PUHINUI FARMS LIMITED V IH WEDDING & SONS LIMITED HC AK CIV 2006-404-771

PUHINUI FARMS LIMITED V IH WEDDING & SONS LIMITED HC AK CIV 2006-404-771 15 February 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2006-404-771BETWEEN PUHINUI FARMS LIMITED Plaintiff AND IH WEDDING & SONS LIMITED Defendant Hearing: 27-30 August 2007 Appearances: K Crossland and P Morris for the plaintiff D M O'Neill for the defendant Judgment: 15 February 2008 at 10 a.m.JUDGMENT OF POTTER JIn accordance with r 540(4) High Court Rules I direct the Registrar to endorse this judgment with a delivery time of 10 a.m. on 15 February 2008.Solicitors: Stace Hammond, P.O. Box 19-101, Hamilton Nielsen Law, P.O. Box 1108, Hamilton Copy to: D M O'Neill, P.O. Box 815, HamiltonTABLE OF CONTENTSIntroduction [1] The lease [3] Factual background [14] Pleadings [39] Issues [57] Did Weddings hold over after the lease expired on 30 June 2002? [58] Meeting on 10 August 2004 [63]Evidence about the 10 August meeting [69]Correspondence following 10 August 2004 meeting [82]Discussion and conclusions [89] Was Weddings required to reinstate the quarry? [105] Did Puhinui suffer loss which should be answered in damages? [110] Quantum of damagesSubmissions about diminution in value [116]The rule in Joyner v Weeks [124]Costs of reinstatement : experts' agreement [131]Which lease plan applies? [136]Submissions about cost of reinstatement [164]Discussion and conclusions [167] Is Weddings liable for royalties under the lease to the termination date 17 January 2006? [171] Is Puhinui estopped by its conduct from claiming further moneys under the lease? [176] Is Weddings liable for rates under the lease to the termination date 17 January 2006? [189] Was Weddings a trespasser from 18 January 2006 to 4 August 2006? [194] Is Weddings liable to Puhinui for mesne profits during the trespass period and in what sum? [199] Is Weddings liable to Puhinui for interest on any amounts judged to be owing, and if so at what rate? [209]Has Puhinui waived its right under the lease or (if applicable) the second lease? [215] Result [220] Costs [221] Leave reserved [222]Introduction[1] The plaintiff Puhinui Farms Limited, owned a property in Wiri, Manukau City comprising 29.6910 hectares. A quarry was situated on the property. In 1996 Puhinui leased to the defendant IH Wedding & Sons Limited the whole of the property for a term of six years with two rights of renewal of two years each. When the initial term of the lease expired in 2002 Weddings did not renew the lease but remained in occupation of the property until it eventually vacated in August 2006. In these proceedings Puhinui claims from Weddings royalties, rates and the loss Puhinui claims to have suffered as the result of Weddings' failure to reinstate the property in accordance with the terms of the lease. [2] Weddings denies any breaches of the lease and says that a second lease was agreed between the parties at a meeting on 10 August 2004 and Weddings has complied with the terms and conditions of the second lease. Weddings also pleads certain other affirmative defences.The lease[3] The lease was dated 22 July 1996. Puhinui leased the property to Weddings for the purpose of granting to Weddings rights to quarry. [4] The lease was for an initial term of approximately six years terminating on 30 June 2002 with two rights of renewal of two years each, exercisable on 12 months notice. [5] Rent payable under the lease was to be calculated by way of royalty computed on all quarry products won and removed from the property at the rate of $1.75 per cubic metre of crushed products and $0.75 per cubic metre of non-crushed products. [6] There was a minimum royalty payment required of $75,000 per year. Royalties were to be computed quarterly on the last days of March, June, Septemberand December in each year in respect of products won and removed during the preceding quarter and payment of the royalties was to be made on the 20th day of the month immediately succeeding each quarterly period. Each quarterly payment was to be not less than $18,750, reflecting the annual minimum royalty of $75,000. [7] The lessee was required to pay GST in addition to royalties and other payments required under the lease. [8] In addition to payment of royalties, Weddings was required to pay all rates, charges or assessments payable in respect of the property. The obligation to pay rates gave rise to the only major issue between the parties during the term of the lease. When Weddings failed to pay rates to the Manukau City Council, Puhinui issued summary judgment proceedings. Outstanding rates were paid by Weddings on 21 May 1999, prior to the summary judgment hearing. [9] Clause 7.4 provided for interest in respect of any amount due under the lease which remained unpaid 14 days after the due date computed at a rate 2% per annum above the rate for the time being adopted by Puhinui's bankers as the base rate for overdrawn cheque accounts. [10] Weddings was required to work the property as a quarry in compliance with industry standards and the Quarry Management Plan ("QMP") approved by the Manukau City Council which was annexed to the lease as schedule B. [11] Clause 5.8 required reinstatement. It provided:To reinstate the surface of the Leased Property by filling and compacting with quarry strippings or suitable clean fill material whether taken from the site or brought in and free from contaminated soil or toxic materials to the levels and contours prescribed by the Quarry Management Plan as set out in Schedule B and in accordance with the specifications comprised in Schedule C and to form carriageways located as directed by the Lessor to an agreed subgrade level and to supply and place a 150 mm thick layer of sub-base aggregate over the carriageway area so as to leave the Leased Property when reinstated as suitable for industrial purposes including all necessary planting and landscaping.[12] Clause 5.18 required Weddings at the termination of the term of the lease to yield up possession of the property in condition complying in all respects with the requirements of the lease as to reinstatement. [13] Schedule B to the lease contained Quarry Management Plan 872-1 dated 9 March 1991. Schedule C contained specifications relating to rehabilitation of the quarry. It required that upon completion of quarrying the whole site was to be finished to levels shown in the QMP. It stated that the proposed end use of the site after quarrying was completed was industrial land and that the standard of fill materials and compactive effort must be compatible with this end use. Specifications in relation to fill material, fill placement and compaction standards followed. Clause C6 required that during and on completion of back-filling operations a report was to be prepared by a registered engineer experienced in geo- technical engineering, on all the filled areas. The report was required to be suitable for submission to Manukau City Council in support of a future subdivision application.Factual background[14] When Weddings entered into the lease there were issues concerning the failure of the previous lessee, McConnell Dowell, to reinstate. These were resolved by Weddings and Puhinui reaching agreement that Puhinui would pay $61,250 to Weddings as soon as Weddings reinstated an uncertified area filled by McConnell Dowell to the certification standards laid down by Manukau City Council for a zoning of Business Class 6. It was also agreed that Weddings should take immediate possession of an excavator valued at $15,000 and that the royalty payment for the quarter ended 31 March 1997 should be waived. This agreement was detailed in a letter from Puhinui to Weddings dated 30 July 1997 and accepted by Weddings on 7 August 1997. Apparently the certification was not provided and the $61,250 was not paid. [15] By letter dated 24 June 2002 Puhinui offered Weddings a right of renewal for a further two years from 1 July 2002, at a royalty rate to be agreed on by the parties, as provided in the lease. The letter also stated that Puhinui wished to reviewprogress towards the timeframe of having the quarrying completed and restored by the end of the lease period on 30 June 2006 (being the final expiry date of the lease if both rights of renewal were exercised). [16] Weddings did not respond to that offer but in July 2002 the parties met. Weddings was not prepared to increase the amount of the royalty payments. The parties orally agreed that Weddings could continue to occupy the quarry on the same terms as the expired lease with Weddings to give one months notice should it wish to vacate the property. [17] On 14 May 2004 Puhinui again addressed the matter of the term of the lease in a letter to Weddings from its solicitors Edmonds Judd. The letter recorded that the lease was simply running on from month to month, but said that Puhinui was prepared to allow the term to be renewed to 30 June 2006 at which time the lease would finally expire. However, the offer was conditional upon compliance by Weddings with its obligations under the lease to reinstate as set out in clauses 5.6 and 5.8 and schedules B and C to the lease. The letter requested urgent confirmation that such reinstatement would immediately commence. [18] Weddings did not respond. Puhinui withdrew the offer of renewal by letter from its solicitors dated 4 June 2004. [19] On 10 August 2004 the parties met to discuss issues concerning the quarry. What took place at this meeting is critical in this case and I consider it under a separate heading later in this judgment (refer at [63]). [20] By late 2004 Puhinui decided to sell the property. [21] In March 2005 Puhinui instructed Mark Mitchell of Mark T Mitchell Limited, Consulting Geo-technical Engineers, to prepare a report for prospective purchasers. Mr Mitchell prepared a quarry development and rehabilitation plan. His report dated August 2005 incorporated a plan showing the cutting and filling required to reinstate the land to the level of an industrial site in compliance with thelease. He attached to his report a copy of the lease incorporating the QMP and the Schedule C specifications for reinstatement. [22] Mr Mitchell's estimate of the cost of reinstatement was carried forward into the third amended statement of claim which sought damages for the cost of reinstating the property estimated at $579,093.75. [23] Mr Mitchell made an addendum to his witness statement after he reviewed certain documents in the agreed bundle of documents for trial which had not been available to him when he prepared his report in August 2005. After discussions between Mr Mitchell and Mr Geoffrey Farquhar, the engineering expert for Weddings, the experts reached an agreement produced in evidence at trial which included agreed amounts for the costs of reinstatement. [24] Puhinui instructed CB Richard Ellis Limited to market the property for sale. Puhinui received 13 different offers from ten prospective purchasers including an offer from Weddings. Rock Solid Holdings Limited made three offers by letter dated 7 October 2005. These were referred to as Option 1, Option 2 and Option 3. Option 1 offered $10.7m on an "as is where is" basis. This was subsequently increased by $800,000 to $11.5m after negotiation, because of competing bids. Option 2 offered $12.1m (which Mr Bishop of Rock Solid confirmed in evidence would have been increased by $800,000 in the same way as the price under Option 1 was increased), but required Puhinui to indemnify Rock Solid against any claims from: a) Weddings or its assignee, transferee or successor, in relation to its right to quarry the land; b) Auckland Regional Council or Manukau City Council arising from any resource consent attached to the property or otherwise under the Resource Management Act 1991; c) The requirement under the lease to reinstate the property;d) Any ongoing obligation or liability to McLachlan Park Limited, owner of a neighbouring property, under a contribution agreement for the construction of a road. [25] Option 3 contained a higher price but conditions that were more onerous for the vendor and was not considered by Puhinui. [26] Puhinui says that it did not accept Option 2 because of Weddings' failure to reinstate the land in accordance with the lease. Puhinui claims that if Weddings had reinstated the land as required by the lease then it would have been in a position to accept Option 2. By way of an amendment to the third amended statement of claim granted at the commencement of the hearing, Puhinui claims as an alternative to the cost of reinstating the property, $1.4m being the diminution of the sale price of the property (the difference between the price offered under Options 1 and 2). [27] Puhinui entered into an agreement for sale and purchase on the basis of Option 1 with Rock Solid dated 14 October 2005. The sale was of 28.9384 hectares requiring a subdivision of the property, the land sold being proposed Lot 23 on a plan of subdivision of the existing property. The agreement for sale and purchase provided for a deposit of 10% of the purchase price to be payable upon the agreement becoming unconditional. [28] On 17 October 2005, Puhinui issued a termination notice to Weddings which gave Weddings three months to vacate the property, this being the notice period agreed by the parties at the meeting on 10 August 2004. The termination notice expired on 17 January 2006. It required Weddings to carry out full reinstatement of the property before the date of termination and to remove all machinery, stock and other property belonging to Weddings. [29] The agreement for sale and purchase with Rock Solid required a termination notice to be given to Weddings once the agreement became unconditional and provided for the settlement date to be deferred until expiry of the three months notice to be specified in the termination notice. However, Puhinui elected to give the termination notice, including the requirement for reinstatement, once it had enteredinto the agreement with Rock Solid. Mr Chambers said in evidence that Puhinui did so because if the agreement with Rock Solid had not proceeded to settlement (e.g. because the subdivision could not be completed), then Puhinui would have needed to re-negotiate the sale of the property. [30] Weddings did not vacate by 17 January 2006. [31] On 23 January 2006 Puhinui gave Rock Solid permission to move a digger and crushing screen on to the quarry site to undertake some testing of the quality of rock to be extracted from the quarry. Puhinui through its solicitors advised Weddings of this arrangement by a facsimile of 24 January 2006. The advice noted that the termination notice had not been complied with and that Puhinui would be taking steps to remove Weddings from the premises without further notice. This was pursued in a further facsimile of 1 February 2006 which stated that Weddings was on the property illegally without the consent of Puhinui. It required immediate departure from the property. It noted that the situation had been aggravated by Weddings continuing to bring material on to the site and to operate its own machinery. [32] In January 2006 Rock Solid was urging Puhinui to remove Weddings. Puhinui in conjunction with Rock Solid put up signs on the property directing Weddings and its contractors to stay off the property. Weddings did not stay off the property. [33] On 2 March 2006 Weddings signed a heads of agreement with Rock Solid's nominee McLachlan Quarry Trust ("MQT"). The document purported to provide Weddings with a three month rent free period with a further period of three months during which Weddings would have access to the property, subject to payment of a bond of $50,000. Vacant possession was to be given after six months. When Rock Solid advised Puhinui of the arrangement with Weddings by letter of 3 March 2006, Puhinui objected on the basis that it still owned the property and had not authorised Rock Solid or MQT to license Weddings. Rock Solid accepted the situation, but Mr Bishop in evidence described it as "frustrating".[34] On or about 6 July 2006 Puhinui locked the gates to the quarry and placed a container adjacent to the gates to prevent Weddings having further access. This also meant that MQT was excluded from the property. [35] By a heads of agreement dated 11 July 2006 Puhinui granted to MQT as nominee of Rock Solid a non-exclusive licence to occupy part of the quarry, backdated to 1 June 2006. The heads of agreement recited that for reasons beyond the control of Puhinui, title to the 28.93 hectares of the property, after transfer to the Manukau City Council for roading purposes of approximately .52 hectares, was still not available to enable settlement to take place and that the delay was preventing MQT from undertaking development works on the property. The rental was stated to be $320,000 per annum plus GST payable monthly in advance until settlement or cancellation of the agreement for sale and purchase. MQT was also to pay the Manukau City Council rates and the Auckland Regional Council rates on the total area of land from 1 June 2006. Puhinui acknowledged that MQT was permitted to allow Weddings to enter the site for removal of plant and machinery and explosives, but for nothing else. [36] The rent stipulated was in accordance with a rental valuation obtained by Puhinui from Mr Patrick Callesen of CB Richard Ellis Limited. He estimated a ground rental for the approximately 10 acre area of the quarry of $320,000 per annum plus Manukau City Council rates in a letter to Puhinui dated 30 June 2006. However, the monthly licence fee actually paid by MQT to Puhinui was $20,000 plus GST from 1 June 2006. MQT has paid the rates on the whole property since 1 June 2006. [37] MQT remained in occupation of the land pursuant to that licence until settlement was completed on 27 August 2007. [38] Puhinui brought summary judgment proceedings against Weddings for vacant possession. A consent order made following a Court hearing on 21 July 2006 gave Weddings until 4 August 2006 to vacate the property, which it did.Pleadings[39] The third amended statement of claim pleads the lease between Puhinui and Weddings dated 22 July 1996 and that the lease expired on 30 June 2002 without the right of renewal having been exercised by Weddings. These facts are admitted by Weddings. [40] Puhinui pleads that after the expiry of the term of the lease on 30 June 2002 Weddings held over on the property with Puhinui's consent until 17 January 2006. This is denied in the statement of defence, but in written opening submissions it was accepted by counsel for the defendant that from the end of June 2002 until the end of June 2004 Weddings was holding over. Weddings' position is that at the meeting on 10 August 2004 a second lease was entered into under which Weddings was lessee from end June 2004 on different terms and conditions from the original lease. [41] Puhinui pleads that during the holding over period Weddings performed its payment of royalties obligations by making payments for the six quarters between 30 September 2002 and 31 December 2003. Weddings admits making payments of royalties after 30 June 2002. [42] The first cause of action alleges breach of contract. It is alleged that in breach of its contractual obligations under cl 3 of the lease, during the holding over period Weddings did not provide the reports for the quarters ending 31 March 2004 and 30 June 2004 or pay the overdue royalties for those quarters. Further, that Weddings did not pay the minimum royalty payments of $18,750 per quarter for the quarterly periods subsequent to that ended 30 June 2004 to the termination date of the lease on 17 January 2006. These breaches are alleged to give rise to an outstanding balance of $121,128.75 in respect of royalties (including GST). It is further alleged that in breach of cl 5.2 of the lease, during the holding over period Weddings did not pay the full amount of overdue rates. The shortfall is claimed at $58,905.80 (including GST). [43] These claims are denied by Weddings. Weddings pleads that all rates have been paid as agreed, relying on the alleged agreement for a second lease made on 10August 2004 which Weddings claims limited its liability for rates to $26,000 per annum (being the amount of rates levied and paid prior to the year ended 30 June 2004). [44] Puhinui further alleges breach of Weddings' contractual obligations under cl 5.8 of the lease in failing to reinstate the property. Puhinui seeks damages for the cost of reinstating the property estimated in the statement of claim at $579,093.75 or $1.4m being the diminution of the sale price of the property (pursuant to the amendment to the statement of claim allowed as recorded in my minute of 27 August 2007). [45] Accordingly Puhinui seeks judgment for: a) Unpaid royalties from 1 July 2002 to the date of expiry of the termination notice on 17 January 2006, totalling $121,128.75. b) An order that Weddings account to Puhinui for the royalties on all quarry products removed from the property between 1 January 2004 and 30 June 2004 by providing reports for the quarters ended 31 March and 30 June 2004. c) Unpaid rates to the date of expiry of the termination notice totalling $58,905.75. d) Site reinstatement costs in accordance with the lease or $1.4m being the diminution in the sale price of the property. e) Interest on the judgment sums at the rate specified in cl 7.4 of the lease or at such other rate as the Court deems appropriate. [46] The second cause of action pleads trespass in respect of the period following 17 January 2006 to the date the property was vacated on or about 4 August 2006. Puhinui claims mesne profits for that period, calculated at the rate of $320,000 plus GST per annum (based on the valuation by Mr Patrick Callesen of CB Richard EllisLimited), less the amount of the monthly licence payments of $20,000 plus GST paid by MQT from 1 June 2006. Mesne profits are claimed in the sum of $148,767.13. [47] Puhinui also claims the amount of rates during the trespass period less rates recovered from MQT, calculated at $19,591.38. [48] Interest under cl 7.4 of the lease is claimed on the judgment sums for mesne profits and rates during the trespass period. [49] The defendant denies liability for the amounts claimed under the second cause of action in trespass. [50] Weddings pleads the following affirmative defences: [51] First: A second lease agreement agreed by Puhinui and Weddings at the meeting on 10 August 2004 upon the following terms: i) No standard minimum royalty of $18,750 per quarter; ii) Weddings to remain at the quarry on a month to month basis; (This is not disputed by Puhinui) iii) Either party could give three months notice of termination in writing; (This is not disputed by Puhinui) iv) Any material removed to attract a royalty payable to Puhinui of $1.75 per cubic metre of material payable on a quarterly basis; v) Rates payable to a maximum of $26,000 per annum; vi) All figures agreed were exclusive of GST.[52] By amendment to the statement of defence to the third amended statement of claim allowed at the hearing without opposition from Puhinui there was added to the pleading in respect of the agreement for a second lease:And this was the only basis on which the defendant would remain in the property.That amendment was seen by Weddings as inferring a pleading that the reinstatement obligation under the lease was varied or negatived by the second lease agreement, which was not otherwise specifically pleaded. [53] Weddings pleads that as a consequence of the second lease agreement reached at the meeting on 10 August 2004 nothing is owed to the plaintiff. [54] Second: Estoppel, based on the acceptance by Puhinui of royalty payments without reservation of rights or objection to the payments, after the alleged second lease agreement. Weddings pleads that if it had been required to pay the minimum royalty of $75,000 per annum (as alleged) it would have left the quarry immediately, and has altered its position in reliance on acceptance of the payments. [55] Third: Waiver. Weddings pleads that by sale of the property to MQT, allowing MQT into possession of the property and knowing of the bond paid by Weddings to MQT, Puhinui has waived any rights it may have under the lease (which are denied) or alternatively the second lease agreement. In this respect the statement of defence pleads at paragraph 26:The agreement for sale and purchase provides as follows (a) All disputes arising in respect of any lease between the plaintiff and defendant devolved to the purchaser; (b) Any aspects of reinstatement of the quarry are to become the responsibility of the purchaser.[56] Fourth: No loss. Weddings pleads that because Puhinui has sold the quarry to MQT Puhinui has suffered no loss.Issues[57] The pleadings give rise to the following issues for determination: 1. Did Weddings hold over after the lease expired on 30 June 2002? 2. At the meeting on 10 August 2004, was a new or second lease agreed by Puhinui and Weddings on the terms and conditions pleaded by Weddings and recorded in a letter of Mr Maurice Hayes to Puhinui dated 11 August 2004? 3. Was Weddings required to reinstate the quarry? 4. If so, has its failure to do so resulted in loss to Puhinui as pleaded, namely damages for the cost of reinstatement of the property or alternatively diminution in value of the property? 5. If so, what quantum of damages should be awarded to Puhinui? 6. Is Weddings liable for royalties under the lease to the termination date, 17 January 2006? 7. Is Puhinui estopped from claiming further moneys under the lease by its conduct in accepting payments of royalties after the 10 August 2004 meeting? 8. Is Weddings liable for rates under the lease to the termination date, 17 January 2006? 9. Was Weddings a trespasser from 18 January 2006 to 4 August 2006? 10. If so, is Weddings liable to Puhinui for mesne profits during that period and in what sum?11. Is Weddings liable for rates paid by Puhinui from 18 January 2006 until 1 June 2006 (the date when Puhinui received rent and rates from MQT under its licence to occupy)? 12. Is Weddings liable to Puhinui for interest on any amounts judged to be owing, and if so at what rate? 12. Has Puhinui waived its right under the lease or (if applicable) the second lease?Did Weddings hold over after the lease expired on 30 June 2002?[58] The applicable principles are stated in Laws of New Zealand : Landlord and Tenant paragraph 113:The basis on which a tenant remains in possession after the expiration of a lease is in part a matter of fact where there is no agreement but the tenant continues in possession with the consent of the landlord a new tenancy for an indefinite period arises by implication. The new tenancy will be on the same terms as the original lease although the parties may agree to vary those terms. The new tenancy will be determinable either as agreed or in default of agreement by one month's notice to quit.[59] The authorities cited are Card v Bilderbeck [1951] NZLR 296 and Cole v Kelly [1920] 2 KB 106 (CA). [60] When the lease expired on 30 June 2002 Weddings remained in possession. It did not accept Puhinui's offer of a renewal of the lease which was subsequently withdrawn. It continued to pay royalties in accordance with the terms of the lease. For the six quarters ending 30 September 2002, 31 December 2002, 31 March 2003, 30 June 2003, 30 September 2003 and 31 December 2003 it provided to Puhinui reports detailing royalty payment calculations and sales figures. Each report included a schedule of actual royalties calculated as against the quarterly minimum royalty payment of $18,750. The reports were signed by Mr D J Askew who described himself as Contracts Manager.[61] In opening submissions for Weddings, Mr O'Neill accepted that from the end of June 2002 until the end of June 2004 Weddings was holding over. Nevertheless in his witness statement Mr Wedding maintained that subsequent to 30 June 2002 royalty payments were made by Weddings to Puhinui "by office management". He maintained those payments were incorrectly made based on the minimum royalty, and that he was not aware what was happening until the matter came to his attention in 2004. It is difficult to accept that Mr Wedding, who agreed he was the "boss" of the company, was unaware of these significant payments being made to Puhinui in accordance with the terms of the lease over a period of 18 months from 30 June 2002. Mr David Askew, who Mr Wedding said in evidence was general manager of the company at that time (although there was a subsequent falling out to which Mr Wedding referred in answer to cross-examination), clearly had authority to make the payments and the reports to Puhinui. The concession was appropriately made by Weddings. [62] I find as a fact that after the lease expired on 30 June 2002 and was not renewed Weddings was holding over on the same terms as the lease. This period during which Weddings continued to hold over requires determination of the second issue.Meeting on 10 August 2004[63] The meeting was held at the Chancellor Hotel in Mangere and was attended by Mr W A (Bill) McLachlan a director of Puhinui, Mrs Sally Chambers also a director and her husband Mr Bruce Chambers, accountant to Puhinui. For Weddings, Mr Ian Wedding was in attendance together with Mr Maurice Hayes a director and accountant for the company and Mr David Askew. [64] Weddings alleges that a second lease agreement was agreed at this meeting upon the terms detailed in the statement of defence and set out in [51] above. [65] At the time the meeting was convened royalty reports for the quarters ending 31 March 2004 and 30 June 2004 had not been provided and royalties for those quarters had not been paid. The rates demand to 31 June 2004 had only just beenreceived and had been sent to Weddings by Mr McLachlan on 27 July 2004. It demanded rates of $46,419 for the year ended 30 June 2004, a significant increase over the rates for the previous year which were approximately $26,000. Puhinui had been paying the rates and seeking reimbursement from Weddings. [66] Reinstatement had not been completed. Puhinui had concerns about reinstatement, particularly in the light of recent approaches for the sale of the quarry land. [67] Mr Chambers made notes recording the discussions that took place during the meeting. They are reproduced below:PUHINUI FARMS NOTES OF MEETING AT MANGERE PUB (CHANCELLOR)Us Bill, Sally, Me Them Dave/IanMaurice Hayes (?) 1. Bill – Why are they not paying. Last report Dec. 03. Lease says quarterly plus rates. Pf need money for rates expenses. 2. Since no renewal in June 02, Bill says on month to month old lease continues .. cash due. 3. Maurice says no! Material going out is not from quarry. It is other material so no royalty due. 4. BC says The walls are still being blasted and the holes dug so some royalty minimum is being recovered. Even if W use it as a transfer base rent is due. 5. Ian says quality not there now. Concrete rejected so cost is too great. 6. Bill says having no reports for March and June 04 meant we do not know what is happening. Why are they late. 7. Dave says they are written and with Ian. But don't believe them. Some of material is S + D. Bill wants to know who we do believe. No comment. 8. Sal – if there is no rock left, why don't you leave? – after filling the holes. 9. Dave? Ian, if we leave we need more than a month. 10. Bill yes to restore will take longer than that – Ian says restoration is expensive.11. BC asks why restoration is not in keeping with Babbage plan to ARA – Dave said not possible. 12. IW do not want a minimum of $75k & reduced rates. Bill says we need cash for rates & expenses. We are only paying rates demands because in W name they did not pay. 13. Dave says there will still be funds e. $60 + say 25k. 14. Bill says MCC mucked up rates. He has only just got rates to 30/6/04. Ian says W have their Mangere rates why is ours late – Bill tabled the a/c received. IW – Too much. Bill said arrears must be paid first. 15. Dave says Mar ¼ June ½ due plus some rates. They will pay now ($35k plus 40k) so Bill will have funds. 16. Ian says zoning in "quarry" not business .. why are B6 rates – Bill say MCC have been visited and claim a quarry is B6. They have passed some relief though & amended a/c. MCC say rates are a land tax. There does not have to be value (BMcL) 17. Looking ahead MH says – no minimum, $26pa rates a depot equivalent, royalty on materials won. 18. BC. How do we see what materials are won. If rock was no good what about other – (MH gave no reply). 19. Bill says rates include water and sewerage even though we have no connection. – This is a change in rating boundaries. 20. MH says will stay on month to month from 1/7/04 no minimum & $500pw rates. 21. Bill says no. Not going to backdate to July suggest August. Only if all arrears are up to date otherwise they leave now. 28. Dave want three months notice to leave to get materials & plant out. This is agreed but restoration must be done then too. 29. IW say restoration by big hill is done. Not economical to take more out. Face shot to clay. RL is 6.5 W says road is RL16/Big Tree RL18. 30. Bill say Babbage to sign of muck from harbour but Dave says never there? Who certifies the fill done as pe lease. 31. Weddings have file management plan with ARC. Not final levels. 32. Glyn is a problem. No proper filling. Water crosses PF land. His has not compacted. 33. Dave to handle section consent on area behind big wall. Will take 3- 4 months. 34. Martin to look at zoning.35. PF to decide when economical life ends, as W report unrealiable. 36. Dave says no winnings Sept to Christmas likely. 37. MH to write resume of discussions and arrange for arrears to be paid now. Post to all. 38. Bill says PF want certificates for restoration and cash otherwise arrangements fail. We need certs for sale. All a bit of waste of time. W do not want to listen to anyone – MH anyway. Dave seems very strained!![68] Mr Hayes also made notes which are reproduced below. His notes were made on notepaper headed "Hotel Grand Chancellor":10/8/04 Bill McLaughlin __________________________________________________ Rates o/s $44,000 30/6/2004 __________________________________________________ $25,000.00 in rates @ 30/6/04 Royalty o/s Rates ___________________________________________________ Agreed to pay rates but no minimum royalty material ext. ___________________________________________________Evidence about the 10 August 2004 meeting[69] Mr Chambers' evidence was that it was agreed at the meeting that if Weddings provided the missing reports so that its claims could be checked, and paid the outstanding royalties and rates immediately so that Puhinui retained cash flow, Weddings would be permitted to stay on the property on a month to month basis and rates would be limited to $500 per week ($26,000 per annum) from August 2004. The minimum royalty would be waived but existing royalty rates on all rock extracted would remain. Puhinui would give three months notice to quit so that Weddings could remove its plant and finish restoration in terms of the lease. Puhinuiwould require a certificate for the restoration in the manner set out in the lease, as it would be required for a future sale of the property by Puhinui. Unless all these matters were actioned immediately the arrangement would be at an end. [70] Mr Chambers was adamant in response to cross-examination by Mr O'Neill that Puhinui's agreement to no minimum royalties and rates being capped at $26,000 per annum was subject to a rider that the arrears were to be brought up to date, and that the condition related to all arrears, both the rates and the royalties which were overdue for the March and June quarters of 2004. He disagreed with Mr O'Neill that his notes suggested that the condition related only to the backdating of rates. While he agreed that paragraph 21 related to the issue of backdating of rates to August rather than July (which he said had been requested by Mr Hayes), he said that did not exclude the requirement for all arrears, both rates and royalties, to be brought up to date. He said the condition related to the period forward from 1 August, and that the arrangements were to take effect from 1 August provided Weddings satisfied all arrears. That did not happen so Puhinui notified Weddings that the arrangement failed. [71] Mr McLaughlin's evidence was that much of the meeting focused on Weddings' assertions that it was unable to extract sufficient material to justify paying the minimum royalty, but there was nothing to judge those assertions against as Weddings had not provided reports for the previous two quarters. He said that after some discussion Puhinui agreed that if Weddings provided the overdue reports and brought all payments up to date then from that point onwards the minimum royalties would be waived. This would mean that Weddings would only be liable to pay royalties on the amount of material extracted from the quarry which up to that time (save for the lack of information about the last two quarters) had averaged approximately 90% of the minimum royalty payment. [72] As to rates, he said that Puhinui agreed to Weddings paying only $500 per week ($26,000 per annum) with effect from 1 August 2004. Puhinui did not agree to backdate the concession to 1 July 2004, as was recorded in Mr Chambers notes. He repeated that this concession was made on the basis that all overdue payments were brought up to date and the overdue reports were filed. Puhinui also agreed toWeddings having three months notice to quit so that it had time to get its machinery off the property and to attend to reinstatement. [73] Mr McLaughlin was extensively cross-examined by Mr O'Neill about the meaning of paragraphs 20 and 21 of Mr Chambers' notes. It was put to him that the requirement in paragraph 21 that all arrears be brought up to date, was a reference to rates only. Mr McLaughlin did not agree; it was his understanding that the condition relating to no minimum royalties and the rates being payable at $26,000 per year was agreed: providing the other things were brought up to date [74] Mr Wedding said in evidence that at the meeting he made it quite clear that the lack of material in the quarry made it uneconomical to pay a standard minimum royalty figure. If the minimum royalty figure was to continue then Weddings would immediately leave the property. He said the agreement was that no minimum royalty payments would continue, and this was not conditional upon anything else. He said he also made it clear that the land rates were to be paid at the previous rate, not the new increased rates. [75] He said that before vacating the property Weddings had started to undertake restoration of the area at the front of the quarry but did not finish it as the sale to Peter Bishop was in progress. He understood the obligation of his company to reinstate the land under cl 5.8 of the lease applied only under the lease which Weddings did not renew in 2002. In answer to cross-examination by Mr Crossland he confirmed that to his mind, the promises under the lease had ceased in 2002 when Weddings did not renew the lease. He agreed there was nothing about reinstatement in the letter Mr Hayes wrote to Puhinui on 11 August 2004 (at [82]), but said that was because there was no lease. He agreed that reinstatement was "quite possibly amongst other things" discussed at the meeting on 10 August 2004. [76] Mr Wedding was very vague about payment of rates and royalties. He claimed this was all done by others in his company. He could not comment on the lack of reports for the quarters ending March and June 2004. He said in answer to cross-examination by Mr Crossland that when in paragraph 18 of Weddings'statement of defence it is alleged that certain matters were "agreed" when the parties met on 10 August 2004, "agreed" was the wrong word. He maintained it was simply put very clearly to Puhinui that the terms and conditions on which Weddings were prepared to stay on in the quarry were as set out in the statement of defence, i.e. no minimum royalties, royalties payable at $1.75 per cubic metre of material on a quarterly basis, rates limited to a maximum of $26,000 per annum, a monthly tenancy with three months notice of termination in writing. He considered these terms and conditions were obviously accepted by Puhinui because Weddings was not evicted, but he had never said it was "agreed". [77] Mr Hayes' evidence was that when he returned to his office in the afternoon of 10 August 2004, while the events of the meeting were fresh in his mind, he immediately dictated a letter to Edmonds Judd, solicitors for Puhinui. That letter was sent on 11 August 2004 and recorded the agreement reached at the meeting. The agreement was to vary the royalties to what was extracted with no minimum payment, and rates were limited to $500 per week. These agreements were not conditional on any other matters. He said that if there had been any conditions or variations he would have included them in his letter. Further, he said the agreements reached at the meeting and recorded in his letter were not reached on the basis that Weddings had any obligation to restore the land as provided by cl 5 of the lease. Mr Hayes said a lot of other matters were discussed at the meeting but the agreements reached were recorded in his letter of 11 August 2004. He said his letter of 11 August 2004 was a: concise and accurate minute of the meeting and the agreement reached and sets out the future arrangements Weddings had to remain in the quarry.[78] He said in his witness statement that since the meeting of 10 August 2004 Weddings made payments to Puhinui based on the agreement reached at the meeting. However, he accepted in answer to cross-examination that for the years ended 30 June 2003 and 30 June 2004 Weddings paid the minimum royalties of $75,000. [79] Mr Hayes stated that after the lease expired Weddings remained at the property on a monthly basis. He said:It was clear that there was an understanding that the lease would continue on a month to month basis.[80] When referred to an affidavit dated 31 March 2006 he swore in the summary judgment proceedings, in which he said that Weddings remained on the property without the landlord's consent, Mr Hayes said it was his understanding that the lease and land transactions had to be in writing and he did not recall having any written confirmation of an ongoing month to month lease. [81] He considered that Mr Chambers in his letter of 12 August 2004 (refer [83]), in referring in the final paragraph to the requirement for reinstatement, included an "afterthought" which was not covered on his (Mr Hayes') reading of Mr Chambers' notes of the meeting of 10 August 2004, and that Mr Chambers' letter contradicted what he and Mr Wedding considered to be very clear and concise agreements reached at the meeting on 10 August 2004. He believed Mr Chambers letter introduced issues outside what had already been agreed. He accepted that he did not respond to Mr Chambers indicating that belief.Correspondence following 10 August 2004 meeting[82] Mr Hayes wrote to Edmonds Judd, solicitors for Puhinui, on 11 August 2004:Re Lease Puhinui Farms Limited - I H Wedding and Sons Limited I would advise that a meeting was held at Mangere on the 10 th August, 2004 at 2.00pm to discuss the situation of the lease between the two parties. In attendance was Mr Bill McLaughlin, Bruce and Pam (sic) Chambers, Ian Wedding, David Askew and Maurice Hayes. The issue of the ongoing arrangement for the lease was discussed in full and for the landlords lease their situation was made quite clear in that they would like to move towards the opportunity to sell the property in due course. Lease Term It was mutually agreed that it would be accepted that the tenancy would be ongoing on a monthly basis but three months notice of termination would be given in writing by either parties to terminate the lease. Lease Cost Ian Wedding made it quite clear that with the lack of material that was in the quarry for easy recovery that it was no longer economic to pay a standardminimum rental figure of $75,000.00 per annum. There was discussion between all parties with regards to this rental situation but it was made quite clear that if there was a minimum rental required I.H. Wedding and Sons Limited would terminate the lease at the earliest opportunity. At the end of this discussion it was agreed that no minimum royalty or fixed rental would be paid but the existing royalty arrangement of $1.75 per cubic meter of material removed would be paid on a quarterly basis. It was requested that this would be paid in future on a tonne basis but the nett effect in monitory (sic) terms would mean there was no difference in the actual royalty paid on product removed. Rates Mr Bill McLaughlin advised that he had only in the last few days received a notice for the rates for the year to the 30th June, 2004 and these were charged at $44,000.00. Dave Askew advised that he had previously objected to the large rate increase and for the prior year this was negotiated down to $26,000.00. Given the uneconomic operation of the quarry Weddings made it quite clear that they would only be prepared to pay $26,000.00 in rates for the current year on a monthly basis. Dave Askew was of the opinion that the Manukau City Council had incorrectly assessed the rates on business 6 and that negotiations between the council with both Bill McLaughlin and Dave Askew should be commenced to endeavour to obtain a reduced rates charge. It was accepted that Weddings owed outstanding rates for the previous year ended 30 th June, 2004 but again it was made quite clear that they would not accept the liability for more than $26,000.00 per annum. Change of Zone and Historic Places Trust Conditions Dave Askew advised that work was well advanced in obtaining Historic Places Trust clearance (section 11) and he would proceed to work together with the appropriate authorities and Bill McLaughlin to finalise this. In Dave Askew's opinion the present zoning for the property was 'quarry zone' and this could only be changed by an application by the property owners at a time they considered that the economic resource of the quarry was extinguished. By giving this notice the owners could apply to change the land to business 6 which is the highest industrial use zoning. This could be done when the next district plan is proposed but if it were to be done part way through the existing plan there would be a cost to the owners. The meeting concluded at 4.00pm and M Hayes advised that he would write minutes of the meeting and forward these to Puhinui Farms Limited solicitor for any legal action which may be required in respect of the agreements on ongoing tenancy agreements.[83] Mr Chambers replied the following day, 12 August 2004:Puhinui Farms Ltd and I H Wedding and Sons LtdThank you for a copy of your letter to Edmonds Judd conveying the basis of Puhinui Farms Ltd Directors meeting with you and Messrs Wedding and Askew.There are some matters that you have raised which do not agree with the notes I made and I now think we should address them for the sake of accuracy. 1. There is no reference to the fact that payment of the outstanding royalties for the quarters ending March and June 2004 were now due and were to be paid immediately. 2. The rates due for last year were notified to the company on 29 July 2004 not 10 August as inferred at the meeting. The Directors of Puhinui Farms Ltd did not agree to a suggestion that only $26,000 be paid for the period ending 30 June 2004. They did agree to this for the current year ending 30 June 2005; but for last year the total amount of $46,419.14 incl GST was due. We agreed that we would again make submissions to Manukau City Council to get it reassessed and pass any such recovery to Weddings. The rates for that period are now due in full. 3. Referring to the lease cost and the future royalty due, whilst you refer to an amount of $1.75 per cubic metre converted to a per tonne basis, it was indicated to those at the meeting that past declarations of metal sold were not accurate, although you said that it was in favour of Puhinui Farms Ltd. It now needs to be established how reliable declarations will be made in future when they have a bigger impact and are not part of a liability due. Your suggestions would be appreciated. I note that Dave Askew will proceed with the application to Historic Places Trust now, but remind you that Mr Bill McLaughlin will be unable to assist until he returns from overseas in mid-September. In the meantime this matter should be progressed. Referring to item 1 above, it should be noted that any agreements reached by the Directors of Puhinui Farms Ltd were solely on the basis that Weddings complied with their obligations in supplying immediately the royalty reports, and making payment of royalties and rates due, and if this is delayed then they reserve their rights to resile from the agreements reached. The agreements did not release Weddings from the obligations to restore the land that has been quarried, in accordance with clause 5 of the agreement in particular clause 5.6 and 5.7 and 5.8. because of the agreement for 3 months notice, Weddings must proceed to honour these arrangements so that if such notice is given, this restoration can be completed in the time available.[84] On 25 August 2004 Mr Chambers sent an email to Mr Hayes stating that he had tried to contact Mr Hayes without success. He said:The arrangement made at the meeting was that the reports and cheques would be posted that week but to date they have not arrived at Bill McLaughlin's place. We were under the impression that as part of the agreements made at the meeting this would be done, and my letter to you confirmed this understanding. Please ask Weddings to mail the cheques immediately.I would also ask that you confirm the contents of the letter I sent you dated 12 August 2004. Your letter to Edmonds Judd a copy of which you sent to me, did not cover all the points dealt with at the meeting and my letter was to establish that these extra matters had been covered. I ask that you confirm this as soon as possible.[85] Mr Hayes replied the same day that he could not answer Mr Chambers' queries at that stage because Mr Wedding had been rushed to hospital the previous week and he (Mr Hayes) would be away the following week. He said that as soon as Mr Wedding was able and he was available, the issues raised would be addressed. [86] On 9 September 2004 Mr Chambers, having heard nothing further, sent another email asking if progress had been made and advising that the reports and cheques had not been received. There were no further communications. [87] On 11 October 2004 Puhinui picked up a cheque from Weddings for $42,187.50 being royalties for the quarters to 31 March 2004 and 30 June 2004, but there were still no reports. The outstanding rates were not paid until payment was made pursuant to a consent order made on 21 July 2006 following Puhinui's application for summary judgment made in February 2006 seeking orders for possession and payment of outstanding royalties and rates. This resulted in a consent order that Weddings pay to Puhinui $42,001.68 on account of rates for the period to 17 January 2006 which included the balance of rates owing to 30 June 2004 of $22,174.23, Weddings having paid two instalments on account of these rates during 2005. [88] On 30 May 2005 Edmonds Judd wrote to Mr Hayes advising that Puhinui considered the arrangements made at the meeting on 10 August 2004 no longer applied and would adhere to the terms of the original lease. The letter referred to Mr Hayes' letter of 11 August 2004 and Mr Chambers' reply of 12 August 2004 and noted that despite Mr Hayes' email on 25 August 2004 the issues raised by Mr Chambers had not been addressed. The letter further stated that the various concessions offered to Weddings by Puhinui were clearly on the basis that Weddings would immediately attend to the necessary payments, the provision of royalty reports for the period from January 2004 to the present day and payment of royalties based on the reports, but Weddings had failed to do so. Puhinui reserved the right to auditprevious royalty reports. Demand was made for all rates for the year 2003/2004 and also required payment of rates for 2004/2005 which Puhinui offered to reduce to $26,000 plus GST on a "without prejudice" basis provided there was compliance with all matters raised in the letter within seven days of the date of the letter. The letter finally advised that reinstatement must be commenced immediately pursuant to Weddings' obligations under the lease and that Court orders would also be sought in that regard.Discussion and conclusions[89] It is apparent that Puhinui and Weddings each came to the meeting on 10 August 2004 from different starting points. Puhinui proceeded on the basis that Weddings was holding over as lessee under the terms and conditions of the lease. Puhinui was concerned that although Weddings had provided royalty reports and paid royalties in accordance with them up to 31 December 2003, during 2004 there had been neither reports nor payments of royalties. Further, that rates for which Weddings was liable under the lease had not been paid. Puhinui had received a rates demand from the Manukau City Council for rates to 30 June 2004 for the significantly increased amount of $46,419.13. It was experiencing cash flow difficulties because although the lease required the lessee to pay the rates, having experienced during the term of the lease the situation where Weddings had failed to pay rates due and Puhinui had been obliged to issue summary judgment proceedings to recover the rates, Puhinui had taken it upon itself to pay the rates when due and to seek recovery from Weddings under the lease. Puhinui was also concerned about reinstatement. The lease had expired on 30 June 2002. Clause 5.8 of the lease required reinstatement in accordance with the QMP and the specifications in schedule C. This had not been completed. So Puhinui came to the meeting looking for an agreement with Weddings that would see the breaches of the lease remedied. [90] On the other hand, Weddings came to the meeting on the basis that the lease had terminated on 30 June 2002 and its obligations as lessee under the lease had expired with the lease. Mr Wedding said in evidence that Weddings did not have a lease because the lease finished in 2002. Mr Hayes expressed the opinion that therewere no enforceable obligations under the lease because there was nothing in writing confirming a month to month lease after the lease expired. Both those contentions were incorrect. I have found that following the expiry of the lease on 30 June 2002 Weddings was holding over on the terms and conditions of the lease, as was conceded by counsel for Weddings. [91] Further, the position taken by Mr Wedding and Mr Hayes is inconsistent with the practice Weddings continued following expiry of the lease until the quarter ended December 2003 of forwarding royalty reports on a quarterly basis and paying royalties on the basis that the minimum annual royalty payment of $75,000 was applicable. Mr Hayes accepted in answer to cross-examination, that minimum royalties were paid for the years ended 30 June 2003 and 30 June 2004. [92] The approach taken by Mr Wedding at the August 2004 meeting, as confirmed by Mr Hayes, was to stipulate the conditions upon which Weddings was prepared to continue in the quarry, i.e. no minimum royalty payment, rates limited to $26,000 per annum and three months notice of termination. That is the arrangement Mr Hayes recorded in the letter he wrote immediately following the meeting on 11 August 2004 (refer above at [82]). Mr Wedding and Mr Hayes were emphatic that there were no conditions attached to these arrangements. [93] Mr McLaughlin and Mr Chambers were equally emphatic that the concessions offered by Puhinui were conditional on Weddings promptly remedying past breaches. Mr Chambers made that clear in the letter he wrote on 12 August 2004 (refer above at [83]) in which he set out matters he had recorded as being part of the arrangements agreed on 10 August 2004. They included the requirement for past breaches to be remedied promptly and recorded the ongoing obligation under the lease that Weddings reinstate the quarry in accordance with the terms of the lease. [94] The notes made by Mr Hayes at the meeting were brief (refer above at [68]). In explaining them to the Court he said the reference to $44,000.00 related to Weddings acceptance that it owed outstanding rates for the previous year as recorded in his letter of 11 August 2004. The figure of $25,000 was a reference to the limit ofliability for future rates which Weddings was prepared to accept, as recorded in his letter, but the figure should have been $26,000 being $500 per week. The reference to 30/6/04 was to the period for which royalty statements were outstanding. The final note, he said, referred to the agreement to pay rates but no minimum royalties on materials extracted. [95] So Mr Hayes' notes and his letter of 11 August 2004 reiterated the conditions as stated by Mr Wedding, upon which Weddings was prepared to continue its occupancy of the property. However, both Mr Wedding and Mr Hayes agreed that other matters were discussed at the meeting. Clearly this was so, as is evidenced by the much more detailed notes of the meeting taken by Mr Chambers. [96] There are several references in Mr Chambers' notes to the matter of restoration which was a requirement of the lease. For example, paragraph 28 notes:Dave (Askew) wants three months notice to leave to get materials & plant out. This agreed but restoration must be done then too.[97] Several entries refer to the state and stage of restoration. Mr Chambers queried why restoration was not in keeping with the Babbage plan to the ARA, (Babbage being the consultants employed by Weddings). Mr Askew replied it was "not possible". Mr Wedding is recorded as saying "restoration is expensive". Finally at paragraph 38 Mr Chambers records:Bill says PF (Puhinui) wants certificates for restoration and cash otherwise arrangements fail. We need certs for sale.[98] I consider it is clear that restoration was discussed in some detail and Puhinui's position conveyed, that future arrangements in relation to royalties and rates were conditional upon the reinstatement obligations under the lease being met by Weddings. I do not accept Mr Hayes' contention as given in evidence, that the last paragraph of Mr Chambers letter of 12 August 2004 which referred to the obligation to reinstate was an "afterthought". The notes of the meeting clearly record otherwise. Further, it would make no sense that Puhinui would relieve Weddings of the reinstatement obligation which was of considerable value to it, particularly with a sale being contemplated, as well as granting significantconcessions in relation to royalties and rates, without getting anything in return. Puhinui was simply requiring compliance by Weddings with its existing contractual obligations under the lease to reinstate. [99] Because of the different starting points from which each of the parties approached the discussions at the meeting on 10 August 2004, it is possible that each left the meeting with a different understanding of the agreements reached, because each viewed the discussion from its own perspective. But the arrangements intended by each of the parties were made abundantly clear in the correspondence that immediately followed the meeting on 11 and 12 August 2004. As arranged at the meeting, Mr Hayes wrote the next day with his summary of the discussions. Mr Chambers immediately responded raising matters which he said did not agree with the notes he had taken and which he thought should be addressed for the sake of accuracy. He listed those items and invited further suggestions from Weddings. Importantly, he recorded that any agreements by Puhinui were solely on the basis that Weddings complied with its obligations in supplying immediately the royalty reports, and making payment of the royalties and rates due. He stated that if this was delayed, then Puhinui reserved its rights to resile from the agreements reached. He also specifically stated that Weddings was not released from its obligations to restore the land in accordance with cl 5 of the lease. [100] Despite promptings from Mr Chambers, neither Mr Wedding, Mr Hayes nor anyone representing Weddings ever replied to Mr Chambers letter of 12 August 2004, although Mr Hayes indicated that the issues would be addressed subject to the difficulty of Mr Wedding being in hospital at the time. The issues were not addressed at any time before Puhinui through its solicitors withdrew any concessions made at the meeting on 10 August 2004 and confirmed that Puhinui would be adhering to the terms of the original lease. [101] In answer to questions from the Court, Mr Hayes expressed the view that Mr Chambers' letter introduced issues outside what had already been agreed and that he was not prepared to confirm them. But he accepted he never advised Mr Chambers of this either in writing or verbally. He also accepted in answer to cross-examination by Mr Morris that Mr Chambers' letter of 12 August 2004 gave a much differentinterpretation from his interpretation as to what happened at the meeting and what was agreed. He agreed it would have been reasonable to have responded to Mr Chambers' letter within 4-6 weeks. [102] Even when Edmonds Judd wrote on 30 May 2005 withdrawing from any arrangements made at the meeting on 10 August 2004 because of failure by Weddings to honour the agreements as Puhinui understood them, and advising that Puhinui would be adhering to the terms of the original lease, Weddings made no objection and raised no point of disagreement. Again Weddings simply did not reply, even though the letter directly referred to the ongoing operation of the lease which Mr Wedding and Mr Hayes said in evidence they believed was at an end, including Weddings' obligations under it. [103] The conclusion I reach on the basis of the evidence is that there was no agreement reached at the meeting on 10 August 2004 in relation to the terms and conditions of the lease, except as to the three months notice of termination. The parties entered upon the discussions from different starting points and with different agendas. The letters of 11 and 12 August 2004 clearly confirm that there was no consensus, and that no new agreement was reached. No attempt was made by Weddings to enter into further discussions as suggested by Mr Chambers in his letter of 12 August 2004 so that points of disagreement could be resolved. Any concessions made by Puhinui were withdrawn by the letter of Edmonds Judd of 30 May 2005. [104] I am satisfied the evidence does not establish on the balance of probabilities that a second lease upon the terms alleged by Weddings, was agreed at the meeting on 10 August 2004. Accordingly the terms and conditions of the lease under which Weddings was holding over continued in effect, subject only to variation of the notice period for termination, which was agreed as three months.Was Weddings required to reinstate the quarry?[105] Because I have held that the lease continued in effect after 30 June 2002, and no agreement was reached by the parties for a new or substitute lease, it follows thatthe obligation to reinstate contained in the lease, in particular cl 5.8 which refers to the QMP in schedule B and the specifications in schedule C, was an obligation of Weddings as lessee. [106] In his evidence Mr Wedding referred in some detail to the restoration work carried out by Weddings. He said that Weddings had not quarried very much of the property and had started to undertake restoration of the area at the front of the quarry before vacating the property, but did not finish it as the sale to Peter Bishop was in progress. [107] Further, an annual management plan dated September 2004 prepared by Babbage Consultants Limited for Weddings to be submitted to the Auckland Regional Council for comment and approval in relation to resource consents under which rehabilitation works were being undertaken at the quarry, presents an annual management plan for 2004/2005, and refers to planned rehabilitation clean filling which had not been undertaken in the period May 2003 to April 2004, and rehabilitation works which would be recommenced in the year to April 2005. The report also refers to the proposed extension of the quarry operating area in the south eastern area of the property in the period to 30 April 2005. So clearly on the basis of its own expert's report, both quarrying and rehabilitation were ongoing activities proposed by Weddings, notwithstanding Mr Weddings' assertion in evidence that Weddings' obligation to reinstate expired with the lease on 30 June 2002. [108] The obligation to reinstate was addressed in Puhinui's letter of 24 June 2002, Edmond Judd's letter of 14 May 2004, Mr Chambers' letter of 12 August 2004, Edmonds Judd's letter of 30 May 2005, and in the termination notice issued by Puhinui to Weddings on 14 October 2005 Weddings was required to carry out full reinstatement of the property before the date of termination, 17 January 2006. To none of these advices and requirements did Weddings raise any dispute or objection. [109] I find that Weddings' failure to complete reinstatement is in breach of the lease.Did Puhinui suffer loss which should be answered in damages?[110] Weddings pleads that Puhinui has suffered no loss. It was submitted that Puhinui, having elected to take Option 1 before giving notice to quit to Weddings, cannot now say to Weddings that Weddings has caused its loss. While Weddings has not reinstated, because Puhinui has elected not to transfer/sell in a reinstated state, it is now unreasonable for Puhinui to claim that Weddings caused the loss. Having relieved itself of the obligation to sell the quarry in a reinstated state, Puhinui is stuck with its own election. Puhinui chose which option it wanted. [111] It was further submitted that if Puhinui had elected to take Option 2 and then made demand of Weddings for reinstatement, if Weddings had failed to reinstate Puhinui could have done so, and it would then have had a legitimate and certain claim for damages. [112] I do not accept the arguments advanced for Weddings. The fact that under the terms and conditions of Option 1, Puhinui was relieved of the requirement to reinstate the property in accordance with the lease, with Rock Solid assuming responsibility and indemnifying Puhinui from any liability in respect of reinstatement, does not mean that Puhinui suffered no loss. It is relevant to record here that Weddings' pleading at paragraph 26 of the statement of defence to the third amended statement of claim that "all disputes arising in respect of the lease between the plaintiff and the defendant devolved to the purchaser", is incorrect. Puhinui did not assign to Rock Solid any rights or obligations under the lease, or any remedies it had against Weddings. It simply ensured by the contractual terms of the agreement for sale and purchase that resulted from the acceptance of Option 1, that Puhinui had no obligations to Rock Solid for reinstatement. [113] Puhinui was placed in the position where it did not have a reinstated property to sell because Weddings had failed to reinstate in terms of the very specific provisions of the lease. Requirements by Puhinui for reinstatement to be completed (refer above at [108]), had been ignored.[114] Faced with that situation, Puhinui elected an option that was available to it from Rock Solid, to accept a lower sale price and relieve itself of the responsibility of either trying to enforce the reinstatement obligations under the lease against Weddings or itself to carry out reinstatement (which was not part of Puhinui's core business, unlike Weddings or Rock Solid) and seek recovery from Weddings under the lease. In all the circumstances, I consider the election made by Puhinui was commercially logical, justifiable and reasonable. The alternatives carried real risks of delay, uncertainty and additional costs, particularly given the history of Puhinui's dealings with Weddings over the lease. [115] But because Puhinui elected Option 1, thus removing any obligation on its part to achieve reinstatement, does not mean that it suffered no loss. Clearly it did. It received a lesser price for the property than if the property had been available for sale in a reinstated state. The issue then becomes what is the measure of Puhinui's loss due to the property not having been reinstated as required by the lease. I turn to consider that issue.Quantum of damagesSubmissions about diminution in value[116] Puhinui submitted that it should be awarded damages of an amount very close to $1.4m being the diminution in value of the property arising from Weddings failure to reinstate. This figure represents the difference between the prices under Option 1 ($11.5m) and Option 2 (effectively $12.9m) offered by Rock Solid for purchase of the property. Puhinui's position is that if Weddings had reinstated the land as required by the lease then it would have been able to accept Option 2 which would have yielded the higher sale price. Puhinui submitted that diminution in price should apply with greater weight over a pure reinstatement cost approach, because the value of the property always lay in the land as developed building platforms, and the lease specifically states that the proposed end use of the site after quarrying is completed is to be industrial land (schedule C to the lease). The lease also requires that at the end of the term Puhinui was to be provided with "a report suitable forsubmission to Manukau City Council in support of a future subdivision proposal" (schedule C). [117] It was submitted that if Puhinui is compensated only for reinstatement costs there is no recognition of the lost opportunity to extract full commercial value from the property. Mr Crossland also submitted that here real evidence is available of transaction value from the sale to Rock Solid, whereas the figures agreed by the experts for the cost of reinstating the property are theoretical only. [118] Clause 15 of the agreement for sale and purchase between Puhinui and Rock Solid identified four matters for which the purchaser assumed responsibility and indemnified the vendor pursuant to the purchaser's acknowledgment that it bought the property on an "as is, where is" basis. They were:(i) Any claim for ownership or compensation for lost ownership made by a third party. (ii) Any claim arising out of obligations imposed by any resource consent attached to the property. (iii) The requirement to reinstate the property as more particularly set out in the Agreement to Lease between the Vendor and IH Wedding & Sons Limited dated 22 July 1996 ("the Lease"). (iv) Any dispute or claim arising out of the Lease including the failure by the tenant to vacate the property pursuant to the Termination Notice in which case the Purchaser shall remain obligated to complete settlement without any claim then or in the future against the Vendor.[119] The form of agreement for sale and purchase which was included with the original offer from Mr Bishop's company, Euroclass, dated 7 October 2005 specified a fifth matter, being any ongoing obligation or liability imposed on Puhinui pursuant to the Contribution Agreement entered into between Puhinui and McLaughlin Park Limited on 30 September 2004. However, this does not seem to have been carried forward into the final form of the agreement for sale and purchase. [120] The thrust of Puhinui's submissions was that the matters other than reinstatement were minor or inconsequential and that reinstatement was likely tohave been "by far the most influential factor in calculating the offers to be made for the property". [121] Mr O'Neill submitted that the Court simply does not know what figure Mr Bishop attributed to reinstatement. All that is known is that the differential was $1.4m and that the factors in cl 15 of the agreement for sale and purchase contributed unequally to make up that figure. [122] I agree with Mr O'Neill about the lack of evidence on this aspect. There is no firm evidence as to what portion of the $1.4m differential was attributed by Rock Solid to reinstatement. Mr Bishop's evidence was that absent the harbour fill brought onto the property by Weddings, Rock Solid/MQT would have paid "significantly more" to buy the property as reflected in the three options tendered to Puhinui. But Mr Bishop was unable to give any details of the amount attributed to the cost of reinstatement. He simply confirmed that the difference of $1.4m between Options 1 and 2 reflected all four factors which contributed unequally in the assessment the purchaser made. [123] It is not for the Court to speculate or to guess, which I would be doing if I were to adopt the approach urged by Puhinui to make an award very close to $1.4m because in Puhinui's view, the other matters paled into insignificance. I therefore reject that approach.The rule in Joyner v Weeks[124] In Joyner v Weeks [1891] 2 QB 31 (CA) Lord Esher MR delivering the judgment of the Court of Appeal said that a very long line of cases showed a constant practice as to the measure of damages in cases of reinstatement. He stated at 43:Such an inveterate practice amounts, in my opinion, to a rule of law. That rule is that, when there is a lease with a covenant to leave the premises in repair at the end of the term, and such covenant is broken, the lessee must pay what the lessor proves to be a reasonable and proper amount for putting the premises into the state of repair in which they ought to have been left. It is not necessary in this case to say that that is an absolute rule applicableunder all circumstances; but I confess that I strongly incline to think that it is so. It is a highly convenient rule. It avoids all the subtle refinements with which we have been indulged to-day, and the extensive and costly inquiries which they would involve. It appears to me to be a simple and business like rule; and, if I were obliged to decide that point, I am very much inclined to think that I should come to the conclusion that it is an absolute rule. But it is not necessary to determine that point in the present case. The rule that the measure of damages in such cases is the cost of repair, is, I think, at all events, the ordinary rule, which must apply, unless there be something which affects the condition of the property in such a manner as to affect the relation between the lessor and the lessee in respect to it.[125] Fry LJ, the other member of the Court, observed at 46 that the rule so laid down is one of great practical convenience, much more simple, he said, than the measure of damages being the amount of the diminution of value of the reversion not exceeding the cost of repairs. He said there was complexity about such an approach which involved the ascertainment of two amounts in order to take the smaller of the two, which was unfit for determining affairs as between man and man in a court of law. [126] In Maori Trustee v Rogross Farms Ltd [1994] 3 NZLR 410 the Court of Appeal held that the rule in Joyner v Weeks was not an absolute rule. It was, however, the prima facie rule that would be applied unless the lessee could show by sufficiently cogent evidence that in both the short and the long term the lessor would definitely suffer no loss or would suffer a loss which could definitely be assessed at less than the prima facie measure. [127] In Rogross the Court of Appeal noted at 418-419 that damages in contract are designed to represent the monetary equivalent of the promised benefit which has not been provided, in other words to put the injured party as nearly as possible as far as money can do it, into the position he would have been if the contract had been performed. [128] The Court said at 419:That sum of money will ordinarily equate the cost to the lessor of having the covenant performed. It is when the lessor is unable or does not wish, for whatever reason, to have the covenant performed that the difficulties said to be inherent in the rule arise. It follows that there is justification for holding that the rule is not absolute. But on a prima facie basis the rule fits comfortably with the purpose of damages for breach of contact.[129] The Court concluded at 420:We would therefore state the law as follows. The rule in Joyner v Weeks is not an absolute rule. It is, however, a prima facie rule which will be applied unless the lessee can show by sufficiently cogent evidence that in both the short and the long term the lessor will definitely suffer no loss or will suffer a loss which can definitely be assessed at less than the prima facie measure.[130] In that case the Court held that Rogross had not demonstrated any sufficient reason for departing from the prima facie measure. The Court observed at 420:It might be added that the uncertainty over these issues is a good example of the desirability of a firm prima facie starting point.Cost of reinstatement : experts' agreement[131] In assessing the cost of reinstatement in this case, the Court is greatly assisted by the evidence of the experts called by the parties, Mr Mark Mitchell for Puhinui and Mr Geoffrey Farquhar for Weddings. Mr Mitchell on the instructions of Puhinui prepared the report which was provided to interested parties prior to the submission of tenders for purchase of the property. He provided a witness statement, and having had access to further documentation contained in the agreed bundle of documents, completed an addendum to his witness statement dated 29 August 2007. Mr Farquhar considered the reports and correspondence provided by Mr Mitchell and also visited the site prior to completing his witness statement. [132] The experts subsequently conferred and continued their discussions during the course of the hearing. They reached agreement on a number of critical matters. They presented to the Court a written agreement dated 29 August 2007 when they gave their evidence on 30 August 2007. [133] The experts calculated the cost of reinstatement on the basis of the requirements of the lease. They identified the documents or parts of documents that referred to geo-technical and quarry management matters as including: a) Agreement to lease, Section 5.8 (page 2)b) Schedule B, Section 3. Quarrying and Restoration (page 12) c) Schedule B, Section 5.2 (page 14) d) Schedule B, attached Site Plan – Restoration proposals (page 16) e) Schedule C, Sections C.4, C.5 and C.6 (pages 20 to 21) f) Auckland Regional Council lease Application 24128, Section 5.3 Proposed Activities (pages 306 to 308) and attached plan (page 328) g) Auckland Regional Council Resource Consent 24128, advice Note 11 defining cleanfill (page 326) h) Mark T Mitchell Ltd letter dated 14 March 2005 (pages 148 to 152) i) Stockpile volumes ex CKL Surveys (page 159) j) Mark T Mitchell Ltd Part A Summary Report (pages 169 to 198) k) Babbage Consultants letter of 22 July 2004 (pages 121 and 122) l) Babbage Consultants fax of 25 July 2007 presenting fill compaction testing carried out in February, March and April 2001 (pages 480 to 482). [134] The experts reached agreement on the cost of reinstatement, but they presented their agreed figures as two alternatives based on the two signed site plans attached to the lease which showed different final levels of restored ground to be achieved. [135] The engineers quite properly, found themselves unable to determine which of the two signed site plans attached to the lease should govern the situation. They therefore determined and agreed the cubic metres of soil that would be required to fill the site on the basis of each of the two plans attached to the lease. Theydetermined that restoration to the levels in site plan 1 would require a total of 300,000 cubic metres of fill, while site plan 2 would require 100,000 cubic metres of soil. They agreed that the cost of reinstatement was respectively $1,590,000 under plan 1 and $740,000 under plan 2.Which lease plan applies?[136] To determine the cost of reinstatement based on the experts' agreed assessments, it is therefore necessary that I determine which of the two plans attached to the lease was intended by the parties to the lease to be incorporated as part of Schedule B to the lease determining the level of restored ground to be achieved under the reinstatement requirements of the lease. [137] Clause 1 of the lease provides:The Lessor leases and the Lessee accepts a lease of the land described in Schedule A ("the Leased Property") for the purpose of granting to the Lessee rights to quarry, remove and sell rock, earth and scoria subject to reinstatement of the surface and otherwise on the terms and conditions set out in this Agreement.[138] The lessee covenants under the lease:5.6 to work the Leased Property so that while having regard to reasonable constraints imposed by normal quarrying practice the extraction of wanted material followed by reinstatement as required by clause 5.8 commences in the north eastern corner adjacent to the entrance and carries on generally towards the south west in an orderly and progressive fashion leaving the reinstated land as far as possible one continuous area spanning the width of the site; 5.7 in working each section to remove all materials to the levels specified in Schedule B and not to commence filling until the Lessor if the Lessor so desires has effected any survey necessary to establish conformity with the Lessee's obligations; 5.8 to reinstate the surface of the Leased Property by filling and compacting with quarry strippings or suitable clean fill material whether taken from the site or brought in and free from contaminated soil or toxic materials to the levels and contours prescribed by the Quarry Management Plan as set out in Schedule B and in accordance with the specifications comprised in Schedule C and to form carriageways located as directed by the Lessor to an agreed subgrade level and to supply and place a 150 mm thick layer of sub-base aggregate over the carriageway area so as to leave theLeased Property when reinstated as suitable for industrial purposes including all necessary planting and landscaping.[139] Schedule B to the lease comprises the QMP. It is headed:PUHINUI SCORIA LIMITED AND PUHINUI FARMS LTD QUARRY MANAGEMENT PLAN 872-1[140] The QMP states that it is prepared by WM J Adie & Assoc. Consulting Surveyors, P.O. Box 23184, Papatoetoe, and is dated 9 March 1981. [141] Clause 1.01 of the QMP states:This text is the written part of Quarry Management Plan 872-1 which has been prepared to Ordinance 14.7.3.3.1 of "City of Manukau First Reviewed District Scheme 1980".[142] In clause 3 the QMP documents are defined:3.01 This Text 872-1 (Dated 9 March 1981) 3.02 Sheet 872-6 (Amended March 1981) – "Topographical Locality Plan". This has been prepared to illustrate the above properties relative to the topography of the surrounding properties. 3.03 Sheet 872-7 "Topographical and Cadastral & Restoration Stating Plans" (Drawn March 1981). 3.04 Sheet 872-8 (Drawn March 1981) – "Typical sections". 3.05 Sheet 872-9. This is a copy of part of an aerial photograph flown 31 July 1975.[143] Of those documents which are defined as the QMP documents, only the Text 872-1 and Sheet 872-7 are attached to the lease. Sheet 872-7 appears to have been initialled by the parties to the lease. It is a black and white plan on which the following notation appears:Sheet 872-7 Drawn: March, 1981 Amended: March 1981 October 1986 November 1986 WM JOHN ADIE & ASSOC.From the dates noted above, which appear in the bottom left hand corner of the plan, it appears that Sheet 872-7 has been updated on two occasions after it was prepared as part of the QMP in March 1981. [144] Following the Text 872-1 of the QMP, there is attached to the lease a document headed "Town Planning Committee – 4/5/81 ("the Town Planning document"). This document concludes with a recommendation:That Quarry Management Plan 872 prepared by John Adie and Associates on behalf of Puhinui Scoria Ltd and Puhinui Farms Ltd be approved.[145] The Town Planning document, which appears to be a Minute or report from the Town Planning Committee of the Manukau City Council, refers to the receipt of a QMP for Puhinui Scoria Ltd and Puhinui Farms Ltd for the quarrying and restoration of the major part of Lots 2 and 3 DP 48867 described as the area shown on Review Maps 22 and 23. [146] Then follows "Planning Map: 22". The map is headed "Application of Puhinui Scoria Ltd and Puhinui Farms Ltd Quarry Management Plan Restoration proposals" which appears to have been prepared by the Planning Department of the City of Manukau. It is noted as drawn by "J Shaw" on 2.4.81, beneath which appears "M. J. Hayman, City Planner". [147] In the Town Planning document, reference is made to this map. Paragraph 3.1 states:It is proposed that the land will be restored to two basic planes of 1 in 200 falling from a northeast – southwest ridge 15.82 m above mean sea level about 10 metres west of the western boundary of Lot 3 DP 48867. (The restoration proposals are illustrated on the attached plan).[148] Then follow as further attachments to the lease, correspondence between WM John Adie & Associates and the Manukau City Council in March and April 1986 regarding a proposed lowering of the restoration profile as provided in Quarry Management Plan 872-1. The surveyors say they are forwarding two prints off the top left hand corner of "our Sheet 872-7" on which they have illustrated the proposed changes with coloured lines.[149] The City of Manukau's response of 14 April 1986 says: I understand that it is intended to present a revised Quarry Management Plan on the completion of negotiations between the parties and that the plan will show lowered restoration contours In view of the operational requirements of Puhinui Scoria Ltd to commence stripping of the area formerly occupied by the homestead before the onset of winter, and the fact that the existing approved batters will be lowered, the plan submitted (Plan 872-1) is acceptable as an interim management plan for the northern part of the quarry only, pending receipt of a revised management plan within twelve months.[150] The next document attached to the lease is an Auckland Regional Authority letter dated 18 February 1981 referring to stormwater disposal, which is not relevant to the matter of reinstatement. [151] Then follows Schedule C to the lease entitled "Backfill control in rehabilitated areas of Quarry". Clause C.1 states:ScopeUpon completion of quarrying, the whole site is to be finished to levels shown in the Quarry Management Plan attached in Schedule "B". This process is to be completed in stages as outlined in clause 56 (sic) of the Lease. The proposed end use of the site, after quarrying is completed, is industrial land. The standard of fill materials and compactive effort must therefore be compatible with this end use. (The reference to clause 56 of the lease is clearly intended to be a reference to clause 5.6 of the lease).[152] The final document immediately before the backing sheet to the lease, is Sheet 872-7. Sheet 872-7 is not immediately adjacent to Schedule B but follows Schedule C. I do not think anything significant turns on this. In the original lease document, Sheet 872-7 is a fold-out plan twice the width of the printed pages. To accommodate it in the document, it would have been practical to attach it immediately in front of the backing sheet where it could be easily folded to the standard sheet size. But this is clearly the plan referred to in clause 3.03 of the QMP as "Sheet 872-7" (refer above at [14]). [153] Clause 5.8 of the lease (refer above at [137]) prescribes the reinstatement obligation by reference to: the Quarry Management Plan attached as set out in Schedule B and in accordance with the specification comprised in Schedule C [154] Clause C.1 of Schedule C refers to: in the Quarry Management Plan attached in Schedule "B" [155] Planning Map: 22 immediately follows the Town Planning document in the lease. Clearly the Town Planning Committee also had before it Sheet 872-7 because in paragraph 2 of the Town Planning document, the QMP submitted by the applicants is recorded as consisting of two plans, an aerial photograph (flown in 1975), a set of cross sections and a written explanation. Comparing these documents with those defined in clause 3 of the QMP, the two plans referred to must be Sheet 872-6 and Sheet 872-7. [156] The Town Planning document uses the word "plan" in several ways: to refer to the QMP, the two plans submitted with the QMP and "the attached plan" illustrating the restoration proposals. It recommends approval of Quarry Management Plan 872 prepared by WM John Adie & Associates, which must be a reference to the QMP in its totality, incorporating 872-1, 872-6, 872-7, 872-8 and 872-9. [157] Paragraph 3.1 of the Town Planning document refers to the ridge 15.82 metres above mean sea level and relates proposed restoration to two basic planes falling from this ridge " illustrated on the attached plan". This can only be a reference to Planning Map: 22, for that is the only plan on which the level of 15.82 metres is recorded. However, the Town Planning document then goes on to recommend approval of QMP 872, which incorporates not Planning Map: 22 but Sheet 872-7 showing restoration proposals and sequences. [158] The correspondence between WM John Adie & Associates and the Manukau City Council which followed five years later in March-April 1986, refers to lower restoration contours, to plan 872-1 being acceptable as an interim management plan for the northern part of the quarry only (presumably a reference to the 1981 QMP 872-1 as headed, although clause 3 of the QMP defines 872-1 as the text) and to a revised management plan to be received by Council within twelve months. Itappears that the 1981 approval (whatever precisely were its terms), was varied by the 1986 correspondence. [159] The notations on Sheet 872-7 attached to the lease, as to amendments in October 1986 and November 1986 (refer above to [142]), suggest that Sheet 872-7 was further amended, by inference to meet the requirement of council for a revised management plan within twelve months of April 1986. [160] I conclude from the above analysis of Schedules B and C attached to the lease that:• QMP 872 including Sheet 872-7, prepared by WM John Adie & Associates was presented to Manukau City Council in about March 1981.• The Town Planning Committee on 4 May 1981 recommended its approval but arguably with varied restoration levels based on Planning Map: 22 attached to the Town Planning document.• The restoration contours for the northern part of the quarry were varied in 1986 with the agreement of Manukau City Council – they were lowered.• Whatever place and purpose Planning Map: 22 had at that time (which is most unclear from the Town Planning document), the reinstatement proposals were advanced and amended in 1986.• A revised management plan was required by council within twelve months of April 1986.• Sheet 872-7 was amended in October and November 1986 by WM John Adie & Associates, although the respect or respects in which it was amended cannot be identified on Sheet 872-7.• Sheet 872-7 attached to the lease reflects the most recent programme of restoration under QMP 872.• The developments evidenced by the 1981 approval and the 1986 correspondence with the Manukau City Council have been included as part of Schedule B to show the link through to Sheet 872-7 incorporating the 1986 amendments. [161] On that basis, I conclude that the plan which the parties to the lease intended should be incorporated as part of Schedule B was Sheet 872-7, or plan 2 referred to in the agreement between experts dated 29 August 2007. [162] Further, as Mr Crossland accepted, in the event of ambiguity or doubt the contra proferentem rule would require the lease to be construed against the lessor Puhinui, whose solicitors prepared it, and in favour of the lessee Weddings. That would require the less onerous of the two plans from the lessee's perspective, to be treated as the plan relevant to the lessee's reinstatement obligations under the lease. [That is Sheet 872-7 (plan 2).] [163] It follows that the cost of reinstatement pursuant to the lease as determined and agreed by the engineering experts is $740,000. I adopt that figure as the prima facie measure of loss to be applied in terms of Joyner v Weeks and Rogross.Submissions about cost of reinstatement[164] Further submissions were presented in writing pursuant to leave granted at the conclusion of the hearing to provide to Weddings the opportunity to consider whether it wished to call further evidence or wished to make further submissions, given the late amendment to the statement of claim granted at the commencement of the hearing following the sale to Rock Solid having become unconditional, thereby providing evidence of the sale price of the property. Weddings elected simply to make further submissions to which Puhinui filed submissions in reply. [165] Weddings submitted that any damages assessed should be significantly less than the $740,000 agreed by the engineers under plan 2. It was submitted that the figure of $740,000 would be the cost to an independent contractor of undertaking the reinstatement for the purchaser. Weddings asserted, however, that Mr Bishop has undertaken reinstatement with his own machinery and has also been chargingdumping fees, selling material won from the quarry and "making money both ways from the quarry". (The latter is an interesting submission in the light of Mr Weddings' repeated assertions that there was no material any longer worth winning from the quarry. Mr Bishop's evidence was to the contrary). [166] It was submitted that while there is some evidence before the Court from the expert engineers as to the cost of reinstatement, Mr Bishop with access to his own resources would have put a different figure on the cost of reinstatement, which would have been significantly less than the $740,000 assessed by the engineers.Discussion and conclusions[167] I find the arguments of Weddings on this aspect to be quite illogical. How Mr Bishop chooses to conduct his business at the quarry following settlement of the purchase from Puhinui does not assist in determining Puhinui's loss resulting from Weddings' failure to reinstate in terms of the lease. Weddings is asking the Court to speculate and guess as to how Mr Bishop calculated the amount of the purchase price in the options he tendered to Puhinui, in much the same way as Puhinui has suggested the Court should speculate as to the manner in which Mr Bishop calculated the prices tendered in the options given to Puhinui. [168] If I were to indulge in speculation, I could equally well speculate that Mr Bishop with his long experience and demonstrated ability in the industry, in determining the amount of the tenders under Options 1 and 2 might well have assessed the cost to Puhinui of reinstatement, had it undertaken the exercise Weddings submitted it should have undertaken, namely carrying out the reinstatement itself thereby establishing the extent of its loss. Aware, as no doubt he was, that Puhinui was not in the business of quarrying and reinstatement, in assessing the value of the respective options to Puhinui, Mr Bishop might well have factored into the $1.4m differential between Options 1 and 2 the cost to Puhinui (as distinct from the cost to Rock Solid or for that matter Weddings) of reinstating the quarry, on the basis that Puhinui would have been obliged to employ independent contractors.[169] But the Court does not speculate. Suffice to say that the submissions by Weddings fail to meet the test in Joyner v Weeks, i.e. they fail by a good margin to show that Puhinui's loss can definitely be assessed at less than the prima facie measurement which is that damages will ordinarily equate the cost to the lessor of having the reinstatement covenant performed. [170] I therefore revert to the agreed assessment of the expert engineers that the cost of reinstatement under plan 2 is $740,000. In my judgment that is the measure of damages to which Puhinui is entitled.Is Weddings liable for royalties under the lease to the termination date 17 January 2006?[171] It follows from my findings: a) Weddings was holding over after the lease expired on 30 June 2002; and b) There was no second lease agreed by the parties at the meeting on 10 August 2004 upon the terms and conditions alleged by Weddings - that Weddings is liable for royalties under the lease to the termination date 17 January 2006. [172] Puhinui claims the sum of $121,128.75 (including GST) for unpaid royalties as set out in the Table at paragraph 11 of the third amended statement of claim. Mr McLachlan gave evidence of the amounts which comprise the total claim. [173] Royalty reports to 30 March 2004 and 30 June 2004 were not provided by Weddings, though payment of $42,187.50 on account of royalties for these two quarters was made on 11 October 2004. Mr Hayes completed an exercise for these two quarters which he referred to at paragraph 23 of his witness statement. His analysis showed $16,810.90 due for the quarter ended 30 March 2004 and $17,245 for the quarter ended 30 June 2004.[174] For both quarters the assessed amount is less than the minimum royalty payment under the lease of $18,750 per quarter. Therefore the assumption made by Puhinui in its calculations that the minimum royalty payment was due for each of these quarters, is not displaced by the assessment of Mr Hayes as given in evidence. [175] Mr Hayes subsequently carried out a like assessment for the quarter ended 30 September 2004 which he produced in evidence. It showed royalties due of $19,986.33 (excluding GST). In the absence of a royalty statement, Puhinui had adopted the minimum royalty payment of $18,750 for the quarter to 30 September 2004 in compiling its claim. On the basis of Mr Hayes' evidence the total claim should be increased by the difference of $1,236.33 plus GST, to $122,519.62 ($121,128.75 plus $1,236.33 plus GST $154.54).Is Puhinui estopped by its conduct from claiming further moneys under the lease?[176] Weddings pleads that after the meeting on 10 August 2004 Puhinui continued to accept royalty payments without reservation of rights or objection to the payments and is therefore estopped from claiming any further moneys. It is alleged that in reliance on acceptance of the payments by Puhinui, Weddings has altered its position by remaining on the property when it would have left the property immediately if it had been required to pay royalties and rates under the lease rather than the alleged second lease agreement. [177] Weddings referred to payments made on 28 June 2005 of $4,137.37 for royalties to 31 December 2004 and $5,199.22 for royalties to 31 March 2005 (including GST), which were accepted by Puhinui without challenge. [178] Weddings further referred to a payment of $5,126.68 made on 30 December 2005 which Weddings said represented royalty payments to 30 June 2005, 30 September 2005 and 20 December 2005. This was also accepted by Puhinui without challenge. Mr McLachlan's evidence in relation to this payment was that he checked Weddings' calculations, found them to be incorrect (he calculated a shortfall of $8030.93 on the basis of the product returned in the accompanying royalty report),and noted the discrepancies in handwriting on Weddings' letter. Mr McLachlan said he overlooked that the minimum royalty was payable. He said Puhinui accepted the payment because " it was better than nothing, we had obligations and payments to make". Mr Chambers could not give a reason why reference to the minimum royalty payment was not made when the miscalculation was referred back to Weddings, but referred to the practice of an annual "wash-up" when any ups and downs were sorted out. Mr McLachlan and Mr Chambers both agreed in answer to cross-examination that the payment was consistent with the agreement Weddings claimed was reached at the 10 August 2004 meeting. [179] Weddings further referred to letters written by Mr Chambers to Weddings on 22 November 2005 and 16 December 2005. In the first of these letters Mr Chambers required: the furnishing of quarterly reports on materials removed and payment of royalties as set out in the lease agreement.He detailed the missing reports and then stated:Payments on account pending the declarations of amount due as listed above, have been received for periods: (payments made were then detailed).He stated that payments were overdue on all quarters listed, less the amounts paid on account. [180] In his letter of 16 December 2005 Mr Chambers noted no response to his letter of 22 November 2005 requesting overdue reports and payment of royalties. He also pointed out that rates had not been paid in accordance with the details previously advised. [181] Weddings submitted that it is significant that in these letters there is no reference to minimum payments, merely requests for reports. [182] The matters relied on by Weddings as founding an estoppel need to be considered in context:• On 12 August 2004 Mr Chambers had written to Weddings making Puhinui's position clear, that the concessions offered at the 10 August 2004 meeting were conditional on Weddings remedying breaches of the lease.• On 30 May 2005 Edmonds Judd had written to Weddings advising Weddings that the concessions offered by Puhinui at the meeting on 10 August 2004 were withdrawn because Weddings had not met the conditions. The letter demanded payment of rates and royalties, required reinstatement and stated that failing immediate compliance the arrangements made on 10 August 2004 would no longer apply and Puhinui would adhere to the terms of the original lease.• Mr Chambers' letter of 22 November 2005 requiring reports and payment of royalties "as set out in the lease agreement" and referring to payment "paid on account for the quarters listed" was consistent with Edmond Judd's advice of 30 May 2005 that Puhinui would adhere to the terms of the original lease.• On 17 October 2005 (after the June 2005 payment but before the December 2005 payment) notice was given terminating Weddings' occupancy of the property on 17 January 2006 and requiring reinstatement. [183] The principle of estoppel by conduct was examined by the High Court of Australia in Waltons Stores (Interstate) Limited v Maher (1988) 76 ALR 513. Deane J at 553 explained the principle thus: [It] precludes departure from a representation or an induced assumption (a representation by silence) of existing or future fact in circumstances where the party estopped has knowingly and silently stood by and watched the other party act to his detriment.[184] Weddings claims that it acted to its detriment in remaining on the property when it was uneconomic for it to do so if the minimum royalties under the lease were still required to be paid. [185] Even if that much were to be accepted, I do not accept that situation was brought about because Weddings relied on acceptance by Puhinui of the payments made in June and December 2005, as pleaded by Weddings. When the paymentswere accepted Weddings was under clear notice from Puhinui that any concessional arrangement reached on 10 August 2004 had not been honoured by Weddings and was withdrawn. Weddings has raised no objection or query. In the face of that advice, the acceptance by Puhinui of the payments in June and December 2005 could not reasonably have constituted clear encouragement or inducement to Weddings that it could rely on the alleged second lease agreement, nor be treated by Weddings as such. [186] The conduct of Puhinui in accepting the payments could be characterised as confused, but it is not the case that Puhinui knew or intended that Weddings would act in reliance on the acceptance, when it had been made abundantly clear to Weddings that any arrangement reached on 10 August 2004 was at an end. I accept Mr McLachlan's evidence that he overlooked the minimum royalty provision when accepting the December 2005 payment. Given the correspondence that preceded the payment and acceptance, it is not rational or reasonable to suggest that Mr McLachlan was acting in accordance with a second lease agreement, as suggested by Mr O'Neill in oral submissions, or that he was knowingly attempting to encourage Weddings in the belief that such an agreement was on foot. I find there is no unconscionable conduct on the part of Puhinui from which Weddings requires relief such that the doctrine of estoppel should be applied. [187] I find on the facts that Weddings' defence of estoppel has not been made out. [188] Accordingly there will be judgment for the plaintiff for unpaid royalties from 1 July 2002 to 17 January 2006 in the sum of $122,519.62.Is Weddings liable for rates under the lease to the termination date 17 January 2006?[189] It follows from my findings referred to at [171] above that Weddings is liable for rates under the lease to the termination date 17 January 2006. [190] Puhinui claims the sum of $58,905.80 for unpaid rates as set out in the Table at paragraph 10 of the third amended statement of claim. Weddings has notchallenged these calculations, its challenge being directed to the alleged agreement to limit Weddings' liability for rates to $26,000 per annum for the years after the rating year ended 30 June 2004. [191] Weddings has been credited in the Table with payments made to Puhinui for rates, including payments made as the result of Puhinui's summary judgment application which resulted in consent orders as recorded in the minute of Associate Judge Abbott dated 21 July 2006. [192] Although in Mr Chambers' letter of 12 August 2004 and in the letter from Edmonds Judd of 30 May 2005 Puhinui made an offer to reduce to $26,000 (plus GST) Weddings' liability for rates for the 2005 year, this was on the basis that there was prompt compliance with matters raised in the letter, which essentially called for payment of arrears of royalties and rates. Weddings did not pay overdue rates, resulting in Puhinui issuing summary judgment proceedings. [193] Accordingly there will be judgment for the plaintiff for unpaid rates to 17 January 2006 in the sum of $58,905.80.Was Weddings a trespasser from 18 January 2006 to 4 August 2006?[194] When the termination notice expired on 17 January 2006 and Weddings failed to vacate the property, Weddings became a trespasser. This was accepted in submissions for Weddings, though issue was taken with the period during which the trespass continued. [195] I consider that Weddings remained a trespasser until it vacated on or about 3 August 2006, pursuant to the consent orders made in Puhinui's summary judgment application for possession. [196] Steps taken by Puhinui and Weddings subsequent to the expiry of the termination notice are entirely consistent with Weddings being a trespasser:• In January 2006 Puhinui erected a notice outside the quarry prohibiting unauthorised access. Weddings did not heed that notice.• When Weddings purported to enter into a Heads of Agreement with MQT on 2 February 2006 which gave Weddings access to the quarry for a period up to six months on payment of a bond to MQT, Puhinui immediately advised Mr Bishop that the purported Heads of Agreement was not valid and that Puhinui remained owner of the land until settlement was completed (which did not occur until 27 August 2007).• On 17 February 2006 Puhinui commenced these proceedings and filed an application for summary judgment against Weddings seeking (inter alia) a writ of possession for the property.• On 6 July 2006 Puhinui locked the quarry gates to deny Weddings access. This also had the effect of denying access to MQT and resulted in a non-exclusive licence to occupy entered into between Puhinui and MQT on 11 July 2006 with effect from 1 June 2006.• On 21 July 2006 Puhinui's summary judgment application was settled by agreement. The consent orders required Weddings to vacate by 4 August 2006.• On 3 August 2006 Weddings' departure from the quarry was confirmed. [197] Any arrangement Weddings purported to make with MQT, without the authority of Puhinui as owner of the property, can have no effect on Weddings' status as a trespasser from the time the termination notice expired on 17 January 2006 until pursuant to the consent orders which settled the summary judgment proceedings, Weddings vacated the property. Nor can the arrangements Puhinui made with MQT for occupation on a non-exclusive basis vary or alter the status of Weddings as trespasser. The trespass simply continued during part of the period of MQT's licence.[198] I conclude that Weddings was a trespasser from 18 January 2006 until it vacated the property on or about 3 August 2006.Is Weddings liable to Puhinui for mesne profits during the trespass period and in what sum?[199] Mr O'Neill for Weddings accepted that mesne profits were due from 17 January 2006 but raised issues in respect of the period for which mesne profits were payable and to whom they were payable. [200] There can be no doubt that any mesne profits due are payable to Puhinui on whose property Weddings was a trespasser. [201] Puhinui claims mesne profits in respect of Weddings' trespass during the period 18 January 2006 to 4 August 2006 at the rate of $320,000 (plus GST) per annum less the amount of the monthly licence payments of $20,000 (plus GST) agreed between Puhinui and MQT pursuant to the non-exclusive licence to occupy dated 11 July 2007. The monthly licence payments of $20,000 (plus GST) commenced from 1 June 2006. The total claimed for mesne profits is $148,767.13. [202] Puhinui's claim to $320,000 (plus GST) per annum is based on a rental assessment obtained from Mr Paddy Callesen of CB Richard Ellis Limited dated 30 June 2006. He estimated a ground rent for the 10 hectare area of quarry at $320,000 per annum calculated on the basis of an 8% return on the land value of the 10 hectare quarrying portion of the property. His assessment included Manukau City Council rates in addition to rent. [203] Puhinui says this assessment was discounted under the licence agreement with MQT because of the presence of Weddings on the property so that MQT's licence, which related to the whole of the property, was on a non-exclusive basis. Nevertheless, after Weddings vacated the property it appears that the licence remained in effect on the same terms and conditions including the licence fee, until the sale to Rock Solid was settled on 27 August 2007, during the hearing.[204] Puhinui is entitled to recover mesne profits for damages which it has suffered through being out of possession of the land because of Weddings trespass:Smallbone Nominees Limited v Waikune Holdings Limited (1978) 1 NZCPR 5;Roberts v Rodney District [2001] 2 NZLR 402. [205] I consider the rent paid by MQT under the Heads of Agreement with Puhinui dated 11 July 2006 is the better evidence of the damages to which Puhinui is entitled. It provides evidence of rent and rates actually paid while MQT occupied the property on a non-exclusive and then exclusive basis after Weddings vacated on or about 3 August 2006. It also provides evidence of rent for the whole of the property, which was the basis upon which Weddings previously occupied the property and held over as lessee. Mr Callesen's valuation was only of the quarry, occupying about 10 hectares of the property. [206] After MQT took possession under the Heads of Agreement from 1 June 2006 Puhinui ceased to suffer loss through Weddings' continuing trespass. Puhinui is therefore entitled to judgment for mesne profits during the period 17 January 2006 to 30 May 2006 at the rate of $20,000 per month (plus GST), which I calculate to be $88,387 plus GST of $11,048, a total of $99,435. [207] Puhinui is also entitled to rates for the same period which are claimed at paragraph 20 of the third amended statement of claim in the total sum of $19,591.38. No objection has been taken by Weddings to this calculation. [208] There will therefore be judgment for Puhinui for mesne profits totalling $99,435 and rates totalling $19,591.38.Is Weddings liable to Puhinui for interest on any amounts judged to be owing, and if so at what rate?[209] Weddings did not dispute Puhinui's entitlement to interest on any judgment sums ordered, but argued that the rate of interest should be the rate under the Judicature Act.[210] Clause 7.4 of the lease provides for interest in respect of any amount due under the lease which remained unpaid for 14 days computed at a rate 2% per annum above the rate for the time being adopted by Puhinui's bankers as the base rate for overdrawn cheque accounts. [211] Puhinui's account with Westpac was not overdrawn during the relevant period. Puhinui provided a letter addressed to it by Westpac dated 23 February 2006 which advised that the unsecured overdraft interest rate for Puhinui Farms Limited "is currently 25.70% pa". [212] Puhinui does not seek interest at the overdraft rate advised by Westpac. Mr McLachlan in evidence said that Puhinui sought interest only at a rate it considered reasonable, namely 16%. [213] The lease clearly contemplates and provides for a contractual interest rate at 2% above base rate. I see no basis for Weddings proposition that the Judicature Act rate should apply. I consider the approach of Puhinui on this issue to be reasonable. [214] There will be an order that there be interest paid on the judgment sums in terms of cl 7.4 of the lease at the rate of 16%.Has Puhinui waived its right under the lease or (if applicable) the second lease?[215] Weddings pleads that by allowing the purchaser into possession of the property, allowing the purchaser to bring fill on to the site and to remove Weddings' material, and having knowledge of the payment of the bond to the purchaser by Weddings, Puhinui has waived any rights it may have under the lease or alternatively the second lease negotiated on 10 August 2004. [216] I have previously held that there was no second lease negotiated on 10 August 2004. [217] When Puhinui entered into the agreement for sale with Rock Solid on 14 October 2005 it did not assign or transfer to Rock Solid any of its rights orobligations under the lease with Weddings. As I have noted (see above at [112]) Weddings' pleading that the agreement for sale and purchase provides that all disputes arising in respect of any lease between the plaintiff and defendant devolved to the purchaser, is incorrect. Any rights or claims under the lease which Puhinui had against Weddings, or for that matter Weddings had against Puhinui, were unaffected by the sale to Rock Solid. The lease created contractual rights and obligations between the parties which if breached, each was at liberty to pursue. [218] Nor can Puhinui's actions in dealing with the purchaser while Weddings was a trespasser on the property, in a manner which tried to accommodate the difficulty caused by Weddings' continuing trespass, possibly amount to waiver. [219] There is no merit in this defence and it is dismissed.Result[220] There will be judgment for the plaintiff as follows: a) $122,519.62 for unpaid royalties to 17 January 2006; b) $58,905.80 for unpaid rates to 17 January 2006; c) $740,000 for reinstatement; d) $99,435 for mesne profits; e) $19,591.38 for rates during the trespass period; f) Interest on the judgment sums at the rate of 16%.Costs[221] Puhinui has been generally successful. It is entitled to costs and proper disbursements. I consider costs on a 2B basis to be appropriate. With the benefit ofthat indication I anticipate that the parties will be able to settle costs by agreement. However, if either party wishes to be heard further on the matter of costs then leave is reserved to file a memorandum within 21 working days of the date of this judgment, the other party to have a further 10 working days to reply. I will then settle costs on the basis of the written memoranda unless I am persuaded that a hearing is required.Leave reserved[222] This judgment deals with a number of matters of detail. Should there be any lack of clarity or error in calculations or like matters of detail, leave is reserved for either party to apply on 3 working days notice to the other to seek clarification or correction.