Green Meadows Farm Company Limited v Techni-Plan Limited
[2017] NZHC 286
•3 March 2017
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2016-419-287 [2017] NZHC 286
UNDER The Companies Act 1993 BETWEEN
GREEN MEADOWS FARM COMPANY LIMITED
Applicant
AND
TECHNI-PLAN LIMITED Respondent
Hearing: 22 February 2017 Appearances:
Mr J Forsey for Applicant
M K Badcock for RespondentJudgment:
3 March 2017
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
03.03.17 at 3.30 p.m., pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
GREEN MEADOWS FARM COMPANY LIMITED v TECHNI-PLAN LIMITED [2017] NZHC 286 [3 March
2017]
Background and introduction
[1] The present dispute arises out of construction work which was carried out on a dairy shed and bridge, both of which are located on rural land near Otorohanga. The construction work was carried out by the respondent company, Techni-Plan Ltd (“TPL”). The managing director of TPL was Mr Daniel Roberts. The respondent submitted a quotation for the dairy shed in February 2016 and the price was
$435,000. The respondent also submitted a quotation in the same month to build the bridge for a sum of $56,840.
[2] While there is clarity about the identity of the party which was to do the construction work, one of the key issues that arise in this case is the identity of the party which was to be the principal under the contract.
[3] The respondent says that the correct party to the contract was Green Meadows Farm Co Ltd (“GMFCL”), while the applicant, GMFCL, says that it was Hammond Dairy Farm Ltd (‘HDFL”).
[4] It is common ground that in February 2016 two documents, which were intended to be construction contracts, were entered into. One was for the construction of a dairy shed and the other a bridge. It is further agreed that the company required to carry out the construction was the respondent. There is a dispute, though, about which of the two companies named above the respondent actually contracted with.
[5] Because of that dispute, the parties are unable to agree that invoices rendered for partial construction of the dairy shed and bridge were payable by GMFCL, which is the company from which the respondent has claim to payment. The applicant agrees that the contract was entered into, but it says that the principal under that contract was HDFL.
[6] The background to how the dispute comes before the Court is as follows. The respondent has claimed that it served payment claims on GMFCL under the Construction Contracts Act 2002 (“CCA”). They say that GMFCL did not effectively respond by way of payment schedules, with the result being that GMFCL
became liable for the costs of the construction. The respondent seeks to enforce what it sees as its right to recover payment by serving a statutory demand upon GMFCL under s 289 of the Companies Act 1993. The applicant has applied to set aside that statutory demand pursuant to s 290 of the Act.
[7] It is common ground that GMFCL is a New Zealand company, having a registered office in this country. The ultimate holding company of GMFCL is the Canadian Public Sector Pension Investment Board. The directors of GMFCL are listed as persons whose addresses are shown as being in Québec, Canada, and one person with an address in New Zealand. In the extract from the companies register, a company called Global Herd NZ Limited is listed as “extensive shareholdings”. It would seem to own the majority shares in GMFCL.
[8] It was also common ground between the parties that HDFL is a subsidiary of GMFCL. The same persons are the directors of HDFL as are the directors of GMFCL.
[9] Further, it is agreed that the corporate group to which the companies belong retained a consultancy firm called FarmRight to manage contracts for the construction of buildings on dairy farms which the group had purchased in the Otorohanga-Aria area.
[10] The essential issue for determination is whether GMFCL entered into the contract with the respondent.
[11] The parties agreed that, in determining that question, the Court is required to interpret the contractual arrangements in order to ascertain who the parties to the contract were. They further agreed that the Court can have regard to extrinsic evidence which is relevant to that question. There was also agreement that the general range of considerations that the Court can take into account are those which were discussed in the Supreme Court decision in Vector Gas Ltd v Bay of Plenty
Energy.1 The Supreme Court also held in Gibbons Holdings Ltd v Wholesale
Distributors Ltd that subsequent conduct can be taken into account for the purpose
1 Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444.
of elucidating the meaning which the parties intended their contract to have when they entered into it.2 Before I discuss the various considerations that the parties put forward supporting their point of view, I will give consideration to the principles that are to guide the Court when exercising the jurisdiction under s 290 of the Companies Act.
Section 290
[12] The section pursuant to which the application is brought is s 290 of the
Companies Act, which provides as follows:
(1) The court may, on the application of the company, set aside a statutory demand. (2) The application must be—
(a) made within 10 working days of the date of service of the demand; and
(b) served on the creditor within 10 working days of the date of service of the demand.
(3) No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the court may extend the time for compliance with the statutory demand.
(4) The court may grant an application to set aside a statutory demand if it is satisfied that—
(a) there is a substantial dispute whether or not the debt is owing or is due;
or
(b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c) the demand ought to be set aside on other grounds.
(5) A demand must not be set aside by reason only of a defect or irregularity unless the court considers that substantial injustice would be caused if it were not set aside.
(6) In subsection (5), defect includes a material misstatement of the amount due to the creditor and a material misdescription of the debt referred to in the demand.
(7) An order under this section may be made subject to conditions.
2 Gibbons Holdings Ltd v Wholesale Distributors Ltd [2007] NZSC 37, [2008] 1 NZLR 277.
[13] The principles which are applicable when the Court is applying the section were stated in the judgment of this Court in North Harbour Equine Hospital Ltd, where the following statement of principle was made:3
The general principles which the Court applies in approaching its discretion in this matter are conveniently set out in Brookers Company and Securities Law at CA 290.02(1):
“(1) General principles
…
These principles … are as follows:
a) The applicant must show that there is arguably a genuine and substantial dispute as to the existence of the debt.
b) The mere assertion that a dispute exists is not sufficient. Material, short of proof, is required to support the claim that the debt is disputed.
c) If such material is available, the dispute should normally be resolved other than by means of proceedings in the Companies Court.
d) An applicant must establish that any counterclaim or cross demand is reasonably arguable in all the circumstances.
e) It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.”
[14] The consequence of applying those principles in the present case means that the Court is to inquire whether there is a substantial dispute between the parties about whether the applicant was the party which contracted with the respondent for the construction of the dairy shed and the bridge. The Court may be able to reach sufficient certainty concerning the meaning of the contract so that it can rule out the existence of a substantial dispute concerning that issue. It may conclude that there is no substantial dispute, in that GMFCL was indeed the contracting party, and therefore decline to set aside the statutory demand. Alternatively, the Court may determine with reasonable certainty that the contracting party was HDFL. If the former is the outcome reached, then the application to set aside the statutory demand will be dismissed. If the latter construction is the one that seems correct, then the
application will be granted. The third possibility is that the Court is unable to come
3 North Harbour Equine Hospital Ltd v DK Little Corporate Trustee Ltd HC Auckland CIV-2006-
404-7585, 19 February 2007 at [17] per Abbott AJ.
to a clear view. There is therefore a substantial dispute as to the meaning of the contract and, in which case, the Court will allow the application.
Did the applicant and respondent enter into a contract?
[15] The points which the applicant makes in support of its position are those which are set out in the notice of application.
27While the Construction Contracts listed the principal as “GMFCL – Hammond”, this is not a legal entity. At all times, TPL was aware that the Construction Contracts were with Hammond, and not with Green Meadows or FarmRight. As examples:
27.1The building consent for the Shed Contract was applied for under the previous owner of the Hammond site, and under FarmRight’s name. There was a request to transfer the consent to Hammond on 28 April 2016. Once the building consent had been transferred to Hammond, TPL should have been clearly aware who it was contracting with.
27.2Prior to the disputed payment claims, all payments made to TPL under the Construction Contracts came from bank accounts owned by Hammond;
27.3On 29 February 2016, a memorandum was sent to all contractors engaged at the Hammond site, which made no reference to FarmRight or Green Meadows, and noted that invoicing was to be made out to Hammond. “Hammond” was listed at the top of the page; and
27.4On 2 May 2016, TPL was provided with authority to act on behalf of Hammond to arrange consents and permits under the Contracts.
[16] The grounds that the respondent relies upon are as follows. It says that the respondent’s first contract with the Green Meadows group of companies involved a dairy shed construction carried out on another property, which I understand was later acquired by a further company in the Green Meadows group called Arataki Dairies Ltd. Mr Roberts says that, as with the present contract, the contract in relation to Arataki Dairies Ltd was managed by FarmRight and, in particular, Mr Jolly from that company acted as the agent for Arataki Dairies Ltd. Mr Roberts says that, during the course of construction of the Arataki property, Mr Jolly told him that tenders would be coming up soon for a further construction contract on another property, which should be for a company who he called GMFCL (which was Green
Meadows Farm Co Ltd). Mr Roberts said that Mr Jolly told him that GMFCL
owned other farms, one of those being the Hammond dairy farm.4
[17] I note that Mr Jolly in his response affidavit does not directly refute the above assertions. However, the overall impression that I have gained from the evidence is that none of the participants in the present dispute appreciated the significance of various companies being separate legal entities. It is understandable that Mr Jolly may have referred to GMFCL owning other properties because it did in a sense. It was the holding company or the head of the group which was carrying out building and farming operations in the area. The second, related, point is that the subjective understanding of Mr Jolly, about which company would be contracting in regard to the Hammond farm, is not relevant evidence. In Vector Gas, the point was made that background evidence available to interpret a contract does not include the
subjective understandings of individuals about the effect of the contract.5 There is
no reason to suppose that the strictures on using evidence for that purpose do not apply to the question of who a party understood the contracting party to be in this case.
[18] The next point which is made for the respondent is that, on the face of it, the construction contracts both referred to “GMFCL-Hammond” on the cover page of the contract. Mr Badcock, for the respondent, submitted that this provided strong indications that GMFCL was to be the contracting party and the subject matter was construction works to be carried out on what was known as the Hammond property. I accept this aspect of the documentation as a point which supports the position of the respondent.
[19] Next, the respondent submits that its conduct was entirely consistent with the contracts having been entered into with GMFCL because it addressed progress claims to “GMFCL-Hammond”. This point is substantially similar to the previous one. That, however, begs the question of what the parties intended when they included the term “GMFCL-Hammond” on their contractual documents. Was it
intended to be a descriptor of the subject matter of the contract, rather than a
4 BD 166.
5 Vector Gas, above n 1, at [19] per Tipping J.
statement of who would be the principal that was able to enforce the contract against the constructor?
[20] On the other side, the applicant first submits that the term “GMFCL- Hammond” does not refer to a legal entity. Mr Forsey, for the applicant, did not offer any analysis of the argument beyond that point. However, it would seem to be a legitimate argument that the purpose of using the term “GMFCL-Hammond” was not to describe one of the parties to the contract, because it is unlikely that the parties would have intended to adopt, for that purpose, a description which did not refer to an extant legal entity.
[21] The agreement did not contain a provision often found at the beginning of contractual documents, where the identity of the parties and their status in the contractual arrangement are explicitly defined. As I have noted, the term “GMFCL- Hammond” appeared on the cover of the contractual documents without further text explaining its significance.
[22] Secondly, the applicant points out that their application for building consent for the dairy shed was lodged with the relevant territorial authority prior to the point where the ultimate owner of the property, HDFL, had acquired title. For that reason, the consent was applied for in the name of Mr Greathead, the vendor of the property. This procedure was adopted, I accept, because there was going to be a delay while the Overseas Investment Commission considered the application to acquire the property. The application for consent was actually made by the respondent. On 28
April 2016, when the requisite consent had come to hand, FarmRight emailed
Mr Roberts saying:
The Dennis Greathead titles have now been placed into Hammond. Please
start to process the transfer of permits/consents to Hammond.…
[23] A short time later, an authority in more formal terms from FarmRight was sent to the respondent which stated:
I authorise Techni-Plan Ltd to act on behalf of Hammond Dairy Farm Limited to transfer building consents on the property to Hammond Dairy Farm Limited…
[24] I agree with the applicant that this provides evidence of post contract conduct which is consistent with the principal under the contract being HDFL. The statements contain the first identification of a legal entity which, it can be inferred, was to be the principal under the contract. The respondent, having obtained the consents pursuant to the contract in its own name, was now being required to transfer those consents again pursuant to the contract. This exchange would signify to the reasonable reader that the contractual right to do that was being exercised for the benefit of HDFL. That, in turn, carries with it the inference that a reasonable reader of the documents would draw an inference that it was that company which was entitled to the benefits under the contract, and was therefore the principal party to it.
[25] An associated inference is that, because the works were being carried out on land which now belonged to HDFL, the contract was with that company who would be in control of what happened on its land.
[26] In February 2016, a memorandum was sent to all contractors engaged on site, requiring invoices to be submitted to “Hammond Dairies Ltd”. The invoices were to be sent to the address of HDFL. The use of the term “Hammond Dairies Ltd” appears to have been a misnomer for HDFL. Notwithstanding this mistake, the document construed overall represents post contractual conduct which enables an inference to be drawn that the principal was contracting with HDFL.
[27] The exchange of documents to which I have just referred was also reasonably to be construed as confirming that FarmRight was acting as an agent of another party or parties in the contractual arrangements. It might be considered that identification of, and therefore certainty as to, the principal came some time after the parties had begun to carry out the contractual works. It was not submitted to me that the timing of these developments, which I have just been discussing, raised questions about the lack of contractual certainty as to who the parties to the contract were, resulting in an invalidity of the arrangements. It is at least arguable in my view that, if such an argument were to be put forward, any difficulty was resolved by the tacit agreement of the respondent to treat HDFL as the party with whom it was contracting. As a result, any problem about the identity of the contracting parties was removed retrospectively
[28] I consider that most of the arguments that were put forward by Mr Badcock in the context of his well considered argument have been dealt with in the discussion to this point. There are, however, some additional matters that he raised which I will briefly consider.
[29] Mr Badcock pointed out that, after a dispute had arisen under the contract and the parties had obtained the assistance of lawyers, no issue was raised that the construction contracts were not with GMFCL until September 2016. The statutory demands in this case were issued on 19 August 2016. Prior to that point, the parties had indeed been exchanging correspondence about whether the respondent was in breach of its contractual obligations and whether it had repudiated the contract. It was only after the statutory demands were issued to GMFCL that the question of identity of the principal under the contract became a central issue. That, in my view, explains why it is from September 2016 that the contentions about whether GMFCL was the principal became of importance. I do not consider there is anything in this point.
[30] The concluding observation I make is that, up until the point where a dispute broke out, the three people who were involved in the contract, Mr Anselmi and Mr Jolly on the one side and Mr Roberts on the other, all who were laypeople, did not appreciate and were not concerned with questions about which precise legal entities were involved in the contract. It is likely that the respondent trusted that he would be paid for his work and was not concerned with the source of payments. There was no reason to believe that the contract would not proceed smoothly and that his company would not get paid what it was owed. From the point of view of Mr Anselmi and Mr Jolly, they no doubt had some background knowledge about the structure of the GMFCL companies. They are likely to have known that ownership of the farm, where the construction was to be carried out, would not be finalised until the Overseas Investment Commission decision was released and legal formalities were complete. All of these factors meant that there was an undesirable vagueness about who the parties to the contract were. However, those uncertainties were resolved by the way in which the parties conducted themselves. There is to be spelt out of their overall conduct an intention that the contracting parties would be the party which was to own the farm, HDFL, and the respondent. The contention on the
part of the respondent that there was certainty on this issue and the parties are to be taken as having entered into a contract between the applicant and respondent right from the outset is at the very least arguable
Conclusion
[31] I have concluded that the applicant is able to demonstrate that there is a substantial dispute concerning whether the parties entered into a contract. That conclusion follows from the view that I have reached that there is doubt as to whether FarmRight, which would have been the agent of the applicant had a contract been entered into, in fact had been directed and authorised to enter into such a contract. The terms of the contract which the parties signed are inconclusive as to the identity of the counterparty with whom the respondent was intending to contract. While extrinsic evidence is available to assist in resolving the question, such evidence as was put before me is inconclusive. The result must be that the parties will have to obtain the determination of the Court in ordinary proceedings brought for the purpose. That is to say, the question of what party, against any, the contract might be enforceable is not a suitable one for the Court in its company’s jurisdiction to resolve in the context of an application to set aside the statutory demands.
[32] Because of uncertainties about who the parties to the contract were, it follows that the issue of payment claims under the CCA does not give rise to an uncontestable debt owing by the applicant to the respondent.
[33] For those reasons, I order that the statutory demand is to be set aside.
[34] Mr Forsey submitted that, in the event that his client was successful, costs should be awarded on a solicitor client basis against Mr Roberts personally. I am unable to discern any principled basis as to why that should be the outcome. It was Mr Forsey’s client, or more accurately its agent, which caused the state of affairs that gave rise to confusion in this case. The contracts which were apparently drafted by laypeople in the employment of FarmRight did not address the key question of who the parties to the contract were and that gave rise to all the subsequent problems. In my view, the just and fair result in this case is that the applicant should have costs on
a 2B basis, together with disbursements to be fixed by the registrar and I order
accordingly.
J.P. Doogue
Associate Judge
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