ROBERT GARY HIRST and HELEN MAY HIRST v GEORGE VOUSDEN and GLENNYS VOUSDEN [2002] NZCA 142 (20 June 2002)

IN THE court of appeal of new zealand

ca25/02

	between	robert gary hirst and helen may hirst
		Appellant

	and	george vousden and glennys vousden
		Respondent

Hearing:	12 June 2002
Coram:	Blanchard J Doogue J Fisher J
Appearances:	F B Bolwell for Appellants M J Koppens for Respondents
Judgment:	20 June 2002

judgment of the court delivered by blanchard j

[1] The Hirsts and the Vousdens were friends.The Hirsts owned a property at Waipu Cove on which their tenant, a Mr McCarthy, ran a takeaway and accommodation business.Apart from the takeaway bar and associated proprietors' accommodation there was also a block of five cabins and two other buildings, one consisting of two cabins and the other of one cabin and a games room.

[2] The Hirsts were dissatisfied with Mr McCarthy's performance.His operation of the business was said to have been less than satisfactory and he was many months behind in his rental payments.The condition of the buildings had deteriorated badly.

[3] In the course of 1998 the parties discussed the possibility that Mr McCarthy would have his lease terminated and the Vousdens would take over as tenants.In general terms, the idea was that there would be an initial period of one year - a trial period - and if matters went satisfactorily the Vousdens could lease the property for another nine years, making 10 years in all.No goodwill or key money would be charged to the Vousdens for such business as they might effectively inherit from Mr McCarthy but at the end of the 10 years, or if the Vousdens elected to walk away from the business at an earlier time, they in turn would not be entitled to require the Hirsts to pay them anything for the goodwill of such business as there might then be.

[4] In November 1998 there was a meeting of the parties which Mrs Vousden said occurred on 21 November.The discussions were pursued and in the course of them, it is accepted, Mr Hirst gave the Vousdens a copy of the lease document with Mr McCarthy.The significance of that occurrence was in dispute at the trial.Mr Hirsts' position was that it was given to the Vousdens simply so that they would know what a commercial lease looked like.It was Mr Hirst's evidence that he had emphasised that the lease form - that of the Auckland District Law Society - did not relate "to what would possibly be offered at some future point."He had said that any lease to the Vousdens would be "based on that loosely".It is clear that the Judge rejected this rather unlikely explanation and preferred the evidence of Mrs Vousden which was to the effect that the terms contained in the lease form, i.e. the printed terms in the Schedule, would form the basis of the arrangement. Obviously, however, they would be overridden by any inconsistent terms which were expressly the subject of agreement between the parties.That appears to have been the view of the trial Judge, Morris J, and we have no doubt that in this respect he was right.

[5] It is convenient to note at this point that the "boilerplate" contained a provision that the rent was to be paid without any deduction and that there was a standard rent review provision which included a ratchet clause, namely that the rent after any review should not be less than the rent immediately before the review date.It was also provided that pending the resolution of the reviewed rent the tenant was to pay the rent specified in the landlord's notice which commenced the rent review process.Any adjustment was to be made upon determination of the reviewed rent.

[6] It is also of relevance that the lease form contained the standard provision forbidding an assignment without the written consent of the landlord but providing that the landlord should give consent if, inter alia, it was shown to the landlord's satisfaction that the proposed assignee was respectable, responsible and had the financial resources to meet the tenant's commitments under the lease and there were no rent arrears or other subsisting breach of any of the tenant's covenant.The schedule of standard terms also contained an arbitration provision.

[7] It was Mrs Vousden's evidence that she took the lease form to a solicitor and obtained what must have been some fairly generalised advice about the proposal.Clearly, however, the parties had not yet come to terms.It had not been decided when Mr McCarthy's lease would be brought to an end so that the Vousdens could go into possession.There was not yet a commencement date.And there was uncertainty about the exact nature of the arrangements after the end of the first year; in particular, the way in which the balance of nine years would be split up.The preferred split seems to have been 3 x 3 x 3 (and therefore with three yearly rent reviews) but 4 x 4 with two yearly rent reviews had also been mentioned although plainly that would have given nine years only.It is the position of the Hirsts, contested by the Vousdens, that after the one year period the continuing arrangements would still have to be negotiated and that accordingly they would have an absolute right to decide not to grant any further lease or extension.The Vousdens, unsurprisingly, say that the trial period was for their benefit so that they could gain some experience in running a business of this kind (going in, as it were, as novices) and that if they thought at the end of the one year that they could make a success of the business, they would have the right to the first of the further periods.

[8] Unfortunately, apart from some notes made by Mrs Vousden and Mr Hirst at various times, none of this was recorded in writing and the parties tended to express themselves in laypeoples' terms which, as might be expected, lack the precision of lawyers.The Court has had the task of determining whether the parties, on both sides, actually committed themselves to a contract under which the Vousdens were entitled to the further nine years.

[9] But that is to anticipate somewhat.To return to the narrative, there was a meeting between Mrs Vousden and Mr and Mrs Hirst in February 1999.The McCarthy lease was still continuing and no notice to quit had been given to him.Mr Vousden was excluded from the meeting because the Hirsts wished to raise with Mrs Vousden some concerns about Mr Vousden's capacity to operate the business.However, notwithstanding their reservations, the Hirsts clearly elected to proceed.It was Mrs Vousden's evidence, given, as we say, without much precision, that at this meeting the exact terms were decided or confirmed. Mr Hirst produced in evidence a note which he had made prior to the meeting of the points which he intended to raise.Those notes contain reference to a rental of $19,000 per annum plus GST (which was certainly agreed for the first year) and the comment:

Reviewable at the end of year prior to establishment of terms of lease.

It was also noted that the Hirsts were not prepared to buy any goodwill back - hence no key money.(But there was nothing said about non-assignability.)

[10] The note also spoke of establishing a term of lease after the 12 month rental period.One of the points was recorded as follows:

At the end of the term of lease to be confirmed (i.e. 3x2 years, 3x3 yrs?) we reserve the right to take over business (not including chattels) if we decide so.However there is a strong possibility an extension on the lease of three years (?) would be offered subject to the satisfactory fulfilment of the terms of the lease.

[11] The points which we have quoted are certainly consistent with the taking of a position by the Hirsts, at least at the beginning of the discussion, that an extension would be granted at the end of the one year period only if they were happy with the way things had developed.The Judge has, however, found that the parties actually agreed upon the extension, if the Vousdens wanted it, at that meeting.Mrs Vousden and Mr Hirst gave evidence about the meeting. The Judge recorded that he accepted the evidence of the Vousdens in preference to that of the Hirsts:

Specifically I accept the plaintiffs understood at the end of 12 months they would have the right to release essentially on the same terms as the one given to them and I record I am satisfied Mr Hirst in particular appreciated this was the position.I do not accept the defendants' claim the granting of any lease at the end of the initial 12 months was subject to the Hirsts being satisfied with the Vousdens as tenants.

[12] Having reviewed the evidence, we have come to the conclusion that the Judge cannot be said to be wrong in making this critical finding.He thought it was consistent with what the Vousdens were committing themselves to during the first year and that the position taken by the Hirsts was totally at odds with the then future plans of both parties.We agree.It seems most unlikely that the Vousdens, comparatively naive as they may have been about matters of business, would have been prepared for Mrs Vousden to give up her job in Auckland (Mr Vousden had previously been made redundant) and move to Waipu Cove and put in a good deal of hard work in trying to revive a failing business, only to be at the mercy of the Hirsts at the end of the first year.Obviously the rewards for the work done in the first year were likely to be reaped only if there were an extension.

[13] It has to be said that Mrs Vousden's evidence is, as we have indicated, somewhat lacking in precision - she tended to give quite rambling answers - but she did say that matters were decided or confirmed at the February meeting. That was in the context of having spoken of periods of 3 x 3 x 3.Mrs Vousden said that in fact the main concern of the Hirsts at the meeting had been that the Vousdens would be available to take over if they proceeded to give Mr McCarthy a notice to quit.The Judge heard and saw the witnesses, an advantage we do not have.We have concluded that it would be wrong for us to take a different view and we affirm his finding that it was agreed that at the end of the one year period and subject, of course, to their having met their obligations during that period - of which there is now no question - they were entitled to call for a lease for three years (with two rights of renewal of three years each) on the terms contained in the schedule to the Auckland District Law Society's lease form.That of course included the requirement that there be no deduction from rental payments and the ratchet clause.But it also included the right of assignment with the consent of the lessor.In the latter connection we note that in the last of the points from Mr Hirst's note he refers to reserving "the right to take over business (not including chattels)".That indicates that Mr Hirst well understood that the business would belong to the Vousdens (or any assignee) until the end of the 10 years when, upon the lease coming to an end, it would revert to the Hirsts.

[14] We have not overlooked a note made by Mrs Vousden much later on, after the parties had fallen out, of which Ms Bolwell, for the appellants, made much during oral argument.She referred to a passage which indicates considerable uncertainty over what would happen after the initial one year.It is quite plain, however, on a reading of the entirety of that note that it sets out a chronological narrative, much as we have been doing in this judgment, and that in the paragraph in question Mrs Vousden is describing the position in November 1998 before she took the lease form to her lawyer.It is not indicative of her state of mind at the time of the February meeting when, obviously, the Vousdens were being asked to firm up their position so that the Hirsts would know that they definitely had someone to replace Mr McCarthy if notice were given to him.

[15] The Hirsts did give notice to Mr McCarthy who vacated after Easter.The Vousdens were at the property during Easter familiarising themselves with the situation although they did not go inside any of the cabins other than the one that they were themselves occupying.The Vousdens have alleged that it was a term of the arrangement that the business would be a going concern in the sense that the takeaway bar and the cabins would be operational when they took over, which occurred in April 1999.We do not consider, however, that there was any such term, at least as expressed in that bald way.It is clear from the evidence that the Vousdens anticipated that the business might have to be closed for perhaps a few weeks after they took over either because Mr McCarthy might remove the chattels which belonged to him and which would need to be replaced before the business could operate, or because there might be a problem with the local authority concerning the continuing licensing of the business. Both of these things happened and the Vousdens did have to buy chattels - they say they expended about $15,000.There were difficulties with the local authority.It was decided that work should be done on the building in which the takeaway bar was housed.There was therefore no business for the Vousdens to run.Mr Vousden did some work about the property which was in a very untidy condition.Mrs Vousden remained in her employment in Auckland.The Vousdens were receiving little or no income from the property.The Hirsts nevertheless insisted upon receiving payment of the monthly instalments of rent.They needed this in order to be able to show their bank an income stream from the property and thus obtain finance for the renovations, which proved to be much more extensive than either side, it seems, originally envisaged.The Vousdens were prepared to oblige their friends by paying the rent although they say that there was an understanding that there would be an appropriate adjustment at a later time to recognise the position in which they found themselves.As it happened, the takeaway bar was not ready to open for business until December 1999 - just before the beginning of the holiday period over which much the greater proportion of the annual earnings of this kind of business is derived. Therefore for a period of eight and a half months the Vousdens were paying rent but receiving no income from the takeaway business.

[16] Nor did they receive income from the cabins which also proved to be in a very rundown condition.They were affected by a flooding problem in winter. The Hirsts proposed that five of the cabins should be removed and replaced with a new accommodation building.This appeared to be to the ultimate advantage of both parties and the Vousdens agreed.These cabins were removed in October 1999.Unfortunately, complications developed with the local authority which would not permit the erection of the proposed new building.Matters dragged on and eventually the five cabins were returned just before the expiry of the first year, at the end of March 2000.Work had been done on them and they would have been in lettable condition but for the fact that they had, quite deliberately on the part of the Hirsts, not been connected to power and water. By that time too the high season of 1999-2000 was virtually over.The cabins remained virtually useless.

[17] The previous good relationship between the Vousdens and the Hirsts had broken down.The Hirsts were taking the position that the Vousdens were not entitled to any further extension of the lease - a position which might to the objective observer appear quite unreasonable given that the Vousdens had been paying rent at $19,000 per annum throughout the 12 months, had had to commence the takeaway business in the running of which they were inexperienced some eight and a half months into the 12 month period and had not had the five cabins available as anticipated, nor any replacement.(The other cabins remained in a very poor condition and, it seems, were not used for accommodation.)Whatever the competence of the Vousdens, it is surprising that their "friends", the Hirsts, chose to treat them in this way.

[18] Although the Hirsts contended that there was no continuing lease arrangement, the Vousdens remained in occupation and continued to operate the takeaway bar.They took the position that in the circumstances they should be given a rent holiday to compensate them for what had happened during the first 12 months.The Hirsts would agree to the waiving of one months rent only.The Vousdens also contended that the rent after 1 April 2000 should be set below $19,000 per annum until the cabins were properly made available to them, i.e. connected up.The Hirsts were insisting that the new rent be $20,000 per annum, if there were to be any lease, and that the terms of any lease would have to be negotiated by the respective solicitors.For some months there was a stand-off during which time the Vousdens paid no rent, taking the view that they were entitled to do that because the Hirsts were refusing to recognise any extension of the lease and to connect up the cabins.The Vousdens were asking for a written lease in the form they said had been agreed upon and would not pay any further rent until they received it.

[19] The solicitors endeavoured to resolve the dispute but negotiations broke down, mainly, it seems, because the Vousdens were stipulating that any lease should contain a right of assignment.We have already indicated our view, in agreement with Morris J, that they were entitled to insist upon the inclusion of such a provision.It seems from the correspondence that if this point had been overcome there would have been little difficulty in reaching agreement on the new rental at a level of $20,000 per annum plus GST, on the basis that the cabins were connected up, which was something able to be done very swiftly, if the Hirsts were minded to do it.

[20] Regrettably the stand-off continued and on 14 October 2000 the Hirsts served notice to quit on the basis of non-payment of rent.The Vousdens responded by applying to the High Court under s120 of the Property Law Act 1952 seeking relief against forfeiture of the lease.As there was no question that, if they had the right to a renewal or extension, they had exercised that right, that application may have been misconceived.It is patent on these facts that an application for equitable relief against forfeiture for non-payment of rent, if any such application were needed, would have succeeded.The Hirsts, however, pre-empted the position.At about 5pm on 22 December 2000, when solicitors' offices had closed for the Christmas holidays, the Hirsts and supporters arrived at the premises accompanied by a policeman and the Vousdens were evicted.Thereafter they elected not to pursue their application for relief against forfeiture and commenced the present proceeding seeking damages for breach of the lease contract by the Hirsts, in particular for unlawful termination.

[21] Something of Morris J's judgment has already been mentioned.We will now set out his other conclusions.It is convenient to mention, first, that the statement of defence of the Hirsts did not plead the Contracts Enforcement Act 1956.The defence available under that Act, of an absence of a sufficient writing, must be pleaded.It was not until after the Vousdens' case had closed that the Hirst's counsel applied to amend the statement of defence in this respect.In the exercise of his discretion Morris J refused that application. He said that the Vousdens' case could well have been shaped considerably differently had the issue been specifically pleaded.There could well have been further material raised on the issues of part performance "and the nature of cheques and receipts given as payment of the rent".He said that the central issue in the case had always been whether there was an oral agreement and the terms of it."The issue between the parties is not whether there was an agreement but the terms of it".He went on to note, however, that if he had allowed the application he would without hesitation have found that there had been part performance by the Vousdens such as to justify him finding a legally binding contract.He referred to the actions of the Vousdens in moving into the premises, the work done by them in and about the property and the money and time they spent on it, and said that these could only be activities done in reliance on the contract which the Vousdens alleged.

[22] We consider that the Judge properly exercised his discretion.There would have been prejudice to the Vousdens in allowing the application.They were entitled to prepare for trial on the basis that the technical point that there was no sufficient writing was not being taken and that they would not have to rely upon proving acts of part performance.Their evidence was accordingly not directed to the question of why they did certain things about the property. Moreover, we agree with the Judge that, if the application had been granted, there were acts of part performance so that the defence would have failed in any event.

[23] The Judge said that he was satisfied that there was in November 1998 a concluded bargain between the plaintiffs and the defendants.For the reasons we have already given, that cannot be correct but our difference from the Judge relates only to the point of time at which matters matured sufficiently that there can be said to have been a concluded bargain.That point was reached, taking into account the result of the meeting in February, once the Vousdens were able to move into possession and thus the arrangements could commence to be implemented.The Judge also said that he was satisfied that the terms of the proposed lease "are sufficiently identified by reference to the copy handed to Mrs Vousden and a consideration of the terms of that lease along with what I accept has been said by the parties".We agree, and have already given our reasons.

[24] The Judge was satisfied that it was the intention of both parties that the takeaway business would be a going concern when taken over.We have indicated that we take a different view on that point.The Vousdens were accepting the risk that the business might be closed for a relatively short period.That occurred and then, in the initial stages at least, and with the consent of the Vousdens, the physical position underwent some change both as to the takeaway bar and the cabins.The Vousdens elected to carry on.We do, however, accept that the Hirsts were in breach in respect of the five cabins from the point at which they were able to be restored to the property and the Hirsts deliberately refused to connect them up.Thus by the end of the 12 month period, at the latest, the Hirsts were significantly in breach of the contract with the Vousdens in that respect.

[25] Ms Bolwell was particularly critical of the following paragraph of the judgment which concluded the Judge's discussion on the issue of liability:

The plaintiffs were bound to pay the rent for 12 months.This period expired in April 2000.They were then entitled to ask for a lease on the terms agreed to in November 1998.They asked.They were not offered such a lease.They stopped paying rent.The fact is no rental was agreed to for the period subsequent to the end of April 2000.Had the contract been carried out and the lease executed, rental no doubt would have been agreed to either on the basis of a fair market rental or by arbitration or by agreement.I do not see this as a situation where the tenant was holding over.The plaintiffs were there pursuant to a contract which I have found the defendants subsequently breached. I note in this regard the draft form of lease handed to the plaintiffs contains specific provisions as to payment of the rent with review provisions.There is provision for arbitration if there is disagreement.The defendants in my view were therefore not entitled in the circumstances to issue a notice to quit or evict the plaintiffs from the premises on the basis of their being trespassers. Effectively the defendants were in breach of the terms of the contract which I have found was made between the parties in November 1998.The plaintiffs are therefore entitled to damages.

[26] We consider that the conclusion reached by the Judge in this paragraph was correct save for the reference to November 1998.It is said for the Hirsts that he overlooked the "no deduction" and ratchet clause provisions of the Law Society form; and that accordingly, because the Vousdens declined to pay ongoing rent when they should have continued paying at the rate of $19,000 per annum pending resolution of the dispute, the Hirsts were entitled to cancel any contract which might have existed on the ground of non-payment of rent. Therefore, it was submitted, the eviction was lawful.

[27] Again, we disagree and affirm the view taken by the Judge.First, it is arguable that the "no deduction" clause may not be applicable in a circumstance in which the breach takes the character of rendering a significant portion of the income earning asset unusable by the lessee.We need not decide that point because, in the second place, the Hirsts were disentitled from taking the point against the Vousdens because they themselves were denying the existence of any continuing contract and thereby repudiating it.How can it be said that lessees are obliged to keep making rental payments pursuant to a contract (i.e. not merely because they are holding over or are in possession at the sufferance of the lessor) when the lessors are refusing to acknowledge the existence of the lease contract?And how can a purported cancellation of the lease on that ground then be valid?Thus, even if the Vousdens were not entitled to assert a setoff or to seek a rent reduction or to cease rental payments, the Hirsts had disentitled themselves from relying on that point.The eviction was therefore unlawful.

[28] It would of course have been different if the Vousdens had in reality no continuing contract of the kind which they have asserted, and which we have found to exist.But the Hirsts elected to act unilaterally to remove the Vousdens from the property without having the question of the existence of the lease determined by the Court, as the Vousdens plainly wanted.They are therefore the authors of their own misfortune.We add that the Vousdens were prepared to pay the disputed moneys into their solicitors' trust account. Their conduct cannot in the circumstances be seen as a repudiation of their obligations under the lease to which they were entitled.

[29] The judgment of Morris J then turned to the assessment of damages.He reviewed the submissions of counsel and referred to evidence from accountants called respectively for the Vousdens and the Hirsts.The Judge saw no basis for allowing damages simply because the business was not up and running when the Vousdens took over.He said that thereafter, because of the carrying out of the necessary works when the Vousdens themselves were aware of the situation and elected to go ahead, they had acquiesced in the doing of the works.

[30] The Judge said that he found it very difficult to assess just what the takeaway business and the accommodation business would in fact have earned had the Vousdens been able to remain in possession.He was satisfied they would have made a profit but he found it difficult to make "anything other than a broad assessment".The Judge took the view that the Vousdens "went into this operation with their eyes wide open as to the state it was in".He did not accept that they could have anything by way of damages for the period prior to their eviction, observing that there was considerable evidence which suggested "they did not run the place well".

[31] In the end, after referring to the general discretion under s9 of the Contractual Remedies Act 1979, the Judge merely said that he awarded the Vousdens $70,000 pursuant to that section:

This amount is a fair assessment of the probable loss of income and loss of worth of the business which they have suffered as a result of the unlawful termination by the defendants of this contract.This award is made on the basis they will in fact pick up from the premises the material of theirs which is still there and the defendants will make a refund of such stock as is probably payable.

[32] The Judge then rejected the Vousdens' claim for exemplary damages but found that the action of the Hirsts in evicting the Vousdens as they did, "without legal justification and also in my view with total disregard", justified an award of aggravated damages of $5,000 for each of the Vousdens. He commented that the Hirsts' action was "high-handed in the extreme and must have added to the distress of both the plaintiffs who were already in a most disturbing situation".

[33] The way in which the Judge ultimately fixed compensatory damages of $70,000 is unsatisfactory because he has given no real indication of the way in which he came to that figure.Having said that, it is unavoidable in a situation of this kind that an assessment will involve some elements which can be described as "broad-brush".And there is a particular difficulty because the eviction came at a time when the business was still relatively in its infancy.

[34] In the cross-appeal of the Vousdens seeking an increase in the damages award there is a mixture of sums claimed on the basis of expectation loss and sums claimed for wasted expenditure and loss of alternative opportunity, sometimes known as reliance losses.We will now examine what is properly claimable on each basis and then determine which measure best represents the appropriate award.

[35] We begin with the claim for the loss of the value of the business because of the eviction, which is properly coupled with a claim for profits lost (i.e. business income not received) because of breaches during the continuance of the lease.The accountant called for the Vousdens estimated that if the takeaway business had continued for the second year (1 April 2000 to 31 March 2001) it would have produced a profit of a little less than $47,000.(That is debatable but for the moment we take it as a given).If a business with present earnings at that level had been offered for sale in December 2000 it would have attracted a goodwill payment.The evidence before us suggests that goodwill for such a business would have been the equivalent of half a year's profit. That may be thought conservative but there was little evidence directed to this point by which we can be assisted.It is in fact unnecessary to take that matter further because the amount sought in the statement of claim for "Loss value of the business" is for $15,000 only.

[36] In addition, the Vousdens would have been able to sell the chattels which they owned and used in the business.Their claim is now put forward in the sum of about $13,500, reduced a little from the figure in the statement of claim. But it is apparent that some at least of the chattels remain available to be uplifted by the Vousdens, as the Judge noted.We assess the loss in relation of the chattels which could otherwise have been sold as part of the going concern at $7,500.

[37] The Vousdens left behind stock valued at $4,500, which could also have been sold.But as it seems to have been taken over by the Hirsts, that sum is properly claimable.

[38] Also claimable on this first approach are damages for continuing breaches by the Hirsts during the currency of the lease.Because the Vousdens, accepting the good faith of the Hirsts, acquiesced in the closure of the takeaway bar for renovations and the removal of the five cabins, we must proceed on the basis there was no breach of contract in this respect.As we have indicated, however, there was a breach when the cabins were not returned in usable condition.The loss of income from this source, mostly during the low season, was moderate.But, as the Vousden's accounting expert said, in the situation in Waipu Cove lack of cabin occupancy produced a lower number of customers for the takeaway bar.We assess the overall loss of profits from the unavailability of the cabins and consequential reduced retail patronage at $10,000.

[39] The total of the foregoing sums is $37,000.To that total there could be added a further sum to compensate for lost profits for a reasonable period pending a notional sale of the business.We find it unnecessary to try to calculate any additional sum on that account given the greater reliability of the alternative approach to damages in this case to which we now turn.

[40] The second approach to damages is an assessment of wasted expenditure and loss of opportunity to earn elsewhere.Wasted expenditure includes the amount of losses suffered in running the business unless and to the extent that these were increased by the incompetence of the Vousdens.In round figures, the losses from 1 April 1999 until the eviction totalled $45,000.Part of this happened because the business could not commence trading until December 1999.The Vousdens were not to blame for this delay.Such losses could not be recouped before the eviction, particularly when there was the ongoing situation with the unconnected cabins.Morris J expressed the view, based on the evidence he heard, that the Vousdens were not very competent in their running of the business.To some extent that was excusable and the Hirsts knew when entering into the contract that they were dealing with people with no prior experience.Some private use of business assets is also alleged to have contributed to the reported loss.The Vousdens did have "free" accommodation during the period in question which should be brought to account.The claimed figure also includes the writing-off of a van originally valued, for book purposes, at about $6,000.It was in dispute whether the van was actually used for business purposes but, even if it was, the Hirsts cannot be blamed for the deterioration of the van to an apparent nil value over the period in question.

[41] Making, as best we can, an adjustment for these matters, we assess the claimable business losses at 60% of the book loss or $27,000.

[42] Next, there is the same loss on chattels as on the first approach, namely $7,500.(The depreciation is taken into account in the claimed business loss.) There is also the loss on stock of $4,500.In addition there is a claim for itemised incidental expenditures for which we allow $2,500.

[43] The final head is salary or wages foregone - what the Vousdens would have earned if they had not entered into the contract.In Mrs Vousden's case, she would almost certainly have remained in her employment, from which we know she derived income of about $19,000 (or approximately $2,000 per month) from April till December 1999.It is reasonable for the claim in respect of her to be at that rate throughout the period of the lease and for, say, three months after the eviction (to cover the 2000 - 2001 holiday period when she could not be expected to find work and for a time thereafter seeking employment).That is $2000 x 15 months=$30,000.There are difficulties in assessing Mr Vousden's claim since he was not employed, having been made redundant, before the saga commenced.In view of his age and, it would seem, his relatively limited abilities, there is no certainty that he would have otherwise been in steady employment.He would not have qualified for an employment benefit because of his wife's earnings.We allow $10,000 in his case.

[44] We have also considered and rejected a third possibility, that damages might be calculated on the basis of the profits which would have been derived prior to the eviction but for breaches by the Hirsts, together with projected profits for a reasonable future period.If reliable information concerning the profitability of the business were available, that might have been an available option.But the difficulties in making such an assessment make the result of any such exercise insufficiently reliable.We were, for the purposes of the first approach, content to adopt the annualised profit at which the respondents' expert arrived, but we have to say that his method involved a comparison of figures for such a very limited period in the two financial years (which was all that was available) that we would not be prepared to place much reliance upon it.We were content to adopt it for the first approach because the goodwill figure was limited by the statement of claim and it was also obvious to us that that approach was going to produce a figure much lower than the second approach.On the material before the Court, an assessment of what profit might have been derived within a reasonable time of the eviction would be simply guesswork.

[45] On the second approach the damages total $81,500.We consider that this is the sum which the Judge could properly have awarded.To adopt the first approach would unfairly disadvantage the Vousdens because it involves valuing the business as at the time of the eviction when it was just getting started and the Vousdens were certainly not seeking to sell it.It is reasonable to assume that, if the eviction had not occurred and the Hirsts had honoured their contractual obligations, the value of the business would have increased very significantly, though we are unable to say by how much.The Vousdens should not be disadvantaged because their development of the business was unlawfully cut short.To award damages on an expectation basis would, to an extent, allow the Hirsts to benefit from their own wrong.

[46] Both sides sought to have us depart from Morris J's total award of $10,000 for the distress caused by the circumstances of the eviction.We consider that he was right to award damages of this character and we do not differ from his assessment of the appropriate quantum.

[47] In the result, the appeal is dismissed and the cross-appeal allowed.The damages payable by the Hirsts are fixed in total at $91,500.The Hirsts must pay the costs of the appeal in the sum of $5,000 together with the reasonable expenses of the Vousdens, including travel and accommodation costs of their counsel, to be fixed if necessary by the Registrar.

Solicitors:

Kendall Strong, Auckland for Appellants

Wynyard Wood, Auckland for Respondents