Bartletts Creek Vineyard Ltd Partnership v Vinlink Marlborough Ltd
[2022] NZHC 1012
•12 May 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-002384
[2022] NZHC 1012
UNDER Sections 244, 251, 253 and 226–228 of the Property Law Act 2007 BETWEEN
BARTLETTS CREEK VINEYARD LTD PARTNERSHIP
Applicant
AND
VINLINK MARLBOROUGH LTD
Respondent
Hearing: 28 March 2022 Counsel:
B Gustafson for Applicant
D H McLellan QC and R A Idoine for Respondent
Judgment:
12 May 2022
JUDGMENT OF BREWER J
This judgment was delivered by me on 12 May 2022 at 3 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Sharp Tudhope (Tauranga) for Applicant Anthony Harper (Auckland) for Respondent
BARTLETTS CREEK VINEYARD LTD PARTNERSHIP v VINLINK MARLBOROUGH LTD [2022] NZHC 1012 [12 May 2022]
Introduction
[1] This case concerns a dispute over the possession of grape growing land in Marlborough. It was commenced by originating application pursuant to s 244 of the Property Law Act 2007 (the PLA) and pt 19 of the High Court Rules 2016.
[2]This judgment decides two pre-hearing applications:
(a)In the first, VinLink Marlborough Ltd (VinLink) applies to strike out the affidavit of John Belsham, filed by Bartletts Creek Vineyard Ltd Partnership (Bartletts), on the basis that it was filed out of time, is not an affidavit in reply and is not admissible expert evidence.
(b)In the second, Bartletts applies to strike out portions of the affidavit of Simon John Gilbertson, filed by VinLink, and a paragraph of VinLink’s notice of opposition dated 9 September 2021, on the basis that they reference without prejudice communications.
Background1
[3] Bartletts owns some 94.8 hectares of land in Marlborough planted as a vineyard. On 12 January 2017, this land was leased to Sacred Hill Marlborough Vineyards Ltd (Sacred Hill) with a final expiry date in 2051. Sacred Hill’s business involved the growing and procuring of grapes and the operation of a substantial winery.
[4] Clause 11.2.2 of the lease provides that if a receiver is appointed for Sacred Hill, it is lawful for Bartletts to re-enter and repossess the land, thereby terminating the lease.
[5] On 11 May 2021, receivers were appointed for Sacred Hill. They continued to trade Sacred Hill with the intention of selling it as a going concern. They began negotiations with VinLink.
1 A comprehensive summary of the factual background is present in Bartletts Creek Vineyard Ltd Partnership v Maginness [2021] NZHC 2295 at [20]–[43].
[6] Bartletts considered there had been a breach of cl 11.2.2 because receivers had been appointed. On 14 May 2021, Bartletts gave notice to Sacred Hill under s 246 of the PLA that it would cancel the lease if the breach was not remedied by 21 May 2021. The solicitors for the receivers corresponded with Bartletts over the following days with the result that no action to cancel the lease was immediately taken by Bartletts.
Sacred Hill was then placed into voluntary administration.2
[7] On 25 May 2021, VinLink entered into an agreement with the receivers to purchase Sacred Hill’s business.3 The agreement included an assignment by Sacred Hill to VinLink of the leasehold interest in Bartletts’ land.
[8] The lease between Bartletts and Sacred Hill required Bartletts’ consent to the assignment. Its consent could not be unreasonably withheld. Clause 10 of the lease relevantly provides:
10.1The Lessee will not assign, sublet or part with possession of the Land or any part of the Land without the prior written consent of the Lessor (consent not to be unreasonably withheld; provided that such an assignment will only be to a party of equal or greater capacity to maintain the productive capacity of the vineyard and meet the obligations of this lease).
…
10.3 The Lessor shall not unreasonably withhold or delay consent if the following conditions are fulfilled:
…
v.The Lessee proves to the reasonable satisfaction of the Lessor that the proposed assignee or sub-tenant is (and in the case of a company that the shareholders of the proposed assignee or sub-tenant are) respectable and responsible and has the financial resources to meet the Lessee’s obligations under this Lease …
(emphasis added)
[9] Bartletts’ consent was sought but it refused to consent. This proceeding was brought to determine who is entitled to possession of the land and whether or not
2 The appointment of administrators meant that Bartletts was for the moment unable to enter into possession or take action under the lease.
3 This was conditional upon the expiry of a notice under s 119 of the Property Law Act 2007.
Bartletts was in breach of the lease by refusing to consent to the assignment of the lease.
VinLink’s application to strike out Mr Belsham’s affidavit
[10] VinLink applies to strike out the affidavit of Mr Belsham on the basis that it was filed out of time, is not an affidavit in reply and is not admissible expert evidence pursuant to s 25 of the Evidence Act 2006 (the Act).
[11] VinLink’s principal submission is that, pursuant to r 7.20, the affidavit was required to be filed at the same time as the originating application.
[12] My summary of the arguments of counsel for and against the “not in time and not in reply” issues occupied three-and-a-half pages. I have not included them in this judgment because I have the view that more basic principles apply and are determinative.
[13] First, the objective of the rules “is to secure the just, speedy, and inexpensive determination of any proceeding or interlocutory application”.4 Procedural rules will not be interpreted in a way which defeats this objective.
[14] Second, and consistent with this, a failure to comply with a requirement of the rules must be treated as an irregularity.5
[15] Third, the Court has an unfettered discretion to extend and shorten time prescribed in provisions in the rules.6
[16]So, my inquiry is: “where does the overall justice lie?”
[17] The proceeding has a two-day hearing scheduled to commence on 25 October 2022. Mr Belsham’s affidavit was filed and served on or about 21 January 2022. Mr Belsham purports to be an expert in winemaking and wine vending in
4 High Court Rules 2016, r 1.2.
5 Rule 1.5(1)(a).
6 Rule 1.19.
New Zealand. He gives opinions as to whether Bartletts’ consent to the assignment has been unreasonably withheld having regard to cl 10 of the lease.
[18] Putting aside the issue of whether Mr Belsham is qualified as an expert to give the opinions contained in his affidavit, I see no prejudice to VinLink (that cannot in due course be met by costs) if the affidavit is not struck out.
[19] There are occasions when the interests of justice require strict adherence to time limits prescribed by the rules. This is not one of them. All that has happened is that an affidavit has been filed eight months before the date of the hearing. On its face it contains relevant and probative evidence going to the dispute between the parties. If VinLink wants to respond to it, and it is in the interests of justice for it to do so, then it has ample time to seek to respond.
[20] As to whether Mr Belsham’s opinions are admissible as expert evidence, my clear view is that that will be for the presiding judge. On the face of the affidavit, Mr Belsham’s experience qualifies him to give opinions on the winemaking and wine vending business in New Zealand. The presiding judge might find some or all of the opinions substantially helpful. Or the Judge, in the context of all the evidence, and having heard cross-examination, might not.
[21]The application to strike out Mr Belsham’s affidavit is declined.
Bartletts’ application to strike out portions of Mr Gilbertson’s affidavit
[22] Bartletts applies to strike out portions of the affidavit of Mr Gilbertson dated 9 September 2021 and paragraph 3(e) of VinLink’s notice of opposition dated 9 September 2021 on the basis that they reference without prejudice communications.7
[23] Mr Gilbertson is a director of VinLink. In his affidavit, he gives evidence of a meeting that occurred on 31 May 2021 between himself, Rob Gisvin of VinLink and Grant Rowan, a director of Bartletts. Shortly before the meeting, VinLink had entered into an agreement with the receivers of Sacred Hill to acquire its assets. This included
7 Paragraphs [30]–[44] and [85]; and pages 60–62 of the exhibits being a letter dated 3 June 2021 from Paul Dunleavy and Grant Rowan to VinLink.
an assignment by Sacred Hill to VinLink of the leasehold interest in Bartletts’ land. Mr Gilbertson describes the purpose of the meeting with Mr Rowan as being to “get to know one-another and provide an opportunity to candidly share any concerns and aspirations for the new relationship”.
Bartletts’ position
[24] Bartletts submits that the meeting on 31 May 2021 was explicitly agreed by the participants to be conducted on a without prejudice basis and a consequential letter dated 3 June 2021 is marked without prejudice and contained a potential offer. Therefore, evidence of the meeting and of the letter cannot be given because it would breach privilege.
[25]Section 53 of the Act describes the effect of privilege:
53 Effect and protection of privilege
(1)A person who has a privilege conferred by any of sections 54 to 59 in respect of a communication or any information has the right to refuse to disclose in a proceeding—
(a)the communication; and
(b)the information, including any information contained in the communication; and
(c)any opinion formed by a person that is based on the communication or information.
…
(3)A person who has a privilege conferred by any of sections 54 to 59 and 64 in respect of a communication, information, opinion, or document may require that the communication, information, opinion, or document not be disclosed in a proceeding—
(a)by the person to whom the communication is made or the information is given, or by whom the opinion is given or the information or document is prepared or compiled; or
(b)by any other person who has come into possession of it with the authority of the person who has the privilege, in confidence and for purposes related to the circumstances that have given rise to the privilege.
[26] Section 57 of the Act deals with the privilege applying to settlement negotiations:
57 Privilege for settlement negotiations, mediation, or plea discussions
(1)A person who is a party to, or a mediator in, a dispute of a kind for which relief may be given in a civil proceeding has a privilege in respect of any communication between that person and any other person who is a party to the dispute if the communication—
(a)was intended to be confidential; and
(b)was made in connection with an attempt to settle or mediate the dispute between the persons.
(2)A person who is a party to a dispute of a kind for which relief may be given in a civil proceeding has a privilege in respect of a confidential document that the person has prepared, or caused to be prepared, in connection with an attempt to mediate the dispute or to negotiate a settlement of the dispute.
[27] Mr Rowan deposes that Bartletts had been trying to take possession of the land since May 2021, that Mr Gilbertson had contacted him and stated that VinLink was to secure the assets of Sacred Hill from its receivers and that Mr Gilbertson advised him he was aware of Bartletts’ attempts to terminate the lease. It was Mr Gilbertson who proposed the meeting on 31 May 2021 at VinLink’s offices.
[28] The evidence of Mr Rowan is that the meeting of 31 May 2021 commenced with him stating that he attended it on a without prejudice basis and Mr Gilbertson agreed to that. Mr Gilbertson accepts that Mr Rowan said he wanted the meeting to proceed on a without prejudice basis. Mr Gilbertson also accepts that he agreed to that stipulation. But Mr Gilbertson says he was not aware at that time of any potential dispute between Bartletts and VinLink or that Bartletts had tried to terminate the Sacred Hill lease.
[29] Bartletts submits the evidence of Mr Gilbertson that he did not know of an actual dispute cannot be taken as evidence that he did not know Bartletts was actively trying to get possession of the land. At that stage VinLink had not taken assignment of the lease (though it had signed an agreement to conditionally do so) and Bartletts had been trying to get possession of the land from the receivers. Bartletts submits that
as the party likely to purchase Sacred Hill’s assets from the receivers, VinLink no doubt carried out due diligence and should have been aware of the attempts by Bartletts to terminate the lease and take possession of the land. It was therefore very much in the interests of VinLink as the potential purchaser of the assets and assignee of the lease to try and agree with Bartletts that Bartletts would not attempt to cancel the lease by taking possession.
[30] The 3 June 2021 letter referred to the parties’ dealings with the receivers of Sacred Hill, responded to a request from VinLink about Bartletts’ view of fair terms of a lease, and proposed an alteration to the lease but on an explicitly without prejudice basis.
[31] Bartletts submits that on the balance of the evidence, and in particular the contemporaneous documents, there was a potential dispute that could, and indeed did, arise between VinLink and Bartletts when the assignment occurred. The correspondence that was agreed to be without prejudice was a clear attempt by VinLink and Bartletts to settle that potential dispute.
[32] If the Court were now to rule that VinLink can effectively disclose its version of those without prejudice discussions (which are not accepted by Bartletts as accurate) on the basis that VinLink was unsure that a potential dispute might eventuate, that would, it is submitted, cut across the policy rationale behind settlement privilege
— being to encourage frank and open settlement discussions without fear that those discussions will be used in evidence. It is submitted VinLink has not discharged the onus of establishing that the contents of the without prejudice communications should lose their status of being inadmissible in evidence. The identified portions of Mr Gilbertson’s affidavit should therefore be struck out.
VinLink’s position
[33] VinLink does not dispute that the words “without prejudice” were used at the meeting and in a heading to Sharp Tudhope’s (Bartletts’ solicitors) letter of 3 June 2021. However, the use of those words is not conclusive as to the existence of
privilege.8 It submits that the meeting and the letter were not privileged and, in the alternative, it is in the interests of justice for evidence of the communications to be adduced in the proceeding in accordance with s 57(3)(d) of the Act.
[34] By reference to s 57(1) of the Act, VinLink observes that a communication said to attract privilege must be made at a time when a dispute already exists between the parties to the communication and the dispute must be “of a kind for which relief may be given in a civil proceeding”. Section 57 allows a privilege only in respect of negotiations which take place after the parties are already in a dispute of a kind for which relief could be granted. It does not matter whether the parties apprehend litigation, just that the nature of their dispute is of a kind for which relief could be granted.
[35] VinLink submits that neither the discussions at the 31 May 2021 meeting nor the letter dated 3 June 2021 were made in connection with an attempt to settle a “dispute” of any kind between the parties, let alone of a kind “for which relief may be given in a civil proceeding”.
[36] Mr Gilbertson’s evidence about the 31 May 2021 meeting is that its purpose was to discuss a possible new relationship between VinLink and Bartletts. The agreement between the receivers of Sacred Hill and VinLink was signed on 25 May 2021 and was conditional. VinLink had not, by the time of the meeting on 31 May 2021, formally requested Bartletts’ consent to the assignment of the lease and Bartletts had not yet refused consent. This did not occur until 13 July 2021. On 30 July 2021, Bartletts served a notice of intention to cancel the lease. This gave rise, in the first instance, to an injunction proceeding by VinLink and subsequently to the present proceeding.9
[37] Contrary to Mr Rowan’s evidence, Mr Gilbertson deposes that he had no knowledge before the 31 May 2021 meeting, nor was he told at the meeting, that
8 New Zealand Institute of Chartered Accountants v Clarke [2009] 3 NZLR 264 (HC) at [45].
9 VinLink initially applied ex parte on notice for an injunction to prevent Bartletts seeking to take possession of the land. The matter came before Churchman J. However, orders were not made and it was agreed between VinLink and Bartletts that the present application would be brought to determine possession of the land and whether Bartletts’ refusal of consent was reasonable.
Bartletts had initiated steps to take possession of the land from Sacred Hill or its receivers. In any event, VinLink submits this is irrelevant to the present application because even if there had been a dispute between Bartletts and Sacred Hill (or its receivers), VinLink was not a party to that dispute, and therefore no question of privilege arises.
[38] Mr Gilbertson deposes that there was no discussion at the 31 May 2021 meeting about the concerns Bartletts has now raised in this proceeding. The meeting instead involved, among other things, discussions about any concerns that Bartletts may have had with VinLink taking over the lease and the potential for Bartletts to negotiate a higher rental. The 3 June 2021 letter then sets out the terms that Bartletts was proposing for a new lease between Bartletts and Vinlink, and in particular a higher rental. VinLink accordingly submits that at the time of the meeting and the subsequent letter no dispute existed between the parties that they were attempting to settle.
[39] Moreover, even if there was a dispute it was not “of a kind for which relief may be given in a civil proceeding”. Bartletts did not refuse consent until after the meeting and the 3 June 2021 letter. Neither party therefore had the right to sue the other as that could not happen until the parties either entered into an alternative transaction that gave a right to sue (which did not happen) or until Bartletts refused consent to the assignment of the lease. As neither of these events had occurred by 31 May or 3 June, s 57(1) does not apply.
[40] On this basis, VinLink submits that Bartletts’ claim for privilege in respect of the meeting and letter should be dismissed and its application to strike out portions of Mr Gilbertson’s affidavit declined.
[41] In the event the Court finds that the communications are privileged pursuant to s 57(1), VinLink submits in the alternative that it is in the interests of justice for evidence of the communications to nevertheless be adduced in the proceeding in accordance with s 57(3)(d) of the Act, which provides:
(3)This section does not apply to—
…
(d)the use in a proceeding of a communication or document made or prepared in connection with any settlement negotiations or mediation if the court considers that, in the interests of justice, the need for the communication or document to be disclosed in the proceeding outweighs the need for the privilege, taking into account the particular nature and benefit of the settlement negotiations or mediation.
[42] VinLink submits that it may be in the interests of justice to disclose a communication where a without prejudice claim is used to conceal unlawful conduct.10 The scope of unlawful conduct is broad. In Unilever Plc v The Proctor & Gamble Co, Robert Walker LJ described it as “unambiguous impropriety”.11 The assessment under s 57(3)(d) involves a balancing exercise and, in particular, consideration of whether the need for disclosure outweighs the need for the privilege.
[43] VinLink submits that in this case the interests of justice favour disclosure of the communications because the statements alleged by Mr Gilbertson to have been made at the meeting, complemented by the 3 June 2021 letter, amount to an attempt to impose an unlawful condition on Bartletts’ consent to the assignment of the lease by virtue of s 227 of the PLA.
[44] Section 227(1)(a)(i) of the PLA provides that consent is unreasonably withheld if, as a condition of, or in relation to, giving consent, the lessor requires the payment of additional rent. VinLink notes that it is essentially undisputed for the purpose of the present application that Bartletts was seeking higher rent. It submits that the question for the Court is accordingly whether Bartletts’ position amounted in substance to a condition that additional rent be paid in return for the grant of consent. Such a finding could result in Bartletts’ subsequent refusal to grant consent being deemed unreasonable.
[45] VinLink observes that the determination of Bartletts’ application turns on whether its consent was unreasonably withheld. It would, VinLink submits, be manifestly unjust if Bartletts were permitted to maintain at trial that its real reasons for withholding consent related to VinLink’s financial capacities rather than its
10 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [83]. See also a review of the relevant authorities in Smith v Shaw [2020] NZHC 238, [2020] 3 NZLR 661 at [34]– [42].
11 Unilever Plc v The Procter & Gamble Co [2000] 1 WLR 2436 (CA) at 2444.
expressed interest in receiving a higher rental. In these circumstances, it would be contrary to justice to allow the communications to be protected by privilege and the need for disclosure outweighs the need for the privilege.
Discussion
[46] Privilege does not arise simply because a discussion is agreed to be “without prejudice” or because those words appear at the top of a written communication.12 As s 57 of the Act makes clear, for privilege to be conferred there has to be in existence a dispute between the parties of a kind for which relief may be given in a civil proceeding. Further, a communication for which privilege is sought must be intended to be confidential and made in connection with an attempt to settle the dispute.
[47] Here, there was no dispute between the parties. There was a potential for dispute but that potential had not given rise to a civil cause of action:
(a)VinLink had only a conditional agreement with the receivers of Sacred Hill.
(b)There had been no contact between VinLink and Bartletts prior to Mr Gilbertson calling to arrange the meeting of 31 May 2021.
(c)Bartletts owned the land which VinLink wished to take possession of through Bartletts’ lease to Sacred Hill. The meeting of 31 May 2021 was for the purpose of each party sounding out the other’s position. It was not in any way a settlement negotiation.
[48] Likewise, the letter of 3 June 2021 was not part of a settlement negotiation. There was still no dispute. The letter was Bartletts’ response to the situation as discussed at the meeting and represented the pursuit of a business opportunity or commercial advantage.
12 At the hearing I raised with the parties whether in some circumstances an agreement that a discussion is “without prejudice” could give rise to an estoppel against later putting the discussion into evidence. The parties subsequently filed brief submissions on the point. It is not something I need to explore in the context of this case.
[49] The issue for the Court when determining Bartletts’ application will be whether it reasonably withheld consent to VinLink taking an assignment of Sacred Hill’s lease. The relevance of the evidence of the meeting and the letter to that issue is that at that time Bartletts was expressing an interest in a higher rent, not expressing doubts as to VinLink’s financial capabilities. How important that is remains to be seen.
[50] Because of this conclusion I will not address VinLink’s alternative submission on the applicability of s 57(3)(d) of the Act. I do not need to; and I think that whether s 227(1)(a)(i) of the PLA in the circumstances of this case can engage with s 57(3)(d) has factual and legal complexities which make it undesirable for me to do so.
Result
[51]VinLink’s application to strike out Mr Belsham’s affidavit is declined.
[52] Bartletts’ application to strike out portions of Mr Gilbertson’s affidavit (and paragraph 3(e) of VinLink’s notice of opposition) is declined.
Costs
[53]Any memoranda as to costs must be filed by 27 May 2022.
[54] If no memoranda are filed by that date then costs on the applications will be regarded as reserved.
Brewer J
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