Cameron v Everest Central Investments Limited

[2019] NZHC 2398

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-1890

[2019] NZHC 2398

BETWEEN

GRAEME JOHN WESTBROOK CAMERON AND JAMES PHILLIP
TURNBULL as trustees of THE WHITBY TRUST AND WHITBYCO LIMITED
Applicants

AND

EVEREST CENTRAL INVESTMENTS LIMITED

Respondent

Hearing:

20 September 2019

Counsel:

T J G Allan for Applicants

J McBride and F Lupis for Respondent

Judgment:

20 September 2019

ORAL JUDGMENT OF WHATA J

Solicitors:           Grove Darlow & Partners, Auckland

Greenwood Roche, Auckland

CAMERON AND TURNBULL v EVEREST CENTRAL INVESTMENTS LIMITED [2019] NZHC 2398

[20 September 2019]

[1]    The plaintiffs, Graeme John Westbrook Cameron and James Phillip Turnbull (as trustees of the Whitby Trust) and Whitbyco Limited (together Whitby) are the registered proprietors of a property at 285 – 297 Lincoln Road. The defendant, Everest Central Investments Limited (Everest), is the registered proprietor of adjacent land originally described as 297 – 309 Lincoln Road. Everest is in the throes of constructing a large retail complex. A dispute has arisen between Whitby and Everest about construction of, among other  things,  a  48-metre-long  wall  at  a  height  of 16 metres on their boundary. Whitby says that a wall at that height breaches an agreement reached with the previous owners of the land now held by Everest. In that agreement, Magsons Hardware Limited (Magsons) agreed, in the context of an application for a consent for a Mitre 10 Mega building:

The maximum height of the southern wall of the Mitre 10 Mega building, including parapets, shall be no more than twelve metres of RL.5 (plus or minus 100 millimetres) as shown on the SKG Limited plan titled elevation drawing SK-05, dated 30 September 2010, job number 554803 …

[2]    The same agreement records that the parties to this agreement include named parties and their successors as defined in s 2A of the Resource Management Act 1991. Whitby seek an urgent interim injunction preventing any further work on the wall, pending determination of their substantive claim for permanent injunction based on the terms of the agreement.

[3]Everest opposes the application.

Context

[4]    Graeme Cameron and James Turnbull are, as I’ve noted, trustees of the Whitby Trust. The Whitby Trust owns the property at 285 – 297 Lincoln Road, hereafter referred to as the Whitby property. This property adjoins the property being developed by Everest at what was originally recorded as 297 – 309 Lincoln Road. That property had been previously owned by Asian Auckland Investments Limited (AAIL), which had been established for the purposes of placing a “blind” bid on the property, ultimately with a view to developing a Mitre 10 Mega on the site. The site was purchased by AAIL on 28 February 2008. At that time, Magsons was the owner of a Mitre 10 in Henderson and was interested in placing a Mitre 10 Mega on the site.

Vinod Kumar, a director of Magsons, set about obtaining resource consent for that purpose. Mr Kumar is now a director of Everest.

[5]    A consent was obtained from the Waitakere City Council on 23 January 2010 (the Mitre 10 Mega consent). Whitby appealed the Council’s decision to grant consent. Ultimately, Whitby and Magsons reached an agreement about certain conditions of the consent. This is recorded in an agreement dated 21 October 2010. The signatories to the agreement included Canam Corporate Holdings, Graeme Cameron and James Turnbull as trustees of the Whitby Trust, collectively referred to as Canam in the agreement.

[6]The agreement records the background as follows:

Background

1.1Magsons has been granted a land use consent by Waitakere City Council to construct and operate a Mitre 10 Mega outlet at 297 – 307 Lincoln  Road  and 156  Central Park Road,  Henderson  being Lot  2 DP131804 and Lot 1 DP125187.

1.2Canam occupies the adjoining property at 285 -295 Lincoln Road and 19 Soljan Drive, Henderson.

1.3Canam lodged an appeal against the Waitakere City Council’s decision granting land use consent to Magsons having the Environment Court reference ENV-2010-AKL-000053: Canam Corporate Holdings Limited and Whitby Trust v Waitakere City Council – topic ENV-2010-304-00016.

1.4The parties have agreed to settle Canam’s appeal on the terms contained in this agreement.

[7]The agreement then records:

(2)       The parties agree:

2.1The parties to this agreement include the named parties and their Successors as defined in s 2A of the Resource Management Act 1991.

2.2The Mitre 10 Mega building shall be set back five metres along the length of the common boundary of Lot 2 and Canam’s property as shown on the CPG Limited plan titled master plan drawing SK-01, dated 30 September 2010, job number 554803 a copy of which is attached to this agreement marked “A”.

2.3The maximum height of the southern wall of the Mitre 10 Mega building including parapet shall be no more than twelve metres or RL20.50 (plus or minus 100 millimetres) as shown on the CPG Limited plan titled elevations drawing SK-04, dated 30 September 2010, job number 554803 a copy of which is attached to this agreement marked “B”.

[8]The agreement then imposes the following obligation on the parties:

2.7To immediately sign and lodge with the Environment Court consent documents resolving Canam’s appeal on the basis of Magsons resource consent being amended by:

(a)Amending condition (1) as follows (additions and deletions)

(1)The development shall proceed in accordance with the plans, drawings and elevations prepared by CPNZ Limited titled:

●…

●Elevations SK-05, dated 14 August 2009

30 September 2010 job number 554803.

(d)      Inserting the following conditions:

(2A) The maximum height of the southern  wall  of  the Mitre 10 Mega building including parapet shall be no more than twelve metres or RL12, 20.5 (plus or minus 100 millimetres) as shown in CPG NZ Limited plan titled elevations drawing SK-05, dated 30 September 2010, job number 554803.

[9]Canam was then under the obligation to withdraw its s 274 notices.

[10]   I also note that cl 3 contains a dispute resolution clause, together with general undertakings:

3Dispute resolution

3.1If any dispute arises under this agreement, the parties will in good faith attempt without delay to resolve the dispute by negotiation between them and failing such resolution, refer their dispute to mediation with the assistance of a suitably qualified and experienced mediator agreed between them.

3.2Each shall pay half the expenses of any mediation under this clause.

4General undertakings

4.1The parties are bound jointly and severally by the terms of this agreement.

4.2The terms of this agreement shall remain strictly confidential as between the parties and shall bind their successors and assignees.

[11]   In late 2010, Mr Kumar purchased the shares in AAIL so that his interests via Magsons Investments Limited (MIL) owned the property.

[12]   The Environment Court  gave  approval  to  the  Mitre 10 Mega consent  on  1 November 2012, but it transpires that the Mitre 10 Mega 10 proposal as consented was not attractive to the market. In 2014, Magsons went back to the Council to ask if it could remove the large mezzanine floor and two levels of offices above. The Council agreed, and the application was lodged on 8 January 2014.

[13]   There were then exchanges between Magsons’ planning consultant, Mr Vernon Warren, and Mr Cameron about the then proposed variation. Those communications included the following:

(a)In an email from Mr Warren  to Mr Cameron, dated 12 May 2014,   Mr Warren stated:

Thank you for discussing the proposed reduction in the Mitre 10 Mega development at 297 – 309 Lincoln Road and the application to change the previously approved conditions of consent.

I enclose a letter requesting your confirmation that the proposed changes continue to comply with the conditions of the agreement with the Whitby Trust and Canam Corp, and hopefully, that you will also give your written approval for the changes …

(b)In his accompanying letter, also dated 12 May 2014, Mr Warren wrote to Mr Cameron about the proposed retail development. The letter said:

Mitre 10 Mega reduced development 297 – 309 Lincoln Road, Whitby Trust and Canam Corp agreement

Dear Graham

As discussed, it is now proposed to significantly reduce the scale of the Mitre 10 Mega + office tower development at 297

– 309 Lincoln Road as follows:

●The office tower including park podium and ramp has been deleted;

●The M10M Store and Garden Centre is within but a little smaller than the footprint approved by the Environment Court. The mezzanine retail floor has been deleted;

●The southern façade height is reduced to 10.8m.

…

Also to assist, I copy the following conditions from the Court conditions related to your boundary and these are not to be changed except to refer to the new plans:

A2The maximum of the height of the southern  wall of  the Mitre 10 Mega building including parapets must be no more than 12m or RL 12.00 (plus or minus 100 mm) as shown on the CPG NZ Limited plan titled Elevations drawing SK-05, dated 14 June 2012 job number 554803.

A3 The building must be sited at least 5m  from  the southern boundary of the application site.

…

I would be even more grateful if you could put in a letter that you give approval for the proposed s. 127 application to change the conditions of consent and initial the plans and the enclosed proposed change of conditions document and return these to me.

(c)This is followed by a facsimile, dated 26 June 2014, from Mr Warren to Mr Cameron wherein he states:

Conditions A2 would then read:

A2 The maximum height of  the  southern  wall  of  the Mitre 10 Mega building including parapets must be no more than 10.7m or RL 29.0m (plus or minus 100mm) as shown on the MAK & Associates plan titled “Proposed Elevation” job 599 sheet A2-02 Rev 00.

[14]   A copy of that part of figure A2-02 dealing with the southern elevation, which shows a maximum height of 12 metres, is reproduced as Figure 1 attached.

[15]   Subsequent to these exchanges, however, it became clear that the Mitre 10 Head Office no longer wanted to proceed with the Mitre 10 Mega on the property. Mr Kumar therefore decided to abandon plans for a Mitre 10 Mega development on the site. He subdivided the property on 23 January 2015, to create records of title 641013 (being some 6,492 square metres in Lot 1 DP4711769) and 641014 (being some 4.6504 hectares in Lot 5 DP471769).

[16]   MIL then sold the land held in record of title 641013 (being Lot 1) to AEG Lincoln Limited on 13 February 2015. AEG Lincoln Limited unit titled the land in December 2016 and developed a commercial complex containing various food outlets and a child care centre on the land. MIL subdivided the land held in the record of title 641014 (being Lot 5) to create records of title 618171 and 618172, on 3 November 2015. MIL then transferred the land held in record of title 618172 to Central Park 156 Limited on 17 November 2015. The development, the subject to these proceedings, is being developed on the remaining title being 618171. The building site is indicated below in shade with property boundary 618171 indicated in blue.

[17]   A fresh resource consent for a new building to accommodate what is called “Nido Living” was made and preparation for that undertaken. Mr Kumar refers to this project as Project Everest. The relevant application was made in October 2015 and was granted on 21 June 2016. The Nido Living consent approved the following activities on site:

(a)Total floor area of 27,363 square metres;

(b)Retail floor area being 19,392 square metres, granted as a non- complying activity;

(c)One office floor area of 1,503 square metres;

(d)Café floor area of 570 square metres; and

(e)Associated warehousing and loading area, parking and circulation and landscaping.

[18]   The Nido  Living  concept  involved  a  significant  financial  undertaking.  Mr Kumar divested his interests in the Mitre 10 store to fund it and in 2018, MIL decided to make the Nido Living warehouse automated at a cost of $4.5m. Additional warehouse was needed to accommodate it. A revised consent enabling this was processed by Council on a non-notified basis and approved on 19 October 2018.

[19]   Private equity investors for Project Everest were sourced and a project disclosure statement was issued seeking $30m in private equity funding on or about 5 February 2019. The offer was over-subscribed. The disclosure statement refers to development costs of some $62.000m, made up of:

(a)Purchase price of $21.2m

(b)Construction costs: $37.8m

(c)Issue costs of $3.575m

[20]Mr Kumar states that this, in turn, is funded by:

(a)Capital from Central Park Property Limited of $30m;

(b)Magsons Investments’ contribution of $7.5m; and

(c)Debt finance from Pearl Fisher Capital Limited of $25.075m.

Whitby’s key submissions

[21]Mr Allan, for Whitby, submits that the agreement has two key parts;

(a)Clauses 2.1-.2.6 which impose an ongoing obligation to restrict development in the manner described; and

(b)Clauses 2.7 onwards which impose obligations to obtain resource consents on specified terms.

[22]   He further submits that there has been a material breach of the agreement insofar as Magsons has:

(a)excavated out the 5-metre set-back zone between the common boundary and the southern wall of the mega retail centre now being constructed, reducing the level down by 900 millimetres for its entire 100 metre length and has foreshadowed an intention to concrete the entire length, rather than bund it up to one metre to facilitate landscaping by the plaintiff, as required by the agreement;

(b)erected a 16-metre-high steel structure on (approximately) 48 metres of the southern wall, rather than keep the southern wall at 12 metres as required by the agreement and has been constructed (plus or minus 100 millimetres); and

(c)erected a 12.5-metre-high steel structure on the remaining 132 metres of the southern wall, rather than keep the southern wall at 12 metres

(plus or minus 100 millimetres) as required by the agreement and has been constructed.

[23]   He submits that the agreement is binding on Everest because “successors” are bound by it and significantly, Mr Kumar is the central figure throughout all reconsent applications. His knowledge of the agreement should therefore, he says, be attributed to MIL and then Everest. In the result, he says there is at least a serious issue as to whether Everest is bound by the agreement and has breached it.

[24]   As for the issue of “successors”, Mr Allan noted that the agreement refers to “successors” and “successors” is defined as follows at s 2A of the Resource Management Act 1991:

2A      Successors

(1) In this Act, unless the context  otherwise  requires,  any  reference to a person however described or referred to (including applicant and consent holder), includes the successor of that person.

[25]   Section 2A, he says, has the effect of extending the definition of “successors” to successors of a person and therefore extends the application of this concept to those who succeed to rights other than land title, and recognises that consents, other than land use consents, do not run with the land.

[26]   Thus, Mr Allan contends it is at least arguable that the parties intended that the expansive definition of “successors” would apply and that, in consequence, the rights and obligations under the agreement would pass to the successors, including MIL and then Everest.

[27]   He further submits that the subsequent actions of Magsons and MIL are corroborative of this interpretation, because Magsons and MIL’s agents sought to reassure Whitby that a foreshadowed intention to vary the resource consent would not contravene the agreement.

[28]   Critically, he says, Everest had actual or imputed knowledge of the agreement because Mr Kumar was the “directing mind and will” of all interested companies and

cannot now, he says, deny the existence of the obligation and its binding effect on them.1 Mr Allan relies, in this regard, on the reasoning and outcome in Lebon v Aqua Salt Co Ltd.2 In that case, the Privy Council had to assess whether a landowner, a company, was on notice of a prior unrecorded sale of part of a property owned by it. The vendor, Mr Jingree, was a director of the company but had long since passed away. The Privy Council found that it was bound. The Court noted:

[26] Their Lordships consider on the facts of this case, the substantive rule requires the knowledge of Mr Jingree to be attributed to Aqua. There is no reason why the general principle formulated by Moore-Bick LJ should not apply. The formation of the company was the means by which Mr Jingree exploited the agreement he had made with Black Rocks three years earlier. If he had been able to raise the money himself and obtain title by authentic deed, he would undoubtedly have been bound by his agreement with Mr Lebon. In the event, the purchase was made by the company. But Mr Jingree was a promoter, director and substantial shareholder. It is true that he did not represent the company before the notary, but that was a mere formality. What matters is that the company purchased by virtue of the arrangements he had made with Black Rocks and that he was a director at the time of the purchase. It may have been a breach of his duty to the company and the other investors not to disclose that he had sold the house, but that should not give the company better rights against Mr Lebon than he alone would have had. In those circumstances, their Lordships consider that Mr Jingree's knowledge should be attributed to Aqua, which was therefore bound by the sale to Mr Lebon.

Everest’s submissions

[29]   Mr McBride, assisted by Mr Lupis, submits that Whitby’s claims are misconceived for the following reasons, in summary:

(a)The agreement does not purport to bind anyone except Magsons and Whitby;

(b)The Agreement only obliged Magsons to obtain a resource consent on specified terms, nothing else;

(c)Successors can only mean successors to the parties to agreement;

1      As to attribution, Mr Allan refers to Blanchard v RBI Ltd [2014] NZHC 1602 (HC), at [104] – [148], Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, [1995] 3 NZLR 7.

2      Lebon v Aqua Salt Co Ltd [2009] UKPC 2.

(d)The agreement could not purport to bind persons who were neither parties to the agreement or succeeded to the interests of those parties;

(e)The agreement purports only to bind the parties to specified terms insofar as they relate to the application for the then resource consent, and not outside that resource consenting matrix; and

(f)While attribution of knowledge for the purposes of protecting equitable interests in land is common place, the extension or transfer of contractual obligations between distinct companies by so-called attribution simply because they share the same director is unprecedented and unprincipled.

Assessment

[30]   Based on the limited information and argument available to me, I consider that it is difficult to maintain that the agreement may be enforced against Everest in the way claimed by Whitby. First, ordinarily succession in RMA matters is addressed to rights to participate in resource management processes or to consenting rights.3 It would appear to be novel to extend that RMA concept to include succession to substantive contractual obligations that have not found expression in resource consent conditions or, for example, in consent notices. Second, the agreement is, at first blush at least, directed to a specific development, rather than all future development. The Court of Appeal in Far North District Council made a similar point in relation to a not entirely dissimilar agreement affecting the right to build.4 Third, the parties had the opportunity to agree land covenants that might bind the parties and all future landowners in the way now claimed by Whitby. Having failed to do so, an intention to achieve this by contract only appears very unlikely. Fourth, the effective assignment of the obligations to Everest without its clear agreement, and without consideration,

3      See Arthur’s Point Protection Society Inc v Queenstown Lakes District Council (2009) 15 ELRNZ 245; Schwass Family Partnership v Malborough District Council [2006] NZRMA 271; Te Mauri O Te Wai Inc v Northland Regional Council [2011] NZEnvC 65; Buckingham Asset Management Ltd v Auckland City Council EnvC Auckland A027/09, 9 April 2009; Sun Pacific Villas Timeshare Resort Body Corporate S.45940 v Bay of Plenty Regional Council [2002] NZRMA 561 (HC); Goldmine Action Inc v Otago Regional Council (2002) 8 ELRNZ 129.

4      Far North District Council v Te Runanga-A-Iwi o Ngati Kahu [2013] NZCA 221.

would also appear to be very novel. Fifth, this case does not appear to be like Lebon v Aqua Salt Co Ltd, as it involves knowledge of an equitable interest in property enforceable against a third party who obtained a legal interest.

[31]   But, having said that, Mr Kumar is central to what has happened, and it is arguable that he was the directing mind of Magsons who, by agreeing not to build higher than 12 metres on the southern boundary, lead Mr Cameron and the Whitby interests more broadly to believe that it and persons associated with Magsons would honour that commitment. It is further arguable, applying the well-known dicta in Wholesale Distributors, that Magsons (and MIL’s) conduct after the agreement supports Whitby’s construction of it.5 That is, for some years after the agreement, Mr Warren, agent for both of them, sought Whitby’s agreement to a varied proposal. Mr McBride also accepts for the purposes of the present argument that both MIL and Everest would have had actual knowledge of the obligations under the agreement. A claim therefore that MIL acquired the property, and Everest then sought to develop it, knowing that Magsons had committed its assigns and successors to those obligations, and thus should be bound by it, is not untenable.

[32]I therefore propose to examine the balance of convenience.

The balance of convenience

[33]   I deal first with Everest’s concerns about delay. Mr McBride notes that the new project has been in the public domain for some time. But I do not consider there has been undue delay in bringing this matter to the Court’s attention. It appears this application was brought within a month of the change in wall heights coming to the full attention of Mr Cameron.

[34]   Turning then to the implications of an injunction. I have the benefit of evidence from Tony Graham Day (an engineer), Thomas Geoffrey Young (a valuer), Vernon Warren (a planner), and Jeremy John McAlistair (the project manager), together with the evidence of Mr Brett-Smithies (another valuer), all dealing with the likely impacts

5      Wholesale Distributors v Gibbons Holding Ltd [2007] NZSC 37, [2008] 1 NZLR 277 at [52].

of an interim injunction. I think the following key points may be drawn from that evidence:

(a)Mr Day believes that the construction timeline can accommodate a two to three-month delay without too much cost or trouble to Everest.

(b)Mr McAllister disagrees, noting that the relevant building consent to complete the next part of the development to this part of the building (that is, relating to cladding) had been granted, roofing has been lifted into place, which was to be installed by 20 September 2019 (that is, today) and the cladding by 4 October 2019.

(c)Mr Young considers it is very difficult to quantify diminution in value based on the effects of the higher walls and losing the 5-metre set back, noting that the assessment involves idiosyncratic subjectivity. He says, however, that it will inevitably impact on future tenants and therefore future rentals.

(d)Mr Brett-Smithies does not accept that diminution in value is difficult to assess. He refers to assessments involving the effect of pylons and motorways as examples of comparable assessments. He also says there is no evidence to suggest future tenants will be put off by it; and notes there is a scaffolding business to the immediate south which is unlikely to be affected.

(e)Mr Warren explains that at the time of the application for the Nido Living protect, the Unitary Plan had been advertised, and this enables a much larger development, including a 20-metre high building, to be established on the southern boundary of the site. This, he said, explains non-notification.

[35]   Against this background, Mr Allan submits that there will be little effect on the construction timeline if the injunction is granted. By contrast, he says if it is not granted, Whitby’s tenants will be exposed to the much higher wall. Furthermore, he

submits that if Whitby does not obtain any interim relief, he will be going to trial asking for an altogether more difficult remedy, namely, a mandatory injunction to pull down part of the potentially completed building.

[36]Mr McBride responds:

(a)There is significant financial pressure to complete the development as quickly as possible and any delays to completion place the project in jeopardy;

(b)Any delay on the construction timeline has multiple effects, including creating significant commercial uncertainty for the investors in the Everest Project;

(c)The physical impacts of the development, the framing for which is already built, will be relatively minor on the existing environment; and

(d)While it will be a matter for assessment in the final analysis, the fact that Everest is on notice of Whitby’s claim will clearly be a factor in Whitby’s favour if Whitby ultimately succeeds on it claim.

Assessment

[37]   I am satisfied that the balance of convenience does not favour the grant of an injunction. Notably, the frame for the impugned part of the building has already been installed. This is a significant structure. To my mind, while no fault of Mr Cameron’s, I think it is too late to stop the construction process at this late stage. Linked to this, the construction process is clearly in full flight. Contrary to Mr Day’s opinion about this, any delay will have a major impact on the construction timeline. Everest is basically ready and waiting to complete the roofing and the cladding.

[38]   I also prefer the evidence of Everest as to the likely financial implication for them of the delay. Mr Kumar notes that there will be a need to refinance and Magsons Developments Limited will be required to reimburse Everest for most of the interest and associated fees payable. Furthermore, if the development is completed later than

the target completion date of 30 November 2019, Magsons must pay Everest monthly amounts necessary to ensure the continuity of the monthly distributions to investors until completion of the development.

[39]   In addition, and significantly, the potential impact on investors of mid construction injunction is a relevant factor. In my view, the case for Whitby is not sufficiently meritorious, in terms of the underlying merits, or comparable offsite impact in the interim, to warrant exposing the investors to this impact and uncertainty.

[40]   In this later regard, I have seen photos of the site, and while it is not a factor that will bear on the end result, the impact on the existing environment, having regard to the driveway that runs alongside that part of the building that appears to breach the agreement, and the nature of the existing tenants, is relatively small compared to the likely impact caused to Project Everest by what could be a reasonably lengthy delay.

[41]   Nothing I say here should be seen to be deprecating of a claim, if successful, based on the enforcement of contractual rights. As Mr Allan submitted, the starting point is that such rights should be vindicated unless there is good reason that they should not be.6 This then dovetails though into the important point that Everest assumes a risk by going ahead with its development in the face of Whitby’s claims.

[42]   In the result therefore, I am satisfied that the case for injunction has not been made out.

Costs

[43]   Mr McBride sought costs in excess of scale. He complains that the case lacked merit and was brought to the Court in a way that brought undue angst and cost to Everest. Mr Allan wants an opportunity to respond.

[44]   I am happy for submissions to be filed. It may assist the parties to know that while Whitby’s claim is on its face difficult one, I do not presently agree that it is so

6      Jaggard v Sawyer [1995] 2 All ER 189 (CA) at 199ff and 207-209.

weak that it ought not have been brought. I also think the concerns about conduct need to be weighed against:

(a)the legitimacy of Whitby’s  grievance – based on what  I have read  Mr Cameron  legitimately  assumed  he  had  an   agreement   with  Mr Kumar interests which protected the southern boundary; and

(b)the risk to Whitby of any procrastination.

[45]   My current thinking therefore is that costs on 2B scale and disbursements in Everest’s favour would be sufficient.

[46]   Having said that, if submissions are to be filed, that must occur within five working days.