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High Court of New Zealand Decisions |
IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY
CIV 2008-409-000120
BETWEEN CELIBRIALA LIMITED
Plaintiff
AND WARWICK LIVINGSTONE INWOOD,
ANNE JEANETTE INWOOD,
DOROTHY REAY HALLIDAY,
MICHELLE SPENCER AND CHERIE
CHRISTIAN
First Defendants
AND
S F C PROPERTIES LIMITED
Second Defendant
Hearing: 5 March
2008
Counsel: J V Ormsby and G E Slevin for Plaintiff
D M Lester and K G Hales for First Defendants
No Appearance for Second Defendant
Judgment: 14 March 2008
JUDGMENT OF PANCKHURST J
The
Why Not Café
[1] The plaintiff company is owned and operated by Garry and Lynn Husband.
The company was formed when Mr and Mrs
Husband purchased the Why Not Café
in Kaikoura. The first defendants are their landlords. When the Husbands took a
lease of the premises
in which the café is situated in 2006 they insisted upon the
inclusion of a right of first refusal in relation to the purchase of
the land and
buildings, should their landlords decide to sell. In that event and before any sale to a
third party, the landlords
were required to give 10 days written notice of the terms
upon which the Husbands could purchase the freehold.
CELIBRIALA LIMITED
V WARWICK LIVINGSTONE INWOOD, ANNE JEANETTE INWOOD,
DOROTHY REAY HALLIDAY, MICHELLE SPENCER AND CHERIE CHRISTIAN HC CHCH CIV 2008-
409-000120 14 March 2008
[2] In September 2007 the landlords concluded an agreement for sale and
purchase with the second defendant
company, SFC Properties Limited. Written
notice was not given to the Husbands before the agreement was concluded. But, the
first
defendants maintain that Mr Husband was verbally offered the freehold at the
agreed purchase price of $500,000 in June 2007 and that
Mr Husband said that he
and his wife were not interested in purchasing at this price.
[3] The plaintiff company seeks specific
performance of the right of first refusal
contained in the lease and an injunction restraining the landlords from selling to SFC
Properties Limited. But the landlords claim that the alleged conversation in June
2007 precludes the Husbands from insisting upon
their strict contractual rights under
the lease. They assert that the Husbands are estopped from asserting and relying
upon the right
of first refusal contained in the lease.
[4] The single effective issue in the case is whether there was a conversation
between
Mr Husband and Dorothy Halliday (one of the landlords) in the course of
which the freehold was offered for sale at $500,000 and the
opportunity to purchase
was declined. There is a marked conflict as to the circumstances and content of the
relevant conversation.
Counsel agreed that the resolution of that conflict would
effectively decide the case.
[5] SFC Properties Limited, I note, although
joined as a second defendant, has
elected to take no part in the proceeding. It abides the decision of the Court with
reference to
the plaintiff's claim.
Some further background
[6] The Why Not Café is situated on the main street in Kaikoura. Warwick and
Anne Inwood, Dorothy Halliday and her late husband were friends and business
partners. About 11 years ago they purchased the Why
Not Café. A short time later
Mr Halliday died. The two daughters of the Halliday family inherited shares in the
café building.
[7] For several years one of the daughters and her husband ran the Why Not Café
business. In January 2006 they sold the business
to the Husbands. Mr and Mrs
Husband had moved to Kaikoura about two years earlier. They had purchased the
Craypot Restaurant and Bar, which is next door to the Why Not Café. Hence,
the
purchase of the Why Not Café as a going concern represented an expansion of the
Husbands' business interests in central Kaikoura.
The agreement for sale and
purchase of the business included a term to the effect that the vendors would secure a
right
of first refusal in relation to the purchase of the land and buildings.
[8] The owners entered into a long-term lease with the
Husbands. The term was
four years with full rights of renewal totalling 16 years. A special term of the lease
provided:
Right of first refusal to purchase premises
47.1 Lessor to offer property to lessee
If at
any time during the term of any renewal and for as long as
Celibriala Ltd remains as tenant but not otherwise, the
Lessor desires
to sell the property at 64 WestEnd, Kaikoura comprised in
Certificate of Title 5A/541
(Canterbury Registry) (for the purposes
of sub-clauses 1-4 (inclusive) "the Property"), the Lessor shall first
deliver written notice ("the Lessor's Notice") specifying the terms
and conditions upon which the Lessor
is prepared to sell the
Property.
47.2 Lessee's acceptance of offer
The Lessee shall have
ten (10) ordinary business days from receipt
of the Lessor's Notice to by written notice ("the Lessee's Notice")
advise the Lessor whether the Lessee, or a person nominated by the
Lessee who will be identified, wishes
to acquire the property on the
terms and conditions specified in the Lessor's Notice. If the
Lessee's
Notice contains advice the Lessee wishes to acquire the
property on such terms and conditions then from receipt by
the
Lessor of the Lessee's Notice a binding agreement shall exist for the
sale and purchase of the
property.
[9] In 2007 there were two conversations which are of crucial importance to the
resolution of this proceeding. The
first occurred in March. There is no significant
disagreement as to the content of this discussion.
[10] The March meeting was
initiated by Mr Husband. He met Mrs Halliday and
the Inwoods at the Craypot restaurant. Mr Husband indicated that he and his wife
were interested in purchasing the freehold of the Why Not Café for $300,000. This
figure was based on what he believed the rating
value of the property to be, namely
$270,000. However, the owners advised that the most recent valuation, in
September 2006, was
$410,000. They added that a sale price above the rating value
would be required, but they were not keen to sell anyway. Mr Husband
evinced no
interest in purchasing the freehold at or above the level of the new valuation figure.
[11] On 14 June 2007 a real
estate agent in Kaikoura presented a signed offer
from SFC Properties Limited to purchase the café for $410,000. This offer came
as
a surprise to the owners. They had not placed the property on the market. Over the
next few days there were a number of telephone
discussions between Mrs Halliday
and the Inwoods, who reside in Nelson. A decision was reached that they would sell
the freehold
for $500,000. Conscious of the lessees' right under the lease,
Mrs Halliday (who lives in Kaikoura) was deputed to contact
the Husbands
concerning their company's right of purchase. This she did a few days later,
probably on 19 or 20 June.
[12]
As it happened the Husbands had a winter holiday in Brisbane during the first
half of June. They returned to New Zealand on the
night of Monday, 18 June and
arrived home to Kaikoura in the early hours of the morning. Mr and Mrs Husband
did not go to the restaurant
and café until the early afternoon.
[13] Either that afternoon, or the next day, around lunchtime Mrs Halliday called
at the restaurant. Unlike the meeting in March, this visit was unarranged. It is
common ground that Mrs Halliday and Mr Husband had a conversation at about this
time, but the content of the conversation and the
circumstances in which it occurred,
are markedly in dispute.
[14] Mrs Halliday maintains that she offered the freehold to Mr
Husband for
$500,000. He said that he and his wife were not interested in purchasing at that
price. Mr Husband, however, maintains
that the figure of $500,000 was not ever
mentioned, let alone an opportunity to purchase at that price conveyed to him. I
shall return
to the competing versions of the conversation shortly.
[15] After her visit to the Craypot restaurant Mrs Halliday arranged with
the agent
for a counter offer to be made at $500,000. The amended agreement was sent to
Mr and Mrs Inwood on 21 June and returned
a week later. On 3 July the agent
transmitted the offer to the prospective purchaser.
[16] During June and July the agent acted
as an intermediary between the parties,
culminating in advice to the buyer that a counter offer at $450,000 would not be
accepted.
On 1 September SFC agreed to the vendor's price, but sought an
additional term in the agreement relevant to a rent review which
was due to occur in
the period before settlement of the sale. SFC wished to conduct the rent review
process. This was acceptable
to the vendors. The agreement was amended and
signed in final form on 4 September.
[17] A further special term of the agreement
allowed SFC two calendar months to
conduct a due diligence process. On 5 November SFC confirmed that due diligence
had been completed
and that the agreement was unconditional. Settlement was to
occur on 31 January 2008.
[18] During the next few days Mrs Halliday
called at the Craypot restaurant on
two occasions. Mr Husband was not there. She left a message with an employee for
Mr Husband to
contact her. It is common ground that the two spoke within the next
day or so, probably on 9 November. Again, there is some conflict
as to what was
said. Mr Husband maintains that he was told that the café premises had been sold to
a Queenstown buyer and that settlement
of the sale was to occur on 31 January.
Mrs Halliday maintains she told Mr Husband that the sale price was $500,000 and he
congratulated
her on the sale.
[19] Aside from speaking to his wife, Mr Husband did nothing until 12 December.
That day he telephoned his solicitor
in Timaru, Mr Tony Shaw, and told Mr Shaw of
his dissatisfaction. The next day Mr Shaw wrote to the owners' solicitors advising
that
Mr and Mrs Husband (through their company Celibriala Limited) were
interested in purchasing the property and that, if the owners
were indeed minded to
sell, the lessors' notice pursuant to clause 47.1 of the lease should be immediately
issued. This letter elicited
an immediate response from the owners' solicitors. I
shall refer to the terms of the correspondence shortly, since the instructions
given to
the respective solicitors and the letters written by them are relevant to resolution of
the essential conflict concerning
the June 2007 conversation.
[20] When the parties could not find a solution to their differences, this
proceeding was filed by
Celibriala Limited on 25 January 2008. An interim
injunction was granted later that day. Accordingly, settlement
of the sale and
purchase did not proceed on 31 January. SFC remains ready and willing to settle,
but completion of the sale transaction
remains on hold, pending the outcome of this
proceeding.
The elements of equitable estoppel
[21] The first defendants' statement
of defence raises both estoppel and waiver.
However, Mr Lester relied upon the former to the exclusion of the latter. Rightly in
my view he accepted that the defence case either gave rise to an estoppel, or it did
not. Nothing was to be gained in seeking to
rely upon the pleaded alternative
defence of waiver.
[22] Equitable estoppel, in New Zealand, has been defined in a number of
judgments of the Court
of Appeal. What is sometimes termed the modern approach
to promissory estoppel involves a focus upon unconscionability.
In National
Westminster Finance New Zealand Ltd v National Bank of New Zealand Ltd [1996]
1 NZLR 548 (CA) at 549, Tipping J said:
The decisions of this Court in Wham-O MFG Co v Lincoln Industries
[1984] 1 NZLR 641 and Gillies v Keogh [1989] 2 NZLR 327 have
emphasised the element of unconscionability which runs through all
manifestations of estoppel. The broad rationale
of estoppel, and this is not a
test in itself, is to prevent a party from going back on his word (whether
express or
implied) when it would be unconscionable to do so.
[23] Nonetheless, it is still necessary for the party alleging an estoppel
to show a
promise or representation on the part of the other party, reliance upon that promise or
representation, that such reliance
has caused detriment and that it would be
unconscionable to allow the party who has gone back on his word to do so. In this
case
counsel were in broad agreement that the pivotal consideration is the first
requirement, namely whether Mr Husband, having been
offered the premises at
$500,000, clearly represented to Mrs Halliday that he and his wife were disinterested
at that price. If this
element of estoppel is established, it is scarcely tenable to
suggest that reliance upon the representation did not follow and that
the owners have
not suffered detriment, given that they face a likely claim from SFC. Nor was
Mr Ormsby bold enough to contend that,
even if Mr Husband had gone back on his
word, his behaviour was not unconscionable in all the circumstances of this case.
Instead,
counsel contended that there was no promise, or representation, upon which
to found an estoppel in the first place.
[24] Mrs
Halliday's evidence of the important meeting in June 2007 indicated that
the relevant conversation lasted only about five minutes
and occurred while
Mr Husband was in the middle of business-related paperwork. It was not suggested,
however, that the brevity and
informal nature of the conversation necessarily
precluded a finding that a binding commitment was given. Burbery Finance v
Hindsbank
Ltd [1989] 1 NZLR 356 (CA) is an example of a case where a brief
telephone conversation was held to be sufficient to found an estoppel. It is the
content
of the conversation which is all important and, in this case, whether a right to
purchase at $500,000 was conveyed on the one hand,
and clearly declined on the
other.
Was there an offer, and declinature, at $500,000?
[25] There were no witnesses to the
June conversation. Resolution of the conflict
depends upon an assessment of the evidence of Mr Husband and Mrs Halliday.
Mr Husband's
evidence
[26] Prior to going into business in 2004 Mr Husband worked as an auditor for the
Inland Revenue Department for about
20 years. He was also the treasurer of the
Public Service Association for approximately four years.
[27] With reference to
the meeting with the owners in March 2007 Mr Husband
said that when he was advised of the up-to-date rating value of $410,000 he
responded that he and his wife could not do anything at that price, at that time. He
added that the owners indicated they were
unsure about selling anyway and were
content to keep the property in the meantime.
[28] With reference to the June 2007 conversation
Mr Husband said this:
11. Later in 2007 Mrs Halliday told me there were people in Queenstown
interested
in the property, but she did not say that they were intending
to sell it.
12. I would not have become involved
in those negotiations if invited to,
because that would have created an auction-like situation in which
they could go back to the other party and drive the price up. If she
had said they were intending to offer it for sale
I would have just
asked her to make any offer she might want to make in writing, but
these things were
not discussed between us.
13. I think that was in June but cannot recall whether that conversation
took place
on the street or at the Craypot. I do recall telling my wife
about it though and telling her that no figures had been
mentioned.
We thought the people who were interested were probably the same
people who had recently bought
other properties nearby.
[29] Mr Husband also explained that the meeting was unlikely to have occurred
on 18 June, around lunchtime,
as his family did not return home from Brisbane until
the small hours and he did not go to work until the early afternoon. Mr Husband
considered that if the conversation had occurred that day he would certainly have
recalled it. As to the frequency of Mrs Halliday's
visits to the restaurant, or the café,
Mr Husband said that on about four or five occasions she dropped off rate demands,
but otherwise
it was not her practice to visit either of the premises.
[30] Mr Husband could not place an exact date upon the conversation
later in the
year when Mrs Halliday informed him of the sale of the café premises. He agreed
that messages were left for him with
an employee. His evidence continued:
When I did eventually speak to her she told me the property had been sold. I
was surprised and said "Oh", but made no other comment about it. I may
have thanked her for letting me know but I certainly
did not congratulate her
on the sale. My recollection is that she came to the Craypot and told me that
while I was
in the office and she was standing at the door.
The final sentence is significant for the fact that the description of the circumstances
is consistent with those described by Mrs Halliday, but with respect to the June 2007
meeting. She described interrupting Mr Husband
who was attending to paperwork
and that she stood near the door to the office while the two spoke.
[31] It was not until 12
December that Mr Husband consulted his solicitor
concerning the right to purchase. Mr Tony Shaw was not called as a witness, but
his
file note of the 12 December conversation, and others, and letters he wrote on the
Husbands' behalf, were produced in the agreed bundle of documents. The first file
note
recorded this:
3 months ago she said in discussion with Queenstown buyer. Couple of
weeks ago she said they had
sold.
[32] On 13 December Mr Shaw wrote to the owners' solicitor, Mr Lindsay
Martin, requesting that the right to purchase clause
in the lease be invoked. The
letter included this:
We are instructed that a representative of the landlord has told Mr Husband
(one of the directors of Celibriala Limited and guarantor of the lease) that the
property has been sold to someone
in Queenstown. Mr Husband was also
told that settlement is scheduled for 31 January.
It seems that, consistent with his
evidence concerning the conversation, Mr Husband
did not mention the figure of $500,000 to his solicitor.
[33] Mr Martin did
in a letter which he wrote to Mr Shaw on 14 December. I
shall return to the content of that letter in a moment. It asserted the matters
relied
upon as giving rise to the estoppel.
[34] Following receipt of that letter Mr Husband again spoke to Mr Shaw on
18 December.
The file note of that conversation is essentially similar to the previous
one. On 19 December Mr Shaw again wrote to Mr Martin. The
letter included this:
Mr Husband instructs us that when he approached your clients at the
beginning of the year,
he indicated that he wanted to purchase the property
and would pay "around the GV". We are instructed that your clients'
response was to say that the new GV was $410,000.00. Nothing was said at
the time about "requiring $500,000.00".
Your clients also apparently
advised Mr Husband that they were quite happy to keep the property.
Approximately two
months ago your clients advised Mr Husband that there
were people in Queenstown interested in the property. Nothing was said
to
Mr Husband to the effect that your clients intended selling the property with
total disregard for the first right
of refusal.
The letter ended on the note that Celibriala Limited was in a position to purchase the
premises for $500,000 and that
a lessor's notice pursuant to clause 47.1 should be
issued immediately.
[35] There was no response to that letter before Christmas.
On 15 January 2008
Mr Shaw wrote again to Mr Martin seeking an answer. This was provided on
22 January by Mr Martin's partner, Mr
Keith Hales. In substance this letter (to
which I will return) restated the owners' perspective in terms similar to the letter of
14 December.
[36] To my mind Mr Husband's evidence concerning the March, June and
November conversations was essentially consistent
from the time he first spoke to
Mr Shaw until he gave evidence before me. He said that in March the figure of
$500,000 was not mentioned
and indeed that the owners were then disinclined to sell
the premises. In June he was told of discussions with a prospective buyer
from
Queenstown, but again the figure of $500,000 was not mentioned, let alone the
opportunity to buy in at that figure offered to
him. Similarly, Mr Husband said that
the sale price was not identified in November when he spoke to Mrs Halliday. Nor,
of course,
was a figure of $500,000 mentioned to Mr Shaw.
Mrs Halliday's evidence
[37] I have already set out the gist of Mrs Halliday's
evidence concerning the
March meeting (para [10]).
[38] After describing the surprising receipt in June 2007 of the SFC offer
to
purchase the café premises for $410,000, Mrs Halliday detailed the discussions she
had with the Inwoods and her daughters and
confirmed that a decision was reached
to counter offer at $500,000. These discussions occurred over a weekend, and it was
probably
18 or 19 June that she went to speak to Mr Husband. En route to town she
called on her partner, Mr Kevin Genet, at a building site
to drop off his lunch. This
was around 11.00 am. He accepted a lift with her into town and in giving evidence
Mr Genet confirmed these aspects. Mrs Halliday found Mr
Husband in the office at
the Craypot restaurant. Initially both Mr and Mrs Husband were present.
[39] Her evidence continued:
13. Mr Husband informed me that they had just got back from holiday and
had piles of paperwork to attend
to. I was left standing at the door
while I spoke to him. I don't remember Mrs Husband contributing to
the conversation, in fact I am not sure if she even stayed in the room.
14. I told Mr Husband that we had an offer to
purchase the café, that it
was completely out of the blue and that the offer was at $410,000, the
Government
Valuation. I told him that we were not interested in
selling at that price and that we were going to counter-offer
at
$500,000.
15. I told him that the reason I had come to see him was to offer him the
property
at that price as the tenant had first right of refusal.
Mr Husband said they were not interested in purchasing at that
price.
This did not surprise me given he was not interested in purchasing at
$410,000 only a few months
earlier.
16. I went on to tell Mr Husband that the offer had come from a developer
from Queenstown and we
were not particularly optimistic that he
would meet out price. Mr Husband told me that the Queenstown
purchaser had been snooping round the Craypot Café and had already
bought other properties in the street, including
the PGG building and
the Shell garage. From that conversation I got the impression that the
Husbands
owned the freehold of the Craypot Café.
17. I then left. The whole conversation only lasted about five minutes as
the Husbands seemed anxious to get on with the paperwork.
Mr Husband was quite clear that he was not interested
at $500,000.00.
[40] As can be seen Mrs Halliday gave a reasonably detailed account of this
important conversation. It seems likely
that it was 19 June that she visited the
restaurant, given the evidence of the Husbands that they did not go to work on the
18th
until the early afternoon.
[41] With reference to the discussion in November Mrs Halliday said that she left
messages at the
restaurant for Mr Husband and:
Mr Husband then rang me on 9 November, having got the message from
Rebecca [an employee].
In that conversation I told Mr Husband that the sale
at $500,000 was confirmed and was going to settle on 31 January.
Mr Husband congratulated me on the sale.
[42] Mr Lindsay Martin swore an affidavit which was admitted in evidence,
without
cross-examination. He deposed that he was telephoned by Mrs Halliday on
14 June 2007 when she advised him that there was a buyer
interested in the café
premises. Mr Martin arranged for a copy of the deed of lease to be sent to
Mrs Halliday. The next thing
from Mr Martin's perspective was receipt of the
agreement for sale and purchase dated 4 September 2007. He was not consulted
with
reference to the conclusion of that agreement. When the agreement became
unconditional on 5 November he telephoned Mrs Halliday to
report this
development, but also to seek her confirmation that the lessees' right of first refusal
had been extended to them.
[43] Mr Martin made a file note of the conversation. It included this:
At the beginning of the year the tenant apparently
came to her and asked her
if the landlords wished to sell the premises. He offered something in the
region of $300,000.00.
She then had the property valued at $410,000 and
approached him again and he said he would not be interested in that figure.
She indicated that they would not accept anything less than $500,000.00 in
any event. He said that they certainly would not be interested at that price.
This note is markedly
at odds with Mrs Halliday's evidence. She said that the figure
of $500,000 was first raised in June, not following the property being
revalued and
an approach being made to Mr Husband, but rather in direct response to the SFC
offer to purchase at $410,000.
Nor is the file note readily consistent with a
conversation occurring between Mrs Halliday and Mr Husband in June. It suggests
that
the $500,000 figure was identified after the meeting "at the beginning of the
year" and that this figure was mentioned to Mr Husband
in a context divorced from
the SFC offer.
[44] Consistent with the file note Mr Martin wrote to Mr Shaw on 14 December,
as follows:
We refer to your letter of 13 December.
We have discussed the matter at some length with Mrs Dorothy Halliday,
who is one of the proprietors of the freehold of the premises of the Why Not
Café. She has advised me that at the beginning
of this year, Mr Husband
approached her and enquired as to whether or not the freehold of the
premises was for sale.
At that time, the suggested price put forward by him was $300,000.
Our client then arranged for the property to
be valued and was advised that
the value was $410,000. Mr Husband indicated that he was not interested at
that price.
Mrs Halliday then went on to say that in any event, they would
not be selling the freehold at the price of $410,000 and would
be requiring
$500,000.
The premises have been sold. The consideration is $500,000 plus GST (if
any).
[45]
Before this letter was written Mr Martin recorded on his original typed
5 November file note:
Dot [Mrs Halliday] reconfirmed
above details 13/12/07.
Hence the letter mirrors the terms of the file note. And it contains no reference to a
conversation in
June.
[46] The situation did not change in January either, when Mr Hales wrote to
Mr Shaw on the 22nd of the month. He too recorded
an account referable to the
meeting in March 2007 and on the basis it was subsequent to that meeting the price
of $500,000 was identified
by the owners, which elicited a disinterest on Mr
Husband's part at that price.
[47] When proceedings were threatened Mrs Halliday
personally recorded an
account with reference to three conversations occurring in March, June and
November 2007. Consistent with
her Court evidence, this one page typed statement
did not relate the figure of $500,000 back to the March meeting. The statement,
which was prepared by Mrs Halliday at counsel's request and signed by her and
Mr and Mrs Inwood, included this with reference to
June:
We decided we would put in a counter offer of $500,000. At this time I
went and saw the tenants at their business
premises and offered them the first
right of refusal at $500,000. They indicated they were not interested at that
price.
We proceeded with the sale to SFC Properties Ltd and they agreed to
our price on 4th September 2007 with a clause that gave
them 2 months due
diligence.
[48] When cross-examined concerning why she had not referred to the June
conversation in these
terms when instructing Mr Martin, I was rather left with the
impression that Mrs Halliday had not anticipated this obvious challenge
to the
consistency of her evidence. She appeared to be bemused, rather than rattled, when
it was pointed out that her solicitor's
file note, and letters, asserted an estoppel based
on events which had occurred in the aftermath of the March meeting.
Resolution
of the conflict
[49] The differences in the accounts of Mr Husband and Mrs Halliday are
obviously marked. Most important
of all there is a black and white conflict
concerning the conversation which probably occurred about lunchtime on 19 June
2007. Mr
Husband thinks that discussion may have occurred on the street or in the
restaurant, while Mrs Halliday is clear that she spoke to Mr Husband from the
doorway
of his office. Mrs Halliday maintains that she said the owners intended to
counter offer at $500,000 and the Husbands were given
the right to purchase at this
price. Under questioning she said that this was the very purpose of her visit to the
restaurant.
[50] Yet, Mr Husband is equally adamant that a purchase price of $500,000 was
not even mentioned, let alone a right to purchase
at that figure offered to him, and
declined out of hand. His recollection is that Mrs Halliday spoke of an interested
buyer from
Queenstown, that he thought it likely the interested party was the same
person who had purchased other properties in Kaikoura, but
that he deliberately
refrained from raising the issue of price, because he did not want to create an auction
like situation as between
the Husbands and the prospective Queenstown buyer.
[51] The extent of the differences between the two key witnesses invites
the
conclusion that one of them did not give truthful evidence. However, that was
certainly not my impression. I found nothing which
suggested deliberate dishonesty.
To the contrary, both Mrs Halliday and Mr Husband impressed me as straight-
forward people, who
were genuinely endeavouring to recall the events to the best of
their ability.
[52] How, then, is the conflict to be resolved?
It is for the first defendants to
satisfy me that a right to purchase at $500,000 was extended to Mr Husband and that
the opportunity
was unequivocally declined by him on behalf of himself and his
wife. I am not satisfied of this. In light of all the evidence I
am left in considerable
doubt as to exactly what was said in the course of the June 2007 conversation. A
number of matters prompt
me to this view.
[53] I regard the terms of the March 2007 discussion as important background. It
is common ground that Mr Husband
signified a wish to purchase the premises for
$300,000, unaware that the rating value had been increased to $410,000. Mention of
this figure was sufficient to cause Mr Husband to say words to the effect that
$410,000 was out of their league. He believes that
he added the qualification "at that
time", but I think the addition of these words is a little unlikely. But, the fact
remains that
Mrs Halliday remained well aware of the Husbands' right to purchase,
since she said as much and gave this as the very reason for
visiting the restaurant in
June. Importantly, the terms of the conversation in March were calculated, I think,
to indicate to Mrs
Halliday that, at an increased price of $500,000 only three months
on, there was no realistic prospect of the Husbands being interested.
This probably
inclined her to be less exact at the June meeting than might otherwise have been the
case.
[54] On 14 June, following
receipt of the surprise offer at $410,000, Mrs Halliday
rang Mr Martin. Mrs Halliday did not mention this telephone call in her evidence.
Mr Martin said of it that he was simply told that there was a party interested in
purchasing the premises and that he arranged for
his assistant to send a copy of the
deed of lease to Mrs Halliday. Mrs Halliday did not recall receiving the deed. But
what is clear
is that advice was neither sought, nor given, concerning the obligations
contained in clause 47 of the lease. Had Mrs Halliday
been advised of the
importance of ensuring that the Husbands were offered the café premises at
$500,000, this may have lent weight
to Mrs Halliday's account of the conversation
which occurred a few days later, probably on 19 June.
[55] Nor is the position
of the owners helped when I have regard to Mr Martin's
file note of 5 November 2007. Perhaps it is a pity that Mr Martin gave evidence
by
affidavit, rather than in person. It is conceivable that he and Mrs Halliday were at
cross purposes when they first spoke on 5
November. But by 14 December matters
had moved on. The previous day Mr Shaw had written a letter requiring that the
right of first refusal contained in the deed of lease
be formally invoked. Before
replying on behalf of the owners, Mr Martin spoke to Mrs Halliday and apparently
satisfied himself that
his 5 November file note was accurate. He recorded as much.
Hence, his reply to Mr Shaw contained a version of events most referable
to the
meeting in March and its aftermath, with no obvious reference to the June
discussion.
[56] It must be the case that either
Mrs Halliday gave a confused description of
events when she first spoke to Mr Martin or that the two were somehow at cross
purposes,
with the result that reference to the terms of the June conversation was lost
from the solicitor's file note. I say this because
Mr Martin recorded that $500,000
was identified as an acceptable sale price after the property was valued at $410,000
and that the
right of first refusal was extended at that point (not in the context of the
SFC offer).
[57] Even assuming some confusion on
5 November, I am satisfied that
Mrs Halliday did not clearly convey a right of first refusal to Mr Husband when the
two spoke in
June 2007. No doubt that was the purpose of her visit. But I can only
conclude that Mrs Halliday saw it as a long shot that the Husbands
could be
interested at $500,000 and accordingly her approach to the discussion was nowhere
near as decisive and effective as she
believed to be the case when she gave evidence
before me. In the result Mr Husband appreciated that there was a prospective buyer
in Queenstown, but he was not given to understand that he was being called upon to
exercise the right of first refusal contained
in the lease. I am unsure whether the
figure of $500,000 was mentioned, but whether it was or not, I find that the
conversation must
have lacked precision. It was for Mrs Halliday to establish the
importance of what she was about. Influenced, no doubt,
by Mr Husband's
expression of disinterest at $410,000 in March and absent express advice from Mr
Martin concerning the lessors' obligations
under the lease, Mrs Halliday failed to get
her message across.
[58] It inevitably follows that there was no verbal refusal of
an opportunity to
purchase at $500,000 by Mr Husband. The terms of the conversation had not served
to put him on notice that the
landlords were willing to sell the premises for $500,000,
let alone that he was being called upon to exercise the right contained
in the lease to
purchase at that figure. In short, I find that the circumstances were not such as to
require him to exercise the
right of first refusal on behalf of the plaintiff company.
Absent a verbal exercise of that right, there is no basis for a finding
of promissory
estoppel.
Result
[59] Celibriala Limited is entitled to the relief sought in the amended statement of
claim.
I order specific performance of the first defendants' obligation to forthwith
offer the property to the lessee in terms of clause
47.1 of the lease. In the meantime
the first defendants are restrained from completing the sale of the property to SFC
Properties
Limited (or any other purchaser) until such time as the lessee provides a
notice in terms of clause 47.2 of the lease, or until the
expiry of the 10 ordinary
business days allowed to give such notice.
[60] For completeness I note that Mr Ormsby in opening
the plaintiff's case,
submitted that the right of first refusal gave rise to an interest in land once the lessors
wish to sell became
manifest: Motor Works Limited v Westminster Auto Services
Limited [1997] 1 NZLR 762 (HC). Mr Lester accepted this to be the case, although
of course without prejudice to the defence based on promissory estoppel.
Accordingly,
I need not further consider this aspect.
[61] As to costs my present inclination is that a 2B award should follow the event.
However, if the plaintiff seeks an award on some other basis it may file a
memorandum within 15 working days and in that event the
first defendant shall have
10 working days within which to reply.
_________________________________________________________________________________
Solicitors:
Wynn Williams & Co, Christchurch for Plaintiff
Helmore Bowron & Scott, Rangiora for First Defendants
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