Biscuit Creek Forest Limited v Vallance - [2022] NZSC 36

IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI

SC 152/2021
[2022] NZSC 36

BETWEEN	BISCUIT CREEK FOREST LIMITED Applicant
AND	SIMON FREDERICK VALLANCE AND ROSA VALLANCE Respondents

Court:	William Young, Glazebrook and O’Regan JJ
Counsel:	W A McCartney for Applicant M G Colson QC and M C McCarthy for Respondents
Judgment:	1 April 2022

JUDGMENT OF THE COURT

AThe application for leave to appeal is dismissed.

BThe applicant must pay the respondents costs of $2,500.

____________________________________________________________________

REASONS

The applicant (Biscuit Creek) seeks leave to appeal against a decision of the Court of Appeal relating to an agreement under which the respondents agreed to sell to Biscuit Creek the right to a 44.7 per cent share in the proceeds of logs felled under a registered forestry right.[1] The right was described in the Court of Appeal judgment as “the Owner’s share” and the agreement as “the OS Agreement”. We will use the same terminology.
[1]Biscuit Creek Forest Ltd v Vallance [2021] NZCA 577 (Miller, Brown and Collins JJ) [CA judgment].
The factual background is set out in some detail in the judgment of the Court of Appeal.[2] Some of the matters in dispute have been resolved, and, given the scope of the present application, a truncated summary is all that is required.
[2]CA judgment, above n 1, at [7]–[24].
At the time the OS Agreement was entered into, the respondents were unsure as to whether the owners of the Owner’s share were the respondents in their personal capacity or the trustees of a trust associated with the respondents (the Trust).[3]
[3]The respondents are trustees of the Trust, along with a third trustee.
Biscuit Creek is a company controlled by a relative of the respondents, Andrew Vallance. At the time the OS Agreement was entered into, the respondents told Andrew Vallance that they understood that the Trust held the Owner’s share. However, as a result of a discussion with Andrew about the history of transactions relating to the Owner’s share, he persuaded the respondents that they owned the Owner’s share in their personal capacities. The Courts below found that the Trust was, in fact, the owner, and this is no longer challenged.[4]
[4]Biscuit Creek Forest Ltd v Vallance [2021] NZHC 640 (Mallon J) [HC judgment] at [129]; and CA judgment, above n 1, at [38].
The outcome of this was that the OS Agreement was entered into by the parties under a common mistake (that the respondents were the owners of the Owner’s share, rather than the Trust).
The significance of the mistake relates to the GST treatment of the OS Agreement. The price for the Owner’s share was a GST inclusive price, based on the assumption that no GST was payable because the respondents were not registered for GST. However, the Trust was registered for GST. Thus, the Trust would have been liable to account for GST of almost $175,000.
The Court of Appeal found that the mistake resulted in a substantially unequal exchange of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] NZSC 36
Decision Date: 1 April 2022

CaseChat Overview and Summary

The Supreme Court of New Zealand dismissed an application for leave to appeal from Biscuit Creek Forest Limited against a decision of the Court of Appeal. The case concerned an agreement under which the respondents, Simon Frederick Vallance and Rosa Vallance, agreed to sell to Biscuit Creek the right to a 44.7 per cent share in the proceeds of logs felled under a registered forestry right. The Court of Appeal had found that the agreement was entered into under a common mistake and cancelled the agreement under section 28(2)(b) of the Contract and Commercial Law Act 2017.

The legal issue before the Supreme Court was whether the Court of Appeal's decision to cancel the agreement was correct. Biscuit Creek argued that the Court of Appeal had made three errors in its analysis: (a) that the appropriate remedy was cancellation because, but for the mistake, a substantially different bargain, or none, would have been struck; (b) that section 21 of the Contract and Commercial Law Act did not require the respondents to be held in some degree to their mistaken bargain; and (c) that cancellation was appropriate because it was unlikely the transaction would have been entered into at all but for the mistake. Biscuit Creek also argued that a miscarriage of justice would arise if leave to appeal was not granted.

The Supreme Court found that these issues were particular to the facts of the present case and did not raise any point of general or public importance as to the application of the contractual mistakes provisions of the Contract and Commercial Law Act. The Court also found that there was no risk of a miscarriage of justice in the present case. The Court concluded that it was not in the interests of justice to grant leave to appeal and dismissed the application. The applicant was ordered to pay the respondents costs of $2,500.

Orders