GPL Limited v Dempster
[2014] NZHC 3263
•16 December 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-2590 [2014] NZHC 3263
BETWEEN GPL LIMITED
Plaintiff
AND
DAVID WILLIAM DEMPSTER and LILLIAN MARGARET DEMPSTER as trustees of the DEMPSTER PROPERTY TRUST
First Defendants
DAVID WILLIAM DEMPSTER and ANDREW WILLIAM JACOBSEN as trustees of the D DEMPSTER TRUST and LILLIAN MARGARET DEMPSTER and ANDREW WILLIAM JACOBSEN as trustees of the L DEMPSTER TRUST collectively as parties/partners of the DEMPSTER JOINT TRUST
Second Defendants
GENE ANTHONY LIMITED Third Defendant
Hearing: 3 December 2014 Appearances:
R S Pidgeon and JRS Lewis for the Plaintiff/Applicant D G Collecutt for the First and Second Defendants/Respondents, excluding Mr Jacobsen
No appearance by or on behalf of Mr Jacobsen
No appearance by or on behalf of the Third Defendant
Judgment:
16 December 2014
JUDGMENT OF WOODHOUSE J
This judgment was delivered by me on 16 December 2014 at 4:15 p.m. pursuant to r 11.5 of the High Court Rules 1985.
Registrar/Deputy Registrar
……………………………………
GPL LIMITED v DEMPSTER [2014] NZHC 3263 [16 December 2014]
CIV-2014-404-2569
IN THE MATTER of an application that Caveat 9822506.1 against the property comprised in computer registry identifier NA62C/366 (North Auckland Registry) not lapse
BETWEEN GPL LIMITED Applicant
ANDDAVID WILLIAM DEMPSTER and LILLIAN MARGARET DEMPSTER as trustees of the DEMPSTER PROPERTY TRUST
First Respondents
DAVID WILLIAM DEMPSTER and ANDREW WILLIAM JACOBSEN as trustees of the D DEMPSTER TRUST and LILLIAN MARGARET DEMPSTER and ANDREW WILLIAM JACOBSEN as trustees of the L DEMPSTER TRUST collectively as parties/partners of the DEMPSTER JOINT TRUST
Second Respondent
[1] The first defendants are the current registered proprietors of a property in Henderson. I will refer to the property as “Unit F”, although there are two supplementary units in addition to Unit F. The second defendants were the prior registered proprietors of Unit F. The plaintiff became a tenant of Unit F when the second defendants were the proprietors and continued in occupation when title was transferred to the first defendants.
[2] The plaintiff now seeks interim injunctions against “the first and/or second
defendants” as follows:
(a) An order directing the defendants “to forthwith permit the plaintiff to resume possession of Unit F … with all rights and privileges as lessee pursuant to [a] lease dated 16 March 2007”.
(b)Prohibiting the defendants from settling a sale or transferring title of the unit to any party other than the plaintiff pending further order of the Court or agreement of the parties.
[3] The interim injunctions are sought in CIV-2014-404-2590 (the substantive proceeding). There is a related proceeding (CIV-2014-404-2569) in which the plaintiff, as applicant, has obtained an order that a caveat it has lodged against title to the unit shall not lapse pending further order of the Court.
Background
[4] In 2004, Mr and Mrs Dempster, with Andrew William Jacobsen, became registered as proprietors of the unit as trustees of two Dempster family trusts. The trustees operated the unit under the name the “Dempster Joint Trust”.
[5] On or about 16 March 2007 a document headed “Lease Agreement” was signed by Mr John Hardie on behalf of the plaintiff (GPL) and by Mr Dempster. Mr Hardie is the sole director of GPL. Mr Dempster’s signature was under handwritten names “David Dempster” and “Lillian Dempster” with the two names bracketed against a further handwritten notation “Dempster Joint Trust”.
[6] There is a central issue as to whether this “Lease Agreement” created a contractually enforceable agreement between GPL and the trustees of The Dempster Joint Trust. It will nevertheless be convenient to refer to it as “the lease”.
[7] The lease was presented by Mr Hardie to Mr Dempster for signature. It had been drafted by Mr Hardie using a draft that had been prepared for another transaction. It is dated 16 March 2007. Provisions of the lease of most relevance to the issues presently arising are as follows:
The lease is of indefinite duration until 16 March 2016 maximum, commencing immediately and payable monthly in advance [sic].
If the Lessee should wish to terminate the lease prior to 12 September 2016 [sic] the Lessee will give the Lessor not less than 60 days notice of the date on which it will vacate the premises and on which date the lease will then terminate.
…
Rental increases if any take effect only annually from the date of this agreement … The Lessor shall give at least 90 days written notice of any rent increase.
…
The monthly rental on commencement of the lease is $1,712.00 inclusive of
GST.
If the Lessee defaults in rental for 14 days the Lessor can change the locks.
In the event the Lessor wishes to sell the premises the Lessee shall have first option for 7 working days to purchase at the same price as the Lessor would accept from any other purchaser who has made a written offer to purchase which is or has become unconditional save for this Lessee’s option. The Lessee’s option may be supported by caveat.
[8] The provision quoted above for the lessor to “change the locks” on default in payment of rent was a handwritten addition which I infer was added at the request of Mr Dempster. There is no provision, in the original typed version, or as a handwritten addition, giving the lessor a right to terminate on notice.
[9] The lease was not signed by Mrs Dempster, or by Mr Jacobsen (who was trustee of both family trusts and registered as proprietor for the half interest of each of the family trusts). The fact that Mrs Dempster did not sign is a matter requiring consideration. I am satisfied that the absence of Mr Jacobsen’s signature is not
relevant, at least on the basis of the arguments advanced on this interlocutory application. Mr Jacobsen has taken no part in the proceeding.
[10] Mr Dempster said in an affidavit in opposition that he told Mr Hardie that he was only one of the trustees and the other trustees had to agree to the proposed lease. He said that he also told Mr Hardie that the trustees would need a Law Society lease. Mr Hardie denied that he was told these things.
[11] Mr Dempster also said: “I signed the draft agreement to show that I was prepared to agree to the terms we had discussed”. Mr Dempster said that when he discussed the “draft agreement” with Mrs Dempster she said she was not prepared to agree to it.
[12] Mrs Dempster said in an affidavit that she was not prepared to sign the lease because the amount payable for rent was incorrect, the standard Auckland District Law Society form had not been used, and there was no guarantee from the directors of GPL. She said that for this reason she did not present the lease to Mr Jacobsen for signing. She sent an email to Mr Hardie dated 20 March 2007. This recorded her rental calculation, which was $19.46 per month more than the monthly figure in the lease. She asked for “the full name of the guarantors for this lease and the names of directors for the drafting of the formal lease”.
[13] Mrs Dempster said she phoned Mr Hardie in about April 2007 seeking payment of the additional monthly sum. Mr Hardie confirmed he got a phone call from Mrs Dempster to that effect and that it was on 17 April 2007. He said he made it clear that GPL saw no reason to pay more than had been agreed. Mr Hardie followed this up with an email of 18 April which includes the following:
… The deal made with Dave [Mr Dempster] is the one applicable. If you disagree sort it out amongst yourselves …
[14] Mr Hardie said he spoke to Mr Dempster about the requested rent increase. He said that Mr Dempster said to forget it and that Mr Dempster would sort it out. Mr Dempster did not directly challenge what Mr Hardie said. He said that the difference was so small he was prepared to leave the matter unresolved.
[15] In her affidavit Mrs Dempster produced a copy of a letter from “Dempster Joint Trust” to GPL dated 9 August 2007 which she said she sent to GPL. The copy produced by Mrs Dempster records:
Further to our previous communications on this subject we confirm that the document signed by David Dempster on the 16 March 2007 is not enforceable as it has not been signed by all interested parties, nor would they have signed had such a document had it been presented to them [sic]. The only lease that the three trustees recognise is a New Zealand Law Society lease.
In the interest of all concern [sic] we request that information be provided to enable us to complete a formal lease.
The authenticity of this letter, or at least its effect, is in issue because Mr Hardie said he never received it.
[16] GPL took possession of the unit in March 2007 and paid rent at the figure recorded in the lease. Apart from the matters already referred to, there is no evidence of any other relevant action taken by or on behalf of the Dempsters until
2010. Over that period GPL remained in occupation and paid the rent recorded in the lease.
[17] Mr Hardie said that in February or March 2010 he received a phone call from Mr Dempster about allowing a valuer to inspect the unit. Mr Hardie said he understood that there was to be “some sort of transfer of the property and that it had something to do with [Mr Dempster] wanting to get rid of a third trustee”. Mr Hardie said he was concerned about how the transaction would affect GPL’s lease and its option to purchase the property and, as a result, a caveat by GPL was lodged against the title. This was registered on 30 March 2010. There is evidence from Mr Hardie and from Mr Dempster about discussions of possible sale to GPL, with differences which do not need to be noted.
[18] There was also a letter from the Dempsters’ solicitors to GPL. Relevant parts of the letter were as follows:
(a) What is recorded in the copy of the letter of 9 August 2007 produced by Mrs Dempster, and which Mr Hardie said he did not receive, was repeated in the solicitors’ letter.
(b)It was said that notice had been given to GPL that “the landlord is resettling their existing trust and transferring the property to their new trust”.
(c) There was reference to an offer to sell to GPL for $240,000 and that this was declined.
[19] GPL’s solicitors replied by letter dated 8 April 2010. Amongst other things they record that Mr Hardie had no recollection of the 9 August 2007 letter. They stated that Mr Hardie had been told by Mr Dempster that “the Landlord was resettling the trust”, and that Mr Dempster had asked if Mr Hardie was interested in buying Unit F for $240,000. Mr Hardie said $140,000 would be more acceptable and that went no further. The solicitors did state:
If a disposition is being made from the present Landlord to another party, then the property must be offered to our client at the price that the other party is prepared to pay. Please immediately advise the price inserted in the documents resettling the trust and transferring the property.
[20] The next event of moment appears to have been proceedings issued by GPL against Mr and Mrs Dempster and Mr Jacobsen for an order to sustain the caveat. The proceedings were settled in December 2010. The terms of settlement include the following:
(a) GPL undertook to withdraw the caveat and to discontinue its proceeding. The caveat was withdrawn on 22 December 2010.
(b) There was the following provision:
This settlement is without prejudice to the parties’ claims referred to in the proceeding, and in particular neither party makes any concession as to the status and effect of the document which is exhibit D to the affirmation of J D Hardie in support of originating application for order that caveat not lapse.
Exhibit D was not in evidence, but it may be inferred that it was a copy of the lease.
[21] Following this settlement, the resettlement of the Dempster trusts proceeded. Transfer to Mr and Mrs Dempster of title to Unit F was registered on 18 January
2011.
[22] The evidence does not disclose any events of consequence occurring between the December 2010 settlement and steps taken by the Dempsters to sell Unit F in March 2014. GPL continued in occupation on the same basis that it had been in occupation since 2007. This included payment of rent on a monthly basis at an increased rate sought by the Dempsters and accepted by GPL.
[23] In or about March 2014 the Dempsters entered into negotiations with the third defendant, Gene Anthony Ltd, for possible sale of Unit F to Gene Anthony. Mr Leckey, a director of Gene Anthony, represented the company in the negotiations. In these negotiations there were emails between Mrs Dempster and Mr Leckey to the essential effect that advice of possible sale should not be given to Mr Hardie until after the sale had been completed.
[24] The first email was from Mrs Dempster on about 27 March 2014. She said that she and Mr Dempster agreed to sell for $200,000 plus GST “on the condition that John Hardy [sic] is not advised until after the sale has been completed”.
[25] Mr Leckey replied on 2 April 2014 and said, amongst other things:
I plan to keep John [Hardie] in there but would need to get your tenancy agreement checked over by my lawyer to see if it will be a smooth transaction. I had intended on forming a new agreement with him but that may be difficult if you don’t want him to know – this is something I need to nut out with my lawyer.
I understand he had the first right to purchase and that has since expired?
[26] In her reply Mrs Dempster said that “John” did not have a tenancy
agreement. She said:
He is on a month by month basis and his option to purchase has expired. It is essential that John has no idea what is happening as when we notified him some years ago that we were transferring the property into a new trust he put a caveat on the title that took us to the High Court and cost of thousands in legal bills and accomplished nothing.
[27] On 30 April 2014 Mr Leckey told Mrs Dempster that he had pre-approval from his bank for the purchase. He said:
I have also spoken to my solicitor and have been advised that John would need to be advised of any sale so vacant possession would probably be the best way for both of us to complete the deal
[28] On 18 June 2014 a written agreement for sale and purchase of the unit was entered into between Mr and Mrs Dempster and Gene Anthony. The purchase price is $200,000 with a deposit of $10,000. The agreement is subject to finance in a sum “sufficient to complete”. There is provision for vacant possession.
[29] By letter dated 14 July 2014 the Dempsters gave notice to GPL to vacate the unit by 27 August 2014. There is no evidence that Mr Hardie, or any other representative of GPL (and there does not appear to be any other representative), had knowledge at this time of the agreement between the Dempsters and Gene Anthony. Mr Hardie’s evidence is that he understood from discussions with Mr Dempster that the unit was to be occupied by Mr and Mrs Dempster. It is to be inferred from this that Mr Hardie, if he considered the Dempsters were not entitled to terminate the lease on notice, nevertheless was willing to do so in such circumstances. The alternative inference, on the available evidence, is that Mr Hardie considered that in terms of the lease as he understood it, the lessor was entitled to give reasonable notice to quit if the property was required for the lessor’s personal use. In any event, Mr Hardie took steps to clear out the unit in order to provide vacant possession by the stipulated date.
[30] On Saturday, 23 August, when GPL was still in occupation, Mr Hardie’s son, Kevin Hardie, was at the unit with his three sons aged 6 to 12 years. There is an affidavit from Kevin Hardie describing a confrontation with a person he did not know, but who claimed to be the landlord and who wanted entry. Mr Dempster has acknowledged that it was him and that a dispute arose. Kevin Hardie said he feared for the safety of his boys and called Police.
[31] The extent of any confrontation between Kevin Hardie and Mr Dempster is relevant to a decision subsequently made by John Hardie, on behalf of GPL, to vacate the premises, but these matters cannot be resolved at this stage.
[32] The other relevant event from the incident on 23 August was disclosure to Kevin Hardie of a copy of a single page recording an agreement for sale and purchase of the unit at a price of $200,000. Kevin Hardie’s evidence is that this page had been given to one of the police officers by Mr Dempster and the police officer took the initiative to show it to Kevin Hardie. Kevin Hardie’s evidence is:
I saw that it was a sale and purchase agreement for the property and that the price was $200,000, however before I got a chance to see who the purchaser was, the visitor came up very angrily and snatched it out of my hand and told the police officer that either I had no right to see it, or that the police officer had no right to show it to me.
[33] Kevin Hardie subsequently sent a text message to his father referring to the agreement at $200,000. John Hardie asked “has he sold it”. Kevin Hardie’s response was: “That’s what it looks like. He was angry that the police showed it to me.”
[34] On 25 August GPL lodged a caveat against title to the unit. An estate or interest was claimed in the following terms:
Pursuant to an unregistered Lease Agreement dated the 16th day of March
2007 whereby the caveator is the Lessee and the registered proprietors David
William Dempster and Lillian Margaret Dempster are the Lessors.
[35] Mr Dempster says that on 26 August Mr Hardie sent Mr and Mrs Dempster an email advising that GPL would have vacated the unit by midnight on 27 August. Mr Hardie said: “Sorry we were not able to get out earlier …”. GPL, it appears, did vacate the premises by midnight on 27 August and paid the balance of rent owing up to that date.
[36] Mr Hardie explained the decisions he made, and in particular the decision to vacate the premises after becoming aware of the apparent agreement for sale, in the following terms:
Representation by the Dempsters was at all times that upon termination they would live or use the units themselves and on that basis GPL began to withdraw from the units because with the intention of insisting on their rights at a later time when the company was not so busy and we could insist on the original agreement, we were aware of the respondents position as to the original agreement being a draft agreement only and wished to consider our options after we had left for new premises. It was at the point that we were aware that the respondents intended to sell the property in breach of the right of first refusal that we realised that we had to move fast and instructed our solicitors to place a caveat over the property at the first earliest opportunity. After the altercation with my son Kevin we continued to vacate the property in order to avoid further altercations with the respondents that may turn physical.
[37] Mr Dempster said that the sale to Gene Anthony was due to settle on 29
August. He said that he and Mrs Dempster became aware of the caveat “only just prior to settlement”.
[38] GPL’s application for an order sustaining the caveat was filed on 30
September. The application for the interim injunctions and the substantive statement of claim were filed on 1 October.
Discussion
[39] The principles applying on applications for interim injunctions, and the particular principles in relation to mandatory injunctions, were not in issue and on this application do not need to be summarised.
[40] What needs to be determined is whether there is a serious question to be tried in respect of the following issues:
(a) Was there a lease which included the following terms: (1) the lessor, without the lessee’s consent, had no right of termination on notice before 16 March 2016; and (2) the right of first refusal recorded in the lease signed by Mr Hardie and Mr Dempster?
(b)Was there a lease in force in 2014 which included the two terms just referred to?
(c) If there was a subsisting lease with those terms in 2014, was it brought to an end in 2014 as a consequence of either: (1) the agreement of GPL as lessee; or (2) an election by GPL to cancel the lease, including the right of first refusal, as a consequence of repudiation by the Dempsters (with the latter leaving GPL with a right to sue for damages, but not to enforce the lease or the right of first refusal)?
(d)Has the right of first refusal arisen and, if so, has GPL exercised its rights in accordance with the provision in the lease?
Was there a binding lease?
[41] Mr Collecutt, for the Dempsters, argued that the lease document signed in March 2007 by Mr Hardie and Mr Dempster did not then, or at any subsequent date, bind the proprietors of the unit as lessors. The argument was founded on the primary proposition that Mr Dempster had no authority to bind the other trustees. He submitted that Mr Dempster had no actual authority and no ostensible authority to bind Mrs Dempster and Mr Jacobsen. There was a further argument that there was no agreement because of a failure to agree on the monthly rental. There was a third argument that there was no enforceable agreement because of a failure to comply with s 2 of the Contracts Enforcement Act 1956 (which was in force when the lease was signed in 2007).
[42] I am not persuaded that these arguments are fatal to GPL’s application; that is to say, fatal in the sense that the claim by GPL is not seriously arguable. This is not to say that the arguments for the Dempsters are to be dismissed. They also require serious consideration.
[43] The reason these arguments are not fatal is that the answers to the propositions of law will require investigation, for GPL and quite possibly also for the Dempsters, of a range of factual issues by the Court. The present evidence, which makes GPL’s case seriously arguable, is that a written “Lease Agreement” was signed in 2007, this contains the two provisions of importance on the present application, GPL went into possession immediately on the document being signed
and proceeded to perform the agreement by paying the recorded rent over the following years. Mrs Dempster did raise the matters recorded in the factual background, but when GPL went into occupation and began to pay rent there was no suggestion by or on behalf of the Dempsters that the lessor resiled from the provision relating to “indefinite duration until 16 March 2016” or the right of first refusal. Mr Collecutt did argue that if the written lease agreement had force, the lessor was still entitled to terminate it on reasonable notice. It may be that admissible evidence as to the interpretation of the provisions will lead to that conclusion. Construing the document without the aid of other admissible evidence I consider that the Dempsters, as lessors, did not have a right to terminate on reasonable notice, unless GPL agreed. The lease made express provision for termination on notice by GPL as lessee, and express provision for termination by the Dempsters as lessor in the event of default by GPL, but no provision for termination on notice by the Dempsters.
[44] The argument that there was no legally effective agreement because there was no agreement on the rent cannot succeed if the Dempsters’ primary argument, just dealt with, is unsuccessful. In any event, it is seriously arguable for GPL that the issue raised by Mrs Dempster in the first month or so was of no consequence because rent was in fact paid and accepted in all of the following months at the figure stated in the lease.
[45] In respect of the argument under s 2 of the Contracts Enforcement Act 1956 I am satisfied that it is seriously arguable for GPL that there was sufficient compliance with the Act and, if that is not correct, there were material acts of performance by GPL in reliance on the validity of the written lease.
Was the written lease agreement in force in 2014?
[46] This issue is identified as a separate issue because of the events in 2010 when title to the unit was transferred on resettlement of the Dempsters trusts and GPL lodged the first caveat. The question is whether the right of first refusal was triggered at that point, and not exercised by GPL and, if so, whether that means that the right of first refusal was then spent.
[47] I am satisfied that it is seriously arguable for GPL that the right of first refusal was not triggered. If that right was not triggered, the lodging of the caveat by GPL in 2010 could not alter that fact.
Was the lease brought to an end in 2014? If not, does GPL have a subsisting right of first refusal, or option to purchase?
[48] The issues arising under this heading were advanced by Mr Collecutt as his primary argument for the Dempsters. That is understandable. The arguments advanced, assessed in relation to some undisputed facts, are reasonable arguments. These undisputed facts are: the notice of termination given by the Dempsters; GPL’s acceptance of that notice; GPL’s vacating of the premises on the stipulated date; and the vacating of the premises notwithstanding knowledge of an apparent agreement for sale to a third party. These facts provide a foundation for an argument that there was an agreement between GPL and the Dempsters to bring to an end all of their arrangements relating to the unit, whatever each thought the arrangements were. These facts also provide a foundation for the alternative argument that, if it was not a case of agreed termination, the Dempsters’ acts, based on GPL’s own argument, amounted to repudiation and GPL, with the right to elect between holding the Dempsters to the lease or cancelling, elected to cancel. If there was cancellation then any remedies for GPL are confined to damages; it could not enforce the lease and it could not enforce a right of first refusal to purchase Unit F.
[49] In the absence of other evidence bearing on those facts GPL might not have an arguable case. What in my judgment tips the balance sufficiently in favour of GPL is the evidence of the following, and some of which is also undisputed fact: the Dempsters’ representations to Mr Hardie as to why they wanted to end the lease; the evidence of covert dealings by the Dempsters with Mr Leckey over the sale; the events involving Mr Dempster and Kevin Hardie, with Police intervention, in the few days immediately preceding GPL’s departure from the unit; the disclosure to Kevin Hardie, not to GPL, of some limited information about the sale; and the lodging of the caveat, by GPL, of which the Dempsters had notice within a maximum of six days of the disclosure to Kevin Hardie of the sale agreement. The events over those final days are relevant to an assessment of GPL’s intentions; in particular whether there was continuing agreement voluntarily to bring the lease to
an end, or a legally effective election to cancel following a repudiation. Those matters do require full investigation at trial and do give rise to serious issues to be tried. Some aspects are noted in the following paragraphs.
[50] First, it is seriously arguable for GPL that the lease as a whole was not brought to an end by GPL’s actions, through Mr Hardie. The evidence provides a serious argument for GPL that GPL’s acceptance of the notice was obtained by misrepresentation by the Dempsters. That misrepresentation could mean that there was no acceptance, or agreement, binding on GPL. The evidence of misrepresentation is Mr Hardie’s evidence that he was told that Unit F was required for the Dempsters personally. The actual reason for the notice is clear – vacant possession for a sale to Gene Anthony. But information about the sale was actively suppressed.
[51] Second, it is seriously arguable that GPL did not agree to terminate or elect to cancel the lease once it received further information. GPL did vacate the premises after it obtained some information indicating that there may have been misrepresentations by the Dempsters as to why they wanted the vacant possession and further indicating the actual state of affairs – an agreement for sale to a third party. But the question at this point is whether GPL’s act of leaving the unit, on 27
August, is, in all the circumstances, sufficient to establish a clear acceptance by GPL that the lease was at an end. The answer to those questions is not clear. Mr Hardie’s email to Mr and Mrs Dempster of 27 August, when assessed in context, and in particular when assessed in relation to Mr Hardie’s explanation for his actions, cannot be treated on this interlocutory application as clear affirmation that the lease was at an end.
[52] The date on which the caveat was lodged, and its terms, are also important evidence in support of GPL’s claim. On the face of it, the terms of the caveat are inconsistent with an argument that, by 25 August when the caveat was lodged, GPL did accept that the lease was at an end. It was clearly a reaction to the discovery two days before of the agreement for sale to a third party. It was a reaction which by its express terms positively asserted that there was a continuing lease. The departure
two days later is not necessarily inconsistent with a contention that the lease remained in force, including the right of first refusal.
[53] Third, there are issues as to whether GPL ever had a right of first refusal, as contained in the written lease, and, if it did, whether that right came to an end in
2010. For reasons already noted I am satisfied that it is seriously arguable in favour of GPL that the written lease was binding, in its terms, on the Dempsters. I am further satisfied that it is seriously arguable that the events in 2010, with the resettlement of the Dempster trusts, did not trigger the right of first refusal.
[54] GPL’s contention that there was, from the outset, a binding right of first refusal is in fact borne out by Mrs Dempster’s email to Mr Leckey in April 2014 when she said that Mr Hardie’s “option to purchase has expired”. This could only be a reference to the right of first refusal in the lease which Mrs Dempster, in her affidavits in opposition, contended never came into existence. Mrs Dempster’s suggestion to Mr Leckey that the option had expired would appear to be directed to the events in 2010 which I have concluded, on the present evidence, did not bring the right of first refusal to an end.
[55] A further issue is whether the right of first refusal, if it continued in force after 2010, was triggered when Kevin Hardie was shown the copy of a page from the agreement for sale and purchase. It is arguable for GPL that it was not triggered. What was required was formal notice from the Dempsters to GPL. The brief disclosure on 23 August by the policeman to Kevin Hardie of what appears to have been a copy of one page from the agreement with Gene Anthony, did not come close to the formal notice required by the provision in the lease. Formal notice may not have been provided until GPL received a full copy of the agreement for sale and purchase through discovery in this proceeding. By then GPL had certainly made clear that it wished to exercise what by then amounted to an option to purchase Unit F for $200,000.
[56] If the inadvertent disclosure to Kevin Hardie on 23 August could be treated as some form of notice to GPL, then it is still seriously arguable for GPL that it gave notice of its intention to exercise the option to purchase within seven working days.
In my judgment it is seriously arguable that the caveat lodged on 25 August, although it simply claims the broad interest as lessee, without reference to the option, was nevertheless sufficient to constitute notice to the Dempsters of an intention to exercise the option. The Dempsters had notice of the option within seven working days of the assumed notice of the sale on 23 August. This is because of Mr Dempster’s own evidence that he and Mrs Dempster became aware of the caveat “just prior to settlement”. Settlement was due to take place on 29 August.
Balance of convenience
[57] The balance of convenience favours GPL. The interests of Gene Anthony, as purchaser under the agreement with the Dempsters, might have been an important factor weighing against GPL. But Mr Leckey filed a memorandum on behalf of Gene Anthony recording that Mr Leckey had obtained legal advice and that the memorandum was prepared with the assistance of counsel. Mr Leckey records his and his company’s position in terms of what he said he knew. Although Mr Pidgeon made some reference to this it is unnecessary on this interlocutory application to express any view as to what Mr Leckey may or may not have known, and it would be inappropriate to do so because Mr Leckey has not been heard on this and probably would not have anticipated an issue of that nature. The important point is the clear position taken by Gene Anthony that it will abide the decision of the Court. Mr Leckey said that if the Court upholds the Dempsters’ position he is ready to settle, but if the Court upholds GPL’s position then he is prepared to “move on” subject to recovery of his deposit.
[58] Given the advice from Mr Leckey it is appropriate to assess the balance of convenience by considering the interests of GPL and the Dempsters only. From the Dempsters’ perspective they do have their interest as vendors in the agreement with Gene Anthony Ltd. Orders as sought by GPL will prevent that agreement proceeding to settlement for some considerable time and may result in the loss of the agreement. That consideration needs to be weighed against the fact that, if a sale to Gene Anthony is not completed, any loss flowing from this is a loss that would be readily calculable in damages, although it is not apparent that there would necessarily be any loss of any consequence. The Dempsters will not have received
$200,000 on a sale to Gene Anthony, but the Dempsters will still own Unit F. Adverse consequences for the Dempsters, if in the end GPL is unsuccessful with its substantive claim for specific performance of the option, are consequences which should be readily redressed by costs, and an award of damages if any are proved.
[59] GPL’s position does involve considerations going beyond matters readily able to be assessed in damages. The assumption for this analysis is that GPL has an enforceable right to buy the unit for $200,000. If there is no injunction that will be lost. In my judgment the weight to be attached to the right of the Dempsters to sell to Gene Anthony, on the evidence as it stands, is less than that of GPL given the way in which the Dempsters handled matters, in their dealings with Mr Leckey and with Mr Hardie, between March and August 2014. There is an added factor in GPL’s favour in relation to acquisition of this particular unit. This is that GPL owns and occupies another unit in the same block as unit F and leases a third unit in the same block from which it operates some of its business.
[60] Part of the relief sought by GPL on the present application is an order permitting it to resume possession of unit F pursuant to the lease it claims and on the terms of the lease. An order to this effect, although of course opposed by the Dempsters, is a factor favouring a grant of the interim orders on an assessment of the balance of convenience. It will require GPL to resume payments of rent, and a condition can be imposed on the grant of the interim order that continuation of the order may be reviewed if rent is not paid. That can be a condition whether or not GPL chooses to occupy, provided vacant possession is made available to it.
[61] There is an undertaking from GPL as to damages and evidence of a capacity to meet any order in that regard.
[62] For these reasons I am satisfied that the balance of convenience favours the granting of the orders, rather than refusing them and leaving GPL to pursue a claim for damages.
Overall justice and discretion
[63] The final question on an application of this nature is to ask where the overall justice lies.1 A broad assessment favours GPL. Given the limited amount of evidence this has to be a provisional assessment. With that important qualification I do record the impression that the Dempsters have not been straightforward in their dealings with GPL in ways that affect the equities as between the parties. GPL’s claims are founded on what GPL contends is a contract, but equitable principles may
have an important bearing on some of the issues that arise, and in particular contentions advanced by Mr and Mrs Dempster.
[64] Those observations also provide reasons why I consider that the ultimate discretion that remains as to whether or not the orders should be made, is a discretion to be exercised in favour of GPL. The conditions that I will record have an additional bearing on these considerations.
Result
[65] There is an order that the first defendants, as registered proprietors of Unit F and accessory Units 16-17 at 28-30 Moselle Avenue, Te Atatu, Auckland, being the property contained and described in certificate of title NA62C/366 (the Property), grant vacant possession of the Property to the plaintiff upon the following terms and conditions:
(a) Vacant possession is to be made available to the plaintiff at 9:00 am on Monday 2 February 2015.
(b)Upon vacant possession being made available and assured to GPL, GPL shall pay rent in the same monthly sum that was paid by GPL up to 27 August 2014, with the first payment to be made on 2 February
2015, or on such later date as vacant possession is provided.
1 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at 142.
(c) The plaintiff is bound to pay rent on the terms just recorded whether or not the plaintiff chooses to go into possession, provided vacant possession at all times remains available to the plaintiff.
(d)If the plaintiff fails to pay monthly rent within seven working days of the due date the first defendants may apply to the Court for an order terminating the plaintiff ’s right of occupation and for such other orders as the Court deems fit.
(e) Subject to the preceding sub-paragraph (c), this order shall continue in force pending further order of the Court.
[66] There is a further order prohibiting the first and third defendants, pending further order of the Court, from taking any steps, or any further steps, pursuant to the agreement for sale and purchase of the Property made between the first defendants and the third defendant and dated 18 June 2014.
[67] There is a further order prohibiting the first defendants, pending further order of the Court, from entering into any agreement with any other party for disposition of the Property, whether by sale or otherwise.
[68] It is a condition of the three orders recorded in [65]-[67] that the plaintiff pay into the trust account of the plaintiff’s solicitors a sum of $10,000 on the following terms:
(a) That sum is to be paid on or before 23 January 2015.
(b)Proof of payment may be provided by written confirmation from the plaintiff’s solicitors to the first defendant’s solicitors that payment has been made.
(c) That sum of $10,000 shall constitute security for a deposit payable by the plaintiff to the first defendants for purchase of the Property from the first defendants should the Court determine that the plaintiff is
entitled to an order for specific performance for sale of Unit F to the plaintiff in a sum of $200,000.
(d)The plaintiff’s solicitors are to hold that sum in trust, on interest bearing deposit, for the respective interests of the plaintiff and the first defendants as may be determined by the Court and it shall not be paid out, in whole or in part, save in accordance with an order of the Court.
(e) If the sum of $10,000 has not been paid to the plaintiff’s solicitors by
4:00 pm on 23 January 2015 the first defendants may apply for an order discharging the orders recorded in [65]-[67] above.
[69] If the plaintiffs pays the sum of $10,000 on the terms recorded in [68], the first defendants shall pay the plaintiff’s costs of and incidental to the plaintiff’s interlocutory application for the injunctions with those costs to be assessed on a 2B basis together with reasonable disbursements, with the quantum to be determined by the Registrar if there is any issue between the parties. If the sum of $10,000 is not paid in terms of the preceding order, costs in respect of the plaintiff’s interlocutory application will be reserved.
[70] In the caveat proceeding, CIV-2014-404-2569, the order made on 29 October
2014 was that the caveat shall not lapse pending further order of the Court. Given the orders made above, in the substantive proceeding CIV-2014-404-2590, no further order is required at this stage in relation to the caveat. The existing order continues in force.
[71] The substantive proceeding is to be set down for a telephone case management conference on a date to be allocated by the Registrar in February 2015 or on the first available date after February 2015. Counsel should confer in good time before that conference with a view to seeking agreement on all necessary timetable directions to seek to ensure that the substantive proceeding is set down for hearing as soon as reasonably possible.
An observation
[72] If this proceeding goes its full course, to a defended hearing to determine GPL’s substantive claims, legal costs are likely to be reasonably high, and they may be disproportionate if assessed in relation to the purchase price of Unit F. The essence of GPL’s argument is that it is entitled to purchase at the same price recorded in the agreement with Gene Anthony – $200,000. GPL says, in effect, that it is ready willing and able to settle a purchase with the Dempsters in a sum of $200,000. What the Dempsters were wanting to do was to sell to Gene Anthony for $200,000. On a simple cost/benefit analysis, the prudent course would seem to be for the Dempsters to accept Mr Leckey’s willingness to withdraw, repay his deposit, and proceed with a sale to GPL. In monetary terms at least there would seem to be no difference in the result of any real consequence.
[73] It may be that there are other considerations that might influence Mr and Mrs Dempster’s assessment as to whether they should sell to GPL. Mr Collecutt, when I raised the matter in court, indicated that there might be, but quite properly was not in a position to divulge any privileged information.
[74] Even if there are considerations influencing the parties of which I am unaware, I would nevertheless urge them to seek to settle this dispute. If they have not been able to settle the dispute before the case management conference they must advise the court, in their memorandum, as to what steps have been taken to endeavour to settle the dispute and what each party is willing to do in relation to
alternative dispute resolution.
Woodhouse J
Solicitors / Counsel:
Mr R S Pidgeon, Barrister, Auckland
Mr M Lockhart (applicant’s instructing solicitor), Lockhart Legal, Solicitors, Auckland
Mr D G Collecutt, Barrister, Auckland
Mr N Dowsett (first and second respondents’ excluding Mr Jacobsen instructing solicitor), SimpsonDowsett Mackie, Solicitors, Auckland
Mr A W Jacobsen
Gene Anthony Ltd
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