Hudson Bay Holdings Limited v Waitakere Properties Limited HC Auckland CIV-2009-404-1134

[2011] NZHC 259

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-404-1134

BETWEEN  HUDSON BAY HOLDINGS LIMITED Plaintiff

ANDWAITAKERE PROPERTIES LIMITED First Defendant

ANDWAITAKERE CITY COUNCIL Second Defendant

Hearing:         21, 22, 23, 24, 25 June and 16 & 17 August 2010

Appearances: G P Curry and C M Crocker for Plaintiff

M E Casey QC, G R Nicholson (16 & 17 August) and S-L Stead for
First and Second Defendants

Judgment:      28 March 2011

JUDGMENT OF COOPER J

This judgment was delivered by Justice Cooper on

28 March 2011 at 2.15 p.m., pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Solicitors:

Anderson Creagh Lai, PO Box 106-740, Auckland 1143

Kensington Swan, Private Bag 92101, Auckland 1142

Copy to:
G P Curry, PO Box 106-586, Auckland 1143

M E Casey QC, PO Box 317, Shortland Street, Auckland 1140

HUDSON BAY HOLDINGS LIMITED V WAITAKERE PROPERTIES LIMITED HC AK CIV-2009-404-1134

28 March 2011

Table of Contents

Para No

Introduction  [1]

The facts

Background  [5]

The District Plan and the proposed subdivision  [14] The Agreement  [27] After the Agreement  [43] Meeting on 13 November 2008  [70] The events of December 2008  [80] Delays  [103]

The arguments  [106]

Discussion

What did the express terms of the Agreement require?  [120]

Was the Agreement varied?  [139] Waiver  [160] Estoppel  [165] Should terms be implied?  [168]

Was Hudson Bay in breach of clause 18.7 of the Agreement, and the mortgage?

[184]

Result  [185]

Introduction

[1]      The plaintiff (“Hudson Bay”) is the registered proprietor of land situated at Clark Road, Hobsonville near the western shores of Auckland‟s Waitemata Harbour. Part of its land was developed by the erection of a building intended to be used for boat  building,  but  a  substantial  part  of  it  was  left  vacant.   The  first  defendant (“WPL”) is a council controlled trading organisation, as defined in s 6 of the Local Government Act  2002.    It  was  owned  at  all  relevant  times  by Waitakere  City Holdings Ltd, a wholly owned subsidiary of the second defendant (“WCC”) the

territorial authority for the district in which Hudson Bay‟s land is situated.1

[2]      On 22 June 2005, Hudson Bay entered into an agreement (“the Agreement”)

in respect of the land with “WPL or nominee”.2    The Agreement provided for the

1 WCC no longer exists. Its rights and obligations have been assumed by the Auckland Council, constituted on 1 November 2010. Notwithstanding this change, it will be appropriate to continue to refer to the second defendant as WCC.

2 WCC and WPL executed a Deed of Nomination on 8 July 2005 under which WPL nominated WCC

as the purchaser under the Agreement and WCC accepted the nomination.

subdivision of Hudson Bay‟s land so as to enable a unique identifier to be issued for the vacant part of it.  It was WPL‟s responsibility to carry out the subdivision.  Once separate title had issued for it WPL was to acquire the vacant land for a purchase price of $7,650,000 plus GST (if any).   However, in the event that WPL had not settled the purchase by 22 July 20083  Hudson Bay had the right to require WPL to purchase all of its land (the “put option”).

[3]      For reasons that will be discussed later there was a delay in carrying out the subdivision, and it was not completed by 22 December 2008.  Hudson Bay purported to exercise its right to require WCC, as the nominated purchaser under the Agreement, to buy all of the land at an incremental cost of $7,575,000, that is for the total sum of $15,225,000 plus GST (if any).   It now seeks orders compelling the acquisition of all of the land at that price, and interest on the purchase price from

18 March 2009 down to the date of payment.

[4]      WPL and WCC deny that Hudson Bay is entitled to the relief claimed.  They say that everything was in place prior to 22 December 2008 to enable the settlement to be completed but that, motivated by a desire to require WCC to purchase all of the land, Hudson Bay wrongly refused to settle in breach of its obligations under the agreement, and that Hudson Bay was not entitled to exercise the put option.  The defendants counterclaim, seeking a declaration that Hudson Bay‟s purported exercise of the put option was invalid and ineffective, and cannot be validly exercised in the future.  They claim that Hudson Bay‟s conduct in declining to complete settlement on 19 December 2008 was in breach of the agreement.  The defendants also seek an order for specific performance of the agreement by Hudson Bay so that WCC can acquire the vacant land for the purchase price provided in the agreement.  In addition to breaches of the agreement, WPL and WCC advance claims based on waiver, estoppel, and the terms of a mortgage that secured advances made by WCC to

Hudson Bay pursuant to the Agreement.

3 This date was later extended by agreement to 22 December 2008.

The facts

Background

[5]      Hudson  Bay  was  incorporated  on  18 September  2003  with  a  view  to acquiring land that had been used historically as part of the Hobsonville airbase.  Its principal was Mr William Lloyd, who had established a yacht building business in Canada.  He was a New Zealand citizen, and intended to return home, relocating his business here.  He had previously been in the airforce and was aware that, following a decision made in 2000 that it should close, the Hobsonville airbase had been decommissioned.  He thought that the land would be suitable for his boat building business.

[6]      The airbase land had been acquired for defence purposes by the Crown in the

1930s.   The closure of the base engaged the offer back provisions of the Public Works Act 1981.  Mr Lloyd negotiated with the successors of those from whom the land had been acquired, the Luke family.   He paid them what he described as “a substantial sum” for the acquisition of their rights under the Public Works Act, and as a consequence two companies that he controlled were able to acquire land formerly part of the airbase.  One company was Hudson Bay, which acquired an area of about four hectares (the “Hudson Bay Land”) which is the land the subject of the present dispute.

[7]      The other company was Premium Property Holdings Ltd (“Premium”) which required the right to purchase a block of some 12 hectares (“the Premium Land”) lying immediately to the south of the Hudson Bay land.  Mr Lloyd hoped to sell the Premium Land at a profit.  He intended that the land acquired by Hudson Bay should be used for boat building, and on it he arranged the development of a three bay “super yacht factory” at a cost of about $7,500,000 (being the total of the land and construction costs).   The yacht building activities were carried out from October

2000 by Sovereign Yachts Ltd, another company owned by Mr Lloyd.   It was his evidence  that  at  one  stage  it  employed  up  to  120  people,  but  the  business subsequently failed and Sovereign Yachts Ltd was placed in liquidation on 3 June

2009.   A substantial part of the Hudson Bay land was not needed for Sovereign Yachts Ltd‟s activities and was left vacant.  Mr Lloyd negotiated with WPL with a view to selling to it both the vacant land and the Premium Land.

[8]      WCC and the Marine Industry Association had identified the Hobsonville airbase as a potential area for marine-related industrial development because of its special attributes. These were the combination of situation in a major urban area, flat topography and adjacent deep water access.   WCC‟s  objectives for the area could not, however, be achieved without significant processes under the Resource Management Act 1991 and under the Local Government (Auckland) Amendment Act  2004.    Under the  former, WCC  publicly notified  a proposed  change to  its District Plan to zone approximately 20 hectares of land in the area as a “Marine Industrial Precinct”.  Under the latter Act, WCC sought to bring the land within the metropolitan urban limits set out in the Regional Policy Statement.

[9]      WCC‟s proposed District Plan change applied to the Premium Land (12.1572 hectares in area) the Hudson Bay Land (4.0295 hectares) and four hectares owned by the Crown.

[10]     Mr Parker, who was WPL‟s chief executive officer, gave evidence that WCC negotiated the purchase of the Premium Land so as to ensure that the land which was the subject of the plan change would be developed as a marine precinct.  On 22 June

2005, an agreement for sale and purchase was executed between Premium as vendor and WPL or nominee as purchaser under which the latter would acquire the Premium Land for $7,650,000 plus GST (if any).  The agreement acknowledged that, at the time, there were outstanding issues needing resolution between the vendor and the Crown concerning the price at which the vendor would be able to acquire the land from the Crown.  Other conditions also needed to be satisfied, including settlement with the members of the Luke family with whom Mr Lloyd had been negotiating for acquisition of their rights under the Public Works Act.   In the result, all of the outstanding matters were eventually able to be resolved, and on 22 May 2007 the Premium Land was acquired by WCC as WPL‟s nominee under the Premium Agreement.  The Premium Land was then transferred by WCC to WPL to be held on trust for WCC.

[11]     The Agreement between Hudson Bay and WPL or nominee was negotiated and executed at the same time as the Premium Agreement.   The former drew a distinction between the vacant part of the Hudson Bay Land and the land on which the yacht manufacturing building had been erected.  WPL was to acquire the former, but  the  latter  was  to  be  retained  by Hudson  Bay.   As  earlier  noted,  under  the Agreement it was the responsibility of WPL to carry out the necessary subdivision to enable this to occur.

[12]     Mr Parker‟s evidence was that although the two agreements were separate documents,  WPL and  WCC  regarded  both  as  important  for  the  purpose  of  the development of the marine precinct.  He also explained that a delay in completing the outstanding processes under the Public Works Act in respect of the Premium Land was part of the reason for a variation executed on 5 July 2005 (“the Variation”) which altered not only the Premium Agreement but also that with Hudson Bay.  The variation was executed by WPL, Hudson Bay and Premium.

[13]     The variation changed provisions in the Premium Agreement providing for the possession and settlement dates and gave the purchaser the option to cancel the agreement if settlement had not occurred by 30 June 2007.   Certain dates in the Hudson Bay Agreement were also extended4  and a new clause was added under which Hudson Bay guaranteed the performance of Premium under the Premium Agreement.

The District Plan context and the proposed subdivision

[14]     It appears from Mr Parker‟s evidence that in the period leading up to the execution of the two agreements in June 2005 WPL and WCC anticipated that the proposed subdivision of the Hudson Bay Land would be a straightforward process under the proposed  change  to  the District  Plan.    However,  as  explained  in  the

evidence of Mr Sheard,5 the procedures relating to the plan change were protracted.

4 Including the date on which Hudson Bay could exercise the put option, which became 22 December

2008: see n 3 above.

5 WCC‟s Manager: Legal Services.

[15]     The plan change was one of a number of changes that were publicly notified by  WCC  on  31 March  2005  in  response  to  statutory  obligations  imposed  on territorial   authorities   in   the  Auckland   region   under   the   Local   Government (Auckland) Amendment Act 2004.   The obligation was to introduce District Plan changes consistent with the Auckland Growth Strategy.  Three of the plan changes that  were  publicly  notified  by WCC  sought  to  establish  new  “peripheral  urban growth areas” in the northern part of WCC‟s district.  Also on 31 March 2005, the Auckland Regional Council publicly notified a change to its Regional Policy Statement that, relevantly, sought to amend the metropolitan urban limits to include the land affected by the three WCC plan changes (including the land of the former Hobsonville airbase) within the urban area.

[16]     WCC‟s  proposed  plan  change  sought  to  re-zone  the  former  Hobsonville airbase into four special areas, including a marine industry special area, a hauling special  area,  a  Hobsonville  Base  village  special  area  and  a  future  development special area.   In each of those special areas, development could only occur in accordance with a comprehensive development plan.

[17]     The  statutory  processes  relating  to  the  proposed  plan  change  were  not completed at council level until 31 July 2007.  After that there were appeals to the Environment  Court  filed  by  the Auckland  Regional  Council,  North  Shore  City Council and commercial interests.  It was not until 3 July 2009 that the appeals by the Regional and North Shore City Councils were resolved by a consent order issued by the Environment Court.  The other appeals were confined in their ambit to an area not relevant to this proceeding.

[18]     After  3 July 2009, WCC  was  able  to  treat  the  proposed  plan  change  as effectively operative in accordance with s 86F of the Resource Management Act. Until that point was reached, because the Hudson Bay Land was not in an urban area, a subdivision that created an additional lot would require resource consent as a discretionary or limited discretionary activity.  However, any subdivision advanced prior to the approval of a comprehensive development plan would require consent as a  non-complying  activity.    It  was  not  until  September  2009  that  WCC  sought approval of a comprehensive development plan.   It was Mr Sheard‟s evidence that

prior to 3 July 2009 the creation of a new lot for part of the Hobson Bay Land would also have required a non-complying activity consent under WCC‟s operative District Plan because of a requirement for a minimum lot size of four hectares.   A non- complying activity consent would have required a comprehensive assessment of potential adverse effects.  Mr Sheard considered that controversy about the apparent ease with which the New Zealand Defence Force had been granted resource consent in 2000 so as to enable the original issue of separate title for the Hudson Bay Land, also made public notification of any further subdivision consent application more likely.

[19]     Mr Sheard‟s   evidence   was   that   the  potential   delays   attendant   on   an application for non-complying activity consent to subdivide the Hudson Bay Land, and ultimately the risk of refusal of such an application, meant that a different approach was necessary to ensure that the objectives of the Agreement could be achieved.   The defendants considered that a subdivision incorporating a boundary adjustment and amalgamation with the Premium Land would be much more straightforward, and likely to produce the desired outcome.   It was for this reason that WPL and WCC decided to take that approach.

[20]     The desirability of doing so was confirmed in the evidence of Mr Parker, who instructed  Mr  John Wisker,  a  registered  surveyor  and  a  director  of  Cato  Bolan Consultants Ltd, to obtain the necessary resource consent to subdivide from WCC in its capacity as the regulator.   Mr Wisker advised that because of the possible difficulties of proceeding to seek consent to subdivide the Hudson Bay Land into two new lots, the boundary adjustment approach would be preferable.   While the Hudson Bay Land would by this means effectively be divided into two lots the application would be advanced on the basis that the new lot, to be acquired by WPL, would be immediately amalgamated with the adjacent Premium Land, and thereafter held together with that land in one certificate of title.  As a consequence, the number of titles would ultimately not be increased.   WCC would be invited to impose a condition on the subdivision consent requiring the amalgamation to occur.

[21]     The process to be followed and the reasons for it were further explained in the evidence of Mr Wisker.  His advice to WCC was that the proposed subdivision

by means of a boundary adjustment would require discretionary activity consent under the relevant district plan provisions.  However, this was essentially because of the presence on the land of the Sovereign Yacht‟s building;  the reduced lot size on which the building would stand following any subdivision meant that the District Plan rules limiting the extent of building site coverage would be infringed. Also, the proposal  would  reduce  the  existing  lot  size  to  a  greater  extent  than  would  be permitted as a limited discretionary activity.  In Mr Wisker‟s view, however, since no physical  changes  to  the  landscape  were  proposed  and  any  future  developments would be subject to the comprehensive development requirements of the proposed change  to  the  District  Plan,  the  application  for  subdivision  consent  could  be advanced on the basis that there were no more than minor adverse effects on the environment.

[22]     Further,   the   proposed   boundary   adjustment   amalgamating   the   newly subdivided lot with the Premium Land would mean that significant difficulties would be avoided.  Without that approach, the proposed subdivision would have involved the creation of two stand alone lots each of which was less than the minimum four hectares required by the District Plan, one of which was an additional lot.   Mr Wisker said that, from his extensive experience with development in WCC‟s district, an application of that nature, needing non-complying activity consent, would have been publicly notified, would have attracted submissions, and even if granted might have prompted an appeal to the Environment Court.  There was a risk in fact that ultimately the application might have been refused.

[23]     The evidence called by the defendants on these issues was not effectively challenged and I accept that, by the time the application for subdivision consent was made on 27 March 2008, the subdivision by boundary adjustment approach offered the best prospect of ensuring a successful outcome within the time-frame contemplated by the Agreement.

[24]     In accordance with the foregoing discussion, the application for subdivision consent as lodged with WCC sought to subdivide the Hudson Bay Land into two lots:  lot 1, on which the Sovereign Yachts Building was located (ownership of which was to be retained by Hudson Bay) and lot 2, referred to as the “vacant land”.  The

intention was that lot 2 would be amalgamated with the Premium Land, ultimately in the ownership of WCC.  From this point, I will refer to the two separate parts of the Hudson Bay Land as “lot 1” and “lot 2”.

[25]     The application was not publicly notified.  It was granted by WCC on 18 July

2008 and authorised the creation of the two lots as proposed.  Lot 1 was one hectare and lot 2, 3.0295 hectares.  There was a requirement that lot 2 be amalgamated with the Premium Land.

[26]     Prior to the lodging of the application for subdivision consent, there had been discussions between the parties about the shape and extent of the lots to be created pursuant to the subdivision.   The discussion focused on two plans, referred to as “option 1” and “option 2”.   It will be necessary to refer to the two options again below, but for present purposes it is sufficient to note that after the subdivision consent was granted WPL‟s  secretary, Mr Wakefield, noted that the plan approved did not reflect the option 2 plan which had been agreed between the parties.  Under that plan, lot 1 was to be 1.0295 hectares in area, and lot 2 three hectares.  There were discussions between Mr Wisker, Mr Parker and Mr Wakefield, as a result of which it was decided to seek a variation of the consent under s 127 of the Resource Management Act. An application was lodged accordingly, and granted on 18 August

2008, with the result that the subdivision assumed the form that had been referred to

in the “option 2” plan, discussed by the parties.

The Agreement

[27]     The Agreement was an agreement for sale and purchase of real estate in the standard form adopted by the Real Estate Institute of New Zealand and the Auckland District  Law  Society,  Seventh  Edition,  2  July  1999,  together  with  “Special Conditions of Sale” set out at clauses 15-26.  The front page, having referred to the parties and given the address of the property, set out the legal description and stated the purchase price as $7,650,000 plus GST (if any).  It was stated that there would be no deposit, and that the purchase price was to be paid by bank cheque or electronic transfer on the “possession date”.   The possession date was initially stated to be

22 July  2005,  but  as  I  have  noted  earlier,  that  date  was  altered  to  refer  to

22 December 2008 by means of a variation.

[28]     Also on the front page of the agreement was a reference to the “settlement date”, a provision which has assumed great importance in the arguments in this Court. The settlement date was said to be:

Five working days after a Guaranteed search of the new title to the property is available for searching, or otherwise in accordance with clause 20.

[29]     I shall refer to clause 20, which was in the Special Conditions of Sale, again shortly.  Two provisions in the General Terms of Sale in the standard printed form should  also  be  mentioned  at  this  point  because  they  have  been  referred  to  in argument. The first is clause 3.7, which provided:

3.7      On the settlement date:

(1)       The  purchaser  shall  pay  or  satisfy  the  balance  of  the purchase price, interest and other moneys, if any, due as provided  in  this  agreement  (credit  being  given  for  any amount payable by the vendor under subclause 3.9 or 3.10); and

(2)      The vendor shall concurrently hand to the purchaser:

(a)       the   memorandum   of   transfer   of   the   property provided by the purchaser under subclause 3.5, in registrable form;  and

(b)       all other instruments in registrable form required for the purpose of registering the memorandum of transfer;  and

(c)       all instruments of title –

the obligations in subclauses 3.7(1) and 3.7(2) being interdependent.

[30]     Then, under the heading “New Title Provision” clause 3.12 provided:

3.12     (1)      Where –

(a)       the transfer of the property is to be registered against a new title in the course of issuing (including a new or provisional title following the loss of the outstanding copy of the title); and

(b)      a  search copy,  as defined in section 172A of the

Land   Transfer  Act   1952,   of   that   title   is   not

obtainable  by  the  fifth  working  day  prior  to  the settlement date –

then, unless the purchaser elects that settlement shall still take place on the agreed settlement date, the settlement date shall be deferred to the fifth working day following the later of the date on which:

(c)       the  vendor  has  given  the  purchaser  notice  that  a search copy is obtainable; or

(d)      the   requisitions   procedure   under   clause   5.0   is complete.

(2)       This  subclause  shall  not  apply  where  it  is  necessary  to register  the  transfer  of  the  property  to  enable  a  plan  to deposit and title to the property to issue.

(3)       Deferment of the settlement date under this subclause shall not constitute deferment of the possession date unless the parties so agree.

[31]     Clause 15 of the special conditions of sale defined the terms “property” and the “whole block”.  “Property” was said to be “that part of the whole block shown outlined in red on the annexed plan”.  “The whole block” was defined as meaning all of the land in Identifier NA 134C/260 North Auckland Land Registry”.  In terms of the expressions used in this judgment so far, “the whole block” was the Hudson Bay Land.  “Property” was the part of the land which Hudson Bay was agreeing to sell and WPL was agreeing to purchase under the Agreement.  There was in fact no plan attached to the agreement and that issue had to be attended to by the parties subsequently, as will later be discussed.  Eventually, however, what I have referred to as the “option 2” plan was adopted, and the “Property” for the purposes of the Agreement was that area shown as the “balance area” of three hectares on that plan. This was lot 2 in the proposed subdivision.

[32]     WPL‟s obligations with respect to the subdivision were set out in clause 18.

Clause 18 provided:

18.0     Subdivision

18.1The  parties  acknowledge  that  at  the  date  of  this  agreement  the operative district plan of the Waitakere City Council does not permit the subdivision of the land in the whole block that would provide a unique identifier for the property.

18.2The parties further acknowledge that the Waitakere City Council has promulgated   a  change   to   its  district   plan  in   respect  of  the Hobsonville area which will provide an opportunity to subdivide the whole block to provide a separate title for the property and another title or titles for the remainder of the whole block.

18.3It is the intention of the parties that the Purchaser shall arrange for the subdivision of the whole block to enable the issue of a unique Identifier for the property which may be transferred by the Vendor to the Purchaser to complete this agreement.  However, the parties are committed to the acquisition of the property by the Purchaser and have agreed that should such subdivision not be completed by 22nd [December] 2008 certain rights will accrue to the Vendor to require the Purchaser to purchase the whole block, and that in the event of the  Vendor  not  exercising  such  rights  by  the  22nd    July  2015 additional  rights  shall  accrue  to  the  Purchaser  to  enable  the Purchaser to purchase the whole block.

18.4The  Purchaser  shall  as  soon  as  subdivision  of  the  whole  block becomes either a permitted activity or a controlled activity within the Waitakere City Council‟s district planning scheme (or sooner at the option of the Purchaser) prepare and lodge an application for subdivision consent to obtain a separate title for the property.

18.5The Purchaser shall be fully responsible for payment of all costs relating to the application and implementation of such subdivision consent, including (without limitation) the cost of preparation of the application for subdivision consent, Council filing fees, undertaking of all necessary survey and engineering works, and the payment of financial contributions levied on the subdivision consent.

18.6The Vendor shall co-operate fully with the Purchaser in respect of the application for subdivision consent and shall provide reasonable access to the Purchaser and its consultants and employees to enable the subdivision consent to be implemented.

18.7The Vendor shall upon demand promptly execute all documents and do all such things as may be required to obtain and implement such subdivision consent and obtain a new title to the property including, without limitation, execution of all plans, transfers, easements, consents, restrictions and liaison on behalf of the Vendor having any interest or involvement in the land.  For these purposes the Vendor shall  not  later  than  22nd   [December]  2005  deliver  a  Power  of Attorney to the Purchaser duly executed by the Vendor in the form annexed to this agreement.   The Vendor hereby authorises the Purchaser to execute all documents and do such things under the authority of such Power of Attorney to give the fullest effect to the provisions of this agreement for sale and purchase.

[33]     As  can  be  seen,  the  wording  used  contemplated  subdivision  pursuant  to WCC‟s district plan change as either a permitted activity or a controlled activity.  It was at the point when that status had been achieved that, in terms of clause 18.4, the purchaser was to prepare and lodge the application for subdivision consent.  In the

event, it did become not possible for a subdivision application to be advanced as a permitted or controlled activity in accordance with the plan change at the times relevant to this proceeding.  It should also be noted that, under clause 18.3, there was provision for “certain rights” to accrue in the event that the subdivision was not completed by, as originally stated 22 July 2008, but in terms of the variation, by

22 December 2008.   Similarly, the “additional rights” given to the purchaser were exercisable  if  the  vendor  had  not  exercised  its  rights,  by  22 July  2015,  a  date changed by the variation to refer to 22 December 2015.6     The parties referred in argument to the rights given to the vendor and purchaser in clause 18.3 as, respectively, the “put option” and the “call option”.

[34]     Those rights were set out in clause 20, which is important in the context of the arguments in this Court.  Clause 20 provided as follows:

20.0     Purchase of whole block

20.1In the event that the Purchaser has not settled the purchase of the property by 22nd  [December] 2008 (“the notional completion date”) the Vendor may, at its election, require the Purchaser to complete the purchase of the whole block.

20.2Notice of the vendor‟s election to require completion of the purchase of the whole block must be given within seven days of the notional completion date, time being of the essence.

20.3If the Vendor exercises its election to require the purchase of the whole block within the time limit specified, the Purchaser shall purchase the whole block not later than a date 20 working days after receipt of notice in writing of the Vendor‟s election or 20 working days after the price for the whole block has been determined in accordance with the price calculation process set out in clause 21 hereof, whichever date is the later.

20.4In the event that the Vendor does not elect to require settlement of the purchase of the whole block within the election window, the Vendor shall have the same right of election for periods of seven days commencing on the 22nd  [December] 2009, and the same right shall recur for a period of seven days commencing on the 22nd day of [December] in each year thereafter if at that date either the purchase of the property or of the whole block has not been completed by the Purchaser until 22nd  [December] 2055 on which date the rights of purchase under this clause shall lapse if not then exercised.

6 The quotations from the Agreement substitute “December” for “July” in accordance with the

variation.

20.5     If the Purchaser has not completed the purchase of the property by

22nd   [December]  2015,  the  Purchaser  may  elect  to  purchase  the whole block.

20.6     The    Purchaser‟s    right    of    election   shall    accrue    on    the

22nd [December] 2015 and the Purchaser shall have a period of seven days from that date to advise the Vendor of its election to complete the purchase.

20.7In the event that the Purchaser does not elect to require settlement of the purchase of the whole block within the election window, the Purchaser shall have the same right of election for a period of seven days commencing on the 22nd  [December] 2016, and the same right shall recur for periods of seven days commencing on the 22nd day of [December] in each year thereafter if at that date either the purchase of the property or of the whole block has not been completed by the Purchaser until 22nd  [December] 2055 on which date the rights of purchase under this clause shall lapse if not then exercised.

20.8If the Purchaser exercises its right of election, settlement shall be completed on the later of the date being 20 working days after the date of notice of the Purchaser‟s election, or 20 working days after determination of the price for the whole block in accordance with the price calculation process, whichever date is the later.

20.9Time is of the essence in respect of all periods of time and dates in this clause.

[35]     It is Hudson Bay‟s  purported exercise of the rights given by clause 20.1 which has given rise to the present proceeding.

[36]     Clause 19 of the Agreement was headed “Mortgage Advance”.  It provided for WPL to procure WCC to make an advance of the sum of $4,650,000 to Hudson Bay as an “initial advance” on the possession date of 22 December 2005.   That advance, and any further advances, were to be secured by a first ranking registered mortgage  prepared  at  the  purchaser‟s  cost  by  its  solicitors,  including  a  priority amount of $7,650,000.  In the event that the sale of the property had not been settled by 22 December 2007, WPL had to procure WCC to make a further advance on the security of the mortgage in the sum of $1 million.  There was a similar obligation, but requiring an advance of $2 million, if settlement had not been completed by

22 December 2008.  The further advances were to be made on the same terms as the initial advance, and were to be repayable in the same manner.

[37]     Repayment was dealt with in clause 19.1.3 and 19.1.4, in the following terms:

19.1.3 It is the parties intention that the loan advances will be repaid by the Vendor and the mortgage shall be discharged on completion of the sale of the property and demand shall not be made for repayment prior to settlement except in the event of a default by the mortgagor which remains unremedied for a period of seven days after notice in writing to remedy such default has been given to the mortgagor.

19.1.4 Repayment of the mortgage prior to the settlement of the sale shall not release the Vendor from its obligation to sell the property to the Purchaser for the purchase price nor release the Vendor from the obligation to sell the whole block to the Purchaser if the Purchaser is able to exercise an election to acquire the whole block pursuant to the provisions of clause 20 hereof and chooses to do so.

[38]     Clause 19.1.2 provided that the ordinary interest rate “payable” under the mortgage would be 0 per cent per annum.  However, there was provision for penalty interest “if payable at any time”.   Such interest was to be at a rate five per cent higher than the Bank of New Zealand‟s prime mortgage lending rate on loans for the acquisition of commercial property prevalent at the time of the event giving rise to the imposition of the penalty interest rate.

[39]     Clause 21 of the agreement provided for a price calculation process.  It was in the following terms:

21.0     Price calculation process

21.1For the purposes of this agreement the sale price of the whole block shall be the sum of $7,650,000.00 plus GST (being the purchase price of the property under this agreement) together with a further sum plus GST being the difference between the value of the whole block less the value of the property at the date of valuation.

21.2Any valuation shall be undertaken as at the date of notice of exercise of election.

21.3In any event the further sum shall not be less than $7,575,000.00 plus GST.

21.4     The further sum shall be determined in the following manner:-

21.4.1    By agreement between the parties;  or

21.4.2If they are unable to agree within twenty-eight days of receipt of a notice of election, by a single registered valuer if the parties can agree upon one; and

21.4.3If the parties cannot agree upon a single registered valuer within a further period of seven days by an independent

registered valuer to be nominated by the President of the

Auckland District Law Society.

[40]     As will be seen, in purporting to exercise its rights under clause 20.1, Hudson Bay waived any right that it might have had to require payment of a sum greater than the $7,575,000 (plus GST) amount referred to in clause 21.3 as the incremental cost payable in the event that WCC was obliged to purchase all of the Hudson Bay Land.

[41]     I have referred to the fact that the agreement was varied.  In fact, the variation was  executed  on  5 July  2005  not  long  after  the  Agreement  and  the  Premium Agreement were executed.  It was not explained why the parties so quickly formed the view that, amongst other things, the dates referred to in the original Agreement were too imminent.  However, I accept Mr Parker‟s evidence that Mr Lloyd needed more time in order to complete his negotiations with respect to the Premium Land.

[42]     Apart from changing the dates in the manner I have described, the variation added the following provision as a special condition of sale in the Agreement:

27.The Vendor acknowledges that the Purchaser has entered into this agreement in reliance on representations made by the Vendor to the Purchaser  that  the  Purchaser  shall  be  able  to  acquire  12.1572 hectares being Lot 1 DP317419 from Premium Property Holdings Limited in accordance with the terms of an Agreement for Sale and Purchase dated 22nd June 2005 between Premium Property Holdings Limited and the Purchaser or its nominee.

The Vendor hereby guarantees to the Purchaser the performance of Premium Property Holdings Limited (“Premium”) under that agreement and agrees to indemnify and save harmless the Purchaser from any losses incurred by the Purchaser as a result of any default by Premium under that agreement.  For the purposes of this clause the Vendor acknowledges that it is convenanting both with Waitakere Properties Limited as Purchaser and with the Waitakere City Council and that this covenant constitutes an obligation which is intended to be secured by the all obligations mortgage in favour of the Waitakere City Council given by the Vendor in accordance with the provisions of clause 19 hereof.

After the Agreement

[43]     On 8 July 2005 WCC was nominated as purchaser under the Agreement and on 21 July 2005 WCC and Hudson Bay entered into a loan agreement to implement

clause 19 of the Agreement.  Under the loan agreement Hudson Bay acknowledged receipt of the sum of $4,650,000 (the Principal sum).   It was stipulated that an ordinary interest rate of 0 per cent would apply, but in the event of default by Hudson Bay in the performance of its obligations the penalty interest rate would apply.

[44]     The loan agreement provided that the principal sum was to be repaid on demand but noted that the parties intended that the principal sum and any further advances would be repaid on completion of the purchase of the Property (i.e. lot 2) pursuant to the Agreement.  It was provided that demand for repayment could not be made except in the event of a default by Hudson Bay under the loan agreement or any security granted by Hudson Bay under the loan agreement, or in the case of a default by Hudson Bay as the purchaser under the Agreement.

[45]     The loan agreement further provided that Hudson Bay would give WCC a first and exclusive mortgage security over the Hudson Bay Land, and the required mortgage  was  also  executed  by  Hudson  Bay  on  21 July  and  registered  on  the certificate of title on 22 August.  Then on 2 August 2005, WCC registered a caveat against the title to the Hudson Bay Land reciting its interest as Purchaser under the Agreement.   Both the mortgage and the caveat applied, as was appropriate, to the whole of the Hudson Bay Land.

[46]     Hudson Bay subsequently borrowed $10 million from Marac Finance Ltd (“Marac”).  Marac was aware of the subdivision of the Hudson Bay Land.  Marac‟s solicitor was Mr Logie, a principal in the firm Lane Neave.  Mr Logie gave evidence that it was ultimately intended that the loan be secured by a mortgage over lot 1 in the proposed subdivision.  In the meantime, Marac took a second mortgage over the whole of the Hudson Bay Land.  Hudson Bay, Marac and WCC executed a Deed of Priority of Mortgages on 23 February 2006 which provided that WCC‟s  mortgage was a first mortgage to rank in priority before Marac‟s mortgage in respect of the “priority amount”, the latter defined as the principal and interest advanced to Hudson Bay by WCC.   Marac‟s mortgage was registered on the certificate of title of the Hudson Bay Land on 27 March 2006.

[47]     Mr Logie said that the second mortgage was registered only for the purpose of protecting Marac‟s intended position as holder of a first mortgage over the proposed new lot 1 to be created as a result of the subdivision.  He said that Marac‟s only interest in respect of the subdivision documentation and registration documents later tendered by the solicitors acting for Hudson Bay and WCC was to ensure that Marac would retain a first and only registered mortgage over that lot.  Marac would have no continuing interest in security over the new lot 2 once the subdivision was complete.

[48]     In accordance with the provisions of the Agreement further advances were to be made by WCC on 22 July 2007 and 22 July 2008 in the event that settlement had not taken place by those dates.  The further advances were to be secured by WCC‟s mortgage. As 22 July 2007 approached, Mr Wakefield sought that Hudson Bay enter into a deed acknowledging receipt of the initial advance of $4,465,000 made by WCC and the further advance of $1 million due if the sale had not been completed by 22 July.  The further advance was duly made, and the deed of acknowledgement was executed on 30 July 2007.

[49]     A further advance, in the sum of $2 million was made in July 2008, and acknowledged in a deed dated 22 July.   This meant that WCC had advanced the equivalent of the purchase price of the land it was to acquire under the Agreement. Any residual payment on settlement would be in respect of GST (if any) and payments due in respect of rates or any other adjustments for outgoings.

[50]     In the meantime, there had been correspondence and discussions concerning the plan defining the property to be acquired intended to be attached to the Agreement.   Mr Wakefield had noticed in December 2006 that the plan was not attached,  when  making  preparations  for the settlement  of the acquisition  of the Premium Land.   Mr Wakefield raised the issue with Mr Parker who informed him that  agreement  on  the  precise  dimensions  of the property had  not  in  fact  been reached at that point.

[51]     Mr Parker explained in evidence that during the time when the agreement was negotiated plans had been prepared by Cato Bolam7 referred to as the “option 1” and “option 2” plans.   Under the former, the land to be retained by Hudson Bay (lot 1) was rectangular in shape, with the longest boundaries parallel to the Premium boundary to the south.   Under the option 2 plan, the longest boundaries were perpendicular  to  the  Premium  boundary.    The  two  plans  were  referred  to  in  a

facsimile sent by Mr Parker to Mr Lloyd on 4 July 2005.   At the time, Mr Parker expressed the opinion that option 2 would be preferable from Mr Lloyd‟s point of view as it would enable expansion of the Sovereign Yachts building (in a northerly direction) “in line with the current bays” (I infer the reference here was to the yacht building bays) and the balance of an area shown as “sealed yard area” to the east of the building (and outside lot 1) could be “common”.

[52]     As earlier discussed, the subdivision consent for the Hudson Bay Land had initially been obtained on the basis of the option 1 plan, and was later varied to provide  for  the  option  2  plan.    It  was  Mr Parker‟s  evidence  that  there  was  no requirement, in respect of either plan, to provide anything other than access from a legal road to the land to be retained by Hudson Bay (lot 1).  Both plans provided for that.  As will emerge, Hudson Bay subsequently took the view that the option 2 plan was inadequate because it would not provide sufficient room on lot 1 for a long boat constructed in the Sovereign Yacht premises to be moved out of the building and turned around, so as to enable its removal from the site. As the settlement date under the Agreement approached, there was to be a significant discussion about this issue, referred to by Hudson Bay‟s representatives as the lack of the necessary “swing room”.

[53]     Mr Wakefield said that after he raised the issue of the missing plan with

Mr Parker it took some time to locate the option 1 and option 2 plans.  However, on

17 August 2007 Cato Bolam sent copies of the plans to Hudson Bay‟s solicitors and there was a meeting between Mr Parker and Mr Lloyd at which the plans were discussed on 21 August 2007.  Mr Parker said that he could not recall the exact terms

of their discussion, but that by the end of the meeting Mr Lloyd‟s position was that

7 It was Mr Wisker‟s evidence that the plans had been prepared on Mr Lloyd‟s instructions, at a time

when Cato Bolam were acting for him.

the option 2 plan should be used.  In accordance with that, Hudson Bay‟s solicitors, Morgan Coakle sent an e-mail to Mr Wakefield and Mr Sheard in the following terms:

We understand that Greg Parker met with Bill Lloyd this morning to discuss a number of matters regarding the land at Hobsonville and option 2 was agreed in respect of the plan to be attached to the agreement for sale and purchase.  We further understand that this is the only matter identified this morning needed to facilitate the payment of the mortgage advance.

We would therefore be grateful if payment of that advance could be made to our trust account together with receipt of your confirmation of deposit.

[54]     Notwithstanding that apparent agreement, the option 1 plan was the one that was used in the resource consent application.  This appears to have been simply the result of inadvertence.  It is not clear on the evidence why or by whom this mistake was made, but that does not matter.   In any event, the mistake was subsequently rectified and the option 2 plan substituted by a variation of the subdivision consent, as I have earlier explained.

[55]     An issue that  assumed  some importance in the hearing was  whether the option 2 plan seen by Mr Lloyd showed a 25 metre dimension between the eastern face of the Sovereign Yacht‟s building and the eastern boundary of lot 1.  Under the option 2 plan, the eastern boundary of lot 1 would be the western boundary of an area marked “sealed yard area” which was rectangular in shape before narrowing to an area marked “sealed driveway” at its northern end.  This driveway would be able to be accessed from lot 1, and would give vehicular access to an existing sealed road. The sealed yard area and driveway were on the land in the new lot 2, to be acquired by WCC.

[56]     Mr Lloyd gave evidence that he had never been requested to review any plans relating to  the area that  would  be needed  to manoeuvre boats  to  and  from  the Sovereign Yachts building.   He had however discussed the need for practical arrangements in this respect with Mr Parker when they met on 21 August 2007, as part of the process of selecting option 2 for the layout of the subdivision.

[57]     He also stated that it was not until he received a survey plan in November

2008 that he realised that insufficient room had been provided for vessels to be

swung round in the right-of-way space that had been provided for lot 1 over the new lot 2.  Further, Mr Lloyd maintained that he had not been called on to state which option should be implemented until June 2007, and in cross-examination he said that the option 2 plan attached to Mr Parker‟s facsimile of 4 July 2005 had not shown the

25 metre dimension on it.

[58]     Mr Parker, however, said that the 25 metre dimension had been shown on the option 2 plan sent with his facsimile of 4 July 2005, and also that there had been no other versions of that plan.   Mr Lloyd stated that when he met with Mr Parker in August 2007 for the purpose of agreeing which of the options should be adopted, the option 2 plan then on the table had also not contained the 25 metre dimension.  Once again, Mr Parker‟s evidence was to the contrary.

[59]     Various copies of the same option 2 plan were referred to in the evidence, as evidently discussed by the parties or mentioned in correspondence at different times. All of them contained the 25 metre dimension.  Mr Lloyd was not able to refer in fact to any version of the option 2 plan which did not refer to the 25 metre distance and I prefer Mr Parker‟s evidence on this point, on which he was not in fact cross- examined.    I  also  accept,  as  Mr Parker  conceded,  that  it  was  obvious  that  on occasions much more swing room than could be accommodated on lot 1 would be necessary for the practical operation of the Sovereign Yachts premises, when completed boats more than 25 metres long were required to be removed from the premises.  The necessary swing room however could physically be provided when it was necessary, on lot 2.

[60]     I have earlier referred to the fact that WCC proceeded with a subdivision by way of boundary adjustment and explained the reasons which led them to take that course.  On 8 August 2008, Mr Wakefield sent an e-mail to Hudson Bay‟s solicitor, Mr Kuran of Morgan Coakle, attaching the proposed survey plan for the subdivision, together with the proposed easements.8     Included in the documents was the amalgamation condition imposed by WCC requiring that lot 2 be transferred to WCC

as the owner of the Premium Land and that “one computer freehold register be

8 At that stage, the subdivision consent had been granted, but not varied so as to reflect the agreed option 2 plan. However, the draft survey plan which was forwarded by Mr Wakefield assumed that WCC would grant the application to vary the subdivision consent, and so reflected the option 2 plan.

issued to include both parcels”.  Also included was a copy of the option 2 plan itself. In another e-mail sent to Morgan Coakle on 11 August, Mr Wakefield referred to the subdivision as “effectively a „boundary adjustment‟ … incorporating the adjoining land already vested in WPL via Council …”.

[61]     After further correspondence over matters  of  detail,  Morgan  Coakle  sent Mr Wakefield an e-mail on 25 August 2008.  This included the following statement, which   has   assumed   considerable   importance   for  WCC‟s   argument   that   the Agreement was varied:

We are instructed by our client to confirm that the survey plan forwarded to us under cover of your email dated 8 August 2008 is acceptable to our client.

[62]     They also said:

With regard to the registered mortgage in favour of Marac Finance Ltd we confirm that the first mortgage will be required to be brought down over the lot that is to remain vested in our client.

We will be contacting Marac Finance Ltd once we have received your draft easement documentation as we will be required to obtain their consent to a partial discharge of their mortgage and the registration of the easements.  We note that the draft easement documentation is to be provided to us and we look forward to receiving these for our review.

[63]     WCC relies on that letter as establishing that Hudson Bay agreed to the subdivision proceeding by way of boundary adjustment with important consequences for the manner in which settlement was to occur under the agreement.  I accept that there never was any suggestion from Hudson Bay or its solicitors that the boundary adjustment approach was inappropriate, although I do note that by that stage the defendants had already obtained the subdivision consents.

[64]     The author of Morgan Coakle‟s letter of 25 August 2008 was Ms Judd, who gave evidence.  The written brief from which she read stated at one point that when instructed to review the subdivision plan she had initially not focused on any of the proposed easements or indeed noticed the notation contained in the documents about the fact that the subdivision was to proceed by way of a “boundary amalgamation”. Later in her evidence however she said that she had not been aware “until receipt of

the 8 August digital survey plan” that the proposal was to subdivide by way of a boundary adjustment “rather than subdivide in the conventional manner”.

[65]     That evidence tended to confirm that she was aware of the proposed method of subdivision and that is consistent with the fact that in other correspondence, such as a letter that she wrote to Mr Wakefield on 21 August 2008 her heading contained the words “boundary adjustment and subdivision” and the same words were used in an e-mail that she sent to Mr Wakefield on 22 August.  What was proposed had in any event clearly been signalled by Mr Wakefield‟s e-mails of 8 and 11 August, referred to above.   Consistent with that, in cross-examination Ms Judd accepted, despite initial reluctance, that she knew from August 2008 that the subdivision would proceed by transfer of the new lot 2 to WCC so as to be included in the same title as the Premium Land.  Effectively, her evidence was that she had not focused on that aspect of the matter, having been more concerned at the time about boundary definition and the extent and adequacy of easements.  Be that as it may, given what led up to it, I am satisfied that Morgan Coakle‟s letter of 25 August 2008 must be taken as acceptance by them on behalf of Hudson Bay that the subdivision would proceed  in accordance with the  boundary adjustment  and amalgamation method advanced by WCC.

[66]     That being the case, it does not matter whether or not Mr Lloyd was in New Zealand or overseas when the letter dated 25 August was sent.  However, there was an issue about that, and for completeness I will deal with it.  In his evidence in chief, he claimed that he had been overseas in August 2008, and that any dealings between Hudson Bay and Morgan Coakle were conducted by his son Joe Lloyd on his behalf. Ms Judd also gave evidence to the same effect.  She said that it was Joe Lloyd who instructed her that Hudson Bay accepted the lot boundaries shown on the proposed survey plan forwarded with Mr Wakefield‟s e-mail of 8 August.   She noted that Mr Kuran of Morgan Coakle had forwarded Mr Wakefield‟s e-mail to Joe  Lloyd on

11 August.

[67]     However,  Mr Kuran‟s  e-mail  was  sent  to  both  Bill Lloyd  (as  the  first addressee) and to Joe Lloyd.  Importantly, the former conceded in cross-examination that he had in fact been in New Zealand in August and most of September.  This was

consistent with other evidence he gave about having been overseas for 5 weeks, arriving back in November.   Once he accepted that he had been present in new Zealand  in  August,  Mr Lloyd  then  said  that  he  did  remember  the  Wakefield correspondence, stating:

Now I remember those, they came in to Morgan Coakle and they were mostly easements and that which I didn‟t know anything about so they would have sorted those out, I remember that much.

[68]     I conclude that Mr Lloyd  was present at the time when Morgan Coakle confirmed Hudson Bay‟s agreement to the boundary relocation subdivision methodology.  Further, he would have been well aware that the option 2 plan was the one being implemented, and that there was a distance of only 25 metres between the Sovereign Yachts building and the eastern boundary of the proposed new lot 1.  As with every other copy of that plan, the one attached to Mr Wakefield‟s  e-mail of

8 August forwarded to the Lloyds by Mr Kuran showed that dimension.

[69]     On 16 September 2008 WCC, acting as the regulator, signed the certificate approving the digital survey plan under s 223 of the Resource Management Act. Then, on 24 September 2008, Land Information New Zealand advised that the proposed subdivision had been approved as to survey on that day.  On 18 November

2008 WCC, as the consent authority, issued its certificate under s 224(c) of the Resource Management Act, confirming that all conditions of the subdivision consent had been complied with to WCC‟s satisfaction.

Meeting on 13 November 2008

[70]     In the meantime, there had been a meeting on 13 November 2008.  Ms Judd said that the genesis of the meeting was her suggestion that the parties needed to confer to resolve issues relating to the easements proposed to service and benefit the proposed lot 1.  In particular, following his return from overseas, Mr Lloyd told her that he had reviewed the subdivision plan and the proposed easements for lot 1, and had realised that that lot and its appurtenant easements would not in fact allow Hudson Bay the legal right to use a sufficient area for swing room.  He instructed her that  this  was  not  acceptable  and  was  not  as  he  had  specifically  agreed  with

Mr Parker.  Similarly, Mr Lloyd gave evidence that it was not until he reviewed the survey plan in November 2008 that it had become clear to him that insufficient swing room had been provided for in the proposed right-of-way easement.

[71]     That point was then made in a letter written by Morgan Coakle to Corban Revell on 6 November 2008.  In that letter, Ms Judd said that it was important that the  right-of-way  be  adequate  to  enable  Hudson  Bay  to  take  yachts  from  the Sovereign Yachts building and move them to the road.   She asserted that, as the survey plan had not shown the location of the existing building, and the boundary of lot 1 was not shown on the site itself, Hudson Bay had not been able to ascertain whether the area on the plan was “long enough” for Hudson Bay‟s purposes.  It may well be that issue had not received the attention that it should have done prior to that point.   However, the dimensions of the proposed subdivision and easements were clearly shown on the various plans that had been forwarded with Mr Wakefield‟s e- mail of 8 August and careful attention of those would have alerted Hudson Bay to what was proposed.  Mr Parker gave evidence that he had never agreed or envisaged that Hudson Bay would be granted an easement of the dimension that appeared to be required by Hudson Bay.   There was, of course, no such requirement in the Agreement, and Hudson Bay had agreed to the option 2 plan.  A right-of-way was proposed as part of the subdivision because that was necessary to give vehicular access to the nearest road.   Mr Parker said that with future development, the road would  be  moved  to  a  position  immediately  adjacent  to  the  Sovereign  Yachts building, but in the meantime the right-of-way was required.   In the future, the council‟s proposed marine precinct would allow room for a boat to manoeuvre out of the Sovereign Yachts building, and that had been discussed with Mr Lloyd.

[72]     Those present at the meeting on 13 November were Mr Lloyd and his son Joe, together with Ms Judd representing Hudson Bay, and Mr Parker, Mr Wakefield and Ms Roberts of Corban Revell, together with Mr Wisker.  It is clear that, at the meeting,  Mr Lloyd  emphasised  the  need  for  an  established  legal  right  for  the necessary swing room to accommodate the largest of the boats that Sovereign Yachts might be contracted to build.  The proposed right-of-way was insufficient to do that. Those representing WPL and WCC pointed out that Hudson Bay had chosen option

2, rather than option 1 which had included the existing “sealed yard area”, and would

therefore have allowed for more swing room.  However, according to the note that Ms Judd  took  of  the  meeting,  Mr Lloyd  was  clear  in  response  that  in  all  his discussions  with  Mr Parker  it  had  been  anticipated  that  the  right-of-way  to  be provided would be sufficient for him to undertake the business that he currently operated from the building.

[73]     Mr Lloyd himself did not give evidence to the same effect.  This is what he said:

In my meeting with Greg Parker on site on 21 August 2007, the need for me to be able to manoeuvre my boats to the harbour was discussed as part of the process of me selecting Option 2 for the layout of the subdivision plan following which I confirmed to my lawyers that Option 2 would be acceptable.  The subdivision layout plan did not specifically show the legal right of way access to my site but it did show the driveway and a sealed yard area.  Greg told me at that meeting that WPL intended the area of land at the front of the Sovereign Yachts building to be available as a sealed yard for car parking and swing room for vessels, to service multiple buildings including the Sovereign Yachts shed.  I chose option 2 because it would enable me to extend my building in the future if need be, and I understood from Greg that the required swing room would be made available by WPL.

[74]     I accept on the basis of the evidence of both Mr Lloyd and Mr Parker that the issue of swing room was discussed between them at least in August 2007, and possibly earlier.  However, it is not clear to me that it was ever stipulated by Hudson Bay that a legal right to swing room had to be provided as part of the subdivision process.  I am satisfied on the evidence that WCC intended that, as part of the proper functioning of the area in accordance with its proposed marine precinct, there would be an ability for Sovereign Yachts and other boat builders who it was hoped would establish in the area to do whatever was necessary in practical terms to move yachts of whatever size from their premises to the harbour, and that WCC would facilitate that.  But I am not satisfied that, prior to November 2008, Hudson Bay had raised this issue as a matter that had to be attended to as part of the subdivision process. Tellingly, this was not done in the various documents concerning the subdivision and the necessary easements that had been forwarded to Hudson Bay in August;  and the plans approved by Morgan Coakle did not provide for the extensive easement that Hudson Bay required to be provided at the 13 November meeting.

[75]     Consistently  with  that,   Mr Lloyd‟s  evidence  was  that   when   Ms Judd suggested in the meeting on 13 November that the right-of-way should be extended the meeting became “very tense”.   Mr Wisker had explained that modifying the easements plans at that stage would mean that new subdivision plans had to be prepared and approved by WCC. According to Mr Lloyd, Mr Wakefield had become angry and Mr Parker threatened to use the power of attorney in favour of WPL that was contained in the Agreement.   I consider it most unlikely that the defendants‟ representatives would have reacted in the manner referred to by Mr Lloyd had there been any appreciation prior to then that, from Hudson Bay‟s point of view, a legal easement was necessary to deal with the swing room issue.

[76]     According  to  Mr Parker,  he  was  concerned  that  a  new  and  potentially significant issue had been raised that would take time to resolve.  I accept that it was for that reason that he suggested that the parties should consider extending the date for settlement to allow sufficient time for this to occur.  Effectively, this would mean deferring the date when Hudson Bay could exercise its put option under the Agreement.  Toward the end of the meeting, the Hudson Bay representatives sought time to confer amongst themselves.  Having done so, they advised that Hudson Bay would not  agree to  extend  any of the times  in  the Agreement,  but  they would consider  a  written  proposal  to  deal  with  the  swing  room  issue.    As  to  that, Mr Wakefield had made the suggestion that an unregistered swing licence could be provided to Hudson Bay to overcome what appeared to be an impasse.

[77]     In the result, Corban Revell wrote to Morgan Coakle on 17 November 2008 making three proposals.  First, it was suggested that the put option date be extended to 30 June 2009, the parties seeking to identify a suitable additional area for an easement limited to the “occasional” transportation of boats from the Sovereign Yachts building, subject to Sovereign Yachts giving the necessary notice of needing to exercise the easement.  The easement would require further consent from WCC as the  regulator.    A  second  proposal  envisaged  completion  of  the  subdivision  as currently proposed, with the parties subsequently agreeing on conferral of a further covenant for the swing room.   Once again, this was put forward with a proposed extension of the put option date, to 30 April 2009.  Finally, it was suggested that a further  alternative  was  simply  to  enter  into  a  memorandum  of  understanding

providing that from time to time, and on 48 hours notice, either neighbouring land owner could request the grant of a licence to use the defined area of the other‟s land for the purposes of a boat launch.  The terms of such memorandum of understanding would need to be agreed.

[78]     On 19 November, Ms Judd e-mailed a letter to Corban Revel.   The letter included the following:

2Our   client   is   unwilling   to   provide   any   extension.      In   the circumstances, and to progress lodgement of the subdivision documents, it will accept a land covenant being registered to protect its rights of reasonable access to its land for the purposes of its business.

3Our  client  requires  that  there  be  a  binding  written  agreement (perhaps by a binding heads of agreement) between the parties prior to lodgement of the subdivision documents:

(a)      To register the land covenant. (b)  Identifying with certainty the:

(i)       Land area covered by the covenant;

(ii)      The general parameters of access to that the land; (we refer to this below as well);

(c)      A specific and definite time frame for the lodgement of the land covenant;

(d)      An agreement that our client can use the sealed area for its business until the land covenant is registered.

The main terms of the land covenant can be negotiated and agreed contemporaneously with the finalisation of the terms of the easements.   There does not need to be any delay in progressing finalisation of the easement instruments and we await a response to our mark ups on the easement instruments previously forwarded to you.

You will appreciate that from our client‟s point of view a vague “agreement to agree” a framework about making repeated future requests for a licence (without any certainty of those requests being granted)  after the subdivision documents are lodged  provides  no comfort or certainty to our client or the conduct of its business.

Accordingly, our client will require the binding agreement in relation to  the  land  covenant  to  be  executed  before  it  will  agree  to registration of any documentation.

4We look forward to hearing from you as soon as possible so that the subdivision can be progressed.

[79]     Mr Wakefield gave evidence that, apart from the issue concerning swing room, there was no issue raised at the meeting of any concern by Hudson Bay as to the method of subdivision by way of boundary adjustment and amalgamation.  No evidence  to  the  contrary  was  called  and  I  accept  his  evidence.    It  was  also Mr Wakefield‟s   evidence  that,  following  receipt  of  Morgan  Coakle‟s   letter  of

19 November, with the deadline for the subdivision quickly approaching he felt the need for more experienced and expert legal assistance.  Accordingly, he instructed Mr Haynes, a consultant to Kensington Swan, who were WCC‟s principal solicitors, to progress the necessary dealing with Morgan Coakle to secure settlement in accordance with the Agreement and the subdivision consent that had been obtained. It was an important part of Mr Haynes‟ brief to avoid Hudson Bay becoming entitled to exercise the put option.

The events of December 2008

[80]     Shortly after he was instructed, Mr Haynes arranged to meet with Morgan

Coakle.  He met with Mr Martin, a partner in that firm, and Ms Judd on 2 December

2008.  At the meeting, Mr Haynes said that WCC wished to complete settlement as soon as possible, and in any event, prior to 22 December 2008.  According to Mr Haynes, Mr Martin responded that Hudson Bay wished to be in a position to exercise the put option, and that during the meeting it became plain to him that Hudson Bay‟s solicitors would not be looking to facilitate an early settlement.  There was further discussion  about  the  swing  room  issue.    Mr Haynes  confirmed  that  WCC  was prepared  to  grant  a licence  even  though  that  had  not  been  provided  for in  the Agreement.

[81]     Following the meeting, Mr Haynes wrote to Ms Judd, by a letter e-mailed on the same day.  The letter was important, because it set  out Mr Haynes‟ view on the issue that lies at the heart of the present dispute.  He took the view that, with the proposed subdivision proceeding by way of boundary adjustment, strict application of the terms of the agreement that settlement was to occur a specified period after the

issue of a new title would be unworkable.  The difficulty in such a case, as he put it, is that the transfer that would enable the plan to deposit cannot be registered until settlement has taken place, yet settlement cannot take place until the new title issues. That matter, and the swing room issue were the main matters of substance pursued in his letter of 2 December 2008, in which he wrote:

We confirm we are now acting for Waitakere City Council in this matter. We refer to our meeting this morning. As arranged, we set out below our client‟s position in relation to certain aspects of this transaction.

Settlement

1The  Agreement  for  Sale  and  Purchase  effectively  provides  that settlement is to take place five working days after a guaranteed search note of the new title to the relevant land is available for searching.

2In  point  of fact, settlement  will need  to occur in advance  of  this because a new title cannot issue until the relevant land is transferred to our client and the title amalgamated with that of our client‟s adjoining land.

3We expect to be in a position very shortly to confirm that all matters are in  order for  the  deposit of the  plan immediately the  requisite documents are registered.  We also expect to obtain confirmation from a senior LINZ officer that matters are all in order for the deposit of the plan.

4On this basis, we will be looking to settle the purchase very shortly and certainly prior to 22 December 2008.   We will then present the requisite documents for registration to enable the subdivisional plan to deposit and the amalgamation condition to be satisfied.

5We should appreciate your early confirmation that your client will co- operate to enable settlement to take place on this basis.  If this is not forthcoming, we believe our client will instruct us to issue legal proceedings to enforce its rights.

Swing Room for Large Boats

6We discussed this issue with you at our meeting. We indicated that the Agreement for Sale and Purchase does not address this matter and in our view neither party is entitled to delay settlement on account of this issue.

7Nevertheless,  as  we  indicated,  our  client  is  comfortable  with  the principle of a licence being entered into to enable appropriate swing room over the land either side of the eastern boundary between Lots 1 and 2. We discussed with you the likely terms of the relevant licence.

8We believe our client would be prepared to enter into an appropriate Memorandum of Understanding to negotiate in good faith with a view to finalising the terms of the licence following settlement.

9Alternatively,  if  your  client  desires,  the  settlement  date  could  be extended for, say, two months to allow time for all the terms of the licence to be resolved.   In that event, our client would of course reserve its present right to require settlement irrespective of the outcome of the negotiations.

Mortgages

10     A discharge of our client‟s mortgage will be available on settlement.

A partial discharge of the Marac mortgage in respect of Lot 2 will of course be required as well.

General

11      We  should  appreciate  your  early  advice  in  relation  to  the  above matters.

[82]     Morgan Coakle replied on 4 December 2008.  They agreed that in a “normal conveyance of land” where a subdivision was to occur prior to settlement and the land being sold to the purchaser was to be amalgamated with another title, then what Mr Haynes had proposed was one way in which settlement could occur.  However, Ms Judd expressed the view that Mr Haynes‟s proposal failed to acknowledge the particular contractual terms agreed by the parties in the present case, and the circumstances here were different to a “normal” subdivision.  She asserted that the Agreement had always contemplated settlement to occur after the issue of the title, and stated that Hudson Bay‟s instructions were that it wished to proceed with settlement on the basis set out in the Agreement.   She noted that the result of the advances  made by WCC was  effectively that  the net  payment  on  settlement  to Hudson Bay would simply be of GST.  In that respect, she recorded that Hudson Bay was willing to proceed with settlement on the basis of a written undertaking from Kensington Swan as WCC‟s solicitors, given prior to the lodgement of the subdivisional plan, that the necessary funds to make the GST payment were held in trust  and  would  be  forwarded  on  settlement  on  receipt  of  the  appropriate  GST invoice.  However, Hudson Bay‟s stance in relation to the timing of settlement was contained in the following five propositions which Ms Judd set out in the letter:

1Settlement in the manner proposed by you is not supported by any conveyancing practice as the circumstances here are unique.   The purchase price has already been paid.

2The settlement mechanism proposal is being put forward with the sole intent to vary the Agreement relating to settlement, so that our client will be precluded from exercising a right in the Agreement of

a substantial and valuable benefit granted by Waitakere Properties

Limited.

3It is for our client as vendor to manage its own risk within the terms of the agreement made by the parties.  Are you implying by your proposal that your client cannot or will not pay the GST on settlement?   If they will pay the GST on settlement and you will provide the undertaking sought, then there is no need to vary the Agreement.

4        The  Agreement  between  our  respective  clients  was  signed  on

22 June 2005.  It was varied at your clients request on 5 July 2005 to provide for an extension under clause 20.1 from 22 July 2008 to

22 December 2008.

5Your client has had a number of years to complete the subdivision as contemplated by the Agreement.  If the issuing of title is unable to be completed within the time period set out in the Agreement, then your client finds itself in this position due to its own delays.

[83]     On the issue of swing room Morgan Coakle proposed that an appropriate licence be negotiated and completed prior to settlement.

[84]     Mr Haynes  took  the  view  that  Morgan  Coakle‟s  stance  was  contrary  to accepted conveyancing practice and would have resulted in an unacceptable risk to WCC.  This was so because if it had discharged its mortgage over the Hudson Bay Land prior to settlement, it would have become an unsecured creditor of Hudson Bay to the extent of $7.65 million.   Mr Haynes took the view that if Hudson Bay had gone into liquidation and/or declined to settle, the entire sum of $7.65 million would have been at risk.  In addition, he considered that if WCC had taken title to the land subject to the two mortgages then, by virtue of s 203 of the Property Law Act 2007, WCC would have become liable to Marac under its second mortgage.  On the other hand, a partial discharge of WCC‟s mortgage in respect of lot 1 would have meant that WCC would have lost roughly half its security.  Further, Mr Haynes considered that if registration had been effected prior to settlement, Hudson Bay would have remained the beneficial owner of the land, title to which would have been amalgamated with that of the Premium Land (now owned by WCC).  He considered that this would have rendered “virtually nugatory” WCC‟s power of sale.

[85]     Mr Haynes  reiterated  his  view  on  the  required  settlement  procedure  on

8 December 2008.  He wrote:

Settlement Procedure

The position is as follows:

1The provision on the front page of the agreement that the settlement date is “five working days after a guaranteed search of the new title to the property is available for searching” is in the circumstances of this case inconsistent with clause 3.7(2) which provides that on settlement the vendor must hand to the purchaser a transfer in registrable form.

2This is because, by reason of the amalgamation condition, the new title for the amalgamated area cannot issue until the subdivisional plan deposits following registration of the transfer.

3         It is against this background that in our letter to you of 2 December

2008 we proposed that settlement take place in advance of the plan depositing.   We will then attend to registration of the transfer and other documents necessary to enable the plan to deposit and the amalgamation condition to be satisfied.  On settlement, the GST can be paid and any necessary rating adjustments effected.

4In  our  view,  what  we  are  proposing  is  not  a  variation  of  the agreement but simply a means by which the agreement is  given commercial effect.   You will be aware that  Courts construe  and interpret  contracts  in  a  manner  which  gives  them  commercial efficacy.

5We  also  refer  you  to  clause  3.12(3)  of  the Agreement  which  is entirely consistent with the position set out by us above.

6If  your  client  is  not  prepared  to  co-operate  in  the  settlement procedure set out above, then our client will issue High Court proceedings seeking, among other things, specific performance and damages.

7Further, if settlement is delayed by your client, our client‟s position will be that the vendor will not be entitled to exercise the election contained in clause 20 of the agreement.

[86]     Morgan Coakle replied on 10 December 2008.  They stated that they took a different view of the correct legal position.  Ms Judd wrote:

We take a different view of the correct position in law.

The intent of the parties to the contract was that the purchaser would have until a specified date to complete the subdivision of the land.  This date was a  fundamental  crossroads  under  the  contract  –  if  subdivision  had  not occurred by the date, then the vendor was entitled to require the purchaser to purchase the whole block.  The significance of this date was confirmed by the variation agreement dated 5 July 2005 in which your client was given an additional 5 months before the put option was exercisable.

Since July 2005, your client has been aware of the 22 December 2008 date and the need to have completed the subdivision by then, if it wanted to avoid the obligation to purchase the remaining land.   We understand that the purchaser has not taken timely steps to pursue the subdivision and that it is far from complete, and cannot be completed by 22 December 2008.

In these circumstances, you have requested a settlement ahead of the completed subdivision.  Our client does not accept the requested changes to the contract, and wishes to exercise the put option, if subdivision is not complete by 22 December 2008.  It believes its stance is in accordance with the deal agreed between the parties in 2005, as recorded in the contract.  It views the purchaser‟s request as based on the fact it cannot meet the subdivision deadline, and it wishes to avoid its clear contractual obligations in clause 20 of the cont[r]act.

You have asserted that the title contemplated by the settlement term cannot be  produced  because  of one  of  the  conditions  attaching to  the  resource consent.    It  is  a  matter  for  the  purchaser  what  terms  were  accepted  as attaching to the subdivision, and whether it is able to settle as prescribed by the contract.   However, if the Purchaser cannot settle by the process contractually agreed before 22 December 2008 because of the impediments arising out of the subdivision, then the contract provides for what happens – the put option engages.

Clause 18.2 provides for the issue of a separate title for the remaining land currently occupied by Hudson Bay.   You have not mentioned this in your proposal for a variation of contract.   It is clear from the contract that the availability to the vendor of a separate title for the remaining land is one of the outcomes of the subdivision, and that the vendor is not required to settle before that title is available.

land being sold is to be part of a subdivision, and Mr Haynes gave evidence to the same effect.  The presence of the clause in the printed General Terms of Sale lends weight to that submission.  However, I do not consider that assists WCC in this case.

[137]   Clause 3.12(2) however is clear and had the consequence that clause 3.12(1) did not apply in this case.  The parties had made their own provision on the front page of the Agreement by means of the Settlement Date provision.   As I have emphasised, that provision adopted clause 20 if under the first part of the provision settlement had not occurred by 22 December.  I do not consider that clause 3.12 can have any impact either on the first part of the Settlement Date provision or on clause

20 which stands quite independently of clause 3.12 and must be applied in its own terms.  In the circumstances, it is not strictly necessary to have resort to clause 25.2 of the Agreement (itself one of the Special Conditions of Sale) which provides that where there is any conflict between the provisions of Special Conditions and the General Terms, the Special Conditions must prevail.  However, that clause reinforces my conclusion that clause 20 must be applied, notwithstanding anything in clause

3.12 or any other clause in the General Terms.

[138]   In summary, I consider that the Agreement meant that the Settlement Date could not occur before a guaranteed search was available for the new title containing lot 2, and since that point had not been reached by 22 July and the purchase of lot 2 had not been settled, Hudson Bay became entitled to exercise the put option.

Was the Agreement varied?

[139]   The fundamental contention in WCC‟s  case is that the decision to proceed with the subdivision by means of a boundary adjustment had the necessary consequence that settlement could no longer occur in the manner or sequence contemplated by the Agreement.  Lot 2 would be amalgamated with and be held in the  same  title  or  identifier  as  the  Premium  Land.    In  order  for  that  to  occur, settlement had to take place in advance so that the lot was able to be amalgamated and the new title issued in the name of WCC.

[140]   In the circumstances, Mr Casey argued that Hudson Bay‟s agreement to the subdivision proceeding by way of amalgamation necessarily meant that it had also agreed that the Settlement Date provision would no longer apply.  He submitted that the provisions of the Agreement dealing with the process for achieving the subdivision and the sequence of settlement were severable machinery provisions leaving  the  essential  terms  of  the  Agreement  materially  intact.     There  was accordingly no need to record a variation in writing having regard to what was said

by Tipping J in Rattrays Wholesale Ltd v Meredyth-Young & A’Court Ltd:19

One point is clear enough, namely that an aspect of a composite transaction which does have to be in writing can only be varied in writing. When there is a composite transaction only an aspect which does not have to be in writing can be varied by parol and then only if it can be severed from the remaining parts of the transaction. Severance will be possible only if the removal of the part sought to be severed leaves that part of the transaction which has to be in  writing  materially  intact.  The  part  removed  may  be  related  to  the remainder but it must not amount to a material term upon which the disposition of the land proceeded. I would reconcile the diverse authorities on that basis. It reflects the essential principle that all material parts of a transaction involving a disposition of land must be recorded in writing and therefore no material part can properly be severed so as to enable it to be varied by parol.

[141]   Mr Casey submitted that the Court should decide that the Agreement had been varied so as to replace the provisions that contemplated and were premised on a conventional subdivision and he relied on the fact that on 8 August 2008, as earlier discussed, Mr Wakefield had e-mailed Morgan Coakle attaching the proposed survey plan which identified that the subdivision would be proceeding by the boundary adjustment method.  The documents forwarded included the amalgamation condition imposed by WCC.  Then, there had been a further e-mail sent to Morgan Coakle by Mr Wakefield  on  11 August  which  referred  to  the  subdivision  as  “effectively  a

„boundary adjustment‟”.  On 25 August Morgan Coakle wrote that it was instructed

to confirm “that the survey plan forwarded to us under cover of your e-mail dated

8 August  2008  is  acceptable  to  our  client”.     Mr Casey  submitted  that  the amalgamation condition “had the effect” of requiring settlement to occur before the issue of the new titles and he claimed that Hudson Bay‟s solicitors would have been

aware of that consequence.  The latter submission was based on evidence given by

19 Rattrays Wholesale Ltd v Meredyth-Young & A’Court Ltd [1997] 2 NZLR 363 at 377.

Ms Judd in cross-examination.  However, as I read her evidence in the passage on which Mr Casey was relying, I do not consider it justifies his submission.

[142]   The relevant passage in the cross-examination was as follows:

Q.        So that with your experience in subdivisional matters, you would know   that   in   the   case   of   a   boundary   adjustment   with   an amalgamation condition, there would not be a separate title unique to the three hectares, it would be a title which would incorporate both that land and the adjoining land that was to be amalgamated with it, correct?

A.       Yes it would happen automatically, yes.

Q.        And that in turn would require a transfer of the three hectare area to the  owner  of  the  adjoining lot,  so  that  that  amalgamation  could occur, correct?

A.       Yes.

Q.        So you knew from August 2008 that that is how this transaction would have to proceed to give effect to the subdivision consent, that is by the transfer of, part of the land, that is the vacant land – the three   hectare   land   –   to  Waitakere   to   be   amalgamated   with Waitakere‟s 12 hectares, before title could issue?

A.       That is the result of the amalgamation condition, yes.

Q.        And that was known to you from the outset, with your experience in these matters?

A.        If I had focussed on the amalgamated condition I would have known that yes, but yes.

Q.        And at no time did you go back to Mr Haynes or anybody else and say the agreement talks about a unique identifier or title for the three hectares only did you?

A.       Not at that time, no. Q.    At no time?

A.       No.

[143]   Ms Judd  plainly  accepted  that  had  she  focused  on  the  amalgamation condition  that  had  been  imposed  by  WCC  as  the  regulator,  she  would  have understood that lot 2 would have to be transferred to WCC to enable the amalgamation  with  the  Premium  Land  to  take  place.      However,  Mr Casey‟s submission referred to a concession that settlement would have to occur before the

issue of the new titles.  That submission does not appear to be justified by Ms Judd‟s

evidence.

[144]   Mr Casey also relied on Morgan Coakle‟s  letter of 11 December 2008 in which Ms Judd agreed with the order of registration of the various documents that had been proposed by Mr Haynes.20

[145]   Despite   Mr Curry‟s   submission   to   the   contrary,   I   accept   Mr Casey‟s proposition that it would be possible for the parties to an agreement such as this to agree orally on an alteration to the Settlement Date and, on the approach explained by Tipping J in Rattrays Wholesale Ltd v Meredyth-Young & A’Court Ltd21  that it would not be necessary for that agreement to be recorded in writing.   However, effectively, in the present case, WCC appears to assert a written variation based on the correspondence between the parties to which I have referred.

[146]   I am not satisfied that Hudson Bay did agree to vary the Agreement as WCC now asserts. As Mr Curry submitted all that Mr Wakefield‟s e-mail of 8 August 2008 sought was that Morgan Coakle should:

… confirm not later than Friday 15 August that the Plan is agreed by your client(s) for the purpose of the intended subdivision outcome.

[147]   Similarly, in their letter of 25 August 2008, Morgan Coakle simply recorded their instructions that the survey plan forwarded was acceptable.  Had Hudson Bay or its advisors specifically turned their mind to the issue, they may or may not have accepted that WCC might later argue that a consequence of the subdivision methodology that WCC had chosen to adopt was that it would be necessary for the land in lot 2 to be transferred to WCC to enable the amalgamation to occur.  There is however no evidence that that was the case, nor, it can be added, is there evidence that WCC‟s solicitors at the time turned their minds to that issue.

[148]   In my view, far more specific evidence would be required to establish a variation of the relevant provisions of the Agreement so as to require settlement to be

20 See above at [88].

21 Above n 18.

fully completed prior to the availability of a guaranteed search than is contained in the correspondence on which Mr Casey relied.

[149]   Mr Curry referred to the decision of the Court of Appeal in Gawn & Anor v MacDonald,22   a case which  also  involved  parties  to  an  agreement  for sale and purchase where there was a proposal that settlement should occur in advance of title being available.  The case turned on its own facts, but the Court of Appeal held that the letters fell short of establishing a binding commitment to depart from the settlement procedure laid down in the contract.  I consider that a similar outcome is

appropriate in the present case.

[150]   That conclusion, which I reach on the basis of the correspondence, is fortified by the fact that I have not been able to accept WCC‟s basic proposition that the change  to  the  subdivision  methodology that  was  originally  contemplated  in  the Agreement necessarily meant that settlement had to occur in advance of the new title incorporating lot 2 becoming available.   I have already accepted that Hudson Bay must be taken to have agreed to the subdivision proceeding by means of the amalgamation approach.   That much did flow from the correspondence in August

2008, even though WCC had in fact obtained the subdivision consent on that basis without consulting with Hudson Bay.  That did not however necessarily mean that the settlement provisions needed to change.  That assertion was not advanced until Mr Haynes was instructed and on 2 December 2008 wrote to Morgan Coakle stating that settlement would need to occur before a guaranteed search of the new title was available  for  searching.    At  that  point  that  he  sought  Morgan  Coakle‟s “early confirmation” that Hudson Bay would “co-operate to enable settlement to take place on this basis”.  That confirmation was never forthcoming.  Morgan Coakle‟s reply of

4 December 2008 stated, amongst other things:

The Agreement between our respective clients always contemplated settlement to occur after issue of the title.  Our client‟s instructions are that it wishes to proceed with settlement on the basis set out in the Agreement.  Our client is entitled to require the terms of the Agreement to be complied with in relation to settlement and our client is happy to settle on the basis set out in the Agreement.

22 Gawn & Anor v MacDonald (1992) 2 NZ Conv C 191,071.

[151]   Other extracts from that letter have been set out earlier in this judgment.

[152]   That was a position from which Hudson Bay‟s solicitors essentially never departed.   It is to be noted also that in their letter of 4 December, Morgan Coakle stated that Hudson Bay was willing to proceed with settlement on the basis that Kensington Swan provided a written undertaking as WCC‟s solicitor, prior to lodgement of the subdivisional plan, that the necessary funds to complete the GST payment on settlement were held in trust and would be forwarded on settlement upon receipt of an appropriate GST invoice.

[153]   After  further  correspondence  from  Mr Haynes,  Morgan  Coakle  wrote  on

10 December in terms that included the following:

We have previously advised you that Hudson Bay is ready willing and able to hand to the purchaser a signed memorandum of transfer as soon as one is proffered to it so that the plan can deposit and the amalgamation of titles occur as required by the resource consent.  We look forward to receiving the same.

[154]   In fact, the parties never saw eye to eye on this issue and I am satisfied that there never was an agreed variation.

[155]   Importantly, Morgan Coakle in fact proposed a method of proceeding which would have enabled the  Settlement  Date provision  to  be met.    Essentially,  that appears to have been rejected by Mr Haynes for two reasons.  The first was his view that orthodox conveyancing practice meant that the matter should proceed as he had suggested it should.  He confirmed in evidence that in his experience, the procedure adopted by property lawyers in such circumstances is to effect settlement in advance, with the documents then being registered, resulting in the deposit of a subdivisional plan and the issue of new titles.  Secondly, he considered that acceptance of Morgan Coakle‟s proposal would have involved exposure of WCC to unacceptable risks.  He claimed that if WCC had discharged its mortgage from Hudson Bay prior to settlement, it would have become an unsecured creditor of Hudson Bay to the extent of $7.65 million.   Then, if Hudson Bay had gone into liquidation or declined to settle, the entire sum of $7.65 million would have been at risk.  On the other hand,

the purpose of the taking of a mortgage by WCC, as provided for in the Agreement, to secure the various advances that had been made, was to avoid just that risk.

[156]   Mr Moore agreed with Mr Haynes as to what was accepted conveyancing practice in the case of a subdivision proceeding by way of boundary adjustment. Mr Jones, giving evidence for Hudson Bay, did not directly deal with this issue in his evidence in chief, and I am prepared to accept that the general approach would be that which Mr Haynes said should be adopted.

[157]   However, in the present case, there was a specific provision which provided that the settlement date would be five working days after a guaranteed search of the new title to lot 2 became available for searching.   I accept that the amalgamation approach meant that lot 2 was never placed in its own title, but rather, was held together with the Premium Land.   But that was as a result of the terms of the subdivision consent that WCC had obtained and there was never agreement that the provisions of the Agreement concerning settlement were to be altered.

[158]   To the extent that WCC was placed in a position of greater risk under the Settlement Date provision set out on the front page of the Agreement it was simply the inevitable outcome of the method of subdivision that WCC had chosen to adopt. It was however possible to proceed in the manner which Morgan Coakle suggested and Mr Jones gave evidence to that effect.

[159]   Consequently, it is not correct to assert that variation of the Agreement was a necessary consequence of the changed method of subdivision employed by WCC. For all these reasons, I reject WCC‟s contention that there was a variation to the Agreement.

Waiver

[160]   WCC asserts that there was a waiver by Hudson Bay of the “machinery provisions in clause 18 relating to subdivision following a district plan change” and a waiver by WCC of the requirement in the definition of the “Settlement Date” for a guaranteed search of the new title for lot 2 before settlement.

[161]   As  to  the  waiver  by  Hudson  Bay,  Mr Casey  asserted  that  the  evidence establishes that it accepted that subdivision could be undertaken by way of boundary adjustment and amalgamation.  The reference is again to Morgan Coakle‟s letter of

25 August 2008.  Mr Casey submitted that by accepting this method of subdivision, Hudson Bay waived the need for compliance with the strict terms of the Agreement with respect to subdivision and in consequence the settlement sequence.  I reject that argument on the facts, essentially for the same reasons as I have already set out in relation to the argument that the Agreement was varied.

[162]   As to the waiver by WCC of a need for a guaranteed search, WCC submitted that it was entitled unilaterally to waive the requirement for a guaranteed search because it invoked a statutory protection which was for its benefit alone.  Mr Casey noted that under s 172A of the Land Transfer Act 1952, there is compensation for a purchaser who obtains a guaranteed search before settlement and suffers loss.  He submitted that, where there is a waiver of a statutory provision, the accepted rule is that any party has the right to waive the advantage of the law made for its sole benefit and protection.   In this case, the five working day period was for the sole benefit  of WCC;    there  was  nothing in  the agreement  to  indicate that  the five working day period contained in the Settlement Date provision was for the benefit of Hudson Bay.  Accordingly, WCC was entitled to waive the need for the guaranteed search which it did on 2 December 2008 by notifying Hudson Bay that it wished to settle prior to the issue of titles.

[163]   I cannot accept that the Settlement Date provision was inserted entirely for the benefit of the Purchaser.  I have already pointed out that if a guaranteed search of lot 2 were available, then one would also be available for lot 1.  It would obviously be  prudent  for  Hudson  Bay  to  check  that  that  title  was  in  order,  that  WCC‟s mortgage had indeed been discharged over it and that the encumbrances were in place.  Indeed, the ability to make that enquiry would be a matter of vital concern to Hudson Bay.   I note further that although Hudson Bay owned the land being subdivided, WCC was arranging for the subdivision.  The fact that the formula in the Settlement Date provision referred only to a guaranteed title being available for lot 2 does not alter the fact that Hudson Bay could also derive a benefit under it, and would have appreciated that when the Agreement was executed.   As I have also

pointed out, there were practical reasons for Hudson Bay wanting to check the title which contained lot 2 as well.  Further, it is not possible to contemplate waiver of the requirements to the first part of the Settlement Date provision, without implications for the rights which arose for Hudson Bay under the second part of the clause, with its adoption by reference to what was set out in clause 20.

[164]   In all the circumstances I do not consider that WCC had a unilateral right to waive the provisions of the Agreement concerning settlement.

Estoppel

[165]   Mr Casey submitted that both Hudson Bay and WCC had proceeded on the basis that the subdivision and settlement procedure would have to be varied to account for the amalgamation condition which would necessarily result in no title being issued prior to “settlement”.   This submission was based on the same correspondence  which  I  have  discussed  in  relation  to  the  alleged  variation  and waiver.

[166]   Mr Casey relied on what was said by Tipping J giving the judgment of the Court of Appeal in National Westminster Finance NZ Ltd v National Bank of NZ Ltd:23

The decisions of this Court in Wham-O MFG Co v Lincoln Industries [1984]

1 NZLR 641 and Gillies v Keogh [1989] 2 NZLR 327 have emphasised the element of unconscionability which runs through all manifestations of

estoppel. The broad rationale of estoppel, and this is not a test in itself, is to

prevent a party from going back on his word (whether express or implied)

when it would be unconscionable to do so.

[167]   Mr Casey‟s submission that the correspondence clearly showed that both parties accepted that the settlement procedure would have to be changed as a consequence of the amalgamation condition cannot be sustained on the facts and I reject it.  I do not consider that it can be said that Hudson Bay at any time went back on its word.  There is no basis upon which it can be estopped from relying on the

settlement procedure contained in the Agreement.

23 National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548.

Should terms be implied?

[168]   I have earlier set out24  terms that the defendants claim were implied in the Agreement.   Mr Casey referred to BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings25  in which the majority of the Privy Council held that five conditions must be satisfied in order for a term to be implied into a contract.26   It must be reasonable and equitable to do so;  necessary to give business efficacy to the contract;  the implied term must be so obvious that “it goes without saying”;   be capable of clear expression and must not contradict any express term of the contract.   Mr Casey submitted that all of these preconditions were satisfied in respect of both of the implied terms relied on.

[169]   Mr Casey also sought to rely on passages in the judgment of Cooke and

Quilliam JJ in Devonport Borough Council v Robbins27 who observed that:28

In our opinion, a term must have been implied in this contract that there would be reasonable co-operation and discussion between the parties. The object of the contract being to achieve a common goal, it is inconceivable that they could rightly keep each other at arm's length. This may be treated, as Mr Wallace would treat it, as an application of the principle stated in the well-known words of Lord Blackburn in Mackay v Dick (1881) 6 App Cas

251, 263:

“I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on circumstances.”

Equally it may be  treated as implicit in this  particular contract. All the conditions listed in the majority judgment delivered by Lord Simon of Glaisdale in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16

ALR 363, 376; 52 ALJR 20, 26, are satisfied by an implied term of reasonable co-operation and discussion.

24 At [113].

25 BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings

(1977) 16 ALR 363.

26 At 376.
27 Devonport Borough Council v Robbins [1979] 1 NZLR 1.

28 At 23.

[170]   Mr Casey also referred to the decision of the Privy Council in  Attorney- General of Belize v Belize Telecom Ltd29 in which it was said that:30

The question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs.   The most usual inference in such a case is that nothing is to happen.   If the parties have intended  something  to  happen,  the  instrument   would   have   said   so. Otherwise,  the  express  provisions  of  the  instrument  are  to  continue  to operate undisturbed.   If the event has caused loss to one or other of the parties, the loss lies where it falls.

[171]   Mr Casey submitted that such a situation was very different from the present. This was a case where the Agreement provided for both subdivision and settlement, but did not provide for the method of settlement where the manner of subdivision originally contemplated by the parties changed to one where the stated method of settlement was “no longer applicable”.   He argued that on the present facts, the implied terms were necessary because the method of subdivision had  created a circular process.   It was no longer possible to settle in strict accordance with the Settlement Date provision on the front page of the Agreement.  It was necessary for the  parties  to  co-operate  to  effect  settlement  due  to  the  changed  method  of subdivision which had been agreed.   By refusing to settle the transaction in the manner proposed by Kensington Swan, and by insisting on the process provided for on the front page of the Agreement, Hudson Bay had breached the implied terms.

[172]   For Hudson Bay, Mr Curry argued that it was unnecessary to imply either of the terms on which WCC relied in order to give business efficacy to the Agreement. It remained possible to settle in the manner contemplated by the Agreement and any risks involved in doing so for WCC were insubstantial.   The Agreement was a comprehensive and sophisticated contract that had been negotiated between the parties with the advice of experienced  and competent legal advisors and it had stipulated the procedures in relation to settlement in detail.  It provided for what was to occur if settlement had not been achieved by 22 December 2008.  The fact that a different  subdivision  method  had  been  employed  than that  contemplated by the Agreement in fact stood in the way of the implied terms on which WCC sought to

rely since the terms could not have been implied at the outset.

29 Attorney-General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988.

30 At 17.

[173]   Mr Curry accepted that Hudson Bay had a duty to co-operate with WCC, but argued that that duty had been provided for in clause 18.7 of the Agreement and having regard to the comprehensive provisions of that clause there was no need for a wider duty to be implied when to do so would require Hudson Bay to accept a different settlement process than that envisaged by the Agreement.  This was a very different  factual  situation  to  that  which  arose  in  Devonport  Borough  Council  v

Robbins,31 where there was no express contractual duty on the Council to co-operate

and it had purported to exercise a discretion under the agreement that undermined its entire purpose.

[174]   I accept Mr Curry‟s submissions.  WCC changed the method of subdivision without prior consultation with Hudson Bay and there was no attempt at the time to reach  agreement  on  an  altered  approach  to  settlement.    When  Mr Haynes  later proposed that a different settlement methodology to that contained in the Agreement was necessary that was rejected by Hudson Bay.   It remained possible to settle in accordance  with  what  the Agreement  required  even  if  WCC  might  have  been exposed to greater risks as a consequence.  In all the circumstances I do not consider it would be reasonable or equitable to imply the terms for which WCC argues.

[175]   Nor do I consider that it would be necessary to do so for reasons of business efficacy.    The  most  substantial  issue  to  which WCC  can  refer  in  favour  of  its argument for the implied terms is the issue of risk.   I have already referred to Mr Haynes‟ view that WCC would have been exposed to unacceptable risks if it had discharged its mortgage from Hudson Bay prior to settlement and become an unsecured creditor of Hudson Bay.  That, together with his perception of what was normal conveyancing practice in the situation that had arisen drove his insistence that settlement should occur prior to the creation of the title which was to contain lot

2.  However, as I have already said, any increased risk to which WCC was subjected was simply the result of the change to the method of subdivision, which WCC itself instigated.

[176]   Further,  I  am  not  convinced  that  the  risks  were  as  substantial  as  WCC

claimed.  Mr Casey submitted that to proceed in accordance with the proposal put

31 Above n 25.

forward by Morgan Coakle would have given rise to two particular risks.  The first was that if WCC‟s mortgage was discharged before settlement the funds that WCC had advanced to Hudson Bay would have been unsecured.

[177] However, the necessary transactions to complete settlement under the Agreement would all have been filed contemporaneously, in an order that was agreed between the parties.  It will be recalled that WCC‟s mortgage covered the whole of Hudson Bay‟s land and the proposed order of registration put forward by Mr Haynes involved registration of the complete discharge of WCC‟s mortgage near the outset. However, there was nothing to prevent a partial discharge of that mortgage, with maintenance of it over lot 2.  Mr Logie gave evidence that Marac was not concerned as  to  whether  or  not  WCC‟s  discharge  was  a  complete  discharge  or  a  partial discharge in respect only of lot 1.   Any risk to WCC would then be limited to whatever difference there might be between the actual value of lot 2, which WCC was contemporaneously acquiring, and the funds previously advanced which would effectively be set off as the purchase price (together with the GST required to be paid) on settlement.   The consequence would have been that when the new title (including lot 2 and the Premium Land) was issued it would issue subject to WCC‟s own mortgage over lot 2, which could obviously then simply be discharged.

[178]   Given Mr Haynes‟s careful approach and the discussions which he had with Mr Fotu to ensure in advance that the necessary documents were in order, which I infer he would also have taken in the different scenario proposed by Morgan Coakle, it would be unlikely that there would have been any problem leading to rejection of the various documents necessary to complete the transaction.   However, in that eventuality, the status quo would remain.   I acknowledge that under this approach WCC would not have maintained its security over the whole of the Hudson Bay Land, and to that extent its position would have been less secure.  However, I do not consider that sufficient to justify the implied terms now claimed on the basis of business efficacy.

[179]   I  have  reached  the  same  view  in  relation  to  the  second  risk  on  which Mr Casey focused, namely the claim that WCC would have been exposed under Marac‟s mortgage, which also applied to all of Hudson Bay‟s land, by virtue of s 203

of the Property Law Act 2007.   I accept that if it had acquired lot 2 subject to Marac‟s  mortgage  then  WCC  might  have  faced  potential  liability  under  that mortgage.      However,   Mr   Logie   confirmed   that   Marac‟s   only  interest   was preservation of its security over lot 1.  Marac would be content for its mortgage to be discharged in so far as it affected the land comprised in lot 2, so that title would be free of that encumbrance when it issued.  Any concerns of WCC about events that might occur in the period that elapsed between the date of registration and the point when titles issued could have been met by Marac providing a waiver of any rights it had under s 203 during that period.  Mr Logie considered that would be the “usual practice in circumstances where the obligations under a mortgage are not intended to apply to a new party, who was not the principal borrower”.   On the basis of his evidence I infer that such a waiver would have been given by Marac if it had been sought.

[180]   I should record here that Mr Casey objected to Mr Logie‟s evidence about these matters on the basis that, in part at least, Mr Logie purported to give it as an expert  property  lawyer.     Mr Casey‟s  objection  extended  in  particular  to  four paragraphs  in  Mr Logie‟s  brief  which  he  addressed  under  the  heading  “Risk Mitigation Options Available to WCC” and which he introduced by referring to his experience in relation to matters of this kind, having acted for Marac and other financiers  for  more  than  15   years,  including  in  respect  of  many  property development loans, complexities regarding subdivisioins, multiple lenders and negotiations about their respective security positions.   Mr Casey also complained that the evidence should have been included in Mr Logie‟s original brief and not provided by way of addition to his original brief.  I note that Mr Curry, in response to Mr Casey‟s  latter assertion sought leave to adduce the evidence under r 9.5 of the High Court Rules.

[181]   I ruled at the time that I would receive the evidence and give my reasons in the judgment.   Briefly, I did not consider that WCC would be prejudiced by my receipt of the evidence, noting as I did that Mr Casey could seek instructions as to any rebuttal evidence that he might wish to call in response.  Further, there was no suggestion at the time that the evidence had been received late or that it covered any matters that the defendant was not in a position to respond to.  The evidence was

relevant and I was in no doubt about Mr Logie‟s qualifications to give it.  Further, it seemed to me at the time, as it still does, that Mr Logie had no reason to favour one side or the other in the evidence that he gave.

[182]   In the result I am not satisfied that either of the risks referred to by Mr Casey justify implication of the terms in question on the basis of business efficacy.  I reach the same conclusion with respect to the risks of liquidation and disclaimer of the Agreement referred to by Mr Haynes in evidence.  In that respect I note that Morgan Coakle‟s proposal involved the provision of a signed transfer to enable the plan to deposit subject to suitable undertakings.  By that means WCC would have become registered proprietor of lot 2 and its position would have been enhanced compared to its previous status as mortgagee.

[183] Nor do I consider that the terms would pass muster under the other considerations set out in BP Refinery,32  or the slightly more flexible approach that flows from McNeill v Gould33 where the Court of Appeal adopted what is said about implied terms in paragraph 13.004 of Volume 1 of Chitty on Contracts:34   it is in my view not possible to imply the suggested terms as representing the “obvious, but

unexpressed, intention of the parties”.  In my view, had it been suggested to Hudson Bay at the time of the Agreement that circumstances might arise in which it could be obliged to settle without being able to check the title of lot 1 it is likely to have rejected that proposition.

Was Hudson Bay in breach of clause 18.7 of the Agreement, and the mortgage?

[184]   I have earlier summarised WCC‟s argument that Hudson Bay was in breach of clause 18.7 of the Agreement and of the mortgage.   Both propositions were founded  on  Hudson  Bay‟s  refusal  to  settle  in  accordance  with  the  process  that Mr Haynes required to be followed.  It follows from the conclusions I have already

expressed that Hudson Bay was entitled to rely on the provisions as to settlement in

32 Above n 23.

33 McNeill v Gould (2002) NZ ConvC 193 557 at [25]-[27].

34 Chitty on Contracts (see now para 13.004 of the 30th ed).

the Agreement and that means that it was not in breach of its obligations under either the Agreement or the mortgage.

Result

[185]   The conclusions set out above mean that Hudson Bay is entitled to judgment on its claim.

[186]   The prayer for relief (after paragraph 26) in the amended statement of claim seeks an order that the defendants purchase the whole block in accordance with the put option together with an order that the defendants pay Hudson Bay the sum of “$15,225,000 plus GST and apportionments under the Agreement in settlement”. There is reference also to interest on the sum of $15,255,000 plus GST and apportionments from 18 March 2009 to the date of payment.  It seems to me that it would be appropriate for the Court‟s order to deal with the money that WCC advanced in the sum of $7,650,000 and it would be preferable for any sums that are properly payable in respect of interest and apportionments to be specified in the Court‟s orders.   I invite counsel to confer and submit an agreed memorandum (if possible) or separate memoranda if there is disagreement, setting out the precise terms of the orders to be made.

[187]   There is judgment for Hudson Bay on the defendants‟ counterclaims.

[188]   Hudson  Bay  is  also  entitled  to  costs.    I  record  that  this  was  a  matter warranting the appearance of second counsel.  If there is any disagreement as to the quantum of costs I will receive memoranda from counsel, to be filed by Hudson Bay within ten working days and by WCC within ten working days of receipt of Hudson Bay‟s memorandum.  Counsel should observe those time limits with respect to the memoranda referred to in [186] as well.