Fruiti Organics NZ Limited v Down Under Organics Limited [2012] NZHC 1549 (3 July 2012)

Last Updated: 16 August 2012

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2011-441-121 [2012] NZHC 1549

IN THE MATTER OF Section 290 of the Companies Act 1993

BETWEEN FRUITI ORGANICS NZ LIMITED Plaintiff

AND DOWN UNDER ORGANICS LIMITED Defendant

AND VICKI EMMA HYLAND Counterclaim Second Defendant

Hearing: 29 June 2012 (Heard at Napier)

Counsel: N. Gray - Counsel for Counterclaim plaintiff

No appearance for Counterclaim defendants

Judgment: 3 July 2012

_{JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL}

This judgment of Associate Judge Gendall was delivered by the Registrar on 3 July

2012 at 3.30 pm under r 11.5 of the High Court Rules.

_{Solicitors: Sainsbury Logan & Williams, Solicitors, PO Box 41, Napier}

FRUITI ORGANICS NZ LIMITED V DOWN UNDER ORGANICS LIMITED HC NAP CIV-2011-441-121 [3

July 2012]

Introduction

[1] In this proceeding the counterclaim defendant, Fruiti Organics NZ Limited (Fruiti Organics) sought injunctive relief (which was declined) and now seeks relief against cancellation, or reinstatement, of a sub-lease of a 40.73 acre orchard property at Raukawa Road, Hastings (the land). Under the sub-lease the defendant/counterclaim plaintiff Down Under Organics Limited (Down Under) is the landlord and Fruiti Organics is the tenant.

[2] The application by Fruiti Organics for injunctive relief was declined by this

Court in a Minute issued by His Honour Justice Simon France on 25 February 2011.

[3] As I have noted, the defendant was the lessee of the land which was used for a commercial apple orchard. The Deed of Sub-Lease (the sub-lease) entered into between the parties commenced on 25 June 2010 and had a final expiry date of 31

May 2011.

[4] On 31 January 2011 Down Under served on Fruiti Organics a Notice of its

Intention to Cancel the Sub-Lease for breaches of covenants. Then, on 23 February

2011 Down Under re-entered and took possession of the land and terminated the sub- lease.

[5] There is a possible question here as to whether the substantive proceedings by Fruiti Organics against Down Under have been formally served on Down Under but before me no real issue was taken with that aspect. What is clear, however, is that Fruiti Organics has effectively taken no further steps to advance that substantive proceeding against Down Under since early in 2011.

[6] Instead, on 2 February 2012 it was Down Under which filed its statement of defence to the substantive claim together with a counterclaim against both Fruiti Organics and against Vicki Emma Hyland (Ms Hyland) as counterclaim second defendant. This counterclaim sought unpaid rental and other monies under the Deed of Sub-Lease together with costs claimed by Down Under as a result of alleged breaches of the sub-lease by Fruiti Organics. In addition, the claim against Ms

Hyland is made on the basis that as guarantor she guaranteed all the tenant’s obligations under the sub-lease and performance of that contract by Fruiti Organics, and is thus liable also for the default here.

Summary Judgment Application

[7] Before me is a summary judgment application by Down Under as counterclaim plaintiff seeking judgment on its counterclaim against both Fruiti Organics as First Counterclaim Defendant and Ms Hyland as Second Counterclaim Defendant.

[8] This summary judgment application before me has a reasonably long history. On a number of occasions Mr David Hyland (Mr Hyland) who indicated he is the General Manager of Fruiti Organics endeavoured to appear in person in this Court both for that company and also for Ms Hyland.

[9] On numerous occasions it was indicated to him that as a non-lawyer he could not appear as counsel for Fruiti Organics in line with the decision in GJ Mannix and that counsel would need to be instructed to appear for the company. In addition it was confirmed that obviously he could not appear for Ms Hyland.

[10] In response, Mr Hyland stated on a number of occasions that he was obtaining legal advice and representation for both Fruiti Organics and Ms Hyland and that representation was imminent.

[11] Notwithstanding this, no such representation has eventuated.

[12] Instead, on 29 June 2012 the date which has for some time been scheduled for the hearing of Down Under’s present summary judgment application, Mr Hyland purported to file in this Court documents headed “Notice of Opposition and Supporting Affidavit by Plaintiff and Counterclaim Second Defendant to Summary Judgment” and “Accompanying Memorandum”.

[13] Both these documents, including what purported to be a statement on behalf of Fruiti Organics and Ms Hyland were unsigned. In addition, no leave was sought for them to be filed out of time at what was very much the eleventh hour.

[14] In addition there was no appearance of any kind for either Fruiti Organics or for Ms Hyland at the hearing on 29 June 2012. Mr Hyland in his 29 June 2012

Memorandum however had stated “We don’t wish to adjourn the hearing only ask that the accompanying document be received as our defence and treated fairly as such.”

[15] Before me, Mr Gray, counsel for Down Under opposed my reading or accepting the Notice of Opposition and related documents and suggested they should be put to one side.

[16] Properly he noted the documents purported to be filed were entirely non- compliant – they were not signed, the affidavit in support was not sworn, it was likely that no filing fees had been paid and the documents certainly had not been served on Down Under.

[17] Mr Gray contended that all this was simply too late given particularly that throughout every opportunity had been given to Fruiti Organics and Ms Hyland to put their “house in order”.

[18] Whilst I accept these arguments advanced before me by Mr Gray, nevertheless, under all the circumstances here I am prepared to consider and take into account the Notice of Opposition and accompanying memoranda filed by Mr Hyland on 29 June 2012. It is important that the Court in addressing the present summary judgment application has all proper material before it. I will give due weight to this last minute material which has purported to be filed on behalf of Fruiti Organics and Ms Hyland, given also that this material was simply “sprung” upon Mr Gray for Down Under on the morning of the hearing, with no opportunity for him or Down Under to fully consider it or to reply. In my view, however, the provision of this additional material will make little difference to the ultimate outcome here, as will become apparent as this judgment unfolds.

[19] I turn now to consider the summary judgment application itself.

Summary Judgment Principles

[20] Rule 12.2(1) of the High Court Rules deals with summary judgment applications and provides:

12.2 Judgment when there is no defence or when no cause of action can succeed

(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

[21] The principles of summary judgment have been recently summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26]:

The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1; (1986) 1 PRNZ 183 (CA), at p 3; p 185. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [1979] 3 WLR 373 (PC), at p 341; p 381. In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[22] Therefore, the application for summary judgment can only succeed if I am satisfied that Fruiti Organics and Ms Hyland have no arguable defence to the claims made against them for outstanding rent and covenant breaches under the sub-lease.

[23] In this regard, Down Under’s counterclaim here effectively seeks two sums:

(a) $26,519.63 (GST inclusive) for rental and other payments due under the sub-lease; and

(b) $50,095.20 representing what is said to be costs incurred by Down

Under in remedying Fruiti Organic’s breaches under the sub-lease

and/or harvesting the apples in the orchard following termination of the sub-lease.

[24] This $50,095.20 is identified in Down Under’s counterclaim as follows: (a) Tractor and Hydralada Driving Charges $11,320.00 (b) Machinery Hire Charges $15,783.76 (c) Fruit Carting Charges $14,982.50

(d) Fruition Horticultures Costs for carrying out the

independent crop assessment $ 1,108.96 (e) Biogrow’s Certification Charges $ 2,127.50

_{(f) Vehicle Lease and Road User Charges $ 4,772.48}

_{TOTAL $50,095.20}

[25] As to the initial claim for $26,519.63 (GST inclusive) throughout this matter Fruiti Organics appears to have clearly accepted a liability for this sum. Indeed, in the latest document “Notice of Opposition” document filed by Mr Hyland on 29 June

2012 at para 1 it is stated for Fruiti Organics:

1. Fruiti Organics agrees that the outstanding amount of $23,573.00 (plus

GST) from the 2010 season is owed to Down Under Organics. (words in brackets added)

[26] There can be no doubt therefore as I see it that Fruiti Organics and Ms Hyland have no defence to the claim for this $26,519.63 (GST inclusive) acknowledged to be due, and summary judgment for this amount is to be entered.

[27] Turning now to the second claim for $50,095.20 noted at [23](b) above, this amount essentially relates to what is said to be harvesting and other necessary costs incurred by Down Under once the sub-lease was terminated. This harvesting of the apple crop followed a report obtained by Down Under from “Fruition Horticulture” (experts in this area) which is before the Court that appears to state quite clearly that

as at February 2011 the crop needed urgent attention and that the apples were inappropriate to be considered for export.

[28] This claim for $50,095.20 it seems is strongly disputed, however, by Fruiti Organics. Indeed even leaving aside the Notice of Opposition and supporting memorandum filed in this Court on the date of this hearing, Mr David Hyland in an earlier affidavit filed in this proceeding sworn 23 February 2011 takes issue with any contention that Fruiti Organics was in breach of the sub-lease and was not in a position to properly harvest the apple crop in question.

[29] Turning now to the documentation in this matter, the Sub-Lease between the parties which determines their contractual rights here quite clearly at para 9.1(i) incorporates as a term the dispute resolution provisions at para 12.7 of the Head Lease. These require that, in the event of a dispute arising between the parties, meetings are first to occur followed by a mediation and if mediation does not resolve those issues between the parties, they are to be determined by arbitration. The issues subject to this dispute resolution clause are stated to be “any dispute or difference arising between the parties as to the meaning or application of any part of the lease or any other matter in connection with or arising out of or which may have an effect on the lease.”

[30] In the present case as I understand them, Fruiti Organics’ claims against Down Under relate to allegations of wrongful termination of the sub-lease, improper removal (theft) from the land of Fruiti Organics’ property and complaints over other steps said to be taken improperly by Down Under under the sub-lease. Although Fruiti Organics’ claim in this regard is not properly quantified, from the latest 29

June 2012 “Notice of Opposition” an amount of about $194,500.00 seems to be sought. For its part Down Under seeks from Fruiti Organics the reimbursement of the $50,095.20 costs I have outlined at para [23](b) above.

[31] I remind myself that the present application before me is one for summary judgment on which I must be satisfied that the counterclaim defendant, Fruiti Organics has no defence to the claim against it in the sense that there is no real question to be tried – Pemberton v Chappell.

[32] In the present case most of the evidence presently before the Court has been provided by Down Under. Nevertheless, Fruiti Organics has identified what could be seen as a dispute or difference between the parties regarding the sub-lease and the respective obligations of the parties under that contract.

[33] As I see the position, there is a possible argument that exists in this case over Down Under’s disputed counterclaim for $50,095.20 and Fruiti Organic’s own claim that these constitute a present dispute which is required to be referred to arbitration under the dispute resolution provision imported into the sub-lease (assuming any earlier required mediation has been unsuccessful).

[34] And, as I understand the position none of this has occurred here.

[35] A reasonable argument exists therefore that the present application by Down Under with respect to the disputed $50,095.20 claim is not suitable for summary judgment. It should be the subject of arbitration under the sub-lease and this has not occurred. That aspect of the present summary judgment application therefore must be refused.

Conclusion

[36] For the reasons outlined above the application by Down Under for summary judgment succeeds against Fruiti Organics as to the agreed sum of $26,519.63.

[37] It is appropriate that an order for payment of this sum from the crop sale proceed monies currently held by Sainsbury Logan & Williams with their undertaking in their solicitor’s trust account be made.

[38] An order is now made therefore that the sum of $26,519.63 from this retained sum is to be paid to Down Under within 5 working days of the date of this judgment.

[39] It is appropriate also that a summary judgment order for this agreed sum of

$26,519.63 should be made against Ms Hyland as counterclaim second defendant and guarantor. She clearly guaranteed all the obligations of Fruiti Organics under the sub-lease. An order to this effect is now made.

[40] The application by Down Under for summary judgment with respect to the second claimed amount of $50,095.20 however fails. This application is dismissed.

[41] As to costs, although Down Under has only been partially successful in its present summary judgment application, given the tortuous history of this matter and the difficult position it has been placed in by the actions of Fruiti Organics and Ms Hyland (particularly in failing to observe Court time limits and obtain proper representation for the present application despite claims that they would do so) in my view it is appropriate for a costs order to be made here in favour of Down Under.

[42] Costs are therefore awarded to Down Under on this present summary judgment application against both Fruiti Organics and Ms Hyland on a category 2B basis together with disbursements as fixed by the Registrar.

[43] Simply as a next event in this proceeding, the Registrar is directed to list this matter for call in the next available Associate Judge’s List to consider a way forward for both the substantive claim by Fruiti Organics and the remaining counterclaim by Down Under.

‘Associate Judge D.I. Gendall’