Kent Sing Trading Company Ltd and Others v JNJ Holdings Ltd

• Jurisdiction: New Zealand
• Judge: Thomas J
• Judgment Date: 27 August 2019
• Neutral Citation: [2019] NZCA 388
• Court: Court of Appeal
• Docket Number: CA34/2018
• Date: 27 August 2019

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

[2019] NZCA 388

Court:

Wild, Thomas and Muir JJ

CA34/2018

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

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

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

• 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 Kent Sing was justified in (purportedly) terminating the Lease due to JNJ's conduct was untenable. 13

14 The Judge found that exclusion clauses in the Lease prohibited a claim in damages arising out of breach of contract and/or tortious interference with goods. 14 He found JNJ was not liable in negligence, both because JNJ did not owe a duty of care and because JNJ was not negligent. 15 On the whole, he found there was insufficient evidence to establish any liability and concluded that JNJ was not in breach of the Lease when it was cancelled. 16

15 JNJ, as the successful party, then claimed indemnity costs pursuant to the Lease of $203,820.59 against Kent Sing, and against Mr Thai and Ms Wu as guarantors. 17 Costs on a 2B basis and disbursements totalling $71,637.00 were also claimed against General Goods in respect of the counterclaim. The Judge accepted JNJ's contractual entitlement to indemnity costs and to costs on the counterclaim. In light of what he viewed as deficiencies in the costs claims, he awarded JNJ $61,146.18 in respect of its claim and $21,491.10 in respect of the counterclaim. 18

16 There are four grounds of appeal:

• (a) breaches of discovery obligations;

• (b) alleged failure to cross-examine the appellants' witnesses;

• (c) invalidity of the PLA notice; and

• (d) costs.

17 JNJ has cross-appealed the costs decision.

Discovery

18 The main ground of appeal is that the Judge erred in law and/or fact in failing to take into account and have any proper regard to the importance of pre-trial discovery, the relevant details of which can be summarised in the following way:

• (a) In March 2016, Kent Sing had sought further and better discovery, including all records in support of JNJ's claim to cancel the Lease and all records/communications concerning water ingress and nuisance, including proof JNJ had carried out the lessor's works.

• (b) On 8 April 2016, the Court ordered, by consent, that JNJ file and serve an affidavit as to further discovery. On 19 April 2016, JNJ's in-house lawyer, Mr Park, filed an affidavit saying JNJ did not have any more documents of the kind stipulated and had carried out a check to ensure this was the case.

• (c) When Mr Park was giving evidence, it became apparent there were other documents that had not been discovered and were introduced for the first time by JNJ at trial. These were relevant and material to water ingress and nuisance, and to the amounts JNJ claimed were payable. There were also other relevant documents...