Progressive Livestock Limited v Donaldson

[2023] NZHC 1097

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

I TE KŌTI MATUA O AOTEAROA TE TIHI-O-MARU ROHE

CIV-2021-476-24

[2023] NZHC 1097

BETWEEN

PROGRESSIVE LIVESTOCK LIMITED

Plaintiff

AND

SCOTT JAMES DONALDSON

First Defendant

SLD AGRICULTURE LIMITED (in

liquidation) Second Defendant

Hearing:	9 May 2023
Appearances:	T C G Nation for plaintiff
Judgment:	10 May 2023

JUDGMENT OF OSBORNE J

This judgment was delivered by me on 10 May 2023 at 11.30 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

PROGRESSIVE LIVESTOCK LIMITED v DONALDSON [2023] NZHC 1097 [10 May 2023]

[1]    The plaintiff, Progressive Livestock Ltd (Progressive), trades as a livestock agent.

[2]    This proceeding arises from a form of contract it enters into with farmers which I will refer to as a “livestock contract” (detailed below from [9]) in relation to heifers in calf.

[3]    The first defendant, Scott Donaldson, was in 2019/2020 conducting farming operations on the West Coast and in mid-Canterbury. He was the sole director and shareholder of the second defendant, SLD Agriculture Ltd (“the Company”). Livestock contracts were entered into between April, May and June 2019 (as detailed below at [10]–[12]). Payment has not been made to Progressive for $473,403.10 representing the total payment due under the livestock contracts.

[4]    The  Company  was  placed  in  liquidation  by  shareholder  resolution  on  30 September 2022.

[5]The whereabouts of Mr Donaldson are unknown.

[6]    Defences filed by Mr Donaldson and the Company were previously struck out for non-compliance with unless orders.1

[7]    This hearing has proceeded as against Mr Donaldson and the Company by way of formal proof on Progressive’s affidavit evidence.2

[8]    The claim against the Company will be dismissed, the Company being in liquidation.

The livestock contracts

[9]    The basic nature of Progressive’s livestock contracts was that a “grazier” took a lease of in-calf heifers for a particular season (in this case 2019/2020). The grazier got the benefit of the calves then produced and of the heifers’ milk production. The

1      Progressive Livestock Ltd v Donaldson [2022] NZHC 2491.

2      Under High Court Rules 2016, r 15.9.

grazier was committed to paying a lease for each heifer and an agreed purchase sum for a minimum of 50 per cent of the number of the leased heifers, with a commitment to purchase any remaining stock at the same agreed price the following season.

[10]   In April, May and June 2019, Progressive entered into three livestock contracts involving Mr Donaldson.

[11]   For each of the three transactions, two documents were completed. A grazing agreement (the Grazing Agreement) identified a grazier as Progressive’s agent to graze and manage livestock. In each Grazing Agreement, the grazier’s name was recorded as “Scott Donaldson T.A. SDL [sic] Agriculture”, and Mr Donaldson signed the document as “Grazier”. The second document executed was entitled “Lease Cow/Heifer Agreement” (the Heifer Agreement). In the Heifer Agreement the Lessee was identified as “Scott Donaldson t.a. SDL [sic] Agriculture” and Mr Donaldson signed as “Lessee”. By each of the Heifer Agreements the Lessee agreed to pay a lease fee of $150 per heifer on 21 December 2019 and for any stock not purchased in June 2020 to pay the same lease fee per heifer on 21 December 2020.

[12]   The Lessee was obliged to purchase at least 50 per cent of the number of leased heifers on 1 June 2020 at an agreed price ($1,950 under the April agreements; $1,850 under the May agreements; and $1,900 under the June agreements). The purchase price for the first tranche of heifers was to be paid on 1 June 2020. The Lessee was required to purchase the remainder of the leased animals (those not purchased on 1 June 2020) on 1 June 2021.

[13]   The agreed livestock were delivered to the identified property in 2019 (163 in April; 140 in May;  and  74 in July).  The transport companies variously invoiced  Mr Donaldson and the Company for the transportation.

[14]   In December 2019 Progressive issued an invoice to “SDL [sic] Agriculture Limited” for the lease of the 377 heifers ($65,032.50 including GST). In July 2020 Progressive issued a further invoice to “SDL [sic] Agriculture Limited” for the sale of 189 heifers ($413,655.00 including GST).

[15]Neither invoice was paid.

[16]   On 14 July 2020 Progressive uplifted 196 heifers from where they were grazing. Of that total, 181 had the same ear tags as those previously delivered and a further seven had ear tags replaced due to missing or damaged tags. That total (188) represented 50 per cent of the 377 leased heifers. The balance of heifers uplifted — eight not in calf — were the subject of a credit subsequently recognised by Progressive in favour of the defendants.

[17]   Progressive’s solicitors sent emails to Mr Donaldson calling for payment and in correspondence with Mr Donaldson’s solicitor headed the discussion “Donaldson and Progressive Livestock Limited”.

[18]   On 30 June 2021 Progressive’s solicitors sent a formal letter of demand addressed to “SLD Agriculture Limited” through the defendant’s solicitor and enquired whether the solicitor was authorised to accept service on behalf of the Company and of Mr Donaldson personally.

[19]The demand was not met — no payment was made.

This proceeding

[20]   Progressive issued this proceeding against Mr Donaldson and the Company. By its first cause of action it sought judgment against Mr Donaldson. It alternatively sought judgment against the Company.

[21]   Progressive applied for summary judgment of its claim against Mr Donaldson. The  summary  judgment  application  was  opposed.  In  November  2021   Associate Judge Lester dismissed the summary judgment application.3

[22]   The Judge found Progressive’s debt claim ($473,403.10) was established.4 The Judge nevertheless refused summary judgment on the basis there was a real question to be tried in relation to the identity of the contracting party. As the Judge put it, he

3      Progressive Livestock Ltd v Donaldson [2021] NZHC 3112.

4 At [34].

could not determine which of the documents issued by Progressive was correct — the contracts or the invoices.5

The evidence

[23]   The evidence on this formal proof hearing is that provided by the deponents for Progressive. The content of that evidence is reflected in the summary I have given above.

[24]   I remind myself that the matters Mr Donaldson put in evidence on the interlocutory  application  for  summary  judgment   (and   referred   to   in   Associate Judge Lester’s judgment) are not in evidence at this substantive hearing.

Discussion

[25]   The liability of the Grazier/Lessee under the livestock contracts is clearly established as being $473,403.10.

[26]   The question of who is liable as Grazier/Lessee under those contracts is determined by s 25(2) Companies Act 1993 (the Act), which provides:

25       Use of company name

…

(2)Where—

(a)A document that evidences or creates a legal obligation of a company is issued or signed by or on behalf of the company; and

(b)The name of the company is incorrectly stated in the document,—

every person who issued or signed the document is liable to the same extent as the company if the company fails to discharge the obligation unless—

(c)The person who issued or signed the document proves that the person in whose favour the obligation was incurred was aware at the time the document was issued or signed that the obligation was incurred by the company; or

5 At [38].

(d)The Court is satisfied that it would not be just and equitable for the person who issued or signed the document to be so liable.

…

[27]   The proposition that the livestock contracts are to be considered as documents “signed by or on behalf of” the Company under s 25(2)(a) has to be tested against the subsequent provisions of the subsection. The name of the company has been incorrectly stated in the document, in terms of s 25(2)(b).

[28]   As Mr Donaldson signed the document, he is liable to the same extent as the Company (the Company having failed to make payment) unless either subs (2)(c) or

(d) applies.

[29]   Subsection (2)(c) does not apply. Mr Donaldson has not provided proof that any responsible officer of Progressive was aware that the obligation was being incurred by the Company.

[30]   Nor is there any basis under subs (2)(d) for the Court to find that it would be just and equitable for Mr Donaldson to not be liable under the livestock contracts. The fact that Mr Donaldson signed the contracts in his own name with the explanation “trading as SDL Agriculture” counts against him — this was not a technical breach of s 25.

[31]   Mr Donaldson’s liability therefore arises under the livestock contracts. The fact that Progressive’s subsequent invoicing and correspondence lend itself to confusion does not detract from the contractual liability. Mr Donaldson had liability under s 25(2) of the Act. Progressive was entitled to payment pursuant to that liability once it fulfilled its obligations of delivery (as it did).

Outcome

[32]   Progressive has established Mr Donaldson is personally liable under the livestock contracts for the principal debt ($473,403.10).

[33]   Progressive claims interest under the Interest on Money Claims Act 2016. Under s 10(1) of that Act the Court must award interest for the delay in payment of the money.

[34]   Under s 9(1)(a)(i) of the Interest on Money Claims Act Progressive is entitled to interest on $65,032.50 from 20 December 2019 and on $408,370.60 from 1 July 2020. Interest will be awarded on those initial amounts from those dates.

Costs

[35]   Mr Nation seeks an award of costs on a 2B basis,6 together with disbursements for all steps in the proceeding other than those covered by previous costs orders.7

Orders

[36]I order:

(a)there is judgment for the plaintiff against the first defendant in the sum of $473,403.10;

(b)interest is awarded on the initial amount of $65,032.50 beginning on 20 December 2019;

(c)interest is awarded on the initial amount of $408,370.60 beginning on 1 July 2020;

(d)the first defendant is to pay to the plaintiff such costs of the proceeding as have not already been awarded, on a 2B basis to be fixed by the Registrar, together with the plaintiff’s reasonable disbursements; and

6      High Court Rules 2016, Category 2 under r 14.3(1) and band B under r 14.5(2).

7      See Progressive Livestock Ltd v Donaldson [2022] NZHC 2245 at [29].

(e)the plaintiff’s claim against the second defendant is dismissed.

Osborne J

Solicitors:

Timpany Walton, Timaru