Levin Meats Ltd v Perfect Packaging Ltd HC Auckland CIV-2011-409-000018

[2011] NZHC 822

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-409-000018

BETWEEN  LEVIN MEATS LIMITED Appellant

ANDPERFECT PACKAGING LIMITED Respondent

Hearing:         11 May 2011

Appearances: P T Finnigan for Appellant

A Marsh for Respondent

Judgment:      1 August 2011

RESERVED JUDGMENT OF HON JUSTICE FRENCH

Introduction

[1]      In what circumstances will a company be bound by a contract which its

General Manager/Chief Executive Officer has entered into without board approval? [2]      That is the key issue in this appeal from a decision of the District Court.[1]

[1] Perfect Packaging Ltd v Levin Meats Ltd DC Christchurch CIV-2010-009-000986, 26 November 2010.

[3]      A second  key issue  relates  to  the  measure  of  damages  awarded,  and  in

particular whether the District Court Judge was wrong not to deduct the fair market value of the goods which had been sold under the contract in question.

Factual background

[4]      At all material times, Levin Meats Limited was a meat processor with an annual turnover of $80m.

LEVIN MEATS LIMITED V PERFECT PACKAGING LIMITED HC CHCH CIV-2011-409-000018 1 August

2011

[5]      The  General  Manager/Chief  Executive  Officer[2]   of  Levin  Meats  was  a

[2] At the hearing there was a dispute as to whether Mr Grey‘s correct title was General Manager or Chief Executive Officer. On appeal, Levin Meats accepts that nothing turns on whether the designation was General Manager or Chief Executive Officer.

Mr Phillip Grey.

[6]      In February 2008, Perfect sent Levin Meats a sale agreement for the purchase of a Belca Dakar wrapping machine, two image coding machines, printing plates and spare parts. A letter enclosing the agreement was marked ‗Attention Phil Grey‘. The sending  of  the  contract  followed  extensive  negotiations  between  Perfect  and Mr Grey in 2007, the provision of a written quote which Mr Grey had accepted by placing an order in August 2007, and the provision of an earlier draft contract to Mr Grey in December 2007.

[7]      Under  the  February  agreement,  the  purchase  price  was  expressed  to  be

$203,369 plus GST.  The amount of the GST and a 10 per cent deposit was to be paid on delivery, with a further 10 per cent deposit due 20 days from commission. The balance of $201,026.18 was to be paid by way of a premium on all wrapping film purchased from Perfect over a two-year period, it being calculated that Levin Meats would buy 2795 rolls of wrapping material during that period.

[8]      As noted by the Judge, the obvious benefit of this method of payment for Levin Meats was that it would assist cashflow because it meant instalments would only become payable during times of production.   There may also have been tax advantages.

[9]      It was a further term of the agreement that while risk would pass to Levin Meats on delivery, Perfect retained ownership until Levin Meats had paid the full contract price.

[10]     On 7 March 2008 Perfect received payment of the first deposit ($20,336.90)

and GST ($25,421.13) from Levin Meats.   The machine was duly installed and tested.

[11]     On 10 March 2008 Mr Grey emailed Perfect.  The subject line of the email was ―Paper Work‖, the opening sentence referring to ―paper work that just need a little of a tidy up‖.   The email went on to suggest some amendments to the sales contract, and also stated:

Person Guarantee, Im not a Director or Shareholder so I can not sign this any suggestions?

[12]     In evidence, Perfect‘s director, Mr Smith, said he was surprised to read this email because he had always assumed Mr Grey was the main shareholder/director of Levin Meats.   The form of personal guarantee in the sales agreement did not specifically require the signature of a director.  However, Mr Smith agreed it would be more appropriate for a director to sign and (having obtained the names of Levin Meats‘ directors from a Companies Office search) he amended the contract accordingly, showing the named directors as the signatories.  A new buyout clause was also inserted, as well as some minor amendments relating to shipping.

[13]     At Mr Grey‘s request, Mr Smith urgently couriered the amended contract on

26 March 2008 to Levin Meats, to Mr Grey‘s attention, so it would arrive in time for the March board meeting.

[14]     By the end of March 2008, the second deposit ($20,336.90) had been paid and the machine was fully operational.

[15]     The  signed  contract  was  however  never  returned  to  Perfect.    Mr Smith initially attributed this to dilatoriness on the part of one of his own staff, but when the contract still did not arrive he decided to call in to Mr Grey‘s office on 6 August

2008 to collect it himself.  At the meeting, Mr Grey produced the February 2008 agreement and signed it.  Mr Smith queried whether it was okay for Mr Grey to sign that particular contract rather than the March version which required the directors‘ signatures.  Mr Grey assured him he had full signing authority to sign on behalf of Levin Meats and that he would himself give a personal guarantee.

[16]     According to Mr Grey‘s evidence, he was unaware at the time he signed the contract  that  the  directors  of  Levin  Meats  were  in  the  process  of  selling  the

company‘s  business  and  assets  to  another  meat  processor,  Alliance.    Mr Grey testified that he only became aware of the sale on settlement in early November

2008.

[17]     The sale to Alliance did not include the Belca wrapping machine, and the contract with Perfect was not assigned.

[18]     After the sale to Alliance, Levin Meats ceased trading.  The machine was put into storage and then moved to another location.   Levin Meats made no further payments and did not place any further orders for film wrap.

[19]     Both Mr Grey and Mr Smith made attempts to sell the machine, but without success.

[20]     Perfect took legal advice, and in a letter dated 27 October 2009 its solicitors wrote to Levin Meats seeking payment of the full amount of the purchase price still outstanding, namely $191,090.18.

[21]     It did so on the basis of an implied term that in the event the purchaser put itself in the position of not being able to acquire further rolls of wrapping film, the balance of the contract price would become due and payable.  The existence of an implied term to that effect is not disputed.

[22]     When payment was not forthcoming, Perfect issued proceedings for recovery of the purchase price in the District Court against both Levin Meats and Mr Grey.

[23]     Levin Meats disputed liability on the grounds that Mr Grey had no authority to enter into the sale agreement and that accordingly the contract was not binding on the company.

[24]     Before the hearing the parties agreed, in October 2010, that Perfect could lease the machine to another meat processor (Blue Sky Meats NZ Limited) for a 12- month period commencing 1 November 2010.   That was agreed on the basis that Perfect would enter into the lease as agent and without prejudice to its claim that Levin Meats is the actual owner of the machine.

[25]     Under the lease, Blue Sky has the option to purchase the machine at any time during the period of the hire for the price of $120,000.

[26]     At the commencement of the hearing on 22 November 2010, Perfect advised the Judge that it had settled with Mr Grey and accordingly its claim against him, which was based on the guarantee, should be struck out.  The Judge so ordered, and Perfect then called Mr Grey as its first witness, followed by a Perfect employee who was present at the 6 August 2008 meeting, and then Mr Smith.

[27]     Levin Meats was not legally represented.   It was represented by one of its directors, Mr Grieve, who was also the company‘s only witness.

[28]     The  sole  issue  for  determination  was  that  of authority,  Levin  Meats  not raising any defence as regards the nature of the contract or otherwise.

[29]     In his evidence, Mr Grey contended that he had acted within his authority. He  testified  that  as  the  chief  executive  officer,  he  very  much  controlled  the company‘s operations and was authorised to enter into contracts as required with no set limits to the liability of such contracts.

[30]     This was strongly disputed by Mr Grieve.  He claimed Mr Grey did not have any authority to enter into contracts for the acquisition of significant capital items without board approval, and that he did not have the board‘s approval to enter into this particular contract.  According to Mr Grieve, the board had in fact specifically instructed Mr Grey that the only arrangement they would be prepared to countenance was one which allowed Levin Meats to use the machine and pay for consumables, but without any obligation to buy.    It was only after the sale to Alliance that the directors discovered the extent of the obligations under the contract.   Mr Grieve further  alleged  that  the  payment  of  the  deposits  had  been  concealed  from  the directors.

[31]     For its part, Perfect maintained that whatever the arrangements might have been as between Mr Grey and the board, all that mattered was that Mr Grey had apparent authority, which Perfect had no reason to doubt.

The Judge’s decision

[32]     In his decision the Judge stated that because Perfect‘s case was based on apparent and ostensible authority, it was unnecessary for him to determine whether Mr Grey did or did not have actual authority to enter into the contract.[3]

[3] At [7].

[33]     The  Judge  then  referred  to  s  18(1)  of  the  Companies Act  1993,  which relevantly states:

18       Dealings between company and other persons

(1)      A company…  may  not  assert  against  a  person  dealing  with  the company… that—

…

(c)       A person held out by the company as a[n]… employee… of

the company—

…

(ii)      Does not have authority to exercise a power which a[n]… employee… of a company carrying on business of the kind carried on by the company customarily has authority to exercise:

(d)       A person held out by the company as a[n]… employee… of the  company  with  authority  to  exercise  a  power  which a[n]… employee… of a company carrying on business of the kind carried on by the company does not customarily have authority to exercise, does not have authority to exercise that power:

(e)      A document issued on behalf of a company by a[n]… employee… of the company with actual or usual authority to issue the document is not valid or not genuine—

unless the person has, or ought to have, by virtue of his or her position with or relationship to the company, knowledge of the matters referred to in any of paragraphs (a), (b), (c), (d), or (e), as the case may be, of this subsection.

[34]     The Judge noted that as regards s 18(1)(c), there was no evidence as to the powers customarily exercised by a general manager or chief executive officer of a meat processing company.

[35]     However, the Judge was satisfied that the absence of such evidence was immaterial because on his analysis, even if CEOs of meat processing companies do not customarily have authority to sign contracts of the type at issue, the case could still come within s 18(1)(d).

[36]     The Judge accordingly identified the primary issue as being whether Mr Grey was held out by Levin Meats as having authority to sign agreements of that kind, an inquiry which he said must be approached in a commercially realistic way.

[37]     The Judge went on to state that while the fact Mr Grey held himself out as having authority to sign the contract was not of itself material, what was material was  that  the  directors‘ conduct  made  it  more reasonable  for  Perfect  to  rely on Mr Grey‘s express representations about his authority. That conduct comprised:[4]

[4] At [17].

(a)      Conferring upon Mr Grey the title, status and  facilities of general manager (if not chief executive officer) when:

(i)Its general manager might reasonably be expected to have the authority to enter into contracts for the acquisition of capital items of the value of the subject contract.

(ii)The contract was within the ordinary authority of a general manager of a company of the kind and scale of the first defendant.

(b)Its apparent failure to put any internal controls on and to monitor Mr Grey‘s  activities  so  as  to  ensure  that  no  such  unauthorised contracts were entered into.

(c)      Its failure to ensure that Mr Grey kept it informed about the dealings that resulted in the delivery of the machinery to the first defendant‘s premises before the contract was signed.

[38]     In the Judge‘s assessment, while the particular method of financing might be thought unusual, the evidence established it was a method familiar to Levin Meats and which the board had approved before.  The contract itself was not unusual and had clearly been entered into in the ordinary course of Levin Meats‘ business.

[39]     The Judge therefore concluded that the signing of the contract at issue was within the apparent authority of Mr Grey, and it followed from this finding that Levin Meats was liable to perform the contract.[5]

[5] At [19].

[40]     Having reached this conclusion on liability, the Judge then turned to the question of quantum, holding that Perfect was entitled to judgment for the balance of the purchase price owing plus any interest that might be payable.  He further held that, neither party having cancelled the agreement, Perfect must give Levin Meats credit for any payments made by Blue Sky under the lease or upon exercising its option and that Levin Meats will take the benefit of the lease upon payment of the balance of the purchase price and its acquisition of title.

[41]     In  a subsequent  minute, following further submissions  from  counsel,  the

Judge refined the formulation of the judgment in the following terms:[6]

[6] Minute of Judge G S MacAskill as to Form of Judgment, 9 February 2011 at [5].

(a)       Judgment in the sum of $[specify] comprising:

(i)        The balance of the purchase price of the machinery owed by the first defendant to the plaintiff $191,090.18.

(ii)      Less the total sum of the payments made by Blue Sky Meats Ltd to the plaintiff under the lease of the machinery to the date of judgment $[specify].

(b)       Subject to the payment of the judgment sum, costs and interest, the defendant is entitled to receive any additional sums paid by Blue Sky Meats to the plaintiff under the lease or for the purchase of the machinery.

Grounds of appeal

[42]     On  appeal,  Levin  Meats  was  represented  by  counsel  Mr Finnigan.    He advanced a number of grounds of appeal.[7]   These may be conveniently summarised as follows:

[7] A ground of appeal relating to the costs award was abandoned at the hearing.

(i)On  the  evidence,  no  concluded  contract  ever  came  into existence, there being no certainty as to price.

(ii)The Judge was wrong to find on the evidence that Mr Grey had ostensible authority to enter into the contract.

(iii)In finding that the proviso to s 18(1)(d) did not apply, the Judge failed to take into account evidence that showed Perfect was aware or should have been aware Mr Grey did not have authority.

(iv)The Judge was wrong not to deduct the market value of the machinery at the time of breach from the damages.

Discussion

Was the Judge wrong to find that Mr Grey had ostensible authority?

[43]     Sections 18(1)(c) and (d) are statutory estoppels designed to protect those dealing with a company.  They are in large part based on common law concepts of apparent or ostensible authority.

[44]     Apparent or ostensible authority arises when an agent does not have actual authority but the principal allows the agent to appear to have authority to third parties.  Apparent authority acts as a form of estoppel, preventing the principal from

denying the validity of the acts carried out by the agent with apparent authority.[8]

[8] John Farrar (ed) Company and Securities Law in New Zealand (Brookers, Wellington, 2008) at 144

[45]     It  was  common  ground  that  before  the  doctrine  could  apply  to  bind  a company to a contract which its agent has entered into without authority, four pre- requisites or conditions must be satisfied:[9]

[9] Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 (CA).

(i)the making of a representation to the contractor that the agent has the authority to enter on behalf of the company into a contract of the type sought to be enforced;

(ii)the representation must be made by a person or persons who had actual authority to manage the business of the company either generally or in respect of those matters to which the contract relates;

(iii)the third party was induced by the representation to enter into the contract, ie relied on it;

(iv)that in its constitution, the company has not either restricted its capacity to enter into a contract of that type or to delegate authority to enter into a contract of that type to an agent.[10]

[10] Condition (iv) is now of very little practical relevance in New Zealand.

[46]     As  noted  in  Savill  v  Chase  Holdings,[11]   the  essence  of  the  doctrine  of ostensible  authority  is  that  it  is  the  principal‘s  representation  that  creates  the authority, not the agent‘s assertion that he has that authority.   Or to put it another way, the representation of apparent authority must flow from the company and not the agent.

[11] Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 at 305.

[47]     Mr Finnigan  submitted  that  in  this  case  the  Judge  has  misapplied  the principles of ostensible authority, and that his finding of ostensible authority was the result of faulty reasoning and an inadequate analysis of the evidence.

[48]     In support of that submission, Mr Finnigan identified the following alleged errors:

(a)      The Judge made inconsistent findings of fact in that at one part of the judgment  he  states  that  Mr Grey  impliedly  represented  he  had authority,  while  in  another  part  he  says  that  Mr Grey  expressly represented he had authority.

(b)The Judge failed to take into account a February 2009 report written by Mr Grey to his board in which he disclaimed any intention or authority to make any capital purchase of the wrapping machine.

(c)      In   the   absence   of   documentary   evidence   such   as   Mr Grey‘s employment contract, reports and board minutes, the Judge was not in a position to make any findings about the implications of Mr Grey‘s title and designation.

(d)The  Judge  contradicted  himself  by  disavowing  the  need  for  any evidence of the customary powers of a CEO on the grounds of relevance, but then later in the judgment invoking customary powers as a key reason for his ruling under s 18(1)(d).

(e)      The  Judge  was  wrong  to  make  assumptions  about  the  ordinary authority of general managers/CEOs generally in the absence of any evidence.  Evidence of such matters was required whether the inquiry was under s 18(1)(c) or (d).

(f)      In any event, as the case law suggests, it is far more probable that a general  manager‘s  role  is  to  manage  the  company‘s  assets,  not purchase capital items.

(g)The  Judge  made  findings  about  matters  on  which  there  was  no evidential foundation or in respect of which there was a conflict of evidence which he did not resolve.

[49]     In my view, many of these criticisms are unfounded or misconceived.

[50]     Levin Meats agreed to the short cause trial process under the new 2009

District  Court  Rules.   In  those  circumstances,  it  ill  behoves  them  on appeal  to challenge  findings  on  the  grounds  that  documents  such  as  board  minutes  and company contracts were not produced, especially when the documents in question were in their possession rather than the possession of the claimant.  In any event, in so far as the missing documents relate to the scope of Mr Grey‘s actual authority, they were essentially irrelevant.  His actual authority was not the issue.  The issue was his apparent authority as represented by the company.

[51]     For the same reason, it cannot be a valid ground of appeal that the Judge failed to have regard to a board report which indicates Mr Grey must have known he did not have authority.  Also immaterial is whether the Judge wrongly characterised Mr Grey‘s  representation  as  both  express  and  implied.[12]      What  matters  for  the purposes  of  apparent  authority is  the  representation  made  by  Levin  Meats,  not Mr Grey.  Likewise, criticism that the Judge should have treated Mr Grey‘s evidence

with greater caution and looked for corroborative documentary evidence.  Mr Grey‘s credibility did not have the importance it would have done had the issue been his actual authority.

[12] There is in any event no inconsistency. The Judge was referring to two different points in time.

[52]     I accept that the existence of other contracts signed by Mr Grey on behalf of Levin Meats involving the purchase of capital items bears on the issue of apparent authority.  However, while Levin Meats challenged Mr Grey‘s claims that he did not need board approval to enter into those contracts, it was never disputed (with one

exception)[13]   that  he  had  indeed  signed  them.    On the  contrary,  in  answer to  a

question from the Judge, Mr Grieve accepted that there were ―contracts  of similar importance  to  the  one  in  dispute  today  that  Mr Grey  signed  on  behalf  of  the company‖.   Mr Grieve also accepted that in cases where Mr Grey had signed, there was no way the other contracting party would have known whether the board had approved the transaction or not.

[13] The Cryovac contract, worth over $400,000 according to Mr Grieve.

[53]     In those circumstances, there was clearly a sufficient evidential foundation for a finding that Mr Grey had been involved in the acquisition of capital items of

significant value. At best for Levin Meats, it could be said (as the Judge did say) that this particular purchase was at the higher range of items that Mr Grey acquired without the contract being signed by the directors.  Production of the contracts would not have taken matters further.

[54]     Nor do  I consider it  is  open  to  Levin  Meats  on  appeal  to  raise  alleged inconsistencies in the evidence of Mr Grey when those alleged inconsistencies were never put to him.   Mr Grey‘s testimony that he would have signed the February contract in February but for the personal guarantee is not necessarily inconsistent with his March email requesting other amendments to the contract.  It may well be that he did not consider these other changes were significant and would have been prepared to proceed without them, as in fact he ultimately did.  In saying that, I have not overlooked other inconsistent statements in Mr Grey‘s information capsule and earlier will-say statements, but without these being drawn to his attention and an explanation sought, it would be wrong for me, especially on appeal, to attach significance to them now.

[55]     Where Mr Finnigan was in my view on stronger ground was his argument that the Judge failed to distinguish adequately between s 18(1)(c) and (d).   There does seem to be an apparent contradiction between the Judge on the one hand relying on what authority a general manager might reasonably be expected to have, while at the same time saying the case may be decided under subs (1)(d) upon the assumption that a person in Mr Grey‘s position does not customarily have authority to sign contracts of that kind.

[56]     For  my  part,  if  required  I  would  have  been  prepared  to  accept  without evidence  that  a  chief  executive  officer  of  a  company  like  Levin  Meats  would normally have authority to enter into contracts for the acquisition of capital items of the  value  of  the  contract  at  issue.    Significantly,  the  various  authorities  which

Mr Finnigan relies on involved middle management, not a chief executive officer.[14]

[14] Kreditbank Cassel v Schenkers Ltd [1927] 1 KB 826; Freeman & Lockyer, above n 9; Leaper v Sealord Shellfish Ltd [2010] DCR 191; The National Mutual Life Association of Australia Ltd v Coal Corporation of New Zealand Ltd (1992) 6 NZCLC 67,722.

[57]     However, for reasons which I will now explain, it is not necessary for me to decide this appeal on that basis.

[58]     The key difference between s 18(1)(c) and s 18(1)(d) is that subs (1)(d) involves an agent having apparent authority that would exceed his or her normal customary authority.

[59]     On the assumption it is not common for a chief executive officer of a meat processing company the size of Levin Meats to enter into contracts of this type, it follows that to satisfy subs (1)(d), more than just the designation ‗chief executive officer‘ is required.

[60]     In my view, there was more in this case.  The evidence established that Levin Meats was a family-owned company with the directors residing in the North Island and never seen at the plant.  While Mr Grey was in regular contact with one director and was required to file monthly reports to the  board, it is clear he enjoyed a significant degree of autonomy.   The directors did not even know that Mr Grey‘s business card showed him as the CEO, nor presumably that his email signature also stated that he was the Chief Executive Officer.  When outsiders contacted the plant, Mr Grey was the only person available, and appeared to be in complete control. Further, and very significantly, Mr Grey had previously negotiated and signed contracts for the purchase of valuable capital items on behalf of the company.  He was also placed in a position to be able to make payment of the deposits and the GST. There was an obvious lack of supervision and monitoring.

[61]     The combined effect of these matters persuades me that, whatever the normal practice may be in meat processing companies, Levin Meats held out or represented to the world at large, and in particular Perfect, that Mr Grey did have the authority to enter into a contract of the type at issue.    Section 18(1) and the conditions of ostensible authority at common law are satisfied.

Did the Judge err in finding that the proviso to s 18(1) was not applicable?

[62]     It was common ground that under the proviso to s 18(1), Perfect would not be entitled to rely on s 18(1)(d) if Mr Smith knew or ought to have known Mr Grey did not have authority to enter into the contract.

[63]     It was also common ground that ‗knowledge‘, for the purposes of the proviso, was wider than actual knowledge and would include imputed or deemed knowledge such as wilfully shutting one‘s eyes to the obvious, wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make, knowing of circumstances which would indicate the facts to an honest and reasonable person, and knowing of circumstances which would put an honest and reasonable person on

inquiry.[15]

[15] Farrar (ed), above n 8, at 121-122.

[64]     In his decision the Judge referred to the existence of the proviso but stated that Levin Meats had not raised any matter relating to it and accordingly there was no need to consider it any further.

[65]     Mr Finnigan submits this overlooks three crucial items of evidence:

(i)Perfect‘s discovery in March 2008 that Mr Grey was not a director or shareholder.

(ii)Perfect‘s  conduct  in  submitting  an  amended  form  of  the contract requiring it to be signed by the directors.

(iii)Perfect‘s  knowledge  that  the  directors  had  not  signed  the amended contract at their March board meeting.

[66]     Those matters, Mr Finnigan submitted, should have alerted Perfect to the fact

Mr Grey  did  not  have  authority,  or  at  least  prompted  Perfect  to  question  its assumptions and make further inquiries.

[67]     Mr Finnigan also drew my attention to the following passage in the notes of evidence when Mr Smith acknowledged that the failure to return the signed March contract had aroused his suspicions:[16]

[16] Perfect Packaging Ltd v Levin Meats Ltd CIV-2010-009-000986 (Notes of Evidence, 22

November 2010) page 96, line 10.

Q.       - but we can look at that. That‘s from March.

A.       Yes.

Q.       And that wasn‘t signed?

A.       No.

Q.       Did that arouse your suspicions?

A.       It did and I – I wasn‘t responsible for the North Island area, although

– and I‘d had issues with our representative up there about getting the signed document.  And I put pressure on him to sign it, to have the document signed.  I don‘t know what Phil Grey was doing with the documents I‘d sent him.  Every time I seemed to send him one, I was asked for an amendment to be made.  That last amendment was made with your names on it for signature, for your signatures.  We never had that.   I had a copy on at the time I called in to get the contract signed by Phil.  He produced a document that was an earlier one  and  I thought,  ―Well  why aren't  you  signing?   Where‘s  the signed documents with the directors‘ names on?‖   And he said – I said, ―Are you okay about signing this document because you were unhappy about it before?‖  And he said it was okay.   He had full signing authority.

[68]     In Mr Finnigan‘s submission, this evidence is irreconcilable with the Judge‘s finding that the directors‘ failure to sign in March was insufficient to put Perfect on notice.

[69]     I do not accept that submission.  Unfortunately, Mr Smith was never asked what his suspicions concerned.  Viewed in context and looking at his evidence in its entirety, the most likely interpretation is that Mr Smith‘s suspicions related not to Mr Grey‘s authority but rather the bona fides of Levin Meats and the possibility of it trying to welch on the personal guarantee, if not the whole deal.

[70]     Mr Smith regarded himself as having reached a concluded agreement with

Levin Meats well before the meeting on 6 August 2008.

[71]     In my view he was right to do so.  At the very latest a contract must have come into existence by the end of March 2008.   By that time the plant had been installed and was fully operational, and the two deposits had been paid.  Levin Meats had also ordered and paid for film at the premium rate.  All the essential terms had been agreed.  Suspicions in August 2008 are therefore irrelevant.

[72]     A personal guarantee did of course require a signature.  It is noteworthy that in his 10 March 2008 email, Mr Grey only raised the issue of his status in relation to the personal guarantee, not the contract as such.  He was not saying, and never did say, ―I cannot sign a contract of this sort.‖

[73]     I am satisfied the Judge was correct to find the proviso was not applicable.

Was there certainty of contract?

[74]     This is an issue that was never raised in the District Court.

[75]     I am not prepared to grant Levin Meats leave to raise it now, not least of all because I consider (for the reasons articulated above at [71]) that it is an argument without merit.

[76]     For  completeness,  I  should  add  that  in  support  of  his  argument  that  no concluded contract ever came into existence, Mr Finnigan also relied on the fact that certain attachments to the February 2008 agreement were never produced.   The documents in question included pricing information.  Mr Finnigan submitted there was therefore no certainty as to price.   However, the uncontradicted evidence was that the documents were enclosed.   There was also never any suggestion at the hearing that price had not been agreed, and this was never put to either Mr Grey or Mr Smith.

Was the Judge wrong not to deduct the value of the machine?

[77]     Mr Finnigan submitted that, this being a contract for the sale of goods, the correct measure of damages was the value of the promised benefits not received (ie payment of the purchase price) less the value of the machine at the time of breach.

In support of that contention he referred me to section 51 of the Sale of Goods Act

1908 and the decision of Ryan v Hallam.[17]

[17] Ryan v Hallam [1990] 3 NZLR 184.

[78]     Mr Finnigan contended that the option price of $120,000 under the Blue Sky lease should be taken as the fair market value and deducted from the contract price, or alternatively that the matter should be remitted to the District Court to enable expert valuation evidence to be called.

[79]     I disagree that either course of action is appropriate.

[80]     It  is  well  established,  as  indeed  Mr Finnigan  himself  accepted,  that  the measure of damages is flexible and that general rules may yield to the interests of achieving justice on the particular facts.

[81]     In this case, the evidence established there was no available market in the sense that the wrapping machine could not be freely and readily re-sold.  Mr Smith gave unchallenged evidence about several unsuccessful attempts to sell the wrapping machine.  Mr Smith further testified that the figure of $120,000 in the Blue Sky lease was based on depreciation.  On the evidence, it seems highly unlikely that Blue Sky will exercise the option.

[82]     In those circumstances, I consider that the Judge‘s approach was principled and a sensible, practical solution which was fair and reasonable to both parties.

Outcome

[83]     In my view, appellate intervention is not warranted. [84]        The decision of the District Court Judge is confirmed.

[85]     As regards the costs of this appeal, my expectation is that these will be able

to be resolved by agreement between the parties.

[86]     If,  however,  agreement  does  not  prove  possible  and  a  formal  award  is required, Mr Marsh is to file submissions first, followed by any submissions in reply ten working days thereafter.

Solicitors:

SRB Law, Christchurch

Duthie Whyte, Auckland

P T Finnigan, Auckland