Matapiro Olives (2008) Limited v The Olive Press Limited
[2020] NZHC 876
•4 May 2020
IN THE HIGH COURT OF NEW ZEALAND MASTERTON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKAORIORI ROHE
CIV-2019-436-17
[2020] NZHC 876
UNDER the Companies Act 1993 BETWEEN
MATAPIRO OLIVES (2008) LIMITED
Applicant
AND
THE OLIVE PRESS LIMITED
Respondent
Hearing: 16 April 2020 Appearances:
T Wano for applicant
R Gordon and A Leggat for respondent
Judgment:
4 May 2020
INTERIM JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
[1] This is an application pursuant to s 290 of the Companies Act 1993 by Matapiro Olives (2008) Ltd for an order setting aside a statutory demand dated 22 October 2019 served on it the same day by The Olive Press Ltd.
[2] The case concerns the interpretation of a contract between the parties whereby Matapiro, a Hawkes Bay producer of olives, engaged The Olive Press, a Wairarapa processor to process olives. The dispositive issue is whether, in that contract, Matapiro assumed a commitment to consign to The Olive Press 250 tonnes of olives in each of three seasons, 2018, 2019 and 2020. Matapiro contends it made no such commitment. The Olive Press says that it did.
[3] It is common ground between the parties that the terms of the contract are contained in a series of emails exchanged between Matapiro’s Managing Director, Mr John Arthur, and The Olive Press’ Chairman, Mr Rodney Lindgard, concluding on
MATAPIRO OLIVES (2008) LIMITED v THE OLIVE PRESS LIMITED [2020] NZHC 876 [4 May 2020]
28 April 2018, together with The Olive Press’ Handbook containing its standard terms of trade.
[4] In an email dated 26 April 2018, which obviously followed some preliminary discussions, Mr Lindgard set out The Olive Press’ offer to Matapiro as to the terms upon which it would be prepared to contract:
Thanks for the information, and for the opportunity to provide you with an olive processing proposal tailored to your needs.
We note your preferences (which we have no issue with) and propose the following accordingly:
Conditions
·Commitment to contract process with [The Olive Press] for 2018, 2019 and 2020 olive harvests
·Minimum through put each season 250 tonnes of olive fruit
·Minimum daily batch of 10 tonnes of olive fruit (estimated from bin volumes)
·Maximum daily batch of 16 tonnes estimated (excess fruit held over to following day)
·Batches booked accurately (by varietals and indicative volumes) 14 days in advance
·Deliveries confirmed no longer than 12 noon the day before
·Fruit delivered no later than 10:00 am on confirmed processing day
·Supply own Talclenzyme processing aids as per batch/bin instructions
·Supply own oil containers with/without bladders
Undertakings
…
Rates & charges
·Default rates e.g. 50c per kg for 50 plus tonnes, as per 2018 handbook
·Contract flat rate of 47c per kg for 2018 season, subject to above conditions
·Admin charge of $45 per batch waived, subject to above conditions
·Other charges as per 2018 handbook
·Any rate/charge increases for 2019–2020 seasons not to exceed respective CPI annual adjustment in March each year
Payment terms
·Rebate of 2c per kg on standard/contract rates if payment made 14 days prior to delivery (based on estimated batch tonnages)
·Otherwise standard payment terms of full payment prior to all uplift to apply, as per 2018 handbook
In all other respects, [The Olive Press’] Terms of Trade will apply — see page 13 in our 2018 handbook, as attached.
[5] There obviously followed further discussions between Mr Arthur and Mr Lindgard because, on 27 April 2018, Mr Lindgard emailed Mr Arthur again saying:
Hi John, thanks for the call Wednesday night, I appreciate your frank and supportive approach.
We are prepared to amend our proposal below as follows:
·Contract flat rate of 45c per kg for 2-year term (until end of 2019 season)
·Start date Tuesday 15 May at 9:00 am
·Priority processing on Tuesdays, Wednesdays, Thursdays, Fridays and Saturdays
…
I’m keen to lock our arrangement in today if possible as I would like to get another customer email out as soon as possible regards an early start. We don’t expect much fruit at the beginning but it should dovetail in nicely with your deliveries and will be seen positively by local growers.
[6] Mr Arthur emailed Mr Lindgard on 28 April 2018 accepting the terms proposed.
[7] It is unnecessary to traverse in detail what then transpired during the 2018 season, except to record:
(a)First, that Matapiro consigned approximately 350 tonnes of olives to The Olive Press that season;
(b)Second, that the parties fell out in relation to payment for the processing of Matapiro’s 2018 harvest. In short Matapiro did not pay The Olive Press’ invoices within the timeframe that would have entitled it to the 45c per kg rate, with the result that The Olive Press issued invoices based on the default rate and ultimately pursued a claim based on that rate by serving a statutory demand and commencing winding up proceedings. In the end, Matapiro paid the full amount of the invoices;
(c)Third, this appears to have resulted in a degree of friction between the parties, or at least between Mr Arthur and Mr Lindgard. In relation to this there is a considerable amount of affidavit evidence before the Court in this proceeding as to the nature of this discord and the impact that it might or might not have had on the parties’ subsequent actions. I reach no views about these matters, which would necessarily be speculative.
[8] The evidence is that the 2019 olive season was not an especially good one. There is some difference in the parties’ evidence as to the extent of this fall-off in production, but nothing turns on this. Mr Arthur’s evidence, which is uncontested, is that Matapiro’s olive groves produced only approximately 12 tonnes, and that the company decided that it would be uneconomic to have this harvest processed. Instead it sold its entire harvest to a third party. Thus Matapiro did not consign any olives to The Olive Press for processing in 2019.
[9] On 30 September 2019, so well after the end of the olive harvesting season, The Olive Press rendered an invoice to Matapiro for the processing of 250 tonnes of olives at the minimum contract rate, that is to say 45c per kg. When Matapiro contested its liability to pay anything in respect of the 2019 harvest (in correspondence between the parties’ solicitors), The Olive Press served its statutory demand, whereupon Matapiro filed and served this originating application.
[10] Mr Wano for Matapiro helpfully summarised the principles that apply to applications to set aside statutory demands under s 290 of the Companies Act. In
doing so he relied on Confident Trustee Ltd v Garden and Trees Ltd,1 Carpet Plus 2013 Ltd v Ateam Flooring Specialists Ltd 2 and AAI Ltd v 92 Lichfield Street (in rec and in liq).3
[11] As Mr Wano submitted, in Confident Trustee Ltd, the Court of Appeal summarised the principles involved as follows: 4
(a)The onus is on the applicant seeking to set aside the statutory demand to show that there is arguably a genuine and substantial dispute as the existence of the debt. The Court’s task is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due.
(b)The mere assertion that a dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed.
(c)If such material is available, the dispute should normally be resolved first in ordinary civil proceedings before any statutory demand is issued.
(d)If a counterclaim, cross-demand or set-off is suggested, an applicant must establish that this is reasonably arguable in all the circumstances.
(e)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of creditability arise unless such evidence is contrary to the available documents or earlier statements made by the parties.
[12] Mr Wano then emphasised what was said by the Court of Appeal in AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq):5
It is important to keep in mind the words of the statute. What the applicant must show is that the dispute it raises has substance; the applicant must explain to the Court what the dispute is; and the dispute so shown must be a real and not a fanciful or insubstantial dispute … The Court must also keep in mind the requirement that what is intended to be a summary hearing should not be converted into a full-blown trial.
[13] Mr Gordon accepted that analysis of the principles to be applied, but emphasised that the resolution of this case does not involve any disputed factual issues,
1 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578.
2 Carpet Plus 2013 Ltd v Ateam Flooring Specialists Ltd HC Akld CIV-2008-404-4728.
3 AAI Ltd v 92 Lichfield Street (in rec and in liq) [2015] NZCA 559.
4 Confident Trustee Ltd v Garden and Trees Ltd, above n 1, at [16].
5 AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq), above n 3, at [22].
and that the sole question is the proper interpretation of the contract. On that basis, he submitted that this is a case in which the Court can and should resolve the conflict.
[14] That brings me to the essential issue for determination, in relation to which counsel’s submissions were polarised.
[15] On behalf of Matapiro Mr Wano submitted in effect that, having not consigned any olives to The Olive Press in the 2019 season, the company had no obligation to pay anything. On behalf of The Olive Press Mr Gordon contended that the parties’ contract was of a “take-or-pay” nature, or in other words that Matapiro had committed to consign to The Olive Press a minimum of 250 tonnes of olives for each of the three seasons involved and was obliged to pay at the minimum contractual rate for that amount, whether or not it consigned any olives for processing.
[16] In assessing the parties’ competing contentions, I bear in mind that the burden on Matapiro is only to establish that its contention has substance and is not merely fanciful or insubstantial.
[17] The starting point is the terms of the contract on which the parties agreed in their email correspondence. In this regard it is noteworthy that the parties agreed that the standard terms set out in the Handbook would only apply to the extent that they were necessary to flesh out anything not otherwise settled. This is clear from the final passage of Mr Lindgard’s email of 20 April 2018:
In all other respects, [The Olive Press’] Terms of Trade will apply — see page 13 in our 2018 Handbook, as attached.
[18] Mr Wano and Mr Gordon both focussed on the first two “Conditions” set out in Mr Lindgard’s email of 20 April 2018:
·Commitment to contract process with [The Olive Press] for 2018, 2019 and 2020 olive harvests
·Minimum throughput each season of 250 tonnes of olive fruit
[19] In my view, there is no room for dispute as to the meaning of those words. Matapiro made a commitment to engage The Olive Press exclusively to process olives
for it during the three seasons. As to quantity, Matapiro committed itself to consign a minimum of 250 tonnes in each of the three seasons (in consideration for the discounted processing rate).
[20] Nor do the terms under the headings “Rates & charges” and “Payment terms” appear to me to be ambiguous. The parties agreed on a flat rate of 45c per kg (for 2018 and 2019), the availability of which was predicated upon Matapiro paying prior to pick up. If Matapiro did not pay prior to pick up (as in the 2018 season), then The Olive Press would be entitled to charge at the standard rates as set out in its Handbook.
[21] Mr Wano however referred to aspects of The Olive Press’ Handbook — in particular its Terms of Trade as contained in the Handbook — which he contended put a different complexion on this.
[22]He referred first to cl 7 which provides:
Customers will be invoiced according to the weight and corresponding cost of each batch processed as per [The Olive Press’] Processing Rates and Schedule of Charge.
[23] I cannot see how cl 7 assists Matapiro. It is a description of The Olive Press’ standard terms and conditions, the very terms and conditions which the parties altered in their correspondence.
[24] Mr Wano then referred me to a note to The Olive Press’ 2018 Processing Rates and Schedule of Charges — also contained in the Handbook — which provides:
Where seasonal throughput is less than estimated, customers will be charged at season end for any rate difference that may occur e.g. an estimated harvest of 12 tonnes originally priced at 70c per kg would all be charged retrospectively at 80c per kg if the actual seasonal throughput turned out to be only 8 tonnes.
[25] Again, this seems to be entirely irrelevant in the present case where the parties negotiated a different arrangement involving exclusivity for three years, a minimum quantity and a flat rate (fixed for the first two years).
[26]In reliance of those provisions Mr Wano submitted:
… that the correct interpretation of the Contract is as follows:
18.1When a discounted rate is offered, Matapiro is obliged to comply with a series of requirements or a default rate will apply.
18.2Where the Minimum Throughput Condition in the Contract is met, Matapiro is able to receive the benefit of the discounted contract flat rate of 45c per kg of olives processed for the 2018, 2019 and 2020 olive harvesting seasons.
19.It is submitted that the Contract does not require Matapiro to provide a minimum level of throughput of 250 tonnes for the 2018, 2019 and 2020 olive harvesting seasons, nor does it provide [The Olive Press] with the contractual right to invoice Matapiro for the balance in the event that Matapiro does not provide 250 tonnes for processing.
[27] I am unable to accept that submission. Whilst it is true that the contract provides that different rates might apply depending on whether Matapiro pays whatever it is obliged to pay in a timely way, those rates are simply the agreed flat rate for processing of 45c per kg and the standard rate (again, for 2018 and 2019). It appears to me to be quite impossible to interpret the contract as saying in effect that if Matapiro does not meet its obligation to consign a minimum quantity of olives in any season then the arrangements revert to The Olive Press’ standard terms of trade under which that company can only charge for olives actually consigned and processed.
[28] Mr Wano developed a further argument based on the need for the Court to adopt a “commercially realistic” interpretation of the contract.
[29] I do not think it does any disservice to Mr Wano’s argument to summarise it as coming down to the proposition that it is commercially unrealistic to imagine that Matapiro would have committed itself to a contract which obliged it to consign at least 250 tonnes of olives to The Olive Press for processing for three seasons, given the fickle nature of the agricultural industry and the risk that that would involve — in short that the parties could not have meant to say what they did say in their contract.
[30] Where two parties enter into a contract which is unambiguous in respect of one party’s obligations it is simply not open to that party to contend, after the event, that the contract should be interpreted so as to give rise to a different set of obligations because the obligations that arise on the face of the agreement are commercially
unrealistic.6 That would involve rewriting the parties’ contract so as to relieve one of them of the consequences of a bad bargain. This is not the Court’s role.
[31] In any event, I have some difficulty in this case in seeing why it should be asserted that it is commercially unrealistic to think that Matapiro would have entered into the commitment which on the face of things it did to consign 250 tonnes of olives to The Olive Press for processing in each of the three seasons. For a start, as at the date of the agreement, 28 April 2018, Matapiro must be assumed to have known that it would meet or exceed that threshold in 2018, as it did. There is no reason to think that the company would not have been confident of its ability to do so in the two following seasons. In any event, contracts are of course largely about the attribution of risk between the parties and, as Mr Gordon submitted, if Matapiro did regard the possibility of not having a 250 tonne harvest in any season as an unacceptable one, it was always open to the company to insure against that risk.
[32] In the end, the view I take is that it is not open to Matapiro to contend that the Court should relieve it of its contractual responsibilities on the ground that it would not have entered into them because they are not “commercially realistic”.
[33] During the course of the hearing an issue arose on which neither counsel had focussed.
[34] This being an application for an order setting aside a statutory demand, the immediate matter for determination is whether Matapiro as the applicant can establish that there is a genuine dispute as to whether the alleged debt is due.
[35] The alleged debt is of course the amount of The Olive Press’ invoice of 30 September 2019 ($129,375 incl of GST), which forms the basis of the statutory demand.
[36] I have already concluded that Matapiro’s failure — for whatever reason — to consign at least 250 tonnes of olives to The Olive Press for processing in the 2019
6 As Tipping J put it in Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] NZLR 44 at [20], “A party cannot be heard to say — never mind what I signed, this is what I really meant.”
season constituted a breach of contract, and of course it was on that basis that The Olive Press rendered its invoice.
[37] It is important not to lose sight of the fact that Matapiro’s primary breach of contract was its failure to consign at least 250 tonnes of olives, not its failure to pay The Olive Press’ invoice.
[38] It is of course elementary that in an action for breach of contract the innocent party may only recover damages reflecting its proven loss (except in cases involving claims pursuant to liquidated damages clauses, which Mr Gordon does not contend this is).
[39] Matapiro’s contractual obligation in this case was disjunctive, not only because it could have discharged it by consigning 250 tonnes of olives or more, but also because it could have elected to pay processing costs at either of two rates. But there is no difficulty in identifying the counterfactual here — that is, how things would have panned out had Matapiro not breached the contract — because The Olive Press claims the minimum amount that would have been payable — the minimum quantity of olives (250 tonnes) and at the minimum rate of 45c per kg.
[40] However, that appears to me to ignore a potentially important point, namely whether Matapiro’s breach resulted in any cost savings to The Olive Press for 2019.
[41] The issue is whether it is open to Matapiro to contend that The Olive Press’ net loss is not properly reflected in, and less than, the amount of its invoice.
[42] The difficulty is that this possible line of argument was not expressly signalled in Matapiro’s originating application, affidavit evidence or written submissions. Nor, as I say, was it addressed until raised by the Court.
[43] Matapiro’s application arises in the context of winding up proceedings — or potential winding up proceedings — and I am reluctant to take a drastic step such as winding the company up without Matapiro having had a chance to develop such an argument.
[44] Equally, it would be quite unfair to resolve the case on the basis of an issue that was not signalled by Matapiro and which The Olive Press has therefore not had a proper opportunity to address.
[45] In the interests of justice the appropriate course appears to me to be to invite a further exchange of evidence and submissions in relation to this issue and I direct:
(a)The Olive Press is to file and serve any further affidavit evidence (limited to addressing the above issue) and any further written submissions (limited to five pages) within 10 working days of the date of this interim judgment;
(b)Matapiro is to file and serve any affidavit evidence in reply (again, limited to addressing the above issue) and any further written submissions (again, limited to five pages) within a further 10 working days.
[46] On receipt of that material I will deal with the remaining issue on the papers and give a final judgment.
[47] I authorise the Registrar to accept for filing unsworn affidavits if the parties are unable to arrange for such affidavits to be sworn to meet the above timetable as a result of the Covid-19 crisis, provided that (unchanged) sworn versions of the affidavits are filed and served as soon as possible.
[48] I also reserve leave to the parties to come back to the Court by memorandum if the above timetable is unworkable.
Associate Judge Johnston
Solicitors:
Govett Quilliam, New Plymouth for applicant
Minter Ellison Rudd Watts, Wellington for respondent
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