Sargison and Leonard v Anthem Wine Company Limited HC Christchurch CIV 2009-409-1876 - [2010] NZHC 529

IN THE HIGH COURT OF NEW ZEALAND

CHRISTCHURCH REGISTRY

CIV-2009-409-001876

UNDER the Receiverships Act 1993
IN THE MATTER OF the receivership of Anthem Holdings
Limited

BETWEEN PAUL GRAHAM SARGISON
JOHN MAURICE LEONARD Plaintiffs

AND ANTHEM WINE COMPANY LIMITED
First Defendant

AND SECURED FINANCE LIMITED
Second Defendant

AND SECURED LENDING LIMITED
Third Defendant

Hearing: 15-19 March 2010

Appearances: S O McAnally and B Hojabri for Plaintiffs

A J Forbes QC and K W Clay for Defendants

Judgment: 27 April 2010

RESERVED JUDGMENT OF HON. JUSTICE FRENCH

Introduction

[ 1 ] The plaintiffs are the receivers of the personal property of a company called

Anthem Holdings Limited. They were appointed by Perpetual Trust Limited, which holds security over Anthem Holdings’ present and after acquired personal property, the relevant security agreement having been entered into in March 2006.

The receivers seek a declaration that Anthem Holdings has a property interest

in certain wine stocks.

SARGISON AND ANOR V ANTHEM WINE COMPANY LIMITED AND ORS HC CHCH CIV-2009-409- 001876 27 April 2010

Anthem Holdings is part of a group of companies owned and controlled by Christchurch developer, Mr David Henderson.
The first defendant, Anthem Wine Company Limited, is also part of the same group. Anthem Wine Company says that Anthem Holdings has no interest in the wine. Mr Henderson and Anthem Wine Company contend that up until early 2008 the true owner of the wine was in fact another company known as Gibbston Downs Wines Limited. They further contend that in February 2008 Gibbston Downs Wines sold the wine to Anthem Wine Company. Thus, Mr Henderson and Anthem Wine Company argue it is Anthem Wine Company which now owns the wine.
The second and third defendants, Secured Finance Limited and Secured Lending Limited are financiers. They advanced monies to Anthem Wine Company in mid 2008 and took security over the wine stock. They seek to uphold Anthem Wine Company’s claim of ownership.
The key issue for determination is essentially a factual one as to whether Anthem Holdings has or had any interest in the wine and whether Anthem Wine Company purchased the wine as it claims in early 2008.

Factual background

The wine in question is the product of three vintages: 2006, 2007 and 2008. It comes from a vineyard previously known as Gibbston Downs Vineyard, but now known as Anthem Vineyard.
The history of Gibbston Downs/Anthem vineyard began in 1998 when a company called Gibbston Ventures Limited purchased some land in the Gibbston Valley with a view to developing a vineyard experience for tourists. Gibbston Valley is located in the Kawarau Gorge near Queenstown.
As at 1998, Gibbston Ventures was a wholly owned subsidiary of another company, Property Ventures Limited. Property Ventures was a major development and investment company with a very substantial share capital. Its shares were held by a diverse group of owners which included Mr Henderson.

[10] The original concept underlying the proposed vineyard was that it would consist of a number of individually owned lifestyle blocks, each owner having shares on a pro rata basis in a single company which would manage the vineyard. In effect, the company would operate as a co-operative.

[11] In 2002, the land was accordingly subdivided into 11 or so lifestyle blocks, the proposed co-operative having been incorporated the previous year. That company was Gibbston Downs Wines Limited. Gibbston Downs Wines was a subsidiary of the land owning entity Gibbston Ventures which, as I have already mentioned, was in turn a subsidiary of Property Ventures.

[12] Three of the lifestyle blocks were acquired in 2002 by the company at the centre of this proceeding, Anthem Holdings – then known as Gibbston Downs Holdings Limited. Unlike Gibbston Ventures and Gibbston Downs Wines, Gibbston Downs Holdings was a company which was entirely under the control of Mr Henderson. Gibbston Downs Holdings was a subsidiary of his main operating company, RFD Investments Limited.

In 2003, the vineyard was planted.
As part of the subdivision process, land covenants were registered against the title of each of the lifestyle blocks. Significantly for present purposes, clause 2.8 of the land covenant stipulated that the registered proprietor shall not:
Without the written consent of The Developer [then defined as Gibbston Ventures] (for the withholding of which no reason shall required to be given) conduct any commercial activity on the land, or garage or store on the land any plant or equipment other than that normally required for residential use PROVIDED THAT the cultivation of grape vines or such activities, garaging or storage within the reasonable contemplation of any contract between the registered proprietor and Gibbston Downs Wines Limited or other company approved by The Developer shall be deemed not to be a breach of this covenant.
Unfortunately, the uptake in sales of the lifestyle blocks was slow, with only five of the lots being sold to independent land owners (i.e. owners not associated with the developers) between 2002 and 2004.

[16] The agreements for sale and purchase that were signed by the independent owners contained special conditions that included the following:

2. WINE COMPANY
The Vendor has incorporated a Company, Gibbston Downs Wines Limited (“the Company”), which will own the brand and label of Gibbston Downs Wines. The Vendor will procure that the Company will enter into a Wine Growing and Management Agreement with the purchasers of the vineyard lots within the Gibbston Downs development such contract to be in the form referred to in clause 3 below. It is proposed that the total shares issued in the Company will be 100,000 shares. Without creating any binding obligation the Vendor records its intention to offer each of the Purchasers of the vineyard lots 4,000 shares in the Company. Purchasers of residential villas proposed to be developed and sold shall each be offered 1,000 shares in the Company...
The shares in the Company to be offered to purchasers as set out above shall be fully paid shares and shall be allotted at no cost to the purchaser if the purchaser elects to accept the allotment.
RFD Investments Limited shall be entitled to subscribe for 29,000 shares in the Company.

3. GRAPE GROWING AND MANAGEMENT AGREEMENT
It is an express term and condition of this agreement that the Purchaser will enter into a contract with the Company for the management of a vineyard and the planting, cultivation, harvesting and sale of grapes on the land which contract shall be in the form set out in Schedule “A” of this agreement.

[17] The Grape Growing And Management Agreement attached to the agreement for sale and purchase was expressed to be an agreement with Gibbston Downs Wines. The recital stated that:

The Company is incorporated for the purpose of creating a brand and label for wines to be produced; for providing management services in relation to the establishment of vineyard areas; for the planting, cultivation, harvesting, the sale and purchase of grapes and for the manufacture of wines produced from the grapes grown on the Land;

[18] Under the agreement, the lot owner agreed to sell to Gibbston Downs Wines all the grapes planted, cultivated and harvested on the land and to pay the costs and expenses incurred in relation to the establishment and management of the vineyard, including the planting, cultivating and harvesting of the grapes.

[19] Clause 4 of the Grape Growing and Management Agreement provided that Gibbston Downs Wines would inter alia purchase all grapes harvested from the land, arrange for the transportation of the grapes to a winery, and undertake all work required to make and bottle the wine produced from the grapes. Clause 5 of the agreement provided that the purchase price to be paid by the company to the lot owner for the grapes “shall be the fair market price for grapes in the Gibbston region”.

[20] As will be readily apparent, the land covenant, the special conditions in the agreements for sale and purchase and the grape growing agreement were all consistent with the underlying concept of a vineyard co-operative. This concept was also reflected in a 2002 promotional pamphlet and a business plan prepared in December 2003.

[21] As these various documents make clear, it was intended at least in 2002 and 2003 that Gibbston Downs Wines would be responsible not only for the planting and harvesting of grapes but also the processing of the grapes into wine as well as the marketing of the wine. It was to be wine maker, producer and seller.

The promotional brochure for example stated:
Gibbston Downs Wines Ltd owns the brand Gibbston Downs and will hold the growing management and grape purchase contracts with each lot holder.
The promoters have capitalised the company at $100,000 and each lot holder is entitled to 4,000 shares of $1.00 each in Gibbston Downs Wines Ltd at no cost...
This structure has been implemented because it provides the greatest opportunity for all land owners in Gibbston Downs to participate in the vineyard, the wine production and to receive maximum benefits from the creation of a high standard product and a popular brand.
While the business plan said:
After the first full harvest in 2007 it is expected that Gibbston Downs Wines Ltd will become an economic unit. Shares will have been allocated to land owners and the Company will operate independently with its own elected board.
At this stage it is expected that land owners will receive approximately $4,366 return after expenses per h/a of land planted.
Although the business plan refers to the first harvest taking place in 2007, the first full harvest actually took place in March/April 2006.
By that time, there had been a number of important developments.
Those developments were as follows:
i)Ongoing arguments with the independent lifestyle block owners about cost overruns. The conflict prompted the then manager of the vineyard project to question the wisdom of persisting with a co-operative.
ii)The slow uptake in sales of the lifestyle blocks.
iii)A decision by Property Ventures (the owner of both Gibbston Ventures and Gibbston Downs Wines) in 2004 that the vineyard project was no longer compatible with its core activities. Property Ventures decided it wanted to exit the project and was reluctant to provide any funds for winemaking.
iv)An agreement between Property Ventures and Mr Henderson that:
a.       he, or companies associated with him, would acquire the remaining lifestyle blocks in the vineyard from Gibbston Ventures; and,
b.      he, or companies associated with him, would when circumstances allowed eventually acquire the shares in Gibbston Ventures and so acquire ownership of Gibbston Downs Wines.
v)  A policy decision by Mr Henderson that interests associated

with him would attempt to purchase back as many of the

lifestyle blocks as had been sold to independent third party purchasers.

As Mr Henderson put it, he was the only person “throwing his hand up” to take over the project once Property Ventures decided to exit. The aim was that ultimately Mr Henderson through his companies would be landowner, vineyard manager and wine producer. What had started life as a Property Ventures enterprise was to be a Henderson enterprise.
The extent to which these developments changed the original vision – in particular the impact they had on the role of Gibbston Downs and its intended winemaking, sales and marketing functions – is very much in dispute.
However, there is no doubt that these developments coincided with the following events.
·Gibbston Ventures Limited (the original developer) changed its name to Anthem Ventures Limited.
·The Gibbston Downs Vineyard was re-branded as the Anthem Vineyard.
·No further lots were sold to independent parties after 4 September 2004.
·No independent landowners were ever allotted shares in Gibbston Downs Wines.
·Gibbston Downs Holdings (the company entirely owned by Mr Henderson) changed its name to Anthem Holdings.
·Over time, companies associated with Mr Henderson started to acquire more lots.

Although companies associated with Mr Henderson came to own most of the land within the vineyard, the Property Ventures subsidiary Gibbston Ventures still owned the land on which another development (called the Village at Anthem) was proposed. Property Ventures was therefore prepared to continue to fund Gibbston Ventures, and also Gibbston Downs Wines, for part of the vineyard operational and maintenance costs. However, according to the evidence of Mr Hunt, the former financial controller for Property Ventures, Property Ventures was reluctant to provide funding for winemaking activity because it saw that as something for which Mr Henderson was responsible, rather than Property Ventures.
Of the various companies associated with Mr Henderson which acquired lots in the vineyard, the entity that acquired the most land was Anthem Holdings.
In December 2004 the then manager of the vineyard project produced a draft business plan which amongst other suggestions proposed that Anthem Holdings assume the function of winemaking and the marketing and sale of the finished product. In his evidence, Mr Henderson denied ever seeing this business plan.
In or about September 2005, Mr Henderson appointed a Mr Evan Vertue to be the Chief Executive Officer of Anthem Holdings Limited and to manage the Anthem Group.
Mr Vertue acted as Chief Executive Officer between September 2005 and 11 December 2007. He was thus in charge of the first two harvests, apart from a three-month absence in mid-2007. By October 2007, all but two of the lots sold to independent owners had been “re-acquired” by Henderson interests. Gibbston Downs Wines, however, still remained under the control of Property Ventures.
According to Mr Vertue’s testimony, Mr Henderson gave him the very clear understanding that while Gibbston Downs Wines remained responsible for maintaining the vineyard, it was no longer to be responsible for winemaking, that role having been assumed by Anthem Holdings:

... it was common knowledge between myself and Mr Henderson for the
whole period of my involvement and reflected all of the business structures,

all of the list of creditors, all of the cash flow forecasts and all of the contracts ...
(Notes of evidence, page 81, line 10)
It was always known and understood through our creditor schedules, all of our cash flow schedules, all of our structure plans, that Gibbston Down Wines Limited and Anthem Holdings Limited were quite separate structures with separate roles and all of my reporting to Mr Henderson was on that basis, and that is documented.
(Notes of evidence, page 61, line 21)

Consistent with that understanding, when Mr Vertue entered into various contracts for the purpose of producing both the 2006 and 2007 vintages, he did so in the name of Anthem Holdings.
Thus for the purposes of the 2006 vintage, which was made by outside winemakers using grapes sourced from the Anthem vineyard and elsewhere, it was Anthem Holdings which purchased the external grapes, arranged transport of the grapes to the winemakers and entered into the winemaking and bottling agreements with the external winemakers.
The 2007 vintage was made by an in-house winemaker and the wine then sent in bulk to outside contractors for bottling. It was Anthem Holdings that entered into contracts for the purchase of wine equipment and barrels. It also, I am satisfied, was the entity which employed and paid the in-house winemaker.
Anthem Holdings insured both the 2006 and 2007 vintage, as well as agreeing to provide wine from the Anthem vineyard to one of the independent landowners as part of the deal in “re-acquiring” the lifestyle block.
Significantly, the contracts Mr Vertue signed on behalf of Anthem Holdings with external winemakers and bottlers contained warranties that the grapes, juice of the grapes and the resulting wine was, at all times, the sole and exclusive property of Anthem Holdings.
Mr Vertue claimed that at all times Mr Henderson was well aware of what he, Mr Vertue, was doing.
When it was put to Mr Vertue that Anthem Holdings was only doing these things as agent for Gibbston Downs Wines, Mr Vertue stated “that was never the case” and that “Anthem Holdings was acting absolutely on its own account”. He also stated that he had never previously heard any suggestion of there being an agency until this dispute arose.
For his part, Mr Henderson says Mr Vertue’s understanding was wrong and that the only authorised change to the original 2003 business plan was the shift in focus from the sale of lifestyle blocks to the re-purchase of those blocks. There was never any departure from the original intention that Gibbston Downs Wines was to own the grapes and make the wine from those grapes. It continued to be winemaker, marketer and wine seller. Mr Henderson denied having any knowledge of the detail of the contracts entered into by Mr Vertue until October 2007.
Anthem Wine Company Limited – the company which Mr Henderson claims purchased the wine stocks in 2008 from Gibbston Downs Wines – was incorporated on 11 November 2007.
Mr Vertue says Mr Henderson instructed him to incorporate Anthem Wine Company and that the reason given for creating the company was because the name Anthem Holdings was not considered an appropriate name for a wine company. The wine was known as “Anthem Wine” and the generic term “Anthem Wine Company” was being used informally and there was thus a need to formalise the process.
Mr Henderson however contends that Mr Vertue had nothing to do with the incorporation of Anthem Wine Company. According to Mr Henderson’s evidence, Anthem Wine Company was incorporated because after reviewing the operations of the vineyard in October 2007 he had come to a decision by 18 December 2007 that there was a need for rationalisation, Gibbston Downs Wines was doing too much and a new company should be established to take over its winemaking and sales/marketing functions. Mr Henderson says further that having made that decision, Gibbston Downs wines stocks were subsequently transferred to the new company by 18 February 2008.
During 2008 Mr Henderson signed a number of security documents and winemaking agreements on behalf of various entities. This included the signing of a contract in June 2008 with a winemaker called Maude Wines for the processing of pinot noir grapes for the 2008 vintage. Mr Henderson purported to sign that contract on behalf of “Anthem Estates Limited”, a company which did not in fact exist.
Then on 26 August 2008 the plaintiffs were appointed receivers of Anthem Holdings’ personal property.
As at the date of the receivers’ appointment, there were still bottled wine stocks from both the 2006 and 2007 vintages being stored at the premises of the external winemaker and bottler which had signed the contracts with Mr Vertue, while there were 32,340 litres of unbottled 2008 vintage pinot noir held by Maude Wines.
It is this bottled and bulk wine which is at issue.
Since the receivers were appointed, some of the 2006 and 2007 vintages have been sold pursuant to a preservation order. It is however common ground that legally the fact of the sales makes no difference to the parties’ respective positions. Perpetual’s security interest has been perfected. Thus, if Anthem Holdings did have a property interest in the wine stocks to which the security interest attached, it would extend to the sale proceeds.
For completeness in this recital of the background facts, I should record that the receivers objected to the admissibility of certain documents which the defendants sought to adduce. The objection was on the grounds of hearsay and non-discovery. I have decided the documents should be admitted, there being no discernible prejudice to the receivers, who themselves adduced some hearsay evidence.

The competing claims to the wine stocks

The receivers contend it is likely Anthem Holdings is the legal owner of the wine stocks, but say they are not required to prove that. According to the receivers, it is enough that Anthem Holdings assumed possession and control of the grapes and the resulting wine for each of the three harvests. They argue that it thereby acquired possession of the wine in the legal sense (control of the asset with the intention of asserting such control against others) and as the party in possession of personal property, it has the best title against all but the rightful owner. No other party has asserted a better or stronger title. In particular, the only other possible contender (Gibbston Downs Wines) has not made any claim. Accordingly, so the argument runs, Anthem Holdings is legally in the same position as the finder of chattels in such cases as Armory v Delamirie (1722) 1 Stra.505 and Parker v British Airways Board [ 1982] 1 QB 1004.
As for the alleged sale of the wine stocks to Anthem Wine Company in 2008, the receivers say that either the sale never happened (the burden of proof being on the defendants) or if it did, Gibbston Downs Wines did not have anything to sell.
In short, the receivers’ argument is that either Anthem Holdings is the true owner (in which case Gibbston Downs Wines had nothing to sell to Anthem Wine Company in 2008) or, if Gibbston Downs Wines is the true owner, it has not made any claim and it never sold the wine to Anthem Wine Company. Without there being any other contenders, Anthem Holdings, as the party in possession, has a sufficient property interest.
For their part, the defendants acknowledge that Anthem Holdings met the costs of producing the wine at least for the 2006 and 2007 vintages. However, they say that at all times Anthem Holdings Limited was simply acting as the agent of Gibbston Downs Wines, regardless of Mr Vertue’s subjective understanding.
On the defendants’ version of events, Gibbston Downs Wines remained the winemaker and therefore did have something to sell in 2008 when it sold the 2006 and 2007 vintages to Anthem Wine Company. Anthem Wine Company then assumed responsibility for the 2008 harvest and winemaking.
In support of the contention that it was Gibbston Downs Wines that owned the wine, the defendants rely on the provisions in the sale and purchase agreements, the grape growing agreement and the land covenant, as well as the 2003 business plan – all of which, as I have said, clearly contemplate Gibbston Downs Wines as winemaker. They also point to evidence that Anthem Holdings’ bank account was used as something of a clearing house for other companies in the group, something which was unknown to Mr Vertue, who never saw any of the bank statements.
According to the evidence of the group’s accountant, it was common practice for the various entities within the group to pay the debts of each other, with a view to there being a later “wash up” when all the income and expenditure would be allocated to the right accounting “buckets”. The fact Anthem Holdings may have paid the liabilities of Gibbston Downs was consistent with this practice and could not mean that in law Anthem Holdings had somehow assumed the function of winemaker or acquired an interest in the wine. The defendants acknowledge that payments made by Anthem Holdings on behalf of Gibbston Downs Wines should have been properly recorded as an inter-company advance, but that was not commonly done in the group. At no stage did Mr Henderson ever give any instruction or direction that Anthem Holdings was to become the winemaking entity. Throughout, it remained only a property owning entity and developer.

The Court’s findings

As acknowledged by one of the receivers, Mr Sargison, there is evidence supporting both versions of events. The difficulties are compounded by the lack of proper record keeping and lax accounting practices. No accounts for Gibbston Downs Wines for example have been done since 2004 and the inter-company “wash up” has never been completed.
However, despite those difficulties, after seeing and hearing the witnesses and after careful consideration of all of the documentary evidence, I have come to a clear view that on the balance of probabilities the weight of evidence supports the case propounded by the receivers.
In particular I am satisfied that the original structure contemplated in 2003 was superseded by events and that there was a fundamental change of direction as a result of Property Ventures deciding to exit the project and Mr Henderson and his interests taking it over. I am satisfied that this change of direction resulted in Anthem Holdings assuming the role of winemaker and am further satisfied that the alleged sale from Gibbston Downs Wines to Anthem Wine Company did not take place as claimed.
I have come to those conclusions for the following reasons.
First, in my view, as a general proposition, greater weight should attach to documentation that came into existence before this dispute arose than documents created thereafter.
Secondly, in so far as there was a conflict in the evidence between the defendants’ witnesses and Mr Vertue, I prefer the testimony of Mr Vertue. Mr Vertue appeared under subpoena. He impressed as an honest witness who was concerned to be accurate. There was no suggestion of his having any grievance or axe to grind against Mr Henderson and his evidence was consistent with the weight of contemporaneous documentation. Unlike virtually all the witnesses called by the defendants, Mr Vertue no longer has any association with Mr Henderson. The one exception was Mr Balani, a former vineyard manager, but his evidence was not contentious because it was limited to events prior to the crucial 2004 developments.
Mr Vertue had no knowledge of Anthem Holdings’ name and bank account being used by others as a clearing house, so it cannot be said that was the reason for his using Anthem Holdings’ name to pay for wine production. I am satisfied that the reason he did what he did was because of the understanding he was given by Mr Henderson. Further, the evidence established that it was not only Mr Vertue who was of the understanding that Anthem Holdings owned the wine. So too were the group’s own solicitors. In August 2007, Anthem Holdings through its solicitors sought a release of the wine stocks from Perpetual’s security so that the wine could be offered to another financier. Further, although the release was never implemented, Mr Henderson himself signed the deed of release.
Even Mr Hunt, the group accountant (who denied knowing of any direction that Anthem Holdings was to become the winemaking entity), opened a supplier account when wine packaging was urgently required in the name of Anthem Holdings. Mr Hunt claimed the account was opened prior to Anthem Wine Company being incorporated. However, that is not correct. Anthem Wine Company was incorporated on 11 November 2007 and the account was not opened until 26 November 2007. Mr Hunt also claimed that Anthem Wine Company was operating its bank account from July 2008 onwards. However the bank statements, which had not been discovered, showed the bank account was only opened in October 2008, which is after the receivers were appointed.
Much was made of the fact that the packaging in question had the name “Anthem Wine Company” stamped on it. However, the evidence of Mr Vertue (which I accept) was that the phrase “Anthem Wine Company” had been widely used as a generic brand name for some time. I therefore do not attach significance to the presence of that name on the packaging.
For the same reason, I also do not attach much significance to evidence that some of the 2007 vintage may possibly have been bottled in 2008, as a result of instructions from the in-house winemaker using the name “Anthem Wine Company”. If the in-house winemaker (who I am satisfied on the evidence was employed by Anthem Holdings) did use the name “Anthem Wine Company” prior to the receivership, it is more likely than not that she was simply using the generic brand name. She was not called to give evidence.
Another reason why I accept Mr Vertue’s evidence is that it makes commercial sense having regard to the nature of the changes that had taken place in 2004. By the time of the 2006 vintage, the situation was one where Mr Henderson’s ultimate ambition was to control both the land and the commercial aspects of the vineyard. The concept of a co-operative had been completely abandoned. Landowners were not going to acquire shares in Gibbston Downs Wines and Mr Henderson’s interests were assuming primary responsibility for funding the wine production. Yet, Gibbston Downs Wines remained a Property Ventures subsidiary. Until Mr Henderson acquired control of Gibbston Downs Wines, there was an obvious risk that if his interests advanced funding to Gibbston Downs Wines for wine production, the money could be taken by Property Ventures (companies associated with Mr Henderson were in debt to Property Ventures) and a risk that the wine and Mr Henderson’s Anthem brand would belong to Property Ventures. Mr Henderson thus had a good reason to look for an alternative winemaker to Gibbston Downs Wines, an alternative that unlike Gibbston Downs Wines was entirely subject to his control. Of the alternative entities, Anthem Holdings was an obvious choice to assume the role because it was the Henderson related vineyard entity with the best asset base.

[71] Further, even after Mr Vertue left, Anthem Holdings continued to have an involvement in relation to the 2008 vintage and continued to assert its ownership of the 2006 and 2007 vintages. Anthem Holdings’ stock reconciliation prepared by an unidentified author in February 2008 included the 2006 and 2007 vintages, while the company’s profit and loss account for the period 1 April 2007 to 15 February 2008 shows income from wine sales. Also, after Mr Vertue had left, Anthem Holdings’ solicitors still remained of the understanding that Anthem Holdings owned the wine. In March 2008 they sent an email to the winemaker who was storing the 2006 and 2007 vintages confirming they were in possession of wine stocks “owned” by Anthem Holdings. Even the second and third defendants themselves were of the understanding in March 2008 that Anthem Holdings had an interest in the wine.

The fact that Mr Vertue’s evidence was consistent with documentation created by others as well as by himself is obviously significant.
In challenging Mr Vertue’s evidence, the defendants argued that if, as he claimed, Anthem Holdings was the true owner, why would Mr Henderson have bothered with the incorporation of Anthem Wine Company. However, as I have already mentioned, Mr Vertue said he was given an explanation at the time about the need to formalise the brand name. Moreover, the evidence showed that by then Mr Henderson could well have had another motive, which he would have been unlikely to share with Mr Vertue, and that was to move the property out of Anthem Holdings. Mr Henderson was starting to come under financial pressure from Perpetual. The loan administrator had demanded reduction of the principal by 12 December 2007, and a request from Anthem Holdings for another extension for repayment of the full amount had been declined. The loan was due for repayment on 31 January 2008.
In contrast to Mr Vertue, I found Mr Henderson an unreliable witness who was at times evasive and contradictory. In cross-examination he sought to deny, for example, that the vineyard had been re-branded the Anthem vineyard in late 2004, when that had been stated in his own written brief of evidence. He was also evasive on the issue as to whether the intention to give the landowners shares in Gibbston Downs Wines had been abandoned by 2006, when it was patently obvious it must have been. His attempts to blame his solicitors and deny knowledge of the documents that did not suit his case – including documents which he had himself signed – were not plausible. Nor were his attempts to minimise the use of the generic brand name Anthem Wine Company.
Admittedly, Mr Henderson’s contention that Gibbston Downs Wines remained the winemaking entity was supported by a number of other witnesses. However, as Mr McAnally for the receivers pointed out, the evidence of these other witnesses consisted in large part of reliance on the grape growing agreements and the land covenants, as well as reliance on internal accounting records created on the instructions of Mr Henderson after the dispute arose.
In my view, the land covenant and the contractual documents do not pose an insuperable barrier to the receivers’ case. The land covenant does not specifically deal with winemaking and it does not compel Gibbston/Anthem Ventures to enforce it. Nor would the grape growing agreement prevent Gibbston Downs Wines from nominating or acquiescing in the appointment of an alternative wine company. The evidence established that in fact only two of the independent landowners ever signed the grape growing agreement, and that while the others may have been under a contractual obligation to enter into the agreement, no attempt was ever made to enforce that obligation. Of the two that did sign, only one is still a lot owner.
I accept that on the face of it Mr Vertue’s evidence about a change of direction in 2004 is inconsistent with the fact that two agreements for sale and purchase signed in 2006 still refer to the Gibbston Downs Wines grape growing agreement. In one of the 2006 agreements, there is even a purported assignment of the grape growing agreement. However, other aspects of the same contracts tend strongly to suggest that it was simply a case of outdated and standardised documents being used without regard to subsequent changes.
More problematic for the receivers’ analysis is the question as to how Anthem Holdings came to acquire the grapes (apart of course from the grapes grown on its own land). Its profit and loss account does not show any costs relating to the purchase of grapes. When asked about this, Mr Vertue said he assumed that at some stage there would have to be some sort of accounting at least to the independent lot owners. Mr Vertue went on to point out that this was only to the extent that the independent landowners were still there, bearing in mind that they were being progressively bought out and that there were only two left by October 2007.
The defendants’ case is also problematic on this issue. There was no evidence of Gibbston Downs Wines ever having made any payment to buy the grapes from the landowners. The defendants sought to overcome this problem by contending that, although no money ever changed hands, it had always been intended the value of the grapes would be offset against the far greater amounts owed by the landowners to Gibbston Downs Wines for establishing and maintaining the vineyards. There was certainly evidence of invoices for vineyard costs being sent to the landowners in the pre-Vertue days, although no evidence that the landowners themselves shared this understanding. Further, Gibbston Downs Wines has not produced a set of accounts since 2004 and a reconciliation of the set-off amounts relating to each owner has still not been completed.
The evidence on this issue is unsatisfactory and I have found it the most troubling aspect of the case.
However, there is no doubt that Anthem Holdings took possession of the grapes, and then controlled, funded and managed the making of the wine, as well as asserting its ownership. As Mr McAnally put it, short of crushing the grapes itself, there was not much more Anthem Holdings could have done to ensure production. There was no evidence of any of the other landowners, or Gibbston Downs Wines for that matter, raising any objection.
In those circumstances, and having regard to the entirety of the evidence, I consider the correct analysis is that there must have been a notional sale of the grapes to Anthem Holdings.
Even if I am wrong on that and Anthem Holdings converted the grapes, that is still not fatal to the receivers’ case based as it is on possessory title. In the absence of any claim from Gibbston Downs Wines, the receivers are still entitled to rely on the property interest which I accept as a matter of law arises out of Anthem Holdings’ right to possession of the wine.
It would of course be different if Gibbston Downs was the true owner and had sold its wine stocks to Anthem Wine Company. However, I am satisfied that no such sale ever took place.
The evidence about the sale is heavily dependent on the say-so of Mr Henderson. Regrettably, I am unable to accept that evidence. In my view, it was not credible:
a)Having regard to the fact this would have involved the transfer of an asset worth approximately $1 m between two companies that were not related companies, I would have expected there to have been some formal record. However, the only written record of the transaction is Mr Henderson’s handwritten notes of a meeting he held with his accountant, Mr Bailey, on 12 February 2008 when he claims to have advised Mr Bailey of the fact of the transfer. As at 12 February 2008, Mr Henderson was a director of both companies but he was not the sole director of both and he did not at that time have control of the purported vendor, Gibbston Downs Wines. He only acquired control of that company in mid-2008.
b)There was no evidence of any agreed purchase price which in itself would render the alleged sale contract void for uncertainty. Nor was there any evidence of the exact date on which this transfer supposedly took place. All the notes record is Mr Henderson advising Mr Bailey on 12 February 2008 that the transfer (the possibility of which they had supposedly discussed in October 2007) had now been effected.

c)Not only was there no written sale agreement, Gibbston Downs Wines, the supposed vendor, did not ever issue an invoice.
d)There has been no accounting of the transaction for GST purposes.
e)There was no evidence of the matter ever going to the board of Property Ventures (the vendor’s parent company) for approval. In cross-examination, Mr Henderson said he “could not recall” whether it had gone to the board.
f)On 18 February 2008, a strategic business plan headed “Proposal for Rationalisation and New Vision” was prepared by an outside wine consultant for the vineyard. Despite the fact this plan was prepared the same month as the alleged transfer, it makes no mention of any recent sale.
g)After the alleged sale took place, several documents came into existence still showing Anthem Holdings as having an interest in the wine. This included the Anthem Holdings stock reconciliation, as well as a winemaking service agreement and the second and third defendants’ own security documents. In March 2008 Anthem Holdings offered security in “all present and after acquired” wine stocks to Secured Finance, which the latter considered sufficient to register a financing statement.
h)Also in March 2008, i.e. after this alleged sale, it was Anthem Holdings which insured the 2006 and 2007 vintages.

In March 2008 there is evidence of the Anthem Group’s solicitors remaining of the understanding that Anthem Holdings owned the wine.

j)Mr Henderson claimed that one of the concerns driving his October 2007 review of the Anthem operations was his discovery that Mr Vertue had been using the Anthem Holdings account and entering into contracts on behalf of the wrong entity. Yet despite this professed concern there was no evidence of his ever having raised the matter with Mr Vertue, who was still an employee at the time of the review. Nor was there any evidence for that matter of Mr Henderson raising the issue with his solicitors.
k)On 26 November 2007, after Anthem Wine Company had been incorporated and after Mr Henderson had held his first meeting with Mr Bailey, Anthem Holdings entered into a contract for the supply of wine packaging at the instance of the company accountant, Mr Hunt.

l)In April 2008, again after the alleged transfer, Mr Henderson himself signed a winemaking agreement with a winemaker on behalf of Anthem Holdings and Gibbston Downs Wines – no mention being made of Anthem Wine Company. Mr Henderson was unable to provide any explanation for this, despite his allegedly being concerned about Mr Vertue entering into similar contracts in the past on behalf of Anthem Holdings. If he truly was concerned, as he says he was, it would be reasonable to have expected him to pay close attention to the identity of contracting parties and not make the same mistake himself.
m)After the alleged transfer, Mr Henderson himself also signed a number of security documents on behalf of Anthem Holdings which are inconsistent with the alleged sale having taken place. At best for him, they show a significant degree of uncertainty.
• The March 2008 security documents which I have already
mentioned. They include references to “all wine owned by Anthem Holdings” and “all present and after acquired wine” owned by Anthem Holdings.

• On 7 May Mr Henderson signed an acceptance of a loan offer

from Secured Finance under which the security was expressed to include “first registered specific security interest over all wine owned by Anthem Holdings and/or Gibbston. To include specific first ranking charge of invoices relating to grapes sold ex 2008 harvest.”

On 16 May 2008 he also signed a commercial loan facility agreement which refers to a first ranking specific security agreement over “all wine owned by Anthem Wine Company Limited, Anthem Holdings Limited and Gibbston Downs Wines Limited.” It was signed by Mr Henderson on behalf of Anthem Wine Company and Anthem Holdings, but the place for signature on behalf of Gibbston Downs Wines has a line through it.
On 16 May he signed a specific security agreement whereby both Anthem Wine Company and Anthem Holdings (“the debtor”) granted a security interest over “all present and after acquired grapes, grapevines, and wine owned by the debtor...”
On 16 May he signed a deed of assignment of a chose in action in which both Anthem Wine Company and Anthem Holdings were described as “the vendor of certain grapes from the 2008 harvest...”
On 27 June 2008, Mr Henderson signed a commercial loan facility agreement whereby the security included “a first ranking specific security agreement over all wine owned by Anthem Wine Company Limited, Anthem Holdings Limited.”

n) His signing of a winemaking agreement in June on behalf of a non‑

existent Anthem company is also at odds with his claim about a sale

as well as being at odds with his professed concern about Mr Vertue’s conduct.
o)Although Mr Henderson’s account of the crucial October and December meetings was supported by Mr Bailey, the latter did not have any notes of the crucial meetings and did not appear to observe Mr Henderson taking notes.
p)The only written record of the Henderson/Bailey meetings other than Mr Henderson’s notes is inconsistent with his claim the transfer had taken place by 18 February 2008. Written instructions to Mr Bailey’s staff (which Mr Bailey said he checked at the time for accuracy) reflect uncertainty in May 2008 about the ownership of the wine stocks and suggest the stocks are yet to be transferred.
q)Anthem Wine Company did not start operating a bank account until October 2008.

In rejecting Mr Henderson’s evidence about the sale I have not overlooked that in April 2008 Mr Henderson did sign a contract with a winemaker on behalf of Anthem Wine Company.
However, later that same month he signed another winemaking agreement with a different service provider, this time on behalf of Anthem Holdings and Gibbston Downs Wines without any reference to Anthem Wine Company. Significantly, this latter document shows a handwritten correction by him in relation to the name of Gibbston Downs Wines that had been typed on the front page of the contract. He cannot therefore be said to have overlooked the identity of the contracting parties.
Both these April 2008 winemaking contracts relate to wine which is not part of this proceeding. The only 2008 wine which is part of the proceeding is the unbottled pinot noir wine held at Maude Wines.
As I have already mentioned, the contract for the making of this wine was made in June 2008. Mr Henderson signed that on behalf of a non-existent company: Anthem Estate Limited. He did not offer any explanation as to why he had done that.
I am satisfied on the evidence that between late-December and the date of the receivership, it was Anthem Holdings that continued to meet the cost of producing the wine, which must have included the cost of the 2008 vintage and the transportation of the pinot noir grapes to Maude Wines. In those circumstances, and given my finding there was never any sale to Anthem Wine Company, I consider the receivers’ case for a property interest based on Anthem Holdings’ right of possession to the wine once it was produced is made out in respect of the 2008 pinot noir, as well as the 2006 and 2007 vintages. Anthem Wine Company has no title to assert against that of Anthem Holdings.
I am also satisfied that by the time the wine was transformed into the state it was in as at the date of the receiver’s appointment, the security interest created by the general security agreement had attached.

Outcome of hearing

The receivers are entitled to declarations that the 2006, 2007 and 2008 vintages, as defined in the statement of claim, are the personal property of Anthem Holdings Limited. I make those declarations accordingly.
In respect of each of the three vintages I direct that the receivers are entitled to immediate possession of the wine or any proceeds representing its earlier disposal, and are entitled to manage, including sale of the wine, each of the vintages in accordance with their obligations under the Receiverships Act 1993 and the general security agreement by which they were appointed.
As regards costs, the receivers indicated that in the event they were successful, they would wish to apply for indemnity costs pursuant to the security agreement. In the event the parties are unable to agree on the issue of costs, Mr McAnally is to file submissions first, with Mr Forbes filing any submissions in reply within ten working days thereafter.

Solicitors:

Keegan Alexander, Auckland

Cousins & Associates, Christchurch (Counsel: A J Forbes QC, Christchurch)