Lyon v AK651441 Limited - [2014] NZHC 1178

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-406 [2014] NZHC 1178

BETWEEN
ALISTAIR MARK STUART LYON

First Plaintiff

AK3694975 LIMITED as corporate trustee of the LAZONA TRUST Second Plaintiff

AND

AK651441 LIMITED as corporate trustee of THE QUAY TRUST

First Defendant

RMCL LIMITED Second Defendant

GEOFFREY LAWSON RIDLEY Third Defendant

QST LIMITED Fourth Defendant

Hearing: 12, 13 and 14 May 2014

Counsel:

SH Barter for Plaintiffs
PJ Dale for Defendants

Judgment:

29 May 2014

JUDGMENT OF FOGARTY J

This judgment was delivered by me on 29 May 2014 at 4.30 p.m., pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors: Barter & Co, North Shore City
Ellis Law, Auckland

LYON v AK651441 LTD [2014] NZHC 1178 [29 May 2014]

The subject property and its acquisition

[1] Mr Lyon and Mr Ridley are long-term business associates. They both worked together at Chase Corporation in the 1980s. In the 1990s, Mr Lyon began his own property developments through a company called Mission Corporation (Mission Corp) and employed Mr Ridley as the development manager.

[2] By 1994, Mr Ridley’s remuneration on projects depended on the success of the project and he was getting a percentage of the profit of two projects – Remuera Road and Midcity. It was Mr Ridley’s idea to consider investment in the Quay Street property which is the subject of this litigation. The property is Maori leasehold land in Quay Street in Auckland. It is a large site of 11,555m2. The leasehold interest was 150 years and was being assigned by Magellan Orakei Limited, a corporate offshoot of Ngati Whatua o Orakei Maori Trust Board.

[3] Prior to purchasing the lease, Messrs Lyon and Ridley developed a plan of purchase and development of the property as a joint venture, 50/50.

[4] They conceptually divided the property into three principal sites which would be leased long-term, and another site upon which they would build 20 retail/commercial units which would be resold. As a later development, at Mr Lyon’s suggestion, they decided also to build 20 residential units above the retail and commercial units (sometimes, jointly called the secondary units). The plan therefore was to develop these retail and commercial units and sell them. Mr Lyon said that the proceeds from these sales would repay fully the Westpac debt, leaving the three principal unit sites mortgage-free and able to be on-sold or redeveloped after the expiry of the 40 year subleases applying to these sites. He said that he and Mr Ridley referred to this as “our superannuation fund”. Mr Ridley disputed this. He said the original funding was for the land purchase only ($5,475,000) but that further funding was needed, and that it was wrong to say Westpac would be fully repaid. Mr Ridley also disputes ever referring to the transaction as “our superannuation fund” and did not recall Mr Lyon saying that.

[5] I prefer Mr Lyon’s recollection. Obviously Westpac, as the purchaser’s

banker, would likely fund the construction. Mr Ridley did…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2014] NZHC 1178
Decision Date: 29 May 2014

CaseChat Overview and Summary

The case of Lyon v AK651441 Limited was a dispute over the ownership and profits of a leasehold property in Auckland. The plaintiffs, Alistair Mark Stuart Lyon and AK3694975 Limited, claimed that the defendants, AK651441 Limited, RMCL Limited, Geoffrey Lawson Ridley, and QST Limited, had breached a joint venture agreement and fiduciary duties. The court found that the joint venture agreement was valid and enforceable, despite not being in writing, as it was supported by other written documents and the conduct of the parties. The court also found that the Lazona loan agreement, which replaced the joint venture, did not extinguish the plaintiffs' beneficial interests in the leasehold property. The court ordered the defendants to account for profits and rentals from the property, and granted declarations of breach of the joint venture agreement and fiduciary duties. The court also ordered remedies, including interest and costs, and reserved the issue of further remedies and enforcement.

The legal issues in the case were whether the joint venture agreement was valid and enforceable, whether the Lazona loan agreement extinguished the plaintiffs' beneficial interests, and whether the defendants breached the joint venture agreement and fiduciary duties. The court resolved these issues by interpreting the written documents and the conduct of the parties in the context of their business relationship and the nature of the property. The court also applied the principles of equity and trust law, and the requirements of the Property Law Act 1952 and 2007. The outcome of the case was that the plaintiffs were entitled to a share of the profits and rentals from the leasehold property, and the defendants were liable for breach of the joint venture agreement and fiduciary duties.

Orders