Kent Sing Trading Company Ltd and Others v JNJ Holdings Ltd

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeThomas J
Judgment Date27 August 2019
Neutral Citation[2019] NZCA 388
Docket NumberCA34/2018
Date27 August 2019

[2019] NZCA 388

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Court:

Wild, Thomas and Muir JJ

CA34/2018

Between
Kent Sing Trading Company Limited
First Appellant
Quoc Thai
Second Appellant
Le Quan Wu
Third Appellant
General Goods Limited
Fourth Appellant
and
JNJ Holdings Limited
Respondent
Between
JNJ Holdings Limited
Appellant
and
Kent Sing Trading Company Limited
First Respondent
Quoc Thai
Second Respondent
Le Quan Wu
Third Respondent
General Goods Limited
Fourth Respondent
Counsel:

M C Black for Appellants in CA34/2018 and Respondents in CA529/2018

P F Dalkie and S M Bhanabhai for Appellant in CA529/2018 and Respondent in CA34/2018

Property — lease dispute — alleged breach of discovery obligations — cross-examination duties — Evidence Act 2006 — validity of notice issued under the Property Law Act 2007 because of a miscalculation of operating expenses owed — indemnity costs

The Court held there had been deficiencies in discovery, however, if Kent Sing really was as disadvantaged as it claimed, it should have raised the matter with the Court and sought further orders or an adjournment. Criticism could also be levelled at Kent Sing in respect of discovery. The Judge's conclusions had rested primarily on his findings as to the credibility of the various witnesses and those findings outweighed any adverse inferences that might have been available to him in respect of the deficiencies in JNJ's discovery. There was no real possibility that proper discovery would have produced the opposite result.

Under s92 Evidence Act 2006 (“EA”) (cross-examination duties) set out cross-examination requirements. The issues in dispute were squarely before the Judge. There had been no material failure to observe the cross-examination duties set out in s92 EA.

A notice was not invalid because it demanded a greater sum than actually owed. The relevant requirement in s245 PLA (cancellation of lease for breach of covenant to pay rent) and s246 PLA (cancellation of lease for breach of other covenants) was to adequately informthe lessee of the nature and extent of the breach complained about. The failure to pay rent had been separately identified as a breach and the amount. The fact the PLA notice specified a second breach relating to outgoings, one of which was not in fact a breach, had not invalidated the PLA notice in respect of unpaid rent.

JNJ was entitled to indemnity costs under the lease. JNJ's claim was a simple claim for unpaid rent, Kent Sing had filed three amended statements of defence, raising a large number of affirmative defences. It could not that a party contractually entitled to indemnity costs was awarded a sum less than it would have received on a scale 2B costs award in a case where the actual costs significantly exceeded that sum. It could not be the right result that a party contractually entitled to indemnity costs was awarded a sum less than it would have received on a scale 2B costs award in a case where the actual costs significantly exceeded that sum. There was also no basis to reduce disbursements by 70 per cent. A disbursement may only be disallowed or reduced if it was considered disproportionate in the circumstances of the proceeding. The 70 reduction should not have been made to JNJ's costs award in respect of the counterclaim made by Kent Sing where costs were on a scale 2B basis.

Kent Sing's appeal was dismissed. JNJ's cross-appeal was allowed.

  • A The application for leave to adduce further evidence in CA34/2018 is declined.

  • B The appeal in CA34/2018 is dismissed.

  • C The appeal in CA529/2018 is allowed. Judgment is entered for the appellant against the respondents in the sum of $132,770.38.

  • D In respect of their counterclaim in CA529/2018, General Goods Ltd and Kent Sing Trading Co Ltd are jointly and severally liable to pay JNJ Holdings Ltd costs calculated on a 2B basis plus disbursements subject to the amendments set out in [139] of the judgment.

  • E In terms of cl 14.1(b) of the Lease, the appellants in CA34/2018 are to indemnify the respondent for the costs of that appeal and the respondents in CA529/2018 are to indemnify the appellant for its costs of that appeal.

JUDGMENT OF THE COURT
REASONS OF THE COURT

(Given by Thomas J)

Table of contents

Para No.

Introduction

[1]

Background

[2]

The decision

[12]

Discovery

[18]

Application for leave to adduce further evidence

[21]

Deficiencies in pre-trial discovery

[28]

Documents produced at trial

[35]

Legal principles

[42]

Analysis

[49]

Pre-trial discovery

[50]

Documents produced at trial

[52]

Inferences

[64]

Water ingress

[69]

Noxious smells

[79]

Other complaints

[80]

Conclusion

[85]

Cross-examination

[87]

Legal principles

[91]

Analysis

[93]

Validity of the PLA notice

[95]

Submissions

[100]

Analysis

[102]

Costs

The Judge's costs decision

[117]

Kent Sing's appeal

[125]

Cross-appeal

[127]

Submissions

[128]

Analysis

[131]

Result

[140]

Introduction
1

On 21 December 2017, Moore J gave judgment in the sum of $215,048.42 plus interest for JNJ Holdings Ltd (JNJ) against three defendants in a lease dispute. 1 He concluded that JNJ as lessor validly cancelled the lease for non-payment of rent. The defendants (and counterclaim plaintiffs) failed almost entirely in their affirmative defences, set-off and counterclaims. They now appeal.

Background
2

JNJ owns a large commercial building known as the Metro Centre situated on Queen Street, Auckland (the Building). By lease commencing 1 March 2013 (the Lease), it leased premises in the upper basement floor of the Building to Kent Sing Trading Co Ltd (Kent Sing), a wholesale importation company. General Goods Ltd (General Goods), an associated company, operated Kent Sing's retail venture out of the premises.

3

Kent Sing contended that the premises were not fit for purpose, being plagued by issues including water ingress (causing stock damage), a noxious smell emanating from the basement, a white sheet covering a pile of rubbish, faulty automatic doors, and a lack of signage. It claimed JNJ did not respond adequately to complaints.

4

Little more than a year after the Lease commenced, Quoc (Ken) Thai, one of the directors and shareholders of Kent Sing and the second appellant, 2 wrote to JNJ's general manager, Mr Van Der Ham, raising these concerns. He claimed a chronic failure on the part of JNJ to rectify the problems and purported to give notice of General Goods' intention to sublet the premises. He also claimed the right to terminate the Lease with immediate effect.

5

A face to face meeting between the parties did not resolve matters and, on 5 May 2014, Lucinda Thai, the daughter of Mr Thai and Ms Wu, again wrote to Mr Van Der Ham. This time she purported to cancel the Lease on account of these issues. The last day of trading was to be 30 June 2014.

6

Prior to that date, however, on 11 June 2014, JNJ had issued Kent Sing a notice under ss 245 and 246 of the Property Law Act 2007 (the PLA notice) advising that rent and operating expenses totalling $20,199.45 were due and, unless paid within 10 working days, being 25 June 2014, JNJ intended to exercise its remedies under the Lease, including cancellation and re-entry.

7

The breach was not remedied. On 25 June 2014, Kent Sing removed its stock from the premises and the following day JNJ re-entered.

8

On 27 June, Kent Sing paid JNJ $20,199.45.

9

JNJ sued Kent Sing for breach of the Lease. It sought damages of $235,838.82 plus interest and costs for expenses associated with obtaining a new tenant, unpaid rent and other expenses. It also sued Mr Thai and Ms Wu as guarantors.

10

By its third amended statement of defence, set-off and counterclaim, Kent Sing claimed the PLA notice was invalid and, in any event, JNJ's breach of express and implied terms meant Kent Sing was justified in cancelling the Lease. It asserted all rent was paid and JNJ wrongfully repudiated the Lease. Three affirmative defences were pleaded, claiming numerous breaches of express and implied obligations in the Lease, failure to provide possession of the whole of the premises and misrepresentation. The guarantors denied liability on the same basis.

11

The defendants claimed a legal and equitable right of set-off and/or counterclaim, saying they had validly cancelled the Lease, JNJ had no entitlement to damages and, if they had any liability to JNJ, their losses should be set off. They and General Goods claimed stock damage of $57,478.73, excess rent payments of $55,696.57 and loss of profit of $519,141.89 plus GST, interest and costs. They also claimed damages in negligence, breach of contract and tortious interference with goods.

The decision
12

The Judge found JNJ had validly cancelled the Lease after Kent Sing failed to pay rent and other payments by the due dates. 3 His damages award of $215,048.42 plus interest represented a reduction in some of the amounts claimed, due to his finding that the contractual rate of interest was an unenforceable penalty. 4

13

The Judge rejected all Kent Sing's affirmative defences. He found the claims of water ingress and a noxious smell were exaggerated, 5 no representations about signage had been made, and that any delays in putting up signage were attributable to both parties. 6 He rejected claims concerning the automatic doors, 7 failure to carry out lessor's works on the premises, 8 maintenance of the roof and common area, 9 failure to

provide utility services, 10 and failure to deliver up. 11 Those claims were also bundled into generic claims of breach of terms to give business efficacy, quiet enjoyment and derogation from grant. These broader claims, too, were unsuccessful. 12 In short, the Judge concluded the suggestion...

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2 cases
  • Creighton v R
    • New Zealand
    • Court of Appeal
    • 28 May 2020
    ...above n 7; Burns v National Bank of New Zealand Ltd [2004] 3 NZLR 289 (CA) at [75]; and Kent Sing Trading Company Ltd JNJ Holdings Ltd [2019] NZCA 388 at ...
  • Creighton v R
    • New Zealand
    • Court of Appeal
    • 28 May 2020
    ...above n 7; Burns v National Bank of New Zealand Ltd [2004] 3 NZLR 289 (CA) at [75]; and Kent Sing Trading Company Ltd JNJ Holdings Ltd [2019] NZCA 388 at Crown Law Office, Wellington for Respondent ...

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