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Wilson Parking New Zealand Limited v Fanshawe 136 Limited

[Judgment: Wilson_Parking_NZ_Ltd_v_Fanshawe_136_Ltd__Ors_Judgment_2.pdf]

COURT OF APPEAL OF NEW ZEALAND

TE KŌTI PĪRA O AOTEAROA

21 August 2014

MEDIA RELEASE

WILSON PARKING NEW ZEALAND LIMITED v FANSHAWE 136 LTD AND OTHERS

(CA24/2014) [2014] NZCA 407

PRESS SUMMARY

This summary is provided to assist in the understanding of the Court’s judgment. It does not comprise part of the reasons for that judgment. The full judgment with reasons is the only authoritative document. The full text of the judgment and reasons can be found at www.courtsofnz.govt.nz.

The Court of Appeal has today delivered a decision relating to a commercial property at 136 Fanshawe Street, Auckland. A company associated with Mr Mosen Haghi originally owned the property and intended to develop it. Wilson Parking New Zealand Ltd (Wilson) leased the property as a carpark. The lease gave Wilson a right of first refusal in the event that the property was sold.

Mr Haghi encountered financial difficulties. He decided to “warehouse” the property by selling it to a finance company for a significantly reduced price and buying it back a year later. This arrangement required Wilson to waive its right of first refusal for both the sale and the buy-back. Wilson waived its right of first refusal for the sale to the finance company and promised to waive its right of first refusal for the buy-back agreement. In reliance on the promise, Mr Haghi spent money, time and effort on the development of the property and incurred substantial costs in obtaining the finance needed to fund the buy-back. 2

The Court of Appeal upheld the finding by Katz J in the High Court that Wilson knew Mr Haghi was incurring expense and encouraged him to continue efforts to develop the property.

Some time later, Wilson changed its mind. It did not waive its right of first refusal on the buy-back agreement but entered into a sale and purchase agreement with the finance company to purchase the property itself. As a result there were two competing agreements for sale and purchase – one between the finance company and Mr Haghi’s company and one between the finance company and Wilson.

The High Court found that Wilson was estopped (prevented) from denying it had waived its right of first refusal and ordered that the finance company perform the agreement by selling the property back to Mr Haghi’s company.

The primary issue in the Court of Appeal was what kind of relief was appropriate. One option was a reliance-based remedy that would put Mr Haghi in the position it would have been in if the promise had never been made. This would mean an award of compensation for the money and effort Mr Haghi had expended. The second option was one that would fulfil the expectation relied upon by Mr Haghi. That would mean preventing Wilson from reneging on its promise and ordering that the finance company perform the sale and purchase agreement by selling the property back to Mr Haghi’s company.

The Court of Appeal agreed with the High Court that the waiver letter given by Wilson amounted to an unequivocal statement by Wilson that it would waive its right of first refusal in the event of Mr Haghi or a related party purchasing the property. That condition was fulfilled. Mr Haghi reasonably relied on that promise and thereby acted to his substantial detriment.

The Court of Appeal upheld the High Court finding that expectation-based relief was the just and proportionate remedy in this case. The direct losses incurred by Mr Haghi’s company were substantial. A purely mathematical measure of the losses was too narrow an approach. It would be unjust to permit Wilson to take advantage of a windfall gain by opportunistically reneging on its unequivocal promise. Further, the promise did not confer benefits upon Mr Haghi’s company alone. Wilson gave its promise knowing that Mr Haghi was trying to refinance the property in order to provide a real opportunity to develop the site for the mutual advantage of both parties. At the time it had made the promise, Wilson had anticipated benefits for itself from the development through increased carpark revenue. In the circumstances, it was appropriate to hold Wilson to the promise that it had originally made, in part for its own benefit.

The High Court order requiring the finance company to sell the property back to Mr Haghi’s company was upheld. Wilson’s appeal was dismissed.

[Judgment: Wilson_Parking_NZ_Ltd_v_Fanshawe_136_Ltd__Ors_Judgment_2.pdf]

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