Le Coiffeur Limited v Channer

[2022] NZHC 576

IN THE HIGH COURT OF NEW ZEALAND MASTERTON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKAORIORI ROHE

CIV-2021-435-14

[2022] NZHC 576

BETWEEN

LE COIFFEUR LIMITED

Plaintiff

AND

JEFFREY DAVID CHANNER and BRENDA JOAN CHANNER

As Trustees of the Ruby Slippers Trust Defendants

Hearing:	14 and 15 March 2022
Appearances:	D Calder and C Houlahan for Plaintiff K Sullivan for Defendants
Judgment:	25 March 2022

JUDGMENT OF GENDALL

This judgment was delivered by me on 25 March 2022 Pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date

LE COIFFEUR LIMITED v CHANNER [2022] NZHC 576 [25 March 2022]

Introduction

[1]                 The major issue for determination in this case revolves around one discrete question — what is the proper interpretation of a phrase “current GV/RV” in an option to purchase clause in the commercial lease entered into between the parties to this proceeding, the plaintiff Le Coiffeur Limited (“LCL”) as tenant and the defendants, the trustees of the Ruby Slippers Trust (“the Trust”) as landlord?

[2]                 LCL trades as a hair salon in Martinborough, a business purchased from the Channer family in 2016. The business operates from leased premises at 29 Jellicoe Street, Martinborough (the Property). The Trust as landlord and LCL as tenant entered into a commercial deed of lease (the Lease) for the premises in September 2019. A right for LCL to purchase the Property at the “current GV/RV” was included in the Lease.

[3]                 On 13 March 2021 LCL gave notice to the Trust of its intention to purchase the Property insisting around that time that the “current GV/RV” for the Property was

$325,000. This figure represented the Government valuation/rating valuation for the Property effective from 1 September 2017 which was for review at 1 September 2020. That valuation review was activated around 1 September 2020 and undertaken by Quotable Value NZ (QV) with a new Government valuation/rating valuation for the Property of $480,000 advised in the District Valuation Roll (DVR) for the local authority concerned on 1 February 2021.

[4]                 LCL followed up its notice of intention to purchase the Property by submitting to the Trust on 27 March 2021 a contract for the sale of the Property to it at the price of $325,000 (including GST).

[5]                 The Trust refused to sell the Property to LCL at this figure of $325,000, insisting that the “current GV/RV” for the Property was $480,000.

[6]                 In this proceeding, LCL seeks an order for specific performance against the Trust requiring it to sell the Property to LCL for the $325,000 figure. In the event this Court declines to make an order for specific performance, LCL seeks judgment against the Trust for an amount being the difference in value between the $325,000 purchase

price and the market value of the Property either as at the date of this hearing or some other appropriate date. As to that question of “market value” for the Property, generally unchallenged evidence is before the Court from a registered valuer which assesses its fair market value as at 14 May 2021 at a figure of $625,000.1

[7]                 The issue for determination therefore is whether the words in the Lease “current GV/RV” as at 13 March 2021, being the date LCL purported to exercise the right to purchase, mean:

(a)the Government Valuation/Rating  Valuation  assessed  by  QV  as  at 1 September 2020, and updated on the South Wairarapa District Council (SWDC) District Valuation Roll (DVR) following approval by the Valuer-General on 1 February 2021 at a figure of $480,000 (“the

$480,000 valuation”) — as the Trust contends; or

(b)the Government Valuation/Rating Valuation assessed by QV as at 1 September 2017, and in effect for the SWDC for rating purposes until 30 June 2021 being noted in SWDC’s Rating Information Database (“RID”) at a figure of $325,000 (“the $325,000 valuation”) — as LCL contends.

Factual background

[8]                 Helpfully the parties here have filed an agreed statement of facts pursuant to  s 9 of the Evidence Act 2006, outlining the background to this dispute. For present purposes it is useful to set this out in full which I now do.

Parties

[9]                 LCL is a limited liability company incorporated on 15 February 2016. LCL trading as Le Coiffeur Hair Boutique, owns and operates a hairdressing salon (“the Business”) from the premises located at 29 Jellicoe Street, Martinborough.

1      Letter from P R Forrester, a registered valuer of Forrester Valuations dated 14 May 2021, exhibited as annexure “BJC 1” in the affidavit of Brenda Channer, sworn 4 October 2021.

[10]              The current directors of the plaintiff company are Pierce (“Mr Boyle”) and Anne-Christine (“Mrs Boyle”) Boyle, (together “the Boyles”). Mr Boyle holds 99/100 shares in the Plaintiff company. Mrs Boyle holds the remaining 1/100 shares.

[11]              The Defendants are Jeffrey (“Mr Channer”) and Brenda (“Mrs Channer”) Channer, together (“the Channers”), in their capacity as the Trustees of the Ruby Slippers Trust (“the Trust”). The Trust owns the Property.

Purchase of the business

[12]              In 2013, the Channers and Mrs Channer’s daughter, Ellen, who was a trained hairdresser and the sole stylist, opened a hairdressing business trading under the name “Ellen on Jellicoe”.

[13]              In January 2016, the Boyles approached the Channers about purchasing the Business. Mr Boyle was a hairdresser in Wellington at that time.

[14]              On 31 January 2016, Mr Boyle entered into an Agreement to purchase the Business from the Channers.

[15]The key terms of the Purchase Agreement were:

(a)the purchase price was $20,000;

(b)Mr Boyle would initially acquire a 25 percent ownership stake in the Business, on payment of 25 per cent of the purchase price ($5,000). As further payments were made towards the purchase price, Pierce’s ownership stake in the Business would increase pro rata;

(c)the Property was not included in the purchase of the Business, but “both parties acknowledge that the Salon premises are a critical component of the business”; and

(d)the Purchase Agreement was conditional on Mr Boyle, or his nominee, entering a “mutually agreeable rental arrangement” with the Trust as owner of the Property.

[16]              Mr Boyle made an initial payment of $5,000 in February 2016 towards the purchase price.

[17]              LCL was incorporated on 15  February 2016.  The original  directors  were Mr Boyle and Mr Channer.  The  shareholders  were  Mr  Boyle  as  to  25%  and  Mr Channer as to 75%. This shareholding division reflected the proportion of the purchase price that had been paid by Mr Boyle.

[18]              At some point between February 2016 and April 2016, ownership of the Business was transferred to LCL.

[19]              In November 2017, Mr Boyle made a further payment of $2000 towards the purchase price.

[20]              In June 2018 Mr Boyle made a further payment of $3,100 towards the Business purchase price. The Channers refunded $100 of this to Mr Boyle.

[21]              In September 2019 Mr Boyle made the final payment of $10,000 towards the Business purchase price.

[22]              The Channers have both since stepped down as directors of LCL, effective    1 October 2019. Mr Channer has also transferred his shareholding in LCL to Mr Boyle.

The Property

[23]              The Trust purchased the Property on 3 April 2013. It is an historic Victorian- style single-storey commercial building built some time in the 1890s. It is situated in a prime location just off the main square in Martinborough and surrounded by retail stores, a cinema, and cafes, ensuring good foot-traffic by locals and visitors to the area. Mr Boyle, and then LCL (from February 2016), have operated the Business from the Property since April 2016. The Property has been a hairdressing salon since 2013.

First tenancy agreement

[24]              In January 2016 the parties signed a Tenancy Agreement for a 12-month fixed-term tenancy of the Property, commencing on 15 March 2016 (“the Tenancy”). The Tenancy Agreement was prepared by Mr Channer on a standard residential tenancy agreement form.

[25]              The Tenancy Agreement included a specific term that gave Mr Boyle the right to purchase the Property from the Trust for $260,000 (excluding GST) at any time within the 12-month period from the commencement of the Tenancy.

[26]The Tenancy became a periodic tenancy from 15 March 2017.

Current lease

[27]              In and around April and June 2018 the parties agreed that they needed to enter into a new lease for the Property. In June 2018 Mr Channer prepared a discussion document titled “New Tenancy Agreement”, which he sent to the Boyles for their consideration.

[28]              On 18 September 2019, LCL and the Trust entered into a Commercial Deed of Lease (“the Lease”) for the Property.

[29]The material terms of the Lease are:

(a)the commencement date is 1 October 2019;

(b)the Trust agrees to rent to LCL the retail premises located at 29 Jellicoe Street, Martinborough, excluding the shed located at the rear of the Property;

(c)the term of the Lease commences on the commencement date and comprises three rental periods of three years each, making a total term of 9 years;

(d)subject to the provisions of the Lease, LCL will pay a Base Rent on a weekly basis that is inclusive of GST and is calculated as being the current GV/RV divided by 850;

(e)the lease includes a term (clause 13) that LCL has the right at any time during this Lease to purchase the building at the “current GV/RV” provided they give written notice of their intention to do that and can provide an unconditional Sale and Purchase Agreement within 30 days of the notice being issued. This Lease will then terminate on the Settlement agreed within that Sale and Purchase Agreement.

[30]              The parties’ primary disagreement concerns the proper interpretation of the term “current GV/RV” contained in cl 13 of the Lease.

Rating Valuation for the Property

[31]              The South Wairarapa District Council (“SWDC”) is required under the Rating Valuations Act 1998 (“RV Act”) to revise its District Valuation Roll (“DVR”) every three years. Quotable Value NZ (QV) undertakes the revaluation of properties for the SWDC.

[32]              In 2017 QV revalued the Property at $325,000. For SWDC rating purposes, the new rating valuation took effect on 1 July 2018.

[33]              In June 2020 QV undertook another general revaluation of properties within the SWDC district. This general revaluation was concluded in November 2020.

[34]              The Property’s rating valuation was revalued at $480,000. On 29 January 2021 the Valuer-General approved the revaluations and on 1 February 2021 QV updated the SWDC District Valuation Roll. On or about 11 February 2021 the Channers received the Notice of Rating Valuation from QV.

[35]              For SWDC rating purposes the new rating valuation did not take effect until  1 July 2021.

Rent increase

[36]              By email dated 12 February 2021, Mr Channer informed Mr Boyle that as the new rating valuation of $480,000 had been notified by QV, the weekly rent for the Property would be increased to $564.70, effective from 14 March 2021. This was in accordance with the rent review process set out in clauses 8 and 9 of the Lease.

[37]              The Boyles objected to the rent increase on the basis that for SWDC rating purposes the new rating valuation of $480,000 did not come into effect until 1 July 2021.

[38]LCL started paying the increased rent amount of $564.70 from 1 July 2021.

Objection to new rating valuation

[39]              Objections to the rating valuation  needed  to  be  lodged  no  later  than  by 19 March 2021. Both parties lodged objections to the new rating valuation of

$480,000. QV did not change the valuation.

Exercise of the right to purchase

[40]              On 13 March 2021 LCL gave written notice to the Trust of its intention to exercise its right to purchase the Property pursuant to cl 13 of the Lease.

[41]              On 27 March 2021 LCL sent the Channers by email an unconditional Agreement for Sale and Purchase, ADLS 2019 (2nd Edition) (“the ASP”).

[42]The material terms of that ASP are:

(a)the purchase price is $325,000;

(b)a deposit of 10 per cent is payable to the vendors’ solicitor’s Trust account on the signing of the ASP by both parties; and

(c)the proposed settlement date was 7 May 2021.

[43]              The Trust’s lawyers, Core Legal, sent a letter dated 16 April 2021 to LCL advising:

(a)the purchase price of $325,000 does not comply with the requirements in cl 13 of the Lease;

(b)the Trust had received a Notice of Rating Valuation (for $480,000) for the Property in February 2021, which said the new valuation is effective as at 1 September 2020;

(c)the current GV/RV for the Property is therefore $480,000, not

$325,000;

(d)there is no basis for LCL’s position that the date for the new rates being set for the Property (being 1 July 2021) is the date from which the new rating valuation of $480,000 applies; and

(e)the offer to purchase at $325,000 is rejected and LCL’s obligations under the Lease continue.

[44]              LCL’s lawyers, Gibson Sheat, responded to Core Legal’s letter on 22 April 2021 saying:

(a)the new rating valuation of $480,000 does not take effect until 1 July 2021, and that this is supported by the QVNZ Valuation Guide dated September 2019;

(b)the property details page for the Property on the SWDC’s website supports LCL’s position that the current rating valuation is $325,000;

(c)the capital value listed on the Rates Assessment Notice from the SWDC for the Property dated 7 April 2021 is $325,000;

(d)an e-dealing had been set up for the transaction and requesting that the signed ASP be returned by 30 April 2021;

(e)failure to return a signed ASP will cause LCL to file proceedings, seeking an order for specific performance.

[45]              Core Legal responded to Gibson Sheat’s letter on 13 May 2021 with a further letter reiterating that the “current GV/RV” for the Property is $480,000, because it was approved by the Valuer-General on 1 September 2020 and LCL was notified prior to the right to purchase being exercised.

[46]              On 11 May 2021 LCL registered a caveat against the title to the Property claiming an equitable interest pursuant to the right to purchase contained in the Lease, which was exercised on 13 March 2021.

[47]              This concludes the agreed statement of facts which the parties have accepted as the essential factual position here.

[48]              Notwithstanding this, from the evidence before me certain other factors emerge.

[49]              First, the relationship between the Channers and the Boyles initially appeared to be a good and helpful one. The business sale for the hair salon initially it seems was on favourable terms for the Boyles. The Channers, and particularly Mr Channer, had provided advice, mentoring and assistance which, although Mr Boyle now attempts to downplay,2  does seem to have been regarded as of assistance at the time.

2      In his evidence before me under cross-examination, Mr Boyle rather surprisingly claimed: “I was treated unfairly by the Channers — I was not given business mentoring by them.”

When final payment for the business was made, albeit some years late, and the Channers transferred their interest in LCL to the Boyles in December 2019, Mr Boyle wrote to Mr Channer specifically saying:

“Thanks for your help over the years and for your work as the manager and accountant!”; and

“Thank you once again for the opportunity you gave us, Jeff. You have been a good mentor, as your word.”

[50]              The genuine gratitude expressed in these emails is clear. In addition, the not inconsiderable delay the Channers without complaint accepted in waiting to receive payment of the balance of the $20,000 hair salon business purchase price no doubt was of considerable help to the Boyles in finding their feet in their new business.

[51]              Then, when the Lease was negotiated and put in place finally in September 2019, with the assistance of lawyers who advised the Boyles on a detailed basis, the evidence before me shows that the Boyles engaged in that Lease negotiation in a detailed and meaningful way. Mr Boyle responded to the Channers on a clause by clause and line by line basis in considering the lease and proposed a number of changes to it.3 On all of this I accept that completion of the Lease following these lengthy negotiations can only be seen as a relatively collaborative process here.

[52]              And in particular, turning now to the specific use in the option to purchase clause in the lease of the words “current GV/RV”, there can be no doubt these were words both parties agreed to at the time. In his 17 July 2019 email Mr Boyle stated that the proposed right to purchase based on the current GV/RV was “agreed”.4 A few days later, Mr Boyle proposed a change in the option to purchase clause to be given 60 days to provide an unconditional purchase agreement following notification of an

3      Witness to this was the detailed 17 July 2019 email exchange between the parties in evidence before me.

4      Indeed, Mr Boyle’s knowledge relating to the current GV/RV of the Property is clear when on 22 August 2019 he asked Mr Channer by email:

“Just wanted to touch base about the lease … as well,

*  Could you please let me know the actual GV/RV of the building please?

*  Can you confirm that even signing a lease for 3 x 3 x 3, if we want to buy the building next January, the lease won’t be any issue?”.

Mr Channer’s email reply to Mr Boyle the same day confirmed the GV/RV then was “currently

$325,000”.

intention to purchase, instead of the 30 days provided for in the Lease. This change however was ultimately not made.

Contractual interpretation

[53]              The approach in New Zealand to contractual interpretation is well settled.5 To summarise:

(a)an objective approach is taken to “ascertain the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.”6

(b)contractual language must be interpreted within its overall context broadly viewed.7

(c)if the language at issue, construed in the context of the whole contract, has an ordinary and natural meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant.8

[54]This overall judicial inquiry is encapsulated by the following passage from

Bathurst Resources Limited v L & M Coal Holdings Ltd:9

“The objective approach to this contextual assessment is a legal construct designed as the best way of reliably determining the true agreement as recorded in the words of the contract. It rejects the parties’ subjective evidence of intent as irrelevant to what parties meant and as generally unreliable. Rather, the court (embodying the reasonable person) assesses the evidence reasonably available to both (or all) of the parties at the point of contract which could bear upon the meaning of those words. Overall, this is a test which best supports the aim of the efficient and just conduct of proceedings.”

[55]              Background knowledge and expertise reasonably attributable to the parties is of some relevance here.  Although at some point the Boyles claimed to have little

5      Bathurst Resources Limited v L & M Coal Holdings Limited [2021] NZSC 85, at [43].

6      Firm PL 1 Limited v Zurich Australian Insurance Limited [2014] NZSC 147, at [60].

7 At [61].

8 At [63].

9      Bathurst Resources Limited, above n 5, at [46].

commercial or business experience or knowledge and to know little of the rating valuation process, these claims seemed to be softened later in evidence and through cross-examination of Mr Boyle given that they had bought and sold two properties in recent years, and acquired significant assistance and mentoring in a business sense from the Channers once they acquired the salon business in 2016.

[56]              Lastly, at para [62] in its decision in Firm PI v Zurich Australian Insurance Limited the Supreme Court cited with approval a passage from the judgment of Lord Collins in Re Sigma Finance Corp10 (a case which emphasised the need for regard to be given to the commercial purpose of a contract) with the analysis necessarily according with business common sense and favouring a commercially sensible approach. Lord Collins said:

“… In this type of case it is the wording of the instrument which is paramount. The instrument must be interpreted as a whole in the light of the commercial intention which may be inferred from the face of the instrument at the nature of the debtor’s business. Detailed semantic analysis must give way to business common sense…”.

Discussion

[57]              As I have noted above, it is the proper interpretation of the term “current GV/RV” contained in cl 13 of the Lease that is the parties’ primary disagreement in this case.

[58]              At the outset it is clear and accepted by the parties here that the expression “GV/RV” means “Government Valuation/Rating Valuation”. And, so far as the qualifying word “current” in the definition is concerned, this necessarily “speaks as at some point of time”.11

[59]              I accept too that in construing a lease, like any other contract the first consideration must be the language of the lease itself. Here, that language is simple and reasonably concise. Nothing in the lease suggests to me that the expression

10     Sigma Finance Corp [2009] UK SC 2.

11     Granby Consolidated Mining Smelting & Power Co Ltd v Attorney-General for British Columbia

[1923] AC 247 at 251 (PC).

“current GV/RV”, (meaning current Government Valuation/Rating Valuation), should be assigned any unusual or confusing definition.

[60]              If the parties had chosen instead of the words “current GV/RV” to use expressions such as “current land value” or “reasonable land value” this almost certainly would mean “fair market value” of the land, being what a willing buyer would pay for the land in the open market. But here, the Channers as I see it in what was an attempt to provide a more favourable opportunity for the Boyles to purchase the Property itself (accepted by all as an integral and important aspect of the hair salon business), agreed on the current GV/RV assessment as the critical price test. At one level as I see it this can only be seen as a generous approach on the part of the Channers and something entirely advantageous to the Boyles. Indeed, this generosity had what might be seen as a double effect. This is because not only was the formula applied in the lease to set the price at which the option to purchase the property could be exercised, but it was also used for the assessment of rental reviews under the Lease.

[61]              It is interesting to note this formula also differed in character from the initial option to purchase the Channers provided to LCL/the Boyles under the first January 2016 12-month Tenancy Agreement. This gave Mr Boyle the right to purchase the Property at a named price of $260,000 (excluding GST). In his evidence Mr Channer confirmed however that this $260,000 figure represented largely its then Government Valuation plus certain sale costs. It was, Mr Channer said, simply in the nature of a discounted figure — it was what the property “owed the Trust”.

[62]              Turning back to the expression at issue in the Lease, I address first the word “current”. This is defined in The Chambers Dictionary,12 as:

“belonging to the period of time now; … up-to-date, present …”.

[63]              And, in The New Shorter Oxford English Dictionary,13 the word “current” in so far as it relates to the issue of time, is defined as:

“now passing, in progress, belonging to the current period of time.”

12     The Chambers Dictionary 11th ed Chambers Harrap 2008.

13     The New Shorter Oxford English Dictionary, Clarendon Press, Oxford, 1993.

[64]              At one level it might be said here that in considering GV/RV for the “current period of time” in March 2021 (when LCL purported to exercise its option to purchase) the “current” valuation for the Property was the $480,000 valuation assessed to run from 1 September 2020. One reason for this would be simply that the valuation was assessed by Quotable Value (QV) as at 1 September 2020, to take into account comparable sales and market values for properties throughout the region at that specific date. In other words, it was an official assessment of value for the Property on 1 September 2020 which rating authorities and others would rely upon and use for different purposes for three years thereafter. If that is accepted, and in my view there is a possible argument here in its support, LCL must fail in its present claim in that it has not properly exercised its option to purchase in terms of the Lease. That should have been at the price of $480,000 and not the $325,000 LCL nominated. This would without more dispose of the present case before me.

[65]              I will leave this aspect on one side however and continue. This is because in any event there is a further argument in favour of the Trust’s position here that at worst, the “current GV/RV” for the Property at the new figure of $480,000 was settled for present purposes not necessarily on 1 September 2020, but without question four months later on 1 February 2021. This was when the DVR was updated to show

$480,000 as the appropriate valuation for the Property. In giving notice later in March 2021 that it was to exercise its option to purchase LCL could only do so at the updated GV/RV figure, then settled at $480,000, which it failed to do.

[66]              So far as these Government Valuation/Rating Valuation assessments are concerned, there is independent evidence before me from two sources. The first, provided for the Trust is from David Nagel (Mr Nagel), who is the General Manager of QV, and a registered valuer with over 35 years’ experience. His detailed explanation to the Court in his affidavit on the process of setting rating valuations and how they are then recorded, is of particular assistance here. In particular he provides a fundamental explanation of the difference between the DVR and the RID which LCL in particular contends is fundamental to support its present argument.

[67]              The second source, for LCL is provided in the affidavit of Kirsty McMenamin (“Ms McMenamin”) dated 21 May 2021. She is the rates officer for the SWDC. In that May 2021 affidavit, she deposes:

“2.       I confirm that the current rating valuation for … (the Property) is

$325,000.

3.A new rating valuation of $480,000 for the Property has been notified by QVNZ, but that does not take effect until 1 July 2021.”

[68]              Mr Nagel, in his 1 October 2021 affidavit before me, deposes by way of conclusion:

“Conclusion

24.So whilst the new rating valuations are effective as at 1 September 2020, they are first used to set the rates from 1 July 2021.

25.However, once the district valuation roll is updated, it is correct to say that the current rating valuation as recorded in the District Valuation Roll for 29 Jellicoe Street, Martinborough was $480,000. This occurred from the date that the Valuer General approved the revaluation (being Friday 29 January 2021 although the formal roll update occurred on Monday 1 February 2021).

26.Whilst the previous District Valuation Roll of $325,000 was still used for rating purposes until 30 June 2021, it was no longer the current rating valuation for the property from 1 February 2021 which was

$480,000.”

(Emphasis added)

[69]              Neither Ms McMenamin nor Mr Nagel were required for cross-examination on the evidence they had outlined in their respective affidavits. Ms McMenamin as I have recorded, is the SWDC rating officer. While she noted the opinion in her affidavit that the new $480,000 rating valuation for the Property, whilst notified by QVNZ did not take effect for rating purposes until 1 July 2021, I am satisfied from her perspective this related simply to the levying of rates by the SWDC which operate somewhat in arrears. This is so, given that the effective revaluation date to determine the value of properties was to be 1 September 2020.

[70]              On this issue I am satisfied it is difficult to go past the firm evidence before the Court from Mr Nagel, the registered valuer with over 35 years professional experience, principally involving rating valuation work. He is now the General Manager of QV.

His conclusions at paragraph 26 of his 1 October 2021 affidavit (outlined at [68]) are unequivocal. I accept his view that although the previous DVR figure of $325,000 was still being used for rating purposes by the SWDC until 30 June 2021, “it was no longer the current rating valuation for the Property from 1 February 2021 which was

$480,000”.

[71]              In my view this conclusion is assisted by the fact that QV valuations have wide uses, not only simply for local authorities to assess rates. In Bateman’s NZ Encyclopaedia,14 in the entry relating to Quotable Value NZ, the following is noted:

“QV is the Government agency charged with preparing valuation rolls for all districts in the country, and keeping them up to date, noting changes in property holdings, ownership, occupancy and development with value revisions at then [3] yearly intervals. … The department’s valuations are authoritative for levying rates … and also for Government Departments and agencies involved in land transactions.”

[72]              Mr Nagel in his evidence clearly set out the difference between the DVR and the RID. The fact the RID may have continued after 1 September 2020 to record a valuation of $325,000 must be seen as simply something used for its rating purposes assessment only. As Mr Nagel pointed out, it does not make the current or actual Government Valuation or Rating Valuation for the Property here a figure of $325,000 either as at 1 September 2020 or 1 February 2021 or even as at 13 March 2021. It is significant also that the official notice from the SWDC confirming to the Trust as property owners the new valuation of $480,000 was received on either 10 or 11 February 2021.   This gave rise to the rental increase  notice by the Channers on     12 February 2021. The dispute that immediately followed was about rental for the premises. It was not until about one month later on 13 March 2021 that LCL’s notice to buy the Property at the “current GV/RV” was given without mentioning a price or value. It was only when the subsequent proposed sale contract was provided that this included a price at $325,000 (including GST if any).

[73]              It seems too that Mr Boyle for LCL, a man with a marketing and science degree from France with some experience in running his successful business here, was well aware of rating revaluations in this case. From his evidence he knew the rating

14     Lynne Richardson (ed) Bateman New Zealand Encyclopaedia, (6th ed, David Bateman Limited, Auckland, 2005).

revaluation for the Property was delayed when he was told this by the SWDC in December 2020.15 Also he had enquired earlier of Mr Channer prior to 1 September 2020 as to the rating valuation for the Property and was told it was $325,000. He also would have been well aware through legal advice obtained and the extended clause by clause negotiations which took place over the terms of the lease prior to its being signed in September 2019, of the importance of Government Valuations here, given the Lease provisions both as to rental assessment and the purchase option.

[74]              Overall, I note too that SWDC’s DVR is a roll on which that local authority holds valuations for property in its area. That is the database of valuations which are fully searchable on all property databases. They do not change until the council concerned, in this case SWDC updates them, or until an objection alters them. Until such time as this might occur, they are the current actual rating valuation for each property, as Mr Nagel has confirmed. As I note, they also are not only used for striking rates, in the rating cycle for the following period. They have other common uses, for example, by real estate agents, websites such as the property valuation market, government departments and the like.

[75]              Mr Nagel confirms too that in common parlance there is no distinction between a GV (Government Valuation) and a RV (rating/rateable valuation). Including these terms in the Lease seems likely to be a reflection of the colloquial use of the term “Government Valuation” up to the present.

[76]              In his affidavit Mr Nagel notes there are two official registers that record rating valuations:

(a)the DVR established by the Valuations Act; and

(b)the RID established by the Rating Act.

15     Notes of Evidence page 8, lines 9–29.

[77]              Local councils such as the SWDC here must keep a DVR.16 This must contain all information for a rating unit (meaning the land comprised in a record of title) required by the Rating Valuation Rules 2008. SWDC here has delegated maintenance of its DVR to QV as a registered valuer, as Mr Nagel confirms.

[78]              In addition to a DVR each territorial authority such as SWDC must also keep and maintain an RID.17 The overriding purpose of the RID is to record all information that is required for the Territorial Authority to set and assess rates, with that information being reasonably accessible to the members of the public.18 The information that must be recorded on the RID includes the valuation information on the DVR, but also extends to information required to strike the rate for a rating unit.19

[79]The distinction between the DVR and the RID has been judicially noted in

Meridian Energy Company v Wellington City Council20as follows:

“Under s 7 of the Rating Valuations Act 1998 local authorities are required to maintain a District Valuation Roll, which records the value of each rating unit. The council has contracted the maintenance of its District Valuation Roll to Quotable Value NZ (Quotable Value). The District’s valuation Roll is a subset of the information that must be recorded on the rating information database and the council maintains the rating information database independently of Quotable Value”.

[80]              Finally, it is clear valuations of this type show that GV/RV figures are principally used for rating purposes. Mr Nagel addresses this in his affidavit, and confirms21 rating valuations are not substitutes for market valuations.

[81]              Here, the Trust maintains $480,000 was the current rating valuation according to the DVR, where it was recorded (at the latest) on 1 February 2021 and certainly at the time the notice of intention to purchase was served by LCL. So far as the RID is concerned, however, at the time LCL’s notice was served, its current rating valuation seems to be shown as $325,000.

16     Section 7(1) Rating Valuations Act, and Local Government Act 2002 sched 2 part 2.

17     Local Government (Rating) Act 2002 s 27(1).

18     Section 27(3).

19     Section 27(4).

20     Meridian Energy Company v Wellington City Council [2017] NZHC 48.

21 Affidavit of David Nagel at [10].

[82]Mr Nagel addressed this in his affidavit and says:

“[22] For rating purposes local governments do not adopt the new rating valuations as soon as they are approved. The process usually takes some months for objections to be considered and for the council to strike and approve the rates for the following year.

[23] For the above reasons the rating valuation only takes effect for rating purposes when the next rating year begins, which starts on 1 July each year until 30 June of the following year”.

[83]              With this in mind LCL contends that SWDC considered the $325,000 valuation to be “current” until 1 July 2021 after which point the $480,000 valuation would become current, along with all other rating valuations in the area so that the council could strike and approve rates for the following rating year, commencing 1 July 2021.

[84]              To repeat, LCL in counsel’s submissions therefore suggested the issue here is not “what is the current rating valuation?” but whether the term “current GV/RV” in cl 13 of the lease means:

(a)the current GV/RV according to the DVR? or,

(b)the current GV/RV according to the RID?

[85]              Here, there is no doubt in my mind for all the reasons I have outlined above, that, at the very least, the definition in [84](a) above, is the appropriate one.

[86]              Applying what I see is a commercially sensible interpretation to these words “current GV/RV”, the provisions in the Lease and particularly cls 8 and 25 also in my view support this as a reasonable interpretation here. For completeness I will consider briefly those rent review provisions.

[87]Clause 8 of the Lease which addresses the rent review states:

“8. The landlord has the right to review the rental  Base  Rate,  in  accordance with the terms of clause 5 above, when changes in the GV/RV are notified by the South Wairarapa District Council”.

[88]              As I see the position it would be unusual to say the least, for the Lease to be interpreted in such a way to allow a review of rent on the new “notified” GV/RV (here being the $480,000) but for the earlier GV/RV at $325,000 to be used for the purposes of LCL as tenant having the right to purchase the Property.

[89]              On this rent review issue it is also interesting to note that it was on 12 February 2021 that Mr Channer advised Mr Boyle that as the new $480,000 rating valuation had been notified by SWDC/QV, the weekly rent under the Lease was proposed to be increased to $564.70 (representing the new valuation divided by 850), effective from 14 March 2021. This accorded with the rent review process set out in cls 8 and 9 of the Lease. This was met by an objection from the Boyles to the rent increase, whereupon it seems the Channers acknowledged the increase in value from $325,000 to $480,000 was significant. Accordingly, they offered the Boyles an initial 50% reduction in the rent until 1 July 2021. That offer was rejected by the Boyles. Instead, on 13 March 2021 LCL gave its written notice to the Trust of an intention to exercise the right to purchase the Property pursuant to cl 13 of the Lease.

[90]              In considering the evidence here, and the context and history of arrangements between the Channers and the Boyles throughout relating to both the Property and the hair salon, in my view the Channers sought to assist the Boyles and their business both financially and otherwise with lease terms that in any commercial sense can only be seen as advantageous to the Boyles.

[91]              The rental reviews and purchase option in the Lease, tied as they were to Government valuation figures rather than market values at the time, must be seen as helpful and generous to the Boyles. Indeed, as I have noted above, Mr Boyle in particular was fulsome in his thanks to Mr Channer for his help “over the years” and for his work as “the manager and accountant” as “a good mentor”, and for “the opportunity you gave us, Jeff”. That the narrative should have changed so dramatically with the present dispute is unfortunate to say the least. Mr Sullivan, counsel for the Trust and the Channers, in his final submissions to me in strong language contends:

“What started as a very generous approach by the Channers to assist a young French family who had moved to New Zealand into a successful hairdressing

business in a growing small town, with the business being purchased below cost with the right to buy the building at a sum below market value, has turned into a bitter, financially taxing and increasing nasty campaign by the Boyles against them”.

[92]              I make no comments on the specifics of these allegations — it is not appropriate here for me to do so. Suffice to say that it seems a considerable pity that the relationship between these parties has turned significantly such that their acrimonious dispute has reached this Court.

Conclusion

[93]              Balancing all matters before me, I am satisfied here that the proper interpretation of what is a remarkably simple and straightforward provision in cl 13 of the lease, must align with the position advanced before me on behalf of the Trust and as confirmed by Mr Nagel in his expert evidence. The words “the current GV/RV” at the operative time in the context here must reasonably mean “at the sum of $480,000”. I find this is the case, if not from 1 September 2020 then, as Mr Nagel confirms at paragraph [26] in his uncontested affidavit, at least from 1 February 2021.

[94]              That effectively leads to the conclusion that LCL’s present claim against the Trust for specific performance or damages must fail. It is dismissed.

[95]              I turn briefly to consider LCL’s further argument before me that as an alternative the contra proferentem rule applies to resolve what is a genuine ambiguity in the contractual wording of cl 13 of the Lease (in the sense it is to be construed against the party who prepared the contract, said to be Mr Channer here). As I see it, this has no application in this case. There is no reasonably arguable ambiguity in the simple expression in cl 13 of the Lease. Again I find this rule has no application here.

Result

[96]              For all the reasons I have outlined above, LCL’s claim against the Trust fails and is dismissed.

Costs

[97]              No detailed submissions on costs were made before me from counsel for the parties here. I am satisfied that costs however ought to follow the event. My provisional view therefore is that the Trust as the defendant is entitled to an award of costs, likely to be on a category 2B scale basis.

[98]              I urge the parties and counsel however to liaise with a view to endeavouring to settle between themselves the issue of costs. If they are unable to do so, I will receive memoranda from counsel for the defendant limited to five pages which are to be filed within 20 working days of delivery of this judgment. The plaintiff will then have 10 working days in which to file a reply, also limited to five pages. I will then give my decision on costs based upon the memoranda filed and all material before the Court.

,

Gendall J

Solicitors:

Gibson Sheat, Wellington Core Legal, Masterton