Remediation (NZ) Limited v Enviro (NZ) Limited
[2024] NZHC 860
•19 April 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1140
[2024] NZHC 860
BETWEEN REMEDIATION (NZ) LIMITED
Plaintiff
AND
ENVIRO (NZ) LIMITED
First Defendant
ENVIRO WASTE SERVICES LIMITED
Second Defendant
Hearing: 9, 10, 11, 12, 15, 16, 22 and 23 May and 3, 4, 6 and 7 July 2023 Appearances:
J W Maassen, J D Cameron (until 16 May 2023) and M A Black for the Plaintiff
G C Williams, T J Lindsay and MBE Morrison for the Defendants
Judgment:
19 April 2024
JUDGMENT OF GAULT J
This judgment was delivered by me on 19 April 2024 at 4:00 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Solicitors / Counsel:
Mr J W Maassen, Barrister, Wellington
Mr J D Cameron and Ms M A Black (plaintiff’s instructing solicitor), Willis Legal, Napier Mr G Williams, Barrister, Auckland
Mr T J Lindsay and Ms MBE Morrison (defendants’ instructing solicitor), Lindsay & Francis, Auckland
REMEDIATION (NZ) LTD v ENVIRO (NZ) LTD [2024] NZHC 860 [19 April 2024]
TABLE OF CONTENTS
Introduction [1] Factual background [5] Councils’ Request for Proposal [9] Letter of Intent [15] Tender submission [17] Award Date - preferred tenderer [26] Subsequent events – summary [29] Issues [30] Obligations owed to Revital [33](a) Breach [33](c) Causation and loss [33](e) Fair Trading Act 1986 [33](g) The fact witnesses [34] Contract – LOI obligation Approach to contract formation and clauses to negotiate [37] Approach to contractual interpretation [43] Discussion [45] Fiduciary claim Applicable principles [56] Discussion [57] Breach
Subsequent events [63]
Enviro’s agreements with TCC [68]
Draft agreements sent to Revital [75]
Health and safety [101]
Withdrawal by Enviro [120]
All reasonable steps [122]
Causation [147]
Outstanding commercial issues [150]
Health and safety issues [152]
Quantum [171]
Expectation damages – applicable principles [173]
Discussion [177]
Date of breach or hybrid approach [181]
Date of breach assessment [192]
Fair Trading Act 1986
Misleading and deceptive conduct [205]
Result [212]
Costs [214]
SCHEDULE 1
SCHEDULE 2
Introduction
[1] Remediation (NZ) Ltd (Revital)1 alleges breach of contract, breach of fiduciary duty and misleading and deceptive conduct by Enviro (NZ) Ltd (ENZ) and its subsidiary, Enviro Waste Services Ltd (ESL) (together, Enviro2), in relation to the parties’ collaboration on a tender proposal to the Tauranga City Council (TCC) and Western Bay of Plenty District Council (WBOPDC) (together, the Councils) for waste management services. This collaboration concerned the parts of the tender that related to organic waste processing at TCC’s Te Maunga site in Mt Maunganui.
[2] Enviro and Revital signed a letter of intent and collaborated on a tender submission to the Councils. The tender was successful. Enviro then negotiated and signed a services contract with TCC, but Enviro and Revital failed to conclude a services contract between themselves.
[3] Revital’s pleading claimed damages estimated to be in excess of $24 million.3 At trial, Revital opened on the basis that its quantum expert quantified the loss as
$7.595 million but following expert evidence its claim reduced to $3.568 million in expectation damages.
[4]The parties’ respective counterclaims were resolved during the trial.
Factual background
[5] ESL was incorporated in 1995 and provides waste collection and disposal services to both the public and local authorities.4
[6] In 2008, Revital was incorporated and purchased an organics processing operation at the Te Maunga site from Perry Environmental Ltd. Revital took over the lease with TCC, and the existing resource consents. Revital operated a green waste facility at the site. It received and processed green waste from Bay of Plenty residents
1 Remediation (NZ) Ltd, trading as Revital Fertilisers until September 2022, is part of the Revital Group.
2 I generally refer to Enviro as it is unnecessary to distinguish between ENZ and ESL for the purposes of the claims given their interrelationship (as pleaded).
3 The operative pleading was Revital’s amended statement of claim dated 9 March 2022.
4 ENZ was incorporated in 2013.
and sold the composted product. Revital is in the business of recycling waste following the ‘circular economy’ model of sustainability.
[7] In 2016, Revital obtained resource consents from the Bay of Plenty Regional Council for discharge to air and discharge to land involved in processing organic waste, due to expire on 20 February 2032.
[8] On 1 June 2017, TCC granted Revital a further lease for the Te Maunga site until 30 June 2018. On 30 January 2018, this lease was extended to 29 February 2020 with no right of renewal.
Councils’ Request for Proposal
[9] On 27 August 2019, the Councils publicly announced that they would soon be releasing a Request for Proposal (RFP) for their kerbside collection services contracts and Tauranga’s facility contracts, including the renewal of site leases. They said the kerbside collection contracts were due to commence in July 2021, while the timing of facility contracts (or leases) would be subject to expiry dates of existing leases, site upgrade requirements and the need to process kerbside collected refuse, recycling and organics from July 2021. The document also stated:
The availability and quality of waste services is extremely important to TCC and WBOPDC. We want to engage with the market early to help inform our RFP and reduce uncertainty for potential suppliers regarding what TCC and WBOPDC is seeking to achieve. We are seeking a contractor that will partner with us, using their expertise and innovation, to achieve our overall objective of reducing household waste to landfill.
Our intention is to procure our waste services contracts and any associated site leases at one time to allow for synergies and economies of scale to be realised. This approach is subject to approval of our procurement strategies by our respective Councils. It is our intention to retain and enhance existing diversion of material from landfill and to encourage collaboration between contractors through joint submissions which clearly demonstrate these attributes. For our kerbside services, our overall objective is to reduce household waste to landfill.
[10] On 17 October 2019, Mr O’Neill, managing director of Revital, emailed Mr (Glen) Jones of Enviro proposing that they meet “regarding the Tauranga tenders to see if there are things we can do together on this”.
[11] On 4 November 2019, Revital’s Mr O’Neill and Mr Buist (chief financial officer) met Enviro’s Mr Rutter and Mr Jones at Revital’s Cambridge office to discuss collaborating on the tender. It is common ground that Enviro planned to tender for the full suite of available contracts under the RFP whereas Revital’s interest was in relation to the food waste processing and green waste processing contracts (the organics processing contracts). The parties had in mind collaboration in relation to the organics processing contracts.
[12] On 28 November 2019, TCC and Revital agreed to extend the lease for the Te Maunga site from 29 February 2020 to 28 February 2021. TCC agreed to enter good faith discussions with respect to renewing the lease for three months, on up to three occasions, such that the final expiry date was potentially 30 November 2021.
[13] On 16 December 2019, the Councils released their joint RFP for the tender of various contracts for their refuse, recycling and waste collection, processing and disposal services in the region. They anticipated that contracts would commence in July 2021 and that the facility contracts would have an initial term of 16 years with options to extend of two plus two years. Another important aspect of the RFP in relation to the organics processing contracts was that TCC intended to relocate the successful tenderer away from the existing composting site to a new site within the Te Maunga waste complex (site relocation) at some undetermined point in the future (due to TCC’s proposed expansion of its wastewater treatment plant).
[14] On 14 January 2020, the Councils held a suppliers’ RFP briefing conference. The presentation indicated their primary objective was to divert waste from landfill. TCC indicated that its best estimate as to timing for the Te Maunga site relocation was around year three of the contract.
Letter of Intent
[15] On 16 January 2020, Mr O’Neill and Mr Buist of Revital, together with Mr Lord (who had been engaged by Revital as a consultant to assist with the opportunity) met with Mr Jones and Mr Rutter of Enviro at the Coffee Club in Horotiu to discuss the RFP. They agreed to document their proposed collaboration in a letter of intent.
[16] On 11 February 2020, following a period of negotiation and the exchange of drafts, ESL (on ENZ letterhead) and Revital signed a document entitled “LETTER OF INTENT FOR ACCEPTANCE & PROCESSING OF FOOD WASTE AND GREEN WASTE (“SERVICES”)” (LOI). Key terms of the LOI are included in schedule 1 of this judgment. In essence, the LOI provided that ESL would submit a response to the Councils’ RFP (tender submission) and that the tender submission would provide for Revital to provide the Services on headline commercial terms outlined. The key term in issue is para 9(a)(iii)(F) of the LOI which stated:
the parties must take all reasonable steps to enter into the Service Agreement within 6 months from the Award Date 5
Tender submission
[17] Following the signing of the LOI, the parties worked together to include Revital’s inputs in the tender submission. In particular, Revital provided Enviro with its pricing schedules, including for rent payable. On 2 March 2020, Mr Jones emailed Mr Buist stating:
We are populating the pricing schedule today and require your final pricing.
Note that any pricing delivered as discussed is Revital Pricing and is on a straight pass through basis as agreed. Mat Kenny will forward the populated pricing schedule with your pricing on it when completed.
[18] In relation to rental, Revital offered to pay $75,000 per year for the interim solution lease at the existing site and $150,000 per year for the new lease following relocation.
[19] On 4 March 2020, Enviro (ESL) submitted the tender submission to the Councils. Key parts of the tender submission are set out in schedule 2 of this judgment. I address the nature of the relationship between Enviro and Revital later in this judgment. In relation to food waste and green waste processing for TCC, the tender submission in essence comprised an interim solution for two to three years where Revital would lease the existing two hectares green waste facility at Te Maunga to process green waste. Food waste would be processed by Enviro at the existing
5 “Award Date” was defined in the LOI by reference to ESL being successful in its tender submission and formally selected as preferred tenderer.
Hampton Downs organics processing plant.6 Thereafter, following completion of a new one-hectare Te Maunga organic processing site, Revital would process both green waste and food waste there. Revital would convert the waste into compost for sale by Revital through its sales channels. The tender submission referred to and appended the LOI. It included pricing and a list of “Assumptions (Non-Price)” (described in the evidence as riders), including for Revital. Mr Jones of Enviro declared the tender submission to be true.
[20] On 28 May 2020, Enviro presented the tender submission to the Councils with allocated time slots for Enviro’s potential subcontractors, including Revital. This included a summary of the interim solution:
• Food waste Hampton
• Green waste Te Maunga
[21] It also summarised the proposed new facility, the technology and Revital’s credentials.
[22] Thereafter, Enviro had ongoing contact with the Councils’ agents, Morrison Low. From time to time, Enviro updated Revital.
[23]On 1 July 2020, Enviro responded to questions from Morrison Low,7 including:
Question: EnviroNZ as Head Contractor
Council’s preference is that EnviroNZ act in the position of head contractor. To that end please confirm the following:
• The subcontractor agreements that would be in place with …, Revital …
• The sublease agreements that would be in place for Revital …
Response:
Subcontractor agreements including “Pre-Qual Certification” would be implemented for … Revital ... The subcontract agreements would contain back to back arrangements of agreed Council KPI’s including compliance with resourcing consents, H&S conditions such as incident notification and quality of materials produced (such as having a bio-grow certified organic
6 The tender submission also proposed consolidation of food waste at Maleme Street (if a commercial only RRC – Resource Recovery Centre).
7 This document was not shown to Revital at the time.
material). Subcontractors would be required to participate in joint meetings with Council and each other to ensure Council and resident satisfaction was achieved.
Sublease agreements would be in place between EnviroWaste and … Revital. Conditions would include but not be limited to: Performance Bonds, Compliance with Resource Consents, Site Make good requirements (if any) and other matters which Council [sic] which EnviroWaste would be liable for to Council.
[24] On 15 July 2020, Enviro reported to Revital on some feedback from the Councils on pricing (gate rates and lease rental). Mr Jones’ email to Mr Buist, following Mr Jones’ discussion with Mr Lord, included:
1. Greenwaste rate of $54 is not competitive. Outside of the tender process whakatane [sic] and Rotorua were cited as examples of market rates being
~$48. They would not elaborate on competitor bids other than to say that to stay in, the proposed rates need to be reviewed
2. They expect a market rent on the facility and with no guarantees on a local consent for foodwaste the proposed $75k for “Greenwaste only” needs a review. Not currently competitive.
[25] On 17 July 2020, Mr Buist responded to Mr Jones agreeing to reduce Revital’s green waste rate and increase its sublease rent:
We can amend our proposal, in principle, to the following:
• Gate rate for Council run Greenwaste Collection $48 / tonne
• Lease to $150k from day 1.
• Bond of $85k, which has been determined using the Council’s bond formula.
All of our caveats & conditions per the original RFP still obviously apply.
Award Date - preferred tenderer
[26] Following a meeting between Enviro and TCC on 4 August 2020, on 6 August 2020 Morrison Low advised Mr Jones that Enviro was the preferred proposer for all of the Councils’ tendered services. Therefore, the Award Date was 6 August 2020, which began the six-month period referred to in para 9(a)(iii)(F) of the LOI. Enviro advised Revital that it was the successful tenderer around mid-August 2020 although it did not advise Revital of the actual Award Date.
[27]On 13 August 2020, Enviro emailed Revital stating:
We continue to work with Tauranga City Council to target closing out this opportunity. Base lease documents are being prepared (more detailed than those proposed in the tender).
…
Re: any additional queries you may have, please direct these through James Rutter or myself. We have not yet signed with Council, so continue to remain in probity and as such Council will not engage with any third parties.
[28] Enviro’s position was that it was working with the Councils to finalise a head lease and service agreement and once Enviro had signed its head contracts with the Councils, then Enviro would engage with Revital regarding negotiation of subcontracts. Accordingly, Revital waited to hear further.
Subsequent events – summary
[29]I deal with subsequent events in more detail below. In summary:
(a)In November 2020, Enviro (specifically, ESL) and TCC entered into an agreement for the provision of specified services entitled “Facility Services Contract TC106/20” (Facility Services Contract) to commence in July 2021, and a deed of lease for the Te Maunga site (Head Lease) to commence on 1 March 2021; and TCC gave Revital notice of termination of lease in respect of the Te Maunga site, effective as at 28 February 2021.
(b)On 22 January 2021, Enviro sent Revital first drafts of a proposed sublease and subcontract.
(c)Revital considered there were major gaps in these draft documents and Enviro provided updated drafts on 3 February 2021. Negotiations continued without focus on the expiry of the six-month period on 6 February 2021.
(d)There were two major issues, which were never resolved. An attempt to agree a short-term sublease to enable negotiations to continue failed.
(e)These issues were overtaken in March 2021 by Enviro’s concerns about Revital’s health and safety compliance at the Te Maunga site.
(f)Ultimately, on 29 March 2021, Enviro withdrew from all negotiations and required Revital to cease all activity at the site.
(g)Enviro (specifically, ESL) sought and obtained an order for possession of the site in an earlier proceeding in this Court.8
Issues
[30] Although Revital’s claim pleaded breach of fiduciary obligations as the first cause of action, Mr Maassen for Revital understandably treated the breach of contract claim as the primary cause of action. This acknowledged that in a fiduciary claim where the essential legal relationship is contractual, primacy must be given to the contract.9
[31] Revital’s contract claim in essence is that following Enviro’s selection as preferred tenderer (the Award Date), Enviro failed to “take all reasonable steps to enter into the Service Agreement within 6 months” (para 9(a)(iii)(F) of the LOI).
[32] Enviro’s characterisation of the LOI at trial ultimately differed from that put forward in the earlier proceeding. In that proceeding, the Enviro witnesses described the LOI as no more than an unenforceable agreement to agree.10 While that characterisation persisted in some of Enviro’s evidence at trial in this proceeding, Enviro’s case ultimately was more nuanced. It accepted that the LOI was a binding contract for some purposes. It argued instead that the LOI term in para9(a)(iii)(F) that “the parties must take all reasonable steps to enter into the Service Agreement within 6 months from the Award Date” is unenforceable as an agreement to agree.
8 Enviro Waste Services Ltd v Remediation (NZ) Ltd [2021] NZHC 3270.
9 See below at [56], Dold v Murphy [2020] NZCA 313, [2021] 2 NZLR 834 at [52]-[56].
10 Enviro Waste Services Ltd v Remediation (NZ) Ltd [2021] NZHC 3270 at [9], n 2 and [57]. The Court did not need to, and did not, reach a finding in relation to Revital’s claim pursuant to the LOI (at [84]).
[33]Accordingly, the issues to be determined are:
Obligations owed to Revital
(a)Whether Enviro had a contractual obligation under the LOI to take all reasonable steps to enter into a Service Agreement with Revital following ESL’s selection as preferred tenderer on 6 August 2020.
(b)Whether Enviro owed Revital fiduciary duties.
Breach
(c)Whether Enviro breached such a contractual obligation under the LOI.
(d)Whether Enviro breached its fiduciary duties.
Causation and loss
(e)Whether Enviro’s breach(es) caused loss.
(f)The quantum of loss caused.
Fair Trading Act 1986
(g)Whether Enviro engaged in misleading and deceptive conduct.
(h)Whether declaratory relief is appropriate.
The fact witnesses
[34] Before turning to the issues, I make some further preliminary observations about the evidence of the witnesses. In their evidence about the relationship between the parties and the interactions that occurred in discussions and correspondence, witnesses on both sides sought to provide commentary and explain their respective subjective intentions. For example, Revital’s fact witnesses (Mr O’Neill and Mr Buist) sought to emphasise references to “partnership”, “partnering”, “joint venture” and “joint tender” whereas Enviro’s fact witnesses (principally Mr Rutter and Mr Jones,
as Mr McKenzie was only involved later) sought to downplay the use of, and explain what they intended when using, these terms and instead emphasised the references to Revital as a “subcontractor” and indeed only a “potential” subcontractor to perform the organics processing services. Subjective intention evidence is irrelevant, at least in relation to contract interpretation. More generally, the fact briefs of evidence contained a good deal of material that was in the nature of submission, or argumentative. Concessions were made in cross-examination and it was not suggested that any of the witnesses were disingenuous but such evidence was largely irrelevant and unhelpful. The Court is not assisted by evidence that is in the nature of submission or argumentative. A related point is that adverse inferences are not to be drawn from the lack of cross-examination on such evidence. I derived more assistance from the documents themselves – or more particularly from the key documents ultimately relied on.11
[35] Also, as indicated, Enviro’s characterisation of the LOI differed from that of its witnesses in the earlier proceeding. I do not suggest that the earlier evidence was disingenuous. I accept it likely reflected Enviro’s view at the time, albeit that view was somewhat misconceived. It may also help to explain some of Enviro’s conduct in the period between August 2020 and March 2021.
[36] The evidence of some of Enviro’s witnesses suggested they had little need for Revital, which I consider was overstated. Revital’s witnesses emphasised the strategic importance of its niche offering moving from a linear to circular economy following best waste management practices. In any event, the parties chose to collaborate in tendering as a consortium. Enviro was the lead tenderer covering the suite of services sought by the Councils and providing a key point of contact whereas Revital was a niche player offering some services only, in conjunction with Enviro. Whether Revital was described to the Councils as a partner, subcontractor or otherwise, the contractual arrangement between Enviro and Revital was governed by the LOI. I now turn to that.
11 The trial bundles extended to over 11,000 pages, including duplicates. Having regard to the size of the bundle and the default nature of r 9.5(4) of the High Court Rules 2016, I directed that documents that were merely footnoted (in briefs or openings) but not referred to during evidence were not automatically received into evidence.
Contract – LOI obligation
Approach to contract formation and clauses to negotiate
[37] Counsel relied on different aspects of the Court of Appeal’s decision in Electricity Corporation of New Zealand Ltd v Fletcher Challenge Energy Ltd (ECNZ).12 That case concerned whether a signed heads of agreement was a binding contract and the enforceability of a clause requiring “all reasonable endeavours” to negotiate contractual terms. In relation to the first issue, the majority judgment (of four judges) delivered by Blanchard J said:
[53]The prerequisites to formation of a contract are therefore:
(a)An intention to be immediately bound (at the point when the bargain is said to have been agreed); and
(b)An agreement, express or found by implication, or the means of achieving an agreement (e.g. an arbitration clause), on every term which
(i)was legally essential to the formation of such a bargain; or
(ii)was regarded by the parties themselves as essential to their particular bargain.
A term is to be regarded by the parties as essential if one party maintains the position that there must be agreement upon it and manifests accordingly to the other party.
[54] Whether the parties intended to enter into a contract and whether they have succeeded in doing so are questions to be determined objectively. In considering whether the negotiating parties have actually formed a contract, it is permissible to look beyond the words of their “agreement” to the background circumstances from which it arose – the matrix of facts. This can include statements the parties made orally or in writing in the course of their negotiations and drafts of the intended contractual document.
…
[56] It is also permissible when considering contract formation (or rectification) to look at subsequent conduct of the parties towards one another, including what they have said to each other after the date of the alleged contract …
…
12 Electricity Corporation of New Zealand Ltd v Fletcher Challenge Energy Ltd [2002] 2 NZLR 433 (CA).
[58] The Court has an entirely neutral approach when determining whether the parties intended to enter into a contract. Having decided that they had that intention, however, the Court’s attitude will change. It will then do its best to give effect to their intention and, if at all possible, to uphold the contract despite any omissions or ambiguities …
…
[62] We agree with Professor McLauchlan (“Rethinking Agreements to Agree” (1998) 18 NZULR 77, 85) that “an agreement to agree will not be held void for uncertainty if the parties have provided a workable formula or objective standard or a machinery (such as arbitration) for determining the matter which has been left open”. We also agree with him that the court can step in and apply the formula or standard if the parties fail to agree or can substitute other machinery if the designated machinery breaks down. This is generally the approach taken by this Court in Attorney-General v Barker Bros Ltd.
[63] However, if essential matters (i.e. legally essential or regarded as essential by the parties) have not been agreed upon and are not determinable by recourse to a mechanism or to a formula or agreed standard, it may be beyond the ability of the Court to fill the gap in the express terms, even with the assistance of expert evidence. …
…
[65] A helpful analysis of various possible situations is given by Lloyd LJ in Pagnan S.p.A v Feed Products Ltd (1987) 2 Lloyd’s Rep 601, 619. After pointing out that the parties may intend to be bound forthwith even though there are further terms still to be agreed, his Lordship said that, if they then failed to reach agreement on the further terms, the existing contract is not invalidated unless the failure to reach agreement renders the contract as a whole “unworkable” or void for uncertainty. By “unworkable” we take him to mean that the transaction is lacking in business efficacy. Lloyd LJ continued:
“It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word ‘essential’ in that context is ambiguous. If by ‘essential’ one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by ‘essential’ one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by ‘essential’ one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, ‘the masters of their contractual fate’. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called ‘heads of agreement’.”
[66] It follows that merely because an important term is deferred to be settled on a future occasion, that does not mean that there is no intention to be bound. In such circumstances, provided the Court is satisfied that the parties did intend to enter immediately into a contractual relationship, it will do its best to find a means of giving effect to that intention by determining, if possible, the outstanding matter.
[38] The majority found that the heads of agreement was not binding. They went on to consider the respects in which the agreement was said to be uncertain, including addressing the heads of agreement’s “all reasonable endeavours” obligation to negotiate contractual terms. The majority said:
[114] … even if the clause were part of an otherwise binding HoA, we would have difficulty in seeing that, because of the nature of the “not agreed” items, it could create any legally enforceable obligation to negotiate further…
[115] The end in view (the full agreement) is insufficiently precise for the Court to be able to spell out what the parties must do in exercising their reasonable endeavours. Where the objective and the steps needing to be taken to attain it are able to be prescribed by the Court, a best endeavours or reasonable endeavours obligation will be enforceable. That may be possible in relation to some contractual negotiations of relative simplicity and predictability (Coal Cliff Collieries). But a negotiation of complex contractual terms is such a variable matter, both in process and in result, and so dependent on the individual positions which each party may reasonably take from time to time during the bargaining, that it is impossible for a Court to define for them what they ought to have done in order to reach agreement. The Court neither knows the result nor is able to say how each offer should have been made, nor whether it should have been accepted. If ECNZ had sat on its hands and absolutely declined to bargain – which was not the case – it would have been necessary, in order to provide a remedy to be able to state what, as a minimum, it was obliged to do as part of the bargaining process. That may have been possible, as can be seen from the presumption for good faith bargaining now to be found in s 32 of the Employment Relations Act 2000 and the Code promulgated pursuant to s 35 of that Act, but in fact ECNZ did actively participate in a lengthy bargaining process.
[39] Soon after ECNZ, the Court of Appeal also decided Wellington City Council v Body Corporate 51702 (Wellington).13 The Court distinguished between a process contract and a substantive bargain. Breach of a contract to negotiate lies in failure to try, either at all or according to whatever may be required. Breach does not lie in failing to agree.14 The Court said that contracts to negotiate were not to be held in all circumstances to be unenforceable.15
13 Wellington City Council v Body Corporate 51702 (Wellington) [2002] 3 NZLR 486 (CA).
14 At [14].
15 At [15].
[40] The Court also addressed the need for sufficient precision for the Court to be able to identify what the parties must do. Referring to Burrows Finn and Todd, Law of Contract in New Zealand, the Court said:16
… the authors appropriately point out that when the parties intend that an essential obligation is to be determined by some objective criterion, the Court will supply the answer if the parties cannot agree and even if the agreed machinery proves defective. However, when the content of the obligation is left for future determination on a purely subjective basis, the Court cannot assist and the contract fails for want of sufficient certainty…
[41]The Court also said:
[30] The position can be summed up in the following way. The essence of the common law theory of contract is consensus. It follows that for there to be an enforceable contract, the parties must have reached consensus on all essential terms; or at least upon objective means of sufficient certainty by which those terms may be determined. Those objective means may be expressly agreed or they may be implicit in what has been expressly agreed…
…
[32] It is implicit in what we have just said that there will be some circumstances in which a process contract is enforceable. The tender cases, although sui generis, provide some analogy: see for example Transit New Zealand v Pratt Contractors Ltd [2002] 2 NZLR 313. In such cases a specific procedure is in issue, and the Court can reasonably determine what the parties are required to do and whether they have done it. If a contract specifies the way in which the negotiations are to be conducted with enough precision for the Court to be able to determine what the parties are obliged to do, it will be enforceable.
[42] I add that a label such as “letter of intent” is not determinative. Letters of intent come in all sorts of forms. There can therefore be no assumptions.17
Approach to contractual interpretation
[43]In ECNZ, the Court majority acknowledged that: 18
16 Wellington City Council v Body Corporate 51702 (Wellington) [2002] 3 NZLR 486 (CA) at [29], citing John Burrows and others Burrows Finn & Todd, Law of Contract in New Zealand (2nd ed, LexisNexis Butterworths, Wellington 2002) at 3.7.3ff.
17 ERDC Group Ltd v Brunel University [2006] EWHC 687 (TCC), [2006] All ER (D) 468 (Mar) at [27].
18 Electricity Corporation of New Zealand Ltd v Fletcher Challenge Energy Ltd [2002] 2 NZLR 433 (CA) at [50].
The question whether negotiating parties intended the product of their negotiation to be immediately binding upon them, either conditionally or unconditionally, cannot sensibly be divorced from a consideration of the terms expressed or implicit in that product
[44] The approach to contractual interpretation was more recently set out by the Supreme Court in Firm PI 1 Ltd v Zurich Australian Insurance Ltd t/a Zurich New Zealand,19 and later summarised in Savvy Vineyards 4334 Ltd v Weta Estate Ltd:20
[24] There is no dispute as to the approach to interpretation applicable. The approach is that set out by this Court in Firm PI 1 Ltd v Zurich Australian Insurance Ltd. The Court in that case said the approach was an objective one. The Court went on to accept that “in interpreting commercial contracts the courts should have regard to their commercial purpose and to the structure of the parties’ bargain, to the extent that they can reliably be identified”. The Court also said:
[63] While context is a necessary element of the interpretive process and the focus is on interpreting the document rather than particular words, the text remains centrally important. If the language at issue, construed in the context of the contract as a whole, has an ordinary and natural meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant. But the wider context may point to some interpretation other than the most obvious one and may also assist in determining the meaning intended in cases of ambiguity or uncertainty.
Discussion
[45] In relation to this and the other issues, given the extent of the parties’ submissions (which for Enviro were divided between Mr Williams and Mr Lindsay) I address their essence or gist rather than every formulation of every argument.
[46] For Enviro, Mr Lindsay addressed this issue in closing. He submitted that para 9(a)(iii)(F) of the LOI – stating that “the parties must take all reasonable steps to enter into the Service Agreement within 6 months from the Award Date” – is unenforceable, characterising it as little more than an agreement to negotiate or agree.
19 Firm PI 1 Ltd v Zurich Australian Insurance Ltd t/a Zurich New Zealand [2014] NZSC 147; [2015] 1 NZLR 432.
20 Savvy Vineyards 4334 Ltd v Weta Estate Ltd [2020] NZSC 115, [2020] 1 NZLR 714 (footnotes omitted).
[47] It is common ground that para 9(a)(iii)(F) is misplaced in para 9(a)(iii), which lists provisions to be contained in the Service Agreement. Rather, para 9(a)(iii)(F) states a prior obligation which should be read as a standalone clause in para 9(a). In any event, the issue is whether it is enforceable.
[48] As the Court of Appeal said in ECNZ, the Court has an entirely neutral approach when determining whether the parties intended to enter into a contract. However, having decided that they had that intention, the Court’s attitude changes. It will then do its best to give effect to their intention and, if at all possible, to uphold the contract despite any omissions or ambiguities.21
[49] Here, as indicated, it was ultimately common ground that the parties intended to enter into a binding contract when they executed the LOI. The LOI explicitly states in para 7 that it is a binding contractual agreement. There is no difficulty giving effect to the parties’ intention to uphold the LOI contract. The issue concerns the enforceability of the specific term in para 9 requiring the parties to “take all reasonable steps to enter into the Service Agreement within 6 months from the Award Date”, although during argument Mr Lindsay submitted that all of para 9 is unenforceable.
[50] As Enviro submitted, the subsequent tender submission is not relevant context to the LOI. The two documents should not be conflated for the purpose of determining the enforceable terms of the LOI. For example, the non-price assumptions/riders in the tender submission are not the source of contractual obligation for either party under the LOI. However, the tender submission may be relevant to an assessment of breach.
[51] The distinction between a process contract and substantive agreement has some application here. The LOI could not bind the Councils. Even though the LOI stated that “[n]otwithstanding any further negotiations in relation to the Services Agreement, the parties agree that the Services Agreement will reflect the commercial terms outlined para 9(a)(iii)” (in para 4) and that “ESL and Revital will enter into the Service Agreement which will include the terms and conditions set out in this [LOI]” (in para 9(a)(ii)), given the expiry clause I doubt the LOI committed the parties (subject to
21 Electricity Corporation of New Zealand Ltd v Fletcher Challenge Energy Ltd [2002] 2 NZLR 433 (CA) at [58].
termination rights) to a service agreement on the agreed commercial terms even if, taking all reasonable steps, they could not otherwise agree. But that is not Revital’s case.
[52] Revital’s case is that Enviro failed to take all reasonable steps. Unlike an obligation to negotiate an agreement in the abstract, it is possible to give effect to the obligation here in relation to process and substance. Even though negotiation is a variable matter, here all reasonable steps are informed by the commercial context of the RFP and particularly by the parties’ agreement to the specific commercial terms set out in para 9(a)(iii) of the LOI. Although there were other matters that remained to be agreed, there were no specified “not agreed” items as in ECNZ. The timeframe was based on an Award Date indicating the Councils’ selection of the tender submission based on the LOI. It is possible to give sensible content to the obligation. The end in view is sufficiently certain. Contract formation is no longer an issue and so the Court will do its best to give effect to the parties’ intention,22 as expressed in the LOI. In this context, the role of the Court in a commercial dispute is to give legal effect to what the parties have agreed. To hold that a clause is too uncertain to be enforceable is a last resort.23
[53] While I do not consider it necessary to inform the commercial context further to give the term content, if it were, and without conflating the LOI and the tender submission or treating the tender submission as a variation, the matters that Enviro and Revital agreed when finalising the tender submission for submission on 4 March 2020 can also inform the commercial context, as Mr Lindsay ultimately acknowledged. That included pricing (gate rates and rent) and back-to-back contracts (service contract and lease). In a part of the LOI that Enviro now accepts to be binding, the parties agreed that the tender submission “shall provide for Revital to provide the Services on the headline commercial terms outlined below under para 9(a)(ii), which must have intended to refer to para 9(a)(iii). Insofar as gate rates, for example, were still to be agreed when the LOI was signed, the parties must have intended them to be
22 Electricity Corporation of New Zealand Ltd v Fletcher Challenge Energy Ltd [2002] 2 NZLR 433 (CA) at [58].
23 Astor Management AG v Atalaya Mining plc [2017] EWHC 425 (Comm), [2017] All ER (D) 115 (Mar) at [64]-[65]; Focus Construction Interiors Ltd v Spaceworks Design Group Ltd [2019] NZHC 2211 at [35].
agreed for the tender submission – as they were.24 That then provided further commercial context for the steps required in the event of selection as the preferred tenderer.
[54] I do not accept Enviro’s submission that the parties intended only to commit to a tender submission. That is the focus of para 3 of the LOI, but para 4 and para 9(a)(ii) referred to above go further. Given the terms of these two provisions, even though para 9 is entitled “PRELIMINARY AGREEMENT BETWEEN THE PARTIES”, the parties clearly intended to commit to a process in the event of selection as preferred tenderer.25 That was also clearly the position stated to the Councils. To conclude otherwise would enable Enviro to get the benefit of Revital’s exclusive commitment to the tender submission without any obligation at all on Enviro to follow through with Revital, allowing Enviro after its selection as preferred tenderer to choose unilaterally to cut out subcontractors and step in and provide all the services itself. I also do not accept that because Enviro was to be the sole tenderer, the limited effect of the LOI was that Enviro had complete autonomy to negotiate with TCC and Revital’s only protection was its right of veto - meaning it could walk away if it did not accept Enviro’s terms.
[55] I consider the obligation on both parties in the LOI to “take all reasonable steps to enter into the Service Agreement within 6 months from the Award Date” is enforceable even though taking all reasonable steps would not necessarily result in a service agreement. That raises causation and loss issues but does not in my view preclude a binding contractual term.
24 One rate remained to be agreed (the outstanding gate rate for non TCC waste). The cost of the new processing facility was not to be agreed – it was Revital’s cost (albeit the details of the facility were not specified in the LOI).
25 The reference to “may” in para 9(a)(iii)(G) does not suggest otherwise. That merely gave Enviro the option of requiring that Revital enter into a Deed of Lease with either ESL or Council in order to be able to comply with the Service Agreement.
Fiduciary claim
Applicable principles
[56] The principles governing whether a relationship is of a fiduciary nature are not in dispute. They were summarised by Kós P for the Court of Appeal in Dold v Murphy:26
[52] First, fiduciary duties are assumed responsibilities. Fiduciary responsibility may be inferred where the relationship is one of assumed trust, confidence and loyalty. These qualities were identified in a trio of New Zealand Supreme Court decisions in the latter-half of the first decade of this century: Chirnside v Fay, Paper Reclaim Ltd v Aotearoa International Ltd and Amaltal Corp Ltd v Maruha Corp.27 As Tipping J noted in the Chirnside decision, a relationship may give rise to fiduciary duties in two situations. The first is where there is an inherently fiduciary relationship between the parties, such as between solicitor and client, trustee and beneficiary, and principal and agent.28 The second context is where particular aspects of a relationship that is not inherently fiduciary nonetheless justify it being classified as such. As Tipping J has noted:29
“No single formula or test has received universal acceptance in deciding whether a relationship outside the recognised categories is such that the parties owe each other obligations of a fiduciary kind.”
But the Judge went on to note:30
“[A]ll fiduciary relationships, whether inherent or particular, are marked by the entitlement … of one party to place trust and confidence in the other. That party is entitled to rely on the other party not to act in a way which is contrary to the first party’s interests.”
[53] The point was put slightly differently by Blanchard J in the Paper Reclaim decision:31
“A fiduciary relationship will be found when one party is entitled to repose and does repose trust and confidence in the other. The existence of an agreement, express or implied, to act on behalf of another and thus to put the interests of the other before one’s own is a frequent manifestation of a situation in which fiduciary obligations are owed. Partners are a classic example of parties in that situation. Their position is different from that of parties to a contract who may have to cooperate but are doing so for their separate advantages.”
26 Dold v Murphy [2020] NZCA 313, [2021] 2 NZLR 834.
27 Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433; Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26; [2007] 3 NZLR 169; and Amaltal Corp Ltd v Maruha Corp [2007] NZSC 40, [2007] 3 NZLR 192.
28 Chirnside v Fay [2006] NZSC 68; [2007] 1 NZLR 433 at [73].
29 At [75].
30 At [80].
31 Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26; [2007] 3 NZLR 169 at [31] (footnote omitted).
[54]The same Judge put it slightly differently again in the Amaltal
decision, noting that in a fiduciary relationship:32
“[O]ne party is entitled to rely upon the other, not just for adherence to contractual arrangements between them, but also for loyal performance of some function which the latter has either agreed to perform for the other or for both or has, perhaps less formally, even by conduct, assumed.”
[55] We consider the relevant principles can be summarised in this way. Some relationships are inherently fiduciary in nature, involving trust, confidence and a degree of dependence, such as solicitor and client and trustee and beneficiary. In other cases a fiduciary relationship is only likely to be inferred when the legal relationship between parties involves: (1) the conferral of powers in favour of the alleged fiduciary, which may be used to affect the proprietary rights of the beneficiary; (2) the apparent assumption of a representative or protective responsibility by the alleged fiduciary for the beneficiary (for example, to promote the beneficiary’s interests, or to prefer the interests of the beneficiary over those of third parties); and (3) the implied subordination (although, not necessarily, elimination) of the alleged fiduciary’s own self-interest.
[56] Secondly, where the essential legal relationship is contractual, primacy must be given to the contract. The contract is the starting place.
As Blanchard J observed in Paper Reclaim:33
“When parties have formed a contract the correct approach is first to decide exactly what they have agreed upon. Only then should the court consider whether any particular aspect of their agreement gives rise to a relationship which can properly be characterised as fiduciary, imposing an obligation of loyalty on one or both parties, which supplements the express or implied contractual powers. It is not enough to attract an obligation of loyalty that one party may have given up more than the other in entering into the contract or that the contract may be more advantageous for one party than the other. Nor is a relationship fiduciary in nature merely because the parties may be depending upon one to perform the contract in its terms. That would be true of many commercial contracts which require co-operation.”
Discussion
[57] Given my conclusion that the LOI contains an enforceable contractual obligation to take all reasonable steps to enter into the Service Agreement within six months from the Award Date and it is common ground that primacy must be given to the contract, it is strictly unnecessary to address the fiduciary argument. I will do so briefly.
32 Amaltal Corp Ltd v Maruha Corp [2007] NZSC 40; [2007] 3 NZLR 192 at [21].
33 Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26; [2007] 3 NZLR 169 at [31].
[58] Revital says that fiduciary duties arise from the fact that the waste management arrangements between the parties contained the following characteristics:
(a)Revital gave up its strict commercial rights to tender for the Key Tender Contracts to operate under ESL’s banner.
(b)Revital was to be the exclusive service provider under ESL’s tender for the Services. ESL was Revital’s agent to secure that entitlement as the exclusive tenderer through the tendering process. The existence of agency characteristics commonly imports fiduciary duties.
(c)ESL was given a mandate to submit a tender and, reflecting the LOI, to enter into contracts with TCC that impacted Revital’s future obligations. This mandate created a vulnerability for Revital. Vulnerability to the exercise of power is identified as a key part of the fiduciary principle. Cooke P once stated, “vulnerability is an important, indeed, cardinal feature of a fiduciary relationship”.34
(d)As the sole tenderer, ESL was given special access to the Council if ESL won the tender as the successful tenderer.
(e)ESL was given access to Revital’s sensitive commercial information and pricing for the tender.
(f)The relationship required an ongoing relationship over a long period on a commercial and good faith basis.
[59] Enviro says that the parties’ relationship was contractual only. There was no room, need or factual basis to impose fiduciary obligations. The LOI was a product of Revital looking out for its own commercial best interests.
[60] As indicated, Revital’s witnesses sought to emphasise references to “partnership”, “partnering”, “joint venture” and “joint tender” whereas Enviro’s
34 Watson v Dolmark Industries Ltd [1992] 3 NZLR 311 (CA) at 315.
witnesses sought to downplay the use of, and explain what they intended when using, these terms and instead emphasised the references to Revital as a “subcontractor” and indeed only a “potential” subcontractor to perform the organics processing services. These characterisations were overstated, and some concessions were made in cross- examination. Revital was only a potential subcontractor in the sense that the Councils’ requirements and final service agreement were unknown. It was not suggested that any witnesses were disingenuous. In the context of this fiduciary argument too, I derived most assistance from the documents.
[61] Revital’s fiduciary case was based on the LOI and the tender submission rather than the earlier exploratory discussions. The tender submission was expressed as a tender by ESL alone but went on to say that it was a joint proposal via exclusive service contracts with service providers including Revital. The tender submission said that ESL and Revital had signed a letter of intent for exclusive service contracts for the listed services and referred to the LOI in an appendix affirming each party’s commitment to the relationship and the joint proposal to the benefit of the Councils. The tender submission said that Revital would sign back-to-back contracts with ESL. The executive summary said that ESL was leading a partnership with Revital (among others) and referred several times to them as partners. References to partnership continued in the subsequent question and answer exchanges between ESL and Morrison Low on behalf of the Councils. The LOI itself contained para 12(d) providing that any previous understanding, agreement, representation or warranty relating to that subject matter is replaced by the LOI and has no further effect, but without using “entire agreement” wording.
[62] I consider the parties agreed to collaborate as set out in the LOI but this did not amount to a fiduciary relationship. It was not a partnership in the legal sense. There was to be no profit sharing. The parties agreed in the LOI to collaborate or work together in their mutual interest to offer an agreed solution in the tender submission, but Enviro did not assume an obligation to act in Revital’s interests and contrary to its own interests in negotiating with the Councils or with Revital. There was a common objective and agreed exclusivity, but Enviro did not agree to subordinate its interests in favour of Revital’s interests. Commercial risks were undertaken independently and Revital protected its own position with the non-price assumptions/riders and reference
to legal review in the tender submission. ESL did not act as Revital’s agent when negotiating the organics processing components of its service agreement with TCC. Rather, the obligations that ESL owed Revital as it negotiated with TCC were contractual and contained within the LOI, including the contractual obligation in issue referred to above. The relationship does not involve the elements summarised by the Court of Appeal in Dold v Murphy – conferral of powers, the apparent assumption of representative or protective responsibility and implied subordination of self-interest. Given the contractual relationship, there is no need to supplement the contractual obligation in issue with a fiduciary obligation of loyalty.
Breach
Subsequent events
[63]I now deal with events from August 2020 in more detail.
[64]On 10 September 2020, Enviro emailed Revital stating:
We continue to work with TCC to close out the Tauranga Opportunities for Organics Processing.
You will (request will go to Peter) receive a request from Sarah Millar at WSP to complete some baseline stormwater testing for leases.
This will further assist in being able to close out the leases with Council.
If you could please let Peter know that this request will come through, that would be helpful.
I’ll be in touch once the Council lease documents are received for your site.
[65]On 2 October 2020, Revital requested an update and Enviro responded:
The contracts and leases for the facilities are not yet complete with Council. It has been a very long drawn out process. We expect to close this out in the next 2-3 weeks, and will be in touch with any contentious items surrounding the organics processing site.
[66] Mr Buist said he realised that Enviro had negotiated the contracts with the Councils without Revital’s involvement and called Mr Jones to express concern that Revital had not been involved in the negotiation. Mr Jones outlined the process that once Enviro had signed its head contracts with the Councils, then Enviro would engage
with Revital regarding negotiation of subcontracts. Mr Buist said he advised Mr Jones that, at the very least, Revital expected that all of its tender riders, and the provisions of the LOI, would be addressed in the contracts with TCC. Whether this conversation occurred in such a detailed way at this stage need not be decided. Suffice to say that Revital was aware that Enviro was negotiating with TCC before engaging substantively with Revital and acquiesced to some extent.
[67] On 28 October 2020, Mr O’Neill emailed Mr Jones asking how Enviro was progressing with the tender documents. He noted “We now have 8 months to the proposed start of the new contract and we have nothing in place”. Mr Jones replied that TCC were still to finalise the documents for the RTS’s and GreenWaste sites. Mr Jones said he was hopeful of this occurring over the next fortnight and then Enviro would be in touch on getting “our agreement” underway.
Enviro’s agreements with TCC
[68] On 4 November 2020, Enviro and TCC entered into the Facility Services Contract and a Development and Infrastructure Works Agreement for the Te Maunga Refuse Transfer Station (Development Agreement).35 The date of mobilisation of the Facility Services Contract was 4 November 2020 and the date of commencement for the contract works was 1 July 2021. Mr Rabbidge of Revital was included in the key personnel. The Facility Services Contract included provisions about occupancy of the Te Maunga site, and a mobilisation plan outlining activities required before the date of commencement. An initial draft of the mobilisation plan was due within 10 working days of 4 November 2020. The schedule included draft leases. An initial draft health and safety plan was due within one month of 4 November 2020. The Facility Services Contract also included detailed service specifications for food waste and green waste processing.
[69] On 16 November 2020, Enviro and TCC entered into the Head Lease to commence on 1 March 2021.
35 Enviro and the Councils entered into agreements concerning other services earlier: waste collection services with TCC on 15 September 2020 and kerbside waste collection services with WBPDC on 1 October 2020.
[70] On 23 November 2020, TCC gave Revital notice of termination of lease in respect of the Te Maunga site, effective as at 28 February 2021.
[71] On 2 December 2020, Mr O’Neill and Mr Buist of Revital met with Mr Jones, Mr Rutter and Mr McKenzie of Enviro at a restaurant in Ellerslie next to Enviro’s office. At the meeting, Mr McKenzie was introduced as a new Enviro employee who would be assisting going forward. Enviro confirmed that the Facility Services Contract and the Head Lease with TCC had been executed (Mr Jones had informed Mr Buist by telephone prior to this). Enviro advised that it would prepare back-to- back subcontracts, and try to get them to Revital before Christmas. Mr Buist and Mr O’Neill recalled Mr Jones saying that when the sublease and service agreement were available there would be “no surprises”. Mr Buist also recalled Mr Jones saying that Revital’s key rider of securing the right to operate the plant at Te Maunga for 16 years from the date of the commencement had been addressed in the contracts with no rental increases in the period. Mr Jones recalled describing the deal that Enviro had negotiated as securing both Enviro and Revital’s interests. He considered that Enviro had secured a very good deal from Council for the organics processing services. It is likely Mr Jones said there would be “no surprises” in the draft agreements they were preparing for Revital but in any event Enviro gave Revital a positive message about the very good deal they had secured. Reference to the 16-year term was unlikely to have been in sufficient detail to address the commencement date issue that surfaced later, as indicated below.
[72] On 23 December 2020, Mr Rutter advised Revital that the sublease and service agreement documents would not be available before the Christmas break. Mr Rutter said that getting them to Revital was a priority early in the new year, and that Mr McKenzie would be leading this project and would be in touch in early January.
[73] On 13 January 2021, Mr Buist followed up. Mr McKenzie advised that the documents would likely be available “mid next week”.
[74] On Thursday 21 January 2021, Mr McKenzie said to expect them “either Friday or early next week”. Mr O’Neill recorded that, given the documents had been
promised for well over three months, it required them by 22 January 2021 to review before the upcoming monthly board meeting.
Draft agreements sent to Revital
[75] On 22 January 2021, Enviro sent Revital first drafts of a proposed sublease and subcontract. Enviro noted that once they reached agreement, ESL was required to obtain TCC approval.
[76] On reviewing these drafts, Mr Buist was concerned that there were significant gaps in the documents – including that they did not refer to food waste.
[77] On 27 January 2021, Mr Buist spoke on the phone with Mr McKenzie regarding the apparent gaps in the documents. Mr Buist said he advised that Revital believed they did not address matters in the LOI. He said Mr McKenzie apologised, implying Enviro had had a major internal miscommunication on various matters, and told Mr Buist that he was not aware that Revital had agreed to be involved in the food waste processing part of the tender. Mr Buist said Mr McKenzie agreed the draft documents needed to be largely rewritten and were not at a stage where the parties could negotiate them, and that he would aim to get a new set of drafts to Revital by Monday, 1 February 2021. Mr McKenzie had a different recollection of this conversation and explanation for the gaps that did not involve such an apology or acknowledgement. I accept that Mr Buist raised concern about gaps in the documents given his follow up email (below). It is unnecessary to decide the extent of Mr McKenzie’s response except to say he acknowledged that he agreed to go away and review the food waste arrangements within the TCC head services contract (the Facility Services Contract), amend the draft subcontracts as necessary and turn them around as soon as possible.
[78]Mr Buist followed up the phone call with an email:
Further to our call, having reviewed the documents there are some major gaps. Headline areas not covered include:
• Foodscraps processing;
• New plant build to accommodate Foodscraps; and
• A number of the commercial terms agreed in the attached LOI (see clause 9.(a)(ii) & (iii))
As discussed, rather than having an iterative mark up process at this juncture (which will require wholesale changes to these docs) it might be worthwhile having a quick call tomorrow AM with Glen or James to discuss the best way forward to get everything in order.
[79] On 3 February 2021, Mr McKenzie emailed Mr Buist updated drafts of the subcontract and sublease. This draft subcontract added reference to food waste, but also cl 2.7 stating:
To the extent and/or for the period that the Service Provider is unable to process some or all of the Food Waste in accordance with this agreement, ESL reserves the right to retain some of [sic] all of the Green Waste.
[80] On 4 February 2021, Mr Buist called Mr McKenzie to express concern about the updated drafts. They also had different recollections of this conversation. Mr Buist recalled raising his concern that the documents were a surprise given what Mr Jones had said at their December 2020 meeting, and recalled Mr McKenzie responding that he understood that, but the documents had been agreed by TCC and “they are what they are”. Mr McKenzie acknowledged that he could have used those words. That is consistent with his focus on the documents being back-to-back with Enviro’s agreements with TCC. Mr Buist indicated that Revital’s major concerns included cl 2.7 set out above. Mr McKenzie acknowledged that Mr Buist at least said he thought the subcontract and sublease should run for 16 years from the date the new food waste processing facility was operational (a non-price assumption/rider in the tender submission). According to Mr Buist’s evidence, Mr McKenzie said he would follow up on the issues and asked that Mr Buist email him outlining Revital’s concerns in writing. Mr Buist said that Mr McKenzie acknowledged that these were major issues and suggested he would need to bring Mr Jones and Mr Rutter back into the discussion, as they were responsible for negotiating the contracts with TCC. It is unnecessary to resolve the difference between their recollections given the contemporaneous documents. If the cl 2.7 concern about Enviro’s retention of green waste was not raised on this call, it was raised soon after, as indicated further below.
[81] The same day, Mr Buist sent Mr McKenzie Revital’s comments on the updated drafts of the subcontract and sublease and said:
Further to our call, key info still missing / not addressed in these documents:
- Automatic 16 year extension of agreements when new site goes operational (see the attached final RFP page 98. Contract Term)36
- Requirements for the new premises to be supplied on a ‘ready to build’ basis.
On the draft documents themselves, we note the general one sided nature of the wording, which will be addressed more comprehensively in a later mark up. However, in the interests of time, please see the attached mark up dealing with what we see as the key commercial issues.
Let me know when you would like to discuss.
[82] Revital’s mark up included deletion of the clause reserving ESL’s right to retain some or all green waste.
[83] The same day, Mr Buist requested a copy of the Head Lease (which was referred to in the draft sublease). The next day, 5 February 2021, Mr McKenzie provided Revital with a copy of the redacted Head Lease. This provided for any new lease for the alternative premises to have the same final expiry date as the Head Lease. Revital realised this would mean that at any point in the 16-year term, Revital could be given two years’ notice to relocate to the alternative premises, it would be obliged to consent to and build the required processing facilities, and if it did not do so, it would have to exit the site within two years and transfer its resource consents to Enviro.
[84] 6 February 2021 was six months from the Award Date. The LOI provided that it expired on failure by the parties to execute the Services Agreement within that period. However, the Award Date was unknown to Revital at the time and the parties continued to negotiate. Indeed, Mr McKenzie said the parties were working towards a 1 March 2021 deadline given Revital’s lease expiry. Enviro acknowledged that during negotiations, neither team placed focus on the LOI expiry date.
[85] On 9 February 2021, Enviro provided further draft documents with comments and tracked changes. Ms Toomey, Enviro’s in-house legal counsel, commented that Enviro could not accept Revital’s deletion of the clause reserving Enviro’s right to retain some or all green waste, and could not offer that the lease would extend for a
36 This refers to the non-price assumptions in the tender submission.
minimum of 16 years from the date of commencement of trading at alternative premises.
[86] That same day, Mr Buist reported to Mr O’Neill that there were two major issues:
1.There is NO provision in the contracts that allow for the agreement to be extended to 16 years from the date of new site operations commencement.37
2.ESL’s obligation to supply us with all green waste volumes (as per the LOI)
[87] Mr Buist said this was the first time Revital became aware that Enviro was contemplating not complying with the terms of the LOI. His email to Mr O’Neill referred to speaking with their lawyer.
[88] Also on 9 February 2021, Enviro advised Revital that Enviro wanted to perform baseline environmental and safety audits of its nominated subcontractors prior to formal subleases or subcontracts commencing.
[89] On 16 February 2021, Mr O’Neill and Mr Buist met with Mr Jones, Mr Rutter, Mr McKenzie and Mr King (general manager Hampton Downs) via Microsoft Teams to discuss the key issues with the draft subcontract and draft sublease, including the contract term (16 years from relocation). Enviro undertook to reopen the issue with TCC. Following the meeting, Mr McKenzie emailed Mr Buist:
Some notes from our discussions.
Contract term
A – ESL to approach TCC and look at options for 16 year term or alternatively some form of early termination or balloon payment arrangement. – MM
A – Investigate contracts in term [sic] of rent increases to apply, intent is to incur “0” rent increase for first 16 years – MM/JB
Exclusivity
A – ESL to understand how much green waste is required and what sources will be required to support composting at Hampton Downs - JR
37 This was expressing concern at the omission given the non-price assumption/rider, rather than acknowledging omission from the LOI as submitted by Enviro.
A – Revital – Provide some contingency solutions for accepting food waste and green waste around the Tauranga area - JB
A – Revital – Provide some contingency solution to supply of green waste closer to Hampton Downs to offset any requirement to transport from Tauranga- JB
Contract Commencement
• Agreed to pursue execution of sublease for 1 month performing the draft subcontracted services and continue negotiations in good faith. Once agreement has been reached terms and conditions would apply retrospectively to the lease commencement date.
A – Prepare short term lease extension document for execution - MM
Other
• Once a pathway is identified for exclusivity and contract term further negotiations will take place on gate rates.
• ESL can commence safety and environmental audits
[90] Recognising that Revital’s lease expired on 28 February 2021 and to allow negotiations to continue as indicated, Mr McKenzie was to prepare a draft short-term sublease agreement.
[91] On 18 February 2021, Mr Buist asked Mr McKenzie for the full unredacted copy of the Head Lease given that TCC could compel Revital to enter into a new lease on the same terms as the Head Lease if the Head Lease was terminated.
[92] On 19 February 2021, Mr Buist emailed Mr McKenzie a revised version of the draft sublease with a proposed change to the relocation clause.
[93] The same day, Mr McKenzie sent Revital a draft Letter of Agreement (LOA) which he said would allow Revital to continue operating while they continued negotiating the agreements. It provided that the parties would have one month from 1 March 2021 to finalise and execute the sublease and subcontract, and that in the meantime they would be bound by the LOA, using the last versions of ESL’s draft sublease and subcontract as the basis for the short-term agreement.
[94] On 22 February 2021, Mr McKenzie emailed Mr (Paul) Shaw in relation to conducting the baseline health and safety audit of Revital’s operations at the premises.
[95] On 23 February 2021, Mr McKenzie emailed Mr Buist Enviro’s comments on the updated draft of the sublease.
[96] On 24 February 2021, Mr Buist emailed Mr McKenzie a revised draft of the LOA. Revital had added reference to the LOI, excluded the application of some clauses in the draft subcontract and sublease and extended the one-month term to three months.
[97] On 25 February 2021, Mr McKenzie sent Mr Buist Enviro’s edits on the draft LOA, with copies of the other documents unchanged (other than Revital’s latest mark up in the subcontract) for the purpose of the interim agreement. Mr McKenzie’s email said that if the parties could not “close this interim agreement out” by the next day, he would need to elevate internally. He said it was important that any response from Revital represented its final position. The edits on the draft LOA proposed a compromise two-month extension, but Ms Toomey’s comments did not agree to Revital’s references to the LOI.
[98] On 26 February 2021, Mr Buist emailed Mr McKenzie Revital’s final draft of the LOA as sought and explained Revital’s position. Revital agreed to the two-month extension but not to the other changes and comments. Mr Buist’s covering email also stated:
Fundamentally our position, having taken further advice from our Barrister, is as follows:
* This is a short term arrangement to allow negotiations to continue re the Subcontract / Sublease.
* The LOI is the governing document with regards to those negotiations, and will continue to be so until those negotiations are finalised.
* The inclusion of the draft Subcontract & draft Sublease, as they currently stand, is solely as a basic operational framework for day to day activities for the next 2 months. They are not adequate to govern our long term arrangement or further negotiations. Hence our requirement to explicitly preserve the position of the LOI.
We consider this to be a fair and reasonable approach. At the end of the day, we just want to get on with negotiating the final documents.
This is our final position regarding the Extension Letter. Should you need to escalate further, we are prepared to engage in need.
[99] Mr O’Neill recalled a telephone call from Mr Jones on Sunday 28 February to say there were things in the LOI that Enviro could not meet, and Mr O’Neill’s reaction was to say “let’s sit down and work it out”. Mr Jones did not recall making that call on a Sunday. I need not decide whether it occurred.
[100] On that same day, 28 February 2021, Revital’s lease from TCC expired and on 1 March 2021 Enviro’s Head Lease commenced.
Health and safety
[101] On 1 March 2021, the health and safety consultant appointed by Enviro, Mr Shaw, attended the Te Maunga site. Although Mr Shaw had called the week before, when he arrived the site manager was not expecting him and asked him to call Mr Rabbidge. Mr Shaw called Mr Rabbidge, who was not pleased. However, the visit proceeded.
[102] On 3 March 2021, Mr Shaw sent his draft health and safety report to Mr McKenzie at Enviro. The report was headlined “Documented processes need to be viewed to establish alignment with Legislative Requirements.” It identified as key issues:
· The existing Health and Safety Management System is outdated and not at the maturity level one would expect of an established operation of this nature
· Basic items such as Hazardous Substance Controls were not documented, or staff empowered with the level of knowledge to adequately control risks
· Hazards are controlled at the point of exposure which appears a very reactive approach to risk management
· Health Risks have not been fully mapped and basic controls to mitigate exposure such as Respiratory Protection Equipment (RPE) was not routinely worn
· Critical Risks and critical controls had not been identified, assessed, assigned, or monitored to ensure their effectiveness and to reduce risks to the business to tolerable levels in the interim and longer term.
· There was limited up to date data captured to accurately assess the site health and safety performance
[103]The same day, Mr McKenzie forwarded the report internally, stating:
The formal Safety Audit for Revitals [sic] operations. In short it appears:
•ESL is now in breach under terms of our agreement with TCC
•Revital is not complying with the warranties of the LOI
•ESL and Revital do not have any agreement around land access or services
•ESL requires a level of confidence in Revitals [sic] Safety Management System, its alignment with our statutory and contractual obligations, and Revitals [sic] ability to comply with it.
[104] Also on the same day, Enviro consulted with TCC who expressed support for Enviro’s proposed course of action (suspending Revital’s operations at the site). Mr McKenzie emailed a copy of Mr Shaw’s report to Revital and Ms Toomey also wrote to Revital attaching a copy of Mr Shaw’s report. Her letter continued:
As you will appreciate, there are serious breaches of the Health & Safety laws and requirements contained in the Report which create significant, serious and material risk for both Remediation and Enviro Waste Services Limited (EnviroNZ).
We confirm that no lease or subcontract has been negotiated to govern the site or performance of services. Further to this, we confirm that no rent has been paid by you to EnviroNZ nor has any bond been put in place.
In the circumstances, in the absence of these agreements and given the significant Health & Safety risks identified in this Report, we require that you cease all activity on the Tip Lane, Mt Maunganui site as at close of business today, 3 March 2021, until you have taken all necessary steps to rectify the Health & Safety issues identified in the Report and can demonstrate and provide evidence to EnviroNZ’s satisfaction that all Health & Safety laws and requirements are being met.
If this is not demonstrated and received by EnviroNZ from you by 5.00pm Friday 5th March 2021 EnviroNZ reserves all of its rights to permanently prevent Remediation access to the site.
[105] That evening, Mr Buist responded by email advising that Revital did not accept Enviro’s position. He said a more formal comprehensive response would be provided the next morning but gave Enviro notice that Revital would be continuing to operate at the site the next day.
On 4 March 2021, Mr Buist emailed Ms Toomey again, stating:
•We do not accept the findings of the Paul Shaw report you refer to.
• In any event, we consider your proposed response of requiring Remediation (NZ) Ltd (Remediation) to suspend all activities to be entirely inappropriate and disproportionate.
• It is our view that EnviroNZ has adopted this position to undermine our position with respect to the Letter of Intent (LOI) and indeed the wider negotiations between our two companies in relation to TCC/WBOP organic waste processing.
• We consider your approach to be a clear breach of your obligation to be negotiating in good faith.
• We are happy to engage in an independent, constructive review of Remediation’s H&S practices at the Tauranga site. The H&S of our staff, customers and contractors is of paramount importance to the [sic] Remediation. However, we are unwilling to engage on the basis of an audit report with clear ulterior motives to undermine our position with respect to the LOI.
• We will be engaging an independent Health & Safety auditor to undertake a new report in the coming days.
• In the event you wish to pursue this matter on the course you outlined, attempting to undermine the LOI, we will respond accordingly.
[107] The same day, the parties had a Teams meeting. Mr McKenzie refuted the allegation that Enviro was seeking to undermine the LOI. Following the meeting, Mr O’Neill emailed Mr McKenzie:
As a follow-up to today's meeting the following steps are being put in place.
(1) We have a meeting tomorrow with an independent consultant regarding a site audit at the Te Maunga site, given that is a public holiday in Taranaki on Monday, the proposed day for the audit is Tuesday the 9th of March.
(2) In the interim we will have a senior manager is [sic] onsite at all times to ensure site practises and staff behaviour is compliant with current Health & Safety legislation.
(3) Once the report is produced, we are happy to have it peer reviewed by an appropriately qualified person.
I will keep you updated on progress.
[108]Ms Toomey replied to Mr Buist:
Just to confirm in writing that Enviro Waste rejects the allegations in your below email.
As discussed earlier today, the requirement to suspend services and the timeframe attached with providing evidence to Enviro Waste’s satisfaction that all health & safety obligations are being met was a direct reflection of the serious nature of the concerns raised in Paul Shaw’s report and was in a concerted effort to reduce potential risk to Enviro Waste, Revital and TCC.
[109] Revital made arrangements for another health and safety consultant from Matike Consultancy Ltd to conduct an assessment, initially by way of desktop review, and advised Enviro on 5 March 2021.
[110]On 9 March 2021, Mr Peri of Matike visited the Te Maunga site.
[111] On 10 March 2021, Mr McKenzie emailed Mr Buist stating that Enviro would like to take steps to further clarify Paul Shaw’s findings and Revital’s concerns around the same. Mr McKenzie reiterated the importance Enviro placed on health and safety and the serious concerns outlined in Paul Shaw’s report, and asked that Revital complete a Telarc Q-Safe form and return it by 17 March 2021. This was a health and safety self-audit form. The email also said that on completion of the audit documentation, Enviro would engage an independent health and safety consultant to review Revital’s response and assess its health and safety practices, which may include a site visit the next week.
[112] On 11 March 2021, Mr Buist replied to Mr McKenzie, referring again to the independent audit Revital was undertaking, stating that the results would be provided in due course and proposing they discuss next steps once the results were in. Mr McKenzie responded, stating in relation to this that:
ESL rejects any understanding that ESL agreed that your third party safety audit (organised by Revital) and that this audit forms part of any process for resolving our concerns around Revital’s safety practices. Revital proposed the third party audit on the basis that you did not agree with Paul Shaw’s report.
[113] The same day, Mr Peri of Matike completed his report. The section of the report entitled “Performance Summary – RISK” stated:
· Revital have robust QHSE systems for all business processes and ensures employees are actively managing safety and associated risk.
· The full range of health risks are managed and controlled; this was sighted in the health monitoring which I requested to see from management.
· Safety is always a priority and consistently part of design thinking, this is proven by being GAP, Assure Quality and BioGro approved, noting the commitment to health and safety that is required by all Revital employees.
2.The parties acknowledge that ESL will be submitting a response to the RFP (“Tender Submission”) in relation to the Services.
3.ESL and Revital have agreed that the Tender Submission shall provide for Revital to provide the Services on the headline commercial terms outlined below under paragraph 9(a)(ii) [sic]
4.The parties acknowledge that they will need to enter into a more detailed agreement in relation to the Services (“Service Agreement”). Notwithstanding any further negotiations in relation to the Services Agreement, the parties agree that the Services Agreement will reflect the commercial terms outlined paragraph 9(a)(iii)
5.Subject to paragraph 6, the parties agree to operate on an exclusive basis regarding the Tender Submission. This means that Revital agrees that it will not bid to Council directly in response to the RFP and ESL must use Revital for the RFP.
6.The parties acknowledge there are many services requested by Council for which ESL is submitting a response to the RFP. If ESL is not selected as the sole preferred tenderer in relation to the following contracts [Transfer Station operation contract(s), Greenwaste collection contract, Foodscraps collection contract] (“Key Tender Contracts”) then Revital shall have the right to negotiate, in relation to the provision of the Services, directly with Council or the preferred tenderer(s) for the Key Tender Contracts.
7.This Letter of Intent is a binding contractual agreement but may be terminated as set out below.
8. DURATION OF LETTER OF INTENT
This Letter of Intent commences on the last date of signing of the document by the parties and unless otherwise agreed by the parties, expires on the earlier of;
(a)receipt by ESL of notification from the Council that has been wholly unsuccessful in securing any position as preferred tenderer in relation to the Key Tender Contracts
(b)failure by the parties to execute the Services Agreement within 6 months from the Award Date;
(c)A material breach by either party of the terms of this Letter of Intent; or
(d)signing by both parties of the Service Agreement (“Term”).
9. PRELIMINARY AGREEMENT BETWEEN THE PARTIES
(a)Revital and ESL have agreed that:
(i)Revital will provide pricing to ESL which ESL is expressly authorised to disclose to Council.
(ii)should ESL be successful in its Tender Submission and is formally selected as preferred tenderer by Council (“Award Date”), ESL and Revital will enter into the Service Agreement which will include the terms and conditions set out in this Letter of Intent.
(iii)ESL and Revital agree that the Service Agreement will contain provisions that:
(A) the Service Agreement be for an initial term of 16 + 2 + 2 years.
(B) Gate rates which are to be negotiated between the parties
(C) Revital to establish, at its cost, the processing facilities as outlined in schedule A,65 subject to receiving all necessary approvals and consents.
(D) Revital will build the facilities to accommodate the initial capacity agreed between the parties. [sic] in the event it becomes apparent that additional capacity is required later in the life of the Services Agreement, the parties agree to work in good faith to incorporate the additional capacity.
(E) Revital will be bound by and ensure it does not cause ESL to be in breach of any terms and conditions contained in any contract between ESL and Council relating to the Tender Submission;
65 Schedule A in the LOI was blank.
(F) the parties must take all reasonable steps to enter into the Service Agreement within 6 months from the Award Date;
(G) ESL may require that Revital enter into a Deed of Lease with either ESL. [sic] or Council in order to be able to comply with the Service Agreement;
(H) Pricing offered by Revital will be based on partnership rates. In turn, the pricing offered by ESL to the Council shall be no more than the pricing by Revital to ESL for the same services under the Service Agreement. For the avoidance of doubt Revital’s Gate Rate negotiated between the parties to be included in the Tender Submission is to be representative of a reasonable discount not available to Revital’s other customers.
(I) Pricing for non-council kerbside derived material will offered by Revital at partnership rates to be agreed. This will include first right to access both foodwaste and greenwaste processing infrastructure.
(J) Revital must process all food waste and green waste delivered to the processing site (which will be advised by ESL) by ESL or any of its contractors, in accordance with the requirements of ESL and Council. If Revital are not able to comply with this requirement, it [sic] indemnify ESL for all costs incurred by ESL in disposing or processing of the food waste and green waste through alternate means.
(K) ESL shall ensure that all greenwaste and foodwaste collected pursuant to the Key Tender Contracts is delivered to Revital for processing.
(L) All greenwaste and food waste delivered to Revital by ESL shall be compliant with any resource consents relating to the Services,
(M) this will be an exclusive agreement between Revital and ESL. This means that Revital agrees that it will not bid to Council directly in response to the RFP and ESL must use Revital for the RFP and cannot use any other party for the Services. Exclusivity lapses if ESL is not successful with its Tender Submission.
10. WARRANTIES
10.1Revital warrants that it:
(a)will ensure that it will comply with all laws of New Zealand …;
…
(d) will ensure that it and its employees and/or contractors supply the Services safely including, without limitation, complying with all relevant provisions of the workplace health and safety laws and any related or other laws which apply to the supply of the Services;
…
10.2ESL warrants that it:
(a)will ensure that it will comply with all laws of New Zealand:
(b)will obtain and maintain, all licences, accreditations, certificates or registrations which it is required to possess by any laws in order to supply any services for which ESL is successful in relation to the wider RFP (ESL Wider Service Offering):
(c)will supply the ESL Wider Service Offering with the standard of care, professionalism, skill, judgment and diligence expected of a competent contractor:
(d)will ensure that it and its employees and/or contractors supply the ESL Wider Service Offering safely including, without limitation, complying with all relevant provisions of the workplace health and safety laws and any related or other laws which apply to the supply of the ESL Wider Service Offering;
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11. INDEMNITY
11.1Revital must indemnify and hold harmless ESL against, and must pay ESL on demand, the amount of any claim, damage, expense, loss or liability which ESL incurs in respect of;
(a)any breach by Revital of any of its obligations under this Letter of Intent;
…
which is directly caused by or contributed (liability will be accordingly apportioned in this respect) to by Revital and relates to the Services.
11.2ESL must indemnify and hold harmless Revital against, and must pay Revital on demand, the amount of any claim, damage, expense, loss or liability which Revital incurs in respect of:
(a)any breach by ESL of any of its obligations under this Letter of Intent;
…
which is directly caused by or contributed (liability will be accordingly apportioned in this respect) to by ESL in respect of the Services or the ESL Wider Service Offering.
12. MISCELLANEOUS
…
(c)If a Services Agreement is signed by the parties during the Term, the Letter of Intent shall be immediately terminated.
(d)Any previous understanding, agreement, representation or warranty relating to that subject matter is replaced by this Letter of Intent and has no further effect.
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SCHEDULE 2
KEY PARTS OF THE TENDER SUBMISSION
1.About the Respondent
Our Profile
This is a Tender by Enviro Waste Services Limited (ESL) alone to supply the Requirements.
…
ADDITIONAL REQUIREMENTS FOR JOINT PROPOSALS Parties to joint proposal ESL proposes a joint proposal, via exclusive service contracts with the following service providers:
…
• Remediation Ltd (Revital)
…
Nature of the relationship between the parties for the purpose of the joint proposal ESL, … and Revital have no commercial
investments in each other’s organisations. The joint proposal is based on mutually beneficial outcomes for Council.
Confirmation that all parties are committed to the relationship and the joint proposal ESL, … and Revital have signed letters of
intent for exclusive service contracts for the services listed below. Refer to the Appendix 2.1-3 to view copies of the signed letters of
intent, affirming each party’s commitment to the relationship and the joint proposal, to the benefit of Council.
Parts of the Services that each party will be responsible for delivering … Revital
· 8Ta TCC Food Waste Processing
· 8Tb TCC Green Waste Processing
· 8W WBOPDC Food Waste Processing
Structure and systems that support joint governance, accountability and financial and contract management … and Revital will sign back to back contracts with ESL, commensurate and consistent with
all governance, accountability and financial and contract management terms and conditions agreed between Council and ESL.
…
2. Response to the Requirements
…
Introduction – Executive Summary
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Enviro Waste Services Ltd is leading a partnership with the following local specialists – Revital Group Ltd, … and
…, to offer our full spectrum of service to both Tauranga and Western Bay of Plenty.
…
You will be engaging with a partner who demonstrates collaboration across the industry. These are exclusive partnerships with incumbent specialist contractors.
We have signed Letters of Intent with each of our partners – …, Revital and
... You will see a stated and demonstrated commitment to working with the providers that you are familiar with. These partners bring established relationships, capabilities and end- market outcomes in the Bay of Plenty region.
As noted, these partners include:
…
Revital for all organics processing – from day one of the contract, we can confirm all green waste and food waste processing, and end-market solutions are already in place.
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2.1.CAPABILITY TO DELIVER
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Organics Processing (Revital) Background
Remediation (NZ) is a limited liability company established in 2008, combining the existing composting and vermiculture processing assets of Perry Environmental Waste Services into one business. Based in the upper North Island, Revital is predominantly a family owned business originating in Taranaki. The O’Neill family have been involved in composting and vermicomposting since 1996, setting up their first facility on their Taranaki farm. The business trades under the Revital Brand name, collectively called Revital Group (henceforth called ‘Revital’) and employs 53 staff across four provinces (Bay of Plenty, Waikato, Taranaki, and Auckland).
Revital has grown to be one of New Zealand’s largest composting companies, processing over 100,000 tpa of organic wastes into beneficial composts, fertilisers, garden products, vermicompost, and liquid soil conditioners.
Products and Markets
Revital’s core business is the composting of organic wastes, such as green waste, food waste and certain commercial organic waste, into quality composts and vermicast at their composting and vermiculture sites. These products are sold in bulk and bags to the agricultural, horticultural, landscape and bagged markets throughout New Zealand.
To keep up with sales demand, Revital also sells under contract the compost products produced by ESL at Hampton Downs and Taupo.
Revital owns the Central Landscape franchise with 11 key sites throughout the Auckland region. They also have landscape sites in Cambridge and New Plymouth. To supply pumice and sand for their growing media mixes, Revital also owns a pumice and specialist sand quarry in Cambridge, which we operate ourselves.
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Relevant Services
Revital has six composting sites throughout the North Island, as detailed below.
Location Number of composting sites Materials composted tpa Taranaki Composting x 2
Vermicomposting x 1
· Green waste
· Food waste
· Paunch grass
· Animal mortalities
· Drilling muds
75,000 Cambridge Composting x 1 · Green waste 10,000 Otorohanga Vermicomposting x 1 · Green waste
· Pig manure
5,000 Tauranga Composting x 1 · Green waste 15,000
These composting sites process a variety of household, commercial and industrial organic wastes. The Taranaki, Cambridge, and Tauranga sites have all be in operation for over 20 years. The Otorohanga site is a new site established to vermicompost pig manure from one of New Zealand’s largest pig farms (Waratah Farms).
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2.2. CAPACITY TO DELIVER Key Personnel
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Revital Key Role Name Commitment Location Contractor’s Representative Kerry ONeill As required Split between New Plymouth & Cambridge Contract Manager Peter Rabbidge 25% Tauranga H&S Manager Trevor McLaughlin 33% Cambridge Tauranga Organic Site Manager and Quality Manager Colin Vanderviel 100% Tauranga Compost Sales Maureen Rabbidge 100% Tauranga BOP Horticultural Sales Elenka Nikolof 100% South Auckland/ BOP Organic Waste Specialist Mike Lord As required Cambridge
Plant and Equipment
…
Revital
Revital are the incumbent operators of the Tauranga composting facility. We currently lease the Tauranga Organic Centre from Tauranga City Council. As we are the incumbent operator, we will be retaining our existing workforce.
The proposed interim organics processing solution (Organics Processing (Service Specifications 8Ta, 8Tb and 8W on page 77), we will require an extra staff member to assist at the Hampton Downs PARRC Organic Centre to deal with the extra volumes that will be composted.
The development of the new composting facility will be done on a new site, so will not impact on the current green waste composting operation. Revital has contracted Mike Lord to oversee the development of the new site, and Mike will work with the key contractors to design, construct and commission the site and its services. Once the site is ready for processing, the incumbent staff will be inducted and trained on the
new site. Due to the forced aeration composting system, no extra staff members are required due to the automation of the new process.
Current Commitments
…
Revital are the incumbent operators of the Tauranga CC composting facility, leasing the Tauranga Organic Centre from Tauranga CC. As the incumbent operator, our commitments in Tauranga are “Business-As-Usual”.
Hampton Downs is adequately resources [sic] to handle the interim and immediate volumes.
The development of the new composting facility at Te Maunga will
be done on a new site, so will not impact on the current green waste composting operation. Revital has contracted Mike Lord to oversee the development of the new site, and Mike will work with the key contractors to design, construct and commission the site.
Once the site is ready for processing, the incumbent staff will be inducted and trained on the new site. Due to the forced aeration composting system, no extra staff members are required due to the automation of the new process.
2.3 THE SOLUTION (METHODOLOGY)
General (all Service Specifications)
…
Our team will work closely with Council and stakeholders. As long- term incumbent providers of service to Tauranga City ESL, Revital and … already have strong relationships in place.
Our operations teams would be in contact daily and we would target monthly operational review meetings along with quarterly governance meetings to ensure contract
Food Waste and the ability to process on Day 1.
Due to the extended time it will take for Revital’s existing green waste processing site to pass through the consent process, and subsequent
deliverables including compliance and diversion targets. We anticipate the finalised agreement would have flexibility to allow both parties to adapt as our industry evolves, and allows shared rewards for innovation and collaboration.
ESL will lead our partnership with
… Revital. ESL will apply back-to- back rigour across all aspects of the services, most especially pertaining to all HSQE functions.
…
construction of food waste processing facilities, we propose consolidating food waste at Maleme Street (if a commercial only RRC).
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Organics Processing (Service Specifications 8Ta, 8Tb and 8W)
...
The ESL-Revital partnership propose two solutions to the processing of food waste and green waste for Council - 1. An interim solution and 2. A long-term solution.
Current status - It is Council’s preference to start kerbside collection of green waste and food waste on the 01/07/2021. The existing Tauranga City composting facility was developed in 1998 to process the cities [sic] green waste. The site is located at the Te Maunga waste designated processing area next to the Te Maunga Wastewater Treatment plant. It is not consented for or designed to take the volume of food waste proposed to be collected by the kerb side service. To process food waste will require significant capital development, and a new resource consent to be able to process the projected kerbside collection volumes.
To accommodate the expansion of the wastewater treatment plant, Council is also proposing within the next two to three years to relocate the composting facility to a new piece of land in the Te Maunga waste designated area. With the proposed relocation of the composting facility, any development at the existing site would not be economically viable.
1. Interim solution - For the first two to three years, while resource consents are being applied for and the final design of the composting plant confirmed, we propose that all food
waste will be processed at the existing ESL Hampton Downs PARRC – Organics processing plant.
This site is consented to process up to 30,000 tonnes per year of organics (food waste and green waste). The site is designed to process food waste utilising an internal drop-off and processing building, and specially designed compost bunkers with forced aeration technology. The facility is world class regarding environmental and process control. The current facility has capacity to process the proposed volumes of food waste to be collected by Council.
2. Long-term solution - In discussions with the BOPRC, we have been advised that any expansion of the current composting facility will need to reduce environmental effects due to combined effects of the other waste processing activities in the Te Maunga area.
The proposed new facility to be built in Te Maunga will be very similar to the Hampton Downs PARRC plant and will deliver excellent environmental control, minimising and containing odour and leachate generation. The new composting facility will be able to compost all the green waste and food waste collected from the kerbside collection runs and the green waste from the Transfer Stations and commercial collectors that is currently composted at the Revital site.
…
The advantages of selecting the ESL and Revital partnership to process both food waste and green waste include:
· Green waste provides the base matrix to be able to compost food waste. Food waste is dense and wet and needs to blend with green waste to allow air to circulate, heat to dissipate and moisture to evaporate. The idea [sic] matrix is three parts Green waste to one-part food waste
· We have established commercially viable organic processing plants and have experience with existing operations in:
‐Tauranga (Revital green waste processing at Te Maunga)
‐Cambridge (Revital composting plant)
‐Taranaki (Revital composting and vermicomposting plants)
‐Taupo (ESL green waste composting plant)
‐Hampton Downs PARRC (ESL green waste and food waste processing)
· Revital currently sell all compost products produced by Revital and ESL. The partnership has established end markets throughout the Bay of Plenty, Waikato, and Auckland
· Revital also own the Central Landscape Supplies franchise, which has 11 landscape yards Auckland wide
· The partnership proposes to utilise proven technology that is used at Hampton PARRC and in multiple countries around the world
· Our team not only includes the expertise of the existing Revital team but includes organics processing experts such as Mike Lord and Rupinder Brar, whose CV’s are included in our Appendices. Mike holds a bachelor’s degree in Earth Science, is the founding member of Compost New Zealand and a long- term member of WasteMINZ organic sector group. Rupinder holds a Doctorate in Environmental Engineering, with his thesis focused on organics processing
· Compost is a valuable soil amendment that increases horticultural and agricultural production, improves soil and plant health and retains moisture in the soil making plants more resilient
…
Interim solution – We are proposing to compost Tauranga food waste at the Hampton PARRC facility while we build the new facility in Te Maunga. This will allow us to start processing from the start of the contract. Green waste collected from kerbside and the RRC and will continue to be processed at the current Te Maunga composting facility.
…
For the first two to three years, while the design is finalised, resource consents submitted, and site construction work completed at the new Te Maunga organic processing
site, we propose that all food waste will be processed at the existing Hampton Downs PARRC organics processing plant.
Green waste will continue to be processed at the existing Revital Te Maunga site under its current consent, until the new site is ready for
commissioning. The site layout is shown in the adjacent schematic.
The new site is proposed to be located on the adjacent piece of land being offered by Tauranga CC in the Te Maunga waste designated area.
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TCC Leases (Service Specification 10T)
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2. Te Maunga RRC – RRC for Public and Commercial Waste with High Diversion Potential (C&D construction material)
The Te Maunga RRC site is proposed to be the Tauranga diversion hub for all public and construction and demolition waste streams. The site will become New Zealand’s leading RRC, focused on high volume diversion of materials from landfill.
Through a combination of onsite sorting and the provision of options for recovery of pre-sorted streams, the Te Maunga RRC will target the segregation of following key areas to achieve a high level of diversion, as detailed in the proposed site layout schematics in Appendix 11.10-11.
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Health and Safety Management
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Contract Management Plan (CMP) - A contract specific CMP will be prepared for this partnership that will
include a Health and Safety Plan outlining the relevant management systems and procedures.
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Assumptions (Non-Price)
...
Revital Assumption Name Description of assumption Processing site · The new organic waste processing site in the Te Maunga waste complex being approximately 1 hectare in size (the “New Processing Site”).
· The New Composting Processing Site being supplied on a ‘ready to build’ basis (specifically
in relation to load bearing capacity and flood levels of the site). Including power, water, sewer. “i.e. The site is fit to build on”. Processing volumes · Revital is able to secure sufficient green waste volume from either a Council green waste collection, or the RRC operator to enable food waste processing. Consents · Obtaining all necessary consents and that there are no unduly onerous consent related requirements which would render the proposed solution uneconomic or unfeasible. Contract Term · Due to the uncertain timing of relocation to the New Processing Site, to offset capital development costs, we require a minimum operational period of 16 years for the new composting facility Contamination · Contamination rates on Council backed food waste and green waste collections not exceeding 3% (10% by volume)
4. Proposed Contract
…
Option 2: Having read and understood the Proposed Contract, I have the following suggestions to make. If successful, I agree to sign a Contract based on the Proposed Contract subject to negotiating the following clauses:
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ESL and our partners are tendering for a wide range of services in the tender submission. We reserve the right to undertake a full and detailed external legal review of the contract during negotiations.
5. Schedules
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Schedule 4 – Proposed Subcontractors and Suppliers
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Subcontractor/Supplier Type and extent of subcontract or supply work … … Revital Provide all labour, plant and equipment to deliver compliant services associated with Service Specifications:
· 4Ta - TCC Food Waste Collections
· 4Tb - TCC Green Waste Collections
· 4W - WBOPDC Food Waste Collections
Engineered Composting Systems Design of composting bunkers, Tunnels (if required) and mass floor. Supply of all aeration technology and components IDAC Construction Above ground specialised compost bunker development AZTECH buildings Drop off and processing building construction, and Screening and storage facility Fulton Hogan Sub grade, preparation, roading and drainage
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7. Appendices
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2. ESL and Partners – Letters of Intent
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2. Revital (Food and Green Waste Processing – 8Ta, 8Tb, 8w)
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[LOI reproduced]
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