Biscuit Creek Forest Ltd v Vallance

[2021] NZHC 640

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV 2018-454-56

[2021] NZHC 640

BETWEEN

BISCUIT CREEK FOREST LTD

Plaintiff

AND

SIMON FREDERICK VALLANCE and ROSA VALLANCE

Defendants

CIV 2019-435-15

BETWEEN

SIMON FREDERICK VALLANCE and ROSA VALLANCE
Plaintiffs

AND

ANDREW PHILIP VALLANCE

Defendant

Hearing:	7-11 September 2020
Counsel:	W A McCartney and N R Eilenberg for Biscuit Creek Forest Ltd M G Colson and M C McCarthy for Simon and Rosa Vallance
Judgment:	26 March 2021

JUDGMENT OF MALLON J
Table of contents
Introduction	[1]
The evidence	[7]
The parties and the farm	[7]
Ownership of farm	[9]
The Forestry Right	[12]
2003 negotiations	[17]
2016 agreements	[24]
Sale to others	[68]
The outcome for Andrew	[91]

BISCUIT CREEK FOREST LTD v VALLANCE [2021] NZHC 640 [26 March 2021]

Ownership of the Owner’s Share as at April 2016  [93]

The issue  [93]

A forestry right  [94]

The Partnership’s forestry right  [98]

The Owner’s Share  [107]

Conclusion  [129]

Construction of the OS Agreement  [130]

The issue  [130]

The principles  [131]

The OS terms  [132]

Conclusion  [143]

Common mistake  [144]

The issue  [144]

The law  [145]

Application to the facts  [147]

Conclusion  [158]

Other issues  [159]

Misrepresentation  [160]

Interdependence  [166]

Failure of finance clause  [187]

Property Law Act  [192]

Uncertainty  [195]

Frustration  [196]

Termination by effect of law  [197]

Failure to tender settlement  [198]

Andrew’s claimed loss  [199]

Counterclaim  [207]

Result  [218]

Introduction

[1]    This proceeding arises out of the sale of Te Kanuka Station, a Wairarapa farm, and related forestry interests. Te Kanuka Station was owned by Simon and Rosa Vallance and later by their family trust, the Vallance Winkeleer Trust (the Trust). They had created a forestry right (the Forestry Right) over the land which was held by the Te Kanuka Station Partnership (the Partnership). Simon and Rosa also held a share in the Partnership (the Partnership Share). Under the terms of the Forestry Right, Simon and Rosa or their Trust had the right to receive 44.7 per cent of the forestry proceeds (the Owner’s Share). It is a contract for the sale and purchase of the Owner’s Share that is in issue.

[2]    Ultimately the Trust sold the farm to a third party and the Partnership sold the Forestry Right to another third party in 2017. However, Andrew Vallance, a cousin of Simon and his neighbour at the relevant time, claims that he, through his company Biscuit Creek Forest Limited (BCF), had entered into an earlier agreement in 2016 (the OS Agreement) to purchase Simon and Rosa’s rights to the Owner’s Share. Andrew says Simon’s failure to settle the OS Agreement caused BCF loss. BCF brings this proceeding to recover that loss.

[3]    In broad terms, the issues concern whether the OS Agreement was valid and enforceable and, if it was, whether Simon and Rosa should be granted relief from its effect, or whether Andrew suffered any loss because Simon and Rosa failed to perform their obligations under it.

[4]    The main issue is whether Simon and Rosa or the Trust had the right to the benefit of the Owner’s Share. Simon and Rosa say that the Trust had the right and the OS Agreement was of no effect because it was entered into with Simon and Rosa. They say they were induced to enter into the OS Agreement by a misrepresentation made by Andrew about this or due to unilateral or common mistakes. Simon and Rosa also say that they intended that the sale of the Owner’s Share was to be tied to an agreement for the sale of Te Kanuka Station to Andrew and that, when Andrew was unable to complete that sale, any agreement they had with him about the Owner’s Share came to an end.

[5]    Simon and Rosa also bring a counterclaim contending that Andrew breached the Fair Trading Act 1986 by representing that the OS Agreement and the Te Kanuka Station agreement were interdependent and advising Simon and Rosa that they did not need legal advice. They say their loss is their legal costs arising from the dispute with Andrew and they seek general damages.

[6]    Andrew contends that Simon and Rosa owned the Owner’s Share at the time of the OS Agreement and denies he made any misrepresentations or that there were any mistakes. He says the OS Agreement was not tied to the sale of Te Kanuka Station. He says the OS Agreement was enforceable and it only did not proceed because Simon refused to accept settlement when it was tendered in accordance with the OS

Agreement and repudiated the agreement on 10 March 2017. He says his loss is the profit BCF would have made on the Owner’s Share from the later sale of the Forestry Right.

The evidence

The parties and the farm

[7]    Simon and Rosa are husband and wife. Te Kanuka Station comprises approximately 830 hectares (ha) (over three titles) of hill country east of Masterton. For five generations it was farmed by the Vallance family (Simon’s forebears and then his family). Simon and Rosa took over Te Kanuka Station from Simon’s parents in 1981. They added to the land they initially held by purchasing a piece of land from Simon’s brother, Rupert. They farmed sheep and beef and undertook various developments, including a forestry block. The farm was their livelihood and they raised their family there.

[8]    Andrew Vallance is the sole shareholder and director of BCF. He is a younger cousin of Simon. He has known Simon all of his life. He and his wife farmed a neighbouring property called Ngatahuna Station. Andrew is also a chartered accountant. His accountancy practice has a large rural client list and he has regularly dealt with the Forestry Rights Registration Act 1983 in his practice.

Ownership of farm

[9]    Initially Simon was the only registered proprietor of Te Kanuka Station but by 1991 Simon and Rosa were the registered proprietors. In January 2000 Simon and Rosa transferred Te Kanuka Station to the Trust. The trustees were Simon, Rosa and Timothy Bunny. The transfer to  the Trust  was  pursuant  to  an  agreement  dated  15 October 1999 (the Trust Agreement). The Trust Agreement described the property being sold as:

… 829.8921 hectares more or less being Lot 1 DP 84165 and part Lot 2 and 3 DP 14732  all  CT  51B/755 TOGETHER   WITH AND  SUBJECT TO:  (1)
Pipeline rights created by Transfer 396810. (2) Right of way created by Transfer 396810. (3) Right of way specified in Easement Certificate 368238.2.
(4) Right of way created by Transfer 399878.2 (5) Mortgages 399878.9 and 399878.11. (6) B.428877.1 Transfer granting forestry right.

[10]   The purchase price was $1,234,095, with $1,202,000 recorded as being apportioned to “Land and buildings at Government valuation” and the balance to “Plant equipment and motor vehicles”. The Trust Agreement also recorded that on the possession date Simon and Rosa would sell to the purchaser the sheep and cattle set out in an attached Valuation of Livestock for the price of $295,078.

[11]   John Gold, now deceased but a lawyer with Gold Walsh at the relevant time, acted for Simon and Rosa on this transaction. In a letter dated 15 December 1999 he advised their accountant, Terrence Bartlett, that “all documentation has now been completed for the transfer of the farm property and stock and plant from Simon and Rosa to the [Trust]”. He also advised that the transaction had been put through as the sale of a going concern and was therefore zero-rated for GST purposes.

The Forestry Right

[12]   In around 1993, prior to the Trust Agreement, Simon and Rosa decided to create a forestry right over part of the property and to sell the forestry right to a partnership. The Forestry Right was registered on the farm title in 1995. The title for Te Kanuka Station records this right as:

B418877.1 Forestry Right pursuant to the Forestry Rights Registration Act 1983 to Philip John Guscott, Richard William [Birch] and John Winston Gold for a term of 30 years from 30.9.1984 (or until otherwise as provided for in the transfer) – 16.2.1995 at 9.33 am

[13]   This is the Forestry Right recorded in the description of the property in the Trust Agreement above at (6).1

[14]   The background to this was a decision by Simon and Rosa to make approximately 200 ha of the farm available to the Partnership for the planting of pinus radiata trees. The terms of this grant were set out in a Memorandum of Transfer of Forestry Rights dated 30 September 1994 (the Memorandum of Transfer). Amongst other things, the Memorandum of Transfer provided for the Owner’s Share. The Owner’s Share was the right to receive 44.7 per cent of the gross stumpage value of the harvested forest in specie or in cash. Simon and Andrew each referred to this as

1      Refer [9] above.

“the forestry right” although the Forestry Right was that recorded in the Memorandum of Transfer and registered on the title and the Owner’s Share was a term in that Memorandum of Transfer.

[15]   A deed of partnership was entered into for the purposes of this forestry enterprise. The copy provided for the proceedings was undated and unsigned, but was drafted in 1993 in anticipation of the creation and registration of the Forestry Right. The partners were listed in a schedule to the partnership deed. The partnership deed appointed Mr Guscott, Mr Birch and Mr Gold, who were three of the 25 named partners, as “Custodian Trustees” and Simon Vallance as “Manager”. The Custodian Trustees agreed to be the registered proprietors of the Forestry Right and Simon was appointed as Manager to carry out the day-to-day administration of the Partnership’s affairs. At the relevant time Simon and Rosa held one of the 25 Partnership shares.

[16]   The forest was planted in three stages in 1992, 1993 and 1994, with the Partnership reimbursing or paying the costs involved. The trees were due to mature between 2017 and 2022. Simon organised the work on the forestry, such as pruning and maintaining tracks, and he would send out newsletters and requirements for partners to fund costs as needed.

2003 negotiations

[17]   In 2003 there were some negotiations between Andrew and Simon about Andrew buying Te Kanuka Station. Those negotiations included the preparation of draft contracts. The agreement for sale and purchase was in ADLS Form (the draft land agreement). Mr Gold was recorded on the agreement as the vendor’s solicitor, Simon Ogilvie of Logan Blathwayt was recorded as the purchaser’s solicitor and John Murray was recorded as the real estate agent.

[18]   Initially the vendor was the Trust and the purchaser was Andrew (or a nominee), no purchase price was set, and the agreement included “Further Terms of Sale”, which provided:

14.0 The parties of this agreement acknowledge the Memorandum of Transfer of Forestry Right, a copy of which is attached to this agreement

15.0 The Vendor agrees to provide the Purchaser with a tax invoice for supply of the Land and Buildings and Forestry Right at the date of acceptance of this agreement.

16.0 This agreement is conditional upon the Purchaser arranging finance on terms and conditions satisfactory to the Purchaser on or before 4pm Friday 7th November 2003. This condition is inserted for the sole benefit of the Purchaser.

[19]   In later drafts the vendor for the sale of the land was amended to be Simon, Rosa and the Trust, and further terms were added. An appendix was also added, which provided that the Trust. as owner of the land, agreed to sell its interest in the land, and Simon and Rosa, as “owner of a 44.7% share in the Forestry Right”, agreed to sell that interest. This amendment was accompanied by a separate agreement between Simon and Rosa as vendor and Andrew as purchaser of the “vendors 44.7% share in the forestry right (B418877.1)” (the draft Owner’s Share agreement).

[20]   The draft Owner’s Share agreement provided that settlement was to be contemporaneous with settlement of the draft land agreement and, if that did not occur, the draft Owner’s Share agreement could be cancelled. A similar term was added to the draft land agreement, which provided that it was part of a combined transaction with the draft Owner’s Share agreement and if they were not settled contemporaneously either party could cancel the draft land agreement.

[21]   In short, it was proposed that there would not be a sale to Andrew of one without the other. It was also understood by those involved in drafting the agreements that the Trust owned the land and Simon and Rosa owned the Owner’s Share in the Forestry Right. Andrew was aware of this because his solicitor advised him by email dated 28 October 2003 that there were two vendors (the Trust for the land and Simon and Rosa for the trees).

[22]   A note made by Andrew at the time showed that he was thinking about the tax implications if Simon and Rosa were not GST registered. Andrew asked a tax adviser, Murray Pashby, if a secondhand goods credit could be claimed on a forestry right. Mr Pashby provided an Inland Revenue public ruling about the circumstances in which a purchaser of a forestry right could claim an input tax deduction.

[23]   In the end, no agreements were concluded. Simon understood that was because a proposed partnership between Andrew and Richard Hay, pursuant to which Richard would buy the front half of the farm and Andrew would buy the back half, did not work out. Andrew said they did not proceed because a price was never agreed upon.

2016 agreements

[24]   In 2016 Simon and Rosa were looking to semi-retire and, with that, to sell Te Kanuka Station and their forestry interests. They knew Andrew had been interested in buying Te Kanuka Station and decided to contact him to see if he might still be interested. They thought he might struggle to buy all of Te Kanuka Station but were hopeful he might be able to sell part of it to Simon’s niece, Vicky, and her husband, Brett, who farmed a neighbouring block. It was Vicky’s father, Rupert, from whom Simon had earlier purchased a piece of land.

[25]   In March 2016 Simon met with Guy Farman, who was a forestry consultant and part of Farman Turkington Forestry Limited (FTF). Mr Farman had provided forestry advice to Simon over the years and often discussed the value of trees. In their March 2016 discussion Mr Farman told Simon he thought the Partnership trees were worth between $15,000 to $20,000 per ha depending on where the market was at.

[26]   Rosa saw Andrew at the supermarket in early April 2016 and, aware of his earlier interest, suggested he contact Simon if he was interested in buying Te Kanuka Station. On the evening of 7 April 2016 Andrew met with Rosa and Simon at their home on the farm. Andrew confirmed his interest and said he would offer some of the farm to Vicky and Brett and he would buy the back half of the farm. Rosa said she was pleased about this. Vicky and Brett had previously expressed interest in part of the farm and did not have the finances to purchase the whole farm. Andrew’s intentions were a way of keeping the farm in the family. Rosa understood that Andrew said his main interest was the land rather than their interests in the Forestry Right.

[27]   In preparation for the meeting, Simon had prepared some notes on a worksheet. Simon’s notes included a price of $5,883,360 that Simon and Rosa wanted to realise, made up as follows:

(a)       Land ($5,200 per ha x 830): $4,316,000;

(b)       Farmhouse: $160,000;

(c)       Trees 44.7 per cent of ($15,000 x 200 ha = $3,000,000): $1,341,000; (d)           Partnership Share [($3,000,000 x 55.3%) x 1/25]: $66,360.

[28]The worksheet also:

(a)noted “the Trust” alongside the trees calculations;

(b)set out a calculation for the 44.7 per cent Owner’s Share of $1,788,000 and the Partnership Share of $88,480 based on a value for the trees of

$4 million (that is, $20,000 x 200 ha);

(c)referred to plus GST (if any) in relation to the land and plus GST in relation to the Partnership Share;

(d)noted the forest road and bridge (8 km x 1000): $80,000;

(e)noted the average tree age of 23 years; and

(f)referred to two comparative farm prices and set out other calculations.2

[29]   Andrew’s note of the meeting recorded  an offer  for sale of the forest from  “S & R” of “200 ha x 15K $3,000,000 x .447 = $1,341,000 ü” and an offer of the land and buildings from the Trust of “5200 x 830 ha 4,316,000” plus “cottage 160,000, 4,476,000 ü” for a total of $5,817,000. He also had a per hectare figure of $5,450 that had been crossed out. He also noted that the position with ETS (meaning emissions trading scheme) needed to be confirmed and made a note of some possible purchasers for a pre-harvest sale.

2      The purpose of other calculations was unclear and did not correspond to either Simon’s or Andrew’s evidence about how the prices were calculated.

[30] Simon’s evidence was that he worked through his notes with Andrew pointing to things in the notes as he did so. Andrew said that Simon had his notes on the dining table as they discussed figures but that Simon did not specifically show them to him. Andrew said that as Simon was going through his notes, he was making his own notes. In any case, there is no dispute that by the end of the discussion they had agreed the price set out in Simon’s notes at [27] above, that the price for the land and building would be $4,476,000 and the Owner’s Share would be $1,341,000. They had different recollections about how that price had been reached.

[31]   Simon’s evidence was that there was no quibbling over the price. He came to the meeting having worked out that he wanted a price of $5,200 per ha for the farm. He said there was “quite a discussion about the price and reference to what Guy Farman told [him]” in relation to the trees. He said this was about the difference between the $3 million and the $4 million for the trees and that the market value of the trees was $17,500 per ha. He said they agreed to lower the price of the trees to

$15,000 per ha and to increase the price of the land by applying the $5,200 figure to the whole farm (830 ha) when the land with the trees (200 ha) was worth less than the grazing land. He said this was for two reasons:

(a)First, to reduce the tax payable on the sale, since he understood the Owner’s Share was taxable whereas the farm was not, so the lower the price of the Owner’s Share the less tax that the Trust would have to pay on it.

(b)Secondly, to make it easier for Andrew to make a higher margin if he on-sold the Owner’s Share immediately, as he intended to do. This in turn would help him to finance the purchase of the farm.

[32]   Andrew’s recollection was that Simon wanted a bit more than $5,200 per ha for the land. They discussed that a neighbouring farm had recently sold for $5,450 per ha and that is why Andrew initially wrote this figure down. Andrew said that they ended up agreeing on $5,200 and he recalled that Simon said something to the effect that he would have liked a bit more. Simon disagreed with Andrew’s evidence that he had wanted $5,450 per ha.

[33]   Andrew disagreed with Simon’s evidence that the price of the forestry rights was reduced and the price of the farm increased. He said he would not have agreed to pay someone else’s tax bill and Simon’s “maths” concerning such a trade was incorrect. He was firm in cross-examination that there was no trade-off discussed between the price of the farm and the Owner’s Share.

[34]Andrew accepted that the land under the trees would be worth a bit less than

$5,200 but not too much less. This was because the trees were to be harvested in the next few years and then the land could be utilised again. Andrew also said that the

$5,200 per ha was applied across the land even though part of the land was marginal or was in bush or riverbanks. In other words, it was always the case that in a per hectare sum some land would be worth more than other parts.

[35]   Andrew said that Mr Farman’s figures for the forest value were based on a hypothetical tonnage when the forest was logged. Andrew said he discussed this with Simon and also that there was a “fair bit of doubt” about what had been planted. He said he rode around the area thoroughly in 2003 and saw that there were gullies full of scrub that had never been planted. He said this meant there was uncertainty over the 200 ha. He said he had no desire to pay at the top of Mr Farman’s range because of the uncertainty. In the end they agreed on $15,000 per 200 ha but “in the back of [Andrew’s] mind” was uncertainty about the tonnage, the hectares of wood, the cost of roading and other things to be investigated during the due diligence period. Andrew said “[w]e agreed on the total value. I had a, probably a slightly different impression in my mind of how we got there, less hectares at a slightly higher value”.

[36]   Andrew’s evidence was that he asked Simon and Rosa if they were registered for GST. This was of interest to him because if they were, then the price for the Owner’s Share would be plus GST, and if they were not, the price would include GST and he could claim a secondhand goods GST credit. He recalled that they thought the Owner’s Share was now owned by the Trust. Andrew told them they would definitely remember if it had been transferred to the Trust because they would have been taxed on the sale and that tax would have been significant. Andrew also told them there was nothing on the title to indicate a transfer of the Owner’s Share to the Trust. He said

this because he thought that a transfer would be shown on the title, although he has since been advised that this is not necessarily correct.

[37]   Andrew instructed his lawyer, Ms Van Zyl, to prepare an agreement for the sale and purchase of the land and another agreement for the sale and purchase of the Owner’s Share. Andrew was to be the purchaser of the land agreement and his company BCF was to be the purchaser of the Owner’s Share. Andrew provided the 2003 draft Owner’s Share agreement to Ms Van Zyl to use for the agreement to purchase the Owner’s Share. In doing so, he crossed out the provision in the 2003 draft Owner’s Share agreement that stated it was co-dependent on the land agreement. He did this because he wanted the agreements to be separate.

[38]   On 8 April Andrew visited Rosa and Simon again. Andrew’s and Simon’s evidence was that Andrew had two contracts with him, one for the Owner’s Share (the OS Agreement) and one for the land and buildings (the Land Agreement). Andrew said he also had the titles for Te Kanuka Station with these. Simon said that from a layman’s point of view the contracts were a bit confusing but they looked alright and he and Rosa trusted Andrew. He and Andrew discussed them over the dining table and Rosa would come and go.

[39]   The OS Agreement was drafted with the names of Simon and Rosa as vendors. Simon said that he and Andrew discussed this. Simon said he told Andrew that the Trust owned the forestry right. Andrew told him this was not correct. According to Simon, Andrew said that as a chartered accountant he checked legal titles all the time and knew what he was doing. He said Andrew showed them the Memorandum of Transfer and pointed to their names and said he had looked up the titles. He said Andrew told them that they were not GST registered and this meant they would not have to account for GST on the sale of the Owner’s Share and Andrew would be able to claim a GST credit on the sale.

[40]   Andrew had retained the documentation from the 2003 negotiations and had looked at them in preparation for the meetings on 7 and 8 April. He could not see anything to indicate a change to the Forestry Right since 2003. He therefore thought it was unlikely that there had been any change in the ownership of the land or the

Owner’s Share since their 2003 negotiations. He was a bit unclear about what he took with him to the meetings. In evidence-in-chief Andrew said that he obtained a copy of the main title for Te Kanuka Station. In cross-examination he accepted that this was probably the 2003 title because he had not carried out an updated title search. He also initially said he did not have the Memorandum of Transfer with him but later accepted he probably did have it with him. And similarly, he initially said he did not show the Memorandum of Transfer to Simon and Rosa but later said he might have done so.

[41]   Simon also said that Andrew told them there was no point getting lawyers and real estate agents involved as they were an added expense. Simon said that “[a]s a friend, cousin, neighbour and an accountant” he was prepared to take Andrew’s word on these matters. Simon said he was devastated to learn through this litigation that Andrew had in fact been to see a lawyer the previous day.

[42]   Andrew disagreed with Simon’s evidence about this. While he did not say that the contracts he had with him had been prepared by his lawyer, it was his evidence that he expressly told Simon and Rosa to get legal advice and he pointed to the back page of the land contract which recommended obtaining legal advice. He said Simon said he was happy with the contracts, he did not need legal advice, and his lawyer would not be of any use. Andrew was also aware that Simon and Rosa, having spent 40-odd years farming, had business experience and so were able to make their own decision about whether they needed legal advice.

[43]   Simon said that in their discussions it was agreed that all the agreements would work together. In addition to the OS Agreement and the Land Agreement there was the matter of the Partnership Share that Simon and Rosa wished to sell. Having the agreement for the Partnership Share was less critical because it was worth a smaller amount. Simon said that Andrew said something like, “that’s nothing, I could write you a cheque for that tomorrow”. They shook hands.

[44]   Rosa confirmed Simon’s evidence on these matters. She said Andrew arrived at their house with an “armful of papers”. This included the Memorandum of Transfer as proof that Simon and Rosa were the owners of the forestry right interests. She said

Andrew kept pointing to their names on the Memorandum of Transfer as “owners” and was adamant he was correct. She also said that Andrew suggested that lawyers were an unnecessary expense and the agreements were “pretty well generic”. Andrew presented them with the OS Agreement, which he wanted them to sign then and there. He left them with the agreement for the land to have it signed when their trustee was available. Rosa said that Andrew said he could pay for the 1/25th Partnership Share when the other two agreements were due, saying “oh that’s only about $66,000”. She also said that they agreed the three agreements were to run together.

[45]   Andrew’s evidence was that he was intending to on-sell the Owner’s Share if he could to assist in financing the land purchase. He initially said he did not recall discussing this with Simon and Rosa during their meetings at the house but later said he may have done. In any case, his evidence was that, if he was not able to on-sell the Owner’s Share, he was happy to keep it because it would increase in value before harvest. Andrew also said the fact that he was looking to on-sell the Owner’s Share was why he would not have agreed to the two contracts being co-dependent. He thought there was a possibility that a purchaser of the Owner’s Share would require Overseas Investment Office approval. As this could be a long process he did not want approval on one contract holding up the other. He denied knowing that Simon and Rosa were under the impression that the contracts were co-dependent.

[46]   Andrew disagreed with Simon and Rosa’s evidence about the Partnership Share. He accepted it was raised in their discussions but said he told them he could not buy it. He said he told them it would be possible to find an investor. He did not say he could write a cheque for it. Andrew said he had his reasons for declining to buy the Partnership Share.

[47]   The OS Agreement was dated 8 April 2016. It was signed by Andrew, Simon and Rosa on that date but witnessed later in April by a neighbour. It was left with Simon and Rosa so that they could arrange this. Its specific terms are discussed in more detail later. For now, I note that BCF agreed to purchase Simon and Rosa’s “44.7% share in the Forestry Right” for $1,341,000 inclusive of GST (if any), settlement was to take place on 30 June 2016, the vendors undertook to obtain necessary consents and signatures, and the agreement was conditional on the purchaser

obtaining finance by 6 May 2016.  At some point the finance date was amended to   8 July 2016 and the settlement date was changed to 31 January 2017. These amendments may have been made on 8 April 2016 but the evidence about this was unclear and it may have happened later when the Land Agreement was executed.

[48]   Andrew intended to use Baker & Associates Land & Leasing Ltd (Bakers) to market the Owner’s Share on his behalf. On 22 April 2016 Simon and Rosa wrote to Bakers authorising this. This letter advised of their agreement to sell to BCF, that BCF intended to sell “the trees”, and that Simon and Rosa consented to Bakers marketing the trees but they would not be liable for the costs and commission of any resulting sale. This letter was prepared by Andrew for Simon and Rosa to sign and send.3 Andrew said that Simon and Rosa were very supportive of his efforts to on-sell the Owner’s Share before settlement because they knew it would assist him to finance settlement of the land purchase.

[49]   On 3 May 2016 Inland Revenue advised that BCF was now registered for GST with effect from 1 April 2016. Around this time, Andrew received an offer for the whole forestry right plus rent and for a new forestry right for another 45 years. Such a sale would have required the consent of the Partnership. It is not clear what Andrew did about this offer but in any case it did not proceed.

[50]   The Land Agreement was not signed at the meeting on 8 April 2016 because it needed the signature of Mr Bunny, who was a trustee along with Simon and Rosa. On 27 May 2016 Simon, Rosa and Mr Bunny as the trustee vendors and Andrew as purchaser signed the Land Agreement. The purchase price was $4,476,000, with a deposit of five per cent to be paid immediately, and the balance to be paid on the settlement date of 30 June 2016 (at some point this was amended to 31 January 2017 and the evidence differed on why that was). The agreement was conditional upon Andrew completing due diligence (on a range of matters including finance) and notifying the vendor in writing within 20 working days (at some point amended to  30 working days, that is, 5 pm on 11 July 2016) that the property was suitable for his requirements. This due diligence clause was expressed to be “for the sole benefit of

3      The description of “the trees” was another example of Simon and Andrew inaccurately describing the nature of the Owner’s Share.

the purchaser” and could be waived by the purchaser giving notice of waiver in writing.

[51]   After these agreements were signed, Simon and Rosa saw more of Andrew at the farm than they normally would. Simon said Andrew was consistent in assuring them that the agreements worked together. Simon said Andrew was struggling to secure finance and had not paid the deposit for the land purchase, which was meant to have been paid immediately. Rosa agreed with this and recalled that on one occasion he said he had good news about the finance, and she brought out a bottle of bubbly to celebrate, but it turned out that he was only 99 per cent there with raising finance.

[52]   Andrew’s evidence was that he was looking for ways to finance the two agreements. He took about six potential buyers to look at the forest. He was also looking at selling part of the land and the cottage to Vicky and Brett. He sent an email to ANZ on 1 June 2016 and to Vicky on 8 June 2016 about this proposal.

[53]   Sometime in June, Simon and Rosa wrote to the Partnership, advising that they were looking to sell their Owner’s Share and Partnership Share in the trees. This letter recorded that “the market price at the moment would be $15,000-$20,000 per ha for the trees if harvesting now at 22-24 years old”.4 The letter offered Simon and Rosa’s Partnership Share. This was because the partners had the first right of refusal for this share. Simon said that Andrew suggested this letter be sent because he was aware of this. Andrew’s evidence was that he knew the Partnership agreement contained a pre-emptive right and so he had told Simon that it had to be offered to the other partners before selling it to anyone else.

[54]   On 10 June 2016 Ms Van Zyl forwarded to Brett Gould (Simon and Rosa’s solicitor after Mr Gold’s death) a copy of the OS Agreement. Ms Van Zyl noted that the agreement was conditional upon obtaining finance by 8 July 2016.

[55]   Around this time, Simon took the OS Agreement and the Land Agreement to Mr Gould to discuss them with him. Mr Gould recalled being surprised that Simon

4      This is consistent with Simon’s inaccurate understanding that the trees were at this time on average 23-years-old.

and Rosa were the vendors under the OS Agreement. His understanding was that forestry rights ran with the land. However, he recalled that Simon was adamant at their meeting that he and Rosa owned the interest personally because Andrew had assured them of that and had the documents which showed this. Mr Gould did not look any further into the ownership at this time. He said he would have done so at this time if the agreements had not already been signed.

[56]   On about 15 June 2016 Mr Gould sent an email to Ms Van Zyl, copied to Simon and Rosa, which said:

[W]e have raised the following issues with our client about the two contracts they have signed:

ISSUE

1.  The contracts are not expressed as being interdependent and conditional on each other

2.  The conditional dates don’t match 8 July for the FR and 11 July for the farm

3.  Deposits – the land agreement has the deposit payable upon [signing] of the agreement not when unconditional and the FR agreement has no deposit

4.  Farm Agreement

…

5.  FR Agreement

…

we record our understanding that the vendor is not gst registered and the purchaser will be

we understand our client may have wanted the right to otherwise sell their interest in the forest if an acceptable offer was made before this [agreement] became unconditional

We appreciate the parties are related but would like to see the above matters addressed in our client’s interest at least and ask that you take instructions with a view to the above matters being addressed.

[57]   Mr Gould said these were the issues he had discussed with Simon and Rosa. Simon said the last point about he and Rosa wishing to sell the forestry interest in the meantime was not quite right. As far as Simon was concerned, the two agreements went together.

[58]   Ms Van Zyl did not respond to this letter. She asked Andrew for instructions. Andrew said he did not give her any instructions because, as far as he was concerned, both agreements were already complete and signed and he did not want to spend money on lawyers arguing over what should or should not be in them. He said “we [Simon and he] were happily chatting to each other at the same time that Brett was firing off emails to my solicitor. So [he] thought not a lot to argue about here”. At some point later in June 2016, Mr Gould obtained a title search and the Memorandum of Transfer. This confirmed his view was that they ran together.

[59]   Andrew was having difficulty arranging finance and was not going to be in a position to make the Land Agreement unconditional by 11 July. On 8 July 2016 Andrew had lunch with Simon and Rosa at the farm. They discussed the agreements, as is confirmed by Simon’s diary for that day. Andrew presented a proposal to amend the Land Agreement. Amongst other things, this proposed deferring settlement of

$1 million if Andrew had not successfully agreed a sale of the Owner’s Share by the settlement date. It also proposed that the deposit be paid by 31 July 2016. Simon did not agree to these amendments. However, his evidence was that he was happy to keep negotiations open up to the expiry date of the Land Agreement because Andrew kept assuring Simon that he would get finance.

[60]   On 8 July 2016 Ms Van Zyl advised that cl 7 of the OS Agreement (the finance condition) was confirmed. Andrew said he probably told Ms Van Zyl that plan A was a loan from the bank and plan B was investors buying shares in BCF. He said “we didn’t have it writing but that was under control”. He accepted in cross-examination that he did not have a binding commitment from a bank to advance funds for the purchase of the Owner’s Share nor from investors to buy shares in BCF. Simon did not know that Andrew did not have finance in place. Later that day, Mr Gould emailed Ms Van Zyl to say that he was still waiting for a response to his 15 June email and she replied saying she was still waiting for instructions.

[61]   On 11 July 2016 Ms Van Zyl wrote to Mr Gould requesting an extension of the due diligence condition of the Land Agreement until 1 August 2016. Mr Gould replied the same day advising that the extension was not granted. He sent a further email later that day, reiterating that and recording the Land Agreement was at an end. Mr Gould

also referred to the OS Agreement and said “our clients did not appreciate the failure presumably intentionally to provide for a deposit”.

[62]   This led to a meeting between Simon and Andrew in Masterton on 12 July 2016. Simon gave Andrew a handwritten proposal. This was for a sale by Simon and Rosa of the Owner’s Share at $1,341,000 inclusive of GST (as per the 8 April 2016 OS Agreement), and by the Trust of Te Kanuka Station for $4,392,640 plus GST and the Partnership Share for $66,360 plus GST. In other words, the proposal was the same as that agreed on 7 and 8 April 2016 except the price of Te Kanuka Station was reduced by $83,360, deposits were to be paid on the Owner’s Share and Te Kanuka Station contracts, the Partnership Share was included and it was proposed that “all three contracts bound together”. The proposed settlement date for the Partnership Share was 31 August 2017 and 31 January 2017 for the other contracts. Simon said Andrew initially agreed to this proposal but later changed his mind. Simon told Andrew that unless he had a deal by the end of August they would be marketing the farm and forest interests with joint realtors (John Murray at PGG Wrightson and Rod Cranswick at Farmlands).

[63]   Shortly after this (on a date  between  12  and  15  July),  Simon  met  with Mr Gould. Mr Gould told Simon that his view was that the Trust owned the Owner’s Share. Simon said he was shocked by this and felt like Andrew had misled him. On 15 July 2016, Mr Gould sent an email to Ms Van Zyl, copied to Simon and Rosa, saying “we understand that these agreements have been re-negotiated on the following basis”. This email set out the terms which were consistent with the handwritten proposal discussed on 12 July in Masterton except that it stated that, in relation to the “44.7% forestry right”, “the vendor is now the Vallance Winkeleer Trust which assumed the same as the landowner when the land was transferred to it on 21/1/2000

– and so the price needs to be plus GST”. Ms Van Zyl responded on 21 July saying “[o]nce I have received instructions I will get back to you”.

[64]   Andrew said he did not provide instructions to Ms Van Zyl because he did not agree with the revised offer for a number of reasons. He said he told Simon he would “prefer to keep plodding away at the finance for the agreements that we’d signed in April”. He was aware that the Land Agreement was not on foot but Simon’s words

were that he was “still willing to entertain my offer”. Andrew said that he did not wish to buy the Partnership Share because it would present tax issues for him if he was to sell the Owner’s Share. He said that, although his request for an extension on the Land Agreement had been declined, he had no reason to doubt that the OS Agreement was still on track and unconditional. He accepted that Simon did not say much about the OS Agreement because they were working on ways to finance the farm, particularly ways to help Vicky and Brett get finance.

[65]   Andrew asked Simon to try to persuade the Partnership to agree to a pre- harvest sale. This would have produced funds that would have assisted Andrew to buy the farm. Even though the Land Agreement had not been extended, Andrew still wanted to buy it and Simon still wanted to sell it. On 22 July 2016 Simon wrote to the Partnership advising that it was time to vote yes or no to a pre-harvest sale. He said that he had a valuation of $3.5 million which would give a price of $77,000 per share. This was consistent with Simon’s understanding that Mr Farman had given a likely present market value of $17,500 per ha. Simon provided a copy of this letter to Andrew and Rosa invited him to join a conference call with the Partnership on       30 August.

[66]   Simon said he did these things because of his recent 15 July offer, which meant there was still a possibility of Andrew buying the Owner’s Share, along with the Partnership Share and the farm. As it happened, Mr Guscott did not let Andrew participate in that call. Andrew said he and Simon were keeping each other informed of developments at this time and he was under the impression they were happy with the sale of the Owner’s Share to BCF. Amongst other things, he said that during August he had a forestry company visit the farm to look at the forest.

[67]   By 30 August 2016 Andrew had a funding proposal from ANZ. This was conditional on various matters including an unconditional agreement for the sale and purchase of the cottage and related title (which Andrew was intending to sell to Vicky and Brett) and an unconditional agreement for the sale by the Partnership of the Forestry Right. Andrew said that, despite this proposal, Simon and Rosa refused to extend the agreement for the sale of the land. He accepted in cross-examination that Simon had said “don’t worry, we’ll still work with you but we’re going to list it”.

Sale to others

[68]   In September 2016 Simon and Rosa worked with PGG Wrightson and Farmlands to sell all the Trust’s interests (land and forestry interests). Simon provided a handwritten note with his instructions to Mr Murray. In summary these instructions were:

(a)to sell the farm (land plus building, 830 ha) for $4,392,640 plus GST if any, with a 10 per cent deposit to be paid to the Trust;

(b)to sell the 44.7 per cent interest in the Forestry Right for $1,341,000 (15,000 x 200 x 44.7 per cent) plus GST if any, with a 10 per cent deposit to be paid 50/50 to Simon and Rosa who were not registered for GST;

(c)to sell the one share in the Partnership for $66,360 ([($15,000 x 200) x

55.3 per cent] x 1/25) to be paid to the Trust;

(d)all three contracts to be bound together;

(e)settlement date of 31 January 2017; and

(f)commission to Mr Murray of two per cent on the farm and 44.7 per cent forestry interest sales, but not on the Partnership Share sale.

[69]   Andrew met with Mr Murray on a number of occasions between September and December 2016. He was aware that the Owner’s Share was being listed for sale. He did not have Ms Van Zyl write to Mr Gould to say that he had an unconditional sale for the Owner’s Share because he “didn’t want to annoy everyone too much when I’m in the middle of trying to buy the land, still reasonably confident that we’ll get there in the end. You know I just let that one lie”. He said he “didn’t honestly think that we would be cast aside as we were at that point”.

[70]   The date for tenders was 14 December 2016. Three offers were received, including:

(a)An offer from Andrew and BCF for the land for $3,650,000. The offer included a term that the parties acknowledge that Simon and Rosa had already entered into an unconditional agreement dated 8 April 2016 for the sale of their interest in the forestry right.

(b)An offer from John McFadzean or nominee for the land of $3,550,000, which excluded the forestry interests.

[71]   There were no negotiations with Andrew over his offer to see if a deal could be struck. Andrew said he thought Simon would still have been willing to do a deal with him if he had thought that Andrew “had the horsepower that he required”. However, Simon had given up on Andrew being able to put together the finance and his evidence was that he thought the offer was “an attempt to trap us back into the previous agreement”.

[72]   John Murray’s evidence was that on 19 December 2016 Simon called him and asked him to tell Andrew that the sale of the forestry right to him was null and void. Mr Murray’s notes of Simon’s instructions recorded that if Andrew’s prior offer was not cancelled, then Simon would not proceed with Andrew. Simon cannot recall this, but assumes it was prompted by Andrew’s claim in the tender that the OS Agreement was still alive. Andrew confirmed Mr Murray passed on this message. Andrew claimed he was surprised by this because Simon and Rosa had given him no previous indication that this was their view.

[73]   On 20 December 2016, Mr Gould called Mr Murray into his office and told him the OS Agreement was invalid. Mr Murray made a note of his intended advice to Simon and Rosa, namely that they wanted the best overall deal, that going with Andrew would avoid tax and legal issues (because Andrew was saying he had a valid contract for the trees), that going with Andrew would avoid the need for three separate deals, and they should share the tree plotting information with Andrew.

[74]   Andrew considers the reason Simon told Mr Murray that the OS Agreement was null and void was because Simon had just received a valuation of the forest at just over $3,500,000 excluding GST. Simon said that this simply confirmed what he

already knew from Mr Farman - that the forest was worth between $3,000,000 to

$4,000,000 (or $15,000 to $20,000 per ha). Andrew knew that the Partnership had arranged for a valuation. He did not know the outcome of that valuation at the time because the Partnership would not show it to him. He did not see it until discovery in this proceeding. He has a  different  view  to  Simon  about  whether it  confirmed  Mr Farman’s view as discussed with Simon in March 2016.

[75]   In any case, Andrew instructed Ms Van Zyl to contact Mr Gould to clarify the statement that the OS Agreement was null and void. This led to the following communications on 20 December 2016:

(a)Ms Van Zyl emailed Mr Gould (at 12.40 pm) stating that there was a valid confirmed unconditional agreement in place with BCF and suggesting that Mr Murray may have been confused about this.

(b)Mr Gould replied nine minutes later saying that “[r]ecent investigations have raised doubt over the validity of this Agreement”  and asking  Ms Van Zyl to set out the grounds on which she asserted otherwise. Mr Gould also said the matter was of some urgency.

(c)Andrew instructed Ms Van Zyl to reply, asking for the grounds on which Mr Gould asserted the OS Agreement was not valid. Ms Van Zyl replied to Mr Gould in accordance with this instruction around two hours later (at 2.45 pm).

(d)Nine minutes later (at 2.59 pm) Mr Gould responded stating that “recent investigations of all the relevant document have revealed” that the Owner’s Share was held by the Trust, not Simon and Rosa, and so the OS Agreement prepared by Andrew with Simon and Rosa as vendors was invalid. Mr Gould said that unless he heard otherwise from Ms Van Zyl by 4.30 pm, he would assume this position was accepted by Andrew “enabling our clients to enter into any other contracts presented in relation to the 44.7% interest in the forest proceeds”.

(e)At 4.38 pm, Mr Gould emailed Ms Van Zyl and said that, as the 4.30 pm deadline had passed, it was impliedly accepted that the OS Agreement was at an end and his client was free to enter into another contract for the Owner’s Share.

[76]   Ms Van  Zyl replied early the next morning saying that she had not seen     Mr Gould’s 2.59 pm email until that morning. She said that BCF considered the OS Agreement to be a valid and enforceable contract and “any other actions by your client will be at his peril”. Mr Gould sought to impose further time frames for a substantive response which Ms Van Zyl resisted.

[77]   Ms Van Zyl provided a substantive response on 22 December 2016. She said that:

(a)Simon and Rosa were the original owners of the Owner’s Share and there was no evidence that when Te Kanuka Station was transferred to the Trust in 2000 that the Owner’s Share was transferred with it.

(b)The negotiations in 2003, in which John Gold was involved for Simon and Rosa and the Trust, were on the basis that Simon and Rosa retained the Owner’s Share.

(c)Simon and Rosa accepted during the April 2016 negotiations that they retained the Owner’s Share.  No different position was taken when  Mr Gould sent his 15 June 2016 email.

(d)Irrespective of who owned the Owner’s Share, BCF had a valid and enforceable agreement with Simon and Rosa and it was for them to take steps to enable that to occur (perhaps a back-to-back agreement with the Trust or having the Trust agree to the sale).

(e)Mr Gould’s clients would need to tell prospective purchasers that a prior purchaser was asserting rights to the forestry.

[78]   Mr Gould did not reply to this letter. Andrew continued to look for finance for the farm purchase. He wanted to make a fresh offer if he was able to obtain finance.

[79]   On 11 January 2017 an agreement for the purchase of the farm was reached between the Trust and Mr McFadzean with a price of $4,000,000. This offer excluded the Owner’s Share and the 1/25th share in the Partnership.

[80]   Settlement of the OS Agreement,  if  valid  and  enforceable,  was  due  on  31 January 2017. On 26 January 2017 Ms Van Zyl wrote to Mr Gould, enclosing the documents she considered to be necessary for the settlement and asking for Mr Gould’s settlement statement and E-dealing undertaking. Mr Gould did not respond.

[81]   On 27 January 2017 BCF lodged a caveat on the land which temporarily stopped its sale to Mr McFadzean. Simon felt that Andrew was trying to pressure their purchaser. Andrew said he lodged the caveat to protect BCF’s right to purchase the Owner’s Share because he was worried that Simon and Rosa would not settle. At this time he was “pretty sure [he] had most of the wheels in motion by then” by which he meant that he thought he was going to be able to come up with the finance.

[82]   On 30 January 2017 Andrew’s timesheet record said “investors to cover for useless bank”. Andrew said the main argument with the bank was about whether he needed $1,341,000 or the net amount after the GST refund figure. Also, one of his investors had money in a deposit which he did not want to break. The bank would not rely on this investor’s undertaking and said the deposit would have to be broken. He said the bank “weren’t wildly helpful to be fair”.

[83]   On 31 January 2017 Ms Van Zyl personally attended Mr Gould’s office and tendered settlement with a bank cheque for $1,341,000. Mr Gould would not accept the cheque and said he did not have instructions. Ms Van Zyl followed this up with a hand-delivered letter on 1 February 2017 saying that BCF was ready, willing and able to settle. There was further follow up correspondence from Ms Van Zyl over the next few days.

[84]   On 10 and 14 March 2017 Mr Gould wrote to Ms Van Zyl maintaining that the Trust owned the Owner’s Share, that the forestry right was a profit à prendre and therefore an easement under s 293 of the Property Law Act 2007, which meant the “grantor’s rights and benefits from such an easement run with the land”. He said that because Simon and Rosa did not own the rights the OS Agreement purported to transfer, they were under no obligation to settle and the OS Agreement was not a valid agreement of the Trust. Mr Gould also asserted that Andrew had induced Simon and Rosa to enter into the two agreements and had caused them loss. He requested confirmation that the caveat be removed within five working days.

[85]   On Andrew’s instructions, Ms Van Zyl advised Mr Gould on 16 March 2017 that BCF had elected to cancel the OS Agreement and sue for damages. As the caveat could only remain to protect a claim for specific performance, it would be removed.

[86]   The agreement between the Trust and Mr McFadzean became unconditional on 22 March 2017 with settlement on 3 May 2017 to Mr McFadzean’s nominee (Band of Brothers Limited).

[87]Following this settlement, further arrangements were entered into as follows:

(a)Because the sale to Mr McFadzean did not include the purchase of the Trust’s forestry interests, Simon and Phil Guscott met with him to discuss arrangements. They wished to ensure that the Partnership would continue to have access to the farm in order to harvest the forest. They negotiated that the Trust would pay Band of Brothers $47,250 per annum plus GST following the settlement. Simon said this reflected that Band of Brothers would not receive any income from the 200 ha of the farm that was under forest. These arrangements were later recorded in a deed dated 19 June 2017 between the Trust, Band of Brothers and the Partnership.

(b)The Partnership decided to sell the Forestry Right. It entered into a deed with the Trust dated 25 May 2017 under which the Trust agreed to take all necessary steps to enable the sale to be completed.

(c)The Trust and the Partnership entered into a deed dated 21 July 2017. Under this deed the Partnership agreed to pay to the Trust a

44.7 per cent share of the proceeds of the sale of the Forestry Right and to use its best endeavours to procure the purchaser of the Forestry Right to covenant with Band of Brothers to pay the rent to it.

[88]   Andrew disputes that there was any need for an agreement to pay rent to Band of Brothers. He would not have agreed to this if he had purchased the Owner’s Share. Andrew’s view was that Band of Brothers had bought the land subject to the Forestry Right, which was registered on the title. In Andrew’s view this meant that Band of Brothers was obliged to provide access to the Partnership in accordance with the terms of the Memorandum of Transfer and that it had no right to receive rent from anyone. Andrew also disputes that there was any need to pay the rates and outgoings, as this was also governed by the Forestry Right and it placed the responsibility on the Partnership. He said that he would have consulted Ms Van Zyl about this if he had purchased the Owner’s Share. Ms Van Zyl said that, if Andrew had done so, she would have advised him that he had no obligation to pay the rent and outgoings.

[89]The Forestry Right was sold on the open market, after a tender process, for

$3,600,008 to FTF under an agreement dated 18 September 2017. The purchase was zero-rated for GST. The terms included that the purchaser would pay the rental of

$47,250 per annum plus GST to Band of Brothers.   The settlement took place on     9 October 2017. This was a few days late, which meant penalty interest applied and the Partnership received $3,605,925. The costs of the sale were $54,564.43. The net proceeds were $3,551,361.41.

[90]   A 44.7 per cent share of the net proceeds was $1,587,458.55. However, the Trust received $1,443,378.20 as its 44.7 per cent share of the net sale proceeds. This lesser amount was to recognise the Trust’s responsibility for the rental payment to Band of Brothers until FTF took over the forestry and FTF would have lowered its tender bid because of this rental payment. The Trust also received $82,630.63 for its 1/25th share in the Partnership.

The outcome for Andrew

[91]   Andrew was undoubtedly disappointed in missing out on the land. He explained his position in the following exchange:

Q. So does that mean that you wanted [the] owner’s share regardless of what happened with the failed property, because I had understood and I may be wrong that really your main interest was getting at least some of the farm property?

A. We had maybe 100 or on a good day a couple $100,000 worth of trees on the boundary that we couldn't do anything with and there are still some there, there's a third party involved in these trees but there's still some trees there that we still intend to take out through this land. So the simplest way to roll all that into a bundle was to get involved, was to take possession of the owner’s share, get involved in the decision-making with the forest and wrap those trees all up into one. So the owner’s share was quite important from that point of view.

Q. What about the other way around, did you want the farm without the, if you couldn't have the owner’s share did you still want the property?

A. Yes.

Q. And did you have any preference for one or the other?

A. The land, I mean the land was obviously a better thing long-term because it’s there forever. When the owner’s share’s gone it’s gone.

Q. Yes.

A. So the land was slightly more attractive from a borrowing point of view as well as a long-term income-earning project, yes.

Q. And would the way you were thinking of financing the owner’s share, was that going to assist you with the finance for the farm property?

A. Yes because if we’d had land and the owner’s share the whole thing would have been an awful lot easier. And I, you know, I was operating in the belief that we’d all [hold] hands together and Brett and Vicky would get what they wanted. We would – Simon wouldn’t be left with part of his farm sold to Brett and Vicky and the rest of it chopped up for someone else and we’d all work together quite nicely. In the beginning that was their – that was the plan.

Q. And were you pretty disappointed when you didn’t succeed in getting the farm?

A.  I was extremely disappointed, yeah.

[92]   Although Andrew did not get the deal he had hoped for from Simon and Rosa, he did end up purchasing 217 ha from Band of Brothers. This was the area at the back of the farm which had been the area he had always been interested in. Vicky and Brett

purchased an area of the farm but, according to Andrew, “it’s cost them … damn near twice as much for the smaller area of land” than it would have done if the April agreements had proceeded. Band of Brothers retained the rest.

Ownership of the Owner’s Share as at April 2016

The issue

[93]   The question of who owned the Owner’s Share as at April 2016 is relevant to a number of the defences raised by Simon and Rosa. Andrew says it was owned by Simon and Rosa. Simon and Rosa say it was owned by the Trust.

A forestry right

[94]   Forestry rights are statutory interests created pursuant to the Forestry Rights Registration Act 1983.5

[95]   Section 2 defines a “forestry right” as “a right created in accordance with this Act”. Section 2A of the Act provides for the creation of forestry rights as follows:

2A      Creation of forestry rights

(1)A forestry right may be created by the proprietor of land—

(a)by creating in accordance with subsection (3); or

(b)by granting to any other person; or

(c)        by reserving to the proprietor on the sale of the land,— the right to—

(d)establish, maintain, and harvest; or

(e)        maintain and harvest,— a crop of trees on that land.

(2)The forestry right may also—

(a)grant or reserve rights of access and rights of construction and use of tracks, culverts, bridges, buildings, and other works and facilities if those rights are ancillary to and necessary for the purposes of subsection (1):

5      Hinde McMorland & Sim Land Law in New Zealand (LexisNexis, 2003) at 16.083.

(b)provide for charges, payments, royalties, or division of the crop or the proceeds of the crop including the right to receive and the obligation to surrender units,—

whether or not such rights or provisions are coupled with an obligation.

(3)Despite any enactment or rule of law, the proprietor may, in accordance with this section, create a forestry right for the proprietor.

(4)No right created under this section is capable of conferring a right of exclusive possession of the land.

[96]   Section 3 of the Act deems every forestry right to be a profit à prendre and provides for its registration under the Land Transfer Act 2017 (or formerly the Land Transfer Act 1952). A profit à prendre confers a right to sever and take from the burdened land to the grantee’s own use some part of the realty of that land which is capable of ownership.6 It is an interest in land that runs with the burdened land (the servient tenement) and binds purchasers of the land.7 It is also a property right that may be mortgaged, assigned or sub-granted except to the extent that such dealings are not expressly prohibited.8

[97]   Section 2 defines a “covenant” as “any covenant, whether positive or negative in effect, contained in a forestry right” registered under the Land Transfer Act. Section 4 provides that “every forestry covenant relating to land of a covenantor” is binding “on the heirs, executors, administrators, and assignees of the covenantor” unless a contrary intention is expressed in the forestry right.

The Partnership’s forestry right

[98]   The Partnership’s forestry right (deemed a profit à prendre by s 3 of the Act) was registered on the title of Te Kanuka Station (as described above).9 This meant that Simon and Rosa and their successors in title were bound by this interest.

[99]   This forestry right was  created  by  the  Memorandum  of  Transfer  dated  16 February 1995. It provided:

6      At 16.079.

7      At 16.085.

8      At 16.084.

9      Refer [12] above.

Whereas A. SIMON FREDERICK VALLANCE of Masterton, Farmer, as to an undivided one-half share and the said SIMON FREDERICK VALLANCE and ROSA VALLANCE of Masterton, Married Woman, as to an undivided one-half share (herein together with their executors, administrators and successors in title referred to as “the Owner”) are registered as the proprietor of an estate in fee simple as tenants in common in equal shares subject however to such encumbrances liens and interests as are notified by memoranda underwritten or endorsed hereon in all that piece of land containing [legal description of the Te Kanuka Station farm land]

B.   The Owner has agreed to make available to the partners of the Te Kanuka Forestry Partnership a portion of the said land as is shown on the diagram endorsed hereon and edged in yellow (hereinafter called “the land”) for the purpose of establishing a pinus radiata forest and to grant to the said partners certain forestry rights within the meaning of the Forestry Rights Registration Act 1983 in respect of the Land.

C.  The Owner and the partners have agreed upon the terms and conditions of the forestry rights as set out hereinafter in this Memorandum of Transfer.

Now therefore in consideration of the covenants and agreements on the part of the partners hereinafter recorded the Owner transfers and grants to [the Partners] … (herein referred to as “the Grantees”) the forestry rights set out hereafter subject to the performance and observance by the Grantees of the covenants set out hereafter and otherwise upon the terms and conditions set out in this Memorandum of Transfer.

(Emphasis added)

[100]   Clause 1 of the Memorandum of Transfer defined “forestry rights” as “all the rights granted by the Owner to the Grantees as set out in Clause 5”. This reference is clearly a typographical error. Clause 5 provides for “mutual provisions”. Clause 2 is the provision under which the Owner grants rights to the Grantees. It is as follows:

2.  FORESTRY RIGHTS:

The Partners may exercise the following rights in respect of the Land during the currency hereof:

2.1   To enter upon the Land … for all purposes connected with the Forestry Rights.

2.2  The sole right to plant, establish, plan, manage, cultivate, maintain, protect and render productive, fell cut down, harvest, carry away, sell and otherwise utilise any or all trees, timber and logs growing or to be grown in or on the Land.

2.3   To provide, construct and use all roads, tracks, ramps, skids, culverts, bridges and gates on the Land and on the adjoining land of the Owner as may be necessary for, or conducive to the efficient exercise by the Grantees of the Forestry Rights.

2.4   To construct on the Land [and remove] buildings, plant, and other works and facilities as may be necessary for, or conducive to the efficient exercise by the Grantees of the Forestry Rights.

2.5  To place and stack on the Land any harvested trees or logs.

2.6   Either themselves or by others on its behalf to cut, remove and dispose of forest produce from the Land.

[101]Clause 3 set out “The Grantees’ Covenants”. These required the Partnership:

(a)to exercise the Forestry Rights without undue delay and to normal industry standards;

(b)to comply with statutes, regulations (etc) relating to the use of the land and to “keep the Owner indemnified in respect of all such matters”;

(c)not to assign or mortgage the Forestry Rights without “first obtaining the consent in writing of the Owner” and as a condition of consenting to such a disposition “the owner may require that a Deed of Covenant

… be entered into with the Owner …”;

(d)to pay all rates, taxes, charges (etc) which are charged or imposed on “the Land” and “where the outgoings are assessed together with other land of the Owner to pay an appropriate proportion of the same”.

(e)to indemnify “the Owner” against claims (etc) arising out of “the Owner’s ownership of the Land” or the exercise of the Forestry Rights (amongst other others) and to maintain insurance for such claims.

(f)at the expiry of the Term, to leave the Land in a clean, tidy and suitable condition and to leave roads, bridges and culverts in a condition no worse than at the commencement of the Term;

(g)to arrange insurance cover for fire damage to the trees and providing for payment the Owner to receive payment from the insurance proceeds; and

(h)to keep proper records.

[102]   Clause 4 set out the Owner’s Covenants. These included that the Partnership “may enjoy the Forestry Rights for the Term without any interruption or disturbance from the Owner or any person or persons lawfully claiming by, from or under the Owner”.

[103]   Clause 5 set out the Mutual Provisions”. This included permitting the Owner to inspect the Land and the Forest at all reasonable times and providing a dispute resolution procedure.

[104]   Clause 6 provided for “Payment of Timber”. Clause 6.1 defined “gross stumpage value” as the sale proceeds of the forest produce less costs. Clause 6.2 provided for payment of “the Owner’s share” in specie or cash. Clause 6.3 provided that “[t]he Owner’s share of the calculated gross stumpage shall be forty-four and seven-tenths percent (44.7%)”.

[105]Clause 10 provided for a 30 year term.

[106]   An attached map showed the area over which the Forestry Right was granted. It described the area as totalling 222 ha with 192 ha being plantable and the balance being riparian reserves.

The Owner’s Share

[107]   The rights set out in cl 2 of the Memorandum of Transfer set out a “forestry right” as defined by s 2A(1) of the Forestry Rights Registrations Act. In particular, it grants the right to another person (the Partnership) the right to establish, maintain and harvest trees on the land.

[108]   Clause 2 of the Memorandum of Transfer also grants rights to enter the land and to construct and use tracks, culverts and other works in terms of s 2A(2)(a). Clause 6 (which provides for the Owner’s Share) provides for the division and payment of the crop or its proceeds in terms of s 2A(2)(b). The issue is whether the

matters in s 2A(2) are themselves a “forestry right”, and more particularly whether the Owner’s Share is a “forestry right”.

[109]   Andrew submits that the Owner’s Share is itself a “forestry right”. He submits that the right to proceeds of the crop is a right created under the Act (it is created under s 2A(2)(b)), and so is a forestry right in itself. He says that this meant it could be bought and sold separately (as it was in the later sales) and could be registered on the title separately. Counsel characterised it as a sub-forestry right to the Partnership’s broader forestry right, severable and conferring just the benefit of the gross stumpage proceeds.

[110]   Simon and Rosa submit s 2A(1) is the forestry right that may be created under the Act.   They submit that to be a forestry  right it must create one of the rights in    s 2A(1)(d) or (e) and, if it does that, the creator of the right may also provide for any of the benefits or obligations under s 2A(2). They submit that those benefits or obligations, if provided for, are not a “forestry right” themselves.

[111]   I agree with Simon and Rosa’s submission about this. The words and structure support this. Section 2A(1) provides how a “forestry right may be created”. Section 2A(1) provides what a forestry right (the thing created under s 2A(2)) may also provide for. Those are benefits or obligations that arise only if there is a right in relation to a crop of trees on land under s 2A(1). The reference to “created” in s 2A(1), and its absence from 2A(2), are important because the definition of “forestry right” in s 2 is a right “created” under the Act. In other words the forestry right is that created in ss 2A(1) and (2).

[112]   Further, s 3 deems every forestry right to be a profit à prendre. Charges, payments or royalties, division of the crop, or proceeds of a crop are not in the nature of a profit à prendre. They are benefits or obligations associated with the profit à prendre grant. Similarly, the right to enter land and to construct and use tracks (etc) are not in the nature of a profit à prendre. They are rights made in the nature of easements to facilitate the profit à prendre grant. The rights in s 2A(2) do not confer rights to sever and take from the burdened land to the grantee’s own use some part of

the realty of that land which is capable of ownership.10 While trees and timber are part of the land, the sale proceeds from the harvested trees or timber are not.11

[113]   In any event, categorising the Owner’s Share as a “forestry right” does not alter whether it can be severed from the forestry right created. It can be, but it must be done expressly. Otherwise the land will be subject to the forestry right on the terms that it has been granted. In this case the land was subject to a forestry right that provided for “the Owner’s Share”. The more relevant question than whether the Owner’s Share is a forestry right in and of itself, is who is the “Owner” referred to in the Memorandum of Transfer for the purposes of cl 6.

[114]   As to that, provisions of the Forestry Right (aside from cl 6) assume that “the Owner” is the registered proprietor of the land. For example:

(a)the Owner’s agreement that the Partnership could construct and use roads, tracks, bridges and gates (cl 2);

(b)a right for the Partnership to enjoy the forestry right without interruption or disturbance from the Owner (cl 4.1);

(c)a covenant by the Owner to not carry out or grant to another person rights that would interfere with the forest or the forestry right (cl 4.2);

(d)a term that the Grantees have a right of first refusal of a future forestry right where the Owner proposes to re-afforest the land within six months of harvesting (cl 7.5);

(e)the Owner’s right to refuse assignment or mortgage of the forestry right or in respect of any part of the land by the Grantees (cl 3.3(a));

10 See E H Burn and J Cartwright Cheshire and Burn’s Modern Law of Real Property (18th ed,  Oxford University Press, 2011) at 703: “… a profit, unlike an easement, carries the right to remove something from the servient tenement … Since a profit imports the privilege of carrying away something from the servient tenement, the dominant owner enjoys such possessory rights as will enable him to maintain trespass or nuisance at common law for an infringement of his right, but the owner of an easement is restricted to the remedies of abatement or an action of nuisance”.

11 Land Transfer Act 2017, s 5 definition of “land”; and Land Transfer Act 1952, s 2 definition of “land”.

(f)the obligation on the Partnership to indemnify the Owner for any claims arising out of the Owner’s ownership of the land (cl 3.5(a));

(g)the Owner’s right to graze the forest land during the term (cl 4.3); and

(h)the Owner’s right to enter into and inspect the forest land during the term (cl 5.1).

[115]   These are all provisions that are only necessary or appropriate if the Owner is the registered proprietor of the land. This is consistent with the definition of “the Owner” under “A” at the beginning of the Memorandum of Transfer. The Memorandum of Transfer defined “the Owner” to ensure that the Owner’s rights and obligations attached to the Owner’s “successors in title”. The definition is not limited to a person who succeeds to the title under the will or intestacy of the person who owned the land. In ordinary legal usage a “successor in title” is “the party that comes later in time than the other, as the holder of an estate or interest in property”.12

[116]   Andrew says the definition of “Owner” under “A” of the Memorandum of Transfer referred to the grantor of the Forestry Right but “Owner” under cl 6 referred to whoever held the Owner’s Share at any point in time. He says the Memorandum of Transfer is inconsistent when referring to “Owner” or “owner”. He says the parties’ intention that the Owner’s Share could be held separately from the registered proprietor of the land is consistent with the 2003 draft arrangements in which Mr Gold, who drafted the Memorandum of Transfer, was involved.

[117]   Andrew contends that “the Owner”, as defined at the beginning of the Memorandum of Transfer, defines that only for the purposes of identifying who owns the land that is the subject of the Forestry Right. He contends that the definition

12 Trischa Mann (ed) Australian Law Dictionary (3rd ed, Oxford University Press, 2017). See also Henry Campbell Black Black’s Law Dictionary (online ed) <thelawdictionary.org>: A “successor” is someone who “replaces or follows a predecessor” and “successor in interest” is someone who “follows another in ownership or control of property”. See also Randle v Contact Energy Ltd CA258/00, 19 November 2001 at [7]-[8] for the same approach in the context of a registered compensation certificate under which “the lessee, successors and assigns” covenanted not to make further claims for compensation for the land. The Court of Appeal recorded that it was “common ground that the appellants are successors in title to the land … They acquired their interest in the land in 1985 by way of deferred payment licence and then in 1995 acquired the freehold estate at which point the respective interests merged”.

applies only to the obligations in the Forestry Right that by necessity must run with the land. He contends that it does not apply to the Owner’s Share, because that is a severable interest, as subsequent events showed. He says it is unfortunate that the clause providing for the Owner’s Share refers to “Owner” but it cannot mean whoever succeeds to the land because we know that need not be the case from the later sales.

[118]   The Memorandum of Transfer contains some minor errors in that it sometimes refers to “owner” rather than “Owner” and there is the typographical error referred to earlier.13 They are clearly errors, and minor in nature, and are an insufficient basis on which to infer that the reference to “Owner” in cl 6 was not intended to be the person(s) defined as “Owner” at the outset of the Memorandum of Transfer. There is nothing else to suggest that “Owner” in cl 6 meant anything other than what it meant (and has to mean in the context of those provisions) throughout the Memorandum of Transfer, namely the registered proprietor of the land (that is, Simon and Rosa or their successors in title). The reference to “herein” in the definition also indicates it is intended to apply throughout.

[119]   It also does not follow from the fact that the Owner’s Share could be severed from the Forestry Right whereas as other Owner’s rights and obligations could not, that “Owner” in cl 6 meant something other than the registered proprietor. The Owner’s Share was a right to receive a share of the sale proceeds of the harvested forest produce in cash or to elect to receive that share in specie. It compensated Simon and Rosa for the fact that while the trees were on the land they could not use if for other farming purposes and were not receiving rent.14 The Owner’s Share therefore reflected that the registered proprietor’s use of their land was restricted.

[120]   If Simon and Rosa were to sell the farm, they could negotiate terms with the purchaser to retain the right to receive payment from the harvested forest if they wished to do so. The purchaser could factor into their purchase price the fact that they would not be able to use that part of the farm on which the trees were planted until the trees were harvested and/or seek a rental payment from the Partnership. These were

13 At [100].

14     Mr Guscott’s evidence was that the Owner’s Share was a greater percentage than is usually the case because of this.

arrangements that could be negotiated. But absent any such express arrangements, the Owner’s Share would be transferred with the other bundle of rights and obligations of the Owner created by the Memorandum of Transfer and registered on the title, to Simon and Rosa’s successor in title.

[121]   This meant that when Simon and Rosa sold the farm to the Trust, the agreement for the sale and purchase did not need to specify that the Owner’s Share was being transferred to the Trust. As the successor in title of Simon and Rosa, the Trust became “the Owner” for the purposes of the Forestry Right created by the Memorandum of Transfer. The agreement for sale and purchase described the land being transferred to the Trust as “together with and subject to” the various easements and encumbrances on the title and the Forestry Right. Absent an express condition excluding the Owner’s Share from the transfer, which in turn would likely have required an instrument varying the Forestry Right documented in the Memorandum of Transfer to ensure clarity and certainty, the Trust as successor in title became the Owner for all purposes under the Forestry Right, including the Owner’s Share.

[122]   It follows that this was not a case of Mr Gold overlooking the need to expressly provide for the transfer of the Owner’s Share to the Trust if that was intended (an unlikely scenario in Andrew’s submission given he had drafted the Memorandum of Transfer). There was no such need to so provide. Nor was there any need to expressly provide for the consideration. The consideration for the land and buildings of

$1,202,000 incorporated that the land was subject to the Forestry Right (with associated Owner’s obligations as well as its rights, including the right to proceeds under the Owner’s Share).

[123]   Andrew submits that the 2003 negotiations show that the Owner’s Share was retained by Simon and Rosa. The documentation at that time indicates that Mr Gold had some involvement on Simon and Rosa and the Trust’s behalf. However, it is not clear from that documentation whether Mr Gold approved any of the versions in which the proposed sale of the Owner’s Share (described as “vendors 44.7% share in the forestry right (B418877.1))” was separated from the proposed sale of the Te Kanuka Station land and which altered the vendor of the Owner’s Share to Simon and Rosa.

[180]   I accept that Andrew knew that Simon and Rosa had in mind doing an overall deal for everything and he did not make it plain in their discussions that the agreements were not interdependent. My assessment is that Andrew was keeping his options open with different ideas about how he might be able to make things works, and would have wanted to ensure an outcome that gave him flexibility. I consider that he would not have deliberately told Simon and Rosa one thing while fully intending to do something else. Rather, his approach to any possible misunderstanding held by Simon and Rosa would have been to say nothing because that could potentially give him more options as matters with financing and possible investors evolved. Further, Andrew hoped he would be able to buy the Owner’s Share and Te Kanuka Station and that a purchaser for the Partnership Share would be found. If he could achieve this, it would not matter that he had not committed to an interdependent arrangement. From his perspective, his efforts to achieve this would comply with the gentlemen’s agreement they had.

[181]   This approach was perhaps most evident with his approach to Mr Gould’s email of 15 June 2016 (raising issues with the agreements) when he decided to not to instruct Ms Van Zyl to respond because, as far as he was concerned, the agreements were complete and he did not want to spend money arguing about it when he was happily talking to Simon. It was also his approach when he did not wish to accept Simon’s revised July proposal. And it was also his approach when he knew that Simon and Rosa were offering the Owner’s Share for sale in September 2016, but did not assert that he had an enforceable contract for the Owner’s Share until he submitted his tender in December 2016. His explanation, that he did not want to annoy anyone when he was trying to buy the land, fits with keeping his options open while also seeking to maximise his prospects of securing a favourable deal in the tender.

[182]   It is to be remembered that Andrew left the agreements with Simon and Rosa for witnessing (in the case of the OS Agreement) and for the signature of the third trustee (in the case of the land agreement). It was plain on their face that there was no condition providing that they were interlinked. Simon was a farmer, but this was not the first agreement for sale and purchase he had ever seen or signed. Andrew was reasonably entitled to expect that Simon would see that the agreements were not expressed to be conditional on each other. He would not have represented that they were interdependent when it was plain on inspection that they were not.

[183]   I consider at best there was an expectation by all of them that Andrew would be buying Te Kanuka Station and the Owner’s Share and would sort out the sale of the Partnership Share. This might be termed a gentlemen’s agreement but both sides knew that a gentlemen’s agreement was not binding. Simon and Rosa hoped and trusted Andrew to find a way to do a deal whereby all their farming and forestry interests would be sold to him and/or others in some shape or form. Andrew hoped to do that but could not get sufficient commitment from his bank or investors by the end of August when Simon and Rosa thought they had given him enough time.

[184]   Their arrangements and respective understandings do not form sufficient grounds to give rise to an equitable estoppel. There was no unconscionability given that there was no more than a gentlemen’s agreement and it was plain that the contracts were not expressly conditional on each other. Nor do they give rise to an implied term. An interdependence condition was not necessary to give business efficacy to the two agreements and would be contrary to that to which they had agreed.

[185]   Nor do they give rise to a unilateral mistake for which relief should be granted. That is because, even if Simon and Rosa entered the OS Agreement and the Land Agreement understanding that the two agreements were legally conditional on each other (which in my view they did not), and that Andrew knew of this mistake (which in my view he did not), performance of one without the other would not result in a substantially unequal exchange of values or disproportionate obligations.

[186]   To explain this last point further, Simon and Rosa contend that it would result in an unequal exchange in part because the price of the Owner’s Share was lower than it otherwise would have been in exchange for a higher price for Te Kanuka Station. I have rejected that this was Andrew’s view of how the prices were derived. Simon and Rosa also contend that the loss of the ability to sell Te Kanuka Station, the Owner’s Share and the Partnership Share as a package was important to them because of their imminent retirement away from the Wairarapa. However, when they sought to sell that package later they did not receive a tender from anyone else for that package. The fact that they were retiring did not necessitate a sale of the package to one purchaser.

Failure of finance clause

[187]   Simon and Rosa contend that the OS Agreement terminated on 8 July 2016 because Andrew had not arranged finance. They say that cl 7 of the OS Agreement (“Agreement conditional on purchaser arranging finance by 8th July 2016”) was not a clause for the benefit of Andrew alone. They accept that the traditional position is that finance clauses are for the benefit of the purchaser alone but they say such clauses need not always be and it will depend on the circumstances.34

[188]   They say the circumstances here were that both parties knew that Andrew might not be able to raise the finance for the OS Agreement and it suited Simon and Rosa to be able to renegotiate everything if Andrew could not satisfy the condition. They contrast the wording of cl 7 of the OS Agreement, which is not expressly stated to be for the benefit of Andrew alone, with the finance clause in the Land Agreement, where it was.

[189]   It is not necessary to state that a clause is for the benefit of one party, it is a question of construction whether it is.35 I do not accept that the fact Andrew did not have confirmed finance in place meant that the OS Agreement was no longer on foot. Ms Van Zyl advised on 8 July that “we hereby confirm clause 7 of the Agreement”. By that communication, Ms Van Zyl was advising that the OS Agreement was now unconditional and would be proceeding to settlement on the settlement date. Put another way, she was advising that Andrew was not claiming that he had been unable to obtain finance and so the OS Agreement was at an end.

[190]   Ms Van Zyl’s communication was consistent with the traditional position that a subject to finance condition is for the benefit of the purchaser. If it was important to Simon and Rosa to know exactly what the financial arrangements Andrew had made as at 8 July 2016, it would be expected that Mr Gould would have asked for this information. He did not do so. Instead Mr Gould’s only response to Ms Van Zyl’s communication was to say that Simon and Rosa did not appreciate Andrew’s failure

34 Hinde McMorland & Sim Land Law in New Zealand, above n 5, at 8.2.3(c) stating “a ‘subject to finance’ condition, even if not described as being solely for the benefit of a purchaser, will normally be taken to have that effect”. Strack v Grey [2019] NZCA 432 at [61] and [63].

35 Globe Holdings Ltd v Floratos [1988] 3 NZLR 331 at 334.

to provide for a deposit in the OS Agreement. It was Andrew’s obligation to have the finance to settle the transaction on the settlement date and how he did that was up to him.

[191]   Simon and Rosa knew that Andrew wanted to purchase the farm. When Andrew was unable to confirm finance for the Land Agreement by the due date, they took the opportunity to seek to renegotiate both agreements and an agreement for the Partnership Share. The proposed renegotiation involved a sale of the Owner’s Share at the same price and with Simon and Rosa as vendor (subsequently revised when Mr Gould advised the vendor would be the Trust and the price would be plus GST). It was not until 19 December 2016 that Simon made it plain he regarded the OS Agreement as null and void. When he did so, he did not say it was because Andrew had confirmed cl 7 without establishing that he could meet the financial commitment. As it transpired, Andrew was right in his view that he would have had the finance to settle the OS Agreement on the settlement date, as the cheque Ms Van Zyl attempted to proffer in settlement demonstrated.

Property Law Act

[192]   Simon and Rosa submit that the OS Agreement does not comply with s 24 of the Property Law Act 2007 (PLA). That section requires that a “contract for the disposition of land is not enforceable unless … the contract is in writing or its terms are recorded in writing …”. Disposition is defined as meaning any sale, transfer, grant, assignment amongst other things, and includes “an easement, profit à prendre, or any other interest in land”.36 Land is defined as “all estates and interests, whether freehold or chattel, in real property”.37

[193]   Simon and Rosa say that s 24 requires that material terms of the contract be in writing. They say that material terms were omitted because Simon and Rosa were purporting to sell the Owner’s Share; there was no mechanism to deal with the implications that the Trust, rather than Simon and Rosa, owned the Owner’s Share; cl 4 was “hopelessly inadequate in this regard”; and there was no mechanism to deal

36     Property Law Act 2007, s 2.

37     Section 2.

with disputes over how the transfer of the Owner’s Share was to be documented in the circumstances.

[194]   The OS Agreement did not sell a profit à prendre. It was a contract purporting to sell the right to receive 44.7 per cent of the gross stumpage in cash or specie. I did not receive submissions on whether this qualified as a disposition of “land”.38 But that aside, I am not persuaded that the OS Agreement failed to provide the material terms for the sale. If Simon and Rosa in fact retained the Owner’s Share (contrary to my view) or if the correct interpretation of the OS Agreement was that they were obliged to procure the sale from the Trust (also contrary to my view), I consider the material terms (price, subject matter, burden on vendor to take the associated necessary steps to effect the sale, the date for finance to be confirmed and the settlement date) were all present.

Uncertainty

[195]   Simon and Rosa say that the OS Agreement was void for uncertainty. This relies on the same matters that are said to be material and absent for compliance with s 24. I do not agree. If Simon and Rosa owned the Owner’s Share, the parties intended to create legal relations, the material terms were present and the Court would do its best to interpret those terms to give effect to their intention.39

Frustration

[196]   Discharge by frustration was not pursued by counsel for Simon and Rosa in closing submissions.

Termination by effect of law

[197]This was not pursued separately from the defences already discussed.

38 Burrows, above n 27, at 9.3.2, discussing the lack of clarity on what may qualify as an interest in land. See also Hinde McMorland & Sim, above n 5, at 6.041 discussing whether the right of an unpaid supplier to enter the land to remove fixtures qualifies as an equitable interest in land.

39 At 3.7.

Failure to tender settlement

[198]   Although the documents Ms Van Zyl prepared were criticised, this was not pursued separately from the defences already discussed.

Andrew’s claimed loss

[199]   It is not necessary to determine Andrew’s claim for damages because he has not succeeded in establishing an enforceable FR Agreement under which Simon and Rosa were obliged to procure the Trust’s agreement to sell the Owner’s Share. For completeness, however, I set out my conclusion on his claim for damages if I had found otherwise.

[200]   Andrew contends that, had BCF been the owner of the Owner’s Share when the Forestry Right was sold, BCF’s profit would have been $421,371.55. This sum was derived as follows:

(a)BCF would have received $1,587,485.55 as its 44.7 per cent share of the net proceeds of sale from the sale to FTF without deduction for rent or outgoings. No GST would have been payable, because the sale was zero-rated.

(b)After its secondhand goods credit, BCL’s net purchase price would have been $1,166,086.96.

(c)BCF’s lost profit was therefore $421,371.59.

[201]   This claim assumes that if  Simon and  Rosa  had  settled  with Andrew  on 31 January 2017 he would have retained the Owner’s Share until 17 October 2017 when the sale to FTF took place. The principal purpose of the Owner’s Share for Andrew, initially at least, was to make a profit to enable him to finance the purchase of the farm. I do not have sufficient details about the purchase from Band of Brothers to determine on the balance of probabilities whether he would have sold the Owner’s Share before the sale to FTF to assist with that purchase.

[202]   The claim also assumes that BCF would have been successful in resisting the obligation to pay rent to Band of Brothers. I am not persuaded that it would have been successful in that for the reasons advanced on behalf of Simon and Rosa, namely:

(a)Andrew was not a party to the relevant negotiations and is therefore unaware of the dynamics of those negotiations. Mr Guscott was clear in his evidence that Mr McFadzean was firm that rental had to be paid. Andrew did not call evidence from Mr McFadzean to contradict this evidence.

(b)The negotiations with Mr McFadzean took place before the agreement to sell Te Kanuka Station to Band of Brothers was settled.

(c)It was logical that rent would be paid to Band of Brothers while the trees prevented the use of the land by Band of Brothers when it did not have the benefit of the Owner’s Share (which was intended to compensate the Trust for the use of the land).

(d)FTF agreed to take on the rent obligations and so it can be inferred that it thought such an obligation was appropriate.

(e)It is clear from Andrew’s attempts to sell the Forestry Right that there was an expectation of rental payment to the land owner associated with it.

[203]   To these reasons I would add that Andrew wished to buy the back part of the farm from Band of Brothers. That wish likely would have been relevant to negotiations with Band of Brothers over its view that it should be paid rent for the land subject to the Forestry Right.

[204]   The claim also assumes that BCF would have been entitled to a GST credit for a secondhand good. That depended in part on whether the Owner’s Share was a Forestry Right. I consider that once severed from the Memorandum of Transfer it was a contractual right to receive proceeds on the harvest of the forest. The Goods and

Services Tax Act 1985, s 2 defines “goods” as not including choses in action. A chose in action is a personal right of property that can only be claimed or enforced by action and not by taking physical possession. That seems to fit with the nature of the Owner’s Share which was an obligation to pay in cash or in specie (which is the manner in which the payment obligation may be satisfied). The Owner’s Share did not provide for a party with the right to the benefit of the Owner’s Share to enter the land and take possession of the harvested forest. It was incorrectly described as a “44.7% share of a forestry right” by Simon and Andrew.

[205]   Lastly, the usual date for determining loss is when the contract was breached or was cancelled. The evidence from the expert called by Andrew was that stumpage values were steadily increasing in the period from February/March 2017 to September 2017, which means that Andrew’s calculation based on the sale that eventuated does not reflect what would have been his loss at the date the contract was cancelled.

[206]   For these reasons, I would not have been satisfied on the balance of probabilities that Andrew had established that he suffered the loss claimed, had he made out his claim that Simon and Rosa breached the OS Agreement by failing to sell the Owner’s Share to him.

Counterclaim

[207]   Simon and Rosa contend that Andrew engaged in conduct that was misleading and deceptive in breach of s 9 of the Fair Trading Act. They seek damages for the legal costs arising from their dispute with Andrew (including those arising before the BCF proceeding was filed) and for the personal stress, anxiety and inconvenience Andrew caused them by his representation and conduct and by bringing the BCF claim.

[208]   They say that Andrew engaged in misleading and deceptive conduct by representing that the three agreements (for the land, the Owner’s Share and the Partnership Share) would run together and by advising Simon and Rosa that they did not need legal advice about these agreements. More specifically, they say that Andrew Vallance:

(a)gave them assurances that the agreements were interdependent;

(b)shook hands with Simon to acknowledge the “gentleman’s agreement”;

(c)was aware that the 2003 agreements were interdependent because he struck out the contemporaneous clause from the draft Owner’s Share agreement, but did not show Simon and Rosa that he had done that when presenting the OS Agreement in 2006 or tell them he had done so;

(d)told them that he had prepared the agreements himself, when in fact Ms Van Zyl had prepared them;

(e)told them that the agreements were generic, and that he had prepared many like it before; and

(f)told them that there was no need to get legal advice, and instead they could keep it in the family.

[209]   I have found that Andrew did not represent that the three agreements would run together. He did not assure them they were interdependent, but nor did he dispel Simon and Rosa’s expectation that there would be a deal for everything when he had in mind that he might proceed with purchasing either or both of the Te Kanuka Station and Owner’s Share and he would not be purchasing the Partnership Share.

[210]   I accept Simon and Rosa’s evidence that Andrew told them the agreements were generic and he had prepared many like it before. That fits with how Andrew approached the opportunity to purchase Simon and Rosa’s farm and forestry interests, that is, to have in mind and to pursue a range of ways he might be able to make it work. I also accept that Andrew gave the impression that he had prepared the agreements and did not mention Ms Van Zyl’s involvement. My assessment is that Andrew would have regarded Ms Van Zyl as writing up his instructions rather than providing legal advice per se.

[211]   I also accept that there was a discussion about whether legal advice was necessary, from which Simon and Rosa gained the impression that Andrew did not think it was necessary. I am not satisfied that Andrew recommended against legal advice, nor that he explicitly told them it was unnecessary. I consider it more likely that Andrew said the agreements were pretty straightforward and lawyers would cost money without directly saying they should not get legal advice. I consider that Simon and Rosa on the one hand and Andrew on the other were not interested in spending money on lawyers for a deal between family that they regarded as straightforward enough. Simon and Rosa were happy that they had agreed a price for everything and that, if it proceeded, the farm would stay in the family.

[212]   I consider that Andrew’s conduct and intentions were not entirely transparent and that was more about what he did not say than what he did. While omissions can be misleading, I consider that Simon and Rosa were not misled by Andrew into thinking that there were to be three agreements that legally would be interdependent. I consider that Simon knew the two signed agreements were not legally interdependent. He accepted that he had read the agreements before he signed them. He had seen at least four sale and purchase agreements (the purchase of the farm from his parents, the purchase of the land from his brother, the purchase of a property by Rosa, and the purchase of the farm by the Trust). I consider that Rosa relied on Simon, rather than Andrew, in deciding to sign the agreements.

[213]   I also consider that Simon and Rosa were not misled by Andrew’s conduct into deciding to sign the OS Agreement and the Land Agreement without seeking advice. They knew they could seek legal advice and had used lawyers in the past. The agreements were left with them (one for witnessing and the other for Mr Bunny’s signature). They had time to consider the agreements without Andrew around. Although they had signed the OS Agreement, matters were not irreversible at that point. I consider that, at that early stage before the Land Agreement was signed, they would have been able to tell Andrew they had changed their minds and that the terms of the sale of all their interests were to be renegotiated if that is what they wanted on reflection. Andrew would have had an incentive to accept this because he was keen to purchase the farm and with the benefit of legal advice that the Trust retained the Owner’s Share it would have become apparent to him that the GST credit was not

going to be available to him. Simon made his own decision not to waste money on lawyers on agreements that he was happy with, just as Andrew did (other than that Andrew had Ms Van Zyl prepare the agreements in accordance with his instructions).

[214]   Even if Simon and Rosa were misled by Andrew’s conduct on these matters, I consider a reasonable person in their circumstances would not have been misled.40 The agreements involved their key assets. They were substantial assets. Andrew had persuaded Simon and Rosa that they owned the Owner’s Share against their own view about that. They were aware that they could have had their lawyer check whether Andrew was correct. They were signing agreements they understood Andrew had prepared and they knew he was not a lawyer. They regarded Andrew as more commercially experienced than them, but that was a reason for them to ensure the agreements were in an appropriate form from their perspective and not just from his perspective. They were not under any time pressure that made taking legal advice difficult. They had used lawyers before. They knew they had not signed any agreement for the Partnership Share and had at best a vague assurance from Andrew that there would be no difficulty in writing a cheque for that share. These factors distinguish the case from the many situations in which parties enter into real estate agreements without lawyers.41

[215]   The Court of Appeal has said the Fair Trading Act “is not designed to provide a guarantee to purchasers who fail to look after their own interests in a manner which is reasonable in the circumstances”.42 A reasonable person in the circumstances of the defendants would not have been deceived or misled by Andrew’s alleged misleading conduct into entering the contract without checking it with a lawyer and relying on alleged oral agreements on terms that were important to them.

[216]   Because the Fair Trading Act claim is not made out it is unnecessary to determine whether Simon and Rosa suffered loss from Andrew’s conduct for which they should be compensated. Had I found otherwise, I would not have found that Simon and Rosa should be reimbursed their entire legal fees arising from the dispute.

40     Red Eagle Corporation v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [26]; AMP Finance NZ Ltd v Heaven (1997) 8 TCLR 144 at [28].

41     Messenger v Stanaway Real Estate Ltd [2015] NZHC 1795 at [90].

42     Janus Nominees Ltd v Fairhall [2009] NZCA 280; [2009] 3 NZLR 757 at [41].

They could have sought to protect themselves from that dispute by investigating at a much sooner stage the issue of who owned the Owner’s Share and firmly advising Andrew that the OS Agreement was of no effect but could be renegotiated with the Trust for a price that was plus GST. Mr Gould’s communications in July 2016 did not go this far because Simon at this stage was still willing to work with Andrew if he could get the finance for the Land Agreement. Andrew was apparently left with the impression that Simon changed his mind when he received the 19 December 2016 valuation.43 For completeness I note my view is that this impression was false. I consider that Simon and Rosa had gone sour on selling anything to Andrew. Their preference had always been to sell all their assets to one purchaser, they had given Andrew enough time to arrange finance and he had not been able to do that. Essentially, they felt they had wasted their time with Andrew, despite having given him every opportunity. Their preference became to sell to someone other than Andrew who would be in a position to settle the transactions.

[217]   There is also the question of whether it is appropriate to compensate for costs on an indemnity basis for pre and post proceeding costs order under the Fair Trading Act when the High Court Rules provide the rules for costs claims and the Fair Trading Act claim is really an aspect of why they say they were not obliged to proceed with the OS Agreement or should be entitled to relief from that obligation. The High Court Rules do not allow for pre-commencement costs and indemnity post-commencement costs are available when specified circumstances arise. The better approach (if Andrew’s conduct had been found to be misleading and deceptive) would probably have been to consider an appropriate costs order in accordance with the rules and possibly make a small compensation award to recognise the stress caused to Simon and Rosa by Andrew’s conduct.

Result

[218]   BCF has failed in its claim against Simon and Rosa Vallance. Accordingly judgment is entered for Simon and Rosa Vallance on that claim.

43     I say apparently because Andrew also knew that Simon was purporting to offer the Owner’s Share as part of the tender process.

[219]   Simon and Rosa Vallance’s claim against Andrew Vallance has failed. Accordingly judgment is entered for Andrew Vallance on that claim.

[220]   For the purposes of costs, I can indicate that my view is that Simon and Rosa Vallance are the successful party although they did not succeed on all the defences they raised. I consider that the counterclaim is best viewed as an adjunct to the affirmative defences on which they did not succeed. If the parties are unable to agree the costs that are payable, they have leave to file brief submissions confined to the issues that have prevented agreement. Those submissions are to be filed within four weeks of the date of this judgment.

Mallon J