Cardrona Holdings Limited v Cardrona Ski Resort Limited HC Dunedin CP 59/00

[2001] NZHC 643

IN THE HIGH COURT OF NEW ZEALAND
DUNEDIN REGISTRY CP 59/00

BETWEEN CARDRONA HOLDINGS LIMITED
Plaintiff

AND CARDRONA SKI RESORT LIMITED
Defendant

Hearing: 20-21 June 2001

Counsel: A J P More for Plaintiff
W D C Alcock for Defendant

Judgment: 13 July 2001

JUDGMENT OF PANCKHURST J

Solicitors:
Adrian More Barrister, Dunedin for Plaintiff
Gallaway Haggitt Sinclair, Dunedin for Defendant
cc: Master Venning

Introduction:

[1] The dispute between the parties concerns entitlement to certain land in the aftermath of agreements which resulted in establishment of the Cardrona ski field near Wanaka. The field is situated on slopes which formerly were part of Knuckle Peak Station. In late 1988 relevant parties entered into an agreement which resulted in subdivision of the station. The higher land became the ski field area, owned by Cardrona Ski Area Limited (now Cardrona Ski Resort Limited).

[2] The balance of Knuckle Peak Station, referred to as the farmland, was to be acquired by Cardrona Holdings Limited (CHL) upon subdivision. This case concerns the exact extent of the land acquired by CHL. It seeks rectification of an agreement for sale and purchase dated 29 December 1988 which gave rise to the subdivision. In particular, it seeks an order rectifying the agreement to include two parcels of land which it considers were part of the farmland, but which in error were not transferred to it in 1993.

[3] Cardrona Ski Resort Limited (Cardrona) does not accept that CHL is entitled to one of the parcels in question. Moreover, via a counterclaim, it asserts that CHL received more in the way of farmland than that to which it was entitled. Accordingly, Cardrona also seeks rectification of the December 1988 agreement.

Background:

[4] The full background is complicated. I do not propose to refer to it in full detail. It is extensively recorded in an earlier judgment of this Court delivered by Holland J on 3 November 1992, in CP 45/91, in which CHL was the plaintiff and Waiorau Holdings Limited (Waiorau) the defendant.

[5] In about 1970 Mr John Lee acquired Knuckle Peak Station, situated South-west of Wanaka on state highway 89 (commonly known as the Crown Range road.) Sometime later Mr Lee acquired two smaller areas of land, which I shall refer to as sections 48 and 51. These had frontage to the state highway and, in keeping with several other nearby sections also in Cardrona township, intruded into the general area of Knuckle Peak Station which otherwise ran from state highway 89 in a north-westerly direction into the ranges. Following his acquisition of sections 48 and 51 Mr Lee let both properties for residential purposes, since there were houses on both lots.

[6] A further larger area of the station. which I shall refer to as Certificate of Title 9A/770, comprising over 80 hectares, is also relevant to the present dispute. This area along the northern boundary of Knuckle Peak Station has direct access at its eastern end to the state highway. At a later stage Mr Lee secured a zone change with reference to at least part of Certificate of Title 9A/770 so that such part may be available for ski field related residential development.

[7] Mr Lee endeavoured to construct a road across the station to the intended ski field area. He was joined in this initiative by three others with whom, in 1981, he entered into a partnership. In about 1983 Mr Lee transferred all of the land which comprised Knuckle Peak Station (including sections 48 and 51 and Certificate of Title 9A/770) to a newly formed company, Waiorau. This company was to be a land-owning entity, while the partnership would promote and develop the ski field. There were taxation and other advantages in this arrangement.

[8] By about 1985 the partners realised that the cost and resources necessary to establish the ski field were beyond the partnership. New and bigger investors were required. Throughout the next four years the ski field development proposal moved through several stages. A public company named Cardrona Ski Area Limited (later Cardrona Group Limited) was formed as a vehicle to promote and establish the ski field. Front the outset one point of common agreement was that Knuckle Peak Station would be subdivided so that the upper slopes became ski field land, and the lower area closest to the state highway remained farmland, albeit with the potential for ski resort residential development. To this end the members of the partnership formed a new company which following a name change became Cardrona Holding’s Limited, the present plaintiff.

[9] In 1985, a comprehensive agreement was concluded whereby control of Waiorau passed to the then company through which development of the ski field was to be advanced. (Henceforth I shall refer only to the defendant company, Cardrona, it is not necessary to complicate matters by referring to the different companies which over time were involved in the ski field project.) To ensure that CHL could acquire the farmland, following the subdivision, an option was granted to it to purchase such land from Waiorau for $220,000. In addition, to provide passage to the ski field it was agreed that CHL would grant a right of way across its land for an access road. Originally it was anticipated that the subdivision would be achieved within a one year timeframe. In fact there was still no sub-division of the land by mid 1988.

[10] In the meantime CHL’s option to purchase the farmland was preserved by the execution of fresh option agreements, since the initial one was subject to an expiry date. In 1988 an Australian investment company, Veall Securities and Finance Limited (Vealls) became interested in the ski field development. Vealls obtained a shareholding in Waiorau. Accordingly, when what proved to be the final terms of agreement were negotiated in 1988-89, Vealls was a central player. (Incidentally Waiorau in 1966 became amalgamated with Cardrona and hence CHL need not seek relief against any other party.)

[11] Mr Ian Veall was opposed to Cardrona only having access to the ski field by a right of way. He was insistent that Cardrona must own the access road. CHL was content with this change, provided it had the right to use that part of the access road which crossed its land. The final agreement between the then relevant parties was concluded in mid 1988. Cardrona, Vealls, and Waiorau were parties to the structuring or joint venture agreement. The recitals and definitions referred to “the farm option” whereby CHL may acquire “the surplus land”. Similarly, Cardrona enjoyed an option to acquire that land described and defined as the “ski field”. Importantly, for present purposes, the surplus land was “that part of the land not included in the ski field”. A plan annexed to the agreement depicted the total area of land owned by Waiorau which was to be divided into the two parts.

[12] The final option in favour of CHL was dated 10 August 1988. It accommodated Mr Veall’s requirements, namely that CHL would acquire the farmland but not the access road passing through it, and, (a matter relevant to the counterclaim in this proceeding), that CHL would provide an easement to Cardrona for a power cable to be laid through the farmland. Annexed to the option was a draft subdivisional plan which recorded the area of the farmland as 792.03 hectares. This figure is also of present relevance.

[13] CHL purported to exercise its option to purchase, and as a result an agreement for sale and purchase dated 29 December l989 was concluded between Waiorau as vendor and CHL as purchaser. The agreement contained a legal description of the land to be bought and sold, being “approximately 845.8752 hectares” in area. Again, this figure is of significant relevance in relation to the counterclaim.

[14] Despite completion of the agreement for sale and purchase, Cardrona did not accept that CHL was entitled to acquire the farmland. It considered there had not been a valid exercise of the option to purchase, and hence, that the agreement itself was not binding. This impasse resulted in the earlier proceeding heard by Holland J in 1992. CHL sought specific performance of the 29 December 1989 agreement against Waiorau. Cardrona, on account of its then shareholding in Waiorau, was the effective defendant. The case was heard over three days in August and a judgment was delivered in November 1992. The judgment was both lengthy and complex.

[15] The central issue was who was entitled to the farmland. While CHL sought specific performance, Cardrona (through Waiorau) maintained that it was entitled to acquire the farmland. This reflected a further term of agreement, namely that if CHL did not exercise its option Cardrona would acquire both the “ski field” and the “surplus land’’ from Waiorau.

[16] But, in the event Holland J concluded that the option had been validly exercised by CHL. Accordingly he ordered specific performance of the agreement by Waiorau. At the same time he accepted that the 29 December 1989 agreement failed to record an essential term, namely that CHL was to have a right of way over the access road to the ski field where it ran through the farm property. This was rectified. He made further related orders, which are not presently relevant.

[17] As required in terms of the judgement Waiorau transferred to CHL by memorandum of transfer dated 12 March 1993 three parcels of land totalling about 845 hectares in area. At that time CHL understood that it had acquired all the “surplus land” to which it was entitled in terms of the 1988 arrangements.

Subsequent Developments:

[18] In the mid 1990s CHL sold sections 48 and 51, the two residential properties in Cardrona township, together with a contiguous section, Lot 2 DP 17960 (area 3.9829 hectares) to a common purchaser. But CHL found itself unable to give title to Lot 2. Close examination of the certificates of title which followed the subdivision and of the 1993 transfer revealed that the area of Lot 2 was not included. The issue was raised with the District Land Registrar (DLR) for Otago. In the result a new Certificate of Title, 17C/906, was issued in July 1996 for Lot 2. Waiorau was shown as the registered proprietor. This reflected the circumstance that Waiorau was the registered owner of the land on the previous certificate of title and since the DLR did not consider Lot 2 was included in the March 1993 transfer, Waiorau remained the registered proprietor. Subsequently in August 1999 the area contained in Certificate of Title 17C/906 was amended to 3.7300 hectares.

[19] Somewhat later a further similar problem came to light. This concerned a narrow strip of land on the eastern side of the state highway, being the only part of the farmland on this side of the road. CHL understood that this strip of land had likewise been transferred from Waiorau to it in 1993. Accordingly it farmed the land as a single paddock, part of the greater farm area. Work undertaken by surveyors brought to light that, despite its being in possession, CHL did not have title to the paddock.

[20] Again the matter was raised with the DLR with the result that Certificate of Title 13A/l57 was amended on 24 June 1999. The title itself bears a handwritten addition “Part Section 1 Block II, Knuckle Survey District remains herein” and the accompanying plan is amended to include the strip to the eastern side of the state highway as part of the title. However, the registered proprietor is again shown as Waiorau. The DLR had likewise concluded that the March 1993 memorandum of transfer from Waiorau to CHL did not include the paddock.

The Claim and Counterclaim:

[21] The claim by CHL, as finally framed, was a single cause of action in which it sought rectification of the legal description contained in the 29 December 1989 agreement for sale and purchase to include “Lot 2 DP 17960, Certificate of Title 17C/906 (Otago Registry)”, and Part Section 1, Block II. Knuckle Survey District, Certificate of Title 13A/157 (Otago Registry)” together with a consequential order that the defendant company specifically perform the rectified agreement by transferring the subject land to it.

[22] There are two aspects to the counterclaim as it was finally formulated. First, rectification was sought of the same agreement for sale and purchase to substitute as the area of land sold 771.5043 hectares for the figure of 845.8752 hectares which appears in the agreement. Further, an order was sought that CHL “transfer back” the extra land.

[23] The basis of this claim is a comparison of the 10 August 1988 option held by CHL and the December 1989 sale and purchase agreement. The former entitled CHL to acquire land described in the First Schedule to the option being an area of 792.03 hectares “more or less”. By contrast, the agreement which arose from the exercise of such option provided for CHL to acquire the land described therein “comprising approximately 845.8732 hectares”. A further 20.5257 hectares were deducted from the area shown in the option, being the area of the access road, so that the total area the subject of the claim became 74.3709 hectares.

[24] The second aspect of the counterclaim concerned the power cable easement in favour of Cardrona which likewise came into existence via a term in the option of 10 August 1988. The gist of the claim was that although an easement had been granted it did not coincide with the actual position of the power cable as laid. Accordingly the relief sought was that “the power cable easement . . . be resurveyed to conform with the path of the laid cable”. In the course of evidence it became plain that it would be premature to rule upon this aspect. CHL was not aware of the problem which prompted this aspect of the counterclaim (which incidentally was introduced by amendment at a very late stage). Counsel thought it likely that the matter could be resolved by discussion and without the intervention of the Court.

[25] Against this background I turn to the evidence in the case. CHL called two witnesses, brothers. Messrs Ray and John Lee. The only witness for Cardrona was Mr Veall.

The Witnesses:

[26] Mr Ray Lee, the principal witness for CHL, was the accountant for the partnership formed by his brother in the mid 1980s and, subsequently, the accountant and secretary of both CHL and Waiorau. In the latter capacity he became a signatory to the various options and agreements with which this case is concerned.

[27] Mr Lee described the history which led to the final arrangements concluded in 1988 and 1989. He explained, and I accept, that there was a common intention throughout that Cardrona would acquire the ski field area and CHL the lower farmland area adjacent to the state highway. To that end CHL was granted options dated 21 November 1985. 29 June 1988 and, finally, 10 August 1988. In each the legal description of the land which CHL may elect to purchase was described in similar terms. The change of most moment was in relation to ownership of the access road to the ski field. That is rather than CHL granting a right of way in favour of Cardrona, the reverse became the case. This was at the insistence of Mr Veall. This was one of a number of arrangements recorded in the joint venture agreement between Cardrona, Vealls, and Waiorau in mid 1988 (refer paragraph [11]).

[28] Mr Ray Lee was also involved in the exercise by CHL of its option and, subsequently, in the conclusion of the agreement for sale and purchase dated 29 December 1989 between Waiorau as vendor and CHL as purchaser. He supplied to solicitors in Wellington the legal description of the land which was to be bought and sold. Such description was of land which totalled approximately 845.8752 hectares, whereas the plan to the 10 August 1988 option recorded the farmland area as 792.03 hectares.

[29] With reference to this difference the gist of Mr Lee’s evidence was that hectarage played no significant part in the relevant discussions and agreements. Throughout it was common ground that the land held by Waiorau would be divided into two parts being the ski field and the farmland. Hence, that the plan annexed to the option referred to a particular hectarage and the December 1989 agreement to an area approximately 53 hectares larger excited no comment or reaction at the relevant time. The focus of the parties was upon the bargain to which they had agreed: Cardrona would acquire the ski field land, while CHL was entitled to purchase the balance, variously referred to as “the surplus land” or the farmland. I accept this evidence.

[30] With reference to Lot 2, the area of 3.730 hectares which CHL had on-sold but to which it could not give title, and the narrow paddock on the eastern side of the state highway, Mr Lee said that such parts formed part of the surplus land (or farmland). The understanding at the time was that the agreement for sale and purchase included these two areas. The mistake lay in the legal description which was contained in the agreement and which was carried forward into the transfer. Again, I accept his evidence on these points.

[31] Mr John Lee’s evidence was comparatively brief. He supported and adopted the history of events as outlined by his brother. He also gave first-hand evidence of events which followed the 1992 hearing before Holland J and implementation of the order for specific performance. With reference to Lot 2 he confirmed the sale of the land (together with sections 48 and 51) to the then publican of the Cardrona Hotel. Title was given to the two sections, but the solicitor acting for CHL ascertained that Lot 2 remained in Waiorau’s name as registered proprietor. Likewise, with reference to the paddock on the eastern side of the state highway, he explained how he learnt that Waiorau remained the registered proprietor of that paddock when he was involved in freeholding adjacent land which comprised his pastoral run.

[32] Finally, with regard to Certificate of Title 9A/770 (refer to paragraph [6]) Mr Lee outlined the steps he had taken in the 1980s to have part of the land rezoned to enable development of ski field accommodation. He was adamant that all of this title comprised part of the surplus or farm land which CHL was entitled to acquire under its 1988 option. Until the hearing of this case it had never been suggested to him that all or part of Certificate of Title 9A/770 was not intended to be included in the sale to CHL. Indeed, he said that about eighteen months or two years ago, when he became aware of the title problems in relation to Lot 2 and the paddock, he met with Mr Duncan Veall and a Mr Gilbertson (as representatives of Cardrona) and that in a full and friendly discussion no claim was made on behalf of Cardrona in relation to any land below the ski field boundary as fixed in the original subdivision. As in the case of his brother, I found Mr John Lee’s evidence straight-forward and credible.

[33] Mr Ian Veall (who is Duncan Veall’s father) gave evidence of the history of his company’s involvement in the ski field venture. He confirmed that it was at his initiative that ownership of the access road lay with Cardrona, rather than CHL. He also confirmed that it was of his making that Cardrona in 1988 obtained an option to acquire the surplus land from Wiorau, should CHL not take up its option. He said that his preference was for Cardrona to retain all the land since “nobody could foresee what the future needs of the ski field may be”. More specifically, he produced a file note of a meeting in Sydney on 10 June 1988 at which he had expressed this sentiment in the course of negotiations.

[34] Against this background he went to the option agreement of 10 August 1988 and in particular the plan annexed to it which gave the area of the farmland which CHL may acquire as 792.03 hectares. Turning to the agreement for sale and purchase of 29 December 1989 he contended that it clearly contained a wrong figure, 845.8752 hectares, and “that is why I believe the agreement should be rectified”. With reference to which land made up the excess of 74.3709 hectares, I found Mr Veall’s evidence difficult to follow. He suggested that Lot 2 was not included in CHL’s option, nor were the adjacent sections 48 and 51, and part of the land in Certificate of Title 9A/770 as well.

[35] In cross-examination Mr Veall was asked why rectification of the agreement was not sought at the 1992 hearing. He responded that the focus at that time was upon whether CHL had validly exercised its option or whether Cardrona was entitled to the surplus land by virtue of its back-up option. Hence, he said, attention was not given to the precise area described in the 1989 agreement. When asked why, following Holland J’s judgment and the requirement to specifically perform the agreement, the error as to area was not raised and pursued he, in my view, had no satisfactory answer to offer.

[36] Regrettably I am driven to the conclusion that the counterclaim, to the extent it seeks rectification of the agreement for sale and purchase, is borne of opportunism. I am in no doubt that the difference in area recorded in the plan annexed to the option and the area recorded in the agreement itself was noticed, only belatedly, and in the context of this proceeding. The fact is that there is no basis in the historical evidence to suggest that any part of the land owned by Waiorau outside the ski field area was somehow earmarked as not to be included in the August 1988 option. To the contrary, the evidence is only consistent with a straight-forward arrangement, whereby Waiorau’s land was to be divided into two parts, being the ski field and the surplus land, subject only to the access road arrangement.

Rectification:

[37] I did not understand there to be any divergence between counsel as to the relevant principles. I think it sufficient for present purposes to refer to the case of Westland Savings Bank v Hancock [1987] 2 NZLR 21 (HC), in particular to the headnote:

“For a Court to rectify a written instrument it must be established that the parties held a single corresponding intention on the point in question right up to the moment of execution of the instrument. That corresponding intention must have been objectively apparent from the words or actions of each party. There need not have been formal communication of the common intention by each party to the other or outward expression of accord,”

and, as to the onus:

“Proof of an antecedent common intention which ex hypothesi conflicts with the written instrument sought to be rectified must be convincing. The fact that a party subsequently acted as if the instrument stood in the form into which it is sought to be rectified is strong evidence of that party’s intention at the time to execute the instrument in the rectified form.”

It remains to consider whether these requirements are satisfied in the present instance.

Conclusions:

[38] I am in no doubt that CHL has established a case for rectification. The bargain between the parties was that the land held by Waiorau would be subdivided into two parts, subject only to the special arrangements concerning the access road. Cardrona was to acquire the ski field land on the upper slopes, and CHL the balance of the land, aptly referred to as “the surplus land”, and being all the farm area adjacent to the highway.

[39] I am entirely satisfied that this was the common intention of the parties to the time the agreement for sale and purchase was concluded on 29 December 1989. I am equally satisfied that the length and complexity of the legal description of the surplus land was such that, through oversight, Lot 2 and the paddock on the eastern side of the state highway were not included. This no doubt arose on account of various dealings with the land which resulted in the non-inclusion of these parcels in new certificates of title as they were issued. I see no need to set out the relevant certificate of title details which indicate the source of the problem. To my mind it is the bargain between the parties which is important, rather than the underlying complexities which give rise to the present need for rectification.

[40] The subsequent conduct of the parties is also telling. There is no evidence suggestive of the fact that Lot 2 and the paddock were not considered to have passed to CHL in 1993. To the contrary the conduct of the parties was only consistent with the reverse situation.

[41] Accordingly there shall be an order that the agreement for sale and purchase be rectified by including in the legal description of the land in such agreement:

“(a) DP 17960 Certificate of Title 17C 906 (Otago Registry), and

(b) Part Section 1, Block II, Knuckle Survey District, Certificate of Title 13A/157 (Otago Registry).”

There shall also be an order for specific performance of the agreement as rectified.

[42] Cardrona’s claim for rectification of the agreement by reduction of the area which is included in it is dismissed. The evidence is overwhelming that the bargain between the parties was for CHL to acquire the surplus land, having an area of approximately 845.8752 hectares, and the agreement records as much. In short, the agreement accurately captures the intention of the parties. It was the plan annexed to the August 1988 option which contained an error as to area.

[43] In relation to the counterclaim as it concerns the power cable casement it is necessary to timetable a future directions hearing, in case settlement between the parties does not result. To that end the matter will be mentioned before the Master on Wednesday, 14 November 2001, but with leave reserved for counsel to request the Registrar to convene a telephone conference at an earlier date, if required.

[44] Costs are reserved. CHL is to file a memorandum in support, and Cardrona shall have ten working days in which to reply.