Thavarag v Willis Street Parking Limited [2023] NZHC 105 (3 February 2023)

Last Updated: 27 February 2023

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2022-485-000654 [2023] NZHC 105

BETWEEN	MARIATHAS JOHNSON THAVARAG Appellant
AND	WILLIS STREET PARKING LIMITED Respondent

Hearing:	1 February 2023
Appearances:	N Donaldson and J J Pietras for the Appellant F S Tuteja for the Respondent
Judgment:	3 February 2023

JUDGMENT OF GRICE J

Introduction

[1] This is an appeal against the entry of summary judgment in the District Court on a claim relating to the recovery of rental.¹

[2] The summary judgment in favour of Willis Street Parking Ltd (Willis), the plaintiff in the claim and the respondent in this appeal, was delivered in a supplementary decision dated 11 October 2022.² In an earlier reserved decision dated 12 August 2022 on the same summary judgment application, the Judge had declined to grant summary judgment on the basis there was a “credible defence” that the default interest charged on the rental which was also claimed was an unenforceable penalty.³

¹ Willis Street Parking Ltd v Thavarag [2022] NZDC 19896 [supplementary decision].

² Supplementary decision, above n 1.

³ Willis Street Parking Ltd v Thavarag [2022] NZDC 15200 [reserved decision] at [76].

THAVARAG v WILLIS STREET PARKING LIMITED [2023] NZHC 105 [3 February 2023]

[3] This appeal concerns whether the Judge had the power to revisit the summary judgment, having declined it in the first instance. The appellant alleges that the Judge exceeded his jurisdiction under the District Court Rules 2014 (the Rules) as there was no jurisdiction to enter summary judgment under r 11.13 after the application had already been dismissed. The appellant also alleges there was no jurisdiction to enter summary judgment without the respondent first obtaining leave to file a second interlocutory application, pursuant to r 7.44.

[4] Two main issues arise for determination in this appeal. The first is whether there was a procedural path which would enable the Judge to revisit the dismissed summary judgment application judgment and whether that path was followed by the Judge. The second is a more general issue which became apparent in the course of the appeal, that is whether the defendant, who is the appellant in this appeal, was entitled to an opportunity to be heard in relation to the supplementary judgment, and, if so, whether he was given that opportunity.

Background

[5] The facts were recorded in the reserved decision.⁴ Mr Thavarag had been the operator of a food stall leased from Willis. Mr Thavarag had signed a lease and guarantee in July 2017. In March 2019 and thereafter until the end of the lease in July 2020, he missed his monthly payments. In April 2022, Willis filed an application for summary judgment for the outstanding rental together with operating expenses and default interest payable under the lease on overdue amounts.

[6] Willis calculated the liability for the alleged period of default to be

$121,853.91, being the monthly payments and default interest on those payments. Willis also claimed $49,954.81, being the default interest between the end of the lease and 8 February 2022, together with default interest calculated from 8 February 2022 to the date of payment. The total amount sought by way of summary judgment was

$169,808.72 plus default interest to be calculated from 8 February 2022 to the date of payment.

⁴ At [1]–[5].

[7] In the reserved decision, the Judge noted that Mr Thavarag opposed the summary judgment application on four grounds:⁵

(a) the guarantee was signed and initialled in two parts on two consecutive days;

(b) Willis failed to keep pests (pigeons, cockroaches and rats) out of the market, in breach of the landlord’s obligations;

(c) Willis failed to mitigate its loss when Mr Thavarag stopped paying rent in March 2019, 16 months before the end of the lease; and

(d) the clause agreeing the default interest rate was so vague as to be unenforceable.

[8] The Judge dealt with each of those defences. In relation to the signing of the guarantee, the Judge found that the way the lease and guarantee were entered into did not, as a matter of law, invalidate the guarantee.⁶ In relation to the issue of pests in the market, the Judge found that the material raised the “potential” of a claim of set-off, but that did not prevent enforcement of the lease terms.⁷ The material provided by Mr Thavarag did not raise the potential of demonstrating “a derogation so great as to justify his termination of the lease.”⁸ The third defence related to a breach of Willis’ obligation to mitigate its loss. The Judge found that Mr Thavarag’s factual foundation for raising the defence was slight and relied only on the absence of a re-letting of the stall between May 2019 and February/March 2020.⁹ The Judge accepted Willis’ evidence on this point, which was that it had employed a manager with responsibility for running the market successfully and that other stalls were also vacant during the period. The Judge accepted that Willis had said it was doing what would be expected of a commercial owner of a food market.¹⁰ Therefore Mr Thavarag had not established

⁵ At [6].

⁶ At [34].

⁷ At [47].

⁸ At [47].

⁹ At [53].

¹⁰ At [53].

he had a credible prospect at trial of demonstrating that Willis did not take reasonable steps to mitigate the loss caused by the repudiation of the lease.¹¹

[9] In relation to the final ground of opposition, the Judge considered that the clause in the lease relating to default interest was “awkward”.¹² However, the Judge found the intention of the clause was sufficiently clear so as to provide for interest at 16 per cent per annum pro-rated over the number of days being considered.¹³ On an additional and second issue relating to the default interest rate agreement, the Judge found that the default interest arrangement must be “proportionate” and that “what is proportionate must be considered in the context of the agreement.”¹⁴ The Judge found there was a credible defence to be tested at trial that the default interest arrangement was more than was needed to recognise the legitimate interests of Willis, and for that reason was an unenforceable penalty.¹⁵

[10] Mr Thavarag had also pleaded three affirmative defences, which corresponded to the defences raised in the arguments on the summary judgment application.¹⁶ The Judge noted Willis had failed to comply with the Rules by failing to file a reply to the affirmative defences.¹⁷ The Judge found, however, that this failure did not cause any real prejudice to Mr Thavarag, given that Willis’ responses to the affirmative defences were raised in the summary judgment context ahead of any formal reply to the statement of defence.¹⁸ The Judge found it did not advance the interests of justice to determine the dispute in reliance on that procedural misstep on Willis’ part, and directed Willis to file its reply to Mr Thavarag’s affirmative defences within 10 working days.¹⁹

¹¹ At [54].

¹² At [59].

¹³ At [59] and [61].

¹⁴ At [68].

¹⁵ At [70].

¹⁶ At [71].

¹⁷ At [72] and [75]. Under the District Court Rules 2014, the plaintiff must file and serve any reply to an affirmative defence within 10 working days. If this is not done the affirmative defence is treated as being admitted: rr 5.64 and 5.65.

¹⁸ At [75].

¹⁹ At [75] and [77].

[11] In concluding, the Judge declined to enter summary judgment.²⁰ The Judge considered there was a credible defence to be tested at trial that the default interest arrangement was an unenforceable penalty.²¹ The Judge said he “would have been prepared to give summary judgment in relation to the monthly payments owing under the lease” but the summary judgment application and statement of claim did not clearly allow for that separation.²²

[12] The Judge set down a case management conference for 13 September 2022 to settle the mode of trial and timetable.²³

[13] On 1 September 2022, Willis filed a substantial memorandum which included submissions directed at the Judge’s finding that the default interest was a penalty. In particular, it cited Willis Street Parking Ltd v Kumar, a District Court decision which it argued was a similar case and in which the Judge had allowed judgment for default interest.²⁴ By memorandum of the same date, Mr Thavarag’s lawyers filed a memorandum opposing the reopening of the application for summary judgment and responding to the arguments by Willis.²⁵

[14] On 13 September 2022, the parties appeared before Judge Hinton for the case management conference. The usual purpose of the case management conference at that stage in a proceeding in which summary judgment had been dismissed is to set the mode of trial and put in place a timetable, as well as to consider any interlocutory matters before trial. Judge Hinton issued a minute following the conference, in which the Judge noted there had been a discussion with counsel for both parties and the memoranda filed had clarified the matters in issue.²⁶ He went on to note that the Judge issuing the reserved decision had declined summary judgment but had noted that summary judgment would have been available with respect to the rental payments sought, with the exception of the claim for penalty interest, as the Judge had

²⁰ At [76].

²¹ At [76].

²² At [76].

²³ At [78].

²⁴ Willis Street Parking Ltd v Kumar [2020] NZDC 10907.

²⁵ Neither of the memoranda dated 1 September 2022 were included in the agreed bundle of documents on appeal. Counsel took the view that they were not relevant to the appeal, however in their submissions confirmed the general tenor of the memoranda.

²⁶ Minute of Judge Hinton, 13 September 2022.

considered there might be an argument concerning whether the interest was a penalty and unenforceable.²⁷ The Judge went on to record the parties’ positions, namely that Willis sought summary judgment on its claim, absent a claim for interest, while Mr Thavarag averred this was not possible and the whole matter should go to a full trial.²⁸

[15] The Judge noted in relation to the plaintiff’s position that it was possible an application could be made under r 11.13 of the Rules “at least”, and in relation to the defendant’s position that the prospect of further evidence raised additional issues which should be addressed.²⁹

[16] Given both of these matters, Judge Hinton noted he was of the view, and counsel agreed, that the matter should be referred back to the Judge who had dealt with the summary judgment application.³⁰ The “form in which that happens” was left to counsel.³¹ The Judge noted that Willis was considering obtaining further advice, and that “it may be that a separate further formal application is made on behalf of the plaintiff.”³² The Judge noted discussions between the lawyers for the parties might result in a joint memorandum being prepared for the Judge to whom the matter was being referred back.³³

[17] Counsel consequently prepared a joint memorandum, dated 14 September 2022, setting out their respective positions and requesting the Judge consider the procedural issue of whether the dismissed summary judgment application could be revisited.

[18] The memorandum recorded the background and stated that counsel sought a determination on “whether steps may be taken before judgment is sealed, including (but not limited to) reliance on [r] 11.13”, which rule states that a step may be taken

²⁷ At [3].

²⁸ At [5]–[6].

²⁹ At [7]–[8].

³⁰ At [9].

³¹ At [10].

³² At [10].

³³ At [10].

on a judgment before it is sealed “only with the leave of a Judge.” The memorandum stated the plaintiff requested:

... that the Judgment be re-entered for the Principal claim only, on the basis it was prepared to be awarded in the Judgment and in its opinion, to avoid prejudice, and the parties’ and the judge’s resources, in repeating summary judgment on the determined matter.

[19] As the memorandum recorded, the plaintiff was “prepared to submit any amended claim or affidavit in support, as required.”

[20] The memorandum recorded the defendant’s position as being that the Court did not have jurisdiction to enter or seal judgment for the lesser amount as there had yet to be any judgment issued in the plaintiff’s favour. The defendant submitted there was no jurisdiction for the plaintiff to now sever its claim for interest, given that its application for summary judgment had been unsuccessful. If the plaintiff wished to seek judgment for the principal only, the defendant submitted, it would need to either seek leave under r 7.44 to bring a second application for summary judgment or prove its claim at an ordinary trial.

[21] The joint memorandum went on to say that should it be determined that the matter proceed to trial, the plaintiff would discontinue its application and seek leave to bring a second application for summary judgment for a claim of only the principal. It recorded the defendant’s position as being that he wished to continue to trial or would respond to the plaintiff’s new application for summary judgment.

[22] The key part of the memorandum was as follows:

11. Counsel seek His Honour Judge Nicholls’ direction on whether there is jurisdiction to seal judgment on the Principal or whether the plaintiff needs to seek leave to bring a second application for summary judgment, or proceed to an ordinary trial.

[23] Without further notice, on 11 October 2022 the Judge issued the supplementary decision.³⁴ In that decision the Judge noted the matter had been referred back to him by the joint memorandum of counsel and that he had in his reserved decision of 12 August 2022 “recorded that the overall effect of my decisions on these issues is

³⁴ Supplementary decision, above n 1.

that I would be prepared to give summary judgment on a claim by Willis for the monthly rental payments owing under the lease and personal guarantee, but not the claims for default interest.”³⁵

[24] The Judge noted he had declined to enter summary judgment in that decision, however, due to the way the summary judgment application had been framed, as the statement of claim “did not lend itself to dealing with the monthly payments in default interest separately”.³⁶

[25] However, the Judge went on to say the following:

[4] The material that has been filed since highlights how that approach of mine could have the effect of robbing Willis of the fruits of its victory. Having found the application for summary judgment made out as far as the monthly payments go, the alternative would have been to enter judgement [sic] on liability, and ask for quantum to be clarified.

[26] The Judge said the material filed since clarified the position and he consequently entered summary judgment in favour Willis on the outstanding monthly rental payments for the amount of $121,853.91.³⁷ The Judge noted he was conscious Willis disagreed with his earlier decision that there was an issue to be tried in relation to the claims for interest but that Willis could now decide whether it wished to “continue with that aspect of its claim.”³⁸ The Judge said further:

[7] I am also conscious that in the joint memorandum of counsel, the defendant refers to “potentially new evidence” in support of the defences that we discussed at the hearing of the summary judgement [sic]. However, the process for the hearing of the summary judgement [sic] application was a fulsome one, with a good amount of notice and a lot of material filed by both parties, that was discussed fully at the hearing. At the end of that process my decision was that I would be prepared to give summary judgement [sic] on the monthly rental payments owing under the lease. This supplementary decision gives effect to that.

[27] Summary judgment was entered in favour of Willis on the outstanding monthly rental payments, for the sum of $121,853.91.³⁹

³⁵ At [2].

³⁶ At [3].

³⁷ At [5].

³⁸ At [6].

³⁹ At [8].

Analysis

[28] Mr Pietras for the appellant indicated he had been surprised when the supplementary decision dealt with summary judgment and entered it in favour of Willis without any further notice. He said he had expected the Judge would address the issues raised in the memorandum and in particular provide a direction on whether there was jurisdiction to seal judgment on the principal sum or whether the plaintiff needed to seek leave to bring a second application for summary judgment or that the matter would proceed to an ordinary trial. Ms Tuteja for the respondent said she was not surprised that summary judgment had been entered in favour of Willis for the rental amount as in her view the submissions made by Willis in its memorandum of 1 September 2022 on the substantive position in relation to the default interest/penalty argument were correct. Ms Tuteja acknowledged that the supplementary decision did not record the process by which the Judge revisited the dismissed summary judgment application. These submissions were consistent with the documents before the court, in particular the joint memorandum of 14 September 2022, which recorded that the issue counsel were asking the Judge to deal with was the procedure by which the summary judgment application could be revisited.

[29] Ms Donaldson for the appellant submitted that if the correct procedure for revisiting the dismissed summary judgment application was by treating the supplementary judgment as a “step” taken on a judgment before it was sealed, as suggested by Judge Hinton, leave of the Judge would be required before the step could be taken, and this had not been sought nor given by the Judge under r 11.13. Ms Donaldson said that in any event no judgment or order was extant at the time of the supplementary decision and no leave application had been filed to bring a second summary judgment application, nor was a recall application made.

[30] A recall application may be made pursuant to r 11.9 as follows:

11.9 Recalling judgment

A Judge may recall a judgment given orally or in writing at any time before a formal record of it is drawn up and sealed.

[31] Ms Tuteja pointed to r 1.3, which provides that the objective of the Rules is “to secure the just, speedy, and inexpensive determination of any proceeding or interlocutory application.” She said it was clear that Willis was entitled to judgment on the rent not paid and therefore its recognition that it would not pursue the default interest meant that the Judge should enter judgment for the rental amount which he had determined was owing to Willis. Ms Tuteja submitted that being required to undertake further procedural steps before judgment was reconsidered would not be consistent with the “just, speedy, and inexpensive determination” of the proceeding.

[32] Argument was also directed at whether the principle of finality was relevant and prevented the revisiting of the dismissal of the summary judgment. Ms Tuteja submitted it was a matter of discretion for the court in the context of the proceedings as to when the principle of finality prevented the summary judgment being revisited.

[33] The summary judgment application had been dismissed in clear terms. Neither party argued otherwise. It is not possible to ascertain from the supplementary decision the procedural path taken to deal with the fact of the dismissal of the summary judgment application.

[34] There was no leave granted in the reserved decision calling for further submissions on the application for summary judgment. Nor was there any application for leave to bring a further summary judgment application. Such an application would be subject to the limitation in r 7.44 as follows:

7.44 Limitation as to second interlocutory application

• (1) A party who fails on an interlocutory application must not apply again for the same or a similar order without first obtaining the leave of a Judge.

• (2) A Judge may grant leave only in special circumstances.

[35] Rule 11.13, which provides that a step may be taken on a judgment before it is sealed “only with the leave of a Judge”, has no application. Firstly, there was no judgment,⁴⁰ merely the dismissal of the summary judgment application. Secondly, no

⁴⁰ A judgment includes an order.

application for leave had been made, even if it were arguable that the dismissal of the application amounted to an order for the purposes of the rule.

[36] The joint memorandum by counsel dated 14 September 2022 was clearly seeking from the Judge a direction as to the procedural steps to be taken. That was what Mr Thavarag was expecting would be dealt with. Depending on the Judge’s directions, unless Mr Thavarag waived his rights (as to which there is no evidence before me), he was entitled to be heard on whatever application followed.

[37] Clearly the object of the Judge in issuing the supplementary decision was to avoid further delays and dispose of the matter in an expeditious manner. There is some merit in this approach, particularly in view of the object of the Rules insofar as they concern dealing with matters in a speedy and inexpensive manner.

[38] However, r 1.3 refers to the objective of the Rules being to secure the “just, speedy, and inexpensive determination” of any proceeding or interlocutory application. It is no coincidence that in r 1.3 “just” precedes “speedy and inexpensive”. The overriding consideration is the interests of justice. The resolution of a matter in a speedy and inexpensive manner cannot be done by depriving the defendant of his right to be heard.

[39] Mr Thavarag had a right to expect that the procedure laid out under the Rules would be followed, or, if that was not to be followed, that he be given an opportunity to be heard on the issue.

[40] The usual process under the Rules is that when an application for summary judgment is dismissed, under r 12.12 the Court must give directions as to the future conduct of the proceedings and the mode of trial. The likely mode of trial in this matter would have been as a short or simplified trial, in terms of the criteria set out in r 10.1. As a matter of procedure, this case was referred for further directions to the Judge who dealt with the summary judgment application. It is clear from the joint memorandum of 14 September 2022 that neither party held the expectation that the Judge would, without further notice, go ahead and revisit the summary judgment determination.

[41] Accordingly, there was no procedural path identified by the Judge by which to deal with the dismissed summary judgment application. There was no extant application before the Judge when he issued the supplementary decision. If the Judge was intending to revisit the dismissed application, the appellant was, at a minimum, entitled to be heard on whatever procedural course was taken in the circumstances.

Conclusion

[42] The appeal is allowed. The District Court was in error in further considering the application for summary judgment which had been dismissed and therefore was no longer extant. The Judge in his supplementary decision failed to deal with the application by the parties for a direction as to the procedural steps to be taken in relation to the dismissed summary judgment application. In addition, Mr Thavarag’s right to natural justice to be heard in relation to any further application in respect of the dismissed summary judgment application was breached.

[43] The judgment in the supplementary decision is set aside and the matter is remitted to the District Court. I do not consider it appropriate to give any further directions in relation to how the matter proceeds from here. I anticipate there will be a further case management conference. Willis may make a further application for summary judgment, recall or such application as it thinks fit in terms of the relevant rules, or alternatively the matter may proceed to trial. Those are matters for further consideration by the District Court.

Costs

[44] Counsel indicated that Mr Thavarag is legally aided. He therefore will be seeking costs. It appears appropriate that costs should follow the event on a 2B basis. However, if the parties are unable to agree, given that indication, any application for costs and submissions should be made by memorandum on or before five days from the date of this judgment. Any response should be filed within a further five days and any reply with a further three days.

Grice J

Solicitors:

Thomas Dewar Sziranyi Letts, Lower Hutt

Stonewood Group Limited, Downtown Auckland