MACFARLANES ESPRESSO LTD V SHAW FOOD LIMITED HC NWP CIV 2006-443-000237

MACFARLANES ESPRESSO LTD V SHAW FOOD LIMITED HC NWP CIV 2006-443-000237 29 March 2007IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY CIV 2006-443-000237BETWEEN MACFARLANES ESPRESSO LTD Plaintiff AND SHAW FOOD LIMITED Defendant Hearing: 16 and 17 October 2006 (written submissions filed on 26 October, 20 and 23 November 2006) Appearances: S W Hughes for Plaintiff T C Brewer and C E Clarke for Defendant Judgment: 29 March 2007JUDGMENT OF COOPER JThis judgment was delivered by Justice Cooper on 29 March 2007 at 4.00 p.m., pursuant to r 540(4) of the High Court Rules Registrar/Deputy Registrar Date: Solicitors: Till Henderson Kill, PO Box 1, New Plymouth Auld Brewer Mazengarb & McEwen, PO Box 738, New Plymouth Copy to: S W Hughes, PO Box 8213, New Plymouth[1] Macfarlanes Espresso Ltd ("the plaintiff" or "Macfarlanes"), occupies premises at the corner of Morley and Devon Streets in New Plymouth ("the premises"). It uses them for the purposes of a cafeteria. The defendant ("Shaw Food") owns the lease of the premises, and wants Macfarlanes to vacate them.The dispute[2] The dispute has arisen in the following circumstances. A company called Fresha Ltd ("Fresha") previously held the head lease to the premises, having leased them from Novaglam Enterprises Ltd ("Novaglam") in 2000. By an oral agreement apparently made about August 2000, Fresha agreed to sub-let part of the premises to Macfarlanes, and another part of the premises to a butcher trading as TLC Meats. [3] There is a dispute about the terms of the sub-lease, as to whether it was anything more than an implied monthly tenancy. The plaintiff says that the sub-lease commenced on 1 August 2000, that it was for an initial period of two years with rights of renewal for two further periods of two years and that it was on terms that "substantially mirrored" the head lease. The plaintiff says that it was agreed that the agreement, which was oral, would be confirmed in writing. That never occurred, but the plaintiff has continued in occupation of the premises since August 2000. [4] In November 2005 however, Fresha sold its business to Shaw Food. The agreement for sale and purchase of the business contained a provision in the following terms:18.0 The Purchaser acknowledges that various discussions and negotiations have taken place with Tony Varga (TLC Meats) and Macfarlanes Catering in relation to the completion of sub-leases for those businesses in respect of the areas they occupy at the Fresha Centre. Neither sub-lease has ever been concluded and the Purchaser acknowledges that on possession of the Business and assignment of the Head Lease they assume such rights and obligations (if any) as may presently exist in respect of those businesses and the incomplete sub-leases.[5] The plaintiff alleges that, prior to the execution of that agreement, Fresha agreed to vary the sub-lease by providing for a further right of renewal of four yearsfrom 31 July 2006. The plaintiff contends that the right of renewal that had been agreed was subsequently acknowledged by the defendant. [6] The key paragraphs in the brief statement of claim allege as follows:9. MACFARLANES met with Shaw in November 2005 where [sic]: 9.1 The right of renewal for 4 years was acknowledged by Shaw. 9.2 Macfarlanes agreed to review the rental paid thereupon. 10. AS a result of this agreement, Macfarlanes: 10.1 Instructed a valuer to prepare the necessary valuation. 10.2 Tendered to Shaw a cheque for the shortfall of the revised rental from the date of the meeting referred to in clause 9 above. 10.3 Omitted to plan the location of their business from Morley Street. 11. SHAW has wrongly denied such right to renew the lease.[7] A notice to quit was issued on 30 March 2006, requiring the plaintiff to vacate the premises by 30 May. [8] The proceeding was commenced on 24 May 2006. In the statement of claim's prayer for relief the only substantive relief sought is an order for specific performance, requiring the defendant to provide a written deed of sub-lease confirming renewal of the lease for a period of four years from 1 August 2006.Interim relief[9] The plaintiff sought interim relief and for that purpose filed affidavits by Craig Bruce Macfarlane, who is the managing director of Macfarlanes, his father-in- law Russell Arthur Boddington who is also a director of Macfarlanes, and other relevant witnesses. Pursuant to orders made by Harrison J on 26 May, Shaw Food was directed to file any affidavits upon which it intended to rely by 16 June 2006, with affidavits in reply to be filed by Macfarlanes on or before 30 June. It was thenenvisaged that a fixture would be granted at which the matter would be dealt with substantively, with the status quo being preserved in the meantime pursuant to an undertaking by the defendant. [10] For reasons which it is not necessary to recount, a fixture was not in fact able to be allocated for this matter until October 2006. Further, the time that was then set aside was sufficient only to complete the evidence and leave was granted for counsel to file submissions in writing. That process was not completed until 23 November.The defendant's case[11] Shaw Food denies that there was any agreement entered into between Macfarlanes and Fresha. It says further, however, that if there was such an agreement it was an oral one and it was therefore unenforceable unless the doctrine of part performance applies. Then, the defendant submits that no actions amounting at law to part performance have been pleaded, and says that even if they had been, it would not on the facts of the case be unconscionable to allow the defendant to rely on the Contracts Enforcement Act. [12] Further, Shaw Food contends that even if there was an agreement between Macfarlanes and Fresha in October 2005, as the plaintiff alleges, clause 18 of the agreement for sale and purchase of the Fresha business could not operate to bind Shaw Food, because although it initially took an assignment of the Fresha lease, that was only until its expiry on 6 June 2006. Consequently, any right of renewal for a further term of four years which existed under that lease was not exercised. [13] In fact, Shaw Food entered into a new lease from Novaglam which commenced on 6 June 2006, contained one right of renewal of five years and had a final expiry date of 5 June 2016. As a consequence, the defendant contends that even if there had been an agreement concluded in October 2005 between Macfarlanes and Fresha, as is alleged by the former, that would not bind Shaw Food in any way, because in terms of clause 18 of the agreement for sale and purchase between Fresha and the defendant, any obligations assumed were only in respect ofthe "incomplete sub-leases", that is the sub-leases to Fresha and TLC Meats, that commenced on 1 August 2000.The principal issues[14] The two main issues in contention are first, whether there was in fact an agreement between Macfarlanes and Fresha in October 2005 to vary the sub-lease by providing for a further right of renewal of four years from 31 July 2006 and second, whether Shaw Food acknowledged Macfarlane's right pursuant to that agreement at a meeting in November 2005. I will deal first with the alleged agreement, which the plaintiff says was made on 10 October 2005.An agreement on 10 October 2005?[15] On that day, there was a discussion between Mr Boddington and Mrs Kuthy, who was the principal of Fresha Ltd. Mr Boddington's record of that discussion was contained in a note that he wrote to Mr Macfarlane on the same day, after the discussion had occurred. That note read as follows:10/10/05 Craig, Verna phoned to say she is expecting to sell Fresha shortly, possibly November. The buyers are a couple from Sydney. She has explain[sic] to them our position (and the Butchers) and should they proceed with the purchase it will be on the basis that our sub-lease runs parallel to her head lease, with the same right-of-renewal of 4 years, from mid 2006. The purchasers are to come here in early November and will wish to meet with us then to confirm with us this arrangement. They will no doubt be looking for a rent increase. I suggest we get a market rent assessment in advance of this meeting. R[16] Both Mr Boddington and Mrs Kuthy had sworn affidavits for the purposes of the interim relief application, on which they were cross-examined in the substantive hearing. Mr Boddington supplemented his affidavits by stating that the conversation that he had had with Mrs Kuthy had been of about five minutes in duration, that herattitude toward the plaintiff in the discussion had been amicable and that he had been left as a result of the discussion in no doubt whatsoever that she had accepted that Macfarlanes' sub-lease would run until June 2010. Mrs Kuthy, however, maintained that neither on 10 October 2005 nor at any other time had she had a discussion with either Mr Boddington or Mr Macfarlane regarding the continuation of the lease beyond the six year term due to expire on 6 June 2006. [17] She agreed that she had telephoned Mr Boddington on 10 October 2005. On her account, she informed him then that she was expecting to sell her business in November that year. By then, she had in fact signed the agreement for sale and purchase, which she did on 23 September. According to her evidence she had been trying to sell the business for some years. In late 2000 and early 2001 her late husband, Loui Kuthy, had become seriously ill with multi-infarct dementia and it had become necessary for Mrs Kuthy to look after him full-time. It was for this reason that, despite prompting by Mr Macfarlane and Mr Boddington she had never finalised a written form of sub-lease to Macfarlanes. Her evidence was that she had simply not had the time or energy to respond to those requests. [18] In June 2005 she had a meeting with all of the directors of Novaglam. She advised them that she was intent on selling the business and that Fresha would not be taking up the renewal of the head lease. By then she had met with Mr Stephen Shaw and Ms Sherrie O'Neill, his partner. They had expressed interest in purchasing the business and she had advised the directors of Novaglam of their potential interest. On 5 September 2005 there was a further meeting between her, the directors of Novaglam, Mr Shaw and Ms O'Neill. Mr Shaw and Ms O'Neill had presented a business plan at that meeting and discussed their experience in the food industry and plans for the premises. [19] It was Mrs Kuthy's evidence that clause 18 of the agreement for sale and purchase of the business, which I have earlier set out, was included because the sub- lease to the plaintiff had never been formalised. The date on which Mr Shaw and Ms O'Neill were to purchase the business and commence occupation of the premises was 7 November 2005. There was therefore a period of about seven months during which the lease from Novaglam to Fresha would continue, until it expired in June thefollowing year. During that seven month period, Macfarlanes' right to occupy would be dependent upon whatever rights they had pursuant to the arrangements agreed with Mrs Kuthy back in August 2000. It was her evidence that, in the telephone discussion with Mr Boddington on 10 October, she had simply assured him that the plaintiff would be able to remain in the sub-let premises until expiry of the Fresha lease. [20] When Mrs Kuthy was cross-examined by Ms Hughes, the following exchange took place:I'm going to show you a doc Q attached to Mr Macfarlane's affidavit of evidence. It is a file note that Mr Borrington took on 10 October 2005. I want you to read it to yourself. Do you now recollect phoning Mr Boddington on 10 October 2005? Yes I do. Do you recollect telling him you were going to sell Fresha shortly? That I was hoping, expecting to yes. That you expected to do that in November? That's right. Do you recollect telling him the buyers were a couple from Sydney? Yes. You recollect telling him that you had explained to them Macfarlanes' position and should they proceed with the purchase it will be on the basis Macfarlanes' sub-lease runs parallel with previous head lease with same right of renewal from July 2006? Definitely not, I did not state that.[21] She said that when Mr Boddington had asked her about the lease, she had said that she had asked the purchasers to honour the "handshake agreement", by which she meant the verbal agreement that she had had with Macfarlanes to allow them to occupy the premises for a total period of six years. There was a further exchange as follows:During this conversation Mr Boddington raised with you the renewal of the lease do you agree with that? Which conversation. 10 October 2005? No I do not agree. Do you say that you said to him I have asked the purchasers to honour our gentleman's agreement through to June 2006? That is correct. So you say you told him that as far as you were concerned the agreement was only to June 2006? That was our agreement. Is that what you told him when you talked to him on 10 October? Yes.So isn't it the case that Mr Boddington said that a rent review would be necessary for the renewal? For the renewal of what? Of the lease? No I said that to expect because I had not asked for the rent to be upgraded over the past years to expect them to negotiate for an increased rental, the new owners. Isn't it the case Mr Boddington said he would engage Hutchins & Dick to do the valuations? Not in our conversation never. So it must have come as a great surprise to you that Macfarlanes assert that they have had this agreement with you that [if] your lease were to continue then their lease would continue? Very much so. We never came to that arrangement. So you say that Mr Boddington's note is false? Regarding the renewal and going in conjunction with my head lease yes. Every other aspect of this note is correct? As far as our conversation yes. So you say that middle bit should have recorded Verna told me that we had a deal until June 2006 only? It should have recorded exactly that, our original 2 x 2 x 2 lease.[22] Mrs Kuthy's evidence needs to be seen in the context that she had received a letter from Mr Boddington dated 30 September 2005. That letter read as follows:Dear Verna Macfarlanes Espresso Bar, Fresha Centre I see from previous correspondence that Macfarlanes Espresso Limited's sub-lease of the above premises commenced 1 st August 2000 and runs for six years until 31 st July 2006. There is a lot of correspondence on the file and I know there have been numerous discussions over the period of the tenancy. Some while ago you sent us a copy of the head lease so that we understand, that for all practical purposes, our sub-lease for the premises runs parallel with the head lease, which also has a term of six years. The particular reason of writing at this time is to advise you that if the head lease is renewed, as provided in the Third Schedule, subject to clause 35; Macfarlanes Espresso Limited also wish to exercise their right to renew for the further available term of four years. If, for any reason, the head lease is not renewed then Macfarlanes Espresso Limited will seek to lease the premises direct from the Lessor. I have been trying to contact you to clarify this point but since I have been unsuccessful am writing with a copy to Mr Gary Brown for the Lessor. Please confirm your position for us as soon as you can.Yours sincerely Russell Boddington[23] I observe parenthetically that Mr Boddington's reference to the date of 31 July 2006 is apparently based on the commencement date of 1 August 2000 that appeared in sub-lease documentation that the parties exchanged before and after Macfarlanes moved into the premises. As I have noted, no formal sub-lease was ever signed. Had it been, it is likely that the expiry date would have been 5 June 2006, that being the date on which the head lease was to expire (unless the further four year right of renewal was taken up by Fresha). [24] Ms Hughes, for the plaintiff submitted that the letter of 30 September 2005, read together with Mr Boddington's note of his telephone conversation with Mrs Kuthy on 10 October 2005, pointed to the likelihood that Mr Boddington's account of the events was correct. Ms Hughes stressed that there had been no challenge to the fact that Mr Boddington made the note following the telephone conversation on 10 October. She also relied on what had been provided in clause 18 of the agreement for sale and purchase suggesting that if it had simply been intended for that clause to provide that the sub-leases were intended to conclude in June 2006, the clause could have been expressed more directly so as to achieve that result. She contended that the clause was at best ambiguous, and at worst a possibly deliberate effort to obfuscate the true intention of the defendant and Fresha. She argued that in fact the clause referred to a future obligation which was in keeping with the existence of an agreement as asserted by the plaintiff. [25] Ms Hughes relied for her "obfuscation" argument on a further series of questions and answers that had occurred during the Court's questioning of Mr Shaw:Was there a concern there might also be some on-going issue beyond that time? From after 30 September that was highlighted to us by Verna who told us that Mr Boddington had sent a letter to Novaglam Investments seeking a direct lease on the business. So in the week or so following that letter she advised that was the case and we may have some issues there, which is why when we met Macfarlanes in November we did not want to discuss a renewal of lease and when we were asked about that at that meeting we responded we are unable to discuss those issues as we are simply assignees of the lease until June 2006.Am I right in thinking then that when the agreement was signed and clause 18 referred to such rights and obligations as may presently exist, indirect language was deliberately used rather than simply referring to the obligation that seems to be accepted on all sides down to June 2006, vaguer language was used possibly referring to potential additional obligations? My understanding of clause 18 is that we recognised that there were sub-leases in the business but Verna's verbal agreement with Macfarlanes which gives them tenures up to her six years and then after that we were to have a new lease and we could continue our business as we saw fit. Was there any period during which you contemplated giving Macfarlanes the right to stay beyond June 2006? Absolutely not. So in your mind that was never a possibility? Never a possibility. So why didn't you say that to them when you met? We were one week in the country and had just taken over a business and we thought it prudent that we would meet with them to introduce ourselves and to seek a rental increase at that time until June 2006. Was there a sense if you were frank about your intentions it was less likely that agreement would be reached on the rental increase down to June 2006? It is hard to say because that's the only meeting that we had with Macfarlanes. There were on-going discussions were there not? No. Didn't at one stage your solicitors ask that the pestering cease?Discussions as in correspondence yes but no discussions.[26] Ms Hughes also relied on the business plan that had been prepared by Mr Shaw and Ms O'Neill and was presented to the meeting of the Novaglam directors at the meeting that took place on 5 September 2005. That document had made no allowance for any costs associated with the set up of a café in the premises presently occupied by the plaintiff. On the other hand, it had provided for a review of the rent to be paid for the Macfarlanes' space while not recording any increase in operating costs for the Fresha business, nor any increase in gross sales for that business. Ms Hughes maintained that this showed that, at the time the plan was prepared and presented, there cannot have been an intention to terminate the plaintiff's occupancy of the premises. Ms Hughes, of course, was obliged to take the matter further and maintained that the business plan lent support to the plaintiff's contention that there had in fact been an agreement between the parties to renew the lease. [27] Ms Hughes also relied on the course of dealings between the plaintiff's representatives and Mrs Kuthy from the time when Macfarlanes commencedoccupancy of the premises. Thus, on 13 August 2001 Mr Macfarlane had written to Mrs Kuthy seeking to address the issue of the lease because:We are currently expediting our business plan for further expansion and would like to finalise details within the Fresha complex[28] She referred in addition to a handwritten note of Mr Macfarlane's on a file copy of that letter, reading:Verna phoned on the 16 th/08 in response to this letter advising she has just sold wholesale (Fresha) been very busy give her a couple more weeks.[29] Then there was an undated note, which appears to have been written some time in 2002 by Mrs Kuthy to Mr Macfarlane. The note read:Craig, Can you please ring me at home some time when you have a moment. We need to get together some time soon as my life is becoming more complicated and confused. I wish to tell you personally of some of the possible developments. Many thanks. Verna Phone 751-3698[30] That was followed by a meeting which Mr Macfarlane said took place on 29 August 2001, but which I think, must have occurred on 29 August 2002 since 29 August in 2001 was not a Thursday. Mr Macfarlane took a file note which was also undated, after that meeting. His file note reads:On Thursday the 29 th August, I met with Verna concerning current Lease agreement and rent review. She advised of her impending personal circumstances which have adversely affected her ability to promote the centre and provide closure on our rental agreement. She is inviting her family members to attend a meeting to discuss her current dilemma in the hope that they may want to buy into the business. Until such time as she is able to make a decision on the future of Fresha she has foregone[sic] rent increases in lieu of the fact that we have incurred delays regarding the lease. She has said that in the event of selling we will be notified and I told her that it was not an option for us to relocate and I expressed my satisfaction with the location and what it provides for as collective income to the group. She acknowledged this and also her commitment to Tony the butcher.After a meeting for one hour Verna left on the basis that the rent would remain the same and that we had a gentlemen's agreement in relation to the lease until she has worked through her personal circumstances.[31] In his affidavit, Mr Macfarlane deposed that he raised in discussions with Mrs Kuthy "at various times" the prospect of the plaintiff's lease continuing beyond the end of the six year term. He asserted that she had agreed that the plaintiff's right to occupy would be directly parallel with her rights and that if she renewed the lease, then the sub-lease would similarly be renewed. Further, it had been made clear and accepted by Mrs Kuthy that in the event that she chose not to renew the lease, then Macfarlanes would be given an opportunity to negotiate directly with the landlord. It was on that basis that Mr Boddington had written to an acquaintance, who was a director of Novaglam, on 1 June 2005 in the following terms:Mr Gary C.M.Brown Townsend Road R.D.3 New Plymouth Dear Gary Macfarlanes Espresso Limited Lease: Fresha Complex How's things? We should get together for lunch sometime and catch up. I understand it is probable that Verna may choose not to extend her lease when it is up for renewal part way through next year. We have one or two things going on that may have a bearing on Macfarlanes being interested in expanded premises, but for the time being we are seeking confirmation that the lease for the espresso bar area can be extended so that the existing operation may continue. Whatever the outcome for the Fresha area, I would imagine the espresso bar will be welcome, as it is a major drawcard for the public and has strong local community support. We would be interested in a two year term with two rights of renewal each of two years, or a six year term with two yearly rent reviews. Would you please confirm that one of these options will be available. The other lease terms and conditions we can discuss with you nearer the time; for the present we are wishing to secure your assurance with regard to a continuation of occupancy. Please drop me a note in reply and suggest a time to "do lunch". Any Wednesday would probably best suit me. RegardsRussell Boddington Copy: Craig Macfarlane[32] In the circumstances, Ms Hughes felt able to submit that the conversation that Mr Boddington had with Mrs Kuthy on 10 October 2005 was "confirmatory of previous discussions or understandings between the parties". Ms Hughes also saw significance in the date on which the agreement for sale and purchase of the Fresha business had been executed by the parties. I have already recorded that it had been signed by Mrs Kuthy on 23 September 2005. It appears from the evidence, in which a copy of the document was produced with various facsimile markings on it, that it had been finally executed by Mr Shaw and Ms O'Neill on behalf of Shaw Food on or about 28 October. Ms Hughes underlined the fact that by then, both Mrs Kuthy and Mr Shaw had been aware of the "assertions being made by Macfarlanes". [33] Dealing with each of the matters highlighted by Ms Hughes I note, first, that I do not see anything in the terms of the letter dated 30 September 2005 from Mr Boddington to Mrs Kuthy which advances the plaintiff's principal allegation that an agreement was concluded on 10 October 2005. While it makes plain that the plaintiff wished to stay on in the premises whether as a sub-lessee or as a lessee direct from Novaglam, the letter does not suggest that there was any understanding at that time that the sub-lease would be varied by providing a further right of renewal for four years from 31 July 2006. Indeed, the letter is inconsistent with that because it specifically contemplates that if the lease were not renewed, any right of the plaintiff to continue to occupy the premises would have to be derived from the head lessor. Mr Boddington understood the position, as is shown by the terms of his letter to Mr Brown of 1 June 2005. Plainly, if Fresha did not exercise the right of renewal, Macfarlanes would need to reach agreement with Novaglam, and Mrs Kuthy could not secure such an agreement. [34] Insofar as the discussion on 10 October itself was concerned, I note that in cross-examination Mr Boddington conceded that the words that he wrote in his record of the discussion were not the precise words that Mrs Kuthy had herself used, although he maintained it was an accurate account of what had been discussed, and recorded the position that she had led him to understand. For reasons that I willmention shortly, I am not persuaded on the balance of probabilities that Mrs Kuthy did indicate that, on the sale of the business, the sub-lease would run parallel to the head lease with a right of renewal for four years. I observe first, however, that even if she had told Mr Boddington what he recorded in his file note, the agreement would not have applied to a circumstance in which there never was a renewal and a new head lease was entered for a different term, which is in fact what transpired. [35] Leaving that issue on one side, however, I am left in doubt that Mrs Kuthy did make the comments that Mr Boddington recorded, because I consider, having regard to the history of the dealings between the parties and Mrs Kuthy's state of mind at the time, it is inherently unlikely that she would have agreed to vary the lease in the manner asserted. Plainly, she did not want to bind herself to taking a renewal of the head lease and for various reasons she wanted to be quit of the premises. I found convincing her evidence that she never intended to renew the lease and that she had told the landlord that she did not wish to do so in June 2005. As far back as 2002, with the onset of her husband's illness, Mrs Kuthy had found running the business burdensome. She had evidently pursued with other members of her family the possibility that they might take it over. [36] Mr Shaw and Ms O'Neill visited the premises whilst on holiday from Australia in early 2005. After a brief discussion, Mrs Kuthy asked Mr Shaw if he would like to buy the business. Discussions and negotiations developed from there and it is inherently unlikely in the circumstances that Mrs Kuthy would have done anything which might have had the effect of binding Shaw Food to the renewal of the sub-lease at a time when she had already executed the agreement for sale and purchase of the business. She knew that Macfarlanes were unlikely to want to leave, and would probably stay until the end of the term of the Fresha lease. Beyond that, there would not be any advantage for her, when she had already signed the agreement for sale and purchase of her business in September, agreeing in October to extend the term of the lease. [37] Then there is the fact that, apart from the bare record in Mr Boddington's file note, there is no suggestion that any terms had been discussed by Mrs Kuthy. If there was to be a renewal, on what terms as to rental was that to take place? Therehad already been a long period during which the plaintiff had been occupying the premises for less than market rental. That was, apparently, because Mrs Kuthy had not been able to focus on matters to the extent necessary to finalise the terms of a formal sub-lease and, according to Mr Macfarlane, she had in fact agreed to forego rent increases when they met in August 2002. [38] Next, I consider that the wording of clause 18 of the agreement for sale and purchase is consistent with Mrs Kuthy's evidence. The first point to note is that there is nothing in the agreement which suggests that, at the time it was executed, there was any agreement or understanding along the lines for which the plaintiff contends. Plainly, the agreement having been executed in September, it could not reflect what, if anything, had been agreed on 10 October 2005. Nevertheless, the language used in the second sentence within the clause suggests that it is confined to issues that might or might not arise from the fact that no formal sub-lease had been concluded either with the plaintiff, or with TLC Meats. I think the words must have been written with a view to the fact that there was a degree of uncertainty surrounding the terms on which both sub-tenants occupied their respective premises. There is no suggestion that there was any understanding in relation to their on-going occupancy of the premises in the event that, as has occurred, the head lease was not renewed. [39] I have not found the terms of Shaw Food's business plan of much significance. It was prepared at an early stage, and was broad in its outline. I doubt that as at September 2005 either Ms O'Neill or Mr Shaw had formulated their intentions in the detail that would be necessary to support the kind of contentions made by Ms Hughes on the basis of the plan's wording. Possibly, also, they did not want at that stage to reveal precise plans, if they had them, for the use of the Macfarlanes space. That, of course, was their right. I return to that possibility later in this judgment. [40] I also do not consider that any of the correspondence or discussions upon which Macfarlanes relied between 2002 and 10 October 2005 establish that there was on the later date an agreement as now alleged. In my view, the course of dealing shows that for most of that time there was uncertainty as to what Freshawould do. Macfarlanes, for their part, were aware that they might have to deal direct with Novaglam if Fresha's lease was not renewed. There was no agreement, however, that prevented Novaglam dealing direct with Shaw Food, (Novaglam is not, of course, a party to this proceeding) and no agreement by Shaw Food that it would not do so. [41] For all these reasons, I have concluded that there was no agreement between the plaintiff and Fresha in October 2005 to vary the sub-lease by providing for a further right of renewal of four years from 31 July 2006. I use the expression "sub- lease" because that is the language of the plaintiff's claim. However, in the absence of any formal documentation of, or agreement on terms, the true position was that the plaintiff was a monthly tenant of Fresha in accordance with s 105 of the Property Law Act 1952.Did Shaw Food acknowledge Macfarlanes' "Right"?[42] Given the terms of the conclusion that I have just expressed, the second issue that I identified at the outset does not strictly arise. The statement of claim was not drafted so as to assert that there was any separate agreement that arose between the plaintiff and the defendant in November 2005. Consistent with the pleading, Ms Hughes did not contend that any such new agreement had been reached. Rather, as has been seen, what the plaintiff asserts is that the right of renewal for four years was "acknowledged" by Shaw Food. [43] If, as I have held to be the position, there was no 10 October 2005 agreement, it is, therefore, strictly unnecessary to consider what took place at the meeting in November 2005. However, in case the findings that I have made about the absence of agreement on 10 October 2005 are incorrect, I go on to consider the subsequent events, albeit it more briefly. [44] In his affidavit of 24 May 2006, Mr Macfarlane referred to a meeting that had occurred in early November 2005. He maintained that at that meeting it had been agreed that the "sub-lease agreed between Fresha/Macfarlane was acknowledged". Further, he said that in recognition of the renewal and the low rate of rental beingpaid by Macfarlanes, it had been agreed that a review of the rent to the end of the term and for the period of the renewal was appropriate. He deposed that, as a result of the discussion which had to his mind confirmed the various discussions that he had previously had with Mrs Kuthy, he instructed Hutchins and Dick, registered valuers, to prepare a valuation. He attached a letter of instructions that he had sent to the valuers on 24 November 2005. [45] That letter was in the following terms:24th November 2005 Frank Hutchins Hutchins & Dick P.O. Box 321 New Plymouth Dear Frank Re: Morley Street, Lease Further to our recent discussions we propose the following interim rental (full occupation cost); effective from the 20 th December 2005 until the expiry of the current lease term.• Rates (share of) and Insurance $2400.00• Power $nil (separately metered)• Parking $2000.00• Return on fitout owned by Landlord $2625.00 $17,500.00 @ 15%)• Outdoor seating – encroachment $1500.00• 60 square meters @ $160.00 $9600.00$18125.00 inclusive GSTThis offer is made in consideration of Macfarlanes sublease being extended to run parallel with the Head Lessee and renewals thereof. We would also be willing to consider the purchase at book value the Lessees fit out originally paid for by the Lessor. If this was of interest to the Head Lessee we would be interested to see a copy of the deprecation[sic] schedule. Yours sincerely Craig Macfarlane For Macfarlanes Espresso Limited Director.[46] It is to be observed that the instruction concerned a valuation that was to run between 20 December 2005, until the expiry of the current lease term. There was no instruction to provide a valuation which might apply after the end of the current lease term, for the term of any renewal. It should also be noted that the offer was made "in consideration of Macfarlanes' sub-lease being extended to run parallel with the Head Lessee [sic] and renewals thereof". Although the wording is not absolutely clear, I think that the likely meaning is that Mr Macfarlane was offering an increased rent down to the expiry of the current term, in return for a renewal of the sub-lease, and that both matters were then up for negotiation between the parties at that stage. In other words, there had not been any prior agreement or acknowledgement by Shaw Food that Macfarlanes could remain in occupation. [47] Mr Hutchins then appeared to be in a position whereby he was effectively acting as a broker for both parties, with their agreement, endeavouring, as he put it to "draw them together". A letter that he wrote to Mr Shaw and Ms O'Neill on 16 December 2005 purported to contain a "condition" in respect of the agreement by Macfarlanes to pay an increased rental down to the end of the current term. The condition was that there should be a lease commencing at the expiry of the current term, which would be on terms and conditions "to be agreed between the parties". Mr Macfarlane maintains that he was annoyed by the terms of that letter, because he considered that all Macfarlanes needed at this stage was "confirmation of the renewal of an existing right to occupy". Be that as it may, it is not without significance that Mr Hutchins wrote in the terms he did, having spoken to both parties. He made no suggestion that there had already been an agreement. [48] More important, however, are the terms of a letter that Mr Macfarlane himself wrote on 17 January 2006 to Ms O'Neill and Mr Shaw. In that letter, Mr Macfarlane included the following paragraphs:During the set up of Fresha the then Head Lessee approached and encouraged our company to establish the café operation as it presently exists. Certain financial and other incentives and considerations were agreed. The understanding in respect of a lease was clearly that our lease ran parallel with the Head Lease and we have continued to pay the agreed rental and opex on this basis. All of this is well documented in correspondence and you would have been made aware of this at the time you purchased the premises, in fact, our meeting with you in November 2005, when you raisedthe matter of an increase in rental indicated that you are, so we are merely restating the facts as you understand them. . At that meeting and subsequently through Frank Hutchins we have indicated a willing agreement to increase the rental and opex payments from $10,771.44 incl GST p.a. to $22,612.50 incl GST p.a. commencing 4 thNovember 2005. The assurance we are seeking and must have from you in return is confirmation of your understanding and acceptance of our sub-lease arrangements with the previous Head Lessee; including any right of renewal from the expiry of the current term.[49] I consider that the significant point to be made about the language of that letter is that it seeks confirmation of an understanding and acceptance by Ms O'Neill and Mr Shaw of the sub-lease arrangements with the previous head lessee. It does not assert that there had already been acceptance that the "sub-lease" would continue beyond the current term. [50] On 5 February 2006, Ms O'Neill wrote to Mr Macfarlane recording that so far as she was aware no formal sub-lease had ever been finalised. Against the possibility that the information in her possession was incomplete, however, she sought that a copy of a signed sub-lease be forwarded to her. She then recorded that, in the absence of any formal sub-lease, her view was that the lease of the café was on a monthly basis which could be terminated by either party on one month's notice. [51] This brought a response from Mr Macfarlane on 9 February 2006. Amongst other things, he wrote:As explained in our letter to you of 17th January 2006 we have been a sub- tenant at Fresha since it opened in 2000. Arrangements made with the lead- lessee are well documented and have always implied her intention to formalise our position with a sub-lease consistent with the head-lease. As recently as 10 th October 2005 it was confirmed to us that you were buying the business of Fresha with full knowledge of these arrangements. You confirmed this when we met in November 2005 to discuss your plans, our tenancy and an appropriate rental increase. From our point of view formalising these things has only been delayed by the involvement of Mr Frank Hutchins, but now that the figure for rental and OPEX is agreed we are ready to proceed. We have clearly stated previously that the site is an integral part of our business and our belief that, as a Macfarlanes Espresso Bar, an integral partof the Fresha complex. It has certainly been this since 2000. We have previously agreed to an increase in rental from 4 th November 2005 on the basis of a formal sub-lease being put in place. This is simply asking you to formalise something left unattended by the previous head-lessee due to personal circumstances that affected her throughout her tenure. We accept that the new figure to apply on this basis for rental, OPEX and GST is $22,612.50 per annum effective from 4th November 2005, subject to review at market rates on the renewal of lease, timed for mid 2006.[52] He tendered with his letter a cheque in the sum of $3,947, to cover the increase in rental and out-goings for four months, commencing 4 November. He indicated that the automatic payment would be adjusted, effective from 4 March. His letter also stipulated that the payment was to be received on the understanding that formal sub-lease arrangements would be finalised, on the basis that the sub-lease was to run parallel with the head lease, including the right of renewal. However, the cheque was returned on the basis that the defendant did not accept the terms on which it had been tendered. Thereafter, there was correspondence between the solicitors and the present proceeding eventuated. [53] I do not consider that the correspondence to which I have referred is consistent with the allegation that the plaintiff now makes which is essentially that the defendant acknowledged that there was an existing right to extend the sub-lease beyond the expiry of the head lease. If there had been such an acknowledgement, one might have expected there to be some written expression of it by Shaw Food, but there is none. Further, Mr Macfarlane's letters, while making the point about Macfarlanes' rights being co-extensive with the head lease, do not actually assert that Shaw Food had agreed to extend the term beyond expiry of the head lease. In effect all that is sought is confirmation that the sub-lease arrangements with Fresha are to be honoured. Shaw Food could perfectly well agree to that while still intending that there be no renewal of the assigned head-lease after 6 June 2006. [54] Mr Shaw denied that there had been an acknowledgement such as Macfarlanes assert. It was his evidence that he had never intended to enable Macfarlanes to stay in the premises beyond the expiry of the term of the existing head lease. He maintained that he had told Mr Hutchins that, although Mr Hutchins expressed a different view when he gave evidence. Mr Shaw conceded, however, that he had not told Macfarlanes' representatives direct that their right to remain inthe premises would not be extended, prior to causing the defendant's solicitors to serve notice to quit. He maintained that, in discussions with Macfarlanes, he had adopted the stance that as the defendant was simply an assignee of the head lease until 6 June 2006, he had not been in a position to discuss a further term. [55] It is not clear to me why that should have been so and I have to say that I found Mr Shaw's evidence, on some of these matters, less than straightforward. I have already quoted at [25] an exchange that occurred during questioning by the Court. [56] It is clear from that evidence that Mr Shaw and Ms O'Neill did not tell Mr Macfarlane or Mr Boddington that there would be no extension of their right of occupancy beyond 6 June 2006. That may have been because they did not wish Macfarlanes to leave before then but, more likely, because of apprehension that, if the position were made plain to Macfarlanes' representatives, that would jeopardise any prospect of obtaining increased rent down to the expiry of the existing head lease. In the absence of some motivation along those lines, it is difficult to understand why Mr Shaw did not directly state that the rights of occupancy would not be extended given that, as I also accept, Mr Macfarlane and Mr Boddington had made the plaintiff's desire to stay on in the premises plain. [57] Nevertheless, unedifying as Mr Shaw's answers were about the surrounding circumstances, I find on the balance of probabilities, for the reasons I have mentioned, that there was no acknowledgement given by Shaw Food of any agreement that may previously have been entered into by Mrs Kuthy for an extension of the term.Conclusion[58] For the reasons I have given I have concluded that there was not an agreement on 10 October 2005 for extension of the term of the sub-lease for a further four years beyond expiry of the then existing head lease. I have also concluded that, even if my first conclusion were wrong, there was no subsequent acknowledgement of such an agreement by representatives of the defendant.[59] Since the defendant did not renew its lease but rather entered into a new lease as from 6 June 2006, the plaintiff could not in any event assert a right to continued occupancy of the premises based on any agreement it had with Fresha. The lease under which Fresha occupied the premises has expired. There could be no basis in the circumstances upon which the plaintiff could maintain a right to continued occupation of the premises and no basis upon which it could succeed on its claim for specific performance. [60] Given those conclusions, it is unnecessary for me to deal with any of the other issues on which the parties were apart, including those related to the Contracts Enforcement Act and the doctrine of part performance. [61] For the reasons I have given, the defendant is released from the undertaking that it gave on 26 May 2006. There is to be judgment for the defendant with costs calculated on the basis of Category 2 and Band B.