Pango New Zealand Limited v Peria Trust

[2021] NZHC 961

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2019-404-2556

[2021] NZHC 961

BETWEEN

PANGO NEW ZEALAND LIMITED

Plaintiff

AND

PERIA TRUST

First Defendant

PERIA TRUST ROSS LANDS LIMITED

Second Defendant

Hearing:

3 February 2021

Counsel

G E Hughes for Plaintiff

J E M Lethbridge and A C Elia for Defendants

Judgment:

3 May 2021

JUDGMENT OF CAMPBELL J

This judgment was delivered by me on 3 May 2021 at 1:30 pm Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

PANGO NEW ZEALAND LIMITED v PERIA TRUST [2021] NZHC 961 [3 May 2021]

Introduction

[1]    The first defendant, Peria Trust (the Trust), is an incorporated charitable trust. It owned properties near Kaitaia on which there were pine forests. In March 2017, the Trust entered into a lump sum cutting rights agreement (the agreement) with the plaintiff, Pango New Zealand Ltd (Pango). Under the agreement the Trust sold to Pango cutting and ownership rights to the trees located in the pine forests on the properties. The agreement also provided Pango with full access and rights to any metal or quarry on the properties.

[2]    A dispute has arisen between the Trust and Pango about Pango’s access and rights to any metal or quarry on the properties. The second defendant (Ross Lands) is involved in the dispute, as it is now the owner of the properties.

[3]    Pango alleges that the Trust and Ross Lands have wrongfully denied Pango access to a quarry on one of the properties. Pango sues for an injunction, specific performance of the agreement, and damages. Pango seeks summary judgment on parts of its claim.

The agreement

[4]The agreement contains background clauses. These recite:

A.Pango carries on independent forestry operations and activities in New Zealand.

B.PT [the Trust] will at the Commencement date own the Land and the Forest.

C.Pango has agreed to buy and PT has agreed to sell the cutting and ownership rights concerning the Trees located in the Forest on the terms and conditions set out in this agreement.

[5]The key operative clauses in the agreement are found in cl 2:

2Obligation and price

2.1PT agrees to sell and Pango agrees to purchase from PT for the Price all of the Trees, and the rights granted to it under this agreement.

2.2Pango will harvest all the Trees and remove the felled Trees from the Land during the Term on the terms set out in this agreement and as

provided in the Forestry Rights, as the case may be, at Pangos [sic] cost.

2.3PT confirms that Pango and or its assignees shall have all such access as is required to enable Pango and or its assignees to harvest and remove the Trees from the Land during the Term.

2.4Pango will have full access and rights to any metal/quarry on the properties free of charge where the use is for Pango and where Pango makes the metal available to others then it shall pay to PT monthly a royalty calculated at $3.00 m3. Pango will provide PT access to all records concerning extraction of metal from the Land in order that PT can monitor the metal utilised by Pango.

[6]The agreement has several relevant definitions:

(a)“Forest” means “as shown on the plans attached and referred to in Schedule 1”. Schedule 1 has a table that sets out the legal descriptions of eight properties, but does not contain or refer to any plan. Schedule 2 is headed “Map of forest and access”, but there is nothing under that heading (other than the next heading, “Schedule 3 Trees”, after which there are four plans).

(b)“Land” means “the land on which the Forest is marked on the plan attached to this agreement and further described in Schedule 1 … ”. As I have said, Schedule 1 sets out the legal descriptions of eight properties.

(c)“Trees” mean the pine trees “located in the Forest as at the Commencement Date, as more particularly defined in Schedule 3”.

[7]    Clause 10.1 of the agreement provides that Pango is responsible for the entire operation of harvesting and for the provision of efficient means for felling, extracting, loading, removing and measuring the trees. Clause 10.2 provides that Pango must ensure that its obligations under the agreement are complied with at its cost.

[8]Clause 12 of the agreement deals with access. Its provisions include:

12.1PT grants Pango a non-exclusive and non-transferable licence of access to and over the Land commencing on the Commencement Date (or such other date as the parties may agree in writing) and continuing

for the duration of the Term for the purposes set out in this agreement. The access to the Land is shown on the plan set out in Schedule Two but it is accepted that the access may change by agreement between parties.

12.2Should Pango wish to make alterative access arrangements it is Pango’s responsibility for negotiating access through any other land that is not owned by PT or that does not have legal access over at its cost.

[9]    Clause 12.1, it can be seen, states that access to the Land is shown on “the plan set out in Schedule Two”. As I have explained above, there is nothing under the heading of Schedule 2 (other than Schedule 3, which does contain plans). One of the issues on the summary judgment application is the extent to which, if at all, the plans in Schedule 3 show the access that is referred to in cl 12.1.

[10]Clause 13 makes provision for roading:

13.1Pango may construct such access roads (Access Roads) to and through the Forest for the purposes of harvesting the Trees. If any additional access roads are required, Pango will construct such roads and all ancillary facilities, including any cattle stops or fencing, at its cost and in accordance with this agreement.

13.2PT acknowledges and consents to Pango developing and constructing the Access Roads and confirms that Pango will not be required to remove the Access Roads or make good or otherwise remediate the Land where the Access Roads have been constructed.

13.3The Access Roads formed by Pango will vest (in an “as is where is” state) in or on the earlier of expiry or earlier termination of this agreement.

13.4PT will grant Pango full access right to all Metal-Quarry pits on the harvested property plan area on the basis described in clause 2.4.

13.5PT shall not charge Pango for the use of the Access Roads.

[11]   Clause 29.1 is an “entire agreement” clause. Among other things it provides that the agreement supersedes all previous agreements relating to the matters dealt with in the agreement. The parties had entered into an earlier lump sum cutting rights agreement, dated December 2016. In light of cl 29.1 I do not see any need, on the present application, to refer to that earlier agreement.

Access to quarry on Honeymoon Valley property

[12]   The agreement is in respect of eight properties. This proceeding concerns one of those properties, part section 177 Parish of Maungataniwha, in record of title NA55B/628. This property has been referred to in the proceeding as the “Honeymoon Valley” property, and I will use that description.

[13]   There is a metal quarry on the Honeymoon Valley property. Access to that quarry is at issue in this proceeding.

[14]  

The Honeymoon Valley property includes frontage onto a public road, Honeymoon Valley Road. This is shown on the plan that is part of the record of title to the property:

[15]   The Honeymoon Valley property also has frontage, at its northwest corner, onto an unnamed “paper” road that connects to Honeymoon Valley Road. This is shown on the following plan:

[16]   The northern portion of the Honeymoon Valley property is shown at the bottom centre of that plan (shaded in pink). The paper road in question runs from the bottom left corner of the plan. The paper road passes, and fronts onto, the north-western corner of the Honeymoon Valley property. It then continues in a (generally) north- easterly direction, terminating at the junction (shown near the top centre) of Peria Valley Road and Honeymoon Valley Road.

[17]   There is a constructed access way that runs from Honeymoon Valley Road to the quarry on the Honeymoon Valley property. The path of this constructed access way is indicated by the black dotted line that has been superimposed on the above plan. It largely follows the path of the paper road. However, it can be seen that the constructed access way deviates from the paper road just south of the junction of Peria Valley Road and Honeymoon Valley Road. At that point the constructed access way runs over a property shown on the plan as “LINZ Parcel ID 7067284”.

[18]   That property is Māori freehold land vested in several owners. The property has been referred to in this proceeding as the “Mete land”. A Mr Tobin manages the Mete land.

A dispute

[19]   After the agreement between the Trust and Pango commenced, Pango used the constructed access way (including the portion that runs over the Mete land) to access and extract metal from the quarry on the Honeymoon Valley property. From July 2018 a dispute developed about Pango’s access and rights to metal in the quarry.

[20]   Initially the dispute was about the extent of Pango’s right to metal from the quarry. Pango says that under the agreement it has the right to extract an unlimited volume of metal from the quarry until 30 April 2030, provided that if it on-sells metal to third parties, it is to pay a monthly royalty to the Trust (calculated by reference to the volume on-sold). The Trust says that the agreement is concerned with the harvesting of trees, and that Pango’s right to metal from the quarry is ancillary to and limited by that purpose.

[21]   In June 2019 the dispute came to a head. A gate on the Mete land, where the constructed access way meets Honeymoon Valley road, was locked. Since that time Pango has been unable to use the constructed access way to access the quarry.

The pleadings and Pango’s application for summary judgment

[22]   Pango began this proceeding in November 2019. In its statement of claim Pango pleaded two causes of action:

(a)Trespass was alleged against both the Trust and Ross Lands, for wrongfully denying Pango access to the quarry and preventing it from exercising its right to extract metal. Pango sought an injunction (restraining the defendants from blocking or refusing Pango access to the quarry) and damages.

(b)Breach of contract was alleged against the Trust, for locking the gate to the constructed access way and for instructing Pango not to take metal from the quarry. Pango sought an injunction, specific performance (requiring the Trust to provide access) and damages.

[23]   Pango applied for summary judgment against both defendants, but only in respect of the claims for an injunction and for specific performance. Pango sought a trial on damages.

[24]   There were delays in advancing Pango’s application for summary judgment. I do not have to traverse the reasons for those delays.

[25]   In September 2020, Pango filed an amended statement of claim. This made some amendments to Pango’s causes of action in trespass and in breach of contract. It also added a third cause of action, against the Trust, for misrepresentation. In essence, this alleged that the Trust represented to Pango, prior to entry into the agreement, that the first part of the constructed access way to the quarry passed over land owned by a third party (what I have called the Mete land), that the third-party land was owned by local whānau who had no issue with their land being used as access, and that the Trust “would warrant” access over the third-party land.

[26]   Pango did not, after filing its amended claim, amend its application for summary judgment. It did not seek summary judgment on its new cause of action in misrepresentation.

Pango’s application to amend its application

[27]   In its written submissions filed in advance of the hearing, Pango said that it was no longer seeking summary judgment on its cause of action in trespass. It therefore pursued its summary judgment application only on its cause of action for breach of contract (and, therefore, only against the Trust, not against Ross Lands).

[28]   However, Pango said that, in respect of that cause of action, it was seeking summary judgment for an injunction, specific performance and damages. This was in contrast to its application, which sought an order that damages be determined at a trial. Pango’s written submissions were not accompanied by an application to amend its summary judgment application.

[29]   At the start of the hearing I raised this with Mr Hughes, counsel for Pango. I said that it appeared to me that, even if I were to find for Pango on liability on the breach of contract cause of action, damages were not before me on this application.

[30]   After the morning tea adjournment Mr Hughes made an oral application to amend the summary judgment application. He said that Pango had provided evidence of its loss in further affidavits filed and served in September 2020. The Trust had had ample opportunity, he submitted, to consider and respond to that evidence of loss, and therefore would not be prejudiced by the amendment.

[31]   I declined Pango’s application to amend. The Trust had been faced with an application that expressly said that damages were for trial. The Trust was entitled to proceed, and had proceeded, on the basis that it did not have to address loss in its opposition and affidavits. It would have been prejudiced by the late amendment.

Summary judgment principles

[32]   The onus is on Pango to establish that the Trust has no defence to the breach of contract cause of action.

The issues

[33]   Two issues arise from Pango’s summary judgment application and the Trust’s opposition.

[34]   The first issue arises from the fact that the constructed access way crosses the Mete land. The issue is whether, under the agreement, the Trust is obliged to provide Pango with access over the Mete land.

[35]   The second issue arises from the dispute to which I referred earlier over the extent of Pango’s right to metal from the quarry. The issue is whether Pango has the right to extract an unlimited volume of metal from the quarry, or whether (as the Trust says) Pango’s right to metal is limited.

[36]   For Pango to succeed, both issues have to be resolved, to the summary judgment standard, in Pango’s favour.

[37]   The second issue was the main focus of the submissions the parties filed in advance of the hearing. But it seems to me the first issue is the logical starting point, and I will begin with it.

Is the Trust obliged to provide Pango with access over the Mete land?

[38]   Clause 2.4 of the agreement provides that “Pango will have full access and rights” to any metal or quarry on the properties. Clause 2.4 is referenced in cl 13.4, which provides that the Trust will “grant Pango full access right to all Metal-Quarry pits … on the basis described in clause 2.4”.

[39]   Mr Hughes said that on their plain meaning these clauses created a binding obligation on the Trust “to ensure Pango has reasonable access” to the quarry. He emphasised the words “full access”. Mr Hughes submitted this obligation was breached once the gate was locked, preventing use of the constructed access way over the Mete land.

[40]   I do not accept that submission. The agreement has to be read as a whole. Clauses 2.4 and 13.4 express Pango’s legal right of access to quarries on the properties, and do so only in general terms. The clauses do not specify, nor deal with, any physical access way. Nor do the clauses deal with the question of access over land owned by a third party. Other provisions of the agreement do deal (to some extent) with those two matters.

[41] First, there are cls 12.1 and 12.2. I have set these out at [8] above. In the first sentence of cl 12.1 the Trust “grants” Pango a “licence of access to and over the Land”. That is the language of a legal right of access. However, the second sentence of cl

12.1 then says:

The access to the Land is shown on the plan set out in Schedule Two but it is accepted that the access may change by agreement between parties.

[42]   That sentence is, quite clearly, dealing with the physical location of access to (but not over) the properties. The effect of cl 12.1 is that the parties agreed that the physical location of the access was shown on the plan in Schedule 2, though such access could change by agreement. In a moment I will come back to whether, under cl 12.1, the access to the properties included access over the Mete land.

[43]   Clause 12.2 then provides that if Pango wishes to make alternative access arrangements “it is Pango’s responsibility for negotiating access through any other land that is not owned by PT”. This means that if Pango is not already entitled, under cl 12.1, to access over the Mete land, it is Pango’s (not the Trust’s) responsibility to negotiate such access.

[44]   Secondly, there is cl 13.1. This entitles Pango to construct access roads “to and through the Forest” for the purposes of harvesting the trees. This clause is concerned with (construction of) physical access ways within the properties (since the “Forest” is a subset of the properties). That is in contrast to the second sentence of cl 12.1, which is concerned with physical access to the properties. Both clauses contrast with cl 13.4, which as I have said does not specify, nor deal with, physical access.

[45]   It follows that cls 2.4 and 13.4 did not oblige the Trust to provide Pango with any particular physical access to the quarry, and therefore did not oblige the Trust to provide access over the Mete land.

[46]   The second sentence of cl 12.1 provides the only basis for the Trust having an obligation to provide Pango with any particular physical access to the quarry. This sentence begins by saying that the access to the properties is shown on the plan set out in Schedule 2. Schedule 2 is headed “Map of forest and access”, but all that appears under that heading is the next heading, “Schedule 3 Trees”, after which there are four plans.

[47]   At the hearing I raised with Mr Hughes my concern that Schedule 2 itself did not appear to set out any plans. Mr Hughes’ response was that the plans in Schedule 3 (or at least some of them) were part of Schedule 2. He said that the first of those

plans showed the quarry on the Honeymoon Valley property, and showed an access way that followed the paper road from that property.

[48]   Even if I were to accept that the plans in Schedule 3 were part of Schedule 2 (and that is not a matter I have to decide), the problem is that, as Mr Hughes acknowledged, the plan on which he relied stops just to the north of the Honeymoon Valley property. It does not cover the area where the constructed access way crosses the Mete land. It therefore does not, in terms of cl 12.1, show that access to the properties crosses the Mete land.

[49]   Mr Hughes had a fall-back argument. He said, correctly, that cl 12.1 provides that the access “may change by agreement between the parties”. He said that when the parties entered into the agreement they both knew that the constructed access way crossed the Mete land.1 He submitted, therefore, that the access had been changed by agreement.

[50]   That argument may have some merit. However, this is a summary judgment application, and I am not persuaded that the Trust has no answer to it. Pango did not plead its case on this basis. Its affidavit evidence, while referring to discussions about the access way, did not suggest there had been an agreed change reached under cl 12.1. The argument was raised for the first time at the hearing (in answer to my questions about the lack of any plan showing access in terms of cl 12.1). The Trust therefore did not address, in its affidavits, the possibility that a change had been agreed. In addition, cl 12.1 contemplates that any such agreed change would occur after the agreement itself was entered into. Mr Hughes’ argument, instead, was that the change had been agreed before the agreement was entered into.

[51]   Pango may have other legal avenues open to it in respect of this argument. It is already pursuing one: its third cause of action in misrepresentation. But, responsibly, Pango does not seek summary judgment on that cause of action.

1      Mr Hughes referred me to an affidavit by Mr Johns, in support of the Trust’s opposition, dated 19 November 2020. At [58] of that affidavit Mr Johns confirms there were discussions, pre-contract, about the access way crossing the Mete land.

[52]   I conclude that Pango has not persuaded me, to the summary judgment standard, that the Trust is obliged to provide Pango with access over the Mete land.

Does Pango have the right to extract an unlimited volume of metal from the quarry?

[53]   Given my conclusion on the first issue, it is not necessary for me to determine the second issue. However, given that this issue is regarded as of some importance to the parties, and recognising that counsel provided detailed submissions on it, I will set out my provisional views.

[54]   I first note that Ms Lethbridge, for the Trust, said that one reason for resisting summary judgment was that Pango had not pleaded that the agreement entitled it to extract an unlimited volume of metal from the quarry. It is correct that Pango did not plead that entitlement. But that would not have prevented me from determining this issue. The Trust’s contention that Pango’s extraction right was limited to the purpose of harvesting trees was, quite clearly, the basis upon which the dispute between the parties started. The Trust’s opposition to Pango’s application included the contention that Pango’s right was limited (and therefore that the Trust did not have to provide access for unlimited extraction). The issue therefore was raised on the pleadings.

[55]   Clause 2.4 says that Pango will have full rights to any metal. It then distinguishes between metal “where the use is for Pango” (in which case the metal is free of charge) and metal “where Pango makes the metal available to others” (in which case Pango must pay a royalty). On the plain meaning of the clause, there is no limit placed on Pango’s right to the metal.

[56]   It is possible that, when cl 2.4 is read in the context of the agreement as a whole, Pango’s entitlement to extract metal “where the use is for Pango” is limited to uses connected to the main purpose of the agreement, namely harvesting trees on the properties. Such a limitation would be consistent with the placement of cl 13.4 (which references cl 2.4) within a section of the agreement entitling Pango to construct access roads on the properties for the purposes of harvesting trees.

[57]   It is very difficult, however, to see how such a limitation could be placed on Pango’s entitlement to extract metal “where Pango makes the metal available to others”. Metal made available to third parties would not be used for the purposes of harvesting trees on the properties. That part of cl 2.4 therefore assumes that Pango will extract metal other than for the purpose of harvesting trees on the properties. The Trust’s supposed limitation would conflict with that underlying assumption.

[58]   Ms Lethbridge submitted that, properly interpreted, cl 2.4 merely entitled Pango to extract metal for the purposes of harvesting trees. It was only if Pango, having extracted metal, found that it had a surplus, that it could sell that surplus to third parties. That is a most unlikely interpretation. Clause 2.4 begins by conferring “full” rights to metal. There is no limit expressed on that right. The balance of cl 2.4 deals with whether Pango is obliged to pay for the metal. It does not place a limit on Pango making metal available to third parties.

[59]   Ms Lethbridge said, quite correctly, that the agreement must be interpreted in its factual matrix. She cautioned me against interpreting cl 2.4 in a summary judgment context, when the facts have not been fully tested. She referred me to Ngati Tama Custodian Trustee Ltd v Phillips, in which the Court of Appeal said “The existence of a factual dispute does not always preclude the court from entering summary judgment in a contract claim, but caution is required.”2 I accept that. But Ms Lethbridge did  not identify any relevant disputes as to the factual matrix. I acknowledge that the parties have different views about the essential purpose of the agreement, about whether the extraction of metal was ancillary to the forestry rights, and about whether extraction was at the discretion of the Trust. But those were merely differing views as to what, on a proper interpretation of the agreement, was intended. They were not factual disputes.

[60]   Indeed, the factual matrix supports Pango’s position that there is no limit on its right to extract metal for on-sale to third parties. Clause 2.4 requires Pango to provide the Trust access to all records concerning extraction of metal in order that the Trust can monitor the metal utilised by Pango. That requirement was not in cl 2.4 as

2      Ngati Tama Custodian Trustee Ltd v Phillips [2019] NZCA 647 at [43].

originally drafted. It was added after the Trust’s lawyer enquired of Pango’s lawyer how the Trust would be able to know when Pango was supplying metal to third parties, and how it was intended this be monitored.3 That enquiry does not suggest any limit (as opposed to monitoring) of Pango’s on-sales. Monitoring was needed, given that Pango had to pay royalties on sales to third parties.

[61]   Finally, both parties relied on subsequent conduct to support their interpretations. The conduct Pango pointed to was that it had paid, and the Trust had accepted, royalties in respect of on-sales of metal to third parties. The conduct on which the Trust relied was that the presentation of the royalty statements led to the Trust disputing Pango’s supposed unlimited extraction right. Ms Lethbridge said that the parties’ respective reliance on subsequent conduct reinforced that there were factual disputes that had to be determined before the contract could be interpreted. I disagree. There was no factual dispute about the subsequent conduct. The dispute was about whether that subsequent conduct assisted in interpreting the agreement. (In my view it was of no assistance.)

[62]   For all those reasons, if I had had to determine the second issue, I would have determined it in Pango’s favour, even on the summary judgment standard.

Result

[63]Pango’s application for summary judgment is dismissed.

[64]   The Trust indicated that it wished to be heard on costs. The usual position is that costs are reserved where a plaintiff’s summary judgment application is dismissed. If the Trust nonetheless wishes to pursue costs, it should file and serve a memorandum by 14 May 2021. Pango should respond by 21 May 2021. Each memorandum should not exceed two pages (excluding relevant annexures or schedules).

Campbell J

3      This enquiry was not in dispute. One of the Trust’s affidavits annexed an email from its lawyer, containing the enquiry.