Ririnui v Landcorp Farming Ltd
[2014] NZHC 3402
•22 December 2014
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-2915 [2014] NZHC 3402
UNDER the Judicature Amendment Act 1972 BETWEEN
MITA MICHAEL RIRINUI Plaintiff
AND
LANDCORP FARMING LIMITED First Defendant
THE MINISTER FOR STATE-OWNED ENTERPRISES AND THE MINISTER OF FINANCE
Second Defendant
THE ATTORNEY-GENERAL Third Defendant
WHEYLAND FARMS LIMITED Intervener/Interested Party
Hearing: 26 November 2014 Counsel:
A N Isac, J P Koning and J B Orpin for Plaintiff
S A Barker and B Gnanalingam for First Defendant
J R Gough and S J Humphrey for Second and Third Defendants
P J Crombie for IntervenerJudgment:
22 December 2014
FINAL JUDGMENT OF WILLIAMS J
[1] On 26 May 2014, I issued an interim judgment in this matter. The facts as they obtained at the time of that judgment are fully set out therein and I do not
propose to revisit them.1
1 Ririnui v Landcorp Farming Ltd [2014] NZHC 1128, [2014] NZCCLR 20.
RIRINUI v LANDCORP FARMING LIMITED & ORS [2014] NZHC 3402 [22 December 2014]
[2] There have been developments since that judgment, and in response to it. I will summarise those below. It is sufficient for present purposes to record that in my interim judgment I made orders:
(a) declaring the decision of the Office of Treaty Settlements (OTS) to disclaim any interest of Ngāti Whakahemo in Whārere Farm to be invalid and of no effect;
(b)requiring the Minister for Treaty of Waitangi Negotiations to reconsider whether Whārere Farm should be dealt with wholly or partly under the Protocol in light of the fact that Ngāti Whakahemo has extant Treaty claims in respect of the Whārere Farm land;
(c) requiring the Minister whether personally or through OTS to consult with Ngāti Whakahemo with respect to that tribe’s possible acquisition of Whārere Farm whether outright or in joint venture with other interests;
(d)preventing the completion of the transfer of Whārere Farm to Micro Farms for two months from the date of this judgment to allow such consultations to proceed; and
(e) directing a further hearing in this matter prior to the expiry of the two month period.
[3] Subsequently the parties agreed that the two month freeze imposed by order (d) preventing settlement of the transaction between Landcorp and Micro Farms, could be extended by consent. Micro Farms’ nominee (Wheyland Farms Ltd) had entered into a lease with Landcorp until 30 May 2015, pursuant to cl 22 of the agreement for sale and purchase. That development took some of the urgency out of the situation.
[4] After the interim judgment, the plaintiff applied to amend his statement of claim to include a new allegation of bad faith – certain evidence in that respect
having come to the notice of counsel at a late stage. I granted the application and will address my reasons for doing so below.
[5] In the meantime, both parties have appealed my interim judgment and they have a fixture before the Court of Appeal on 10 February 2015.
[6] I note finally that Wheyland Farms Ltd (Micro Farm’s nominee) applied to intervene following my interim judgment. I made an order granting intervener status by consent. For clarity, I refer throughout this judgment to the intervener as Micro Farms/Wheyland.
[7] I turn now to outline the evidence in relation to the Minister for Treaty of Waitangi Negotiation’s reconsideration of his decision, the subject of declaration (a), and his and OTS’ consultations pursuant to orders (b) and (c) before turning to consider the issues that require final resolution. The first issue relates to the contention between the parties over the meaning of my order at (c); and the second relates to the bad faith allegation the subject of the amendment to the plaintiff’s claim. Once I have addressed those matters, I will finally reach my conclusions about whether further orders are required including, crucially, an order setting aside the agreement for sale and purchase between Landcorp and Micro Farms/Wheyland.
Minister’s reconsideration and Crown consultation
[8] The Minister for Treaty of Waitangi Negotiations has now reconsidered whether Whārere Farm should be dealt with wholly or partly under the Protocol in accordance with order (b). He swore an affidavit dated 19 September 2014 outlining his conclusions and reasons in that respect. The Minister concluded that Whārere Farm is not, in whole or in part, of potential interest for a future Treaty settlement. His reasons were as follows:
(a) There were “a number of core Crown properties” in Ngāti Whakahemo’s area of interest that are capable, I assume, of being used in settlement of Ngāti Whakahemo’s claims.
(b) The claim had yet to be fully assessed and no negotiation mandate on
behalf of Ngāti Whakahemo had been accepted by OTS.
(c) But the preliminary Crown assessment suggested that the farm would have exceeded the value of any Ngāti Whakahemo settlement by up to
40 times.
(d) OTS could not, in any event, accommodate a negotiation with Ngāti
Whakahemo within its 2014/15 work programme.
(e) Land banking the farm would involve uncertainty as to how long it would need to be held, with exposure to potentially significant maintenance costs in the meantime.
(f) The purchase price of the farm exceeded available funds in OTS’
Capital Purchase Fund anyway.
[9] The Minister indicated that he also considered the possibility of “a joint venture with other iwi”, but concluded that this involved too much risk for the Crown at this stage in light of the fact that Ngāti Whakahemo had no Crown- recognised mandate, and negotiations with OTS had not commenced.
[10] A possible subdivision of the farm was also considered, but the Minister took the view that this too involved an uncertain timescale, too many risks, and would have been too resource-intensive for OTS’ current work programme. He considered:
In addition, it would potentially commit the Crown and Ngāti Whakahemo to using most, if not all, of Ngāti Whakahemo’s estimated quantum in advance of mandate and negotiations, which would effectively remove any ability for the parties to negotiate in the future. This would be unacceptable. It would also not be necessary in light of other core Crown properties in Ngāti Whakahemo’s area of interest.
[11] In the meantime, Marian Smith, Deputy Director Special Projects at OTS, filed her fifth affidavit in which she described the Crown’s investigations into the Ngāti Whakahemo claim and consultations undertaken with Ngāti Whakahemo. She deposed that OTS had instructed an independent historian to prepare a report on
Ngāti Whakahemo’s claims. A draft of this report was given to Ngāti Whakahemo and expert views were exchanged with Ngāti Whakahemo’s historian before the report was finalised.
[12] Ms Smith advised that the Crown took the view that order (c), requiring consultation with Ngāti Whakahemo with respect to the tribe’s possible acquisition of Whārere Farm, was dependent upon the Minister reaching a positive conclusion with respect to order (b). Consultations with Ngāti Whakahemo under (c) were therefore limited to the Minister agreeing to facilitate discussions between Landcorp and Ngāti Whakahemo.
[13] Ms Smith records that on 4 July 2014, Mr Steven Carden, Chief Executive of Landcorp, wrote to her, declining to engage in such consultations because Landcorp had appealed and because Landcorp had a binding agreement for sale and purchase so that discussions with Ngāti Whakahemo could expose it to potential claims by the purchaser.
[14] General matters remain in relation to the orders made on 26 May.
The meaning of order (c)
[15] Order (c) required the Minister:
… whether personally or through OTS to consult Ngāti Whakahemo with respect to that tribe’s possible acquisition of Whārere Farm whether outright or in joint venture with other interests.
Submissions
[16] The Crown and Landcorp argued that this order was not engaged because it was implicitly conditional on the outcome of the Minister’s reconsideration under order (b). Since, it was argued, the Minister has concluded that there is no basis upon which the Crown will be prepared to acquire all or part of Whārere Farm for Ngāti Whakahemo, whether for Ngāti Whakahemo alone or in joint venture, order (c) was simply not engaged.
[17] The Crown argued that it cannot have been the case that the intention of the order was to create a free-standing obligation in the Crown to consult with Ngāti Whakahemo in respect of the acquisition of Whārere Farm, irrespective of the outcome of the Minister’s reconsideration under order (b). The Crown argued that the plaintiff’s case was not pleaded that way, nor was it decided that way by me, and in any event, the Crown said, this would be a startling extension to the general law in relation to consultation obligations.
[18] Ngāti Whakahemo argued that order (c) was indeed a standalone order referring to the possibility of the Crown pursuing “more creative options … than simply banking Whārere [Farm] to settle Ngāti Whakahemo’s claims.”2 Ngāti Whakahemo also pointed to [160] where I said:
The shareholding Ministers could have intervened, not necessarily to require the land to be transferred to the OTS bank, but to create an opportunity where that question could be resolved between the Minister for Treaty of Waitangi Negotiations and Ngāti Whakahemo. I expect other iwi, including Ngāti Mākino, might also have had an interest in such discussions. It seems to me therefore that a genuine opportunity needs to be provided for those discussions to be had in good faith.
[19] Mr Isac submitted that the Crown’s interpretation of the order was wrong. He said:
The difficulty with this interpretation of the interim judgment is that it places the fate of the agreement squarely in the hands of the defendants; all they have to do to avoid having the agreements set aside is to refuse to discuss the sale with Ngāti Whakahemo (as they have done).
Analysis
[20] I must say I am somewhat surprised by the controversy that has arisen over order (c). Perhaps, on reflection, it would have been better to include an express proviso to order (c) making it clear that (b) and (c) were linked. The context of the judgment ought to have made that clear even if (I am prepared now to accept) the orders themselves didn’t. Paragraph [146] sets out my thinking:
Now I wish it to be clear that I am not saying that OTS was obliged to acquire Whārere pursuant to the Protocol in order to make it available to Ngāti Whakahemo in due course as part of its Treaty settlement package.
2 At [94].
There are too many steps in that decision-making chain in which officials and Ministers must reach decisions over matters about which I have no detailed evidence and less competence. All I am saying is that the shareholding Ministers ought, in the particular circumstances of this case, to have:
(a) properly apprehended the Crown’s obligations to a tribe with unsettled claims in relation to the land in question;
(b) taken the time to explore ways in which those obligations might have been satisfied. The obligation is, in short, to explore that possibility with an open mind and in good faith.
[21] I refer also to [162]:3
I have decided that it is not yet appropriate to set aside the agreement for sale and purchase to Micro Farms. That is because it is by no means a foregone conclusion that the consultations between the Crown and Ngāti Whakahemo will produce an agreement to proceed to acquisition and I do not feel it is the role of this Court to do anything more than provide the Crown and Ngāti Whakahemo with space to discuss whether an arrangement over the land is practical. I have decided that the path of least resistance is to leave the agreement in place in the meantime until outcomes of the consultations become clearer. Should the Crown and Ngāti Whakahemo come to a point where they agree that the land, or some part of it, should be acquired in order to address Ngāti Whakahemo’s claims, then it will be appropriate to make orders setting aside the agreement for sale and purchase, but not until then.
[22] The Ngāti Whakahemo claims and acquisition were thus intimately linked. Ngāti Whakahemo had, after all, pitched its case that way. The tribe argued it had unextinguished claims that could be settled in whole or in part through the farm being made available by Ministerial intervention. That necessarily required the Minister to accept that there was enough value in the Ngāti Whakahemo claims and they were sufficiently well understood to justify utilising Whārere Farm at this point.
[23] I specifically did not direct that there should be discussions between Ngāti Whakahemo and Landcorp. Landcorp has an extant agreement for sale and purchase in place. Such discussions would have been problematic. Rather, I directed that the Crown and Ngāti Whakahemo discuss either land banking or some more creative means of acquiring the land. All of that hinged, by inexorable logic, on the Minister for Treaty Negotiations having concluded that Ngāti Whakahemo’s extant claims
justified the Crown assisting that tribe into the acquisition of the land. If the
3 Emphasis added.
Minister, in good faith, had reached such a conclusion then, by order (c), he was obliged to consult further with Ngāti Whakahemo, and I had signalled in the interim judgment that I would have set aside the agreement between Landcorp and Micro Farms/Wheyland if necessary to allow those discussions to proceed to fruition.
[24] As it happens, the Minister has made his assessment and concluded that there is no basis upon which Whārere Farm could be acquired by the Crown or upon which some more creative joint venture arrangement should be explored because, primarily, the value of Ngāti Whakahemo’s claims is likely to be far too small to justify such an action. The Minister’s concerns about mandate and OTS’ negotiations programme for 2014-15 add weight to that conclusion, but it is the initial assessment of value that appears most cogent.
[25] Ngāti Whakahemo did not attack the Minister’s decision or reasons. There was no suggestion that he had failed to take account of relevant considerations, had somehow misdirected himself on the law or that his conclusion was irrational. Such arguments would have been very difficult to sustain.
[26] Instead, Ngāti Whakahemo argued at the contextual level. Ngāti Whakahemo argued that the Minister’s reconsideration was tainted by the shadow that hung over it, of the extant sale and purchase agreement that I had intentionally left in place. That may be so, but that was the order I made, reasoning that an appropriate path of least resistance was to give the Crown and Ngāti Whakahemo space whereby the former could reconsider and then both could engage in discussions. The argument about the shadow cast by the agreement is for the Court of Appeal rather than me. It is not a matter that I can or should revisit.
[27] I did not intend in order (c) to accord Ngāti Whakahemo a free-standing right of consultation unconnected to an assessment of an appropriate response to its claims under order (b). There would have been no principled basis to do so.
The allegations of bad faith
Background
[28] Ngāti Whakahemo originally argued that as a result of communications between Landcorp Board member, Traci Houpapa and Ngāti Whakahemo negotiator, Willie Te Aho, Ngāti Whakahemo had a legitimate expectation that Landcorp would not sell Whārere Farm until after a scheduled meeting was held between Ms Houpapa, Mr Carden (Landcorp’s Chief Executive) and Ngāti Whakahemo interests on 7 March. In my interim judgment, I rejected that contention finding that no clear and unequivocal statement to that effect had been made by Ms Houpapa. I did say, however, that she had “intentionally fudged” the purpose of the 7 March meeting and that she had been “less than candid” in her email communications with Mr Te Aho. I inferred that that was “in order not to spook Ngāti Whakahemo into going to Court
before the agreement with Micro Farms was executed”.4
[29] At [161] I found (admittedly by way of proviso) that Landcorp’s actions at the key time could not be said to have been “in bad faith, or even [to have] lacked good faith …”.
Application to amend statement of claim
[30] On 6 October 2014, some four months after the interim judgment, Ngāti Whakahemo then applied to amend its statement of claim for a fourth time. The proposed amendment introduced (for the first time) an allegation of bad faith against Landcorp. I granted the application on 14 November 2014 following a hearing the previous day. I indicated that I would provide reasons subsequently. I will briefly address these before turning to the substantive issues raised by the bad faith cause of action.
[31] The proposed amendments related to a conversation that allegedly took place between Ms Houpapa and Mr Te Aho on 4 March 2014 at some time after 5.03 pm and before 5.51 pm. This was, it will be remembered, the day before the agreement
for sale and purchase was executed. Three days earlier Ms Houpapa and Mr Te Aho
4 See generally [110]-[114].
had made arrangements for a meeting to occur between herself and Mr Carden on one side and Ngāti Whakahemo interests on the other. By the time of the alleged conversation on 4 March 2014, both sides knew that Landcorp was pursuing a sale with the highest bidder in the 2013 tender process, but only Ms Houpapa knew that Landcorp had no interest in pursuing a sale with any party other than that highest bidder. It was alleged that in the 4 March telephone conversation, Mr Te Aho asked what the ballpark figure was that Ngāti Whakahemo needed to offer for Whārere Farm in order to successfully acquire it. He said Ms Houpapa responded that it would be in the vicinity of $23 million. The agreed purchase price was in fact
$19.025 million.
[32] On the basis of this evidence, Ngāti Whakahemo alleged that Landcorp had acted in bad faith. By indicating an inflated “ballpark” price, Ms Houpapa, gave the impression, and intended to give the impression, on behalf of Landcorp, that the meeting on 7 March would be a negotiation meeting. In fact, as we know, the land was sold on 5 March to Micro Farms. Ngāti Whakahemo allege that, but for this offer to engage in negotiations, the tribe would have applied for an injunction as the fifth. Ms Houpapa, they said, tricked them into taking no action until it was too late.
[33] The only direct evidence on the conversation was that of Mr Te Aho. In his affidavit he said he had not disclosed the information in his earlier evidence because he believed the information had been imparted to him by Ms Houpapa in confidence and he was obliged to protect that confidence. He had no idea of the actual price and therefore did not know that he had been deceived until the price was disclosed by Micro Farms/Wheyland.
[34] On 27 August, Micro Farms/Wheyland filed an affidavit as intervener including in it an unredacted copy of the sale and purchase agreement. This disclosed, for the first time, the actual purchase price paid. At this point Mr Te Aho emailed Ms Houpapa advising that he would “now go on the record” regarding details of the 4 March conversation and the application to amend was duly made with appropriate affidavits in support. He felt he was now justified in breaching the confidence because, he considered, the confidence had been used to deceive him.
[35] High Court Rule 1.9(2) allows amendment to any pleadings at any stage of a proceeding where such amendment is necessary for determining the “real controversy” between the parties. According to the Court of Appeal in Elders Pastoral Ltd v Marr a three-stage inquiry is required:5
(a) Is the amendment in the interests of justice?
(b) Is there significant prejudice to the defendants? (c) Will it cause significant delay?
[36] Ngāti Whakahemo argued that it was in the interests of justice in this litigation to allow the amendment. It was, Ngāti Whakahemo argued, inappropriate in the context of a state-owned company, to prevent such a significant issue from being properly litigated. Further, the tribe argued there was no undue prejudice: Landcorp should have disclosed the contents of this conversation anyway because Ms Houpapa was the primary beneficiary of the confidence duty referred to by Mr Te Aho, and because Landcorp knew about the conversation and was obliged to disclose it in judicial review. Further, it was argued Landcorp had six weeks, prior to the hearing of the application to amend, to file any evidence in response to Mr Te Aho’s allegations and has not taken that opportunity. Finally, Ngāti Whakahemo argued that allowing the amendment carried no risk of delay.
[37] In reply Landcorp argued three forms of res judicata estoppel: cause of action estoppel, issue estoppel and extended res judicata under Henderson v Henderson6 Landcorp argued that, in the context of Ngāti Whakahemo’s legitimate expectation argument and in relation to its “utmost good faith” argument under s 9 of the State-Owned Enterprises Act 1986 (the SOE Act), Ngāti Whakahemo advanced issues of good faith and they were finally resolved in the interim judgment. This meant, Landcorp argued, no further bad faith cause of action could be raised. Nor could Ngāti Whakahemo raise bad faith as an issue at all. Third, pursuant to
Henderson v Henderson, Ngāti Whakahemo could, with reasonable diligence, have
5 Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 (CA).
6 Henderson v Henderson (1843) 3 Hare 100, 67 ER 313 (Ch).
raised this issue in its initial pleading and it chose not to. Ngāti Whakahemo should not, after issues of bad faith have been resolved in the interim judgment, be able to raise them again at this late stage.
[38] Finally Landcorp argued that allowing the amendment was likely to cause significant delay in terms of the test in Elders Pastoral Ltd v Marr. Reply affidavits may be required by Landcorp, it was argued, including from Ms Houpapa, and cross- examination at length of Ms Houpapa and Mr Te Aho would be almost inevitable if the amendment were allowed. This would impose, Landcorp argued, unnecessary, unreasonable and lengthy delays in light of the late introduction of this issue.
[39] In my view res judicata has no application because the judgment in this case has yet to be perfected. Rule 1.9 is, to the extent that it can apply even after an interim judgment is issued, an exception to Henderson v Henderson. In any event, there can be no issue estoppel in respect of the question of bad faith simpliciter, because that matter was not finally resolved in the interim judgment. Ngāti Whakahemo very carefully did not plead bad faith, against either the Crown or Landcorp. To the extent that I concluded in passing, that there was no bad faith, that was by no means a final conclusion since the issue was not directly in play. All that was argued was that Landcorp lacked utmost good faith, an argument mounted as an aspect of Treaty principle rather than common law bad faith.
[40] Ngāti Whakahemo’s position is weakest in terms of extended res judicata. Does Mr Te Aho’s contention that he did not raise the matter earlier because of an obligation of confidence avoid the impact of Henderson v Henderson? I consider that it does. There is no real challenge to the proposition that Mr Te Aho genuinely believed that the information conveyed in the 4 March telephone conversation was imparted in confidence and that he was obliged to protect the source so that Ms Houpapa was not exposed to criticism by her Landcorp colleagues for secretly going behind their backs as it were. This meant that the content of the conversation could not be disclosed, even to his own counsel in this litigation. Mr Te Aho was not prepared to break that confidence until he discovered that in fact, on his version at least, he was being deliberately misled. I accept Mr Te Aho’s explanation, agree that
he had good reason to withhold evidence of the discussion, and conclude that extended estoppel does not apply.
[41] I am satisfied therefore that the issue of bad faith surrounding discussions between 4 and 7 March 2014 is one of the issues of real controversy between the parties in terms of r 1.9. I conclude further that there was no significant prejudice to the defendants in allowing the amendment and, in light of the absence of any explanation from Ms Houpapa (either before the hearing of the application to amend or subsequently), nor is there any significant risk of delay.
[42] I allowed the amendment to the statement of claim accordingly.
The substantive claim in bad faith
Chronology
[43] It is necessary first to set out in more detail the chronology of the events that occurred in the crucial period between 28 February when the Landcorp Board resolved to sell to Micro Farms/Wheyland and 7 March when Ms Houpapa and Mr Carden eventually met with Ngāti Whakahemo representatives.
[44] On the afternoon of 28 February the Landcorp Board met and resolved:7
… to authorise the Chief Executive to enter into negotiations for the sale of Whārere for not less than $[redacted] (plus GST if any) with the highest bidder in the December 2013 tender with settlement no later than 31 May
2014.
[45] It was also noted:
… that Ngāti Whakahemo had threatened injunction proceedings to delay/prevent the sale and that Landcorp will be liaising closely with Crown Law in respect of any proceedings in the High Court and in the Waitangi Tribunal.
7 The figure redacted in this extract has elsewhere been publicly released. It is therefore not redacted in other parts of this judgment.
[46] Ms Houpapa was present. The minutes record:
Traci Houpapa agreed with the proposed recommendation and expressed her disappointment that iwi were not able or were not prepared to meet the market. She advised that both herself and the Chief Executive proposed to meet with Ngāti Whakahemo to explain Landcorp’s position.
[47] There can be no doubt, in my view, that Ms Houpapa became aware, at the Board meeting, if she did not know before, that Landcorp would be selling Whārere Farm to Micro Farms/Wheyland for the amount of their original bid in the tender being $19.025 million.
[48] The following day, Steven Carden emailed Ms Houpapa suggesting that she
set up a meeting between the two of them and Ngāti Whakahemo in Wellington on
7 March. He suggested contact was best made by Ms Houpapa:
I suspect that you can better position the meeting the right way and not set an expectation that we are meeting to negotiate.
That evening (at 9.00 pm) Ms Houpapa emailed Mr Te Aho saying:
The Landcorp Board has met and decided not to extend the timeframe. The Landcorp lawyers have been asked to respond to Koning Webster’s letter accordingly.
[49] The timeframe referred to here was the window within which Landcorp entered into negotiations with Ngāti Makino and other tribal interests pursuant to a request from the Minister for Treaty of Waitangi Negotiations. The “timeframe” for such negotiations ended on 28 February. It is common ground that Ngāti Whakahemo was not aware that such a timeframe existed.
[50] A meeting on 7 March was then suggested in the email “to discuss the
situation if [Mita Ririnui and Jock Horne] would like”.
[51] On Monday 3 March, Buddle Findlay rejected a request of 27 February 2014 from Koning Webster, solicitors, for an undertaking that Landcorp give 20 working days notice of any proposed sale. Buddle Findlay advised that the resumption provisions under the SOE Act provide sufficient protection to Ngāti Whakahemo.
[52] On 4 March, Koning Webster then wrote directly to the Ministers of Treaty of Waitangi Negotiations and State-owned Enterprises to request the same 20 working days undertaking. At 11.15 am Mr Te Aho emailed Ms Houpapa accepting her invitation to meet on the 7th. He said:
I understand, which was clear from you [sic] email, that Landcorp is now re-
engaging with the highest bidders for Whārere Farms.
[53] At 11.26 am, Mr Te Aho wrote to Mr Ririnui advising that Ngāti Makino had pulled out of contention for Whārere and Landcorp were going back to the highest bidders. He said:
… with the news Landcorp has walked from the Ngāti Makino proposal and is considering the highest bidders, we need our commercial proposal put on the table. If it is not commercial, then we will be wasting Landcorp’s time (and mine). Can you two please focus on what our commercial purchase range is and confirm that we have lending support. We need to go straight to price when we meet with Landcorp on Friday or by conference call if earlier agreed by Traci.
[54] Mr Te Aho then copied his internal exchanges to Ms Houpapa in order to reiterate, in his words “We are serious”. He said “time may have conspired against us as you noted on Saturday, but the buck has not stopped yet”.
[55] Mr Te Aho asked for a conference call between the parties prior to Friday’s meeting and there were various exchanges by text during the afternoon with Mr Te Aho pursuing Ms Houpapa and Mr Carden and one or both of them being unavailable.
[56] At 4.18 pm on 4 March, Buddle Findlay received the agreement for sale and purchase duly executed by Micro Farms. This was then forwarded to Landcorp at
4.43 pm and was executed at some point after that. The agreement duly executed by Landcorp was forwarded to Micro Farms/Wheyland’s solicitors at 12.17 pm the following day.
[57] Meanwhile, at some point between 5.03 pm and 5.51 pm on 4 March, Mr Te Aho spoke to Ms Houpapa by telephone. The only evidence of the call is from Mr Te Aho. He said he “asked her what the ballpark figure was that Ngāti
Whakahemo needed to offer for Whārere Farm. In response Ms Houpapa said it would need to be in the vicinity of $23 million”.
[58] He continued:
Ms Houpapa made no mention of the fact that the land had already been sold and nor did she give any indication that Landcorp was not interested in a commercial offer from Ngāti Whakahemo. Given that she provided me with a figure that Ngāti Whakahemo needed to meet in order to be in the ballpark, I understood that Landcorp was still prepared to receive an offer on 7 March.
[59] Some time shortly after that conversation Mr Te Aho emailed Mr Ririnui, Mr Horne and Mr Gardiner, advising them that he was in receipt of “100 per cent trustworthy” (and implicitly confidential) information. He confirmed that “the Landcorp are going down the sale and purchase process”, he confirmed a meeting on Friday in Rotorua and advised:
I am advised that if our purchase price is $23 million, we will be in the ballpark.
[60] Mr Te Aho then spoke to Mr Pryor of Ngāti Awa and confirmed the
$23 million figure to him. Mr Pryor asked whether that included stock or was for the land only.
[61] At some time after 6.51 pm, Mr Te Aho had a further discussion with
Ms Houpapa in respect of the stock question raised by Mr Pryor. He said he:
… asked whether the $23 million included stock. She said it did not. Again that was the only matter of substance discussed in the call. Ms Houpapa did not mention that Whārere Farm was about to be sold or give any indication that it was pointless for Ngāti Whakahemo to put together a commercial offer.
[62] Meanwhile on 5 March at 8.15 pm, Ms Houpapa texted Mr Te Aho with a suggested meeting time for 7 March and in response Mr Te Aho confirmed the time but noted “price is a challenge – Ngāti Awa pulled out this arvo. So we will need to talk about actual milk solids as our banks have a view”.
[63] The following day Ngāti Whakahemo was advised in a Waitangi Tribunal judicial conference that Whārere Farm had been sold on 5 March. The scheduled
meeting nonetheless took place on 7 March. During the meeting Mr Ririnui confirmed (exhibiting contemporaneous handwritten notes to his affidavit) that Ms Houpapa confirmed to Ngāti Whakahemo that the purchase price was
$23 million. Mr Ririnui said:
At this point Steve Carden expressed his own surprise at the price of
$23 million. He thought the market value was around the $18 million mark and said that Landcorp had been really surprised by such a high price.
[64] As I have indicated, on 27 August and in the context of this litigation, Mr Pamment of Micro Farms/Wheyland served an affidavit that included an unredacted copy of the agreement for sale and purchase. This disclosed for the first time that the purchase price was not $23 million but $19.025 million. Mr Te Aho emailed Ms Houpapa on 3 September as I indicated above at [34] indicating that he would now go on the record. There was then a telephone conversation between the two at some time after 4.51 pm in which, according to Mr Te Aho, Ms Houpapa did not deny that she had indicated that any offer needed to be in the vicinity of
$23 million, but communicated that she regarded the 4 March discussions as confidential. She noted her disappointment at the confidence being breached.
[65] Landcorp filed no evidence in reply from either Ms Houpapa or Mr Carden. The only direct evidence of the conversations alleged to have taken place on 4 and
7 March is the evidence of Mr Te Aho, Mr Ririnui and others on the Ngāti Whakahemo side. Landcorp filed affidavits from the company secretary, Mr Kennedy-Goode and General Manager, Property and Environment, Phillip McKenzie. These two had been delegated the task of completing the agreement for sale and purchase with Micro Farms/Wheyland. Both deposed to the fact that they had no knowledge of any conversation between Ms Houpapa and Mr Te Aho on
4 March and knew of no basis why Mr Te Aho (or anyone else) could have the impression that the purchase price was $23 million. Further affidavits were filed by Board members Basil Morrison, Nicole Davies-Colley and John Brakenridge, all confirming that they had no knowledge of any discussion between Ms Houpapa and Mr Te Aho.
Submissions: Landcorp and Micro Farms/Wheyland
[66] In response to Ngāti Whakahemo’s claims of bad faith, Landcorp does not deny the content of the alleged conversations on 4 and 7 March. Landcorp’s rejoinder was, in essence:
(a) it is not as bad as it looks;
(b)the conversations were too late to be relevant because the Board had already resolved to sell to Micro Farms/Wheyland on 28 February; and
(c) even if bad faith is proved, there is no basis upon which Landcorp can
be obliged to negotiate with or sell to Ngāti Whakahemo.
[67] Mr Barker submitted that, if one stepped back from the facts, the only safe conclusion is that Ms Houpapa was exploring the possibility with Ngāti Whakahemo, of Landcorp perhaps achieving a higher price than the $19 million it had resolved to accept from Micro Farms/Wheyland. That, he submitted, was nowhere near bad faith. He underlined that Landcorp is bound by s 5 of the SOE Act to operate as a commercial business. He noted that Ms Houpapa was in no position to bind Landcorp in any of the comments that she made and that Mr Te Aho must have known she was not speaking for the Board when communicating with him in confidence in the way she did. What Mr Te Aho did know as a result of those discussions was that Landcorp was going back to the highest bidder and that there would be no extension of the “timeframe”.
[68] Ms Houpapa did not say that the purchase price to Micro Farms was
$23 million. Even on Mr Te Aho’s evidence, she only indicated that an offer of
$23 million would be “in the ballpark”. Mr Te Aho made no further inquiries. Specifically he did not ask how far the negotiations had gone nor what price was on offer. Finally, he noted that Ms Houpapa was not copied into emails of the negotiators Mr Kennedy-Goode and Mr McKenzie and they, as they deposed, had no idea what she was doing.
[69] On the second point, Mr Barker submitted that the only decision that might be reviewable was the resolution of the Board on 28 February to sell to Micro Farms. The conversation between Ms Houpapa and Mr Te Aho took place four days later and so was too late to have any effect on that decision. Thus, Mr Barker submitted, the 4 March conservation is no more than an informal and unsanctioned exchange and Mr Te Aho knew that.
[70] Mr Barker submitted further that Mr Te Aho and Ngāti Whakahemo’s solicitors had been threatening injunction proceedings from an early stage, and well before the resolution of Landcorp’s Board on 28 February. Having made those threats on a number of occasions, there is no particular reason to believe that Ngāti Whakahemo would have got to Court on time on the morning of 5 March to stop the sale, if it had not carried out any of its many threats prior to that date.
[71] Finally, Mr Barker argued that even if bad faith was made out, there is no point in setting aside the extant agreement for sale and purchase because the Court has no power to force Landcorp to negotiate with Ngāti Whakahemo, let alone to sell to them. The appropriate remedy at this stage is resumption and that remedy, he argued, remains available.
[72] Both Landcorp and Micro Farms/Wheyland argued that, whatever Ms Houpapa’s actions on and around 4 March, and whatever her motivations, the Court should not exercise its discretion to set aside the agreement because Micro Farms/Wheyland is an innocent party that would suffer severe and unjustified prejudice if that were the result.
Analysis
[73] What adverse inferences then (if any) should be drawn from the silence of Ms Houpapa and Mr Carden? As the cases set out in The New Zealand Judicial Review Handbook suggest, where the evidence on a point is held by one side, and that side maintains silence, it is appropriate to take the point as proven against it.8
This involves the imposition of a tactical burden, rather than a shift in the burden of
8 Matthew Smith The New Zealand Judicial Review Handbook (Thomson Reuters, Wellington,
2011) at 29.5.2 and especially at 31.2.8.
proof. Mr Isac referred also to the Court of Appeal decision in Perry Corporation v
Ithaca (Custodians) Ltd in which the Court said:9
… The absence of evidence, including the failure of a party to call a witness, in some circumstances may allow an inference that the missing evidence would not have helped a party’s case. In the case of a missing witness such an inference may arise only when:
(a) the party would be expected to call the witness (and this can be so only when it is within the power of that party to produce the witness);
(b) the evidence of that witness would explain or elucidate a particular matter that is required to be explained or elucidated (including where a defendant has a tactical burden to produce evidence to counter that adduced by the other party); and
(c) the absence of the witness is unexplained.
Where an explanation or elucidation is required to be given, an inference that the evidence would not have helped a party’s case is inevitably an inference that the evidence would have harmed it.
[74] Ngāti Whakahemo submitted that the only available inference from Ms Houpapa and Mr Carden’s silence is that anything they could have said would have harmed Landcorp’s case. Thus, Ngāti Whakahemo asks me to infer from their silence that Ms Houpapa in particular knew that Ngāti Whakahemo would have sought an injunction if they were aware that an agreement between Landcorp and Micro Farms/Wheyland was to be completed before 7 March. And further that Ms Houpapa deliberately deceived Ngāti Whakahemo into believing that they could negotiate the purchase of Whārere until after the agreement for sale and purchase with Micro Farms/Wheyland was safely executed.
[75] If true, would this be bad faith? The answer is undoubtedly yes. As Whata J
noted in Van Essen v The Attorney-General of New Zealand:10
“Bad faith” has an imprecise meaning. It is usually associated with dishonesty, misleading conduct, improper purpose and deliberate breach of a duty.
[76] In his text Mr Taylor takes a different approach:11
9 Ithaca (Custodians) Ltd v Perry Corporation [2004] 1 NZLR 731 (CA) at [153]-[154].
10 Van Essen v The Attorney-General of New Zealand [2013] NZHC 917, [2013] NZAR 809 at
[76].
Bad faith is in essence no more nor less than the commission of a reviewable error knowing that an error is being committed.
That takes the idea in a different direction, but in my view if an official exercising public power in some way deliberately misleads or acts dishonestly, then bad faith is likely to be proved. There is no doubt that, while Landcorp was engaged in commercial negotiations, it was nonetheless acting under its empowering statute and so was exercising public power. Nor is there any doubt that Ms Houpapa was speaking on behalf of Landcorp when she engaged with Mr Te Aho. The Board minutes of 28 February make that clear.
[77] In any event, as I noted in the interim judgment,12 review will be available against a state-owned enterprise that engages in fraud, corruption, or bad faith or in analogous situations in which “the integrity of the contracting process has been undermined in the same way as in the case of corruption, fraud, or bad faith”.13
[78] At the very least it must be the case that if it were shown to be the intention of Ms Houpapa to actively mislead Ngāti Whakahemo, then her actions in that regard would have undermined the integrity of the Micro Farms/Wheyland contracting process. I do not accept Mr Barker’s second argument that the reviewable decision is the Board’s resolution on 28 February and therefore the
4 March discussion between Ms Houpapa and Mr Te Aho was too late to affect the legality of that resolution. Assuming it was Ms Houpapa’s purpose to protect the contract with Micro Farms/Wheyland until it was fully executed, I see no reason why such an action would not undermine the integrity of the contract process even if the key decision is made earlier. In any event, the action of Mr Kennedy-Goode and Mr McKenzie in executing the agreement pursuant to the Board resolutions must also be reviewable.
[79] I see the chain of events in this case as no different in principle to a Landcorp
Board member interfering in a straight tender process by deceiving a competing
11 Graham Taylor Judicial Review: A New Zealand Perspective (3rd ed, Lexis Nexis, Wellington
2014) at 15.80.
12 Ririnui v Landcorp Farming Ltd, above n 1, at [153] to [157]. See also Lab Tests Auckland Ltd v Auckland District Health Board [2008] NZCA 385, [2009] 1 NZLR 776.
13 Lab Tests Auckland Ltd v Auckland District Health Board, above n 9, at [91].
tenderer into believing that the lead tender is so high that there is no point in making a bid. It would, in my view, be quite unacceptable for a state-owned enterprise to be seen to be behaving in this fashion whether or not its statutory mandate is to act commercially.
[80] In my view however, the situation is not as simple as that. It is of course quite possible that Ms Houpapa did intend to lull Ngāti Whakahemo into believing that they could negotiate to purchase Whārere Farm. But it is also possible that she genuinely thought that if Ngāti Whakahemo could produce a significantly higher bid they might still be able to acquire the land, notwithstanding the Board’s 28 February resolution. It may be that she did not realise that the agreement with Micro Farms/Wheyland would be executed so quickly. She could of course have explained in evidence which of those two options was in fact the case, but she did not.
[81] I am mindful of the fact that a finding of bad faith, or even something akin to bad faith, is a serious matter and should not be adopted lightly. The general principle is that the more serious the allegations, the clearer the proof ought to be. A finding of bad faith is a most serious finding indeed.14
[82] I have to say that I am very uncomfortable with the evidence as it currently obtains. I am very suspicious that Ms Houpapa engaged in deceitful conduct and that her silence is protecting that. But all I have is suspicion. There are two equally plausible explanations and in the particular circumstances of this case I need more than suspicion to choose between them. It is, I confess, tempting to treat silence as an admission here, but the fact is Ms Houpapa and Mr Carden may be keeping their silence for other reasons, not because “to speak is to confess”. If Ms Houpapa was genuinely trying to get Ngāti Whakahemo to increase its bid, it would be a rather bad look for a Board member to admit that she was actively undermining a Board resolution by going behind the Board’s back to encourage a competing bidder. So there may be entirely unrelated reasons for Ms Houpapa’s silence and for Mr Carden
to be complicit in that silence.
14 See for example Hopper v North Shore Aero Club Inc [2007] NZAR 354 (CA); Donovan v
Graham HC Auckland CP 1908/89, 24 February 1992.
[83] In short it may be unfair, on reflection, to speculate in the face of their silence, which of the two options is the correct one. I do not therefore think that this is a case in which I should adopt the Court of Appeal’s reasoning in Ithaca and conclude that silence is an admission.
[84] Of equal weight is the fact that there is a second factor that makes a finding of bad faith unnecessary.
[85] Even if Ngāti Whakahemo had succeeded in proving bad faith, or something akin to it, it would ultimately have provided them little comfort. Ngāti Whakahemo constructed its case on the basis that Landcorp’s bad faith had prevented them from getting to Court on time to stop the sale to Micro Farms/Wheyland. If Landcorp’s bad faith could have provided a basis to set aside the sale and purchase agreement, what arguments would be available to them in Court if they were now given a clean slate to argue their case afresh? Ngāti Whakahemo cannot argue for a right to negotiate a purchase with Landcorp. There is no basis for such a right and less still for a right to purchase. And I have already rejected the argument that s 9 applies to Landcorp directly. So, at the core of its case, Ngāti Whakahemo has no particular rights or expectations vis a vis Landcorp at all.
[86] In the end, Ngāti Whakahemo’s case is constructed on the existence of a Treaty-based interest pursuant to which the Crown should assist it in the acquisition from Landcorp of the farm. That interest (or perhaps expectation) was lost with the Minister’s reconsideration under the Protocol. In short, therefore, even if Ngāti Whakahemo could prove that Ms Houpapa acted in bad faith, this was never going to assist their case. Their success depends not on Landcorp’s actions, but on the Minister’s attitude to their claim. Had the Minister taken a view more consistent with Ngāti Whakahemo’s interests, then a finding of bad faith against Landcorp could well have been a powerful factor in support of setting aside the agreement with Micro Farms/Wheyland. But without Ministerial support, Ngāti Whakahemo’s position is, on my analysis, hopeless.
[87] I would therefore shrink from making a finding of bad faith in circumstances where such a finding could make no difference to the outcome.
Conclusion
[88] It must follow that Ngāti Whakahemo have gone as far as they can go in this litigation. There can be no declaration of bad faith, of non-compliance with order (c), or a declaration that the agreement for sale and purchase is invalid.
[89] Ngāti Whakahemo will however be entitled to holding orders pending the
appeal hearing on 10 February. Order (d) is extended accordingly until 10 February
2015 preventing completion of the transfer to Micro Farms/Wheyland.
[90] Although Ngāti Whakahemo has not, in the end, succeeded, this is a case in which the tribe’s costs ought to be met by the defendants. I am of that view because that fairly reflects the tribe’s success at the interim stage having exposed a reviewable error in the Minister for Treaty of Waitangi Negotiations, and in light of Landcorp’s actions – particularly those of Ms Houpapa and Mr Carden – in the period between 1 and 7 March.
[91] I have not accepted the plaintiff’s pleading of bad faith, but even on that basis, I was struck by the fact that, on the evidence, Ms Houpapa and Mr Carden maintained the ruse of a $23 million purchase price at the meeting of 7 March. An award of costs against Landcorp is also appropriate.
[92] The defendants will pay the costs of the plaintiff on a 2B basis certified for second counsel.
[93] The application is otherwise dismissed.
Williams J
Solicitors:
Stout Street Chambers, Wellington
Buddle Findlay, Wellington
Crown Law, Wellington
Cooney Lees Morgan, Tauranga
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