the filing of a statement of defence.[56] There is a need to cover any outstanding interlocutory directions that are required in this case. A case management conference is the most appropriate way of dealing with this. It is also, having regard to the outcome of the application, the time to discuss costs on the summary judgment application. [57] Accordingly, I establish case management conference by telephone with counsel at 12.30pm on 23 May 2006. It will deal with any outstanding interlocutory applications that are required in respect of this proceeding and the issue of costs on the summary judgment application. Counsel shall file and serve memoranda dealing with these items two working days before the conference. _____________________ JA Faire Associate Judge