Having received full government compensation following the compulsory acquisition of a Carl’s Jr fast food site taken for widening Auckland’s upper harbour highway, Restaurant Brands also snatched $400,000 held in an escrow account since its 2014 purchase of the site, money put up by vendor Forsgren NZ Ltd as compensation should road widening go ahead.
Whilst lawfully entitled to the Forsgren money, Restaurant Brands’ morality in demanding payment was questioned by Justice Muir. In a $10.5 million deal in 2014, Restaurant Brands Ltd purchased seven Carls’ Jr fast food sites from Forsgren interests. This included $1.7 million paid for premises located on the corner of Upper Harbour Highway and Paul Mathews Road on Auckland’s North Shore. Restaurant Brands expressed concern potential road widening would affect access, reducing profitability. A side letter was signed, agreeing $400,000 of the $10.5 million purchase would be withheld, placed in escrow as potential compensation for Restaurant Brands should road widening affect upper harbour business in the next four years. The deal saw Forsgren remain as site lessee, in turn sub-letting to Restaurant Brands. The wording of this side letter was subject of minute examination in the High Court five years later.
In late 2017, Restaurant Brands was told of plans to compulsory acquire land under the Public Works Act. Government compensation was agreed, with Restaurant Brands paid $1.4 million. The High Court was told this valuation was better than Restaurant Brands own assessment. Government calculations did not take into account Restaurant Brands’ contractual rights to the $400,000 escrow account. Forsgren said the $1.4 million government payout to Restaurant Brands included compensation for future income lost because of the forced closure, losses compensated by funds in the escrow account. Allowing Restaurant Brands to also access the $400,000 escrow account would result in an unanticipated windfall, it said.
The side letter entitled Resturant Brands to payment from the escrow account if any time within four years of purchase its rights to the upper harbour site were ‘terminated for any reason.’ Public Works compulsory acquisition ‘terminated’ its right of occupation; Restaurant Brands was entitled to the $400,000, Justice Muir ruled. A court is not justified in concluding that a contract does not mean what it seems to say simply because, so interpreted, the contract is unduly favourable to one party, he said.
Restaurant Brands Ltd v. Forsgren NZ Ltd – High Court (19.09.19)
19.169