Formosa Auckland Country Club Limited v Cochrane HC Auckland Ap34-Sw01

[2001] NZHC 519

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY AP34-SW01

BETWEEN FORMOSA AUCKLAND COUNTRY CLUB LIMITED
110 Jack Lachlan Drive,
Beachlands
Appellant

AND LAURENCE JAMES COCHRANE
of Drury
Turf Consultant
Respondent

Hearing: 19 June 2001

Oral Judgment: 19 June 2001

Counsel: Jennifer A Wickes for appellant
Katrina Wilson for respondent

[ORAL] JUDGMENT OF WILLIAMS J

Solicitors: Loo & Koo, DX CP31056 Newmarket, Auckland, for appellant
Kevin P McDonald, DX BP66086 Takapuna

[1] This judgment deals with an appeal by Formosa Auckland Country Club Ltd against a reserved decision delivered by Simpson DCJ on 9 March 2001 ordering the Country Club to pay the respondent, Mr Cochrane, $39,480 plus interest at 11% on that sum from 1 February 1998 down to the date of judgment, plus costs.

[2] The claim relates to a contract pursuant to which Mr Cochrane and the Country Club agreed that he would supply Windsor Green couch grass to the Country Club for its golf course. The allegation is that Mr Cochrane supplied some 13,000m2 of Windsor Green to the Country Club between December 1995 and 1996 but that the condition of the contract was that the Country Club would make the same amount of Windsor Green available to Mr Cochrane from its nursery and that it supplied only 6420m2. The balance of 6580m2, Mr Cochrane alleged, was worth $6.00 per square metre and accordingly his loss is that sum multiplied by the deficiency, $39,480. The Country Club denied being in breach of the contract. Although it acknowledged the quantity of the respective supplies it claimed that the contract between the parties remained in force and that it was willing to perform the same. It said the terms of the contract did not then require it to return turf to Mr Cochrane.

[3] Mr Cochrane was the head greenkeeper for the Country Club during the period up to about June 1997 when its golf course was in the process of development. He was also the sole licensee, at least for the North Island, for Windsor Green. That is a form of couch grass developed in Australia and apparently used on golf courses in that country, Taiwan and perhaps elsewhere, but new to New Zealand for that purpose.

[4] Put broadly, initially the arrangement between the parties was that Mr Cochrane would supply Windsor Green for the Country Club’s course and that in return, once the Club had opened, it would supply an equivalent amount of Windsor Green to Mr Cochrane from the club’s nursery.

[5] Naturally enough in the circumstances the arrangements were informal at the outset but the principal terms of the contract were recorded in a fax Mr Cochrane sent the Country Club on 15 December 1995, the relevant terms of which are :

“Windsor Green Turfgrass (L J Cochrane) obligations:

1. Supply Windsor Green couch free of charge but to be supplied back by Formosa at a later date.

. . .

Formosa Golf Club’s Obligations:

1. Re-supply Windsor Green couch used from Windsor Green turf farm back to Windsor Green Turf farm a no charge . . . .

6. Pay all costs including labour associated in moving couch sods from Windsor green turf farm and all costs including labour associated in planting of the Windsor Green couch.”

[6] It was common ground between the parties that over the succeeding year up until towards the end of 1996, Mr Cochrane supplied some 13,000m2 of Windsor Green for the Country Club’s course. He said that the turf which he supplied was of the same quality and condition as would be required for lawns. As he was in the process of developing the business of the turf farm and was supplying turf to home owners he required turf of good quality for that purpose, well maintained, weed-free, healthy and of a good sole.

[7] About the middle of 1997 Mr Cochrane proposed to leave the Country Club’s employment and in order to go some distance towards formalizing the arrangement between the parties, they entered into a brief contract which simply said:

“THE Contractor has provided 13,000 sq metres of Windsor Green turf to the Principal from his turf farm for the building and completion of the golf course.

THE Principal shall return the same amount (13,000 sq metres) of Windsor Green turf provided by the contractor as soon as the golf course is completed.”

[8] In the District Court it was in contention whether or not the Country Club had been completed and opened. That was not an argument pursued in this Court following the learned District Court Judge’s finding.

[9] Although the evidence was to the effect that the opening of the course was delayed somewhat and that a tournament scheduled for the Country Club for April 1997 was unable to be held there as the course was not ready and the New Zealand Open was similarly unable to be held at the course in December 1997, it was common ground that there was an international tournament held in conjunction with the Club’s formal opening in January 1998. That point accordingly passes from consideration.

[10] Between about 8 June 1998 and down until 12 March 1999 Mr Cochrane went to the Country Club on a number of occasions and uplifted turf from its nursery on account of the 13,000m2 to which he was entitled pursuant to the contract. He uplifted about 6,200m2 in total.

[11] He said that during that period - although it was not principally his obligation so to do - he did maintain the turf in the nursery in order to prevent its condition deteriorating, but that he ceased to maintain the Club’s Windsor Green from about November 1998 onwards.

[12] On 3 June 1999, when relations between the parties were beginning to worsen, there was a discussion between Mr Cochrane and representatives of the Club at which it was agreed that there was 6,800m2 of turf still due to Mr Cochrane in terms of the contract.

[13] His solicitors wrote to the Country Club on 30 August 1999 recording the terms of that agreement and also saying

“Our client has also been advised that there will be no turf available to him until after Christmas of 1999, again depending upon the turf management of the nursery. Our client urgently requires that the turf be returned and in the circumstances he proposed that all of his turf be returned when the next crop becomes available. He anticipates that that will occur sometime on the 1st of January 2000. Our client also requires that the turf be returned in good condition. Our client intends to plan around this arrangement unless you are able to deliver to him the turf at a date earlier than the 1st of January 2000.”

[14] The Country Club’s manager, Mr Siu, responded on 1 September 1999 saying:

“Yes, it has been established that there is some 6,800 square metres of Windsor Green Couch still to be returned to you. Upon your visit to the site on the 3rd of June 1999 there was approximately 7-8000 square metres left on the nursery, but at no time were you given the impression that any was available for your use at this time.

Formosa is contractually bound to return the remaining Couch, yes, but this is solely at the discretion of the company and only when the “course is completed”.

As stated in the letter received 30 August, you wish to retrieve some/all of the remaining Couch January 2000, provided Formosa’s Couch requirements have been fulfilled, this should be acceptable.

Be advised this will be the last opportunity to retrieve Couch from the Nursery in a “maintained” condition, due to the time which has elapsed since the contract was negotiated, therefore you have had ample opportunity to obtain your owed Couch in the past.”

[15] Mr Cochrane’s last harvest of turf from the Country Club’s nursery took place on 19 November 1999 when he uplifted 220m2. He said it was in poor condition.

[16] Accordingly he arranged for his solicitors to write, on 26 November 1999, complaining about the condition of the turf uplifted on 19 November and at the standard of maintenance. The letter said that Mr Cochrane’s main concern was that “6,800m2 of “Windsor Green Couch Grass” will not be available by January 2000 as stated in your earlier facsimile”.

[17] In the event that sufficient turf of the required quality was not available as requested, the letter gave notice of Mr Cochrane’s intention to sue the Country Club for the “market value of the outstanding turf due to him which our client estimates to be in the order of $39,000.”

[18] On 22 February 2000 and again on 16 May, Mr Cochrane arranged for a Mr Glasgow, an expert in sports turf, to view the turf in the Country Club’s nursery. Mr Glasgow’s opinion, as repeated in his evidence, was that none of the turf in the nursery was suitable for Mr Cochrane’s purposes of supplying customers as a lawn on either date and between those two visits, namely in March 2000, Mr Cochrane issued these proceedings in the District Court.

[19] On 3 April 2000 the Country Club wrote to him saying that the remaining 6,580m2 was “available for your removal” and asking him to “remove this Couch promptly and in one cutting” but, given that by that stage Mr Cochrane’s proceedings had been served on the Country Club the Club’s willingness and ability to comply with that letter may be in doubt.

[20] In her judgment, following a hearing on 20 December, the learned District Court Judge set out the background and defined the issues as whether the golf course had been completed - now, as earlier noted, abandoned - and whether the turf offered by the Country Club was of “sufficient quality to discharge the debt”. She dealt with the question of completion and the factual background earlier mentioned before concluding (p3 para 7) that the Country Club “has not provided turf of a sufficient quality to discharge the debt”.

[21] The learned District Court Judge then turned to the question of implied terms and in particular whether it was a term implied in the contract that Mr Cochrane was entitled to the return of turf of the same quality as that supplied. After dealing with authority and noting the parties’ agreement as to the nature and quality of the turf supplied for the golf course, she took the view that the Country Club (para 10 p 4) “was expected to return turf of an equivalent quality to that supplied by the plaintiff” and amplified that (para 13 p 4) that the turf would be of “a quality that would allow him to supply his other customers”. The learned District Court Judge held that the turf offered did not reach that quality and accordingly concluded (para 14 p 5 ):

“I find that a term should be implied into the contract that the turf to be supplied by the defendant company was intended to be of equivalent quality to that originally supplied by the plaintiff.”

[22] The learned District Court Judge then turned to the question of time for completion, noting that almost three years had passed since the official opening of the golf course but that at no time had the contract been cancelled or repudiated under the Contractual Remedies Act 1979 s 7. After reviewing authority, the learned District Court Judge first declined to order specific performance of the contract - not something that appears to have been pleaded or sought by Mr Cochrane at least - and then held (para 19 p6) that a term could be implied into the contract “that the turf would be supplied within reasonable time”. She concluded that three years was beyond that time-frame.

[23] Having reached the point where she was satisfied that the Country Club was in breach of contract, the learned District Court Judge dealt with the question of damages briefly by holding (para 20 p6) that

“The defendant has failed to supply 6,580 square metres of turf being the balance of the amount specified in the agreement of 30 June 1997. I fix the value of Windsor Green couch grass at $6.00 per square metre. The defendant is ordered to pay to the plaintiff the sum of $39,480. There will be interest on that sum at the rate of 11 % per annum from 1st February 1998 down to the date of entering judgment. Costs will be fixed by the Registrar.

[24] Ms Wickes, counsel for the Country Club, submitted that there as no basis for any award of damages in the value of the turf because the contract was still on foot.

[25] In considering that submission there are a number of aspects that need to be taken into account.

[26] First, if it is a question of implied term, the tests to be applied are those set out by Cooke P (as he then was) and Quilliam J in Devonport Borough Council v Robbins [1979] 1 NZLR 1, 23 where the following appears:

“All the conditions listed in the majority judgment delivered by Lord Simon of Blaisdale in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363, 376; 52 ALJR 20, 26, are satisfied by an implied term of reasonable co-operation and discussion. It is reasonable and equitable; necessary to the business efficacy of the contract, so that the contract would not be effective without it; so obvious that it goes without saying; capable of clear expression; and does not contradict any express term of the contract.

[27] As to the question of time, it has long been the case that at common law stipulations as to time are not of the essence of the contract unless the parties expressly stipulate for such or the nature of the circumstances and the subject matter of the contract makes it imperative that an agreed date be observed (see Burrows Finn & Todd Law of Contract in New Zealand (1997) para 17.6 p638). As the learned authors say, if a time stipulation is of the essence according to either test it comes within the Contractual Remedies Act 1979 s 7(4)(a) so that breach would justify cancellation.

[28] Before considering the contractual terms, it is also pertinent to note the terms of the Contractual Remedies Act 1979. As s 7(1) makes clear, the statute is now a code relating to cancellation of contracts. Section 7(2) says that a party may repudiate a contract if they make it clear they do not intend to perform the contract or complete performance. Under s 7(3)(b) a party may cancel a contract if a stipulation in the contract is broken but, under s 7(4), only if, in the case of anticipated breach, it will substantially reduce the benefit to the cancelling party. Section 8(2) makes it clear that cancellation may be made known by words or conduct evincing an intention to cancel.

[29] Looking at the evidence and the documents in this case it is, in the Court’s view, reasonably plain that what these parties intended was that initially Mr Cochrane would supply 13,000m2 of Windsor Green of adequate quality for installation on the Country Club’s golf course and that in return, once he had satisfied his obligations in that respect, the Country Club would supply him with the same amount and quality of Windsor Green for him to supply to his customers in his new business, principally for lawn purposes. As the learned District Court Judge noted, although stipulations as to time are not normally of the essence of the contract, in the Court’s view such became of the case in this instance.

[30] That is clear by the terms of the agreement reached orally by the parties on 3 June 1999 and in particular by the Country Club’s letter of 1 September. That letter made it plain in its terms that Mr Cochrane had until January 2000 to uplift the remaining turf due to him under the contract but that that was his “last opportunity” to retrieve couch from the nursery in a maintained condition. In effect, therefore, the Country Club was requiring Mr Cochrane to uplift the remaining turf, thus complying with the Country Club’s obligation, by January 2000 or further supply would not be available. It was the Country Club therefore, in the Court’s view, which made time for performance of the essence of the contract to supply Windsor Green of the same quality as that supplied to it.

[31] Mr Glasgow’s and Mr Cochrane’s letters show clearly that the Windsor Green available from the Country Club in January 2000 and the succeeding months was not of a quality which could comply with the Country Club’s obligations. It follows that if the matter is regarded as one of terms implied in the contract as to time of performance and quality of product, the Country Club was in breach from at least January 2000 onwards in both respects.

[32] Therefore, although by a somewhat different path than that followed by the learned District Court Judge, this Court arrives at the same conclusion. Certainly there is nothing advanced by counsel or appearing in the evidence or the documents to suggest there was no evidential foundation for the conclusions which the learned District Court Judge reached. In the Court’s view, therefore, she was justified in reaching the view which she did.

[33] It remains however to note that, as the learned District Court Judge observed, there has never been an express cancellation or repudiation of the contract in so many terms. However, the Country Club’s view was made plain by the terms of the contract and correspondence and in particular by the letter of 1 September to which reference was earlier made. They made it clear that they would not be prepared to perform the contract beyond January 2000. It was therefore up to Mr Cochrane to decide whether he accepted that condition and arrange performance, or whether he would accept that as repudiation by the Country Club of its contractual obligations after that date. He clearly opted for cancellation of the contract when the turf available to him in January 2000 was not up to contractual requirements and it is clear that by suing the Country Club in March 2000 he was giving it notice of his cancellation. There can be few notices of cancellation more emphatic than issuing proceedings against the party alleged to be in breach.

[34] On the question of non-compliance with the contractual terms therefore, the Court takes the view that Mr Cochrane has complied with his obligations and is entitled to maintain the judgment in his favour entered in the District Court, subject only to the question of quantum.

[35] As earlier noted, the learned District Court Judge dealt with that topic with brevity. This Court means no disrespect by that observation given that the parties themselves did not explore quantum of damages in any depth. Indeed, apart from the pleadings and the briefs which merely assert the loss rather than detail it, the entire evidence on the topic is at p 12 of the notes in the following passage:

“Q. You have said that the 6,500 odd turf that is outstanding to you is worth some $39,000, haven’t you?

A. Correct.

Q. That’s what you could sell it to somebody for or thereabouts?

A. Exactly.

Q. But you would have to uplift it all from Formosa to do that, wouldn’t you?

A. We uplifted the previous 6,000 square metres.”

[36] In argument in this Court it was submitted that the learned District Court Judge fell into error in simply awarding Mr Cochrane the sale price of the 6,580m2 without reduction for the costs of recovery or any other costs which he would have incurred had he uplifted the turf and sold it to his customers.

[37] This is not a case, however, in the Court’s view which requires detailed examination of the legal principles, particularly given the paucity of evidence on the topic. The learned authors of Burrows Finn & Todd (op cit para 20.2.2 p707) record that where there is a failure in breach of contract to supply goods the measure of damages is ascertained by reference to the market value. The Sale of Goods Act 1908 s 52(3) deals with damages for non-delivery and provides that where there is an available market for the goods the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered or, if no time was fixed, then at the time of refusal to deliver. As the learned authors observe (op cit p708) :

“If, for instance, the buyer has agreed to resell the goods, sometimes their resale price may be taken as representing their value, and the seller will be required to pay the difference between the sale and resale prices even though he or she had no notice of the subcontract.”

though as the Court of Appeal observed in Stirling v Poulgrain [1980] 2 NZLR 402 at 420 such is not an inflexible rule.

[38] In this case the exercise is simplified because it is not a question of setting-off the purchase price to Mr Cochrane against the sale price which might have been obtained by him because he was to pay nothing for the balance of the turf to which he was entitled. The evidence from him as to price was that the market price throughout the relevant period varied from between $5 and $7 per square metre, the lower price being obtainable only for sales in large parcels and often to other commercial concerns such as landscapers. The learned District Court Judge opted for a sales value mid way between those extremes and given the lack of evidence on the topic in this Court’s view she fell into no demonstrable error on that score.

[39] In those circumstances therefore, the Court takes the view that no ground has been made out to interfere with the learned District Court Judge’s finding that Mr Cochrane was entitled to the sum of $39,480 as a measure of his damages for the breach of the contract.

[40] The remaining topic requiring to be dealt with is that of interest.

[41] As noted, the learned District Court Judge ordered interest at 11% from 1 February 1998. She nowhere records the basis for her choosing either that date or that rate although it may be that she took the view that interest should run from shortly after course completion because, of course, that was one of the issues before her. However, but with respect to her, it is clear that Mr Cochrane continued to draw turf from the Country Club’s nursery until well after that date. The last amount which he uplifted was on 19 November 1999 and according to the correspondence from the Country Club he could have uplifted the balance at any time before about January 2000 provided the quality was acceptable.

[42] In this Court’s view therefore the cause of action did not accrue until January 2000 at the earliest because it was not until then that it was possible to ascertain the precise volume of turf to which Mr Cochrane was entitled at the required quality which he did not uplift because it was of substandard quality. Up to that stage the contract remained on foot and was capable of compliance provided quality could be achieved.

[43] In those circumstances therefore, in this Court’s view and with respect to the learned District Court Judge, the appropriate time for the commencement of any award of interest in Mr Cochrane’s favour was 1 January 2000 at the earliest.

[44] The Court then turns to rate. The learned District Court Judge opted for the rate set by the Judicature Act 1908 but as is well-known over the past few years 11% is a rate of interest which has well exceeded that commonly charged by banks and other financial institutions or paid to persons such as Mr Cochrane who are out of their money for a period. Ms Wilson, for Mr Cochrane, helpfully provided the Court with a schedule of Bank rates payable over recent times. The Court also relies on its own knowledge of interest which has been paid over recent years. None of those rates approach 11%. In those circumstances the Court, doing the best it can from those sources, is of the view that the appropriate rate of interest would be 7 1/2%.

[45] In the event, therefore, the Country Club’s appeal is dismissed other than in respect of interest where the District Court judgment is varied to provide for the Country Club to pay interest to Mr Cochrane from 1 January 2000 down to the date of judgment and from the date of judgment until the date of payment at the rate of 7 1/2% per annum.

[46] As to costs, if the parties are unable to agree the Court is prepared to consider memoranda as to costs from counsel, with counsel stipulating in those memoranda, if they think it appropriate, that the Court may deal with the question of costs without further hearing. In that event, the memorandum from counsel for the respondent is to be filed within 28 days of today and from counsel for the appellant within 35 days of today. It may assist counsel and the parties in their negotiations if the Court observes that currently at least, and subject of course to reading counsel’s memoranda, the Court is of the view that Mr Cochrane is entitled to an award of costs but that it is likely to be relatively modest given that the Country Club has succeeded in part on the appeal.