KBL INVESTMENTS LIMITED v KBL COURTENAY LIMITED & ORS [2016] NZCA 227

KBL INVESTMENTS LIMITED v KBL COURTENAY LIMITED & ORS [2016] NZCA 227 [25 May 2016]IN THE COURT OF APPEAL OF NEW ZEALANDCA84/2015[2016] NZCA 227BETWEEN KBL INVESTMENTS LIMITEDAppellantAND KBL COURTENAY LIMITEDFirst RespondentSTEPHEN KINSGLEY EDGARTURNERSecond RespondentADRIAN LANCE GREENThird RespondentHearing: 8 and 9 March 2016Court: Harrison, French and Miller JJCounsel: P J Dale and V E Fletcher for AppellantD J Chisholm QC and MJW Lenihan for RespondentsJudgment: 25 May 2016 at 3.45 pmJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondents one set of costs for a standard appeal on a band A basis and usual disbursements. We certify for two counsel.____________________________________________________________________REASONS OF THE COURT(Given by Miller J)Introduction[1] In 2011 KBL Investments Ltd (KBL) was unable to service the first mortgage on its commercial property at 11–13 Courtenay Place, Wellington, and faced a forced sale at the hands of its mortgagee. Its principal, Kevin Clark, turned to Kingsley Turner and Adrian Green, owners of GTF Capital Ltd, to secure new financing. It was a role Mr Turner had played for him in the past, notably when KBL bought the building in 2003.[2] Orakei Securities Ltd (Orakei), a company controlled by Messrs Turner and Green, made an offer but it was conditional on investor support, which was not forthcoming. Messrs Turner and Green then offered, and KBL accepted, a warehousing facility under which a company they set up for the purpose, KBL Courtenay Ltd (Courtenay) would purchase the property for $3,550,000 and KBL could buy it back not later than 16 December 2011 for $3,815,000. KBL was also topay a fee of $20,000 and "interest" of $24,000 per month.[3] The mortgagee sale was averted and deeds documenting the warehouse transaction were executed on 5 October 2011. However, KBL was unable to finance the buy-back despite an extension of time until 16 February 2012. It blames thisresult on Courtenay's refusal to agree to the property being unit-titled. Courtenay has refused to re-convey to KBL, and in April 2012 it proceeded to unit-title the property itself.[4] KBL brought proceedings in the High Court, without success.1 It sued Courtenay in contract, alleging breach of implied terms that it would facilitate unit-titling and allow KBL six months from the date on which the warehousing transaction settled in which to exercise its option. That claim is not pursued on appeal.[5] KBL also sued Messrs Turner and Green alleging breach of fiduciary duty. Some of the particulars of that claim corresponded to the contract allegations. But KBL also alleged that Messrs Turner and Green had withheld from KBL until 9 June1 KBL Investments Ltd v KBL Courtenay Ltd [2015] NZHC 30 [High Court judgment].2011 the knowledge that investors would not support the Orakei loan offer, and made the warehousing offer for the purpose of acquiring the property for themselves. That claim is pursued on appeal.[6] Courtenay was also sued in oppression under the Credit Contracts and Consumer Finance Act 2003 (CCCFA). KBL alleged that the warehousing agreement was in substance a credit contract and Courtenay behaved oppressively by refusing to cooperate with unit-titling and refusing to extend time. That claim is also pursued on appeal.BackgroundThe acquisition and proposed subdivision[7] Mr Clark is an experienced real estate professional and property developer who was legally advised throughout the events we describe here. In 2002 he formed KBL with associates to acquire the property. The intention was to redevelop it, subdividing it into a strata title building of mixed use, consisting of up to four retail units on the ground floor and eight apartments on the upper level. Finance for the purchase was arranged by Mr Turner and GTF Capital. The property was refinanced in 2004, with a first mortgage being granted to Perpetual Trust Ltd, whose agent and manager was Balmain New Zealand Ltd (Balmain).[8] KBL obtained a resource consent from the Wellington City Council to allow the subdivision, but the redevelopment created issues with an adjoining land owner that was also intending to develop its property. An agreement was negotiated between them for boundary adjustments, the creation of various easements and a transfer of air rights. Until the boundary adjustment was completed KBL could not proceed with the subdivision. These steps required the consent of KBL's mortgagee,which was not forthcoming. That in turn led to the neighbouring owner lodging a caveat against the title.[9] While KBL was working through this process over a period of several years it ran into financial headwinds, experiencing trading losses in the years 2007 to 2010. It fell into default under the mortgage and failed to pay rates. It also, andsignificantly for present purposes, exceeded the loan to value ratio of 70 per cent of the market value of the property. Indebtedness was approximately $3,500,000, which amounted to 78 per cent of the value of $4,450,000 before subdivision that was disclosed by a valuation supplied in December 2010. A later addendum to the valuation estimated the value at $6,125,000, comfortably within the loan to value ratio, following subdivision.The mortgagee sale[10] On 2 February 2011 Balmain served a default notice under the Property Law Act 2007 alleging defaults in payment and breach of the loan to value ratio. KBL could not remedy the default, and Balmain commenced to sell the property by tender. It refused to await the subdivision, taking the view that it was a complex process in connection with which KBL had been uncooperative. Further, KBL allowed the resource consent to lapse in May 2011, a fact that became known in mid-June. The tender process was to close on 29 June 2011, at which date Balmain had received five tenders.KBL's attempts to refinance[11] In the meantime, Mr Clark attempted to refinance the mortgage. He appointed a mortgage broker, Gary Hey. He also sought finance from ASB Property Finance, which made an indicative proposal but ultimately declined on 18 May 2011 to make a firm offer.[12] Immediately on learning of ASB's decision, Mr Clark called Mr Turner.They met on 19 May. On the same day, Mr Turner wrote to Balmain stating that he was confident he could sort things out, arranging finance and enabling KBL to complete the subdivision and hold on to its equity. In response Balmain stated that the marketing campaign would start the following week and there would be four weeks until the tender closed.[13] Mr Turner set about sourcing finance. At the same time Mr Hey was instructed to approach financiers. It was agreed that Mr Turner would deal with BNZ and Westpac, and Mr Hey could talk to anyone else.[14] On 24 May Mr Turner emailed an offer of finance on the letterhead of Orakei, which as noted is a company owned by Messrs Turner and Green. It stated that the purpose of the loan was to refinance existing mortgagees and to enable KBL to complete unit-titling of the property and then refinance Orakei. The maturity date of the facility, which was $3,500,000, was to be six months from the date of advance. The offer was conditional on investor support and it contained various conditionsindicating that it was an arm's length transaction; for example, Orakei was toprepare all the necessary documents to protect its interests and it was to review and be satisfied with the status of the proposed subdivision. Orakei confirmed subsequently that it would give its consent as mortgagee to enable the registration of easements and the boundary adjustment.[15] In connection with the refinancing Mr Clark provided Mr Turner with various documents, notably the existing valuation, the amount owed under the mortgage and a seismic assessment advising that the building was not deemed earthquake prone.[16] It is not in dispute that Mr Turner was unable to obtain the investor support that he needed, and that he and Mr Green knew this by about the beginning of June 2011. However, Mr Clark did not learn that the Orakei offer had fallen through until 9 June, when he was presented with the warehousing proposal.[17] In the meantime, and unbeknown to Mr Clark, Mr Green had approached BNZ for financing to support the warehousing proposal, under which, it will be recalled, KBL would no longer own the property. On 26 May Mr Green emailed Andrew Hay at BNZ as follows:Hi Andrew,Tried your landline this am, when you have a clear 5 mins would you please call me. I have an opportunity to participate in a freehold, leased, commercial property in a prime location in Wellington, has real upside. Current Colliers valuation $4.45 M as is. Contracted rent roll circa $0.32 K pa. Looking to gear reasonably aggressively.This email, as the Judge recorded, was one of a number of communications between Mr Green and BNZ that were not discovered before the trial and were only supplied while Mr Green was under cross-examination.[18] Mr Green's explanation at trial for contacting BNZ was that he wanted a fallback scenario in the event that investors would not support the Orakei loan. Heaccepted that the approach to BNZ envisaged that a "Green/Turner entity" wouldacquire the property to avoid a mortgagee sale, explaining that that was so because"KBL was unbankable".[19] By letter of 3 June BNZ Capital offered Mr Green indicative terms on which BNZ might provide debt facilities. The terms envisaged that Messrs Green and Turner would guarantee the advance, which would be made to Orakei. This letter too was not disclosed.[20] On 9 June Messrs Turner and Green met with Mr Clark in Auckland. There they told him that the Orakei offer would not proceed for lack of investor participation, and they presented him with the warehousing proposal, set out in a two page letter. There was much dispute at trial about what Mr Clark was told regarding the proposal and what he understood it to mean, but it is of little moment now because the terms are no longer in dispute. The proposal was written on theletterhead of GTF Capital and headed "structured finance transaction". It explained that the facility would require that the property be transferred into a "trust company"to be formed for the purpose. The purpose was that of refinancing the property. Unlike the Orakei proposal, the warehousing proposal did not state that its purpose was to permit subdivision. It referred to unit-titling once only, when recording that the valuation report was to be readdressed to Orakei and was to confirm a value of not less than $4,450,000 and once unit-titled a combined value of no less than $6,125,000. The valuer was to confirm that the report might be relied upon for mortgage lending purposes.[21] The term of the facility was approximately six months, but the element of uncertainty concerned the commencement date only. The expiry date was fixed. The offer stated that the facility would expire on 16 December 2011 and timing wasof the essence. By that date KBL or its nominee must have exercised its right and effected the buy-back.[22] The sale price was to be $3,500,000 (later increased by $50,000 to match the highest tender that Balmain had received). The buy-back price was to be the same sum plus $250,000 being a warehousing facility fee, plus interest at $24,000 per month, representing a return of 8.25 per cent per annum on the transfer price. The interest obligation was to be met by rental proceeds from the property. KBL was to pay a structuring fee of $35,000 on settlement of the sale to Courtenay; this was later reduced to $20,000 and the balance of $15,000 was added to the buy-back price. Costs were also payable.[23] Mr Clark signed the letter on 10 June. But he did not abandon his attempts to refinance. An attempt was made to have Balmain stay its hand on the introduction of$500,000 of new equity, sourced from associates of KBL's owners. That proposalwas ignored. Mr Hey continued his efforts and procured an offer of finance from ASAP Finance Ltd on 15 June 2011. This did not proceed either. In the High Court Cooper J was satisfied that the conditions attached to this proposal could not be met by KBL.2[24] The warehousing proposal was subject to documentation, which the parties negotiated over succeeding months, Balmain having been persuaded to stay its hand when presented with the proposal. The documents took the form of a warehousing deed, an agreement for sale and purchase from KBL to Courtenay, and an option deed containing the buy-back right. We need not detail the language used in the deeds, which corresponded to the letter of 9 June. We do note that on more than one occasion before the deeds were executed on 7 October Mr Clark or his representatives sought to have the buyer, Courtenay, agree that it would cooperate with unit-titling during its ownership but those attempts were rebuffed. The explanation given, and accepted by Cooper J, was that Messrs Turner and Green were wary of any risk that they might be deemed developers for tax purposes.32 High Court judgment, above n 1, at [80].3 At [87].[25] Steps were taken to clear away legal obstacles to the subdivision in the meantime. The resource consent was renewed and the boundary adjustment was made. It all took some time, but by 14 October all that remained was the requirement to apply for deposit of a unit plan and the issue of titles. Nonetheless, KBL could not refinance. It maintains that it could not do so unless the unit-titling had first been completed. Mr Clark tried to persuade Messrs Green and Turner to cooperate, going so far as to arrange a tax opinion that suggested the risk of being treated as a developer was not high. He also negotiated an extension to the expiry date, to 16 February 2012. The price for the extension was an increase of $100,000 per month in the buy-back price.[26] In the event, 16 February came and went. Shortly after that date an unnamed buyer made an approach to buy the property but the inquiry seems not to have been pursued. Some very limited attempt appears to have been made to sell the property. KBL maintains that this was only a pretence. In April 2012 Courtenay chose to unit-title the property, having taken tax advice to the effect that tax risk would be averted if it was to hold the property for ten years or more. It is said that Courtenay is now a long-term holder.The High Court's conclusions[27] At trial KBL contended that a contract was formed when Mr Clark signed the warehousing offer dated 9 June, and that the agreement contained implied terms; specifically, that Courtenay would consent to the deposit of the unit title plan application and the issue of the unit titles, and that if settlement was delayed through no fault of KBL the time for buy-back would be extended to six months from that date. This claim failed, Cooper J reasoning that the letter of 9 June was subject to contract and the parties did not mean to be bound until the formal documentation was executed, by which time KBL unquestionably knew Courtenay would not agree to unit-titling while it held the property.4 As noted, there is now no appeal from that part of the judgment.4 High Court judgment, above n 1, at [126] and [131].[28] The fiduciary duty claim alleged that on 18 May 2011 Messrs Turner and Green agreed to assist KBL with financial advice and to assist in refinancing the property. It was not in dispute that they did agree to assist in that way. KBL pleaded that they assumed fiduciary obligations to use their best endeavours to help KBL, to act in good faith and in the best interests of KBL, not to exploit KBL to their own advantage, and not to allow a conflict of interest.[29] A number of the particulars pleaded corresponded to the alleged implied terms in the warehousing agreement. For example, it was said that Messrs Green and Turner unreasonably refused to execute the unit plan application or to extend the deadline for repurchase. However, KBL also alleged that Messrs Green and Turner had breached their obligations by seeking to procure the property for themselves, and in particular had sought to procure loan funding from BNZ for that purpose and had withheld from KBL until 9 June the knowledge that contributors to the Orakei loan were not prepared to invest. Further, it was said that they had introduced the warehousing facility for the purpose of acquiring the property. Equitable compensation was sought representing the difference in the market value of the property and the price paid by Courtenay.[30] Cooper J accepted that in general a fiduciary relationship arises from the relationship of finance broker and client, although that principle had to be applied in a manner that reflected the particular factual context.5 In this case, he held, Mr Turner would have been acting as a finance broker and subject to fiduciary duties when approaching a trading bank or potential investors on behalf of KBL. But in accordance with past practice, potential investors in the Orakei loan might have included Messrs Turner and Green themselves (as Mr Clark accepted in cross-examination) and Orakei would have been acting as a lender, with a clear conflict of interest vis-a-vis KBL. That being so, once investors had been secured for the Orakei proposal it would be difficult to contend that the broker–client relationship retained any continuing relevance.[31] On the facts, of course, that proposal did not proceed and the Orakei proposal was withdrawn at the 9 June meeting. At that point, the Judge found, the role of5 High Court judgment, above n 1, at [160].Messrs Turner and Green was clearly crystallised; they proposed that a company in which they were personally interested would purchase the property subject to the buy-back offer.6 That being so, the Judge plainly considered that any fiduciary relationship had come to an end at that point and no fiduciary duty was associated with the warehousing facility.The appeal[32] On appeal, Mr Dale for KBL maintained that Messrs Turner and Green exploited their fiduciary relationship with KBL by seeking to acquire the property for themselves, beginning almost as soon as the relationship began. That was done by:(a) making the Orakei loan offer;(b) withholding information that the offer had lapsed;(c) approaching the BNZ for funding;(d) persuading KBL to enter into the warehousing agreement;(e) using confidential information disclosed to them by KBL to acquire the property for only the amount of the mortgage debt;(f) making excuses for not unit-titling;(g) refusing to give KBL the indulgence of time; and(h) pretending that Courtenay only unit-titled the property because it was unable to sell it.Further, the appeal is now argued as a lost opportunity case. Specifically, it is said that because of the breaches of duty KBL lost opportunity to salvage its financial6 High Court judgment, above n 1, at [166].situation in some other way; that is, by an alternative to the warehousing arrangement.[33] Some of KBL's allegations are plainly unsustainable in the absence of anyappeal against the contract findings. Notably, it is manifest that the fiduciary relationship came to an end by 9 June. Indeed, we did not understand Mr Dale to suggest otherwise. That being so, the behaviour of Messrs Turner and Green, and of Courtenay, after that date can be relevant only insofar as it evidences an antecedent breach of fiduciary duty.[34] The appeal focused on a number of findings of fact made by Cooper J. We will address them so far as relevant. They are the following findings:(a) that Messrs Turner and Green did not set out to acquire the property for themselves;(b) that there was no delay in telling Mr Clark of the failure of the Orakei loan, or if there was it was not sinister;(c) that Mr Clark was told on 9 June 2011 that Messrs Turner and Green would not unit-title the property while they owned it because they might be characterised as developers; and(d) that Courtenay unit-titled the property only four months after the warehouse agreement had expired for the reason that it was unable to sell the property as a single unit.The contested findingsMessrs Green and Turner's intention to acquire the property[35] Cooper J made the following findings:[58] Although Mr Dale submitted that I should conclude that Mr Greenhad by 26 May decided that Mr Turner's and his interests would be betteradvanced if they acquired the property, and that the email of 26 May to BNZ was essentially the beginning of that process, I have not been persuaded thatis the case. Mr Green's explanation that he was seeking a backup ifinvestors were not able to be secured seems plausible as does his observation that that would necessarily involve putting in place a "Green/Turner entity" because "KBL was unbankable".[173] I have not been prepared to find that Mr Green's approach to BNZon 26 May 2011 was part of any desire to acquire the property; rather it was to ensure that if investors could not be found to support the OSL proposal there would be another option involving bank finance to a vehicle owned bythe defendants [36] On appeal, KBL claims that Mr Green's approach to BNZ was: Mr Green [taking] steps to obtain finance for himself from the Bank of New Zealand so that he and Mr Turner through [Orakei] could buy theproperty It was open to the Judge to draw the obvious inference that from this point onwards the respondents' intention was to acquire the property forthemselves and to obtain the benefit of the uplift in value. And that is whatthey did KBL relies on the email to BNZ, and an indicative term sheet from BNZ (dated 3 June 2011) that gave expected terms and conditions on which the bank wasprepared to "provide debt facilities to support the purchase of" the property.[37] Further, KBL points to contradictory evidence given by Mr Turner on thispart of the case, giving examples. Mr Turner stated that "there was no prospect that Iwas ever going to be able to bank it with the BNZ or Westpac so I made no contactwith the BNZ or Westpac and did nothing further on it whatsoever that was the entire extent of that". However, Mr Turner's evidence was that Mr Green had thedealings with BNZ, and he denied that the two men sought to acquire the property for themselves:Q. Well I suggest to you that what this shows is that right from the start you and Mr Green saw the opportunity to acquire this property and to take it for yourselves?A. No it's not the case. Right from the start we wanted to generate income for ourselves by assisting Kevin [Clark] with avoiding having the property inevitably mortgagee sold in June.Q. as early as 3 June the bank writes to you in the first paragraph "Providing facilities to support the purchase of the aboveproperty". You see that? That is consistent with the intention thatyou and Mr Green formed at the outset to acquire this property for yourselves?A. The intention we had which is what we carried out was to, um, warehouse the property with a specific right for KBL to buy it back again at a price they agreed to and give them a chance to sort themselves out.[38] In his evidence-in-chief, Mr Green was asked by Mr Chisholm QC why he would have been sending such an email to BNZ when the Orakei conditional loanoffer was still alive. Mr Green responded that "if the placement had failed I felt itappropriate that we had a fallback in place and this was my, this was my emailgetting that fallback in place should the placement not proceed".7 He referred to it as a second line of funding to save the property from mortgagee sale if the privateplacement "didn't get there". The examination then followed continuingcommunications Mr Green had with Mr Hay at BNZ after the warehouse offer had been accepted by Mr Clark so that "we would be in a position to settle". On 15 Junehe chased up Mr Hay, who was proving difficult to pin down, and referred to timing being absolutely critical because his client, Mr Clark, was about to have a multi- million dollar property sold out from under him.[39] We are not persuaded that the Judge's findings were wrong. In particular, itwas reasonably open to him to conclude that the purpose of the approach to BNZ was as Mr Green explained; as a backup in case KBL could not refinance.Delay between ascertaining the Orakei loan would not proceed and telling Mr Clark[40] As Cooper J recognised, the evidence as to when the Orakei proposal fell over was unclear but Mr Clark was not told of it until the meeting on 9 June 2011 at which he was presented with the warehousing proposal.8 Mr Green said in his evidence-in-chief that he had been told about the lack of investor support on 31 May 2011, the same day Messrs Turner, Green and Clark travelled to Wellington to inspect the property. The Judge found it more likely that Mr Green was mistaken7 Mr Green came back to the issue in cross-examination, referring to his email as "a marketing document to a bank to get a young account manager excited" and stating that he needed analternative plan in case the placement fell over, which would necessitate a Green/Turner entitybecause "KBL was unbankable".8 High Court judgment, above n 1, at [49].about the date than that Mr Turner had found out about the lack of investment and deliberately chose to conceal that information from Mr Clark.9[41] KBL challenges this finding, submitting that Messrs Green and Turner delayed telling Mr Clark that the Orakei proposal had failed because they wanted to deny Mr Clark time to regroup and consider other options.[42] In cross-examination, Mr Green confirmed that he learned of the Orakei failure on 31 May, and at the outside he was "sure that by the 1st of June Kingsleyknew that the [key investors] weren't in". He reconfirmed that "I knew on the 31st.I'm sure Kingsley knew, if not the 31st, by the 1st". When pressed as to how he couldbe so sure, he said that it was the day they were in Wellington; he received a phone call confirming there would be no investment while he was in Wellington; that he would have seen Mr Turner after the phone call; and that they would have discussed the issue on the plane home. He later stated that they may have discussed warehousing on that flight, but certainly by 2 June.[43] Mr Green accepted that between 31 May and 9 June, while he and Mr Turner were drafting the warehouse agreement, he was aware that Mr Clark did not know that the Orakei offer was no longer on the table. Mr Clark met with Mr Turner on 2 June for the purpose of providing further information. He was not told of the loss of investor support at this meeting. Mr Green said that the information was withheld for as long as a week. He accepted it was unfair to withhold the information and that Mr Turner ought to have told Mr Clark as soon as the information became available.He didn't know why the information was not passed on.[44] Mr Turner stated in cross-examination that he would have found out about the lack of investor support at some point between 2 and 8 June, but that he was unable to recollect what day it was. He said that he did not immediately pass thatnews on to Mr Clark because he thought the best approach was to "come up with another way for Mr Clark to avoid having the property mortgagee sold, so we were applying our attention to presenting Mr Clark with an alternative rather than just a9 High Court judgment, above n 1, at [50].'we can't assist'". In short, he accepted that there may have been a brief delay intelling Mr Clark, it was immaterial.[45] As noted, Cooper J found that Mr Green was likely mistaken about the date; he had trouble recalling dates and he did not keep a diary. We are not persuaded thatthe Judge was wrong. He observed that even on KBL's theory of the case there would have been no reason for Mr Turner to have met with Mr Clark on 2 June while keeping that information from him. By that, we think the Judge was referring toKBL's independent and contemporaneous attempts to secure refinancing through Mr Hey. There is no reason to suppose that KBL would have behaved any differently if the information had been passed on sooner. Mr Dale pointed out that KBL did not approach BNZ or Westpac, but there is no evidence that those institutions would have refinanced KBL. It remains the case that, on the record before us, KBL had no real prospect of refinancing, and if there was a delay of some days in telling Mr Clark about the Orakei failure, it made no difference.Communication to Mr Clark of the tainting concern[46] Justice Cooper accepted the evidence of Messrs Turner and Green that they told Mr Clark of the tainting concern at the time of entering into the warehousing agreement:[87] Mr Turner maintained that the discussion about the warehouse facility had in fact taken place on 9 June and that there was nothing"offhand" about the comments he then made on that issue. Mr Clark wouldeither have to complete the unit title subdivision before title was transferred to Courtenay, or enter into some other arrangement after ownership had been transferred. He and Mr Green did not want to run the risk of being tainted as developers. I accept his evidence for the reasons already given.[47] Justice Cooper found on the balance of probabilities that the issue of cooperation regarding the subdivision must have been discussed at the 9 Junemeeting and rejected Mr Clark's evidence to the contrary.10 The Judge also rejected on the facts the wider point made by Mr Dale: that Messrs Turner and Green10 High Court judgment, above n 1, at [78].represented to Mr Clark that the terms of the warehousing agreement were effectively the same as the original Orakei offer.11[48] KBL says the Judge's findings are inherently improbable, for withoutunit-titling KBL would not have been able to refinance, thereby making the warehousing agreement pointless. Mr Dale emphasised the warehousing agreement referred to unit-titling in the special conditions, stating that the valuation should confirm a value once unit-titled of no less than $6,125,000 GST inclusive. Hechallenged Cooper J's finding that "in clear contrast" to the Orakei offer, thewarehousing agreement did not include unit-titling as a purpose to the transaction.12He sought to convince this Court that it is unlikely a reader would have noted the omission of the phrase in the purpose clause.[49] The evidence of Messrs Turner and Green was that they told Mr Clark on 9 June 2011 that they would not agree to unit-title the property while they owned it. The Orakei offer included the subdivision of the property into unit-titles as a specified purpose; this was deliberately removed from the 9 June letter and was not included in the warehousing agreement. The reason for that removal was, according to Mr Green, discussed with Mr Clark. Mr Turner also attested that the inclusion of a term that the mortgagees would consent to the unit-titling of the property was "anon-starter" and that at a meeting held on 22 June 2011 he and Mr Green repeated to Mr Clark that they would not agree to subdivision. This evidence about the 22 June meeting was not disputed and Mr Green confirmed this account of the conversation. By that time, Mr Clark had legal advice on the draft agreement.[50] Mr Clark admitted that he and Mr Turner had discussed tainting in an"off hand" way at a meeting on 15 June 2011. He later professed uncertainty as to the date this conversation took place and whether there was more than oneconversation about tainting. Mr Turner denied that this was an "off hand" comment,calling it a clear statement of position and a reiteration of previous discussions of the issue. Under cross-examination, Mr Turner insisted that this was not their first discussion about the issue.11 High Court judgment, above n 1, at [170].12 At [141].[51] Mr Morgan, Balmain's representative, stated in his evidence that duringmeetings "in the weeks before 4 July 2011" at which he was present Mr Turner mentioned that he and Mr Green did not wish to be tainted as developers and would not be taking steps to unit-title. He said this was in the context of Messrs Turner andClark seeking Balmain's consent to a clause that made the vendor's mortgagees'consent to the subdivision a condition of the agreement for sale and purchase.[52] The respondents also point to corroborating correspondence between September and November 2011, which referred to earlier communications with Mr Clark. On 30 September, Courtenay's solicitor wrote to KBL's solicitor stating "I have been advised that you've already discussed that our client has made it clearfrom the beginning it will not register a unit title development, it has concerns about being seen as a developer". This was repeated in an email from Courtenay'ssolicitors on 19 October 2011, to which was attached an email from Mr Turner thatsaid "as Kevin has specifically acknowledged after settlement, Adrian and I have always said that we would not undertake a subdivision whilst we own thisproperty, as we would quite possibly be tainted "[53] On 23 November 2011, Mr Turner sent an email to Mr Clark in which he stressed that since June he had always emphasised that he and Mr Green did not want to assume any risks associated with the unit-titling.[54] As noted, Cooper J accepted the evidence for the respondents. We have observed that his findings are consistent with the documentary record and the evidence of Mr Morgan. We are not persuaded that the Judge was wrong. We repeat that there was no appeal against his finding that the warehousing agreement wassubject to contract, and Messrs Turner and Green's position was certainly made clearbefore the documents were finally signed in October.The genuineness of Courtenay's attempts to sell the property[55] Cooper J did not expressly address KBL's assertion that Courtenay's effortsto sell the property were not genuine. However, he found that Courtenay did try to sell the property in one title, for which they utilised the services of Mr Dallas ofColliers, who had previously marketed the property on behalf of KBL.13 Cooper J found that there was no real interest in the property and it failed to sell, after which Messrs Turner and Green decided they would investigate unit-titling.14 Thesefindings are inconsistent with KBL's argument that no genuine effort was made tosell.[56] Mr Dale argued that the explanation that Messrs Green and Turner tried tosell the property was "completely discredited", and that the attempts were notgenuine, as shown by them ignoring the offer from the unnamed buyer and "the evidence overall".[57] Mr Dallas gave evidence that he met with Messrs Turner and Green on 21 March 2012 to explore strategies for selling the property, which resulted in advertisements in local media. In May 2012 Colliers targeted known property owners with existing holdings in Courtenay Place who might have been interested in increasing their holdings, and signage was erected on the property. There was no real interest, and Messrs Green and Turner instructed Mr Dallas to end his involvement but stated that he should make contact with them if he became aware of an interested purchaser.[58] In cross-examination, Mr Dallas agreed that he was not told anything about what the property would be worth if it was unit-titled, and that such information was something that would be unusual for a serious vendor to withhold. However, he did not accept the proposition that the marketing efforts were half-hearted, pointing to the signage on the front of the building and Colliers' commitment to the sale. Hedenied telling Mr Clark that Messrs Turner and Green were uncommitted vendorsand disagreed with the proposition that "there was no real attempt to sell thisproperty other than to put a few signs up".[59] Mr Green characterised the marketing strategy as being private treaty, based on the fact that Colliers told them there was no point having a full marketing campaign because the property was too tainted and approaching the logical buyers13 High Court judgment, above n 1, at [112].14 At [112]–[113].required no marketing. The property had been well exposed through the mortgagee sales process and in September/October 2011. Mr Turner said that Colliers told them Courtenay Place was a tightly held environment for which there were only a few natural buyers, all of whom were known to Colliers and able to be approached. When Mr Dale put to Mr Turner that he had no real interest in selling the property, Mr Turner responded:It's just absolutely not the case. Like are you, what, if you are suggestingthat I went through some sort of façade here of engaging with Colliers, giving them an agency, putting a sign on the building and arranging for them to show people through and sell the property through this period in 2012, I had no, no — I wasn't creating a smokescreen for anything. I, as far as I wasaware KBL wasn't and couldn't exercise its option to repurchase and we, wehad a building that was ours. There was no prospect of, there was no sign of any litigation looming. I heard nothing from Clark whatsoever. I've gotbetter things to do with my time Mr Dale than go through the charade oflooking like I'm marketing the property with Colliers.It was done because we wanted to see if we could elicit an offer for the property in one title.[60] On the evidence it is unclear why the unsolicited expression of interest was not followed up. It is evident that Courtenay did not respond and the interested party did not pursue its inquiry. Mr Turner pointed out that the email was sent on 20 February 2012, only a few days after it became clear Mr Clark was not going to exercise the option to repurchase; being so early on, they were not really looking to do anything with the property, they were working out how to proceed.[61] We do not agree that the evidence of Courtenay's attempts to sell without subdividing is completely discredited, as counsel argued. There was very little public marketing, but the decision to focus on a small pool of prospective buyers who could be reached more directly was explained. It was open to the Judge to accept it.Fiduciary duty claimWas there a fiduciary duty owed and how long did it last?[62] KBL's case is that when Mr Clark and KBL engaged Messrs Turner andGreen a fiduciary relationship was created, that the obligations that flowed from this relationship were breached almost as soon as the relationship began (and by 26 May 2011 at the latest, when Mr Green sought finance from BNZ), that confidential information was disclosed to Messrs Turner and Green, and that they used that information to their advantage and KBL's detriment.[63] The respondents accept that a broker may owe context-specific fiduciary obligations while acting in that capacity.15 Mr Turner also accepted in evidence that he did act as a broker for KBL. (There is no evidence that either of the otherrespondents ever held such a position in relation to KBL.) We accept Mr Chisholm's submission that Mr Turner's role as a broker was restricted to the very short periodof time in which it was anticipated that he would approach Westpac and BNZ on behalf of KBL. This plan was abandoned as futile almost at once, in favour of an attempt to find investors to contribute to the Orakei loan. We agree with Cooper J that at that point the brokering role was at an end and the rights and obligations of the parties would have been subsumed in the contract arrangements between Orakei as lender and KBL as borrower.16[64] We are prepared to accept that there was a short-lived fiduciary relationship between Mr Turner and KBL while he acted as a broker. We are not, however, persuaded that the factual context shows the respondents owed fiduciary obligations to KBL that extended past the time when the Orakei proposal was mooted. Mr Clarkknew that Orakei was acting at arm's length from the point when he was firstprovided with Orakei's draft offer of finance on 23 May 2011. In that agreement,Messrs Turner and Green were financiers, who do not normally owe duties, and KBLand Orakei were counterparties in a commercial loan that protected the lender's15 This general principle was recognised in the High Court judgment, above n 1, at [160], citingMorlend Finance Corp (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 (SC) at 308; andHurstanger Ltd v Wilson [2007] EWCA Civ 299, [2007] 1 WLR 2351 at [33]–[34].16 High Court judgment, above n 1, at [163]–[165]. The futility of approaching BNZ and Westpac was not contested.interests. By way of example, the terms and conditions included a statement thatsolicitors would draw up documents to protect Orakei's interests in the loan.Was there a breach of that duty when it did exist?[65] KBL alleges a number of breaches, which we will deal with in turn. Most of these acts occurred after the fiduciary relationship had come to an end, but for completeness we have listed the other reasons why we think they were not made out.[66] It is claimed that it was a breach of the respondents' obligations to fail to disclose on 26 May or earlier that they had taken steps to acquire the property for themselves and subdivide it for their own profit. As we have found above, this allegation fails on the facts. As a result, there was no such disclosure to be made.[67] Similarly, the facts stand in the way of the allegation that the delays indisclosure regarding both the Orakei offer and the respondents' intention to refuse toconsent to unit-titling were a breach of the respondents' duties to KBL. We have notbeen prepared to overturn the Judge's findings that there was no delay and thatMr Clark was told of the tainting concern at the time of the warehousing agreement.[68] The refusal by the respondents to consent to unit-titling is also presented as a breach. This too fails on the facts, and the allegation is unsustainable in light of the warehousing agreement.17[69] The allegations that the property was obtained at a substantial undervalue by exploiting the vulnerability of KBL simply cannot be sustained. The warehousing agreement was a commercial agreement under which there was always a possibility that Courtenay would become the ultimate owner of the property. KBL secured what it was contractually entitled to: an option to repurchase for an expressly stated period of time.[70] Nor are we persuaded that confidential information was misused. We asked Mr Dale what information was disclosed, but he pointed to nothing that would not be17 See Clark Boyce v Mouat [1993] 3 NZLR 641 (PC) at 648 for the principle that a fiduciary duty"cannot be prayed in aid to enlarge the scope of contractual duties".required by any financier, including Orakei, and nothing that was not obvious, including the amount of the mortgage debt, the potential for subdivision to increase the value of the property, and the current state of the subdivision arrangements. The argument that this information was misused in the warehousing agreement assumes incorrectly that the object of that agreement was that of securing the property forKBL. The facts are that the warehousing agreement averted the mortgagee's saleand gave KBL time to refinance. That was its objective. It necessarily required that the respondents should know the amount needed to repay Balmain.If there was a breach, was there loss?[71] KBL would also have failed in proving that any such breaches caused them loss.18 In short, the argument KBL makes is that the combined outcome of the breaches is a loss of a chance to seek a better outcome: KBL would have had alternatives if the breaches had not occurred.[72] Putting to one side pleadings issues,19 this submission also ignores that:(a) KBL continued to unsuccessfully attempt to secure alternative finance and was unsuccessful in its negotiations with the mortgagee, including after the warehousing;(b) Mr Morgan reinforced in evidence that the mortgagee sale would inevitably have occurred if the warehousing agreement had not been entered into;(c) the lapsed boundary adjustment consent would have, on its own, made it impossible to refinance prior to the mortgagee sale being completed, which was acknowledged by Mr Hey at trial; and18 A breach that causes no loss is not compensatable: Target Holdings Ltd v Redferns [1996] AC 421 (HL) at 439; Gilbert v Shanahan Partners [1998] 3 NZLR 528 (CA) at 535–536; andPremium Real Estate Ltd v Stevens [2009] NZSC 15, [2009] 2 NZLR 384 at [32].19 KBL accepts that it did not argue for the loss of a chance in the High Court, but submits there is no reason this Court could not make that assessment on appeal.(d) by October 2011 all external impediments to subdivision had been removed so that completion was a formality, so KBL should havebeen able to refinance against the property's subdivided value. It isnot plausible that lenders would refuse to refinance if satisfied that legal impediments had been removed, and there is no evidence to that effect.[73] The appeal against Cooper J's findings regarding fiduciary duties cannotsucceed.Credit contract claimWas the warehousing agreement a credit contract for the purposes of the CCCFA?[74] KBL argues that the warehousing agreement was in substance a mortgage: it was for a defined term and amount, the buy-back was effectively an equity ofredemption, it was not an arm's length commercial transaction, the payment ofinterest was $24,000 a month consistent with a secured loan advance, and there was a payment of fees.[75] The definition of credit contract is:7 Meaning of credit contract(1) In this Act, unless the context otherwise requires, credit contractmeans a contract under which credit is or may be provided.(2) If, because of any contract or contracts (none of which by itself constitutes a credit contract) or any arrangement, there is a transaction that is in substance or effect a credit contract, the contract, contracts, or arrangement must, for the purposes of this Act, be treated as a credit contract made at the time when the contract, or the last of those contracts, or the arrangement, was made, as the case may be.(emphasis added)[76] In this case there was no deferment of debt; KBL transferred the property to Courtenay with a right to repurchase on certain conditions. In addition KBL did not owe Courtenay money after the agreements were entered into, rather it held a right toexercise the option. For these reasons Cooper J was not satisfied that the agreement was a credit contract.[77] However, it is arguable that the warehousing agreement and option deed were in substance a credit contract. The buy-back price was calculated by applying interest and fees over the term of the arrangement, and the subsequent extension was priced as a sum per month. It was, in effect, a holding arrangement to enable KBL to refinance, subject to the payment of interest and costs. We are prepared to assume without deciding that it was a credit contract for the purposes of the CCCFA.Was the contract oppressive?[78] Oppressive is defined in the CCCFA:118 Meaning of oppressiveIn this Act, oppressive means oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice.[79] The test is whether the transaction or some term of it is in contravention of reasonable standards of commercial practice.20 The burden of proving this rests on the person making the allegation, and includes a burden of providing evidence as to what reasonable standards of commercial practice are.21 The role of an independent solicitor will change matters: unless the lender has knowledge of circumstances that render the lending oppressive, a contract on which the borrower had legal advice should not be treated as oppressive.22[80] Mr Dale acknowledged in the High Court that this cause of action depended on the Court finding there was a deliberate strategy to mislead KBL in order to acquire the property. Were that allegation proved, Cooper J would have treated it as a departure from reasonable standards of commercial practice that justified reopening the contract.23 But it was not made out on the facts.20 GE Custodians v Bartle [2010] NZSC 146, [2011] 2 NZLR 31 at [46].21 Greenbank v Haas [2000] 3 NZLR 341 (CA) at [24]–[25].22 GE Custodians v Bartle, above n 20, at [50].23 High Court judgment, above n 1, at [186].[81] In this Court KBL further argued that the respondents acted oppressively by using confidential information and exploiting their knowledge that KBL could not refinance without unit-titling; further, the term of the warehousing agreement was too short and the fee demanded for an extension was excessive.[82] KBL did not call expert evidence as to reasonable standards of commercial practice. The respondents did. Their expert attested that:(a) the margin in the warehousing agreement was reasonable;(b) extensions are unusual in a warehousing agreement, so could be expected to come at a cost; and(c) given KBL's circumstances and the factors taken into account byMessrs Turner and Green in setting the price of the extension, the terms were not unreasonable.[83] We further observe that Mr Clark is a commercially sophisticated andexperienced property developer, that KBL's broker acknowledged the transactionwas high risk and could lead to Courtenay retaining the property, and that KBL had legal advice at all relevant times.[84] Accordingly, KBL has failed to show that the warehousing agreement or some term of it was oppressive. This ground of appeal fails.Decision[85] The appeal is dismissed.[86] The appellant must pay the respondents one set of costs for a standard appeal on a band A basis and usual disbursements. We certify for two counsel.Solicitors:Izard Weston, Wellington for AppellantCarson Fox Legal Ltd, Auckland for Respondents