Manukamed Investors v Salem Charitable Trust HC Masterton CIV-2010-435-243
[2011] NZHC 1760
•18 November 2011
IN THE HIGH COURT OF NEW ZEALAND MASTERTON REGISTRY
CIV-2010-435-243
BETWEEN MANUKAMED INVESTORS Plaintiff
ANDSALEM CHARITABLE TRUST First Defendant
ANDDENIS ERIC WATSON Second Defendant
Hearing: 7 November 2011 (Heard at Wellington)
Counsel: A.W. Johnson - Counsel for Plaintiff
K.P. Sullivan - Counsel for Defendants
Judgment: 18 November 2011 at 3:00 PM
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
This judgment was delivered by Associate Judge Gendall on 18 November 2011 at
3.00 pm under r 11.5 of the High Court Rules.
Solicitors: Martelli McKegg, Lawyers, PO Box 5745, Wellesley Street, Auckland 1141
Wilson & Co, Solicitors, PO Box 208, Wellington 6143
MANUKAMED INVESTORS V SALEM CHARITABLE TRUST & ANOR HC MAS CIV-2010-435-243 18
November 2011
Introduction
[1] Before the Court are applications for summary judgment by the plaintiff seeking:
(a) The grant of leave to file that application against the defendants; and
(b)Orders by way of limited specific performance of an agreement for sale and purchase between the parties.
[2] The application is opposed by the defendants.
Background Facts
[3] The parties here represent two interest groups, the first being the Watson interests who are broadly resident in New Zealand, and the second being the Buckley interests who are broadly resident in the United States of America.
[4] In mid 2009 they entered into a joint venture agreement relating to the supply of manuka honey for manuka honey based specialist medical products. As part of that agreement the plaintiff as purchaser entered into a Sale and Purchase Agreement with the first defendant (the Agreement) for the purchase of approximately 1,000 of its hives in New Zealand. The second defendant guaranteed the performance of the obligations of the first defendant under the Agreement.
[5] The purchase price for the hives was $1,000.00 per hive meaning the full purchase price under the contract was $1,000,000.00.
[6] Settlement under the Agreement was completed some time ago and the
$1,000,000.00 purchase price paid to the first defendant.
[7] As part of the completion and settlement arrangements to be undertaken under the Agreement, clause 4.2 of the contract stated:
4.2 Transfer of Hives
On the completion date, against payment of the purchase price in accordance with clause 3, the vendor must deliver to the purchaser:
(a) Ownership and control of the hives (it being agreed that the vendor will fulfil this requirement by leaving the hives at the premises);
(b) A fully completed transfer of registration form as prescribed by the
National Pest Management Strategy (NPMS);
(c) Confirmation that it has a fixed unique identification tags to the Hives.
[8] Although para 4.2(a) noted above has been complied with, the plaintiff contends that the defendants have not carried out their obligations required under clauses 4.2(b) and (c) above.
[9] The present summary judgment application specifically seeks at para 1.2:
1.2 Specific Performance of the Agreement as to:
1.2.1 The completion of a fully completed transfer of registration form as prescribed by The National Pest Management Strategy for the
1,000 hives the subject of the agreement.
1.2.2 Confirmation as to the affixing of unique identification tags to the
1,000 hives, the subject of the agreement, (full particulars being provided of the specific steps taken).
[10] The operative part of the defendants’ Notice of Opposition to the present summary judgment application sets out the following grounds upon which summary judgment is opposed:
(a) The Agreement requires the dispute to be determined by mediation, and no mediation has been convened.
(b) The plaintiff has no authority to bring this proceeding.
(c) The formalities of transfer were drafted by lawyers using terminology which applied to the American Foulbrood Pest Management Strategy (AFPMS) rather than to the transfer of legal ownership.
(d)The registration under the AFPMS does not determine the transfer of ownership.
(e) The 1000 hives of Manukamed Investors are managed by Watson and
Son Ltd (WSL) under a Supply and Service Agreement.
(f) The 1000 hives owned by Manukamed Investors have been registered on the AFPMS under Watson and Son’s code so that the hives can be administered.
(g)The transfer to a new code H4409 in the name of Manukamed Investors can be actioned but the hives will need to be marked with this new code and the responsibility for compliance with the AFPMS will need to be renegotiated as part of the supply agreement with Watson and Son.
Counsels’ Arguments and My Decision
[11] Rule 12.2(1) of the High Court Rules deals with summary judgment applications and provides that this Court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action. The principles relevant to that assessment were summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd:[1]
The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1; (1986) 1 PRNZ 183 (CA), at p 3; p 185. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [1979] 3 WLR 373 (PC), at p 341; p 381. In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[1] Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26] (adopted more recently by the Court of Appeal in Cockburn v CS Development No 2 Ltd [2010] NZCA 373, (2010) 24 NZTC 24,431 at [26]):
[12] There are four preliminary matters which need to be addressed here. I now deal with these in turn.
A. Application for Leave to File the Present Summary Judgment
Application
[13] The plaintiff ’s present claim for summary judgment was filed after ordinary proceedings were commenced and the application therefore requires leave pursuant to r 12.4(2) High Court Rules.
[14] In support of this leave application the plaintiff notes that the present summary judgment application was filed only after the defendants had filed their statement of defence. Para 9 of that statement of defence specifically pleads:
They (the defendants) deny para 9 and state further that ownership and control of the hives was completed in accordance with the sale and purchase agreement, other than the formality of registration and confirmation of affixing unique tags.
[15] The plaintiff contends therefore that this pleading in para 9 of the statement of defence contains an admission that the Agreement was not complied with in so far as first, completion of a transfer of registration and secondly affixing of unique tags on the hives (as required by clause 4.2 of the Agreement) is concerned.
[16] As a result, the plaintiff says that the absence of a defence only became apparent as a result of this pleading by the defendant with the present summary judgment application filed shortly thereafter.
[17] In my view there is strength in this argument. I am satisfied that leave should be granted to bring the present summary judgment application.
[18] An order is made granting leave accordingly.
2. Mediation
[19] It is the defendants’ contention here that in the Agreement at clause 9.3 the parties agreed a process to resolve disputes which required mediation in the event that they were unable to achieve a resolution.
[20] There can be no doubt here that these joint venture parties have now fallen out in a major way. Clearly from all the material before the Court, they have a range of disagreements and disputes over a wide number of issues. The present proceeding relates to only one of those issues.
[21] It is the contention of counsel for the defendants therefore, that as mediation was the forum to which disputes were to be referred, that must apply here.
[22] In response, the plaintiff argues that in fact in the present case there are no matters in dispute. Its position is that the defendant has freely admitted it has failed to comply with clauses 4.2(b) and (c) of the Agreement and thus, as there is no dispute on these issues, there is nothing to mediate and clause 9.3 of the Agreement does not apply.
[23] As I understand the position, there is already an existing mediation between the Buckley interests and Watson & Son Limited. This mediation however relates to the servicing of hives but this is not relevant to the Agreement here, nor is Watson & Son Limited a party to this proceeding. I accept the plaintiff’s contention that a reference to mediation is not appropriate in the present case as the matters over which it complains are not in dispute.
[24] I dismiss this mediation referral defence advanced for the defendants.
3. Authority to Bring the Proceedings
[25] This issue was raised in related loan agreement proceedings which were before this Court earlier.
[26] The defendants complain that bluntly speaking, the plaintiff here seeks to obtain retrospective consent to the bringing of the present proceedings many months after they have been filed. That authority it seems is claimed following the holding of meetings of the joint venture where no representatives of the defendants or the Watson interests were present.
[27] Mr Watson the second defendant appears to depose that he and his interests as one of the joint venture partners forming the plaintiff object to the authority of the present proceedings.
[28] In response, the plaintiff notes that in earlier proceedings when this issue of authority was raised, an adjournment was granted by this Court so that further meeting/s of the joint venture parties could be convened to obtain the necessary authority to continue with the proceeding.
[29] In an affidavit before the Court, Mr Buckley confirms the following matters:
(a) On 22 September 2011 (US date) a notice was sent to Mr Watson and Mr Scarlett being board members on behalf of the Watson entities for the joint venture confirming a time for a meeting by way of audio link up at 11.00 am on 7 October 2011 (NZ time). The faxed confirmation of this was attached to Mr Buckley’s affidavit.
(b)There was no attendance by the Watson entities’ board members at the audio link-up meeting which took place on 7 October 2011.
(c) On 12 October 2011 (US date) notice of a supplementary meeting was forwarded to Mr Watson and Mr Scarlett. That supplementary meeting was called for Tuesday, 25 October 2011 at 11.00 am (NZ time).
(d) There was no attendance by the Watson representatives at the 25
October 2011 supplementary meeting.
(e) Instead, Mr Buckley and Mr Brosche (as the board members present) voted in favour of the resolution authorising the bringing of the present and other proceedings). In doing so, it is said that Mr Buckley also exercised a casting vote as “Chairman” of the joint venture.
(f) After the supplementary meeting, minutes of the meeting were again forwarded to Mr Watson and Mr Scarlett.
[30] Mr Buckley submits that as a result of the resolution at the supplementary meeting there is authority available to the plaintiff now to ratify and/or continue with its present proceeding.
[31] Against this, Mr Sullivan for the defendants raises certain issues concerning the meeting process and the assumption by Mr Buckley that he may have continued as Chairman of the joint venture.
[32] Mr Sullivan contends that in terms of the Joint Venture Agreement entered into by the parties it is now Mr Watson who is deemed to be “Chairman” and therefore any suggestion that Mr Buckley may have made a “casting vote” is inappropriate.
[33] Whilst that may be correct, in my view it does not affect the clear position that the Watson interests chose not to participate in either the 7 October 2011 joint venture board meeting or the 25 October 2011 supplementary meeting. Mr Sullivan contends that clause 4(c) of the Joint Venture Agreement must apply here and this provides:
A resolution of the Board is passed if it is approved by a majority of the Board members or, at a supplementary meeting under clause 3(b) of this Schedule 1, by a majority of the Board members then present (provided one board member representing each party has voted in favour of the resolution).
[34] He contends that, as no Board member representing the Watson interests had voted in favour of the resolution at either the initial meeting or the supplementary meeting, then it could not be properly passed.
[35] With respect I disagree. Although the wording of clause 4(c) of the Joint Venture rules on its face appears to be clear, its result if applied literally would be an absurd one. This would mean that any disapproving party could simply absent themselves from every board meeting and supplementary board meeting and thus
prevent the passing of any resolution whatever to enable the joint venture to progress.
[36] The situation in my view is covered under the rules in para 3(b) of the Joint
Venture Agreement which provides for a supplementary meeting and states in part:
... the Board members attending the supplementary meeting shall constitute a quorum for the transaction of the business referred to in the Notice of Meeting and any business necessarily incidental thereto which may come before the meeting.
[37] As I see the position, a pragmatic consideration of para 4(c) of the rules shows that it provides for a resolution of the board to be passed in two situations. The first is if it is approved by a “majority of the board members”. The second which is an alternative (by the inclusion of the word “or”) in my view is superfluous. This is the alternative that a resolution of the board is passed at a supplementary meeting but requiring one board member representing each party to vote in favour of that resolution. As I see it that alternative as noted above leads to an absurd situation.
[38] I am satisfied here that passing of the resolution in question at the supplementary meeting was carried out in a satisfactory manner and authority for the plaintiff to bring this proceeding has been properly provided. I decide this preliminary point also in favour of the plaintiff.
4. Name of the Plaintiff
[39] The plaintiff here is known as Manukamed Investors. It is an unincorporated joint venture between BMH Investors LLC a United States company and Salem Honey Limited Partnership, a duly registered partnership having its registered office in Masterton New Zealand.
[40] The defendants have taken issue with the plaintiff suing in the name of the joint venture.
[41] Accordingly, before me if necessary the plaintiff has sought leave to substitute the partners of the joint venture (BMH Investors LLC and Salem Honey
Limited Partnership) as the plaintiff in place of Manukamed Investors. That application is brought pursuant to r 4.56 High Court Rules if it may be required.
[42] The defendants object to any such change of name of the parties here and submit that the present proceeding is simply a nullity. With respect I disagree.
[43] I am satisfied there is no prejudice to the defendant in this case if the plaintiff remains simply described as Manukamed Investors or indeed even it is changed to substitute the actual joint venture constituted partners. At all times it is clear to the parties who the plaintiff is and in any event, in my view, because of the close relationship shared between all the parties in the various transactions between them, the position here is entirely clear.
[44] Accordingly, I dismiss any defence to the present application raised by the defendants on the basis that the plaintiff is incorrectly named. I find that the plaintiff is correctly named here and that there is no need for any change.
[45] Having disposed of these preliminary issues I now turn to consider the two substantive issues before the Court in the present application.
Substantive Issue 1 – Completed Registration Form
[46] As noted at para [9] above the present summary judgment application seeks as a first substantive remedy the completion by the defendants of a fully completed transfer of registration form as prescribed by The National Pest Management Strategy for the 1,000 hives the subject of the Agreement.
[47] On this, the only defence which appears to be advanced by the defendant is the suggestion that a completed registration form is merely a formality, it does not determine transfer of ownership of the hives and is really not necessary here.
[48] In my view this argument is quickly disposed of. Clause 4.2 of the Agreement as I see it is not simply about ownership. This clause is headed “Transfer of Hives”. Clause 4.2(a) refers to delivering ownership and control of the hives.
Sub-clauses (b) and (c) however are clauses relating to the identification and registration of the particular hives as now being hives owned by the plaintiff.
[49] As I see the position, sub-clauses (b) and (c) go beyond this issue of ownership. Issues concerning the Personal Property Securities Act might well arise here and the plaintiff as I understand it contends that at the moment, it might not be in a position to properly register its security interests under the Personal Property Securities Act in the hives as against those parties who are currently in possession of the hives be they lessees, bailees or otherwise.
[50] From the National Pest Management Strategy transfer of registration form it is clear that a number of details need to be provided in relation to each particular apiary where the hives are situated. It is this information which the plaintiff contends would enable it to properly register its security interests as against those various apiary property owners, but at the moment it maintains that it is not able to do this. The plaintiff suggests therefore that its priority position is at risk as against any General Security interest holders registered on the Personal Property Securities Register for the various apiary property owners.
[51] In my view there is substance in these arguments. But, in any event and notwithstanding this, as I see it the requirements outlined in sub-clause 4.2(b) of the Agreement are clear and unequivocal. As a mandatory requirement, the vendor under the Agreement is to deliver to the purchaser a completed transfer of registration form for the 1,000 hives as prescribed by the National Pest Management Strategy. This clearly has not occurred here. There is simply no defence of any substance advanced by the defendants in response to this aspect of the plaintiff’s claim. An order by way of summary judgment requiring specific performance of clause 4.2(b) of the Agreement is to follow.
Second Substantive Issue – Affixing of Identification Tags to the Hives
[52] Under this issue, again as I have noted at para [9] above, the plaintiff seeks specific performance of clause 4.2(c) of the Agreement which requires confirmation
by the vendor as to the affixing of unique identification tags to the 1,000 hives the subject of the Agreement.
[53] There is no disagreement between the parties that clause 4.2(c) of the Agreement does specify a mandatory requirement for the vendor to affix unique identification tags to the hives and this does not appear to have occurred.
[54] It does seem the defendants have acknowledged that the hives in question have been registered with an appropriate authority under the code held by Watson & Sons Limited. Mr Sullivan for the defendants contends that details of the location of the hives and the occupier of the property in question are all held by Watson & Son Limited as beekeeper and by The New Zealand Ministry of Agriculture and Fisheries.
[55] In addition however, Mr Sullivan also appears to concede at para 22 of his submissions before me that the unique identification tag markings “are not finished”. He says that every beehive has to be visited and the new code number H4409 marked on it. He acknowledges it is not disputed that the Agreement requires some form of marking, but contends that the affixing of tags is the only issue outstanding.
[56] Mr Sullivan notes that the process to complete the affixing of tags requires a person to visit each farm and to mark with some form of indelible marker or paint the number on the hive.
[57] Mr Watson apparently has said that he or his son can take Mr Buckley or someone representing the Buckley interests to every farm to show them the hives in question. This however does not affect the mandatory obligation under the Agreement to affix the unique identification tags.
[58] As I see the position, again there is no defence of any kind to the plaintiff’s claim here. Affixing of the identification tags to the hives appears to me to be relevant both with respect to the confirmation of ownership of those hives and also regarding the provision of further details to enable the plaintiff to perfect registration
of any security interest it may wish to register under the Personal Property Securities
Act.
[59] Mr Watson at para [25] of his affidavit has indicated that he is now setting up a new code (H4409) under the plaintiff ’s name and the hives in question can be physically tagged with this new number. He notes however that this has not as yet occurred. In his 6 May 2011 affidavit Mr Watson indicates the physical change to tag all the hives in question is likely to take some three months.
[60] Given that no real defence of any kind has been advanced here to this second substantive claim made by the plaintiffs, summary judgment is to be granted to the plaintiff and the specific performance order sought for the affixing of the identification tags is to follow. As to timing, there was no real opposition from Mr Johnson for the plaintiff to the defendant having a period of three months for the affixing of these unique identification tags. That work is to be undertaken within three months of the date of this judgment.
Conclusion
[61] For all the reasons outlined above, the plaintiff ’s application for summary
judgment here succeeds.
[62] Orders by way of specific performance of the Agreement are now made whereby:
(a) The defendants are forthwith to procure and deliver to the plaintiff a fully completed transfer of registration form as prescribed by The National Pest Management Strategy for the 1,000 hives the subject of the Agreement, to enable completion of the registration of this transfer to properly occur.
(b)The defendants are within three months of the date of this judgment to procure the affixing of unique identification tags to the 1,000 hives the subject of the Agreement to identify and mark those hives as
being the property of the plaintiff and also within that period to confirm that this has occurred providing full details of the specific steps taken to carry out this identification and marking.
[63] As to costs, the plaintiff has been successful in this summary judgment application and I see no reason why costs should not follow the event in the usual way.
[64] The plaintiff is therefore entitled to costs which are now ordered against the defendants on this application on a category 2B basis together with disbursements as fixed by the Registrar.
‘Associate Judge D.I. Gendall’
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