CHRISTCHURCH CITY COUNCIL V LINK COMPANY LIMITED AND ORS HC CHCH CIV 2005 409 966

CHRISTCHURCH CITY COUNCIL V LINK COMPANY LIMITED AND ORS HC CHCH CIV 2005 409 966 13 February 2008IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY CIV 2005 409 966BETWEEN CHRISTCHURCH CITY COUNCIL Plaintiff AND LINK COMPANY LIMITED First Defendant AND PRIME ESTATES LIMITED Second Defendant AND DENIS LAWRENCE HARWOOD Third Defendant AND ALLARD INVESTMENTS LIMITED Fourth Defendant AND BARCLAY SECURITIES LIMITED Fifth Defendant AND PALMHAVEN DEVELOPMENTS LIMITED Sixth Defendant AND JOHN LESLIE PURVIS Seventh Defendant AND PATRICK CASSERLY Third Party Hearing: 1, 2, 3, 4, 5, 8, 9, 10, 11, 12, 29, 30, 31 October; 1, 2, 5, 6 November 2007 Appearances: G H Nation, E R Hendy and M B Martin for Plaintiff G C Knight for First Defendant and Third Party A J Forbes QC and A V Foote for the Second, Third, Fifth and Sixth Defendants D M Lester for the Fourth and Seventh Defendants Judgment: 13 February 2008JUDGMENT OF CHISHOLM J A. The plaintiff's claims against all the defendants and the second defendant's claim against the third party are dismissed. B. There are orders on the fourth and sixth defendants' counterclaims for removal of the caveats over Lots 53, 54 and 55. C. Unless memoranda are filed on behalf of the fourth and sixth defendants within 14 days, their counterclaims for damages will be dismissed. D. Memoranda are to be filed if agreement cannot be reached as to costs.E. Leave is reserved to any party to apply further should the need arise.____________________________________________________________________REASONS____________________________________________________________________INDEX Part I: Introduction This Case [1] Background [6] The Pleadings [42]Against Prime (Second Defendant) [43] Against Harwood (Third Defendant) [48] Against Allard (Fourth Defendant) [49] Against Barclay (Fifth Defendant) [51] Against Palmhaven (Sixth Defendant) [52] Affirmative Defences and Counterclaim by Prime, Harwood, Barclay and Palmhaven [53] Counterclaim by Allard [55]Cases For Plaintiff and Defendants [56]Plaintiff's Case [57] Defendants' Cases [59]The Evidence [61] Part II: Factual Issues Introduction [65] Signing of the Link/Prime Agreement [66]The Valuation Reports [68] Link/Prime Agreement [70]Mr Harwood's Fax [73] Plaintiff's Witnesses [76] Defendants' Evidence [83] Conclusions [97]Confirmation Of Agreement [109]Defendants' Evidence [111] Plaintiff's Evidence [119] Conclusions [123]The Addendum [129]Mr Harwood's Evidence [132] Other Evidence [135] Conclusions [138]Settlement [143]Mr Harwood's Nomination [144] The Deed of Assignment [146] Deduction Of $1,200 [152]Deed Of 10 September [155] Agreements With Allard and Palmhaven [158]History [159] Sales To Allard And Palmhaven [183]Advice That Council Intended To Enforce Swap Agreements [197]History [198] Conclusions [211]Drawing The Threads Together [214] Part III: Legal Implications Introduction [215] Whether The Swap Agreements Ever Became Unconditional [216] Land Transfer Fraud Cause Of Action [220]Legal Principles [221] Alleged Dishonesty On The Part Of Mr Harwood And The Companies [223] Conclusions [225]Other Causes Of Action [241] Estoppel/Abandonment [246]Defendants' Case [249] Plaintiff's Response [252] Elements Of Estoppel And Abandonment [260] Conclusions [262]Counterclaims [278] Outcome ` [281]Part I Introduction This Case[1] In September 2000 Christchurch City Council (plaintiff) and Link Company Limited (first defendant) entered into conditional agreements giving effect to a land swap arrangement whereby the Council was to transfer a reserve to Link for residential development and Link was to transfer another piece of land of similar size to the Council for reserve purposes. Although re-zoning giving effect to the land swap was implemented in anticipation of the land swap agreements being settled, they were never settled. [2] By July 2003 Link was in serious financial difficulty and on 24 July 2003 it entered into an agreement for the sale of land included in the swap agreements to Denis Harwood (third defendant) or his nominee. There are major issues about the actual land that Mr Harwood was intending to purchase and whether he was aware of the swap agreements entered into by the Council and Link in 2000. In due course Prime Estates Limited (second defendant) became the nominated purchaser from Link. [3] Ultimately Prime on-sold part of the land to Allard Investments Limited (fourth defendant ) and another part to Palmhaven Developments Limited (sixth defendant). Barclay Securities Limited (fifth defendant) provided finance. The Council contends that Mr Harwood was the controlling influence behind Allard, Palmhaven and Barclay and that these sales by Prime were part of an overall plan to defeat the Council's interests under the swap agreements. Patrick Casserly, the driving force behind Link, was joined as third party by Prime. [4] In this proceeding the Council is seeking to enforce the swap agreements against the various defendants. It relies on:• contract• land transfer fraud• constructive trust• the Fair Trading Act 1986. Link was placed in liquidation shortly before the trial began and did not actively participate in the hearing. Likewise, apart from giving evidence for the plaintiff, Mr Casserly did not participate as a party. [5] Part way through the hearing the plaintiff abandoned its claim against John Purvis (seventh defendant). And during closing submissions Mr Nation indicated that the plaintiff did not seek to pursue its claim against Link (in liquidation).Background[6] Events culminating in this proceeding evolved over several years. There are numerous factual conflicts and the documentary record includes many contradictory and confusing aspects. To a large extent the plaintiff and defendants seem to have construed events and documentation from entirely different perspectives. While it will, of course, be necessary to resolve the significant conflicts later, this background is nothing more than a highly abbreviated summary of a very complicated and somewhat extraordinary factual situation. [7] At the centre of the proceeding is vacant land located at Bexley, a residential suburb of Christchurch. Hopefully the aerial photograph attached to this judgment will assist in understanding the narrative that follows. [8] Lot 1 on DP62792 was held by the Council as a reserve. It was zoned Open Space. Link owned Lots 53, 54 and 55, all on DP77204. They were zoned Living 1 which permits residential subdivision. Lot 54 is the rectangular lot on the right with two narrow legs running off it, one of which runs alongside the Bexley expressway. For ease of reference the individual lots will be referred to as Lots 1, 53, 54 and 55. [9] On 14 September 2000 the Council and Link entered into two reciprocal agreements for sale and purchase (the swap agreements).[10] Under the first agreement the Council agreed to sell Lot 1 to Link for $231,380, with settlement to be effected on 31 January 2001. The agreement was conditional upon various matters, including settlement of the other agreement. There was also provision for the creation of a right of way over Lot 55 in favour of Lot 1 so that Lot 1 would have access to Farnborough Street. At that stage Link was already involved in the residential development of adjacent lands (stage 1) and it intended to extend the residential development to Lots 1 and 55 (stage 2) following implementation of the swap agreements. [11] The other agreement provided for Lots 53 and 54 to be transferred by Link to the Council. These lots were to be used by the Council as a reserve in place of the reserve on Lot 1. The purchase price under this agreement was $230,230, being $1,150 less than the purchase price under the other agreement (these purchase prices had been arrived at after valuations were obtained). In other respects the second agreement effectively mirrored the first agreement. [12] Although each agreement specifically recorded that the purchaser was entitled to lodge a caveat, that step was never taken. A caveat would almost certainly have avoided the events giving rise to this proceeding and the proceeding itself. [13] After the swap agreements were signed the zoning of Lot 1 was changed from Open Space to Living 1 and Lots 53 and 54 were rezoned from Living 1 to Open Space. The Council also began to develop Lots 53 and 54 as a reserve, including the construction of some posts and chain protection, planting and grassing. [14] For various reasons settlement of the agreements could not take place on 31 January 2001 and it was not until a year later that the stage was reached where the Council believed that the swap agreements were unconditional. Council officers asked Mr Casserly to advise a settlement date. Although a settlement statement was prepared by Link's solicitors on the basis that settlement would be on 4 October 2002, settlement did not take place, primarily because of unresolved issues concerning the right of way over Lot 55.[15] By this time Link was under severe financial pressure, especially from its second mortgagee, Hartford Nominees Limited. The situation was complicated by the fact that implementation of the swap agreements would require Hartford Nominees to co-operate with the release of the securities over Lots 53 and 54. Faced with these problems Link decided that it would have to sell its land. According to Mr Casserly his intention was to sell Stage 2 of the development (Lots 1 and 55) on the basis that the swap agreement would be implemented in conjunction with the sale. Valuations were obtained on that basis, and a buyer was sought. [16] Although Link entered into an agreement with Awatea Visions Limited for the sale of Lots 1 and 55 for $1 million (which was later reduced in a subsequent agreement to $750,000) and the agreement became unconditional, Mr Casserly was not confident that the contract would be completed (it later transpired that his concern was justified because Awatea was not able to complete). So he approached his friend, Justin Prain, to see if he knew of anyone who would be interested in purchasing the land. Mr Prain had considerable experience in land development and about 18 months earlier Mr Casserly had raised the possibility of Mr Prain becoming involved in the development, but nothing had come of it. Mr Prain was either supplied with, or already held, various documents relating to the land, including valuations. [17] Denis Harwood, who held a very extensive portfolio of rental properties but had not been previously involved in a development of this nature, was the only person that Mr Prain thought might be interested in purchasing the land at very short notice. By the time Mr Prain approached Mr Harwood on 23 July 2003 there were indications that Link was on the brink of receivership at the hands of Hartford Nominee. Mr Casserly was extremely concerned about that possibility because he believed that Hartford Nominees would attempt to take advantage of the situation and gain ownership of the Link land without paying anything like proper value. [18] On 24 July 2003 Mr Prain showed Mr Harwood the land. By that time Mr Prain had faxed to Mr Harwood 34 pages of the documentation that he had concerning the land. It was Mr Prain's evidence that while Mr Casserly had earlier mentioned to him that there had been negotiations with the Council about swappingLot 1 for Lots 53 and 54, there was no mention of any concluded agreements and he had been left with the understanding that a swap was open to negotiation. He passed this on to Mr Harwood. Both Mr Prain and Mr Harwood maintain that when they inspected the land they were totally unaware that any land swap agreements had been reached and they believed Link was selling the land that it then owned - Lots 53, 54 and 55. [19] Later that day they attended a meeting with Mr Casserly and his solicitor, Bevan Stone, in Mr Stone's office. At that stage there were indications that Hartford Nominees was actually in the process of appointing receivers. Mr Harwood was not prepared to pay more than would be necessary to clear the mortgages, and agreement was reached that he or his nominee would pay $620,000 with settlement on 22 August 2003. Mr Stone then handwrote an agreement on a standard form and the agreement was signed by Mr Casserly and Mr Harwood (the Link/Prime agreement) The Link/Prime agreement provided for the sale and purchase of Lots 1 and 55 conditional upon, first, the Awatea agreement not being settled by 31 July 2003 and, second, Mr Harwood completing due diligence by that date. The document did not make any reference to the swap agreements. Hartford Nominees appointed receivers that day. [20] It is the Council's case that the Link/Prime agreement correctly recorded that Mr Harwood was purchasing Lots 1 and 55. The Council claims that Mr Harwood knew about the swap agreements when he signed the agreement and that he must have realised that he was effectively buying Stage 2 of Link's proposed residential development. Amongst other things, the Council points to the documentation supplied by Mr Casserly to Mr Prain, particularly the valuations, which refer to the swap agreements. On the Council's case it was perfectly clear that the swap agreements would have to be implemented as part of the Link/Prime sale. [21] While Mr Harwood accepts that he knew when he signed the Link/Prime agreement that there had been negotiations between Link and the Council, he maintains that he did not know that there were signed agreements between those parties. His case is that he believed he was purchasing Lots 53, 54 and 55 and that once he had purchase those lots he thought he would be able to negotiate with theCouncil about swapping Lot 1 for Lots 53 and 54, or parts thereof. But he did not regard a swap as essential, and if it did not eventuate he intended to develop lots 53, 54 and 55. [22] Mr Harwood maintains that he only realised that there was an error in the legal description of the land recorded in the Link/Prime agreement when he saw his solicitor, David Parris, on the evening of 24 July after having signed the agreement. He claims that after the error was picked up he thought he had rectified it by altering the title references on the agreement and having those alterations initialled by Mr and Mrs Casserly. He thought he had deleted the title reference to Lot 1 and replaced it with the title references for Lots 53 and 54. For reasons that will be explained later the alterations did not in fact alter the legal description of the land. [23] According to Mr Harwood the first he knew of the swap agreements was when they were mentioned by Mr Casserly the day after the Link/Prime agreement had been signed when he and Mr Casserly were on site. However, Mr Harwood maintains that Mr Casserly left him with the clear understanding that they were"dead and at an end", and that he was free to re-negotiate all aspects of the swap with the Council. This explanation is categorically rejected by the Council. As the Council sees it, Mr Harwood knew about the swap agreements from the beginning and he was attempting to re-open the matter in the hope that he might be able to achieve more favourable terms, but he always knew that if negotiations with the Council failed he would be bound by the swap agreements, copies having been sent to him by Mr Stone on 28 July 2003. [24] Soon after signing the Link/Prime agreement Mr Harwood telephoned Mr Freeman, a senior planner employed by the Council with whom he had had previous dealings. He told Mr Freeman that he had conditionally purchased the Link land and that he only had a week to complete due diligence. It was Mr Harwood's evidence that he only confirmed the Link/Prime agreement after Mr Freeman had told him during a later telephone conversation that the swap agreements had "fallen over"because they had not been followed up at the time. Mr Freeman denies he said that.[25] Because of various complications, principally the possibility that the receivers might seek to avoid the Link/Prime agreement, Roger Fraser, a solicitor with expertise in receivership and insolvency law, was instructed by Mr Harwood on 14 August 2003. The same day an addendum to the Link/Prime agreement was signed by Mr Harwood and the Casserlys. It included the following clauses:"The parties agree to vary the Contract dated 24.07.03 by deleting the reference to CT 38C/300 [title to Lot 1] and substituting CT44B/528 [title to Lot 54] comprising 5365m 2 and CT44B/27 [title to Lot 53] comprising 4645m 2. The parties acknowledge that CT's 44B/528 and CT44B/527 are subject to exchange agreements for Sale & Purchase between the Vendor (Link Company Ltd.) and the Christchurch City Council dated 14 September 2000 whereby these titles are exchanged for CT38C/300 and the purchaser acknowledges that the purchase of the land in these titles is subject to those agreements."It was also recorded that the parties had agreed to vary the settlement date to 18 August 2003 and that in all other respects the agreement dated 24 July 2003 was confirmed. [26] As with most aspects, there are sharply conflicting explanations for, and interpretations of, this document. For its part the Council maintains that the document was to ensure that the swap agreements would be implemented. On the other hand, Mr Harwood maintains that the addendum was generated to satisfy the receivers about the correct description of the land and to bring forward the settlement date to make sure that the transaction was settled before a petition to wind up Link was heard. He maintains that that is all he "took on board" at the time. [27] Despite the variation to the settlement date, settlement did not actually take place until 22 August 2003. On that date Mr Fraser's firm prepared a deed of assignment. After referring to background matters, including the swap agreements, the document provided:"1. Link assigns the benefit of the Council contract to Prime. 2. Prime covenants with Link that it will perform Link's obligations under the Council Contract and indemnify Link from all claims by the Council under the Council Contract and all costs and claims relating thereto." (The underlining has been added)After the document had been signed by both parties Mr Harwood crossed out the underlined words and the alteration was initialled by the Casserlys. All this happened on the same day. [28] Mr Harwood's explanation was that a person from Mr Fraser's firm had called at his office and told him that it was necessary for the document to be signed urgently for the purposes of settlement. He had not seen the document previously and because he was in a meeting he had no opportunity to read it and simply signed it. Once he had a chance to look at the document he was shocked by the implications and, having been unable to reach Mr Fraser, spoke with Mr Parris who suggested that he delete the underlined words and have the deletion initialled by the Casserlys, which he did. [29] Again, the Council rejects this explanation. It believes that the deed of assignment supports its case and that Mr Harwood's explanation is yet another instance of him dishonestly attempting to explain away evidence that is damaging to him. [30] As already mentioned, the Link/Prime agreement was settled on 22 August 2003. On settlement Lots 53, 54 and 55 were transferred to Prime and the transfers were registered that day. Although a credit of around $1,200 was allowed to reflect the swap agreements, Mr Harwood maintains that he was not aware of this credit until well after settlement. [31] On 10 September 2003 another document was entered into by Link, Prime and Mr Casserly. After referring by way of background to various matters, including the swap agreements, the document recorded that Link assigned to Prime the full benefit and enjoyment of all subsidiary contracts and that Link and Mr Casserly would take all reasonable steps to ensure that Prime received the benefit of those contracts. [32] During the lead-up to the settlement of the Link/Prime agreement and thereafter, there were ongoing discussions and meetings between Mr Harwood and Council officers about a land swap. The Council was willing to look at thepossibility of Lot 1 being utilised for residential subdivision on the basis that only part of Lots 53 and 54 would be used for reserve purposes (with the balance being used for residential purposes). Alternative subdivision layouts were considered. [33] In November 2003 the Council's solicitors informed Link's solicitors that they wanted to settle the swap agreements. Link's solicitors advised that Link had assigned its interest in the swap agreements to Prime. No further attempts to settle were taken by the Council at that time, and negotiations between Mr Harwood and the Council continued. In December 2003 Prime requested the Council to commence a variation to change the zoning of Lots 53 and 54 to Living 1. [34] At the beginning of 2004 Council staff worked on the possibility of rezoning Lots 1, 53, 54. Neighbours who had purchased on the basis that Lots 53 and 54 would be open space were not happy. By February a resident was threatening legal action if this rezoning went ahead. Internal Council reports concerning these matters proceeded on the basis that the swap agreements had not been implemented. [35] On 5 March 2004 Council officers and Mr Harwood met with Simon Newberry, a registered valuer. Mr Newberry was asked to value Lots 1, 53 and 54 so that the land swap negotiations between the Council and Prime could progress. It is the defendants' case that at that meeting a Council officer said that they had checked with the Council's legal department and that the swap agreements were at an end. [36] Three days later, on 8 March 2004, Prime entered into an agreement to sell Lots 53 and 54 to Faye Siddall (as agent for a company to be formed) for $90,000 with settlement to be in six months time. Ms Siddall, who was employed by Mr Harwood, subsequently nominated Allard to be the purchaser. In the agreement it was acknowledged by the purchaser that the land was currently zoned reserve but that the Council had agreed to rezone it back to its former Living 1 zoning within five years. The agreement also recorded an acknowledgement by the purchaser that there were continuing negotiations with the Council and that up to 5,000 square metres of the land being sold might have to be returned to the Council for reserve purposes.[37] The same day Prime entered into an agreement with Mr Harwood (as agent for a company to be formed) for the sale and purchase of Lot 55 for $670,000, subject to the existing mortgage for $550,000 to Barclay. Settlement was to be effected in six months. It was a term of the agreement that Prime would continue its current negotiations to acquire Lot 1 from the Christchurch City Council. Palmhaven became the purchaser. [38] On 16 June 2004 Mr Newberry provided a valuation report which valued Lot 1 at $200,000 and Lots 53 and 54 at $890,000. This valuation came as a complete surprise to everyone and discussions about revising the values ensued. [39] On 11 August 2004 Steve McCarroll, a property and leasing advisor in the property unit of the Council, wrote to Mr Harwood indicating the basis on which a new agreement could be submitted to the Community Board and the Council for approval. In simple terms the Council would accept reduced reserve areas on Lots 53 and 54 (with the remainder being available for residential development), Lot 1 would be transferred to Prime, and the Council would pay Prime $83,900. [40] Although a further meeting between Mr Harwood and Council officers was arranged at the beginning of September 2004, no meeting eventuated because negotiations came to an abrupt end when Ian Thomson, the Council's in house solicitor, wrote to Mr Harwood on 8 September advising that the Council intended to take steps to enforce the swap agreements. The day before that letter was written the Allard purchase was settled and the transfer was registered the next day. The Palmhaven purchase was settled and the transfer registered at the end of September 2004. [41] This proceeding was issued by the Council on 5 May 2005.The Pleadings[42] It is convenient to begin by briefly describing the causes of action against each defendant against whom a claim is still pursued. That will be followed by abrief outline of the affirmative defences and counterclaims pleaded by the defendants.Against Prime (Second Defendant)[43] Four causes of action are pleaded against Prime: land transfer fraud; knowing receipt; breach of a constructive trust; and breach of the Fair Trading Act. Link denies the allegations underpinning these causes of action and opposes relief. [44] As to the first cause of action it is alleged that Prime committed fraud in terms of ss62, 63 and 182 of the Land Transfer Act by:"(a) Agreeing to buy the Link Land and Lot 55 from Link on the basis that it would recognise and protect the Council's interest in the Link Land and Lot 55. (b) Retaining the Link Land and Lot 55 for itself. (c) Mortgaging the Link Land and Lot 55 to Barclay Securities. (d) Transferring the Link Land to Allard and Lot 55 to Palmhaven. (e) Otherwise denying the Council's rights and interest in the Link Land and Lot 55."Orders are sought setting aside the transfer from Link to Prime, the transfer from Prime to Allard, and the mortgage in favour of Barclay. In addition the Council seeks a declaration that it is entitled to trace its interest, and a mandatory injunction requiring Prime to fulfil Link's obligations under the swap agreements. Alternatively damages and an order requiring Prime to account for any profit are sought. [45] In relation to the second cause of action, knowing receipt, the Council alleges:"69. Link as registered proprietor of the Link Land and Lot 55 was under a Constructive Trust to recognise and protect the Council's interests in respect of the Link Land and Lot 55 pursuant to the Council Contracts. 70. In breach of that Constructive Trust, Link transferred the Link Land and Lot 55 to Prime. 71. Prime had knowledge of that Constructive Trust, the circumstances giving rise to it, and the breach of it.72. By reason of the circumstances in which Prime acquired the Link Land and Lot 55, it was liable to account to the Plaintiff under a Constructive Trust on the ground of knowing receipt. 73. Further or alternatively, the Council is entitled to trace or follow its interest in the Link Land and Lot 55. 74. Prime received, retained, and dealt with the Link Land and Lot 55 for itself in particular through: a. Registering itself as the proprietor of the Link Land and Lot 55. b. Mortgaging the Link Land and Lot 55 to Barclay Securities. c. Transferring the Link Land to Allard and Lot 55 to Palmhaven.d. Failing to account to the Council and otherwise denying the Council's rights in respect of the Link Land and Lot 55."Similar relief is sought. [46] With reference to the third cause of action, constructive trust, it is alleged:"75. By reason of all the circumstances in which it acquired the Link Land and Lot 55, Prime was under a Constructive Trust to recognise and protect the Council's beneficial interest in the Link Land and Lot 55 pursuant to the Council Contracts. 75. In breach of that Constructive Trust, Prime received, retained, and dealt with the Link Land and Lot 55 for itself in particular through: a. Registering itself as the proprietor of the Link Land and Lot 55. b. Mortgaging the Link Land and Lot 55 to Barclay Securities. c. Transferring the Link Land to Allard and Lot 55 to Palmhaven.d. Failing to account to the Council and otherwise denying the Council's rights in respect of the Link Land and Lot 55.Again, similar orders are sought. [47] Finally, with reference to the breach of the Fair Trading Act 1986 it is alleged:"77. At the time Prime dealt with Link and the Council over the purchase and sale of the Link Land and Lot 55, Prime was "in trade" for the purpose of the Fair Trading Act 1986. 78. In those dealings in breach of section 9 of the Fair Trading Act 1986, Prime engaged in conduct that was misleading or deceptive or likely to mislead or deceive in:a. Representing to Link on the purchase of the Link Land and Lot 55, that it would meet Link's obligations pursuant to the Council Contracts with regard to the sale of the Link Land to the Council, the purchase of the Council Land and the creation of a right of way easement over part of Lot 55 for the benefit of the Council and the Council Land when it in fact intended to maintain to the Council that it was not bound by such contracts. b. Stating to Council staff that: i. the Council Contracts had never eventuated and/or ii. had ceased to be of any effect and/or iii. that Prime had been unaware of such contracts when it acquired the Council Land and Lot 55. 79. Through such conduct and representations, Link was misled and induced to enter into an agreement to sell the Link Land and Lot 55 to Prime, and the Council was misled and induced to enter into discussions and negotiations about Prime's wish to change the development plans for the Link Land and the terms of sale for Lot 55 as referred to in paragraph 32 above."An order pursuant to s43(2)(c) of the Fair Trading Act requiring Prime to convey to the plaintiff the Link land and a right of way over Lot 55 is sought. In the alternative damages are sought in the sum of $200,000.Against Harwood (Third Defendant)[48] It is pleaded that Mr Harwood acted dishonestly in procuring or assisting Prime to breach the constructive trusts on which Prime held the land. Equitable compensation of $200,000 (being the estimated cost of the Council obtaining adequate legal access to Lot 1) is sought. The Council also seeks an order that Mr Harwood account for any profit or benefit obtained as a result of the breaches. Mr Harwood denies the allegations against him and opposes relief.Against Allard (Fourth Defendant)[49] Two causes of action are pleaded against Allard. First, the Council alleges that:"84. In becoming registered as the proprietor of an estate in fee simple of the Link Land and in the way it has dealt with its interest in the Link Land, Allard has acted fraudulently in terms of Sections 62, 63 and 182 Land Transfer Act 1952 in that it did so with knowledge of the Council's interest in the Link Land and/or with the intention of defeating that interest.An order setting aside the transfer of the Link land from Prime to Allard and a mandatory injunction to enable the Council to become the registered proprietor are sought. [50] A second cause of action alleging knowing receipt is also pleaded. The allegations supporting both causes of action are denied by Allard and relief is opposed.Against Barclay (Fifth Defendant)[51] Two causes of action are pleaded: land transfer fraud; dishonest assistance in breach of trust. Relief is sought along similar lines to that sought against Allard. Again the allegations are denied and relief is opposed.Against Palmhaven (Sixth Defendant)[52] Two causes of action are also pleaded against this defendant: land transfer fraud; knowing receipt. Again the relief is along similar lines to that sought against Allard and Barclay. Palmhaven denies the allegations and opposes relief.Affirmative Defences And Counterclaim By Prime, Harwood, Barclay and Palmhaven[53] By way of affirmative defence these defendants plead, first, estoppel and, second, abandonment of the swap agreements by mutual non-enforcement and effluxion of time. [54] They also counterclaim for removal of the caveat registered over Lot 55 by the Council and seek damages of $546,000. No particulars of the damages were provided and my recollection is that that issue was not mentioned during the trial or during closing submissions.Counterclaim By Allard[55] Allard also counterclaims for removal of a caveat registered by the Council over the Link land and for damages of $28,500. Again my recollection is that the issue of damages was not traversed during trial or during closing.Cases For Plaintiff and Defendants[56] Given the foregoing it is only necessary to provide the briefest of outlines at this stage.Plaintiff's Case[57] When Mr Harwood entered into and confirmed his contract with Link he knew about the swap agreements and realised that they would have to be performed. He deliberately concealed from the Council the true nature of the arrangements that he had entered into with Link and, notwithstanding that he had contracted with Link on the basis that he would perform the swap agreements, he dealt with Council staff on the basis that he was not bound. Subsequently he dishonestly caused Prime to transfer part of the land to Allard and another part to Palmhaven for the purpose of defeating the Council's interests under the swap agreements. [58] Given Mr Harwood's knowledge at all relevant times, he was, at the very least, guilty of wilful blindness. In fact, however, he was clearly dishonest and his knowledge and state of mind can be attributed to all the defendants who subsequently acquired an interest in the land. At no stage did the Council intend to abandon the swap agreements and no estoppel arose. The Council is entitled to relief accordingly.Defendants' Cases[59] There were misunderstandings between the parties who were at cross purposes in relation to the:• land to be transferred under the Link/Prime agreement;• status of the swap agreements;• purpose of the addendum and deed of assignment. At the time Mr Harwood signed the Link/Prime agreement he was unaware of the swap agreements and once he became aware of them he only confirmed the Link/Prime agreement after receiving an assurance from the Council that the swap agreements were at an end. Throughout it was his intention to buy Lots 53, 54 and 55 and to then negotiate a swap with the Council on the basis that it would receive part of Lots 53 and 54 in return for Lot 1. He was not bound by the swap agreements. [60] The sales from Prime to Allard and Palmhaven were for reasons entirely unrelated to the swap agreements. If there had been any dishonest intent behind those transactions they would have taken place much earlier. Given the conduct of the Council over an extremely long period the Council is estopped from attempting to enforce the swap agreements. In any event it abandoned those agreements and cannot now pursue a claim for them to be enforced.The Evidence[61] Twelve witnesses gave evidence for the plaintiff and eleven for the defendants. The following table provides an overview of the witnesses (not necessarily in the order that they were called).Plaintiff's WitnessesPatrick Casserly Director of Link. Bevan Stone Solicitor for Link. Ian Thomson Council's in house solicitor. John Kirkwood Solicitor for Hartford Nominees. Christopher Freeman Senior planner with Council. Stephen McCaroll Former property and leasing advisor within the Council's property unit. Antony Claude Handisides Subdivisions officer for the Council's Environment Services UnitAnthony Murray Area development officer of the Council's Linwood Service Centre.Blake Cescon Solicitor with Buddle Findlay who acted for the Council.Hamish Frizzell Manager of surveying firm involved with the land. William Blake Valuer who produced valuations in November 2004 and June 2007.Geoffrey Clayton Witnessed signatures on the addendum. Karen McNaughton Owns a property neighbouring the land (evidence admitted by consent).Defendants' WitnessesDenis Harwood Third defendant. Justin Prain Introduced Mr Harwood to land. Allen Martin Finance broker who arranged finance for Link from Hartford Nominees (evidence from UK via video link) Judith Simmiss Present on 25 July 2003 when Mr Casserly and Mr Harwood met on site. Simon Newberry Valuer who undertook valuations in January 2002, November 2002 and June 2004. David Parris Mr Harwood's solicitor. Roger Fraser Solicitor instructed by Mr Harwood on 14 August 2003. (Now deceased; brief read). Stephen Savill Solicitor with Mr Fraser's firm who dealt with the file when Mr Fraser was absent. Richard Lascelles From 2003 assisted Mr Harwood in negotiations with the Council. Paul Rutledge Former solicitor who, along with Mr Harwood, met with Mr Stone on 5 June 2007. John Purvis Mr Harwood's chartered accountant. Seventh defendant until claim against him was abandoned.While a detailed analysis of the evidence will follow in Part II of this judgment, it is appropriate to make some general observations at this stage.[62] At both a general and specific level there are acute conflicts between the evidence for the plaintiff and the evidence for the defendants. At a general level the thrust of the evidence on each side is poles apart. For the plaintiff the primary allegation is that Mr Harwood was aware of the swap agreements and set out to take advantage of the Council in a devious and manipulative way. This is denied by the defendants who claim that Mr Harwood attempted to negotiate a swap agreement with the Council in good faith only to have the Council unilaterally terminate negotiations when they were on the brink of agreement. [63] At a specific level there are numerous acute conflicts. In many instances the evidence on particular topics is so contradictory that one version must be right and the other wrong. But it is not always easy to determine which is which. Even allowing for difficulties in witnesses trying to recall events after a long time, it was impossible to avoid the conclusion that at times witnesses on both sides slanted their evidence to bolster their cause. Wherever possible I have attempted to test the evidence of witnesses against the documentary record and against the evidence of other witnesses, but again this has not always been easy. [64] It might also be added that the apparent willingness of Mr Harwood and the Casserlys to enter into, and change, documents relating to the Link/Prime transaction is quite remarkable. Moreover, it is extremely difficult to make sense of some of the actions of the main players (Mr Harwood, Mr Casserly and Council officers).Part II Factual Issues Introduction[65] Given the numerous factual disputes I have decided to address the various issues on a chronological basis. The following table outlines the matters to be addressed:Date Event Primary Issue24/7/03 Signing of Link/Prime Whether Mr Harwood knew about theagreement swap agreements and, if so, to what extent. 31/7/03 Confirming of Link/Prime agreement Whether Mr Casserly and/or the Council advised Mr Harwood that the swap agreements were at an end before he confirmed. 14/8/03 Signing of addendum Circumstances giving rise to the addendum and its effect. 22/8/03 Settlement Implications, if any, arising from settlement and associated documents. 10/9/03 Further deed Effect and implications of the document. 8/3/04 Signing of agreements for sale by Prime to Allard and Palmhaven Motivation behind those agreements 8/9/04 Formal advice that Council intended to enforce swap agreements Factors behind the Council's decision to bring negotiations to and end.Once those specific issues have been resolved it will be possible to draw all the threads together and reach final factual conclusions.Signing of the Link/Prime Agreement[66] There is a sharp conflict of evidence about whether Mr Harwood knew about the swap agreements when he signed the Link/Prime agreement at Mr Stone's office. It is the Council's case that by the time the parties met in Mr Stone's office Mr Harwood already knew about the swap agreements and that the agreements were also discussed during the meeting. While the defendants accept that Mr Harwood was aware that there had been negotiations between the Council and Link, it is their case that he was unaware on 24 July that there were signed agreements and that he only learned about them the next day when he talked with Mr Casserly on site. [67] Before outlining and analysing the evidence on both sides there are three preliminary matters that need to be explained: the valuation reports; the Link/Prime agreement itself; and a fax sent by Mr Harwood to Mr Stone after the agreement was signed.The Valuation Reports[68] When he approached Mr Prain for assistance in finding a buyer, Mr Casserly supplied Mr Prain with various documents (or possibly Mr Prain already held them as a result of his earlier involvement with Mr Casserly, it does not matter which version is adopted). These included two valuation reports valuing stage 2 of the Link development which made reference to the swap agreements. For example, the Ford Baker valuation report stated:"Stage 2 comprises the northern end of this development and with the north-eastern side boundary being bordered by the ring road that abounds the middle suburbs in Christchurch to allow for ease of vehicle movements. In addition to the principal parcel of 2.6731 hectares, a parcel of 1.0060 hectares is to be transferred from the Christchurch City Council to the development company in exchange for the reserves provided by the development at 30 Farnborough Street (4645 m 2) and 32 Brightstone Crescent (5365 m 2)."I accept that these valuation reports were included in the 34 pages faxed by Mr Prain to Mr Harwood on 23 July 2003. [69] Naturally the Council places considerable weight on these reports and it contends that Mr Harwood is lying when he maintains that he did not know about the swap agreements when the Link/Prime agreement was signed. While Mr Harwood concedes that he might have received the valuation reports and other documents from Mr Prain, he maintains that he did not look at them. For reasons that will be explained shortly, I accept Mr Harwood's explanation.Link/Prime Agreement[70] Like so much of the documentation in this case, there are anomalies in the legal description contained in this agreement. The version included in the agreed bundle contains the following legal description:44B/632 "Area: 2.6731 ha Lot: 55 DP: 77204 CT: 38C/301 1.0060 ha Lot 1 DP 62792 33F/240 38C/300"As can be seen two title references have been crossed out and replaced by two other title references. At the time the agreement was signed titles 44B/632 and 38C/300were the current titles for Lots 55 and 1 respectively. Title 38C/301 was the previous title for Lot 55 and title 33F/240 was the underlying title for Lots 53 and 54. [71] Another version of the agreement, which was produced as Exhibit 2, contains the following legal description:"Area 2.6731 Lot: 55 DP:77204 CT: 38C/301 44B/632 1.0060 Lot 1 DP 62792 33F/240 38C/300"Whereas there are two signatures at the bottom of the equivalent page of the other document, there are three signatures at the bottom of this page, which might suggest that this was the final version. However, while this page might be later in time, it seems to have been taken from a different document because there is no reference to"ha" after the area of each lot and only one title reference has been deleted. [72] Given that the agreement was signed several years ago it is scarcely surprising that no-one was able to confidently explain exactly what happened. For present purposes, however, it is unnecessary to explore that aspect any further because the alteration to the title references was overtaken by the addendum (which changed the legal description to Lots 53, 54 and 55) and by the transfer of those three lots on settlement. It might also be added that although Mr Harwood's alterations failed to achieve his purpose, the fact that he made alterations which were initialled by the Casserlys supports his evidence that he realised there was a problem after discussing the matter with Mr Parris, and tried to fix it.Mr Harwood's Fax[73] There is a handwritten fax from Mr Harwood to Mr Stone dated 25 July 2003 stating:"Re purchase contract you negotiated yesterday with Link Company Ltd. Can you please [sic] a copy of the contract with the Council for the reserve exchange."Notwithstanding that the fax is dated 25 July and refers to the Link/Prime agreement having been negotiated "yesterday", the facsimile printout indicates that the fax was actually sent at 10.41pm on 24 July.[74] According to the plaintiff this proves that Mr Harwood must have been aware of the swap agreements when he signed the Link/Prime agreement. However, Mr Harwood believes that, given the age of his fax and difficulties he has had with it in the past, the date printed out by his fax must have been inaccurate. He believes that the fax was actually sent at 10.41pm on 25 July. Nevertheless under cross- examination he conceded that he might have hand-drafted the fax with the intention of sending it the following day after it had been typed, but then changed his mind and sent it on the night of 24 July without having it typed out. [75] For reasons that will become apparent in a moment, I regard the fax as a critical piece of evidence.Plaintiff's Witnesses[76] The primary evidence for the plaintiff comes from Mr Casserly and Mr Stone. [77] Mr Casserly explained that he talked to Justin Prain because Mr Prain was involved in property development in Christchurch and Link had used him as a consultant in the past. It was Mr Casserly's evidence that Mr Prain:" had the valuation reports from Simon Newberry of Ford Baker and from Fright Aubrey Justin Prain knew all about the Council land swap contracts and about the plans that Link had for the stage 2 development. Justin Prain told me that he might be able to get things resolved through bringing in Denis Harwood."Mr Casserly then went on to say that soon after that Mr Prain confirmed that Mr Harwood was very interested and the next day he met with Mr Prain and Mr Harwood in Mr Stone's office. [78] According to Mr Casserly most of the meeting in Mr Stone's office was about what would have to be done to get Hartford Nominees out of the picture and"do the deal". He said:"Bevan Stone discussed all the figures that were involved. He also talked about the land swap contracts and the difference in prices which meant there was a small amount that would have to be paid to the Council. Dealing with the mortgagees and completing the landswap contracts were all tied up together. This was all covered in the discussions at the office with Bevan Stone As far as the contract was concerned it was the same as with the other deals. We were selling the land that Link would own after the land swap contracts with the Council had been settled. So part of the land we were selling was lot 1."Mr Casserly said that everyone thought that the land swap contracts with the Council would be settled as part of the deal. [79] While Mr Casserly acknowledges that he walked over the land with Mr Harwood after the agreement was signed (he was not sure whether or not it was the next day) his evidence was that he did not say that the swap agreements were not binding or that Mr Harwood would be free to negotiate new arrangements with the Council. He also rejects Mr Harwood's contention that Mr Stone had said during the meeting that they could forget about any arrangements or agreements with the Council because the receivership would put paid to all that. [80] Under cross-examination Mr Casserly was pressed about his assertion that Mr Prain and Mr Harwood were aware of the swap agreements. When responding Mr Casserly relied heavily on his belief that they would have been aware of the agreements from the valuation reports. He also said that at the meeting in Mr Stone's office Mr Harwood wanted to know what the benefits were, and that he was told by Mr Stone that they were ready to settle the swap agreements. [81] Now I turn to Mr Stone's evidence. He said:"I cannot remember the precise conversation we had about the land swap contracts at this meeting but I prepared the contract with Mr Harwood, Mr Prain and Mr Casserly there. The contract was prepared on the basis that the land swap with the Council would be settled at the same time as the sale from Link to Mr Harwood."Mr Stone said that everyone at the meeting knew that the contract had to be signed urgently and that they had word Hartford Nominees was about to appoint a receiver. [82] Under cross-examination Mr Stone stood by the statement in his brief in reply that although he could not specifically recall discussing the land swap agreements at the meeting on 24 June, "I tend to think that those contracts probably were at least mentioned in passing". When it was put to him later that he had norecollection at all of the land swap contract being mentioned at the meeting, his reply was "No, I don't". And in response to the allegation that he had commented that the receivership would put paid to the swap agreement, Mr Stone said that he could not recall making any such statement and did not think that he would have done so.Defendants' Evidence[83] While the evidence for the defendants came primarily from Mr Prain and Mr Harwood, the evidence of Mr Martin and Mr Rutledge bears on the topic. I will begin with Mr Martin's evidence because it concerns events first in time. [84] Before moving to the United Kingdom in 2005 Mr Martin was a finance broker in Auckland. In 2001 Mr Casserly sought his assistance in arranging finance to enable Link to continue with its subdivision. He said Mr Casserly had talked about the swap agreements and indicated:"they had not been either deemed unconditional nor settled and they were unenforceable as they had basically expired through lack of action by both parties. In particular I recall Mr Casserly telling me that he had deliberately allowed the contracts to lapse because of non formation of some roading that was required by the contractors."Mr Martin said that after stage 2 became financially fraught he and the manager of Hartford Nominees expressed interest in purchasing the project and by June 2003 they were close to reaching agreement. He is positive that at no point during the discussions did Mr Casserly mention to him that there were binding agreements or that if they purchased stage 2 they would have to honour any kind of interest that the Council had in the land. [85] It was Mr Martin's evidence that once he learned that Mr Harwood had purchased the land he made arrangements to meet with him because he was keen to be involved in the development of Stage 2. He met with Mr Harwood on several occasions. At all times Mr Harwood spoke to him about the "Link land" being the land that he had purchased, and at no point was there any reference to any contracts with the Council.[86] Before leaving Mr Martin's evidence it should be noted that Hartford Nominee's solicitor, Mr Kirkwood, gave evidence that he had read Mr Martin's brief. Contrary to Mr Martin's evidence, Mr Kirkwood said that both he and the Hartford Nominee's manager were aware that the Link land was to be sold to the Council as part of a land swap. I take this evidence into account when assessing the weight that should be accorded to Mr Martin's version of events. [87] Now I consider Mr Prain's evidence. He had known both Mr Casserly and Mr Harwood for some years, and Mr Casserly was a longstanding friend. He was familiar with the Link land (Lots 53, 54 and 55) because about 18 months earlier Mr Casserly had tried to involve him in a venture concerning the land, but nothing had come of it. He is quite sure that at that time Mr Casserly did not mention any binding contractual arrangement with the Council. [88] Shortly before 24 July 2003 he was approached by Mr Casserly and asked if he knew of anyone who might take the Link land off his hands. He recalled that Mr Casserly was "desperate to get rid of the land" and as a longstanding friend he was concerned about Mr Casserly's personal exposure. Mr Harwood was the only person he knew that might be interested in the land at such short notice. [89] The following day he showed Mr Harwood the land. Although at the time he was aware from Mr Casserly that there had been negotiations with the Council about swapping land, Mr Casserly had left him with the clear understanding that there were no binding arrangements and that any swap was open for negotiation. He conveyed this to Mr Harwood. This was fundamental to the advice he gave Mr Harwood because he knew from his earlier involvement with the land that a new subdivisional approach was essential. Had he been aware that there were irreversible binding contracts with the Council he would not have encouraged Mr Harwood to become involved. He is quite sure that nothing was said at the meeting to suggest that Mr Harwood should take over, or be bound by, any pre-existing agreements. [90] Under cross-examination Mr Prain said that there were major pitfalls with the proposed Link subdivision (stage 2) and he thought it was "very constraining" and"doomed to fail". Through his involvement with the Council on other developmentshe believed the Council would be very favourably inclined towards the sort of development he had in mind. He was sure that Lots 53, 54 and 55 were the lots being sold. [91] Now I outline Mr Harwood's evidence. He confirmed that when Mr Prain showed him the land he told him that there had been negotiations with the Council about the possibility of a swap, but there was no mention of any binding agreement. He also remembered being told by Mr Prain that it might be possible to get the Council to agree to a high density development overlooking whatever areas of reserves might ultimately be formed. [92] Mr Harwood said that he had no recollection of any discussions at the meeting in Mr Stone's office regarding past negotiations with the Council and he is certain that there was no discussion at all regarding contracts between Link and the Council. Had there been any such discussion he would have asked Mr Stone, as Link's solicitor, to give him copies of the contract there and then. He can recall Mr Stone commenting to Mr Casserly that he could "forget about" any agreements or arrangements with the Council as the receivership would put paid to all that and that it would be up to him (Mr Harwood) to carry out his own negotiations with the Council. [93] It was Mr Harwood's evidence that the day after the agreement was signed he met Mr Casserly on site and there was a detailed discussion about the possibility of negotiating an arrangement with the Council. Mr Casserly made it clear to him that it was "entirely up to me to negotiate whatever arrangement I wanted". During this discussion Mr Casserly mentioned that he had actually signed agreements with the Council some years before but they were not enforceable. Mr Harwood said he was left with the clear understanding that the prior Link/Council contracts were dead and at an end. [94] Under cross-examination Mr Harwood denied that he had approached the matter on the basis that he was buying stage 2. He said stage 2 meant nothing to him. From the outset he had no interest in pursuing the Link subdivision because hewanted to do a more modern mixed zoning form of subdivision and his focus was on Lots 53, 54 and 55. [95] Finally, Mr Rutledge, a former solicitor who assisted Mr Harwood and his legal advisers on this case, gave evidence about a meeting with Mr Stone on 5 June 2007. The meeting was arranged by Mr Harwood who was also present. [96] Mr Rutledge said that Mr Stone confirmed a number of matters to them: Mr Casserly was "desperate" to sell the land; he (Mr Stone) could not recall whether the Link/Council contracts were discussed in the course of the meeting on 24 July 2003; the land described in the Link/Prime agreement was intended to be all of the Link land and that the inclusion of the legal description of the Council block of land was a mistake; and if the swap agreements had been mentioned in the course of the meeting on 24 July he would have been able to give Mr Harwood copies of those contracts at the time.Conclusions[97] There are extreme conflicts between the evidence adduced on each side. After considerable thought I have arrived at four conclusions. [98] First, Mr Casserly, on the one hand, and Mr Prain and Mr Harwood, on the other, were at cross purposes about the land to be sold. Almost certainly this was not realised by either side at the time. [99] Mr Casserly believed that he was selling stage 2 of the Link development (i.e. Lots 1 and 55) on the basis that the land swap agreements would be implemented immediately before the sale was settled. In his mind this reflected the basis on which the valuations had been completed and the Awatea sale had been negotiated. His belief was reinforced by the fact that he knew Mr Prain had the valuations and he assumed that they would have been read by both Mr Prain and Mr Harwood. [100] Mr Prain, on the other hand, believed that Lots 53, 54 and 55 were being sold. In his mind it would not have been worth recommending the deal to Mr Harwood unless a new subdivisional concept could be negotiated with the Council.Although he knew that there had been earlier negotiations with the Council, Mr Casserly had assured him that there were no binding agreements and that Mr Harwood would be free to negotiate. He did not realise that Mr Casserly intended to settle the swap agreements immediately before settling the sale to Mr Harwood. [101] I pause here to observe that whereas I am wary of the evidence of both Mr Casserly and Mr Harwood, I have no hesitation in accepting Mr Prain's evidence. He did not have any axe to grind. Indeed, he knew both parties and was a longstanding friend of Mr Casserly. As he said in his evidence, while he was attempting to help Mr Casserly because he was concerned about his financial predicament, he did not want to deceive Mr Harwood in any way. Apart from those factors, Mr Prain was an impressive witness. [102] Mr Harwood was on the same wavelength as Mr Prain. This reflected the following circumstances: as a result of the incredible speed with which matters were progressing and his lack of previous experience with subdivisions, he arrived on site without having taken much notice of the material faxed to him by Mr Prain because he would be able to talk to Mr Prain on site; his initial reaction to the site was not favourable (car bodies, Housing Corporation development nearby etc); however, Mr Prain assured him that although there had been previous negotiations with the Council, it should be possible to arrive at a new concept which would overcome those problems. [103] Second, before the agreement was signed Mr Harwood had been told that there were land swap agreements between Link and the Council. That is why he sent a fax to Mr Stone later that night asking for copies. [104] I cannot accept the defence proposition that the print-out from the machine was inaccurate and the fax was actually sent on the night of 25 July. We know that the machine correctly recorded the date in relation to another fax sent on 24 July and, beyond Mr Harwood's bald assertion, there is no other evidence of the machine malfunctioning. As Mr Harwood conceded under cross-examination, he might have drafted the fax on the basis that it would be sent the next day but then changed his mind, hence the date and the reference to the Link/Prime agreement having beennegotiated "yesterday". It is also highly likely that he made an error as to the date. This is reinforced by another handwritten fax from Mr Harwood dated 25 July in which he asks an agency for searches to be provided "as early as possible tomorrow morning". We know from the title searches that they were carried out at 9.20am on 25 July which means that the date in the fax requesting the search must have been wrong. [105] Third, the swap agreements were only mentioned in passing. Given the incredible speed with which things were happening, the spectre of receivership, the evidence about the length of the meeting in Mr Stone's office, and the evidence about the matters discussed, I am unable to accept that there was anything more than a passing reference to the swap agreements. At the time the matter was probably not given much thought by anyone. Mr Casserly and Mr Stone would have been approaching the matter on the basis that the swap agreements were to be settled first and would accordingly be their problem. And Mr Prain and Mr Harwood would not have seen any significance in the matter because they had been assured (Mr Prain by Mr Casserly and Mr Harwood by Mr Prain) that a new arrangement could be negotiated with the Council. I do not accept Mr Casserly's evidence that the matter was discussed in some depth at the meeting. If that had been the case I am sure that Mr Stone would have turned his mind to the matter and that some reference to swap agreements would have been included in the Link/Prime agreement. [106] I do not think that this third conclusion is inconsistent with the fact that Mr Harwood did not obtain a copy of the swap agreements at the meeting. Either he did not think of doing so at the time or Mr Stone did not supply a copy because his staff had left. Both those possibilities strengthen the conclusion that there was only passing reference to the swap agreements at the meeting and that no-one attached any particular significance to them at the time. [107] Fourth, when the issue of the swap agreements cropped up on site the day after the Link/Prime agreement had been signed, Mr Casserly assured Mr Harwood that it was entirely up to him to negotiate with the Council because the swap agreements were at an end. This conclusion reflects several factors: the previous day there had only been passing reference to the topic; Ms Simmiss' account of theconversation she overheard corroborates Mr Harwood's version of events; and Mr Harwood's account of what he was told by Mr Casserly ties in with Mr Martin's evidence about what had been told earlier by Mr Casserly. [108] There was probably another reason for Mr Casserly's assurance. Mr Casserly was desperate to sell and knew that the Link/Prime contract had a due diligence clause which could provide an "out" for Mr Harwood. The discussion on site would have brought home to Mr Casserly that Mr Harwood wanted to develop a new concept and that the swap agreements might stand in the way. Therefore he would have been at pains to reassure Mr Harwood that the agreements were at an end and that he would be free to negotiate a new agreement with the Council.Confirmation Of Agreement[109] On 31 July 2003 Mr Harwood sent a fax to the receivers confirming that condition 16 of the contract could be treated as satisfied. He maintains that before he sent the fax he had obtained confirmation from Mr Freeman, a senior planner with the Council, that the swap agreements were no longer alive. Mr Freeman denies that he provided any such information to Mr Harwood. [110] It is convenient to first consider the defendants' evidence. Then I will consider the plaintiff's evidence and reach conclusions.Defendants' Evidence[111] The evidence of Mr Harwood and Mr Parris directly bears on this issue. [112] According to Mr Harwood he telephoned Mr Freeman to tell him that he had conditionally purchased the subdivision and during the conversation the question of swapping land cropped up. His evidence was that Mr Freeman said that he understood that the Council had already "done that deal", but that he would check it out with his legal and property department. During the evening of 30 July Mr Parris advised him that it would be prudent to hear back from Mr Freeman as to the status of the swap agreements before he confirmed the agreement.[113] Mr Harwood also said that during the evening of 30 July he asked Mr Parris to draft a letter to the receivers seeking an extension of time to complete due diligence. As a result the following letter was forwarded to the receivers on 31 July:"I have been advised you have been provided with a copy of a contract dated 24 th July 2003 in which I am the purchaser of certain land in Bexley in respect of which The Link Company is the vendor. This contract is conditional upon my completing full due diligence by midnight on 31 st July 2003. It is also conditional upon a prior contract dated 27.5.03 not being settled by today. We have undertaken exhaustive enquiries in the course of due diligence, however there are some matters outstanding which still need to be clarified. For example Lot 1 DP 62792 is not owned by Link but owned by the Christchurch City Council. Link Company had an agreement with the Council to acquire Lot 1 by way of an exchange (plus cash contribution) for other land owned by Link (namely Lots 53 and 54 on DP 77204). These exchange contracts were to have been settled on 31.1.01. I am advised your client Hartford Nominees Ltd has held the original transfers for some considerable time. I will need to obtain confirmation from the Council and Link that these exchange contracts remain in full force and effect. In addition the Council has advised there are issues relating to uncontrolled fill and possible contamination affecting this land. We have instructed professionals to investigate these matters and they can attend to this next week. For this reason we will need to obtain from Link an extension of time to confirm the contract through to only 5.00pm Friday, 8 th August 2003. Would you please confirm by 2.00pm today that the Receivers are prepared to grant the required extension?"The letter was signed by Ms Siddall (a member of Mr Harwood's staff). Mr Harwood has no recollection of reading or signing the letter. Under cross- examination he said that he thought the paragraph referring to the exchange contracts remaining in full force and effect was a "typo" because all the information he had was that they were at an end. [114] No extension was forthcoming. Mr Harwood maintains that before confirming the agreement he had a telephone discussion with Mr Freeman who told him that he had checked with the property department and that someone had "cocked it up" and the previous swap agreements had "fallen over" because they had not been followed up at the time.[115] The agreed bundle includes the following note in Mr Harwood's handwriting:" 30/7/03 Chris Checked with Department Property. Guy had cocked it up & the deal had fallen over cos it hadn't been followed up at the time. "The file note also records a number of other topics which Mr Harwood maintains were traversed during the telephone conversation. According to Mr Harwood the file note should have been dated 31 July. [116] It should also be mentioned that in his evidence in chief Mr Harwood maintained that while he was carrying out due diligence he visited the Linwood service centre of the Christchurch City Council and inspected their files relating to Lots 53, 54 and 55. He said that he ascertained from those files that the Link land was all zoned residential. However, when faced with Mr Murray's evidence (see [121] below) he modified his stance by saying that nothing on the files alerted him to the change of zoning to open space. [117] Now I turn to Mr Parris' evidence. He said that despite Mr Harwood's understanding that he was not bound by the swap agreements, he would have pressed Mr Harwood to obtain confirmation from the Council that the contracts were at an end. By 30 July that confirmation had not come through and there were also other matters of concern. Thus Mr Harwood wanted an extension of time and he was asked to draft a letter. He recalls that he came up with the reason given in the letter for the extension which he now regards as "unfortunate". He said:"I drafted the paragraph in question in the letter simply in an effort to put forward a legally based reason for the request for an extension of time that the Receiver might accept. While the reason given did not reflect Mr Harwood's true position in connection with the Link/Council contracts I did not at the time believe that any harm would be done by putting matters in the way that I did ".He does not know whether Mr Harwood read the letter before it was sent. Under cross-examination Mr Parris took responsibility for the drafting and acknowledged itmight have been "pushing the boundaries a little" and "may have gone a little bit further than being completely frank with them".[118] Mr Parris said that Mr Harwood told him on the afternoon of 31 July that Mr Freeman of the Council had phoned him that afternoon with confirmation that the Council did not consider the swap agreements were still in force.Plaintiff's Evidence[119] The evidence of Mr Freeman and Mr Murray is directly relevant to the period in question. [120] In his initial brief Mr Freeman said that although he could not recall the first conversation and could not remember any conversation distinctly, he was quite sure that he never gave Mr Harwood any information about the status of the land swap agreements with the Council. However, in his evidence in reply he said:"3. I may have told him initially when he said that the land swap contracts were not binding on him, that I would have to check that out with the property section of the legal department. I would not have decided for myself that these contracts had come to an end or that they were unenforceable. I would not have enquired of property/legal as to whether Harwood had just bought the land."Under cross-examination Mr Freeman acknowledged that he had not kept a record of any telephone conversations with Mr Harwood on 30 or 31 July and that a number of matters referred to in Mr Harwood's note could well have been discussed. He also accepted that he might have said to Mr Harwood "the previous agreements can't have been followed up on". On the other hand, he was emphatic that he would not have said to Mr Harwood that someone from the property section had told him the previous deal had fallen over. [121] Mr Murray is the area development officer at the Linwood service centre. He described the information held at the Linwood Service Centre. The thrust of his evidence was that it would have been impossible for Mr Harwood to have confirmed the zoning of Lots 53 and 54 from the information held at the service centre.[122] Indirectly the evidence of Mr Thomson, an in house solicitor of the Council, is also relevant. Although he did not join the Council until early November 2003, Mr Thomson reviewed the legal department files before that time because the two in house solicitors who had been involved with the swap agreements were no longer with the Council and were unavailable to give evidence. He also gave evidence that after he had joined the Council he was asked by Mr McCarroll to look into the swap agreements. His evidence was:"On the basis of the response I got from Mr McCarroll and from what I had seen and without looking at exactly what had happened in relation to the land swap contracts I assumed on the face of it that the conditions had not been satisfied, that the contracts may never have become unconditional and that because the Link land which was to be sold to the Council had now been sold to a third party, the original contracts with Link could have become unenforceable. I would have expressed a view to that effect to Chris Freeman and probably also Steve McCaroll."He said that this was very much an informal view as to "how things looked on the face of it".Conclusions[123] Again it is difficult to resolve the conflicts in the evidence. As I see it the evidence on both sides is riddled with inconsistencies and it is difficult to be very confident about any of the evidence. [124] Obviously Mr Harwood's purported file note of his telephone conversation with Mr Freeman is a critical piece of evidence. If, as the Council alleges, it was concocted for the purposes of this litigation Mr Harwood's credibility will be close to zero, if not zero. On the other hand, if it was a contemporaneous record of the conversation it will be a compelling piece of evidence in support of his evidence about what was said. [125] In my view several factors support the conclusion that the file note is genuine. First, Mr Freeman conceded that some of the other matters recorded in the file note (which have not been quoted in [115]) might well have been discussed. Second, he acknowledged that he might have told Mr Harwood that he would have to check out whether the land swap contracts were binding, which lends considerable support to Mr Harwood's contention that he actually did so. Third, hisacknowledgement that he might have said to Mr Harwood that the swap agreements had not been followed up on adds further support. Fourth, it is apparent from the agreed bundle that Mr Harwood kept diary notes in relation to other matters. Finally, there is a remarkable similarity between the stance of the legal department as recorded in the diary note and the stance actually taken by Mr Thomson when he looked into the matter some time later. Probably the in house solicitor/s handling the matter before Mr Thomson had arrived at the same conclusions as Mr Thomson and advised Mr Freeman accordingly. So I proceed on the basis that the file note is genuine. [126] The letter to the receivers of 31 July also presents serious issues concerning the credibility of Mr Harwood and Mr Parris. Given Mr Parris' evidence I can effectively rule out any possibility that there was a "typo" in the paragraph relating to the swap agreements. He seemed to suggest that the paragraph in question was deliberately worded that way in the hope that it would persuade the receivers to grant an extension. I cannot follow that argument. On the other hand, I cannot ignore the fact that Mr Parris seems to accept responsibility for the letter. Nor can I disregard the fact that Ms Siddall signed the letter on behalf of Mr Harwood which supports the view that he might not have seen it. Under those circumstances I do not think it would be right to judge the credibility of Mr Harwood and Mr Parris solely on the basis of the letter. But it is one of the factors that I take into account. [127] At the end of the day I am left in this position. The conflict between the evidence of Mr Harwood and the evidence of Mr Freeman cannot be resolved on the basis of my assessment of them in the witness box. Thus I need to approach the matter on a broader basis. Whereas Mr Harwood's evidence is supported by his diary note, Mr Freeman's evidence cannot muster that sort of support. Moreover, Mr Harwood's version is supported in material respects by Mr Parris' evidence and also by later events (similar comments by a Council officer at a meeting on 5 March 2004). On the other hand, there is the conundrum of the letter of 31 July, but that is ameliorated to some extent by the fact that Mr Parris has taken responsibility for the letter and it might not have been seen by Mr Harwood before it was sent. Finally, I keep in mind that the onus rests on the plaintiff.[128] Taking all those matters into account, I prefer the defendants' version of events. Thus I proceed on the basis that before Mr Harwood confirmed the Link/Prime agreement he was advised by Mr Freeman that the swap agreements had"fallen over".The Addendum[129] Before addressing the addendum I should mention some events between the confirmation of the Link/Prime agreement on 31 July 2003 and the signing of the addendum on 14 August 2003. [130] After the Link/Prime agreement was confirmed by Mr Harwood, he was in communication with Mr Kirkwood, the solicitor acting for Hartford Nominees. On Mr Kirkwood's file there is a file note dated 5 August 2003 which includes:"Land exchange is to be done. You could probably"While Mr Kirkwood thought that his note indicated that they had discussed the swap agreements, he had no particular recall of the conversation. Under cross- examination he accepted that Mr Harwood might have told him that he was going to negotiate with the Council. [131] Subsequently various issues, including an issue about the legal description in the Link/Prime agreement, arose. The receivers took the view that none of the contracts before them (Awatea, Link/Prime, and another contract with Horncastle Homes that had surfaced) could proceed because they included land that was not owned by Link. These complications prompted Mr Harwood and Mr Parris to instruct Mr Fraser and, on Mr Harwood's version of events, also prompted the preparation of the addendum.Mr Harwood's Evidence[132] Mr Harwood said that when he and Mr Stone met with Mr Fraser on 14 August they were told by Mr Fraser that Link was facing a winding-up application which was to be heard on 25 August 2003. Mr Fraser advised that the problem withthe legal description should be resolved and the settlement date for the Link/Prime should be brought forward to 18 August. Because he was busy, Mr Fraser left Mr Harwood to follow up those matters. [133] Although Mr Harwood has no clear recollection as to the circumstances in which the addendum came into existence, he knows that he handwrote a draft and he is quite sure that the draft was dictated to him over the telephone. He does not now recall who dictated it to him. It was his clear understanding that the document was generated in order to satisfy the receivers about the mis-description of the land. He believes he sent his handwritten notes to Mr Fraser for comment and at the same time had them typed up by his typing agency. There were two drafts before Mr and Mrs Casserly came in to sign the document which was witnessed by Mr Clayton. [134] Notwithstanding that part of the addendum has been quoted earlier, it is helpful to reproduce the whole document:"This is an addendum to the Sale & Purchase Agreement. Dated: 24 July 2003 Between: Link Company Ltd. as Vendor of the one part and D.L. Harwood (As Agent) purchaser of the other part. Whereby it is agreed as follows: The parties agree to vary the Contract dated 24.07.03 by deleting the reference to CT 38C/300 [title to Lot 1] and substituting CT44B/528 [title to Lot 54] comprising 5365m 2 and CT44B/527 [title to Lot 53] comprising 4645m 2. The parties acknowledge that CT's 44B/528 and CT44B/527 are subject to exchange agreements for Sale & Purchase between the Vendor (Link Company Ltd.) and the Christchurch City Council dated 14 September 2000 whereby these titles are exchanged for CT38C/300 and the purchaser acknowledges that the purchase of the land in these titles is subject to those agreements. The parties agree to vary the settlement date to Monday 18 th August 2003. In all other respects the parties confirm the contract dated 24 July 2003."Mr Harwood claims that he was not conscious of the legal interpretation of the fourth paragraph until recently. He said that he had no explanation for this lapse other than that he believes it reflects his "hypoglycaemic state" at the time (about which he gave evidence). According to Mr Harwood all he took on board was that the purposeof the document was to correct the mis-description and bring the settlement date forward.Other Evidence[135] The other evidence does not really shed any further light on the matter. [136] Mr Casserly said that at the time they were under a lot of pressure and there was a lot happening. He believes that the document was signed in Mr Harwood's office. Mr Clayton confirms that he witnessed the document in Mr Harwood's office and that he took out of the discussion at the time the document was being signed that Mr Harwood was going to make things easier for the Casserlys and Link by taking over responsibility for the swap agreements. [137] The documentary record confirms that the addendum was sent by Mr Fraser to Mr Stone on 15 August. Mr Fraser does not believe that he turned his mind to the passage dealing with the prior contracts because if he had he would have raised the matter with Mr Harwood. Apart from receiving the document from Mr Fraser, Mr Stone said that he had no involvement and did not instigate it. Mr Parris does not comment on the document.Conclusions[138] Although there is no direct evidence that the receivers authorised the document, this can be safely inferred. The receivers' concern about the legal description, which appears to have been a primary motivation behind the addendum, was obviously satisfied by the document thereby enabling the Link/Prime agreement to be settled. [139] Given that the addendum was signed by both parties and authorised by the receivers it should be taken at face value. Adopting that approach, two features are significant. [140] First, to the extent that the addendum provides for the purchase of Lots 53, 54 and 55, it probably vindicates Mr Harwood's evidence to the effect that he hadalways understood that he was purchasing those lots. I do not read anything into the word "vary". When all the surrounding circumstances are taken into account the compelling inference is that the parties were trying to correct any earlier misunderstanding between them and satisfy the receivers as to the legal description. [141] Second, it includes a clear acknowledgement that the Link/Prime agreement was subject to the swap agreements. Even allowing for underlying pressures that he might have been facing at the time, I cannot accept that Mr Harwood failed to appreciate this. He had handwritten the first draft and signed the final version. What probably happened was that both Mr Casserly and Mr Harwood were desperately trying to find a quick and practical solution that would satisfy the receivers so that the Link/Prime agreement could be settled before the winding up petition came before the Court. They would also have been conscious of possible competition from the other agreements. My interpretation is that at that time Mr Harwood was prepared to go along with the swap agreements. This is supported by Mr Kirkwood's file note of 5 August. But Mr Harwood and Mr Casserly would have realised that the receivers probably would not be interested in settling the swap agreements. Thus Mr Harwood accepted responsibility for the swap agreements thereby removing a complication that might have prompted the receivers to avoid the Link/Prime agreement or delay their decision. [142] But, as we shall see in a moment, the operative effect of the addendum in relation to the swap agreements was short-lived.Settlement[143] Three particular matters require consideration: Mr Harwood's nomination of Prime to complete the purchase of "stage 2"; the deed of assignment; and the deduction of $1,200 from the settlement proceeds to reflect the swap agreements.Mr Harwood's Nomination[144] When Prime was nominated as purchaser Mr Harwood signed a document dated 15 August stating that he nominated the company to:" complete the purchase of the property at Farnborough Street, Brightstone Crescent Christchurch subdivision stage 2 pursuant to the contract dated 24 July 2003 (as varied)".Under cross-examination Mr Harwood said that he believed he was asked by Mr Fraser to sign the nomination form and he did not know where the reference to stage 2 came from. There is no mention of this in Mr Fraser's brief and his untimely death means that it was not possible to explore this aspect any further. [145] This nomination form is consistent with the addendum. Indeed the addendum is expressly recognised by the words "as varied". My interpretation is that at this time Mr Harwood was still going along with implementing the swap agreements because he thought that was the only way the matter could be settled.The Deed Of Assignment[146] Although settlement was to be effected on 18 August, this was not achieved. When Mr Savill of Fraser & Associates became involved with the file that day he formed the impression from a file note left by Mr Fraser (but without consulting Mr Harwood) that there needed to be a deed of assignment, and he spoke with Mr Stone who agreed. At Mr Savill's request Mr Stone sent him copies of the swap agreements and Mr Savill prepared a draft assignment which was forwarded to Mr Stone for approval. It was approved by Mr Stone. Mr Savill said that by this time Mr Harwood was considerably agitated by the delays and that although he told him that the addendum called for a deed of assignment, Mr Harwood did not appear to pay much attention to this part of the conversation and they did not discuss the document itself. Although Mr Savill said he sent a draft to Mr Harwood, Mr Harwood claims that he did not see it. I accept that Mr Harwood might not have seen it. [147] When Mr Fraser returned to Christchurch Mr Savill handed the file back to him. On settlement date Mr Fraser was given the deed of assignment duly signed by the vendor and he gave a written undertaking that it would be executed by the purchaser. Immediately after settlement he arranged for copies of the deed of assignment to be delivered to Mr Harwood's office for signature and return. There is no mention of any prior discussion with Mr Harwood.[148] For convenience I repeat at this stage the relevant provisions of the deed of assignment:"1. Link assigns the benefit of the Council contract to Prime. 2. Prime covenants with Link that it will perform Link's obligations under the Council Contract and indemnify Link from all claims by the Council under the Council Contract and all costs and claims relating thereto." (The underlining has been added)As outlined earlier, Mr Harwood maintains that when the person from Fraser & Associates asked him to sign the deed he did so without looking at it because he was in a meeting and was told that the document was required for settlement. Once he finished his meeting he looked at a copy of the document and was shocked by clause 2. Having received advice from Mr Parris because he was unable to reach Mr Fraser, he deleted the underlined words and had the deletion initialled by Mr and Mrs Casserly. [149] While Mr Casserly initially denied that he had initialled the deletion, by the time he prepared his brief in reply he accepted that he and his wife had initialled the deletion in clause 2. He said that he was unable to remember the circumstances surrounding the amendment to the document. It is, of course, highly significant that the deletion was accepted and initialled by Mr and Mrs Casserly. They were able to bind Link because the receivers had retired earlier that day. [150] I accept Mr Harwood's version of events which is supported by Mr Parris and is consistent with the other evidence, including the documentary record. The only plausible inference that can be drawn from the deletion is that Mr Harwood had decided that Prime should not be obliged to perform Link's obligations under the swap agreements but that Prime would indemnify Link if the Council took action. Presumably Link agreed (through Mr Casserly) because it was protected and, in any event, by this time Mr Casserly was probably not much interested because Link was facing a winding up petition and he believed that the swap agreements were unenforceable. [151] Whatever the underlying explanation, as between Prime and Link the deed of assignment meant that Prime was not obliged to perform Link's obligations underthe swap agreements. To the extent that it provided otherwise, the addendum had been overtaken by the later document.Deduction Of $1,200[152] It is not disputed that on settlement there was a deduction of $1,200 from the amount paid by Prime on settlement. Although this deduction was not referred to in the settlement statement or in the statement of transaction forwarded by Fraser & Associates on 4 September 2003, it could have been calculated if Mr Harwood had turned his mind to the issue. However, Mr Harwood claims that he only learned of the deduction some months later. [153] Mr Stone maintains that he had mentioned the credit to Mr Harwood. That may well be so. But in view of the findings that I have made I do not think this is a matter of significance. Not surprisingly Mr Stone was imprecise as to when he mentioned the credit to Mr Harwood and it might well have been at a time when Mr Harwood was approaching the matter on the basis that he would take responsibility for settling the swap agreements. [154] All in all I do not attribute any significance to the credit of $1,200. I accept that Mr Harwood only found out about it some time after settlement and that by that time it was not a matter of moment. To him the deed of assignment would have been the crucial document.Deed Of 10 September[155] On 10 September 2003 Link, Prime and Mr Casserly entered into a deed containing the following provisions:"BACKGROUND A. By a Contract dated 14/9/2000 Link contracted with the Christchurch City Council ("the Council") to exchange the land in titles 44B/527 and 44B/528 (Canterbury Registry) for the land in CT 38C/300 (Canterbury Registry) ("the Council Contract"). B. The Council Contract has yet to be performed.C. By an Agreement for Sale and Purchase dated 24/7/03 (as varied) Link agreed to sell the land in titles 44B/527 and 44B/528 (Canterbury Registry) to Denis Harwood as Agent ("Harwood"). D. Harwood was acting as Agent for Prime. E. Link and Prime entered into an agreement dated 22 August 2003 under which LINK assigned to Prime the full benefits of the Contract between Link and the Christchurch City Council. F. By Agreement dated 24 July 2003 as [sic] subsequently Link sold to Prime all the estate and interest of Link in certain parcels of Land contained and described in CTs 44B/528 and 44B/527 and 44B/632. G. Link has agreed with Prime that collaterally with the settlement and the sale of the land referred to F above Link would assign to Prime the full benefit of all agreements, contracts and arrangements Link may have had or been a party to in relation to the land sold to Prime. NOW THIS DEED WITNESSES:- 1. That in addition to the transfer of the land sold by Link to Prime in accordance with the contract dated 24 July 2003 and further to the assignment dated 22 August 2003 of the benefit of the Christchurch City Council exchange contracts Link hereby transfers sets over and assigns to Prime the full benefit, use and enjoyment of all other subsidiary or secondary contracts, agreements, schemes and arrangement whether written or oral with any other party relating to the subdivision proposals for the land sold to the intent that where appropriate Prime may seek to enforce such agreements or arrangements for the benefit of Prime. 2. That Link and Casserly will at the request of Link take all reasonable steps to assist Prime in enforcing or obtaining the full benefit of any such contracts, agreements, schemes or arrangements relating to the proposed development of the land sold."According to Mr Harwood this document was prepared by his solicitors to make sure that Prime could take over all the agreements with the contractors and other parties that Link had been dealing with in connection with the subdivision. [156] Mr Casserly does not dispute that this was the underlying purpose of the agreement. He said that he did not talk to his lawyers about it and was not given an original of the document. [157] I do not read too much into this document. The swap agreements are only mentioned in the recitals as a matter of background. It might be significant, however, that recital E refers to the assignment of "benefits" under the swapagreements to Prime which is entirely consistent with the deed of assignment as amended.Agreements With Allard And Palmhaven[158] The issue is whether these agreements were entered into by Prime (through Mr Harwood) with the underlying intention of defeating the Council's interests under the swap agreements. Before that issue can be determined it is necessary to recount the history from 25 July 2003 to 8 March 2004 when the Allard and Palmhaven agreements came into existence.History[159] After Mr Harwood first made contact with Mr Freeman on 25 July 2003 there was a continuing dialogue between these two men. It is not disputed by Mr Freeman that Mr Harwood was insisting on a new deal on the basis that he was not bound by the swap agreements. As Mr Freeman said:"It was a theme of his conversations with me that as the new owner of lots 53 and 54 any earlier arrangement with the Council no longer mattered. He dealt with me on the basis that if he was going to change the existing subdivision plans this was something that would have to be worked through with the Council staff. He also dealt with me on the basis that if the Council wanted any reserves on lots 53 and 54 it would have to do a deal with him because he was the new owner of the land."Mr Freeman confirmed that he was willing to look at Mr Harwood's proposals and that during 2003 he was not concerned about the exact status of the land swap contracts because he assumed that if the Council wanted to have the reserves in lots 53 and 54 it would have to deal with Mr Harwood. [160] On 12 September 2003 Mr Harwood wrote the following letter to the Council:"Thanks very much for your fax of 29 th August Although I have had brief discussions with Chris Freeman over Council's proposals to develop a reserve in Farnborough Street, I think it is appropriate to provide formal notification to the Council that Prime Estates has purchased all the land comprised in Lots 53, 54 and 55 on DP 77204 formerly owned by Link Company Ltd.Chris was unaware Council did not own Lots 53 and 54 on which Council are proposing to site Council Reserve as per the plan you have been good enough to send to me. I believe Council and Link came close 4 years ago to reaching agreement on an exchange but this never eventuated. Prime Estates are anxious to cooperate with Council as far as possible in negotiating a fresh agreement along similar lines with some minor modification and improvements which are necessary to give the best result and environment to a modern "up spec" comprehensive housing development, and new subdivision. To this end I would suggest an early meeting with Council at which these proposals could be discussed. Prime Estates, as an interim measure, requests Council holds in abeyance any further work on Lots 53 and 54 and certainly no proposed plan or notices be sent to any residents concerning any proposals affecting our land. (I enclose copy of September Bexley News for your information). Thanks again for your quick response to Chris Freeman's request. Please do not hesitate to call me to discuss any matters direct."The fax of 29 August from Angus Smith (of the Council's property department) had passed on information about the Council's development plan for the reserves. [161] On 19 September 2003 there was a meeting between Mr Harwood, Mr Freeman and others. Notes were taken by Mr Handisides, the Council's subdivisions officer. These notes record that Mr Freeman was willing to look at changing the reserves. Subsequently a designer in the Council's policy and planning department prepared some concept plans and Mr Frizzell also provided some plans. According to Mr Freeman:" we were all just dealing with the situation on the basis that Mr Harwood was the new owner, the land swap contracts hadn't settled so the Council had not become the owner of lots 53 and 54."There is no suggestion that the swap agreements were discussed at that meeting. After the meeting discussions continued. [162] On 11 November 2003 the Council's solicitors, Buddle Findlay, wrote to Mr Stone advising that they were acting for the Council and that they had been instructed by it to settle the swap agreements. It is not clear who within the Council had provided those instructions, or why. In any event the Buddle Findlay letterreferred to a fax from Mr Stone to the Council on 16 July 2003 and asked Mr Stone to advise when the matter could be settled. [163] In his reply two days later Mr Stone advised that Link had assigned its benefit in the two agreements to Prime which, he said, was a company owned and operated by Mr Harwood. Mr Stone said that he understood Mr Harwood had been in contact with the Council in respect of the land referred to in the agreements and suggested that Mr Harwood be contacted. Mr Harwood's telephone numbers were provided. [164] Blake Cescon of Buddle Findlay spoke to Mr Harwood on 18 November 2003. According to Mr Cescon's evidence, which is supported by a file note, Mr Harwood told him that he wanted to enter into fresh agreements with the Council and that he wanted to negotiate from scratch. Mr Cescon said that the thrust of Mr Harwood's conversation was that the arrangements with Link over the subdivision were almost archaic or outdated and that a modern subdivision could not occur under the swap agreements. He said that Mr Harwood did not tell him about the status of the earlier exchange agreements and that at that time he did not know whether or not those agreements were binding on Prime. [165] Another meeting between Mr Harwood and Council officers was held on 11 December 2003. Mr Handisides' notes refer to Mr Harwood saying at the outset that the exchange of reserves had never been completed and that he was now talking to the Council about a new and different exchange. Mr Freeman accepted that that was consistent with the way that Mr Harwood had discussed things with him at the time. The notes also indicate that the history of the matter was mentioned and that there was reference to "pocket parks" and to "new reserves". In broad terms the evidence of Mr Freeman and Mr Handisides about the meeting is consistent with Mr Handisides' notes. [166] On 16 December 2003 Mr Handisides sent a memorandum to the Council's in house solicitor, Aidan Prebble, enclosing a copy of Planning Map 34A which showed the land in question and the zoning of Lots 53 and 54 as Open Space 1. He said in his memo:"This was part of an exchange with an existing reserve that was never completed."The memorandum goes on to record that Mr Harwood had purchased the unfinished subdivision and was proposing a different reserve layout that would entail residential allotments over Open Space land. It was stated in the memorandum that Mr Handisides had been asked to obtain Mr Prebble's recommendation and to inquire whether the proposed subdivision required notification. [167] A further meeting was held on 19 December 2003. This time Mr Cescon was also present. According to Mr Cescon's file note he had been told by Mr Harwood on 16 December that he was arranging a meeting with Council at which the exchange of lands would be discussed. The same day Mr Cescon had received a telephone call from Angus Smith of the Council's property department to the effect that Mr Harwood would be presenting his plans involving a new land swap and that zoning issues would arise. After the telephone conversation with Mr Smith Mr Cescon made some inquiries about the swap agreements. He believes that he looked at the file of another solicitor in his firm. At that stage he did not check the exact status of those agreements because he understood from Mr Smith that Council staff were prepared to consider fresh plans that were to be presented by Mr Harwood. [168] The meeting on 19 December was run by Mr Freeman. He said that the plans that were being discussed were to be subject to agreement over valuation and "a new deal". He does not recall any discussion about the swap agreements. He said that Mr Harwood made it clear that as the new owner he wanted to develop the land differently and that it was confirmed at the meeting that a variation of the City Plan would be required. Mr Freeman said that Council officers were prepared to look at supporting such a variation so that the reserve areas could be altered and that it was agreed that the Council staff would begin work on initiating the proposed variation. Mr Freeman also said that Mr Harwood expected the Council to pay something for the parts of Lots 53 and 54 that were to be used for reserve purposes and that they talked about getting updated valuations. [169] Mr McCarroll said that his first involvement with the Bexley development came shortly before the meeting on 19 December when he was asked by his manager, Angus Smith, to familiarise himself with the property section's file and toattend the meeting. He was not asked to establish the current status of the land swap contracts. Mr McCarroll explained that his involvement was on the basis that the Council staff were looking at a possible new deal with Mr Harwood and possible changes to reserves. When he looked at the file he realised there had been land swap contracts some years previously. He could not tell from looking at the file why they had not been finalised and he did not make any further inquiries. As he understood it, the meeting on 19 December would be on the basis that the agreements were no longer relevant and that Council officers had to deal with Mr Harwood as the new owner. He remembers that Mr Harwood was dismissive about the earlier contracts and made it clear that he did not consider that they were of any relevance. He does not believe that the status of the agreements was discussed at the meeting and he does not mention any later discussion with Mr Cescon (see [171] below). Mr McCarroll said that the general outcome of the meeting was that Mr Freeman, the main person discussing the proposals with Mr Harwood, was positive about the proposals. [170] Mr Cescon recalls that at the meeting Mr Harwood said that Link had assigned the benefits of the agreement over the land to Prime and that there was some discussion about the attitude of neighbours. He gathered from the discussion the parties were to progress the proposals with a view to putting them to the Council's meeting in February 2004. [171] It was Mr Cescon's evidence that after the meeting had broken up he had a discussion with Mr Harwood, Mr McCarroll and Mr Martin. He said that he mentioned to Mr Harwood and the others that, depending on the wording of the assignment to Prime, the Council may be able to enforce those agreements against Prime. He did not recall Mr Harwood taking any issue with that. After the meeting he had a discussion with Mr McCarroll and matters were left on the basis that he would wait for further instructions from the Council. His evidence was that during January he had a further discussion with Mr McCarroll and was told that "the matter was not proceeding any further at this stage". He said that he did not hear anything further until 1 September 2004 when he was approached by the Council for advice about whether the swap agreements could be enforced.[172] Returning to the meeting of 19 December, Mr Harwood is confident that there was no discussion either at or after the meeting concerning the possible enforcement of the swap agreements. While Mr Martin, who was also present at the meeting, could not recall much about the meeting, his evidence was that to the best of his memory it was never suggested that the Council had any right to the land. [173] On 22 December 2003 Prime formally requested the Council to commence the process of varying the District Plan to change the zoning of Lots 53 and 54 to Living 1. A Council officer wrote to the Bexley Residents' Association on 13 January 2004 advising that this request had been received. It was explained in that letter that the land had originally been zoned open space under a variation which came into effect on October 2001 as a result of a proposed land swap between the Council and the then owner of the affected land. The letter continued:"This land swap was never completed and the new owner of the land seeks to develop the land with reserve areas in different locations to those presently zoned Open Space."The letter went on to say that the Council's parks, waterways and subdivisions team had been involved in discussions with the new land owner and were satisfied that alternative reserve areas were achievable. The Association was invited to comment on the proposed rezoning. Similar letters were forwarded to other interested parties. [174] In response the Council received a lawyer's letter dated 16 February 2004 indicating that their client strenuously objected to the proposed variation because their client had relied on information provided by the Council at the time of purchase. The letter also expressed concern that the land swap had never been completed and expressed the view that the Council had been negligent in not ensuring the land swap was completed. It was indicated in the letter that the possibility of issuing proceedings to recover damages from the Council, should the proposed zoning change take place, would need to be explored. [175] On 18 February 2004 Mr McCarroll prepared a brief internal report about the proposed land exchange (one seems to be a draft). In one of those reports there is reference to the fact that "for reasons unknown" the exchange did not occur. In the other it is stated that Link "became bankrupt and the land exchange did not occur".[176] As mentioned earlier (see [122]), Mr Thomson, an in house Council solicitor, was asked by Mr McCarroll to look into the swap agreements. He advised Mr Freeman and Mr McCarroll that on the face of the available information the swap agreements might never have become unconditional and that because the land had been sold to a third party the agreements could have become unenforceable. [177] Although Mr Thomson is not specific about the timing of this advice, he seems to indicate that it would have been after some email correspondence at the end of March. I think it was probably earlier. Mr Thomson returned from leave at the end of January 2004 and soon after his return the letter of 16 February 2004 threatening legal action against the Council arrived. It would be remarkable if this letter did not prompt someone within the Council to seek legal advice about the status of the swap agreements. I believe that Mr Thomson's advice was actually provided before the meeting on 5 March 2004 which will be discussed in a moment. Moreover, the email correspondence at the end of March appears to be consistent with the scenario that there had been earlier discussions about the swap agreements involving Mr Thomson. [178] Now I come to the meeting of 5 March 2004. At that meeting Mr Newberry received joint instructions from the Council and Mr Harwood to undertake a valuation of Lots 1, 53 and 54 so that there would be some basis for determining any payment that might be necessary. Also present at the meeting were Mr Freeman, Mr McCarroll, Mr Harwood and Richard Lascelles who was assisting Mr Harwood. Mr Newberry took notes. [179] According to Mr Newberry there was reference to the swap agreements at the beginning of the meeting. He said:"I recall that one of the Council officers said in respect of those contracts that they had checked with the Council's legal department and that those contracts were at an end."Mr Newberry said that the meeting then moved on to discuss a fresh arrangement whereby the Council would acquire significantly less land from Prime by way of exchange than had been the case under the swap agreements. He was given a plan at the meeting which showed that part of Lots 53 and 54 would be rezoned to L1. Hisevidence was that during a discussion about the basis on which the various blocks were to be valued Council officers admitted that "the Prime land had been wrongly "sterilised"".[180] In broad terms Mr Harwood supports Mr Newberry's evidence. He recalls Mr Freeman referring to the swap agreements and stating that the Council's legal department had confirmed to him that they were at an end. He also recalls Mr Freeman tabling a plan at the meeting and general discussion as to the basis on which the valuation was to be undertaken. Although Mr Lascelles was present at the meeting, his file notes only commence on 26 August 2004. He said he has no recollection of his earlier involvement. [181] Mr Freeman said that he is quite sure that no-one in the legal department had confirmed to him before that meeting that the land swap contracts were at an end and he does not recall any discussion about the contracts at the meeting because they were there to talk about a "new deal" and the basis on which the land was to be re- valued. However, under cross-examination this exchange occurred:"Q. Mr Newberry says that at the start of the meeting mention was made of the prior contract that had existed between Council and Link relating to an exchange of land in terms of which the Council were to obtain land for the formation of reserves within the subdivision. A. That would be right, yes. Q. The prior contracts were mentioned at that meeting. A. I am pretty sure the previous arrangements were mentioned at least, yes, but they weren't the point of the meeting so hard to say how much we went thru the valuer.Mr McCarroll said that he does not recall either Mr Freeman or himself making any statement about the contracts being at an end. He is quite sure that he had not been told by the legal section or anyone in the Council's property section that the land swap contracts were at an end. Nor does he remember Mr Freeman making any comment about the land being sanitised. [182] I accept Mr Newberry's evidence. Of all the people who gave evidence Mr Newberry could be regarded as truly independent. He had been instructed by bothparties. Under cross-examination he was thoroughly tested by Mr Nation but remained consistent in his evidence and refuted any suggestion he might have been mistaken. Moreover, his evidence was supported by Mr Harwood. Judged against Mr Newberry's evidence the evidence of Mr Freeman and Mr McCarroll was not convincing and Mr Freeman's concession under cross-examination largely undermined his evidence on the topic.Sales To Allard And Palmhaven[183] Prime entered into agreements for the sale of Lots 53 and 54 to Ms Siddall as agent (subsequently Allard) and Lot 55 to Mr Harwood as agent (subsequently Palmhaven) on 8 March. Those agreements have already been outlined in [36] and [37]. The Council alleges, and Mr Harwood denies, that they were part of a scheme to defeat its interest under the swap agreements. The issue is whether the plaintiff has made out this allegation. [184] As to Lots 53 and 54, Mr Harwood gave evidence that once he realised that those lots were zoned Open Space and that it was going to take a long time for them to be rezoned he lost interest in developing them and decided that they should be offered to his office manager. He said (and this was confirmed by Ms Simmiss) that it had been his policy over many years to assist staff members in this way. He warned Ms Siddall that the rezoning would take some time and that she would not be able to develop the land until it had been completed. He arrived at the price of $90,000 on the basis that three houses could be built on each lot. He drew up the agreement and subsequently asked his accountant, Mr Purvis, to assist Ms Siddall with the purchase. He had no personal involvement in the structure that was put in place for Ms Siddall. [185] With reference to Lot 55, Mr Harwood said that he had decided by this time to retain the intended leasehold sections as a long term investment and that Mr Purvis had advised him that a new company would be necessary. He also said that there were underlying tax reasons for this decision.[186] In his evidence Mr Purvis said that his involvement with Mr Harwood had been limited to tax structuring of his affairs and related matters. He said he had no involvement in the negotiation or preparation of the agreement for sale of Lots 53 and 54 to Ms Siddall but that after the agreements had been entered into he had been asked by Mr Harwood to act for her and he did so. Mr Purvis said that he saw himself as acting in an independent professional role and he dealt directly with Ms Siddall. Because Ms Siddall had some money coming to her, temporary finance was provided by Mr Harwood's finance company, Barclay Securities. [187] Mr Purvis said that in due course Allard (which had previously been formed for another client whose venture had not proceeded) was used as the vehicle to complete the purchase. He was already the sole director of that company and the shareholder was Gloucester Trustee Services Ltd which is one of his professional trustee companies. Pursuant to a bare deed of trust dated 6 May 2004 it was acknowledged that the shares were held on behalf of Ms Siddall. He remained the sole director. [188] The transaction was settled on 7 November. Mr Purvis said that in the interests of saving costs Mr Harwood attended on settlement and registration. However, the funds had been advanced by Barclay to his office and he had ultimately billed Ms Siddall $551.25 for costs. At no stage was he aware that the Council laid claim to the land. Subsequently he was authorised by Ms Siddall to participate in the application for subdivision because it was in Allard's interests to do so. Mr Purvis rejected any suggestion that he acted as a puppet of Mr Harwood. [189] Now I confront the issue of whether the sales were part of a scheme to defeat the Council's interest in the swap agreements. [190] It is probably not surprising that before proceedings were issued the Council attributed sinister connotations to the Allard and Palmhaven agreements. It knew that Mr Harwood had entered into the addendum which included a commitment to honour the swap agreements. Moreover, at the very time that the Council decided to take steps to hold Mr Harwood to the swap agreements he had sold Lots 53 and 54 to an employee for what seemed to be an extremely low price and Lot 55 to anothercompany in which he was patently involved. His finance company had been used and there were links to Allard through his accountant. [191] Even after the plaintiff's evidence had been presented there was still justification for the plaintiff's concerns. Indeed, at the close of the plaintiff's case I declined Mr Lester's application for judgment in favour of Mr Purvis because I was not satisfied that the Allard transaction was above board. After that the Council and Mr Purvis reached a compromise whereby the Council's claim against Mr Purvis was abandoned on the basis that he would give evidence. [192] Now that all the evidence has been presented I am perfectly satisfied that the Council's allegations have not been made out. This reflects four main factors. [193] First, the timing of the agreements and the fact that settlement under each agreement was to be delayed for six months. There is considerable strength in Mr Forbes' submission that if Mr Purvis had been intent on defeating the swap agreements he would not have delayed the sales to Allard and Palmhaven for upwards of nine months. Nor would he have delayed settlement under each agreement for a further six months. It may well be that by the time the agreements were due for settlement Mr Harwood had wind that the Council was going to take action to enforce the swap agreements. But that is beside the point. The critical time was when the agreements were entered into and I am quite satisfied that there were no sinister motives at that time. [194] Second, the context does not support the plaintiff's contention. I have found that only three days before the agreements were entered into there had been a meeting at which a Council officer had said that the swap agreements were at an end. Moreover, the parties had instructed Mr Newberry to proceed with valuations at the same meeting. Under those circumstances it is difficult to see why Mr Harwood would have found it necessary to take steps to secure his situation by agreeing to transfer the land to Allard and Palmhaven. As far as he was concerned, negotiations with the Council were proceeding and the swap agreements were irrelevant.[195] Third, the purchase price of Lots 53 and 54 has been fully explained. The agreement with Allard entitled Prime to take back such part of the land as might be required for reserve purposes. In addition, the land was still zoned Open Space and it was anticipated that it would take some years before the zoning was changed and development could proceed. [196] Fourth, Mr Purvis has provided a full explanation. Having heard his evidence and seen him cross-examined I have no reason to disbelieve his evidence which effectively confirms that the Allard transaction was at arm's length.Advice That Council Intended To Enforce Swap Agreements[197] Again it is necessary to begin with the history leading up to the Council's letter of 8 September 2004 advising that it wanted to settle the swap agreements.History[198] After the meeting on 5 March 2004 Mr Newberry proceeded with the valuation of Lots 1, 53 and 54 and the resulting valuation, which came as a surprise to the Council officers and Mr Harwood, obviously gave rise to tensions. At one stage Mr Harwood was talking about a payment by the Council of up to $250,000 even though only part of Lots 53 and 54 would be available for reserve purposes. There was also the underlying issue of the neighbours. [199] On 28 July 2004 the general manager of City Environment wrote to the chairman of the community board saying that it had been brought to her attention that Council officers had not met the timeframes that they had committed to in relation to the subdivision and that although she was assured considerable progress had been made, there were still critical issues to resolve before the options could be reported to the community board, standing committees and the Council. Included in the list of critical issues were:"1. The legal position of the Council in relation to the contract for the land exchange with the previous owners is complex. We are collating events over the past 10 years and will have this complete by 30 August.2. Given that our previous contract has lapsed, valuations have been gained and negotiations are well advanced ".The letter said that staff had been asked to give priority to addressing these matters so that there could be a report for the board's meeting on 30 August. [200] What seems to be an earlier draft of the same letter includes a history and a comment that "the file remains silent beyond this date [July 2002] as to why Link did not settle. Some of the conditions of the agreement were never fulfilled ". It then went on to state:"Council's in house solicitor has perused the sale and purchase agreements with Link and confirmed that they are not enforceable. Link ceased to be involved in business activities, the contract was never in an unconditional state and the land has now been sold."Notwithstanding that that letter is probably only a draft, it provides some insight as to the thinking of the Council's officers at the time and the reference to the in house solicitor's advice is obviously a reference to Mr Thompson's advice. Draft reports for the community board meeting carry similar references. [201] Nevertheless discussions continued and on 11 August 2004 Mr McCarroll wrote a letter to Mr Harwood which included the following:"I have discussed this matter in length with other Council Officers and we are prepared to make an offer of exchange, based on the independent valuation advice received from Ford Baker, on the following basis: 1. The Council owned area containing 1.0060 hectares being Lot 1 DP 62792 has been valued (updated) at $425,000. 2. With reference to drawing number 8132-04B completed by Glasson Potts and Fowler the valuation of the individual parcels, again as assessed by Ford Baker, are as follows: Lot 1 325m 2 $ 32,500.00 Lot 2 - 2654 m 2 $290,000.00 Lot 3 - 851 m 2 $ 43,000.00 1434 m 2 $143,400.00Total Values: $508,900.00On the basis of the valuation advice received an exchange of the above parcels on the basis that Prime Estates are paid a further $83900 would seem fair and reasonable ".Mr Harwood was asked to provide his comments by 16 August because officers needed to prepare a report for the community board and subsequently the Council. At least at officer level it looked as though the parties were on the brink of an agreement. [202] In due course a copy of the report for the community board was supplied to Mr Harwood. The report indicated that although there had been negotiations over many months, no agreement had been reached to enable a final decision to be made. Mr Harwood complained that he was very concerned about the accuracy of the information being conveyed to board members and could not understand why the promised report had been downgraded to a memo. Nor could he understand why his variation request had been put on hold. [203] Mr Harwood attended the Burwood Pegasus Community Board meeting of 30 August accompanied by Mr Lascelles. Several Council officers, including Mr McCarroll, were present. According to Mr Harwood assurances were given to the meeting by Council officers that they would work with him to urgently resolve outstanding issues and he gave assurances that he would fully co-operate. Mr Harwood said that after the meeting he met with Council officers outside the meeting room and that he and Mr Lascelles were led to believe that contracts would be forthcoming straight away. This is confirmed by Mr Lascelles. [204] Mr McCarroll does not accept that either he or Angus Smith gave an assurance that matters would be finalised and contracts would be forthcoming immediately. He said that Mr Harwood had indicated to him the proposal in this letter of 11 August was "grossly inadequate" and that they were not contemplating any increase on the amount that the Council might pay. He also said that by then the Council's legal department was inquiring very closely into the legal situation. [205] Whatever the truth of the matter it is clear that both sides were frustrated. Mr Thomson said that he became involved again because of frustrations expressed by other staff over their inability to arrive at an agreed position with Mr Harwood andbecause of concerns expressed by local residents about possible changes to the reserve areas. Email traffic establishes that by 2 September the Council had become aware of the addendum and Mr Stone had been authorised to release it to the Council. A Council officer interpreted the document as indicating that "Link locked Harwood into performing the CCC/Link agreement".[206] On 2 September 2004 there was a meeting attended by the Chief Executive and other officers. The background in the minutes includes a brief history containing a statement that the agreement to exchange land "never became unconditional and subsequently the land was sold" and that it was necessary to crystallise the Council's position. With reference to a meeting with Mr Harwood that had been scheduled for the following day, the minutes record that he was to be told "we are reviewing our obligation under previous contract".[207] After he became aware that Council officers were not prepared to talk to him, Mr Harwood recorded a telephone call that he made to Mr Freeman. Regardless of the ethics involved, the discussion provides a valuable insight into what Mr Freeman was really thinking. Mr Harwood complained to Mr Freeman that the contracts were going to be sent through last Monday, everyone seemed to be dodging for cover and not wanting to meet, and the meeting set for Friday had been cancelled because Mr Smith was not available. Mr Freeman's response was that Buddle Findlay were looking at the old contract and that was all that he could say. Later the following exchange took place:"Harwood: the thing is the contract with Link was never perfected you know. Freeman: Yeah I know well that's the point. That was my initial advice. You know everything I do. Harwood: But at the end of the day I am saying, right from the outset, I am saying and I have co-operated with you to do an exchange. Freeman: We will do a compromise and I'm comfortable with where we have got to. I would like to see the thing wrapped up."Later Mr Harwood asks whether someone was trying to protect their backside. In response Mr Freeman said "Oh yeah that is it – I don't know why really".[208] A telephone call to Mr McCarroll by Mr Lascelles with Mr Harwood on another line was also recorded. During that conversation this exchange took place:"Harwood: What's the hold up? Now come clean, there is a hold up thing going on. What's it all about? McCarroll: I don't know. It is really us getting the options sorted and be able to put it in front of you. Harwood: But I thought the option was sorted in terms of your letter of 11 August? McCarroll: There has been a backwards step in terms of seeking outside advice. There is, I think Chris Freeman might have mentioned to you last week that there was outside advice being sought but it doesn't necessarily affect the options with regard to Harwood: Well shall we get on with it? McCarroll: So I am more than happy to get a contract together and organised."Later Mr McCarroll said that he was trying to get a report together and convince"those here" that this is the best and most achievable option. There was also talk about a revised offer. Mr McCarroll said that he would need to talk to Mr Thomson and that he would try to do so before the end of the day with a view to getting some contracts drawn up and put in front of Mr Harwood. [209] On 8 September 2004 the Council wrote to Mr Harwood saying that it had reviewed its position with regard to the swap agreements and had taken advice about its rights and obligations under those agreements. Notice was given that the Council intended to take steps to settle the transaction. A settlement date of 24 September 2004 was set. [210] On 14 September Mr Harwood wrote an angry letter to the Council saying that he was astounded at the attitude now being adopted by the Council. He then made 14 points and warned that if the Council did not reconsider its position it was inevitable there would be a prolonged legal battle. He was right.Conclusions[211] It is impossible to understand why more than two months after Mr Harwood had formally advised the Council that he had purchased the land, the Council instructed its solicitors to settle with Link. Whatever the reason, that episode put the issue of the swap agreements squarely before the Council. But it did not seriously grapple with the issue. Instead it continued to negotiate with Mr Harwood on the basis that the swap agreements were at an end and irrelevant. This pattern was repeated on other occasions when the issue of the swap agreements came up. [212] By the time the Council made its move in relation to the swap agreements the parties had been negotiating for over a year. I am satisfied that when the Council made its move the parties were very close to settlement. This is especially apparent from the letter of 11 August 2004 and the recorded telephone conversations. Although it was necessary for the community board and Council to endorse the arrangement, I do not think that would have been a problem. Indeed, it was acknowledged in the plaintiff's closing submissions that if Council staff and Mr Harwood reached agreement on the basis of a deal which could sensibly be put to the Council for approval "there is every indication that this is what would have happened". In any event Mr Harwood gave unchallenged evidence that after the Council made its move he was prepared to drop the monetary payment in order to achieve a settlement. [213] The Council's delay in grappling with the issue of the swap agreements was not justified. I accept that the ongoing negotiations were costly to Prime. In his fax of 27 August 2004 to Mr McCarroll Mr Harwood said that he had previously advised the Council that $44,000 had been incurred in costs.Drawing The Threads Together[214] Once all the threads are drawn together the following picture emerges.• When the Link/Prime agreement was negotiated and signed Mr Casserly and Mr Harwood were at cross purposes, both as to the land involved and the swap agreements.• Although there was only passing reference to the swap agreements before the Link/Prime agreement was signed, by the time Mr Harwood confirmed the agreement he had received assurances from both Mr Casserly and Mr Freeman that the swap agreements were at and end.• Following their appointment the receivers became concerned that Link was purporting to sell land that it did not own and the possibility arose that they might avoid the agreement.• To overcome this problem the parties entered into the addendum which provided a quick and practical solution. It was confirmed that Lots 53, 54 and 55 would be purchased by Prime. It also accepted responsibility for the swap agreements, but that part of the arrangement was short-lived.• On settlement the deed of assignment (as modified) changed this arrangement. While Prime took an assignment of the benefits of the swap agreement it no longer accepted any obligations under it.• After Prime acquired the land Mr Harwood negotiated with the Council on the basis that the swap agreements were irrelevant and at an end. The Council negotiated on the same basis.• Even when the Council attempted to settle the swap agreements with Link it made no serious attempt to determine the status of the swap agreements and continued to negotiate on the basis that they were at an end. This pattern was also repeated on later occasions when the issue of the swap agreements cropped up.• At no stage did the Council reserve any rights in relation to the enforcement of the swap agreements. Nor did it caveat the titles to Lots 53 and 54.• Despite outward appearances there were no sinister motives behind the agreements of 8 March 2004 for the sales to Allard and Palmhaven.• By the time negotiations were unilaterally terminated by the Council the parties had been negotiating for over 12 months and were very close to agreement. Had agreement been reached it would probably have been endorsed by the Council.Part III Legal Implications Introduction[215] In this Part the law will be applied to the factual findings. The following topics will be addressed:• Whether the swap agreements ever became unconditional• Land transfer fraud cause of action• Other causes of action• Estoppel/abandonment• Counterclaims• OutcomeWhether The Swap Agreements Ever Became Unconditional[216] The swap agreements contained four conditions: (a) Formal acceptance by the Council. (b) The Council being satisfied that it had met its obligations under the Public Works Act 1981 in relation to title 38C/300. (c) A certificate pursuant to s321 of the Local Government Act 1974 in respect of title 38C/300. (d) Settlement of the other swap agreement. It is not disputed that conditions (a) and (b) were fulfilled. I also accept Mr Nation's submission that condition (d) is not a condition in the true sense, but merely a way of expressing interdependent obligations: Fund of New Zealand Nominees Ltd v Campbell & Ors (1989) 1 NZ ConvC 190,187. Thus condition (c) is the only condition requiring consideration. [217] A very brief consideration will suffice. This is because Mr Forbes accepted that a purchaser under a conditional agreement for sale and purchase acquires an equitable interest in the property and the Court can, by injunction or otherwise, prevent the vendor from dealing with the property inconsistently with the contract of sale: Bevin v Smith [1994] 3 NZLR 648 (CA) per Gault J at 665. [218] On 21 January 2002 the Council, through Dave Falls, notified Mr Casserly that the contracts were unconditional and on 16 February 2002 Mr Stone, acting for Link, also recorded that the contracts were unconditional. Although there were subsequent problems in effecting settlement, both parties proceeded on the basis that the swap agreements were unconditional. [219] Under those circumstances I agree with Mr Nation that the matter should be approached on the basis that there was either a mutual waiver of the s321 condition or Link is estopped from asserting that that condition was not fulfilled. Either waythe matter can be approached on the basis that the swap agreements were unconditional.Land Transfer Fraud Cause Of Action[220] This cause of action applies to the claims against Prime, Allard, Palmhaven and Barclay. If successful it will negate any defence based on indefeasibility of title under the Land Transfer Act 1952.Legal Principles[221] The relevant principles are not in dispute. Land transfer fraud means actual dishonesty; not constructive or equitable fraud: Assets Company v Mere Roihi & Ors (1905) AC 176 (PC). On the other hand, as the Court of Appeal said inWaimiha Sawmilling Co Ltd v Waione Timber Co Ltd [1923] NZLR 1137 at 1175 (per Salmond J):"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."The fact that wilful blindness can, of itself, amount to fraud was recently affirmed inNathan v Dollars & Sense Finance Ltd [2007] 2 NZLR 747 (CA).[222] An alternative argument based on supervening fraud was also mounted by the plaintiff. The test is conveniently summarised in Land Law of New Zealand (Hinde McMorland & Sim), Volume 1, at 392:" a person who has in good faith become registered as proprietor intending to recognise an unregistered interest, but who later, after a change of mind, dishonestly refuses to continue to recognise that unregistered interest, may become guilty of fraud with the result that such person loses the protection of the indefeasibility provisions of the LTA and cannot claim that the registered title is indefeasible as against the holder of the equitable interest".This approach was adopted in Bunt v Hallinan [1985] 1 NZLR 450, NZ Meat Nominees Ltd v Sim (1990) 1 NZ ConvC 190,478, Tuscany Ltd v Gill (2001) 4 NZ ConvC 193,446 and Potts v Anderson (No 1) [2005] BCL 430; 28 TCL 15/2.Alleged Dishonesty On The Part Of Mr Harwood And The Companies[223] Mr Nation submitted that in dealing with Council staff and the Council Mr Harwood was dishonest and that his dishonesty should be attributed to Prime, Allard, Palmhaven and Barclay. Counsel claimed that Mr Harwood was dishonest because:"a. The statements he made about the land swap contracts and their relevance to him, and his silence as to the true position were in such obvious contrast to the basis on which he had completed the deal with Link as evidenced by the documents which he had signed. b. Harwood/Prime were deliberately embarking on a course of conduct in dealings with the Council where they were going to obtain the benefit of the land swap contracts in so far as acquiring ownership of Lot 1 (zoned living 1 and thus ready for residential subdivision), while denying the Council ownership of Lots 53 and 54 for use as a reserve as had been a fundamental part of the exchange and while denying the Council the right to acquire Lots 53 and 54 on the basis they were almost equal in value. c. He also sought to reduce the value at which Lot 1 was to be brought into account on the basis that it did not have the access to which it was entitled to under the land swap agreements, while seeking for his benefit the value of all the roads and infrastructure that were in place for Lots 53 and 54 – all of which had happened as a result of the approval of the original scheme of which the swap was a part. d. It is submitted that on an objective consideration of the situation of what happened, Harwood would be considered to have been dishonest in attempting to retain for himself/Prime the benefits of the land swap contracts while refusing to meet the obligations which were the consideration for those benefits. Mr Harwood was dishonest because he was knowingly trying to have it both ways. He had acquired Lots 53 and 54 on the basis he would honour the land swap contracts if required to. In attempting to negotiate for the right to develop sections on Lots 53 and 54 and in seeking a further payment from the Council he was asserting that the land swap contracts did not bind him. At the same time he was retaining for himself the right to enforce the land swap contracts if he chose to do so, as Mr Martin understood was the position. This is the inference to be drawn from Harwood's mention of the assignment of the benefits of the contract at the meeting on 19 March 2003, and as a result of the comments made by Mr Harwood as to having an interest in equity in a property on which at one stage there was going to be a reserve from the telephone conversation of 6 September 2004.e. It is submitted that if Harwood had been honest he would have advised the Council staff from the outset the terms on which he and Prime had acquired Stage 2 from Link. If he'd had any doubts as to whether the land swap contracts were enforceable or capable of settlement then he should have made a proper enquiry of the Council and the Council's solicitors or legal section as to the precise status of the land swap contracts and the Council's intentions with regard to those contracts. Instead he dealt with a planner, Mr Freeman. He did not ask Mr Freeman to enquire as to the position re the land swap contracts. He began with the assertion that as far as a land swap was concerned he/Prime were not bound by the obligations which Link had under the contracts and that those contracts were not binding as far as Prime was concerned."Mr Nation further submitted that Mr Harwood's transfer of the land to Allard and Palmhaven in September 2004 was in defiance of the Council's rights, with clear knowledge that the Council was likely to assert those rights. [224] With reference to supervening fraud Mr Nation submitted that even if the defendants initially obtained their interest in the land with the intention of renegotiating to see if a new agreement could be reached, they acted dishonestly by defying the Council's rights once they knew no new agreement would be reached and the Council was asserting its rights.Conclusions[225] Whether Mr Harwood was dishonest (either by way of actual dishonesty or by wilful blindness) needs to be examined at several points in time:• Execution of the Link/Prime agreement• Confirmation of agreement• Execution of the addendum• Settlement• Subsequent negotiations with the Council• Execution of agreements with Allard and Palmhaven. For the purpose of this analysis I will assume that Mr Harwood's knowledge and motives can be attributed to Prime, Allard, Palmhaven and Barclay. [226] Execution of the Link/Prime agreement: I cannot accept that by entering into the Link/Prime agreement Mr Harwood was dishonestly intending to cheat the Council out of its interest in the land under the swap agreement or to otherwise act in a fashion that could be categorised as dishonest. Nor was he under any duty as anhonest man to make further enquiries before purchasing, to abstain from purchasing or to purchase subject to the swap agreements. [227] When entering into the agreement both parties knew that receivers were about to be appointed and the incredible speed with which the agreement was consummated is largely attributable to that factor. If anyone was making the running it was probably Mr Casserly. Before the meeting in Mr Stone's office Mr Harwood was unaware that swap agreements had been entered into. And, as I have already found, there was nothing more than a passing reference to the swap agreements in Mr Stone's office. No-one turned their minds to the implications of the agreements. Under those circumstances I am satisfied that there was no actual dishonesty or wilful blindness on Mr Harwood's part at the time the swap agreements were executed. [228] Confirmation of agreement: The day after the agreement was signed Mr Harwood acquired further information about the swap agreements from Mr Casserly which prompted him to ask the Council about their status. It was confirmed by the Council that they were at an end . This, of course, reinforced what Mr Harwood had already been told by Mr Casserly. It was against this background that Mr Harwood confirmed the Link/Prime agreement. There was no dishonesty on Mr Harwood's part and he was not under any obligation to go behind the assurance that the swap agreements were at an end. [229] Execution of the addendum: By entering into the addendum Mr Harwood was plainly acknowledging the swap agreements. Had that remained the situation the Council's allegation of land transfer fraud would have been strong (but by no means unassailable because of its earlier advice to Mr Harwood that the swap agreements were at an end). However, this situation was short-lived and a little over a week later the addendum had been overtaken by the deed of assignment. In any event, on the Council's own case execution of the addendum could not have constituted dishonesty or wilful blindness on Mr Harwood's part. [230] Settlement: On settlement Link and Prime entered into the deed of assignment which, following Mr Harwood's amendment, dropped any commitmentby Prime to honour the swap agreements. Despite Mr Nation's detailed arguments to the contrary, I cannot accept that this involved any dishonesty on Mr Harwood's part. [231] Between themselves Link and Prime were perfectly free to contract as they saw fit. This was a highly unusual situation where the background events and stance of the contracting parties was constantly changing. For whatever reason both parties to the Link/Prime transaction saw fit to enter into the deed of assignment in its amended form which, as I have earlier found, removed any obligation for Prime to perform the swap agreements. This was consistent with the attitude Mr Harwood conveyed to the Council. I do not accept that there was any dishonesty on Mr Harwood's part. Nor, given the Council's assurance that the swap agreements were at an end, was he under any obligation to refrain from entering into the deed of assignment (as amended). [232] Negotiations with the Council: On 12 September 2003 Mr Harwood gave the Council notice that he had purchased the land and negotiations with the Council continued on the basis, as Mr Forbes put it, that "Mr Harwood was the new owner, the land swap contracts had not settled so the Council had not become the owner of Lots 53 or 54".[233] The Council contends that Mr Harwood deliberately concealed from the Council the true nature of the arrangements that he had entered into with Link (that he had contracted to perform the swap agreements). I reject that proposition. The addendum only reflected the contractual arrangements between Link and Prime for a period of eight days. As I understand the evidence there is no suggestion that negotiations were in full swing before Prime acquired ownership and there is no evidence that during that eight day period Mr Harwood made any representations to the Council that could be categorised as dishonest. After the purchase had been settled Mr Harwood consistently asserted that he was not bound by the swap agreements which was, of course, in line with the contractual arrangement between Link and Prime. [234] Two other events during the negotiations count against the Council's case.[235] First, its bizarre attempt to settle with Link even though it had been formally advised in writing by Mr Harwood well before that time that Prime was the new owner. Even though that triggered contact with Mr Harwood at the time, there was no attempt by the Council to explore the matter any further. Instead it continued its negotiations with Mr Harwood on the basis that the swap agreements were irrelevant. Obviously this reflected the genuine belief of both the Council officers and Mr Harwood at the time. There was no dishonesty. Nor was Mr Harwood under any duty to provide the Council with any further information about the swap agreements or to hold his hand in negotiations. The Council was in just as good a position as Mr Harwood (probably better) to determine the status of the swap agreements and to decide whether it should continue with negotiations. [236] Second, the comments on 5 March 2004 by a Council officer (Mr Harwood claims that it was Mr Freeman) that they had checked with the legal department and the swap agreements were at an end. Given this indication it could not possibly have been dishonest for Mr Harwood to continue negotiations on the basis that this was actually the situation. Nor was he obliged to go behind this clear assurance. [237] Execution of agreements with Allard and Palmhaven: I have already found that there was nothing sinister in these agreements. Individually or in conjunction with other events they could not constitute land transfer fraud. [238] Finally, I reject the possibility that there was supervening fraud. Council's formal notice to settle of 8 September 2004 effectively came out of the blue despite the fact that the parties seem to have been on the brink of agreement after negotiating for over a year. Apart from a brief passing reference by Mr Cescon to the possibility that the swap agreements might be binding almost nine months earlier (which was not carried any further), this was the first indication to Mr Harwood by Council officers that the Council considered the swap agreements were still on foot and that it intended to hold him to them. From that point the Council put up the shutters and Mr Harwood was the only party interested in trying to complete negotiations. [239] Given that situation I reject the Council's proposition that Mr Harwood (and through him the other defendants) acted dishonestly by opposing the Council'sattempts to settle the swap agreements. Mr Harwood was simply defending his position (and the position of the other defendants). He was entitled to do so. There was no dishonesty. [240] My conclusion is that the allegation of land transfer fraud cannot succeed against any of the defendants.Other Causes Of Action[241] To succeed on the causes of action alleging knowing receipt, breach of a constructive trust, and dishonest assistance, the plaintiff must establish that there was a breach of a constructive trust. Royal Brunei Airlines v Tan [1995] 3 All ER 97 (PC) includes a detailed list of the legal requirements for dishonesty in the context of breach of trust claims. [242] Given the factual findings, especially the advice by both Mr Casserly and the Council that the swap agreements were dead, the plaintiff cannot establish Mr Harwood was under a constructive trust to recognise and protect the Council's interest in the land, let alone a breach thereof. Thus the plaintiff cannot succeed in the second and third causes of action against Prime, the claims against Mr Harwood or the second cause of action against Allard, Barclay and Palmhaven. [243] The fourth cause of action against Prime based on breach of the Fair Trading Act must also fail. First, it has not proved that Link was either misled or induced to enter into the Link/Prime agreement on the basis that Prime would meet Link's obligations under the swap agreements. To the contrary, Mr Harwood did not turn his mind to the implications of the swap agreements and no representations were made by him. Second, the Council was not deceived or misled by Mr Harwood's approach to negotiations. Like Mr Harwood, the Council approached the matter on the basis that the swap agreements were irrelevant. Once Council officers reached the view that the agreements were enforceable they refused to negotiate any further.[244] Finally, the findings that there was nothing sinister in the Allard and Palmhaven agreements effectively puts an end to the remaining allegations against those two companies and Barclay. [245] It follows that all the remaining causes of action must also fail.Estoppel/Abandonment[246] While it is strictly unnecessary to consider these defences because the Council has failed on all causes of action, I will nevertheless take the precaution of briefly expressing my views. In doing so I take into account the further memoranda filed on both sides after I had reserved my decision. [247] Once Mr Nation realised that there had been no reference to relevant provisions of the Local Government Act 2002 at the hearing he sensibly raised that issue with Mr Forbes. While Mr Forbes opposed, and still opposes, further submissions, he equally sensibly accepted that the information Mr Nation wanted to bring to the attention of the Court was relevant and likely to be received. So he told Mr Nation the response he would, and did, make. Thus full and relevant information concerning the implications of the Local Government Act 2002 is before the Court without any party being prejudiced. [248] I will now briefly summarise the cases of the parties on the estoppel and abandonment issues. Then I will discuss the legal elements of those doctrines and express my conclusions.Defendants' Case[249] Between 25 July 2003 and 8 September 2004 the Council was expressly and impliedly representing to Mr Harwood that the swap agreements had lapsed, been abandoned, or were otherwise unenforceable, and that, in any event, it did not wish to proceed with them. Instead it sought to negotiate a new agreement. [250] In reliance on this: Mr Harwood confirmed the Link/Prime agreement and proceeded to negotiate with the Council; incurred expenditure in developing hisproposals for a new exchange agreement; Prime mortgaged its land to Barclay and proceeded to sell to Allard and Palmhaven. [251] The defendants also contend that the swap agreements lapsed or were abandoned. They claim that this arose from mutual non-enforcement and effluxion of time. At no time did the Council assert in any way against any of the defendants that it still had any enforceable rights contrary to what was otherwise assumed to be the basis of the negotiations for a new agreement. Moreover, the protracted negotiations were quite inconsistent with any assertion of any such rights by the Council.Plaintiff's Response[252] The defendants have failed to establish the essential prerequisites of an estoppel: council staff did not make any representations to Mr Harwood or the companies that Council would not seek to enforce the land swap agreements; Mr Harwood knew that any new deal would require the Council's approval; and he must have also known that to the extent that this involved abandonment of the swap agreements, Council's approval would also be required. [253] Council officers negotiated with Mr Harwood on the basis of his assertion that he was not bound by the land swap agreements and also on the basis that before the subdivision could proceed the Council would have to come to a new deal with him. There was no clear representation as to what the position would be if no new agreement was reached. In that sense both parties reserved their position. Indeed, Mr Harwood considered that ultimately he would be able to obtain the benefit of swap agreements under the deed of assignment. [254] The only belief or expectation that Mr Harwood could have reasonably formed was that if he and Council staff arrived at an agreed position, that position would be put to Council for approval and there would be a reasonable prospect that the Council's approval would be forthcoming. This did not involve any unequivocal representation by Council officers that Council would not require Prime or other companies to perform the swap agreements.[255] In any event, Mr Harwood was not misled. Given the assignment of the swap agreements he must have known that Council might choose to enforce those agreements if no new deal was achieved. Moreover, he did not act to his detriment in reliance on any representations. He had never been guaranteed that negotiations would lead to a new land swap approved by the Council, and he assumed the risk that there might not be any new deal. [256] If Council staff by conduct or statements did represent or indicate that Council would not enforce the land swap agreements, then such representations were induced by Mr Harwood's conduct. He withheld detailed information from Council, in particular the addendum and the indemnity in the deed of assignment. He also asserted the swap agreements were at an end even though he knew there was sufficient progress to believe that "both Link and Prime would be able to carry on with the Stage 2 subdivision ".[257] Mr Harwood did not come with clean hands. His statements and conduct were misleading and deceptive. Moreover, it would be unconscionable for him to rely on estoppel. [258] Finally, on the basis of the reasoning in Khouri v Waitakere City Council(High Court, Auckland Registry, CP 886-91, 6 August 1997, Elias J), which was expressed to be of general application and not dependent on the provisions of the Public Bodies Contracts Act 1959, neither estoppel nor abandonment can be used as a defence to the Council's claims. Just as Council's approval was necessary for assignment of the land swap agreements, so also was any abandonment of those agreements and entry into a new agreement. All that was happening was that"Council staff were indicating that they would negotiate to see if the basis of a new deal could be arrived at for the Council to approve".[259] The Council had not delegated authority to its staff to abandon the earlier swap agreements and if the actions of the Council staff constituted an estoppel or abandonment they would lead to evasion of the statutory restrictions and legislative scheme in the Local Government Act 2002. Furthermore, in terms of s138(1) of the Local Government Act the Council, having acquired Lots 53 and 54 for use as parksor reserves, would have to consult on the proposal before it sold or agreed to sell. The Council's consultations with the community board in 2004 did not satisfy that requirement.Elements Of Estoppel And Abandonment[260] The elements of an estoppel are well established:• encouraging of a belief or expectation by way of words or conduct;• reliance on that belief or expectation by the other party; and• detriment. The broad rationale is that a person should be prevented from going back on his or her word when it would be unconscionable to do so: National Westminster Finance v National Bank [1996] 1 NZLR 548 (CA) at 549. [261] As to abandonment, the leading case is Paal Wilson & Co A/S v Blumenthal: the Hannah Blumenthal [1983] 1 All ER 34 (HL) in which Lord Brandon delivered the primary speech. He explained at 47:"The concept of the implied abandonment of a contract as a result of the conduct of the parties to it is well established in law: see Chitty on Contracts (23rd edn, 1968) vol 1, para 1231 and cases there cited. Where A seeks to prove that he and B have abandoned a contract in this way, there are two ways in which A can put his case. The first way is by showing that the conduct of each party, as evinced to the other party and acted on by him, leads necessarily to the inference of an implied agreement between them to abandon the contract. The second method is by showing that the conduct of B, as evinced towards A, has been such as to lead A reasonably to believe that B has abandoned the contract, even though it has not in fact been B's intention to do so, and that A has significantly altered his position in reliance on that belief. The first method involves actual abandonment by both A and B. The second method involves the creation by B of a situation in which he is estopped from asserting, as against A, that he, B, has not abandoned the contract (see Pearl Mill Co Ltd v Ivy Tannery Co Ltd [1919] 1 KB 78, [1918–19] All ER Rep 702)."On the evidence there is no possibility of actual abandonment being established. The issue is whether the Council is estopped from asserting that it has not abandoned the contract.Conclusions[262] Whether the matter is approached on the basis of estoppel or abandonment, the underlying factor is estoppel. I am satisfied that the defendants have established the three elements. [263] First, Council officers encouraged a belief or expectation by both words and conduct that the swap agreements were at an end. This carried the clear implication that the swap agreements would not be enforced. Mr Freeman conveyed that message when he responded to Mr Harwood's enquiry on 31 July 2003 and it was reaffirmed at the meeting of 5 March 2004. Such belief or expectation was also conveyed by the conduct of Mr Freeman and Mr McCarroll when they negotiated on the basis that the swap agreements were irrelevant. [264] The negotiations were totally incompatible with the swap agreements remaining in force: only part of Lots 53 and 54 was to be utilised as a reserve; there was no suggestion that the differential of $1,150 under the original swap agreements would apply (valuations were obtained and ultimately an offer of $83,900 was made by the Council); and at all relevant times the subdivisional concept under negotiation was quite different from the stage 2 concept underpinning the swap agreements. [265] Second, it was perfectly reasonable for Mr Harwood to take from, and rely on, the Council officers' representations that the swap agreements were at an end and would not be enforced by the Council. At no stage did Council officers attempt to reserve any rights in relation to the swap agreements. To the contrary, they unequivocally conveyed the belief or expectation that they were negotiating on exactly the same footing as Mr Harwood. He did not mislead or deceive them. If the Council officers had any reservations about the swap agreements it was within their capacity to check. After all, the Council was one of the parties to the agreements and was able to make its own assessment as to the status of those agreements and the wisdom of negotiating with Mr Harwood on the basis that they were irrelevant. The truth of the matter (as revealed by the recorded conversations with Mr Harwood) is that the officers themselves held the view until very late in thepiece that the swap agreements were at an end and would not be enforced. There is no question of Mr Harwood failing to come with clean hands. He was perfectly entitled to adopt a hard line in his negotiations with the Council. [266] Third, but for the belief or expectation held out by the Council, I do not think that Mr Harwood would have confirmed the Link/Prime agreement and entered into negotiations with the Council. Rather, his initial adverse impression of the site, coupled with Mr Prain's advice, would have deterred him from becoming involved in a venture that would require implementation of Link's stage 2 development. I think it was for that reason that on settlement of the Link/Prime transaction Mr Harwood altered the deed of assignment to ensure that he was not obliged to perform the swap agreements. The indemnity did not amount to an acknowledgement that the agreement was enforceable. It was simply a precaution against the possibility that the Council might attempt to enforce the agreement. [267] Other detriment was also suffered. Had the agreement not been confirmed Prime would not have incurred costs in negotiations with the Council. When expressing frustration about the Council's attitude in his fax of 27 August 2004 Mr Harwood stated that he had previously advised the Council that $44,000 had been incurred in costs. While it is true that there was a risk that the parties might fail to reach agreement and the costs would be wasted, the evidence establishes that the parties were in fact actually on the brink of an agreement when the Council terminated negotiations. In this respect I find the recorded telephone conversations particularly revealing. I also accept that if agreement had been reached between Mr Harwood and Council officers, such agreement would probably have been endorsed by the Council. [268] There was further detriment to Prime and other defendants when Prime transferred the land to Allard and Palmhaven in reliance on the assurances of Council officers that the swap agreements were at an end. Indeed, an assurance had been given on 5 March 2004 which was only three days before the agreements with Allard and Palmhaven were signed. In each case Mr Harwood's knowledge can be imputed to the company.[269] The final detriment is represented by this litigation. I am satisfied that this protracted litigation would not have arisen if the Council had not encouraged Mr Harwood to believe that it accepted that the swap agreements were at an end and would not be enforced. [270] I do not think that Khouri v Waitakere City Council can save the plaintiff on the estoppel issue. In that case two landowners sought to prevent the Waitakere City Council from claiming betterment under the Local Government Act 1974 in respect of a road to be constructed through their properties. The claim turned on discussions between Council officers and the landowners who contended that it had been agreed that they would pay a fair and equitable contribution to construction costs instead of betterment. [271] Elias J reached the conclusion that for technical reasons the betterment clause was invalid. However, she then went on to consider other matters, including whether there was estoppel by representation of authority or estoppel by representation that betterment would not be claimed. The Judge accepted that although in general the principles of estoppel apply to public bodies, a public body cannot be bound by estoppel where that would lead to it acting outside its powers, avoiding its duties, fettering its discretion, or evading statutory restrictions such as those provided in the Public Bodies Contracts Act 1959. She concluded that to permit officers acting under ostensible rather than actual authority to bind a public body to a contract would undermine the scheme of the Public Bodies Contracts Act. Thus there was no estoppel by way of representation of authority. [272] As to whether there was estoppel by representation that betterment would not be claimed, Elias J accepted that some of the arrangements would not constitute an agreement contrary to the policy of the Public Bodies Contracts Act. Rather, they would prevent the plaintiffs suffering detriment if the Council was to claim betterment contrary to its representations, and she accepted that Council officers had actual or ostensible authority to make those particular representations. On the facts, however, she found that no estoppel had arisen.[273] As a result of the Local Government Act 2002, the Public Bodies Contracts Act has not applied to City Councils since 1 July 2003. Instead the governing provisions have been those in the Local Government Act 2002, particularly s14 (principles relating to local authorities) and cl 32 of the Seventh Schedule (delegation). The power to delegate is in much more general terms than in the Public Bodies Contracts Act. Despite those factors, however, I proceed on the basis that the general principles discussed in Khouri v Waitakere City Council are applicable in this case. [274] To me the flaw in the Council's argument is that it pre-supposes that any new arrangement would have inevitably involved formal abandonment of the swap agreements. The evidence does not indicate that this would have been the case. Negotiations proceeded on the basis that the swap agreements were irrelevant. If a new arrangement had been reached I do not think for a moment that there would have been any formal abandonment of the swap agreements because that step would have been unnecessary. The Council would have simply endorsed the new arrangement. [275] As I see it the position in this case is akin to the betterment representations inKhouri v Waitakere City Council which Elias J accepted were within the actual or ostensible authority of the Council officers. I accept that the representations of the Council officers that the swap agreements were at an end were within their actual or ostensible authority and did not require any formal approval by the Council. Moreover, the wider delegation powers in the Local Government Act 2002 (compared with the Public Bodies Contracts Act) mean that there is no possibility of this finding undermining the statutory scheme. [276] Nor am I persuaded that s138(1) of the Local Government Act, which requires a local authority to consult before it agrees to dispose of a park, has any direct bearing on the matter. Subsection (2) defines a park as meaning:" land acquired or used principally for community, recreational, environmental, cultural, or spiritual purposes".Lots 53 and 54 had never been acquired by the Council. And on the evidence I doubt that it could be said that the lands were used principally for any of the stated purposes. In any event the evidence suggests that there had in fact been consultation. [277] My conclusion is, therefore, that the Council is estopped from denying that the swap agreements are at an end and that they would not be enforced by the Council.Counterclaims[278] Allard and Palmhaven seek orders removing the caveats lodged by the Council against Lots 53, 54 and 55. Given my earlier conclusions they are entitled to such orders. [279] In addition they seek damages. Allard claims $28,500 and Palmhaven claims $546,000. The prayers for relief in support of both claims indicated that full particulars would be provided before trial. To the best of my recollection no particulars were provided, there was no evidence at trial, and the topic was not mentioned during closing submissions. [280] Assuming this is the position, I intend to dismiss the counterclaims for damages. However, in case I am mistaken in my belief that there has been no reference to this topic, Allard and Palmhaven will have 14 days following delivery of this judgment to draw my attention to any relevant material already before the Courtand the Council will have a further 14 days to respond.Outcome[281] The plaintiff does not seek to continue its claim against the first defendant in liquidation, it has abandoned its claim against the seventh defendant (Mr Purvis) and there has been no attempt by the second defendant (Prime) to pursue its claim against the third party (Mr Casserly). The claims against each of those parties are dismissed and they are entitled to judgment accordingly.[282] This leaves the claims against the second (Prime), third (Harwood), fourth (Allard), fifth (Barclay) and sixth (Palmhaven) defendants. The plaintiff has failed on each cause of action pleaded against those defendants. Had it been necessary I would have also found for those defendants on estoppel. These claims are dismissed and each of those defendants is entitled to judgment accordingly. [283] As to the counterclaims, the fourth and sixth defendants are entitled to orders removing the Council's caveats from Lots 53, 54 and 55. Unless memoranda are lodged on behalf of those defendants in response to the invitation in paragraph [280] of this judgment, the counterclaim for damages will be dismissed. If memoranda are lodged I will decide on the strength of those memoranda whether the counterclaims require any further consideration. [284] If agreement cannot be reached as to costs, counsel should submit memoranda. [285] Leave is also reserved for any party to apply further should the need arise. [286] Now that this litigation is behind them I sincerely hope that the parties will be able to make progress on resolving their differences. One way or other they are going to have to deal with each other if the land involved in this litigation is to be developed. I would have thought a starting point for further discussions would be the agreement proposed by the Council in its letter of 11 August 2004. If at the end of the day the Council is left with Lot 1, s327 of the Property Law Act 2007 might provide a mechanism for the Council to obtain access to Farnborough Street over that part of Lot 55 identified in the map attached to the swap agreements.Solicitors: Wynn Williams, Christchurch for Plaintiff` G C Knight, Christchurch for First Defendant and Third Party Duncan Cotterill, Christchurch for the Second, Third, Fifth and Sixth Defendants (Counsel: A J Forbes QC) Layburn Hodgins, Christchurch for Fourth and Seventh Defendants (Counsel: D M Lester)