Saddik v University of Auckland
[2017] NZHC 2073
•29 August 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2017-404-1735 [2017] NZHC 2073
BETWEEN ABDUL SADDIK
Plaintiff
AND
UNIVERSITY OF AUCKLAND
Defendant
Hearing: 23 August 2017 Counsel:
D K Wilson for plaintiff
D T Broadmore for defendantJudgment:
29 August 2017
JUDGMENT OF KATZ J [Interim injunction application]
This judgment was delivered by me on 29 August 2017 at 10:00am
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors: Loo & Koo, Solicitors, Auckland
Buddle Findlay, Barristers and Solicitors, Auckland
SADDIK v UNIVERSITY OF AUCKLAND [2017] NZHC 2073 [29 August 2017]
Introduction
[1] Abdul Saddik leases premises in the University of Auckland’s food court (“Premises”) pursuant to a deed of lease dated 5 November 2003 (“Lease”). He operates a kebab outlet from the Premises, trading under the name “Unikebab”. The initial term of the Lease expired in 2012 but was subsequently extended to 30
September 2015.
[2] In August 2015, a month before the Lease was due to expire, two representatives of the University, Peter Munro and Karen Moore, met with Mr Saddik. They told him that the University proposed to redevelop the food court, although they were not sure when. The University was therefore unable to give Ms Saddik a new lease of the Premises or further extend the Lease. They told Mr Saddik that he could continue to occupy the Premises on a monthly tenancy and provided him with a letter confirming that position.
[3] Mr Saddik alleges (but the University denies) that during the meeting
Mr Munro and Ms Moore made the following representations to him:
(a) that during the rebuilding of the food court, there would be a temporary solution to enable the Unikebab business to continue in operation; and
(b)that when the new food court had been built, the University would negotiate a lease for the Unikebab business within it.
(together, “the Representations”).
[4] The Lease expired on 30 September 2015, and Mr Saddik has remained in occupation of the Premises on a monthly tenancy since then.
[5] In May 2017, following market research it had undertaken, the University decided to lease the Premises to an Asian food retailer instead of Mr Saddik, pending redevelopment of the food court (now planned to commence at the end of 2018). As a result, on 28 June 2017 the University gave Mr Saddik notice that his tenancy
would terminate on 31 July 2017. Mr Saddik now seeks an interim injunction to restrain the University from terminating his occupation of the Premises and re-entering them. He argues that the University is estopped from doing so, as a result of the Representations.
[6] In deciding whether to grant an injunction, the Court must consider whether there is a serious question to be tried and where the balance of convenience lies.1
The ultimate issue is where overall justice lies.2
Is there a serious question to be tried?
[7] Mr Saddik’s cause of action is in estoppel. In order to establish that an estoppel has arisen, Mr Saddik will need to prove at trial that:3
(a) the University has made the Representations to him, in clear and unequivocal terms;
(b)the Representations have given rise to a belief or expectation on his part that:
(i)he will be able to continue in occupation of the Premises (or some alternative temporary accommodation if that is not possible) until the food court is redeveloped; and
(ii)he will be provided with a lease of premises for Unikebab in the new food court (or at the very least an opportunity to negotiate such a lease).
(c) he reasonably relied on the Representations, to his detriment; and
(d)it would be unconscionable for the University to depart from the belief or expectation it has created through the Representations.
1 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 406-408; and see Klissers
Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at 142.
2 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd, above n 1, at 142.
3 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [44]; Mitchell v Trustees Executors Ltd [2011] NZCA 519 at [47]; and Hansard v Hansard [2014] NZCA 562, [2015] 2 NZLR 158 at [5]. And see generally John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand (5th ed, LexisNexis, Wellington, 2016) at [4.7.4].
[8] The University denies making the Representations. Even assuming (for present purposes) that they were made, however, it submitted that it is not seriously arguable that an estoppel arises in this case, for the following reasons:
(a) Any representation that Mr Saddik would be given an opportunity to negotiate a lease in the new food court is simply an agreement to negotiate, not an agreement to enter into a lease. It is therefore insufficiently certain to give rise to an estoppel.
(b) Mr Saddik has suffered no detriment.
Agreements to negotiate
[9] Mr Saddik states in his affidavit the he understood that “[his] lease had expired and [he] expected to negotiate a new lease with the University once it built a new food court”. Mr Broadmore submitted that this is a bare agreement to negotiate a later agreement, and is therefore unenforceable. As the authors of Law of Contract in New Zealand make clear, “… the courts will not accept as valid a contract to make
a contract or to ‘negotiate’ a later agreement”.4
[10] In Wellington City Council v Body Corporate 51702 (Wellington), Tipping J explained that an agreement simply to negotiate in good faith is unenforceable because such terms are subjective and there is no sufficiently certain objective criterion by means of which a court can decide whether either party is in breach.5
However, if a contract specifies the way in which the negotiations are to be conducted with enough precision for a court to be able to determine what the parties are obliged to do, it will be an enforceable process contract.6 Where there is an enforceable process contract, the breach lies in failing to follow the process, not in failing to achieve the objective.7
[11] Mr Broadmore noted that in this case there is nothing to suggest that there is any agreement as to the process for negotiating a new lease. Given that the alleged
Representations were not sufficiently certain to create an enforceable agreement, he
4 Above n 3, at [3.7.3].
5 Wellington City Council v Body Corporate 51702 (Wellington) [2002] 3 NZLR 486 (CA) at [31].
6 At [32].
7 At [14]-[15].
submitted that they cannot give rise to an estoppel.8 A promise made in negotiations that are subject to contract will not lead to an estoppel.9 Hence, Mr Broadmore submitted, the University has no obligation to give Mr Saddik a lease in any new or redeveloped food court, or to enter into negotiations with him with a view to
negotiating such a lease. Nor is the University obliged to let Mr Saddik continue in occupation of the Premises, regardless of whether a new food court is developed or not. The evidence demonstrates that the Lease has expired, and Mr Saddik has unequivocally been informed that he is now on a monthly tenancy (and he does not dispute that).
[12] Mr Wilson, on the other hand, submitted that there is a serious question to be tried. He submitted that, given that estoppel is an equitable principle, its scope is potentially broad. In appropriate circumstances, notwithstanding the lack of a remedy based on other grounds (such as contract), an estoppel may nonetheless arise. Further, he submitted that Mr Saddik was entitled to rely on the University’s representation that it would negotiate a lease in the new food court with him. The impediment to negotiating such a lease in 2015 was simply that, pending redevelopment of the food court, the terms could not be finalised, such as the particular site that was available to be leased.
[13] Mr Wilson relied on the following passage from Law of Contract in
New Zealand:10
Equity has long recognised other forms of estoppel, in particular, the form often called proprietary estoppel (which itself appeared in such variations as estoppel by acquiescence and by encouragement). In essence, if A led B to believe that B was entitled to an interest in A’s land, and in reliance on this B spent money or effort on the land, perhaps in developing it, equity would sometimes grant B a remedy to avert the detriment B would suffer if A went back on that understanding. Sometimes that remedy amounted even to requiring A to recognise that B had an interest in the land. There are numerous cases of landowner A being required to recognise a right of occupation in B, or an equitable easement or licence in B, because B had been encouraged to his or her detriment in the belief that he or she was entitled to it.
(footnotes omitted).
8 Baird Textile Holdings Ltd v Marks & Spencer plc [2001] EWCA Civ 274 at [38].
9 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [38]; citing Waltons
Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 406 and 422.
10 Above n 3, at [4.7.3].
[14] Overall, Mr Wilson submitted that it is at least arguable that an estoppel has arisen, and the issue is accordingly one that will need to be resolved through cross-examination at trial.
Detriment
[15] Mr Saddik’s evidence is that, in reliance on the Representations, he did not take steps to dispose of the Unikebab business and, on the contrary, turned down offers to purchase it. Furthermore, he claims to have spent money on equipment and improvements, in expectation of a lease in the new food court.
[16] The University submitted that Mr Saddik has not suffered any detriment as a result of his claimed reliance on the Representations, because Mr Saddik does not own the Unikebab business. Rather, Unikebab is operated by Halal Co Ltd, the sole director and shareholder of which is Dima El-Skaf (who is apparently Mr Saddik’s wife).
[17] The University further submitted that, given that Mr Saddik acknowledged in his evidence that he knew that he would not be granted a new lease of the current Premises, any work done on the Premises cannot have been done in reliance on the alleged Representations. It also challenged the credibility of Mr Saddik’s (undocumented) claim that (presumably) Halal Co Ltd was offered significant sums to sell Unikebab, given that the Lease had expired and the business was on a monthly tenancy.
[18] Mr Wilson did not appear to have a specific answer to the point that, based on Companies Office records at least, Mr Saddik does not have a legal interest in the Unikebab business. He did note, however, that the statement of claim and application for an injunction had been prepared in circumstances of urgency and may therefore need to be amended prior to trial. I assume that if Mr Saddik is unable to prove a personal interest in the Unikebab business, his wife is likely to be joined as an additional plaintiff to the proceedings.
Conclusion on whether there is a seriously arguable case
[19] Mr Broadmore has raised a number of fairly compelling arguments as to why Mr Saddik has not established a seriously arguable case. First, although Mr Saddik claims an interest in the Unikebab business in his affidavit, Companies Office records do not appear to support this claim. There is therefore a real issue as to whether Mr Saddik (as opposed to Halal Co Ltd or Ms El-Skaf) has suffered any detriment.
[20] Further, Mr Wilson’s argument that the University is estopped from terminating the current Lease appears to be weak. Mr Saddik acknowledges in his evidence that he was told that the University was unable to further extend his lease of the Premises other than on a month-to-month basis. The letter given to him at the meeting on 28 August 2015 is unequivocal. Either party could terminate the Lease on one month’s notice. It stated:
The University wishes to offer a continued month by month occupancy of the premises on the current terms and conditions provided in clause 38. Termination of this agreement would be given by either party giving one month’s prior written notice.
[21] Where there is a detailed written contract the courts will generally require strong evidence that one party has assured the other that the obligations in it need not be performed to the letter (or that rights will not be enforced).11 As Eichelbaum CJ
observed in Travel Agents Association of New Zealand Inc v NCR (NZ) Ltd:12
Certainly in the field of commercial transactions it would seem undesirable to give undue encouragement to the notion that legal rights, frequently expounded with precision in formal documents, may be overridden by conduct or informal communications of an ambiguous kind.
[22] Although Mr Saddik’s claim that the University is estopped from terminating the Lease appears to be weak, that does not necessarily mean that there is not a serious question to be tried. Lush J said in Henry Roach (Petroleum) Pty Ltd v
Credit House (Vic) Pty Ltd that:13
11 See Law of Contract in New Zealand, above n 3, at [4.7.5].
12 Travel Agents Association of New Zealand Inc v NCR (NZ) Ltd (1991) ANZ ConvR 553 at 555.
13 Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309 (VSC) at 311.
In order to determine whether there is a serious question to be tried it is necessary to consider what is the applicable law and whether there are arguable differences concerning it, what the facts are said to be on the opposing sides, and where the issues lie, and whether there is a tenable combination of resolutions of the issues of law and fact on which the plaintiffs could succeed.
[23] At this preliminary stage, I am not prepared to go so far as to say that there is no serious question to be tried on the issue of whether the University is estopped from terminating Mr Saddik’s occupation of the Premises.
Balance of convenience
[24] Mr Wilson submitted that the balance of convenience favours an injunction because, if the injunction is refused, the University will regain possession of the Premises and Mr Saddik’s claim to occupation of them would cease. Mr Saddik would then be limited to a claim for damages, and the Premises would likely be leased to a third party (as the University intends).
[25] Mr Wilson further submitted that Mr Saddik is in a position to pay damages.
He referred to the following passage in Mr Saddik’s reply affidavit:
I note that in the University’s Notice of Opposition to my application, it is claimed that there is no evidence that I would be in a position to pay damages to the University, should an injunction be granted and my claim be ultimately unsuccessful. I am a successful businessman, and I have interests in a variety of companies and properties. I am the sole shareholder of Shefco NZ Ltd and Yamms Investments Ltd both of which companies operate businesses and own commercial properties. I am a 50% shareholder in Logarithm Education NZ Company Ltd a property and education providing company. I own the family home. While I do not accept that the University could suffer any loss, if it did I would be in a position to meet my undertaking.
[26] Mr Broadmore submitted that, if Mr Saddik’s claim were to succeed, damages would be an adequate remedy for him. The University is clearly in a position to pay damages. Further, in terms of the key representation relied on by Mr Saddik, namely that Mr Saddik would be given an opportunity to negotiate a lease in the new food court, that relief could still be granted, if the Court viewed it as appropriate. The University expects to start developing the new food court in late
2019. The University can still engage in negotiations with Mr Saddik for a lease of premises in the new food court, if required to do so.
[27] As for Mr Saddik’s ability to pay damages, Mr Broadmore submitted that the evidence on that is fairly thin, amounting to bald assertions with no supporting evidence. There is no evidence as to the financial position of any of the businesses in which Mr Saddik is said to have an interest. Further, given that he was mistaken as to whether or not he has a personal interest in the Unikebab business, he may also be mistaken about the shareholding structures of the other businesses. Mr Broadmore further submitted that some of the University’s damages would be difficult to quantify.
[28] The University has a strong preference to provide an Asian food offering, instead of a kebab outlet, in its food court. This reflects student feedback and market research the University has undertaken. Negotiations with the prospective new tenant for the Premises are at a very advanced stage. Subject to the outcome of this injunction application, the University is in a position to enter into a new lease with the new tenant. The new tenant (whose name was not disclosed for commercial reasons) has apparently been named Auckland’s top outlet for the particular type of product it provides and has been repeatedly requested by students. Because it is planned to commence redevelopment of the food court in late 2018, the University’s view is that it is imperative to enter into a lease with the new tenant now, while there is still a sufficient lease term available to make it worthwhile for the tenant.
[29] The University’s position is that if Mr Saddik does not vacate the Premises promptly:
(a) The student experience at the University would be harmed for the period that Mr Saddik remains in possession, rather than the prospective new (preferred) tenant.
(b)The University would suffer reputational harm for the period that Mr Saddik remains in possession, rather than the prospective new (preferred) tenant.
(c) There is a significant risk that the prospective new tenant would no longer agree to a tenancy within the University. If the University
becomes unable to enter into a new lease with the prospective new tenant, the University may therefore suffer:
(i)direct financial losses if the Premises remain untenanted for a period (for example, if Mr Saddik’s claims were to subsequently fail at trial); and
(ii)ongoing damage to its reputation and the student experience, if the Premises have to be leased to a tenant of lower quality than the prospective new tenant.
[30] It is significant, in my view, that damages would likely be an adequate remedy for Mr Saddik. Mr Wilson did not suggest that Mr Saddik’s losses would not be able to be quantified in damages, although he noted that Mr Saddik’s strong preference was for Unikebab to continue to occupy the Premises.
[31] There can be no question that the University is in a position to pay any damages that might be awarded. If damages would be an adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction will normally be granted.14
[32] The position of the University in relation to any damages it may suffer is somewhat more nuanced. In my view it could prove difficult to quantify at least some of its losses in monetary terms. It is not simply an issue of recovering any rental shortfall (if there is one). Indeed, both Unikebab and the proposed new tenant are presumably able to pay a market rental for the Premises. The University, however, views the situation somewhat more holistically than that. Its key focus is on the totality of the student experience it can offer. The University is looking for ways to enhance the student experience on campus. One such way it has identified is to align its food offerings more closely with the preferences of its student body. The University believes that doing so will improve the overall University experience for many of its students. It would be difficult, if not impossible, to quantify such
matters in purely financial terms.
14 American Cyanamid Co v Ethicon Ltd, above n 1, at 408.
[33] I also take into account that although I am not willing to go so far as to say that Mr Saddik’s case is not arguable, in my view it is a weak one. The fact that a claim is weak is a factor that tends to weigh against the granting of an injunction.15
In relation to that part of the claim that relates to the termination of the Lease, Mr Saddik acknowledges that he was told that the University was unable to further extend his lease of the Premises, and that his tenancy could therefore only continue on a monthly basis. The letter given to him at his meeting with Mr Munro and Ms Moore is unequivocal. As I have noted above, where there is a detailed written contract the courts require strong evidence that one party has assured the other that the obligations in it need not be performed to the letter (or that rights will not be
enforced).16
[34] Taking all of these matters into account, it is my view that the balance of convenience favours the University, and that the injunction application should therefore be declined.
Result
[35] The injunction application is declined. The interim injunction that is currently in place will cease to have effect as from 5.00 pm on 8 September 2017.
[36] Costs are reserved, for determination following the substantive trial or other disposition of the proceedings.
[37] Finally, the stay application filed by the University, in reliance on an arbitration clause in the Lease, is to be set down for hearing on the first available
date, with an estimated hearing time of half a day.
Katz J
15 See Shotover Gorge Jet Boats Ltd v Marine Enterprises Ltd [1984] 2 NZLR 154 (HC) at 157. I note, however, the warning of Hardie Boys J that the relative merits of the case ought not to assume prominence to such an extent that the case is effectively tried on incomplete material.
16 Law of Contract in New Zealand, above n 3, at [4.7.5].
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