Johnsonville Property Trust Limited v NZB Trustee Company Limited

[2013] NZHC 2044

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2013-485-748 [2013] NZHC 2044

BETWEEN  JOHNSONVILLE PROPERTY TRUST LIMITED

Plaintiff

ANDNZB TRUSTEE COMPANY LIMITED First Defendant

ANTHONY MOLENAAR Second Defendant

Hearing:                   12 August 2013

Counsel:                  A L Sherriff for Plaintiff

J Toebes for 1st Defendant

Judgment:                13 August 2013

JUDGMENT OF WILLIAMS J

[1]      The plaintiff is wholly owned by the Johnsonville Charitable Trust, a charity registered with the Charities Commission.  The plaintiff seeks judgment by default against NZB Trustee Company Limited (NZB) and Anthony Molenaar.   NZB was the trustee of the Bristol Trust, the owner of a commercial building the subject of this proceeding.

[2]      Mr Molenaar is the sole director and shareholder of NZB.  NZB was placed into liquidation on 14 July 2013 and Anthony Molenaar has taken no steps in this proceeding.  The liquidators of NZB filed a memorandum in this matter indicating that they would not be taking any steps in the litigation but agreed pursuant to s 248(1)(c)(i) of the Companies Act to the plaintiff continuing with its proceedings

against NZB.

JOHNSONVILLE PROPERTY TRUST LIMITED v NZB TRUSTEE COMPANY LIMITED [2013] NZHC

2044 [13 August 2013]

[3]      Between  mid-December  2008  and  mid-February  2009,  Mr  Molenaar  on behalf  of Aotearoa Trustees  Company  Limited  (Aotearoa),  and  David  Evans,  a director of the plaintiff, negotiated the purchase from Aotearoa of a commercial property.  Mr Molenaar advised that his commercial interests needed an injection of cash and the sale of the building to the plaintiff would meet that need by releasing funds to him.   As will be seen, NZB subsequently took over from Aotearoa, as trustee of the Bristol Trust.

[4]      During the course of negotiations, the parties agreed on the structure of this transaction as follows:

(a)      the purchaser would be entitled to require the vendor to repurchase the property after four years at the original purchase price of $2.1 million, plus the value of any capital works carried out by the plaintiff during that four year period;

(b)the vendor would have a mirror right to require the purchaser to sell on the same terms;

(c)      the  plaintiff  would  receive  a  guaranteed  minimum  rental  in  the meantime;

(d)      a  separate  company  belonging  to  Mr  Molenaar  (Queens  Limited)

would provide the rental guarantee;

(e)      Mr Molenaar would personally covenant that he would not alter the ownership or secured indebtedness of the rental guarantor, Queens Limited without the plaintiff’s prior approval.

[5]      A deed dated 10 March 2009 and signed by both principals confirmed these arrangements.    It  will  be  seen  that  this  was  not  a  simple  sale  and  purchase transaction, but rather a quasi lending arrangement in which Mr Molenaar received much needed cash and Johnsonville Property Trust Limited received a guaranteed income stream for four years.

[6]      On 25 May 2012, Mr Evans met with Mr Molenaar who confessed that he had breached the secured indebtedness ceiling provided for in the agreement in respect of Queens Limited, and that that company had been served with Property Law Act notices by its bank.   Mr Molenaar advised that that Queens Limited had therefore entered into an agreement to sell its properties.  Mr Molenaar nonetheless confirmed he would still be repurchasing the property in March 2013 as originally agreed.

[7]      On 5 December 2012, 27 February 2013 and 12 March 2013, the plaintiff’s lawyers gave notices of its intention to trigger the repurchase right.  Further notice was sent directly to Mr Molenaar on 22 February 2013.  No responses were received and no repurchase has occurred.

[8]      Unbeknown to the plaintiff, Aotearoa had retired as trustee of the Bristol Trust in September 2011.   NZB was appointed  at that time as the replacement trustee.    Mr Molenaar  signed  the  deed  of  retirement  and  new  appointment,  as director of both Aotearoa and NZB.

[9]      The proceeding alleges breach of contract against NZB (as successor to Aotearoa) and negligence and breach of the Fair Trading Act against Mr Molenaar personally.  The plaintiff claims the difference between the repurchase value of the building and its current market value, damages to recover the cost of capital works, interest, costs and disbursements.

[10]     On 9 April 2013, the plaintiff instructed valuers to value the property.   A valuation of $1.635 million was indicated by Bayleys Valuations  Limited.   The primary amount claimed under the contract was therefore $465,000 – the difference between $2.1 million and $1.635 million.   Capital works were undertaken in the building during the course of the plaintiff ’s ownership valued at $67,850.51.  These works related to the installation of air-conditioning units and re-roofing work.  The plaintiff also seeks interest costs and disbursements totalling $22,332.88 – costs being on a Category 2B basis.

[11]     The proceeding was served on the two defendants on 16 May 2013.

[12]     There are two matters in this claim that require my particular attention.  The first is whether it is appropriate to substitute damages for specific performance.  The second is whether Mr Molenaar owes a personal duty of care separate to NZB.

[13]     Section 16A of the Judicature Act 1908 provides as follows:

Where the court has jurisdiction to entertain an application for an injunction or specific performance, it may award damages in addition to, or in substitution for, an injunction or specific performance.

[14]     This court has discretion in cases of this kind to decline to award specific performance in favour of damages.   This is a case where the damages option is clearly appropriate.   NZB is in liquidation and cannot repurchase.   The fact that Mr Molenaar has taken no steps suggests to me that his financial status is no better. A specific performance order would serve no purpose.  Damages is the appropriate remedy.

[15]     I  am  also  satisfied  that  alongside  NZB,  Mr  Molenaar  is  responsible personally for the loss suffered by the plaintiff, in accordance with the authority in Body Corporate 202254 v Taylor[1]  and the later authorities collected by Associate

[1] Body Corporate 202254 v Taylor [2008] NZCA 317 [2009] 2 NZLR 17.

Judge Doogue in Conning v Martoni Limited[2].  It clear that the agreement reached

[2] Conning v Martoni Limited [2012] NZHC 401.

between the plaintiff and Aotearoa (later substituted by NZB) was for Mr Molenaar’s personal benefit and in the wider interests of his business holdings.   This is demonstrated by the provision of the rent guarantee by another of Mr Molenaar’s companies – Queens Limited and his personal covenant not to change the ownership of that company or to increase its secured borrowings without the plaintiff’s consent.

[16]     In addition, it was Mr Molenaar who made the approach to the plaintiff and, on the evidence provided by Mr Evans, he worked particularly hard to complete the transaction.

[17]     In light of the centrality of his personal role in the transaction and his motive in obtaining personal benefit for himself and his wider business interests beyond

those of NZB and the Bristol Trust, I am satisfied that the principles referred to in

Taylor and developed in subsequent cases are applicable here.

[18]     The plaintiff will be entitled to judgment against NZB and Mr Molenaar accordingly.

[19]     I attach  to  this  judgment  a schedule of particulars  of interest,  costs  and disbursements as provided by the plaintiff.  It is to be noted that the interest claim

ceases on 14 July 2013, the date of NZB’s liquidation.

Williams J