Whangarei Leasehold Owners Association Incorporated v Whangarei District Council HC Whangarei CIV 2011-488-837
[2011] NZHC 1794
•15 December 2011
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV 2011-488-837
UNDER the High Court Rules
IN THE MATTER OF an application for an injunction
BETWEEN WHANGAREI LEASEHOLD OWNERS ASSOCIATION INCORPORATION
First Plaintiff
ANDCULHAM ENGINEERING COMPANY LIMITED
Second Plaintiff
ANDPORT ROAD ARMS LIMITED Third Plaintiff
ANDWHANGAREI DISTRICT COUNCIL Defendant
AND UNDER Part 30 of the High Court Rules and the
Declaratory Judgments Act 1908
IN THE MATTER OF an application for Judicial Review
BETWEEN WHANGAREI LEASEHOLD ASSOCIATION INCORPORATION LIMITED
First Plaintiff
ANDCULHAM ENGINEERING LIMITED Second Plaintiff
ANDPORT ROAD ARMS LIMITED Third Plaintiff
ANDWHANGAREI DISTRICT COUNCIL Defendant
Hearing: 13 December 2011
WHANGAREI LEASEHOLD OWNERS ASSOCIATION INCORPORATION V WHANGAREI DISTRICT COUNCIL HC WHA CIV 2011-488-837 15 December 2011
Appearances: W W Peters and H S MacDonald for Plaintiffs
G J Mathias and K E Candy for Defendant
Judgment: 15 December 2011 at 5:15 PM
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 15 December 2011 at 5:15 pm
pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date: ...................................
Solicitors: Wayne Peters Lawyers, P O Box 5053, Whangarei 0140 email: [email protected]
Thomson Wilson, P O Box 1042, Whangarei 0140 email: [email protected]
[1] The second and third plaintiffs are lessees of parcels of land in Whangarei. The defendant owns the reversions in respect of that land (“reversions”). The plaintiffs seek an interim injunction, on a “Pickwick” basis, to restrain the defendant from the further marketing of and/or entering into an agreement for sale and purchase with any third party in respect of the reversion of the land leased by the second and third plaintiffs, until the defendant has first offered to sell the said reversion to the second or third plaintiff as the case may be at current market value.
[2] The plaintiffs also seek an order that an independent valuer determine the current market value of the reversion of the land.
[3] The defendant is presently seeking tenders in respect of the reversions in issue as between the second and third plaintiffs and the defendant. The defendant is also seeking tenders in respect of the reversions of other sites leased to other lessees. At the time I heard argument, the only lessees who were parties to the proceedings were the second and third plaintiffs. Thirteen more lessees have since applied to be joined as plaintiffs to the proceedings and have filed undertakings in damages. Given the decision I have reached on the application, I do not propose to make an order joining those parties at present.
[4] Subject to any extension, tenders close at 4:00 pm on 16 December 2011, that is tomorrow, although I understand from a memorandum of counsel for the plaintiffs dated 14 December 2011 that the defendant proposes to extend that period to
4:00 pm, 19 December 2011.
[5] I heard argument on the application for interim injunction on 13 December
2011. At the conclusion of the hearing the defendant undertook not to enter into any agreement to dispose of the reversion in any of the affected sites before 9:00 am,
16 December 2011.
Facts
[6] As I have said, the plaintiffs are lessees of properties in Whangarei. Copies of all the leases are not in evidence and, as I understand it from counsel, there are
some differences between the precise terms of each lease. That said, all are perpetually renewable for terms of 21 years and all provide for there to be one or more rent reviews within each 21 year term. Neither the second or third, nor any other lessee to whom I have referred, has an option to purchase the reversion to the land they lease or a right of first refusal in respect of that reversion.
[7] There was no evidence before me from the defendant. However, it appears from the evidence filed on behalf of the plaintiffs that in the early part of 2010 the defendant began to consider disposing of the reversions. The defendant wrote to some or all of the affected lessees advising them that it was considering the sale of the reversions and that, if it resolved to sell, it:
... intends to offer [the reversion] to the current lessee in the first instance i.e. we do not intend to sell our interests to a third party without offering it to the current [lessee] first. ...
[8] The defendant advised that a lessee could lodge an expression of interest in acquiring the reversion of the site for which they held the lease. It appears that many lessees did so, including the second and third plaintiffs. The defendant acknowledged those expressions of interest and said it would be in contact in “the near future to commence negotiations”.
[9] In a publication dated 13 July 2010, Mr Simpson, the Chief Executive of the defendant, wrote as follows:
Although lessees do not have a right of first refusal, [the defendant] believes on behalf of its ratepayers that it should give our local businesses this right.
The sales process is driven by independent valuations of a fair price to the ratepayers and the lessees, and we look forward to concluding the disposal of these properties in the ratepayers’ best interests.
[10] In early August 2010, the defendant made an offer to each affected lessee to sell to that lessee the reversion in land leased by that lessee. In its offer, the defendant said that it had arrived at the price by taking the “current value” of the freehold interest and adding a “market premium” to address particular factors.
[11] From the evidence, it appears that many lessees, including the second and third plaintiffs, were not willing to accept an offer to sell at that price.
[12] In March 2011 the defendant wrote again to lessees and advised that the premium referred to in the earlier offer had been 40 per cent of current market value, that the defendant did not propose to vary that premium but that the defendant was willing to offer a form of “vendor finance” in respect of the premium. It is not entirely clear from the letter, but it appears that the defendant re-offered the reversion for sale at the price previously offered in August 2010. Also in this letter of March 2011, the defendant advised that it intended to offer all remaining reversions for sale by tender on the open market if agreement was not reached prior to
30 April 2011.
[13] There were then discussions and meetings between a representative of some or all of the plaintiffs and the defendant.
[14] On or about 3 October 2011, CBRE (Agency) Limited (“CBRE”), acting for the defendant, wrote to lessees who had not accepted an earlier offer to sell. The letter made a further offer to sell, at a price which the letter advised was based on a recent valuation of the reversion, that valuation having been undertaken by CBRE’s valuation and advisory services personnel. A summary of the valuation was attached to CBRE’s letter. Offerees were advised that they had until 4 November 2011 to exercise (presumably, accept) the offer.
[15] Some lessees accepted that offer to sell. Others did not and some of those others appear to have made counter offers to buy. The defendant did not accept the counter offers in evidence, but it appears from a further letter from CBRE dated
2 November 2011 that the defendant was willing to allow any party who had counter offered a further opportunity in which to accept the offer to sell first made in October
2011.
[16] Prior to 4 November 2011, the defendant, through CBRE, began to market the reversions for sale. That sales process has continued since. In addition, the defendant issued conditions of tender on or about 12 December 2011. It is a condition of tender that any tender which is submitted is a continuing offer and irrevocable until 23 December 2011. A tender may be made in respect of one or
more sites. A lessee may make a tender for the reversion of the land they lease or for any other reversion, if they wish.
Serious issue to be tried
[17] The plaintiffs plead causes of action as follows: (a) breach of contract;
(b) equitable estoppel; and
(c) negligence;
[18] In addition, the plaintiffs seek judicial review of the defendant’s decision to offer the reversions for sale to third parties before offering to sell each reversion at current market value to the lessee of the land.
[19] In so far as concerns the alleged breach of contract, the plaintiffs allege that the defendant and each lessee entered into a contract (referred to as a process contract) in or about March 2010, pursuant to which contract the defendant was required to give each lessee the first right to purchase the reversion in respect of the land they leased.
[20] The plaintiffs also allege that in July 2010 the parties agreed that the price at which the reversion would be offered would be current market value.
[21] In support of this cause of action, counsel for the plaintiffs referred me to Pratt Contractors Ltd v Palmerston North City Council and Markholm Construction Ltd v Wellington City Council.[1]
[1] Pratt Contractors Ltd v Palmerston North City Council [1995] 1 NZLR 469 (HC) and Markholm
Construction Ltd v Wellington City Council [1985] 2 NZLR 520 (HC).
[22] On the evidence before me, I am not satisfied that there is a serious issue to be tried on this first cause of action. The most that can be said is that the defendant
made a statement in March 2010 as to its intended course of action, namely that it proposed to offer the reversion in each site to the lessee of that site. In July 2010 the defendant said it would make an offer at a fair price, “driven” (presumably determined) by an independent valuation, that price to be fair to ratepayers and to the lessee concerned. A “fair price” in those circumstances might be taken to be current market value. I am not satisfied, however, that that statement was in any way binding on the defendant. In my view it was entirely gratuitous.
[23] This is not a case where the defendant solicited offers to purchase or encouraged parties to incur the expense of making an offer. In that way, the factual situation is immediately different from the situations in Pratt and Markholm.
[24] Even if I am wrong on that, on the evidence it is not clear to me that the defendant has failed to do that which it said it would do. From the evidence, the valuation advice which the defendant has received is substantially different from that which the second and third plaintiffs and other lessees have received. Which valuer is closer to the mark of current market value (if that indeed is the mark to be struck) is unknown and would be a matter for expert evidence. All that can be said at present is that there are substantial differences.
[25] Turning to the second cause of action, I am not satisfied that there has been any detrimental reliance on the statements made by the defendant sufficient to ground an estoppel. Counsel for the plaintiffs submitted that the second and third plaintiffs and other lessees had incurred costs in terms of valuation and legal advice. To the extent these costs were incurred, they were incurred in responding to the offers to sell. I do not consider them to be acts of detrimental reliance made as a result of the initial statements made by the defendant. It follows that I am not satisfied there is a serious question to be tried on the estoppel cause of action.
[26] Likewise on the third cause of action in negligence. In their statement of claim, the plaintiffs contend that the defendant owed them a duty of care, to treat them fairly and in good faith and conduct the process of offering the reversions for sale in an open and transparent manner. I am not satisfied there is a serious issue to be tried on this cause of action. Such a duty, between parties who are negotiating a
commercial transaction, would be novel, even allowing for the duties imposed on the defendant as a local authority.
[27] As for the fourth cause of action, I am again not persuaded that there is any serious question to be tried. As I have said, I consider the statements of intention that the defendant made were gratuitous. I do not consider that those statements or other conduct on the part of the defendant would be likely to give rise to a legitimate expectation as alleged.
Balance of convenience
[28] It appears from the evidence that, through its agents, the defendant has been marketing these properties since mid October 2011, although the defendant would not have known what the final offering would comprise until some time in November 2011. The period for tenders closes in a matter of days. I expect that there will be third parties who have lodged tenders already or that there will be third parties who are almost ready to lodge tenders.
[29] In my view the balance of convenience lies in allowing the tender process to run its course, particularly given the view that I take as to whether there is a serious question to be tried. If an injunction were granted but the plaintiffs did not succeed, some or all bidders might be lost to the defendant. Conversely, the second and third plaintiffs and any other lessee may lodge a bid if they wish.
Result
[30] I decline the application for interim injunction. I make no order for costs at present. If it wishes, the defendant may file a memorandum as to costs by
3 February 2012, with the plaintiffs to follow within two weeks thereafter.
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PETERS J
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