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Kumar v Lucina Investments Limited HC Auckland CIV 2002-404-1984 [2005] NZHC 1249 (9 March 2005)

Last Updated: 5 June 2020

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2002-404-001984

BETWEEN RICHARD RAJESH KUMAR
Plaintiff

AND LUCINA INVESTMENTS LIMITED
First Defendant

AND GARY JOHN PROHM AND GAYLE ANNE PROHM BOTH MANAGERS, AND GARY JOHN PROHM, GAYLE ANNE PROHM AND PROFESSIONAL TRUSTEE SERVICES LIMITED
Second Defendant

AND GARY PROHM MOTOR SERVICES LIMITED
Third Defendant

Hearing: 8, 9, 10, 11 and 16 November 2004 Appearances: Dhirendra Singh for plaintiff
David Chisholm and Rebecca Innes-Jones for first defendant Neville W Woods for second and third defendants

Judgment: 9 March 2005

JUDGMENT OF WILLIAMS J

In accordance with r 540(4) I direct that the Registrar endorse this judgment with the delivery time of ...10:00am ... on the ... 9^th ... day of ... March ... 2005

Solicitors:

Shean Singh, P O Box 10-018 Mt Eden Auckland, for plaintiff KPMG Legal, Private Bag 92101 Auckland, for 1^st defendant Rice Craig, P O Box 72 440 Papakura, for 2^nd and 3^rd defendants

Counsel:

David J Chisholm, P O Box 2629 Auckland, for 1^st defendant

RICHARD RAJESH KUMAR V LUCINA INVESTMENTS LIMITED And Ors HC AK CIV 2002-404-001984

[9 March 2005]

TABLE OF CONTENTS

Paragraph

Introduction

[1] The plaintiff, Mr Kumar, was the tenant of the front part of the property at 681 Mt Albert Road, Auckland, owned by the first defendant, Lucina Investments, from 1999 until evicted on 12 November 2002.

[2] On 7 December 2002 Lucina contracted to sell the whole of the property to the second defendants, Mr and Mrs Prohm, and a company run by their accountant, Professional Trustee Services Ltd (“the Maungawhau Trust”). The third defendant, Gary Prohm Motor Services Ltd, is now lessee of the front part of the premises at 681 Mt Albert Road.

[3] Mr Kumar sued Lucina alleging various breaches of an agreement to lease dated 6 March 2002 and seeking damages. They were reduced at the commencement of the hearing from $981,602 to $309,000. A second claim brought under the Fair Trading Act 1986 s9 sought orders declaring termination of the lease wrongful and that the Maungawhau Trust received 681 Mt Albert Road subject to the lease. Mr Kumar sued the second and third defendants alleging wrongful interference with the lease, seeking the higher of the same damages or Prohm Motor Services’ profit for 15 years. Mr Kumar’s fourth cause of action was, as he termed it, a proprietary claim in equity against the second and third defendants originally seeking relief against forfeiture of Mr Kumar’s lease and requiring the Maungawhau Trust to terminate the Prohm Motor Services’ lease and cease conducting businesses competing with Mr Kumar’s business. But on 11 November 2004 Mr Singh, counsel for Mr Kumar, sought leave to substitute the claim for damages in the other causes of action for all the relief originally pleaded in the proprietary claim in equity. For the second and third defendants, Mr Woods, their counsel, initially objected, but later withdrew that objection and the claim was amended accordingly.

[4] All defendants put the plaintiff to proof and other aspects of their defences will appear as this judgment proceeds.

681 Mt Albert Road – to 6 March 2002

[5] Lucina bought 681 Mt Albert Road from Lamb Service Station Ltd for
$500,000 by contract dated 28 May 2001, it having been nominated as purchaser by the signatory, Just Investments. The property was bought with vacant possession. It had formerly been leased to Shell Oil as a service station but the lessee did not renew its lease which terminated on 31 March 2001. Lucina had plans to restore the service station usage.

[6] The building on the property is one storey at the front and two at the rear. The front had been developed with a forecourt and usual facilities found in a service station. As far back as 8 November 1978 plans attached to an application for extension of the existing workshop and service station show the service station and canopy at the front, a new workshop midway back and a storage area at the rear. The conditional use consent of that date required on-site parking for 12 vehicles. The use of the rear two storey extension for storage was confirmed when a building permit was issued on 3 May 1979 and again in a Council letter to the then owner of 14 October 1980. Construction of a vehicle ramp to the upper floor of the two storey extension was consented to on 22 December 1986.

[7] The contract for Just Investments to buy the property was not due for settlement until 28 September 2001. That was partly to enable the buyer to check existing rights attaching to the land.

[8] At that time, Mr Kumar was in occupation of the front portion of the premises, using it for his business of vehicle repairs, tyre sales and inexpensive warrants of fitness. Mr Kumar described his occupancy rights as a sub-lease from Shell. They may, however, have been no more than an informal licence, at least after Shell’s lease ended. It is unnecessary to decide the true legal position since all parties are agreed Mr Kumar was in occupation, carrying on his business in the front and generally acting as custodian for the rest of the property. His occupancy may have been rent-free subject only to paying rates and outgoings. He knew his then rights ended on sale.
[9] Mr White is a director of Lucina. Now retired, for many years he was a partner in a leading Auckland law firm. After signing the contract, Lucina instructed a Mr Campbell, a planner then employed by Haines Planning Consultants Ltd, to advise on the site’s existing use rights and obtain a Certificate of Compliance. An application was lodged on 4 July 2001 and granted on 23 July for a “service station/workshop”. The accompanying parking layout plan showed 12 parking spaces six of which were on the first floor of the “covered storage area” accessed by the ramp. It is pertinent to record that at that stage existing use rights for the rear two storey building were only for storage ancillary to the proposed redevelopment of the front of the site. Any use of the two storey building other than for storage required a fresh resource consent.

[10] In association with what ultimately proved to be fruitless negotiations with a prospective tenant, Lucina on 21 August 2001 applied for resource consent to develop the site as a modern service station with an office, retail shop (described as a “convenience shop”) and tyre sales in the front and use of the two storey rear structure for associated parking and storage. That would necessarily have involved demolition of the existing service station and workshop and discontinuance of Mr Kumar’s existing workshop activity to counterbalance any increased activity resulting from the development. Auckland City processed the application on a non- notified basis and granted it on 30 November 2001. The decision specifically said it did not constitute building consent approval.

[11] In parallel with Lucina’s efforts to locate a tenant for the redeveloped service station, Messrs White and Kumar entered into negotiations over the possibility of the latter occupying the rear of the premises. There was a difference of view as to when those negotiations began but it seems likely they commenced between the granting of the resource consent on 30 November 2001 and the end of that year. Lucina had not then settled the purchase and on 19 December 2001 Mr White wrote to the vendor’s solicitors recording that Lucina required vacant possession but Mr Kumar had not then decided whether to lease the rear. According to Mr White, during the negotiations with Mr Kumar he expressed doubt whether, without separate resource consent, Mr Kumar would be able to use the rear for the type of business in which he was engaged. Negotiations continued in early 2002. According to Mr Kumar,
Mr White offered him the whole of the two storey building, advised him of the redevelopment in the front with the service station and claimed “Mr White told me the resource consent included my business use because he specifically talked to me about car parking for both of our businesses” and the businesses could co-exist as his car repair and tyre business previously co-existed with Shell’s service station.. The parties might need to co-operate with each other on that issue but Mr Kumar said he was aware Shell owned an adjacent site and suggested that if necessary extra parking could be obtained there. Mr Kumar said Mr White agreed to use his best endeavours to sort out any difficulties with the Council but if Auckland City made clear the two businesses could not co-exist, any lease to Mr Kumar would be terminated.

[12] Despite that, Mr Kumar accepted being told there were uncertainties as to whether his intended use of the premises would be permitted under the Resource Management Act 1991. That was the reason for cl 11 of their agreement ultimately being in the form it was.

Agreement to Lease dated 6 March 2002

[13] On 31 January 2002 Mr White sent Mr Kumar a draft agreement to lease. He returned it, signed and amended after discussion with his solicitor, Mr Singh. The final version was dated 6 March 2002. It provided for Mr Kumar to “lease the existing two storey building ... with yard area and ramp to second storey and r.o.w. to Mt Albert Road” for a term of six years from the “date of commencement” plus three rights of renewal of three years. The date of commencement was defined as the date Lucina’s architect provided a Certificate of Practical Completion for the “adjoining service station being constructed by the lessor”. Rent was to be $25,000
p.a. plus GST and outgoings commencing on the “date of commencement”, the first payment being six months after issue of the Certificate of Practical Completion and with rent being reviewed triennially thereafter. The parties agreed to execute a lease on the ADLS third edition form. The agreement then continued :

8. ADJOINING DEVELOPMENT: The lessee is aware that the lessor is about to develop a service station and convenience shop on the front of the property being acquired by it and that the tenant will suffer from the inevitable noise and disruption arising and that he

shall have no right of action for loss of use or disadvantage this may occasion and that the rent free period recognises the same.

9. TRANSFER OF BUSINESS AS A GOING CONCERN: The lessee is presently carrying on business as a motor mechanic and tyre retailer on the front of the property known as 681 Mt Albert Road as a tenant or under some arrangement with the lessors vendor. It is agreed that such tenancy or arrangement shall forthwith cease on the date of settlement of the purchase by the lessor which shall as provided herein be the commencement date of the lease. The lessor agrees as a matter of grace to allow the lessee to have reasonable time (estimated to one month) to shift his plant and machinery and stock to the premises as well as upgrade the same in association with the work that the lessor is to carry out on the premises as provided herein.

10. SIGNAGE: The lessor agrees to allow the lessee to erect such signage as necessary in compliance with ACC requirements and having regard to the reasonable requirements of the lessee of the service station to be erected on a pole sign at the front of the property and also signs on the boundary fence bounding the ROW access to the premises hereby leased.

11. BUILDING CONSENT: The lessor has been granted Resource Consent to the development of the service station and convenience shop on the front of the property and the overall parking for both business is provided for, which may require each lessee to liase [sic] with each other in that regard which cooperation shall be provided for in the lease of each lessee. Should the ACC refuse to grant a building permit because of the intended use of the premises by the lessee then the lessor may determine this agreement.

12. PREMISES UPGRADE: The lessor will at its expense carry out certain work upgrading the premises as follows :

(A) Widen the ramp as discussed and provide an improved handrail.

(B) Insert two windows with bars in the ground floor walls to provide improved lighting of a size and location to be agreed.

(C) Demolish that part of the red block wall to the extent that it projects beyond the convenience store building to be built by the lessor.

(D) Replace the two garage doors on the ground floor with doors from the existing service area used by the lessee at present or such other doors, as the lessor considers appropriate and install an ordinary door in the building under the ramp.

(E) Allow the Lessee to partially demolish the office situate in the ground floor.

(F) To remove all rubbish and repair or remove electric wiring.
(G) To paint the ground floor of the premises.

13. BUSINESS USE; Motor Mechanic, panel beater, rust repairer & tyre retailer provided the same are permitted uses under ACC Planning Ordinances.

[14] Attached to a draft dated 26 February 2002 but not to the 6 March document was a plan of the premises which all parties accepted as correct.

6 March 2002 – 30 August 2002

[15] Lucina settled on 2 April 2002 with Mr Kumar remaining in the front part of the site. Mr White said it was on an informal basis for one month under cl 9.

[16] Over the next two or three months, Lucina’s negotiations for a tenant for the proposed service station came to nothing because the expected throughput was regarded as uneconomic by the oil companies and the site’s narrowness posed access and turning difficulties. Messrs White and Kumar discussed the position, including the possibility of Mr Kumar leasing the whole property or buying it. Those discussions also came to nothing at that point.

[17] On 30 May 2002 Auckland City granted Lucina’s building and resource consent applications. The application had been lodged on 18 February and its undetermined status was a reason, Mr White said, for the way in which cl 11 was drafted. Mr White wrote to Mr Singh on 25 June 2002 saying :

“... negotiations were at an impasse and Lucina should either lease or sell the property to Mr Kumar, lease the rear to him on new terms, or Mr Kumar should vacate without compensation.”

A proposal in relation to one of those options was solicited.

[18] Mr White said the building consent allowed for all the development authorised by the resource consent – including demolition of the workshop for the convenience store - and thus did not affect the rear building. The resource consent required the continued use of the two storey building for storage and parking in accordance with existing zoning and planning approvals, and the resource and building consents did not deal with Mr Kumar’s business either as Mr Kumar was
not “on our horizon” at that point but was merely occupying the premises as custodian. Surprisingly given the number of documents produced, only page 1 of the building consent application was put in evidence. The balance of the form was not produced nor was the consent itself. That notwithstanding, Mr Kumar did not appear to challenge Mr White’s evidence as to its content.

[19] Correspondence continued between Lucina and Mr Singh. Mr Kumar remained in occupation. An offer to move to the rear of the premises in June 2002 was declined for the reason no move was required as no tenant was in sight for the new service station. On 10 July 2002 Mr Singh responded to Mr White’s 25 June letter, relying on the terms of the 6 March agreement, suggesting the resource consent to develop the service station would have complemented Mr Kumar’s business and saying he was prepared to move to the rear two storey building but only when all the work listed in cl 12 had been completed. An offer to lease the entire premises with a right to sublease was made, as was an offer to buy subject to vendor finance plus compensation for vacation “in the region of $350,000 plus”.

[20] Mr White’s solicitors responded on 10 July giving reasons why the service station proposal could not proceed, notifying of other proposed usages not involving motor vehicles and asking whether Mr Kumar wished to remain. That offer was rebuffed as not including payment of compensation on 11 July, a letter which was followed on 15 July with a requirement for access to the ground floor to enable painting. The balance of the upgrading work was promised including ramp widening as soon as possible after Mr Kumar took occupation of the two storey building. Mr Singh objected on 16 July on the basis that all the work in cl 12 had to be completed before Mr Kumar took occupation, only due a month afterwards under cl 9. Lucina’s position was that Mr Kumar had no right of occupancy of the front part of the site and was bound to move his business to the rear with any resource consent validating his use being a matter for him, particularly given that cl 40 of the ADLS lease said no express or implied warranties had been made by the landlord that the “premises are now suitable or will remain suitable or adequate for use by the tenant” or that the tenant’s use would comply with local authority requirements.
[21] By 25 July 2002 Mr Singh was advising Lucina that Mr Kumar was anxious to move into the rear premises but was unable to do so because of claimed breaches of the agreement to lease. Proceedings for specific performance were threatened. On 30 July he wrote to Lucina’s solicitors, again threatening specific performance proceedings relating to the 6 March agreement, said to be in response to a comment that Lucina was under no requirement to develop the service station and also objecting to the suggestion the balance of the property could be leased to a competitor, something Mr Singh suggested was beyond the terms of cl 19 of the ADLS lease. Lucina’s solicitor responded on 31 July saying it would proceed with the lease including the upgrading, following which Mr Kumar would be obliged to move immediately. The solicitor suggested the only business use listed in cl 13 permitted under Council Planning Ordinances was that of tyre retailer and any formal lease to replace the 6 March document would need to confine Mr Kumar’s permitted use accordingly. The reply of 7 August suggested the whole of 681 Mt Albert Road had existing use rights for a service station and workshop and that authorised all the uses in cl 13.

[22] Lucina’s solicitors responded on 30 August saying completion of the upgrading work was expected within a fortnight and at that point Mr Kumar would be required to vacate the front and shift to the rear. Complaints were made about Mr Kumar’s failure to pay outgoings on the premises from 30 November 2001. Permitted uses in the lease were suggested as obliged to mirror those in the agreement to lease. The argument against competitive use was rejected and Mr Singh was told the front of the property was to be refurbished and rental would commence from completion. If Mr Kumar wished to “discontinue with the new lease” agreement was likely.

[23] Enter Mr and Mrs Prohm, the Maungawhau Trust and their company.

[24] Mr Prohm is a qualified mechanic, unlike Mr Kumar. He and his wife have been running Prohm Motor Services since its incorporation in 1991 as a mechanical repair and service centre with an established clientele largely based on being an AA approved repairer. From 1991 Prohm Motor Services traded from leased premises at 947 New North Road. The lease ended on 31 December 2002 but the company had
a right of renewal to 14 May 2004 on giving three months prior notice. Accordingly, were Prohm Motor Services to renew its lease, notice had to be given before 30 September 2002.

[25] Mr Prohm was interested in 681 Mt Albert Road from well before 2002. He saw it as an ideal site for a business of his company’s type and size. Its location was attractively close to New North Road and to other areas where there were no other AA approved repairers. Accordingly on 12 March 2001, Mr Prohm wrote to Shell Oil expressing an interest in purchasing or leasing 681 Mt Albert Road. Shell referred him to the then proprietor to whom he wrote in similar vein on 28 March 2001. At that stage nothing came of the invitation to negotiate over lease or sale.

[26] Assisting Lucina in its efforts to obtain a tenant for the proposed redeveloped service station at 681 Mt Albert Road was a Mr Hooper, a director of Lucina and an experienced commercial real estate salesperson. He also acted for the Prohms in relation to their unsuccessful tender to buy 947 New North Road. Mrs Prohm then asked Mr Hooper to try and find premises suitable for Prohm Motor Services’ workshop and business and mentioned 681 Mt Albert Road because of the Prohms’ earlier interest. A few weeks later Mr Hooper gave Mr Prohm a draft contract for the purchase of 681 Mt Albert Road for $675,000 with possession on 30 August 2002. The purchaser was Mr Prohm or his nominee and the agreement was conditional on the purchaser’s satisfaction that the property would be suitable for its use having regard to Council’s requirements. The draft contract recorded that a copy of the 6 March agreement to lease and the correspondence between Lucina and Mr Kumar was attached.

[27] Quite when Mr Hooper gave Mr Prohm the draft contract is unclear but it seems likely to have been in about mid-July 2002. Mr Prohm gave the document to his solicitor, Mr Craig, and Mr Craig wrote to Lucina on 22 July 2002 saying that Mr Prohm was “very interested” in buying 681 Mt Albert Road “but not until the present impasse with the tenant Kumar is resolved”. In default of purchase, the letter said the Prohms would buy subject to Mr Kumar’s lease if all areas of disagreement could be resolved by a further lease. The letter said that “Mr Prohm is aware that it might take you some time to resolve all the outstanding issues with Kumar” and offered to
lease the front part of the premises with an option to buy the entire building within two years. The letter said Mr Prohm intended to exercise the option and “such two year period should give you ample time to resolve any outstanding matters with Kumar”. The letter concluded :

He [Mr Prohm] is happy to work in with you and assist you whilst the present impasse with Kumar is resolved, providing this leads eventually to his being able to purchase the entire property.

Mr Prohm said that while he was keen that his company buy 681 Mt Albert Road, it wanted no involvement in the dispute between Mr Kumar and Lucina and was only prepared to buy the property or take an option to purchase when all aspects of the Lucina/Kumar dispute had been resolved.

[28] On 30 August 2002 Mr and Mrs Prohm and Messrs White, Hooper and Craig met and discussed a possible lease with an option to purchase, outright purchase, or a lease of the front part of the property. The meeting was arranged following concern expressed by Mr Craig at the proximity of Prohm Motor Services’ renewal date. Most discussion took place between the solicitors but, in evidence, little was said by participants about the content of the meeting with all preferring to accept the accuracy of Mr Craig’s file note, despite Mr Craig not giving evidence. The note relevantly read :

General discussion about the present position. The existing tenant Kumar is to be moved to the back of the premises as soon as they are ready., The back premises should be completed within approx. two weeks.

The Lessor was made aware of Prohm’s deadlines i.e. they must exercise the right of renewal in respect of their present Mt Albert premises by 30 September 2002. The Lessor expects to resolve matters with Kumar in about two weeks, though this is by no means certain.

In respect of the dispute over the terms of the Agreement to Lease between Lessor and Kumar, Lessor is to have their Solicitors send a letter to Kumar advising the back premises will be ready in two weeks, but if he is unhappy about the changed circumstances (i.e. no petrol station at front), Kumar can walk away at this point without any cost to him i.e. there has been no rent to date, and he will not be charged for the rates and other outgoings. If Kumar does not want to walk away, the Lessor will agree to reduce the term of his lease to an initial one year, with rights of renewal, so that if things do not work out for him, he can leave after one year.

The Lessor repeated to the Prohms that the Lessor would sell the entire property to the Prohms at $675,000 plus GST (presumably zero rated), but

would not enter into any fixed agreements until Kumar’s position as above was known. Therefore it is possible that they would enter into a sale agreement in 2-3 weeks. Prohms put their position that they would not buy the property while there were outstanding problems with Kumar, but once things were sorted out they would buy at $675,000 plus GST.

Prohms also said that they would be prepared to rent with an option to purchase, though the Lessor was not prepared to accept same at this stage.

Lucina’s solicitor’s letter of 30 August would appear to have been written in consequence.

[29] At the 30 August meeting Mr Prohm was told the resource consent for re- development of the service station would not be implemented. As a result, sale to a different form of business was being discussed. That notwithstanding, both Messrs Prohm and White took the view that the existing resource consent for redevelopment of the site as a service station was of value to a purchaser.

[30] Mr Prohm said Mr White wanted to sell the building with the agreement to lease but Mr Kumar was in the front and the front was what he and his company required. He was happy for Mr Kumar to occupy the rear of the building but the Prohm interests did not want to get into the argument at all. They wanted Lucina to resolve the disagreement. All Mr and Mrs Prohm took from the 6 March document was that Mr Kumar was to occupy the rear building for at least 6 years.

[31] Mr and Mrs Prohm, their company and their trust then all had no further contact with Mr White or Lucina or 681 Mt Albert Road until after Mr Kumar had been evicted.

[32] Mr Kumar, however, does not accept that what occurred between Prohm Motor Services and Lucina in the period up to the 30 August meeting or thereafter until eviction resulted from ordinary commercial motives. He takes the view that from at least June/July 2002 onwards Mr and Mrs Prohm and their company and trust were taking steps to disturb his lease because, while his correspondence with Lucina was continuing, Lucina was also negotiating with the Prohms. He relies on the Prohms seeing a copy of the agreement to lease with the draft contract by 30 August at the latest and the limited time remaining for the company to exercise its
renewal option. He suggested Lucina was duplicitous in negotiating with him when it had decided not to redevelop the property as a service station and was negotiating with Mr Prohm. In a number of passages to which Mr Chisholm, leading counsel for Lucina successfully objected, Mr Kumar sought to infer from the course of correspondence ulterior motives on the part of the Prohms to interfere with his contractual position.

[33] As examples, he said he had done nothing before mid-2002 to cause the Prohms to dislike him but Mr Prohm had twice written letters to Shell and the owner “behind my back without me knowing”. “They had all motivations to harm me in each and every way where it was benefited to them.” “I have every reason to believe that because he was always in the back of his mind wanting to get the same premises where I was from 2001” Mr Prohm might hold malice towards Mr Kumar. Mr Kumar took from Mr Craig’s file note that Mr and Mrs Prohm were endeavouring to assist Mr White to get Mr Kumar out of the property and “from the beginning his aim was to get into the property at any cost”. He inferred that because Mr White’s prospective tenant had disappeared, he had no one to occupy the building, Prohm Motor Services’ lease was expiring, they had a long-term interest in 681 Mt Albert Road and “therefore they worked to the extent of evicting me and had [Lucina’s solicitor] given or told the truth on the first day of the Court on the injunction things would have been much brighter and more different”. He inferred from the draft contract Mr Hooper gave Mr Prohm, coupled with Mr Craig’s file note, that Mr Prohm was determined to “make sure that my lease was terminated illegally” even though he was entitled to obtain the best deal relating to the purchase.

[34] As a further example on which he particularly relied, Mr Kumar pointed to the fact that Lucina’s building consent was cancelled on 23 August 2002.

[35] That that occurred was acknowledged by Mr White but he said it was done without his knowledge and without Lucina’s instruction by his consulting engineers and architects because of a dispute concerning fees. The documentary record shows Auckland City wrote to the engineers on 23 August 2002 recording their letter of 6 August – not put in evidence - saying that because the proposed building work had not been carried out the building consent should be cancelled. The 23 August letter
said that had been attended to and a new consent would be required if work was to proceed later. As a result of the cancellation, fees and levies totalling $5575 were refunded by Council and paid to the engineers who, according to Mr White, partly used them in meeting the outstanding disputed fees. He said he knew nothing of the application to cancel the building consent or of its being granted until, at the earliest, about 10 days after the 23 August letter when the engineers sent him a cheque for the balance. But he was unable to recall the exact date he learned of the cancellation. A letter from his solicitors to Mr Singh of 30 September 2002 which showed he had not advised them of the cancellation by that date indicated, he suggested, he did not learn of the cancellation until after seeing the City’s 8 October letter.

[36] Though the engineers and architects did not give evidence, Mr White’s version of this incident was not seriously challenged and, unusual as it may be, it therefore remains uncontradicted.

30 August 2002 – 12 November 2002

[37] Following the 30 August meeting, Lucina and its solicitors were initially involved in two streams of correspondence.

[38] First, Lucina continued its correspondence with Mr Singh. He replied on 2 September to the 30 August letter, saying that if all works were completed and the ramp widened Mr Kumar would take occupation within a month. Liability for outgoings was disputed in terms of cll 3 and 5 of the 6 March document. The letter concluded by requiring a lease strictly in accordance with cl 13. Lucina’s solicitors responded on 6 September saying Mr Kumar was obliged to vacate the front of the premises by the end of the month given to shift his plant, again asserting liability for outgoings and generally reiterating Lucina’s earlier stance. Mr Singh replied on 18 September also repeating his earlier stance and asking for a draft lease.

[39] Secondly, in parallel, Lucina’s planning consultants wrote to Auckland City on 12 September. Given 681 Mt Albert Road was within Council’s Business 4/Mixed Use zone, the consultants enquired if a “change in use of the existing storage area to any alternative activity would require a resource consent” given a
residential zone within 30 metres and an inability for Lucina to utilise its service station resource consent if parking were reduced from that proposed. They also asked whether, if that occurred, Lucina could not implement its building consent. Apparently the planning consultants were then also unaware the building consent had been cancelled. Auckland City replied on 18 September, agreeing that in light of the plans attached to the resource consent the “existing storage at the rear of the site is to be used to accommodate the required parking” and any use of that floor space other than for that use would breach the resource consent. Any new activity on the site would require a variation to the approved consent or a new consent including alteration of conditions.

[40] Lucina’s solicitors sent copies of those letters to Mr Singh on 23 September saying :

As you are aware, clause 11 of the Agreement to Lease provides that the Agreement may be terminated by the lessor if your client’s intended use of the site places in jeopardy the resource consent or building permit in respect of the service station.

In the course of enquiring into the impact of your client’s proposed use on the resource consent, it became apparent that the two activities could not co- exist on the site.

... It would be unlawful for our client to act on the existing building permit with your client’s proposed use and it is clear that a new building permit application, based on the combined use of the site would be refused. In those circumstances, our client is entitled to terminate the Agreement. Please advise whether your client requires ours to go through the formality of applying for and being refused a variation to the existing building permit, before it exercises its right to terminate the Agreement, or whether your client will simply accept that this Agreement must come to an end.

[41] Mr Singh responded on 24 September suggesting the City’s 18 September letter contained no refusal to grant a building permit because of Mr Kumar’s intended use of the premises and saying under the agreement to lease both parties were obliged to endeavour to persuade Auckland City to a different view.

[42] That led to Lucina’s solicitors writing to Auckland City on 30 September in the following terms :

Our client has entered into an agreement to lease the rear of the premises for use as “motor mechanic, panel beater, rust repairer and tyre retailer provided the same are permitted uses under the ACC Planning Ordinances”.

However, the agreement to lease can be terminated by our client in the following circumstances :

“Should the ACC refuse to grant a building permit because of the intended use of the premises [the rear part of the property] by the lessee then the lessor may determine this Agreement.”

... our client has become concerned as to whether it can exercise its rights under the existing building permit for the development of the service station in the event that the lease agreement goes ahead. Your letter of 18 September seems to make it clear that the leasing of the rear of the premises as outlined above, would make it impossible for our client to exercise its rights under the building permit.

We have referred your response to the solicitor acting for the proposed tenant, but he seems unwilling to accept the inevitable, namely that the lease agreement cannot go ahead. Accordingly, so that it can be said that we have complied with the letter of the lease agreement, we would be grateful if you would treat this letter as a formal application to vary the existing building permit so as to permit the service station development at the front and the additional use of the premises at the rear. If, as we understand it, the position is that such variation is not available to our client, then a simple letter declining our request is all that is required.

[43] Mr Singh wrote to Auckland City on 3 October threatening litigation if it did not change its stance a view he repeated in a letter of the same date to Lucina’s solicitors.

[44] Auckland City replied to both in letters dated 8 October 2002. To Lucina’s solicitors, Council said :

In this letter you specifically raise the issue of lease termination based on a circumstance detailed in your letter.

The Building Consent process would, aside from the obvious fire and safety requirements of the Building code, look at the “change of use” under the Building Act, but additionally, look at the relationship of the development to the requirements of the District Plan.

In this specific case, as resource consent has issued, assessment would ensure the building consent was in strict accordance with the resource consent as it was approved. Should any additional infringements arise, or the building consent was not in accord with the approved resource consent, then pursuant to Section 35 of the Building Act, the consent would be “tagged” and identified that no inspections could occur until the outstanding issues had been resolved. The effect is, the building works could not proceed.

Obviously, if the building consent was lodged with an activity which compromised the required parking in the approved resource consent, then the building consent could issue, but subject to a Section 35 encumbrance. ...

Your request under paragraph 4 of your letter that

“... you treat this letter as a formal application to vary the existing building permit ... that such variation is not available to our client, then a simple letter declining our request is all that is required.”

It is noted that Building Consent application AC/02/00905 was cancelled on 23 August 2002 at the request of the agent. In this regard we are unable to “vary” that specific consent.

and to Mr Singh, Council replied :

You will appreciate that the resource consent that has been approved for this site indicates as part of the application, has been considered and assessed by the reporting planner and ultimately determined by the Planning Fixtures Sub-Committee on 30 November 2001, that the “existing storage at the rear of the site” is to be used to accommodate required parking for the activity prior to commencement.

If the consent holder cannot provide that parking in accordance with the approved plans and conditions, then they are unable to give effect to the resource consent without gaining a further resource consent for the shortfall in parking that would ensue.

Similarly, any activities establishing in that area of the site, not covered by the approved resource consent, and would otherwise displace the required parking (notwithstanding the fact it is located within Mixed Use/Business Activity 4 zoning) would also require resource consent.

[45] Correspondence between solicitors continued. On 17 October Lucina’s solicitors pointed out the resource consent required parking to be available in the two level storage area at the rear. Without it, the resource consent could not be implemented, particularly when Mr Kumar’s own business would require parking, saying that “this always loomed as a potential problem in respect of the lease and that is why the parties agreed to the provisions in clause 11”. Lucina was not prepared to endanger the consent and :

“In those circumstances our client is entitled to determine the lease agreement and this letter should be treated as notice that it does so determine the agreement. ... In purely practical business terms the parties embarked on this proposal in the hope that there could be a synergy between the two businesses, the service station and your client’s activities. Closer investigation establishes that this simply cannot happen and from a purely practical point of view, your client should now face reality. ... Your client must take immediate steps to vacate the property.”

[46] Mr Singh responded on 18 October accepting a suggestion that Mr Kumar engage a planning consultant and continuing :

My client does not accept the agreement to lease is at an end. He has a valid lease which he intends to keep and if need be seek specific performance of the contract.

It is well known that your client is looking for ways to terminate the agreement to lease on any basis it can. Surely, if there is no intention of your client to erect a service station, it should come forward and say so without playing games.

Any attempt by your client to re-enter will be vigorously defended.

[47] On 21 October Lucina’s solicitors again called for immediate vacation. On 22 October Mr Singh said his client “has a perfect right of occupation and will not vacate the premises”. On 5 November Lucina’s solicitors again repeated their view the lease was at an end and Mr Kumar was bound to vacate but said upgrading work was being undertaken and that “if your client’s contention were correct, your client would be bound now to make the move to the premises to the rear” to avoid being in breach. It asked whether he would shift. There was no response, Mr Singh being away for a few days. Mr Kumar said he refused to move because the upgrading works were incomplete.

[48] Mr White said throughout the negotiations Lucina was prepared to be accommodating had it met reasonable responses from Mr Kumar or Mr Singh but every concession was met by a further demand, particularly for money. He accepted the correspondence from 15 July to 17 October 2002 was all on the basis that the Kumar lease remained on foot but said everyone realised he had to get resource consent for the use he wished to pursue. However, Mr White did not advise Mr Kumar of this, leaving it to Mr Singh as his solicitor. He said Lucina gave instructions to terminate the 6 March agreement as the only viable alternative because Mr Kumar and his solicitor had not applied for a resource consent for his use of the premises.

[49] On 12 November 2002 Mr White went to 681 Mt Albert Road to take possession. Mr Kumar’s manager, Mr Boe, was present. Mr White advised him of his mission. According to Mr White, Mr Boe handed him the keys. Mr Kumar
disputed that. Mr Boe and other employees shifted the cars present to an adjacent property. Mr Kumar disputed cars were there. Lucina employed a security guard. Mr Kumar arrived several hours later and protested. Mr White told him he could make arrangements to move all his belongings, something he did a few days later by arrangement. Lucina’s solicitors faxed Mr Singh the same day advising of the position and saying the lease had been terminated in reliance on breach of cl 11. Mr Singh faxed a reply the same day saying that Mr Kumar had a month from the 5 November letter to shift having regard to the upgrading work, asking if Lucina would provide keys to the rear and threatening an application for relief against forfeiture.

Since 12 November 2002

[50] Mr Kumar sought relief against forfeiture in proceedings commenced on 13 November 2002. Ellen France J refused ex parte interlocutory interim relief to restore Mr Kumar to the front and rear premises. She was dubious whether there was a serious question to be tried but ultimately declined relief on the basis damages would be adequate.

[51] Mr Kumar’s belief is that France J declined ex parte interim relief only because of a lack of candour in the documents filed by Lucina. Mr Kumar, through Mr Singh, was critical of Mr White’s statement in his affidavit in opposition to the injunction application which, while acknowledging Lucina did not intend to proceed with the service station development, said there was a purchaser committed to buying the land if it could ensure that resource consent for the service station remained in place and was not jeopardised by Mr Kumar’s business at the rear.

[52] In an oral decision delivered on 6 December 2002, Laurenson J also refused relief by way of injunction and directed that a caveat Mr Kumar had lodged against the title not lapse but Lucina should pay $100,000 into Court. If paid, a withdrawal of the caveat would follow. The caveat was later withdrawn.

[53] Of later case management matters, it is only necessary to record Baragwanath J’s concern in a Minute issued on 23 June 2003 that nothing had been done by the
plaintiff in the six months to that date. Timetable orders were made including requiring election by Mr Kumar whether to join Mr and Mrs Prohm, their company and Trust. On 3 July 2003 the Judge directed the preparation by Mr Kumar of trial balances for the years 31 March 2002 and 2003. On 9 October 2003 Rodney Hansen J declined to accept a striking-out application by Lucina and granted Mr Kumar’s application to join Mr and Mrs Prohm, their company and Trust. On 21 April 2004 Doogue J, though expressing doubts about the matter, declined to accept a striking- out application by Mr and Mrs Prohm, their company and Trust, in relation to the cause of action based on unlawful interference with contractual relations.

[54] Of more importance is that within a day or so of 12 November 2002 Mr Prohm was advised by Mr White or Mr Hooper of Mr Kumar’s eviction. Passing the premises, he saw they were empty and Mr Kumar’s chattels had been removed. He assumed Lucina and Mr Kumar had resolved matters by termination of the latter’s lease. He thought it none of Prohm Motor Services’ business to pursue that further. He personally first went into the premises about 14 November. Although Prohm Motor Services had exercised its right of renewal of the lease at 947 New North Road, on 14 November it entered into a lease with Lucina for 681 Mt Albert Road for one year commencing on 30 November for the “motor trade garage at 681 Mt Albert Road excluding the back two storey storage building”. After a rent holiday of one month, rent was $50,000 pa plus GST and outgoings. The parties agreed to enter into an ADLS lease. At that stage, Mr and Mrs Prohm and their solicitor had had no contact with Lucina, Mr White, Mr Hooper or Mr Kumar since the 30 August meeting and had not been copied the correspondence which had passed between those parties over that period or seen the caveat. They were similarly unaware of the litigation seeking interim relief against forfeiture until they received a formal notice of claim on 23 June 2003.

[55] On 7 December 2002 Lucina agreed to sell 681 Mt Albert Road to Mr and Mrs Prohm or their nominee for $675,000 with possession on 13 December. The property was sold with vacant possession (other than the lease to Prohm Motor Services of 14 November). The transaction did not settle until 31 January 2003. The only contact with Mr Kumar until he joined the second and third defendants to this proceeding was an approach to Mr Prohm by Mr Kumar in mid-December after the
agreement for sale and purchase had been signed, claiming still to have a lease. Mr Prohm ignored him.

[56] Prohm Motor Services has since sub-leased the rear of the premises to two businesses, those sub-leases being entered into before the notice of claim was received from Mr Singh.

[57] Mr Prohm said he renewed his lease of 947 New North Road on 23 September but was later surprised to be released by the lessors. About 2-4 weeks after Prohm Motor Services officially opened at 681 Mt Albert Road on 25 February 2003 one of the lessors came into his premises for a warrant renewal and out of the blue offered to terminate the lease. Prohm Motor Services was happy to accept the offer and paid no rent or outgoings thereafter. They have had nothing in writing since, despite reminders.

Planning evidence

[58] After detailing the property’s history, Mr Campbell’s assessment of the position is that to operate his business in the rear of the premises, Mr Kumar required separate resource consent.

[59] The Mixed Use Zone under Proposed Plan Modification 71 notified on 1 July 2001 requires consideration of both the Business Activity for zoned provisions and Mixed Use zone provisions. Plan Modification 71 makes permitted or controlled activities including new buildings and off-street parking within 30 metres of relevant residential zones a restricted discretionary activity other than for minor alterations and additions. In addition, Proposed Plan Modification 3 which applies to the site imposes similar requirements. Mr Campbell made the point there is Residential A Zone land along the western side boundary of 681 Mt Albert Road and accordingly a resource consent as a restricted discretionary activity is required.

[60] Mr Kumar’s activities, Mr Campbell thought, came within motor vehicle sales and service in the Operative District Plan. Accordingly, permitting Mr Kumar to operate as a “motor mechanic, panelbeater, rust repairer & tyre retailer” was a
change in use from the existing storage activity and would require a restricted discretionary activity resource consent application even though it was only a relocation. Although his use of the front portion of the premises may have had existing use rights, Mr Campbell took the view that relocating Mr Kumar’s business affected the environmental impact of the activity through increased visibility and noise and accordingly Mr Kumar could not rely on existing use rights and required a resource consent under the Operative District Plan for this reason as well. He concluded :

... the use of the rear storage area for mechanics, panelbeaters, rust repairers and/or a tyre retailer will require an additional resource consent application. This is because:

(a) the subject site is located within 30 metres of a residential zone, and

(b) is located in a Mixed Use zone.

...

Based on my knowledge of the site and its consent history, it is my opinion that the storage area for Mr Kumar’s activities would result in the consent holder being unable to give effect to the proposed service station redevelopment consent. A new resource consent application would be required for the combined activity of service station and motor workshop. The entire intensity of activity on the site would be reassessed and the effects of that combined activity taken into account as to whether or not consent could be assessed on a non-notified basis and then granted.

And, in summary :

The use of the rear two-level storage area for any activity, other than storage or the parking of vehicles, requires a resource consent because of the change in use and the location of the subject site within 30 metres of a residential zone and in the Mixed Use zone. Such an application would be required to demonstrate the ability to provide the necessary practical parking, but also to a range of other effects, particularly on the adjacent residential zoned properties.

Any building consent issued for works which incorporate those activities at the rear of the site, would be tagged with a certificate under s.35(1A)of the Building Act. Such building consent would prevent the redevelopment of the site in a way which accommodates Mr Kumar’s intended uses in addition to the service station redevelopment, unless a further resource consent was obtained.

Mr Campbell opined it would have been unlikely that any resource consent for Mr Kumar’s would have avoided notification if what was sought was for his normal business, not just vehicle storage and parking.

[61] Mr Kumar’s planner, Ms McPherson, gave it as her opinion that his consent should have been required for the resource consent granted on 4 December 2001 but acknowledged any use of the rear of the site as a workshop would have required variation of the resource consent conditions or a new resource consent as Auckland City said on 18 September 2002. From the omission of reference to Mr Kumar’s workshop in the resource consent application, she inferred a lack of intention by Lucina to work towards co-existence of the two activities as in cl 11 of the agreement to lease. While she agreed with Mr Campbell’s view that use of the rear site other than for storage and parking would mean the consent holder was unable to give effect to the proposed service station, she made the point that a resource consent may have been given for the workshop had it been part of the original application.

[62] Ms McPherson made the important point that resource consents and building consents involve very different assessments by Councils. Resource consents are assessed on effects. Building consents are assessed by reference to compliance with the Building Code and physical standards. Had Lucina applied for a building consent first, the application would have been assessed to determine whether resource consent was required for the proposed use and the building consent application put on hold until resource consent was granted.

[63] Ms McPherson then turned to carparking, expressing the view that if the ground floor of the rear building were considered as a workshop or partly as workshop and partly for tyres and parts, there was the ability to provide sufficient carparking within the whole site. The total required would have been 14 spaces which were provided for in the resource consent application. If the entire ground floor of the rear building was to be regarded as an operational carpark, a total of 16 carparking spaces were required. She attached a plan showing that to be achievable even without the adjacent ownership. That led to her view that the site has the capacity for both the redeveloped service station and the workshop in the rear building and that carparking issues were soluble by co-operation.
[64] However, in cross-examination she accepted Mr Kumar would not have been entitled to advice of the resource consent application if he had no right of occupation of the building at the time or was on a monthly tenancy and she accepted the “rear storage” area in the Certificate of Compliance could have no existing use other than for that purpose. Any change of use would require resource consent.

[65] Further, in cross-examination she was constrained to acknowledge that Council’s carparking requirements would vary according to whether the rear site was for storage or an operational workshop. And she was also constrained to acknowledge that her carparking layout yielding 16 spaces obstructed the right-of- way giving access to the rear premises shown in the 6 March agreement.

Submissions

[66] Only in his final submissions did Mr Singh advise that Mr Kumar accepted that with long-term sub-leases in place with innocent third parties, it would be inappropriate for him to continue seeking specific performance against the Prohm interests, but maintained the claims against Lucina.

[67] Mr Singh concentrated his submissions on seven propositions though accepting the first, estoppel against Lucina, could not be pursued as never having been pleaded.

[68] The second was whether Auckland City refused to grant a building permit or consent because of Mr Kumar’s intended use of the premises. Relying on the documents, he made the point that Lucina’s only building consent application was that of 18 February 2002 which was granted in May that year and remained in place until cancelled by the engineer. It was accordingly unable to be varied when a possible variation was notified on 1 October 2002 and no other consent was applied for before purported cancellation. On that basis, Mr Singh submitted that any breach of cl 11 of the 6 March agreement only occurred through Lucina’s default and accordingly could not be invoked by it (Scott v Rania [1966] NZLR 527, 533). Accordingly, Mr Singh argued, Lucina’s termination was unlawful.
[69] He posed the third issue as being whether it would have been futile for Lucina to seek building consent with Mr Kumar’s intended use of the rear of the premises, relying on evidence that although Mr Kumar’s occupancy of the rear without resource consent would have been in breach of the District Plan, he could have applied for resource consent at a later date if served with an abatement notice by Council inspectors and was likely, so Mr Campbell and Ms McPherson said, to have been granted such consent. The two businesses would both be on site as had, Mr Singh submitted, been the case when the Certificate of Compliance was obtained. A purposive construction of cl 11 of the 6 March document was required to ascertain the parties’ intentions (Hay v Laurent Construction Ltd [1989] NZHC 932; (1990) 1 NZConvC 190,387) and in the case of ambiguity a term could be implied according to the well-known test in Devonport Borough Council v Robbins [1979] 1 NZLR 1, 23.

[70] Mr Singh particularly relied on Firestone Tire & Rubber Co of NZ Ltd v Harvard Construction Ltd (1997) 3 NZConv.C 192,665 which he submitted was on all fours with the present case.

[71] In that case Harvard, through a subsidiary, had a conditional agreement to buy and an option to purchase two adjacent properties. On the former it proposed to design and build premises for a lessee and then sell the property. It offered to lease those premises to Firestone pursuant to an agreement to lease containing a clause, cl 11, making it entirely conditional on Harvard “obtaining town planning approval for the construction of retailing premises on the property on terms and conditions entirely satisfactory” to it. Harvard applied for that approval. Difficulties about traffic engineering indicated public notification would be required. Amendments to the application proposed by Harvard’s consultants were accepted by it and the formal application amended accordingly. Then Mobil became interested in buying both properties. It was told of Harvard’s contract with Firestone but, that notwithstanding, made an offer to buy both sites. Harvard accepted. The contract required vacant possession or monthly tenancies. Accordingly, Harvard had to terminate its contract with Firestone. When the amended town planning application was approaching hearing, Harvard withdrew it. Mobil then settled and Harvard purported to terminate the contract with Firestone for breach of cl 11, though without giving reasons. However, in evidence on a liability hearing, Harvard asserted it
withdrew the application because the conditions were unsatisfactory, notwithstanding its earlier amending its application to include the conditions. After a period of negotiation, Firestone and Mobil agreed on joint development of the site. Harvard was then successfully sued by Firestone for loss of profits and by Mobil for breach of the condition as to vacant possession. In rejecting Harvard’s evidence, Giles J observed (at 192,669 – 192,670) :

The task of the Court is to interpret the words used by the parties in the circumstances existing at the time they were used and to ascertain from those words and those circumstances what the parties meant. Mr Ivory would have it that there should be implied into the clause words to the effect that the lessor be relieved of any obligation to pursue a town planning approval if terms recommended by his own consultants, or by the Town Planning Officer, were considered on a subjective basis, unacceptable to the lessor. Unless confined to the particular facts of this case, the consequences of such an approach are far reaching. These “subject to planning approval” clauses are a regular feature of commercial property transactions. If the position contended for by Harvard is correct then the clauses really provide little protection to a purchaser. If embraced as a principle of general application a vendor would be entitled to abandon a planning application on a subjective basis, thereby becoming free to re-negotiate an alternative sale. Purchasers could be held to ransom and vendors would have the luxury of a contractual commitment from a purchaser from which the vendor could withdraw with impunity.

...

I am unable to uphold Mr Ivory’s submission as to construction of the clause. It is not a difficult clause at all. I am quite satisfied that what was required was for the vendor to pursue an application for town planning approval right through to hearing before the appropriate regulatory authority. Failure to do so is a breach of the agreement to lease. The right to determine whether or not the “terms and conditions” of the town planning approval are acceptable arises only at the point at which the regulatory authority ... has made a determination on the application. In my view, the words of clause 11 are so clear as to constitute the requirement to progress an application through to formal resolution by the local territorial authority as an express term, not an implied term. But if I be wrong on that finding then applying principles of construction which require commercial contracts to be interpreted and construed in such a way as to give them business efficacy, clause 11 has to be construed as containing an implied term that Harvard will use its best endeavours to secure the appropriate town planning consent.

Neither do I accept the defence submission that if pursuing such an application was an exercise in futility then Harvard did not need to go further and could cancel the contract at that point. There may be unique cases where the inevitability of a town planning approval subject to adverse terms and conditions, might justify the party obliged to pursue the application from not proceeding further. At the very least that would require consultation with other parties to the contract and there would need to be compelling

evidence that pursuing the application was a lost cause. I leave that issue open for the appropriate case.

...

Firestone did not confer unilateral jurisdiction on Harvard to decide whether to proceed or not. It had a contractual right to insist upon the matter going right through to a hearing. Futile or not, that is what Harvard contracted to do. Furthermore, it may be that even if the decision were adverse there might, I put it no higher than that, have been an obligation to pursue the matter to the Planning Tribunal. This is because clause 11, in my view, required Harvard to take all reasonable and necessary steps to procure the consent.

(See also W R Clough & Sons Ltd v Martyn [1978] 1 NZLR 313, 317; Serepisos v Steele and Rollets (HC Wellington Civ.2003-485-1335, 13 August 2004 at para [45], Miller J)).

[72] In this case, Mr Singh submitted that not only did Lucina omit Mr Kumar’s business from its resource consent or building consent applications but cancelled the latter and although it offered to vary the same, did not do so or apply for another building consent with Mr Kumar’s business included nor advise Mr Kumar that he needed to apply for his own resource consent.

[73] Mr Singh’s fourth issue was whether Lucina’s conduct was misleading or deceptive. He submitted that both in terms of cl 11 of the 6 March document and in evidence, Mr White told Mr Kumar he had obtained resource consent and carparking for both businesses was catered for though co-operation would be required. This, Mr Singh submitted, was misleading and deceptive as Lucina did not include Mr Kumar’s business use in its resource consent application and, having decided not to erect a service station, cancelled the building consent without reference to Mr Kumar. He relied on Mr White’s statement in the injunction affidavit that Lucina had a purchaser committed to buy the land “provided it can ensure the resource consent for the service station remains in place”.

[74] Turning to the Prohm interests, Mr Singh posed his fifth issue as being whether they interfered with Mr Kumar’s lease. He pointed to Mr Prohm’s earlier interest in purchasing 681 Mt Albert Road, the Prohm interests’ pursuit of the premises following their unsuccessful tender and Mr Hooper’s drafting of the
contract followed by the 30 August meeting. He relied on Mr Craig’s letter of 22 July 2002 as evidence of the Prohm interests being prepared to assist Lucina by leasing the front part of the premises with an option to purchase. Mr Singh suggested “it would not be too strong to suggest at the meeting all parties turned their minds to the cancellation provision under clause 11 of the lease in particular that it could only be exercised under certain conditions”. However, that submission runs counter to the evidence and the file note. Mr Craig’s file note of 30 August day showed Mr Prohm wanted to move into the premises from 1 November but Mr Singh was constrained to acknowledge that, in default of evidence from Mr Craig and given Mr Prohm’s inability to shed light on the comment, it is difficult to know what gave rise to Mr Craig’s note in that respect.

[75] Mr Singh also relied on the Prohm interests’ wish to preserve the resource consent for service station development and their accountant driving past the premises, to submit there was a “strong inference that there was direct persuasion by [the Prohm interests] upon [Lucina] to sort out Kumar lease one way or the other immediately or within a short period of time after ... purchase” and that “while there is some faltering on part of [Lucina] if by affirmation of the Kumar lease ultimately the pressure from the [Prohm interests] gave way and Mr White cancelled the agreement citing clause 11 as the ground”. That, said Mr Singh, came within the authorities on interference with contractual relations such as Quinn v Leathem [1901] UKHL 2; [1901] AC 495, 510; Bedggood and Hughes in Todd et al: The Law of Torts in New Zealand (3^rd edn 2001 para 12.2 p 617). Mr Singh submitted it was an inescapable conclusion that Mr Kumar’s lease was terminated as a direct result of interference by the Prohm interests including a calculated deceptive and misleading statement made by Lucina of their desire to develop the service station when they had no intention so to do, an action which ultimately persuaded Lucina to cancel the lease.

[76] Mr Singh’s sixth issue was whether the Prohm interests’ actions amounted to fraud. By 30 August they had actual knowledge of the Kumar lease and the correspondence concerning its terms, knew Mr Kumar required specific performance, knew Lucina would not develop the site as a service station and knew the building consent was granted and not refused as a result of Mr Kumar’s intended use. The Prohm interests advised Lucina they wanted to purchase the property
provided the resource consent was not jeopardised by Mr Kumar’s intended use, that statement being both false and misleading, particularly given the resource consent expired in December 2003 without the service station being developed. Mr Singh submitted this amounted to fraud within the meaning of the authorities. In particular, he relied on Waimiha Sawmilling Co Ltd (In Liquidation) v Waione Timber Co Ltd [1923] NZGazLawRp 32; [1923] NZLR 1137, 1175 where Salmond J, as part of the majority of the Court of Appeal held :

The true test of fraud is not whether the purchaser actually knew for a certainty of the existence of the adverse right, but whether he knew enough to make it his duty as an honest man to hold his hand, and either to make further inquiries before purchasing, or to abstain from the purchase, or to purchase subject to the claimant’s rights rather than in defiance of them. If, knowing as much as this, he proceeds without further inquiry or delay to purchase an unencumbered title with intent to disregard the claimant’s rights, if they exist, he is guilty of that wilful blindness or voluntary ignorance which, according to the authorities, is equivalent to actual knowledge, and therefore amounts to fraud. Thus in Assets Co Ltd v Mere Roihi ([1905] AC 176, 210) it is said by the Privy Council with relation to fraud under the Land Transfer Act :

“Fraud by persons from whom he claims does not affect him unless knowledge of it is brought home to him or his agents. The mere fact that he might have found out fraud if he had been more vigilant and made further inquiries, which he omitted to make, does not of itself prove fraud on his part. But if it be shown that his suspicions were aroused and that he abstained from making inquiries for fear of learning the truth the case is very different, and fraud may be properly ascribed to him.”

[77] To similar effect is the decision of the Privy Council in that case affirming the Court of Appeal’s judgment where Lord Buckmaster for their Lordships held ([1926] AC 101, 106-107) :

Now fraud clearly implies some act of dishonesty. Lord Lindley in Assets Co v Mere Roihi ([1905] AC 176, 210) states that:

“Fraud in these actions (i.e., actions seeking to affect a registered title) means actual fraud, dishonesty or some sort, not what is called constructive or equitable fraud – an unfortunate expression and one very apt to mislead, but often used, for want of a better term, to denote transactions having consequences in equity similar to those which flow from fraud.”

If the designed object of a transfer be to cheat a man of a known existing right, that is fraudulent, and so also fraud may be established by a deliberate

and dishonest trick causing an interest not to be registered and thus fraudulently keeping the register clear.

[78] Mr Singh submitted Mr Prohm’s suspicions were aroused on 14 November 2002 when he saw Mr Kumar’s business was closed and a security guard posted but made no further inquiry, not even to inquire the basis on which the lease had been terminated. Instead, Mr Singh submitted, the Prohm interests signed an agreement to lease to conduct the same business as that offered by Mr Kumar in defiance of Mr Kumar’s rights and despite Mr Kumar’s approach about a month later before settlement of the purchase. He submitted there was no doubt the Prohm interests had actual knowledge and aroused suspicions but turned a blind eye.

[79] Mr Singh’s seventh issue was to submit that in light of all the foregoing the Prohm interests were constructive trustees of the business for Mr Kumar and accordingly should pay damages to him.

[80] For Lucina, Mr Chisholm went carefully through the existing use rights enjoyed by the site under the Resource Management Act 1991 ss 9(1) and 10(1) focusing attention on the legality of the use and its effects. The 4 July 2001 application for the Certificate of Compliance defined the scope of the existing use rights in the service station and associated shop at the front, the mid-site workshop and the two storey rear storage area. The Certificate of Compliance of 23 July 2001 was in terms of the application, no more than what is complied with being capable of being granted (Sutton v Moule [1992] 2 NZRMA 41, 47).

[81] Therefore, Mr Chisholm submitted, neither existing use rights nor the Certificate of Compliance permitted the two storey rear portion to be used other than for storage and parking particularly when change of use of the rear portion had planning effects beyond the site. Accordingly a separate resource consent was required for use of the two storey rear premises by Mr Kumar’s business irrespective of what happened with the balance of the property.

[82] The resource consent application for the new service station was lodged on 21 August 2001, well before Mr Kumar’s lease was discussed or negotiated. The consent granted to the application on 4 December 2001 said the “activity should be
carried out in accordance with the plans and all information submitted with the application”. Those documents, Mr Chisholm submitted, particularly in association with the District Plan Modifications to which Mr Campbell referred, meant it was impossible for Mr Kumar to transfer his business as described in the 6 March document to the rear premises without separate resource consent.

[83] Mr Chisholm submitted the effect of the Building Act 1991 s 35(1A) was to link building consents and resource consents so that the former remain inoperative until the latter are obtained. Accordingly, though the wording of the 6 March document was outmoded, Mr Chisholm submitted s 35(1A) operated to overcome Mr Kumar’s case.

[84] Mr Chisholm met the suggestion the existing resource consent was capable of variation by referring to Body Corporate 97010 v Auckland City Council [2003] 3 NZLR 513, 524 para [45] where the Court of Appeal held “Section 127 permits an alteration to a condition but not an alteration to an activity.” Thus, change in usage of the rear premises necessitated separate resource consent

[85] Mr Chisholm submitted that central to any possibility of Mr Kumar’s success in this litigation was his establishing a positive obligation on Lucina to apply for a new resource consent either for Mr Kumar or including his business. A proper interpretation of the 6 March document showed, however, he submitted that at that stage Lucina intended to redevelop the service station but it was entitled to change its mind and Mr Kumar’s rights were always subject to activities which might properly occur in the front portion.

[86] Mr Chisholm suggested the difficulty with construing the last sentence of cl 11 of the 6 March document was that factually and legally a Council has no power to refuse a building consent by reason of its intended use, only the powers given by s35(1A). Strictly, therefore, the last sentence was an absurdity but needed to be interpreted in light of the parties’ intentions (Boat Park Ltd v Hutchinson [1999] 2 NZLR 74, 81-82). Bad draftsmanship, he submitted, in terms of Mitsui Construction Co v Attorney-General of Hong Kong (1986) 33 Build LR 1, 14 :

“... affords no reason to depart from the fundamental rule of construction of contractual documents that the intention of the parties must be ascertained from the language that they have used interpreted in light of the relevant factual situation in which the contract is made. But the poorer the quality of the drafting, the less willing any court should be to be driven by semantic niceties to attribute to the parties an improbable and unbusinesslike intention, if the language used, whatever it may lack in precision, is reasonably capable of an interpretation which attributes to the parties an intention to make provision for contingencies inherent in the work contracted for on a sensible and businesslike basis.

[87] Here, Mr Chisholm submitted, the 6 March document placed the risk on Mr Kumar in respect of his required resource consent application. He failed to check the District Plan. He failed to take any action to protect his interests. A duty of co- operation did not equate to an obligation on Lucina to seek resource consent on Mr Kumar’s behalf. The factual situation here did not permit terms to be implied, Mr Chisholm submitted. He made the point that it was not until October 2002 that Mr Kumar first obtained independent planning advice and on his interpretation, any development on the front of the premises would have been delayed while his resource consent application proceeded because of the s 35(1A) tag. A successful outcome was not guaranteed because of residential proximity, environmental effects and parking problems. Mr Chisholm submitted that although at the time of termination of the 6 March document on 17 October 2002, Lucina had not been formally refused a useable building consent by reason of Mr Kumar’s intended uses, it would have been futile to insist on that course given Council’s views. There was no legal obligation so to do (Stewart v Davis (No.2) (1996) 3 NZConvC 192,285, 192,288). In any event, Mr Kumar was in continuing breach of his obligation to move. The proper interpretation of cl 12 did not require the upgrading to be completed before the move was undertaken.

[88] For the Prohm interests, Mr Woods submitted they acted in good faith at all times and were not involved in any deception or fraud. They were innocent parties throughout. There was no basis for equitable relief against them.

[89] Mr Woods submitted the Maungawhau Trust, as registered proprietor of the land, was protected by the Land Transfer Act 1952 s 62 unless s 182 applied. As well as Waimiha, Mr Woods relied strongly on the decision of the Court of Appeal in Bunt v Hallinan [1983] 1 NZLR 450. There Mr Hallinan bought a property at
auction aware of Mr and Mrs Bunt’s interest under an unregistered lease but having received legal advice he could disregard it. Acting in what a majority of the Court of Appeal described as (at 461) as a “contumacious and high-handed” manner, he gave the Bunts notice to quit and demolished some of their buildings before it expired. He was found to have been acting honestly and in accordance with his understanding of his rights, particularly given his inquiries to a real estate agent and a solicitor. It was held that on the facts he did not act dishonestly nor did he acquire title with a view to depriving Mr and Mrs Bunt of their rights, when he had been advised their rights were non-existent. So it was (at 462) “not a case of a person whose suspicions had been aroused abstaining from making inquiries for fear of learning the truth”. Mr Woods submitted, by analogy, that the Prohms knew 681 Mt Albert Road was vacant on 14 November, they were told the lease had been terminated and there was no protective action taken by Mr Kumar of which they were aware which alerted them to his claim of interest before they agreed to lease the premises and then agreed to buy them.

[90] In relation to the claimed unlawful interference with contract, Mr Woods submitted that, put at its highest, the evidence did not disclose a deliberate intention by the Prohm interests to interfere with the 6 March document, nor any intention to inflict economic harm. At most, the Prohm interests’ interference in the contract could only have occurred up to and including the 30 August meeting and, he submitted, there was insufficient evidence of intentional interference and no indirect interference. Further, the Prohm interests’ actions had not been shown to be without lawful justification, given their intention and their right to act in their own self- interest not to harm Mr Kumar.

Discussion:

(1) Was Lucina’s termination of the 6 March document in breach of contract?

[91] 681 Mt Albert Road had been leased by Shell as a petrol station for many years. It permitted its lease to expire and vacated.
[92] By arrangement with the former owner, Mr Kumar first had a sub-lease from Shell but then, on its vacation, took over occupation of the whole of the premises and ran his business from that site from about 2000 paying no rent or outgoings it seems, but providing custodial services.

[93] On 28 May 2001 Lucina through its associated company entered into a contract to buy the site with an extended settlement date to enable it to check the resource management position concerning the property.

[94] On 4 July 2001 it sought confirmation of existing use rights in relation to 681 Mt Albert Road, making the point that the front of the site was occupied by a car repair business and automotive workshop in place of the recent service station and the two storey building at the rear was used for vehicle and goods storage. It contended all those activities were lawfully established and operating in accordance with consents granted. Council issued its Certificate of Compliance on 23 July 2001 on the basis of those statements.

[95] On 21 August 2001 Lucina sought resource consent to enable it to re-develop the existing service station. The application expressly proposed discontinuance of Mr Kumar’s workshop and installing 14 on-site parking spaces. In negotiations with Auckland City over non-notification, Lucina’s consultants made clear the existing use of the two storey building for storage was to be retained as an existing use. Council’s resource consent of 4 December 2001 was for re-development of the service station and sundry earthworks to be carried out in accordance with the plans and other information submitted with the application.

[96] At about that stage Messrs White and Kumar discussed the latter’s position and as a result, after negotiations involving Mr Singh, the 6 March document was executed.

[97] Turning to the terms of that document and adopting a purposive interpretation to construe it in accordance with the parties’ intentions at the time of execution gathered from within its four corners, it conferred a 6-year lease on Mr Kumar of that part of the site shown in the plan attached to the draft with three rights of
renewal of 3 years each with a term beginning on the date of the Certificate of Practical Completion of the re-developed service station. Given re-development as a service station has never occurred so no Certificate has ever issued, the term of the 6 March document has arguably not commenced.

[98] Rental was to be $25,000 pa plus GST and outgoings, commencing six months after the date of the Certificate of Practical Completion of the re-developed service station was issued and reviewable triennially after that date. That arrangement, too, has never commenced.

[99] Then, on 18 February 2002, Lucina applied for a building consent for a “new service station”. Although the full text of the document was not in evidence, it seems likely the accompanying documents covered only that work. They may well not have included the upgrading work required of Lucina by the 6 March document. That is understandable given it was uncertain when that work would be required. When it was to be done, it may well have required a further building consent application pursuant to the Building Act 1991 s 33.

[100] Formal documentation of the lease was to be in accordance with the relevant provisions of the ADLS form as modified by the 6 March document. That included cl 40 excluding warranties by Lucina that the premises were suitable for Mr Kumar’s use or that any use by him of the premises would comply with Auckland City Planning Ordinances. The lease was to be executed within 30 days of Lucina’s solicitors sending the documents. That has never eventuated.

[101] Clause 8 made clear Mr Kumar’s knowledge of the re-development of the service station and convenience shop on the front of 681 Mt Albert Road and the fact he would have no claim for loss of use or disadvantage through that inconvenience. That was recognised through the rent holiday.

[102] Clause 9 then terminated whatever were Mr Kumar’s rights of occupancy on Lucina’s settlement of the purchase but gave Mr Kumar an estimated one month period of grace to move his plant, machinery and stock to the premises defined as the “existing two storey building ... with the yard area and ramp ... and ROW to
Mt Albert Road being to the rear of 681 Mt Albert Road” shown on the plan. That move was to be “in association” with the work required of Lucina by cl 12. There was no contractual requirement that the cl 12 work occurred before Mr Kumar’s shift even though there would have been obvious practical advantage in most, if not all, the work being done before that occurred. Mr Kumar was not contractually entitled to insist on completion of the work before shifting. As noted, he did not shift to the rear before 14 November 2002 so was arguably in breach of cl 9 in that regard. Clause 9 contains a second definition of the commencement date of the lease but whichever definition is adopted – issuance of the Certificate of Practical Completion or settlement of the purchase by Lucina – Mr Kumar was arguably in breach of cl 9 by not shifting to the rear during the currency of the 6 March document. It is the period of grace of one month for shifting which was to be “in association” with the cl 12 work.

[103] Clause 11 of the 6 March document is that most in contention in this case. It may be helpful to repeat it :

11. BUILDING CONSENT: The lessor has been granted Resource Consent to the development of the service station and convenience shop on the front of the property and the overall parking for both business is provided for, which may require each lessee to liase with each other in that regard which cooperation shall be provided for in the lease of each lessee. Should the ACC refuse to grant a building permit because of the intended uses of the premises by the lessee then the lessor may determine this agreement.

[104] Construing the parties’ intentions in relation to cl 11 needs to be undertaken in association not just with the balance of the 6 March document but with the Building Act 1991 s 35 which relevantly states :

35. (1) The territorial authority shall issue each building consent to the applicant in the prescribed form on the payment of any charge fixed by the territorial authority in relation to the consent [and the payment of any levy payable under section 23B of this Act].

(1A) The territorial authority may attach to a building consent issued under subsection (1) of this section a certificate, in the prescribed form, to the effect that an authorisation under the Resource Management Act 1991 which, in the opinion of the territorial authority, will materially affect the building work to which the building consent relates has not yet been obtained, and until that authorisation has been so obtained –

(a) No building work may proceed; or

(b) Building work may only proceed to the extent specified in the certificate.

[105] Dividing cl 11 into its components shows :

1. The first section merely records the existing resource consent to the re-development of the service station and convenience shop on the front of 681 Mt Albert Road. Apart from the fact it is predicated on Mr Kumar no longer being in occupancy of the front part of the premises, it has little relevance to this case so that aspect of the matter is not in contention.

2. Clause 11 then continues to say that the “overall parking for both businesses is provided for”. That, too, is an accurate representation of the existing use rights, the Certificate of Compliance and the resource consent application and grant but, importantly, only on the basis that the rear two storey building would continue to be used for vehicle storage. Any change of use of the rear premises from storage meant, as the evidence shows, a requirement for more parking and an inability to provide it without further resource consent.

100. Clause 11 then continues, in relation to parking, to say that aspect of the matter “may require each lessee to liase [sic.] with each other in that regard which co-operation shall be provided for in the lease of each lessee” :

1. The reference to “each lessee” must be taken to refer not just to Mr Kumar but to the entity to which Lucina wished to lease the re-developed service station and convenience shop on completion of the work.

2. That section of cl 11 required both lessees - Mr Kumar and the lessee of the re-developed service station and convenience shop when found – to co-operate over parking matters.
3. The requirement for the lessees to “liase with each other” over parking, when seen in association with the statement that “overall parking for both businesses is provided for” must be taken, in the period prior to re-development of the service station and its being leased, as a recognition by Mr Kumar and Lucina that when the former shifted his designated business to the two storeyed premises at the rear, formerly used only for storage, that would bring about a change of use which would not only alter the existing use and thus the Certificate of Compliance but would be contrary to the basis on which that part of the property had been included in the resource consent application and grant.

[106] Up to that point, therefore, cl 11 of the 6 March document was a recognition that following Mr Kumar shifting his business use as defined to the two storey rear building once re-development occurred he would thenceforth be operating outside both the Certificate of Compliance and the resource consent grant. That that would be the position was agreed by the planning experts. They were also agreed that Mr Kumar would require a separate resource consent for his business once it moved and that, while both were confident he would have obtained the required consent, it was much less likely his application would have been permitted to proceed on a non- notified basis because of its effect on neighbouring residential sites. Both planners agreed that, particularly if notification were required, the process of Mr Kumar obtaining a resource consent for the altered use of the two storey building, including appeals, could take up to two or three years.

[107] It was suggested on Mr Kumar’s behalf that some obligation lay on Lucina to include Mr Kumar’s business in its resource consent application or seek a variation to include it. There can be nothing in that submission. Lucina’s resource consent application was lodged and granted well before the 6 March document. It may well have been granted well before serious negotiations occurred between Messrs Kumar and White. Mr White said Mr Kumar was not “on our horizon” when it was lodged. It was for Mr Kumar to apply for his own resource consent when his business moved since it was only he who knew the details required for the application. In any event,
as Body Corporate 97010 shows, a resource consent holder’s ability to seek alteration to a condition on which it has been granted does not extend to a change of activity and, plainly, Mr Kumar’s changed use of the two storey building from storage to his business as a motor mechanic, tyre retailer and the like was a change of use.

[108] The section of cl 11 under discussion also clearly contemplated that the resource consent requirements for parking were almost certain to be affected once the rear premises were no longer being used for vehicle storage but were being used for a business such as that operated by Mr Kumar which has a number of vehicle movements during the day and requires vehicles to be parked. The planning consultants confirmed that to be the case. The part of cl 11 under discussion seems to recognise the possibility that the “overall parking” for both businesses could be accommodated but, as Mr Campbell’s criticism of Ms McPherson’s parking layout and its interference with the right of way demonstrated, it seems unlikely such could have been achieved. However, as a matter of contractual interpretation, the early part of cl 11 simply reflects the parties’ optimism that “overall parking” could be provided for and required each – and ultimately Lucina’s lessee – to co-operate and liaise with each other in that respect.

[109] Two further matters regarding the earlier part of cl 11 and other provisions in the 6 March document warrant noting. They are :

1. It was suggested it would have been in accordance with the 6 March document for Lucina to permit Mr Kumar to shift to the rear premises, both knowing he would operate there in breach of the Resource Management 1991 and the City’s consent, but allow him to remain in occupation until such time as he might be served with an abatement notice and then seek to rectify his position. There can be no force in that submission, at least as it applies to this litigation since, if agreed, it would be tantamount to parties permitting a litigant to breach the law and asking the Court to sanction such conduct.
2. It must also be observed that a number of the constructions which Lucina, Mr Kumar and their advisers sought to put on cl 11 and the other provisions of the 6 March agreement in their negotiations both before and after the 30 August meeting were contractually untenable.

[110] That accordingly brings the Court to the proper interpretation to be accorded to the second sentence of cl 11.

[111] The first point to be made is that it is couched in outmoded language. Mr White accepted his knowledge of the relevant law was not entirely up to date. However, all parties were content to read phrases such as “building permit” as “building consent”.

[112] Further, there is force in Mr Chisholm’s submission that a strictly literal interpretation of the sentence may be absurd since no local authority has the power to “refuse to grant a building permit” for building work which otherwise complies. It was doubtless with that in mind that Parliament amended s 35 to enable local authorities to tag building consents to debar building work taking place if no authorisation under the Resource Management Act 1991 has been obtained.

[113] Seen in that light, the second sentence of cl 11 must be read as giving Lucina power to terminate the 6 March document if Mr Kumar’s intended use of the two storey rear portion of 681 Mt Albert Road was such that any building consent granted in relation to the premises would be tagged by Auckland City so as to prevent building work taking place until resource management consent for that use had been given. Given Lucina already had an existing resource consent for re- development of the service station on the basis of continuing use of the rear two storey building for storage, this critical matter effectively comes down to consideration of Auckland City’s two letters of 8 October earlier cited. Seen in that light, the letter of that date to Lucina’s solicitors was clear: strict compliance with the existing resource consent was required and any deviation or building work not in accordance with it would be tagged under s 35 so the work could not take place until the resource consent situation permitted the building work envisaged. That particularly applied to parking.
[114] The letter to Mr Singh was to similar effect. It made plain resource consent had been granted on the basis of usage of the rear building continuing as storage to satisfy parking requirements. If that were not to be the case, any building consent would be tagged and before any building work began, the changed activities on the rear of the site would require a further resource consent to be granted including compliance with parking requirements.

[115] The result is that Auckland City’s letters made clear that Lucina would be unable to undertake any building work concerning redevelopment of the site as a service station until all the necessary resource consents for the whole of the site were in place. It follows that any building consent Lucina obtained for its proposed work would be tagged and therefore inoperable until Mr Kumar’s proposed changed use of the rear two storey portion was sanctioned by an appropriate resource consent.

[116] Lucina’s letter of cancellation of 17 October suggested it would be “impossible to satisfy the City Council’s requirements for car parking on the site. “Impossible” may have over-stated the position but undoubtedly very considerable difficulties and delays would be likely to be encountered in providing sufficient on- site carparking were Mr Kumar’s business to be re-sited at the rear. There is force in the solicitor’s suggestion that that potential problem was the reason for cl 11.

[117] Therefore, construing the second sentence of cl 11 in accordance with the parties’ intentions, the appropriate construction means that given the undoubted delays, perhaps extensive delays, that would inevitably ensue if Lucina’s building consent was tagged under s 35(1A) until any resource consent application by Mr Kumar was successfully concluded to enable him to use the rear building for his business, the certainty of such a tag gave Lucina the right to terminate the 6 March agreement. This is particularly the case given Mr Kumar had no right of occupancy under that agreement from, at most, one month after Lucina settled the purchase. That conclusion is even more fortified by the fact that Mr Kumar never lodged a resource consent application to enable him to carry on his business in the rear building or gave any indication of an intention so to do.
[118] In all those circumstances, as a matter of contractual construction, the appropriate conclusion for the Court to reach is that Lucina was contractually within its rights in terminating the 6 March document with Mr Kumar on 17 October 2002.

[119] That conclusion should not be thought to overlook the fact that Lucina had, probably in July but certainly before the 30 August meeting, abandoned its intention to redevelop the front of the site as a service station but, essentially for the reasons advanced by Mr Chisholm the continued focus of the parties – especially Mr Kumar
– on Lucina’s changed intention misled them in their approach to this case. That remark is similarly applied to the stress Mr Kumar placed on the cancellation of Lucina’s building consent.

[120] What is clear is that the site’s existing use rights, the Certificate of Compliance, the resource consent and the building consent were all granted and continued to rest on the use of the rear two storey building continuing as parking and storage. Any change of use of that building not merely affected the site’s existing use rights and the Certificate of Compliance, but also breached the resource consent. Auckland City’s 8 October letters also made clear that no building work would be permitted on the site unless the proposed changed use of the rear two storey building was sanctioned by a fresh resource consent. Irrespective of whether, in terms of cl 11, the resource consent for the development of the service station and convenience shop on the front of the property was to be utilised, the fact remains that Auckland City made clear it would not permit building work to take place on any part of the site for any purpose or the use of the rear two storey building for any purpose other than parking and storage.

[121] It follows that the focus of the parties – especially Mr Kumar – should not have been on whether Lucina intended to implement its resource consent and should not have been on the adequacy of parking for both businesses but on whether Auckland City would refuse to allow building work on the site as a result of Mr Kumar’s altered use of the rear two story building, that is to say, the parties’ focus should rather have been on the second sentence of cl 11 than the first.
[122] That is also not to overlook that, as earlier noted, Mr Singh placed considerable reliance on the decision in Firestone and in particular on the Judge’s observations that the vendor’s obligation was to continue with its resource consent application through to hearing and even possibly to appeal.

[123] However, this Court’s view is that Firestone is clearly distinguishable in that Harvard first accepted necessary amendments to its application and amended the formal application as a result but then withdrew its amended application just prior to hearing. In those circumstances, the Judge’s observations as to the vendor’s obligations are understandable. But the facts are significantly different from this case. It was not Lucina’s obligation to apply for resource consent for Mr Kumar’s business.

[124] As mentioned earlier, there was no obligation on Lucina either under the Resource Management Act 1991 or the 6 March document to seek resource consent at its cost for Mr Kumar’s business.. He never asked Lucina to act for him in that respect. It was his use of the rear of the premises for his business which would have been the subject of such an application. Only he had the requisite knowledge to lodge it. While Harvard in Firestone was open to criticism for seeking to create a claimed breach of its cl 11, that situation is vastly different from that which obtains here where Mr Kumar did nothing to protect his interests and now seeks to criticise Lucina for failing so to do on his behalf. In addition, in Firestone, Harvard was criticised for declaring its own planning proposals unacceptable to it but, even then, the Judge held Harvard’s obligation was to pursue its planning application to the point where the regulatory authority made a decision on it. Here, Auckland City’s 8 October letters were effectively that decision. They made clear no building work would be permitted and that building consent would be tagged under s 35(1A) until resource consent for Mr Kumar’s altered use of the rear premises was obtained. Effectively, therefore, Lucina complied with its obligations as outlined in Firestone.

[125] For all those reasons, Mr Kumar’s claim against Lucina for breach of contract accordingly fails.

(2) Fair Trading Act 1986 claim

[126] A similar fate must occur in relation to the Fair Trading Act claim since it is essentially based on the same facts. There was no obligation on Lucina to include Mr Kumar’s business in its August 2001 resource consent application since he was not then on their “horizon”. There was no basis for it to be included in the building consent application. There was no obligation on Lucina to apply for resource consent or building consent on Mr Kumar’s behalf. That was his obligation for his business as he intended to run it. He did nothing to protect his own interests or to make any such application. There was no indication he intended so to do.

[127] There was nothing misleading or deceptive in the Lucina negotiating with other prospective tenants or buyers while negotiating with Mr Kumar. Indeed, it ensured they knew the details of Lucina’s arrangements with Mr Kumar. That cannot be characterised as anything more than normal business practice. Accordingly there was nothing Mr White or Mr Hooper said which could have been misleading or deceptive as far as Mr Kumar was concerned.

[128] That is not to overlook the submission that it was misleading or deceptive for Messrs White and Hooper not to advise of Lucina’s change of heart over the re- development of the site as a service station. But there is nothing in that. Lucina owned a site with resource consent for re-development as a service station. If it decided to undertake some other use for the site, it was incumbent on Lucina to seek fresh resource consent but the site, with an existing resource consent application for re-development as a service station, had value to the Prohm interests and may well have had value to other prospective buyers. The statement made by Mr White in his injunction affidavit could not be held misleading or deceptive. In any event, as has already been held, the parties’ focus should have been on the consequences of Mr Kumar’s use of the two storey building. Nothing in the evidence suggests any statements made by or on behalf of Lucina in that regard were misleading or deceptive.

[129] Mr Kumar’s claim against Lucina based on the Fair Trading Act 1986 accordingly also fails.

(3) Claim against Prohm interests

[130] In light of the findings to date, it is strictly unnecessary to deal with Mr Kumar’s claim against the Prohm interests since it has been held that Lucina acted within its contractual rights in terminating the 6 March agreement. That being the case, no conclusion is open that any interference by the Prohm interests with the 6 March document was without lawful justification.

[131] Even so, and for the sake of completeness, it is only fair to all parties – especially the Prohm interests - to record the Court’s views that this claim would have failed on other grounds as well.

[132] The Prohm interests, while contractually bound to 947 New North Road, expressed an interest in leasing or buying 681 Mt Albert Road some months before Lucina contracted to buy it. However, nothing further occurred until, by chance, when their tender to buy 947 New North Road proved unsuccessful, the real estate agent instructed by them happened to be Mr Hooper who also happened to be a director of Lucina. He told them 681 Mt Albert Road might be available for lease or purchase and drafted the agreement. At that stage or certainly before the 30 August meeting, the Prohm interests saw the 6 March document and the correspondence which had passed between the solicitors. They made their interest very clear through Mr Craig, but also made clear both before the 30 August meeting and through the file note and letter of that date, they would only be interested in buying the premises or leasing them with an option to purchase if all difficulties relating to the 6 March document and Mr Kumar’s occupancy were overcome beforehand. There was nothing commercially untoward in that stance.

[133] True, at the 30 August meeting, Mr Craig made a note about the Prohm interests wanting access to 681 Mt Albert Road before 1 November but that is almost certainly to be seen as a reflection of the fact that at that stage the Prohm interests were due to exercise their right of renewal of 947 New North Road and had yet to do so but, if they were to take over 681 Mt Albert Road with all problems concerning the 6 March document and Mr Kumar’s occupancy resolved, that would be an ideal time given their existing lease expired in late December.
[134] The Court then accepts that the Prohm interests heard nothing whatever from Lucina until 14 November 2002 and knew nothing of the correspondence which passed between the parties, including Auckland City, over that period.

[135] Then, on 14 November 2002 after the Prohm interests had renewed their lease of 957 Great North Road and committed themselves to that, Mr Prohm unexpectedly heard from Mr White or Mr Hooper that the Kumar lease had been terminated. A sought-after commercial opportunity having unexpectedly become available, Mr Prohm checked the premises and found them empty with only a security guard in place, and accepted the opportunity offered to the Prohm interests. That, in this Court’s view, could not be said to be action taken “with intent to disregard” Mr Kumar’s rights if they existed. It was open to Mr Prohm not to accept the 14 November offer but, given the Prohm interests’ keenness to acquire the property and the opportunity the phone call offered, there was no reason for him not to commit the Prohm interests to the lease that day leaving the legal niceties and any necessary further inquiries to his solicitors. Similarly, it could not be said Mr Prohm’s suspicions were aroused and he deliberately refrained from learning the truth about the means by which Mr Kumar had been evicted. He simply regarded the means by which the property had become vacant as no business of his and, as a good businessman, accepted, with alacrity, first the lease and, then, the purchase.

[136] Therefore, had it been necessary, the Court would have concluded there was no proof the Prohm interests deliberately intended to interfere with the 6 March document to bring pressure on Lucina or harm to Mr Kumar either directly or indirectly. There was no evidence of interference, no evidence of a deliberate intention to interfere and no evidence of pressure on Lucina. There was simply the acceptance of a commercial opportunity long sought and now unexpectedly available.

[137] These conclusions have been reached after paying due regard to Mr Kumar’s evidence on the topic but it must be said as regards this cause of action, that at every available opportunity he sought to impute a sinister motive to the Prohm interests’ actions. There was simply no basis for the views he expressed and, had it been
necessary, the Court would have ruled in Mr and Mrs Prohm’s favour in any credibility contest.

[138] Mr Kumar’s claims against the Prohm interests accordingly also fail.

(4) Damages

[139] Given the result, it is also unnecessary to deal with damages but again it must be said that, had the Court been required to rule on that issue, the greatest difficulty would have been experienced in endeavouring to calculate whether any damages were payable to Mr Kumar and, if so, their extent.

[140] No detailed discussion is necessary but the deficiencies in the evidence on the topic included not just the fact that the accounts before the Court were in the name of the partnership between Mr and Mrs Kumar but also that they were prepared only after Baragwanath J’s order in June 2003 and then on inadequate records over the financial years 31 March 2000-2003.

[141] Although he accepted all the accounts show him being in partnership with his wife, he said Mrs Kumar runs Caltex Glen Innes and he ran Royal Oak and Glen Eden, and there were separate accounts for the two businesses with a separate bank account. His wife’s name was only there for Inland Revenue purposes. He said his wife’s service station was not included in the accounts but through filing returns as a result of this litigation he was now paying off arrears of GST and income tax.

[142] In a letter to other solicitors and counsel written just before the hearing began, Mr Singh said the business was solely owned by Mr Kumar and the “reference to Mrs Kumar is of no moment”. But that was not the evidence. The fact remains the accounts were prepared for a partnership and must have related to a separate business operated by Mrs Kumar as well. The reference to Mrs Kumar in the accounts could accordingly not simply be disregarded.

[143] Even Mr Kumar (no relation), the plaintiff’s accountant, acknowledged it was not possible to record profits and losses for each of the four businesses operated by
the plaintiff and his wife through one bank account, so he prepared the accounts as if all the businesses were conducted from one premises at one time. He endeavoured to make apportionments but these seemed insubstantially based. He made assumptions as to profitability of what was, essentially, a loss-making business but these assumptions, too, were insubstantially based and included large figures for stock – not a feature of businesses of Mr Kumar’s type – and for expenditure on such things as rebuilding a car. All of that notwithstanding, he reached the view that, had Mr Kumar re-located his existing business to the rear premises of 681 Mt Albert Road in late 2002 it was possible to estimate that the business would have increased in profitability by 15% in each of the next two years and 5% pa thereafter for the next 13 years.

[144] In the Court’s view, there was no valid basis for that conclusion. In the first place, the accountant used Mr Kumar’s current Kelston business as a comparator despite it being in a different part of the city. Secondly, even Mr Kumar acknowledged operating his business from the rear of 681 Mt Albert Road would have impacted on his profitability by comparison with running the business in the front of the property. Further, although he said that, following eviction, he had tried to obtain premises in the vicinity of 681 Mt Albert Road, the efforts he made were unavailing despite the fact that Messrs Hooper and Prohm gave evidence of a number of comparable sites being available at the time in the neighbourhood of 681 Mt Albert Road.

[145] Finally on this aspect of the matter, the business run by Prohm Motor Services is different in kind and quality from that run by Mr Kumar at 681 Mt Albert Road, thus making it inappropriate for the measure of damages to be based on Prohm Motor Services’ profits, even in the doubtful event such are legally claimable. Mr Singh relied on Attorney-General vBlake [2000] UKHL 45; [2001] 1 AC 268 to support profits- stripping as a remedy but that was a very different case of no applicability to the present litigation.

[146] Mr Kumar, the accountant, reached the view that the plaintiff came from a “$5000 loss in the 2001 year to a $36,000 profit in the 2002 year”. However, his
accounts were based only on bank statements annotated by the plaintiff and wage records, and gave a misleading impression. Mr and Mrs Kumar’s accounts show :

The situation was not assisted by the fact that there were different versions of accounts put in evidence. In a second set of accounts for the year ended 31 March 2002 the profit was shown as $36,316 though in a second set of accounts for the year ended 31 March 2003 the previous year’s profit at $36,316 was shown as a deficit for that sum. In similar vein in one version of the accounts for the year ending 31 March 2001 the sales are shown as above but in the comparative figures in version of the March 2002 accounts the 2001 figures are shown as sales of $203,000 with a deficit of $4826. Variations of that magnitude do not inspire confidence in the results or the conclusions drawn from them.

[147] Mr Kumar’s approach was also severely and cogently criticised by Mr Morton, the Prohm interests’ accountant and one who has owned and run service station and mechanical workshops and now specialises in their accounts. He took the view that, amongst other infelicities, relocation costs and costs of re- establishment for Mr Kumar were seriously under-stated and bore on the measure of his loss.

[148] Similarly, a Mr Hatten, a chartered accountant instructed by Lucina, was sceptical, after reviewing Mr Kumar’s documents, of the figures produced by his accountant. He said the cash position of the business was declining over the period it was at 681 Mt Albert Road not increasing in profitability (or not reducing its losses as Mr Kumar averred). He was critical of accounts not being prepared for 681 Mt Albert Road alone. He concluded that “the trial balances down to 30 November
2001 indicated a company which was at best trading at a marginal profitability” and that it was going backwards in cash-flow terms thereafter. He subjected the plaintiff’s figures to detailed analysis to reach the view that the profit projections were “excessively optimistic” and, after it shifted to the rear premises, was “unlikely to attain anything better than marginal profitability”. There was, in his view, no evidence to support the profitability ascriptions on which Mr Kumar based his estimates.

[149] Further on this aspect of the case, even had he been successful on the liability aspect of the case, Mr Kumar would have encountered considerable difficulties in showing that his loss was attributable to the defendants’ breach. There is “crucial difference between causing a loss and providing an opportunity for its occurrence” (Price Waterhouse v Kwan [1999] NZCA 311; [2000] 3 NZLR 39). As the Court of Appeal observed in Price Waterhouse (at 46-47 para [28]) :

Plaintiffs in this field must show that the defendant’s act or omission constituted a material and substantial cause of their loss. It is not enough that such act or omission simply provided the opportunity for the occurrence of the loss. The concept of materiality denotes that the act or omission must have had a real influence on the occurrence of the loss. The concept of substantiality denotes that the act or omission must have made a more than de minimis or trivial contribution to the occurrence of the loss. Looking at the question in this dual way is both a reminder of the difference between opportunity and cause, and a touchstone for distinguishing between them. In some instances the words used have been material or (as opposed to and) substantial. It is preferable, for the reasons just mentioned, to focus on both concepts for they are each relevant to causation issues. No form of words will ultimately provide an automatic answer to what is essentially a question of commonsense judgment.

[150] Here, there would have been considerable delay had Mr Kumar applied in October-November 2002 for resource consent for his altered use of the two storey building. At most, he may have had a claim for loss of profits for the time it reasonably took him to establish alternative premises but, for the reasons mentioned, his Kelston site was not an appropriate comparator. He was also under an obligation to mitigate his losses but appears to have done little to try and find alternative premises in the vicinity of 681 Mt Albert Road. All those observations mean causation as well as quantum would have posed hurdles for Mr Kumar.
[151] With so many discrepancies and differences, the calculation of whatever damages may have been payable to Mr Kumar had he been successful on other aspects of the case would have posed considerable difficulties.

Result

[152] In the result, the Court’s formal orders are :

1. The plaintiff’s claims against all defendants on all causes of action are dismissed.

2. The defendants are entitled to costs against the plaintiff. If counsel and the parties are unable to agree on the costs category to be applied throughout this litigation or as to the quantum of the costs, memoranda may be filed with those from the defendants being filed within 35 days of the date of delivery of this judgment and those from the plaintiff within 42 days, and with counsel certifying in each case, if they consider it appropriate so to do, that all costs can be resolved by the Court without further hearing.

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WILLIAMS J