Seaglass Holdings Limited v Giacon
[2023] NZHC 3552
•7 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-000740
[2023] NZHC 3552
BETWEEN SEAGLASS HOLDINGS LIMITED
Plaintiff
AND
ANDREW GIOVANNI GIACON
First Defendant
ADRIENNE GIACON
Second Defendant
Hearing: 6 to 8 November 2023
Further submissions on 17 November 2023
Appearances:
S Eden and R Katsui for the Plaintiff
E St John and S Maloney for the Defendants
Judgment:
7 December 2023
JUDGMENT OF GORDON J
This judgment was delivered by me
on 7 December 2023 at 3 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors/Counsel:
Gaze Burt, Auckland Ewart & Ewart, Auckland
E St John, Barrister, Auckland S Maloney, Barrister, Auckland
SEAGLASS HOLDINGS LTD v GIACON [2023] NZHC 3552 [7 December 2023]
TABLE OF CONTENTS
Background [3]
The lease [15]
Claim by Seaglass [19]
Summary of defences and Seaglass’ responses [23]
Issues [37]
Issue one: what is the amount of the debt and interest on the debt? [38]
Issue two: Limitation Act 2010 [49]
Issue three: was there a variation of the Lease regarding outgoings
between 11 August 2011 and 12 January 2015? [88]
Issue four: were rent arrears forgiven up to the end of March 2013? [110]
Issue five: was the rent reduced to $7,500 per month plus GST
indefinitely from 1 June 2014? [125]
Issue six: estoppel [159]
Issue seven: should the Court make a declaration that the Giacons
hold an option to purchase the Premises and a right of first refusal? [161]
Result/orders [194]
Costs [198]
[1] The plaintiff, Seaglass Holdings Ltd (Seaglass) seeks judgment against the defendants, husband and wife, Andrew and Adrienne Giacon (together, the Giacons) for what Seaglass says are arrears of rent and outgoings pursuant to the Giacons’ guarantees of performance of a lease between Seaglass, as lessor, and the Giacons’ (now liquidated) company Terrazzo & Stoneworks NZ Ltd (Terrazzo), as lessee.
[2] The Giacons say that no arrears are owing. They raise a number of affirmative defences and a counterclaim.
Background
[3] As will become apparent from this summary of the background and later discussion, commercial and family interests became intertwined.
[4]I will start by identifying the individuals involved and their companies.
[5] Wayne Young1 is described by his son Gary Young as an experienced businessman and property investor. Wayne was a licensed real estate agent and was the principal of a real estate company which sold hotels. As a property investor Wayne owned a large number of hotels over the years through his various companies. Wayne died suddenly on 19 December 2014.
[6] Gary and his sister Cherie Hancock are the children of Wayne’s first marriage to Patricia.
[7] Wayne met Lorraine Hill2 in 1973 and they commenced a relationship. In 1974 Lorraine moved to Russell (where Wayne lived) and the two began living together. Lorraine had two young children, Adrienne (now Mrs Giacon) and Steven (Hill). Mrs Giacon was aged eight at the time. The two children lived with their mother and Wayne and were brought up by them.
1 I will refer to Wayne Young as ‘Wayne’ to avoid any confusion with his son Gary Young whom I will also refer to by his first name. No disrespect is intended by the use of first names.
2 I will refer to Lorraine by her first name, rather than ‘Mrs Young’ as she became. Again, no disrespect is intended by the use of her first name.
[8] Wayne and Lorraine married in 2005 after Wayne and his first wife divorced in the same year.
[9] Seaglass was one of Wayne’s companies. It was established in 1981 and its business was investment in commercial property. Wayne and Lorraine were the directors of Seaglass. After Wayne’s death on 19 December 2014, Lorraine was the sole director of Seaglass until Gary was appointed as another director on 7 October 2015.3
[10] Lorraine was diagnosed with dementia in 2019 and no longer takes part in Seaglass’ affairs.
[11] On 22 April 2005, the Giacons incorporated a company called Swanson Estate Ltd (Swanson). Swanson built a factory at 8 O’Neills Road, Swanson, Auckland (the Premises). The Premises were leased to Terrazzo, which operated a business manufacturing and selling Terrazzo products.
[12] The Giacons were shareholders of Terrazzo between 22 April 2005 and 11 December 2018. Mr Giacon was a director of Terrazzo during that period. On 11 December 2018 the Giacons sold their shares in Terrazzo to Iain Hobson, their former business partner and fellow director of Terrazzo. Terrazzo was removed from the Companies Register on 16 March 2022.
[13] Mrs Giacon’s evidence is that when the Global Financial Crisis (GFC) hit in 2008, there was financial pressure for Swanson to sell the Premises and pay back company loans to the bank. In September 2009, Seaglass bought the factory and a gantry crane inside it from Swanson. The sale price was $1,100,000 including the gantry crane.
[14] Separately, Wayne and Lorraine purchased the Giacons’ family home in Auckland for $700,000. The total of $1,800,000 (from the sale of the Premises and
3 There were various emails sent, actions undertaken and instructions to solicitors given by Gary prior to that date based on his understanding that he was a director of Seaglass earlier in time. Under cross-examination he accepted he had been mistaken and that his appointment as a director commenced on 7 October 2015. I put all those emails, actions and letters prior to 7 October 2015 to one side.
the family home) was the amount needed to pay off Swanson’s loans to the bank. The Giacons rented their home from Wayne and Lorraine until they obtained finance to repurchase it a year later.
The lease
[15] Terrazzo leased the factory from Seaglass under an undated Deed of Lease with a commencement date of 30 September 2009 (the Lease). It is the obligations under the Lease that are the subject of this proceeding. The provisions in the Lease include the following:
(a)The term of the lease was for six years, commencing on 30 September 2009, with one right of renewal for a further period of four years.
(b)The annual rent was $95,000 plus GST payable in monthly instalments of $7,916.66 plus GST (the original rent) in advance, commencing on 30 September 2009. The GST inclusive figure for the original rent was
$8,906.24 per month.4 Terrazzo mistakenly paid $8,960.24 per month from 30 September 2009 until 30 September 2010. The overpayment was later credited to Terrazzo.
(c)Terrazzo was responsible for all outgoings.
(d)There were other provisions as to payment of interest and costs in the event of default in payment.5
[16] The Giacons guaranteed performance of the Lease by Terrazzo jointly and severally.
[17] Around September 2010 Seaglass constructed a new office block at the Premises. Seaglass and Terrazzo entered into a Deed of Variation of Lease incorporating the new office block on 30 September 2010. The additional rent was
$10,000 per annum plus GST bringing the total annual rent to $105,000 plus GST. It
4 GST at the time was 12.5 per cent.
5 The Deed of Lease was in the ADLS Standard Form Deed of Lease (5th ed).
was agreed that the rent would be paid monthly at a rate of $8,750 plus GST (the increased rent) ($10,062.50 including GST) from 1 October 2010. The Giacons again signed the Deed of Variation of Lease as guarantors.
[18] In September 2015 the initial term of the Lease expired. The Lease became a periodic tenancy from then on the same terms and came to an end on 29 September 2019.
Claim by Seaglass
[19] Seaglass says that when the Lease came to an end, Terrazzo was in arrears for rent and outgoings. Formal demands were made by the then solicitors for Seaglass to Terrazzo and the Giacons on 15 October 2021, one for rent arrears and the other for outgoings arrears, together with interest on the amounts claimed. Schedules setting out the arrears were attached to each of the notices of demand.
[20] The then solicitors for Terrazzo responded by letter dated 28 October 2021 disputing the amounts in both notices and advising that Terrazzo sold all its assets on 30 November 2020 and was no longer trading. It was said to be in the process of winding up and that it would be liquidated in the near future.
[21] On 22 April 2022, amended notices of demand for both arrears of rent and outgoings were sent by the solicitors for Seaglass to the Giacons. In the 15 October 2021 demand the rent arrears were stated to be $290,085.04. That amount was adjusted in the 22 April 2022 demand to $229,935.24. The alleged arrears for outgoings remained the same in the amended notice. The sum of $83,848.82 was said to be owing but the interest calculated in the 22 April 2022 demand was for a greater sum than in the 15 October 2021 demand.
[22] As a result of further calculations (updated calculations) by accountant Ross Whitmore (who had prepared the schedules attached to the demands),6 the amounts now claimed are:
(a)$219,872.74 in rent arrears;7
(b)$74,110.85 in interest on rent arrears for the period to 31 March 2022;
(c)$84,047.67 in outgoings;8
(d)$66,074.44 in interest on outgoings for the period to 31 March 2022; and
(e)interest on rent arrears and outgoings at the rate of 10 per cent per annum for the period from 1 April 2022 onwards.
Summary of defences and Seaglass’ responses
[23]The Giacons deny that they are liable for any of the amounts claimed.
[24] Their first affirmative defence is that enforcement of any amount that Seaglass claims fell due prior to 11 May 2016, and any interest claimed on those amounts, is statute-barred under s 11 of the Limitation Act 2010.9
[25] In response, Seaglass says Terrazzo has acknowledged the debt both in writing and by way of part-payment, which entitles Seaglass to a fresh claim from the date of acknowledgement or part-payment pursuant to s 47 of the Limitation Act.
6 There was some disagreement as to whether Mr Whitmore was properly instructed by Seaglass after Wayne’s death. It is not necessary to resolve that issue. By the time of his updated calculations I accept he was properly instructed.
7 Mr Whitmore’s schedules in his updated calculations in fact give two different figures for the outstanding rental payments. One is stated to be $219,877.24 and the other is $219,872.74. There is a difference of $4.50. I have adopted the lower figure.
8 Mr Whitmore’s schedules in his updated calculations give two different figures for the outgoings in arrears. One is stated to be $84,047.67 and the other is $84,047.65. There is only a difference of $0.02. I have adopted the lower figure.
9 The statement of claim was filed on 11 May 2022.
[26] The second affirmative defence is that there was a variation of the Lease agreed between Seaglass and Terrazzo for the period between 11 August 2011 and 12 January 2015, whereby Seaglass agreed not to charge Terrazzo any outgoings for the Premises.
[27] Seaglass does not accept that and says at most, there was a temporary deferment for which no consideration was given. Prior to his death, Wayne required payment of the arrears in rent and outgoings by Terrazzo and Terrazzo acknowledged Wayne’s demand.
[28]The third affirmative defence is that there were two variations as regards rent:
(a)First, the Giacons say that all rent arrears up to 31 March 2013 were paid by a contra arrangement whereby Terrazzo provided goods and services to the new office at the Premises and to the Masonic Hotel, which was owned by another of Wayne’s companies.
(b)Second, the Giacons say that on 3 June 2014 there was an agreement with Wayne to reduce the rent for the premises to $7,500 plus GST per month indefinitely in consideration of the defendants housing and taking care of Wayne’s granddaughter (Gary’s daughter) and Wayne’s great-granddaughter (Gary’s granddaughter) since June 2013.
[29] Seaglass does not accept that. It says there is no written evidence of these alleged agreements and in any event, the value of the works which the Giacons say was done was less than the unpaid rent and outgoings at the time. Seaglass also says the housing and taking care of family members was carried out by the Giacons, not Terrazzo, which did not benefit Seaglass. It also says Wayne’s great-granddaughter was placed in the Giacons’ care in July 2013 and accordingly, was past consideration for the alleged rent reduction.
[30] The fourth affirmative defence is estoppel. The Giacons say that having regard to Wayne’s representations referred to in the second and third affirmative defences above, Seaglass is estopped from:
(a)claiming payments for outgoings between 11 August 2011 and 12 January 2015;
(b)claiming arrears of rent from before 31 March 2013;
(c)demanding rent above $7,500 plus GST per month after June 2014; and
(d)claiming any interest, costs or penalties on those amounts.
[31] In response, Seaglass says the requirements for estoppel have not been made out.
[32] Finally, in a counterclaim, the Giacons seek a declaration that they hold an option to purchase the Premises and a right of first refusal to buy the Premises. They rely on a codicil to Wayne’s will for their counterclaim.
[33]Seaglass opposes the making of a declaration.
[34] For completeness, I record that in her brief of evidence Mrs Giacon made a number of allegations against Gary and his sister Ms Hancock, including that they had instigated these proceedings against her and Mr Giacon in bad faith to punish them for past disagreements and because of hostility towards Mrs Giacon’s mother, Lorraine, with whom Mrs Giacon says Wayne had an affair while married to Gary and Ms Hancock’s mother.
[35] Those allegations were referred to in the opening submissions of Mr St John, counsel for the Giacons. It was submitted the Court could draw the inference that this proceeding is not a genuine dispute over arrears. Rather, it is a personal vendetta. It was also submitted the proceeding was a cynical attempt to enrich Gary and his sister as beneficiaries of Seaglass.
[36] The various allegations were not put to Gary, as they should have been, in cross-examination. In closing submissions the position of counsel for the Giacons was that the Court was not being asked to draw any adverse inferences against Seaglass or Gary for their motivation in bringing this proceeding.
Issues
[37]The issues to be decided are as follows:
(a)Issue one: what amount is owed by the Giacons to Seaglass for rent arrears and unpaid outgoings (together, the debt) and for interest on the debt (subject to any successful defences)?
(b)Issue two: is recovery of any portion of the debt in (a) above statute- barred pursuant to s 11 of the Limitation Act?
(c)Issue three: was there a variation of the Lease whereby Seaglass agreed not to charge Terrazzo for any outgoings for the Premises for the period between 11 August 2011 and 12 January 2015?
(d)Issue four: was there a variation of the Lease whereby Seaglass forgave rent arrears up to 31 March 2013?
(e)Issue five: was there a variation of the Lease as to rent for the Premises whereby Seaglass reduced the rent to $7,500 per month plus GST indefinitely from 1 June 2014?
(f)Issue six: if the alleged agreements referred to in (c), (d) and (e) above regarding outgoings, rent arrears and reduced rent are not enforceable as variations, is Seaglass estopped from claiming outgoings between 11 August 2011 and 12 January 2015 and/or the difference between the rent paid and the rent under the Lease?
(g)Issue seven: should the Court make a declaration that the Giacons hold an option to purchase the premises and a right of first refusal on the terms that they say apply?
Issue one: what is the amount of the debt and interest on the debt?
[38] There is no dispute by the Giacons that they guaranteed the obligations of Terrazzo under the Lease or that they guaranteed the obligations of Terrazzo under the variation of the Lease in September 2010 when the rent was increased by $10,000 plus GST per annum.
[39] In summary, the Giacons say the Court cannot be satisfied as to the reliability of the amount of the debt for the following reasons:
(a)The amounts demanded by Seaglass over the years have varied. In August 2015 Gary and Ms Hancock demanded arrears (in excess) of
$450,000; in September 2015 Gary and Ms Hancock claimed arrears of
$460,000 plus interest; in August 2016, when the former solicitors for Seaglass issued a notice of intention to cancel the Lease, the amount owing for rent was said to be $226,544.23; and on 15 October 2021, Seaglass’ former solicitors issued a Property Law Act 2007 (PLA) notice for rent arrears for $290,085.04.
(b)Mr Whitmore’s updated calculations are sourced from a spreadsheet compiled by Wayne. Those figures are not supported by any primary records.
(c)Wayne’s spreadsheets are unreliable. The Giacons refer to one error where Wayne missed accounting for a rental payment that was made.
(d)Mr Whitmore is not independent.
(e)That Terrazzo was released from the Lease enables the Court to infer that Seaglass was satisfied at the end of the Lease that all alleged arrears had been brought up to date.
[40] I am satisfied that the evidence contained in Mr Whitmore’s updated calculations is sufficiently reliable to prove the amount of the debt (subject of course to any defences to be considered below). I say that for the following reasons.
[41] First, Gary’s evidence was that his father kept his own records and did his own accounts. He says there was a spreadsheet on his father’s computer in his home office which was also backed up on a USB drive in his office. Gary’s evidence was that his father kept a record of the amounts outstanding by Terrazzo on the spreadsheet. The spreadsheet lists “missing payments” and keeps a running total of the rent and outgoing arrears.
[42] As to the absence of underlying records, most of the amounts that form the debt are based not just on Wayne’s spreadsheet but also on Seaglass’ bank statements which were produced in evidence. Those bank statements are cross-referenced in the updated calculations prepared by Mr Whitmore. I accept that the entries in the bank statements are sufficient for the Court to be satisfied that the sums paid by Seaglass to meet outgoings, and the payments made by Terrazzo, are accurately stated in the updated calculations and can be relied upon. I acknowledge that the Giacons were able to identify one rental payment that Terrazzo made but which was not reflected in Wayne’s spreadsheet. However, that one instance is not sufficient to detract from the overall reliability of Wayne’s spreadsheet, particularly with the cross-referencing to the bank statements for most of the payments.
[43] As to the variation in the total amount of the debt demanded at different times, I acknowledge that there have been differences. The total amount of the debt now claimed for rent arrears, outgoings, and interest on both those sums up to 31 March 2022, is $444,105.70. As regards earlier documents referred to by the Giacons, first, the August 2015 email was not a demand made of the Giacons but was an email to Lorraine in which Gary and Ms Hancock stated: “[t]herefore, the total debt, with penalties, will now be in excess of $450,000 and this is without given [sic] consideration to the equipment debt.” As is apparent from the quoted portion, the amount of the debt did not purport to be stated precisely.
[44] The $460,000 figure was adopted by Gary based on a flowchart prepared by the solicitors then acting for Lorraine showing indebtedness as between various companies owned by Wayne and indebtedness to those companies. Under cross- examination Gary accepted that the amount was incorrect. However, there was an apparent basis for the figure adopted by Gary at that time, namely, the solicitors’ flow chart. The later amounts regarding rent arrears in the PLA notices for $226,544.23 and $290,085.04, I accept, are both in excess of the amount now claimed.
[45] However, Mr Whitmore has prepared the updated calculations10 following a line-by-line exercise against both the bank statements and Wayne’s spreadsheet. I do not consider the fact that earlier statements by Gary as to the amount of the debt, and emails or demands which were for a different amount, detract from the reliability of the updated calculations. I also do not consider the fact that the updated calculations were not prepared by an independent expert is material for my assessment.
[46] Any issues that Mrs Giacon raised in her brief of evidence regarding Mr Whitmore’s calculations in his spreadsheets in the common bundle (prepared prior to the updated calculations) are either incorrect, or since taken account of, in the updated calculations relied on as follows:
(a)Mrs Giacon says a payment of $286.35 that Seaglass says it made on 1 October 2012 was not listed in the Seaglass bank statements.
That is not correct. It is listed (but at a later date).
(b)Mrs Giacon says that there were outgoings listed in the original spreadsheets in the common bundle showing as being paid earlier than they were shown in the bank statements.
The dates of payment are made clearer in the updated calculations.
10 The updated calculations were an update of spreadsheets which were included in the common bundle.
(c)Mrs Giacon says that from December 2014, Seaglass sent invoices to Terrazzo for rates, insurance and water and despite Terrazzo paying most of those directly, they are not shown in the spreadsheets.
I accept Seaglass’ position that if there were payments made directly by Terrazzo then they were not made by Seaglass or to Seaglass and so they are not included in the updated calculations. In fact, the only payments by Seaglass for outgoings from December 2014 were four rates payments and four insurance payments. They are reflected in the Seaglass bank statements. There was also one water rates payment which Terrazzo paid to Seaglass.
(d)Several payments were made to Seaglass during 2015 and 2016.
All of these are referred to in the original spreadsheets in the common bundle and in the updated calculations.
(e)Mrs Giacon says that Terrazzo did not fall behind in rent from July 2011 and rent was paid on time for all of 2011.
Seaglass accepts Mrs Giacon is correct in that regard and this is reflected in the updated calculations.
(f)Terrazzo made additional payments to Seaglass from 4 October 2018 to September 2019 totalling $30,470.
These payments are all reflected in the updated calculations and are deducted from the total arrears.
[47] Finally, I refer to the submission by Mr St John that the Court can draw the inference that Seaglass was satisfied at the end of the Lease that all alleged arrears had been brought up to date. Having regard to all the correspondence and emails before the Court which consistently state that there were rent arrears and arrears for outgoings, that is not an inference the Court would draw.
[48] For all those reasons, I am satisfied that Mr Whitmore’s updated calculations setting out arrears of rent and outgoings, relying as they do on Wayne’s spreadsheets, Seaglass’ bank statements, and making some minor corrections in response to Mrs Giacon’s evidence, are reliable. The updated calculations correctly reflect the rent arrears, arrears for outgoings and interest on both sets of arrears.
Issue two: Limitation Act 2010
[49] The statement of claim was filed on 11 May 2022. The Giacons say that having regard to s 11 of the Limitation Act, which provides for a six year limitation period for a money claim, any amounts falling due prior to 11 May 2016 and the interest thereon,11 are statute-barred under s 11 of the Limitation Act.
[50]Seaglass responds relying on s 47 of the Limitation Act which provides:
47 Acknowledgment or part payment
(1)This section applies if the claimant proves that, after the start date of a claim’s primary period, longstop period, or Part 3 period, the defendant—
(a)acknowledged to the claimant in writing a liability to, or the right or title of, the claimant; or
(b)made a payment to the claimant in respect of a liability to, or the right or title of, the claimant.
(2)If this section applies, the claimant is deemed for the purposes only of this Act to have a fresh claim on the day after the date, or the latest of the dates, on which an acknowledgment or part payment was given or made.
(3)An acknowledgment or part payment of the kind specified in subsection (1)—
(a)is binding on the defendant’s successors; and
(b)may be given or made by the defendant or an agent of the defendant and to the claimant or an agent of the claimant.
(4)Payment or part payment of interest by the defendant must be treated for the purposes of this section as an acknowledgment by the defendant to the claimant in writing of the defendant’s liability to pay
11 If the claim for principal moneys is statute-barred, a claim for interest dies with it: A Forbes and S Lennon Laws of New Zealand Guarantees and Indemnities (online ed) at [174]; DFC New Zealand Ltd v McKenzie [1993] 2 NZLR 576 (HC) at 584.
the claimant both that interest and the principal in respect of which it is paid.
[51] Seaglass says that Terrazzo has acknowledged the debt both in writing and by way of part-payment. Accordingly, Seaglass has a fresh claim from the date of acknowledgement and/or part-payment.
[52] I will start with the alleged acknowledgement and then turn to the part- payment.
[53]The rationale for the acknowledgement exception is that it is:12
… in the public interest that a debtor who acknowledges [their] debt, and so induces [their] creditor not to have immediate resort to litigation, should not then be able to claim that the debt is statute-barred because the creditor held [their] hand.
[54] In Bank of New Zealand v Lothian Partners Capital Ltd, Associate Judge Gardiner considered the approach to determining whether a statement is an acknowledgement. After a detailed and careful discussion of the two New Zealand authorities under the current provision, two cases under earlier versions of the Limitation Act, and United Kingdom authorities, the Judge set out the principles she discerned from the statute and those authorities:13
(a)an acknowledgement must made be in writing by the defendant (or their agent) to the claimant;
(b)the acknowledgement can be made at any time after the start date of the claim’s primary period (and need not be made during the primary period);
(c)there is no requirement for proven reliance by the claimant on the acknowledgment;
(d)no particular words are required, and the acknowledgement can be broad and informal provided that, judged objectively, the words used indicate an admission of liability to the claimant;
(e)in respect of a money claim, it is not necessary for the defendant to acknowledge the amount claimed or any other specific amount provided they acknowledge that they owe something, and the amount can be ascertained by extrinsic evidence;
12 Bradford & Bingley Plc v Rashid [2006] UKHL 37 at [38] cited in Bank of New Zealand v Lothian Partners Capital Ltd [2022] NZHC 2489 at [123].
13 At [149] (footnotes omitted).
(f)if they acknowledge they owe something, it is immaterial that they dispute the correctness of the amount claimed;
(g)on the other hand, if they acknowledge they owe a specific part of the amount claimed, their acknowledgement is limited to that part;
(h)the acknowledgement must be read in the context of the document as a whole and all the surrounding circumstances.
[55] To the above list I would also add that, acknowledgement that someone has alleged a debt is not an acknowledgement of liability. In Ryan v Moore the Supreme Court of Canada said:14
… a person can acknowledge as a bare fact that someone has asserted (by making a claim) a cause of action against him, without acknowledging any liability. Simple acknowledgement of the “existence” of a cause of action is insufficient to meet the requirements of [the corresponding Canadian provisions]. Acknowledgement must involve acknowledgement of some liability.
[56] In X and Y v Chief Executive, Oranga Tamariki, Churchman J held that the statement that “an ex-gratia payment of $5,000 is offered to acknowledge the financial and emotional detriment that you [X] indicated in this complaint” was not an acknowledgement of liability on the part of Oranga Tamariki to pay the sums of money sought by the plaintiff in the proceedings concerned.15 What was offered was an ex- gratia payment.16
[57] Finally, on relevant principles, an acknowledgement by a principal debtor does not bind guarantors.17
[58] Seaglass relies first on an email dated 26 August 2016 from the solicitor acting for Terrazzo to a solicitor then acting for Seaglass. The email states:
I need you to confirm that the Property Law Act Notice you have issued (which I note is on your letterhead and signed by you) is withdrawn so that our clients don’t waste time and money on unnecessary legal proceedings.
14 Ryan v Moore [2005] 2 SCR 53, [2005] SCC 38 at [45] cited by Churchman J in X and Y v Chief Executive, Oranga Tamariki [2021] NZHC 2449 at [144].
15 X and Y v Chief Executive, Oranga Tamariki, above n 14, at [149]–[151].
16 At [151]–[152].
17 JCD Corry Laws of New Zealand Limitation of Civil Proceedings: Limitation Act 1950 (online ed) at [295] and [298]; Halsbury’s Laws of England (5th ed, 2021, online ed) vol 68 Limitation Periods at [1318].
Whether there are arrears and if so how much is owed is unclear and has been the subject of extensive correspondence and discussion already. …
…
My client has offered and continues to offer to buy the building and to resolve any rent arrears as part of that.
[59] I do not consider the contents of the email read as a whole, amount to acknowledgement of liability by Terrazzo.
[60] The offer “to resolve any rent arrears” needs to be read alongside the earlier part of the email. The statement earlier in the email “[w]hether there are arrears and if so how much is owed is unclear …” does not indicate an admission of liability by Terrazzo. Further, it does not indicate any admission of liability by the Giacons.
[61] Seaglass next relies on an email dated 20 September 2016 from the then solicitor for Lorraine, in her personal capacity, to the then solicitor for Seaglass, copied to the then personal solicitor for Gary and Ms Hancock and to another solicitor, also said to be a solicitor for Lorraine in her personal capacity. The email says in relevant part:
We have just received an offer from Terrazzo which relates to a global deal for acquisition of the land and buildings and a tidy up of all arrears, claims and other issues relating to the tenancy.
[62] The email does not state that the “offer” is attached. However, immediately following the email in the common bundle is an agreement for sale and purchase of real estate.18 The agreement is undated and not signed. It records the vendor as Seaglass Holdings Ltd and the purchaser as Terrazzo & Stoneworks NZ Ltd. The property address is recorded as 8 O’Neills Road, Swanson, Auckland (the address of the Premises) and the purchase price is stated to be $1,150,000.00. In the further terms of sale it is stated:
This agreement is in full and final settlement of all claims between the parties and between related parties.
18 On the standard Auckland District Law Society and Real Estate Institute of New Zealand
Agreement for Sale and Purchase of Real Estate (9th ed, 2012).
[63] I do not consider this agreement for sale and purchase constitutes an acknowledgement by the Giacons of the debt or any part of it. The document is not signed by them. It is not even signed by Terrazzo.
[64] In terms of the Giacons, I do not consider the reference to “all claims … between related parties” is sufficient to be an acknowledgement by the Giacons for liability to Seaglass. The expression used is “between related parties”. It is not clear what that means. It may mean between parties related to Seaglass and parties related to Terrazzo. But the agreement does not say “between Seaglass and parties related to Terrazzo”.
[65] Further, the reference to the “final settlement of all claims” does not expressly indicate an acknowledgment of the debt per se. It may be acknowledgment of a claim from Seaglass regarding arrears, or a dispute, but that is not the same as acknowledgment of the alleged debt itself.
[66] In short, I do not consider this document contains an acknowledgement of liability by the Giacons to Seaglass.
[67] I next address the issue of part-payment and appropriation. Ms Eden, counsel for Seaglass, refers to payments made by Terrazzo to Seaglass in 2018 and 2019 which were identified as being for rent arrears.
[68] More generally, Ms Eden submits there is established law to indicate a presumption that the debtor’s intention will be to apply any payments made to the earliest debt.19 Apart from the payments referred to in [67] above, where bank statements contain references to “rent arr”, the majority of the bank statements simply include “rent” in the reference. Ms Eden submits that a simple reference to “rent” is not specific enough to indicate whether the payments were to be allocated to earlier rent payments which had already become due. She says there is, therefore, insufficient evidence of an intention that is clear enough to rebut the presumption in Clayton’s Case that the amounts should be applied to earliest debts first.
19 Devaynes v Noble (1816) 1 Mer. 572, 35 ER 781 [Clayton’s Case]; In re Footman Bower & Co Ltd [1961] Ch 443.
[69] First, as to the rule in Clayton’s Case, its application was explained in Yarra Capital Group Pty Ltd v Sklash Pty Ltd:20
… The operation of the rule was explained in [Clayton’s] case by Sir William Grant M.R. in the context of a current, or running, or blended, account that was in existence between the parties, such as a bank account. In those circumstances, his Lordship said: “[t]here is no room for any other appropriation than that which arises from the order in which the receipts and payments take place and are carried into the account. Presumably, it is the sum first paid in that is first drawn out. It is the first item on the debit side of the account that is discharged or reduced by the first item on the credit side; the appropriation is made by the very act of setting the two items against each other.” But it is clear enough that the rule is “a mere rule of evidence and not an invariable rule of law” and, as Lord Halsbury said in Cory Brothers & Co. Ltd v. The Owners of The Turkish Steamship “Mecca” (“The Mecca”), the rule has no operation where the payment in question was properly appropriated by the creditor (or debtor) or where there are distinct and separate debts.
[70] I accept the submission made by Mr St John that the rule does not apply where there are distinct and separate debts (such as monthly payments for rent, as is the case here) to which specific payments may be appropriated.
[71] The principle behind the part-payment exception is that a part-payment by a defendant towards a debt amounts to a “fresh promise to pay”.
[72] In Surrendra Overseas Ltd v Government of Sri Lanka, Kerr J said concerning s 23(4) of the Limitation Act 1939 (UK):21
A part-payment, like an acknowledgment, can only revive the cause of action and start time running afresh if it provides evidence in the form of an admission by the debtor that the debt remains due despite the passage of time. This is consonant with the authorities. In Cottam v. Partridge (1842) 4 Man. & G. 271, 280 the doctrine of part-payment was in my view correctly described in the argument as “payment of money in part-payment of the whole debt, which is an acknowledgment of a debt being due, not in words, but by an act done.” Tindal C.J. said, at p. 287:
The ground on which part-payment was previously held to take the case out of [the Limitation Act 1623] was, that a payment of a part was an admission of the rest by inference, and that, from such payment, a jury might conclude that the rest was due.
20 Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109 at [25] (footnotes omitted).
21 Surrendra Overseas Ltd v Government of Sri Lanka [1997] 1 WLR 565 (QB) at 576.
[73]In In re Oliver Tomlin J said:22
… [b]ut the common law has always recognised that payment on account of something in respect of which the statute is set up may amount to a fresh promise to pay and found a fresh cause of action. …[i]t seems to me plain that any payment which is to have that effect must be a payment made in respect of that which it is sought to recover.
[74] And in In re Footman Bower & Co Ltd Buckley J said (particularly of note where the debt is statute-barred) as follows:23
For a payment to have this effect it was necessary that it should amount to an acknowledgment of the debt and import a new promise to pay the outstanding balance. The mere act of the creditor appropriating a payment to a statute- barred debt could not have this effect, for such an acknowledgment and promise could only come from the debtor. Since the enactment of the Limitation Act, 1939, the position is different, for section 23(4) now contains a statutory provision applicable to simple contract debts whereby any payment in respect of a debt will make time start to run afresh in respect of that debt. There is no longer need to establish a new promise to pay. In my judgment, however, one must still look at the act and intention of the debtor to see whether the payment is made in respect of the particular debt. Payment is in this subsection dealt with in close conjunction with acknowledgment. Just as an acknowledgment can only acquire that character by the act of the debtor or his agent, so also, I think, a payment can for the purposes of the subsection only acquire the characteristic of being made “in respect of” the debt by the act of the debtor or his agent.
[75] Appropriation may be inferred from the nature of similar payments made.24 Where a periodic payment is made in respect of rent, the payment is presumed to be appropriated towards the rent for the period in which it was paid, as the timing of the payment appropriates by implication.25 Rent is a periodical payment that is considered as accruing from day to day and is apportionable in respect of time accordingly.26 In Whitcombe and Tombs Ltd v Keyvar it was stated as follows:27
The general rule as to application of money paid is embodied in the maxim solvitur in modo solventes.[28] A debtor who makes payment in discharge of an invoice for rent surely appropriates his payment to such claim for rent, and,
22 In re Oliver [1927] 2 Ch 323 at 331.
23 In re Footman Bower & Co Ltd [1961] Ch 443 at 449.
24 JCD Corry, above n 17, at [286]; Worthington v Grimsditch (1845) 7 QB 479.
25 JCD Corry, above n 17, at [286].
26 JCD Corry Laws of New Zealand Lessor and Lessee (online ed) at [154]; Property Law Act 2007, s 45.
27 Whitcombe and Tombs Ltd v Keyvar [1959] NZLR 132 at 139.
28 One translation of solvitur in modum solventis in John Burke Osborn’s Concise Law Dictionary (6th ed, Sweet & Maxwell, London, 1976) at 308 is: money paid is to be applied according to the wish of the person paying it.
in my view, the landlord who has received payment of his demand for rent cannot by his subsequent act of issuing a receipt for use and occupation seek to appropriate the payment to a different claim.
[76] In Kivits v Draper Associate Judge Bell addressed the question of appropriation as follows:29
[23] There is a question as to appropriation. Is the payment of $150,000 to be allocated against interest or principal? At the time of the payment a claim for principal was not statute-barred, but some of the interest had been unpaid for more than six years and that was therefore statute-barred under s 20(4). In the absence of evidence, the payment is attributed only to those debts which are not statute-barred. …
[77] The same presumption applies where some debts are disputed and others are not. In the absence of specific evidence that the payee intended to appropriate the payment to the disputed debt, the inference must be that the payee intended to apply the payment to undisputed debts:30
How could the jury infer that the payment might have been made on account of wages, when the party making the payment denied the existence of any such debt? … There being only one admitted debt, I think the jury might well infer that the payment had reference to that debt.
[78] With those principles in mind, I turn to the payments in this case. First, the specific acknowledgement that in 2018 and 2019, payments were made for rent arrears. Ms Eden refers to the following evidence:
(a)Mrs Giacon’s evidence that during 2018 and 2019 Terrazzo made payments totalling $30,470 to Seaglass, and that these included payment for arrears. The last of these payments was in September 2019.
(b)Terrazzo made part-payment of the arrears as early as 11 October 2018 through bank transfers with references to “rent arr”. Mr Giacon remained a director of Terrazzo at the time these part-payments began, and Mrs Giacon remained a shareholder;
29 Kivits v Draper [2016] NZHC 1961 (footnote omitted).
30 Burn v Boulton (1846) 2 CB 476, 135 ER 1031 (Comm Pleas) at 1034 and 1035.
(c)On 12 December 2018 an email from then director of Terrazzo, Mr Hobson, states that he looked “forward to settling the outstanding arrears …”.
[79] However, those statements and evidence of payments need to be seen in the light of the following evidence. The Giacons accept that rent was missed for the months of April 2017 and May 2018. They also accept that they missed a payment of
$4,657.70 (GST inclusive) for insurance on 8 November 2017 and $3,466.39 (GST inclusive) on 20 November 2018. Between 4 October 2018 and 6 August 2019 Terrazzo agreed to a payment plan with Seaglass to pay off these arrears at a rate of
$750 per week. The last payment was made on 6 August 2019.
[80] Further, Mr Hobson’s email of 12 December 2018 relied on by Seaglass, where Mr Hobson states he looked “forward to settling the outstanding arrears”, needs to be read in context. Later in that email Mr Hobson says: “On a seperate [sic] note I would like to request a payment holiday on the $750p/week restarting again 1st week in February.” When that email is viewed as a whole, I consider the reference to settling outstanding arrears is a reference to the specific arrears being paid off at a rate of $750 per week; that is the arrears arising out of the missed rent payments and insurance payments in 2017 and 2018.
[81] All the available evidence indicates that the payments in 2018 and 2019 were for the specific arrears arising out of missed payments in 2017 and 2018. I do not consider those payments can be appropriated in the way that Seaglass purports to do so that they can be applied as part-payment for alleged debts that arose prior to 11 May 2016.
[82] Next I address the claim by Seaglass that generally, any payments made after 11 May 2016 can be applied to alleged debts that arose prior to 11 May 2016. I note that rental payments were made on a monthly basis either at the very end of the relevant month or early the following month. Following the principles set out in [72] to [77] above, I do not consider Seaglass is able to appropriate the payments as part- payments of the alleged debt so as to bring itself within the provisions of s 47 of the
Limitation Act. In other words, payments made by Terrazzo after 11 May 2016 for rent and outgoings do not restart the limitation period under s 47.
[83] Ms Eden makes the additional submission that cl 3.5 of the Lease provides that outgoings shall be payable on demand, or in monthly instalments if agreed. Monthly instalments were not agreed in this case. Ms Eden says, similarly, cl 5.1 provides that in the event of default the tenants shall pay interest on demand. She says Seaglass made demand on the Giacons as guarantors in the first instance on 15 December 2021.31 She says, as at the date of the demand, Seaglass was insisting on payment which was an obligation under the Lease. Ms Eden says that the guarantor’s responsibility in relation to outgoings and interest arose at the date demand was made for these amounts. For the purposes of the Limitation Act, the date that the outgoings and interest became payable was the date of the demand.
[84] However, although not expressed as a formal demand by way of a letter from a solicitor, as was the case with the 15 October 2021 demand, there is evidence that Gary was demanding payment for the alleged arrears in rent and outgoings prior to 11 May 2016 (and after he was appointed a director of Seaglass on 7 October 2015). For example:
(a)On 17 October 2015 Gary emailed Mrs Giacon. The email included the following:
5. There is clearly substantial money outstanding for rent and outgoing [sic]. The fact that Wayne was tracking the debt on his computer up until shortly before his death is conclusive proof that he believed the money is owed.
6. Whether an invoice is sent or not the outgoings are clearly Terrazzo and Stoneworks obligation …
…
10. It will be necessary to resolve the matter of the outstanding money, the equipment and issues arising from the change of shareholding before the lease can be renew [sic]. …
31 The document appears to be dated 15 October 2021.
(b)On 12 November 2015, in an email to Mr Hobson (then a director of Terrazzo), Gary said:
We put forward a proposal which we felt was very generous. This has been totally ignored. Therefore today we will instruct our solicitor to commence proceedings to recover the outstanding debt for rent and outgoings and to terminate the lease for this breach.
(c)On 12 February 2016 Gary sent an email to the solicitors for Terrazzo saying:
On Monday the lease will be terminated for the serious breaches of Non-payment of rent and outgoings, and for changing the shareholding of their company without first getting Landlords approval. We will then pursue the debt and will look to the personal guarantees.
[85] Having regard to the above emails from Gary, I do not accept the submission on behalf of Seaglass that the demand on 15 October 2021 is the date for assessing the limitation period in relation to outgoings.
[86] In summary, in relation to the limitation period, there was no acknowledgement or part-payment so as to enable Seaglass to rely on s 47 of the Limitation Act to restart the limitation period. There were demands for rent and outgoings prior to 11 May 2016. Accordingly, Seaglass cannot rely on the demand made on 15 October 2021 as the start date for the limitation period in relation to outgoings.
[87] It follows that any claims for arrears of rent and outgoings arising prior to 11 May 2016 are statute-barred under s 11 of the Limitation Act.
Issue three: was there a variation of the Lease regarding outgoings between 11 August 2011 and 12 January 2015?
[88] The Giacons say that there was a variation of the Lease whereby Seaglass agreed not to charge Terrazzo for any outgoings for the Premises for the period between 11 August 2011 and 12 January 2015. This issue is now somewhat academic as I have held that claims for any alleged liabilities that arose prior to 11 May 2016 are statute-barred. I will, nevertheless, consider this issue in case I am wrong in my decision on the limitation period.
[89] First, I set out the evidence. There are two key documents. There is a letter from Wayne dated 5 December 2014 (two weeks before he died) to Mr Giacon. The letter addresses both rent and outgoings. For the moment, I will consider the letter as regards outgoings. I set out the letter in full:
Re Seaglass Holdings Ltd and Terrazzo & Stoneworks Ltd
Andrew some time ago I agreed to allow you to pay a lower rent until the economy improved. The agreed amount was $7,500 plus GST per month however you are only paying what amounts to $6,512.74 plus GST which doesn’t always cover the outgoings.
I am also paying on your behalf the rates insurance and water charges with a mounting debt for those items of over $70,000 to date without including any of the rent arrears. The water for November was $628.64.
Over the last 12 months I have had to put $32,500 into the account to keep it in credit and now that I have sold my cashflow business I can no longer do that.
The present situation can not continue and you need to come up with a proposal as to how you plan to deal with the future as you know the rental under the lease is $8,750 plus GST per month and the outgoings you are responsible for being rates, insurance and water charges amount to about
$18,000 per year which is about a further $1,500 per month.
Wayne Young
[90] There is a response to Wayne’s letter on the letterhead of Terrazzo dated 18 December 2014 from Mr Hobson. It reads in full:
RE; Seaglass holdings and Terrazzo and Stoneworks Ltd
Thank you for your letter of 5/12/14. Apologies for the misunderstanding, we’ll redress the rent payment to $7,500 + GST immediately. Andrew and I have also been to see our accountant and asked them to give us the exact amount of rent arrears owing.
I’d appreciate it if you could let us know what the balance of the water and rates outstanding so we can address this at the same time. Once we know what the total balance is we’ll work out an amount we can afford to pay over and above the rent, rates, water etc to pay back the arrears. We would also like to discuss putting in place an agreement to buy back the plant and machinery along with an option to purchase the land and buildings.
Regards
Iain Hobson
Terrazzo & Stoneworks NZ Ltd
[91] There is no dispute that Wayne “… had a strong desire to help Andrew and Adrienne”. That statement was made by Gary in an email to Mr Hobson on 1 November 2015. When Gary was referred to that statement in cross-examination he did not disagree with it.
[92] However, the parties disagree over whether the arrangement as regards outgoings for the period under consideration was simply a deferral or whether it was a variation to provide for permanent relief for the relevant period. Seaglass says, at most, any arrangement was simply a deferral and that the amount accruing was a liability Terrazzo owed to Seaglass.
[93] A consideration of the above two documents indicates that any arrangement was a deferral only. In his letter, Wayne refers to “a mounting debt” for the outgoings for rates, insurance and water charges. The amount of “over $70,000” referred to by Wayne aligns with the amount of accrued outgoings in his spreadsheet. As at 1 December 2014 the total amount in his spreadsheet was $72,042.01. Those personal contemporaneous records show that Wayne was keeping a running total of all amounts owing. I consider the letter indicates that there had been a temporary grace period as regards outgoings by way of a deferral but that was now at an end.
[94] The response on behalf of Terrazzo aligns with that position. Mr Hobson in his response asks Wayne to let Terrazzo know the balance of the water and rates outstanding so that Terrazzo can address this “to pay back the arrears”.
[95] There are later assertions as to what was agreed. For example, on 12 October 2015 Mrs Giacon says in an email to Gary and others as follows:
5)In 2011, Wayne stopped invoicing us for the outgoings and said he would cover these.
6)Since that time, we did not receive any invoices from Seaglass Holdings for any rates or insurance. They were not billed to us by the Council directly, or insurance brokers etc. Wayne paid these. We were not sent a statement for payment at anytime. We could not have paid them, if we were not invoiced them.
We did not receive any invoices or statements from Seaglass Holdings Ltd during this time for rent or rates arrears.
[96] The fact that no invoices were sent during the relevant period does not of itself indicate that the agreement was more than a simple deferral. The two letters in [89] and [90] above, while not contemporaneous, are closer to the time of the oral arrangement and, as I have found, indicate that the arrangement as regards outgoings was simply a deferral that, in particular, was acknowledged by Terrazzo. The amount remained owing by Terrazzo. There was no variation in terms that meant Terrazzo was not liable for arrears of outgoings for the period in question.
[97] In case I am wrong in my finding that there was only a deferral, I address the parties’ arguments as regards variation. Seaglass says (on the assumption, but without accepting, if there was an oral variation not to charge outgoings for the period in question) first, the defence by the Giacons that there was a verbal variation fails by reason of the PLA. Section 24 of the PLA provides that:
24 Contracts for disposition of land not enforceable unless in writing
(1)A contract for the disposition of land is not enforceable by action unless—
(a)the contract is in writing or its terms are recorded in writing; and
(b)the contract or written record is signed by the party against whom the contract is sought to be enforced.
…
[98] Section 25 of the PLA confirms that writing is required for dispositions of interests in land, including equitable interests. Ms Eden submits a lease is a disposition of land and therefore must be in writing. In this case, she says the terms of the alleged verbal variation are not recorded in writing and, therefore, do not comply with the PLA.
[99] As to whether a variation of a lease is required to be in writing, s 24 indicates that a contract “or its terms” must be in writing. Ms Eden accordingly submits that on a basic interpretation of that provision, the terms of a contract must include varied terms. In that regard, Ms Eden refers to Tennyson Motor Inn (2003) Ltd v Wallace where the High Court stated:32
[26] Burrows Law of Contract in New Zealand at paras. 19.3.1 and 19.2.1 makes clear that an oral variation of a contract required by law to be evidenced in writing (such as the Lease), is ineffective with the result that the present variation of lease claimed by the applicant must be considered to be ineffective.
[100] Ms Eden notes that Tennyson Motor Inn was distinguished on the facts by the Court of Appeal in Country Club Apartments Ltd v MFT Properties Ltd.33 As Ms Eden submits, there was a written record of the variation in the Country Club Apartments case in email correspondence.
[101] In response, Mr St John submits (correctly) that the equitable doctrine of part performance is preserved by s 26 of the PLA. This is an exception to the requirements of ss 24 and 25.
[102]A party seeking to rely on part performance must establish:34
(a)That there was sufficient agreement such that it would have been enforceable but for ss 24 and 25 of the PLA.
(b)That there has been part performance of that agreement by the doing of something which:
(i)clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the alleged contract; and
32 Tennyson Motor Inn (2003) Ltd v Wallace HC Napier CIV-2007-441-739, 19 November 2007.
33 Country Club Apartments Ltd v MFT Properties Ltd [2011] NZCA 560, (2011) 13 NZCPR 1.
34 Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281.
(ii)when viewed independently the alleged contract was, on the balance of probabilities, done on the footing that a contract relating to the land and such as that alleged, was in existence.
(c)The circumstances in which the part performance took place make it unconscionable for the other party to rely on the requirements of the PLA.
[103] The issue of part performance only becomes relevant if the first element is satisfied, namely, the existence of an agreement that would be enforceable but for the lack of writing.35 I proceed on the (alternative) basis that there was such an agreement.
[104] If that had been the case, I accept that Terrazzo took steps in performance of the variation by not paying outgoings between 11 August 2011 and 12 January 2015. I further accept that this was an act that amounted to a step in the performance of the agreement (had there been such an agreement) that Seaglass would pay the outgoings for that period. Additionally, if viewed objectively, this was an act done on the footing that the variation to the Lease was in existence. The third requirement will usually follow as it is unconscionable for one party to rely on statutory technicalities to defeat a contract to which it has agreed and on which the other has relied.36 For completeness, I note that the party pleading part performance does not need to show detriment.37
[105] In summary, had there been an oral variation such that Terrazzo was relieved of its liability to pay outgoings for the relevant period and not simply a deferral, I would have accepted the submission on behalf of the Giacons that the equitable doctrine of part performance is satisfied and provides an exception to the requirements of ss 24 and 25 of the PLA.
35 There is the issue of consideration which I refer to next.
36 Mahoe Buildings Ltd v Fair Investments Ltd, above n 34, at 288 and Country Club Apartments v MFT Properties Ltd, above n 33, at [57].
37 Country Club Apartments v MFT Properties Ltd, above n 33, at [56].
[106] There is also the issue of consideration in relation to the variation. Mr St John submits that there is a strong line of authority that consideration is not required to vary an existing contract.38
[107] Ms Eden submits that the original position in relation to consideration is that a practical benefit can constitute consideration for a variation.39 She submits that this should be the applicable legal test due to the lack of evidence of a freely entered into reciprocal agreement with commercial viability.
[108] Even adopting (but without necessarily accepting) Ms Eden’s approach, I consider that Seaglass arguably retained a practical benefit. There is no dispute that Terrazzo was in financial trouble. The Giacons’ evidence is that without the agreements to reduce rent and pay outgoings, it would have gone into liquidation. I accept that the rental portion (which I have yet to address) was greater than the amount of outgoings, but the outgoings were part of the mix. Had Terrazzo gone into liquidation that would have left Seaglass without a tenant in the middle of a recession. I consider it is arguable that there was a practical benefit to Seaglass. But in the end I do not need to decide this point.
[109] In summary, on the facts, I consider the agreement as regards outgoings for the period concerned was simply a deferral. The liability of Terrazzo to pay the outgoings for that period remained. The point, however, is academic as a claim for this period is statute-barred. If there had been a variation, as claimed by the defendants, (rather than a deferral) the defendants would likely have succeeded on the equitable doctrine of part performance as an exception to the requirements of ss 24 and 25 of the PLA that the variation be in writing. Similarly, they likely would have succeeded on the basis there was sufficient consideration by way of a practical benefit to Seaglass (if consideration is, in fact, required for a variation).
59 Statistics New Zealand “Consumers price index” Stats NZ Tatauranga Aotearoa
< and Statistics New Zealand and Reserve Bank of New Zealand “Prices (M1)” Reserve Bank of New Zealand Te Pūtea Matua
< is not only directly comparable to the CPI for Industrial Property but the CPI is the CPI for Industrial Property. There was formerly a separate index for “Industrial Property” but this is now included in the general CPI “basket of goods”.60
[183] I accept the submission Mr St John makes that the machinery for ascertaining the purchase price under the option to purchase and the right of first refusal may be corrected through interpretation. If the Court makes a declaration as sought, the Court would simply substitute the reference in the codicil to the “Consumer Price Index for Industrial Property” to the “Consumer Price Index”.
[184] The next issue is whether the assignment by Terrazzo to the Giacons is valid. I consider it is. The PLA provides that any legal or equitable thing in action may be assigned from one person to another.61 An assignment does not need to be for valuable consideration,62 and assigns all rights and remedies of the assignor in relation to the thing in action.63
[185] The two requirements for a valid assignment are both met in this case: it must be in writing; and must be signed by the assignor.64
[186] Seaglass does not cite any authority for the proposition that its consent was required before Terrazzo could transfer the benefit of the option. I put that submission to one side.
[187] Finally, there is the issue of whether the Court should exercise its discretion to make a declaration.
60 Statistics New Zealand and Reserve Bank of New Zealand “Investment (M3)” Reserve Bank of New Zealand Te Pūtea Matua < indicators/investment>.
61 Property Law Act 2007, s 50 (applicable to assignments made on or after 1 January 2008: s 2).
62 Section 50(2).
63 Section 50(1).
64 Section s 50(1).
[188]Section 3 of the Declaratory Judgments Act 1908 (the Act) provides:
3 Declaratory orders on originating summons
Where any person has done or desires to do any act the validity, legality, or effect of which depends on the construction or validity of any legislation, or any deed, will, or document of title, or any agreement made or evidenced by writing, or any memorandum or articles of association of any company or body corporate, or any instrument prescribing the powers of any company or body corporate; or
Where any person claims to have acquired any right under any such legislation, deed, will, document of title, agreement, memorandum, articles, or instrument, or to be in any other manner interested in the construction or validity thereof,—
such person may apply to the High Court by originating summons for a declaratory order determining any question as to the construction or validity of such legislation, deed, will, document of title, agreement, memorandum, articles, or instrument, or of any part thereof.
[189] The courts have held that s 3 of the Act is very broad,65 and is not to be narrowly interpreted.66 Nevertheless, there is a threshold that an applicant must meet. As is clear from the wording of the section, the particular threshold to be met before a declaration may be sought is that either: an applicant has done or desires to do an act, the validity, legality or effect of which depends on the construction or validity of any will or any agreement made or evidenced by writing (or other instrument as referred to in the section); or an applicant claims to have acquired any right under any such will or any agreement made or evidenced by writing (or other instrument) or to be in any other manner interested in the construction or validity of the will or agreement or instrument.
[190] If either or both of those threshold conditions are met, an applicant may apply for a declaratory order “determining any question as to the construction or validity” of the will or agreement or instrument in question, or any part of it.
65 The Secretary for Internal Affairs v Kilbirnie Tavern Ltd HC Wellington CIV-2007-485-1988, 14 November 2008 at [32].
66 Timaru District Council v The Minister of Local Government [2023] NZHC 244 at [87] citing Mandic v The Cornwall Park Trust Board (Inc) [2011] NZSC 135, [2012] 2 NZLR 194 at [5]–[9] and [82].
[191] In this case the relevant documents are the codicil to Wayne’s will and the agreement that assigns Terrazzo’s rights under the codicil to the Giacons. They are both documents that fall within s 3 of the Act.
[192] Despite the width of the jurisdiction, as confirmed by the Supreme Court in Mandic v The Cornwall Park Trust Board (Inc), the jurisdiction remains discretionary.67 Section 10 of the Act provides:
10 Jurisdiction discretionary
The jurisdiction hereby conferred upon the High Court to give or make a declaratory judgment or order shall be discretionary, and the said Court may, on any grounds which it deems sufficient, refuse to give or make any such judgment or order.
[193] In exercising its discretion the Court will consider whether a declaration would have utility. Seaglass has not identified any reason why, if the Court were to find the option to purchase and right of first refusal are binding on Seaglass and the assignment by Terrazzo to the Giacons is a valid assignment, a declaration should not be made. There is obvious utility in the declaration which I will make in the terms as sought.
Result/orders
[194] Seaglass fails in its claim against the Giacons. The claim by Seaglass is dismissed.
[195]The Giacons succeed on their counterclaim.
[196] I make a declaration that Andrew Giovanni Giacon and Adrienne Giacon (together, the Giacons) hold an option to purchase and a right of first refusal on the following terms:
(a)The Giacons may purchase the property at 8 O’Neills Road, Swanson, Auckland (the property) for $1.1 million (as adjusted by the Consumer Price Index since September 2009).
67 Mandic v The Cornwall Park Trust Board (Inc), above n 66, at [5].
(b)Should Seaglass Holdings Ltd at any time need to sell the property it must first offer it to the Giacons for $1.1 million (as adjusted by the Consumer Price Index since September 2009).
[197] I grant leave to the parties to seek further orders to enable implementation of the Giacons’ option to purchase and/or right of first refusal.
Costs
[198] The Giacons, as the successful parties are prima facie entitled to costs. However, as I did not hear submissions on costs, costs are reserved.
[199] In the first instance I encourage the parties to agree costs. If they are able to do so, a joint memorandum is to be filed within 25 working days of the date of this judgment.
[200] If costs cannot be agreed the Giacons are to file and serve their memorandum on costs within five working days of the date for the joint memorandum. Seaglass is to file and serve its memorandum within five working days of the date of service of the Giacons’ memorandum.
[201] Costs memoranda should not exceed five pages, excluding any attachments. I will determine costs on the papers.
Gordon J
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