West Harbour Holdings Ltd v Waipareira Investments Ltd

JurisdictionNew Zealand
JudgeWoodhouse J
Judgment Date11 July 2012
Neutral Citation[2012] NZHC 1645
Docket NumberCIV-2011-404-5801
CourtHigh Court
Date11 July 2012
BETWEEN
West Harbour Holdings Limited
Plaintiff
and
Waipareira Investments Limited
First Defendant

and

Marina Resort Limited
Second Defendant

[2012] NZHC 1645

CIV-2011-404-5801

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Summary judgment application for discharge of mortgage over townhouses owned by plaintiff — townhouses mortgage secured $2 million lent by first defendant — parties entered into joint venture agreement for proposed development — element of capitalising involved release of $2 million debt — townhouses mortgage never discharged — requirement that second defendant (joint venture company) refinanced debt and title was transferred to it — whether plaintiff ready, willing and able to perform its obligations and therefore entitled to specific performance of the discharge.

Counsel:

R E Harrison QC for the Plaintiff

P J Dale for the Defendants

Mr R E Harrison QC, Barrister, Auckland

Mr P J Dale, Barrister, Auckland

JUDGMENT OF Woodhouse J

Table of Contents

Para No.

Introduction

[1]

Outline of submissions

[4]

The facts

[10]

The townhouses loan and the townhouses mortgage

[11]

The heads of agreement

[13]

The shareholders' agreement

[17]

The initial capitalisation

[20]

The conveyancing settlement

[26]

Other events after the joint venture agreement was made

[36]

Other matters

[46]

The law

Summary judgment principles

[51]

Mandatory interim injunction principles

[57]

Specific performance

[62]

Summary judgment compared with interim injunction

[76]

Affirmative defences

[78]

Conclusion on specific performance or injunction

[81]

Ready, willing and able to settle (reciprocity)

[85]

Discretionary and other matters

[97]

Appointment of receiver

[109]

Injunction relating to joint venture assets

[113]

Injunction in respect of Waipareira's mortgagee powers

[114]

Result and further directions

[115]

Introduction
1

In May 2007 the first defendant, Waipareira, lent $2 million to the plaintiff, West Harbour. This was secured by a mortgage over some townhouses owned by West Harbour at Clearwater Cove (the townhouses loan and the townhouses mortgage). In May 2008 West Harbour and Waipareira entered into a joint venture agreement for a proposed development in another area of Clearwater Cove. They incorporated the second defendant, Marina Resort, as the joint venture company. One element of the capitalising of Marina Resort involved Waipareira's releasing the $2 million debt owed to it by West Harbour. This asset of $2 million became Waipareira's initial investment in Marina Resort in return for West Harbour's giving Marina Resort a credit of $2 million on transfer of 13 units to Marina Resort.

2

The townhouses mortgage has not been discharged; that is to say, it remains registered against title to some of the apartments. Four years after the joint venture agreement was entered into West Harbour has now applied for an order that the townhouses mortgage be discharged. The order is sought on a summary judgment application for an order for specific performance or a permanent mandatory injunction and, in the alternative, on an interlocutory application for a mandatory interim injunction. There are other applications, which I will come to, but the applications for an order discharging the mortgage are the ones of primary concern.

3

The central issue on the application for discharge of the mortgage, stating it in broad terms, is: does release of the debt secured by the mortgage mean that the mortgage must be discharged; or does the joint venture agreement between the parties, made after the townhouses mortgage was granted, contain provisions which mean that West Harbour is not entitled to an order for discharge at this time, or without itself meeting particular obligations?

Outline of submissions
4

In agreements and correspondence between the parties acronyms are used. The pleadings and submissions have also used acronyms and some defined terms. In respect of acronyms, I prefer to use shortened versions of the names of parties. In quotations in this judgment from documents (including submissions and pleadings), where the document has an acronym I have substituted the abbreviated name without indicating the change.

5

The primary factual foundation for the plaintiff's argument for discharge of the townhouses mortgage, putting this in broad terms, has two main parts. The first is that the capitalisation of Marina Resort has been effected, so that West Harbour's debt to Waipareira secured by the townhouses mortgage has been paid. The second is that the joint venture is underway because of this capitalisation and because Marina Resort has been receiving the rent from the 13 units although title to them has not been transferred to Marina Resort.

6

An essential part of the argument of Dr Harrison QC for West Harbour was put as follows in his written submissions:

23. West Harbour's application does not seek specific performance of the Joint Venture Agreement in its entirety. All that it seeks is specific performance (or a mandatory interim injunction) to compel Waipareira to perfect its agreed initial capital contribution to the JV by discharging the Townhouses Mortgage. However, much of what Waipareira raises by way of its affidavits in opposition is directed at opposition to specific performance of the Joint Venture Agreement, overall.

7

Dr Harrison advanced three principal arguments in support of the application for discharge of the mortgage, and with these arguments also constituting a substantial part of the response to the arguments for Waipareira. The arguments, as would be expected, were developed carefully and fully. However, the essence may be conveyed by setting out Dr Harrison's own summary:

  • 25.1 The concluded contractual arrangements comprising the Joint Venture Agreement were sufficiently open-ended to allow West Harbour to embark on pursuit of the JV prior to any conveyancing settlement (including the agreed refinancing of the apartments mortgages and a transfer of title to Marina Resort). As argued in para 13 above, this step if embarked on necessarily contemplated and indeed in terms of the Joint Venture Agreement required — both in practice and in equity — a simultaneous crediting of the parties' respective initial contributions to the JV by way of its initial working capital, from the outset. Both West Harbour and Waipareira together acted on that very basis, by treating the 13 West Harbour apartments as assets of the JV, owned (in equity) by Marina Resort, prior to formal settlement and refinancing. Mutuality of contractual and/or equitable obligation (as between fiduciaries) means that Waipareira cannot take the benefit of West Harbour's agreed contractual contribution (by treating the 13 West Harbour apartments as a JV asset), while at the same time refusing point blank to allow its agreed initial capital contribution to be perfected by providing a discharge of the Townhouses Mortgage.

  • 25.2 Alternatively, West Harbour and Waipareira having agreed to postpone formal settlement and refinancing (including the discharge of the Townhouses Mortgage) because of a belief that a transfer of the West Harbour apartments to Marina Resort would jeopardise the WHT claim by the Body Corporate, ultimately agreed that settlement would proceed in any event on 30 June 2011. [Footnote omitted.] Rather than proceeding with the agreed settlement and refinancing, Waipareira wrongfully repudiate the Joint Venture Agreement and ever since has been in breach of contract as regards the agreed settlement/refinancing transaction. Being in continuing breach of contract, Waipareira cannot rely on its own wrongdoing as a justification for its continuing refusal and consequent failure to perfect its initial capital contribution by discharging the Townhouses Mortgage, which it continues wrongly to assert should serve as security (for what is unclear) pending an overall settlement of the apartments transactions, which it contends is no longer feasible in any event.

  • 25.3 Alternatively, the Townhouses Mortgage in fact and in law currently secures no debt or obligation of West Harbour owed to Waipareira in terms of the contractual and other documentation recording and creating the (former) security interest of Waipareira.

8

A primary submission of Mr Dale for Waipareira was that West Harbour is not entitled to a discharge of the mortgage unless, at the same time, certain obligations of West Harbour and Marina Resort are met. These obligations include in particular, but are not limited to, refinancing of existing mortgages granted by West Harbour over the 13 units followed by transfer of title of the 13 units to Marina Resort.

9

A further substantial part of Waipareira's submissions was directed to a range of matters bearing on the Court's discretion to withhold from West Harbour the relief that it seeks. Waipareira also advances three affirmative defences. These are noted later.

The facts
10

In the usual way, all of the evidence is contained in affidavits without cross-examination of the deponents. As a result, some conclusions expressed in this judgment on disputed facts are provisional. I have not indicated that a conclusion is provisional on every occasion that it is.

The townhouses loan and the townhouses mortgage
11

The townhouses loan from Waipareira to West Harbour was advanced on or about 18 May 2007. It was to be repaid on 18 May 2008. The loan, inclusive of interest for 12 months and other charges, was $2,492,782 (excluding cents). Some payments were made before 18 May 2008. The balance...

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