Norman v Norman Glass Services Limited
[2017] NZHC 1597
•11 July 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2017-404-379 [2017] NZHC 1597
UNDER Part 19 of the High Court Rules IN THE MATTER
of an application to remove caveat pursuant to s 143 Land Transfer Act 1952
BETWEEN
MARK NORMAN Applicant
AND
NORMAN GLASS SERVICES LIMITED Respondent
CIV-2017-404-611
BETWEEN NORMAN GLASS SERVICES LIMITED Plaintiff
ANDMARK NORMAN Defendant
Hearing: 12-13 June 2017 Appearances:
DJG Cox for Applicant in proceeding CIV-2017-404-379 and
Defendant in proceeding CIV-2017-404-611
MAH Macfarlane and H Yiu for the Respondent in CIV-2017-
404-611Judgment:
11 July 2017
JUDGMENT OF GORDON J
This judgment was delivered by me on 11 July 2017 at 3.00 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors: Robert Burnes & Associates Rennie Cox, Auckland Hesketh Henry, Auckland
NORMAN v NORMAN GLASS SERVICES LTD [2017] NZHC 1597 [11 July 2017]
Introduction
[1] Mark Norman is the owner of a commercial unit located on Portage Road in Auckland (the property). On 21 January 2017, Mr Norman entered into a sale and purchase agreement by which he agreed to sell the property to Dempster Holdings Ltd for $785,000. Norman Glass Services Ltd (NGSL) is opposed to the sale and argues that it has a right of first refusal under the terms of an existing lease.
[2] NGSL has now lodged a caveat against the title to the property to prevent the sale of the property. It has also filed civil proceedings to enforce its alleged right of first refusal and seeks an interim injunction, restraining Mr Norman from proceeding with the sale until this Court has determined its claim. Mr Norman, in response, has filed proceedings seeking to remove the caveat against dealings from the title to his property. By agreement, the applications to remove the caveat and for an interim injunction were heard together.
[3] The central issue for this Court to determine is whether NGSL can demonstrate an arguable case that it has a right of first refusal in respect of the property. That determination turns on the existence and terms of any lease agreement between the parties.
The undisputed facts
[4] Mr Norman and his late wife purchased the property in 1987 to use as a place of business for their company, NGSL. In 1993, Mr Norman sold NGSL to the present owner, Graham Metge. NGSL continued to occupy the property pursuant to a Deed of Lease.
[5] The first Deed of Lease was dated 30 September 1993 and was renewed on two occasions for a further period of three years. On each occasion, the parties entered into a Deed of Renewal of Lease, which recorded the terms of the renewal in writing as required by law.
[6] The second Deed of Lease was dated 18 October 2002 for a further period of three years.
[7] The third and final Deed of Lease was dated 26 September 2005. The lease was in the Auckland District Law Society Deed of Lease form (2002). It had a commencement date of 1 September 2005 with one right of renewal for three years. The renewal date was 31 August 2008 with a final expiry date of 31 August 2011 if the right of renewal was exercised. The annual rental was $33,380 plus GST.
[8] The landlord was recorded as Mark Norman. The tenants were listed as NGSL, and Reobert (sic) Selwyn Bezar and Graham Hubert Metge as trustees of the G H Metge Family Trust. Mr Metge was the guarantor.
[9] Other relevant clauses were as follows:
RENEWAL OF LEASE
34.1IF the Tenant has given to the Landlord written notice to renew the lease at least 3 calendar months before the end of the term and is not at the date of the giving of such notice in breach of this lease (including any maintenance obligations) then the Landlord will grant a new lease for a further term from the renewal date as follows:
(a) If the renewal date is a rent review date the annual rent shall be agreed upon or failing agreement shall be determined in accordance with clauses 2.1 and 2.2 but such annual rent shall not be less than the rent payable as at the commencement date of the immediately preceding lease term;
(b) Subject to the provisions of paragraph (a) the new lease shall be upon and subject to the covenants and agreements herein expressed and implied except that the term of this lease plus all further terms shall expire on or before the final expiry date;
(c) The annual rent shall be subject to review during the term of the new lease on the rent review dates or if no dates are specified then after the lapse of the equivalent periods of time as are provided herein for rent reviews;
(d) The Landlord as a condition of granting a new lease shall be entitled to have the new lease guaranteed by any guarantor who has guaranteed this lease on behalf of the Tenant who has given notice;
(e) Pending the determination of the rent, the Tenant shall pay an interim rent in accordance with clauses 2.3 and 2.4; and
(f) Notwithstanding anything contained in clause 34.1(e) the interim rent referred to in that clause shall not be less than
the annual rent payable as at the commencement date of the immediately preceding lease term.
… GENERAL Holding Over
38.1IF the Landlord permits the Tenant to remain in occupation of the premises after the expiration or sooner determination of the term, such occupation shall be a monthly tenancy only terminable by one month’s written notice at the rent then payable and otherwise on the same covenants and agreements (so far as applicable to a monthly tenancy) as herein expressed or implied.
…
Right of First Refusal to Purchase Premises
47.1IN the event of the landlord wishing to sell the unit title interest in the premises at 55B Portage Road during the term of the Lease, or any renewal, the Landlord shall first offer a right of purchase to the Tenant at a price nominated by the Landlord and if the Tenant does not accept such offered price in writing within fourteen days of the date of such offer then the Landlord shall be entitled to sell the unit title of the premises to a third party at the same or for a greater price PROVIDED HOWEVER
a.That if the Landlord subsequently agrees to nominate a lesser price the Landlord shall be bound to offer it again to the Tenant at such lesser price and if the Tenant does not accept such re-offered price in writing within seven days of the date of such further offer then the rights of acceptance of the Tenant shall be deemed to have lapsed and the Landlord shall be entitled to sell the premises to a third party;
b.On acceptance of any offer by the Tenant the Tenant shall forthwith pay to the Landlord by way of deposit a sum equivalent to ten percent of the offered price and the balance in cash in one sum within one calendar month of the date of acceptance by the Tenant (time being of the essence) and the Tenant if requested by the Landlord shall enter into a formal Agreement for Sale and Purchase comprising the above terms and otherwise in the then current form adopted by the Auckland District Law Society.
[10] The parties did not enter into a Deed of Renewal of Lease in 2008, nor did they sign a new Deed of Lease. However, NGSL continued to occupy the property and on 1 April 2009, Mr Norman and NGSL signed a Deed of Assignment of Lease. The Deed of Assignment set out the following key terms:
DATE OF LEASE: 26 September 2005
RIGHTS OF RENEWAL: Two (2) rights of renewal of one (1) year (refer to letter dated 1 October 2008 from Norman Glass Limited to the Landlord).
ANNUAL RENT: $33,380.00 plus GST per annum
EXPIRY DATE OF CURRENT TERM: 31 August 2009
[11] The expiry date of the existing lease, as noted in the Deed of Assignment, was 31 August 2009. That date came and went, without the parties entering into a Deed of Renewal of Lease or a new Deed of Lease. NGSL however continued to occupy the property.
[12] On 18 November 2009 the parties received a rental assessment prepared by Robert Yarnton of Eyles McGough. The rental assessment indicated that the market rent for the property would be around $31,000 which was a lower rent than NGSL had been paying. The parties accordingly negotiated a new, lower rental payment to be paid from that time onward. Between 2009 and 2016, NGSL paid rent on a monthly basis, as well as outgoings on the basis set out in the 2005 Deed of Lease. The relationship between the parties appears to have continued throughout this time in a more or less friendly manner.
[13] On 16 September 2016, Mr Yarnton provided a further rental assessment in which he assessed the market rental at $43,750 per annum plus GST and operating expenses (opex). A short time later, on 7 November 2016, Mr Yarnton presented a market valuation of the property which assessed the market value of the property at
$730,000 plus GST.
[14] At around this time, Mr Norman began discussing the possible sale of the property with David Dempster of Dempster Holdings Ltd, another unit holder in the same complex. Mr Norman indicated to Mr Dempster that NGSL had a right of first refusal but that Mr Norman would otherwise be interested in coming to an agreement. These discussions continued in the period leading up to Christmas. Mr Dempster and his wife, Lillian Dempster, visited the property on 17 January
2017. The sale and purchase agreement for the property was signed four days later with a settlement date of 31 March 2017.
[15] On 27 January 2017, NGSL was served with notice terminating its tenancy of the property. It registered a caveat against the title to the property on 1 February
2017 and, through its solicitors, disputed the validity of the notice terminating its lease. However the dispute regarding validity was not resolved and NGSL vacated the property under protest.
[16] Notwithstanding its vacation of the property, NGSL attempted to make the rental payment owed for the month of March 2017. The payment was rejected by Mr Norman’s solicitors.
Application to remove caveat against dealings: legal principles
[17] I turn first to Mr Norman’s application to remove NGSL’s caveat against dealings under s 143 of the Land Transfer Act 1952. Both parties agreed that the relevant principles of law governing such applications include the following:
(a) For the purpose of the application, the caveator must show that he/she is entitled to, or beneficially interested in, the estate referred to in the caveat by virtue of an unregistered agreement or an instrument or transmission or of any trust (expressed or implied).1
(b)The onus under s 143 lies on the caveator to show that there is a reasonably arguable case for the interest claimed.2
(c) Once the caveator has established an arguable case for the interest claimed, the Court retains a discretion to make an order removing the caveat although it will be exercised cautiously.3
(d)The summary procedure for removal of a caveat against dealings is unsuitable for the determination of disputed questions of facts.
(e) An order for the removal of a caveat under s 143 of the Land Transfer
Act will only be made if it is clear that the caveat cannot be
1 Land Transfer Act 1952, s 137.
2 Castle Hill Run Ltd v NZI Finance Ltd [1985] 2 NZLR 104 (CA).
3 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA).
maintained, either because there was no valid ground for lodging it or that a valid ground no longer exists.4
[18] I accept that the principles listed above should govern the Court’s decision regarding Mr Norman’s application under s 143. Accordingly, NGSL bears the burden of demonstrating a reasonably arguable case that it has an interest in the property, namely a right of first refusal under the terms of a lease between Mr Norman and NGSL.
The evidence
[19] Each party filed extensive evidence in support of its position. Mr Norman swore three affidavits himself and filed further affidavits of Mr Dempster and Mrs Dempster. Mr Metge similarly filed three affidavits in support of NGSL’s case. Other witnesses for NGSL included Ian and Patricia Maclaren, who were employed as office staff at the relevant times; Gregory Hall, who is Mr Metge’s financial adviser; and John Dunlop, who has acted as a solicitor for NGSL and Mr Metge.
[20] Further, and despite acknowledging the principle in [17](d) above that the summary procedure for removal of a caveat against dealings is unsuitable for the determination of disputed questions of fact, each party required certain of the witnesses who had sworn affidavits to attend for cross-examination including both Mr Norman and Mr Metge.
[21] I summarise the evidence for each of the parties below.
The evidence for NGSL
[22] Mr Metge’s evidence was that at the time the lease came up for renewal on
31 August 2008, due to the uncertainties in the economy and the drop in property values consequent upon the Global Financial Crisis (GFC), he was reluctant to commit to another three year lease. He said that instead of a three year term, he and Mr Norman agreed to a renewal of the lease on varied terms, being a one year term
with two rights of renewal for one year each.
4 Sims v Lowe [1988] 1 NZLR 656 (CA).
[23] Mr Metge says that the agreement reached was recorded in a letter which is on the letterhead of NGSL and which reads as follows:5
Mark Norman
25 Lynwood Road
New Lynn 0640
Waitakere
01 October 2008
Dear Mark
Re: Norman Glass Premises
Further to our phone conversation the parties have agreed:
(a) One year lease plus two further rights of renewal of one year each
(b) No rent review as at September 08
Next review to take place September 09 for remainder of term
(c) All other lease details to stay the same
(d) No solicitors costs to be involved in this agreement.
Regards
Graham Metge
[24] It is accepted by Mr Metge that the letter was incorrectly addressed and that
Mr Norman’s address at the time was 125 Lynwood Road.
[25] Mr Metge’s position is that in accordance with what was agreed in 2008 and as recorded in his 1 October 2008 letter, the renewed lease was again up for renewal on 31 August 2009. A rent review was also due, again as recorded in the 1 October
2008 letter.
[26] Mr Metge says that at that time the commercial building market was still very depressed following on from the GFC. He owned a number of commercial properties and he said during 2009 some of his buildings lay empty because of the difficult market conditions. He says it was not uncommon during the years
following the GFC for leases to be renewed for shorter terms and at lower rents.
5 Mr Norman’s evidence is that he did not receive the letter: see [63] below.
Those factors suggested to him that there should be no rental increase and if anything, a decrease. It was agreed with Mr Norman that they would commission a rental assessment of the property from Robert Yarnton of Eyles McGough. That assessment would then form the basis of their discussions in respect of both the rental and the renewal.
[27] Mr Metge says that he was the one who commissioned the report and his recollection is that he did this in August of 2009. He acknowledges that the report was dated 18 November 2009 but says he would not have been concerned with the delay since he understood that the renewed lease, on whatever revised terms he and Mr Norman ultimately agreed, would be back-dated to the renewal date as had happened in 2008. He and Mr Norman each paid half the cost of obtaining the report.
[28] Following receipt of the report, Mr Metge says that he sent a letter dated
2 December 2009 to Mr Norman. Mr Metge says by this letter he was proposing a renewal of the existing lease as varied/amended by the letter which I set out in full as follows:6
Mr Mark Norman
125 Lynwood Rd
New Lynn 0640
Auckland
2 December 2009
Re Building Rental
Dear Mark,
You will no doubt have received your copy of Eyles McGough Ltds rental assessment report dated 18 November 2009 and read the contents therein.
Taking into consideration the report contents, the severe economic downturn in re-leasing empty buildings as well as the pressure I myself is [sic] under with my own buildings, we put to you the following proposition for continued use of your building at 55B Portage Rd New Lynn.
(a) Annual rental to be $27982.00 + gst. (b) Monthly rental paid will be $2331.83 + gst (c) Credit owed for September to December 2009 inclusive
Current monthly rental $2781.67 + gst
6 Mr Norman’s evidence is that he did not receive this letter: see [70] below.
New monthly rental $2331.83 + gst
Credit per month $449.84 + gst
Total credit owed to tenant = $449.84 x 4 = $1799.35 + gst
(d) We propose to treat this credit as follows:
Total rent $27982.00 + gst
Less credit $1799.35 + gstAmended rental $26182.65 + gst
Monthly payment= $2181.88 + gst
(e) Amended lease commences 1 September 2009
(f) Lease to be on a monthly basis and notice to vacate three months advance notice.
We consider the above to be a fair and reasonable offer under the existing economic conditions and await your response.
Yours sincerely
Graham H Metge
[29] This letter was marked with the correct address although the postcode should have been 0600 rather than 0640 as recorded on the letter.
[30] Mr Metge says that shortly after sending the 2 December 2009 letter, Mr Norman came to the premises. The only item Mr Norman questioned from the letter was the rental rate. Mr Norman proposed a rental of $31,000 which was the market rental, as assessed in Mr Yarnton’s report. Mr Norman brought with him a handwritten rental calculation, a copy of which was exhibited to Mr Metge’s affidavit. The note records “four months rental paid for September, October, November and December at the previous rate of $33,480 per annum.” There is then a calculation of a monthly rental based on an annual rental of $31,000 with a credit for four months paid at the previous rate; a further calculation showing a January payment of $2,013.76 (including GST), taking into account that credit; and then monthly payments thereafter of $2,906.25 (including GST).
[31] Mr Metge says that the verbal agreement was that the monthly rental would in fact be $2,589.68 (including GST) for January to September 2010, factoring in a one-month rental holiday. For the rest he understood Mr Norman to agree that the lease would be renewed and amended in accordance with the proposal in his
2 December 2009 letter.
[32] Mr Metge says that he considered the terms of the agreement ought to be recorded so he asked Mr McLaren, who worked for him in an administrative capacity, to write down the contents of the agreement reached. Mr Metge dictated the contents of the agreement which he says had been reached and Mr McLaren handwrote this in a letter. It seems that this was part of the process of letter writing adopted in the business at the time. Some of the letters were sent out in handwritten form and others had typed copies prepared from the original handwritten document.
The letter, which is undated, is set out in full below:7
Mr Mark Norman
125 Lynwood Rd
New Lynn 0640
Auckland
Re Rental – 55B Portage Road New Lynn
Dear Mark,
In regards to the above subject and your recent meeting with Mr Graham
Metge we advise as follows:
1 Rent revision commenced on 1st September 2009.
2 The new rent amount will be $2589.68 per month.
3We are altering the automatic payment to the above amount commencing 2nd January 2010.
4 The current (existing) lease commenced on 1st September 2009 and
is to be on a month to month basis.
5Notice to vacate will be by written notice 3 months in advance given
by either party.
Yours sincerely
Graham H Metge
Owner/operator Norman Glass Services Ltd
[33] As with the 2 December 2009 letter, this letter was marked with the correct address, although the postcode should have been 0600 rather than 0640.
[34] Mr Metge says that Mr McLaren read out this letter to Mr Norman in his presence. He was uncertain whether this occurred at the time Mr McLaren wrote the
letter or at a later date when Mr Norman again visited the property.
7 Mr Norman’s evidence is that he did not receive this letter: see [71] below.
[35] I interpolate that Mr McLaren made an affidavit in relation to this letter and was also cross-examined. He says he recalls this event very clearly because while his job included this process of handwriting letters, anything to do with leases was Mr Metge’s responsibility and so he was surprised that Mr Metge involved him on this occasion.
[36] Mr McLaren says after writing out the letter he went downstairs with the letter. As soon as he entered the office Mr Metge asked him to read it out. Mr McLaren says it was then he noticed Mr Norman in the office. He read out the letter, gave it to Mr Metge, then left the office and went home. He says that during the reading of the letter he heard no complaints from anybody, no reactions and in the little time before he left the factory that day there were no objections to the letter. He says he did not hear any response from Mr Norman.
[37] Mr Metge says he is unable to remember what Mr Norman’s response was, but he is confident that if Mr Norman had expressed any disagreement with the contents of the letter, he would have remembered because they would then have had to undertake further negotiations. Mr Metge says it did not occur to him to ask Mr Norman to sign the letter. He says there was no doubt in his mind about what had been mutually agreed and his business relationship with Mr Norman had always been marked with a certain informality. He says that in writing the letter he was essentially following the same procedure as he had followed in 2008.
[38] Mr Metge says he does not have a specific recollection of posting this letter to Mr Norman but believes it was posted to him by Mr McLaren’s wife, who also worked in the business. Mrs McLaren swore an affidavit and was also called for cross-examination. She gave some evidence regarding the preparation of letters but was not able to assist on whether this letter was in fact posted to Mr Norman.
[39] There is a second version of the undated letter. On this version, there is a handwritten addition below the fifth paragraph: “Note a one months (sic) rental holiday from 1 September 2009 to 31 August 2011 as agreed by both parties.” This note was written by Mr McLaren. Mr Metge believes this was added to remind him that the $2,589.68 (including GST) per month included a one month rental holiday
amortised over the year, meaning that at the end of the year, the monthly rental payments would increase. He does not recall when this notation was added.
[40] As is apparent from NGSL’s bank statements for the period, this was in fact the rental paid by NGSL from January to September 2010. At no time during that period did Mr Norman question the amount paid.
[41] Mr Metge says that following the events as described above, he understood the lease to continue, as varied, but otherwise with all other provisions remaining as before. He continued to pay the same outgoings under the lease as he had previously, including monthly payments for the body corporate levies.
[42] In August 2016 the question of a rent review arose. Mr Metge says that Mr Norman asked him to organise a rental assessment from Mr Yarnton. He says that had he not understood the lease to still be in effect, he would not have bothered to go to the trouble and cost of obtaining a rental assessment.
[43] In his report of 26 September 2016, Mr Yarnton’s assessment of current
market rental was $43,750 (plus GST and opex).
[44] Following receipt of Mr Yarnton’s assessment, there was a meeting between Mr Norman and Mr Metge where the assessment was discussed. Mr Metge says he explained to Mr Norman that while he did not disagree with the valuation set out in the report, NGSL could not afford to pay that amount. Mr Metge told Mr Norman he had other businesses that he was willing to bring into the building, but that if he was going to do that he would like to purchase the building. Mr Metge says that he had raised the possibility of purchasing the property on a number of occasions in the past but that Mr Norman had said his ill health meant he relied on the income from the property for his day-to-day requirements. However on this occasion, Mr Metge says that Mr Norman’s response was that he would have a think about it and let Mr Metge know whether he wished to sell.
[45] Sometime after this discussion, Mr Metge says, Mr Norman agreed to get a market valuation from Mr Yarnton for sale purposes. Mr Norman asked Mr Metge
to make the arrangements with Mr Yarnton. However, rather than payment being made on a half and half basis as had occurred in the past, Mr Norman wished to bear the total cost of the market valuation himself. Mr Metge said he therefore informed Mr Yarnton that payment would be made on that basis and accordingly the report was to be sent to Mr Norman only.
[46] In anticipation of a possible purchase of the building Mr Metge spoke to his financial advisor, Mr Hall, to put finance in place. Mr Metge and Mr Hall met with his ANZ Bank manager on 16 November and 16 December 2016. The manager confirmed there should be no problem with borrowing from the ANZ Bank to fund a purchase. Mr Hall has sworn an affidavit confirming those matters. He deposes, in addition, that as Mr Metge’s financial advisor, he can confirm that Mr Metge has the financial capacity to purchase the property, currently has an extensive property portfolio and is a man of substantial means. He goes on to say that Mr Metge’s finances were in order to be able to purchase the property for $785,000 in late 2016 and that was still the case at the date of his affidavit which was sworn on 23 March
2017. Mr Hall was not called for cross-examination.
[47] Mr Metge says sometime during late November and early December 2016 he saw Mr Norman and asked him if he had received the market valuation. Mr Norman told him that he had, but the valuation was a joke and that he had not yet made up his mind whether to sell the property. The valuation dated 7 November 2016 was annexed to Mr Norman’s affidavit and the sale price was assessed at $730,000 plus GST.
[48] In December 2016 Mr Norman attended a body corporate meeting for the block. He had indicated to Mr Metge right up to that time that he was still considering his position as to sale. After attending that meeting Mr Norman dropped into the property and said that there were two parties he wished to come through the building to establish a proper price for the property. In a later telephone call, Mr Norman again asked Mr Metge if the two parties could visit the property. Mr Metge says his impression was that Mr Norman was trying to establish a price for the property; he did not say that he definitely intended to sell. Mr Metge says he agreed that the parties could view the interior of the property so long as advance
notice was given and that he, Mr Metge, was present. When asked in cross- examination why he had not told Mr Norman in December 2016 that he wanted to purchase the building, Mr Metge said he had already done that three or four times and each time Mr Norman had indicated he had not made up his mind whether to sell the building.
[49] On 17 January 2017 Mr Dempster, who was also a unit-holder in the complex, and his wife arrived at the property. No advance notice of this visit was given. Mr Metge says that NGSL had worked for Mr and Mrs Dempster in the past and he thought that on this occasion they were there to purchase glass for their new home. Mr Metge says he was surprised when Mr Dempster said that the couple wanted to look inside the property and that they were meeting Mr Norman there, but agreed they could have a look through.
[50] Mr Norman later arrived, spoke briefly with the Dempsters and, without speaking to Mr Metge, then left. Mr Metge says that Mr Dempster asked him what his intentions were in relation to the rental and asked how long he had been a tenant. Mr Dempster also said that if Mr Metge wished to stay on as a tenant there would be an increase in the rental amount if he became the new owner.
[51] Mr Metge says he did not wish to enter into discussions with Mr Dempster as this was occurring at his front counter in the showroom with his staff present. He says Mr Dempster then told him that Mr Norman had given him a right of first refusal over the property. Mr Metge says he was taken aback at this. He understood he had the right of first refusal under his lease. But he did not discuss this further with Mr Dempster as the issues were sensitive and members of his staff were nearby. Mr Metge says he asked Mr Dempster whether any money had changed hands or whether an agreement for sale had been signed. He says Mr Dempster said no agreement had been signed but reiterated that he had a right of first refusal.
[52] I will refer to Mr and Mrs Dempster’s evidence further below but note that Mr Metge denies Mr Dempster’s evidence that Mr Metge made it very clear that he had no intention of purchasing the property or entering into a lease because of his age and stage of life. Mr Metge said this would have been nonsensical since he had
already put in place finance so that he could purchase the property if Mr Norman wished to sell. He also disagrees with Mr Dempster’s evidence that Mr Metge said he was contemplating winding down his business interests sometime in the next six to 18 months.
[53] Following the Dempsters’ visit to the site, Mr Metge says he waited for Mr Norman to get back to him on whether he had established a price at which he was willing to sell the property. He says he assumed that once Mr Norman had reached such a price he would let Mr Metge know. He waited for Mr Norman to approach him as he was confident of his right of first refusal under the lease. At no time did Mr Norman contact him to discuss the issue of the right of first refusal. In particular, Mr Norman did not tell him that he had been advised that NGSL no longer had such a right. Had he done so, the situation could have been clarified and if there had been any doubt, the matter could have been resolved before Mr Norman entered into a contract with someone else.
[54] On 27 January 2017 NGSL and Mr Metge were served with a notice dated
24 January 2017 terminating the lease 20 days from the date of service. Mr Metge says he called Mr Norman that evening to discuss the situation. Mr Norman said to him that he had sent the Dempsters to discuss the leasing arrangements with him and that he had treated the Dempsters arrogantly. Mr Norman said he had nothing more to say to Mr Metge, telling him to speak to his solicitor before hanging up.
[55] Mr Metge says taking into account Mr Dempster’s comments on 17 January
2017 in combination with the 24 January 2017 notice, he inferred that the Dempsters wished to purchase the property with vacant possession and accordingly his right of first refusal was likely to have been triggered.
[56] On 1 February 2017, solicitors acting for Mr Metge and NGSL lodged a caveat on the basis of the right of first refusal as set out in the 25 September 2005 lease.
[57] Mr Metge’s evidence is that he complied with the 24 January 2017 notice
reluctantly because he did not wish to be locked out of the building with all his
equipment, glass stock and trucks in the building. He says in doing so he did not accept the validity of the notice and says that if his memory serves him correctly, a cheque was written for the next month’s rent and handed to his solicitor. It was then returned.
[58] Mr Metge’s position that he only moved out under protest is supported by correspondence from NGSL’s solicitors to Mr Norman’s solicitors in February 2017. For example, in a letter dated 7 February 2017 addressed to the solicitors for Mr Norman, the solicitor acting for NGSL raises the 24 January 2017 notice purporting to cancel the lease and records, amongst other things:
…
It is clear that your client is wishing to sell the unit and therefore is obliged to first offer the right of purchase to our client.
As far as the termination notice is concerned, we are in receipt of correspondence (sent by our client to your client) that clearly records a lease or variation of lease being entered into on 1 September 2009 on the existing terms of the then current lease but on the basis that the term of the lease can be brought to an end on three (3) months notice. Therefore the notice purporting to cancel the lease is invalid.
Contrary to what you suggest, the right of first refusal also remains as a term of the lease or lease as varied.
Your client should be aware that your client’s notice to cancel the lease and the failure to provide the offer to sell the premises to our client, has put our client’s business considerably at risk. Our client will seek to recover from your client losses arising from the invalid notice to terminate and the failure to offer to sell the property to our client.
We look forward to receiving the offer to sell the property to our client urgently and, to avoid further losses, urgent confirmation that your client will not be purporting to rely on the invalid notice.
…
[59] Clearly, this letter did not achieve its intended effect.
[60] It was put to Mr Metge in cross-examination that on his version of events, the parties had agreed in 2009 that any notice to vacate had to be on three months’ notice. He was accordingly asked why he moved out within a month. Mr Norman repeated that he could not take the risk of being prevented from entering the building at the end of the period in the notice.
[61] NGSL has incurred costs of approximately $100,000 in moving to the new premises. However Mr Metge says that although he has moved and signed a sub- tenancy for two years at his new premises, he would rather return to the property. Mr Metge says if he is able to purchase the property, he will need to sit down and work out a plan as to what he wants to do with the business on a long term basis.
The evidence for Mr Norman
[62] Mr Norman disagrees with most of the evidence of Mr Metge as recorded above. He does not accept Mr Metge’s evidence that the parties agreed to renew the Deed of Lease from 31 August 2008 for a further period of one year. His evidence is that he met with Mr Metge in August or September 2008 at the property, at which time Mr Metge advised Mr Norman that NGSL would not be renewing the lease and would instead continue on a month to month basis pursuant to the holding over clause in the Deed of Lease. Mr Norman says that Mr Metge advised he wished to continue occupying the property without incurring the costs of a legal renewal, which would have been at Mr Metge’s cost according to the terms of the lease. Mr Norman also says that Mr Metge had stated he would confirm arrangements in a letter to him.
[63] Mr Norman’s evidence is that he never received the letter dated 1 October
2008 which purported to set out the terms of the renewal. He says the address was incorrect and that he first saw the letter when he received the affidavit of Mr Metge dated 23 March 2017, to which it was annexed.
[64] Mr Norman acknowledges that this position is inconsistent with the Deed of Assignment, which refers to the “letter dated 1 October 2008”. However, Mr Norman says, the Deed of Assignment was prepared by Hesketh Henry, the solicitors for NGSL. He says Mr Metge’s solicitor, John Dunlop, spoke to him and explained the Deed was prepared to release the liability of Mr Bezar, who was very ill. Mr Norman did not notice the reference to the 1 October 2008 letter, nor did he notice that the expiry date was described as 31 August 2009. He says he would have read some of the Deed but “it certainly has not made an impression on me at the time, as I said it had been verbally explained to me on the telephone”. He deposes
that he did not take legal advice before signing the Deed of Assignment and was unaware that the right of renewal had been varied.
[65] Mr Dunlop has sworn an affidavit. He recalls talking to Mr Norman but does not recall the specifics of that conversation. He notes that in his email to Mr Norman sending him the Deed of Assignment he stated that “except for the release of the trust from liability, the assignment document is in standard form.”
[66] Mr Norman says that it was subsequently explained to him by his solicitor that the lease was effectively renewed by the assignment until 31 August 2009.
[67] Mr Norman acknowledges that towards the end of 2009 the parties renegotiated the amount of rent payable and that the amount of rent decreased. However, he argues that this was consistent with the existing month-to-month tenancy pursuant to the holding over clause in the third Deed of Lease and he does not accept that the negotiations at that time concerned a renewal of an existing lease.
[68] Mr Norman says he is unclear as to the circumstances which gave rise to the commissioning of Mr Yarnton’s rental valuation resulting in the letter from Mr Yarnton dated 18 November 2009. He says he does not believe he would have initiated the valuation because he says he was aware from the previous year there was only a month-to-month tenancy and in the rental climate as it was, he believes it was more likely that Mr Metge suggested the valuation. He says that Mr Yarnton was in the habit of rendering his valuations promptly and he therefore believes that Mr Yarnton was not asked to undertake the valuation until the beginning of November 2009. Accordingly any inference that the valuation was commissioned because of a right of renewal arising on 31 August 2009 is, he believes, incorrect.
[69] Mr Norman says the report was commissioned for the purpose of a rental review in the context of a monthly tenancy, not a lease. He notes that in the valuation report Mr Yarnton records “this Lease has now expired and we understand Norman Glass will continue on a monthly basis”.
[70] Mr Norman denies receiving Mr Metge’s letter dated 2 December 2009 and denies that he met with Mr Metge to discuss its terms. Rather, he says that Mr Yarnton called a meeting with him and Mr Metge to discuss the valuation and that he had not seen Mr Yarnton’s report until that meeting. Mr Norman says he was disappointed to receive the valuation recording that the appropriate rental should drop from the current $33,380 per annum to $31,000 per annum.
[71] The meeting with Mr Metge and Mr Yarnton took place at the offices of NGSL. Mr Norman says the only discussion was in relation to rental and that if he had thought there was any suggestion that the lease was still in force, he would have broached the subject at the meeting, being aware that the 2005 lease contained a ratchet clause. He says the changing of rental payments and back-dating to 1
September 2009 was not discussed but it was certainly an understanding that he had at that time. There was no expectation, he says, on his part that there would be a letter coming from Mr Metge confirming these arrangements. He denies receiving the undated letter produced in evidence by Mr Metge.
[72] I note that Mr Metge does not recall taking part in any meeting with both Mr Norman and Mr Yarnton present. He says he has checked his business diary entries for the relevant period and no such meeting is recorded.
[73] Mr Norman says that he made the handwritten notes referred to in [29] sometime after this meeting, after the 1 December 2009 rental payment was made. Mr Norman says he gave those notes to Mr Metge at a subsequent meeting. These notes are the only documents prepared or signed by Mr Norman in relation to the tenancy after 31 August 2009.
[74] Mr Norman agrees that a rental of $31,000 per annum plus GST and opex was agreed but he does not accept that he agreed to a rental holiday. When it was put to him in cross-examination that the monthly rental amount of $2,589.68 paid into his account each month between January and September 2010 was in accordance with the terms set out in Mr Metge’s letter of 2 December 2009,8
Mr Norman said he did not notice the amounts at the time, as the money went into a
8 See [32] above.
working account which he only drew on for an automatic payment. He accordingly claims he was underpaid for those months.
[75] Mr Norman says that following the November 2009 rental valuation, the situation continued on what he believes to have been a month-to-month tenancy for the best part of seven years, until the latter part of 2016. However, towards the end of 2016, conscious of the fact that the tenancy was on a month-to-month basis, Mr Norman says he was considering his overall position in relation to the property. With the agreement of Mr Metge, Mr Yarnton was instructed to undertake another valuation of the property for rental purposes, on the same basis as his previous valuation reports.
[76] Mr Norman says that he discussed the 2016 rental valuation figure of $43,750 plus GST and opex with Mr Metge, but that Mr Metge indicated he was not prepared to pay the rental as he considered that the returns from his business were insufficient.
[77] Mr Norman says that following Mr Metge’s refusal to accept or discuss any rent increase he considered his three options were to continue with the existing rental, find a new tenant who was prepared to pay market rent, or sell the property. He discounted the first and decided to obtain a market valuation for sale purposes at his cost. Mr Norman says he did not provide a copy of the sale valuation to Mr Metge and disputes Mr Metge’s evidence that he told Mr Metge the valuation figure was a joke. He did ask Mr Metge for permission for prospective purchasers to visit the premises. Mr Metge agreed but did not make any reference to having a right of first refusal.
[78] Sometime in November 2016, while considering his position, Mr Norman spoke to Mr Dempster. Mr Norman says he was aware that Mr Dempster had recently purchased a further unit in the block. He asked Mr Dempster about the ease he had in leasing the further unit and the current rental he was receiving. In the course of these discussions, Mr Dempster indicated he would be interested in purchasing Mr Norman’s property. The two men then met at Mr Norman’s home. In the course of that meeting Mr Dempster suggested he was prepared to make a provisional offer to purchase, should Mr Norman go ahead with a sale. Mr Dempster
was going overseas and said he would contact Mr Norman on his return just prior to Christmas. Mr Norman accepts he told Mr Dempster that NGSL had a right of first refusal in relation to the property.
[79] On 5 December 2016, Mr Norman approached his solicitors regarding the prospect of selling the property. At that time he provided them with a copy of the Deed of Assignment dated 1 August 2009 and the rental valuations of 2009 and 2016 together with the market valuation for sale purposes. He did not provide them with Mr Metge’s letters of 1 October 2008, 2 December 2009 or the undated handwritten letter9 because, according to Mr Norman, he had never received those letters. Mr Norman then received a legal opinion to the effect that because the lease had not been renewed, he was free to sell the property without reference to the original right
of first refusal.
[80] Mr Norman met with Mr Dempster after his return from overseas and told him that in fact there was no right of first refusal, showing him cl 47 of the 2005
Deed of Lease.
Mr and Mrs Dempster’s evidence
[81] Mr Dempster’s evidence as to his discussions with Mr Norman generally accorded with Mr Norman’s evidence. However, in relation to the right of first refusal, he says Mr Norman initially told him that Mr Metge “might” have a right of first refusal. He says in their discussions Mr Norman said that if he was to sell, his asking price was $800,000 or close to that figure. Mr Dempster countered that perhaps $785,000 might be a figure he would be prepared to consider.
[82] In relation to the visit to the premises with his wife on 17 January 2017, Mr Dempster says that Mr Metge made it very clear to both of them that he had no intention of purchasing the property or entering into any lease because of his age and stage of life. He says Mr Metge told him he was definitely not prepared to pay any increase in rent. In the same conversation, Mr Metge communicated to them that he
was contemplating winding up his business interests based in the property sometime
9 Referred to in [23], [28] and [32] respectively.
within the next six to 18 months. As noted above, Mr Metge strongly denies saying this to Mr Dempster.
[83] Mr Dempster says later that day he phoned Mr Norman and told him of his discussions with Mr Metge. He told Mr Norman that Mr Metge had said he had no intention of purchasing the property, could not afford a higher rent and was considering winding up the business in six to 18 months.
[84] Mrs Dempster also swore an affidavit effectively giving the same evidence as her husband in relation to the alleged conversations with Mr Metge on 17 January
2017. Although notice was given for cross-examination of Mr Dempster, no such notice was given for Mrs Dempster.
[85] Neither Mr nor Mrs Dempster mentioned to Mr Metge at the 17 January 2017 meeting that they had been told by Mr Norman that NGSL no longer had a right of first refusal.
[86] On 22 January 2017, Mr Dempster met with Mr Norman at his home and they agreed upon a price for the property of $785,000. Mr Norman accordingly entered into an agreement for sale and purchase with Dempster Holdings Ltd dated
21 January 2017. It was declared unconditional on 2 February 2017. The settlement date was 31 March 2017 with vacant possession.
Issues
[87] Mr Cox, who appeared as counsel for Mr Norman, accepts as a matter of principle that NGSL would have a caveatable interest in the property if Mr Norman had entered into an agreement to sell the property to DHL on 21 January 2017 during the term of a valid and enforceable renewal of the lease.10
[88] The central issue in this case is therefore whether the lease containing a first right of refusal was renewed and varied in December 2009 as alleged by NGSL.
That is a question of fact, which I will consider below.
10 Motor Works Ltd v Westminster Auto Services Ltd [1997] 1 NZLR 762 (HC) at 765.
[89] In Mr Cox’s submission, this central issue raises a number of sub-issues, as follows:
(a) Did the alleged renewal and/or variation of the lease in December
2009 need to comply with the requirements of s 24 of the Property
Law Act 2007 to be enforceable by NGSL?
(b)If the alleged renewal and/or variation of the lease in December 2009 did not comply with the requirements of s 24 of the Property Law Act, has NGSL satisfied the requirements of the doctrine of part performance?
[90] In my view, these sub-issues can be disposed of with relative ease. Clause
34.1 of the 2005 Deed of Lease clearly contemplates that any renewal of the lease will operate as a new lease, rather than an extension of the existing lease:
34.1IF the Tenant has given to the Landlord written notice to renew the lease at least 3 calendar months before the end of the term and is not at the date of the giving of such notice in breach of this lease (including any maintenance obligations) then the Landlord will grant a new lease for a further term from the renewal date…
(emphasis added)
[91] On Mr Metge’s account of events and as recorded in the undated letter,11 the parties agreed to renew the lease on a month to month basis, rather than a fixed term basis. If Mr Metge’s account of events is accepted, the renewed lease was a short- term lease12 and was not required by law to be recorded in writing.13 If Mr Metge’s account of events is rejected, then NGSL’s case falls away completely. Either way, s 24 of the Property Law Act is irrelevant to the outcome of present application. It follows that it is unnecessary to consider whether the requirements of the doctrine of past performance have been met.
[92] Mr Cox made a further, related submission that where a contract is required by law to be evidenced in writing it cannot be varied by an oral agreement. Mr Cox
11 See [32] above.
12 Property Law Act 2007, s 207, definition of “short-term lease”.
13 Property Law Act, s 24(2)(a).
submitted that even on Mr Metge’s account of events, the parties failed to comply with the requirement in cl 34.1 of the lease that written notice be given to the landlord at least three calendar months before the end of the term. Since NGSL failed to comply with this requirement, he submitted, any valid and enforceable renewal of the lease would have required a variation to the terms of the existing lease, which should have been evidenced in writing.
[93] That submission is misconceived. Clause 34.1 of the 2005 Deed of Lease provides the tenant with a right of renewal, provided that certain conditions are complied with. However, there is nothing to prevent the parties from exercising their freedom to contract by agreeing to enter into a new lease on the same (or similar) terms as the expired lease, under the guise of a renewal.14 That conclusion leads back to the central issue in this proceeding, namely whether NGSL can demonstrate an arguable case that in December 2009, the parties came to an oral agreement to renew the expired lease on terms including a right of first refusal.
Can NGSL demonstrate an arguable case?
[94] Mr Cox submits that Mr Metge’s evidence that the 2 December 2009 letter was a proposal to renew and vary the lease is not credible because the letter does not use the word “renewal”. Instead Mr Metge says “… we put to you the following proposition for the continued use of your building …”. Mr Cox submits it is not credible that Mr Metge would omit to use the word “renewal” if that was what was intended because Mr Metge is an experienced landlord of commercial properties and had previously undertaken three renewals in relation to this property since 1992.
[95] In relation to the meeting which Mr Metge says occurred at the property in December 2009, Mr Cox says Mr Metge’s evidence that agreement was reached with Mr Norman is vague and equivocal. Mr Cox submits that while Mr Metge states he understood Mr Norman had agreed to the lease being renewed and amended as per his 2 December 2009 proposal, Mr Metge provided no evidence as to how he formed this understanding. Further, Mr Cox says, there is no evidence of what was actually
said by Mr Metge and Mr Norman to indicate Mr Norman’s acceptance of the
14 See Jewel Properties Ltd v Phoenix Management Ltd HC Auckland CP35/02, 1 August 2002.
proposal in the 2 December 2009 letter. In any event, Mr Cox notes Mr Norman’s evidence denying that there was any such meeting during which an oral agreement to renew and vary the lease was discussed or reached.
[96] In respect of the undated letter set out at [32] above, Mr Cox submits that Mr Metge’s evidence that this is a record of the oral agreement is also vague, equivocal and not credible because the letter does not use the words “agreement” or “renewal” and does not purport to be a record of agreement between the parties. He submits that there is no evidence that Mr Norman indicated his acceptance of or assent to the contents of the letter. Mr Cox also points out that there is no evidence from Mr Mclaren of any words or conduct on Mr Norman’s part to indicate his acceptance of or assent to the contents of the letter.
[97] Mr Cox further submits that the evidence of the reading of the letter to Mr Norman is not credible. He asks why Mr Norman was not asked to sign the letter at the meeting and why he was not handed a copy of the letter on that occasion.
[98] The question of whether the parties agreed to a lease renewal rather than a holding over is determined objectively, based on the conduct of the parties in light of the surrounding circumstances.15
[99] While neither the 2 December 2009 letter setting out Mr Metge’s proposal nor the undated letter which Mr Metge says recorded the parties’ agreement contain the words “renew” or “renewal”, I consider that it is reasonably arguable that what is proposed and what is recorded as having been agreed is a lease renewal. My reasons first of all in relation to the 2 December 2009 letter are as follows:
(a) Item (e) records “amended lease commences 1 September 2009” and item (f) “lease to be on a monthly basis and notice to vacate three months advance notice.” If Mr Metge had been proposing a holding over under cl 38.1 of the 2005 Deed of Lease there would have been
no need to refer to an “amended lease commenc[ing] 1 September
15 Fair Investments Ltd v Mahoe Buildings Ltd [1992] 3 NZLR 734 (HC); Mahoe Buildings Ltd v
Fair Investment Ltd [1994] 1 NZLR 281 (CA).
2009”. Similarly there would have been no need to state that the
“lease was to be on a monthly basis”.
(b)The three month notice to terminate is inconsistent with the holding over provision in the 2005 Deed of Lease, which contemplates a one month notice period.
(c) The use of the word “lease” twice indicates that Mr Metge was
proposing a lease, rather than a holding over arrangement.
(d) The proposal to back-date the “lease” to commence on 1 September
2009 only makes sense in the context of the renewal of a lease where the previous term had expired on 31 August 2009.
(e) The use of the expression “amended lease” is consistent with how a layperson, albeit one who has experience as a landlord of commercial properties, might describe a renewed lease in which some of the terms of the lease were being varied.
[100] That then brings me to the undated letter. The terms of this letter are also consistent with the lease having been renewed on varied terms:
(a) Item 4 refers to “[t]he current (existing) lease commenc[ing] on
1 September 2009” which “is to be on a month to month basis.” If the letter were recording an agreement concerning the terms of a holding over arrangement under cl 38.1 there would have been no need for item 4.
(b)Item 5 records the three month notice provision. This again is inconsistent with a holding over arrangement under cl 38.1.
(c) The letter and its use of the words “current” and “existing” in item 4
indicates that a lease was still on foot.
(d)As noted above in relation to the 2 December 2009 letter, the backdating of the “lease” to commence 1 September 2009 is consistent with the renewal of a lease whose previous term had expired on 31 August 2009.
[101] The fact that Mr Norman did not sign the letters does not necessarily undermine the case for NGSL. Mr Metge’s evidence is that it did not occur to him to ask Mr Norman to sign the letter because there was no doubt in his mind about what had been mutually agreed and because the business relationship with Mr Norman had always been marked with certain informality. There is nothing inherently implausible about Mr Metge’s evidence on this point.
[102] Further, the letters are not the only evidence in support of NGSL’s case. There is Mr Metge’s evidence that the parties agreed the lease would be renewed on the same terms as the 2005 Deed of Lease, save for the decreased rental and the month-to-month tenancy. There is the evidence of Mr Mclaren, who says he recalls the event very clearly because anything to do with leases was Mr Metge’s responsibility and he was surprised that he was called on, on this occasion. There is also Mr Metge’s evidence that he was unable to remember Mr Norman’s response, but that he was confident that if Mr Norman had expressed any disagreement with the contents of the letter he would have remembered, because it followed that they would have had to undertake further negotiations.
[103] The subsequent conduct of the parties may also be relevant. Up until November 2016 Mr Norman understood that NGSL had a right of first refusal under the lease. Mr Norman said as much to the Dempsters. His position only changed when he received a legal opinion to the contrary. Mr Metge, for his part, knowing that NGSL had a right of first refusal, made arrangements to put finance in place should Mr Norman determine to sell the property.
[104] Taking all of these matters into account, I consider that it is at least reasonably arguable that the parties came to an oral agreement to renew the lease on varied terms including a right of first refusal.
[105] Mr Cox raises one further point which requires brief consideration. He submits that there could be no valid and enforceable renewal of the lease in 2009, since there was no consideration for the renewal. The basis for that submission is apparently that NGSL did not take on any legal obligations, over and above those which were already in existence under the holding over provisions of the 2005 Deed of Lease. If nothing else, however, the terms of the alleged oral agreement required NGSL to give three months’ notice if it wished to vacate the property. Under the holding over clause in the 2005 Deed of Lease, NGSL was required to give only one month’s notice. This extension of the notice period provided sufficient consideration for the alleged oral agreement.
Conclusion
[106] I am satisfied that NGSL has demonstrated a reasonably arguable case that it has an interest in the property, namely a right of first refusal under the terms of a lease between Mr Norman and NGSL.
Application for interim injunction: legal principles
[107] I turn now to NGSL’s application for interim relief. In order to succeed on its
application, NGSL must show that:
(a) There is a serious question to be tried as to the existence and effect of
NGSL’s right of first refusal;
(b)The balance of convenience favours NGSL (including whether damages would be an adequate remedy if the injunction were refused); and
(c) The overall justice favours NGSL.
[108] Mr Cox appeared to accept these general principles. However, he submitted that the following principles should also be taken into account:
(a) A plaintiff seeking interlocutory relief must adduce sufficiently precise factual evidence to satisfy the court that there is a real prospect of succeeding in the claim for a permanent injunction at trial.16
(b)If damages in the measure recoverable at common law would be an adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff’s claim appears to be at the interim relief stage.17
(c) The court should consider, in the event that the plaintiff is unsuccessful at trial, whether the defendant could be adequately compensated under the plaintiff’s undertaking as to damages for any loss sustained as a result of the interim injunction. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there is no reason upon this ground to refuse an interlocutory
injunction.18
(d)The fact that innocent third parties may be detrimentally affected by the grant of an interim injunction may be a factor which gives considerable weight against granting the interim relief.
[109] I accept that these principles are relevant when determining an application for interim relief. However, I do not accept the further submission of Mr Cox that the Court may only consider the balance of convenience in cases where there is some doubt as to the adequacy of damages. Mr Cox did not provide any authority for this proposition. The adequacy of damages is a factor that weighs heavily in the
consideration of the balance of convenience, but it is not determinative.
16 Re Lord Cable (deceased) [1976] 3 All ER 417 (Ch) at 431.
17 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 408.
18 American Cyanamid Co v Ethicon Ltd, above n 17, at 408.
Discussion
[110] In light of my findings in respect of Mr Norman’s application to remove the caveat against dealings, the outcome of this application can be determined with relative ease.
[111] For the reasons set out at [99] to [103] above, I am satisfied that there is a serious question to be tried as to the existence and effect of NGSL’s right of first refusal. Further, I am satisfied that a right of first refusal may be enforced by a decree of specific performance, provided of course that NGSL is successful at trial.
[112] That being the case, I turn to consider the balance of convenience. The weighing exercise is simplified in the present case by virtue of the caveat against dealings, which restricts the parties from dealing with the land. As a result, the grant of an interim injunction will have little or no practical effect. Ms Macfarlane seemed to accept as much, indicating that the application was brought out of an abundance of caution.
[113] Mr Cox raises the issue of NGSL’s capacity to meet an award of damages, if it is unsuccessful at trial. Mr Norman in his notice of opposition to NGSL’s application for interim relief noted that there is no reason to believe NGSL would be in a position to pay damages, in the event that it is called upon to do so. Despite being placed on notice by Mr Norman’s opposition, NGSL has provided no evidence of its ability to meet any award of damages. Although Mr Metge is said to be a man of significant financial means, he is not bound by NGSL’s undertaking.
Conclusion
[114] In the absence of any practical effect and given the concern raised but not answered regarding NGSL’s financial standing, I consider that the balance of convenience weighs against granting interim relief.
Result
[115] Mr Norman’s application to remove NGSL’s caveat against dealings from the
title to the property is dismissed.
[116] NGSL’s application for interim relief is dismissed.
Costs
[117] Although NGSL was successful in opposing the application to remove the caveat, it nevertheless failed in its application for an interim injunction. I therefore give the parties an opportunity to make submissions. If agreement is possible, counsel should file a joint memorandum within 10 working days of the date of this judgment. If agreement is not possible, counsel for NGSL should file a memorandum within 15 working days of the date of this judgment and counsel for Mr Norman within a further 5 working days thereafter. Memoranda should not
exceed 5 pages.
Gordon J
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