LEV PAPOYAN AND B PROPERTY GROUP LIMITED ANDREW STEWART GRAEME McINTOSH HAVEN POINT LIMITED

[2024] NZHC 3040

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2023-059-66

[2024] NZHC 3040

BETWEEN

LEV PAPOYAN

Plaintiff

AND

B PROPERTY GROUP LIMITED

First Defendant

ANDREW STEWART GRAEME McINTOSH

Second Defendant

HAVEN POINT LIMITED

Third Defendant

Hearing:	9 October 2024
Appearances:	B B Gresson and E Downey for Plaintiff M King for Defendants by VMR
Judgment:	17 October 2024

JUDGMENT OF ASSOCIATE JUDGE LESTER

PAPOYAN v B PROPERTY GROUP LIMITED [2024] NZHC 3040 [17 October 2024]

[1]        The plaintiff, Mr Papoyan, was the owner of two substantial sections on Forestlines Rise, Queenstown, each in excess of 1.3 hectares in size (the two Lots).

[2]        On 12 October 2021, Mr Papoyan entered into a conditional agreement for sale and purchase of the two Lots to B Property Group Limited (B Property). The agreement became unconditional on 18 March 2022 and settled on 30 June 2022. On 21 June 2022, B Property nominated Haven Point Limited (Haven Point) to take title to Lot 8 and the second defendant, Andrew McIntosh (Mr McIntosh) to take title to Lot 9.

[3]        Mr McIntosh is the sole director of and owns an 83 per cent share in Haven Point. Mr McIntosh is the sole director of B Property and owns a 50 per cent interest in that company. All negotiations were by Mr McIntosh. I refer to Mr McIntosh in this judgment rather than B Property, as all communications were with him.

[4]        Mr Papoyan had been intending to build a home on the Lots. While planning and site investigation work was undertaken, he had a container home located on Lot 8. This container home was constructed from two containers — hence reference in this judgment to “containers”.

[5]        Mr Papoyan says the container home was excluded from the sale to B Property and that he had an agreement to remove the container home and had agreed to sell it to a third party. Following settlement, Haven Point refused to allow the container home to be removed and the sale to the third party was lost. Mr Papoyan seeks orders requiring the return of the container home, damages representing loss of interest on the lost sale, general damages and indemnity costs.

[6]        I am left in no doubt whatsoever that Mr Papoyan is entitled to the orders sought.  Haven Point’s position in respect of the containers is wholly without merit.  I now explain why I have reached that view.

Containers excluded from sale

[7]        The timeline of communications leading up to the contract on 12 October 2021 is as follows.

[8]Mr Papoyan was represented by his real estate agent, Mr Smith.

24 August 2021:

Email Mr Smith to Mr McIntosh. In this email, referring to the land in question it says:

“In essence you are purchasing two bare land sites at Forest Lines and anything else is a bonus.” The “anything else is a bonus” is “Any survey, geotech, engineering, planning, landscaping and physical site work that has been completed and of course any current consents and all that info can be passed onto you  as  part  of  the  purchase”  Mr Smith  goes   on to say: “Lev and Kat have some additional gear on site which is already spoken for and or is being stored for them. That will be removed from site presettlement”.

24 August 2021:

Earlier on 24 August 2021, Mr McIntosh had emailed Mr Smith advising that he had been looking for a site in Forest Lines for some time and advised that subject to due diligence, he considered the sites would  work  well.   I  note  here  this  suggests   Mr McIntosh was familiar with the sites. He said, “I plan to develop both sites with large new homes (circa GFA 800 sqm each).”

30 September 2021:

Mr Smith emails Mr McIntosh. Mr Smith says the vendor, “… has been at pains  to  point  out  that the sites will be bare land they have sold their container and other items they have on site.”

1 October 2021:

Mr McIntosh replies, “I did actually think the container building was included and had offered it to my builder to use as the site office. I don’t wont to upset the apple cart but could we keep this until the end of the build or rent it off the new owner?” (emphasis added)

1 October 2021:	Mr Smith replies to the email, “I’m sorry the container is 100 % not  for  sale.  It  has  never been associated with the sale and has never been mentioned as so. It will be removed from the site by the end of October and moved to a friend of theirs place. It’s full to the brim with very valuable personal items that they want to hold onto here in NZ for when they return.” Then further in the mail, he says, “The sale is just for bare land and the reports of works they completed as part of their process.”
1 October 2021:	Mr Smith follows up on his last email saying, “Sorry to be short around the container … it’s over due to be removed. I’ve had offers from Everyman and his dog to buy it but it’s simply not for sale.”
1 October 2021:	Mr McIntosh replies to the email, “All good, we can find another site office.”
5 October 2021:	Mr Smith emails Mr McIntosh to discuss the terms of the agreement for sale and purchase. That email concludes that the vendor, “asked me to pass on again that any hardware that they own on site which does not belong to [their builder] will be removed from the site over the next couple of months. [Vendor] just didn’t want that to be a surprise as they already had plans for the container etc and were only ever intending to sell the land.”
6 October 2021:	Mr McIntosh   acknowledges   the   email   from Mr Smith of 5 October 2021, without indicating that he had any different understanding.

Communications post contract, prior to the contract becoming unconditional

[9]        The following correspondence took place after the contract was signed on   12 October 2021:

2 November 2021: On  2 November  2021,  Mr McIntosh  emailed   Mr Smith saying that he had been told that the onsite water tanks were being removed. He said, “We had

expected this to be  part  of  the  land  purchase  and considered these existing chattels.”
2 November 2021	Email Mr Smith to Mr McIntosh. Mr Smith replied, There is no hard chattels in the S&P” and reiterating “… I was very clear that no hardware on site was being sold with the land”, and that the vendors’ “container and associated gear will be moved within the next few weeks…”.
3 November 2021:	Mr McIntosh emails Mr Smith saying, “We did communicate re the container office being removed but I had assumed the tanks were included.” (emphasis added)

[10]      While this last communication is after the contract was made it is before satisfaction of the due diligence condition on 18 March 2022. If Mr McIntosh had any concerns about the containers, he could have raised it in the context of confirming the due diligence condition.

[11]      The above exchange shows beyond any doubt that Mr McIntosh knew the containers on site were not included in the sale and agreed the containers were not included in the sale. It also shows beyond doubt that Mr McIntosh knew the containers were  not  “simple”  shipping  containers  sitting  on  site  used  for  storage  as  on    1 October 2021 he referred to the “container building” and on 3 November 2021 to the ‘container  office”.  In  any  event  whatever  the  character  of  the  containers, Mr McIntosh knew that the sale was for bare land plus consents et cetera but excluding the containers.

[12]      On 11 May 2022, Mr Smith emailed Mr McIntosh advising that “the container home + the decking on Lot 8 can be purchased. Asking is $250k”. Mr McIntosh replied, “Thanks Bas I think the new builder will bring there own site sheds so happy to let the containers go”. This is clear advice to Mr McIntosh that what was on site was a container home — the asking price itself communicates that the containers were of a substantial character. While this communication is after the contract became unconditional, it confirms that Mr McIntosh knew the containers would not be included in the sale and never had been and he was “happy to let the containers go”.

Rhetorically, if the containers had been included in the sale, on what basis could the vendors offer to sell them for an additional $250,000?

Mr McIntosh claims containers are fixture and pass on sale

[13]      Mr Papoyan’s application proceeded on the assumption that the container home was a fixture, however, it is apparent the container home was always intended (and apparently required) to  be removed  from  Lot 8.  Mr Smith, in  an  email  to Mr McIntosh after Haven Point refused to allow removal of the containers, notes the containers were no longer consented and had been built to be removed.

[14]      The agreement for sale and purchase does not refer to the container home. It is clear that Mr McIntosh agreed the contract was for bare land, that is, without the containers on Lot 8. It was also clear that Mr McIntosh knew the containers on site were more than mere standalone storage containers, having referred to them, as I have said, to a container building or a container office. B Property contracted on this basis.

[15]      Mr Smith, in his email after the dispute arose, says that during the year long due diligence process, Mr McIntosh walked across the land multiple times. It is clear beyond doubt from the  photos of the containers that they are a container house.     Mr McIntosh, however, says that, “Prior to August 2022 I have not been able to visit the Property due to COVID-19 restrictions.” The idea that Mr McIntosh would negotiate to buy the two Lots for $5.5m having, in his own words, “been looking for a site in Forestlines for sometime”, and therefore familiar with the Lots, without having visited the site before confirming the due diligence condition, is not credible.

[16]      It is common ground that the starting position is that ownership of fixtures transfers with the sale and purchase of the land. But that common ground in fact undermines the defendants’ position. For chattels to be included in a land sale, they need to be expressly agreed to be included.  Here, the schedule to the 10th  Edition   of the ADLS contract for the sale and purchase of real estate, excluded all the listed chattels. Had the containers been chattels, there would have been no need to agree they were excluded because, as I have said, chattels are by default excluded.

[17]      Accordingly, the fact that it was expressly agreed that the containers were excluded from the sale was recognition that the containers were fixtures, or at least arguably so and needed to be specifically dealt with.

[18]      The general position that ownership of fixtures pass with title is subject to the particular dealings between the parties, as:1

Those persons may regulate the issue between them as they see fit by contract or otherwise. In come cases an estoppel may arise preventing one of them from asserting the legal position. In the absence of any such self regulation the legal position will, of course, apply between those immediate parties too.

(emphasis added)

Containers excluded by agreement

[19]      I note here that the issue is not between the immediate parties to the contract but between Mr Papoyan and Haven Point, the owner of Lot 8 on which the container home is located. However, it is clear that a nominee must take the head contract as they find it.2

[20]      During the hearing, I was under the impression that the respective Deeds of Nomination were not before the Court, but that was incorrect.3

[21]      The Deeds of Nomination record that Haven Point will, “fulfil all of the Nominator’s obligations as purchaser under the Agreement”.

[22]      Counsel for the defendants submitted that the definition of “Agreement” in the Deeds is the agreement for sale and purchase dated 12 October 2021 and not any prior agreement. That may well be true but the fact is B Property agreed to exclude the containers from the purchase. Haven Point can be in no better position than its Nominator. In other words, Mr Papoyan’s right to retain ownership of and remove his containers cannot be defeated by B Property nominating Haven Point to take title.

1      Lockwood Buildings Ltd v Trustbank Canterbury Ltd [1995] 1 NZLR 22 per Tipping J.

2      Cassiny Ltd v Hounslow Holdings Ltd [2021] NZHC 3116 at [20]; and University of Auckland “Sale of Land to purchaser or his nominee” (1974) 22 NZLJ 531 at 531.

3      This matter was originally commenced in the District Court and transferred to this Court for jurisdictional reasons. The Deed of Nomination was on the District Court file. The Deed contains an assignment of B Property’s “interest, right and title” under the contract. B Property’s contract concerning the purchase excluded the containers.

[23]      Whether the agreement in respect of the containers could lead to rectification of the agreement for sale and purchase or whether it was a collateral contract that varied what would otherwise have passed under the agreement for sale and purchase does not matter.4 The simple fact is the containers were not for sale.

[24]      Counsel also considered whether an estoppel arose against Haven Point, which I address below.

[25]      As the passage from Lockwood Buildings shows, parties to an agreement for sale and purchase can regulate the issue of what will pass by the contract, by agreement. I find the exchange between Mr Papoyan’s agent and Mr McIntosh was an agreement that the contract was only for bare land and the containers would be removed from site. Mr Smith could not have been clearer when he said in his email of 1 October 2021, “The sale is just for bare land and the reports & earth works they completed as part of their process”. Mr Smith made it clear that the other residents of Forestlines Rise were unhappy with the presence of the containers and “its overdue to be removed”. Mr Smith said he had numerous offers to purchase the containers but the containers were not for sale.

[26]      There is no tenable basis for Mr McIntosh to assert he had not agreed to exclude the containers from the sale whether they were fixtures or not.

[27]      Whether the containers were fixtures was simply irrelevant to Mr McIntosh. Mr McIntosh cannot now be heard to say that whether the containers were fixtures was material to him  as  the  nature  of  the  containers  was  irrelevant  to  him  in  the pre-contractual discussions I have outlined above. Mr Papoyan was not selling the containers with the land and Mr McIntosh accepted that.

Estoppel

[28]It is common ground that the requirements for an estoppel are:5

4      Practical Guidance – New Zealand Business Law (LexisNexis) “Collateral Contracts” at 61 [accessed 17 October 2024].

5      National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548, at 30.

(a)the parties have proceeded on the basis of an underlying assumption of fact, law, or both, of sufficient certainty to be enforceable;

(b)each party has, to the knowledge of the other, expressly or by implication accepted the assumption as being true for the purposes of the transaction;

(c)such acceptance was intended to affect their legal relations in the sense that it was intended to govern the legal position between them;

(d)the party was entitled to act and has, as the other party knew or intended, acted in reliance upon the assumption being regarded as true and binding;

(e)the party would suffer detriment if the other party were allowed to resile or depart from the assumption; and

(f)in all the circumstances it would be unconscionable to allow the other party to resile or depart from the assumption.

[29]      Mr King, counsel for the defendants, submitted that the underlying assumption of fact should be defined as being there was a common understanding that fixtures were excluded. I see no need to place this gloss on what the common understanding was. In any event, as already noted, it was implied from the fact the containers were expressly excluded that they were fixtures and not chattels. Again, the default position is that chattels are not included in a land sale — therefore expressly excluding the containers communicated that it may have been arguable that the containers were fixtures and had to be expressly excluded. At the risk of labouring the point, whether the containers were chattels or fixtures was not material.

[30]      The above criteria are satisfied because there was an agreement that the containers were not included in the  sale,  would  be  removed  from  the  site  and the contract was only for bare land. That agreement was accepted as being the basis of the transaction, that is, being true for the purposes of the transaction. That

agreement was intended to effect the parties’ legal relations as again, that was the basis upon which the contract was entered. Mr Papoyan was entitled to act on the basis that common position was true and binding. Mr Papoyan will suffer detriment if Haven Point was permitted to depart from that agreement and it would be unconscionable for Haven Point to depart from that common position.

[31]      Mr McIntosh is sole director of Haven Point, so Haven Point was well aware of the arrangements in respect of the containers and in any event, as I have said, Haven Point as nominee takes the head contract, that is the contract between Mr Papoyan and B Property as it finds it. Haven Point cannot claim that B Property’s nomination had the effect of nullifying the agreement in respect of the container of which it had full knowledge.

The position of B Property and Mr McIntosh

[32]      The primary relief sought by Mr Papoyan is an order requiring the return of the containers. That order can only be made against Haven Point as the container house is on its land — Lot 8. I am satisfied Mr Papoyan has demonstrated that Haven Point has no arguable defence in respect of a claim in detinue as it is unlawfully retaining the containers that belong to Mr Papoyan. While an order is sought that Haven Point is to return the containers to Mr Papoyan, more correctly, the order should  be that Mr Papoyan is entitled to have access to the property of Haven Point to take steps to remove the container home. The costs of removing the container home was always going to be met by Mr Papoyan.

[33]      Leave is reserved for the parties to apply further in respect of the exact form of order in relation to the return of the containers including any surrounding decking and infrastructure.

Damages claim

[34]      I referred at the outset to Mr Papoyan having agreed to sell the container home to a third party. A written contract for sale had been prepared but was not executed by the time it became clear that Haven Point was refusing access to the property. The contract recorded that sale price was $100,000.

[35]      With access to the container home becoming an issue, the purchaser’s solicitor wrote to the vendors’ solicitor saying:

Given the actions of the current land owner (changing locks, asserting rights over the containers), can we please:

1.Have the purchase price held in trust until [vendor] has been able to gain access to the site and remove the containers?; and

2.Have a warranty from your client that the containers are his to sell and aren’t subject to any security interests or claims?

[36]      As the sale did not proceed, Mr Papoyan seeks damages based on not having had the benefit of the sale price of the containers. Mr King submitted that as the agreement for sale and purchase had not been signed, there was no certainty that a sale would have occurred. Strictly speaking, that is correct. The claim is really one for loss of opportunity to complete the proposed sale. However, as already noted, there was substantial interest in the purchase of the container home, recall the reference by Mr Smith to “Everyman and his dog” wanting to buy it. The purchase which did not go ahead got to the point of the parties’ instructing their respective solicitors and the preparation of a written agreement which did not proceed because of the actions of Haven Point.

[37]      No other reason for the sale of the containers falling through has been advanced. That a dispute over ownership and the ability to remove the containers would have frustrated a sale, is readily understandable.

[38]      The sale was to the family trust of a person who was familiar with the site, being the contractor who had been assisting Mr Papoyan with construction issues relating to the site. Accordingly, the purchaser knew what it was acquiring, had agreed the price and all the circumstances point the purchaser being prepared to proceed but for Haven Point’s actions.

[39]      I am satisfied that Haven Point has no arguable defence in respect of the claim for interest. Its actions were the sole reason for the sale falling through. But for those actions, Mr Papoyan would have had $100,000.

[40]      There is an order that Haven Point is to pay Mr Papoyan damages in the form of interest on the sum of $100,000 as sought in the statement of claim through to the date of the judgment. Those damages will then carry interest under the Money Claims Act 2016 from the date of this judgment until paid.

General aggravated or exemplary damages

[41]      Mr McIntosh’s actions concerning the containers were, at best, opportunistic. His deliberate flouting of the clear and unambiguous agreement that the containers were not included in the sale, in my view, warrants being marked by a modest award of damages.

[42]      Exemplary and punitive damages are different words for the same thing. Such damages are seen as punishment for the commission of a private civil wrong in        a particularly reprehensible way, that is, in a way deserving of punishment.6

[43]      Haven Point will pay to Mr Papoyan exemplary damages of $5,000 — I so order. The original ground of opposition pleaded by the defendants was abandoned. That defence was that the real estate agent, Mr Smith, misrepresented the nature of the containers, meaning the agreement that the containers would be removed, was induced by misrepresentation as to the containers nature.

[44]      Haven Point’s submissions shifted to submitting that Mr McIntosh’s knowledge could not be imputed to Haven Point, along with reference to Haven Point being entitled to rely on indefeasibility. Defendants’ counsel had, to say the least, difficult facts  to  work  with  but  that  reality  should  have  been  recognised  by  Mr McIntosh from the outset.

[45]      Haven Point as nominee is in no better position than B Property. That reality overtakes arguments about what capacity Mr McIntosh was acting in and indefeasibility. At the heart of this case was the agreement in relation to the containers which Mr McIntosh, through Haven Point, sought to break.

6      Couch v Attorney-General [2010] 3 NZLR at [93].

Costs

[46]      It follows from everything I have said that Haven Point will pay indemnity costs to Mr Papoyan. If those costs cannot be agreed, memoranda may be filed within 10 working days of the date of this Judgment.

[47]      I make no orders against B Property or Mr McIntosh personally at this stage, but I do not dismiss the proceeding against them until such time as  it is clear that  Mr Papoyan is able to obtain recovery of his containers least there be some attempt to frustrate that relief.   B Property remains liable under the agreement  made with     Mr Papoyan — it nominating Haven Point to complete does not remove its liability to meet its obligations under the agreement concerning the containers. If it has put it beyond its own power to meet its obligations then it may well be liable in damages.

[48]      Leave is reserved to seek relief against B Property and/or Mr McIntosh should the need arise.

Associate Judge Lester

Solicitors:

Todd & Walker Law, Queenstown (for Plaintiff) Lane Neave, Christchurch (for Defendants)