Maui Farms Limited v Impress Company Limited
[2018] NZHC 1053
•15 May 2018
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2018-404-338
[2018] NZHC 1053
UNDER The Declaratory Judgments Act 1908 AND
the Property Law Act 2007
BETWEEN
MAUI FARMS LIMITED
Plaintiff
AND
IMPRESS COMPANY LIMITED
Defendant
Hearing: 19 March 2018 Counsel:
G Kohler QC for Plaintiff
M E Casey QC for Defendant
Judgment:
15 May 2018
JUDGMENT OF DUFFY J
This judgment was delivered by me on 15 May 2018 at 11 am pursuant to
Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Solicitors/Counsel:
Lawler & Co, Auckland
G J Kohler QC, Barrister, Auckland Hornabrook Macdonald Lawyers, Auckland M Casey QC, Barrister, Auckland
MAUI FARMS LIMITED v IMPRESS COMPANY LIMITED [2018] NZHC 1053 [15 May 2018]
[1] The plaintiff seeks an interim injunction to maintain its present position until the determination of its substantive claims against the defendant. The defendant opposes the injunction. However, it has responsibly consented to the interim injunction presently in force being extended on the same terms until delivery of this decision, which follows the first opportunity the parties have had to make their opposing arguments to the Court.
[2] The plaintiff’s substantive claims arise from an arrangement that it made with the defendant after the defendant acquired a farming property, which used to be grazed and maintained by the plaintiff for the previous owner when the land in question formed part of a larger block of land known as Kiripaka Station.
Background
[3] The subject property comprises 200 hectares in pasture, 89 hectares of protected native bush and 21 hectares in pine.
[4] Steven Kitchener is a director of the plaintiff. His father used to graze stock on Kiripaka Station. Through his father’s association with this land Steven came to know the former owners. This led to him entering into an agreement where he managed the land including the owner’s stock and in return he was able to stock his own cattle on the land. Over time he built up a herd of his own. When the defendant acquired the property Mr Kitchener came to an arrangement with the defendant under which he continued to graze and maintain the property. To better achieve this end, he incorporated the plaintiff in February 2015.
[5] The arrangement operated from early 2015 until 23 February 2018, after the defendant purported to terminate the arrangement by the giving of 20 working days’ notice.1 The defendant also took steps to exclude the plaintiff from the property and to remove the cattle. All of which has prompted the plaintiff to commence this proceeding and to seek injunctive relief.
1 The written notice was given on or about 22 January 2018 although I note that a representative of the defendant appears to have telephoned Mr Kitchener on 21 December 2017 informing him of the defendant’s wish that he no longer work on the property in the coming year.
Pleadings
[6] The plaintiff brings four causes of action: (a) breach of a short-term lease of one year’s duration; (b) breach of a contractual licence which was terminable on reasonable notice of at least twelve months’ notice; (c) breach of an agreement to lease; and (d) equitable estoppel.
[7] Common to all causes of action is the plaintiff’s alleged performance of certain agreed obligations in reliance on exchanges of correspondence as well as oral communications from the defendant. These have led to the plaintiff expending money and otherwise acting to its detriment on the understanding the grazing arrangement would continue for some years and be terminable on the giving of reasonable notice, which the plaintiff contends to be one year or more.
[8] The defendant has filed no statement of defence. However, it has filed a notice of opposition to the application for an interim injunction. In this notice the defendant contends that the arrangement constitutes nothing more at law than a tenancy under s 210 of the Property Law Act 2007, which is terminable at will on the giving of not less than 20 working days’ written notice to the other party. The defendant also contends that the plaintiff seeks to occupy the defendant’s property for an indefinite term and for no rent or other valuable consideration.
Discussion
[9] The principles on which this Court will grant injunctive relief are well settled and not in dispute herein. The plaintiff is required to show there is a serious question to be tried and the balance of convenience favours the grant of injunctive relief.
[10] It is also well settled that where there are factual disputes on the evidence, particularly those requiring credibility assessment, these are matters that are best left for trial. Nonetheless, I consider that from the basis of affidavit evidence the Court can still make some assessment of the plausibility of the disputed evidence.
[11] I have carefully considered the parties’ evidence. It is clear to me that on the plaintiff’s behalf Mr Kitchener has made a significant investment in terms of time,
labour and money in the property either personally or through contracting others to provide services for the plaintiff. He increased the size of the herd; and later, he says to his cost, he replaced mature cattle for younger cattle at the defendant’s request. He carried out extensive fencing and forestry planting at the defendant’s request, in order to avoid pugging the soil. He expended money on and conducted weed eradication. He says he fertilised the property. He built and installed new tracks, metalled roads and a metalled pad for a building the defendant wanted to erect. Mr Kitchener installed culverts and other drainage. He extended and renewed the water supply to the paddocks. His evidence includes schedules setting out capital expenditure of
$48,604.75 in 2015; $52,476.80 in 2016 and $36,054.80 in 2017, the latter being a shorter period of time due to him being informed by the defendant on 21 December 2017 of their wish to evict him.
[12] The exchange of emails between Mr Kitchener and the defendant’s representatives shows that typically he kept the defendant apprised of the cost, time and labour the plaintiff was expending on the property, often at the direction of the defendant. Further there is undisputed evidence the defendant’s representatives were on the property from time to time and therefore would have seen what the plaintiff was doing to the property. The only direct evidence of the defendant expressing reservation about how the plaintiff was managing the property was in relation to the mature cattle on the property and their pugging effect on the soil, which is something Mr Kitchener says the defendant addressed with the plaintiff. This concern was then ameliorated by the plaintiff replacing the mature cattle with younger and therefore lighter cattle. The ability of the defendant to see this issue as a problem and have it rectified suggests to me the defendant would have noticed the other expenditure and efforts the plaintiff was investing in the property. The defendant’s silence in the face of those things can arguably be viewed as acquiescence or acceptance of them.
[13] I accept the defendant disputes much of the plaintiff’s evidence or else says that:
(a)What the plaintiff did is typically part and parcel of a grazing lease arrangement; and
(b)It was only commensurate with, if not lower than, the level of rental it would otherwise have had to pay the defendant for the grazing rights.
[14] Nonetheless, the level of expenditure and the time and effort involved in the tasks Mr Kitchener undertook were not in my view consistent with an arrangement that is terminable on 20 working days’ notice. Nor do I consider the absence of rent to be material here. For three years the parties worked according to an arrangement that they each apparently understood at the time, and were content for it to continue. I find the plaintiff’s evidence to be plausible and logically consistent with the claims that it makes.
[15] Moreover, I note that from earlier on in the arrangement the plaintiff requested a written lease. Initially the defendant’s response was along the lines that, provided the plaintiff upheld its end of the arrangement so too would the defendant. In the face of receiving communications from the plaintiff identifying its need for a secure arrangement given the level of investment being undertaken by the plaintiff, the defendant consistently refused to enter into a written agreement, but offered as a substitute promises and assurances the arrangement would continue. At no time did the defendant say it wanted the benefit of a short-term arrangement that could be terminated by a short term of notice. Nor did it suggest the arrangement was something that might end at any time on the giving of a short term of notice.
[16] I find some of the defendant’s evidence to be implausible. The property comprises 200 hectares of pasture. The defendant contends that the plaintiff over- stocked the property and carried out weed eradication for its own benefit. However, if stock had not been run on the property and weed eradication carried out it would soon have reverted to scrub as well as mature gorse and blackberry, all of which would have been more difficult for the defendant to eradicate. It was as much in the defendant’s interests as it was in the plaintiff’s interests for the pasture land to be maintained and weeds kept under control. Keeping the property well stocked and carrying out weed eradication was a means to achieve this end. I note that on one occasion the defendant through an email from Nathan Kot sent on 21 April 2015 to Mr Kitchener referred to the defendant’s requirement for the land to be kept “well groomed”. The defendant would have needed someone to look after the property if it
wanted to maintain the property in a “well groomed” state . Here, apart from payment of rates, the defendant paid nothing else and in return its property was maintained and upgraded with additional improvements being done to it.
[17] The outlay and effort that Mr Kitchener describes is consistent with an expectation that he would be able to reap the benefits of what he had done, which would entail an arrangement that would not terminate on the giving of 20 working days’ notice. Indeed, Mr Kitchener says he would not have acted as he did were it not for the fact he believed assurances from the defendant’s representatives that the arrangement was likely to run for five to 10 years. Mr Kitchener also contends that in the context of seeking a more secure arrangement from the defendant he advised the defendant that he would need at least 12 months’ notice if the arrangement was to terminate. I accept the defendant disputes this evidence. Nonetheless, I find Mr Kitchener’s evidence on the question of notice to be plausible.
[18] Accordingly, I consider the plaintiff has provided plausible evidence to support the factual allegations on which its claims rest. I also consider that there is a reasonably strong legal basis for the claims the plaintiff makes, which shows there are serious questions to be tried here.
[19] I consider the defendant’s reliance on s 210 of the Property Law Act to be overly simplistic. At the very least the law of equitable estoppel will protect the interests of someone in the plaintiff’s position. In Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd the Court of Appeal set out the relevant principles to establish equitable estoppel:2
(a)A belief or expectation by the plaintiff has been created or encouraged by words or conduct by the defendant;
(b)To the extent an express representation is relied upon, it is clearly and unequivocally expressed;
2 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [44].
(c)The plaintiff reasonably relied to its detriment on the representation; and
(d)It would be unconscionable for the defendant to depart from the belief or expectation.
[20] The facts as supported by the plaintiff’s evidence show the plaintiff had a belief or expectation the right to graze its cattle on the property would continue for some years. As regards the existence or otherwise of express representations, there is no necessity to determine that now as it does not provide what would otherwise be a missing element in the plaintiff’s case; it is something that may add to the case, but that can be determined at trial. The plaintiff’s evidence shows the plaintiff relied upon the defendant’s representations to its detriment. On the strength of the plaintiff’s evidence there is a reasonable basis for finding the defendant has acted unconscionably.
[21] There is also the claim based on the existence of a short-term lease, which is not required to be in writing.3 A short-term lease is for a term of one year or less and includes a periodic tenancy of one year or less.4 Whilst a short-term lease may be terminated on the terms set out in s 210 of the Property Law Act, that is only if no other term is agreed either expressly or by implication. Here the plaintiff essentially contends that either expressly or by implication the parties agreed the arrangement would run from year to year and be terminable on reasonable notice, which in the context of their arrangement was a period of 12 months’ notice.
[22] I consider it is seriously arguable that in the context of either a short-term lease or an equitable estoppel the arrangement between the parties should be terminable on reasonable notice, which here requires 12 months’ notice. Although dealing with the issue of a period of notice to be implied into an agency contract, in Paper Reclaim Ltd v Aotearoa International Ltd the Supreme Court considered what was a reasonable period of notice for an arrangement the parties had carried out for a number of years in circumstances where, whilst they agreed reasonable notice was required, neither
3 See s 208 of the Property Law Act 2007.
4 See s 207 of the Property Law Act 2007.
had expressly agreed the period of notice for terminating the contract.5 The Supreme Court considered the principles relating to fixing the period of reasonable notice, including by reference to a decision of the Privy Council in Australian Blue Metals Ltd v Hughes where the Privy Council commented:6
The implication of reasonable notice is intended to serve only the common purpose of the parties. Whether there need be any notice at all, and, if so, the common purpose for which it is required, are matters to be determined as at the date of the contract; the reasonable time for the fulfilment of the purpose is a matter to be determined as at the date of the notice. The common purpose is frequently derived from the desire that both parties may be expected to have to cushion themselves against sudden change, giving themselves time to make alternative arrangements of a sort similar to those which are being terminated.
[23] In the present case there is the evidence of Mr Kitchener that he said he needed 12 months’ notice if the arrangement was to end. There is evidence of the defendant’s silence, which if accepted would suggest the defendant acknowledged 12 months to be an appropriate period of notice.
[24] The evidence the plaintiff has provided satisfies me that the 20 working days’ notice given by the defendant is arguably not reasonable notice. Given the level of effort and investment the plaintiff has made in the property it may well be the case that a 12 month period of notice would be reasonable, as that would be a reasonable minimum period for the plaintiff to sufficiently obtain benefit from the level of effort in all respects that it had invested into the property. It would also allow the plaintiff to vacate the property in a way that enabled it to find alternative grazing for its herd of cattle and to properly re-establish its grazing operation elsewhere. Certainly I consider these matters to be seriously arguable.
[25] Accordingly, I am satisfied the plaintiff has established a serious case for argument on the equitable estoppel claim, and the claim based on a short-term lease. This is sufficient to satisfy the first requirement for granting an interim injunction.
[26] I am satisfied the balance of convenience lies in the plaintiff’s favour. It is difficult to see how the plaintiff could be expected to move its entire grazing operation
5 Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [2007] 3 NZLR 169.
6 Australian Blue Metals Ltd v Hughes [1963] AC 74 at 99 (PC).
from the property between now and the trial, on an interim basis. Obviously, if the plaintiff vacates the property before trial that will essentially bring the arrangement to an end then and there. The plaintiff would be left having to find an alternative arrangement, when the evidence shows there is no quick solution alternative to grazing on the property, as well as to quantify the cost involved in doing so in order to support a damages claim. The costs involved in a quick transfer to whatever alternative is found may not be readily quantifiable for the purpose of a damages claim. Unless alternative grazing is readily available, stock may need to be sold, in which case those animals are then lost to the plaintiff. On the other hand the defendant has provided no evidence to show any imminent change it is required to make to the property. Nor has it provided evidence to show the plaintiff has damaged or is likely to damage the property.
[27] I see no reason if this trial proceeds efficiently and expeditiously why the status quo cannot be maintained until the substantive matter is heard. Any damage the defendant suffers through the delay between the granting of an interim injunction and the trial date seems to me to be something that can be adequately compensated for by way of damages. An undertaking as to damages has been provided and at the hearing the defendant did not raise any concerns regarding the plaintiff’s ability to perform that undertaking, if called upon to do so.
Result
[28] I am satisfied that the plaintiff is entitled to the interim relief it seeks. An interim injunction is presently in place. I see no reason why the terms of that injunction should not therefore be extended further until the substantive trial is heard and determined and accordingly I so order.
[29] The parties have leave to file memoranda on costs if they are unable to agree as between themselves the question of costs.
0
2
0