Cashmore v Sands HC Auckland CIV 2004-483-7
[2007] NZHC 1581
•7 February 2007
IN THE HIGH COURT OF NEW ZEALAND WANGANUI REGISTRY
CIV-2004-483-07
BETWEEN COLIN REECE CASHMORE, MARION AGNES CASHMORE AND RICHARD GEOFFREY WARREN AUSTIN (THE TRUSTEES OF THE CASHMORE FAMILY TRUST)
First Plaintiffs
ANDCOLIN REECE CASHMORE Second Plaintiff
ANDERNEST CHARLES SANDS AND LIONEL MAX LAMB (THE TRUSTEES OF THE E C SANDS FAMILY TRUST) Defendants
Hearing: 12-16 and 19 June 2006
Appearances: I R Millard QC for First and Second Plaintiffs
F C Wood and N E Pike for Defendants
Judgment: 7 February 2007 at 2.15 pm at 2.15pm
JUDGMENT OF CLIFFORD J
In accordance with r 540(4) I direct the Registrar to endorse this judgment with a delivery time of 2.15pm on the 7th day of February 2007.
CASHMORE V SANDS HC WANG CIV-2004-483-07 7 February 2007
Contents Para Overview of case [1] The parties and their claims [2] The background to the sale of the Horopito Farm [22]
Mr Cashmore buys the Horopito Farm before auction [35] The Horopito Farm disappoints Mr Cashmore [44] Proceedings are issued [52] An overview of the evidence [54]
The plaintiffs’ claims – the key issue [58]
• The meaning of the Alleged Representations [63]
• Legal principles applicable to the key issue [108]
• Analysis and conclusion on the key issue [115]
• Material breaches of Alleged Representations [140]
• Damages [166]
Other issues [176]
• The Cashmore Family Trust and s 6 of the Contractual Remedies Act [177]
• Mr Cashmore and s 9 of the Fair Trading Act [211] Overall conclusion [221]
Overview of case
[1] In December 2000 the first plaintiffs bought a farm from the defendants. The second plaintiff farms that farm. The first and second plaintiffs allege that during the sale process the defendants misrepresented the fertility and carrying capacity of that farm, and that they have suffered losses as a result. They have sued the defendants to recover those losses, claiming $300,000 (approximately) before interest. They base their separate claims on s 6 of the Contractual Remedies Act 1979 and s 9 of the Fair Trading Act 1986 respectively.
The parties and their claims
[2] The first plaintiffs in this case are Colin Cashmore, his wife Marion Cashmore and Mr Cashmore’s solicitor, Mr Richard Austin, suing in their capacity as trustees of the Cashmore Family Trust. Mr Cashmore was the settler, and he and his wife are discretionary beneficiaries, of that trust. The second plaintiff is Mr Cashmore suing in his personal capacity.
[3] The defendants, Mr Ernest (Sonny) Sands (“Mr Sands Snr”) and Mr Lionel
Lamb, were sued in their capacity as trustees of the E C Sands Family Trust.
[4] In this judgment I refer to the first plaintiffs as the Cashmore Family Trust and the defendants as the Sands Family Trust.
[5] On 17 November 2000 Mr Cashmore entered into an agreement for sale and purchase of real estate (“the Contract”). In the Contract, Mr Cashmore agreed to buy from the Sands Family Trust a farm property at 3032 State Highway 4 near Ohakune (“the Horopito Farm” or “the Farm”). The Farm was acquired by the Sands Family Trust in 1992 and had been farmed by Mr Sands Snr’s son – Laurie Sands (“Mr Sands Jnr”) – on behalf of that Trust. Mr Sands Snr provided management and administrative support to his son.
[6] Mr Cashmore was the party to the Contract. He agreed to purchase the Farm. The Contract provided for Mr Cashmore to nominate a purchaser in his place. He subsequently nominated the Cashmore Family Trust.
[7] After (and indeed to a certain extent before) settlement, Mr Cashmore conducted the farming operation on the Horopito Farm on his own behalf. He did so pursuant to an informal arrangement with the Cashmore Family Trust.
[9] The plaintiffs’ claims were based in part on a number of statements contained in an advertising brochure (“the Brochure”) prepared for the sale of the Horopito Farm. The statements on which particular reliance were placed read as follows:
FERTILISER: 650kg per ha – combination of cropping mix and super. P levels 30 plus. Following cropping 1 tonne of lime per acre. 150 tonnes of fertiliser per year.
LIVESTOCK: 600 Cattle – 300 Ewes
PRODUCTION: Finishing/Breeding policy: Angus Study [sic]/Breeding ewe flock
COMMENT:Approximately 600 acres are effective – a further 75 acres grazable. Balance native bush and stream.
[10] The plaintiffs also based their claims on a number of statements they alleged were made by Mr Sands Jnr to Mr Cashmore, when Mr Cashmore visited the Horopito Farm before the Contract was signed. They said those statements supported and confirmed material contained in the Brochure.
[11] I will refer to statements from the Brochure, and to the statements alleged to have been made by Mr Sands Jnr, as the “Alleged Representations”.
[12] The plaintiffs advanced their separate claims on two fronts.
[13] The Cashmore Family Trust, as the first plaintiffs, claimed that they were induced to enter into the Contract by the Alleged Representations, that the Alleged Representations were false and that therefore, under s 6 of the Contractual Remedies Act 1979, they are entitled to contractual damages for breach of those representations. The central element of these claims was that the Farm was not, as represented, one of high fertility with “P” levels of 30 plus. I note at this point that P levels are a measure of soil fertility. P stands for phosphate, and a given P level – or more accurately an Olsen P level – is derived by a test which measures the amount of free phosphate available in the soil.
a) $150,000 for loss of value – due to the actual fertility of the Farm being less than represented;
b) Interest on $150,000 from 16 December 2000 to date of judgment;
c) $149,242 for loss of production; and
d) Interest on $149,242 from 16 December 2002 to date of judgment.
[15] Mr Cashmore, as the second plaintiff, advanced his alternative claim under the Fair Trading Act, alleging that the defendants in making the Alleged Representations to the first plaintiffs, being in trade, engaged in misleading and deceptive conduct in terms of s 9 of the Fair Trading Act 1986. Furthermore, Mr Cashmore relied on that misleading and deceptive conduct in deciding how to farm the land and suffered production losses and incurred increased fertiliser costs accordingly. Mr Cashmore particularised those damages as:
a) $149,242 for loss of production;
b) Interest on $149,242 from 16 December 2002 to date of judgment;
c) $165,292.59 for extra fertiliser; and
d) Interest on $165,292.59 from 16 December 2002 to date of judgment. [16] As was acknowledged by Mr Millard QC in his opening, there are elements
of duplication in the separate but alternative claims. That duplication may be expressed as follows:
a) The loss of value claimed by the first plaintiffs ($150,000) – due to the fertility of the Farm being less than represented – is duplicated by the cost of fertiliser claimed by the second plaintiff as being required to increase the fertility of the Farm to that represented ($165,292.59); and
b) There is a straight duplicate claim for the loss of production
($149,242).
[17] In his closing, Mr Millard also acknowledged that Mr Cashmore was not able, under the Fair Trading Act, to bring a claim for expectation losses. Accordingly his claim was limited to $165,292.59, and interest on that amount (i.e. for the loss of production). That was a correct concession, and this judgment proceeds on that basis.
[18] I note further that it is not clear to me how two separate plaintiffs can bring “alternative” claims. Liability either arises to them in their separate capacities or it does not. This duplication of claims is a matter to which I will return.
[19] The defendants responded to the first plaintiffs’ claim by denying any misrepresentation to or reliance by the first plaintiffs. They asserted more particularly that:
a) The Brochure, being prepared for a sale by auction on terms which negatived any liability for the vendor and provided an express “as is/where is” basis for sale, was not intended by the defendants to be relied on.
b) The first plaintiffs relied on the second plaintiff’s assessment of the
Horopito Farm, and not on any promotional material. c) In any event, the defendants asserted that:
i) some of the Horopito Farm had “P levels” of 30 plus;
ii)the Horopito Farm had been fertilised with a combination of cropping mix and super at 650kg per ha, 150 tonnes per year on the farmable area; and
iii)the Horopito Farm had a winter carrying capacity of 600 cattle and 300 ewes.
[20] Any loss, the defendants assert, was the result of poor farm management.
[21] The defendants responded in similar terms to the second plaintiff’s “alternative” claim, further denying that in entering into the Contract they were engaged in trade.
The background to the sale of the Horopito Farm
[22] The Sands Family Trust purchased the Horopito Farm in 1992. At that time the Farm was in a relatively undeveloped state. In the years from 1992 to 2000 (when the Farm was sold), Mr Sands Jnr developed a large part of the Farm with the support of his father.
[23] The Sands’ evidence was that the development of the Farm had generally involved a process of improvement of soil fertility and pasture quality.
[24] Old pastures were disced, and lime applied at the rate of one tonne per acre. A crop, generally swede or kale, would then be sown, at which time 350kg of cropping mix fertiliser would be applied. That crop would be fed to stock in winter, and the paddock in question resown in grass in November or December. At that time, another 350kg of cropping mix per acre would be applied. Thereafter, 300kg were applied per acre each year on the new pasture.
[25] A number of paddocks, comprising some 100 acres in total, were – prior to the initiation of the development programme as regards those paddocks – leased out by the Sands to market gardeners and used to grow carrots or potatoes. That market gardening process had involved the fairly intensive use of fertiliser. A tonne (1000kg) of fertiliser and a tonne of lime had been applied per acre. Those paddocks therefore had a base of fertiliser before the Sands embarked on their own regrassing programme.
[26] The details of fertiliser actually applied by the Sands’ scheme is a matter of dispute, as will become apparent.
[27] The Sands were, by their own description, reasonably traditional farmers. They ran cattle and sheep, but predominantly concentrated on cattle breeding and finishing. An Angus Stud was part of that operation. The Sands gave evidence that they concentrated on finishing top quality, high weight animals, focussing on quality rather than quantity. They were intent on building up stock numbers as they developed the Farm.
[28] The accounts for the Sands Family Trust showed that the Horopito Farm had made losses in each of the 30 June years 1997 to 2000 inclusive. Mr Sonny Sands explained that the losses reflected expenditure during the development phase, and that those losses had not influenced the decision to sell the Farm.
[29] In September 2000 the Sands decided to sell the Farm for family reasons. Those reasons were not particularised, but the decision made was to get out of farming, sell the Farm and – as anticipated – separately dispose of the stock and in particular the stud cattle.
[30] Having made the sale decision, the Sands instructed Alan Herbert of Harcourts, Palmerston North, to act as agent. His advice was to sell the Horopito Farm at auction. A date of 16 November 2000 was set for the auction. Settlement was to occur by 1 June 2001. Open days were planned for 25 October and
5 November. A third open day may have been held on 8 November as well.
[31] Following discussions with the Sands, Mr Herbert prepared some promotional material, together with the particulars and conditions of sale at auction.
[32] The promotional material comprised an advertisement and the Brochure. Nothing turns on the advertisement.
[33] The terms and conditions of sale reflected standard form auction terms, including a number of provisions (clauses 10-13) negativing vendor liability. These included a provision (clause 11) requiring the purchaser to satisfy himself of the accuracy of any promotional material and acknowledging that entry into the contract was in reliance on his own judgment.
[34] Some six or seven interested parties visited the Farm on the open days. Mr Cashmore was not one of those parties. At this point the Sands were set to sell the Horopito Farm, as planned, at auction on 16 November.
Mr Cashmore buys the Horopito Farm before auction
[35] In early November, Mr Cashmore became aware of the forthcoming sale of the Horopito Farm.
[36] At that time, Mr Cashmore owned a number of business interests. In November 2000 his main business interest was a civil engineering business, which took up about 60% of his time. He was also a director and half owner of a waste management business – which took up a further 20% of his time, a director and part owner of a diesel workshop engineering company, and was involved in subdividing land at Wanganui.
[37] At the time he was also involved in farming three properties in Oneheiti as a single unit, which took up he estimated 10% of his time. In earlier years he had been a full time farmer.
[38] Mr Cashmore became aware of the sale of the Horopito Farm when he saw an advertisement in a farming newspaper. The property was already known to him, as he had looked it over at the time the Sands had purchased it in 1992.
[39] He was of the view that the Horopito Farm might be a suitable property to run in conjunction with his farms at Oneheiti, either independently or as a finishing block.
[40] By the time he became aware of the sale, it was fairly late in the piece as the open days had already passed. It would appear he first contacted Mr Herbert, the agent, after 5 November. He obtained a copy of the Brochure, which he says he got from Mr Herbert. By Monday 13 November, four days prior to the scheduled auction, Mr Cashmore had visited the Farm on several occasions, and had decided to make an offer. Mr Cashmore did not want to bid at auction, as he considered he had
more chance of securing the property at the price he was prepared to pay prior to the auction. On the Monday he met Mr Herbert in Palmerston North, having previously given him the details of his offer over the phone. Mr Herbert had prepared an agreement for sale and purchase based on those details. The offer was an unconditional one to purchase the Horopito Farm for $1.7m. Mr Cashmore signed the agreement and told Mr Herbert that he would withdraw the offer unless it was accepted by Tuesday night.
[41] Mr Herbert discussed the offer with Mr Sands Snr and also took the opportunity to advise other interested parties of what was happening, and asked them to put forward their best offers by the next day. One offer was received which offered $10,000 more than Mr Cashmore’s offer, but it would appear to have been a conditional offer.
[42] Mr Sands Snr accepted the offer, and there was then some negotiation about additional terms requested by Mr Cashmore. Those additional terms entitled Mr Cashmore to call for an early settlement of the sale of the Horopito Farm - ahead of the 20 March 2001 date stipulated in the Contract - and also effectively gave him an option to purchase the stock on the Farm. The evidence was that those matters were all agreed by 17 November, and the Contract was dated that day.
[43] As matters transpired, settlement did take place in December. Mr Cashmore also purchased from the Sands all the stock on the Farm – some 333 cattle and 373 sheep –and, in fact, began moving his own stock onto the Farm prior to settlement. An arrangement was also made which enabled Mr Sands Jnr to live on the Farm for some time after settlement. Mr Cashmore appointed one of his existing farm employees, a Mr Keenan, to manage the Horopito Farm for him.
The Horopito Farm disappoints Mr Cashmore
[44] Starting before settlement, and through the rest of December and into January, considerable numbers of stock were moved onto the Horopito Farm. Numbers provided in evidence were not absolutely accurate. Mr Cashmore’s farm records did not separately record matters relating to his various individual farms, but
it would appear some 4600 lambs, 600 ewes and 125 cattle (heifers and steers) were involved.
[45] These stocking rates reflected Mr Cashmore’s belief that the Farm could be run more profitably than the Sands had done, and that the Farm’s accumulated feed at settlement and underlying fertility levels would support this more intensive approach.
[46] This did not prove to be the case, according to the plaintiffs’ evidence.
[47] According to the farm manager, Mr Keenan, Mr Cashmore was starting to become concerned by early March as to what was happening. The pastures were not responding to the heavier grazing, and they were beginning to sell off stock because there was simply not enough feed. A pasture improvement program was initiated.
[48] Mr Cashmore gave evidence of beginning to have real doubts about soil fertility by winter 2001, and deciding to commission some soil tests. Those tests were carried out in June and the results provided by Jason Gardiner, a Ravensdown employee, by letter dated 5 September 2001. The tests produced results for measured P levels of 13, 10, 5 and 6, an arithmetic average of 8.5.
[49] In light of those results, Mr Cashmore took advice from Ravensdown and embarked on a programme of bringing the fertility of the Farm up to the level he said he had anticipated was to be the case at the time of purchase.
[50] By December 2003 that process had been largely completed. Reports dated
9 December, on tests taken in late November, showed P levels of 34, 27 and 25. This was in line with what Mr Cashmore asserted he had anticipated the position would be at settlement, but was not.
[51] Mr Sands Jnr expressed the view that Mr Keenan managed the Farm poorly during this period, bringing on too much stock, grazing the grass hard to the ground and leaving stock in the paddocks for too long for grass recovery and fattening. The problems which Mr Cashmore encountered were due to the poor management of the
Farm, and had nothing to do with soil fertility. Those problems were exacerbated by the cutting and removal from the Farm of significant amounts of hay and baleage, and the spraying of pasture and its replacement by pasja (a fodder crop). Mr Sands Jnr’s somewhat critical views of the management of the Horopito Farm by and on behalf of Mr Cashmore received some support from one of the expert witnesses, called by the defendants, Mr Shannon. Mr Shannon, whose evidence more generally I will refer to later, commented in response to a question from me on the rate of stocking reflected by the numbers of stock brought onto the farm in this period. He said it would be a high stocking rate relative to farms in the area, and that he had constructed a feed budget on the basis of the numbers of stock Mr Keenan had assumed. That food budget showed feed cover on the farm collapsing by March or April.
Proceedings are issued
[52] Proceedings were originally filed in April 2003, by the Cashmore Family
Trust, in reliance on the Contractual Remedies Act 1981 and the Fair Trading Act
1986. After various interlocutory skirmishes, a third amended statement of claim was filed in December 2004, to which Mr Cashmore was a party for the first time as second plaintiff bringing his claim under the Fair Trading Act. In that statement of claim the first plaintiffs discontinued their Fair Trading Act claim. It was on the basis of this statement of claim that the case proceeded before me.
[53] The plaintiffs’ damages claims, noting Mr Millard’s concession as regards
Mr Cashmore’s claim for loss of profits, essentially reflect:
a) loss in value of the Horopito Farm at settlement, due to its alleged lower than represented fertility; and
b)loss in trading profits which occurred as a result of that alleged lower fertility during the period from settlement until late 2003, when expected fertility levels were achieved.
An overview of the evidence
[54] During the trial a large amount of factual and expert evidence was tendered, by both sides, on a range of matters.
[55] On behalf of the plaintiffs this included:
a) Mr Cashmore and Mr Keenan’s evidence as to what they had taken from the Alleged Representations, as to Mr Cashmore’s farming activities on the Horopito Farm from late 2000 onwards, and of the detail of the pasture development and fertiliser programme they implemented. They provided details of the application of fertiliser as recommended by Ravensdown to maintain and increase fertility levels following the soil tests in the winter of 2001.
b)Evidence from Mr Austin, Mr Cashmore’s solicitor, as to certain aspects of the Horopito Farm purchase, and of his experience as a rural conveyancer.
c) Evidence from Mr Gollan, a farm consultant, as to possible losses suffered. Mr Gollan took as his starting point the September 2001 soil tests and assumed the Horopito Farm was of poor fertility generally. Based on dry matter production studies undertaken by a local vet, a Mr Seifert, and published in the local Vet Club Newsletter, he derived a value for lost marginal production (that is, meat that would have been produced but was not) of $149,242.00. The Cashmore Family Trust based its loss of production claim on this calculation.
d)A Mr Russell Goudie, a valuer who over the years had had a number of dealings with Mr Cashmore, gave evidence of the valuation he prepared of the Horopito Farm as at the time of its sale to Mr Cashmore. He valued the land on the basis of information provided to him by Mr Keenan as to the condition of the pasture in November 2001, and with reference to what he considered to be
comparative land sales. He had also been told, and factored into his valuation, the low P level results from 2001. He valued the Horopito Farm in November 2001 at $1,550,000. The $150,000 difference between that valuation and the price paid is the basis of the first plaintiffs’ loss of value claim.
e) Dr Roberts, a soil fertility expert, gave evidence in support of the damages claim advanced by Mr Cashmore based on the cost of fertiliser applied. On this point his evidence essentially was that the Ravensdown recommendations to apply fertiliser were soundly based in science, on the basis of the assumed objective of raising soil Olsen P from an average of 8.5 to 30. Mr Cashmore’s loss of value claim of
$169,292.59 represented the cost of applying the fertiliser recommended by Ravensdown, excluding the cost of “maintenance” fertiliser. Maintenance fertiliser is fertiliser required to maintain soil at a particular P level, as opposed to fertiliser required to increase that level.
[56] For the defendants, evidence was given by Mr Sands Snr and Mr Sands Jnr, Alan Herbert (the real estate agent), Mr Paddy Shannon (a farm consultant) and Mr John Edmeades (a soil fertility specialist).
a) Mr Sands Snr was 85 at the time of the trial and retired from farming.
He had been farming since he was 12 years old, retiring (as I understood matters) in 1996 when the family farm near Taumaranui was sold. He recalled, with some emotion, the difficult circumstances of his commencing farming – when his father’s First World War related illness had required that step. He gave evidence as to the general background of the purchase and development of the Horopito Farm, the decision to sell the Farm and contact with Alan Herbert. He acknowledged he was an old fashioned farmer. He explained the purpose of, and what had been intended to be conveyed by, the Brochure, and the type of farming operation that had been carried out on the Horopito Farm. He referred to soil tests the Sands had had
carried out in 1996 and 1998, and how the 1998 tests had produced one result of 38.
b)Mr Sands Jnr gave evidence, focussing on the decision to sell the Farm, his contact with Mr Cashmore on the three visits that Mr Cashmore made shortly before the auction date and his view of the development of the Farm and of its soil fertility.
c) Mr Shannon’s evidence addressed three issues.
i)He first set out why, in his view, the Horopito Farm was in fact capable of supporting 600 cattle and 300 ewes as winter stock.
ii)Secondly, he considered whether the measured soil fertility levels were sufficient to support the level of performance described in the Brochure. He concluded that they were.
iii)Finally, he considered the 2001 and 2003 soil tests, with a view to determining whether the 2001 results were accurate. It was his opinion that the 2001 tests were an aberration, and that taken as a group the 1996, 1998 and 2003 tests gave a true picture of the state of the soil fertility on the Farm.
d)Dr Edmeades was retained by the defendants to review and comment on the briefs of Mr Shannon and Dr Roberts. He broadly agreed with Mr Shannon, as regards the fertility and carrying capacity of the Horopito Farm. He also concluded that the winter 2001 soil tests, which had produced an average Olsen P level of 8.5, were an inexplicable aberration.
[57] During the course of the trial, the plaintiffs also challenged the defendants’
evidence as to the history of fertiliser application, suggesting that the documentary
record did not support completely the defendants’ claims as to the amount and type of fertiliser that had been applied.
The plaintiffs’ claims – the key issue
[58] The first plaintiffs brought their claim on the basis of the Contractual Remedies Act 1979 and in particular s 6, asserting that the Alleged Representations induced them to enter the Contract and were false. Mr Cashmore as second plaintiff alleged that in making the Alleged Representations the defendants, being in trade, engaged in misleading and deceptive conduct in terms of s 9.
[59] There are a number of separate elements for each of these claims, the key features of which are in general terms summarised in a comparative table which appears at 11.3.3 of Law of Contract in New Zealand by Burrows, Finn & Todd (2nd ed, Lexis Nexis NZ Ltd, Wellington, 2004). Mr Millard particularised those elements for the purposes of the plaintiffs’ case in the following questions:
a) What were the plaintiffs entitled to take out of the representations?
b) Did the plaintiffs actually rely on the representations?
c) Were the plaintiffs entitled to rely on the representations?
d) Were the representations wrong?
e) If so, what is the measure of damages? [60] Mr Wood did not materially dispute that outline.
[61] The central element of each of the first and second plaintiffs’ claims is that of misrepresentation, or misleading and deceptive conduct. It is the general position that the two concepts are very close. No material difference was asserted in this case.
[62] Therefore, and as submitted by Mr Millard in his opening for the plaintiffs, the key feature in this case is the allegation by the plaintiffs in regard to the “Olsen P” levels on the Farm. In accordance with the way the plaintiffs presented their case, I will first analyse their claims as regards the Alleged Representations. I will then consider a number of other elements of those claims that are relevant in this case.
The meaning of the Alleged Representations
[63] Put very simply, it was the plaintiffs’ case that the statement in the Brochure “P levels 30 plus”, properly interpreted, meant that the Horopito Farm was represented by the defendants as having average P levels of 30 plus. The Horopito Farm was, therefore, a very high fertility farm. That representation was supported by the accompanying statements in the Brochure as to the fertiliser that had been applied, and was further supported by what the plaintiffs say were the statements in the Brochure as to the winter carrying capacity of the Farm.
[64] In this the plaintiffs rely first on two of the extracts from the Brochure, referred to in [9], namely:
FERTILISER: 650kg per ha – combination of cropping mix and super. P levels 30 pls. Following cropping 1 tonne of lime per acre. 150 tonnes of fertiliser per year.
COMMENT:Approximately 600 acres are effective – a further 75 acres grazable. Balance native bush and stream.
[65] Taking these two extracts from the Brochure together, the plaintiffs say that they read, and were entitled to read, this to be a representation that the Horopito Farm had average P levels of 30 plus across the whole of the effective farming area of 600 acres, on the basis that 150 tonnes of fertiliser had been spread over the property for a number of years at the rate of 650kg per hectare. One hundred and fifty tonnes of fertiliser per year per acre over 600 acres is, they say, approximately equal to 650kg per hectare over 240 hectares. Furthermore, this indicated high fertility on a sustainable basis, a further element of the representation they were entitled to rely on. The plaintiffs were entitled to assume no further capital fertiliser was needed and even that they could “mine” the property. This is, they could benefit
from the accumulated high fertility levels by farming without applying sufficient fertiliser to maintain those levels.
[66] For Mr Cashmore, this question of high fertility levels (P30+) on a sustainable basis was perhaps the key element. Based on the Brochure he did, he said, some quick calculations of the stock he could expect to be able to be put on to the Horopito Farm if he could buy it and get early access. In making his decision to purchase, he was strongly influenced by, he said, and indeed dependent on, what the Brochure said about the fertiliser history and P levels of the Horopito Farm.
[67] The issue of winter carrying capacity is raised by the second statement in the
Brochure relied on by the plaintiffs. This is the statement:
LIVESTOCK: 600 Cattle – 300 Ewes PRODUCTION:
Finishing/Breeding policy:
/Breeding ewe flock
Angus Study [sic]
[68] The plaintiffs say that they took, and were entitled to take, this reference as a representation as to the carrying capacity of the Horopito Farm over winter. They considered that statement to be consistent with the implication from the statement as to fertiliser, namely that the Farm had an overall average P level of 30 plus. It was that overall average P level of 30 plus that enabled it to sustain the winter stocking level the plaintiffs took to be represented by this statement.
[69] The plaintiffs also rely on statements allegedly made to them by Mr Sands Jnr, during visits to Horopito Farm. As I have noted, Mr Cashmore paid 2-3 visits to the Farm in the few days between his first becoming aware of the proposed auction and the signing of the contract. He was variously accompanied on these visits by his wife and Mr Keenan. His evidence was that the Farm looked a picture, with lots of lush pasture and stud cows and stud bulls which were as fat as any animals he had seen before. Mr Cashmore’s evidence was that Mr Sands Jnr presented him with the impression that he was an honest and competent farmer, who was selling the Farm for family reasons so that he could move on to other things.
[70] The plaintiffs assert that, during those visits, Mr Sands Jnr represented that:
a) Lower stocks level then on site were the result of selling stock to take advantage of good market prices and because he was selling the land;
b)Plenty of fertiliser had been applied and maintained which supported the representation in the marketing materials regarding the fertiliser programme;
c) The soil tests would be provided and that the soil tests would support the information contained in the marketing material;
d)Financial reports would be provided and the financial reports would support the information claimed in the marketing material;
e) The marketing materials were an accurate reflection of the land; and
f) That the carrying capacity of sheep and cattle represented in the marketing materials was for breeding stock.
[71] At various points in his oral evidence, Mr Cashmore provided further elaboration on what he had taken from the Brochure. He referred to various assumptions he had made in doing this.
[72] It was an important part of the defendants’ case that Mr Cashmore had undertaken little, if any, due diligence. He had not, for example, made the Contract conditional on receiving soil test information, nor on himself carrying out updated soil tests to confirm the current fertility position. Explaining this approach, he at one point in cross-examination said that given there was a history of 150 tonnes of P based fertiliser per annum, that on his interpretation and reading there was 3,500 approximate stock units wintered and given that all that lined up with the local vet club’s soil and grass growth tests, this indicated to him that he could take what he understood the Brochure to be representing at face value.
[73] In his written brief he stated:
I took from this that the 150 tonnes was just phosphate fertiliser rather than including lime and urea and that this level had been applied for more than just one year. I assumed this to have been applied over many years to achieve the advertised P levels.
[74] He further explained that he considered that fertiliser would have had to have been applied for a period of 5-7 years to achieve an outcome of average P levels of
30 plus. He based this on his knowledge of the soil type having a natural P level of
5-7 at the approximate time of the Sands’ purchase, and therefore to get the P levels up to where they were would require many applications of fertiliser, somewhere in the range of 5-7 years.
[75] During his evidence, Mr Cashmore explained his view that the word “fertiliser” meant something that contained a minimum level of 9 units of P, that something with 7 units was getting close to fertiliser but that something with 3 units was not.
[76] He also spoke of assumptions in his interpretation that the livestock entry was a reference to winter carrying capacity. He acknowledged that the Brochure nowhere said the reference was to winter carrying capacity but said that he had assumed it was because of his previous assumptions regarding fertiliser; 150 tonnes of high P fertiliser across 600 acres of extensive redevelopment, resulting in P levels of 30 plus, was in his mind consistent with a farm having a winter carrying capacity of 600 cattle and 300 ewes. He said that these were assumptions he was entitled to make, as all the material read together supported that interpretation.
[77] Again, explaining in cross-examination why he had assumed that the fertiliser referred to in the Brochure was one with high P levels, he said he had made that assumption because given the statement as to P levels of 30 plus, the spreading of
150 tonnes of fertiliser and the carrying capacity led him to believe that there were significant P inputs.
[78] As is clear, Mr Cashmore took an overall meaning from the Alleged Representations, namely that the Horopito Farm had a very high fertility (average P levels 30 plus), with winter (and therefore, in his mind, finishing) capacities commensurate with that status.
[79] It is also, I think, relevant to this case to note Mr Cashmore’s prior knowledge of the Horopito Farm.
[80] As noted above, the Horopito Farm was already known to Mr Cashmore prior to November 2000, and he had looked it over in 1992 when the Sands had purchased it. Being adjacent to the main road, he had also watched its positive development over the years as he had driven to and from his property in the Paraparas. He said in his written brief (para 10) that he had previously thought it was a sour piece of dirt and had been impressed how it had developed. He had contemplated that this was primarily due to a sound fertiliser programme.
[81] Mr Cashmore subsequently explained, in response to a question from me, in more detail what he knew of the Horopito Farm when he saw it advertised for sale in November 2000. He said that he had been offered the property in 1992 when the Sands had bought it, but that he thought the agent was overly optimistic and he had not been interested in farming that country at that stage. He said hindsight had proved that to be a shocking mistake.
[82] This may help explain the speed with which Mr Cashmore was able to move in the week or so prior to the auction to make an offer, and his determination to buy before auction. In my judgment, he clearly had some views about the Horopito Farm, and its desirability as a possible investment, independently of the information he obtained during the sale process. I do record, however, that in his evidence Mr Cashmore was at pains to emphasise the reliance he had, in fact, placed on that information, notwithstanding what he characterised as the limited prior knowledge or views he had.
[83] Mr Cashmore acknowledged that he had quite a different farming philosophy from that of the Sands. As evidenced by the stocking regime he implemented following settlement, his intention was to operate the Horopito Farm on a far more intensive basis than had ever been the case under the Sands’ ownership, and more – as I understood matters – as a finishing property in conjunction with his other farm at Oneheiti.
[84] Taken overall, I find that Mr Cashmore in effect interpreted the Alleged Representations, relying on a number of assumptions referred to above, as saying that the Horopito Farm was of sufficiently high fertility to enable him to change significantly the style of farming operation carried on, and to do so successfully on an ongoing basis, relying on that high fertility.
[85] The evidence of the defendants as regards the Alleged Representations addressed a number of matters.
[86] First, Mr Laurie Sands gave evidence as to what had been intended by the various statements contained in the Brochure.
[87] The Brochure was a promotional item, not intended to be relied on by purchasers in any formal way – as reflected in the Terms and Conditions of Sale. The intention was to introduce the property to prospective purchasers with the expectation that purchasers would then make further enquiries for themselves about the Farm and its pasture and characteristics.
[88] As to fertiliser and P levels, the meaning intended to be conveyed was that
650 kg of fertiliser, a mixture of cropping mix and super, had been applied the previous year to new grass paddocks. Parts of the Farm had P levels of 30 plus. Approximately 150 tonnes of fertiliser had been applied in the past year, and it was intended to do the same in the next year, the year ending 30 June 2001. Full details of the history of pasture development and fertiliser application were available for any purchaser who requested the same.
[89] As to P levels, Mr Sands Snr said he was certain that the P levels would have been maintained or enhanced over some of the areas of the Farm, given 1996 and
1998 soil tests and subsequent fertiliser application, and that many parts of the Farm would have had P levels of over 30 if they had been tested in December 2000. He did not accept the contention that a general statement of P levels being 30 plus means all of the effective area of 600 acres had P levels of 30 plus. In his view, that was nonsense, as any farmer would know that P levels vary considerably between
paddocks and different stages of development. It was only intended to describe the fact that some parts of the Farm had been tested and had P levels of 30 plus.
[90] As to stock levels, Mr Sands Snr’s evidence was that the words “Livestock –
600 Cattle – 300 Ewes” were intended to convey to prospective purchasers that that was a realistic capacity for the Farm for finishing stock in the year up to the anticipated settlement date of June 2001. The statement did not mean that it was the winter carrying capacity of the property. It was the anticipated capacity of stock for finishing at that time. With the anticipated settlement on 1 June 2001, the Sands intended to have 600 cattle and 300 ewes either bred or finished on the property during that year. In his view, the Farm was more than capable of doing that. If anything, they were understocking the Farm, because they were focussing on cattle and sheep weights, not volumes of cattle and sheep.
[91] As to the Alleged Representations, Mr Sands Jnr’s evidence was that he had personally explained to Mr Cashmore the fertiliser history of the Horopito Farm. He had provided that explanation whilst showing Mr Cashmore over the Farm, explaining the development process that they had generally followed, and where the various paddocks fitted into that process. He said that he had also explained the type of fertiliser used, Dycalcic fertiliser, and the general process that followed in terms of developing each of the paddocks from old to new grass. In his view, Mr Cashmore knew and understood in general terms the Farm’s fertiliser history and various stages of pasture development. He said he answered any questions Mr Cashmore had, and that as far as he was concerned Mr Cashmore knew and understood in general terms the property’s fertiliser history and the various stages of pasture.
[92] I note at this point that Mr Cashmore acknowledged, in general terms, that he had been shown over the Farm by Mr Sands Jrn, and had the development process, including fertiliser applications, explained to him. He formed the view, however, that Mr Sands Jnr did not have a very sound understanding of fertiliser and its inputs. He said that Mr Sands Jnr had not answered detailed questions about carrying capacity, and the type and quantities of fertiliser applied. He had, rather, referred to the general high quality of the stock and the pastures. Mr Cashmore explained that
he had not pursued this line of inquiry because he did not want to offend Mr Sands
Jnr by asking further because of his desire to negotiate a purchase prior to auction.
[93] Mr Sands Jnr, however, denied telling Mr Cashmore that he had sold off stock recently because the Farm was being sold. He said Mr Cashmore would have been aware that the Farm was for breeding and finishing cattle, as he had discussed that with him. He denied Mr Cashmore asked for any additional written materials, but said that he had provided him with a copy of the 1998 soil tests results on his second visit. At no stage did he tell him the Farm could carry a lot more stock than was on it at the time. At no stage did Mr Cashmore ask him about P levels or winter carrying capacity. At no stage did he represent that the property had 600 cattle and
300 sheep as a winter carrying capacity; that was not what the Brochure said and Mr Cashmore was well aware of the Sands policy of breeding and finishing, as that was explained to him.
[94] Whilst it was correct that in the year prior to sale there were not 600 cattle and 300 sheep on the Farm, it was anticipated that there would have been those numbers through to 1 June 2001. The stock numbers were slowly being built up as they developed the Farm. The figure of 600 cattle was for finishing cattle, and was a figure which – in his view – would have been able to be achieved in the year up to the intended settlement date of June 2001.
[95] He acknowledged that the Farm had not finished that number of cattle previously, but that it would have been able to do so in that year as it was coming into full production as a result of their development programme. That was what was intended by the statement in the Brochure.
[96] He also explained the background to soil tests in 1996 and 1998, explaining in his own words why the soil tests were taken and, with reference to the history of the pasture in question, why particular P levels had in his view been achieved. He said, in light of the 1998 soil tests and the amount of fertiliser that had been applied to the property after September 1998, at the time of sale he was confident that the P levels would have been enhanced in those areas of the Farm which had been developed.
[97] In this context, the evidence from the trial as to the Olsen P levels and soil fertility testing assumes some importance.
[98] As noted, “P” stands for phosphate. The “Olsen P” test measures the amount of free phosphate available in the top portion of the soil. Phosphate is important for grass and crop growth, and in particular clover growth, which supports stock and also, over time, increases nitrogen levels in the soil and therefore the soil’s inherent fertility. Higher P levels indicate a greater ability to produce green matter, and in particular clover. One of the experts, Dr Roberts, commented as follows:
… one of the fundamental reasons we are putting P fertiliser on apart from meeting physiological requirements of plants themselves is to create a soil environment to maximise white clover production and function. Its function is to biologically fix atmospheric nitrogen. This nitrogen gets converted to clover protein which the animals then ingest and 80-90% of the protein they ingest they excrete as organic and inorganic nitrogen in dung and urine. Over time this process builds up the soil nitrogen pool and this is what drives primarily annual pasture production with respect to nutrients. Initially through cultivation there is mineralisation or breakdown of dead material, dung and urine and this releases nitrogen. This can support new pastures for a short time. However the process of clover nitrogen fixation needs to continue year on year to build up the underlying and ongoing supply of nitrogen to the pasture system. This is why in low fertility situations new pastures can revert quite quickly to what has been referred to in this courtroom as native pastures. (Notes of Evidence p71)
[99] There were four sets of soil tests referred to in evidence. The first in time is a test taken in 1996, by the Sands. This was one test only and yielded a P level of 26.
[100] The second set of tests were taken in August and September 1998. The first set of three on the effective farming area showed levels of 16, 21 and 38. In the following month there was a further soil test in the native paddock, not being part of the effective farming area, which showed a P level of 5.
[101] In June 2001, and as I have already noted, the plaintiffs’ tests showed P
levels on the effective farm area of 6, 10 and 13, and 5 on the native pasture.
[102] Finally, the tests carried out in December 2003 on the effective farm area yielded P results of 27, 34 and 35.
[103] The defendants contended, and produced expert evidence in support of their contention, that the 2001 tests were an aberration. The plaintiffs argued that the
2001 tests simply reflected their experience and supported their argument that the average P levels on the Farm at settlement had not been as represented. I will return to the accuracy or otherwise of the various soil tests later in this judgment.
[104] For current purposes, I think there are two further significant aspects of the evidence as to soil testing.
[105] The first is that testing of P levels is rarely, if ever, carried out across a whole property to give what might be called average result, and that had not been the case for the Horopito Farm. The evidence of Dr Roberts, for the plaintiffs, was that none of the three sets of soil tests produced reliable representative results. Dr Edmeades’ evidence was that he did not know of a farm where a farmer had gone out to get a weighted average P level result. Mr Gollan also agreed, in cross-examination, that it would be extremely rare for a farm of the nature of the Horopito Farm to have soil tests taken over the whole farm so as to get a soil test result representative of the entire farm.
[106] The second is that for a farm in the general area to have an average P level of
30 plus would be very unusual indeed. Mr Gollan, an expert called by the plaintiffs, said such a result would be exceptional. Mr Shannon, called by the defendants, said that it would be extremely rare.
[107] Against the background of this evidence, I now consider the misrepresentation element of each of the plaintiffs’ claims.
Legal principles applicable to the key issue
[108] The law here is relatively well established. As relevant, to constitute a misrepresentation, - see Weir v Johnson [1984] 2 NZLR 518, which held generally that the term “misrepresentation” where used in the Contractual Remedies Act has the meaning it held under the old common law – the statement in question must be one of past or present fact, and not of opinion. Furthermore, the meaning given to
the statement in question by the person seeking to rely on it must be one which, in all the circumstances, is a reasonable one:
It was a common law principle that the representation should be understood in the sense in which the representee reasonably understood it. That has been held to apply under the Fair Trading Act 1986 (Lawton v Norcross (2000) 9 TCLR 338) and presumably would under s 6 of the Contractual Remedies Act 1979 also: it is in accordance with the usual objective approach of the law of contract. (Law of Contract in New Zealand (2nd ed, Burows Finn & Todd, Wellington Lexis Nexis NZ Ltd 2004)
[109] The defendants argued that the statements in the Brochure were a combination of statements of present or past fact, together with an expression of opinion and or a statement of intention honestly held of what the state of the Farm would be on 1 June 2001. Put very simply, whilst I accept the evidence of the defendants that that is what they intended, I do not think the Brochure – as regards the Alleged Representations – can be read as a statement of opinion or intention. Whilst elements of the Brochure (for example, the settlement date itself and the reference to 90% of the Farm having been regrassed by the autumn of 2001) do obviously include elements of futurity, I do not think the defendants can generally argue that the statements in the Brochure identified by the plaintiffs are, in general terms, properly to be understood as statements of opinion or intention, so as not to be capable of constituting misrepresentations. I reach this conclusion principally in reliance on the language used in the Brochure itself.
[110] The defendants also argued that the plaintiffs had had ample opportunity to carry out their own enquiries and accordingly, having failed to do so, could not now assert misrepresentation by reference to matters which the defendants say such enquiries would have disclosed. That argument is also, in my view, of little assistance to the defendants. It is well established that the mere fact that a party has been afforded an opportunity to investigate and verify a representation does not deprive him or her of a right to a remedy: see Redgrave v Herd (1881) 20 Ch D 1. The Contractual Remedies Act did not change the law in this respect: see NZ Motor Bodies Ltd v Emslie [1985] 2 NZLR 569 at 595.
[111] Of more significance in this case, in my view, is the enquiry as to what is the proper meaning of the Alleged Representations or, in other words, was the meaning that the plaintiffs said they took from the Alleged Representations a reasonable one?
[112] In Bisset v Wilkinson [1926] AC 183, a case involving a dispute over representations made in a contract for sale of a farm in the South Island, the approach to this enquiry was described in the following terms:
In the present case, as in those cited, material facts of the transaction, the knowledge of the parties respectively, and their relative positions, the words of representation used, and the actual condition of the subject-matter spoken of are relevant to the two enquires necessary to be made: what was the meaning of the representation? Was it true?
[113] Similarly in Lawton v Norcross (2000) 9 TCLR 338, a case where proceedings – as here – were brought under s 6 of the Contractual Remedies Act and by reference to s 9 of the Fair Trading Act, Paterson J held that the common law principle that a representation should be understood in the sense in which a representee has reasonably understood it, which applies to the common law of misrepresentations, should also apply to representations which allege to be misleading or deceptive under s 9 of the Fair Trading Act.
[114] In this context, the key question is whether the meaning of the Alleged Representations as asserted by the plaintiffs in these proceedings was one which was reasonable in all the circumstances.
Analysis and conclusion on the key issue
[115] In my view, the answer to that question is no. In summary, I have concluded that Mr Cashmore would appear to have read more into those statements than in the circumstances was reasonable.
[116] I have reached this conclusion by reference to a number of factors, which I
now outline.
[117] The phrase “P levels 30 plus” would appear to be capable of at least four meanings:
a) All P levels 30 plus;
b) Average P levels 30 plus;
c) Weighted average P levels 30 plus (as in effect contended for by the plaintiffs); and
d) Some P levels 30 plus (as contended for by the defendants).
[118] It cannot, therefore, be said that the meaning contended for by the plaintiffs is necessary or obvious.
[119] Mr Cashmore in effect acknowledged this, referring at various points to a range of assumptions and opinions he had made or relied on in reaching his view as to the meaning of this element of the Brochure. These included:
a) his view as to the type (more than nine units of P) of fertiliser that properly constituted fertiliser, and that it was such fertiliser that was being referred to;
b)his assumption that this had been applied for many years, somewhere in the range of 5-7 years; and
c) his assumption that the livestock entry in the Brochure was a reference to winter carrying capacity, with references to stock numbers being to breeding stock and not finishing stock.
[120] These assumptions and opinions, which – in my view – are not themselves able to be based on material contained in the Brochure or information provided by Mr Sands Jnr, would appear to have operated together, supported by the prior knowledge of the Horopito Farm Mr Cashmore brought to the transaction, to bring Mr Cashmore to the view he reached. I acknowledge that Mr Cashmore explained
these assumptions as being justified by the statement as to P levels of 30 plus. However, in turn, he justified his interpretation of the meaning of the statement as to P levels of 30 plus by reference to these matters. Therefore, the fact that he made and relied on these assumptions in this area, in my view, counts against the reasonableness of his interpretation of the reference to “P levels 30 plus”.
[121] In addition, expert evidence as to soil testing established that:
a) farmers rarely, if ever, test for effective P levels across their entire properties; and
b)for a farm in this area to have average P levels of 30 plus across its effective farming area would be rare and exceptional.
[122] Mr Cashmore is an experienced farmer, and though he accepted he was not an expert in soil testing, he clearly had some knowledge of the matter. He also knows the area well.
[123] In my view, the evidence established that Mr Sands Jnr did, when he was showing Mr Cashmore around the Farm and explaining the operation of the Farm to him, set out in some detail the background to the development of the Farm, the application of fertiliser and the development of new pastures over time. This included the market garden phase affecting the approximately 100 acres of the “A” and “D” paddocks, together with the process whereby new pasture was established on other areas of the Farm. Given that history, I think in particular Mr Cashmore’s assumptions that the stated amounts of fertiliser had been applied consistently for up to seven years and were of a consistently high P content, were inferences that could not reasonably be taken from the Alleged Representations.
[124] There is a further evidential matter of relevance here. It was Mr Sands Jnr’s evidence that he showed Mr Cashmore the 1998 soil test results on the second occasion Mr Cashmore visited the Farm. Mr Cashmore denied seeing those results prior to the purchase. This is an important conflict of evidence, as if the results were
shown to Mr Cashmore it creates further difficulty for the reasonableness of the interpretation he says he placed on the Alleged Representations.
[125] On this matter, I prefer the evidence of Mr Sands Jnr. The sale of the Horopito Farm was a particularly significant event for him, and for his father. It would be a matter which would have dominated their lives during this period, and therefore a matter they might be expected to remember with some particularity. For Mr Cashmore, his farming interests only involved 10% of his time overall at this period. Whilst I have no doubt he focussed on the purchase, many other things would also have been occupying him. Events happened over a very short period of time – a matter of days – and it is therefore perhaps not surprising that he does not recall all the details. Quite reasonably, he acknowledged at several points in evidence that he did not have a complete recollection of all events.
[126] Mr Wood submitted in his closing that a finding of fact that Mr Sands Jnr had shown the 1998 test results to Mr Cashmore prior to sale would be a complete bar to the claim for Alleged Representations. In my view, that is not necessarily the case. The test was, by that time, over two years old and P levels could indeed have increased during those two years, as Mr Sands Snr stated was his belief. The point more is that in the context of all the relevant facts and circumstances, the disclosure to Mr Cashmore of those test results contributes to my finding that his interpretation of the statement in question as meaning that effective P levels of 30 plus were present over the Farm as a whole was not a reasonable interpretation.
[127] I finally note, in this context, the conclusion Mr Cashmore drew as to Mr Sands Jnr’s understanding – or more accurately lack of understanding – of matters in relation to carrying capacities and fertiliser history. Although I have not accepted the defendants’ contentions as to the significance of the lack of due diligence by Mr Cashmore, it does seem to me that in this context the fact that Mr Cashmore drew those conclusions also affects the reasonableness of the interpretation he put on the Alleged Representations, as that interpretation depended on understandings he had that Mr Sands Jnr was not in a position to confirm.
[128] Taking all these factors into consideration, I do not think it was a reasonable interpretation of the Brochure to conclude that statements “P levels 30 plus” could be taken as a representation or statement that the Horopito Farm had average P levels across its whole effective farming area of 30 or over. In my view, the meaning contended for by the defendants was, namely, that this was a representation that there were some areas with P levels over 30, is a preferable one.
[129] I acknowledge that – as specifically referred to by Mr Millard in his closing – in his evidence Dr Roberts said that, if he had been buying the Farm, where the Brochure just said P levels 30 plus, he would have assumed that meant the Farm was
30 plus. Mr Gollan expressed a similar view. I have considered that evidence, but remain of the view – noting that the determination of the meaning of a representation is essentially a legal question – that in the circumstances as I have outlined them, Mr Cashmore’s interpretation was not a reasonable one. I also note Dr Roberts’ view, when he became aware of the actual history of the Farm, that none of the soil tests could be regarded as being truly representative.
[130] I turn now to the second key element of the Alleged Representation, that relating to the livestock comments in the Brochure.
[131] In my view, here the evidence of Mr Cashmore and Mr Keenan is particularly significant.
[132] In cross-examination Mr Cashmore acknowledged that nowhere did the Brochure refer to winter carrying capacity or stock capacity. In fact, Mr Cashmore acknowledged those were assumptions he had made based on the overall meaning he had given to the Alleged Representations and, in particular, his interpretation of the overall P levels of the Farm, and those P levels reflecting a considerable period of application of high P content fertiliser. He acknowledged that his was not the only interpretation of those words.
[133] Mr Keenan similarly acknowledged that the Brochure did not refer to winter carrying capacity and that was an assumption that had been made by him and Mr Cashmore.
[134] There is also, in this context, the fact that Mr Cashmore purchased from the Sands, and procured for himself the option to do so, all the stock on the property. The evidence on this point was that he procured that option before finally committing to the contract, so can be taken to have had a full appreciation at that point in time of the stock the Farm was in fact carrying.
[135] The words of the Brochure, in this regard, are in my view particularly ambiguous. Having listened to all the evidence and, in particular, comments by the expert witnesses as to the difficulties that are encountered in trying to equate winter carrying capacity with the ability of a farm in the spring, summer and autumn “growing season” to fatten or finish stock, I do not consider that the livestock remarks in the Brochure are reasonably to be interpreted as a representation as to winter carrying capacity. In my view, it is in fact difficult to put a clear and certain legal meaning on those words at all.
[136] I have concluded above that the meaning of the Alleged Representations claimed by the plaintiffs is not one in which, in my judgment, they would be understood by a reasonable person. On that basis, the plaintiffs do not succeed in their claims against the defendants.
[137] I accept, however, that that conclusion is, as is often the case in disputes of this nature, one made on balance and by reference to all the relevant circumstances. I will also therefore consider other relevant aspects of the plaintiffs’ claims on the assumption that that conclusion is not correct. I will do so first by reference to elements those claims have in common, and then by reference to elements particular to each of them.
[138] Even if I had accepted as reasonable the meaning of the Alleged Representations as asserted by the plaintiffs, to succeed against the defendants they would have had to have gone on and established material breaches of those representations causing damages which, in turn, were properly quantified. In my view, the plaintiffs did not establish either of those further requirements to the civil standard.
[139] I will now consider those issues, noting that this was the focus in effect of much of the trial.
Material breaches of Alleged Representations
[140] In asserting that the effective average P levels on the Farm were not 30 plus, and that the Farm was not the high fertility property represented, the plaintiffs relied principally on three matters:
a) the soil tests carried out in 2001;
b) evidence as to soil fertility based on actual stock numbers of the
Sands’ farming operation; and
c) the amount of fertiliser the plaintiffs assert had in fact been applied by the defendants during the relevant period.
[141] The defendants, consistent with their assertion that they had never represented that the Farm did have average effective P levels of 30 plus, responded by:
a) challenging the accuracy of the 2001 soil tests;
b)asserting that even at various lower P levels and lower levels of fertility the Farm did have a winter carrying capacity of 600 cattle and
300 ewes, and that therefore there was no misrepresentation or loss at all; and
c) arguing that any errors or inaccuracies in fertiliser application records
(which were generally denied) were not material,
so that, taken overall, the plaintiffs had neither established any actionable misrepresentation or misleading and deceptive conduct, and nor had they proved the level of damages claimed.
[142] As to the 2001 soil tests, I assessed the evidence overall as showing that it is not possible to conclude that those tests were accurate.
[143] Expert evidence as to P levels was given for the plaintiffs principally by Dr Roberts. Some additional comment on these matters was also provided by Mr Gollan. For the defendants, Mr Shannon and Dr Edmeades were relied on. Each witness had impressive and relevant qualifications and experience.
[144] Both Mr Shannon and Dr Edmeades addressed this issue by looking at the history of the four sets of soil tests, and of the application of fertiliser to the Farm, both by the Sands (including under the market gardening regime) and by Mr Cashmore. Based on the 1998 soil tests, Mr Shannon concluded that at that time the bulk of the Farm had Olsen P test levels of 21 and over. He considered that applications of fertiliser from 1998 onwards would have maintained or slightly enhanced that. At the same time, the soil tests produced by the plaintiffs for 2001 and 2003 showed an increase in measured results of (approximately) 22-24 Olsen P units. By his calculation, the amount of fertiliser applied by Mr Cashmore would have resulted in an increase of some 11 to 12 units only. He concluded:
• If the average P in 2001 was only between 8 and 9, the average P in
2003 should have been 17-20. Instead it was 32.
• However, if the average P in 2001 was 24-25 then an increase of 9 to 11 units over 2001 and 2003 should give a soil P test of 33 to 36. Again, this prediction is very close to the measured result.
• It is my opinion that the 2001 tests were an aberration, and taken as a group, the 1996, 1998 and 2003 tests give a true picture of the state of soil fertility on the farm. (Brief of evidence – Part C: paras 62-64)
[145] Dr Edmeades essentially concurred in this conclusion. In his words:
I conclude from this that the bulk of the evidence supports the view that the soil fertility on this farm was as represented at the time of sale and that the average Olsen P levels of 8 measured in 2001 is in inexplicable aberration. The apparent decrease from 25 (in 1998) to 8 (in 2001) is most unlikely (beyond reasonable doubt) given the fertiliser P inputs subsequent to 1998 and an increase from 8 (in 2001) to 32 (in 2003) is also unlikely given the P inputs post 2000 (by my estimation the P units in the years 2001, 2002 and
2003) could account for an increase of only 10 Olsen P units. (Brief of evidence – para 7)
[146] Dr Roberts, in an initial brief prepared before he had been provided with the briefs of the defendants’ experts, summarised his view as follows:
The recommendation to apply 293kgP/ha in three applications over an 18 month period to a volcanic ash soil was soundly based in science with the objective of raising soil Olsen P from an average of 8.5 to 30. The use of four soil samples to represent the soil fertility of the farm followed published soil sampling protocol guidelines. It is not possible for soil Olsen P levels to fall from around 30 to 8.5 in nine months under normal farming circumstances. (Brief of evidence – para 39)
[147] Subsequently, when he became aware of the history of the Farm, he said that he could no longer say that the 2001 tests had followed published soil protocols at all. He commented that the Horopito Farm was, from a soil fertility point of view, a patchwork of different areas. In his view, none of the tests taken (1996, 1998, 2001 and 2003) had adopted an approach that would support those results being considered to be representative. As to whether it was possible to lift P levels from the June 2001 assessed levels of 8.5 to the 30 plus measured in September 2003, his evidence was equivocal. He appeared to say a lift of 13 was possible, as opposed to the 22 indicated by the 2003 test. He referred again to his view that none of the results were, however, representative.
[148] Furthermore, Dr Roberts accepted Mr Shannon’s analysis that if the 1998 tests were accurate then on the basis of the fertiliser subsequently applied by the Sands and the Cashmores, P levels would have been maintained or even enhanced until June 2001.
[149] In light of that evidence, I have concluded that the plaintiffs have not established on the balance of probabilities that the 2001 soil tests represented an accurate result and they cannot therefore be relied on to establish a material breach of the Alleged Representations.
[150] The plaintiffs also approach the question of the fertility of the Farm by implication from the history of stock carried on the Farm when it was being farmed by the Sands. In this context, they challenged the representation they alleged had been made as to winter carrying capacity. In addition to Mr Keenan’s evidence as to what had transpired in the early part of 2001, evidence for the plaintiffs here was
principally supplied by Mr Gollan. Very much in summary, his evidence was that on the basis of the numbers of stock carried by the Sands, average Olsen P levels would have had to have been lower than 16 during the years 1998, 1999 and 2000. He based this conclusion on calculations which in his view demonstrated dry matter production from the Farm during those years given the stock actually carried. Put simply, the Farm did not produce the amount of dry matter that was to be expected if the fertility of the Farm was as represented.
[151] Mr Shannon, giving evidence for the defendants, expressed the opinion that the Farm was capable of supporting 600 cattle and 300 ewes as the winter carrying capacity. To reach this conclusion he carried out a very thorough three part analysis involving:
a) a modelling approach, using soil and climate data to predict the pasture growth pattern, and animal feed requirements throughout the year, albeit assuming P levels of 20-25;
b)an estimate of the feed production based on the land resource inventory database; and
c) a summation of the stock units represented by the classes of animals and the performance of those animals to meet farming goals.
[152] Each approach, which I will not attempt to summarise here, gave the same answer: namely, that the Farm would be able to carry the numbers and classes of animals (600 cattle/300 ewes) referred to in the Brochure as the winter carrying capacity.
[153] Although he had assumed P levels in the 20-25 range (based on his analysis of the fertiliser history of the Farm), Mr Shannon also considered a target Olsen P level of 18 would have been sufficient to sustain those production levels required to support that winter carrying capacity.
[154] Mr Shannon differed from Mr Gollan on a number of matters, particularly as regards the distinction he drew between the amount of dry matter required to be produced on the one hand, to provide for a given level of dry matter consumption on the other hand, all as affected by stocking rates.
[155] In my judgment, I found Mr Shannon’s evidence more persuasive overall on these matters than that of Mr Gollan. Given that they are both experts, it is difficult to choose conclusively between them. To the extent that a finding in favour of the plaintiffs on these matters would have required me to find that on the balance of probabilities I accepted Mr Gollan’s evidence in this area ahead of Mr Shannon’s, I am unable to reach that conclusion. Accordingly, I do not consider that the level of stock historically carried by the Sands established the falsity of the Alleged Representations.
[156] The plaintiffs’ case was, as I have noted, that the Alleged Representation as to winter carrying capacity – namely 600 cattle and 300 ewes – was an effective measure of the Alleged Representations overall as to fertility. In his evidence, Mr Cashmore had acknowledged that if the Farm was in fact capable of wintering 600 cattle and 300 ewes, then he could have no complaint. Given Mr Shannon’s evidence on this point, even assuming a P level of 18, and Mr Gollan’s acceptance in a reply brief that P levels of 16 to 19, assuming improved pastures, would support the 3,300 stock units (that is, 600 cattle and 300 ewes) winter carrying capacity, I conclude on the balance of probabilities that the defendants did establish that the Farm had a winter carrying capacity of 600 cattle and 300 ewes. On that basis, there would have been no breach of the Alleged Representations.
[157] The third principal area of dispute was as to the accuracy, or otherwise, of the defendants’ records of fertiliser applied, and of the significance of any errors directly on the statement in the Brochure as to the application of 150 tonnes of fertiliser per year and, in turn, as indirectly affecting actual P levels. Mr Millard also relied on this analysis to challenge aspects of Mr Shannon’s evidence. This issue was inevitably factually very detailed and complex. This aspect of the dispute can, however, be explained by reference to two matters.
[158] The first matter is the statement contained in the Brochure as to 150 tonnes of fertiliser “per annum”. This, the plaintiffs said, required that amount to have been applied for at least two years prior to settlement, if not in fact for several years prior.
[159] The defendants’ figures for fertiliser applied were:
Year to June 1996 42.61 (tonnes) 1997
33.76
1998
87.42
1999
83.48
2000
201.62
[160] The plaintiffs submitted that:
a) Clearly 1999 was well short of 150 tonnes, being only 56% of the figure.
b)Although 1999/2000 at first sight was in excess and, by averaging, with 1999 gets close to 150 per year, there were clear errors in these figures:
i)One application, 26.96 tonnes of Serp/super/lime, was counted three times, whilst Mr Sands Snr had accepted there was only one application.
ii)Two lots of 12 tonnes of “Haymix” were counted when there were none.
[161] At the same time, there were inaccuracies in the amount of P, or phosphate, claimed to have been applied, resulting in an overall material reduction in the amount of P applied, especially in the 1998, 1999 and 2000 years. By reworking a table produced by Mr Shannon, Mr Millard submitted that:
a) in 1999 total P applied was 2,651kg, rather than 4,158kg as claimed;
and
b)in 2000 total fertiliser was a maximum of 135.70 tonnes, as opposed to the 223.62 claimed, with total P of 4,811kg, as opposed to 9,521kg calculated by Mr Shannon.
[162] Having carefully considered this evidence, I am satisfied that Mr Millard has established that, on the balance of probabilities, there was an over-counting by reference to the three entries for Serp/super/lime, and that only one such amount was in fact applied. I have concluded that one of the two disputed crop mix applications would have been applied. Further, in my view, Mr Millard did establish that some of the fertiliser applied may have had a lower P content than that assumed by Mr Shannon.
[163] On the basis of those calculations, it was Mr Millard’s submission that even accepting the 1998 P level results as representative (which he did not), then from
1998 through to 2000 the average P level would have been decreasing. The average must therefore have reduced from P25 to a level even lower than the represented P30 plus.
[164] Mr Millard put these issues to Mr Shannon in cross-examination. Mr Shannon acknowledged that if the adjusted invoiced amounts proposed by Mr Millard were appropriate then indeed less fertiliser had been applied generally than he had assumed. He also appeared to acknowledge Mr Millard’s point as to the P content of certain of the applications claimed. However, in his view, any downward P level adjustments that may have resulted would not have been material. This, in my view, reflects his view that optimum P levels were in the 20 to 25 range, and that within that range the fertility of the Farm was at all material terms as represented in the Brochure. This evidence was not, in my view, contradicted in any material way by the plaintiffs.
[165] Whilst, therefore, Mr Millard did establish:
a) difficulties with the accuracy of the stated “150 tonnes per annum” element of the Alleged Representation – accepting the defendants’ view of how that was properly to be interpreted; and
b) difficulties also with Mr Shannon’s analysis of the amount of P
actually applied,
in my view he was not able to go further and establish the materiality of those matters to the claims made by the plaintiffs. This difficulty was reflected in the way the damages claimed were formulated.
Damages
[166] The Cashmore Family Trust based its damages claims on:
a) Mr Goudie’s valuation evidence; and b) Mr Gollan’s production evidence.
[167] I did not find Mr Goudie’s valuation evidence particularly helpful.
[168] On the one hand his valuation was expressed to be on the basis of the low fertility and condition of the Farm in 2000 as represented to him by Mr Keenan in October 2001 at the time he inspected the Farm for the purposes of his valuation. As I have indicated, I do not consider that the 2001 soil tests can be regarded as being accurate, and therefore would have difficulty in relying on Mr Goudie to that extent. At the same time, Mr Goudie appeared to say in cross-examination that he had not, in fact, relied on the soil fertility tests, but had rather carried out an overall valuation exercise, whereby he reached his view as to the value of the Farm. If he did that, then all his evidence shows is that he had a particular view of the value of the Farm, and that – to the extent that that value differed from the amount paid by Mr Cashmore – the difference was not necessarily caused by the difference between the fertility of the Farm as allegedly represented and as existing in fact.
[169] Mr Gollan’s evidence as to farm production was, in my view, not such as to meet the civil standard of proof as to the damages claimed.
[170] Mr Gollan based his calculation of the loss of profits for the first plaintiff, not by reference to any figures relating to the Horopito Farm itself, but rather on a study carried out by a local vet, Mr David Seifert, of dry matter production levels for “old” pastures with P levels of 11, and “improved” pastures of P levels of 16-18. Given his assumption that the Horopito Farm had P levels as represented in the 2001 tests, Mr Gollan regarded the first category of pasture as analysed by Mr Seifert as an appropriate proxy for the actual production from the Horopito Farm, and the second category as an appropriate proxy for what the represented production levels might have been. Based on those differences, and accepted conversion rates of dry matter into production, and dollar values for that production, he derived his damages figure of $149,424 for loss of production.
[171] He accepted, however, that:
a) his entire report was based on the assumption that the 2001 soil tests were accurate;
b) that if they were not correct his figures could not be relied on; and
c) he did not know what type of grass composition was on the Horopito
Farm, and had assumed therefore that all grass was in fact old pasture.
[172] Given those assumptions, and my conclusion that the 2001 tests cannot be accepted as being accurate, I do not consider that Mr Gollan’s evidence could be relied on as establishing loss of production damages.
[173] Mr Millard made the submission that, because no one had measured actual production levels at the Horopito Farm, a proxy had to be used. That, in my view, does not answer the difficulties that I have identified. Whilst no one measured production post sale, I do not think that can necessarily justify the use of proxy figures based on assumptions that have not been substantiated, without there being significantly greater evidential support for the proposition that, at the end of the day, those proxy figures do bear an appropriate relationship to the realities of what transpired.
[174] I turn finally to the evidence produced by Mr Cashmore in support of his loss of value claim, namely, the cost of application of the fertiliser recommended by Ravensdown. Mr Cashmore’s damages claim of $169,292.59 (for loss of value) represented the cost of applying the fertiliser recommended by Ravensdown, excluding maintenance fertiliser.
[175] In my view, Mr Cashmore also faces difficulties based on the conclusion I have reached as regard the accuracy, or rather lack of accuracy, of the 2001 test results. Furthermore, in my view, he also faces the difficulty that notwithstanding my having accepted the plaintiffs’ claims regarding actual levels of fertiliser and P applied, I do not think there was any evidence for the plaintiffs which established actual P levels on the Farm at settlement, and a causal link between those P levels and properly calculated losses for Mr Cashmore. Certainly, and in light of the evidence regarding the 2001 tests, I do not think it was possible for Mr Cashmore simply to rely on claiming damages based on fertiliser applied in response to Ravensdown recommendations. Although Mr Millard submitted the cost of the fertiliser applied was not challenged, either by direct evidence or in cross- examination, I think this only reflects the fact that the defendants did not contest that Mr Cashmore had applied that amount of fertiliser or that he had paid what he said he had paid for it.
Other issues
[176] I have so far considered the claims made by the plaintiffs very much as they were presented, namely, on the basis that the first and second plaintiffs were in the same position as regards the Alleged Representations. In other words, the Alleged Representations had been made to, and had acted to induce and had been relied upon by the first and second plaintiffs with equivalent legal effect. Their claims, therefore, differed only as to the damages they were entitled to claim. At the outset, I indicated that I considered the way the claims had effectively been presented “in the alternative” gave rise to a number of issues. I now need to consider the separate position of each plaintiff.
The Cashmore Family Trust and s 6 of the Contractual Remedies Act 1979
[177] There are, in my view, a number of potential difficulties with the first plaintiff’s claim under the Contractual Remedies Act 1979.
[178] These involve the requirements of s 6, which provides a remedy for a party to the contract who has been induced to enter into the contract by a misrepresentation, whether innocent or fraudulent, made to him by or on behalf of another party to the contract.
[179] Two issues arise. Was the Cashmore Family Trust a party to the Contract and can that Trust be said to have been induced to buy the Farm by the Alleged Representations?
[180] First, the Cashmore Family Trust was, reasonably clearly, not a party to the Contract. The Contract records the purchasers as “C R Cashmore and/or nominee”. Subsequently the Cashmore Family Trust was nominated by Mr Cashmore. It is settled law that, in the absence of compelling language to the contrary, where a contract of sale is to a named purchaser and their nominee, the named purchaser is and remains through any nomination the only party to the contract. The additional words “or nominee” are a statement of right which the purchaser has, and would have even in the absence of express stipulation, to nominate the persons whose name is to be put into the memorandum of transfer as the person who is take to the legal title. This was stated by the Court of Appeal in Lambly v Silk Pemberton Ltd [1976]
2 NZLR 427 at 429 (per Richmond P) and 432 (per Cooke J as he then was). That decision has subsequently been affirmed in a number of cases, for example Field v Fitton [1988] 1 NZLR 482 at 491 (CA) and Hurrell v Townend [1981] 1 NZLR 536 at 547-548 (CA).
[181] The question which arises is whether, because s 6 requires a claimant under the Contractual Remedies Act to be a party to the contract in question, is the Cashmore Family Trust in a position to bring such a claim?
[182] This point was not addressed by counsel during the trial, and was a matter which I first considered in the course of finalising this judgment. In a memorandum of 30 November 2006 I requested further written submissions on this point.
[183] Mr Millard submitted that the proposition that a nominee was not a party to the contract did not prevent the Cashmore Family Trust bringing a claim under the Contractual Remedies Act. There were two reasons for that.
[184] The first was that s 11 of the Contractual Remedies Act expressly allows assignees to exercise the remedies provided for under s 6 of the Act.
[185] It was Mr Millard’s submission that s 11 expressly permits those to whom the benefit of the contract is assigned to enforce the remedy of damages. That included the remedy in s 6, so long as the party from whom the assignee takes was induced to enter into the contract by the misrepresentation. It was Mr Millard’s further submission that the authorities which had held that a nominee was not a party to a contract treated the nominee as an assignee of the purchaser, and that there had been an assignment in this instance.
[186] That interpretation was consistent with the policy of the Act which was to simplify and remove the legal technicalities attaching to claims for misrepresentation.
[187] Mr Millard’s submission was that that conclusion was reinforced by the following factors:
a) The authorities I had noted in my Memorandum to counsel (dated
30 November 2006) were all cases where the issue was the enforcement of performance of an executory contract, rather than a damages claim under an executed contract (i.e. one that had been performed at least to the extent of conveyance of the property). In none of the cases had the vendor accepted that the nominee had been substituted as purchaser, nor was the assignor a party to the litigation (unlike here).
b)Here the vendor had actually transferred the property to the nominated purchaser thereby accepting the nomination.
c) Both the settlement statement and the tax invoices issued on behalf of the vendor similarly were to the trustees.
d) One of the nominees was the named purchaser (C R Cashmore).
[188] Mr Millard also relied on the Contracts (Privity) Act 1982. In his view, the use of “and or nominee” meant that the contract clearly contemplated someone else taking the benefit of it.
[189] Mr Millard noted the dicta in Field v Fitton [1988] 1 NZLR 482 (CA) at 493-
494, which indicated that s 4 of the Contracts (Privity) Act did not assist a nominee under a contract as the class of person was not sufficiently designated by name, description or reference to class. Mr Millard submitted that this was truly dicta, and not binding, and was wrong, being unduly restrictive when the purpose of s 4 is considered. He adopted the reasoning and conclusion of Tipping J in Rattrays Wholesale v Meredyth-Young & A’Court [1997] 2 NZLR 363 at 380-383. There Tipping J held that a person who was a bare nominee under a contract referring to nominees was entitled to the benefit of ss 4 and 8 of the Contracts (Privity) Act
1979. Mr Millard submitted that those views were endorsed by the Court of Appeal in Balance Agri-Nutrients v The Gama Foundation [2006] 2 NZLR 319 at (especially) [97], [122] and [136]. Mr Millard also referred to the decision of Attorney-General v Forestry Corp of NZ Ltd [2001] 3 NZLR 172 at [129]. He further submitted that the policy behind the Contracts (Privity) Act reinforced that a wide liberal meaning should be given to s 11 of the Contractual Remedies Act.
[190] Finally, Mr Millard said that the claim could still survive under the Fair Trading Act as the Trust relied on Mr Cashmore’s view of the property when agreeing to be nominated, although, as he accepted in his closing, that would not entitle the Trust to expectation losses.
[191] For his part, and on “the party to the contract” point, Mr Wood argued:
a) that the nomination had not made the Cashmore Family Trust a party to the contract and had not effected an assignment; and
b)that the Contracts (Privity) Act 1982 did not help the Cashmore Family Trust, as the representations sought to be enforced were pre- contractual and were not, in the words of s 4 of that Act, “contained in a deed or contract”.
[192] On the view I have taken on the substance of the claims considered together, and given the view I express below as to inducement, this is not a matter I now consider necessary to express a definitive view on. However, the position seems to me to be that in holding that a nominee was not a party to a contract, the courts did not do so on the basis that the nominee was an assignee. In Field v Fitton, on which Mr Millard placed particular relevance on this point, the named party and the “nominee” had in fact executed a memorandum of assignment of the agreement in question, for which assignment the assignee had provided separate consideration ($15,000). Field v Fitton proceeded by analysing separately the implications of the Fitton’s position as nominees, or as assignees, or as parties who might claim the benefit of the Contracts (Privity) Act.
[193] In my view, neither Field v Fitton, nor the other relevant authorities, can be relied on as suggested by Mr Millard to establish that a nominee is in law an assignee, and therefore able to rely on s 11 of the Contractual Remedies Act. Further, it does appear to me that the words referred to by Mr Wood in s 4 of the Contracts (Privity) Act count against the Cashmore Family Trust being able to rely on the provisions of that legislation. The very point of the Contractual Remedies Act, in this context, was to make it more straight forward for parties to a contract to enforce representations made outside the written contractual document.
[194] On those bases, therefore, I tend to the view that the Cashmore Family Trust was simply not in a position to bring a claim under the Contractual Remedies Act.
[195] The second issue is whether the Cashmore Family Trust – even if it were in that position – could be said to have been induced to enter into the contract by the
Alleged Misrepresentations. In this context, the evidence of Mr Cashmore and Mr Austin was that it was not until after the Contract had been signed that the decision was made for that trust to be nominated as purchaser. Mr Cashmore’s evidence was he was the original purchaser under the Agreement for Sale and Purchase with the defendants, and had subsequently nominated the Cashmore Family Trust to be the ultimate purchaser.
[196] Mr Cashmore at para 36 of his written brief said:
I had deliberately entered into the contract on the basis that I could nominate the final purchaser. In consultation with my solicitors I nominated the Cashmore Family Trust. At the time the Trustees of the Trust were myself, my wife and my accountant, Paul MacNicol. The Trustees were content to leave the decision to purchase to me …
[197] At para 7 of his written brief, Mr Austin recorded that:
When Colin had contacted him in November 2000 about Horopito farm he had already signed the contract for purchase as nominee. We discussed whether he was the appropriate purchaser and we agreed that it was an appropriate time for the property to be acquired in the name of the Family Trust. I had for some time recommended he form a Trust and this was a first logical and practical opportunity to place an asset into it.
[198] It was Mr Millard’s submission that as Mr Cashmore was a trustee of the Cashmore Family Trust, the Representations had been clearly made to the first plaintiffs, and therefore had induced, and been relied on by, the first plaintiffs.
[199] At trial, there was no specific evidence that Mr Cashmore was acting as agent for the Cashmore Family Trust when he entered into the contract. Furthermore, had he been so acting there would not have been any necessity for him to nominate that trust as purchaser. On that basis, I find it difficult to see how the Cashmore Family Trust can be said to have had the alleged representations made to it, or to have relied on and been induced by those representations in agreeing to purchase the Farm as nominee of Mr Cashmore.
[200] On that basis, I see considerable difficulties in the way of the Cashmore
Family Trust’s claim under the Contractual Remedies Act.
[201] There is, in my view, a further difficulty the Cashmore Family Trust faces, being the absence of any proof of damages suffered directly by the Cashmore Family Trust, irrespective of the merits of Mr Cashmore’s claim relating to the Alleged Representations, and his reliance on them.
[202] As to any loss in value of the land itself, the evidence would appear to have established that, as a matter of fact, the Horopito farm was (when tested in 2003) at a level of fertility that equated to that which Mr Cashmore alleges was represented to him to be the position at the time of sale, but was not. This had been achieved by Mr Cashmore, in terms of his personally carrying out the farming business on the farm, applying fertiliser without cost to date to the Cashmore Family Trust.
[203] As regards the trading losses, there was no evidence that the Trust had incurred those losses itself, or in any way reimbursed Mr Cashmore for them.
[204] Mr Millard’s submission was that the evidence was that it had been agreed that the Cashmore Family Trust would reimburse Mr Cashmore for the losses he had incurred.
[205] In his written brief (at para 57), Mr Cashmore commented as follows:
Although the property was purchased through the Family Trust it is farmed by me personally. There is no formal lease arrangement between us. It has been agreed with the Trust that they should compensate me for the losses I have suffered in terms of lost production and extra fertiliser.
[206] Mr Austin, in his written brief and in his oral evidence, enlarged on the situation. His written brief (at para 8) was to the following effect:
The trustees have considered what is to happen in the event that this claim succeeds. Because we have always treated Colin as being the agent of the Trust in this deal and have also recognised that if the Trust was misled by the Representations so was he in his capacity as a farmer, it had been agreed that if called upon by Colin, the Trust should compensate him for the loss of production that is proven he has suffered, and the extra costs he has incurred in bringing the property up to the state that was represented.
[207] Subsequently, in his oral evidence, he confirmed that those arrangements had not been formalised and that he expected – as regards the possibility of the Trust
reimbursing Mr Cashmore – they would wait on advice from the accountant as to whether it was recommended for tax purposes. He acknowledged that if the tax adviser was to say that it was not in their tax interests to reimburse, then he would expect a request would not be made. The more general arrangement was that Mr Cashmore leased the farm although there was no formal lease. He said that was not uncommon and there was a range of advice from tax advisers on that point. It was not his normal practice to enter into a lease unless the accountant asked for that to be done.
[208] On that basis, it seems to be reasonably clear that the Trust has not to date incurred a loss as regards the alleged losses, and whether or not it ever reimburses Mr Cashmore in the future for that remains a speculative possibility. In my view, this places a further obstacle in the way of the Cashmore Family Trust’s separate claim.
[209] Overall, these matters reflect the issues I mentioned at the outset as to the first and second plaintiffs bringing their claims “in the alternative” as originally described by Mr Millard. Although I recognise that Mr Millard’s subsequent acceptance that Mr Cashmore’s personal claim was limited to the one reflecting the alleged loss in value of the Farm, and that therefore the “duplication” was eliminated to that extent, I think the conceptual difficulty remained. At the end of the day, and perhaps most fundamentally, the evidence did not establish that Mr Cashmore was acting as a trustee, or as agent of the Cashmore Family Trust, when he entered into the Contract, nor therefore that the Alleged Representations had been made to the Cashmore Family Trust, or had induced the trustees to “enter into” the Contract. To the extent that, as a matter of fact, Mr Cashmore (as a trustee) knew of the content of the Brochure, and the Alleged Representations, that may have induced him to accept his personal nomination to purchase the Farm. It goes without saying that the defendants were not party to any contractual or other arrangements between Mr Cashmore personally and the Cashmore Family Trust as regards that matter, so as to bring the operation of the Contractual Remedies Act into play as against them in that context.
[210] Therefore, and even if I had taken a different view of the substance of matters
– in the way the claims of the first and second plaintiffs were presented at trial as largely being on all fours – I consider that these issues would have presented considerable, if not insuperable difficulties, to the first plaintiffs in their purported reliance on the Contractual Remedies Act.
Mr Cashmore and s 9 of the Fair Trading Act 1986
[211] I now turn to consider particular elements of Mr Cashmore’s claim under the
Fair Trading Act 1986.
[212] The issue which requires consideration here is whether the defendants, in selling the Farm, were acting “in trade”, as this phrase is used in ss 9 and 14 of the Fair Trading Act 1986. Here, the defendant intended to sell the Farm, and then separately dispose of their stock. Furthermore, the Sands Family Trust was quitting farming altogether for family reasons.
[213] In New Zealand Court, a clear line delineating circumstances in which the sale of land will be “in trade” and those when it will not has yet to be drawn. The only Court of Appeal decision on point is Cochrane v Clarke CA66/04 24 February
2005. In this case, which concerned the sale of a dairy farm, the Court of Appeal stated at [36]:
Assuming that Mr and Mrs Clark were acting “in trade” when they sold the farm, a claim for damages/compensation under the Fair Trading Act 1986 would be available and such damages would, of course, be assessed on a detriment or reliance basis. The issue whether Mr and Mrs Clark were acting “in trade” is not entirely easy, see for instance Undrill v Senior (High Court, Blenheim, CP9/94, 20 August 1997), and Sunnylea Farms Ltd v Gray (2004) 21 NZTC 18,667. For the moment, we are inclined to the view that Mr and Mrs Clark were “in trade”. On that footing, the detriment/reliance approach to damages advanced by Ms Cochrane was, at least theoretically, open.
[214] In Undrill, McGechan J held that the vendor acted “in trade” when selling a farm, reasoning at 7:
I accept representations by Seniors were made “in trade” within the meaning of that term in s 9. In principle, one can argue the phrase “in trade” implies
some repetition of the activity in issue, such as retailing goods or service, and should not be applied to the one off sale of an entire business asset. However, there is authority otherwise. I refer in particular to the Australian case of Bevanere Pty Ltd v Lubidineuse [1985] ATPR 40-565; followed in Newell v Garland [1989] 3 TCLR 598, 614 Neazor J. I note also Argy v Blunts [1990] ATPR 41-015 at 51, 274-5; and also the decision of R L Kerr DCJ in Ji Yee v Madden [1992] DCR 564. That permissive approach gains policy support from the willingness of the Court of Appeal in Goldsboro v Walker [1993] 1 NZLR 394 to recognise “conduct” as potentially including a single act. The contrary was not argued, and I see no need to unsettle the law.
[215] In Sunnylea Farms, the other case cited by the Court of Appeal in Cochrane, Venning J distinguished McGechan J’s comments in Undrill. His reasoning, which appears at [47], was as follows:
… there are other difficulties with the claim under the Fair Trading Act. The principal one is whether it can be said the appellant was in trade. Mr O'Neill submitted that a one-off transaction such as the sale of a farm property could be sufficient for the Court to find a party was "in trade": Newell v Garland [1989] 3 TCLR 598; Undrill v Senior (High Court, Blenheim, CP9194, 20
August 1997, McGechan J) and E & KL Zust Limited v Shirtcliffe
(unreported High Court, Christchurch, CP84100, 14 December 2000). However, where the Court has found the sale of a capital asset on one occasion can be regarded as "in trade" the circumstances have generally involved the sale of the capital asset with the business. In the present case the appellant owned the land whereas the farming business was operated by a separate entity, the partnership. The appellant did not trade. That is apparent. It was deregistered for GST purposes because it continually returned nil transactions. In the circumstances if required I would not have found in this case that the appellant was in trade for the purposes of the Act.
[216] The Australian Courts have emphasised, in the context of s 52(1) of the Trade Practice Act 1974 (Cth) that whether land is sold “in trade or commerce” depends on all of the facts. Where they have applied this contextual test, Australian courts have identified a number of relevant considerations. These include the character of the parties involved; whether the vendors have engaged or are about to engage in commercial activities; and whether the transaction is motivated by business as distinct from personal reasons. These considerations are identified in O’Brien v Smolonogov (1983) 53 ALR 107 at 112-113 and Bevanere Pty Ltd v Lubidineuse (1985) 59 ALR 334 at 339 and 341, both decisions of the Federal Court of Australia.
[217] These Australian cases demonstrate that the commercial nature of a one-off transaction is an important, possibly decisive, factor in determining whether a sale of
land is an activity done “in trade or commerce”. Where in all of the circumstances the sale appears to be a springboard for the vendor to remain active in his field of commerce (i.e. to buy another farm or business), the authorities suggest that it will meet the “in trade or commerce” requirement.
[218] This proposition finds support in New Zealand. In Hill v Juzwa and Rabinska HC AK CIV-2004-463-840 20 September 2005 at [66] –[68], Courtney J held that the defendants were not “in trade” for the purposes of the Fair Trading Act when they agreed to sell their residential home to the plaintiffs. Three matters were emphasised. First, the property was owned personally by the defendants who, at the time of the sale, derived their main source of income from their employment, which did not include activities intimately related to the property. Second, the property was not part of any commercial activity, as for example a commercial property development. Finally, the contract was agreed in the context of a trusted family relationship. None of these features were consistent with a sale made in the course of trade. To similar effect, see Looker v Till HC NWP CP17/95 9 July 1996 at 5-6 and Dee v Deane DC AK NP1209/96 26 September 1997 at 18-20.
[219] In the present case, the sale of the land was motivated by personal (family) reasons. There is no suggestion that the sale proceeds were to be used to engage in further activities of commerce, as for example by the defendant, or even his son, buying another farm. There was not any continuity of farming activities (or any broader indication that the defendant had commercial aspirations for the use of the sale proceeds) such as to give the transaction a commercial flavour.
[220] In my view, had I been required to reach a view on this point, these factors would support a conclusion that the hue of this one-off transaction was private and not commercial, meaning that the sale was not done “in trade”.
Overall conclusion
[221] At the end of the day, therefore, neither the first nor the second plaintiff has succeeded in their claim for damages against the defendants. I therefore find in favour of the defendants, and dismiss the plaintiffs’ claims.
[222] The defendants having succeeded, costs will follow the event. I therefore award the defendants on a category 2B basis. If the parties cannot agree on the question of costs, further memoranda may be filed, this however must be done by
9 March 2007.
Clifford J
Solicitors:
Treadwell Gordon, Wanganui, for Plaintiffs
Davys Burton, Rotorua, for Defendants
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