Technix Group Ltd v Fitzroy Engineering Group Ltd - [2011] NZCA 17

IN THE COURT OF APPEAL OF NEW ZEALAND

CA337/2010
[2011] NZCA 17

BETWEEN TECHNIX GROUP LIMITED
Appellant

AND FITZROY ENGINEERING GROUP LIMITED
Respondent

Hearing: 16 November 2010

Court: Chambers, MacKenzie and Simon France JJ

Counsel: J B M Smith and J L W Wass for Appellant
J G Miles QC and P J Wright for Respondent

Judgment: 17 February 2011 at 2 pm

JUDGMENT OF THE COURT

A The appeal is dismissed.

BThe appellant must pay the respondent costs for a standard appeal on a band A basis, plus usual disbursements. We certify for second counsel.

REASONS OF THE COURT

(Given by Chambers J)

Option to purchase land

Fitzroy Engineering Group Ltd, the respondent, operates an industrial manufacturing and boat building business in New Plymouth. Fitzroy leases the property on which it operates its business from Technix Group Ltd, the appellant, which also owns surrounding land. This arrangement arose out of Fitzroy’s purchase of the business from Technix in 1992. Fitzroy could not afford at that time to purchase the land on which the business operated. In order to give Fitzroy some security, the parties agreed to include an option to purchase clause in the lease so that Fitzroy could purchase the property (and some plant and machinery) in the future. The lease also gave Fitzroy a right of pre-emption if Technix wanted to sell the land in the future or received an offer for it which it was minded to accept.
Fitzroy now wants to buy the property and has triggered the option to purchase process under the lease by giving written notice to Technix. That process requires Technix to investigate the cost and procedure involved in subdividing the land. If after this investigation Fitzroy wishes to proceed, Fitzroy must formally exercise its option to purchase. After this process was instigated by Fitzroy, but before Fitzroy had given notice of its desire to exercise its option to purchase, Technix received an offer from “a third party” to purchase the property. This “third party” was a charitable trust associated with Technix’s director, John Matthews. Technix advised Fitzroy of this offer and purported to trigger the pre-emptive right subclause under the lease, which would require Fitzroy to agree to match the third party’s offer within fourteen days if it wished to purchase the property.
This appeal turns on whether Technix can invoke the pre-emption subclause, despite the option to purchase process having already been triggered by Fitzroy. Venning J held Technix could not do so and granted an injunction preventing it from selling the property pending completion of the option to purchase process instigated by Fitzroy.[1]
[1]Fitzroy Engineering Group Ltd v Technix Group Ltd HC New Plymouth CIV-2010-443-102, 20 May 2010.
The dispute has some significance for the parties. Under the option to purchase provisions, Fitzroy has to purchase only the land and premises it actually uses. Under the right of pre-emption process, Fitzroy would be required to purchase additional land. Further, and more importantly, it seems the parties expect…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Technix Group Ltd v Fitzroy Engineering Group Ltd

Details

AGLC: Technix Group Ltd v Fitzroy Engineering Group Ltd [2011] NZCA 17
Case: [2011] NZCA 17
Decision Date: 17 February 2011

CaseChat Overview and Summary

The Court of Appeal of New Zealand heard an appeal from Technix Group Ltd against a decision of Venning J that Technix Group Ltd could not invoke a right of pre-emption to sell property to a third party if an option to purchase process had already been triggered by Fitzroy Engineering Group Ltd. The option to purchase process was intended to give Fitzroy the opportunity to purchase the land and premises it actually used, at a price significantly less than the offer from a third party associated with a Technix director. Technix argued that the right of pre-emption could be triggered at any time during the term of the lease, even if the option to purchase process had already been triggered, but Fitzroy argued that the right of pre-emption could not be triggered if the option to purchase process had already been triggered. The Court of Appeal held that the phrase "any time during the term of the lease" in the right of pre-emption clause must be modified to mean "at any time during the term of the lease other than when subclause (a) or subclause (b) has been engaged". The Court of Appeal held that the parties could not have intended to give Fitzroy a right that could be so easily frustrated by Technix, and that the interpretation of the contract that gave effect to the parties' intention did not flout commercial common sense.

The Court of Appeal dismissed the appeal and ordered that the appellant pay the respondent costs for a standard appeal on a band A basis, plus usual disbursements. The Court of Appeal certified for second counsel.

Orders