Hard To Find But Worth the Effort Quality Second Hand Books (Wellington) Ltd (in liq) v He HC Wellington CIV 2006-485-2078 [2007] NZHC 377; [2007] 3 NZLR 539 (26 April 2007)

Last Updated: 18 January 2018

For a Court ready (fee required) version please follow this link

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

_{CIV 2006-485-2078}

UNDER the District Courts Act 1947

IN THE MATTER OF an appeal under section 72(2) from a decision of the Wellington District Court CIV 2005-085-632 dated 21 August 2006

BETWEEN HARD TO FIND BUT WORTH THE EFFORT QUALITY SECOND HAND BOOKS (WELLINGTON) LIMITED (IN LIQUIDATION)

Appellant

AND YONG QUAN HE, JUN YOU HE & JUAN NA HE

Respondents

Hearing: 29 March 2007

Appearances: D Smith for Appellant

P Withnall for Respondents

Judgment: 26 April 2007 at 11 am

_{RESERVED JUDGMENT OF MILLER J}

CONTENTS

Introduction

Factual background

The pleadings

The District Court judgment

The appeal

Date of re-entry

Does the distraint preclude termination for non-payment of the same rent?

Damages

_Costs

HARD TO FIND BUT WORTH THE EFFORT QUALITY SECOND HAND BOOKS (WELLINGTON) LIMITED (IN LIQUIDATION) V YONG QUAN HE, JUN YOU HE & JUAN NA HE HC WN CIV 2006-485-

2078 26 April 2007

Introduction

[1] At issue in this appeal are the quantum of the appellant’s damages for conversion following an unlawful distraint and the respondents’ right to damages following re-entry for non-payment of the same rent for which distraint was made.

Factual background

[2] I adopt Judge Kelly’s summary of the factual background:

[1] The plaintiff, Hard to Find But Worth the Effort Quality Second Hand Books (Wellington) Ltd, was incorporated on 26 May 2004. The shares are held equally by Mark Baskind and Warwick Jordan on behalf of a trust. The company has been in liquidation since 2 June 2005.

[2] The defendants, a father and two sons, jointly own the premises at 134

Cuba Street, Wellington.

[3] On 28 May 2004 the parties entered into an Agreement to Lease. It was a term of the Agreement to Lease that the tenant, Hard to Find But Worth the Effort Quality Second Hand Books (Wellington) Ltd, would enter into a formal lease with the landlords, Yong Quan He, Jun You He and Jun Na He.

[4] It was agreed the covenants of the lease were not to be more onerous than those contained in the Auckland District Law Society, Commercial Lease Form, 4^th Edition 2002(2), which I will refer to as the ADLS lease form.

[5] The guarantor of the Agreement to Lease, Mark Baskind, agreed to guarantee the obligations of the tenant and to sign the ADLS lease form as guarantor.

[6] The tenancy began on 1 July 2004 and the plaintiff's business, trading as Hard to Find Books, began about then with Mark Baskind as manager of the business.

[7] The premises at 134 Cuba Street were stocked and fitted out by the plaintiff with stock and chattels purchased from Baxter & Mansfield Rare, Collectable and Interesting Books Ltd. The plaintiff also paid for some wiring, cabling and lighting in the premises and to install signage.

[8] A formal Deed of Lease was prepared and forwarded to the plaintiff's solicitor. There were discussions regarding the plan attached to the lease and who was to sign as guarantor.

[9] In December 2004, without notice, Mark Baskind left New Zealand taking with him some equipment and cash belonging to the plaintiff.

[10] In late January 2005 there were various telephone conversations between Warwick Jordan and the solicitors for the defendants, attempting to

negotiate terms on which to continue the business, and the lease of the premises.

[11] The plaintiff failed to pay the rent due on 1 February 2005.

[12] There were further discussions between Warwick Jordan and the solicitors for the landlords in the days leading up to 8 February 2005. Warwick Jordan was attempting to negotiate with the lawyers for Mr Baskind and the landlords to see if the lease could continue to enable the business to continue trading.

[13] On Sunday 6 February 2005 Mr Jordan instructed the acting shop manager to shut the shop and lock it.

[14] On 8 February 2005 a warrant to distrain was issued by the defendants to Jian Huang. On the same day Mr Huang signed an inventory under the Distress and Replevin Act 1908 with four handwritten entries as follows:

Computer, eftpos machine, cash register, books (80)

[15] On 9 February 2005 the solicitors for the defendants wrote to the plaintiff demanding rent arrears of $7,031.25 to be paid by 14 February 2005 and advising that if the rent was not paid by that date, the landlords would exercise its available remedies including termination of the tenancy.

[16] On the same date the solicitors for the defendants also forwarded to the plaintiff a copy of the warrant to distrain and the inventory list. They also advised that the items listed were currently being held at the premises of the landlords and would be sold by public auction, if the sum claimed for rent owing, was not paid within 5 days.

[17] On 22 February 2005 the solicitors for the defendant wrote to the plaintiff enclosing a notice of termination, advising that the landlords re- entered the premises on 22 February 2005.

[18] Discussions then followed between the solicitors for the parties as to the time for removal by the tenant of fixtures, chattels and fittings. The end result of the discussions was that access was provided to the tenant from

3.00pm to 5.00pm on 28 February and from 10.00am to 5.00pm on 1 March

2005. During this time some stock and chattels were removed.

The pleadings

[3] The plaintiff sued for breach of contract (based on the agreement to lease and the ADLS lease form), for breaches of the Distress and Replevin Act 1908, and for conversion in taking over the premises and stock. The damages claimed in the amended statement of claim of 14 September 2005 comprised the value of stock ($68,225), chattels and fixtures at that date valued at $13,575, and costs and

disbursements incurred by the plaintiffs when attempting to remove their stock on 28

February and 1 March 2005, amounting to $2,639.70.

[4] The defendants denied the breach of contract claim, saying that no agreement was entered into in the ADLS lease form because the plaintiff refused to accept the deed of lease that they had prepared. They admitted distraining for rent on 8

February 2005 but say they were entitled to do so before expiration of the 14 day period referred to in the ADLS lease because on 7 February 2005 Mr Jordon advised that he would not be paying any more rent and was closing down the business, and on 8 February he faxed the defendants saying that the shop manager had resigned and the plaintiff was being put into liquidation. The defendants denied re-entering on 8 February. They counterclaimed for $50,858.69 comprising $42,187.50 for loss of rental from 1 February 2005 until the premises were re-let on 1 August of that year, with fitout costs of $937.49 per month due under Special Condition 5 of the Agreement to Lease (a total of $5,624.94) and expenses in relation to the lease and distraint of $3,046.25.

[5] The plaintiff denied the counterclaim, saying that the lease was terminated when the premises were re-entered on 8 February 2005 such that the plaintiff’s obligations ceased as of that date. It acknowledged liability for rent due until

8 February.

The District Court judgment

[6] The Judge found that as at 8 February the contractual relationship between the parties was governed by the agreement to lease, under which they agreed to enter into a formal lease, the covenants of which would be no more onerous than those in the ADLS form. Clause 28 of that form stated that the landlord was not entitled to disclaim for rent until it had been outstanding for 14 days from due date, and clause

29 stated that the landlord was not entitled to re-enter for unpaid rent until it had remained unpaid for 14 days. The Judge held that because there had been part performance the plaintiff had an equitable lease, the terms of which meant the defendants could not distrain or re-enter until rent had been outstanding for at least

14 days from due date.

[7] The Judge then found that the defendants re-entered the premises on 22

February and not, as the plaintiff alleged, on 8 February. It will be necessary to examine her findings further because they are said by Mr Smith to lie at the heart of the appeal. Her conclusion was that the defendants consistently treated the lease as still being on foot right up to giving notice terminating it on 22 February 2005. The evidence failed to establish on the balance of probabilities an unequivocal intention on the part of the defendants, viewed objectively, to retake possession of the premises to the exclusion of the plaintiff before 22 February.

[8] The Judge then found that the distraint on 8 February was unlawful because the defendants were not entitled to distrain before 14 days had elapsed. It is common ground that rent fell due and was unpaid on 1 February 2005. The Judge further reasoned that the distraint was unlawful because the defendants did not enter the premises in the ordinary way; rather, a key was used to enter a side door, and the entry triggered an alarm. She found that the actions of the defendants involved breaking into the premises as she was unaware of any basis for them to use a key to enter through a locked door. Further, the distraint did not comply with the Distress and Replevin Act 1908; the chattels were not distrained in accordance with the warrant to distrain and the inventory dated 8 February did not comply with the Act in that it did not clearly enumerate what had been taken, nor was a bill of charges produced. The items recorded were not sold by public auction, and as at the date of trial they remained in the defendants’ possession.

[9] The Judge then held that it followed from the illegal nature of the distress that the distrainor was a trespasser, and damages for a legal distress can include the full value of the chattels lost without any deduction for rent. The plaintiff was entitled to recover damages for the unlawful distraint, being the value of the chattels and stock distrained, with some aggravated damages as a result of the defendants acting unreasonably and the amount of notice given and the amount of access allowed to the plaintiff to remove stock, chattels and fixtures from the date of re-entry. The defendants had not acted reasonably in selling stock that was left in the premises.

[10] The Judge reviewed the evidence about loss, including that of a valuer. The evidence was unsatisfactory, as the plaintiff acknowledged, but that was a result of

the actions of the defendants. She took a global approach, finding that the plaintiff had proved damages totalling $50,858.69, inclusive of GST. That was an appropriate figure given the overall merits of each party’s claim and what the Judge considered the interests of justice, and it took into account the amount of damages claimed by the defendants in their counterclaim.

[11] Turning to the counterclaim, the Judge recorded that she had found that the defendants did not re-enter until 22 February and therefore that the re-entry was lawful. It followed that although the re-entry determined the lease it did not release the plaintiff from liability in respect of non-payment of rent. The plaintiff was liable for unpaid rent from 1 February 2005. The defendants took reasonable steps to mitigate their loss, and re-let at the premises with effect from 1 August that year. The losses had been proved as claimed, and the defendants were entitled to damages in the sum of $50,858.69.

[12] Turning to costs, the Judge recognised that under s.21 of the Distress and Replevin Act the plaintiff was entitled to recover full costs, but the defendants were also entitled to solicitor/client costs under the ADLS form of lease. In the circumstances, the Judge held that costs would lie where they fell.

The appeal

[13] Hard to Find appeals, saying that the District Court Judge was wrong in law and in fact in finding that the premises were not rented until 22 February 2005, and finding for the defendants on the counterclaim, and in reducing its damages to the sum awarded. There is no cross-appeal, although Mr Withnall invited me to find that the damages awarded to the appellant were nonetheless excessive and asked me to reduce them under Rule 711(4).

[14] Mr Smith focused on the Judge’s factual findings about the date of re-entry, contending that they were not open to her on the evidence. He maintained that if the respondents re-entered and terminated the lease on 8 February, the award of damages on the counterclaim could not be sustained. He argued in the alternative that there was no right to re-enter and terminate on 22 February because the respondents had

elected to distrain for the same default in paying rent that was relied upon to terminate and re-enter. The respondents were bound by their election to distrain, or estopped, or there was no breach as at 22 February because by reason of the distraint the respondents must be taken to have been paid the rent due to them. With respect to damages, he contended that the Judge essentially accepted his client’s evidence as to loss, and that damages ought accordingly to have been awarded as claimed.

Date of re-entry

[15] It was common ground that Judge Kelly correctly stated the test of re-entry. There must be an unequivocal taking of possession, evidenced by an act or acts that, viewed objectively, establish an intention to exclude possession by the tenant: Haddon v PK & CA Bird Motels Limited (1993) 2 NZ Con C 191,600.

[16] In his written submissions, Mr Smith argued that the Judge gave insufficient weight to the fact that the distraint on 8 February was illegal, contending that this fact shifted the onus to the respondent to prove on the balance of probabilities that they had not re-entered the premises and terminated the lease. He cited no authority for that point and I did not understand him to press it in oral argument. In my view it is not correct; the onus, as in any civil proceeding, remains with the plaintiff, and the question is not whether the distraint was unlawful but whether the actions of the respondents, viewed objectively, involved a taking of possession and termination of the lease.

[17] This ground of appeal was otherwise advanced on the facts, and it is possible to deal with it on that basis because I am satisfied that the finding the Judge reached was open to her.

[18] Mr Smith took me carefully through the evidence for the appellant, particularly that of Warwick Jordan, Joseph McCarter, Shane Cook, and Mark Baker. He contended that this evidence established that on 8 February the lessors took possession of the premises, dismantling the alarm system, and that they traded the business from that date, an act that would be inconsistent with the tenant remaining in possession. For instance, Mr Cook, a security guard, attended on 8

February and after discussions with Mr He, made a note recording that the landlord was dismantling the alarm system and taking possession of the premises. Mr Baker, who had worked at the premises, gave evidence that on 10 February books had been removed from the window display and there was a “we are open” sign on the counter, with magazines on a trolley that were not part of the appellant’s stock.

[19] However, the Judge was entitled to prefer the evidence for the respondents. It began with the distraint documents themselves, which were left at the premises. They evidenced an intent to distrain and not to re-enter. There was a letter of 9

February from the respondents’ solicitor recording that they reserved their right to exercise their remedies, including termination, if the rent was not paid by 14

February. The notice of termination was given on 22 February because the respondents, believing that the ADLS lease was not in effect, assumed that 21 days notice was required under the Property Law Act. When they distrained on 8

February they took a computer, an EFTPOS machine, a cash register, and 80 books to other premises (Mr He’s home). They left the premises, complete with remaining stock, and did not change the locks. Mr He’s English appears to be poor (he gave evidence through an interpreter), so the distinction between taking possession and distraining for rent may have been confused. The respondents maintain that they were simply trying to turn the alarm off when Mr Cook arrived, and their evidence was that on 10 February they were cleaning the premises and not trading. Their presence at that time was explicable because the lessee had made it plain that it would not resume trading.

Does the distraint preclude termination for non-payment of the same rent?

[20] The items distrained, which I have listed above, were not sold or accounted for, and evidently remained in the respondents’ possession at the time of the hearing in the District Court. But by a notice dated 22 February 2005, the respondents terminated the lease for non-payment of the rent due on 1 February, demanding that the appellant remove its chattels within three working days of the notice.

[21] Mr Smith advanced his argument initially on the basis that there was an estoppel preventing the respondents from legally terminating the lease. For this he

relied upon the decision of the Court of Appeal in McDrury v Luporini [2000] 1

NZLR 652. It was common ground between counsel that this issue was raised in the District Court but was not the focus of argument there, and Mr Withnall accepted that the point was available in this Court.

[22] McDrury, which was not cited in the District Court, concerned a farm lease which was terminated by re-entry for breach of a fertiliser covenant. The lessors continued to invoice the lessees for rent until the re-entry, and the rent so invoiced was paid. The issue was whether by accepting rent the lessors waived the breach of the lease. The Court of Appeal held that although the lessors had known that the lessees were in breach, they had not, by accepting rent before the issue of a statutory notice under s.118 of the Property Law Act, and during the currency of that notice, waived their right to forfeit the lease if and when the notice expired unfulfilled. Acceptance of rent while the notice ran could not be regarded as an election not to exercise the contingent remedy of forfeiture, nor could any estoppel arise. The question of waiver arises only where the lessor is choosing between two inconsistent remedies for the wrong, and following a breach by the lessee. If with full knowledge of that breach the lessor, having the right to forfeit, unequivocally indicates that the lease will not be forfeited, the law holds the lessor to that election. No choice is possible between inconsistent remedies until the lessor has an unconditional right to cancel or forfeit the lease. The Court also observed that in the period following their becoming aware of a breach, lessors should be entitled to a reasonable time in which to assess their options, and the simple act of accepting rent during that period should not inevitably be construed as leading to an estoppel.

[23] Counsel next referred to Dovey Enterprises Limited v Guardian Assurance Public Limited [1992] NZCA 146; [1993] 1 NZLR 540, in which a notice of termination of lease and warrant to distrain was served on the same day in respect of unpaid rent. The validity of the distress was challenged. It was common ground in the Court of Appeal that the lease was terminated on re-entry, and it was accepted in the High Court that at common law the right to distrain was extinguished by termination of the lease. The High Court held that the termination of the lease by re-entry was the primary step and that the consequential levying of distress was unlawful but resulted in no loss. That conclusion was upheld. The Court of Appeal held:

Where there is a breach of the terms of a lease by non-payment of rent the lessor (subject to the provisions of the lease) may take steps to forfeit the lease or may treat the lease as continuing. They are inconsistent rights and if by statements or conduct the lessor indicates unequivocally to the lessee that one course is or will be adopted, that will be regarded as a binding election resulting in the other being treated as waived or abandoned. If with knowledge of the breach the lessor elects to continue to accept rent or otherwise to treat the lease as continuing the lessor cannot thereafter invoke that breach to terminate the lease. Whether there has been a binding election is a question of fact for the particular case. The elements of common law election were reviewed in Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India [1990] 1 Lloyd's Rep 391. This Court dealt with them in a lease context in Amity Inns Ltd v R H & P L Papps Ltd (CA

25/92, 20 July 1992). The general principles governing a landlord's election to forfeit or not are summarised in para 2226 of Hill and Redman; see also R v Paulson [1921] 1 AC 271, 282, Expert Clothing Service and Sales Ltd v Hillgate House Ltd [1986] 1 Ch 340, 359 and Inner City Businessmen's Club Ltd v James Kirkpatrick Ltd [1975] 2 NZLR 636, 642.

Distress is a self-help remedy for non-payment of rent. It is to be exercised by a landlord with care and in compliance with the provisions of the Distress and Replevin Act. It is a means by which the landlord can recover rent but, because it is a right arising out of the relationship of landlord and tenant, distress is inconsistent with termination of the relationship by forfeiture, and levying distress waives forfeiture for the non-payment of the rent involved; Hill and Redman at para 2226, Hinde McMorland & Sim's Land Law (2nd ed, 1986) at para 5.160, Matthews v Smallwood [1910] 1 Ch 777, 786 and Watkins v Lamb (Auckland, A1063/81, 22 April 1987, Smellie J). Section

3(1) of the Distress and Replevin Act provides:

"3. Distress only on chattels of tenant or person in possession. Distress on agisted stock – (1) No person shall distrain, or levy, for rent due in respect of any messuages or lands, the chattels (other than agisted stock) of any person save and except of the tenant or person in possession of the premises in respect of which such rent has accrued due."

This clearly requires the existence of the landlord/tenant relationship at the time of the distress. Distress is prohibited on the goods of persons not tenants in possession of the premises at the time. In this case therefore the respondent could not distrain for rent after having terminated the lease on re- entry. The distress, as the Judge found, was unlawful.

[24] In reliance on this passage, Mr Smith contended that by levying distress the respondents waived forfeiture for non-payment of the rent unpaid on 1 February

2005.

[25] Mr Withnall contended that under the ADLS form of lease the non-payment of rent was a breach; and that breach subsisted, and authorised termination once the prescribed period in the lease (14 days) had expired with the rent remaining unpaid.

No question of waiver or estoppel arose, for the respondents’ conduct created no expectation that the lease would continue; there is no question of the appellant carrying on in the belief that the distraint signalled an intention to keep the lease on foot. The respondents explicitly reserved the right to terminate, and the appellant for its part did nothing in reliance on the distraint. He sought to distinguish Dovey on the ground that the distraint there followed termination; there is no inherent inconsistency between first distraining and then terminating for non-payment of the same rent.

[26] I have already referred to McDrury and Dovey Enterprises. I should also mention Matthews v Smallwood [1910] 1 Ch 777, 786, in which Parker J held:

Waiver of a right of re-entry can only occur where the lessor, with knowledge of the facts upon which his right to re-enter arises, does some unequivocal act recognising the continued existence of the lease. It is not enough that he should do the act which recognises, or appears to recognise, the continued existence of the lease, unless, at the time when the act is done, he has knowledge of the facts under which, or from which, his right of entry arose. Therefore we get the principle that, though an act of waiver operates with regard to all known breaches, it does not operate with regard to breaches which were unknown to the lessor at the time when the act took place. It is also, I think, reasonably clear upon the cases that whether the act, coupled with the knowledge, constitutes a waiver is a question which the law decides, and therefore it is not open to a lessor who has knowledge of the breach to say “I will treat the tenancy as existing, and I will receive the rent, or I will take advantage of my power as landlord to distrain; but I tell you that all I shall do will be without prejudice to my right to re-enter, which I intend to reserve.” That is a position which he is not entitled to take up. If, knowing of the breach, he does distrain, or does receive the rent, then by law he waives the breach, and nothing which he can say by way of protest against the law will avail him of anything.

[27] These authorities record a general rule that by distraining for unpaid rent the lessor waives its right to terminate for non-payment of the same rent. It does so because the two remedies are inconsistent, so that to elect one is to waive the other.

[28] The common law doctrine of election holds a party to an unequivocal choice between concurrent but inconsistent legal rights. By choosing one that party is deemed to waive the other. It is not necessary that the other party act in reliance on the representation: The Commonwealth v Verwayen (1990) 170 CLR 394 at 406-7,

421; Amity Inns v RH Papps Ltd CA 25/92 20 July 1992. Nor will it assist the first

party to purport to reserve both remedies, so long as the election has been clearly made.

[29] In The Commonwealth v Verwayen (at 406), Mason CJ preferred to speak of extinguishing the right rather than waiving it, observing that waiver is an imprecise term capable of describing both common law election and estoppel. I prefer waiver, despite its imprecision, because ‘extinguished’ suggests that the remedy not taken is forfeit but that is not always so. The lessor waives a legal right or remedy only if it has elected another concurrent but inconsistent right or remedy and, as the Court of Appeal held in Amity Inns, inconsistency is a question of fact to be determined in the circumstances of each case. Distraint and forfeiture are not invariably inconsistent; in particular, any inconsistency may depend on the sequence in which they are exercised. In Dovey, the lessor first terminated the lease and only then sought to distrain; the latter remedy was inconsistent because it rests on the relationship of landlord and tenant. If distraint is completed but fails to realise sufficient to pay the rent, there is no logical reason why the lessor should forfeit its contractual right to terminate subsequently for the unpaid balance. Matthews v Smallwood is also distinguishable; there was no distraint at all; the breach took the form of a prohibited sub-lease, and the question was whether the lessor knew of it.

[30] But as exercised in this case the two remedies were indeed inconsistent. The respondents chose distraint as their first remedy, and then terminated the lease without completing that process. The inconsistency arose because they could not terminate for non-payment unless some of the rent remained unpaid on termination. On distraint, the outstanding rent must be taken to have been paid, at least for so long as they neither returned the distrained chattels nor sold and accounted for them under the Distress and Replevin Act. On the facts, then, the respondents terminated for non-payment in circumstances where the right to do so had been waived, at least until distress was complete. Until then they could not be heard to say that the rent was unpaid.

[31] This conclusion occasions no injustice. The law admits the self-help remedy of distraint but requires that prescribed processes be observed. The respondents

failed comprehensively to comply with the Distress and Replevin Act. The Judge found:

... It is clear that Mr Huang did not distrain the chattels in accordance with the warrant to distrain. Having heard the witnesses give evidence, I find as a matter of fact the landlords distrained the chattels. Mr Huang was in his own words present as a witness. I also find that the inventory dated 8 February

2005, which was signed by Mr Huang, does not comply with the Act because the list of chattels was not completed by him and it lacks sufficient details to identify the books taken. The Third Schedule form requires clear enumeration of what has been taken. Section 11 of the Act also requires a bill of charges be produced, which was not complied with. It is apparent that the items recorded in the inventory have not been sold by public auction. Rather they were removed from the premises and taken to Mr He's home. No notice was given as to where the goods were taken as required by s14 of the Act.

[32] Thus far I have been dealing with election rather than estoppel. I record for completeness that no estoppel arises in this case. The respondents’ solicitor stated in the letter of 9 February that they reserved their right to terminate the lease for non- payment of the same rent, so the appellant was not led to believe that that they intended to keep it on foot. Nor can the appellant point to anything done in the belief that the lease would continue; on the contrary, Mr Jordan advised by fax sent on 8

February that he proposed to put Hard To Find into liquidation.

[33] I conclude that the respondents were not entitled to terminate the lease, as they purported to do, for non-payment of the rent due on 1 February. They are bound by their election to distrain for the same rent. The damages award in favour of the respondents is set aside.

Damages

[34] The next issue concerns the quantum of the appellant’s damages, which the Judge fixed, on a global basis, at a sum equal to the damages she awarded to the respondents.

[35] The Judge took the measure of the appellant’s damages flowing from the unlawful distraint as the value of the chattels and stock distrained, with aggravated damages. Of course it is only the items removed on 8 February that were distrained,

but counsel accepted in this Court that the pleading extended to conversion of the other stock that was in the shop, except that which was removed by Mr Jordan after the lease was terminated. And in fact the Judge assessed the damages on the basis that all of that stock was properly the subject of the claim for damages.

[36] Returning to the Judge’s findings, she dealt first with the access allowed to the appellant to remove its stock, chattels and fixtures on termination. She accepted Mr Jordan’s evidence that because he was given very short notice he was only able to obtain a truck through calling in a favour from a friend, and had to fly to Wellington immediately, arrange some assistance, and do the best he could in the total of nine hours allowed him to remove stock. In that time he was able to remove only some shelving (300 lineal meters), some chattels, and some stock. He was expressly prohibited from removing electrical fittings and signage that the appellant had paid for at the beginning of the tenancy. The Judge found some support for Mr Jordan in the evidence of a defence expert who recognised that between 30 and 45 man hours would have been required to pack the estimated number of books into between 444 and 666 boxes. (On that basis, I estimate that he might have removed up to about 20% of the stock, although his evidence was that he removed only six boxes.)

[37] The Judge also found that the respondents did not act reasonably in their efforts to sell the stock that was left in the premises. She further found that at least from 22 February the respondents were operating the shop and did sell some stock. She accepted the evidence of Mr McCarter in that regard, and rejected the respondents’ evidence that only a few books were sold. It was impossible to know how many books were sold, but the Judge accepted that it was possible to draw the inference that other book dealers may have been to the shop between 22 and 28

February and purchased some of the more valuable stock. That inference was available on the evidence of Mr Jordan and a valuation which put a value of only

$18,500 on the stock extant on 1 March 2005. The Judge accepted evidence that the value of the stock that the appellant purchased on 20 June 2004, when it commenced business, was some $71,000, and the stock was valued for accounting purposes at

$75,000 as at 31 March 2005.

[38] Turning to other items claimed, the Judge also had regard to Mr Jordan’s evidence that when the appellant moved into the premises it paid for electrical wiring work, at a cost of approximately $7,000, as the existing wiring was illegal, and put in expensive fluorescent advertising signs. There was evidence of expenses incurred for recovering fittings and stock.

[39] The Judge’s conclusion as to damages was as follows:

On the basis of all the evidence I have referred to, and taking into account the fittings and stock recovered by the plaintiff, I am satisfied, taking a global approach, that the plaintiff has proved damages on the balance of probabilities totalling $50,858.69 (inclusive of GST). I have come to this figure, taking into account the amount of damages claimed by the defendants in their counterclaim, as an appropriate figure given the overall merits of each parties claim and what I consider to be in the interests of justice in this particular case.

[40] Mr Smith invited me to substitute an award of damages in the sum of

$94,610.87 (including GST), although he acknowledged that there must be a set-off in relation to rent unpaid until the date of re-entry, which I have found was 22

February. He submitted that the Judge appears to have accepted the appellant’s evidence about valuation, although she also acknowledged gaps in the evidence. She dealt with that point at paragraph 67:

The plaintiff acknowledges that the evidence it has presented in respect of the loss suffered is unsatisfactory in some respects. However, the plaintiff says that is as a result of the actions of the defendants because they had possession of the plaintiff's stock and chattels and they have not produced any independent assessment of the value of the stock or chattels. I accept that the actions of the defendants as I have outlined above have prevented the plaintiff from proving the exact extent of the loss.

[41] I do not think it is safe to assume, as Mr Smith would have it, that the Judge accepted the appellant’s evidence as to loss in its entirety. She referred to the evidence but did not evaluate it in detail, and concluded by awarding the appellant significantly less than it claimed. For his part, Mr Withnall addressed only the evidence of value of the distrained items.

[42] I have done my best, in the absence of assistance from counsel, to evaluate the evidence. It begins with the book value of stock, which must be taken as reliable because it is the price paid for the stock in June 2004 with adjustments for stock

bought and sold since then. The amount claimed in the amended statement of claim is $68,225, which is less than the book value.

[43] The appellant’s witness Mr Humphries, an expert book valuer, valued the stock at only $18,500 on 1 March. The discrepancy may be attributed to stock taken or sold by the respondents, stock removed by Mr Jordan, and the circumstances of Mr Humphries’ valuation.

[44] The respondents distrained, and still retain, some 80 books. The Judge also found that they did sell some stock, probably that which was more valuable. There is no evidence to show what was taken or sold, or its value.

[45] Mr Jordan gave evidence that he removed only six boxes of books. He boxed them up but left them in the premises while Mr Humphries valued the remaining stock. Mr Humphries valued the six boxes at only $250. One of the respondents, Jun Na He, gave evidence that Mr Jordan appeared to be very selective about the stock that he took. There is logic in the respondents’ position that he would naturally choose more valuable stock if permitted to remove only part of it. But Mr Jordan explained that the area where rare books were kept was not accessible, because the access to it was covered by a board. That evidence does not appear, on my reading of the transcript, to have been challenged in cross-examination. I also accept that Mr Jordan took only six boxes of books; that evidence appears not to have been seriously challenged. It appears that the Judge generally accepted Mr Jordan’s evidence. On the other hand, I was not referred to any schedule of the stock in the boxes, although Mr Jordan was in a position to prepare one.

[46] Mr Humphries was not available to give evidence, and the Judge admitted his brief valuation under the Evidence Amendment Act (No.2) 1980. Thus he was not questioned about the valuation, which must have been based partly on impression since he lacked time to assess the stock (some 18,000 volumes) on an item by item basis. It is not clear whether he had access to what Mr Jordan described as the rare books area.

[47] He recorded that he made a “close inspection” of the remaining stock on the morning of 1 March 2005 and concluded that the books were all in good condition and were of a type to find a ready, if slow, sale at the “lower priced spectrum” of the used book market. The volumes appeared to represent the background stock of a retail second hand bookshop (meaning that the more valuable items had been sorted out or previously sold). The volumes represented most subjects, with a numerical dominance in fiction. The valuation was a global one, in that a single figure was given for all of the stock.

[48] The most likely explanation for the discrepancy is that the respondents had sold the more valuable stock. That conclusion is consistent with the Judge’s findings. I conclude that the appellant made out its claim for damages for stock in the sum of $68,225 less $250 for books removed by Mr Jordan.

[49] Turning to other chattels and fittings, the amount claimed in the amended statement of claim was $13,575. There was also a claim for disbursements incurred by the appellant in attempting to recover its stock.

[50] The appellant’s evidence about chattels took the form of a chattels schedule and its accounts for the year ended 31 March 2005. The set of accounts in the bundle of documents do not record the basis of valuation. Mr Jordan said in evidence that he understood the chattels to have been valued at $13,575, which was in keeping with the chattels schedule of May 2006 evidently prepared by Mr Jordan. This evidence is unsatisfactory, but it is all that there is, and it does not appear to have been challenged in cross-examination. With the addition of electrical expenses of $6,404.17, the value of the chattels and fixtures totalled $19,979.17 at 8 February

2005.

[51] Mr Withnall submitted that the only evidence about the distrained items was that of Jong He, who thought that the distrained cash register was worth $200-300, and the computer and eftpos machine $400-500 each. It appears that the respondents called no evidence as to value of the other items.

[52] The Judge appears to have accepted that the respondents expressly prohibited the appellant from removing electrical fittings and signage, and she found that Mr Jordan went to significant expense to obtain a truck and travel to Wellington to recover stock. She had regard to receipts produced showing the expenses incurred in relation to recovering the fittings and stock.

[53] I conclude that the best evidence of the value of the fittings and chattels is that of Mr Jordan, which establishes that the items concerned were worth more than the sum of $13,575 claimed. The Judge appears to have accepted the evidence about electrical expenses of $6,404.17, and no objection was taken to that claim on pleading grounds. The other expenses appear reasonable and the evidence is that they were incurred in Mr Jordan’s attempt to remove stock. These totalled

$2,639.70, by my count, and comprised truck rental, flights, accommodation, food, taxis and photography expenses.

[54] The appellant will have damages of $90,593.87 comprising net stock ($67,975), other chattels and fittings ($13,575), electrical expenses ($6,404.17) and removal expenses ($2,639.70). In accordance with Mr Smith’s concession, there will be a setoff for rent due until 22 February 2005. I did not hear from counsel on the question of interest. If payable, it will run (on both sides) from 22 February

2005. Memoranda may be filed if counsel are unable to reach agreement.

Costs

[55] The amended statement of claim included a claim for costs, but did not specify that the appellant sought “full costs” under s.21 of the Distress and Replevin Act, which provides:

Where any distress is made for any rent or sum justly due, and any irregularity or unlawful act is afterwards done by the person causing the distress to be made, his agent or bailiff, the distress shall not be deemed unlawful nor the distrainer a trespasser ab initio, but the party aggrieved may by action recover satisfaction for the damage, and if he recovers he shall have full costs.

[56] No point appears to have been taken about the pleading, however. The Judge recorded that the respondents were also able to claim solicitor/client costs under the ADLS lease, and held that costs should lie where they fall.

[57] In this Court, Mr Smith invited me to award the appellant its full solicitor- client costs of the proceeding. I was given no details of the costs. Mr Withnall did not address the appellant’s costs, but sought costs for his client on a 2B basis.

[58] In the circumstances, I prefer to deal with costs by declaring that the appellant is entitled to full costs under s.21 for conversion, being an unlawful act. I will allow counsel to file submissions on the questions whether the relevant unlawful act is the conversion of the distrained items only and not the subsequent conversion of other stock and chattels. I also require the appellant to supply particularised bills of costs so that the Court and respondents can assess whether the costs are reasonable. Those details should be filed and served by 25 May. Mr Smith should also file and serve submissions by that date, and Mr Withnall by 15 June.

"In accordance with r 540(4) I direct the Registrar to endorse this judgment with a delivery time of 11 am on the 26^th day of April 2007."

Solicitors:

Greg Dunning & Associates, Auckland for Plaintiff

Paul Cheng & Co, Wellington for Respondents

F Miller J