Haines v Herd

[2019] NZHC 342

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE

CIV-2014-488-187

[2019] NZHC 342

BETWEEN

RODNEY DAVID HAINES and KATHLEEN ANNE NORMAN
Plaintiffs

AND

ROBERT JOHN HERD

First Defendant

RHUMBA HOLDINGS LIMITED

Second Defendant

Hearing:	18-22, 25 February 2019 (Heard at AUCKLAND)
Appearances:	N Gedye QC and R C Mark for Plaintiffs J W Maassen for Defendants
Judgment:	5 March 2019

JUDGMENT OF LANG J

HAINES v HERD [2019] NZHC 342 [5 March 2019]

Contents

The issues.............................................................................................................. [9]

Are the two contracts rendered inadmissible by the stamp duties legislation in Vanuatu?............................................................................................................................. [10]

Did the parties reach agreement regarding all essential terms of the contract?

............................................................................................................................. [21]

Principles relating to the interpretation of contracts  [26]

This case  [35]

Did the VBSA satisfy s 40 of the Law of Property Act 1925 (UK)?............... [47]

Was Mr Haines entitled to issue the notice of default on 26 August 2013?.. [50]

Did Mr Haines repudiate the VBSA on 1 September 2013?.......................... [61] Did the VBSA require Mr Haines to exercise the right of sale under Rhumba’s mortgage before seeking to recover any shortfall from Mr Herd?

............................................................................................................................. [71]

Did the plaintiffs take adequate steps to mitigate their loss?......................... [76]

The period between 17 October 2013 and March 2015  [78]
The period between April 2015 and August 2017  [92]

What remedies are available to the plaintiffs?.............................................. [102] Is the VBSA subject to the Sale of Goods Act 1893 (UK)?                   [103] Does the VBSA provide an exclusive range of remedies for breach of contract by Mr Herd?  [107]

Does Clause 6.11 of the VBSA provide a separate right of recovery? [114] What sums are the plaintiffs entitled to recover from Mr Herd under the VBSA?............ [120]

Shortfall between the consideration payable under the VBSA and the ultimate sale price  [120]

The interest payable under Clause 6.8 of the VBSA  [123]
Amounts payable under Clause 9.7(c)  [128]

Claim for consequential losses at common law  [132]

To what extent is Rhumba liable under its guarantee?................................ [150] Summary........................................................................................................................... [154]

Leave reserved................................................................................................. [159]

Interest.............................................................................................................. [160]

Costs.................................................................................................................. [161]

[1]    The plaintiffs in this proceeding, Mr Haines and his partner Ms Norman, were the owners of a 65 foot Hatteras game fishing vessel named “It’s Time” (the vessel). In 2011 the boat was registered in Vanuatu but moored in Auckland.

[2]    In October 2011 the plaintiffs entered into a contract with the first defendant, Mr Herd, under which they agreed to sell the vessel to Mr Herd (the original contract). In exchange for the vessel Mr Herd was to transfer ownership of 50 per cent of the shares in a company called Seascape 4 Ltd. That company owned four islands in Vanuatu known as Urelapa, Elia, Urenaheupe and Ureanarave.

[3]    On 5 May 2012 the parties entered into an agreement varying the terms of the original contract. This was headed “Deed of Variation of Boat Sale Agreement” (VBSA). The VBSA required Mr Herd to purchase the vessel for the sum of AUD$400,000 in cash. Mr Herd was also required to transfer to Mr Haines or his nominee land in Vanuatu having a value of AUD$400,000. The date of settlement was approximately twelve months later, and is now agreed to have been 19 May 2013.

[4]    Under the VBSA Mr Herd was entitled to take immediate possession of the vessel and to move it at his cost to Brisbane, Australia. In consideration for that right Mr Herd agreed to pay interest calculated at the rate of five per cent per annum of the agreed consideration for the purchase of the vessel (AUD $800,000) for the period between the date on which he took possession of the vessel and the ultimate settlement date. Title to the vessel was not to pass to Mr Herd until he provided the consideration prescribed by the VBSA.

[5]    The second defendant, Rhumba Holdings Ltd (Rhumba), is a company controlled by Mr Herd. It was not a party to the original contract but it guaranteed Mr Herd’s obligations under the VBSA. In support of its guarantee Rhumba provided a mortgage over land that it owned in a subdivision it was undertaking on a peninsula near Palikula, situated on the island of Espiritu Santo.

[6]    Mr Herd duly took possession of the vessel and moved it to Queensland as he was permitted to do under the VBSA. Rhumba also provided the mortgage over the Palikula land. Ultimately, however, Mr Herd never paid Mr Haines the sum of AUD

$400,000 and he did not transfer land to Mr Haines as required by the VBSA.  On  26 August 2013, Mr Haines issued a notice under the VBSA requiring Mr Herd to remedy his default within 30 days. Mr Haines claims Mr Herd failed to comply with the notice.

[7]    On 17 October 2013 Mr Haines retook possession of the vessel in Queensland. After he was unable to sell the vessel in Australia, he arranged for it to be sailed to New Zealand in March 2015. The vessel was ultimately sold in New Zealand in October 2017 for the sum of NZ$600,000.

[8]    In this proceeding the plaintiffs seek to recover the shortfall between the price ultimately obtained for the vessel and the amount payable under the VBSA (AUD$240,980). In addition, they seek to recover the interest payable under the VBSA for the period during which Mr Herd had possession of the vessel up until    19 May 2013 (AUD$40,000). Finally, they seek to recover costs they say they incurred in maintaining and selling the vessel between October 2013 and the date on which it was sold (NZ$375,526.78).

The issues

[9]The proceeding raises the following issues:

1.Are the two contracts rendered inadmissible by the stamp duties legislation in Vanuatu?

2.Did the parties reach agreement regarding all essential terms of the contract?

3.Did the VBSA satisfy s 40 of the Law of Property Act 1925 (UK)?

4.Was Mr Haines entitled to issue the notice of default on 26 August 2013?

5.Did Mr Haines repudiate the VBSA on 1 September 2013?

6.Did the VBSA require Mr Haines to exercise the power of sale under Rhumba’s mortgage before seeking to  recover  any  shortfall  form Mr Herd?

7.Did the plaintiffs take adequate steps to mitigate their loss?

8.What remedies are available to the plaintiffs?

9.Are the plaintiffs entitled to recover the sums they expended after they retook possession of the vessel in October 2013?

10.To what extent is Rhumba liable under its guarantee?

Are the two contracts rendered inadmissible by the stamp duties legislation in Vanuatu?

[10]   I deal with this issue first because, if Mr Herd’s argument is correct, both the original contract and the VBSA are inadmissible in this proceeding. As a result, the plaintiffs’ claims would fail.

[11]   Vanuatu’s stamp duties legislation is contained in Chapter 68 of the 2006 Consolidated Edition of the Laws of the Republic of Vanuatu. Section 19 of Chapter 68 provides as follows:

19.      Instruments not duly stamped inadmissible

Except as aforesaid, no instrument executed in Vanuatu or, wherever executed, relating to any property situate or to any matter or thing done or to be done in any part of Vanuatu shall in any civil proceedings be pleaded or given in evidence or admitted to be good, useful or available in law or equity unless it is duly stamped in accordance with the law in fore at the time when it was first executed.

[12]   It is common ground that the plaintiffs did not arrange for either the original contract or the VBSA to be stamped in Vanuatu. On Mr Herd’s behalf Mr Maassen submits that s 19 applies to the VBSA because it related to the transfer of immovable property in Vanuatu, namely the land to be transferred to Mr Haines in part payment for the vessel.

[13]   Had it been necessary to do so, I would have adjourned the hearing to enable the plaintiffs to have the VBSA stamped in order to provide a complete answer to the challenge to its admissibility. When I raised the issue, however, Mr Gedye advised me the plaintiffs had no desire to go to the considerable expense of stamping the VBSA.

[14]   I proceed for present purposes on the assumption that stamp duty would have been payable on the VBSA even though Mr Gedye submitted there was no evidence that this was the case. This submission has some force because, although Mr Maassen referred the plaintiffs’ expert witness, Professor Corrin, to s19 in general terms, he did not ask her to give an opinion as to whether the section applied to the VBSA. Professor Corrin is the Director of Comparative Law in the Centre for Public, International and Comparative Law at the University of Queensland. She gave evidence for the plaintiffs regarding the laws of Vanuatu that are relevant to the issues raised in this proceeding. She has expertise in the law applicable to Vanuatu and Mr Maassen did not challenge her expertise in this area.

[15]   Mr Gedye also challenged Mr Herd’s ability to rely on this defence on several other grounds, including the need for it to be specifically pleaded and the fact that the challenge was only signalled the week before the trial began. I acknowledge these concerns but propose to deal with the argument on the merits.

[16]   Mr Maassen accepts that the words in s 19 that prohibit unstamped documents from being “pleaded or given in evidence” relates only to the admissibility of such documents as evidence in civil proceedings. He argues, however, that the further prohibition on unstamped documents from being “admitted to be good, useful or available in law or equity” go much further. He says they rendered both contracts wholly null and void.

[17]   I do not accept this argument because I consider express words would be necessary for a statutory provision to render an otherwise valid document null and void for all purposes. I consider s 19 is a revenue gathering provision that has limited effect. It renders unstamped documents inadmissible in civil proceedings generally, including cases based on the common law or equity. The use of the word “admitted”

in the phrase relied on by Mr Maassen confirms this is the case. I do not consider the section affects the obligations of the parties under unstamped agreements or affects their validity for any purpose other than admission in civil proceedings. I am therefore satisfied s 19 does not render the two contracts null and void.

[18]   The plaintiffs contend s 19 does not apply in any event to proceedings in New Zealand. He points out that Duffy J held at an interlocutory stage that New Zealand was the appropriate forum for this proceeding.1 Mr Gedye submits that, although the VBSA was governed by the law of Vanuatu, the admissibility of evidence is a procedural matter and is governed by the rules of evidence in New Zealand. He relies for this submission on the following passage from The Laws of New Zealand:2

Questions relating to the admissibility of evidence are governed by New Zealand law as the law of the forum (the lex fori). Thus a document that is admissible for lack of a stamp under the law governing substantive issues (the lex causae) may nevertheless be admissible in New Zealand, provided that, under the lex causae, the absence of the stamp does not render the document wholly null and void. Similarly, a document that is admissible by the lex causae may nevertheless be inadmissible in New Zealand.

(footnotes omitted)

[19]   I accept Mr Gedye’s submission on this point. It follows that, applying the principles referred to above, the rules of evidence of this country govern the admissibility of both contracts. These are primarily contained in the Evidence Act 2006. Furthermore, New Zealand has no comparable statutory provision to s 19 of the Vanuatu stamp duties legislation.

[20]   Both contracts are plainly relevant to the issues raised by the proceeding. They therefore satisfy the primary requirement for admissibility as prescribed by s 7 of the Evidence Act 2006. There is no other basis under that Act or any other Act on which they could be held inadmissible. The contracts are accordingly admissible in this proceeding.

1      Haines v Herd [2016] NZHC 2016 at [22], overturning the earlier decision of Associate Judge Bell in Haines v Herd [2015] NZHC 3365. Duffy J subsequently refused to grant Mr Herd leave to appeal to the Court of Appeal: Haines v Herd [2016] NZHC 3193. The Court of Appeal then dismissed an application by Mr Herd for special leave to appeal: Herd v Haines [2017] NZCA 201.

2      Marcus Pawson Laws of New Zealand Conflict of Laws: Choice of Law (online ed) at [259].

Did the parties reach agreement regarding all essential terms of the contract?

[21]   This issue relates to the consideration Mr Herd was required to provide under the VBSA. Clause 2.1 of the VBSA provides as follows:

2.        CONSIDERATION FOR THE PURCHASE OF THE VESSEL

2.1 For the purposes of this Deed and the Boat Sale Agreement the “The Consideration for the Purchase of the Vessel” shall mean one of the following

(a)The Reinstatement of the Urelapa Island Lease (the shares in SHL and SSFL having already been transferred to Haines); and having 50% ownership of all five islands or

(b)the payment of the sum of AUD$400,000 in cash to Haines and any interest that is due at the time of settlement and the transfer to Haines or his nominee of AUD$400,000 worth of land (as per Vanuatu registered bank panel mortgage valuer valuation) with the preferred Land being Palikula Beachfront or waterfront property; or

(c)Herd and Haines have entered into a Joint Venture to develop land or lands belonging to RHL, contained in Strata Plan 0034 and located at Palikula in accordance with Clause 5 (“the Joint Venture Land”) and Herd has accepted the Boat as consideration or part consideration (as the case may be) for transferring to Haines an interest in the Joint Venture Land.

[22]   It is common ground that the requirements contained in Clauses 2.1(a) and (c) were never satisfied. As a result, Mr Herd was required to pay for the vessel using the formula provided by Clause 2.1(b). Clause 4.1 of the VBSA prescribed the date of settlement if consideration was to be provided under Clause 2.1(b):

4.        ALTERNATIVE CONSIDERATION FOR BOAT PURCHASE

4.1Herd agrees that if the Reinstatement of the Urelapa Island Lease has not occurred by the Lease Reinstatement Date or the Extended Lease Reinstatement Date (as the case may be) and Herd and Haines have not entered into a Joint Venture as provided for in Clause 5 of this Deed then Herd shall, within 14 days of the Lease Reinstatement Date or the Extended Lease Reinstatement Date (if applicable) cause the consideration for the Vessel to be paid in terms of Clause 2.1(b) of this Deed;

As I have already observed, the parties agree that the formula contained in Clause 4.1 meant the date of settlement under the VBSA was 19 May 2012.

[23]   Mr Maassen accepts the parties intended to enter into a contractual relationship when they signed the VBSA. Both believed they had reached agreement regarding the terms on which Mr Herd was to acquire the vessel. The issue under this head arises because, whilst the clause specified the cash portion of the consideration Mr Herd was required to pay, it did not specify the land he was required to transfer to Mr Haines in part consideration for the purchase of the vessel. In addition, the contract was silent as to what would occur if Mr Herd offered land exceeding AUD$400,000 in value.

[24]   Mr Maassen accepts the latter omission could easily have been resolved by an equivalent reduction of the cash component of the purchase price. He submits, however, that the identity of the land was an essential term of the bargain. As a result, the VBSA required the parties to reach further agreement regarding that issue before a binding agreement could come into existence. Until that occurred Mr Herd was under no obligation to either transfer the land or to pay the cash component.

[25]   Mr Maassen refers me in this context to the following well known passage from the speech of Lord Wright in Scammell v Ouston:3

… There are many cases in the books of what are called illusory contracts, that is, where the parties may have thought they were making a contract but failed to arrive at a definite bargain. It is a necessary requirement that an agreement in order to be binding must be sufficiently definite to enable the court to give it a practical meaning. Its terms must be so definite, or capable of being made definite without further agreement of the parties, that the promises and performances to be rendered by each party are reasonably certain. In my opinion that requirement was not satisfied in this case.

…

Principles relating to the interpretation of contracts

[26]   In determining this issue it is necessary to apply the approach taken by the courts in Vanuatu to the law of contracts, and in particular the interpretation of contractual documents. I am assisted in this regard by the evidence of Professor Corrin, who had this to say about the law of contract in Vanuatu;

16.The common law principles of contract law in Vanuatu are founded on the common law of England. Although the Vanuatu Court of Appeal has held that the Vanuatu Courts may draw “on the wisdom

3      G Scammell and Nephew, Ltd v HC and JG Ouston [1941] AC 251 (HL) at 268-269.

and jurisprudence from a whole range of common law countries in search for precedent appropriate to Vanuatu conditions”, in practice the Courts normally look to the English common law in this area.

17.As under English common law, an agreement may be unenforceable if its terms are uncertain, that is vague or ambiguous. This could be the case with regard to clause 2.1 (b) of the Deed, in that the land to be transferred is not specified. However, the Deed does state the criteria by which the land is to be identified, that is it is to be worth AUD$400,000 and the means of valuing the land are specified. Further, preferred land is specified and this arguably gives a reference point for the type of land which is to be transferred, that is beachfront or waterfront. Courts are particularly anxious to uphold contracts that have been partly performed.

(footnotes omitted)

[27]   I accept Mr Gedye’s submission that the principles relating to the interpretation of commercial contracts now appear to be well settled in England through the recent judgments of the Supreme Court in Secret Hotels2 Ltd v Revenue and Customs Commissioners4 and Arnold v Britton.5 In Secret Hotels, the Supreme Court confirmed that English law did not permit evidence to be given relating to the subsequent conduct of the parties to interpret their written agreement. Such evidence will only be admissible in limited circumstances.6 These include situations where a contract is alleged to be a sham, where one party seeks rectification of the contract and where one party claims the original contract has been varied or superseded by a subsequent contract. It may also be relied on to establish a claim that the written agreement only represents part of the totality of the parties’ contractual relationship.

[28]   In Arnold v Britton, Lord Neuberger, with whom Lords Sumption and Hughes agreed, emphasised seven factors that are likely to be relevant when interpreting such contracts.7 Of these, four are relevant to the interpretation of Clause 2.1(b) of the VBSA.

[29]   Three of the factors emphasised by Lord Neuberger relate to the concept of interpreting a contract in a manner that accords with commercial common sense. His

4      Secret Hotels2 Ltd v Revenue and Customs Commissioners [2014] UKSC 16, [2014] 2 All ER 685.

5      Arnold v Britton [2015] UKSC 36, [2015] AC 1619.

6      Secret Hotels2 Ltd v Revenue and Customs Commissioners, above n 4, at [33].

7      Arnold v Britton, above n 5, at [16] – [23].

Lordship noted that this approach cannot be used to interpret a contract in a manner that undervalues the importance of the language used in the document.8 Secondly, common sense cannot be invoked retrospectively.9 In other words, the fact that a contractual arrangement has turned out disastrously for one party is not a reason for departing from the natural meaning of the language used in the contract. Thirdly, the courts should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed.10 The purpose of interpretation is to identify what the parties have agreed, not what the court thinks the parties should have agreed.

[30]   The fifth factor Lord Neuberger emphasised relates to the extent to which the court may take into account the surrounding circumstances when interpreting a contractual provision. In this context His Lordship observed:11

[21] The fifth point concerns the facts known to the parties. When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties. Given that a contract is a bilateral, or synallagmatic, arrangement involving both parties, it cannot be right, when interpreting a contractual provision, to take into account a fact or circumstance known only to one of the parties.

[31]   Professor Corrin said that the English common law rules relating to the admissibility of parole evidence apply to the interpretation of contracts in Vanuatu.12 As a result, parole evidence is not admissible to vary a written contract or to interpret a written contract. Extrinsic evidence will only be admissible where there is ambiguity in the wording used in the document.13

[32]   Professor Corrin referred in this context to the decision of the Supreme Court of Vanuatu in Furet v Ah Pow, in which Fatiaki J observed:14

23.        The law is clear that parole evidence of this kind which discloses the wishes and personal intentions of the parties is not admissible on the construction of a contract. The parties to a written contract reduce their

8 At [17].

9 At [19].

10 At [20].

11 At [21].

12     Pentecost Pacific Ltd v Hnaloane [1984] VUCA 4, [1980-88] 1 Van LR 134.

13     Arnold v Britton [2015] UKSC 36 at [70].

14     Furet v Ah Pow Supreme Court Vanuatu Civil Case No 192 of 2009, 3 June 2014.

agreement into written form, and their mutual intentions must be ascertained from the written words they have used.

24.        The first step in ascertaining what their recorded agreement means is to read the words used by them in their plain and ordinary meaning. If the language used in the contract permits of only one meaning, that meaning must be given to the contract and taken as expressing the intention of the parties. If the language carries a clear and unambiguous meaning, a Court is not justified in disregarding it simply because the contact would have a more commercial or business like operation if construed in a different way – Western Export

Services Inc and Others v. Jireh International Pty Ltd [2011] HCA 45, 282

ALR 64.

25.        On the other hand, if the written contract, read as whole, is ambiguous or capable of more than one meaning, then the Court is permitted to look beyond the language used to the surrounding circumstances and context in which the contract is to operate.

26.In the leading case in Australia of Codelfa Constructions Pty Ltd v.

State Rail Authority of NSW [`982] 149 CLR 337 Mason J with the concurrence of Stephen and Wilson JJ, after an extensive review of leading cases in the United Kingdom, said at 352:

“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hope to make. They are superseded by, and merged in, the contract itself. The object of the parole evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.

Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework or facts within which the contract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those

matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.”

27.        I have set out the above statement of the law at length as it is directly relevant to this case. The High Court of Australia has reaffirmed Codelfa on several occasions since 1982: Royal Botanic Gardens and Domain Trust v.

South City Council (2002) 240 CLR 45 and Western Export Services Inc  and

Others v.  Jireh International Pty Ltd cited above.  See also Byrnes v.  Kendle
[2011] HCA 26 at [98]-[99]; 279 ALR 212 at 237.

[33]   Although the judgment in Furet was delivered several years before the Supreme Court handed down its decision in Arnold v Britton, Fatiaki J clearly applied principles consistent with those confirmed subsequently in that case. There is no reason to believe the courts in Vanuatu will take a different approach in the future.

[34] Professor Corrin also pointed out that there have been some statutory modifications to the common law of contract since Vanuatu achieved independence. These include the Interpretation Act CAP [Consolidated Acts of Parliament] 132, which applies to the interpretation of contracts. Professor Corrin said that this Act does not appear to have any specific application to the facts of the present case.

This case

[35]   The learned authors of New Zealand Land Law opine that “the essential terms of a contract have been described as ‘the five P’s’: parties, property, price. payment and possession.”15 There is no reason to consider a different approach would be taken under English law as applied in Vanuatu.

[36]   In the present case the VBSA clearly identified the parties. The property to be sold was obviously the vessel “It’s Time”. The date on which payment was to be made was able to be ascertained and the agreement also dealt with the issue of possession. The only dispute relates to whether the VBSA also adequately identified the price  Mr Herd was to pay for the vessel. More particularly, it revolves around the fact that the VBSA did not identify the land to be transferred to Mr Herd in part consideration for the purchase of the vessel.

15     Elizabeth Toomey New Zealand Land Law (3rd ed, Thomson Reuters, Wellington, 2017) at 1331.

[37]   A great deal of the evidence related to communications between the parties that occurred well after they signed the VBSA. The established approach under English law makes it clear that these have no relevance to the interpretation of the terms of this particular contract. Neither party contends the VBSA was a sham, neither seeks rectification and neither says it did not reflect their entire agreement either when they signed it or subsequently. I therefore put those communications to one side in interpreting Clause 2.1(b).

[38]   I also consider that, on a literal reading of the words used in the clause, there is no ambiguity. It required Mr Herd to transfer to Mr Haines land in Vanuatu having a value of not less than AUD $400,000. It did not specify the land to be transferred but Mr Haines must be taken to have accepted that he was content to receive any land provided it had a value of not less than AUD $400,000. His interest lay in the value of the land rather than its identity. The value of the land was to be fixed by a valuer who was registered on the Vanuatu panel of bank valuers.

[39]   The argument for Mr Herd is based on the premise that Clause 2.1(b) required the parties to reach further agreement regarding the identity of the land to be transferred but I do not read the clause as containing such a requirement. Both parties knew Mr Herd and associated entities owned numerous parcels of land in Vanuatu. It was for Mr Herd to select which of those parcels was to be transferred under the VBSA. Mr Haines left it to Mr Herd to make that choice provided the land had the appropriate value. The factual matrix in the present case is therefore very different to those in cases where a purchaser is interested in acquiring a particular parcel of land and the contract does not adequately identify that parcel.

[40]   The fact that the clause contains the words “with the preferred land being Palikula Beachfront or waterfront property” supports this interpretation. They indicate that Mr Haines had expressed a preference for the land to comprise waterfront or beachfront land at Palikula. They fall far short, however, of imposing an obligation on Mr Herd to transfer land of that description to Mr Haines.

[41]   In his closing submissions Mr Maassen pointed to several problems arising out of the plaintiffs’ submission in opening that it was incumbent on Mr Herd as the

purchaser “to tender a compliant parcel of land for acceptance by the plaintiffs as vendors”. First, he pointed out that, construed literally, the clause required Mr Herd to transfer freehold land to Mr Haines. It is common ground, however, that under the Constitution of Vanuatu all land in Vanuatu is owned by the Custom owners who are indigenous Ni-Vanuatu. It is therefore not possible for third parties to acquire what would be regarded in New Zealand as a freehold interest in land. It is only possible to acquire a lease of land from the Custom owners for a period of up to 75 years. Secondly, Mr Maassen questioned the meaning of the word “compliant” in this context. Thirdly, he queried why the plaintiffs referred to a parcel of land in the singular when the clause left open the prospect that several parcels could be submitted in satisfaction of the purchase price.

[42]   The answer to the first of these issues is that Mr Herd had extensive experience in property development in Vanuatu and Mr Haines had also bought property there. Both parties therefore knew that only leasehold interests in land could be transferred in Vanuatu, and this is clearly what they envisaged occurring on settlement. The answer to the second issue is that by “compliant land” Mr Gedye was referring to land complying with the requirement that it be worth not less than AUD $400,000 as determined by a valuer who was registered on the Vanuatu banks’ panel of valuers. The answer to the third issue is that it was plainly open to Mr Herd to tender more than one parcel of land to meet the required threshold value.

[43]   The greatest impediment to the proposition that the clause encapsulates the parties’ entire agreement lies in the fact that it would require Mr Haines to accept the transfer of leasehold land in circumstances where he would not have an opportunity to examine and approve the underlying leases. During cross-examination he referred to the fact that he would want to make sure that he “was not about to be kicked off the land in the next couple of years”. That could obviously occur if, for example, a lease only had a short time to run.

[44]   I consider this concern is met by the fact that the value of a leasehold interest in land will obviously be affected by the terms of the lease. A lease that is about to expire, or that imposes onerous obligations on the lessee, would obviously be worth considerably less than one that has 50 years to run and contains no such obligations.

For that reason, although Mr Haines was required to accept whatever leasehold interests Mr Herd chose to tender, he was protected by the fact that they were required to have a total cumulative value of not less than AUD$400,000.

[45]   Finally, Mr Herd drafted the VBSA. I consider he demonstrated that he understood the true meaning of Clause 2.1(b) when he made the following comments in an email he sent to Mr Haines on 6 September 2013 after Mr Haines had issued the notice of default:

…

The Agreement provides that in Clause 9 if I do not pay you $400,000 in cash and provide $400,000 worth of land in Vanuatu by 26th September 2013 your remedy is contained in clauses 9.3 and following.

…

… The land part of the agreement I have always been ready and willing to convey to you. You have suspiciously been silent about indicating your preference for land in this regard which reinforces the proposition that you did not have any intention to be bound by our agreement.

…

As the worst case scenario, the bank has agreed to provide finance against the boat to pay the cash amount under our agreement.

If I was to tender that amount to you on 26 September 2013 you are required by the terms of the contract to accept the $400,000 worth of land or you will definitely be in breach of the contract.

…

(Emphasis added)

[46]   It follows that I do not consider the parties failed to agree on an essential term or that further agreement was required in relation to the land to be transferred to    Mr Haines under the VBSA.

Did the VBSA satisfy s 40 of the Law of Property Act 1925 (UK)?

[47]   The sale or disposition of leasehold land in Vanuatu is subject to s 40 of the Law of Property Act 1925 (UK). This is in similar terms to the requirements formerly imposed in New Zealand by s 2 of the Contracts Enforcement Act 1952 and now imposed by its successor, s 24 of the Property Law Act 2007. Section 40(1) prohibits

an action being taken on any contract for the sale or disposition of land or any interest in land “unless the agreement on which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some person thereunto by him lawfully authorised”.

[48]   Mr Maassen argues that the plaintiffs cannot satisfy s 40(1) because the VBSA does not specify the identity of the land to be transferred to Mr Haines as part consideration for the purchase of the vessel.

[49]   I do not consider this argument can succeed essentially for the same reasons as I have found the parties agreed to all essential terms of their bargain. Once it is understood that the VBSA permitted Mr Herd to select the land to be transferred to Mr Haines, the argument under this head becomes untenable. In common with the New Zealand legislation, s 40(1) has its genesis in the Statute of Frauds.16 This was designed to ensure that a disposition of an interest in land could not be enforced where the terms of the disposition were contained in a purely oral agreement. The possibility that owners of such interests might be deprived of them by fraud justified a requirement, introduced by the Statute of Frauds, that the terms of such transactions were to be contained in a written note or memorandum that was signed by the party against whom it was to be enforced. In the present case the requirements of s 40 were met because the terms of the transaction were set out in the VBSA, and this was signed by Mr Herd. The disposition contained in the VBSA did not breach either the letter or the spirit of s 40.

Was Mr Haines entitled to issue the notice of default on 26 August 2013?

[50]   The VBSA contained the following clauses in relation to the issue of default by Mr Herd in performance of his obligations under the agreement:

9.DEFAULT

9.1Where the Consideration for the Purchase of the Vessel has not been made in terms of clause 2.1(a) or (c) by the Lease Reinstatement Date or the Extended Reinstatement Date (as applicable) and Herd has not paid the Consideration for the Purchase of the Vessel in accordance with clause 4.1 of this Deed Herd will be in default of this Deed.

16     Statute of Frauds 1677 (Eng).

9.2Haines shall give Herd 30 days notice of intention to exercise his rights on default as contained herein prior to exercising any of his rights upon default.

[51]   The argument for the plaintiffs under this head is straightforward. They rely on the fact that the VBSA required Mr Herd to pay Mr Haines the sum of AUD$400,000 and to transfer land in Vanuatu having that value to Mr Haines no later than 19 May 2013. Mr Herd failed to take either step. As a result, he was in breach  of his obligations under the VBSA and Mr Haines was entitled to issue the notice of default at any stage after 19 May 2013. Further, Clause 9.2 required him to take that step if he wished to exercise his rights under the VBSA in relation to the repossession and resale of the vessel and the exercise of the powers of sale under Rhumba’s mortgage.

[52]   Mr Herd’s primary argument on this issue is again based on the premise that the VBSA required Mr Haines to reach agreement with him regarding the land to be transferred as part of the consideration for the purchase of the vessel. Mr Maassen submits the obligations to make the cash payment and to transfer land were indivisible. Both steps had to be taken contemporaneously for settlement to occur. As a result, Mr Herd was not obliged to make the cash payment until agreement was reached regarding the identity of the land. Mr Herd therefore contends Mr Haines issued the notice of default prematurely.

[53]   Furthermore, Mr Maassen submits Mr Herd would have been placed in a very difficult position if he had made the cash payment before he and Mr Haines reached agreement regarding the land. In that event Mr Herd would have paid the cash component of the transactions but would not be able to obtain title to the vessel because of Mr Haines’s continuing failure to reach agreement regarding the identity of the land.

[54]   I do not agree that the obligations to pay the cash component and to transfer the land were indivisible. They were separate obligations but Mr Herd was required to satisfy both on 19 May 2013. Failure to meet either obligation would leave him in default under the VBSA.

[55]   The conclusion I have reached regarding the meaning of Clause 2.1(b) effectively answers the remainder of Mr Herd’s argument on this point. Clause 2.1(b) gave Mr Herd the ability to nominate the land to be transferred to Mr Haines regardless of any agreement on Mr Haines’s part regarding the identity of that land. Mr Haines could only object on the basis that the value of the land was less than AUD$400,000. On 19 May 2013 Mr Herd should therefore have paid the sum of AUD$400,000 and he should also have nominated the parcels of land he had chosen to form the other part of the consideration required under the VBSA for the purchase of the boat. He would also have needed to provide confirmation from an appropriately qualified valuer that the land had a total value of not less than AUD$400,000. Once he failed to take either step he was in default and Mr Herd was entitled to issue the notice of default.

[56]   Mr Maassen next points out that the transfer of leasehold land in Vanuatu is governed by the Land Leases Act, which is set out in Chapter 163 of the 2006 Consolidated Edition of the Laws of the Republic of Vanuatu. Section 36 of the Land Leases Act requires the consent of Custom owners to be given to any transfer of a lease. Mr Maassen submits it was not possible to secure the consent of the Custom owners in the present case until the parties signed an agreement (or Land Lease form) that identified the relevant land and stipulated the consideration paid for the transfer. This would enable the Custom owners to calculate the fee payable to them on the transfer. The transferee must also agree to accept the leasehold interest that is being transferred and agree on the consideration payable under the lease.

[57]   I accept Mr Gedye’s submission that these processes comprise the machinery provisions that give effect to the transfer of leasehold interests. They are invoked once settlement has proceeded in accordance with the contract. They play no role in the formation of the contract or the processes leading up to settlement.

[58]   Mr Maassen also submits there is no evidence that Mr Haines was ready willing and able to perform his side of the bargain. However, Mr Haines said the vessel was unencumbered and Mr Herd already had possession of it. The only remaining step would presumably be for Ms Norman to sign the necessary documents to effect a valid transfer of the vessel into Mr Herd’s name under Vanuatu law. Clause 11 of the VBSA required all parties to take whatever steps were necessary to give

effect to the agreement. The plaintiffs made Ms Norman available to give evidence at the trial but Mr Maassen ultimately did not seek to question her on any issue. It is now not open for him to suggest she may not have been prepared to meet her obligations under Clause 11. This argument has no merit.

[59]   Finally, Mr Maassen emphasises that Mr Haines knew Mr Herd had structured both the purchase price and the delayed settlement to ensure he could source the cash component of the purchase price from the sale of land he owned in Vanuatu and not through further debt. I accept that this may be so but ultimately Mr Herd was under an obligation to have the cash component available no later than 19 May 2013.     Mr Haines accepts he gave Mr Herd further time to meet his obligations but had reached the end of his patience by 26 August 2013. He then decided to issue the notice of default to bring matters to a head.

[60]   The evidence demonstrates conclusively that Mr Herd did not have the cash component available by 19 May 2013, or indeed at any time thereafter. Anticipated sales of land had not eventuated for a variety of reasons. Mr Herd was endeavouring to obtain short term funding from financial institutions to enable him to complete his obligations under the VBSA but he had not obtained funding by the time Mr Haines issued the notice of default. It follows that Mr Herd was in default of both obligations under the VBSA by 26 August 2013, and Mr Haines was entitled to issue the notice of default on that date.

Did Mr Haines repudiate the VBSA on 1 September 2013?

[61]   The English law relating to repudiation of contract is materially no different to the common law position in New Zealand. In short, one party to a contract may repudiate it by means of words or conduct that demonstrate an intention not to honour the obligations imposed by the contract in the future.

[62]   The notice of default that Mr Haines issued on 26 August 2013 was in the following terms:

Dear Robert

PURCHASE OF VESSEL “MV ITS TIME”

The agreement for Sale and Purchase of the vessel ‘Its Time’ is in default.

We advise that in accordance with Clause 10 of the Agreement for Sale and Purchase and clause 9 of The Deed of Variation of the Boat Sales Agreement between us we hereby give you formal notice of Our Intention to exercise all or any of our rights on default.

This notice gives you 30 days in which to remedy the default.

…

[63]   As Mr Gedye points out, Mr Herd was already in default of his obligations under the VBSA by 26 August 2013. The legal effect of the notice of default was to give him further time within which to remedy that default.

[64]   The issue under this head arises because on 1 September 2013 Mr Haines sent the following email to Mr Herd;

Robert

As you are aware, settlement was the 5th May 2013, appropriate settlement notice has been served, then after many months final default notice has been served. And to date we have not received settlement, nor have I received full payment of interest outstanding, or complete payment of insurance.

The final notice was sent on 26th August 2013, so my interpretation of the contract Robert, is , due to the fact that you were unable to complete settlement on the 5th of May, or even on the 5th of June after me allowing discretionary period noted in the contract, we are now in a default situation.

For me to rectify this position I have to do one of two things. Take possession of the boat and sell it and look to you for any shortfall. I am not obliged to take any land offered in Vanuatu, because the land was not available or offered in the settlement timeframe.

…

(Emphasis added)

[65]   Mr Herd immediately sent an email to Mr Haines stating that he did not agree with Mr Haines’ interpretation of the contract, and he subsequently reserved the right to cancel the VBSA in the email he sent to Mr Haines on 6 September 2006.

[66]   Mr Maassen contends that Mr  Haines  made  it  clear in  the  email  sent  on 1 September 2013 that he did not consider himself bound to honour the VBSA because he said he was not prepared to accept any parcels of land that Mr Herd might transfer

to him under the VBSA. As a result, he submits Mr Haines repudiated the VBSA and this gave Mr Herd the right to cancel it.

[67]   Mr Haines’ comments were clearly based on a mistaken view of the legal effect of the notice of default. Whilst he was correct in saying that Mr Herd was in default, Mr Haines also obviously and erroneously considered it was too late for Mr Herd to rectify the default. Mr Haines’s assertion that he was not obliged to accept Vanuatu land was therefore made in the context of his mistaken interpretation of the contract.

[68]   Even if it did amount to a repudiation, however, Mr Herd did not subsequently purport to cancel the VBSA on the ground that Mr Haines had repudiated it. Furthermore, on 26 September 2013 Mr Herd sent an email to Mr Haines confirming that he was prepared to honour the terms of the VBSA.

[69]   Mr Herd confirmed in emails sent on 17 and 20 February 2014 that he considered himself entitled to terminate the contract based on Mr Haines’ repudiation but had not done so. This led to the following response from Mr Haines’ solicitors:

Dear Sir,

RE: ‘ITS TIME’ – CONTRACT FOR SALE & PURCHASE

We are instructed by Rod Haines and Kathleen Norman that pursuant to the original Contract for Sale and Purchase of the above vessel and the variations thereon having given notice, that the Vendors are now exercising their rights under the original Contract and Variations thereon including but not limited to the Sale of the Vessel and recovery from you of any balance costs and interest.

At no stage does the Vendor consider it has repudiated the Contract and to the contrary has allowed for extensions and variations to the original Contract to enable it to remain on foot, all of which have we understand been based on various promises made.

Accordingly at this stage the Vessel is now in the process of being sold and the Vendor has taken steps to protect the balance due under the contractual terms entered into pending final resolution.

[70]   The issue of termination by Mr Herd based on repudiation by Mr Haines does not appear to have been raised again. It is therefore of no moment for present purposes.

Did the VBSA require Mr Haines to exercise the right of sale under Rhumba’s mortgage before seeking to recover any shortfall from Mr Herd?

[71]Clauses 9.3 to 9.8 of the VBSA provided as follows:

9.3Upon expiration of the notice given pursuant to clause 9.2 of this Deed

–

(a)Haines shall take possession of the Vessel and resell it PROVIDED THAT the Vessel is not sold for less than its then market value as determined by a suitably qualified and reputable Valuer; and

(b)Herd shall immediately surrender possession of the Vessel to Haines and Herd shall have no further claim on the Vessel.

9.4Where the combined amount of the sale proceeds of the Vessel are greater than

(a)The Consideration for the Purchase of the Vessel;

(b)the amount owing pursuant to clause 6.7 of this Deed; and

(c)           any costs incurred in exercising the right of sale, Haines shall account to Herd for the excess amount.

9.5Where the combined amount of the sale proceeds of the Vessel are less than

(a)the Consideration for the Purchase of the Vessel; and

(b)the amount owing pursuant to clause 6.7 of this Deed; and

(c)any costs incurred in exercising the right of sale,

Haines shall be entitled to sell, as Mortgagee, Lot 58 PROVIDED THAT the Vessel is sold for not less than its then market value as determined by a suitably qualified and reputable registered Valuer;

9.6If Haines exercises the right to sell Lot 58 pursuant to clause 9.5 Haines shall not sell Lot 58 for an amount less than its then value as determined by a suitably qualified and reputable registered Valuer.

9.7Where the combined amount of the sale proceeds of the Vessel, Lot 58 are less than

(a)the Consideration for the Purchase of the Vessel;

(b)the amount owing pursuant to clause 6.7 of this Deed; and

(c)any costs incurred in exercising the sale of the Vessel and Lot 58.

Herd shall pay such shortfall amount to Haines as a debt;

9.8Where the combined amount of the sale proceeds of the Vessel, Lot 58 are greater than

(a)the Consideration for the Purchase of the Vessel;

(b)the amount owing pursuant to clause 6.7 of this Deed; and

(c)any costs incurred in exercising the sale of the Vessel and Lot 58.

Haines shall immediately pay the excess funds to Herd.

[72]   As will be obvious, the clause provided a sequence of steps to be followed if Mr Herd defaulted on his obligations under the agreement. The first step was the issuing of the notice of default as required by Clause 9.2. Thereafter the agreement provided for the repossession and sale of the vessel followed by the exercise of the right of sale given to Mr Haines under Rhumba’s mortgage.  Mr Herd argues that  Mr Haines does not have the ability to recover any shortfall from him until he has taken both steps. He points out that the land over which the mortgage is secured has a value that will easily enable the amount claimed by Mr Haines to be paid. He therefore contends the present proceeding is premature.

[73]   I consider the wording used in Clauses 9.3, 9.5 and 9.6 of the VBSA to be determinative of this argument. Clause 9.3 provides that, if the notice of default expires unremedied, Mr Haines “shall take possession of the Vessel and resell it”. This is a mandatory requirement. It obliges Mr Haines to take possession of the vessel and resell it as a first step in the recovery process.

[74]   Clause 9.5 is worded very differently. It provides that, where there is a shortfall owing after the vessel has been sold, Mr Haines “shall be entitled” to exercise the power of sale given under Rhumba’s mortgage. Furthermore, Clause 9.6 commences with the words “If Haines exercises the right to sell” the land subject to Rhumba’s mortgage. The wording of these clauses demonstrates that Mr Haines has the right to exercise the power of sale under the mortgage if there is a shortfall after the sale of the vessel but has no obligation to take that step if he does not wish to do so. In other words, having sold the vessel it was for Mr Haines to decide whether he wished to

exercise the power of sale under the mortgage before seeking to recover any shortfall from Mr Herd as a debt.

[75]   It is not surprising that Mr Haines elected not to exercise the power of sale under the mortgage. In an email dated 2 December 2013 Mr Herd advised Mr Haines that if he wished to exercise that power he would need to obtain an order from the courts in Vanuatu authorising him to do so. Mr Herd also said he would defend any such application. Given that statement of Mr Herd’s position one can readily understand why Mr Haines decided not to attempt to exercise the powers of sale given under the mortgage. Regardless of the reason why he made that decision, however, the VBSA did not require Mr Haines to sell the land secured by the mortgage before seeking to recover any shortfall from Mr Haines.

Did the plaintiffs take adequate steps to mitigate their loss?

[76]   This issue arises because of two interrelated factual matters. The first is that the plaintiffs elected to move the vessel from Queensland to New Zealand in March 2015. This meant they incurred the costs involved in that exercise and were also required to pay GST in the sum of approximately $60,000 to the New Zealand revenue authorities. The second is that they did not ultimately sell the vessel until August 2017. These factors raise the issue of whether the plaintiffs acted reasonably in the efforts they made to sell the vessel between 2013 and 2017.

[77]   In this area of the law the courts adopt a realistic approach. This recognises that, where one party breaches its obligations under a contract, the breach will often place the innocent party in a very difficult position. Where, as in the present case, the purchaser defaults under a contract for the supply of goods, the seller has no option but to try to find an alternative purchaser. Depending on the nature of the goods, that may not be an easy task. The approach the courts have adopted in this context is succinctly and colourfully explained in the following passage from the judgment of Roskill J (as he then was) in Harlow and Jones Ltd v Panex (International) Ltd:17

As a matter of arithmetic those figures are correct, but the point is this. The defendants  broke this contract.                   It is they who put the plaintiffs in this

17     Harlow and Jones Ltd v Panex (International) Ltd [1967] 2 LlLR 509 at 530.

difficulty. Of course, a plaintiff has always to act reasonably, and of course he has to do what is reasonable to mitigate his damages. But he is not bound to nurse the interests of the contract breaker, and so long as he acts reasonably at the time it ill lies in the mouth of the contract breaker to turn round afterwards and complain, in order to reduce his own liability to a plaintiff, that the plaintiff failed to do that which perhaps with hindsight he might have been wiser to do.

The period between 17 October 2013 and March 2015

[78]   Mr Haines says that when he uplifted the vessel on 17 October 2013 he moved it from Brisbane to Sanctuary Cove on the Gold Coast. He then listed the vessel for sale with Ray White Marine on the Gold Coast. He says an auction was scheduled for 1 December 2013. On 27 November 2013 Mr Haines sent the following email to   Mr Herd:

…

I said that I would extend the loan for 6 months, on a commercial interest rate. Your email of even date provides no certainty of getting paid, I have been doing everything I possibly can to accommodate your situation the boat is due to go up for auction on the 1^st of December, there has been interest, and as you are aware there is outstanding maintenance that has not been carried out on the boat since you have owned it, for example the boat needs antifouling, bilge pumps not working, water pump is down, duvet in main cabin torn, toilet pan on starboard side has crack in it, boat needs a through [sic] clean and polish, and one would never expect to get a full retail price for the vessel in it’s [sic] condition. I have avoided spending money and adding to your costs such as obtaining a full valuation to avoid any further arguments when I look to you for the short fall. The cost for that professional valuation is $1300 Au on top of that there are brokerage fees, marina fees, and on top of that there will be the registration costs of the mortgage, you will note that the agreement called for a registered valuation of that property you gave as security. You provided a one page letter that said that this is not a valuation and not to be taken as one. Robert as much as I am trying to do everything I can to avoid selling the boat and looking to you for it’s [sic] shortfall and interest content, I will have no option but to continue along that line. Unless you can come up with some concrete proposal in the next 48 hours.

[79]   Ongoing negotiations between the parties appear to have stalled or postponed the auction of the vessel on 1 December 2013. Material produced by Ray White Marine shows that a further auction was arranged for 20 February 2014 at the Gold Coast.Turf Club. The marketing budget produced in anticipation of the auction shows the vessel was to be advertised on three occasions each in two local and national newspapers, and in two magazines and a newsletter.

[80]   At or around the time of the auction Mr Haines received a report dated       13 February 2014 from  Mr  Nicholas  Lockyer,  a  marine  surveyor  and  valuer.  Mr Lockyer assessed the value of the vessel at that time as being AUD$500,000 excluding GST.

[81]   Mr Haines said in evidence that the auction went ahead on 20 February 2014 but did not attract any buyers. He also said in cross-examination that other auctions were held by Ray White. The only offer he received whilst the vessel was in Australia was for a sale at AUD$300,000. Mr Haines said he was not prepared to accept that offer because it was too low. Mr Haines says he obtained a further valuation of the vessel from Ranger Marine in Takapuna in June 2014. This valued the vessel at NZ$550,000 inclusive of GST.

[82]   In mid-2014 Mr Haines decided to return the vessel to New Zealand. One of the reasons prompting this decision was the fact that the advertisement of the vessel for sale in Australia had attracted the interest of the Australian Customs authorities. The vessel had entered Australia under the authority of a cruising permit. This meant no GST was payable when it entered Australian waters. If the vessel was offered for sale whilst it was in Australia, however, GST would be payable at the rate of ten per cent of the sale price. Mr Haines said he talked to other brokers regarding the likely sale price of the vessel and the competition it would be up against in Australia. He says the high cost of maintaining the vessel in Australia was also a factor he took into account in making this decision. If he returned the vessel to New Zealand he could oversee a large part of the maintenance work himself at no cost. All of these factors weighted in his decision to return the vessel to New Zealand.

[83]   In or about June 2014 Mr  Haines engaged  a  New Zealand boat  skipper,  Mr Andrew McGaughey, to sail the vessel back to New Zealand.  This resulted in  Mr McGaughey travelling to Australia and preparing the boat for the journey back to New Zealand. He was assisted in this by Mr Richard Marmont, a marine engineer from Whangarei. Messrs McGaughey and Marmont eventually began the journey back to New Zealand in October 2014 but were forced to return to port within 24 hours after encountering rough weather and trouble with the port engine. Mr Marmont says

this forced them to “limp” back to Brisbane, where they moored at a private berth in Runaway Bay.

[84]   Mr Marmont says that extensive engine repairs were then carried out over the next six months. This was necessary because, when the engine head was removed in November 2014, all sixteen cylinders were found to be damaged. Piston liners were also cracked and broken, and rings were wedged into piston grooves. He says these repairs were clearly going to take some time and he therefore returned to New Zealand.

[85]   Mr Marmont says he returned to Australia in March 2015 as the repairs were nearing completion. He then assisted with the final re-assembly of the port engine and its test run. The vessel returned to New Zealand later the same month with no difficulties being encountered on the way.    It berthed at Opua in Northland on      28 March 2015.

[86]   The plaintiffs derive support for their  decision  to  return  the  vessel  to  New Zealand from the evidence of Mr Scott Sutherland, a commercial skipper with considerable experience in bringing game fishing boats back to New Zealand from Australia for resale. He said New Zealand is low on quality stock in terms of game fishing boats. As a result, between February 2014 and March 2015 there was more demand for vessels like “Its Time” in New Zealand than Australia. Mr Sutherland’s assessment of the Australian market is that it had been in a downturn for some years, and that there were likely to be more potential buyers for a vessel like “Its Time” in New Zealand than in Australia. Mr Haines also said in evidence that the vessel had been on the market for approximately two years when the plaintiffs purchased it.

[87]   Mr Herd sought to counter this evidence by calling Mr Graeme Shaw, a valuer and auctioneer  working for a firm of marine auctioneers and valuers in Australia.  Mr Shaw said he would expect Australia to have a larger pool of potential buyers than New Zealand for a vessel such as “Its Time”. He therefore considered a vessel of that type would sell more quickly in Australia than New Zealand. He said it was unlikely the New Zealand market would produce a superior net return, particularly given the costs involved in re-locating the vessel to New Zealand.

[88]   Under cross-examination Mr Shaw accepted that the Australian marine market has been in a downturn since the global financial crisis in 2008. He also conceded he had very little knowledge of the marine market in New Zealand. His evidence is significantly weakened  by  that  concession.  I  therefore  prefer  the  evidence  of Mr Sutherland on issues relating to the likely benefit to be gained from selling the vessel in New Zealand rather than Australia.

[89]   Given the events that occurred between 17 October 2013 and March 2015, I do not consider the plaintiffs can be criticised for the fact that no sale was achieved or for their decision to return the vessel to New Zealand. The period during which the vessel remained in Australia did not produce any realistic offers notwithstanding the efforts Mr Haines made to sell the vessel by auction on several occasions. The sale of the vessel in Australia would also have resulted in GST being payable there. Although GST was payable at a higher rate in New Zealand, the effect of this was reduced by the difference in the exchange rate at that time.

[90]   I also consider Mr Haines was justified in returning the vessel to this country given the fact that he lives in New Zealand and could maintain the vessel more cheaply here. Furthermore, on the basis of Mr Sutherland’s evidence, the return of the vessel to New Zealand did not create a risk that it would either take longer to sell or realise a lesser sale price if it was sold in New Zealand rather than Australia.

[91]   I have therefore concluded that the plaintiffs acted reasonably during the period between October 2013 and March 2015.

The period between April 2015 and August 2017

[92]   Mr Haines says that when the vessel arrived in New Zealand he had it valued again. This valuation assessed the vessel as being worth approximately NZ$400,000. The valuer advised him that significant work needed to be carried out on the vessel in order to bring it to a saleable condition. This was likely to require the expenditure of approximately NZ$100,000.

[93]   Mr Haines says he did not use the boat after it returned to New Zealand. It remained in the marina at Opua, where maintenance work was carried out on it.

Mr Haines says he spent weeks working on the vessel himself. He says that a lot of detailing work needed to be carried out to make the vessel presentable again after the repairs that had been carried out in Australia. He estimates he spent around 400 hours working on the boat for which he does not seek to be reimbursed.

[94]   Mr Haines says that once the vessel was in a presentable condition he moved it to Auckland. Invoices produced in support of the plaintiffs’ claims for expenditure show that it was moved to Auckland in December 2015, and was initially berthed at Oram’s Marine in the Viaduct Basin. From the end of February 2016 it was berthed at a marina operated by Viaduct Holdings Ltd. Mr Haines says that during this period it was listed for sale at the Auckland Boat Show for the sum of $750,000.

[95]   In cross-examination Mr Haines explained that he listed the vessel for sale with several marine agencies or brokers after it returned to New Zealand. These included Ranger Marine in Whangarei, Hall Marine and Caribbean Boats (Scott White) in Auckland and a company called Game and Leisure, who were the Hatteras agents in Australia. Mr Haines said the vessel was also listed for sale in several magazines. When Mr Maassen questioned Mr Haines as to whether he had paid for a formal sales and marketing programme, he replied that he went to a lot of trouble to ensure that every reputable agent knew the vessel was for sale. He also paid for it to be moored in the Viaduct basin so that it could be seen by persons who were likely to be interested in boats.

[96]   Mr Haines says he received a number of offers to purchase the vessel. Some of these involved offers of real estate in part payment of the purchase price. He says he went to Tokoroa on two occasions to view properties offered as part payment for the vessel. He was eventually able to sell the vessel in August 2017 for New Zealand

$600,000, of which he has only been paid $350,000 to date.

[97]   The invoices show that the vessel was moved to Marsden Cove Marina in September 2017. Costs were then incurred in November 2017 to clean the hull and apply new fibreglass laminate. I assume this work was done shortly before the vessel was delivered to its new owner.

[98]   The sale of a Vessel  such as “Its Time”  is obviously not an easy task.  As  Mr Haines confirmed in cross-examination, it falls within a niche market. As such, buyers may be difficult to find. Mr Shaw emphasised that in his view the sale of a vessel such as this requires the owner to price it correctly. If the owner asks too much, buyers are likely to be deterred. He considered Mr Haines priced the vessel too high when he listed it for sale at the Auckland Boat show for $750,000. He also pointed out that an offer that appears to be much too low can often lead to negotiations that produce a sale at or near the original asking price.

[99]   Mr Haines was obviously not prepared to sell the vessel at a “fire sale” or forced sale price. Mr  Shaw  confirmed  he  regarded  the  offer  of  $300,000  that Mr Haines received for the vessel whilst it was in Australia as falling within that category. The fact that Mr Haines adopted a conservative approach to selling the vessel is not surprising because he knew he would be forced to pursue Mr Herd for any shortfall that may remain owing after the vessel was sold. The email he sent to Mr Herd on 27 November 201318 shows he anticipated arguments were likely to arise at that point. The vessel therefore represented his best means of recovering a substantial portion of what he was owed without having to go to the trouble of pursuing Mr Herd.

[100]   Mr Haines needed to balance the need to obtain a reasonable price for the vessel against the fact that this could well take time, effort and continued expense. Furthermore, he had little to gain out of any undue delay because he was being required to pay for the ongoing costs and maintenance of the vessel until it was sold in circumstances where there was no guarantee he would recover any shortfall from Mr Herd.

[101]   I consider these factors meant Mr Haines was entitled to take a conservative approach so as to obtain the best price possible for the vessel. The evidence demonstrates conclusively that he succeeded in that regard. Mr Herd does not challenge the price that Mr Haines achieved for the vessel and neither does Mr Shaw. He was ultimately able to sell it at market value and not at a forced sale price. I

18 Set out above at [78].

consider that fact demonstrates Mr Haines was justified in acting as he did. It also leads me to conclude Mr Haines acted reasonably during the period between April 2015 and the sale of the vessel in August 2017.

What remedies are available to the plaintiffs?

[102]Three issues need to be considered under this head:

(a)Is the VBSA subject to the Sale of Goods Act 1893 (UK)?

(b)Does the VBSA constitute an exclusive range of remedies for breach of contract by Mr Herd?

(c)Does Clause 6.11 of the VBSA provide a separate right of recovery?

Is the VBSA subject to the Sale of Goods Act 1893 (UK)?

[103]   The Supreme Court of Vanuatu has held that the Sale of Goods Act 1893 (UK) (SOGA) applies in Vanuatu as an act of general application.19 Mr Maassen submits that the SOGA does not apply to the VBSA because the consideration to be paid for the vessel was partly in money and partly through the transfer of land. He relies on the general principle that the sale of goods legislation will only apply to contracts in which the consideration is payable by legal tender. This is succinctly described in the following passage from Benjamin’s Sale of Goods:20

Price must be in money It has been observed that “the full meaning of the word ‘price’ is not actually defined by the Sale of Goods Act, except perhaps by s.[2(1)]”. The consideration in a contract of sale of goods must in English law be a price in money, either paid or promised. By money is meant legal tender; it does not mean money’s worth, so the agreement to transfer goods in exchange for shares is not a sale within the Act. Payment need not, however, be made in cash: a method of payment that enables the seller to obtain money

– and not merely money’s worth – is within the Act, such as the use by the buyer of a charge card or credit card, or a debit card, or digital cash (smart card of payment by text message through a mobile telephone), or cheque, or banker’s draft, or trading check. It is irrelevant that the money payment comes, not from the buyer of the goods, but from the card issuer.

(Emphasis added)

19     Bohn v Vanuatu Maritime Authority [2003] VUSC 137.

20     Michael Bridge, Benjamin’s Sale of Goods (10th ed, Thomson Reuters, 2017) at 137.

[104]   Mr Gedye points out, however, that the learned authors of Benjamin go on to say:

Where the consideration for the transfer of property in goods takes some other form, the contract is one of exchange or barter and the Sale of Goods Act 1979 will not apply, although it may in some respects be governed by analogous principles, either at common law or under the Supply of Goods and Services Act 1982. Where it is agreed that the consideration may consist partly in money and partly in some other form, as where goods are traded-in in part exchange, the contract may sometimes be construed as one of sale, or even as two contracts of sale with a set-off of prices and such adjustment as is necessary. It is open to the parties to agree that the price shall be payable in any currency.

(Emphasis added)

[105]   I consider the contractual agreement contained in the VBSA can be regarded as involving two sales. The first was the sale of the vessel for the sum of AUD$800,000. That sum was to be paid through the provision of AUD$400,000 in cash and the transfer of land in Vanuatu to the value of AUD$400,000. Mr Haines was not required to pay cash for the land. Instead the purchase price of the land was to be offset against the purchase price payable by Mr Herd for the vessel.

[106]   The fact that part of the consideration involved the transfer of land means, however, that the overall transaction is not subject to the SOGA. The SOGA defines “goods” as including “all personal chattels other than things and money”. It also includes “emblements, industrial growing crops, and things attached to or forming part of the land which are agreed to be severed before sale”. Land obviously falls outside this definition. It follows that the arrangement in the present case cannot be regarded as two contracts for the sale of goods and the SOGA does not apply to it.

Does the VBSA provide an exclusive range of remedies for breach of contract by   Mr Herd?

[107]   The material parts of Clause 9 have been set out above.21 Mr Maassen submits they comprise a complete and exclusive range of remedies, and that the plaintiffs are not entitled to resort to remedies that might otherwise be available either at common law or under statute.

21     At [50] and [71].

[108]   Professor Corrin gave evidence that, under  Vanuatu  law,  the  ability  of  Mr Haines to claim damages at common law will depend on whether Clause 9 was intended to provide an exclusive range of remedies. She said intention is to be assessed objectively in this context, and that contractual rights will not necessarily displace common law rights. In the absence of such intention the provision of an express remedy in a contract will not preclude an innocent party from pursuing other common law remedies. Professor Corrin concludes that, in the absence of clear wording, a Vanuatu court is unlikely to interpret such a provision as constituting an exclusive range of remedies if this would fail to provide the innocent party with compensation for the breach that has occurred.

[109]   I consider the parties in the present case intended Clause 9 to provide the primary means by which Mr Haines was to be compensated for any breach of contract by Mr Herd. It clearly reflects Mr Herd’s concern that Mr Haines should have resort to assets before taking action against him personally for any residual debt.

[110]   I do not consider, however, that the clause was intended to operate as the sole means by  which Mr Haines was to be compensated for any breach of contract by  Mr Herd. First, such an interpretation could operate to Mr Haines’ considerable detriment in numerous ways. By way of example, Mr Herd could take steps to prevent Mr Haines from locating or recovering the vessel. He could then rely on Mr Haines’ failure to sell the vessel as a defence to any claim for the amount outstanding under the VBSA. Alternatively, Mr Haines might not be able to sell the vessel at a price equal to or greater than the valuation obtained under Clause 9.3(a). In addition, the breach might cause Mr Haines to suffer loss that was not included in Clause 9.7 (a) to (c). All of these situations would prevent Mr Haines from recovering his losses even though they were caused by Mr Herd breaching his obligations under the VBSA.

[111]   Secondly, the VBSA expressly varied the original contract. It did not replace it. As a result, the original contract remains in force to the extent it is not in conflict with the terms of the VBSA. Clause 10 of the original contract provided as follows:

10.REMEDIES ON DEFAULT

If the Purchaser fails to settle the purchase on the settlement date, and following written notice to settle within seven days of settlement date, the Vendor may at the Vendor’s option without prejudice to any other rights or remedies available to him/her at law or in equity:

(a)            Cancel this Agreement in which case he/she may pursue all or any of the following remedies, namely:

(i)Forfeit and retain for his/her own benefit the deposit paid by the Purchaser (less brokerage commission on the purchase price) but not exceeding in all 10% of the purchase price.

(ii)Sue the Purchaser for damages but in that event the Vendor shall be required to give credit for any deposit, less brokerage commission, retained by the Vendor.

(iii)Re-sell the vessel whether by auction or by private contract and either for cash or on credit and upon such other terms and conditions as he/she may think proper with power to vary any contract for sale, buy in at auction and re-sell. If on any bona fide re-sale contracted within one year from the date of the Vendor’s cancellation the Vendor incurs a loss, the Purchaser shall pay to the Vendor as damages the amount of the loss which may include interest at 17 per centum per annum from the settlement date to the date of the Vendor’s cancellation and all costs and expenses reasonably incurred in any re-sale or attempted re-sale. On any re-sale the Vendor shall give credit for any deposit, less brokerage commission, and any money paid on account of the purchase price but the Vendor shall retain any surplus money.

(iv)LATE PAYMENT: If from any cause whatsoever (save the default of the Vendor) any portion of the purchase price shall not be paid upon the due date for payment the Purchaser shall pay to the Vendor interest at the rate of 17 per centum per annum on the portion of the purchase price so unpaid from the due date for payment until payment but nevertheless this stipulation is without prejudice to any of the Vendor’s right and remedies.

[112]   I consider Mr Haines was required to have resort to Clause 9 as his primary source of remedy.  The first step in the procedure was to give notice of default to   Mr Herd. This would give Mr Herd 30 days to rectify the default rather than seven days as required by Clause 10 of the original contract. Thereafter Mr Haines was required to sell the vessel in accordance with Clause 9.2 to the extent that he was able

to do so. At that  point  the VBSA would  be  cancelled  to  the  extent  it  required Mr Haines to sell the vessel to Mr Herd in exchange for the stipulated consideration.

[113]   Following sale of the vessel, as I have already found, Mr Haines was not required to exercise his powers of sale under Rhumba’s mortgage. Instead, he was entitled to recover the amounts set out in Clause 9.7(a) to (c) of the VBSA from     Mr Herd as a debt. To the extent that losses suffered by Mr Haines fell outside those recoverable under this clause, Clause 10 of the original contract entitled Mr Haines to recover them from Mr Herd under common law, equity or statute.

Does Clause 6.11 of the VBSA provide a separate right of recovery?

[114]Clause 6.11 of the VBSA provides as follows:

6.11Herd hereby indemnifies Haines and Norman for all claims, damages or loss that occurs in relation to the use, operation or occupation of the Vessel by Herd or His Nominee after the Completion Deed Completion Date.

[115]   The plaintiffs contend Clause 6.11  permits them to recover the expenses    Mr Haines incurred after he repossessed the vessel in October 2013. They say that all those costs were caused by Mr Herd’s use, operation and occupation of the vessel.

[116]I do not consider this to be the purpose for which the parties inserted Clause

6.11 in the VBSA. Rather, the clause recognised the fact that the VBSA permitted Mr Herd to take possession of the vessel in circumstances where the plaintiffs retained ownership until settlement in twelve months time. This obviously created risk for the plaintiffs. They, and Ms Norman in particular, ran the risk of being sued for loss or damage caused to third parties by Mr Herd through his use, operation and occupation of the vessel. I consider the clause was primarily designed to provide a means by which the plaintiffs could seek indemnity from Mr Herd in relation to any loss or damage he might cause of that type.

[117]   I accept, however, that the wording of the clause is sufficiently wide to enable the plaintiffs to recover any loss they might suffer themselves as a result of Mr Herd’s use, operation and occupation of the vessel. Even so, this is not an easy recovery route for the plaintiffs to take.

[118]   To take one example, the plaintiffs seek to recover the costs of maintenance and repair work they carried out on the vessel after they repossessed it. To be recoverable under Clause 6.11 those costs must relate to damage caused by the use to which Mr Herd put the vessel. The plaintiffs would therefore need to exclude the likelihood that the damage had been caused by the use to which they had put the vessel earlier themselves, or that it represented the wear and tear ordinarily to be expected for a vessel of this type and age. The evidence in the present case does not permit such conclusions to be drawn in relation to virtually any of the costs the plaintiffs seek to recover under this head.

[119]   I therefore consider the plaintiffs have far more straightforward claims under Clause 9 of the VBSA and under the common law remedy of damages for breach of contract.

What sums are the plaintiffs entitled to recover from Mr Herd under the VBSA?

Shortfall between the consideration payable under the VBSA and the ultimate sale price

[120]   The plaintiffs have established that Mr Herd failed to pay the consideration due on 19 May 2013 under Clause 2.1(b) of the VBSA. He also failed to rectify that default in terms of the notice of default issued on 26 August 2013. The plaintiffs have now complied with their obligations under Clause 9.3 to take possession of the vessel and have re-sold it for a price not less than its market value as determined by a suitably qualified and reputable valuer.

[121]   The resale of the vessel produced a shortfall of AUD$240,980 between the consideration payable under the VBSA (AUD$800,000) and the amount ultimately received for the vessel (NZ$600,000). The shortfall is calculated by converting the amount received for the vessel in New Zealand currency to its equivalent in Australian currency using the exchange rate as at 9 August 2017, being the date on which the sale of the vessel became unconditional. The exchange rate on that date was NZ$.9317 per AUD$1.

[122]   The plaintiffs are entitled to recover the shortfall of AUD$240,980 under Clause 9.7(a) of the VBSA.

The interest payable under Clause 6.8 of the VBSA

[123]Clause 6.8 of the VBSA provided as follows:

6.8 Herd agrees to pay, in addition to the agreed Consideration for the Purchase of the Vessel, a sum equivalent to 5% per annum of the agreed Consideration for the Purchase of the Vessel for the time that Herd has had the use of the Vessel until the Consideration Payment Date, which sum shall be considered as interest on the financial accommodation afforded by Haines and Norman for allowing Herd to take possession prior to the Consideration Payment Date.

[124]   Relying no doubt on the wording used in the clause, the parties have commonly referred to the amount payable under Clause 6.8 as being “interest”, and I will do the same. They have also proceeded on the basis that Mr Herd was potentially liable to pay the sum of AUD$40,000 under Clause 6.8 and not a daily or monthly sum. This represents five per cent of the agreed value of the vessel for a period of 12 months. I use the word “potentially” in this context because Mr Herd disputes his liability to pay interest even though the vessel remained in his possession in Queensland from approximately May 2012 until Mr Haines re-took possession of it on 17 October 2013.

[125]   Mr Herd’s position is that the interest is not payable because the Consideration Payment Date never eventuated. He bases this argument on his contention that the parties never reached agreement regarding the identity of the land transferred under Clause 2.1(b).

[126]   I consider the VBSA required Mr Herd to pay the sum of AUD$40,000 on the settlement date under the VBSA. There is no dispute that the settlement date under the VBSA was 19 May 2013. Mr Herd therefore became liable to pay that sum on that date and he acknowledges he has not paid it. My conclusion in relation to Mr Herd’s earlier argument based on lack of identification of the land means this argument cannot succeed either.

[127]   Mr Herd is liable to pay interest under Clause 6.8. The plaintiffs do not seek judgment under this head for a sum greater than AUD$40,000. They are entitled to judgment for that amount.

Amounts payable under Clause 9.7(c)

[128]   Clause 9.7(c) permits the plaintiffs to recover “any costs incurred in exercising the sale of the vessel” as well as any costs they might incur in exercising the power of sale under Rhumba’s mortgage.

[129]   If the clause is construed broadly, it would cover all of the costs incurred by the plaintiffs in retaking possession of the vessel and preparing it for sale. These would include the costs of moving the vessel back to New Zealand and all of the mechanical and refurbishment work necessary to render it presentable for sale. Construed literally, however, it would only extend to costs directly related to the sale process. These would include advertising and marketing costs, delivery costs and other costs directly referable to the sale process.

[130]   I consider the wording of the clause suggests a literal interpretation is to be applied. It would have been a simple matter for the drafter of the clause to use words demonstrating clearly that it was intended to be of wide application. Instead, the wording used in the clause restricts its application to costs incurred in the sale process.

[131]   The scope for recovery under the clause is therefore relatively limited because Mr Haines incurred very few costs directly referable to the sale process. The bulk of the expenditure related to the costs incurred in rectifying mechanical faults, purchasing fuel, berthage and returning the vessel to New Zealand. Under this head the plaintiffs can only recover the cost of obtaining the report from Mr Lockyer dated 13 February 2014 (AUD$1200) and the fee for the valuation produced by Ranger Marine in July 2014 (NZ$747.50). The plaintiffs would also be entitled to recover the expenditure they incurred during November 2017 after the entered into the contract to re-sell the vessel provided this was required by the contract of re-sale. I consider all of the other amounts claimed by the plaintiffs are insufficiently related to the sale process to be recoverable under Clause 9.7(c).

Claim for consequential losses at common law

[132]   I have already held that Clause 10 of the original contract remained in effect to the extent it was not in conflict with the provisions of the VBSA.22 Clause 10 permitted the plaintiffs to cancel the contract and sue Mr Herd for damages. The original contract was not governed by Vanuatu law so the law of New Zealand applies to the calculation of damages under this head.

[133]   In New Zealand, the Contract and Commercial Law Act 2017 governs the damages to be awarded for breach of contract. Section 196 of that Act provides, however, that the Act does not affect the right of a buyer or seller to recover special damages where by law special damages may be recoverable. Mr Gedye submits the remaining amounts that the plaintiffs claim are recoverable by way of special damages for consequential loss.

[134]   The meaning of “special damages” in contract is distinct from its meaning in tort. The House of Lords has described special damages in a contractual context as damages for losses that are not the “direct natural or probable consequence” of a breach, but that are instead “exceptional in their character”.23 This means special damages must be specifically claimed and proved. Such damages must have been “within the contemplation of both parties at the time of the contract”.24

[135]   The English approach to recoverability of consequential loss arising out of breach of contract is shaped by the principles enunciated in Hadley v Baxendale.25 These divide losses arising out of a breach of contract into two separate limbs: those that arise naturally and directly from the breach of contract itself, and those that may reasonably be supposed to have been in the contemplation of both parties at the time they entered into the contract. Subsequent cases, such as Hotel Services Ltd v Hilton International Hotels (UK) Ltd, have held that consequential loss falls solely within the second limb identified in Hadley v Baxendale.26 Under that approach consequential loss is synonymous with indirect loss.

22 At [111].

23     Ströms Bruks Akt Bolag v Hutchison [1905] AC 515 (HL) at 526.

24     At 526.

25     Hadley v Baxendale (1854) 156 ER 145.

26     Hotel Services Ltd v Hilton International Hotels (UK) Ltd [2000] 1 All ER 750.

[136]   There is currently no appellate authority on this point in New Zealand. Clifford J considered the concept of indirect or consequential losses, however, in Oceania Furniture Ltd v Debonaire Products Ltd.27 That case concerned a contract containing a clause excluding recovery of “indirect and consequential losses”. Clifford J did not consider it helpful to adopt the distinction identified in Hadley v Baxendale, and instead emphasised the need to interpret the words in the context of the contract in question:

[124] In this context, I am satisfied that the ordinary and natural meaning of the exclusion of liability for “indirect and consequential losses” in paragraph

(c) covers all losses other than those arising directly from, or immediately associated with, the obligations that Oceania has taken on – namely, and as relevant, to supply the goods in the orders it has accepted, and not to sell goods to other distributors within New Zealand in breach of the exclusivity provisions.

[137]   The learned authors of McGregor on Damages observe that claims for consequential losses in contract “are as infrequent in actions by the seller for non- acceptance as they are common in actions by the buyer for non-delivery”.28 Nevertheless the text provides several examples of situations in which an unpaid vendor has successfully recovered damages for losses sustained during the period prior to the re-sale of the goods occurs.

[138]   In Harlow and Jones Ltd v Panex (International) Ltd, for example, the plaintiff agreed to sell a large quantity of steel goods to the defendant.29 The plaintiff sued to recover losses it sustained after the purchaser failed to take delivery and pay for the goods. These included the cost of storing the goods before they could be re-sold to a third party. The goods were of a specialised nature and did not have a ready market. The plaintiff was eventually able to sell them and was held to be entitled to recover the difference between the ultimate sale price and the price it would have received under the contract with the defendant. In addition, the plaintiff recovered the consequential losses cause by the need to store the goods whilst it found a new buyer for them.

27     Oceania Furniture Ltd v Debonaire Products Ltd HC Wellington, CIV-2008-485-1701, 27 August 2009 at [105]-[124].

28     McGregor on Damages at [839].

29     Harlow and Jones Ltd v Panex (International) ltd [1967] 2 LlLR 509.

[139]   Neither counsel dealt with the test for recovery of consequential losses in their submissions. In the absence of relevant appellate authority in this country I propose to follow the approach taken in the United Kingdom. This focusses on what was in the contemplation of the parties when they entered into the contract. In determining that issue, however, I will adopt the approach taken by Clifford J in Oceania Furniture and focus on the wording used in the VBSA.

[140]   The breach of contract by Mr Herd meant the plaintiffs were required to re- take possession of the vessel and sell it as prescribed by Clause 9.3 of the VBSA. In doing so the parties must have contemplated the plaintiffs would incur expenditure. They would first need to uplift the vessel and move it to a location at which it could be valued and then sold. This would require them to meet the cost of fuel and provisions and to engage crew to move the vessel and to. Once the vessel was at its new location, the plaintiffs would be required to pay berthage on an ongoing basis and to take out insurance cover.

[141]   The parties would also have contemplated that further expenditure would be required before the plaintiffs could resell the vessel. They would need to ensure the vessel was fit for sale at a reasonable price and then maintained in that state. This could require the plaintiffs to meet the costs of any necessary mechanical repairs and the cost of bringing internal fixtures and fittings to an acceptable standard for sale.

[142]   Furthermore, the parties knew the vessel had been in New Zealand waters until Mr Herd moved it to Australia after the parties entered into the VBSA. Mr Haines continued to reside in New Zealand. I consider the parties must have contemplated that Mr Haines might need to move the vessel back to New Zealand to oversee a sale there if no sale eventuated in Australia. That would obviously require significant further expenditure because it would involve the vessel crossing the Tasman Sea. This would involve the engagement of experienced crew as well as extra costs for fuel and other provisions.

[143]   Finally, I consider the parties would have contemplated that applicable Government taxes would also need to be paid if the vessel was resold. The sale of the

vessel would attract GST regardless of whether the sale occurred in Australia or New Zealand.

[144]   With some minor exceptions, I therefore conclude all of the costs the plaintiffs have incurred since they retook possession of the vessel were within the contemplation of both parties when they entered into the VBSA. They are therefore entitled to recover the costs set out in the schedule produced by Mr Haines at the hearing.

[145]   The first of the exceptions relates to costs incurred when Mr Hannam, a witness called for Mr Herd, was required to clean the vessel up following its return to Australia after the first voyage to New Zealand was aborted in June 2014. Mr Hannam was engaged by Mr Haines to prepare the vessel for its second voyage. He arrived in Australia approximately three months after the first delivery crew had left the vessel following its return to Runaway Bay. He said the shore power had been disconnected and the vessel was in a terrible state. Sewage was leaking onto the floors and numerous other items matters needed to be attended to because the vessel had not been cared for properly during the period after its return to Australia.

[146]   Mr Hannam accepted during cross-examination that he is currently on friendly terms with Mr Herd but has fallen out with Mr Haines. To that extent I accept care must be taken with his evidence. There was, however, no evidence to challenge his account of what he encountered when he arrived at the boat in or about September 2014. Mr Herd should not be required to meet the cost of rectifying these issues because they would not have been within the contemplation of the parties when they entered into the VBSA.

[147]   In his closing submissions Mr Gedye argued that any deduction to reflect this issue should be modest. He suggested an amount of no more than $6,500 to $7,000 could be justified and I agree. The claim is to be reduced by $6,500 to reflect this issue.

[148]   Secondly, Mr Haines has tendered an invoice dated 26 June 2017 from his company charging him the sum of $2,300. The invoice states that it relates to “Administration costs for Its Time Repossession”, and is calculated on the basis of 40

hours at the rate of $50.00 per hour together with GST. There is no doubt that Mr Haines spent considerable time in overseeing the process that led to the return of the vessel to New Zealand and its re-sale here. There is no evidence, however, that Mr Haines paid the sum of $2,300 to his company for the time he spent working on the vessel. I do not consider Mr Herd should be required to reimburse Mr Haines for this sum because it would not have been within the contemplation of the parties when they signed the VBSA.

[149]   Thirdly, many  of  the  invoices  for  costs  incurred  were  rendered  to  and  (I assume) paid by Mr Haines’ company. The evidence does not disclose whether the company later claimed GST input credits on the payments it made on Mr Haines’ behalf. If it did, those amounts will need to be deducted from the final sum payable by Mr Herd.

To what extent is Rhumba liable under its guarantee?

[150]Clause 10 of the VBSA provided as follows:

10.GUARANTEE

10.1RHL [Rhumba] (“the Guarantor”) hereby guarantees to Haines the due and punctual payment of all moneys payable by Herd to Haines under this Deed and the due and punctual observance and performance of all of the terms in this Deed.

10.2The liability of the Guarantor hereunder shall be joint and several, absolute and unconditional and shall not be abrogated, prejudiced or affected by:

(a)any neglect or forbearance on the part of Haines in enforcing the terms of this Deed;

(b)any variation in the terms of this Deed whether with or without the consent of the Guarantor;

(c)the granting of any time, credit or any indulgence or other concession to Herd;

(d)any compounding with Herd or the Guarantor or any release and discharge of Herd or Guarantor from their respective liability to Haines in respect of any of the obligations guaranteed hereunder or otherwise under this Guarantee and Indemnity or any compromise, abandonment, waiver, variation, relinquishment or renewal or any of the rights of Haines or anything done or omitted or neglected to be done

by Haines in the exercise of the rights, authorities, powers and discretions vested in Haines or by any dealing or thing which but for this provision might operate to abrogate, prejudice or affect the Guarantee and Indemnity given by the Guarantor hereunder;

(e)Haines obtaining a judgement against Herd in any Court of competent jurisdiction for payment of the whole or any part of the moneys payable under this Deed;

(f)the liquidation or bankruptcy of Herd;

(g)by reason of any other thing whatsoever which under the law relating to sureties would but for this provision have the effect of releasing or discharging the liability of the Guarantor in whole or in part.

10.3This Guarantee and Indemnity is to be a continuing Guarantee and Indemnity for the payment of the moneys and the observance and performance of the terms referred to in Clause 11.1.

10.4The Guarantor, to further secure its obligations and the obligations of Herd under this Deed agrees to grant a mortgage over Lot 58 in favour of Haines.

[151]   Under Clause 10 Rhumba agreed to guarantee Mr Herd’s obligations under the VBSA. Rhumba is therefore liable to the same extent as Mr Herd under the VBSA.  It follows that the plaintiffs are entitled to judgment against Rhumba for the shortfall between the consideration payable under the VBSA and price ultimately achieved for the sale of the vessel. Rhumba is also liable for the sum of AUD$40,000, being the interest payable under Clause 6.8 of the VBSA.

[152]   Rhumba was not a party to the original contract, under which Clause 10 gave the plaintiffs the right to sue Mr Herd at common law for damages. In many respects that clause was superfluous, however, because the plaintiffs already had the right at common law to sue Mr Herd for damages if he breached the contract. I have also already held that Clause 9 of the VBSA did not provide an exclusive suite of remedies for breach of the VBSA.

[153]   I do not see any distinction in principle between the damages that Mr Herd should pay and those that Rhumba should pay. All of the claims for damages at common law arise directly and naturally from Mr Herd’s breach of the terms of the VBSA. Rhumba guaranteed the due and punctual payment of all monies payable by

Mr Herd under the VBSA and the due and punctual observance by him of all of the terms of the VBSA. It should therefore be liable for those consequences that flow directly and naturally from his breach of the terms of the VBSA.

Summary

[154]   I enter judgment in favour of the plaintiffs against Mr Herd for the sum of AUD$240,980 in relation to the shortfall between the amount of consideration payable under the VBSA and the price ultimately obtained for the vessel.

[155]   The plaintiffs are also entitled to judgment in the sum of AUD$40,000 being the interest payable under Clause 6.8 of the VBSA.

[156]   I enter judgment for the plaintiffs under Clause 9.7(c) in the sums of AUD$1200.00 and NZ$747.50 for valuation costs and $11053.23 being payments made to Marsden Cove Boatbuilders in November 2017. Judgment for the latter is conditional on the plaintiffs providing the defendants with proof that the payments related to work they were required to undertake in terms of the contract for the re-sale of the boat.

[157]   I enter judgment for the plaintiffs by way of common law damages for the balance of the items claimed by the plaintiffs as set out in the amended schedule produced by Mr Gedye in his closing submissions. Judgment is to be reduced by the sums of $6,500 and $2,300 to reflect the issues referred to above at [136] and [137].

[158]   The plaintiffs are also to reduce the amount for which they seal judgment to reflect any GST input tax claimed by Haines House Haulage Ltd on invoices that form the subject of claims in this proceeding.

Leave reserved

[159]   I reserve leave to all parties to seek further directions or clarification if they cannot reach agreement regarding the amounts for which judgment is to be sealed.

Interest

[160]   I understand that the plaintiffs are not seeking contractual interest in terms of Clause 10(a)(iv) of the original contract. If the plaintiffs seek interest under the Judicature Act 1908 or its equivalent counsel may file memoranda addressing that issue.

Costs

[161]   The plaintiffs are obviously the successful parties and as such are entitled to an award of costs and disbursements in their favour. If the parties cannot reach agreement regarding the issue of costs they may file concise memoranda and I will fix costs on the papers.

Lang J

Solicitors:

Richard Mark, Barrister & Solicitor, Kerikeri Wadham Partners, Palmerston North

Counsel:

N Gedye QC, Auckland

J Maassen, Barrister, Wellington