Portofino Wellington Waterfront Limited v Stride Property Limited
[2024] NZHC 1650
•21 June 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2292
[2024] NZHC 1650
BETWEEN PORTOFINO WELLINGTON WATERFRONT LIMITED
PlaintiffAND
STRIDE PROPERTY LIMITED
Defendant
Hearing: 2 May 2024 Appearances:
G J Jones and G P Aspell for Plaintiff
D J Friar and H E Cassone for Defendant
Judgment:
21 June 2024
JUDGMENT No. 2 OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 21 June 2024 at 3:30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
……………………………………
PORTOFINO WELLINGTON WATERFRONT LIMITED v STRIDE PROPERTY LIMITED [2024] NZHC 1650 [21 June 2024]
[1] Portofino Wellington Waterfront Limited (Portofino) has run a restaurant in Wellington since 2009 from premises overlooking Lambton Harbour. From March 2009, Portofino was a sub-tenant of its premises and from 25 October 2013 a lessee, pursuant to a deed of lease of that date, with Stride Property Limited Waterfront Limited (Stride). Mr Dimitrijoski is the director of Portofino who undertook discussions with Stride about lease matters.
[2] Portofino’s lease was for nine years, commencing on 28 September 2013 ending 27 September 2022.
[3] Portofino’s lease contained no right of renewal. Portofino, however, says that communications it had with Stride over an extended period means it has an enforceable right to a new lease. Stride disputes any such right exists and applies to strike out Portofino’s claim and, in the alternative, seeks summary judgment against Portofino.
[4] As I will explain below, in my view, communications between Portofino and Stride relevant to this proceeding commence with an email on 5 October 2020 which followed a meeting between Stride and Mr Dimitrijoski. There are two main streams of correspondence between Portofino and Stride. The first concerns the granting of a new lease — that stream of correspondence is relatively limited. The second stream of correspondence concerns Portofino’s request for a rent rebate due to the COVID-19 lockdowns and the linking of a rebate to an extension of the then existing lease.
[5]Portofino relies on both streams as meaning it was led to believe that Stride:
… was and would continue to remain willing to enter into a further six year lease agreement …
[6] Portofino says it is entitled to a new lease regardless of it seeking extensions to the existing lease discussed in connection with a COVID-19 rent abatement. At its most basic, Portofino’s case is that Stride led it to believe that a new lease would be forthcoming. As a result of Stride having created what Portofino says was its reasonably held belief in that regard, Portofino seeks an order declaring it “is entitled to a new lease commencing 1 December 2020 or from what ever date the Court determines to be reasonable”. That order is sought under the Fair Trading Act 1996
and by way of a cause of action relying on equitable estoppel. Damages are sought in the alternative.
[7] Portofino’s sublease and its lease from Stride are comprehensive written documents. The deed of lease dated 25 October 2013 (the lease) essentially confirmed that Portofino would remain in occupation of the premises on the same terms as its earlier sub-lease.
Summary judgment principles
[8] I prefer to approach Stride’s applications on the basis of an assessment of whether summary judgment is appropriate given the affidavit evidence that has been filed. The principles are not in dispute.
[9] I adopt the statement of principles from the submissions of Mr Friar, counsel for Stride, as follows.
[10] Under r 12.2(2) of the High Court Rules 2016 (the Rules), the Court may give judgment against a plaintiff if the defendant satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[11] Stride has the onus of proving on the balance of probabilities that Portofino’s claim cannot succeed. Usually, this will arise where the defendant can offer evidence that is a complete defence to the plaintiff’s claim. While summary judgment is not appropriate where there are disputed issues of material fact, the Court is not required to uncritically accept evidence that is inherently lacking in credibility. Instead, the Court may take a robust and realistic approach where the facts warrant it.1
[12] The fact that a plaintiff alleges misleading or similar conduct under the Fair Trading Act does not preclude the Court from granting summary judgment in favour of a defendant. For example, in Chip N Repair Ltd v IAG New Zealand Ltd, the Court granted the defendant summary judgment in respect of the plaintiff’s claim under the
1 Westpac banking Corp v M M Kembla NZ Ltd [2001] 2 NZLR 298 (CA), (2000) 14 PRNZ 631, at [60]-[61] and [73] and Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].
Fair Trading Act, ruling that a transcript of the call between the parties established that “the misrepresentation alleged in the statement of claim was not made”.2
[13] Mr Jones, counsel for Portofino, submits that applications for summary judgment require close consideration in terms of approach. He submits:3
When there is a clear legal impediment a strike out may be appropriate; when the facts are incontrovertible to the required degree, summary judgment can be considered.
[14] Mr Jones’ point is that a strike out of itself would not prevent Portofino bringing an amended claim again. Mr Jones submits that a considerable burden exists on a defendant to discharge their obligation in respect of an application for summary judgment.4
[15] Mr Jones emphasises that a summary judgment application is not a mini trial nor should such an application turn on matters of fine balance.
[16] It is important to record at the outset that there are no material factual disputes in this case. Where there were oral discussions, they were recorded in writing and the contents of the emails which refer to discussions are not disputed.
Overview of Portofino’s causes of action
[17] Both counsel recognise there is substantial overlap between the test for whether there had been misleading conduct by Stride for the purposes of the Fair Trading Act and whether Stride, through its actions, is estopped from denying Portofino is entitled to a new lease.
[18] Mr Jones summarised the test for the purposes of the Fair Trading Act as being whether a reasonable person in Portofino’s situation, that is with the characteristics known to Stride or of which Stride ought to have been aware, was likely to have been
2 Chip N Repair Ltd v IAG New Zealand Ltd [2022] NZHC 2047 at [65].
3 Citing Body Corporate No. 207624 v Miller and North Shore City Council [2012] NZSC 83, [2013] 2 NZLR 297 at [4].
4 Citing Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA), (2000) 14 PRNZ 631; and Stephen v Barron CA 804/2012 [2014] NZCA 82, (2014) 21 PRNZ 734.
misled or deceived by the conduct in question. Both counsel accepted that in order to establish a claim in estoppel that:
(a)a belief or expectation by Portofino was created or encouraged by words or conduct by Stride that Portofino had an entitlement to a new lease;
(b)to the extent that express representation is relied on, it must be clearly and unequivocally expressed;
(c)Portofino must have relied on Stride’s conduct to its detriment; and
(d)it would be unconscionable for Stride to depart from the belief or expectation that it created.
[19] The first two requirements to establish an estoppel overlap, as I have said, with the requirements to establish misleading conduct by Stride.
[20] In respect of the Fair Trading Act, the effect of all the circumstances must be assessed. The parties’ discussions, correspondence, conduct or inaction along with the status of the contractual negotiations must be considered in determining whether there was misleading conduct by Stride.
[21] Portofino’s case relies on a mixture of oral discussions, the 5 October 2020 email noted at the outset, and silence or inaction from Stride. The issue for the Court is whether Stride has demonstrated that Portofino’s claims cannot succeed. I am satisfied that it has. At its most basic, my reason for that conclusion is that the matters said to constitute misleading conduct or to found an estoppel were not capable of misleading a reasonable person in Mr Dimitrijoski’s position and so Portofino cannot say it was misled. Mr Dimitrijoski and therefore Portofino cannot have reasonably believed Portofino had been granted or was entitled to a new lease. I will now explain how I have reached that conclusion.
Stride’s starting point
[22] It is common ground that Mr Dimitrijoski travelled to Auckland on 5 October 2020 to meet with Stride to discuss an extension of the lease and other issues. Mr Dimitrijoski says that his purpose of the 5 October 2020 meeting was to make it clear to Stride that Portofino wanted to obtain a three-year plus three-year lease with a further right of renewal. The issue of a rental rebate for the COVID-19 lockdown was also discussed.
[23] Stride sent an email to Mr Dimitrijoski on the evening of 5 October 2020. Mr Dimitrijoski accepts the email correctly records the discussions he had with Stride.
[24]As the email is at the heart of Stride’s application, I set it out in full:
Hi Mario,
Thanks for the catch up today, it was good to talk and hear your plans, I hope that your meetings today were all successful.
Based on our conversations, I feel that the best approach would be to surrender the current Lease and put together a new Lease on the terms as we discussion, the surrender would be subject to signing a new lease and your account being settled before the surrender.
Ive attached a copy of the Deed as per our agreed rent abatement to November 2020, if you could please have this executed so we can process the credits to your account. Ive also attached an email that outlines the new invoices and the credits to be applied to your account as per the Deed. There is currently a largish balance on your account, some of which relate to some items that we had been discussing prior to lockdown, I will need to go back and see where we got to on these, if you could ensure that you are up to date with all agreed rental payments to October 2020.
Provided we get the above sorted, terms of a new Lease would be as follows:
Commencement: 1 December 2020 Term: 6 Years
Right of renewal: Two rights of 3 years each.
Rental: $185,450 per annum plus GST and Outgoings (Service charge) Service Charge: Fair apportionment of Outgoings as per the current Lease (Budget for FY21 $175.26 per sm or $56,434.74 per annum)
Rent Reviews: To market on each third anniversary of the Lease.
Landlords Incentive: Rent Free equivalent to 3 months base rental from the commencement date.
Bank Guarantee: Equivalent to 12 months Gross Rent and Outgoings plus GST.
Form of Lease: Landlords Standard Lease form amended to reflect the terms above.
The above terms are indicative only and not intended to create a legally binding agreement and would remain subject to Stride’s Board approval and I would recommend that you seek legal advice before proceeding.
Once you have completed your conversations with the other stakeholders, if the above is agreeable then I can put together formal documents for the surrender and a new Lease for your consideration and approval by Strides Boards.
If you have any questions, or would like further detail, please let me know. Kind regards
Glenn Dyer
Commercial Asset Manager
[25]Of this email, Mr Dimitrijoski says:
The email does record our discussions and although I accept it says that the matter would be subject to Stride’s Board approval, Glenn had told me during the course of our meeting that he could not see any problem with what I was suggesting and that from his point of view it was a good sensible outcome.
[26] Stride’s position is that Portofino never responded to this email concerning a new lease and much of the subsequent correspondence concerned various possibilities for a rent abatement linked to an extension of the existing lease.
Are communications prior to 5 October 2020 relevant?
[27]Mr Jones submits that Stride’s conduct:
…needs to be considered in the light of all that occurred between March 2020 and the current time, but in particular up until August/September 2021.
[28]Mr Jones further submits:
… any reasonable review of the circumstances surrounding those negotiations shows that it was intended that a lease would be put in place most likely by 1 December 2020 following, if necessary, a period of rent abatement as a result of a specific agreement.
[29] In the end, Mr Jones’ written submissions do not develop why events prior to 5 October 2020 are relevant. In relation to the possibility of a new lease, the
5 October 2020 email is a clear statement of Stride’s position. It does not refer to any prior communications in respect of a new lease save those earlier that day. Even if there had been such discussions before 5 October 2020, the email overtook them. As I will discuss below, Mr Dimitrijoski did not respond to the email of 5 October 2020 and certainly did not suggest it contradicted any prior discussions as to a new lease.
Portofino’s position in respect of the 5 October 2020 email
[30] Mr Jones emphasised that the 5 October 2020 email needs to be considered from the point of view of someone with the attributes of Mr Dimitrijoski.
[31] Mr Dimitrijoski is originally from Macedonia and moved to New Zealand in 2000 to start a new life. He has filed a 14 page narrative affidavit which is in fluent and articulate English. In his affidavit he says:
3. English is not my first language, although now I am able to communicate adequately with restaurant clients and socially. My understanding of written English is not as good as my ability to speak the language. For that reason I still prefer to meet people face to face and to discuss business matters with them in this way. I think it is fair to say that this is also typical of the way that I have tried to deal with our landlords throughout Portofino’s relationship with them.
[32] There is no suggestion that Mr Dimitrijoski suffers under any disability or that he has any inability to comprehend English beyond the passage set out in [31] above. Mr Dimitrijoski does not say he did not understand the 5 October 2020 email or that he found it confusing or incomprehensible. As noted at [25] above, Mr Dimitrijoski’s evidence is to the opposite effect. He confirms the email correctly recorded the discussions he had with Mr Dyer of Stride — therefore he must have understood it.
[33] Given Mr Dimitrijoski accepts the email of 5 October 2020 accurately records the of discussion that day and given his oral language skills are better than his written language skills, Stride made its position on a new lease clear orally and then recorded that in writing.
[34] Mr Jones submitted that Mr Dimitrijoski should be given an opportunity to explain at trial what the 5 October 2020 email meant. The meaning of the email is a matter for the Court when the accuracy of its contents are not disputed.
[35] Mr Jones submitted that Mr Dimitrijoski needed to be afforded some latitude in respect of his evidence that he accepted the email reflected the oral discussions and that his evidence in that regard needed to be heard. Mr Dimitrijoski’s opportunity to provide evidence in respect of his understanding of the email was his affidavit he prepared for this hearing.
[36] Mr Jones submitted it was not appropriate for the Court to take a black letter approach to the meaning of the 5 October 2020 email or to take a magnifying glass to the email to break it down into a series of barriers for Portofino. Further, that the meaning of the email is a matter that should be addressed at trial.
[37] Mr Jones submitted a reasonable person in Mr Dimitrijoski’s position would not read the 5 October 2020 email as containing a number of conditions or steps to be met but rather, it conveyed that the offer of a lease was, to use his expression, “done and dusted” — which Mr Jones submitted was conveyed by the words “Provided we get the above sorted, terms of a new lease would be as follows: …”.
[38] Mr Dimitrijoski has lived in New Zealand for nearly 25 years. His affidavit shows him to be quite fluent in English. Of course, Mr Dimitrijoski must have read and understood his affidavit before affirming it as correct. Ms Aspell who presented the submissions for Portofino in respect of the application for security for costs made by Stride in the alternative to its summary judgment application. She described Mr Dimitrijoski as a successful restauranteur. The business has a substantial turnover. Mr Dimitrijoski can be described as a successful businessman.
[39]In respect of an earlier lease, Mr Dimitrijoski says:
With our previous renewal Stride had sent me a document which I was happy to sign because it was in line with what we had agreed and I trusted then because we had had a good relationship. I did not even send that Lease to my lawyers for checking which is something I would have to be careful about, in the future, I now understand.
[40] However, what this passage conveys is that Mr Dimitrijoski knew enough of the document he was signing to be satisfied that it was “in line with what we had agreed”.
[41]These are the attributes of Mr Dimitrijoski that come out of his own evidence.
How would the email of 5 October 2020 be understood by a reasonable person in Mr Dimitrijoski’s position?
[42] Mr Friar submits that although the 5 October 2020 email provided indicative terms for a new lease, the email also made it clear that those terms were:
(a)“indicative only”;
(b)“not intended to create a legally binding agreement”’
(c)“subject to signing a new lease”;
(d)subject to Portofino ensuring that it was “up to date with all agreed rental payments” as at the date of the email;
(e)subject to executing a Deed of Variation in respect of Stride’s offer of COVID-related rent relief; and
(f)“subject to Stride’s Board approval”.
[43] In the email where it says the terms are indicative and “not intended to create a legally binding agreement”, “not” is in bold in the email.
[44] Mr Jones refers to a meeting that was to occur between Stride and Mr Dimitrijoski on 21 October 2020. Mr Dyer, of Stride, in an email of 19 October 2020, said he would come to visit Mr Dimitrijoski to “… have a conversation about where you have got to with regard to your lease”.
[45] On 20 October 2020, Mr Dyer said he would see Mr Dimitrijoski in the morning to discuss matters but Mr Dyer did not attend the meeting. Whether the meeting was cancelled or Mr Dyer simply did not show up is not explained. Mr Dyer simply says the meeting did not go ahead.
[46] Mr Jones places great importance on Mr Dyer not attending this meeting. He submitted that Portofino:
…is entitled to argue that from that it was fair to assume that Mr Dyer had reverted to the normal course of communications between the parties (i.e. oral) and that when Mr Dyer returned to Wellington a lease would renew no problem at all and would be put in place together with the Covid agreement, if necessary.
[47] Mr Jones submitted that Mr Dyer not attending the meeting would have reasonably conveyed to Mr Dimitrijoski that Portofino did not have to advise Stride that the terms of the 5 October 2020 email were agreeable. This submission conveys that Mr Dimitrijoski initially understood the need to confirm the 5 October 2020 terms but Mr Dyer’s “no show” released him from doing so.
[48] I cannot accept it is reasonably arguable that Mr Dyer not attending the 21 October 2020 meeting could reasonably convey that Portofino did not have to tell Stride if the terms of the 5 October 2020 email were acceptable. The purpose of the meeting was to discuss where Portofino had got to with regard to the lease. That in itself communicated the lease was to be the subject of discussions, whereas Mr Dimitrijoski says that (as set out below) he thought at this time he had an entitlement to a new lease. Portofino on an important commercial matter had actual notice of Stride’s requirements for a new lease. The email called for Portofino to advise if the terms were agreeable. The fact Mr Dyer did not turn up to a meeting cannot be in any way construed as overtaking the requirements of the 5 October 2020 email. No reasonable person in business would assume that from Mr Dyer’s failure to turn up at a meeting (if indeed he was a “no show”) could be construed as Stride abandoning the requirements set out in the 5 October 2020 email or that the lease “… would renew no problem at all…”. This is all the more so when Mr Dimitrijoski knew the purpose of the meeting was to discuss where Portofino “had got to” in relation to the lease. The issue of a new lease remained alive. As I will discuss in more detail below, silence, that is Mr Dyer not attending a meeting, rarely amounts to a genuine representation as it is by its nature equivocal.5
[49] Mr Dimitrijoski does not say that as a result of the meeting not going ahead, he understood Portofino was relieved of the need to confirm it agreed to the terms of the 5 October 2020 email. What he says in his affidavit in respect of the meeting not going ahead was: “So I was left in the position where I thought we had agreed with Stride that we would have a rent rebate and then our 3 plus 3 lease”.
5 Infinity Enterprises NZ Ltd v Kinara Trustee Ltd [2020] NZCA 309, [2020] 3 NZLR 626 at [99].
[50] Mr Dimitrijoski’s evidence is that as a result of the discussions on 5 October 2020 he:
… thought that we would get a 3 plus 3 Lease from Stride to sign and also that there would be some agreement about the rent rebate applying until November if that needed to be done…
…
I should also point out that I expected a Lease to be given to us to sign because that is what had happened before.
[51] Accordingly, on Mr Dimitrijoski’s own evidence, the meeting not going ahead on 21 October 2020 had no affect on him. Mr Dimitrijoski says he considered he was left in the position he believed existed as a result of the discussions and email of 5 October 2020 — that is the discussions on 5 October 2020 and the email of the same date gave Portofino an entitlement to a new lease.
The building is discovered to be earthquake-prone
[52] It is necessary to address when Stride discovered the potential for its building to have earthquake strengthening issues and when they were communicated to Portofino.
[53] Portofino pleads (at para [28] of its amended statement of claim) that in August 2021, Stride received advice from engineers relating to the seismic status of the building or, more accurately, the ground on which it stands.
[54]Paragraph [35] of the amended statement of claim pleads:
35.Prior to receiving the information referred to in paragraph 28 above, the Plaintiff had not received from the Defendant correspondence directed to other tenants in the building explaining the nature of the earthquake damage.
[55] There is no evidence of Portofino being left out of advice to tenants on seismic issues. Portofino’s position is Stride learning of the earthquake issues was the prompt, or was at least a factor that led Stride to resile from what Portofino says were assurances a new long term lease would be granted. Given I am satisfied no such assurance was given by Stride, this issue is a red herring. Advice or a lack of it in
relation to seismic issues in August 2021 is not capable of converting the discussions of 5 October 2020 or the email of that date into misleading conduct. Mr Jones submits that the placement of a long term tenant in the building would be fatal to Stride’s attempts to carry out alterations to the building to allow it to be fully tenanted. Mr Jones goes so far as to say:
That is the reason for this dispute. Stride reversed their way out of the situation they found themselves in by a combination of delay and inactivity.
[56] The reference in the submission to the “situation they found themselves in” is to what existed in August/September 2021. On Portofino’s case, the “situation” was a commitment by Stride to grant Portofino a new lease. We know from Mr Dimitrijoski’s evidence set out at [49] and [50] above, that he thought Portofino had an entitlement to a lease on 5 October 2020.
[57] The seismic issue does not assist Portofino in its claim. As recorded in Mr Jones’ written submissions:
There was no contact at all between the parties from October 2020 to July 2021 when some attempt was made by [Stride] to move matters forward but nothing progressed materially.
[58] To be accurate, following the email of 5 October 2020, there was Mr Dyer’s email of 19 October 2020 (referred to above), the email to put in place a meeting to talk about where Portofino had got to with the lease and to go “over your accounts”. On 20 October 2020, Mr Dyer sent an email to Portofino chasing up execution of the deed recording the COVID-19 rent abatement referred to in the email of 5 October 2020. The execution of this deed was one of the conditions stated in the email of 5 October 2020 to be satisfied before the issue of a new lease could be pursued. The email forwards details of what Stride considers were Portofino’s then rent arrears. I will return to this email further below.
[59]What the 13 July 2021 email from Mr Dyer to Portofino said was:
Just following up on the attached, I do not believe I have received the signed agreement for your COVID abatement. I need to [sic] this to be able to process the credits and look at any further lease negotiations.
[60] Mr Dyer then, on 2 August 2021, sent another email to Portofino addressed to Mr Dimitrijoski:
As discussed, if you could speak to your solicitor about what you would like added to this deed and how you would like it packaged up then we can take it from there.
[61] Then on 23 August 2021, a Mr Earl who had taken over from Mr Dyer, emailed Mr Dimitrijoski advising that he had taken over from Mr Dyer. In that email, Mr Earl said Mr Dyer had passed on: “That we seem to have three matters that need to be addressed”. The three matters were rental arrears of over $91,000 then owed by Portofino, the unsigned COVID-19 rent abatement deed, and the third item being “further lease negotiation for a longer extended term”. Mr Earl said: “I need to get a response from you on these matters before the end of the week so that we can move things forward…”. The level of arrears was referred to as being a breach of the lease that may warrant the issue of a statutory demand and potentially re-entry of the premises. The email concluded:
That being said, I do believe a new lease with a level of rent free is going to be the best option to address things and note Glenn has provided a summary of key terms below on which we are awaiting a formal response.
[62] On 25 August 2021, Mr Dimitrijoski emailed Mr Earl (see [84] below] addressing an extension of the lease for two years connected to the COVID-19 abatement and requested that two guarantors be removed. Stride said it would only consider removing guarantors if they were replaced by a bank guarantee. Mr Dimitrijoski, wanting two guarantors removed for a two-year renewal, hardly communicated to Stride that Portofino thought it was entitled to a new lease on the terms of the 5 October 2020 email.
[63] Again, Portofino’s position relies on Mr Dyer not turning up to the 21 October 2020 meeting. Mr Jones submits:
Mr Dimitrijoski was left waiting for an extended period of time with no contact with the defendant, and expected a lease to be delivered to him for signing (as he had done this previously without reference to his lawyers).
[64] I am unable to accept the proposition that silence from Stride between October 2020 and July/August 2021 can found a claim by Portofino for a new lease or
damages against Stride for it failing to grant a new lease against the background of what was contained in the 5 October 2020 email.
[65] If Mr Jones’ submission is right and Mr Dimitrijoski preferred to deal orally with Mr Dyer of Stride, then the concluding paragraph of the 5 October 2020 email required Mr Dimitrijoski to make contact with Mr Dyer to advise “if the above is agreeable”. Only then would the formal documents for the surrender of the existing lease and a new lease be put in place “for your consideration” and then approval by Stride’s Board. It seems Mr Dimitrijoski did nothing to progress matters.
[66] Portofino says that rather than the ball being in its court, it was for Stride to provide details of the outstanding rent — that being a reference to the 5 October 2020 email which refers to Mr Dyer reviewing the outstanding balance.
[67] While Portofino alleges in its pleadings that Mr Dyer failed to come back to Portofino in respect of outstanding OPEX, the uncontradicted evidence is that this is incorrect. An email from Mr Dyer to Portofino of 20 October 2020 was produced. Mr Dyer says:
Also, prior to catching up tomorrow, I took a look at the accounts I had forwarded through. I have attached a copy of my reconciliation and I have summarised [sic] below.
[68] There then appears a breakdown of amounts Stride says is unpaid and the document attached to the 20 October 2020 email is headed “International Lease Ledger for Portofino Wellington from 1 December 2017 to 2 August 2021”. I note here that Mr Dyer’s email of 20 October 2020 attached his email of 5 October 2020.
[69] The 13 July 2021 email noted at [59] above, referred to further lease negotiations. The 23 August 2021 email, noted at [61] above, made it clear that Stride was awaiting that formal response from Portofino. Mr Earl sent a further email on 25 August 2021 which, in addition to dealing with further negotiations about COVID-19 rental abatement referred to below, had a section headed “Further lease negotiation for a longer extended term”. This referred back to two other issues in the email, one being the continuing arrears and the second being the unsigned COVID-19 abatement deed sent on 5 October 2020. It concluded that until those matters “… are
addressed I don’t think it is appropriate to discuss a further extension of lease given how far we are from expiry”.
[70] The point of referring to this correspondence is that while Mr Dimitrijoski says his entitlement to a new lease was created by the discussions on and the email of 5 October 2020, Portofino’s pleading relies on events well after the email of 5 October 2020 as particulars of the misleading conduct. Those matters include an allegation that Stride delayed finalising the terms of the new lease for a period of eight months, thereby inducing Portofino to believe an offer of the new lease was and would remain open until the issues of the arrears had been resolved. Again, this is a reliance on silence or inaction and I will return to this point below.
[71] A further particular of misleading conduct pleaded by Portofino is Stride communicating with Portofino after a period of eight months, that is the time between October 2020 and July 2021, when Stride indicated a continued willingness on its part to offer Portofino a new lease in conjunction with a form of extension of the current term of the lease and a rebate of rent. The only communication between Portofino and Stride after July 2021 is referred to above, the high point of which is Stride being prepared to look at further lease negotiations. Such hardly founds a reasonable belief Portofino was entitled to a new lease.
[72] Portofino then alleges Stride failed to consider whether to offer Portofino a new lease and failed to agree a new lease with Portofino either immediately after the conclusion of the original rental abatement period or at the conclusion of the original lease. Again, this is a claim of inaction or a failure to act. A failure by Stride to take any of the steps alleged to be omissions or failures to act can only be of significance where it was reasonable for Portofino to expect Stride to take the steps it is alleged Stride omitted to do.
[73] Stride’s correspondence in July and August 2021 made it quite clear that as far as Stride was concerned, there was no finality in respect of a new lease and further negotiations were required. There were still pre-conditions for negotiations to occur, not least being arrears in excess of $90,000. No reasonable person in Mr Dimitrijoski’s position, after receiving the emails noted at [59]-[61] above, would
have thought there was an obligation on Stride to take any steps to advance a new lease as Stride had unequivocally outlined the steps Portofino had to take for a new lease to be advanced.
[74] Accordingly, the passage of time between October 2020 and July 2021 cannot have reasonably conveyed anything to Mr Mr Dimitrijoski in respect of the lease as, at the risk of repetition, his evidence is that he believed Portofino’s entitlement to a new lease had already been created on 5 October 2020. I have said I do not consider such a belief could reasonably have arisen. The obligation of communicating agreement to Stride remained with Portofino and Mr Dyer’s non-attendance at the meeting on 21 October 2020 could not reasonably convey the contrary. Then, after the passage of eight or nine months to July 2021, Stride made its position clear beyond any doubt.
[75] One of the further particulars of misleading conduct alleged at (30)(xvi) of the amended statement of claim, is:
(xvi)Failing to progress the Plaintiff’s entitlement to the new lease by facilitating agreement between the parties in relation to the issues that remained outstanding in respect of rent and forms of lease agreement to be executed as at October 2020.
[76] If anything, this pleading contradicts Mr Dimitrijoski’s own position. On his case, there was nothing to progress after October 2020. But in any event and, again at the risk of repetition, on 5 October 2020 Stride clearly communicated what Portofino had to do to advance the issue of a new lease but Portofino did not respond.
[77] The catch-all pleading is set out in the amended statement of claim at para [30] as follows:
(xvii)Conducting themselves in a manner that caused the Plaintiff to assume that the Defendant would remain willing to enter into the new lease despite any delays caused the defendant.
[78] This last particular essentially summarises Portofino’s case. However, it is a position that is not sustainable on the evidence.
Discussions over rental abatement
[79] At least three different forms of rental abatement were discussed. The first is pleaded to have been reached in April 2020 and is a pleading that there was an agreement between Mr Dimitrijoski and Mr Dyer “[t]hat some measure of rent relief would be provided to the plaintiff”. In the amended statement of claim this is called the first variation. The pleading does not say what “some measure of rent relief” would be and on the evidence, the April 2020 discussion went no further than Stride being willing to look at an abatement. Portofino’s lease did not entitle it to an abatement.
[80] The pleading is then that Stride wrote to Portofino on 6 July 2020 “[i]n an attempt to alter the terms of the first variation”. However, as I have said, there were no terms of the first variation to alter.
[81] Stride’s proposal of 6 July 2020, offered a rent reduction of 50 per cent for six months provided Portofino agreed to extend the original lease for 12 months or, in the alternative, a nine month rent reduction at 50 per cent provided Portofino agreed to extent the original lease for a further 24 months.
[82] On 7 July 2020, Portofino responded to that offer by agreeing to a six month rent abatement and a lease extension of 12 months.
[83] The amended statement of claim pleads that Portofino was unaware it could reject the need for a 12-month extension as it did not appreciate it could do so by virtue of the first variation being in place. Again, no variation was in place prior to the 6 July 2020 proposal. Stride sent Portofino a deed for execution recording the abatement agreement agreed to by Portofino on 7 July 2020. That deed was sent on 16 September 2020 and re-sent with the 5 October 2020 email, but never executed by Portofino.
[84] On 25 August 2021, Mr Dimitrijoski emailed Mr Earl at Stride and asked him to seek approval from the Stride Board for a 50 per cent rental abatement for nine months starting May 2020 and to extend the lease for 24 months until 27 September 2024. Mr Dimitrijoski also sought that two named guarantors be removed.
[85] Mr Earl replied on 1 September 2021 advising that he had discussed Mr Dimitrijoski’s proposal from the preceding paragraph with one of the co-guarantors:
Confirmation of the acceptance of the nine months at 50 per cent in exchange for a 24 month extension to the lease as being the final position in respect of the 2020 matters.
[86] Mr Earl’s 1 September 2021 email went on to refer to the request to remove two of the guarantors and said a bank guarantee covering 12 months’ rent would be required before the guarantors would be released. In addition, payment of the outstanding rent arrears was called for.
[87]It then seems there was another gap in communication through to May 2022.
How does Portofino reconcile seeking a 24-month extension on 25 August 2021 with its claim it was already entitled to a new long term lease?
[88]The short answer is it does not. Mr Jones submits:
As matters progressed through July and August 2021, Stride continued to indicate a long-term lease was part of the intended arrangement (giving rise to the inference that the Board was still comfortable to progress issues with Portofino even though this had not been communicated). Either that or the Board had already actually approved a long-term lease. To the extent that these later negotiations may be argued to militate against a long-term lease the plaintiff again submits that is not the case and is certainly a matter for trial. These discussions took place in accelerated circumstances and the Court should note the plaintiff was again being subjected to a lockdown in Wellington for the first time in 12 months so they were placed under extreme pressure by the defendant who was slowly resiling from their former position. In the plaintiff’s submission a fully contextual view of the circumstances surrounding the variation and renewal obligations will give rise to the view that the plaintiff will succeed in establishing the defendant conducted itself in a way that will entitle Portofino to secure a long-term lease. This position is again reflected in the pleadings which emphasise in detail the context of the negotiations. Section 43 of the Act will provide at trial the ability for a Judge to determine just how any variation on the original suggested agreement might be put in place.
[89] The first sentence of Mr Jones’ submissions overstates what was in the July and August 2021 emails from Stride, which I have already set out. Mr Jones does not explain why the negotiations about shorter term extensions linked to the COVID-19 abatement do not “militate” against a long term lease. Nor is Mr Jones’ submission
that Portofino was placed under extreme pressure “by Stride” which “was slowly resiling from their former position” an accurate statement of the evidence.
[90] If Mr Dimitrijoski genuinely believed he was already entitled to a lease for six years, plus two three-year renewals as set out in the 5 October 2020 email then there is no sensible explanation for him seeking a rental abatement based on a two year extension of the existing lease. Mr Jones’ submission set out above is that s 43 of the Fair Trading Act leaves it open for a trial Judge to work out how the two arrangements can be reconciled.
[91] However, Portofino never signed any deed sent to it in respect of a renewal linked to a COVD-19 rental abatement. Whether or not Portofino was ever entitled to an abatement linked to an extension of the original lease is not the issue. Seeking abatements tied to the extensions of the original term of the lease is inconsistent with an entitlement to a new lease at the end of the existing term. Mr Dimitrijoski does not suggest that he had the ability to elect between his claimed entitlement to a new lease and receiving a COVID-19 related rent abatement with a shorter renewal.
Do any of the above events overtake Stride’s requirements in the email of 5 October 2020?
[92] The email of 5 October 2020 had numerous conditions that had to be met before a new lease would be in place. Unless Portofino can say Stride is estopped from relying on each and every precondition in the email, Stride’s case will fail. Similarly, for the purposes of the Fair Trading Act cause of action, unless Stride misled Portofino into believing it would enter into a further six year lease regardless of the COVID-19 extensions being discussed, Portofino’s claim will fail.
[93] Portofino relies on instances of failure to act, delay or silence by Stride. All of these are instances of silence. Estoppel by silence is discussed in Infinity v Kinara Trustee Ltd.6 The Court of Appeal referred to the following from Equity and Trusts in New Zealand:7
6 Infinity v Kinara Trustee Ltd , above n 5, at [98]-[112].
7 James Every-Palmer “Equitable Estoppel” in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 601 at 632.
[100] As Equity and Trusts in New Zealand goes on to explain:
New Zealand courts have analysed cases of estoppel by silence by asking whether the silent party was under a legal, as opposed to a mere moral or social duty to speak. However, very little guidance has been given on how to establish such a duty. The jurisprudence of the English courts is more developed and utilises a test based on the reasonable expectations of the silent party. In The Lutetian Bingham J held that:
[T]he duty necessary to found an estoppel by silence or acquiescence arises where a reasonable man would expect the person against whom the estoppel is raised, acting honestly and reasonably to bring the true facts to the attention of the other party known by him to be under a mistake as to their respective rights and obligations.
…
(footnotes omitted)
[94]The Court of Appeal in Infinity v Kinara also said:8
[102] The “reasonable person”, as those explanations make clear, is a reasonable third party. It is the expectations of that person, as ever the Court’s proxy, from whose standpoint the Court determines whether the expectation that a reasonable and honest person would speak out to correct an error known to her arises. Thus, when Equity and Trusts in New Zealand refer to the reasonable expectations of the silent party, they refer to the expectations that reasonable third party would have of the silent party.
[103] Various factors are relevant in determining whether a reasonable person would expect the silent party to speak out. Duties to warn mistaken parties are not owed to the world at large and will be rare between commercial parties dealing at arm’s length. Speaking of the various relationship-based factors which may support the existence of a duty to speak out. Equity and Trusts in New Zealand refers to situations where:9
(a)the silent party has invited the other to repose trust and confidence in them;
(b)prior communications between the parties give rise to the duty; and
(c)past dealing between the parties which support reasonable (but erroneous) assumptions.
[95] What then were the true facts that Stride had to explain to Portofino or Portofino’s error known to Stride that it had to correct? I can find none. Stride set out its position in the email of 5 October 2020. Conscious of labouring the point,
8 Infinity v Kinara Trustee Ltd, above n 5.
9 Every-Palmer, above n 7, at 633.
Mr Dimitrijoski agrees that the email of 5 October 2020 reflected the discussions he had with Stride on that date. I have already referred to the correspondence in July and August 2021. In my view, it is clear from that correspondence that Stride was not working on the basis that Portofino has an accrued right to a new lease indeed its communications are inconsistent with such an idea.
[96] Mr Dimitrijoski never communicated to Stride that he believed Portofino had an accrued right to a lease. Indeed, his conduct in negotiating alternative COVID-19 relief related extensions of the existing lease conveyed the opposite. Mr Dimitrijoski never communicated his agreement to the terms of the email of 5 October 2020 nor did he sign the COVID-19 abatement deed. Further, Portofino’s rent remained in arrears for an extended period.
[97] Mr Jones referred to Mr Dimitrijoski placing trust in Stride but he did not suggest the relationship between Stride and Portofino was one of ‘trust and confidence’ — using that expression as a term of art. The parties appear to have had a reasonably good commercial relationship notwithstanding the arrears that built up over and after the COVID-19 lockdowns Portofino had historically been a good tenant, albeit there remained an unresolved dispute over outgoings.
[98] The email of 5 October 2020 also referred to the surrender of the existing lease being subject to signing a new lease and for approval by Stride’s Board. No new lease documentation was “put together” which was to occur after Portofino confirmed the terms were agreeable. Mr Jones submitted that the second paragraph of the 5 October 2020 email, which refers to the surrender of the existing lease being subject to signing a new lease, did not mean the new lease was subject to contract. I do not see a real distinction between saying a new lease is “subject to signing a new lease” and saying that it is “subject to contract”. That is particularly so when the third-to-last paragraph of the 5 October 2020 email made it clear the terms offered were indicative and not intended to create a legally binding arrangement.
[99] Mr Jones sought to say the 5 October 2020 email did not make Portofino’s rights subject to contract because Mr Friar relied on the following proposition that:
… a promise made during negotiations which are ‘subject to contract’ will not found an estoppel, because a plaintiff must have been led to believe that the promise would affect or lead to legal relations.10
[100] Further, just as in Ecoworld Aquarium Ltd v Port Marlborough New Zealand Ltd, any offer of a right of renewal was subject to recording that agreement in a variation to the lease. Here, under the terms of the email of 5 October 2020, the existing lease would be surrendered and replaced by a new lease.
[101] At its most basic, I do not consider Portofino has a reasonably arguable case that anything Stride did, or did not do, misled Portofino in any way in respect of the lease or created or encouraged an expectation by Portofino that it had an entitlement to a new lease.
[102] Stride was prepared to discuss commercial arrangements with Portofino in relation to its lease. Those discussions, however, ranged from extensions of the existing lease from 12-24 months through to a six-plus-three-plus-three new lease. The fact is Mr Dimitrijoski and Portofino were silent on the question of a new lease after 5 October 2020. Mr Dimitrijoski’s silence coupled with his change of focus to a COVID-19 related extension of the existing lease conveyed that issues of a new lease were off the table, at least until the issue of an abatement linked to an extension had run its course. It is not tenable to argue that Portofino has an accrued enforceable right for a new lease commencing 1 October 2020 based on the email of 5 October 2020 and the fact the meeting on 21 October did not go ahead.
[103] I am satisfied that neither of Portofino’s causes of action can succeed. Portofino’s amended statement of claim contains a third cause of action, which Mr Jones advised in his submissions would not be pursued. With the abandonment of the third cause of action there is an order granting summary judgment for Stride against Portofino in respect of the two remaining causes of action in the amended statement of claim dated 10 January 2024. As Mr Friar pointed out, the amended statement of claim was filed after Portofino had the benefit of Stride’s evidence and Mr Dimitrijoski’s evidence had been completed. No alternative way of framing Portofino’s claim was suggested.
10 Ecoworld Aquarium Ltd v Port Marlborough New Zealand Ltd [2022] NZHC 3016 at [134].
Costs
[104] Costs will need to follow the event. Stride is entitled to costs on a 2B basis plus disbursements as set by the Registrar. However, if Stride wishes to be heard on costs, it may file a memorandum of not more than five pages within 10 working days and Portofino may reply within a further 10 working days. If no costs memorandum is filed, the costs order is that Stride is entitled to 2B costs plus disbursements as filed.
Postscript
[105] A request by Portofino to file further evidence and an amended statement of claim after the 2 May 2024 hearing, was dismissed on 21 June 2024 (see Portofino Wellington Waterfront Ltd v Stride Property Limited [2024] NZHC 1649 [21 June 2024] (Judgment no. 1).
Associate Judge Lester
Solicitors:
Wynn Williams, Auckland (for Plaintiff) Bell Gully, Auckland (for Defendant)
Copy to counsel:
G Jones, Barrister, (for Plaintiff)
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