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OHL Ltd v Johns

OHL Ltd v Johns

Case [2019] NZHC 594 27 March 2019

Implied Duty of Honest Performance

Statutory Interpretation

Commercial Law

Contract Law

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-2377

[2019] NZHC 594

BETWEEN
OHL LIMITED

Plaintiff

AND

LLOYD DAVID JOHNS, TREVOR

RAKENA WI KAITAIA, MARAMA FAYE OTI and FAENZA RURUHI KINGI

WAIAUA as responsible trustees of the PERIA CHARITABLE TRUST

Defendants

Hearing: 18 March 2019

Appearances:

N Gedye QC for the Plaintiff R C Mark for the Defendants

Judgment:

27 March 2019

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by me on 27 March 2019 at 3.30 p.m. pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar

……………………………………

Solicitors / Counsel:
Mr N Gedye QC, Barrister, Auckland
Mr B McKinnon (plaintiff’s instructing solicitor) Mr R C Mark, Solicitor, Kerikeri

OHL LTD v JOHNS [2019] NZHC 594 [27 March 2019]

Introduction

[1] The defendants are the trustees of an Ahu Whenua Trust that owns pinus radiata forestry lands in Te Tai Tokerau/Northland. The plaintiff, OHL Ltd, an administration company, claims to be the grantee of forestry rights over the land. The plaintiff says it has succeeded to a 62 per cent of the interests in the forestry right as a result of an amalgamation of companies under s 225 of the Companies Act 1993 (the 1993 Act).

[2] In 2017 the defendants granted “competing forestry rights” over the same lands and trees to third parties. The plaintiff sues for breach of contract and breach of fiduciary duty contending that the defendants have repudiated and purported to terminate the plaintiff’s contract with the defendants. The sale of the trees and the rights to proceeds from them has deprived the plaintiff, it is claimed, of all its interests in the forestry rights.

[3] The plaintiff seeks summary judgment as to liability on the first cause of action, namely breach of contract. The plaintiff claims that the outcome of the application, and of any subsequent damages award, may dictate whether the plaintiff needs to pursue the second cause of action (breach of fiduciary duty).

[4] The defendants say that the forestry right cannot pass to the plaintiff, pursuant to s 225 of the 1993 Act, because:

(a)It is both an express and implied term of the forestry right that it cannot pass to any party without the defendants first having given their prior written consent. The defendants did not give their consent for the assignment of the forestry rights.

(b)It is an implied term of the forestry right that there is a duty of honest performance. The plaintiff breached a duty of honest performance in failing to notify the defendants of the amalgamation and that the plaintiff is now the grantee of the forestry right and failing to carry out the contractual obligations of the grantee.

[5] One of the principal concerns of the defendants is the association of Mr Mark Hotchin with OHL Ltd. The defendants say they would never have agreed to OHL Ltd holding the forestry right given this association. The grantee has unrestricted…

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.

Continue reading OHL Ltd v Johns

Details

AGLC: OHL Ltd v Johns [2019] NZHC 594
Case: [2019] NZHC 594
Decision Date: 27 March 2019

CaseChat Overview and Summary

The High Court of New Zealand was asked to decide whether the plaintiff, OHL Ltd, could obtain a summary judgment against the defendants, the trustees of an Ahu Whenua Trust, for breach of contract and breach of fiduciary duty. The plaintiff claimed it had succeeded to a 62 per cent interest in a forestry right over lands owned by the defendants. The plaintiff alleged that the defendants had repudiated and purported to terminate the plaintiff’s contract with them by granting competing forestry rights over the same lands and trees to third parties. The plaintiff sought summary judgment as to liability on the first cause of action, namely breach of contract, and claimed that the outcome of the application might dictate whether the plaintiff needed to pursue the second cause of action for breach of fiduciary duty. The defendants argued that the forestry right could not pass to the plaintiff without their prior written consent and that the plaintiff had breached a duty of honest performance by failing to notify the defendants of the amalgamation and that the plaintiff is now the grantee of the forestry right. The court found that the defendants’ defence of equitable set-off was arguable and the plaintiff had not established that it lacked credibility or sufficient detail. The court also found that there was no basis in law for submitting that the forestry right ceased to exist upon amalgamation because the prior written consent of the defendants was not obtained and that the defendants’ claim in relation to the duty of honest performance was untenable. The plaintiff’s application for summary judgment was dismissed. The defendants were directed to file, within 14 days, an amended statement of defence providing particulars of the equitable set-off and to provide the relevant initial disclosure in relation to that set-off. The proceedings were to be the subject of a case management conference.

Orders