Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd

• Jurisdiction: New Zealand
• Judge: Ellen France,Randerson,White JJ
• Judgment Date: 21 August 2014
• Neutral Citation: [2014] NZCA 407
• Docket Number: CA24/2014
• Court: Court of Appeal
• Date: 21 August 2014

Between

Wilson Parking New Zealand Limited

Appellant

and

Fanshawe 136 Limited

First Respondent

136 Fanshawe Limited

Second Respondent

Fanshawe Capital Limited

Third Respondent

[2014] NZCA 407

Court:

Ellen France, Randerson and White JJ

CA24/2014

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal from a High Court decision ordered specific performance by the third respondent of a buy-back agreement — third respondent had agreed as part of a financing arrangement to buy the property at a discounted rate and to resell property on a specified date to the first respondent — appellant was the tenant and had a right of first refusal (ROFR) on any sale — to enable financing transaction, gave first respondent a letter waiving its ROFR in respect of the director or any party related to him — first respondent was company that held shares for director's trust and was to be the purchaser for the buy-back — appellant subsequently entered into an agreement with third respondent to purchase property at less than its market value — whether appellant was estopped from asserting an interest under its purchase agreement in priority to that of the first respondent — whether the first and second respondents were “related” parties — whether expectation-based relief should generally only be granted in cases where the claimant's losses could not be readily calculated or there were no obvious baselines.

Counsel:

D J Goddard QC and J Long for Appellant

N R Campbell QC and W A McCartney for First and Second Respondents

No appearance for Third Respondent

• A The appeal is dismissed.

• B The appellant must pay the respondents costs for a complex appeal on a Band A basis and usual disbursements, including travel and accommodation costs for both counsel. We certify for second counsel.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Randerson J)

Table of Contents

	Para No
Introduction	[1]
The detailed facts	[14]
The ROFR and related agreements	[15]
The first waiver letter on the sale to Capital	[18]
The agreements for sale and purchase	[20]
The waiver letter on the buy-back agreement	[23]
Events after the waiver letter	[25]
Wilson changes its mind	[31]
Capital and Wilson sign an agreement to buy the property	[43]
Estoppel principles	[44]
The terms of the waiver	[45]
The Judge's findings on the steps taken by Mr Haghi and Fanshawe in reliance on the waiver letter	[61]
Was the relief granted appropriate?	[68]
Equitable remedies — principles	[72]
The purpose of the doctrine of equitable estoppel	[72]
A flexible approach	[75]
Choice of remedies	[77]
The Australian authorities	[80]
The approach to relief in estoppel cases in the United Kingdom	[104]
Equitable remedies — conclusions	[113]
This case	[125]
Result	[138]

Introduction

1 This appeal raises issues as to the appropriate basis for equitable relief in cases of estoppel. It is concerned with competing agreements for the sale and purchase of a property at 136 Fanshawe Street, Auckland. The property was acquired in 2005 by Viaduct Square Ltd, a company controlled by Mr Mohsen Haghi. We will refer to the company as Viaduct. The property was leased to the appellant (Wilson) as a carpark. The lease contained a right of first refusal (ROFR) in favour of Wilson in the event that Viaduct wished to sell the property.

2 Mr Haghi proposed to develop the property to include new retail office space, apartments and a carpark. In 2007 he obtained resource consent to enable the development to proceed. However Mr Haghi and companies associated with him later encountered financial difficulties. In August 2012 he negotiated an arrangement which he described in his evidence as a “warehousing” of Viaduct's property. This involved a sale of the property to ASAP Finance Ltd (ASAP) and a second agreement under which a company associated with Mr Haghi (Fanshawe 136 Ltd) would buy back the property by September the following year at a price that allowed ASAP to recover a return on the funds it had invested.

3 The buy-back agreement was replaced not long afterwards but with a new vendor, Fanshawe Capital Ltd (Capital), a company associated with ASAP. Fanshawe 136 Ltd later nominated another company associated with Mr Haghi (136 Fanshawe Ltd) as purchaser under the buy-back agreement. Unless otherwise stated, we will refer to Fanshawe 136 Ltd and 136 Fanshawe Ltd as Fanshawe.

4 Both agreements for sale and purchase under the warehousing arrangement were subject to Wilson waiving its ROFR. 1 No issue arose about this in relation to the sale to ASAP/Capital because Wilson waived its ROFR. However, a dispute arose over the buy-back agreement and whether Wilson had failed to honour a promise to waive its ROFR in relation to that transaction.

5 Fanshawe relied on a letter from Wilson dated 20 September 2012 (the waiver letter) 2 to Mr Haghi's representative, Mr Lloyd Parrant in these terms:

Further to our letter to you dated 21 August 2012 [the waiver letter for the sale to ASAP] we confirm that if Mr Haghi or a related party were to repurchase the property at 136–142 Fanshawe Street, Wilson Parking would waive our Right of First refusal to purchase the property, subject to the clause remaining in effect for any further sales of the property.

6 Mr Haghi alleged that in reliance on this letter, he and Fanshawe spent money, time and effort on the development of the property and incurred substantial costs in connection with the finance needed to fund the buy-back. His evidence was that the waiver letter as well as Wilson's conduct thereafter encouraged him in the belief that Wilson was not interested in buying the property itself and that Wilson would waive its ROFR. At the time the waiver letter was given, Wilson's principal interest was to ensure that the development would generate sufficient customers for its carpark.

7 In July 2013, Mr Haghi learned that Capital had offered to sell the property to Wilson. He sought confirmation that Wilson would waive its ROFR in terms of the waiver letter so that the buy-back arrangement could proceed as proposed. Wilson did not provide a waiver of its ROFR. Without further advice to Mr Haghi, Wilson accepted Capital's offer to sell the property to it instead. The purchase price was the same as that payable by Fanshawe under its buy-back agreement. It is not in dispute that this price was at least $3 million below the then market value of the property.

8 Neither the buy-back agreement nor Capital's agreement to sell the property to Wilson has proceeded in consequence of caveats lodged and proceedings issued by Fanshawe against Capital and Wilson.

9 The primary relief sought in the proceedings was an order for specific performance requiring Capital to sell to Fanshawe under the buy-back agreement or damages in lieu. Declarations were also sought. First, that Fanshawe had an equitable interest under the buy-back agreement in priority to any equitable interest Wilson may have had under its agreement to buy the property from Capital. Secondly, a declaration that Wilson was estopped from denying it had waived its ROFR or from asserting an interest in the property in priority to that of Fanshawe. 3

10 In the High Court, Katz J found in favour of Fanshawe. 4 She made declarations in the terms sought by Fanshawe and ordered Capital to specifically perform the buy-back agreement and sell the property to Fanshawe. She also ordered that Wilson's caveat on the title to the property be removed or allowed to lapse.

11 Wilson appeals against the orders made on two main grounds:

• (a) While accepting that the waiver letter encouraged an expectation on Fanshawe's part, the sale to 136 Fanshawe under the buy-back agreement did not come within the scope of the expectation encouraged. In particular, 136 Fanshawe was not a “related party” of

  Mr Haghi. As well, Fanshawe did not provide information establishing that the development would be substantially the same as that earlier proposed.

• (b) Even if the sale was within the scope of that expectation, and an estoppel arose, the appropriate relief to satisfy the equity was a reliance-based award of equitable compensation, not fulfilment of that expectation by an order for specific performance.

12 Two other matters that were in issue in the High Court are no longer in dispute. First, the parties agree that if Wilson is effectively obliged to honour its promise to waive its ROFR under the buy-back agreement then there is no reason not to uphold the order for specific performance made in the High Court in favour of Fanshawe. Secondly, in that event, it is also agreed that the order removing Wilson's caveat from the title should be upheld.

13 Capital did not appear in the High Court having reached agreement with the other parties. The High Court was informed that Capital would abide the Court's decision provided that the only relief sought against it was an order for specific performance in favour of Fanshawe. In this Court, Capital initially advised it would abide the Court's decision but later filed a memorandum raising certain issues about the form of relief. The conclusions we have reached in this judgment make it unnecessary to address those issues.

The detailed facts

14 The basic facts of this case are not in material dispute. The summary that follows draws largely upon documentary evidence and the facts found in the High Court.

The ROFR and related agreements

15 At the time of trial, the property consisted of some retail shops and a carpark. Wilson's lease of the carpark at the property is dated 1 June 2011. The ROFR was expressed in standard terms:

10.9 If the Lessor wishes to sell the Land to any person during the term of this Lease it shall before offering the Land to any...