LSD 2017 Limited v Landscaping Direct Limited - [2022] NZCA 657

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA40/2022
[2022] NZCA 657

BETWEEN	LSD 2017 LIMITED Appellant
AND	LANDSCAPING DIRECT LIMITED (in liquidation) Respondent

Hearing:	15 August 2022
Court:	Katz, Wylie and Palmer JJ
Counsel:	J A Browne and J P Cartwright for Appellant No appearance for Respondent
Judgment:	21 December 2022 at 2:00 pm

JUDGMENT OF THE COURT

ALeave is granted to amend the pleadings to reflect a cause of action that LSD 2017 Limited had overpaid the annual option fee.
BLeave is declined to amend the pleadings to add a new cause of action regarding contractual mistake.
CThe appeal is dismissed.

____________________________________________________________________

REASONS OF THE COURT

(Given by Palmer J)

Summary

LSD 2017 Ltd (LSD) sued Landscaping Direct Ltd (Landscaping) for misrepresentation inducing entry into contracts for the supply of quarried scoria and other building materials (the Supply Agreement) and for purchase of certain assets (the Purchase Agreement). The High Court dismissed the claim, which was heard by way of formal proof.[1] On appeal, we find that there was a misrepresentation but the entire agreement clauses in the contracts mean LSD was not induced to enter into the contracts, and it was not reasonable for LSD to rely upon the misrepresentation. We grant leave to LSD to amend the pleadings to argue that it overpaid the annual option fee, but we dismiss the appeal on that issue as well. We decline leave to amend the pleadings to add a new cause of action for contractual mistake. If LSD wants to argue contractual mistake, it will need to bring a new proceeding. The appeal is dismissed.

What happened?

The Royalty Agreement

[1]LSD 2017 Ltd v Landscaping Direct Ltd [2021] NZHC 3386 (Powell J).

There are three active scoria quarries in New Zealand. The Semenoff Group of companies (the Semenoff Group) operate one in Northland and have a range of other business interests including transport. In 2017, Landscaping also operated a scoria quarry in Taupō (the Quarry) and transported material from the Quarry to depots at Silverdale and Takanini in Auckland. Landscaping was facing financial difficulties.
In July 2017, Mr Stan Semenoff, Mr Alex Semenoff and Mr Lloyd Dixon‑Parrant, of the Semenoff Group, met with Mr Shaun Fredricksen and Mr Rob Yeoman of Landscaping. When they started negotiating, Landscaping provided them with a royalty agreement (the Royalty Agreement) dated 7 June 2011 which it had as the exclusive contractor with the owners of the Quarry as well as the owners of the Māori land under the Quarry, Te Rangatira E Trust and the Māori Trustee. Landscaping paid royalties per tonne of material sold, subject to review during the term of the Royalty Agreement and on renewal. The term of the contract was five years from 20 May 2011 with two rights of renewal for five years each and final termination in May 2026. Landscaping’s obligations were guaranteed by Mr Fredricksen. Clause 7 of the Royalty Agreement provided explicitly that Landscaping’s interest was not…

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: [2022] NZCA 657
Decision Date: 21 December 2022 at 2:00 pm

CaseChat Overview and Summary

LSD 2017 Limited (LSD) sued Landscaping Direct Limited (Landscaping) for misrepresentation relating to the extension of an agreement to mine a scoria quarry and the purchase of certain assets. The High Court dismissed the claim, and LSD appealed. The Court of Appeal found that there was a misrepresentation that an agreement had been extended for a further 15 years, but the entire agreement clauses in the contracts meant LSD was not induced to enter into the contracts, and it was not reasonable for LSD to rely on the misrepresentation. The Court of Appeal granted leave to LSD to amend the pleadings to argue that it overpaid the annual option fee, but dismissed the appeal on that issue as well. The Court of Appeal declined leave to amend the pleadings to add a new cause of action for contractual mistake. If LSD wants to argue contractual mistake, it will need to bring a new proceeding. The appeal was dismissed.

The Court of Appeal found that there was a misrepresentation that an agreement to mine a quarry had been extended for a further 15 years. The misrepresentation was effective as a representation to LSD, which was the contracting party. The Court of Appeal agreed that the misrepresentation induced entry into the contracts. However, the entire agreement clauses in the contracts prevented LSD from succeeding in its argument that the misrepresentation induced it to enter the contracts. The Court of Appeal also found that it was not reasonable for LSD to rely on the misrepresentation, given the uncertainty of the extension and the fact that Landscaping's interest in the quarry could not be assigned. The Court of Appeal granted leave to LSD to amend the pleadings to argue that it overpaid the annual option fee, but dismissed the appeal on that issue as well. The Court of Appeal declined leave to amend the pleadings to add a new cause of action for contractual mistake, finding that LSD may be able to pursue a contractual mistake claim by filing a separate proceeding. The appeal was dismissed.

Orders