Parkhurst v Bisht

• Jurisdiction: New Zealand
• Judge: Walker J
• Judgment Date: 29 October 2021
• Neutral Citation: [2021] NZHC 2888
• Docket Number: CIV-2021-404-000948
• Court: High Court

Between

Parkhurst Corporation Limited

Appellant

and

Madhan Singh Bisht

Respondent

[2021] NZHC 2888

Walker J

CIV-2021-404-000948

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

Damages, Property, Tort — appeal against a District Court decision which awarded the respondent damages for loss of a chance following the appellant's unlawful entry of commercial premises — whether the respondent was deprived of a real and substantial chance to derive full benefit from the lease — mitigation of losses — quantification of loss

Appearances:

A Shinkarenko and T Zaseev for the Appellant

S Raju for the Respondent

JUDGMENT OF Walker J

This judgment was delivered by me on 29 October 2021 at 10 am

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Introduction

1 This appeal concerns damages awarded for ‘loss of a chance’ following a landlord's unlawful entry of commercial premises. The landlord-tenant relationship between the appellant, Parkhurst Corporation Limited (Parkhurst) and the respondent Madhan Singh Bisht foundered in early 2017. Mr Bisht's company, Imaxx Café & Bistro Ltd, was running a restaurant from the leased premises. Parkhurst had become frustrated by Mr Bisht's consistently late and/or deficient payment of rent and outgoings. It made various demands for the sums due. On 14 February 2017, Parkhurst re-entered and took possession of the leased premises by changing the locks. It had not served a valid notice upon Mr Bisht prior to re-entering but contended that Mr Bisht had given up possession of the premises. 1

2 Mr Bisht issued proceedings in the District Court against Parkhurst for breach of the lease. 2 He was largely successful although, for reasons which will emerge, not on his principal claim to damages. The Judge delivered an interim judgment in which she found the re-entry unlawful and liability for breach. She dismissed all the conventional claims for damages but allowed for supplementary submissions on damages for loss of a chance. Ultimately, Mr Bisht was awarded $66,360.93 plus interest and costs under that measure.

3 Parkhurst accepts that the re-entry was unlawful but argues on appeal that the Judge erred in two main respects: first in her assessment of loss of a chance and secondly, by rejecting Parkhurst's affirmative defence that Mr Bisht failed to mitigate his losses.

Background

4 On 11 May 2015, Parkhurst and Mr Bisht signed a formal Deed of Lease (the lease) for premises at 167 Parkhurst Road, Parakai (the premises). The material terms were:

• (a) The lease was to commence on 11 August 2015.

• (b) It was for a term of 18 years with rights of renewal exercisable every two years: the first two year term was to end on 11 August 2017 and the final expiry date was 11 August 2033.

• (c) The monthly rental was $2,383.33 plus GST ($2,740.83 including GST) payable on the 11th day of each month.

• (d) Under clause 3.1, Mr Bisht was required to pay a fair proportion of outgoings as agreed or determined by arbitration.

• (e) Mr Bisht received a 12 week “rent holiday”; the first monthly rental payment was due on 11 September 2015.

• (f) There were two special conditions in the sixth schedule:

  • (i) The first read “[t]he lease will contain a standard demolition clause: i.e in the case of a total purchase of Parkhurst Property”.

  • (ii) The second read “[t]he lease's [sic] will spend up to and from $80,000–$100,000 on renovations to upgrade the premise”.

5 Mr Bisht took possession of the premises in May 2015 and began renovations. 3 They took longer than he anticipated. He estimated that he spent in excess of $180,000, including chattels for the restaurant's operation. The renovation cost was vigorously contested at trial. Based on the notes of evidence, most of the supplementary evidence and cross-examination dwelt on invoices purporting to represent the renovation cost.

6 Rent was paid late from the commencement of the lease. Mr Bisht accepts that he fell behind on payments under the lease as they began to fall due on 11 September 2015 due to the expense of the unexpectedly prolonged renovations. He claimed to be experiencing cashflow problems. For the first eight months of the lease, Mr Bisht

did not pay the GST portion of the rent (paying $2,383.33 instead of $2,740.83 per month)

7 The Judge determined that Mr Bisht failed to pay any money towards outgoings for the entire 21 month duration of the lease, other than a one-off payment of $1,800 following a meeting in November 2016 to discuss the arrears. The Judge was satisfied from the evidence that the outgoings were payable and not objected to until the proceedings were issued. 4

8 The issues came to a head. The directors of Parkhurst asserted that demands to clear the arrears were sent to Mr Bisht on 7 June 2016, 21 September 2016 and 18 November 2016. An invoice dated 14 February 2017 for arrears of $21,129.67 was issued. Mr Bisht denied receiving the letters of demand.

9 On the night of 13 February 2017, witnesses observed what they thought were Mr Bisht's “agent(s) and/or employee(s)” loading furniture and stock out of the premises. The directors of Parkhurst concluded that Mr Bisht was abandoning the premises.

10 On 14 February 2017, after taking legal advice, Parkhurst re-entered the premises. They took the view that equipment was missing and that Mr Bisht was “gutting the place”. They arranged for a lock-smith to change the locks. At the time, the restaurant was not operating. It had not been open since December 2016. Rent for December and January had been paid but rent due on 11 February 2017 had not been paid.

11 Mr Bisht arrived to find the locks changed. A series of letters between the parties' respective legal advisors followed. There was no resolution.

12 On 31 August 2017, Mr Bisht issued proceedings in the District Court.

District Court decision

13 Judge P A Cunningham issued an interim judgment on 15 February 2021 and the final judgment on 27 April 2021. For present purposes, it is the final judgment which is at issue.

14 The Judge found that although the landlord had grounds to issue Mr Bisht with a notice under s 245 of the Property Law Act 2007 (the Act), it plainly failed to do so. The directors of Parkhurst had no reasonable grounds on which to believe that Mr Bisht had already given up possession of the premises. 5 The re-entry was therefore unlawful. 6

15 Mr Bisht's statement of claim sought damages of $190,033.98 said to represent the cost of renovating and upgrading the premises. He also sought damages for the loss of his business/loss of opportunity and for the stress, shame and embarrassment caused by the sudden closure of his business, interest and costs.

16 The Judge noted that the focus at trial was on compensation for the cost of renovating the premises. She referred to 140 pages of invoices, credit notes and statements said to relate to expenditure on the renovation and fit out of the restaurant. Those invoices were variously made out to Imaxx Café & Bistro, Imaxx Café & Bistro Ltd, Curry Leaf (Mr Bisht's other restaurant) as well as businesses associated with Mr Bisht's brother (Kajol Cuisine Ltd). 7

17 During the hearing, with leave of the Judge, the invoices were organised into a schedule and produced as an exhibit. This involved recalculation of expenses. I interpolate here that Mr Shinkarenko mounted a strenuous opposition to this during the trial, having sought source documents and financial documents for the claimed expenses over the course of the proceedings. He submitted that parties who do not disclose documents relevant to a transaction leave themselves vulnerable to an adverse

finding on the facts at the hearing. 8 The Judge nonetheless ruled to allow Mr Bisht to lead oral evidence, including in relation to nine invoices on the basis that if any embarrassment or difficulty was caused to Parkhurst leading to adjournment of the trial, Mr Bisht could expect an award of costs against him

18 The schedule totalled over $190,000 but there was proof of payment of only $59,934.04. The Judge concluded that it was unknown whether the produced invoices had been paid by Mr Bisht personally from his own finances or through another legal entity, or a mixture of the two. Some amounts were also paid for by Mr Bisht's brother or a company associated with him, as he held active accounts with suppliers. Both Mr Bisht and his brother gave evidence that Mr Bisht repaid him later but were at odds as to how much had been repaid. 9

19 The unsatisfactory state of the evidence created problems for the damages claim. While Mr Bisht was the lessee and the plaintiff, he did not own the Imaxx Café & Bistro business. A company bearing that name, Imaxx Café & Bistro Ltd, owned the business. Although Mr Bisht is the sole shareholder and director, the problem was accordingly one of legal personalities. The Judge held that the claimant should be Imaxx Café & Bistro Ltd which was not a party to the proceeding. 10

20 The Judge identified other issues with this head of claim. Mr Bisht had been contractually bound to spend at least $80,000 and up to $100,000. He had also received some benefit from this expenditure by trading for just over a year from the premises. Further, the total amount spent by Mr Bisht (or his entities) included the cost of chattels which should not have formed part of the claim and for which there was no evidence of value.

21 The first head of damages failed for lack of proof and because the proper claimant was the company owning the business rather than Mr Bisht personally.

22 The damages claim for loss of the restaurant business faced the same obstacles. There was no valuation evidence and no other reference points such as an offer or offers indicating how much potential purchasers were prepared to pay for the business. This claim also...