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LMCHB Ltd v Buller Coal Ltd

LMCHB Ltd v Buller Coal Ltd

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Case Copied 27 March 2023 81 min read

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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2021-485-524

[2023] NZHC 633

UNDER the Declaratory Judgments Act 1908

BETWEEN

LMCHB LIMITED (formerly L&M Coal Holdings Limited)

Plaintiff

AND

BULLER COAL LIMITED

First Defendant

BATHURST RESOURCES LIMITED

Second Defendant

Hearing: 20-21 June 2022

Appearances:

J B M Smith KC, M C Smith and H E McQueen for Plaintiff J E Hodder KC, R J Gordon and A S Kirk for Defendants

Judgment:

27 March 2023

Re-issued:

29 March 2023

JUDGMENT OF ISAC J

LMCHB LTD v BULLER COAL LTD [2023] NZHC 633 [29 March 2023]

TABLE OF CONTENTS

Introduction  [1]
Background  [7]
The Supreme Court’s decision  [19]
The hearing and issues  [26]
What was the effect of cl 3.10 on the Deed of Guarantee?  [29]
Relevant contractual documents

The Agreement [32]
The Royalty Deed [38]

The Deed of Guarantee [40]

The Amendment Deed [46]

The parties’ arguments [50]

L&M’s position [51]
Buller Coal’s position [53]

Principles of contract interpretation and the admissibility of extrinsic
evidence [57]
Whole contract approach and interpretation of related contractual
instruments [59]

Consideration [67]

Is the first performance payment due under the Deed of Guarantee? [80]

The parties’ arguments

L&M’s position [81]
Buller Coal’s position [88]

Consideration [93]

The law of guarantees and the nature of liability of a guarantor                 [94] The terms of the Deed of Guarantee and the Agreement for Sale and
Purchase  [97]
The effect of the Supreme Court’s judgment in the context of this case    [109]

Do the Contract and Commercial Law Act or an implied term permit

Buller Coal to rely on cl 3.10? [111]

Is L&M’s promise in cl 3.10 enforceable by Buller Coal under s 12? [112]

An implied term? [117]

Does a Henderson v Henderson abuse arise? [121]

Legal principles  [123]
The parties’ arguments  [127]
Consideration  [135]

Remaining procedural issues [151]

L&M’s challenges to the admissibility of evidence [152]
The use of the declaratory judgments procedure [154]

Conclusion and result [156]

Costs [158]

Post-script [159]

Introduction

[1] In 2021 the Supreme Court found that the plaintiff, L&M, 1 was not yet entitled to a USD 40 million performance payment from the second defendant, Bathurst, under an agreement for the sale of coal mining interests.2 The Court found that although a contractual threshold for the performance payment had been reached, an amendment to the sale agreement meant that Bathurst was entitled to postpone the payment as long as royalties due to L&M were paid in accordance with a separate royalty deed. As royalties continued to be paid as required, the Supreme Court found that Bathurst was not yet liable to make the performance payment.

[2] Undeterred, in this second proceeding L&M applies for a declaration that it is entitled to exercise security rights in relation to the performance payment. It argues the Supreme Court’s judgment only determined Bathurst’s liability under the agreement for sale and purchase. In this new proceeding L&M pursues Bathurst’s subsidiary, Buller Coal (the first defendant) in…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NZHC 633
Decision Date: 27 March 2023

CaseChat Overview and Summary

LMCHB Limited (formerly L&M Coal Holdings Limited) sought a declaration that it was entitled to exercise security rights in relation to a USD 40 million performance payment due under a sale agreement from Buller Coal Limited, a subsidiary of the second defendant, Bathurst Resources Limited. The sale agreement and a deed of guarantee were executed in 2010. The Supreme Court had previously found that Bathurst was not liable to pay the first performance payment as royalties had been paid in lieu. L&M argued that the Supreme Court’s judgment only determined Bathurst’s liability under the sale agreement and that it was now free to pursue Buller Coal under the guarantee. The Court considered three issues: whether the amendment to the sale agreement also modified Buller Coal’s guarantee; whether Buller Coal’s liability under the guarantee had crystallised; and whether L&M’s decision not to raise the guarantee in the previous litigation amounted to an abuse of process. The Court found that the amendment to the sale agreement did not affect Buller Coal’s guarantee as the two were separate contracts. The first performance payment was not due under the guarantee because it was not due under the sale agreement. L&M’s decision not to pursue Buller Coal in the previous litigation was unreasonable and amounted to an abuse of process. L&M’s application for a declaration was dismissed, and Bathurst was awarded costs on a 2B basis.

Orders