Capital Equipment Finance Limited v Dominion Finance Group Limited

IN THE COURT OF APPEAL OF NEW ZEALAND

CA36/02

BETWEEN	CAPITAL EQUIPMENT FINANCE LIMITED
Appellant

AND	DOMINION FINANCE GROUP LIMITED
Respondent

Hearing:	22 and 23 October 2002
Coram:	Keith J Blanchard J Anderson J
Appearances:	R J Asher QC and B D Gustafson for Appellant R B Stewart QC and K M Thompson for Respondent
Judgment:	3 December 2002

JUDGMENT OF THE COURT DELIVERED BY BLANCHARD J

Pyrenees Ltd and its associated company Cityjet Ltd were respectively the owner and operator of passenger aircraft. Pyrenees leased the aircraft to Cityjet. In 1998 Pyrenees borrowed over $2 million from the appellant, Capital Equipment Finance Ltd, secured against (a) a general debenture in the form of an equitable charge over all its assets (the debenture) and (b) a series of instruments by way of security whereby it assigned to Capital the legal title to several Bandeirante aircraft. The debenture was expressed to be a fixed charge over certain assets, including aircraft, and otherwise to be a floating charge.
Pyrenees bought another Bandeirante (Registration No ZK-TZN) in April 1999 for $700,000. Pyrenees funded most of the price out of working capital but was assisted to make the purchase by a further advance of $100,000 from Capital in whose favour Pyrenees executed an instrument by way of security over ZK-TZN on 22 April. All securities were duly registered under the Companies (Registration of Charges) Act 1993.
About a month later Mr Webb of Pyrenees told Mr Verhoeven of Capital that Pyrenees was considering the sale of an aircraft in order to inject working capital into the business. Mr Verhoeven wrote to Pyrenees confirming that Capital was “happy to release our charge” over ZK-TZN subject to repayment of the $100,000 plus interest to date of settlement and a small administration fee.
At a meeting between representatives of Pyrenees and Capital on 19 July, called because Pyrenees had failed in June to meet a principal instalment of $59,000 due on the total borrowing, Capital was told that Pyrenees was to sell ZK-TZN to an Australian company, Curry Kenny Aviation Pty Ltd, for US$375,000 and lease it back from Curry Kenny. A deposit was due immediately from Curry Kenny and would be paid to Capital. The agreement with Curry Kenny, a copy of which Pyrenees sent to Capital on 28 July, was however expressly subject to a “condition precedent” that Curry Kenny should obtain finance approval from a lender of its choice of an amount and on terms and conditions to Curry Kenny’s total satisfaction. In his evidence Mr Verhoeven said that he noted the existence of this condition.
Capital kept pressing for overdue moneys, now totalling $106,309.69 (another monthly instalment having fallen due). In a letter of 29 July it threatened, inter alia, to require the full proceeds of the sale to be paid to it. In response Pyrenees paid all the arrears by bank cheque the same day.
In the course of some exchanges about a possible meeting, which never eventuated, Mr Verhoeven on 3 August enquired when the sale would take place but there is no evidence that during the next three weeks Capital made any further oral or written reference to that matter in its dealings with Pyrenees.
In fact, the proposed sale had fallen through. Pyrenees was aware that because of a change in the nature of Capital’s business it was now preferring to lend on motor vehicles rather than aircraft. It therefore turned to the respondent, Dominion Finance Group Ltd, which agreed to lend $310,000 to Pyrenees and $315,000 to a family trust, the Chester Family Trust, associated with Mr Webb. These loans were to be cross-collateralised over both ZK-TZN and an apartment in Takapuna which the trust was in the process of buying. Pyrenees chose not to tell Capital of its dealings with Dominion. Capital continued to believe that Pyrenees was selling the aircraft on a leaseback arrangement and thereby obtaining working capital. It did not however at any stage stipulate that this was the course which Pyrenees must adopt if it was to obtain a release of the aircraft from Capital’s securities, nor did it make any further enquiry about the sale to Curry Kenny.
The solicitor for Dominion, Mr Nicoll, obtained a company search and noted the existence of the instrument over ZK-TZN. When he wrote to the solicitor for Pyrenees, Mr Samuel of the firm of Jennifer Connell, he included in his list of documents with which Pyrenees must be provided on settlement, a form of consent to entry of memorandum of satisfaction of the instrument and of a charge which Capital also held over Pyrenees’ lessor’s interest in the inter-group lease to Cityjet. On 20 August Mr Samuel, for Pyrenees, wrote to Mr Verhoeven referring to the “chattel mortgage of $100,000” and advising that Pyrenees was “raising $100,000 to make payment to you to discharge your chattel mortgage”. Mr Samuel asked for a settlement statement and a consent to entry of satisfaction of “your mortgage and lease mortgage”. At the same time he wrote to Mr Nicoll noting a number of points, including that the solicitor who had previously acted for Cityjet and Pyrenees was “to provide us with a confirmation as to what consents if any are required by the company’s debenture holders”. Unfortunately this somewhat obscure remark was the subject of very little attention at the trial.
Mr Verhoeven wrote to Mr Samuel on 23 August (by fax) in the following terms:
I refer your letter of 20 August 1999.
We confirm that the settlement of 1980 Embraer Bandeirante aircraft ZK-TZN serial number 110 298 is
Principal outstanding as at 23 August 1999   $90,238.34
           Release Fee  $     500.00
           3 months interest at 9.5%  $ 2,143.16
Total  $92,881.50
Please note, this settlement is based on the understanding that the instalment due today of $59,758.20 will be met by your client’s bank today.
We also consent to the release of our mortgage and lease mortgage in relation to this aircraft.
We ask that you complete the necessary documentation for our execution.
The same day Mr Nicoll reminded Mr Samuel that amongst his requirements for settlement was “Evidence (by way of a letter) from Capital Equipment Ltd [sic] that it will release the aircraft and aircraft lease as security on receipt of $100,000”. Also on the same day, Mr Samuel forwarded to Mr Nicoll a copy of Capital’s letter containing the settlement figure.
The next day the settlement took place. Mr Nicoll paid into the trust account of Jennifer Connell the advances to Pyrenees and the Chester Family Trust. About an hour and a quarter later he received from Mr Samuel a facsimile copy of a consent to entry of memorandum of satisfaction of the instrument by way of security over ZK-TZN executed by Capital. That document, which was later registered, was in the following form:
TO: The Registrar of Companies
Auckland
Capital Equipment Finance Limited at Auckland (the “Chargeholder”) being the chargeholder under and by virtue of an Instrument By Way of Security granted by the Company dated the 22^nd day of April 1999 and registered at the Companies Office at Auckland on the 29^th day of April 1999 (the “Charge”) HEREBY CONSENTS to the entry of a Memorandum of Satisfaction of the Charge BUT WITHOUT RELEASING OR DISCHARGING the Company [Pyrenees] or any other person or persons from the payment of any money remaining owing to the Chargeholder under the Charge or any collateral security or otherwise AND WITHOUT RELEASING OR DISCHARGING any other security or securities for the time being held by the Chargeholder collateral to the Charge or otherwise.
Out of the advance of $310,000 from Dominion to Pyrenees the settlement amount of $92,881.50 was paid to Capital. Approximately $71,000 was transferred to the Chester Family Trust to assist in its purchase of the Takapuna apartment and, after payment of various amounts of costs and disbursements, approximately $114,000 was paid into the account of Pyrenees. By recourse to this latter sum Pyrenees was able to pay the August monthly instalment of principal and interest as required in Mr Verhoeven’s letter.
Unfortunately Pyrenees and Cityjet did not prosper – largely because of the well-publicised grounding of the planes when there were concerns over aircraft maintenance – and on 16 November 1999 Capital appointed receivers of both companies. Capital then discovered, if it was not already aware of the fact, that ZK-TZN was still the property of Pyrenees. It claimed that ZK-TZN was still charged under its debenture, and in priority to the instrument held by Dominion. This proceeding concerns the validity of that claim. The receivers have sold ZK-TZN and an amount of $548,962.56 plus interest is held in a solicitor’s trust account representing the proceeds of sale pending the outcome of the proceeding. Essentially the issue concerns Capital’s contentions that, in the circumstances, ZK-TZN was not released from the debenture (the memorandum of satisfaction being related to the instrument only) and Dominion’s instrument did not obtain priority over the debenture, which was of course earlier in time.

High Court judgment

In a judgment delivered in the High Court at Auckland on 31 October 2001 Salmon J made a factual finding that Mr Verhoeven of Capital was not aware when the settlement took place that, instead of selling the aircraft to Curry Kenny, Pyrenees was receiving a loan from Dominion secured over it. But the Judge also found that the actual nature of the transaction was not of particular concern to Mr Verhoeven at the time:
In my view Mr Verhoeven was much more concerned with receiving payment of the $100,000 lent on ZK-TZN, and ensuring that instalments of interest and principal were paid on time, than he was with the larger issue of the provision of more working capital for Pyrenees.
Nor did Salmon J accept Mr Verhoeven’s evidence that he did not learn of the loan from Dominion until after the companies had been placed in receivership. There was a conflict of evidence, Mr Nicoll saying that he told Mr Verhoeven during a conversation at the end of August or early September 1999 that he was acting for Dominion and that he had called Mr Verhoeven with a view to obtaining further documents (the release of the security over the aircraft lease) in order for Dominion to perfect its security and that Mr Verhoeven expressed no surprise at the content of the call. Mr Verhoeven’s evidence had been that Mr Nicoll did not tell him during that conversation that he was acting for Dominion. On this point the Judge accepted the evidence of Mr Nicoll. He said that he concluded “either that Mr Verhoeven did not absorb the information he was given or (more likely) that he became aware, at least at that stage, (after the instrument by way of security had been released) that Dominion was involved, but was not concerned”.
Salmon J then made a finding that it had been Capital’s intention, through Mr Verhoeven, at the time it released the instrument over ZK-TZN to free that aircraft from all its securities. He said that, had ZK-TZN been sold, it would “automatically” have been released from the debenture “because it would no longer have been owned by Pyrenees”; however, “because Pyrenees retained ownership, the aircraft continued to come within the description of the assets of the company contained in the debenture”.
The Judge found that it was a condition of Capital’s offer to release ZK-TZN that the aircraft be sold “with the intention that the surplus monies be applied to the provision of working capital”. But he also found that there was no contractual obligation on the part of Pyrenees as to the application of moneys received, either from sale or from the proceeds of further borrowing. He said that the absence of reference to the debenture in the conditions of release in the letter from Capital to Pyrenees’ solicitor was no doubt because none of the parties gave any thought to the need to release the aircraft from the debenture. Capital believed it would automatically cease to be subject to the debenture on sale. Dominion no doubt believed they were getting a complete release of all charges but failed to turn their minds to the question of whether anything further was required in relation to the debenture. In this connection the Judge accepted the evidence of Mr Michael Whale, an experienced commercial solicitor, that there should have been a debenture waiver, a formal memorandum of partial satisfaction of debenture or a deed of priorities specifically setting out the required priority position. The Judge held that because neither Capital nor Dominion turned their minds to the need for a release, as a matter of law the debenture was not released.
That led to the question of whether Capital was estopped from denying as against Dominion that the debenture was released. For such an estoppel to exist, the Judge said, there must be a representation in reliance on which the representee has altered his or her position detrimentally. He noted the statement of this Court in National Westminster Finance New Zealand Ltd v The National Bank of New Zealand Ltd [1996] 1 NZLR 548, 549, that the broad rationale of estoppel, not being a test in itself, is to prevent a party from going back on his word (whether express or implied) when it would be unconscionable to do so.
Salmon J said that the representee may be any person whom the representor intended the representation to reach and affect and which it did reach and affect, citing Knights v Wiffen (1870) LR 5 KB 660. He had no doubt that Dominion was a representee in those terms. It believed on the basis of the information received from Capital that ZK-TZN was released from Capital’s securities and acted on the basis of that belief in making the advance to Pyrenees. He said he had already held that Capital intended to convey by its letter that it was releasing ZK-TZN from all charges. “It did not specifically intend a release from the debenture because it did not consider that to be necessary”. Salmon J held that it was reasonable for Dominion to have concluded that Capital’s letter of 23 August 1999 did refer to a complete release of the aircraft from Capital’s securities. It had been submitted that because Mr Verhoeven had no knowledge of all the material circumstances and had an incorrect belief as to the nature of the transaction, his action in giving the representation could not give rise to a situation where it would be unconscionable to prevent Capital from going back on its word. But the Judge found that Mr Verhoeven’s failure to document his requirements in relation to a sale and use of the proceeds, his failure to note the warning signs that indicated that the transaction was not as he thought it to be, and his failure at the time of the discharge to take steps to ensure that the agreement he had entered into with Mr Webb was carried out in its entirety, combined to make it unconscionable for Capital to deny as regards Dominion that it was not releasing ZK-TZN from the debenture as well as from its other securities. As a result, the Judge said, Dominion was entitled to recover the amount owing to it on the loan to Pyrenees from the proceeds of sale of ZK -TZN. (Dominion had accepted that, on the basis of estoppel, it could not claim the loss which it had suffered on the loan to the Chester Family Trust in relation to the apartment, which had failed to realise enough to repay that loan.)

The appeal and cross-appeal

Capital appeals against the estoppel finding. Dominion supports that finding but cross-appeals saying that Salmon J was wrong to find that the debenture was not released. Mr Stewart QC, for Dominion, also introduced an argument not made in the High Court, where neither he nor Mr Asher QC appeared, that the equitable debenture charge did not cover ZK-TZN because for it to do so would have been inconsistent with the assignment of legal title to Capital under its instrument. In the event, we do not find it necessary to reach a view on this interesting submission.

Was the debenture released?

The logical starting point is Mr Stewart’s submission that Capital by its letter to Mr Samuel of 23 August and its acceptance of the stipulated settlement amount agreed with Pyrenees that all its securities over ZK-TZN were released. Mr Stewart said that, contrary to the Judge’s finding, there was no condition of that agreement that there be a sale of ZK-TZN. But, he submitted, even if there were such a condition and even if Capital had been misled about what was to occur, a contract for release of the securities had come into existence. Capital’s remedy would have been cancellation of that contract by notice to Pyrenees. No such cancellation had occurred and, if it had, no property right (i.e. equitable interest as chargee under the debenture) would have revested in Capital because s8(3)(b) of the Contractual Remedies Act 1979 provides that when a contract is cancelled, so far as it has been performed, “no party shall, by reason only of the cancellation, be divested of any property transferred or money paid pursuant to the contract”. Thus, it was submitted, Pyrenees would not be divested of what was transferred to it by Capital by way of release of the debenture charge and the instrument, and Capital would not be divested of the moneys paid on settlement by Pyrenees. Capital’s remedy, if there had been a cancellation, would have been to apply under s9 for relief in the form of an order under subs(2)(a) revesting the interest by way of charge. But subs(5) provides that no such order can be made if that would have the effect of depriving a person, not being a party to the contract, of any interest in any property acquired by that person in good faith and for valuable consideration. Dominion was not a party to the release contract. It had acted in good faith in obtaining its interest in ZK-TZN (there being no allegation to the contrary). It had provided valuable consideration for that interest.
Mr Stewart’s argument of course depended upon his being able to persuade the Court that Salmon J was correct in finding that Mr Verhoeven intended that the aircraft be released from all Capital’s securities on a sale. Counsel submitted that it was implicit in the letter of 23 August that Capital was agreeing, but without reference to any condition about sale, that upon payment of the stipulated amount all securities would be released. Mr Stewart said that a general debenture can be released in respect of a particular asset in an informal manner, such as by letter to the borrower.
In our view the evidence leaves no doubt at all that Mr Verhoeven wrote his letter of 23 August, and accepted the settlement amount of $92,881.50, with the intention that all Capital’s securities relating to ZK-TZN, including its fixed charge under the debenture, should immediately on settlement cease to apply. That is implicit in the letter when it speaks of a “settlement.” Even more importantly, it is the commercial reality. Salmon J found that Capital understood that on settlement the aircraft was being sold to a purchaser which was providing, by way of the purchase price, the funds which would be used by Pyrenees to pay the amount stipulated by Capital. Capital therefore understood, and accepted, that on settlement title to the aircraft would be transferred by Pyrenees to the purchaser. In that context a release of the instrument would be illusory if Capital were to continue to have a charge over the aircraft under the debenture. It was never to be the position that after settlement Capital would enjoy a right of recourse to the aircraft, in the hands of the purchaser, for the balance of the moneys owing to it by Pyrenees. Salmon J rightly found that to be the case, although we do not concur in his view that a release from the debenture would have been automatic once the aircraft ceased to be owned by Pyrenees. It was actually released on settlement, in our view, because, as a matter of construction of the letter in the commercial context in which it was written, that was what Capital had agreed to. Capital’s act of settling and accepting the stipulated payment from Pyrenees was itself enough to effect the removal of the equitable charge from the aircraft. Mr Verhoeven himself confirmed in his evidence that if the settlement requirements were met he was not expecting to hold any residual charge over ZK-TZN. It was not a “part settlement”, whatever Mr Webb of Pyrenees may have thought. Mr Webb’s suggestion in the course of his evidence that the arrangement was for the security to continue, but postponed behind Dominion’s instrument, is contrary to Mr Verhoeven’s stated intention (albeit one based on a misunderstanding of what was going to happen to the aircraft) and certainly is not referable to any agreement reached between Pyrenees and Capital. The possibility of a subordination of Capital’s interest under its debenture was never mentioned. It was not what Mr Verhoeven and Mr Samuel agreed upon in their exchange of correspondence concerning the release. The implementation of the settlement pursuant to that correspondence discharged the debenture over the aircraft. A formal document such as a memorandum of partial satisfaction was desirable so that the register could reflect what had occurred but was not necessary. A memorandum of satisfaction is merely a notice of an event of release or satisfaction which has independently occurred. In it the chargeholder consents to an entry being made of that occurrence in the register. When Salmon J concluded that the parties did not turn their minds to the need for a release he appears to have been contemplating a document evidencing the release. Where we respectfully part company from him is in our conclusion that a release happened as a matter of contract notwithstanding the absence of such a document. Capital and Pyrenees did reach agreement that the aircraft would on settlement cease to be subject to any securities to Capital.

Capital may have settled with Pyrenees as a result of a misrepresentation about what would happen to the aircraft. Pyrenees had concealed from Capital the substitution of a refinancing with Dominion instead of a sale to Curry Kenny or another buyer. Because of concerns which Capital had developed as a result of defaults by Pyrenees in June and July, Capital may have been unlikely to agree to a refinancing of that kind, involving Pyrenees borrowing further money itself and assisting in a borrowing by the Chester Family Trust. But it is not and cannot be suggested that Dominion was aware of Capital’s position in this respect and, of course, the letter gives no hint of it. We agree with Mr Stewart, for the reasons he gave, that if, after settlement took place and the release occurred, Capital had given notice of cancellation of its agreement with Pyrenees to release the aircraft on the ground of a misrepresentation by Pyrenees, the Court could not have granted any relief which would have restored the debenture charge over the aircraft in priority to Dominion’s instrument. All moneys secured to Dominion in terms of the instrument must have continued to have priority. It would have been the same if Capital had invoked the Contractual Mistakes Act 1977 – see s8 of that Act. But in fact the agreement for the release was performed when the settlement occurred and there has been no notice of cancellation by Capital.
It follows that the aircraft was on settlement released from all Capital’s securities and that Dominion’s cross-appeal must succeed. We record, however, that Salmon J found that Dominion’s security did not include the engine which in October 1999 was removed from another aircraft charged to Capital and installed in ZK-TZN. Dominion’s cross-appeal against that finding, and against the Judge’s further findings concerning certain spare parts and the treatment of the cost of certain repairs necessary before the aircraft could be sold, were not pursued and are dismissed.

Estoppel

That is sufficient to dispose of the case. However, as much of the hearing was taken up with issues raised in Capital’s appeal against the Judge’s estoppel finding, it is appropriate that we should briefly give our reasons for concluding that if, contrary to our view, the aircraft had not actually been released, Capital would have been estopped from asserting as against Dominion continuing rights under the debenture in respect of an asset over which both are claiming interests.
The first argument advanced on behalf of Capital against the estoppel was that the letter of 23 August could not be construed as a representation that the debenture would be released. That was unpersuasive for the reasons given in relation to the cross-appeal. It was intended to offer a complete release so that title could be passed to a purchaser. The letter did not mention any condition about sale of the aircraft. From Dominion’s point of view, the reference in Capital’s letter to “settlement” would naturally have been taken to encompass the debenture charge. No person in the position of Dominion would have believed that Capital was intending to release the instrument whilst leaving in place the debenture charge and maintaining its priority. That would have rendered the promised release of the instrument quite meaningless in practical terms. From Dominion’s perspective, if Capital had been wanting to preserve its debenture charge with or without some postponement of its priority, it was to be expected that Capital would have carefully spelled that out.
For the same reason, we reject Capital’s second argument, that Dominion had not established that there was a clear and unambiguous representation.
It was thirdly submitted that Dominion had failed to show that Mr Verhoeven had made the representation with the knowledge that it would be relied upon by Dominion. Again, it seems to us that although Mr Verhoeven was not aware of the participation of Dominion and thought there was going to be a sale to Curry Kenny, a reasonable person in his position must, if they had thought about the situation, have had in contemplation when sending a letter of this character, setting out terms upon which securities would be released over an asset of a trading company, that it might well be relied upon by someone who was about to act as a financier in respect of the asset. In the context of the sale to Curry Kenny a financier was to be involved. Mr Verhoeven admitted that he was aware that Curry Kenny was to proceed only if it had arranged satisfactory finance. Moreover, as the letter said nothing about any condition relating to sale, a reasonable person in his position would have contemplated that, if there happened to be a refinancing instead of a sale, the new financier might well see and rely upon the settlement terms. Mr Nicoll gave evidence, which was not challenged, that it is usual to obtain written confirmation from a security holder in advance of settlement of the terms on which it will release its security. He said that he was in the practice of relying on such financiers’ letters as to the course of action that they will take. Whilst he would have been wiser to seek clarification of this particular letter, and better practice may be to seek a formal documentation of the release, we consider that in the circumstances Mr Verhoeven ought to have expected that a letter of this kind, representing Capital’s terms of settlement, could well find its way into the hands of a financier, or its lawyer, who might rely upon it.
Mr Asher next submitted that Dominion did not in fact rely on the letter or, if its agent, Mr Nicoll, did so, that reliance was unreasonable. The argument was that Mr Nicoll was actually relying upon Mr Samuel to obtain the necessary release, as on behalf of his firm Mr Samuel had undertaken to do, not upon the letter of 23 August; and that Mr Nicoll had not really turned his mind to what, if anything, needed to be done about the debenture. It was submitted that Mr Nicoll had been put on inquiry by Mr Samuel’s letter to him of 20 August about the position under the debenture and the need to do something about that security, and that accordingly any reliance on Mr Verhoeven’s letter was unreasonable.
We agree with the Judge that there was reliance by Mr Nicoll on the settlement terms stipulated by Mr Verhoeven and that his reliance was reasonable. Mr Nicoll was prepared to settle and pay over Dominion’s moneys when he had an undertaking from the firm of Jennifer Connell to procure a memorandum of satisfaction, but he was willing to do so because he had seen a copy of Capital’s settlement terms sent to him in response to his request for proof that Capital would release the aircraft. Mr Nicoll’s approach was faulty but it was induced by the terms of the letter, which plainly stated that the instrument was to be released. As we have said, it would have been completely inconsistent, indeed misleading, if what was being apparently offered by Capital did not also involve the release of its debenture security over the aircraft, which was in all practical respects identical in its effect; and indeed it was not at that time the intention of Capital that it would retain any security over the aircraft. It was not to be expected of a financier reading the letter that it would realise that there was an unexpressed condition relating to sale of the aircraft. In the circumstances the letter did not appear to be making any reservations, and, whilst better practice would have been for Mr Nicoll to seek specific documentation of the release of the debenture, we do not consider that his failure to do so and Dominion’s reliance on the letter can be described as unreasonable.
Mr Asher also submitted that there was nothing unconscionable in Capital’s conduct in now asserting that its debenture security continues and prevails. He pointed out that Capital had been seriously misled by Pyrenees concerning the sale and the injection of working capital. He said that Mr Verhoeven’s evidence showed that Capital would never have given up security over an aircraft worth $700,000 in exchange for $100,000 if the true position had been revealed to it. We consider, however, that whilst Capital may have been misled, because Dominion reasonably relied on the settlement terms letter when it proceeded to make the advance to Pyrenees, it is now unconscionable for Capital to deny the representation implicit in its letter that all existing securities would be completely released.
It was also submitted that if Capital were estopped, Dominion should not receive, in priority to Capital, anything more than restoration of the principal sum advanced to Pyrenees, and perhaps interest at the rate of Dominion’s cost of funds (9½%); that Dominion should not receive the contractual interest rate on the loan to Pyrenees of 13.5% per annum or the penalty rate of 17.5% per annum. But it seems to us that, as a result of the estoppel, Capital is unable to assert that it has any continuing security over the aircraft. Dominion, on the other hand, has a security and is entitled to whatever interest is provided for under its loan contract with Pyrenees. These were the terms to which it committed itself in reliance on Capital’s representation that it would no longer have any interest in ZK-TZN. There is nothing inequitable in its seeking to enforce them.

Result

The appeal is dismissed. The cross-appeal succeeds to the extent appearing in para [25]. Capital must pay Dominion costs on the appeal in the sum of $10,000 together with its reasonable disbursements, including travel and accommodation costs of both counsel, to be fixed if necessary by the Registrar.

Solicitors:

KPMG Legal, Auckland for Appellant

David Nicoll, Auckland for Respondent

[2002] NZCA 314

3 December 2002