Marima Valley Farm Limited v Bartholomew - [2010] NZCA 441

IN THE COURT OF APPEAL OF NEW ZEALAND
CA509/2010
[2010] NZCA 441
BETWEENMARIMA VALLEY FARM LIMITED

Appellant

ANDFLORA BERYL BARTHOLOMEW, DAVID JOHN TULLOCH AND DOUGLAS ROWAN

Respondents

Hearing:9 September 2010

Court:Glazebrook, Arnold and Ellen France JJ
Counsel:P S J Withnall for Appellant

G A Paine and D Rowan for Respondents

Judgment:24 September 2010 at 4.30 pm

JUDGMENT OF THE COURT

AThe appeal is allowed and the judgment of Joseph Williams J of 4 August 2010 is set aside.
B The respondents must pay the appellant costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________
REASONS OF THE COURT
(Given by Glazebrook J)
Table of Contents
Para No

Sale of a dairy farm  [1]
The agreement  [6]
Fonterra’s constitution  [13]
Joseph Williams J’s judgment  [15]
The legal position  [19]
Our assessment  [22]
Result  [29]
Sale of a dairy farm
[1]        Marima Valley Farm Ltd (Marima) owns a dairy farm near Pahiatua. By agreement for sale and purchase dated 15 April 2010, it agreed to sell its land and 71,696 shares in Fonterra Co-operative Group Ltd (Fonterra) to the respondents as trustees of the Bartholomew Tulloch Trust (the Trustees). Settlement was to be on 2 June 2010 and the price was set at $2.6m.
[2]        As the shares could only be transferred with the consent of Fonterra, there was a specific clause in the agreement covering that approval. Clause 22.9 of the agreement required the Trustees to make an application to supply Fonterra with milk. Under Fonterra’s constitution, such an application is deemed to be an irrevocable application to become a shareholder in proportion to the applicant’s milk production. Clause 22.9 also provided that if the application was received by Fonterra after 28 February then the agreement was conditional on Fonterra accepting the Trustees’ application for supply.
[3]        The condition in cl 22.9 was to be satisfied on or before 29 April 2010. On 28 April 2010 the Trustees’ solicitors wrote to Marima’s solicitors seeking an extension to the deadline. The Trustees said that they saw no difficulty in their application to become a Fonterra shareholder being approved and that they anticipated settlement would occur smoothly on 2 June 2010.[1]
[1]Fonterra subsequently (but before 7 May 2010) communicated its approval of the Trustees’ application to supply.
[4]        On 29 April 2010 Marima refused the extension. It indicated that, if the condition in cl 22.9 was not satisfied by 5pm on that day, the agreement would be at an end. The Trustees’ solicitors replied on the same day. They purported to waive the condition in cl 22.9. They said that the clause was for their exclusive benefit and that they viewed the contract as now unconditional. In a later letter on that same day they advised that their application to supply had been received by Fonterra. The next day Marima replied, denying that the condition in cl 22.9 was for the sole benefit of the Trustees and, as it had not been fulfilled, formally cancelled the agreement.
[5]…

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: [2010] NZCA 441
Decision Date: 24 September 2010

CaseChat Overview and Summary

In the Court of Appeal of New Zealand, Marima Valley Farm Ltd (Marima) appealed against the decision of Joseph Williams J, who had held that a condition in a contract for the sale of a dairy farm could be waived by the purchaser and that specific performance of the agreement should be ordered. The Court of Appeal was asked to determine whether the condition in question was for the sole benefit of the purchaser and whether it was severable. The appeal was allowed and the earlier judgment was set aside.

The agreement for the sale of a dairy farm was a package deal that included land, improvements, and shares in Fonterra Co-operative Group Ltd (Fonterra). Clause 22.9 of the agreement required the purchaser to make an application to Fonterra to supply milk and was conditional on Fonterra accepting the application by a certain date. The purchaser purported to waive this condition, but Marima refused to complete the sale on the grounds that the condition had not been satisfied. The purchaser applied for summary judgment, which was granted by Joseph Williams J. Marima appealed against this decision.

The Court of Appeal found that the condition in clause 22.9 was not solely for the benefit of the purchaser, as Marima also had an interest in ensuring that Fonterra's consent was obtained before settlement. Furthermore, the condition was not severable due to the constitutional restrictions on the transfer of shares. The Court concluded that the condition was necessary to ensure that the purchaser could supply Fonterra as a "fully shared supply," as contemplated in the agreement. The Court of Appeal set aside the earlier judgment and ordered the respondents to pay the appellant's costs for the appeal.

Orders