McCauley v NZ Guardian Trust Company Ltd HC Hamilton CP18/01

[2001] NZHC 402

IN THE HIGH COURT OF NEW ZEALAND
HAMILTON REGISTRY CP18/01

BETWEEN: ROBYN FRANCES McCAULEY
Plaintiff

AND: THE NZ GUARDIAN TRUST COMPANY LTD
First Defendant

AND: NOELINE FRANCES ANDERSON
Second Defendant

COUNSEL: A. Foster for Plaintiff
S.J. Chatwin for First Defendant
S.P. Williams (given leave to withdraw) for Second Defendant

DATE OF HEARING: 21 May 2001

JUDGMENT: 23 May 2001

ORAL JUDGMENT OF HAMMOND J

INTRODUCTION

[1] This is an application for an interlocutory injunction to restrain the defendant trustee from proceeding further with a long-term lease of certain farm land.

BACKGROUND

[21 Ms McCauley is the daughter of Mrs Noeline Anderson (formerly Barker) and Dugald Barker, late of Whatawhata, a farmer.

[3] Mr Barker died on 6 December 1994. Under his will, Mrs Anderson was left a life interest in Mr Barker’s estate. The residuary beneficiaries are the plaintiff, Ms McCauley; her brother Christopher Barker; and her two sisters, Joanne Stewart (now Pudney) and Beverley Campen.

[4] The estate is a substantial one of over $3,000,000. It comprises farm lands in the Waikato and fishing and other business interests.

[5] The late Dugald Barker appointed Mrs Barker, as she then was, Mr James Barker and Mr James Ancel as the executors of his will and the trustees of his estate.

[6] Difficulties subsequently arose between James Barker and James Ancel on the one part, and Mrs Anderson on the other part, with respect to the administration and financial management of the estate. All three trustees then applied to this Court for a release and discharge. By consent the first defendant, (“the Guardian Trust”) was appointed as the sole trustee.

THE SUBSTANTIVE ACTION

[7] Ms McCauley seeks an interlocutory injunction restraining the Guardian Trust and Mrs Anderson from leasing or otherwise creating or conveying any interest in what was described as “the home farm” to a third party, pending the determination of Ms McCauley’s substantive action by this Court.

[8] The factual basis of that claim is that there are two farming properties. One is approximately 500 acres, which was referred to by the parties as “the home farm”. The second is a 400 acre block which was referred to by the parties as “the McGowan block”. The home farm had been as the name implies: it had been the home of Mr and Mrs Barker for many years, and that of the children. The McGowan block had subsequently been acquired in the name of Glenim Farm Ltd. These two parcels of land were then operated as one dry stock unit.

[9] Ms McCauley claims that on or about 8 February 1996 it was orally agreed between the former trustees, as the then trustees in Dugald Barker’s estate, and herself on the other part that, (as pleaded):

(i) Upon liquidation of GLENIM FARM LIMITED the plaintiff would receive in consideration of her siblings receiving cash sums for their respective shares, the McGowan Block; and

(ii) Further, parcels of land from the home farm ultimately identified as 20.2518 hectares being part Allotment 69 and 76.9990 hectares being Lot 2 on Deposited Plan 23224, a total area of 97.2508 hectares, would be transferred to the plaintiff; and

(iii) Upon the basis of maintaining the Barker “family” farm holdings as one, the plaintiff would lease to the D.F. Barker Estate the McGowan block at a rental of $35,000 plus GST per annum, such rental being as determined by the then trustees; and

(iv) Such rental in respect of the McGowan block would not be paid by the D.F. Barker Estate to the plaintiff in consideration of the plaintiff receiving a transfer of those parcels of land as referred to in (ii) above; and

(v) Such unpaid rental would accumulate by way of deposit against that value of land to be transferred to the plaintiff;

(vi) The balance of the purchase price for that land to be transferred to the plaintiff as referred to in (ii) above, given that the Barker “family” farm holdings were to be maintained and farmed as one, would be met by way of crediting unpaid rental in respect of the McGowan block and that further land to be transferred to the plaintiff, against the value of land to be transferred, with the balance owing, if any, to be settled upon the death of the second defendant from the plaintiff’s entitlement as a residuary beneficiary in the D.F. Barker Estate.

[10] This meeting is said to have occupied two hours. No note of it has been produced. The transaction, if it was as agreed, was not reduced to writing. The only written “evidence” is a diary note of Ms McCauley dated 8 February 1 996 which says, in part:

“Went to Barker family meeting at McLearys re McGowan’s property. Settled a deal, but Noeline Barker put on a real performance over family’s behaviour . . . A real disgrace.”

[11] The absence of a written agreement with respect to land would normally be fatal in the sense that, even if made, the contract could not be enforced under the Contracts Enforcement Act 1956. To overcome that difficulty, Ms McCauley relies upon the doctrine of part performance. The particulars of that averment (again, as pleaded) are that Ms McCauley:

(i) Proceeded with the acquision of the McGowan block from GLENIM FARM LIMITED;

(ii) Leased the McGowan block to the D.F. Barker Estate at rental of $35,000 (plus GST) as established by the then trustees and as a result of a valuation having been attained by the then trustees from a valuer Mr J.D. Sharp, deceased;

(iii) Acquiesced to the D.F. Barker Estate having sole management and control of purported development of the McGowan block;

(iv) Waived receipt of rental for the lease of the McGowan block by the D.F. Barker Estate;

(v) Accounted for personal income tax on rental of $35,000 plus GST per annum, being rental not actually paid by the D.F. Barker Estate to the plaintiff in respect of the lease of the McGowan block upon the basis that rental be accumulated as capital against the purchase price of that further land to be transferred from the home farm to the plaintiff;

(vi) Installed the water supply to the McGowan block for the benefit of D.F. Barker Estate stock grazed on the McGowan block, in particular there being a lack of water for estate stock over the summer months of 2000/01.

(vii) Assisted the D.F. Barker Estate farm manager as required in respect of general maintenance of fences, races, plant and machinery and buildings situated in particular on the home farm and also on the McGowan block given that both blocks were to and have been farmed as one.

MS MCCAULEY APPLIES FOR AN INTERIM INJUNCTION

[12] What has precipitated the application which is presently before me is that the Guardian Trust has taken the view that, Ms McCauley having taken over the 400 acre block, it is now economically more sensible to lease the 500 acre block for maize growing. Mrs Anderson remarried after Mr Barker’s death. Although there is a house she can live in on the 500 acre block (and she apparently does so from time to time) she is now principally resident in Taupo. The profit and loss account for the farming operation showed total income for the year ending 30 June 2000 of $334,000 and expenses of $297,000, leaving (after certain adjustments) a net profit of $19,500 for that financial year. These figures are all rounded off.

[13] The trustee took the view that a much better return could be obtained by leasing the home farm for maize growing. It is accepted that the trustee has the power to enter into a transaction of that kind. The Guardian Trust therefore entered into a public tender process for a lease of the home farm.

[14] Ms McCauley thereupon asserted that she has the contractual rights with respect to the home property which I have set out. The trustee took the view that it had not been demonstrated to its satisfaction that such rights existed (and it has to be borne in mind that the Guardian Trust is here only a replacement trustee) and that it could, and should, proceed with the tender process.

[15] In April of this year Ms McCauley applied for an interlocutory injunction. This Court made certain orders preserving the position until this hearing. I also authorised the trustee to open the tenders which had been received by the requisite date (26 April 2001). Only one tender was considered acceptable by the trustee. That is for a long term lease at an annual rent of $115,000 plus GST, with rent reviews. By “long term”, I mean a three year lease with two further renewals for three years, or a possible maximum of nine years. That tenderer has been prepared to leave its offer open until this Court delivers a decision on the application now before me.

[16] Ms McCauley’s position is that if an interlocutory injunction is refused now, the probabilities are overwhelming that the trustee will accept the tender offer and that this will put her claim away from her. The consequential effect is then said to be that the 400 acre block which she “acquired” will not be viable as a dry stock unit.

THE RESPECTIVE POSITIONS OF THE DEFENDANTS ON THE APPLICATION

[17] For reasons which were not made apparent to me, at the outset of the hearing Mr Williams entered an appearance, but sought leave to withdraw. Perhaps this was because Mrs Anderson wanted to avoid an outright confrontation, in Court, with her daughter. But this was not said.

[18] The Guardian Trust has taken the view that a substantial loss of income (something over $100,000 per year) will accrue to the estate if the tender is not accepted. The trustee has therefore taken the position that it should put Ms McCauley to proof of her claim. In normal circumstances, where there is a distinct lis between other parties, the trustee could have been expected to adopt a neutral stance, and to abide the decision of the Court. But here the Guardian Trust does not accept that - even on her own evidence - Ms McCauley has the contractual rights she asserts. And, given the stance taken by Mrs Anderson, the trustee’s actions are not really open to criticism, otherwise the claim might go by default.

THE PRINCIPLES APPLICABLE TO INTERLOCUTORY INJUNCTIONS

[19] I need not deal with this aspect of the application in any depth. Both counsel accepted that this Court must first ask whether there is a serious question to be tried, by which is meant that it is not frivolous or vexatious. There must be a triable issue. If that threshold point is reached, the Court must then proceed to the balance of convenience. In so doing, it must have regard to all appropriate factors. Finally, the Court must step back and determine where the justice of the case lies. If any authority is needed for these propositions, I refer to Klissers Farmhouse Bakers Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 140 (CA).

[20] I would just add this. The merits of a claim are not entirely irrelevant. A Court is not supine. In determining whether there is a serious question to be tried, it may be necessary to look to the “merits” so far as the Court can properly determine them at that point. For, if a claim is entirely without merit, that may, in and of itself, be a proper basis for refusing an interlocutory injunction. (See, for instance, the observations of Hardy Boys J in Shotover Gorge Jet Boats Ltd v Marine Enterprises Ltd [1984] 2 NZLR 1 54 at 1 57).

THE EVIDENCE AND THE ISSUES NOW BEFORE ME

[21] In the course of argument, the issues narrowed themselves considerably as the result of an exchange between the Bench and counsel. In particular, Mr Chatwin accepted that if there was an oral agreement of the character and terms pleaded, then there were acts of part performance which could properly support that agreement.

[22] As to the existence of an “agreement”, Mrs Anderson has not filed a statement of defence. She proposes to abide the decision of this Court. For its part, the Guardian Trust has also not presently filed a statement of defence. But as I understood Mr Chatwin, the trustee’s position is that, even on Ms McCauley’s own evidence, the alleged “agreement” is too indefinite and does not satisfy the requirements for even an oral contract; and/or that the discussions held with Ms McCauley were preliminary only, and certainly did not result in a binding contract. Mr Chatwin said - and he was allowed to say this without objection from the Bar - that the trustee has made a preliminary enquiry of the former trustees. He says they do not support Ms McCauley’s propositions.

[23] That said, it seems to me that I must proceed on the basis of the evidence which lies in affidavit form in my Court. What Ms McCauley said in her affidavit is that the home farm of 500 acres was not viable on its own as a dry stock unit. It had to be farmed with the McGowan block of about 400 acres, and certain other smaller parcels owned by her sister Joanne and a small block of 100 acres on “Maori lease”. Initially Ms McCauley and her mother took the view that the family farm should be carried on. However Mrs McCauley’s sisters and brother did not approve of Mrs Anderson running the family farm after her father’s death. Glenim Farm Ltd (which owned the McGowan block) was to be liquidated. But that meant that the issue of who was to receive that land was crucial, “as [it] was required to keep the family farm . . . intact”.

[24] The future of the McGowan block was first addressed as long ago as 1 2 April 1985. That led to a heated family argument. Then in July 1995 it was suggested that Ms McCauley might take over the McGowan block on its own. She was concerned about such a proposition because she could not see that block as forming an economically viable dry stock unit. Ms McCauley was “very nervous” about the whole situation, but she did not want to see the family farm broken up. She deposed, “At that time, farming was depressed and land values were falling. I was worried because this did not seem to be a good business proposition. I felt I had to protect and help my mother and keep the family farm together”.

[25] The McGowan block had been valued at approximately $700,000. As equal shareholders in Glenim Farm Ltd, Ms McCauley’s sisters and brother were demanding that the block be valued at approximately $800,000, and that Ms McCauley should receive it for that value, “otherwise they would put the land up for sale on the open market”.

[26] Ms McCauley then deposed to the crucial meeting, as follows:

On 8 February 1996 a further family meeting was held at Mr McCleery’s office in respect of the McGowan block. It was then confirmed that I would receive the McGowan block upon the basis that the family farm would be kept intact and run as one unit. Further, that I was to receive additional land of approximately 250 acres so that I would have the security of a viable drystock unit in the event that, for whatever reason, the balance of the estate land was conveyed elsewhere. I was in turn to lease the McGowan block back to the estate at a rent of $35,000 per annum. That level of rental was offered to me and accepted by me without question. It is my understanding that the home farm paid Glenim Farm Limited when that company owned the McGowan block rental of approximately $22,000 per annum. Following my father’s death a valuation was obtained from a Mr J.D. Sharp, I believe in 1995. The valuation is dated 21 April 1995. I understand that in that valuation the fair market rental for the McGowan block was suggested at $35,000. I further understand that both Jim Barker and Doug Ancell as trustees were aware of that valuation as they received the valuation on behalf of the estate. Further, through my mother I learnt that the rental for the McGowan block was discussed by Doug Ancell and Jim Barker at Doug Ancell’s home before I received the McGowan block. Rental of $35,000 in respect of the McGowan block was never to be paid by the estate for its use. The rental was to simply accumulate by way of deposit against that value of 250 acres or thereabouts to be further transferred to me. The trustees had sole management and control of the development and maintenance of the McGowan block.

[27] There is no question that the McGowan block was in fact transferred to Ms McCauley on 16 September 1996. There was no formalised “lease” back to the estate. She maintains that “I was reassured by my mother that additional land for transfer to me was being organised by Mr Parham, the estate solicitor of the firm Tompkins Wake, Hamilton. My mother assured me that she and Jim Barker and Doug Ancell had discussed the matter several times with Mr Parham and with Mr McCleery the accountant. Over the following months I was assured that the matter was progressing.”

[28] Ms McCauley deposes that it is her belief that on 8 May 1997 Mrs Anderson confirmed that she “wanted to sell her undivided one half share of the home farm to [her]”. Hence Ms McCauley understood the essence of the proposal to be that her mother would partition off her one half share in the home farm and transfer that to her. The balance of the purchase price for the additional land would be met over time, through rental from the estate of the additional land to be transferred to Ms McCauley, the family farm continuing to be farmed as a dry stock unit and as one. This would mean that “Mac” [Ms McCauley’s husband] and Ms McCauley “would not be financially stretched, any residual debt owing for the additional land would be settled upon Mrs Anderson’s death”.

[29] As I said to counsel during the course of the hearing, this evidence is uncontradicted. There is no contrary evidence from the trustee or Mrs Anderson. And there was no application - which would admittedly be unusual on this kind of application - to cross-examine Ms McCauley at the hearing. It seems to me, therefore, that I have to consider this application solely on the basis of Ms McCauley’s evidence.

[30] In the result, the central issue for my determination today is whether (on Ms McCauley’s evidence) the essential prerequisites for an oral agreement have been made out.

RESOLUTION

A. The Requirements of the Law

[31] I begin with some elementary observations. If a bargaining process begins between parties, what requirements must be met, if that process is to result in that which the law terms a “contract”? Historically, courts have had concerns along two lines. The first is whether all the necessary parties assented to be bound. And secondly, whether the “agreement” is definite enough to be enforceable.

[32] The first requirement (assent) is implicit in the principle that in contract, liability is consensual. Consent can be by words or conduct. The second requirement (definiteness) is implicit in the principle that what contract law is doing is to protect a promisee’s expectation interests. An appreciation of that concept is important, because it is critical that there be a reasonably certain basis for giving an appropriate remedy. My own view is that there is much force in the proposition which is sometimes advanced that less definiteness may be required to support, for instance, an award of damages than a decree of specific performance. Specific performance must itself be formulated with distinct precision because of the severity of the sanction of contempt. That makes it imperative that a court, and the parties, be certain of the limits of that remedy. Those concerns are of distinct significance to the proceeding before me, for in the substantive claim Ms McCauley seeks an order for specific performance to have transferred to her some portion of the home farm.

[33] The content of the requirement of definiteness is therefore, to some extent, conditioned by the relief claimed. Having said that, attempts by Judges to reduce the required content of an agreement to formulae, themselves give rise to difficulties. One frequently cited authority in New Zealand is Dellaca v PDL Industries [1992] 3 NZLR 89 at 97, per Tipping J:

“A contract for the sale and purchase of land to be enforceable (leaving aside the need for writing) must contain certain terms. I have always guided myself on such a point by saying that there must, as a minimum, be clear reference to the five P’s: parties, price, possession, parcels (sufficient description of the land), and payment.”

[34] Such a statement is, with respect, useful as a check-list. But it also needs to be set in the context of why it is that parties do come to what are claimed to be agreements with less than full precision.

[35] One very common reason is that parties do not want to take the time or the trouble to come to full precision. Sale of goods is quite a good example - buyer and seller may agree to sell goods of a quantity and type, and the price, but they may not then specify the time or place for delivery or payment. But the law can imply delivery within a reasonable time.

[36] A second common cause of indefiniteness is a party’s reluctance to raise difficult issues for fear that the particular deal may fall through. Difficulties over specifying quality often come into this category.

[37] Yet a third cause of indefiniteness is the inability of the parties, at the time they negotiate, to foresee all of the problems that may arise. But if seller and buyer do discuss responsibility for quality and are unable to agree on how that issue is to be resolved, there is then a true failure to agree, which is fatal.

[38] As a matter of approach, traditionally the first step in deciding whether the requirement of definiteness has been met is to look to the language of the agreement, where there is a written agreement. In an alleged oral contract, the facts have to be found.

[39] Secondly, sometimes a Court can legitimately put together enough in the way of terms to satisfy the step from preliminary negotiations (including prior communications) to “contract” by reference to external sources, such as trade and other terms. And even without explicit incorporation, an agreement may take on life by a course of dealing between the parties prior to their agreement, or by a course of performance between them after their agreement. And there are the familiar techniques of deferring unresolved matters to independent third parties; or by unilaterally giving one of the parties a power of resolution (as in the latter case by postponing selection of goods by the buyer).

[40] Again, as a very general proposition, the older view was that a court should not “make a contract for the parties” and that a Judge should not be paternalistic in curing draughters’ failings. The more modern view is that the commercial reality is that every day in practice, less than perfect agreements are negotiated. Therefore, generally speaking, the Court should start with the proposition (and certainly so in the case of written documents) that that which looks like an agreement should, if at all possible, be upheld.

[41] Finally under this head, I note that the degree of uncertainty in any given agreement is a factor which may go to the question of whether the parties intended to create legal relations at all. (See, for instance, Jones v Padavatton [1969] 2 All ER 616 (CA)).

B. This Case

[42] The difficulties in this case strike me as these. First, as to the parties, the initial agreement relied upon seems to have involved not only the three trustees and the plaintiff, but also Ms McCauley’s siblings. This point was not raised by counsel. Quaere, whether they would not have had to be parties to the agreement.

[43] As to the subject land, there is real difficulty. What the statement of claim asserts is that parcels of land “from the home farm ultimately identified . . . “ (italics added) are to be transferred. But the statement of claim is not supported by the specific affidavit evidence. What Ms McCauley there said was: “Additional land of approximately 250 acres” [was to be transferred to her]. That is, the reference is not to the particular parcels of land now identified (retrospectively) in the statement of claim.

[44] Mr Foster sought to shore up this gap when it was raised in the course of argument by saying from the Bar that it was his appreciation that this 250 acres was to be adjoining the McGowan block, and that if that were not so, the 250 acres would be land-locked. The last statement, however, is also not quite correct because the provisions of our law relating to real property could offer relief against land-locked land. There is also the clear suggestion in Ms McCauley’s affidavit that what was really to come from the home farm was what was, at the time of the agreement, an undivided one-half share from her mother. But until a partition took effect which yielded up the land which Ms McCauley wanted, it had not been and could not be identified. And, as Mr Chatwin said, there is no allegation that the subject property was identified by some later agreement between Ms McCauley and the former trustees of the estate.

[45] Then there are the problems relating to price. As I understand the fundamental nature of the alleged transaction, in return for Ms McCauley leasing the McGowan block back to the estate, there was to be a rent of $35,000 per annum. There is no direct lease - at most a broad agreement to lease. Rental was to accumulate and reduce the purchase price against a value to be agreed. There was then no agreed valuation. There is no provision for interest; nor is it a fair and appropriate inference that the term of the agreement was to be for the life of Mrs Anderson. The financial arrangements of this kind were of no little moment and some complexity in accounting and tax terms. I again stress the difficulty of granting relief indeed whether by specific performance or damages- under these heads. In that sense, both price and mode of payments were too indefinite.

[46] Mr Chatwin rightly conceded that New Zealand courts have held that an agreement may be sufficiently certain to be enforceable because the Court can determine the price by reference to objective criteria of market value. (See, for instance, Money v Ven-Lu-Ree Ltd [1988] 2 NZLR 414). But this does not seem to me to be such a case.

[47] In much the same vein, a possession date does not seem to have been spelt out, although there is Court of Appeal authority in this jurisdiction (Bouma v Busst [19981 8 TCLR 168) for the proposition that although an agreement for sale and purchase does not contain a settlement date, there may nevertheless be an enforceable contract because the Court may be able to imply a reasonable time for settlement.

CONCLUSION

[48] At the end of the day, in a case like this, where the Court is proceeding solely on the plaintiff’s evidence (which is presumably being put as high as it possibly can be) a finding of indefiniteness with respect to an agreement for sale and purchase of land (particularly as to the subject matter of the agreement) must necessarily lead to a preliminary injunction being refused, on that count alone.

[49] This of course does not mean an end of the proceeding. It merely means that, in my view, a preliminary injunction should not be now issued. It may be that there is further evidence which could be led at trial from Ms McCauley and others. And, as I observed during the course of argument, but without in any way indicating a holding, the trust estate has had the benefit of the use of Ms McCauley’s land for something like five years now. In the absence of a concluded agreement, there may be issues as to a quantum meruit in her favour.

[50] Finally, the transaction has proceeded so far, in an informal matter, that the case cries out for a resolution at the family level. If necessary there could be a judicial settlement conference, or a third party mediation. And if the parties are unable to resolve matters between themselves, and Ms McCauley still asserts a binding contract, then the fact that the trustee chooses to enter into a lease is not necessarily fatal to her long-term aspirations: the lease for maize grazing may in fact be for as little as three years, and no more than nine. And she may be entitled to common law damages.

[51] In the result, I take the view that this is a case in which the plaintiff is more appropriately left to her remedy, if any, at trial. The application for a preliminary injunction is therefore refused.

[52] The proceeding is to be returned to the next Masters List, for a conference as to the steps now to be taken to advance the substantive proceeding.

[53] As to costs, the trustee does not need an order for costs. It is entitled to its costs out of the estate in the usual way. Mrs Anderson withdrew. I am not disposed to make an order for costs in favour of the estate against Ms McCauley. She will therefore bear her own costs of this application.

Application for interlocutory injunction declined.