W H Holdings Limited v Wilding
[2015] NZHC 1173
•28 May 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2015-409-000232 [2015] NZHC 1173
BETWEEN W H HOLDINGS LIMITED
Plaintiff
AND
TIMOTHY WILDING First Defendant
KATHRYN ANN WILDING Second Defendant
Hearing: 25 May 2015 Appearances:
R J Hopkins for Plaintiff
P J Dale for First and Second DefendantsJudgment:
28 May 2015
JUDGMENT OF GENDALL J
Introduction
[1] The plaintiff seeks an interim injunction in relation to a Grazing Licence dated 24 February 2015 (the 2015 Grazing Licence) held by the first and second defendants with the Department of Conservation (DOC). This 2015 Grazing Licence grants, for 10 years, use of an area of DOC land which includes approximately
17 hectares (the DOC 17 hectares) adjacent to a farm property owned by the plaintiff. This DOC 17 hectares land is also beside the Conway River mouth in Marlborough.
[2] In its application for an interim injunction here the plaintiff seeks from the
Court the following orders:
W H HOLDINGS LTD v WILDING [2015] NZHC 1173 [28 May 2015]
(a) A declaration that the first and second defendants hold the 2015
Grazing Licence on trust for the plaintiff as if the plaintiff was the person named in the licence; and
(b)An injunction to restrain the first and second defendants and parties related to them from:
(i)Exercising the rights of a concessionaire under the licence other than with the express permission of the plaintiff; and
(ii)Preventing the plaintiff, its servants or agents from accessing and grazing the land in accordance with the licence.
[3] The plaintiff’s application for an interim injunction is opposed by the defendants.
Backgrounds facts
[4] The parties to this proceeding and their related entities have been involved in business relationships dating back to 1996. The plaintiff company, which carries on business as an owner of farmland, has as its shareholders and directors Bee Teck Hoong (Mr Hoong) and Chun Wing Wong (Mr Wong) who reside in Singapore. The first and second defendants are farmers. In 1996 the first defendant agreed to assist Mr Hoong and Mr Wong, in locating farmland for the plaintiff to purchase. He arranged an inspection for Mr Hoong and Mr Wong of a farm property owned by Mr Nicholas Anderson (Mr Anderson) which adjoins the DOC 17 hectares licence block in issue here. That farm property, known as Lagoon Flat, Conway, (Lagoon Flat) comprised a total of 269.7666 hectares.
[5] The plaintiff then entered into an agreement to purchase the Lagoon Flat property from Mr Anderson or his interests. The purchase related to an area of
252.3666 hectares of freehold land, together with an assignment of the 17 hectares Grazing Licence held at the time by Mr Anderson with the Minister of Conservation. This Grazing Licence for all intents and purposes related essentially to the same
DOC 17 hectares land at the Conway River mouth which adjoined Mr Anderson’s
freehold land.
[6] After entering into the purchase agreement for the Lagoon Flat farm, the first defendant and the plaintiff ’s shareholders agreed to form a business together to breed and farm angus cattle. A company, Te Mania Livestock Limited (TML), was formed (and incorporated on 15 April 1997) for this purpose. The shares in TML are held as to 25% by the plaintiff, 40% by the first and second defendant, 10% by Mr Wong,
15% by Mr John Harrington (Mr Harrington) and 15% by Mr Hong Weigou.
[7] TML then took a lease of the Lagoon Flat property from the plaintiff on some basis and grazed it with TML stock. The first defendant, it appears, was the “man on the spot” and managed the grazing and farm ownership matters, given that Mr Hoong and Mr Wong resided in Singapore.
[8] The purchase of Lagoon Flat by the plaintiff was settled on 20 March 1997. Since that time, the first defendant in 2003, on behalf of the plaintiff, arranged with DOC a new grazing licence (the 2003 Grazing Licence) for the DOC 17 hectares land. This was for a period of five years, expiring 30 June 2007, at an initial concession fee of $250 plus GST per annum increasing to $500 plus GST per annum from 1 July 2003. The 2003 Grazing Licence, which was signed on behalf of the plaintiff by the first defendant purporting to be one of its directors, provided that the plaintiff would not transfer, sub licence, assign, mortgage or otherwise dispose of its interest under the licence. As it had done since 1996, TML continued to graze this DOC 17 hectares land from 2003 as part of its lease arrangement with the plaintiff.
[9] Then, on 30 June 2007 the 2003 Grazing Licence with DOC expired. Nevertheless thereafter, it appears that TML simply continued to graze the DOC 17 hectares land right up to late 2014 or early 2015. It is presumed it did so pursuant to its continuing lease arrangement with the plaintiff for the entire property.
[10] It is useful at this point to note as an aside that the present directors of TML are the first defendant, Mr Hong Weigou, Mr Hoong and Mr Wong. Alternative directors for the two Singaporeans have been nominated and act at present, however.
These alternative directors are Mr Harrington and his partner, Sarah Margaret Adams
(Ms Adams).
[11] From the outset in 1996, it seems relations between the plaintiff, Mr Hoong and Mr Wong, on the one hand, and the first defendant and his interests, on the other, were good. This changed however relatively recently in about 2014. At that later point the parties fell out in a major way.
[12] This culminated on 10 October 2014 in the plaintiff giving notice to TML
that it was terminating TML’s lease of the Lagoon Flat farm property from
31 October 2014.
[13] On 24 October 2014 the plaintiff then entered into an agreement to lease the Lagoon Flat farm property, including the DOC 17 hectares land to an outside third party, Terra Firma Land Company Limited (Terra Firma). The first and second defendants (they say, on behalf of TML), have taken objection to this. As I understand it, proceedings have been issued in this Court seeking, amongst other things, permission for the defendants to bring a derivative action in the name of TML against the plaintiff for an alleged breach of TML’s lease. They say this lease included in favour of TML a first right of refusal to lease the Lagoon Flat farmland on expiry of the lease, which the plaintiff has not complied with. In response, the plaintiff disputes that there was any enforceable lease at all, and, says even if there may have been, that it did not contain any first right of refusal. In addition, consequent upon the major overall fall-out between the parties, other proceedings have been commenced in this Court seeking orders that TML be liquidated or, alternatively, for the shares in TML to be purchased by one or other of the interests concerned.
[14] Shortly after October 2014, in early 2015, another significant event occurred. This followed a private approach being made by the first defendant to DOC, whereby the first and second defendants were successful in obtaining a new Grazing Licence over the DOC 17 hectares land in their names personally. That new 2015
Grazing Licence (the 2015 Grazing Licence) was signed on 24 February 2015. It provided for the licence to commence on 1 March 2015 and to expire on 28 February
2025. The licence also specified that the first and second defendants would not transfer, sub licence, assign, mortgage or otherwise dispose of their interest under the licence without the prior written consent of the Minister of Conservation. It appears that neither the plaintiff’s interests, nor Mr Hoong, nor Mr Wong, were advised of the 2015 Grazing Licence until the first defendant advised Mr Hoong of this on 6
April 2015 as I note below.
[15] Around 1 April 2015 the first and second defendants arranged for part of the
DOC 17 hectares land to be sown in kale. As I have mentioned above, on 6 April
2015 the first defendant emailed Mr Hoong. In this email the first defendant asked
him to advise the plaintiff’s lessee, Terra Firma, to remove its cattle from the DOC
17 hectares land as it was under a new licence agreement and had recently been sown down in winter feed for TML’s winter grazing programme. As a result, the present proceeding and this application for an interim injunction followed.
[16] One final matter needs to be mentioned. This is the fact that the DOC 17 hectares land adjoins a small portion of the Lagoon Flat farm property (probably containing about 15 hectares or so – although I am not fully sure of this). At present the lessee, Terra Firma, has difficulty in using this portion of Lagoon Flat as it is not fenced from the DOC 17 hectares block. Stock on this area of the Lagoon Flat property would therefore simply wander onto the area sown with kale which, understandably, is not satisfactory.
[17] Turning to the essential claim advanced by the plaintiff here, it is twofold. First, the plaintiff maintains that, by virtue of the relationship of the first defendant with the plaintiff, the first defendant owed the plaintiff fiduciary duties in relation to the Lagoon Flat property, which he has breached. These were, amongst other things, duties to act in the best interests of the plaintiff, to disclose relevant information to it, to avoid a conflict of interest, and not to personally profit from his relationship with the plaintiff. The plaintiff contends first, that the first defendant was its agent for the purpose of all negotiations with DOC and otherwise concerning the DOC
17 hectares block and grazing licences for this land, secondly, that he has breached his fiduciary duties to the plaintiff regarding this, and therefore thirdly, he holds the
2015 Grazing Licence on a constructive trust for the plaintiff.
[18] Secondly, and alternatively, the plaintiff contends that the first defendant here is in breach of s 9 of the Fair Trading Act 1986 in two ways. First, it is said that he has made false and misleading representations to DOC in his negotiations for entry into the 2015 Grazing Licence to acquire this licence. These were that he was affiliated with the plaintiff and/or TML, and that TML was the occupier of the DOC land. Alternatively, the plaintiff contends that the first defendant was in breach of the Fair Trading Act 1986 in that throughout he has made false and misleading representations to the plaintiff itself, misleading the plaintiff into believing it had the right to graze the DOC land at all times, and that issues concerning any new licence of this land would be and were properly attended to.
Interim injunction – the principles
[19] The approach to be taken to applications for interim injunctions is well settled. The decision is ultimately to depend on an assessment of the overall justice of the case – Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd.1
[20] Generally, in order to succeed, a plaintiff must show: (a) There is a serious issue to be tried;
(b) That damages will not be an adequate remedy;
(c) That the balance of convenience favours the making of the orders sought; and
(d)In considering all matters, the overall justice favours the making of the orders sought.
[21] The adequacy of damages as a remedy for a plaintiff has been emphasised on many occasions.
[22] As McGechan on Procedure notes at para HR7.53.08 regarding adequacy of damages for the plaintiff:
1 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA).
HR7.53.08 Adequacy of damages for the plaintiff
In American Cyanamid Co v Ethicon Ltd [1975] AC 396, [1975] 1 All ER
504 (HL), Lord Diplock said (at 408B-C, 510f-g):
“the court should first consider whether if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss. He would have sustained as a result of the defendant’s continuing to do what was sought to be enjoined between the time of application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage.”
[23] At this point it is useful also to mention generally the object of interlocutory relief sought by way of interim injunctions. This is noted in McGechan on Procedure at para HR7.53.02 as follows:
The grant of an interlocutory injunction is a temporary and discretionary remedy. Its purpose is to protect plaintiffs against injury by violation of their rights for which they could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in their favour at the trial. A plaintiff’s need for such protection must be weighed against a defendant’s need to be protected against injury resulting from being prevented from exercising legal rights for which the defendant could not be adequately compensated under the plaintiff’s undertaking in damages if the uncertainty were resolved in the defendant’s favour at the trial. The Court must weigh one need against another and determine where “the balance of convenience lies…”
Summary of outcome
[24] Turning to the case before me, at the outset I need to say that this application can be quickly disposed of and must fail. I reach this conclusion, for two principal reasons. First, as I see it, damages are an adequate remedy for the plaintiff here, if indeed the plaintiff ultimately will be seen in the substantive proceeding as significantly wronged by the defendants’ actions and these are actionable. And, secondly, this is a case, given first, the complex nature of relationships between these and related parties and, secondly, the defendants’ unequivocal confirmation that they hold the 2007 Grazing Licence, not personally, but on behalf of the jointly held company TML where, in my view, matters can be resolved, including a resolution of
issues over related substantive concerns before the Court, without the need for the urgent interim relief sought here.
[25] As to this second aspect, it is significant in my view that a large portion of the DOC 17 hectares land has been planted in kale as a winter feed crop which the defendants say is to be utilised solely for TML’s stock. Grazing of this area in the immediate future will therefore be by TML stock and, given the shareholding in TML, all parties here effectively have some interest in this. Any assessment of damages that may follow can be addressed later.
[26] It follows, therefore, in my view that when a final conclusion of what are clearly acrimonious disputes between these and related parties over a wide range of issues is reached, all matters can be properly addressed including questions over ownership and use of the 2015 Grazing Licence. Appropriate damages awards, if any, can then be made.
[27] I turn now to consider the requirements for the plaintiff to succeed here as outlined in para [20] above.
A serious issue to be tried?
[28] I have outlined the plaintiff's essential claim in this case against the defendants based on an alleged breach first, of fiduciary duties and secondly, of obligations under the Fair Trading Act 1986 at [17] above.
[29] On these aspects, Mr Dale for the defendants contended that there are real inadequacies with the plaintiff’s evidence here and fundamental difficulties with its case. One of these difficulties, he said, is the fact that the plaintiff is at fault in that it has purported to assign a licence to use the DOC 17 hectares land to the non-party Terra Firma (by including this area in the Terra Firma lease), in spite of the fact that its original licence had expired in 2007 and that, in any event, DOC's consent was always essential to any assignment. Further, Mr Dale noted that the Terra Firma lease of the Lagoon Flat farm was originally for a period of only six months from November 2014 and was renewed for a final period of six months expiring in November 2015. The renewal to November 2015, it seems, also confirmed that
despite what the lease said, the lessee Terra Firma, would not have access in the meantime to the DOC 17 hectares land for that renewed period.
[30] Mr Dale also raised issues concerning whether on the evidence a fiduciary relationship did exist (or continue at the operative time) between the first defendant and the plaintiff, either as a status-based relationship with the first defendant being an agent of the plaintiff, or otherwise as a factually-based relationship. Then, Mr Dale queried whether the Fair Trading Act 1986 had any application in this case, as he said in neither instance pleaded by the plaintiff were representations made to it. Next, Mr Dale suggested first, that the first defendant’s relationship with the plaintiff and its directors was purely an arms-length commercial one and not a fiduciary relationship and secondly, that in any event any fiduciary obligations the defendant did owe were to TML and not to the plaintiff. Lastly, Mr Dale raised issues of contributory negligence (he noted that the plaintiff had acknowledged it had been remiss in not ensuring the DOC licence for the DOC 17 hectares land was regularly renewed) and limitation under the Limitation Act 2010 (he suggested that the first defendant had not acted for the plaintiffs in any capacity whatever since about 2008).
[31] Be that as it may, and without definitely deciding these questions, for present purposes I am prepared to proceed on the basis that the plaintiff has done enough in this case to show that there is a serious issue to be tried. What does seem clear is that issues may arise over the timing of the first defendant’s acts in making his approach to DOC to obtain the new 2015 Grazing Licence. I say this given that these acts occurred shortly after the plaintiff terminated its lease with TML consequent upon the major falling out between the parties. There also seems little doubt that the first defendant did not advise the plaintiff of the position concerning the DOC licence at this operative time, and also that without notice he proceeded to have the DOC 17 hectares land planted with the kale crop.
[32] In contrast, however, the first defendant has clearly stated in his evidence that the current 2015 Grazing Licence in his and his wife’s name is held for TML (and TML also presumably owns the kale crop planted there) and thus will form part of any final wash-up between the parties when substantive matters concerning TML are before the Court.
[33] Given the outcome I reach in this case as outlined at [38] following, I will proceed therefore on the basis that the plaintiff has done enough here to show that there is a serious issue to be tried.
Damages as an adequate remedy?
[34] The position is well settled that, where damages are an adequate remedy for the plaintiff, injunctive relief will not be granted. In this case, Ms Hopkins for the plaintiff maintains the plaintiff is facing a damages claim for breach of lease from its new tenant, Terra Firma, because of two particular matters:
(a) The plaintiff’s inability to provide access to, and use of, the DOC
17 hectares land as part of the lease (despite it purporting to include this area in the lease); and
(b)The practical difficulty faced by Terra Firma in utilising that area of the Lagoon Flat property adjacent to the DOC 17 hectares land because of the fact that this latter block now sown in kale is not fenced.
[35] On these aspects, Mr Dale says that any claim by Terra Firma has not as yet got off the ground, nor have any damages been identified by it. There is therefore no evidence before the Court of actual loss being suffered by the plaintiff here. Indeed, it is even suggested that, given the lease to Terra Firma was only for six months from November 2014 with just one six months right of renewal ending November 2015 and, for the renewed six month portion Terra Firma has acknowledged that the DOC
17 hectares land is to be excluded, any possible loss and damages claim must be seen as minimal.
[36] Turning now to the suggestion that refusing an interim injunction would render that portion of the Lagoon Flat land immediately adjacent to the DOC 17 hectares land useless, in my view this is not necessarily the case. Although the legal boundary between these blocks of land presently is not fenced and is a long one, some interim arrangement by way of electric fencing might be instituted (admittedly
at a cost) if indeed the adjacent land is of significant grazing value at this early winter time.
[37] And, in any event as I see the position, given that the DOC 17 hectares land is acknowledged to be held for TML, any adjusting damages relating to this can be resolved in the final wash-up between these and related parties. I reach this conclusion particularly in the knowledge that the plaintiff here is a significant shareholder in TML. It does seem too that TML has effectively had the use of the DOC 17 hectares land under a longstanding arrangement since 1996, and the first defendant gives an assurance that it is this which is simply continuing. As Barker J
noted in Bond & Bond v Fisher & Paykel Ltd2 the fate of a longstanding arrangement
(which does anyway benefit in part the plaintiff to a measurable extent) ought not to be decided at an interim injunction hearing.
[38] If the plaintiff, after a final substantive determination of this matter at trial or otherwise, is found to succeed in its present claim against the defendants, I am satisfied the Court can adequately compensate the plaintiff in damages. As I see it, this is a proper response here in lieu of granting the plaintiff the interim injunction sought. For this reason, and on all the evidence which is before me, I conclude that damages here will provide an adequate remedy and therefore the present application fails.
Balance of convenience/overall justice?
[39] It is clear from the authorities that the “balance of convenience” is something more fundamental than mere convenience. What is at issue here is what is more appropriately described as “the balance of the risk of doing injustice”.3
[40] In this area Mr Dale, for the defendants, contends there are powerful obstacles in the way of the plaintiff’s claim. He notes that the interests of DOC need
to be considered and that in his view the first defendant, on behalf of TML, makes
2 Bond & Bond v Fisher & Paykel Ltd [1986] 2 TCLR 79.
3 Mitre 10 (New Zealand) Ltd v Benchmark Building Supplies Ltd [2003] 3 NZLR 186 (HC) at
191; Auckland International Airport Ltd v Air New Zealand Ltd [2006] 9 NZCLC 264, 179 (HC).
out at least as good a claim for the DOC 17 hectares land in issue here as does the plaintiff.
[41] On the issue of the impact on third parties, on its face Terra Firma would seem to be an innocent third party. It is clear that currently Terra Firma as the present lessee of the Lagoon Flat farm is being deprived of use of land it thought it had a right to farm. This is not only the DOC 17 hectares land but also, given the practical obstacles that exist, the small area of land adjacent. On this aspect, however, I have noted above reasons why the issues concerning this adjacent land might be appropriately remedied at this point. What is clear though is that the lease to Terra Firma only runs until November 2015 and certainly, as I have noted above, damages, if any, can be quantified in the overall wash-up between these warring parties.
[42] As to questions of clean hands, it may well be ultimately that the motives of the first defendant and second defendant here, in taking the steps they have, do not bear close scrutiny. That is a matter, however, for proper consideration later when the substantive hearing of this and all other matters is to take place.
[43] The status quo in this case, as I see it, simply requires that the existing kale crop sown on the DOC 17 hectares land should come to maturity and be grazed by TML stock in the meantime. As noted above, TML has had the use of this area in the land it has grazed as part of Lagoon Flat for many years, no doubt with the approval of all involved in TML including the plaintiff. A final wash-up adjustment by way of damages is able to be concluded when the dispute between these and related parties, on the wide-ranging issues concerning their disintegrating business relationships, is resolved. Any potential for financial injury to the plaintiff, as a result of the decision I am now making to refuse the interim injunction it is seeking, can be properly addressed then.
Outcome
[44] For all the reasons outlined above, the present application for an interim injunction fails. The matters at issue between these parties should now go to substantive hearing. There, all the facts can be properly argued and considered and
decisions made relating to the overall dispute of all issues between these parties. And preserving the status quo can be achieved in this case by TML continuing to farm the DOC 17 hectares land in the interim. I have reached the point in this case where I am satisfied that overall justice favours refusal of this temporary and discretionary remedy of interim injunction protection sought by the plaintiff.
[45] As to costs, these are reserved. If the parties are unable to reach agreement on the question of costs, they may file memoranda sequentially and, in the absence of any party indicating they wish to be heard on the matter, I will decide the question of costs based on the material then before the Court.
[46] To further progress this substantive proceeding, I direct the Registrar to liaise with counsel to arrange a directions telephone conference at the first reasonably available opportunity to consider timetabling to trial this and the related matters affecting these parties.
...................................................
Gendall J
Solicitors:
Lane Neave, Christchurch
Paul Dale, Auckland
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