Hickman v Turn and Wave Ltd - [2011] NZCA 100

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA796/2009
[2011] NZCA 100

BETWEEN HICKMAN & ORS
Appellant

AND TURN AND WAVE LIMITED
Respondent

CA797/2009

AND BETWEEN LESTER & ORS
Appellant

AND GREENSTONE BARCLAY TRUSTEES LTD
Respondent

CA798/2009

AND BETWEEN COLLINGWOOD & ORS
Appellant

AND ICON CENTRAL LTD
Respondent

Hearing: 31 August to 3 September 2010

Court: O'Regan P, Hammond and Randerson JJ

Counsel: P J Dale, D W Grove and N R Campbell for Appellants
D J Chisholm and G P Blanchard for Respondent Turn & Wave Ltd
R B Stewart QC and D J Neutze for Respondent Greenstone Barclay Trustees Ltd
B O'Callahan and J Puah for Respondent Icon Central Ltd

Judgment: 29 March 2011 at 11.30 a.m.

JUDGMENT OF THE COURT

AThe application by the appellants to amend the pleadings in each case is dismissed.

B The appeals relating to the five appellants named at [19] are dismissed.

CCounsel for the remaining appellants are to confer with counsel for the other parties and inform the Court by memorandum within one month from the date of this judgment how the appeals by the other appellants are proposed to be dealt with.
DCosts are reserved. Counsel are to confer and file a memorandum within the same period on that subject.

REASONS OF THE COURT

(Given by Randerson J)

Para No
Introduction	[1]
The parties	[5]
The proceedings	[8]
The Judge’s findings	[13]
Issues on appeal	[14]
The Blue Chip companies	[23]
The Blue Chip investment products	[30]
The mainstream product	[32]
The joint venture product	[33]
Premium Income Product (PIP)	[40]
Put and Call agreement (PAC)	[49]
The Sale and Purchase Agreements (SPAs) and associated lease documents	[54]
Greenstone	[55]
TWL	[61]
Icon	[64]
The relationship between the developers and Blue Chip	[68]
The Barclay	[70]
The profit share agreement	[73]
The Westpac funding	[77]
The underwrite agreement	[81]
The Bianco	[90]
The Icon	[111]
The underwrite agreement	[117]
The Blue Chip marketing methods	[128]
The extent to which the developers were aware of the Blue Chip investment products and the ability of the purchasers to settle	[134]
Greenstone	[135]
TWL	[144]
Icon	[155]
The scope of the authority of the Blue Chip sales agents to act on behalf of the developers and the issue of imputed knowledge	[161]
The Judge’s findings	[163]
The scope of agency – Greenstone and TWL	[171]
The scope of agency – Icon	[184]
Imputed knowledge	[192]
Imputed knowledge – Greenstone and TWL	[198]
Imputed knowledge – Icon	[206]
Summary on the issue of knowledge by the developers	[209]
The application to amend the pleadings	[210]
Promissory estoppel	[212]
The ability of the investors to settle without Blue Chip’s support	[230]
Implied term	[234]
Interdependent agreements	[255]
The effect of the entire agreement clauses	[265]
Issues under the Securities Act
Introduction	[267]
The purpose and scheme of the Securities Act	[272]
The definitions of “security”, “debt security” and “equity security”	[279]
The Culverden case	[287]
Are the Blue Chip investment agreements debt securities?	[299]
The JVAs	[300]
The PIP agreement	[317]
The PAC agreement	[327]
Lease arrangements	[331]
Does the exemption under s 5(1)(b) of the Securities Act apply in respect of Blue Chip investment agreements?
The JVAs	[335]
The PIP agreements	[343]
The PAC agreements	[350]
The lease	[352]
The consequences of any illegality under the Act; severability and tainting issues	[353]
Were the SPAs tainted by any illegality in relation to the Blue Chip agreements?	[359]
Summary	[369]
Result	[370]
APPENDIX
The Barclay development
Mr and Mrs Lester	[1]
Ms Janes	[11]
Mr and Mrs Hickman	[18]
Mrs Dick	[20]
Ms Andrews	[27]
Mrs Whyte	[36]
Mrs Crockett	[39]
Mr van Beek	[50]
Mr and Mrs Johnson	[59]
Mr and Mrs Bogardus	[68]
Mr Crawford-Greene	[77]
Mr Stewart	[87]
The Bianco Development
Mrs Hunt and Mr Dwight	[90]
Mr and Mrs Hickman	[98]
Mr and Mrs Britton	[107]
Mrs Bruerton	[116]
Mr and Mrs Busch	[118]
Mr Houkamau	[122]
Mr Hutchinson	[127]
Mr and Mrs Jacobsen	[134]
Mr Leach and Ms Holder	[146]
Mr Stewart	[150]
Mrs Whyte	[159]
The Icon Development
Mr and Mrs McFarlane	[167]
Mr Collingwood and Ms Scanlen	[174]
Mr and Mrs Ashby	[180]
Mr and Mrs Bagley	[187]
Mr and Mrs Cosgrove	[197]
Mr and Mrs Dragicevich	[203]
Mr and Mrs Herrick	[209]
Mr and Mrs Moore	[215]
Mr Stewart	[225]
Mr and Mrs Webber	[229]
Ms Aitkenhead	[243]

Introduction

When the Blue Chip group of companies collapsed in February 2008, hundreds of investors suffered substantial losses. Many also found they were facing liabilities they had not counted upon having to meet. These appeals are concerned with investors who, as part of their investments with Blue Chip, signed agreements to buy apartments in three separate developments in Auckland City.
They bought “off the plans” on the basis that the apartments would be constructed with settlement to take place usually 18 to 24 months later. The respondent developers were not part of the Blue Chip group and when the construction of the apartments was complete they called upon the investors to settle the purchases. The investors declined to do so and purported to cancel the sale and purchase agreements (which we will refer to as “SPAs”).
Selected investors then sought declarations to the effect that they were entitled to cancel the agreements on a variety of grounds we discuss below. The High Court ordered under r 10.15 of the High Court Rules that it would determine, prior to trial, whether the selected investors were obliged to settle or whether they had validly cancelled their agreements.
In three judgments issued on the same day, Venning J found that the investors had not validly cancelled the SPAs.[1] The investors now appeal against those decisions.

The parties

[1]Lester v Greenstone Barclay Trustees Ltd [2010] 3 NZLR 67 (the Greenstone judgment); Hickman v Turn & Wave Ltd HC Auckland CIV-2008-404-5871, 25 November 2009 (the TWL judgment); Icon Central Ltd v Collingwood HC Auckland CIV-2008-404-7424, 25 November 2009 (the Icon judgment).

It is convenient to refer first to the respondent developers and to the developments for which they were responsible:
(a)Greenstone Barclay Trustees Limited (Greenstone) undertook a development known as the Barclay.
(b)Turn and Wave Limited (TWL) was responsible for a development known as the Bianco.
(c)Icon Central Limited (Icon) undertook a development known as the Icon.
We will refer to the three separate sets of proceedings as the Greenstone, TWL and Icon proceedings respectively.
In the Greenstone proceeding there were more than 90 plaintiffs of whom 12 were selected for the purpose of determining the preliminary question. In the TWL proceeding, there were more than 50 plaintiffs from whom 12 investors were selected. And in the Icon proceeding 11 were selected from some 30 investors. The investors were plaintiffs in the Greenstone and TWL proceedings but were defendants in the Icon proceeding. The cancellation issue was raised as part of their defence in that proceeding.

The proceedings

Venning J was careful to clarify the limited nature of the proceedings:
·The judgment could only formally bind the parties selected as plaintiffs who participated in the hearing.
·Separate causes of action against lenders, mortgage brokers, valuers, Blue Chip entities and solicitors were left for another day.
·The judgments were concerned solely with the cancellation issue; they did not address whether the court should order specific performance of the SPAs against the individual plaintiffs.
The grounds on which the investors asserted they were not obliged to settle were:
·Actionable misrepresentation giving rise to a right to cancel under the Contractual Remedies Act 1979.
·Misleading and deceptive conduct under the Fair Trading Act 1986.
·Breach of the Securities Act 1978 through failure to provide a prospectus.
The causes of action for misrepresentation and breach of the Fair Trading Act relied on misrepresentations made by Blue Chip sales agents. In order to give rise to the claimed right of cancellation, it was essential for the investors to establish that, in making the alleged misrepresentations, the Blue Chip agents were also acting as agents for the developers such that their statements should be attributed to the developers as principals.
Strictly speaking, a breach of the Securities Act is not a ground entitling the investors to cancel the SPAs. However, if the separate arrangements between Blue Chip and the investors could be shown to have breached the Act, they would be invalid and of no effect.[2] The next step would be to attempt to establish that the SPAs were tainted by that illegality and were also invalid and of no effect.
[2] Securities Act 1978, s 37(4).
In order to establish this ground, it was necessary for the investors to show that:
·The separate arrangements made between Blue Chip and the investors were “debt securities” or “equity securities” under the Securities Act.
·The SPAs had as their purpose or object the assistance or promotion of the illegal transactions.
·The developers knew of the illegality.

The Judge’s findings

In very brief summary, the principal findings made by Venning J were:
·The relevant sales agents were appointed as agents by the respective developers and had actual authority to market and sell the apartments on their behalf.
·The scope of the agency was limited to marketing and selling the apartments.
·The developers were not liable for misrepresentations by sales agents about the Blue Chip investment products as they were outside the scope of the task the sales agents were engaged to perform for the developers.
·Any actionable misrepresentations about Blue Chip or the Blue Chip investment products that may have amounted to misleading conduct were outside the scope of the agency from the developers.
·The Fair Trading Act causes of action could not succeed.
·There were no other grounds for cancellation.
·The Blue Chip investment products did not constitute debt securities under the Securities Act (with the possible exception of the joint venture agreement we mention below).
·Even if the relevant Blue Chip investment products were debt securities, the exemption for agreements relating to the sale of land under s 5 of the Securities Act applied.
·Even if the Blue Chip investment products were marketed unlawfully in terms of the Securities Act, the SPAs were not made for the purpose of assisting in the illegal arrangement.
·Greenstone and TWL had no knowledge of the alleged illegality. For this purpose, the knowledge of the Blue Chip entities and the sales agents about the detail of the Blue Chip investment products could not be imputed to Greenstone or TWL and they had no reason to be put on inquiry.
·Icon knew of the detail of the relevant Blue Chip investment products but did not know of the alleged illegality.

Issues on appeal

The ground has shifted considerably since the hearing before Venning J:
·Any cause of action based on misrepresentation, whether under the Contractual Remedies Act or as constituting misleading or deceptive conduct under the Fair Trading Act, is no longer pursued.
·The appellants confirmed they do not appeal against Venning J’s finding that the liquidation of the Blue Chip entities nominated as lessee of the apartments does not provide a ground upon which the investors were entitled to cancel.
We note also that an argument based on unconscionability was abandoned at the close of the High Court hearing and that the investors elected in the High Court not to pursue a possible argument based on a collateral or conditional contract.
The issues under the Securities Act remain. The appellant investors also now seek to amend their pleadings to introduce three new causes of action which they assert mean that they would not be obliged to settle the SPAs. These are:
·A claim based on promissory estoppel in which it is alleged that the Blue Chip agents told the investors they would not be required to settle the SPAs or that they would only be obliged to do so if Blue Chip did not perform its obligations in relation to the transactions.
·A claim based on an implied term of the SPAs that the investors would not be required to settle if Blue Chip did not perform its obligations.
·A claim that the SPAs and the separate agreements entered into between the investors and the relevant Blue Chip entities were interdependent with the result that the failure by the relevant Blue Chip entities to perform their obligations meant that the investors had no obligation to settle the SPAs.
The investors’ application to amend the pleadings (which had already been much amended in the High Court) was only made at a late stage after detailed grounds of appeal had been filed. The application to amend was strongly opposed by the developers who maintained they would be prejudiced not only in preparing for the appeals but also because the trial would have been run differently in evidential terms if the new grounds had been live issues at trial. The developers also pointed out that the possibility of amending the pleadings in the High Court to include promissory estoppel had been raised by counsel for the appellant investors but this was abandoned in the closing stages of the trial. No amended pleading including an allegation of promissory estoppel was ever filed in the High Court.
In order to address the concerns raised by the developers, O’Regan P directed that the appellant investors could present argument before us in relation to the new grounds but the developers would not be required to respond unless we decided that leave to amend should be granted. In that event, time would be allowed to the developers to respond to the new arguments. For reasons which we canvass in this judgment, we decided that leave should not be granted and the developers were informed accordingly.
Mr Dale agreed to limit the scope of the argument on appeal initially to a much reduced number of investors. These were Mr and Mrs Lester and Ms Janes in relation to the Greenstone proceedings; Mr and Mrs Britton, Mr Dwight and Ms Hunt in respect of TWL; and Mr McFarlane in respect of Icon. However, the written submissions made on behalf of the investors addressed the evidence of all of them. We have decided, on reflection, we should consider all appellants and we have reviewed the evidence and the investors’ submissions accordingly.
The other investors who were plaintiffs in the TWL and Greenstone proceedings and defendants in the Icon proceeding in the High Court were named as appellants but, strictly speaking, their appeals were not to be advanced at the hearing before us. However, the submissions made on behalf of investors by their counsel did, in fact, address evidence relating to all of the appellant investors. We are conscious that the findings we have made effectively dispose of the applications by the other investors to amend their pleadings and may also resolve their appeals for all practical purposes. Having heard argument on their behalf we decided that it was appropriate to review the evidence relating to their cases to satisfy ourselves that the facts of their cases did not raise issues that would require us to adopt a different approach to those cases. We have, therefore, reviewed the evidence of all of the appellants named in the original notices of appeal, not just the small number of investors whose appeals were to have been advanced before us. However, this judgment formally resolves only the appeals of the appellants named at [19].
We have decided to decline leave to amend the pleadings and to amend the grounds of appeal. This judgment will address the following issues:
·The reasons for our decision declining leave to amend the pleadings and the grounds of appeal.
·Whether any of the relevant Blue Chip investment products breached the Securities Act.
·Whether the developers are tainted with any illegality in that respect.
Before dealing with these issues, it is necessary to set out some background relating to the Blue Chip companies, the relevant investment products, and the Blue Chip marketing methods. Much of this material is drawn from the judgments of Venning J for which we are grateful.

The Blue Chip companies

Blue Chip (New Zealand) Ltd was established in 2000 as a promoter of property investments. It later changed its name to Blue Chip Financial Solutions Ltd and, more recently, to Northern Crest Investments Ltd. In 2004 it was listed on the New Zealand Stock Exchange. It was also listed on the Australian Stock Exchange.
The company had a number of subsidiaries and related entities. In this judgment, we refer to the group generically as “Blue Chip” unless it is necessary to stipulate a particular company within the group. Mr Mark Bryers was the driving force behind Blue Chip.
A common theme in the investors’ evidence was the reliance they placed on prominent directors on the board of the Blue Chip parent company including Mr Jock Irvine (a senior lawyer), Mr Wyatt Creech (a former Deputy Prime Minister), and Mr John Luxton (a former member of Parliament and former Minister).[3] Promotional material emphasised the New Zealand Stock Exchange listing of the parent company and the existence of Macquarie Bank Ltd as a “cornerstone” shareholder.
[3]Messrs Irvine, Creech and Luxton had resigned from the board prior to the collapse of the Blue Chip Group.
Blue Chip’s first public report was issued in March 2005. It reported an annualised net profit after tax of $9.6 million. The report described the Blue Chip investment model:
Blue Chip’s primary product allows people to tap into dormant equity or put spare cash to rewarding use. ...
Our investment products are based on Auckland’s residential property. Few other property markets in New Zealand have such a strong record of growth and yield. It is a robust and rewarding base for generating wealth, delivering:
·           Security ...
·           Capital growth and yield ...
·           Market performance ...
Proven Products
Blue Chip products deliver positive cash flow on a weekly basis. This cash flow is underpinned by long-term fixed leases for clients, supported by annual tax benefits and the potential for attractive capital gains if the property is sold.
Clients achieve these benefits either by investing cash or by using dormant equity in their own home or business.
In most cases, a Blue Chip New Zealand subsidiary, Auckland Residential Tenancies Limited (ART), leases a client’s property. As part of that lease, the Lessee undertakes to pay the rent to the client in each week of the lease, whether or not the property is occupied by a subtenant. ...
The 2005 Annual Report recorded that the Group had made a number of positive advances during the year. The company had expanded into Australia, had carried out 800 property transactions and had 1500 properties under the management of one of its subsidiaries (Bribanc Property Group Limited(“Bribanc”)). The report continued:
Blue Chip currently sources its clients from a network of Licensees and Advisers in New Zealand and Australia.
That network is supported by Blue Chip’s own team of more than a dozen dedicated account managers who oversee the technical aspects of structuring client portfolios.
One of Blue Chip’s core value propositions is that the company undertakes the full sequence of roles from property sourcing through to a packaged ownership solution, including full asset management. As such, it provides one seamless service rather than the investor/owner needing to deal with anything up to eight separate intermediaries.
The integrated nature of the Blue Chip business model provides mutual benefits for clients, developers and Blue Chip itself. For example, by approaching developers and committing to a significant volume of residential dwellings during the development stage, Blue Chip mitigates the developers’ largest single risk – demand. By accessing the property early, Blue Chip optimises the single most important criterion in the investment equation – price. The next biggest hurdles for investors are finance and property management and they are also solved by Blue Chip.

The 2005 report identified the benefits for investors of a Blue Chip investment as:
Blue Chip New Zealand’s point of difference remains providing a financial planning solution that utilises property, rather than just providing a property itself. Offering the associated services continues to appeal as a hassle free investment without sacrificing the returns. Investors know up-front the returns to expect, which is more akin to a financial product than a standard property investment.
At the time of the hearing before Venning J, a number of the Blue Chip companies were in liquidation but this did not include the Blue Chip parent company now known as Northern Crest Investments Limited. The Judge heard evidence from an expert witness to support the allegation made on behalf of the investors that the Blue Chip group was insolvent from the latter part of 2004 onwards. He also heard an opposing expert. The Judge did not accept the investors’ contention.[4] He accepted that certain companies within the Blue Chip group were vulnerable because of advances made to a private company then known as Ingot which was liquidated in June 2008. He also found that, towards the end of 2006, some personnel within the Blue Chip group had identified issues with the joint venture product. This led to the development of the PIP product which we shortly describe. Venning J observed that the assumption that underlay the continued viability of the joint venture product, namely the continued increase in value of the Auckland property market was, at best, optimistic.[5] He concluded, however, that there was insufficient information before the Court to make a conclusive finding on the solvency or otherwise of companies within the Blue Chip group at any particular time.

The Blue Chip investment products

[4] At [68] and [70] of the Icon judgment.

[5] At [69] of the Icon judgment.

Blue Chip marketed four different forms of investment products:
·      The mainstream agreement.
·      The joint venture agreement.
·      The premium income agreement (PIP).
·      The put and call agreement (PAC).
Although we will shortly mention the mainstream product, the focus of these appeals is on the other three products. Key features of the other three forms of Blue Chip investment were:
·The investor signed an unconditional SPA for an apartment yet to be built.
·Finance was usually arranged by Blue Chip.
·The apartment was to be leased to generate income.
·The investor was to receive an immediate return by way of fortnightly payments during the period of the investment which varied according to the nature of the product and the extent of the funds invested.
·Under the PIP and PAC agreements, a Blue Chip entity was granted an option to assume the investor’s obligations as purchaser under the SPA. Under the PAC agreement the investor could also require the Blue Chip entity to exercise its option.

The mainstream product

Mainstream investors purchased the relevant property in their own names or using company or trust structures established on the advice of Blue Chip. The apartments were bought subject to a deed of lease with the rent guaranteed by Blue Chip New Zealand Ltd. There were associated agreements for the sale and purchase of a furniture pack and for property management through Bribanc.

The joint venture product

Under this form of investment, the investor agreed to purchase an apartment but also agreed, jointly with Blue Chip Joint Ventures Ltd, to establish a joint venture entity to engage in the business of owning and leasing the apartment. By way of example, the documents relevant to the joint venture for the Greenstone development were:
·     The agreement for sale and purchase between the investor and the vendor (in this case Greenstone).
·     An addendum to the agreement for sale and purchase between the investor and vendor, pursuant to which the investor requested the vendor to enter into a lease of the apartment and acknowledged the apartment was sold subject to a lease.
·     A deed of lease with ART Apartments as lessee (guaranteed by Blue Chip New Zealand Ltd) and the vendor as lessor. The initial lessee was Barclay Management Ltd – a company associated with Greenstone, (as required by Greenstone’s financiers) but, on settlement, Greenstone agreed to assign the lease to ART Apartments.
·     An agreement for sale and purchase of a furniture pack between the investor and Blue Chip New Zealand Ltd.
·     The joint venture agreement between the investor and Blue Chip Joint Ventures Limited.
The central feature of this product was the joint venture agreement. The property was described as the apartment and associated chattels. The investor’s initial contributions were stated to be:
The obligation and responsibility for all Borrowings on the property together with such sums as shall be necessary to pay for that part of the Property representing the land, buildings and improvements ... together with a contribution towards all costs and disbursements associated with the Joint Venture which obligation and responsibility shall represent 75% of the Joint Venture Units.
The obligations of the Blue Chip entities under the joint venture agreement were:
Arranging and causing all loans to be made to the Joint Venture for the Property, providing an agreement to indemnify the Joint Venture and [the investor] against all or any liability for operating cash shortfall from the Property ... and an agreement to assume management responsibility for the Property and the Joint Venture together with a contribution towards all costs and disbursements associated with the Joint Venture which sum, contributions and agreements shall represent 25% of the Joint Venture Units and that part of the Property representing the chattels, internal fittings and improvements ...
The return to the investor came in the form of a fortnightly procurement fee payable by Blue Chip Joint Ventures Ltd. This company also agreed to pay the interest on the costs of borrowing incurred by the investor and to indemnify the investor for any operating shortfall in the joint venture.
Venning J succinctly summarised the effect of the joint venture agreement to be:[6]
… that in return for the investor providing the equity to enable the joint venture to purchase the apartment, (either by a direct investment or borrowing), Blue Chip Joint Ventures Limited agreed to pay the investor the procurement fee and meet all outgoings on the borrowing and property.
[6] At [34] of the Greenstone judgment.
The joint venture was to continue until wound up unless the parties earlier resolved to sell the property or terminate the joint venture. In general, investors were told the investment would last for approximately four years at which point it was intended that the property would be sold with 95 per cent of any capital gain for the benefit of Blue Chip and 5 per cent to the investor. On a winding-up of the joint venture, the investor was entitled to receive 100 per cent of the net proceeds of sale.
The joint venture agreement in relation to TWL’s Bianco development was in similar terms but with some variations in respect of the lease as we later mention. The joint venture agreement does not arise in relation to the Icon development.

Premium Income Product (PIP)

The Judge described the documents and features of the PIP agreement in Greenstone’s case in the following terms:
[35]     The documents relevant to the PIP agreement were:
·the agreement for sale and purchase between the investor and the vendor Greenstone Barclay;
·an addendum to the agreement for sale and purchase between the investor and vendor, pursuant to which the investor requested the vendor to enter into a lease of the apartment and acknowledged the apartment was sold subject to a lease;
·a deed of lease with ART Apartments as lessee (guaranteed by Blue Chip New Zealand Limited) and the vendor as lessor. The initial lessee was Barclay Management Ltd (as required by Greenstone Barclay’s financiers) – a company associated with Greenstone Barclay, but on settlement Greenstone Barclay agreed to assign the lease to ART Apartments;
·an agreement for sale and purchase of a furniture pack between the investor and Blue Chip New Zealand Limited; and
·the premium income product agreement;
·a deed of nomination.
[36]     The particular features of the PIP investment were the deed of nomination and PIP agreement. The immediate return to the investors was by option fee.
[37]     The PIP agreement was between Blue Chip Premium Income Limited and the investor. Under the PIP agreement:
·The investor granted Blue Chip Premium Income Limited the option to accept the deed of nomination in exchange for which Blue Chip Premium Income Limited was to pay the investor an option fee;
·Blue Chip Premium Income Limited could exercise the option to accept the deed of nomination at any time during the period 30 working days before settlement date;
[38]     The deed of nomination provided for the investor to nominate Ravine Limited to take title to the property. The nomination was expressed to be operative from, and to take effect from the date the option was exercised by Blue Chip Premium Income Limited pursuant to the PIP agreement.
[39]     The PIP agreement also provided in cl 4 that:
(a)The Investor acknowledges and agrees that the Purchase Agreement is binding on the Investor unless Blue Chip exercises the Option. The Investor also acknowledges they will settle the purchase of the Property with the Vendor if Blue Chip does not exercise the Option and that nothing contained in this Agreement shall be construed to constitute a representation by any party to the contrary.
[40]     Clause 5 provided for the situation that would apply in the event Blue Chip Premium Income Limited did not exercise the option. It provided that if:
(a)... [Blue Chip] does not exercise the Option and the Investor settles the purchase of the Property ... Blue Chip shall pay the Investor’s reasonable costs (excluding the purchase price) relating to the settlement of the Property, including (without limitation) the Investor’s interest costs on the borrowing relating to the settlement of that property, on an after tax basis.
(b)Blue Chip will pay the Investor’s reasonable costs in accordance with clause 5(a) by procuring the Lessee to enter into the Lease and as a result thereof the Lessee will pay rent to the Investor which shall be in an amount equivalent to the Investor’s reasonable costs specified under clause 5(a), annualised and paid monthly on the dates set out. ...
(c)In the event the Investor is required to settle the purchase of the Property under the Purchase Agreement, the Lease shall be amended to include an option for the Lessee to purchase the Property at any time during the term of the Lease, or any renewal term, at the same purchase price paid by the Investor under the Purchase Agreement. ...
[41]     In short, under the PIP agreement, the investor took on the obligation to purchase the apartment, but the Blue Chip entities had the option to accept nomination and settle the purchase. In exchange for the investor granting the option, Blue Chip Premium Income Limited agreed to pay the investor an option fee. In the event Blue Chip Premium Income Limited did not exercise the option, the investor was obliged to settle the purchase, but Blue Chip Premium Income Limited agreed to pay the investor’s costs of settlement, (apart from the balance of the purchase price, which was to be provided by the investor), including the investor’s costs of borrowing to settle. If the investor settled the purchase, the lessee [ART Apartments Ltd] was to have the option to purchase the property at the original purchase price.
Clause 2 of the PIP agreement stipulated certain conditions including the execution of the SPA, the developer being described as the vendor:
This Agreement is conditional upon:
(a)the Investor contemporaneously executing and delivering to Blue Chip:
(i)two copies of the Purchase Agreement with the Vendor; and
(ii)two copies of the Deed of Nomination.
(b)Blue Chip arranging signing of the Purchase Agreement by the Vendor and signing of the Deed of Nomination by Blue Chip within 10 Working Days after the date of this Agreement.
(c)the approval of an authorised officer of Blue Chip within 10 Working Days after the date this Agreement is executed. This condition can be waived by Blue Chip.
Associated with the PIP agreement was the Deed of Nomination in terms of which the investor nominated a Blue Chip entity as nominee. The investor agreed to comply with the obligations of the purchaser under the SPA up to the “operative date” which was defined as the date Blue Chip exercised the option to accept the Deed of Nomination. In turn, the nominee agreed to comply with the purchaser’s obligations under the SPA if the option was exercised. Blue Chip also agreed under the Deed of Nomination to reimburse the investor for all money paid by the investor to the vendor under the SPA and all legal and other costs reasonably incurred by the investors in relation to the SPA.
A schedule to the PIP agreement summarised the essential terms of the SPA and another schedule summarised the principal terms of the lease agreement which would apply if Blue Chip did not exercise the option.
The terms of the PIP agreements were the same for all three developments except that in the case of the Icon agreement there were some changes to the terms of the lease which would apply in the event of the Blue Chip entity not exercising the option. These related to the definition of the investor’s costs which Blue Chip agreed to meet in that event. The PIP agreement for the TWL development was between the investor and Blue Chip Premium Income Ltd. In Icon’s case it was with another Blue Chip entity, Amelia Ltd (“Amelia”).
As we later discuss, cls 4 and 5 of the PIP agreement constitute a significant difficulty for the investors in relation to the new grounds they seek to argue so far as they relate to the PIP agreements.[7] The object of the amended grounds was to establish that the investors were misled about their settlement obligations under the SPAs. The proposed new pleadings alleged the investors were led to believe they would not be required to settle because Blue Chip would take over that obligation prior to settlement date. The difficulty with this allegation arises because first, cl 4(a) is explicit in providing that the SPA is binding on the investor unless Blue Chip exercises the option. In that case, it is acknowledged that the investor is obliged to settle the purchase. Secondly, cl 5 provides for what is to happen if Blue Chip does not exercise the option and the investor settles the purchase. In that case, Blue Chip Premium Income Ltd agreed to pay the investor’s reasonable costs involved in settling the transaction (other than the purchase price itself). In particular, Blue Chip Premium Income Ltd agreed to pay for the investor’s interest costs on the borrowing necessary to settle the transaction. Blue Chip Premium Income Ltd agreed to achieve that by procuring the lessee to enter into the lease and to pay a rental equivalent to the investor’s costs of settling. As well, if the investor was obliged to settle, the lease was to be amended to grant the lessee an option to purchase the property at the original purchase price.
[7] Below at [221] – [223] and [254].
The essential terms of the PIP agreement and the associated risks to the investor were also clearly stated in a brochure issued by Blue Chip to investors. The brochure stated, amongst other things, that:
·The client enters an SPA for a property which is anticipated to settle in one to two years and nominates Blue Chip the right to settle the purchase at its option.
·The client pays a ten per cent deposit which is held in the trust account of the property developer’s solicitors with interest accruing on the deposit for the benefit of the client or Blue Chip depending on who settles the purchase.
·In the period from payment of the deposit until settlement, Blue Chip pays a monthly option fee amounting to approximately 16 per cent per annum of the deposit.
·If Blue Chip accepts the nomination and takes over the SPA the client receives back the deposit.
·If Blue Chip does not exercise the option and take over the SPA prior to settlement and the client is required to settle the purchase, Blue Chip will lease back the property from the client and will pay the client’s costs (as stated in the PIP agreement).
Under the heading “Client Risks” the main risks of the investment are then summarised:
The Premium Income Product offers an above average return because it carries a greater risk than that associated with traditional investments such as term deposits.
While Blue Chip intends to acquire the relevant property through exercising its Option to do so, there is no guarantee that Blue Chip will do this. Under the terms of sale and purchase agreement, the client is obliged to settle the sale and purchase transaction in the event that Blue Chip does not exercise its Option.
The decision to exercise or not exercise the Option rests solely with Blue Chip (or any assignee, successor or party who has acquired Blue Chip’s interests).
The client must be prepared and capable of completing the purchase at the agreed purchase price if Blue Chip does not exercise its Option prior to the settlement date. Failure to do so will be a breach of the sale and purchase agreement and could result in the forfeiture of the deposit and the vendor pursuing other legal remedies.
An investment in the Premium Income Product could lead to the client owning the property detailed in the sale and purchase agreement. In this situation the client will lease the property to Blue Chip and receive a rental stream sufficient to make them financially whole on a post tax basis. Nevertheless, this means the client could have an exposure to any fluctuations in the property market and the credit worthiness of Blue Chip as lessee.
The brochure ends by recommending that clients seek professional financial planning and taxation advice before proceeding to invest. It is further recommended that clients consider the portion of available funds and/or equity they place in “higher risk investment opportunities such as this”.

Put and Call agreement (PAC)

PAC agreements are now relevant only to the Icon development where they were used extensively during the latter half of 2007.
The PAC agreement was entered into between the investor and Amelia. The PAC recited that the investor and Icon have executed an SPA for an identified apartment. The operative provisions enabled Amelia (or nominee) to exercise an option calling for the right to purchase the apartment on the terms set out in the SPA. They also provided for a put option enabling the investor to require Amelia to purchase the property under the SPA.
Amelia was able to exercise the call option at any time up to and including one calendar month after the date for settlement of the SPA. The investor was able to exercise the put option at any time up to the same date but no sooner than three months before settlement date. Amelia agreed to pay the investor an amount equivalent to the amount of any cash deposit paid by the investor in the event of the put or call option being exercised. Any interest accrued on the deposit was to be paid to Amelia.
In consideration for the investor entering the PAC, Amelia agreed to pay a call option fee which the Judge said was typically $7,500. In some cases the fee was split between the investor and the sales agent. The fee was expressed to be payable within 14 days of Amelia receiving an underwrite fee from the developer. Amelia was entitled to the interest accrued on the deposit made by the investor and held in the trust account of the developer’s solicitor.

In a number of cases, the investor’s deposit was provided by the investor entering a bond rather than paying cash. The PAC agreement provided that Amelia had the right to approve the bond company and for Amelia to pay the associated reasonable fees.

The SPAs and associated lease documents

The SPAs for units in the three developments varied in a number of respects but their central feature in each case was that, from the point of view of the investor, the contract was unconditional and the investor was obliged to complete settlement upon the settlement date. The parties to the SPAs were the developer as vendor and the investor as purchaser. No Blue Chip entity was a party to the SPAs. The only reference to Blue Chip in the SPAs was in the form of a separate addendum dealing with the lease of the apartments. We deal briefly with each of the SPAs and lease documents in turn.

Greenstone

The SPAs for the Greenstone development were made between Greenstone Barclay Trustees Ltd as trustee of the Greenstone Barclay Trust as vendor and the investor (or nominee) as purchaser. Brookfields was the firm specified as the vendor’s solicitors. The contract warned:
This is a binding contract. If either party has any doubts, legal advice should be sought before signing.
The deposits were usually fifteen per cent of the purchase price with the balance payable on the settlement date. This was defined in terms of cl 18.2 to be the fifteenth working day after the later of the date the vendor provided to the purchaser the certificate of practical completion, notice of the issue of a code compliance certificate or the availability of a search copy of the title. Greenstone agreed to complete construction of the apartments in accordance with plans and specifications attached to the agreement.
In terms of cl 15.1, the SPA was conditional on the vendor obtaining sufficient presales of units in the development by a specific date; the council granting all necessary building and other consents; and the vendor obtaining practical completion by a specified date. The contract was unconditional so far as the purchaser was concerned.
Clause 27 provided:
27 Entire Agreement/Third Party representations
27.1This arrangement records the entire arrangement between the parties relating to the matters dealt with in this agreement and supersedes all previous arrangements, whether written, oral or both, relating to such matters.
27.2In particular the purchaser acknowledges that any representations made by representatives of any third party relating to financial packages between the purchaser and any third party are independent of and unrelated to this agreement and may not be relied on by the purchaser in relation to their obligations in respect of this agreement.
The purchaser and Greenstone also signed an addendum in respect of a lease of the apartment. This document stated that it was “to be signed and read in conjunction with the Sale and Purchase Agreement”. Under the addendum, the investor as purchaser requested Greenstone as vendor to enter into a lease of the apartment from Barclay Management Ltd (a company associated with Greenstone). The investor acknowledged that the apartment was sold subject to the lease and that Greenstone was entitled to all income and would be liable for all expenses under the lease from the date of commencement of the lease until the date of settlement.
The terms of lease were to be those set out in an attached form of lease between Greenstone as lessor, Barclay Management Ltd as lessee and Blue Chip New Zealand Ltd as guarantor. The lease was to be for a total of four years (two terms of two years each). It contained an option to purchase in favour of the lessee which could be exercised on the termination date. It was agreed that Greenstone could substitute itself as guarantor of the lease in place of Blue Chip New Zealand Ltd if Blue Chip was not able to act as guarantor or defaulted in its obligations in that capacity. As we later note, Westpac required Greenstone to guarantee the lease up to settlement.

TWL

The SPAs for TWL were prepared by CMS Legal which was nominated as the vendor’s solicitor. The SPAs were entered into by TWL as vendor and the investor (or nominee) as purchaser. On the second page of the agreement above the place for execution, the SPA stated “it is recommended that the Purchaser seek professional advice before executing this agreement”. Although expressed and structured differently from the Greenstone SPA, the TWL SPA did not differ in substance. The agreement was expressed to be conditional upon a minimum level of sales of units in the development and all necessary approvals by a specified date. TWL undertook to complete the unit in accordance with plans and specifications; a deposit of 15 per cent was payable and was to be held by TWL’s solicitor in trust with interest for the benefit of the investor as purchaser; the balance of the purchase price was payable on the settlement date as defined by cl 12.1 of the SPA in similar terms to those of the Greenstone agreement. The contract was unconditional so far as the purchaser was concerned.
Clause 20.2 of the SPA provided:
The parties acknowledge that this agreement, and the schedules and attachments to this agreement, contain the entire agreement between the parties, notwithstanding any negotiations or discussions prior to the execution of the agreement, and notwithstanding anything contained in any brochure, report or other document. The Purchaser acknowledges that it has not been induced to execute this agreement by any representation, verbal or otherwise, made by or on behalf of the Vendor or its agent, which is not set out in this agreement.
TWL and the investor as purchaser also entered an addendum to the SPA in terms of which the investor requested TWL to enter into a lease of the apartment and acknowledged the apartment was sold subject to the lease. Associated with this was a deed of lease with ART Apartments Ltd as lessee and TWL as lessor. The obligations of ART Apartments were guaranteed by Blue Chip New Zealand Ltd. The addendum to the SPA was later varied by agreement between TWL and the investor to provide for TWL to be guarantor under the lease instead of Blue Chip New Zealand Ltd with the proviso that TWL could substitute Blue Chip New Zealand Ltd as guarantor at any time prior to or after settlement. This term was also varied at Westpac’s insistence in the same way as it required for Greenstone’s Barclay development.[8]

Icon

[8] As we have mentioned at [60]..

The SPAs for the Icon development were between Icon and the investor (or nominee). Walters Law was the firm specified as Icon’s solicitors. A deposit of ten per cent was to be paid with the balance due on settlement date (defined under cl 12 in similar terms to the other SPAs). The purchaser was recommended to seek professional advice before executing the agreement. The Icon agreements were signed by Mr Bryers on behalf of the vendor (unlike the SPAs for the other developments which were signed by the developers’ representatives who had no prior or current position with Blue Chip). The SPA was conditional on Icon obtaining a minimum level of sales of units in the development to justify completion and obtaining all relevant consents by specified dates. The deposit was to be held by the vendor’s solicitor in trust until settlement date with interest accruing to the investor as purchaser. So far as the purchasers were concerned, the SPAs were unconditional.
An entire agreement clause was included in a form identical to that in the SPA for the TWL development.[9]
[9] See at [62].
An addendum to the SPA provided that the unit was sold subject to a lease between Icon Central Ltd as lessor and Icon Central Management Ltd as lessee. The lease was signed by Mr Bryers on behalf of Icon Central Ltd and Mr L J Ross and Mr C Mudgway on behalf of the lessee.
The deed of lease did not, in terms, provide for a guarantor but the addendum provided that Icon Central Ltd would be the guarantor with the proviso that Icon Central could substitute Blue Chip New Zealand Ltd as guarantor at any time prior to or after settlement. This was later varied at Westpac’s insistence in the same way as it required for the Barclay and Bianco developments.[10]

The relationship between the developers and Blue Chip

[10] See at [60].

The relationship between each of the developers and Blue Chip is relevant for two principal reasons. First, it is relevant to the proposed new grounds of appeal since, in supporting the new grounds, the investors rely in part on their contention that the developers knew (either through actual, constructive or imputed knowledge) about the Blue Chip investment products and that the investors did not have the capacity to settle unless Blue Chip performed its obligations. This knowledge is said to be relevant to the issues of promissory estoppel, implied term and interdependent contracts. Secondly, the relationship is relevant to the issues under the Securities Act. How much did the developers know about the detail of the investment products and did they know of any illegality under the Act?
We deal with each of the developments in turn.

The Barclay

The directors and beneficial owners of Greenstone are Mr John Abel-Pattinson and Mr Kevin Cox. Both are experienced property developers. Mr Abel-Pattinson was generally responsible for managing the development of Greenstone’s projects. He would source development opportunities, arrange finance, obtain necessary consents and would structure the development deals. Mr Cox took only an indirect interest in those aspects of the company’s business. His role was to project-manage the construction of the buildings.
The Greenstone directors initially met Mr Bryers in early 2005 when he asked them to act as consultants for a range of development projects then being considered or undertaken by companies associated with him. In October 2005, Mr Bryers asked Mr Abel-Pattinson whether Greenstone would consider developing an apartment building. Ingot, a company associated with Mr Bryers, had an option on a site for a proposed development in Albert Street, Auckland. The project was of interest to Mr Abel-Pattinson because Mr Bryers informed him that Blue Chip had a pool of investors available to purchase apartments and because resource consent for a substantial development had already been obtained. It was agreed that Greenstone would buy the site from Ingot and develop the apartment building under a profit-sharing agreement. An entity associated with Mr Bryers and Blue Chip, Lyell Ltd, was to introduce Blue Chip investors as purchasers for the apartments. The net profits were to be shared between Greenstone and Lyell.
It was further agreed that Lyell would underwrite the sales of the apartments. If Greenstone was unable to achieve a sufficient level of sales, Lyell would be obliged to purchase the unsold apartments. As Lyell was a shelf company, Mr Abel-Pattinson insisted that a guarantee be provided by the parent Blue Chip company. Mr Abel-Pattinson made inquiries which satisfied him it was safe to do business with Blue Chip. Profit share and underwrite agreements were completed between the parties on 24 March 2006.

The profit share agreement

The key terms of the profit share agreement were:
·Greenstone agreed to purchase the land from Lyell and to proceed with the construction of the building and apartments in accordance with agreed plans and specifications.
·Greenstone would settle the sale of the apartments on practical completion in terms of SPAs in an agreed form at agreed prices.
·Immediately prior to settlement of the sale of the apartments, Greenstone would procure Barclay Management Ltd to assign the contemplated leases for each apartment to ART.
·The net profit as defined was to be divided.
·A committee of management was to be set up to make all decisions regarding the development. The committee was to comprise two representatives of each party.
·Lyell’s obligations under the profit share agreement were guaranteed by Blue Chip Financial Solutions (NZ) Ltd.
Clause 16.1 of the profit share agreement provided:
Nothing in this agreement shall create or constitute, or be deemed to create or constitute a partnership between the Parties, nor to constitute or create, or be deemed to create or constitute a party as an agent of any other party for any purpose whatsoever. No party shall have any authority or power to bind or commit, act or represent or hold that party out as having authority to act as an agent of, or in any way to bind or commit the other party to any obligation.
A number of documents were attached to the profit share agreement including the standard form of SPA, a schedule of sale prices for the apartments (established by valuation) and the form of lease. The minimum deposits for the SPAs were to be 15 per cent.
Although under the profit share agreement Lyell was to arrange funding to enable Greenstone to purchase the land and complete the development, the finance was, in the end, arranged by Greenstone through its existing relationship with Westpac Bank and a mezzanine financier, Boston MFS.

The Westpac funding

The Westpac Bank was the lead funder for all three developments. A Mr Farrow gave evidence on behalf of Westpac. He was the head of structured property finance in the property finance unit of the Bank.
In the case of Greenstone, Westpac provided a development funding facility to Greenstone for $37 million to develop the Barclay apartment complex. It was secured by a first mortgage. The Bank regarded the SPAs as the means by which its advances would be repaid. To that end, Westpac stipulated a number of conditions which had to be fulfilled before drawdown of funds could occur. Mr Farrow’s evidence was that the conditions were reasonably standard for development projects of the types at issue.
The conditions included:
·Greenstone had to achieve pre-sales amounting to a net sales value of $39 million.
·The pre-sales were to be at genuine arms-length in the sense that the purchasers could not be parties related to Greenstone.
·Multiple or bulk sales would only be permitted at Westpac’s discretion.
·The obligations of the purchasers under the pre-sale contracts were to be unconditional in all respects at prices disclosed to Westpac (other than conditions relating to completion of construction and issue of title).
·The SPAs were to be in a standard form of agreement supplied to Westpac and were not to be varied.
·The addenda to the SPAs were to be varied to provide that Greenstone would be guarantor under the lease with the right to substitute Blue Chip New Zealand Ltd. Greenstone was to undertake not to substitute Blue Chip New Zealand Ltd prior to settlement without Westpac’s consent.
·Barclay Management was to be the lessee of the apartments until settlement.
·Mr Abel-Pattinson and Mr Cox were to personally guarantee the borrowing.
Prior to drawdown, Westpac’s solicitors were to certify that the SPAs satisfied the drawdown conditions and that the deposits of 15 per cent had been paid and were held in a solicitor’s trust account.

The underwrite agreement

Greenstone and Lyell also entered an underwrite agreement guaranteed by Blue Chip Financial Solutions (NZ) Ltd. The substance of the agreement was that if Greenstone had not sold all the apartments by a specified date, Lyell as underwriter was to purchase, to the maximum of the underwritten amount of $20 million, any apartments remaining unsold. In exchange for providing the underwriting, Lyell was to be paid a fee of 12.6 per cent of the sale price of each unit sold. The fee was to be paid in two instalments, the first on receipt of the deposit and the balance on settlement of the apartments.
For present purposes, the key provision of the underwrite agreement was cl 2.2:
The Underwriter shall use its best endeavours to procure a real estate firm at the cost of the Underwriter, to introduce purchasers to purchase the Units by the Sunset Date, for the Sale Price and on the terms and conditions set out in the Sale and Purchase Agreement and the Addendum and shall act as liaison between the Vendor and those purchasers as and when required by the Vendor in facilitating payment of deposits under and effecting settlements pursuant to the Sale and Purchase agreement and will actively co-operate with the Vendor’s solicitors as required to achieve this.
The Sunset Date was defined as the date by which the vendor was to achieve practical completion under the SPAs.
Clause 9.1 of the underwrite agreement provided:
In consideration of the Parties entering into this agreement each of them represents and warrants to the other of them that any marketing material or other representations made by either of them for and on behalf of the other of them in respect of the Units prior to the sale thereof are and will be accurate and complete as at the date of the relevant Sale and Purchase Agreement and shall not contain any omission of material facts or be misleading and all reasonable enquiries shall have been made to verify the accuracy of any such information.
The underwrite agreement also attached, among other documents, the form of SPA to be utilised and a schedule of sale prices for the units.
Mr Abel-Pattinson said that, to the best of his knowledge, a real estate firm was not used to achieve the sales as contemplated by cl 2.2. This was unnecessary since Blue Chip had a pool of investors available. He saw the underwrite fee as being several times greater than the commission a real estate agent would earn, reflecting the risk Lyell was taking in agreeing to underwrite the development.
After the profit share and underwrite agreements were completed, Lyell, and through it the Blue Chip licensees and sales agents, commenced marketing and selling the apartments. Greenstone began to receive SPAs from April 2006 and SPAs had been entered into for most of the apartments by October 2006.
It is not in dispute that Greenstone took no part in the marketing and sales of the apartments other than to receive monthly reports from Blue Chip as to the apartments sold and deposits received. At no time prior to Blue Chip’s collapse did Greenstone have any dealings with the Blue Chip investors. The SPAs and the deposits paid under them were sent by Blue Chip to Greenstone’s solicitors (Brookfields) who arranged for Greenstone to execute the agreements as vendor.
The collapse of the Blue Chip group came as a surprise to Mr Abel-Pattinson and Mr Cox. It was only in February 2008 that they became aware that Blue Chip was in financial difficulties. Mr Dale accepted that neither Greenstone nor the investors had any reason to suppose that Blue Chip was not going to perform its obligations at the time when the relevant agreements were entered into.

The Bianco

TWL was formed for the purpose of the Bianco development. It sole director was a Mr Manning who was an experienced property developer. Mr Manning first had dealings with Mr Bryers and Blue Chip in 2005 when it was agreed that a Blue Chip entity would purchase one of Mr Manning’s companies. Part of the consideration for the sale comprised shares in Blue Chip Financial Solutions Ltd but it was not suggested to us that this had any material bearing on the matters at issue.
Mr Bryers told Mr Manning he had three residential property developments he wished to sell. One of these was a site at Turner and Waverley Streets. Negotiations with Mr Manning commenced in early March 2006 with a view to the land and associated resource consents being purchased by Mr Manning’s interests. The project was owned by Monrad Ltd, a Blue Chip subsidiary.
Agreement was reached in principle for a Manning company to buy the land and the resource consents. Monrad agreed to underwrite the project. Initial agreements were signed at the end of March 2006 but, after a process of due diligence, these were replaced by two agreements entered into on 20 June 2006 between Monrad as vendor and TWL (or nominee) as purchaser.

When asked to explain references in the brochure to the investors having the capacity to settle, Mr Baldwin said he explained to investors such as the Webbers that they would need to have the capacity to borrow on their properties an additional twenty per cent above the ten per cent deposit already paid. This would provide a total of thirty per cent of the purchase price and the balance of seventy per cent would be funded by borrowing. Because investors might not have the ability to meet the costs of borrowing, Blue Chip agreed to cover those costs should the investor be required to settle.
While Mr Baldwin acknowledged these were theoretical possibilities, he remained confident at the time of Blue Chip’s capacity to settle based on his experience with other investors who had been satisfied with Blue Chip’s performance. No doubt Mr Baldwin’s confidence was conveyed to the Webbers.
In relation to the pleaded representation that Blue Chip would take over the obligation to purchase the units and that they would not be required to settle, the Judge concluded:[194]
[194] At [354] of the Icon judgment.
I accept, having heard Mrs Webber and Mr Baldwin give evidence that Mr Baldwin would have told the Webbers that Blue Chip would exercise the option prior to settlement as that is how he understood Blue Chip made its money and the way it had operated in the past. He fully expected that to continue. Mr and Mrs Webber went ahead on the basis that they did not expect to have to settle, although they understood that they may be required to do so because that was what the documentation provided for.
Mrs Webber confirmed in cross-examination that when she pressed Mr Baldwin about it he said:
In the worst scenario if you had to [settle] Blue Chip would cover all the expenses and the mortgage payments but that won’t happen anyway because you won’t have to settle.
The Webbers were aware there was a risk they would have to settle but relied on it being a remote risk. They had the benefit of legal advice.
On the basis of the evidence and the Judge’s findings, the proposed promissory estoppel argument could not succeed.
There was an attempt to cross-examine Mrs Webber with regard to their capacity to settle but the issue was not seriously pursued.

Ms Aitkenhead

Ms Aitkenhead was a named appellant in the Icon appeal but we were informed that her case has been settled.

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Hickman v Turn and Wave Ltd [2011] NZCA 100

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