MAUI FARMS LIMITED v IMPRESS COMPANY LIMITED [2018] NZHC 1053

MAUI FARMS LIMITED v IMPRESS COMPANY LIMITED [2018] NZHC 1053 [15 May 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2018-404-338[2018] NZHC 1053UNDER The Declaratory Judgments Act 1908AND the Property Law Act 2007BETWEEN MAUI FARMS LIMITEDPlaintiffAND IMPRESS COMPANY LIMITEDDefendantHearing: 19 March 2018Counsel: G Kohler QC for PlaintiffM E Casey QC for DefendantJudgment: 15 May 2018JUDGMENT OF DUFFY JThis judgment was delivered by me on 15 May 2018 at 11 am pursuant toRule 11.5 of the High Court Rules.Registrar/ Deputy RegistrarSolicitors/Counsel:Lawler & Co, AucklandG J Kohler QC, Barrister, AucklandHornabrook Macdonald Lawyers, AucklandM Casey QC, Barrister, Auckland[1] The plaintiff seeks an interim injunction to maintain its present position untilthe determination of its substantive claims against the defendant. The defendantopposes the injunction. However, it has responsibly consented to the interiminjunction presently in force being extended on the same terms until delivery of thisdecision, which follows the first opportunity the parties have had to make theiropposing arguments to the Court.[2] The plaintiff's substantive claims arise from an arrangement that it made withthe defendant after the defendant acquired a farming property, which used to be grazedand maintained by the plaintiff for the previous owner when the land in questionformed part of a larger block of land known as Kiripaka Station.Background[3] The subject property comprises 200 hectares in pasture, 89 hectares ofprotected native bush and 21 hectares in pine.[4] Steven Kitchener is a director of the plaintiff. His father used to graze stockon Kiripaka Station. Through his father's association with this land Steven came toknow the former owners. This led to him entering into an agreement where hemanaged the land including the owner's stock and in return he was able to stock hisown cattle on the land. Over time he built up a herd of his own. When the defendantacquired the property Mr Kitchener came to an arrangement with the defendant underwhich he continued to graze and maintain the property. To better achieve this end, heincorporated the plaintiff in February 2015.[5] The arrangement operated from early 2015 until 23 February 2018, after thedefendant purported to terminate the arrangement by the giving of 20 working days'notice.1 The defendant also took steps to exclude the plaintiff from the property andto remove the cattle. All of which has prompted the plaintiff to commence thisproceeding and to seek injunctive relief.1 The written notice was given on or about 22 January 2018 although I note that a representative ofthe defendant appears to have telephoned Mr Kitchener on 21 December 2017 informing him ofthe defendant's wish that he no longer work on the property in the coming year.Pleadings[6] The plaintiff brings four causes of action: (a) breach of a short-term lease ofone year's duration; (b) breach of a contractual licence which was terminable onreasonable notice of at least twelve months' notice; (c) breach of an agreement to lease;and (d) equitable estoppel.[7] Common to all causes of action is the plaintiff's alleged performance of certainagreed obligations in reliance on exchanges of correspondence as well as oralcommunications from the defendant. These have led to the plaintiff expending moneyand otherwise acting to its detriment on the understanding the grazing arrangementwould continue for some years and be terminable on the giving of reasonable notice,which the plaintiff contends to be one year or more.[8] The defendant has filed no statement of defence. However, it has filed a noticeof opposition to the application for an interim injunction. In this notice the defendantcontends that the arrangement constitutes nothing more at law than a tenancy under s210 of the Property Law Act 2007, which is terminable at will on the giving of not lessthan 20 working days' written notice to the other party. The defendant also contendsthat the plaintiff seeks to occupy the defendant's property for an indefinite term andfor no rent or other valuable consideration.Discussion[9] The principles on which this Court will grant injunctive relief are well settledand not in dispute herein. The plaintiff is required to show there is a serious questionto be tried and the balance of convenience favours the grant of injunctive relief.[10] It is also well settled that where there are factual disputes on the evidence,particularly those requiring credibility assessment, these are matters that are best leftfor trial. Nonetheless, I consider that from the basis of affidavit evidence the Courtcan still make some assessment of the plausibility of the disputed evidence.[11] I have carefully considered the parties' evidence. It is clear to me that on theplaintiff's behalf Mr Kitchener has made a significant investment in terms of time,labour and money in the property either personally or through contracting others toprovide services for the plaintiff. He increased the size of the herd; and later, he saysto his cost, he replaced mature cattle for younger cattle at the defendant's request. Hecarried out extensive fencing and forestry planting at the defendant's request, in orderto avoid pugging the soil. He expended money on and conducted weed eradication.He says he fertilised the property. He built and installed new tracks, metalled roadsand a metalled pad for a building the defendant wanted to erect. Mr Kitchener installedculverts and other drainage. He extended and renewed the water supply to thepaddocks. His evidence includes schedules setting out capital expenditure of$48,604.75 in 2015; $52,476.80 in 2016 and $36,054.80 in 2017, the latter being ashorter period of time due to him being informed by the defendant on 21 December2017 of their wish to evict him.[12] The exchange of emails between Mr Kitchener and the defendant'srepresentatives shows that typically he kept the defendant apprised of the cost, timeand labour the plaintiff was expending on the property, often at the direction of thedefendant. Further there is undisputed evidence the defendant's representatives wereon the property from time to time and therefore would have seen what the plaintiff wasdoing to the property. The only direct evidence of the defendant expressing reservationabout how the plaintiff was managing the property was in relation to the mature cattleon the property and their pugging effect on the soil, which is something Mr Kitchenersays the defendant addressed with the plaintiff. This concern was then ameliorated bythe plaintiff replacing the mature cattle with younger and therefore lighter cattle. Theability of the defendant to see this issue as a problem and have it rectified suggests tome the defendant would have noticed the other expenditure and efforts the plaintiffwas investing in the property. The defendant's silence in the face of those things canarguably be viewed as acquiescence or acceptance of them.[13] I accept the defendant disputes much of the plaintiff's evidence or else saysthat:(a) What the plaintiff did is typically part and parcel of a grazing leasearrangement; and(b) It was only commensurate with, if not lower than, the level of rental itwould otherwise have had to pay the defendant for the grazing rights.[14] Nonetheless, the level of expenditure and the time and effort involved in thetasks Mr Kitchener undertook were not in my view consistent with an arrangementthat is terminable on 20 working days' notice. Nor do I consider the absence of rentto be material here. For three years the parties worked according to an arrangementthat they each apparently understood at the time, and were content for it to continue.I find the plaintiff's evidence to be plausible and logically consistent with the claimsthat it makes.[15] Moreover, I note that from earlier on in the arrangement the plaintiff requesteda written lease. Initially the defendant's response was along the lines that, providedthe plaintiff upheld its end of the arrangement so too would the defendant. In the faceof receiving communications from the plaintiff identifying its need for a securearrangement given the level of investment being undertaken by the plaintiff, thedefendant consistently refused to enter into a written agreement, but offered as asubstitute promises and assurances the arrangement would continue. At no time didthe defendant say it wanted the benefit of a short-term arrangement that could beterminated by a short term of notice. Nor did it suggest the arrangement wassomething that might end at any time on the giving of a short term of notice.[16] I find some of the defendant's evidence to be implausible. The propertycomprises 200 hectares of pasture. The defendant contends that the plaintiff over-stocked the property and carried out weed eradication for its own benefit. However,if stock had not been run on the property and weed eradication carried out it wouldsoon have reverted to scrub as well as mature gorse and blackberry, all of which wouldhave been more difficult for the defendant to eradicate. It was as much in thedefendant's interests as it was in the plaintiff's interests for the pasture land to bemaintained and weeds kept under control. Keeping the property well stocked andcarrying out weed eradication was a means to achieve this end. I note that on oneoccasion the defendant through an email from Nathan Kot sent on 21 April 2015 toMr Kitchener referred to the defendant's requirement for the land to be kept "wellgroomed". The defendant would have needed someone to look after the property if itwanted to maintain the property in a "well groomed" state . Here, apart from paymentof rates, the defendant paid nothing else and in return its property was maintained andupgraded with additional improvements being done to it.[17] The outlay and effort that Mr Kitchener describes is consistent with anexpectation that he would be able to reap the benefits of what he had done, whichwould entail an arrangement that would not terminate on the giving of 20 workingdays' notice. Indeed, Mr Kitchener says he would not have acted as he did were it notfor the fact he believed assurances from the defendant's representatives that thearrangement was likely to run for five to 10 years. Mr Kitchener also contends that inthe context of seeking a more secure arrangement from the defendant he advised thedefendant that he would need at least 12 months' notice if the arrangement was toterminate. I accept the defendant disputes this evidence. Nonetheless, I findMr Kitchener's evidence on the question of notice to be plausible.[18] Accordingly, I consider the plaintiff has provided plausible evidence to supportthe factual allegations on which its claims rest. I also consider that there is areasonably strong legal basis for the claims the plaintiff makes, which shows there areserious questions to be tried here.[19] I consider the defendant's reliance on s 210 of the Property Law Act to beoverly simplistic. At the very least the law of equitable estoppel will protect theinterests of someone in the plaintiff's position. In Wilson Parking New Zealand Ltd vFanshawe 136 Ltd the Court of Appeal set out the relevant principles to establishequitable estoppel:2(a) A belief or expectation by the plaintiff has been created or encouragedby words or conduct by the defendant;(b) To the extent an express representation is relied upon, it is clearly andunequivocally expressed;2 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at[44].(c) The plaintiff reasonably relied to its detriment on the representation;and(d) It would be unconscionable for the defendant to depart from the beliefor expectation.[20] The facts as supported by the plaintiff's evidence show the plaintiff had a beliefor expectation the right to graze its cattle on the property would continue for someyears. As regards the existence or otherwise of express representations, there is nonecessity to determine that now as it does not provide what would otherwise be amissing element in the plaintiff's case; it is something that may add to the case, butthat can be determined at trial. The plaintiff's evidence shows the plaintiff relied uponthe defendant's representations to its detriment. On the strength of the plaintiff'sevidence there is a reasonable basis for finding the defendant has actedunconscionably.[21] There is also the claim based on the existence of a short-term lease, which isnot required to be in writing.3 A short-term lease is for a term of one year or less andincludes a periodic tenancy of one year or less.4 Whilst a short-term lease may beterminated on the terms set out in s 210 of the Property Law Act, that is only if noother term is agreed either expressly or by implication. Here the plaintiff essentiallycontends that either expressly or by implication the parties agreed the arrangementwould run from year to year and be terminable on reasonable notice, which in thecontext of their arrangement was a period of 12 months' notice.[22] I consider it is seriously arguable that in the context of either a short-term leaseor an equitable estoppel the arrangement between the parties should be terminable onreasonable notice, which here requires 12 months' notice. Although dealing with theissue of a period of notice to be implied into an agency contract, in Paper Reclaim Ltdv Aotearoa International Ltd the Supreme Court considered what was a reasonableperiod of notice for an arrangement the parties had carried out for a number of yearsin circumstances where, whilst they agreed reasonable notice was required, neither3 See s 208 of the Property Law Act 2007.4 See s 207 of the Property Law Act 2007.had expressly agreed the period of notice for terminating the contract.5 The SupremeCourt considered the principles relating to fixing the period of reasonable notice,including by reference to a decision of the Privy Council in Australian Blue MetalsLtd v Hughes where the Privy Council commented:6The implication of reasonable notice is intended to serve only the commonpurpose of the parties. Whether there need be any notice at all, and, if so, thecommon purpose for which it is required, are matters to be determined as atthe date of the contract; the reasonable time for the fulfilment of the purposeis a matter to be determined as at the date of the notice. The common purposeis frequently derived from the desire that both parties may be expected to haveto cushion themselves against sudden change, giving themselves time to makealternative arrangements of a sort similar to those which are being terminated.[23] In the present case there is the evidence of Mr Kitchener that he said he needed12 months' notice if the arrangement was to end. There is evidence of the defendant'ssilence, which if accepted would suggest the defendant acknowledged 12 months tobe an appropriate period of notice.[24] The evidence the plaintiff has provided satisfies me that the 20 working days'notice given by the defendant is arguably not reasonable notice. Given the level ofeffort and investment the plaintiff has made in the property it may well be the case thata 12 month period of notice would be reasonable, as that would be a reasonableminimum period for the plaintiff to sufficiently obtain benefit from the level of effortin all respects that it had invested into the property. It would also allow the plaintiffto vacate the property in a way that enabled it to find alternative grazing for its herdof cattle and to properly re-establish its grazing operation elsewhere. Certainly Iconsider these matters to be seriously arguable.[25] Accordingly, I am satisfied the plaintiff has established a serious case forargument on the equitable estoppel claim, and the claim based on a short-term lease.This is sufficient to satisfy the first requirement for granting an interim injunction.[26] I am satisfied the balance of convenience lies in the plaintiff's favour. It isdifficult to see how the plaintiff could be expected to move its entire grazing operation5 Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [2007] 3 NZLR 169.6 Australian Blue Metals Ltd v Hughes [1963] AC 74 at 99 (PC).from the property between now and the trial, on an interim basis. Obviously, if theplaintiff vacates the property before trial that will essentially bring the arrangement toan end then and there. The plaintiff would be left having to find an alternativearrangement, when the evidence shows there is no quick solution alternative to grazingon the property, as well as to quantify the cost involved in doing so in order to supporta damages claim. The costs involved in a quick transfer to whatever alternative isfound may not be readily quantifiable for the purpose of a damages claim. Unlessalternative grazing is readily available, stock may need to be sold, in which case thoseanimals are then lost to the plaintiff. On the other hand the defendant has provided noevidence to show any imminent change it is required to make to the property. Nor hasit provided evidence to show the plaintiff has damaged or is likely to damage theproperty.[27] I see no reason if this trial proceeds efficiently and expeditiously why the statusquo cannot be maintained until the substantive matter is heard. Any damage thedefendant suffers through the delay between the granting of an interim injunction andthe trial date seems to me to be something that can be adequately compensated for byway of damages. An undertaking as to damages has been provided and at the hearingthe defendant did not raise any concerns regarding the plaintiff's ability to performthat undertaking, if called upon to do so.Result[28] I am satisfied that the plaintiff is entitled to the interim relief it seeks. Aninterim injunction is presently in place. I see no reason why the terms of thatinjunction should not therefore be extended further until the substantive trial is heardand determined and accordingly I so order.[29] The parties have leave to file memoranda on costs if they are unable to agreeas between themselves the question of costs.