Stalker v Duncan
[2020] NZHC 1484
•30 June 2020
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2018-412-000097
[2020] NZHC 1484
BETWEEN DOUGLAS BLAIR STALKER and PAMELA ROBYN STALKER
PlaintiffsAND
PHILLIP JAMES DUNCAN
Defendant
Hearing: 25-29 May 2020 Counsel:
B M Russell and M D W King for Plaintiffs M E Parker and E L Keeble for Defendant
Judgment:
30 June 2020
JUDGMENT OF OSBORNE J
This judgment was delivered by me on 30 June 2020 at 10.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
STALKER v DUNCAN [2020] NZHC 1484 [30 June 2020]
Table of Contents
Introduction[1]
The issues identified[4]
The Hampden farm[5]
The background facts
Details provided by Mr Duncan to his real estate agent[9]
The brochure advertisement[10]
Website advertisement[12]
The Stalkers’ farm inspections[17]
Stalkers’ offer of 15 May 2011[25]
The agreement for sale and purchase dated 6 July 2011[28]
Due diligence period[29]
The Stalkers’ subsequent use of Hampden farm [33]
The Stalkers’ discovery of discrepancies [62]
Effective hectares/effective area
The concept of effective area [75]
Calculation of effective hectares [91]
The grazeable/marginal land [94]
Paper roads [97]
Neighbouring land of Mr Nicolson [103]
Reversion of gorse and bush [111]
Margin of error [115]
Assumptions in Mr Shields’ evidence [118]
Wintered stock
The concept of wintered stock[120]
Stock wintered by Mr Duncan[128]
Proportionate allocation of stock to Home Block and Hampden farm[133]
Stock units
The concept of stock unit[145]
The oral discussions[146]
The stock units in fact carried[151]
Application of 70 tonnes’ superphosphate per year
Significance of the fertiliser representation[157]
The evidence of superphosphate application[160]
Reliance/inducement to enter the contract
Pleadings[170]
The evidence[172]
Inducement – the legal test[187]
Submissions[191]
Discussion[202]
Contributory negligence/lack of due diligence
Pleadings[207]
Defendant’s submissions[213]
Plaintiffs’ submissions[221]
The evidence[236]
Discussion[251]
Limitation period
The law [265] Discussion [278] Conclusion [287]
Damages
The claim[288]
The law[291]
Plaintiffs’ submissions[301]
Defendant’s submissions[304]
Discussion[313]
Interest[326]
Loss of rental[327]
Costs and disbursements [332]
Orders[333]
Introduction
[1] In 2011, the plaintiffs (the Stalkers) bought from the defendant (Mr Duncan) a farm property near Hampden in North Otago. They say that they discovered some seven years later (in the course of obtaining a valuation of the farm) that the property had been misrepresented to them at the time of sale. In particular, they say that Mr Duncan had over-represented the effective hectarage of the farm, its stock-carrying capacity and the previous application of fertiliser (superphosphate). They sue for damages.
[2] The Stalkers pleaded two causes of action. The first was for pre-contractual misrepresentation under s 35 Contract and Commercial Law Act 2017 (CCLA). The second was for breach of ss 9, 13 and 14 Fair Trading Act 1986 (FTA). For both causes of action, the Stalkers relied on the same underlying facts. For the Stalkers, Mr Russell at trial withdrew reliance on the FTA cause of action. He recognised that the FTA claim, in the circumstances of this case, added nothing to the misrepresentation claim.
[3] The case raises mainly factual issues but some legal issues. Evidence was provided by experts from the surveying, farm advisory and valuation disciplines.
The issues identified
[4]The following issues existed at the start of the trial:
(a) Issue A – representations:
Did Mr Duncan make the pleaded representations as to effective hectarage, wintered stock numbers, stock units and superphosphate application? (This issue fell away in closing when Mr Parker acknowledged that on the evidence the Court must find that the representations were made.)
(b) Issue B – meaning of representations:
What did the parties understand the representations to mean?
(c) Issue C – reliance:
Did the Stalkers rely on the representations – were they induced to enter the contract on the basis the representations were correct? If so, was the reliance reasonable?
(d) Issue D – misrepresentation:
Were the representations in fact misrepresentations? Did they prove to be incorrect?
(e) Issue E – damage:
Did the Stalkers suffer damage as a result of the misrepresentations?
(f) Issue F – measure of damage:
If so, what is the appropriate measure of damages? In particular, should the Court assess the damage at the date the cause of action accrued (recognised by both counsel, in the event that the breach were established, to be the date the Stalkers confirmed the contract as unconditional, namely 2 August 2011) or at the date of trial?
(g) Issue G – date of assessment of damage (interest or other additional
payment):
If 2 August 2011 is the date for assessment of damage, what further relief should be granted to the Stalkers whether by way of interest, lump sum or other under s 24 Interest on Money Claims Act 2016 (counsel agreeing that s 24 applies to this issue). In any event, have the Stalkers established additional damage in relation to recovery of lease rentals?
(h) Issue H – contributory negligence/lack of due diligence:
Did the Stalkers through their own negligence contribute to their loss (through a lack of due diligence or otherwise) so that s 3(1) Contributory Negligence Act 1947 applies to require reduction of the damages awarded and, if so, to what extent?
(i) Issue I – limitation period:
Does s 14 Limitation Act 2010 apply to preclude the Stalkers’ claim – in particular, ought the required elements reasonably to have been known to the plaintiffs more than three years before 30 October 2018 when the plaintiffs issued this proceeding? (Counsel agreed that s 14(1) Limitation Act is the limitation provision which applies in this case.)
The Hampden farm
[5] The Hampden farm (as it has been referred to for the purposes of this proceeding) lies east of Hampden town, with distant views over Moeraki Bay. It can be accessed from three roads (Easons, Pugh and Duncan), with most parts of the property (other than isolated western portions) having good access. It comprises
449.067 hectares.
[6] The land is a mix of easy, undulating land through to steeper ridges and gullies. As recognised (including by Mr Duncan’s valuer), there are extensive non-effective areas of gorse and native bush spread throughout the property. Pasture is mainly on the cultivated ridges. The farm has a significant measure of permanent fencing. It contains a number of basic improvements and an adequate stock water scheme.
[7] The defendant is Phillip James Duncan. Mr Duncan’s grandfather had purchased the farm in 1880. Mr Duncan took over the farm from his father in 2001. It was run as a sheep and beef farm, as suits the land.
[8] The Hampden farm, as sold to Douglas Blair Stalker and Pamela Robyn Stalker in 2011, had been farmed as part of the larger original Duncan farm. On the sale, Mr
Duncan retained what I will call the Home Block, an area of approximately 152 hectares, of which approximately 144 are effective hectares. The Home Block contained the single homestead on the original property.
The background facts
Details provided by Mr Duncan to his real estate agent
[9] In 2010, Mr Duncan engaged Barry Meikle, a real estate agent employed by Southern Wide Real Estate (Southern Wide) to list the Hampden farm for sale. Mr Duncan gave Mr Meikle the details and statistics relating to the farm which were included in two advertisements, one in the form of a brochure and one placed on Southern Wide’s website.
The brochure advertisement
[10]The front page of the brochure recorded:
LARGE SHEEP & BEEF BLOCK P.O.A.
• Approx 450ha (285ha effective)
• Healthy stock country
• Reliable rainfall area
• Handy to Hampden
• Potential for further development
• Woolshed, sheep and cattle yards
[11] A more detailed description of the Hampden farm was included on page two of the brochure, which included the following information:
Total Area: 450ha approx (285ha effective)
…
Fertiliser:Good fertiliser history. Soil tests available, 1500 tonne lime over 10 years, 70 tonne super per year
…
Wintered Stock: 1500 Ewes – 130% lambing 600 Hoggets
65–120 cows – average 90% calving
Website advertisement
[12]The website advertisement included the following information:
About the Property
Approx 450ha (285ha effective) of healthy stock country in a reliable rainfall area. Handy to Hampden there is potential for further development. Includes woolshed, sheep and cattle yards.
Features
…
Total Area 450ha approx
…
Present Condition (Areas 700 acres effective. 16 acres kale,
approx.) balance pasture. 50 acres 2yr old pasture.
Contour Description 10% flat, 70% rolling, 20% steep hill
…
FertiliserGood fertiliser history, soil tests available. 1500 tonne lime over 10 years, 70 tonne super per year.
…
Wintered Stock 1,500 ewes, 600 hoggets, 65 cows up to (Numbers Approx) 120 average
Production 130% lambing, 90% calving
…
[13] The Stalkers had been farmers in Southland. In 2006, they had sold their Tuatapere farm and invested the proceeds. Mr Stalker then worked managing a deer farm in Queenstown during a period when Mrs Stalker had an extended period of recovery from a serious illness. During that period, as they regularly passed through Moeraki for Mrs Stalker’s treatment, they came to like the area for its warmer climate
and views. The Stalkers decided to look for a new property in the Moeraki/Hampden area.
[14] The Stalkers saw the Southern Wide advertisement. They first contacted Mr Meikle in November 2010, and received a copy of the brochure, which they read. Mr Stalker printed out a copy of the website advertisement on which he was later to make a note (below at [19]).
[15]A visit to the farm was arranged for late November 2010.
[16] Around this time, the Stalkers had responded to an advertisement for another farm at Trotters Gorge. They inspected it but it did not suit their wishes – it was fully deer fenced (with consequential effect on the asking price) and it was very exposed to the prevailing north-easterly, making it less desirable for the purposes the Stalkers had in mind, farming Perendale sheep.
The Stalkers’ farm inspections
[17] On 29 November 2010, Mr Meikle drove the Stalkers along the three roads bounding the Hampden farm for approximately an hour.
[18] Mr Stalker’s impression was that the property had potential, with good natural shelter due to the native bush and gorse. There seemed to be plenty of grass and the property generally seemed reasonably maintained. He saw opportunities for development with further subdivisional re-fencing and better management. During the November 2010 inspection there were ewes, lambs, cows and calves on the property. Mr Meikle describes the inspection as having involved viewing “most of the effective areas”.
[19] The Stalkers arranged a second inspection. On 14 February 2011, Mr Meikle again took the Stalkers around the farm in his four-wheel drive. I return below to the Stalkers’ and Mr Meikle’s respective recollections of the 14 February visit. There is a degree of difference which the Court has to resolve. The Stalkers said they made a number of enquiries and sought answers on a number of subjects. Mr Stalker stated that the farm’s stock units were a vitally important factor for the Stalkers in
considering whether to make an offer. He stated that he and Mr Meikle discussed the stock units (by reference to the stock numbers) as being in the range of 2,500–2,800 and agreed upon the lower figure of 2,500. Mr Stalker referred to his copy of the advertisement on which he had handwritten the figure “2500”, a note which he stated he made at the time of his discussion with Mr Meikle. Mr Meikle, in the briefed evidence he gave, took issue with whether those enquiries were made, stating that he would have gone back to “Phil” (Mr Duncan) if there had been any queries or uncertainty expressed by the Stalkers. But in additional evidence in chief, Mr Meikle stated:
Q. … Do you recall discussing stock units with Mr Stalker?
A. I don’t. Certainly, you know, it was a long time ago. But I would assume we did discuss the subject. But I don’t recall ever being at 2800 on this property or 25, to me, would sound pretty generous.
Q. Do the ad and the brochure refer to stock units?
A. No, no. It’s not our company policy. Stock units are subjective for individual purchases and individual properties and stock types. So it’s a company policy that we refer to stock numbers at winter time, wintered stock. That’s our company policy.
[20] In cross-examination, Mr Meikle accepted that he would have discussed the stock units with the Stalkers. In further cross-examination, Mr Meikle stated: “Well I’d have given them a figure. I question the 2500. It’s not what I’d have worked out with my own calculations”.
[21] Following the February inspection, Mr Meikle made arrangements for the Stalkers to have a further inspection – on this occasion in the company of Mr Duncan.
[22] The Stalkers inspected the Hampden farm with Mr Duncan on 26 April 2011 on what Mr Stalker has described as an in-depth tour of the farm. The Stalkers spoke of the details of discussion with Mr Duncan during the inspection. They said that Mr Duncan assured them that the property was carrying 2,500 stock units. Mr Duncan stated that he did not remember (but he did not challenge) the Stalkers asking some of the questions on which they gave evidence. He nonetheless stated that he would have been happy to answer their questions. As discussed below (at [150]) I find that during
the April 2011 inspection Mr Duncan did give the Stalkers the responses of which they have given evidence.
[23] The 26 April visit completed the Stalkers’ three pre-contract inspections of the Hampden farm.
[24] I find that in the course of those inspections the Stalkers had asked Mr Duncan and his agent a range of questions to verify important details relating to the Hampden farm, including the effective hectares, the numbers of wintered stock by reference to ewes, hoggets and cows respectively, and (in the case of both Mr Meikle and Mr Duncan) the number of stock units the farm carried. Nothing in the answers or information provided by Mr Duncan or his agent would have given the Stalkers cause to doubt any of the information provided in the advertising. It was consistent with the advertising.
Stalkers’ offer of 15 May 2011
[25] Following the 26 April inspection, the Stalkers decided to make an offer to purchase the Hampden farm.
[26] By this time the Stalkers had formed a plan for the property. The proceeds which they still had invested with their bank from the sale of their previous property were earning only three per cent interest. Their plan was to secure a farm at a price which would give them a six per cent return on their investment. On the basis that the farm had 285 effective hectares and would support 2,500 stock units, the Stalkers calculated that they could stock the farm with 2,000 Perendale sheep as an easy-care breed for this type of country.
[27] With Mr Meikle’s assistance, the Stalkers on 15 May 2011 presented an offer to purchase the Hampden farm at $1,210,000. Mr Duncan did not accept that offer and a negotiating process began, which continued through June 2011.
The agreement for sale and purchase dated 6 July 2011
[28] In the event, the Stalkers decided to increase their offer to $1,350,000. The signed offer was presented by the Stalkers on the standard REINZ/ADLS form and, after negotiation of some additional conditionals, signed by both parties and dated 6 July 2011. Material provisions of the agreement included that:
(a)The possession/settlement date was 1 March 2012.
(b)The agreement was conditional upon the Stalkers arranging sufficient finance on terms and conditions suitable to them by 4 pm, 5 August 2011.
(c)There was to be $150,000 (interest free) vendor finance for a period of 12 months from the settlement date.
(d)The agreement was subject to the Stalkers completing due diligence on the property by 5 August 2011.
Due diligence period
[29] Within the due diligence period, the Stalkers pursued further information on two topics:
(a)Paper roads:
Mr Meikle had informed the Stalkers of the “paper road” status of two roads running through the property. The Stalkers wished to check the details in relation to those roads and in particular who was responsible for the upkeep and who had legal access. Mr Meikle recorded in his diary that Mr Stalker had contacted him on 13 July 2010 (one week after the agreement was entered into) for details on the roads. The Stalkers were satisfied with the information they obtained from that enquiry and nothing further turns on that in this case.
(b)Water rights:
The advertisement for the farm records that the farm had its own reliable pumped supply. On their second inspection of the farm (14 February 2011) with Mr Meikle, the Stalkers discussed at length with him the water intake and allocation for the farm. On 20 July 2011, Mrs Stalker checked with the Otago Regional Council that the water allocation for the property would transfer across to the Stalkers on purchase. Mrs Stalker was satisfied with the response and nothing further turns on this matter in this case. She advised Mr Meikle on the same day that the enquiry had been made.
[30] On 2 August 2011, the Stalkers’ solicitors confirmed the contract as unconditional.
[31] Both Mr and Mrs Stalker were cross-examined as to why they did not, by way of due diligence, take steps other than checking upon the roading and water situations. In particular, they were questioned as to a range of documents which they might have requested and a number of steps which they might have taken. I return below at [206] onwards to consider those steps which Mr Duncan alleges the Stalkers ought to have taken by way of due diligence. At this point, I focus on their explanations in relation to the three matters of effective hectarage, stock numbers and stock units. Both Mr and Mrs Stalker were consistent in their responses, namely that they had been provided through the statements made in the advertisements and the answers given to them in their discussions with Messrs Duncan and Meikle specific details which they had no cause to doubt. Mr Stalker in particular spoke of his previous experience on numerous occasions of buying and selling farm property in which the vendor’s statement of specific figures was accepted without other enquiries into supporting documentation or the like. Mr and Mrs Stalker both appeared frank and, when necessary, careful in their answers.
[32] When pressed in cross-examination as to whether, with hindsight, it would have been prudent to have sought further documentation or made further enquiries, both accepted in some measure that that may be so. But I am left in no doubt by their
evidence that they firmly believed that the details contained in the advertising and provided through repeated discussions with Mr Duncan and Mr Meikle were true and accurate. To the extent that they sought further confidence in that regard, they gained such confidence from the physical inspections of the property and the stock, in circumstances where such an inspection could not give a confident assessment of numbers. Mr Stalker explained that, when you stand in a particular paddock, you often cannot see over a ridge to the next. Both Mr and Mrs Stalker with their extensive backgrounds of farming, including sheep farming in particular, formed the view (with the sheep numbers having been represented) that there was plentiful grazing on the farm for those sheep numbers and that the farm was in “good heart”.
The Stalkers’ subsequent use of Hampden farm
[33] The Stalkers settled the purchase of Hampden farm on 1 March 2012. It transpired that they did not themselves go into physical possession as planned either with a mob of Perendales or at all.
[34] Years later, on 31 July 2018, they received a valuation from Graeme Isbister (the Isbister valuation), which identified the effective hectarage of the Hampden farm as being 200.4 and not the 285 advertised.
[35] It is the Stalkers’ case, in response to Mr Duncan’s Limitation Act pleading, that the way in which Hampden farm was operated over the period from settlement through to 31 July 2018 (when the Isbister valuation was received) meant that they could not reasonably have known that they had a cause of action against Mr Duncan based on misrepresentations.
[36]I therefore now identify the use to which the farm was put during that period.
[37] In late 2011, in the period before the settlement of the purchase, Mrs Stalker became unwell again, leaving the Stalkers to make a decision to lease the Hampden farm to a third party to allow Mrs Stalker’s health to improve.
[38] They retained as their agent for the intended leasing the same agent as they had dealt with on the purchase, namely Mr Meikle. Mr Meikle was to prepare an
advertisement and the Stalkers were to provide to him the detail that they considered should be included, including in relation to the term of the offered lease.
[39] The Stalkers discussed what detail to include. On 22 September 2011, Mrs Stalker faxed to Mr Meikle a guideline as to what the Stalkers felt should go into the advertisement but invited him to include anything else he thought should be added. The proposed duration of lease (to commence on 1 March 2012) was for a two-year term with a one-year right of renewal. Mr Stalker would offer himself to be available to manage any operation on an hourly rate. Mrs Stalker included as part of the proposed detail:
Lease 450 ha (285 effective) approx 2100 S.U.
[40] In identifying the 285 effective hectares, the Stalkers were adopting the figure that had come from Mr Duncan. Mr and Mrs Stalker in their evidence both impressed as careful, conscientious people who have a high regard for the reputation and reliability of the farming community amongst whom they live and with whom they have dealt through their careers. I am satisfied that, in being prepared to make the representation as to 285 effective hectares themselves, they firmly believed that to be true. This reinforces my earlier conclusion as to the reliance they had been placing on Mr Duncan’s representation of effective hectares.
[41] Mr and Mrs Stalker each gave evidence of discussion as to the stock unit figure (2,100) which was to be included in the lease advertisement. Their evidence was that there is a tendency amongst lessees to excessively graze leased properties. They did not want their property overgrazed. By selecting a figure of 2,100 stock units, they were seeking to give themselves some comfort in relation to any lessee’s operation of the farm. Their evidence in this regard was logical, informed and persuasive. I am satisfied that their suggestion to Mr Meikle of a 2,100 stock unit figure involved a deliberate understating of what they believed (from Mr Duncan) to have been the stocking rate of the property (equating to at least 2,500 stock units). Significantly, Mr Meikle also explained in his evidence that he understood that the Stalkers, in stating the 2,100 stock unit figure, were deliberately adopting a conservative figure, in keeping with a common approach in farm-leasing to provide the lessor some assurance that the farm will not be overgrazed by the lessee.
[42] Mr Meikle prepared a more detailed form of advertisement, attaching to it a form of deed of lease. The advertisement described the total area as “450ha approx (285ha effective)”. Beside “Stocking Rate”, the advertisement recorded:
Assessed at 7.5 SU per ha (3 SU per acre)
Leasee To Make Own Judgement
[43] Mr Meikle explained in his evidence that he would have converted Mrs Stalker’s 2,100 stock unit figure for the whole farm to 7.5 stock units per hectare by dividing those stock units (2,100) by effective hectarage (285). Being a real estate agent with experience of the farm sector in the Hampden/Moeraki region, the figure of 7.5 for this type of farm in this area evidently accorded with Mr Meikle’s view of a realistic stocking level.
[44] The Stalkers were able, before settlement of the purchase of Hampden farm, to secure a lessee. Bull-der-dash Pastoral Ltd (Bull-der-dash) entered into a lease for a term of two years with a right of one year’s renewal. The rental was $80,000 per annum plus GST. Mr Stalker explained in his evidence that he had calculated the rental on the basis of $280 per hectare and 285 effective hectares (totalling $79,800 rounded to $80,000). The schedule to the Bull-der-dash lease recorded:
Area: 449.067 Hectares approx (285ha approx effective)
[45] Mr Stalker became employed by Bull-der-dash working two to three hours per day on the Hampden farm at an hourly rate. His duties included shifting stock, loading and unloading stock and general farm duties. Bull-der-dash was operating five leased farms in the district, sending bull calves they had sourced to the leased farms to gain weight before being sent to the works.
[46] Mr Stalker stated that he was not aware of the number of stock that Bull-der- dash ran on the farm as cattle were arriving and leaving the farm at different times and it was difficult to keep track of them all. Jonathan Buchly was the sole director of Bull-der-dash. Mr Stalker identified Mr Buchly as the person whose responsibility it was to keep track of all the cattle, including the organising of transporting to and from farms. Mr Buchly gave evidence. He took issue with whether Mr Stalker had fully
described the nature of Mr Stalker’s tasks. But importantly in the present context, Mr Buchly accepted that it was he who made the arrangements for transporting stock on and off Hampden farm (while it was Mr Stalker who was there when the stock arrived and departed). Mr Buchly described Mr Stalker as knowing what stock was coming and going. He stated that Mr Stalker was the one given the trucking paperwork.
[47] Mr Stalker responded that the trucking paperwork did not always arrive at the time the stock arrived or departed. He stated that he knew roughly the total number of stock arriving and leaving but that it was difficult to keep track of it. As an example, he cited a situation in which 100 bulls might show up during the evening and 200 might leave the next day, stock arriving and departing from the farm “all the time”.
[48] On the evidence, it is clear that Mr Buchly was responsible for keeping track of numbers and made the decisions on stock movements. Mr Stalker’s role in that regard was essentially to manage the arrival and departure of the stock on and off the farm.
[49] Mr Duncan led no evidence from Mr Buchly (or anyone else) as to Bull-der- dash’s level of stocking of the farm during the lease. Mr Stalker stated that he had a view that Bull-der-dash was overgrazing the farm with stock at times. Mr Buchly accepted that Mr Stalker had raised overstocking with him in May 2013 – Mr Buchly stated that it was at a time when Bull-der-dash was trying to de-stock the property for the winter but the property the stock were to be moved to had not been destocked.
[50] Mr Stalker referred to a period when up to 75 animals died on the farm during a period of overgrazing. Mr Buchly stated in his evidence that he did not know the number of cattle that had died, stating that “from memory” some had fallen off bluffs and some had gone into the gorse and “never came back”.
[51] I am satisfied on the evidence that, having regard to the nature of Mr Stalker’s role during the Bull-der-dash lease and such matters as he observed, it would not have become reasonably apparent to him that any of the effective hectarage and stocking representations made at the time of purchase had been incorrect.
[52] That takes us through to 28 February 2014 when Bull-der-dash did not renew its lease.
[53] From 1 March 2014, the Stalkers decided to run Hampden farm on their own account. They took up an opportunity to graze heifers for Dairy Farm Partnerships Ltd (DFP), a collection of farms owned by Harvard University which had been managed by Mr Buchly. Over the next three years, they were to graze stock not only for DFP but also for PGG Wrightson, RD1, Progressive Livestock and other local farmers.
[54] The heifer/beef grazing operation which the Stalkers from that point ran was operated across two farms, being the Hampden farm and the Light House Hills farm, a property of approximately 340 hectares some eight kilometres by road from the Hampden farm. The Stalkers leased the latter property for three years from March 2014.
[55] As well as providing heifer/beef grazing to others, the Stalkers built up a mob of approximately 350 ewes. Mr Stalker stated that through this period they ran approximately 2,600–2,700 stock units on the Light House Hills farm and approximately 1,500 stock units on the Hampden farm. The two farms were run as a single operation. Records were not kept of the exact number of stock kept on either property at any particular time, Mr Stalker explaining that that would have been particularly complicated as the stock moved between both properties often and the grazing contracts were such that contract grazing cattle would be moved backwards and forwards from an owner’s property.
[56]Mr Stalker recorded:
Our grazing operation was fairly busy, and we knew roughly what stock were on each property at any given time (most mobs were between 100–150 cattle), but at no point were we alerted to the fact that our farm was seriously deficient in stock carrying capacity and effective hectares.
[57] In early 2017, the Stalkers’ son and daughter-in-law, Callum and Hanna Stalker, approached them about leasing the Hampden farm. Callum and Hanna were,
at the time, in a 50/50 share-milking operation. They proposed to use the Hampden farm as a run-off block for their dairy cows to graze on.
[58] The Stalkers entered into a lease with Callum and Hanna’s company, Bindagin Dairies Ltd (Bindagin), on 11 May 2017. During the Bindagin lease, the Hampden farm was farmed by Hanna and Callum.
[59] The Bindagin lease recorded that the property was 450 hectares (285 effective). As with the Bull-der-dash lease, the rental was $80,000 per annum plus GST. Under the lease, Bindagin took on responsibility for the annual application of both lime and superphosphate at agreed levels. Bindagin also agreed to pay 50 per cent ($2,500) towards the annual chemical cost of weed and gorse control.
[60] Mr Stalker stated that during the Bindagin lease a total of 91,000 litres of spray was applied through the farm’s spray equipment per annum, together with aerial gorse control (by helicopter).
[61] In February/March 2018, with the market improving for timber, the Stalkers harvested a six hectare block of trees on the farm. Mr Stalker stated that the gross return was some $160,000, returning some $120,000 before tax. He stated that the trees were replaced at a cost of some $10,000 for planting and spraying.
The Stalkers’ discovery of discrepancies
[62] In early 2018, Callum and Hanna advised the Stalkers that they were interested in purchasing the Hampden farm.
[63] Upon discussion with their accountant, the Stalkers decided to engage a valuer to value the farm as a starting point for discussion.
[64] They engaged an Oamaru valuer, Warwick Scott, to undertake the valuation. Mr Scott undertook the valuation based on, amongst other things, the information that had been provided in Mr Meikle’s (2011) advertising brochure. Mr Scott, on 2 May 2018, provided a market valuation of $2,650,000 (exclusive of GST if any) (the Scott valuation).
[65] At that point, Callum and Hanna engaged the services of Graeme Isbister, another Oamaru valuer, to provide his valuation. As part of Mr Isbister’s valuation exercise, Cameron Leckie (of Survey Waitaki) undertook a survey of the Hampden farm.
[66] Although Mr Leckie had originally been retained independently by the Stalkers’ son and daughter-in-law, Mr Leckie became the single expert called in this case on surveying issues. He has expertise in rural surveying, including in the survey of the effective hectarage of farms. He first completed a survey in this case in July 2018, by reference to aerial photography of the farm. (The defendant’s valuer, Mr Barron, and his farm advisory expert, Mr Shields, also had regard to aerial photography in relation to effective hectares – they referred to using maps on Property Guru and Google Earth (2011 and 2019).) For his part, Mr Leckie recognised that Google Earth is available but he had preferred other data bases and used the LINZ data base, with ortho-corrected aerial photography. Thereby he came to produce two maps:
(a)Map 701-FAR-001 – based on aerial photography sourced from the LINZ database and taken on 24 February 2014.
(b)Map 701-FAR-002 – based similarly but on photography taken on 31 March 2005.
Mr Leckie explained the pixel resolution of the photography he had used. He identified the spatial accuracy to be +/-three per cent when assessed against an onsite assessment and accurate physical survey.
[67] Mr Leckie found the LINZ maps to be the most relevant available. The Stalkers’ witnesses did not give evidence as to the accuracy of the maps they had referred to, where measurement is significant in this case. I prefer on the evidence, as the most reliable, the survey evidence of Mr Leckie utilising the LINZ database.
[68] On the basis of Map-701-FAR-001, Mr Leckie identified that the effective hectarage of the Hampden farm at July 2018 was 201.6 hectares. This was the information Mr Leckie provided to Mr Isbister for the purposes of Mr Isbister’s
valuation. Mr Isbister provided his valuation on 31 July 2018 (the Isbister valuation). He attached Mr Leckie’s survey plan and took into account the areas of effective and non-effective land. He valued the property at $2,181,500 (exclusive of GST if any).1
[69] By reason of Mr Leckie’s calculation of the effective hectarage of the Hampden farm, Mr Isbister was also asked to provide an assessment of the stock- carrying capacity of the farm. He advised the Stalkers that it was in fact capable of carrying only 1,500 stock units rather than 2,500 stock units.
[70] Mr Stalker stated that the Stalkers were devastated when they received Mr Leckie’s map and the Isbister valuation. Mrs Stalker did not in her evidence give any further detail as to her reaction, focusing on the period of the farm purchase. She stated however that she had read her husband’s brief of evidence and considered it to be true and correct.
[71] It was not suggested to Mr Stalker in cross-examination that his statement as to having been devastated on receipt of the Leckie map and the Isbister valuation was incorrect. I am satisfied on my assessment of the whole of the Stalkers’ evidence that they were indeed devastated upon receiving this information in early August 2018. I accept also that it was the first occasion on which they became aware that Mr Duncan’s representation as to effective hectarage and stock-carrying capacity may have been wrong.
[72] The Stalkers took legal advice, instructing Lane Neave as their solicitors. On 13 September 2018, Lane Neave wrote to Mr Duncan. They identified the details of the 2011 transaction and the associated advertising. They explained the circumstances in which valuations and a survey came to be prepared in July 2018. They attached copies of the Scott and Isbister valuations and the Leckie map (701-FAR-001). They quantified the Stalkers’ loss at $468,500 and calculated a further loss on the lease of
$27,416.66 (excluding GST as at 15 August 2018). Lane Neave demanded payment of $496,000.
1 The Scott and Isbister valuations were admitted in evidence for the purpose of establishing when and in what circumstances they were obtained. They have not been admitted as evidence of the truth of their contents, the two valuers in question not having been called as witnesses.
[73] Mr Duncan instructed Parker Cowan as his solicitors in relation to the demand. In a detailed response, Parker Cowan rejected the claim for five identified reasons:
(a)there were no misrepresentations;
(b)the Stalkers had a duty and a contractual obligation to conduct due diligence and failed to do so;
(c)the Stalkers caused or contributed to any loss in effective hectares;
(d)the Stalkers had suffered no loss; and
(e)the Stalkers’ claim was time-barred.
[74]On 30 October 2018, Lane Neave filed the Stalkers’ claim in this proceeding.
Effective hectares/effective area
The concept of effective area
[75] Mr Duncan provided to Mr Meikle the figure of 285 effective hectares for use in Mr Meikle’s advertising of the Hampden farm. Mr Duncan explained in evidence that he had calculated that figure by reference to the tonnages of superphosphate applied to the Hampden farm which he estimated as 70 tonnes per year. He also supplied that figure to Mr Meikle for inclusion in the advertisement. Accordingly, Mr Duncan’s “285 effective hectares” was calculated by him to represent the fertilised pasture areas on the farm.
[76] In cross-examination, when Mr Russell asked whether Mr Duncan would say that his 285 effective hectares figure was really a rough estimate based on what Mr Duncan thought the fertiliser records showed, Mr Duncan rejected the description of “rough estimate”, preferring “estimate”. I infer that what Mr Duncan meant by his evidence was that the 285 effective hectares was intended to be his careful estimate. Given the importance of effective hectares as described by most of the witnesses, I am satisfied that the Stalkers had no reason to believe that the 285 hectare figure was other than a careful estimate, based on Mr Duncan’s long knowledge of the farm.
[77] Similarly, when Mr Russell suggested to Mr Duncan that, even if the 285 figure was an approximation, it was meant to be close to the actual number of effective hectares, Mr Duncan stated that he believed it was.
[78] The concept of “effective hectares” is, on the evidence, commonly used amongst the farming community and those who advise and support it. Yet the term became the subject in this trial of what is at first blush a surprising degree of qualification. That said, there emerged by the end of the evidence a clear, core, commonly understood meaning of the term as used by these parties, but with some acceptance of a further qualification.
[79] In the event, the Stalkers through their expert farm advisor, Mr Glennie, were prepared at trial to accept the qualified approach for conclusion in the calculation of the actual effective hectarage. I am satisfied that, as a result of that concession, the exploration of possible variations in the meaning of “effective hectarage” lacks significance in relation to the issues which the Court must resolve.
[80] The useful starting point lies in Mr Duncan’s own use of the term in his advertisement, arrived at on the basis of calculating the number of hectares on the Hampden farm on which he spread superphosphate.
[81] After a neighbour of the Hampden farm, Phillip Nicolson, set out in his brief his understanding that “effective hectares” encompasses grazeable areas outside a farm’s fertilised pasture, the surveying witness called for the Stalkers, Mr Leckie, completed an on-farm inspection. Without adjusting his own previous calculation of the effective hectarage, he provided a further second survey plan (Map-701-FAR-002) and calculations as to additional grazeable land covered by the concepts identified by Mr Nicolson. Mr Leckie identified the additional areas as “marginal land”. Mr Leckie indicated in his further survey plan the precise survey points by which he had verified his conclusions.
[82] Mr Duncan chose not to call any witness from the surveying discipline. Mr Leckie’s evidence on surveying matters was therefore uncontradicted. He was an impressively detailed witness, clearly thoughtful and careful in reflecting on his initial
approach, and I accept his evidence as to a surveyor’s understanding of and approach to effective hectares.
[83] In the evidence of the various witnesses, there was support for the core concept of “effective hectarage” as identified by Mr Leckie (and underlying the basis of Mr Duncan’s own calculation). Mr Duncan’s farm advisory witness, Michael Shields, gave evidence that by way of due diligence the Stalkers ought to have called for Mr Duncan’s fertiliser records. For him to identify those as key records from which to extract a calculation (in the way Mr Duncan did, but based on his memory rather than the records) the inference is that the areas fertilised would provide verification of the effective hectarage calculation.
[84] I was referred also (by Mr Shields) to the website of Beef + Lamb New Zealand (the farmer-owned, industry organisation which represents New Zealand’s sheep and beef farmers) (Beef + Lamb). The Beef + Lamb website includes a “Benchmarking Tool” which contains what are identified as “the key performance indicators” for farm classes in a region. It enables farmers (and others involved in agri-business) to compare their farms. Effective area and stock units are identified as “physical indicators”, in other words indicators of performance derived from the physical nature of the farm.
[85] The website records: “For most sheep and beef farm performance analysis the Effective Farm Area is defined as the combined area of pasture and all forage and cash crops”.2
[86] The Beef + Lamb definition was cited by Mr Shields in support of a broader view of effective hectarage than I have identified. Mr Shields stated:
… it is apparent to me that the “effective” area determined by Survey Waitaki does not include grazeable gullies, by which I mean areas where stock will push into to graze, particularly sheep and beef cattle; in my view these gullies should be included in the effective area.
[87] Mr Leckie, whose survey Mr Shields was critiquing, was cross-examined in relation to the Beef + Lamb definition. The assumption in Mr Parker’s cross-
2 “Benchmarking Tool” Beef + Lamb New Zealand < of Mr Leckie was that the reference to “forage” in the Beef + Lamb definition imported into the concept of “effective hectares” those areas into which stock would push into to graze (or “forage”). The following exchange occurred in cross-examination:
Q.Where did you get the definition of effective areas that you have in your first brief that you rely upon?
A. There was some commentary on the Beef and Lamb website and documentation about that and it’s also a combination of that and my experience of mapping.
Q. See, I suggest to you that doesn’t reflect, for instance, how Beef and Lamb New Zealand approach effective areas. I suggest their approach is to say that effective areas are the combined area of pasture and all forage and cash crops. Now, I suggest to you that your definition of effective area in your first brief simply doesn’t reflect that and certainly doesn’t reflect forage and cash crops?
A. I disagree with that. Forage crops would be – form part of the open pasture land that would normally have fertilizer applied to it. So that would fall inside the definition of effective in my first brief.
Q. No, I didn’t say “Forage crops” I said, “Forage and cash crops.” So they’re saying pasture and/or forage and cash crops which suggests that that is something separate to pasture per se?
A. That would, yep.
Q.And you didn’t include that as part of your effective area definition did you?
A. Well there wasn’t cash crops to include. So I didn’t, no.
Q. But they’re areas into which animals may forage for grazing?
A. There are some.
Q. Yes. Have you always previously, in your work, excluded non-pasture from assessing the effective and non-effective areas of farms?
A. Yes.
[88] On the evidence adduced, I find no support in the Beef + Lamb definition for the proposition that its use of “effective area” is intended to include the “pushed into” areas to which Mr Shields referred. The second set of areas in the Beef + Lamb definition is “all forage and cash crops”. The natural meaning of those words is that the area taken up in the crops – be they intended for forage by animals on the farm or for sale off the farm as cash crops – is combined with the area of pasture to constitute
the “effective farm area”. If the definition had been intended to import areas of Mr Shields’ “grazeable land” (what Mr Leckie referred to as “marginal land”), one would have expected that concept to be identified specifically in some such words.
[89] Evidence was however given for Mr Duncan as to a broader view of “effective farm area”. Mr Nicolson explained the approach he had adopted as a farmer:
An effective area is an area where there is feed that stock will graze. This includes areas in native bush (some beneficial grazing) fringe area of gorse (quite a lot of benefit) as stock, particularly sheep and beef, will graze in those areas …
…
I know that some of the areas marked on the Stalkers’ map were effective areas while Phil [Duncan] had the farm due to my knowledge of the Hampden farm and I regularly used to see Phil’s stock grazing in there. From the air, and on the Stalkers’ map it might appear as heavy scrub or gorse, but it can provide limited grazing. These fringe areas can provide reasonable food as with years of cultivation and the mechanical clearing of scrub and gorse weeds there is some soil and fertility movement downhill into the fringe area.
[90] Mr Nicolson’s scrub and gorse areas (containing limited grazing) cannot reasonably be described as the “pasture” identified in the Beef + Lamb definition. But Mr Nicolson’s evidence as to Mr Duncan’s grazing practices was confirmed in Mr Duncan’s evidence. Mr Duncan identified that there were on the Hampden farm non-pasture (and non-crop) areas where at least some types of stock could and would enter to find grazeable material of some nutritional value.
Calculation of effective hectares
[91] Mr Leckie, upon his first survey plan (Map 7001-FAR-001), calculated the effective hectarage of the Hampden farm at the time of settlement to be 200.4 hectares (+/–three per cent). That was set out in detail in his initial brief of evidence. He was subsequently, in his reply brief, to revise his calculation in relation to that date to a figure of 212.4 hectares (+/–three per cent).
[92] In the meantime, Mr Duncan’s valuation witness, Mr Barron, provided through his brief of evidence an alternative calculation of effective hectarage. Starting with Mr Leckie’s initial survey evidence and calculations, Mr Barron suggested that a
further 32 hectares should be added to represent the effective hectarage as at 2012. That figure represented:
(a)six hectares – Mr Leckie having stated his calculation has a margin of error of +/–three per cent;
(b)10 hectares – Mr Barron estimating five per cent of the remaining land (10 hectares) to be “grazeable”;
(c)four hectares – Mr Barron assessing a reversion of gorse and bush during the Stalkers’ ownership;
(d)four hectares – Mr Barron assessing the grazeable land available on paper roads; and
(e)eight hectares – Mr Barron assessing the pasture located on neighbouring land but available to the Hampden farm.
Mr Barron therefore concluded that the Hampden farm had at the time of settlement 232 hectares, representing Mr Leckie’s 200.4 hectares plus Mr Barron’s 32 hectares. Mr Barron recognised that that was still 53 hectares less than the effective area as advertised by Mr Duncan.
[93] It was following the service of Mr Barron’s brief that Mr Leckie undertook a further on-site inspection and prepared his second survey plan, and adjusted his calculation to 212.4 hectares. The difference between Mr Leckie’s two calculations lay in his including a further 10 hectares of what Mr Barron and Mr Nicolson refer to as “grazeable” land and Mr Leckie refers to as “marginal” land.
The grazeable/marginal land
[94] Upon the basis of his further survey work and inspection, Mr Leckie concluded that the marginal land (outside his surveyed effective area boundary) represented 14.6 hectares of the Hampden farm. It is represented on a detailed plan produced by Mr Leckie. Mr Leckie then identified, following physical inspection of the farm, that 10
hectares out of the 14.6 hectares could be grazed, the balance of the “marginal land” being covered by vegetation that would prevent grazing. On the basis of the extended definition of “effective area” advanced for Mr Duncan in this case, Mr Leckie would therefore have included an additional 10 hectares in his calculation. I note that Mr Barron estimated the same additional area in his “grazeable land” calculation.
[95] While there was a suggestion in Mr Duncan’s evidence, particularly that of Mr Duncan himself and Mr Nicolson, that Mr Leckie’s calculations in relation to the “marginal land” may have understated the area, no alternative survey evidence was offered. Mr Barron’s assessment (as a valuer) accorded with Mr Leckie’s.
[96] On the basis of the concession made on behalf of the Stalkers, and Mr Leckie’s calculations which I accept, I find that the effective area of the Hampden farm as at settlement of their purchase in 2012 was 212.4 hectares when pasture, crop areas and marginal land are all taken into account.
Paper roads
[97] A further issue taken for Mr Duncan related to Mr Leckie’s exclusion from his calculation of effective hectarage of areas of “paper road”. It is common ground that the Hampden farm contains areas of paper road, that is unformed, legal road which is Crown land administered by the territorial authority. It is not legally part of the Hampden farm. The availability of the paper roads was raised by Mr Duncan’s valuer, Grant Barron, in his statement that: “The property enjoys additional grazing land derived from some 3.8 km of paper roads”.
[98]Mr Barron took the area covered by the paper roads to be four hectares.
[99] In his reply evidence, Mr Leckie noted that it was unclear how Mr Barron had estimated his stated area. Mr Leckie went on to state that he did not consider that paper roads should be included in the effective area of the farm. He referred to the fact that the paper roads represent Crown land administered by the local council and are not a part of the farm as sold. He also observed that (although not formally constructed as roads) they are used as roads on which the stock may be driven but without guarantee that they will continue to be able to do so.
[100] Mr Leckie stated that in his opinion it is neither appropriate nor normal practice to include grazing areas contained on paper roads, outside the title to a farm, in the effective area of the farm.
[101] Mr Duncan has not established a proper foundation for the inclusion of the paper roads within the effective hectarage of the property. There is no admissible evidence as to the area. Even in terms of Mr Duncan’s extended “grazeable” approach to effective hectarage, it is not established to what extent there is matter on the unformed roads which is grazeable, as against bare farm track. I tend to the conclusion (contrary to Mr Leckie’s opinion) that “effective hectarage” may aptly encompass “captured” areas of legal road where they have no distinct form and have merged into pasture. But Mr Duncan has not adduced that the paper roads on the Hampden farm are actually in pasture (rather than being formed and utilised as farm tracks).
[102] In relation to the Hampden farm, I conclude that Mr Leckie’s exclusion of the area of paper roads was in accordance with the concept of “effective hectares” – as used by the parties.
Neighbouring land of Mr Nicolson
[103] A further issue raised for Mr Duncan relates to a part of the neighbouring land owned by Mr Nicolson. The land is practicably inaccessible from Mr Nicolson’s farmed areas. It contains extensive native bush and gorse but has some pasture area. This is reinforced by evidence led from Mr Nicolson as to his having agreed with the Stalkers’ son that the latter may place a water tank on the land if he wished.
[104] Both Mr Duncan and Mr Nicolson gave evidence of the Duncan family having long enjoyed the use of the area in question. It was described as a “give and take” arrangement. Reference was made to Mr Nicolson having the use of some area of Duncan land, presumably on the same “give and take” basis, but that land was not identified in the evidence.
[105]Mr Barron raised the issue of this “give and take” land. He stated:
The property enjoys additional grazing land derived from … an area west of the property where the boundary fence encompasses an estimated 8 hectares
of cultivated paddocks which is owned by the neighbour. The boundary fence appears to be an estimated 40 years old and as such this extra grazing has been available for a similar period. While this land was not owned by the vendor, and cannot be sold or legally transferred, any intending purchaser noting these additional grazing areas would probably partly include these benefits in the price that they would pay for the freehold title areas.
[106] Mr Leckie, in his further surveying work, identified the land in question. He found the area that would constitute effective farm (if part of the Hampden farm) of
6.7 hectares.
[107] In Mr Leckie’s opinion, the land in question does not constitute effective area of the Stalkers’ farm for three reasons, namely that:
(a)the Stalkers do not own the land;
(b)the land was not included through either the advertising or the agreement for sale and purchase as part of the titles purchased by the Stalkers; and
(c)Mr Nicolson is legally entitled to exclude the Stalkers from the land, with no guarantee as to whether a purchaser from Mr Nicolson would continue the “give and take” arrangement.
[108] The focus is on the effective hectarage of the property, which is a subject matter of Mr Duncan’s representations. The representation was plainly a representation as to the effective hectarage of the Hampden farm. The fact that (in Mr Barron’s view) an intending purchaser would probably partly take these benefits into account in the price they would pay for the farm involves a different consideration to what the effective hectarage of the farm itself is. Mr Barron has confused two concepts. The give and take arrangement over Mr Nicolson’s land cannot be invoked by Mr Duncan as a basis for an increase in the effective hectarage of the farm itself.
[109] Furthermore, even with the assistance of Mr Leckie’s calculation of 6.7 effective hectares on Mr Nicolson’s land, Mr Duncan has not established the extent to which that is offset by Mr Nicolson’s use of any part of the Hampden farm land under
the “give and take” arrangement. It has not been established for Mr Duncan that there is any net benefit to the Hampden farm under the arrangement.
[110] For these reasons the availability of Mr Nicolson’s land is not appropriately brought into account as effective hectarage of the Hampden farm.
Reversion of gorse and bush
[111] Mr Barron calculated an additional four effective hectares upon the basis that there had been a reversion of gorse following sale. Mr Barron, on his evidence, did so by reference to the Google Earth imagery which he had utilised and his on-site inspection. He did not exhibit or speak to the relevant images. Nor was photographic evidence produced. His evidence had support from other witnesses for Mr Duncan, including Mr Duncan himself. Mr Duncan stated, in relation to gorse, that the farm is nowhere near as tidy as it was when the Stalkers took over. He stated that the Stalkers had “lost ground all around the plough-lines”. He referred to “one area” of about 70- 80 acres where the grazing would have been almost halved under the Stalkers. In cross-examination, Mr Duncan rejected the proposition that any roadside assessment he had made was incorrect. Mr Duncan stated, in relation to control of gorse, that Mr Stalker had only started to control the gorse as far as he could see properly in the last two years or so, with “not a lot done for a number of years”.
[112] The Stalkers’ evidence of gorse control was that they had been applying approximately 91,000 litres a years in mixed spray, together with using external providers (including aerial spraying) for particular areas of the farm. Mr Stalker produced his weed and pest control records (as well as his fertiliser records) for all years 2012–2018. Those were not the subject of cross-examination.
[113] Mr Stalker’s evidence was supported by Mr Leckie’s evidence in reply to Mr Duncan. Mr Leckie, based both on his LINZ-data base material and on his onsite inspection did not see sufficient evidence to conclude that the Stalkers had lost ground to gorse. He referred particularly to not having seen gorse reversion over the plough- lines which he described as “reasonably distinct and clear”. Photographs were exhibited of the plough-lines which indeed appear distinct and clear. Mr Leckie identified the Stalkers’ gorse management plan as relevant, noting that they sprayed
gorse in the same three-yearly cycle which Mr Duncan stated he adopted. Mr Leckie concluded that the Stalkers have maintained the effective area of their farm and have controlled gorse appropriately.
[114] On the evidence, I conclude that the survey evidence of Mr Leckie is the most reliable as to the distinction between what was effective and ineffective land both at the time of sale and at the time approaching trial. The evidence does not establish that there has been a material reversion to gorse or bush.
Margin of error
[115] Mr Leckie in his evidence properly identified the margin of error in his calculations (first of 200.4 effective hectares and secondly of 212.4 effective hectares). As his first adjustment to Mr Leckie’s calculation, Mr Barron would have the Court treat the margin of error as requiring a three per cent (six hectare) uplift in effective hectarage.
[116] In his reply evidence, Mr Leckie observed that if the Stalkers were to adopt the same rationale, then six hectares should have been reduced from the effective area calculation.
[117] I am satisfied on the basis of Mr Leckie’s evidence that his calculations reflect what is probable. Adjustment is not required for the margin of error.
Assumptions in Mr Shields’ evidence
[118] I add this in relation to what I find to be the error in Mr Duncan’s represented figure of 285 effective hectares. It is highlighted when contrasted with the calculations of the experts called. Mr Duncan stated in his evidence that he had calculated the 285 hectares from the fertiliser spread on the Hampden farm. In other words, the 285 hectares represented Mr Duncan’s calculation of fertilised pasture, without accounting for possible grazing of gullies and unfertilised (but grazeable) margins. That is the way the Stalkers (and indeed, later, Mr Leckie) understood Mr Duncan to have used the term. I find there to have been no misunderstanding between the parties as to the nature of pasture to which the “285 effective hectares” referred.
[119] On the best scenario for Mr Duncan, Mr Shields now suggests that one might justify the 285 hectare figure by starting from his and Mr Barron’s accumulated figure of 232 hectares (above at [92]) and to then assume that the 53 hectare difference (285 less 232) comprises grazeable gullies. In other words, the 53 hectares which Mr Barron did not think appropriate to take into account (he having assessed the “grazeable” areas at 10 hectares) is taken into account by Mr Shields to justify the stated 285 hectares. Yet the 53 hectares which Mr Shields derived as the “grazeable gullies” are not arrived at by an inspection, survey or other reliable process. They simply constitute a mathematical exercise which assumes some overall relevance of the quoted 285 hectare figure. Significantly, Mr Duncan’s own valuation witness, Mr Barron, with experience of taking into account effective hectarage, was firm in concluding that it was appropriate to use either 220 hectares or 210 hectares in the valuation exercise in order to reflect the fair market value of the property.
Wintered stock
The concept of wintered stock
[120] Mr Duncan’s advertisements contained representations as to the number of wintered stock on the Hampden farm. They are set out as statements of fact. Counsel for Mr Duncan cross-examined the Stalkers by reference to the use of the note “Numbers Approx” which appeared alongside the wintered stock numbers in the website advertisement. That observed, the brochure advertisement which Mr Meikle provided to the Stalkers contained no such qualification. I do not find that the representation was reasonably to be understood as being an exact reference to numbers. The numbers are self-evidently unlikely to be exact numbers. Mr Duncan stated that he had worked out the wintered stock numbers “on an average basis”. He stated that in dry years, he would not run that much stock and in better years, sometimes more. In other words, the numbers he gave to Mr Meikle were what they appeared to be, namely average numbers. The advertised figures were reasonably to be understood as meaning that they represented figures close to actual historical averages. Such is reinforced by the fact that where there had been a significant variation, namely in relation to cows, the advertisement stated the range (65–120) rather than a single number.
[121] Mr Meikle, Mr Duncan’s agent, explained that his company’s policy in advertising property was to avoid using stock unit calculations (which he and other witnesses view as involving subjective judgement) in favour of actual numbers of stock wintered. He explained that purchasers are then able to make their own calculations of stock units.
[122] Mr Duncan confirmed that he ran the Hampden farm on a capital stock basis. It is clear that the Stalkers understood that and understood the concept. For instance, when Mrs Stalker was cross-examined on the basis that the expression “wintered stock numbers approx” in Mr Duncan’s advertising did not have anything to do with carrying capacity, Mrs Stalker replied: “Well, your wintered stock is your carrying capacity”.
[123]She went on to explain:
Winter stock is your, wintered stock is your capital stock. It is your stock that you breed from and it does not leave your farm. That’s why it was classed as wintered stock.
[124] The evidence establishes that, following Mr Duncan’s advertising of the farm for sale and through the parties’ subsequent discussions, both Mr Duncan and the Stalkers shared a common understanding of the concept of “wintered stock”. It was a reference to the capital stock that remained on the Hampden farm (under Mr Duncan’s ownership) throughout the year. That was the basis on which Mr Duncan ran the Hampden farm. I find there was no confusion in the mind of any of the three as to the meaning of the term as it had been used in the advertising and was used in their discussions. The advertisement meant (and was intended to mean) that the farm was wintering 1,500 ewes, 600 hoggets and between 65–120 cows each year.
[125] I find further that the figures represented by Mr Duncan implied that there would be additional stock (sheep) on the Hampden farm at the same time. In his calculations of stock units, Mr Harvey allowed for an additional 20 sheep. He explained that allowance by reference to the number of additional sheep, such as rams, which would be standardly carried in relation to a mob of 1,500 ewes.
[126] The representations as to wintered stock are not properly to be viewed in isolation. Mr Duncan’s and Mr Meikle’s marketing of the property to the Stalkers involved the revisiting of the stock-carrying capacity as Mr Stalker in particular obtained confirmation of details. Mr Stalker’s enquiries as to carrying capacity had a specific focus on stock units, by extrapolation from the wintered stock numbers – as I will come to, that was a predictable, farmer’s method of focusing on the farm’s carrying capacity which can also be represented by wintered numbers (as preferred by Mr Meikle and his company).
[127] I find that the Stalkers have established, as pleaded, that Mr Duncan both in writing and orally represented that the farm was wintering 1,500 ewes, 600 hoggets and between 65–120 cows each year. The statements were plainly made as statements of fact.3 The statements would have been reasonably understood as conveying to a purchaser information on the farm’s (then) carrying capacity. As observed by Fitzgerald J in Shabor Ltd v Graham, in which there was a representation as to a farm wintering 7,500 plus stock units with capacity for more:4
The Property’s carrying capacity at some undefined point in the past, or at some undefined point in the future, would have been meaningless information to a prospective purchaser.
Stock wintered by Mr Duncan
[128] Mr Duncan’s stock records from the periods both before and after the sale of the Hampden farm were discovered and were analysed by Mr Glennie. His arithmetic was not questioned.
[129] To place Mr Duncan’s stock levels in context, it is necessary to refer to the Home Block which was farmed in conjunction with the Hampden farm before the settlement of the Hampden farm sale (on 1 March 2012). The evidence is that Mr Duncan’s Home Block comprised 152 hectares. Mr Stalker, who knows the land in question from roadside viewing, stated that he believed it was likely that the Home Block had 95 per cent effective hectares. Mr Glennie, who had also viewed the Home
3 See Bisset v Wilkinson [1927] AC 177 (PC) at 183–184; and Shabor Ltd v Graham [2020] NZHC 507 at [61].
4 Shabor Ltd v Graham, above n 3, at [61].
Block from the road, viewed it as “pretty much paddock country” and adopted the assessment of 95 per cent effective.
[130] Although the proportion of the Home Block’s effective hectares was of significance to calculations to be done in relation to stock levels and fertiliser application, there was no evidence lead for Mr Duncan as to a different calculation of the Home Block’s effective hectares. However, in cross-examination, Mr Duncan stated that he would say that the effective hectarage of the Home Block was “probably 80, 85 at max, probably close to 80” (then confirming that he was referring to percentages).
[131] The two sets of evidence support two possibilities. On Mr Duncan’s approach (if I adopt 82.5 per cent as the mid-point) his Home Block contains approximately 125 hectares. On the Stalkers’ evidence (at 95 per cent), it would contain approximately 144 effective hectares. For the purpose of considering the next relevant aspects of evidence, the difference between the 125 and 144 figures assumes no significance. Had it been necessary to reach a view on the reliability of evidence, I would have found having regard to other unreliable estimates provided by Mr Duncan that his 80– 85 per cent estimate was likely to be significantly below the actual percentage.
[132] In the event, I now move to identify the proportions of effective hectarage in Mr Duncan’s pre-sale situation. Given that I have found the Hampden farm to contain
212.4 effective hectares, the Home Block, in Mr Duncan’s pre-sale situation, contained either 40 per cent (using the Stalkers’ Home Block evidence) or 37 per cent (using Mr Duncan’s mid-point assessment).
Proportionate allocation of stock to Home Block and Hampden farm
[133] Mr Glennie analysed Mr Duncan’s discovered records for 30 June 2009 to 30 June 2013 (in other words, around mid-winter in each of the five years). Mr Duncan’s records are for his entire farming operation across both the Home Block and (before its sale) the Hampden farm. The records do not identify stock held on one property or the other.
[134] Mr Glennie produced a table showing Mr Duncan’s total stock carried, which is now set out as Table 1:
Table 1
2009 2010 2011 2012 2013 Ewes 1862 1890 1832 1058 1230 Hoggets 420 590 534 330 250 Cattle 89 87 81 9 15
[135] By a process of deduction, Mr Glennie then provided a table as to the level by which Mr Duncan’s carried stock numbers reduced in the period following the sale of the Hampden farm, which I reproduce as Table 2:
Table 2
2012 2013 Ewes 774 602 Hoggets 204 284
[136] These figures indicated to Mr Glennie that at the time the Hampden farm was sold to the Stalkers, it was carrying on average 700 ewes, 250 hoggets and 69 cattle. Mr Glennie noted the difference between those numbers and Mr Duncan’s advertised figures, with only the cattle (average 69) being within their advertised range. Mr Shields, the farm advisory expert called by Mr Duncan, did not provide any comment on Mr Glennie’s calculations. It appeared from his evidence that he was not briefed to critique Mr Glennie’s calculations as to the stock that had been in fact carried by Mr Duncan. Rather, he was instructed to carry out farm modelling to indicate whether the advertised number of stock would have been able to be wintered on the Hampden farm in 2009.
[137] Nor did Mr Duncan respond in his evidence in chief to Mr Glennie’s calculations. He did explain in his evidence that there were only 69 or so cows on the Hampden farm at the time of sale (as against the 130 cows the farm had carried in some years) because he had been culling out old cows and not replacing them in anticipation of the sale.
[138] Mr Russell cross-examined Mr Duncan as to the numbers analysed by Mr Glennie in each year. He confirmed that until the sale the numbers analysed represented his stock numbers held on both properties at 30 June 2009, 2010 and 2011.
[139] Mr Russell then asked Mr Duncan to look at the accounts for the years ended 30 June 2012 and 30 June 2013. This exchange occurred:
Q.Those will show the stock numbers that you had on the land that you held after the sale, in other words they will show the stock records for the home block only. Do you agree with that?
A. Yes, ‘cos I’ve kept extra stock.
…
A. Yes and why they look high is because I’ve just said I get extra stock units on my home block which I live on to try to make a buck out of them, to keep them for a while. So I’ve got nothing like that on the Hampden Farm now and I always believed it to be every blade of grass there should be a sheep. That was a good season if sheep or a cattle beast eating it to try to make money.
[140] Mr Russell then referred to Mr Glennie’s conclusion that at the time of sale, the Hampden farm was actually carrying on average more like 700 ewes, 250 hoggets and 69 cattle. Mr Duncan agreed with Mr Glennie’s conclusion as to the cattle number but disagreed on the numbers for ewes and hoggets.
[141]Mr Russell continued in relation to Mr Glennie’s conclusion:
Q.He says, “Not 600 hoggets, more like 250 hoggets.” Do you accept that he might be right about that too?
A. Well I can’t remember now when I dropped my hoggets number back.
…
A.I can’t remember my hogget numbers and I wasn’t running many stock units down on my home block when I sold the farm and I was taking grass crops off it instead of ending up with sheep or cattle.
[142] It is difficult if not impossible to conclude from the imprecise evidence of numbers provided by Mr Duncan to what extent the logical, mathematical exercise undertaken by Mr Glennie has room for error. I take into account that the key events occurred some eight years before Mr Duncan was put on notice of a claim. But there has been no explanation given of Mr Duncan’s failure in the period leading up to trial to undertake in his evidence his best analysis of figures which might be contrary to those of Mr Glennie. Mr Duncan’s imprecision on matters generally and his evident preference for estimation rather than analysis must count against him in the weight the Court attaches to his answers when it comes to matters of specific detail.
[143] I conclude that Mr Glennie’s analysis, with the logic it involves based on Mr Duncan’s own special purpose financial reports, provides a close approximation of the stock numbers carried at the time of sale.
[144] Even were one to assume that Mr Duncan, in the first season following the sale of the Hampden farm, carried for a period on the Home Block some 20 per cent more stock than usually carried (representing stock that had been transferred from the Hampden farm), that still indicates that Mr Duncan’s advertised Hampden farm figures would have been overstated. To take account of a possible 20 per cent increase of Home Block numbers after the sale, I have revisited Mr Glennie’s calculated average of 700 ewes on the Hampden farm in 2011. If adjusted for the “20 per cent factor”, Hampden farm would have been carrying 926 ewes in 2011. The difference between that figure (926) and the advertised 1,500 ewes means that the shortfall, although reduced, remains substantial.
Stock units
The concept of stock unit
[145] The parties agreed upon the definition of the term “stock unit” for the purposes of this trial in these terms:
The standard accepted measure of a “stock unit” is one breeding ewe with one lamb. A Stock Unit will eat 550 kilograms of dry matter per year. Thus, to carry one Stock Unit, and excluding the use of any supplementary feed, a property would need to grow at least 550 kilograms of dry matter per year.
The oral discussions
[146] Consistently with the expectation identified by a number of the expert witnesses called, Mr Stalker stated that the stock units the farm was carrying was a vitally important factor for the Stalkers in considering whether to make an offer for the Hampden farm. Mr Stalker stated (above at [19]) that his first discussion regarding stock units had been with Mr Meikle when a range of 2,500 to 2,800 stock units was calculated (by reference to the stock numbers which Mr Duncan had given Mr Meikle for advertising). Mr Stalker’s evidence was that he and Mr Meikle then settled on the lower figure of 2,500 stock units. While Mr Meikle, in his initial evidence, appeared to question whether that conversation had occurred, he accepted in cross-examination that he would have given the Stalkers a figure. Because he recalled a figure of 2,300 stock units as flowing from the stock numbers of the advertisement, he expressed doubt as to whether 2,500 was the figure he had given the Stalkers.
[147] Mr Stalker’s evidence was that, on the third farm visit, Mr Duncan also reassured the Stalkers that the property was carrying 2,500 stock units. As noted above (at [22]), Mr Duncan stated frankly that he could not remember if the Stalkers had asked how he ran the farm or about stock units. That said, he stated that if asked, he would have been happy to answer their questions.
[148] Other evidence I heard as to calculations of the stock units on the Hampden farm is relevant to my determination of whether the figure of 2,500 stock units was discussed in the Stalkers’ meetings with Messrs Meikle and Duncan. Mr Shields, Mr Duncan’s farm advisory expert, assessed the wintered stock numbers (ewes, hoggets and cows) to equate to 2,880 stock units (adopting 1.2 stock units for (1,500) ewes,
0.9 for (600) hoggets, and 6 for (90) cows). The Stalkers’ farm advisory expert, Mr Glennie, calculated the advertised wintered stock to equate to a range of 2,595 stock units to 2,925 stock units (adopting 1.15 stock units for ewes, 0.8 for hoggets and 6 for cows). The range of total stock units covered the lowest number of advertised cows (65) up to the highest number (120).
[149] The figures adopted by the experts reflect the degree of subjectivity and judgement involved in any stock unit assessment. The Beef + Lamb benchmarking tool provides figures of one stock unit for ewes, 0.7 for hoggets and 5.5 for mixed aged cows. These figures serve to indicate how farmers assessing stock units might arrive at a figure of 2,500, just below the bottom range of the two experts. What the evidence of both Mr Leckie and Mr Glennie indicated is that the calculations of which Mr Stalker spoke, in relating his discussion with Mr Meikle, are in keeping with the figures that experienced farmers might have been expected to calculate based on the advertised wintered stock.
[150] I find that, in addition to the representations contained in the written advertising material, Mr Duncan (both personally and through his agent, Mr Meikle) orally represented to the Stalkers in their discussions that the Hampden farm was then carrying 2,500 stock units.
The stock units in fact carried
[151] The Stalkers’ pleading is that Mr Meikle, on the Stalkers’ second farm visit, confirmed that the farm carried 2,500 stock units. I found on the evidence that Mr Duncan on the third visit also reassured the Stalkers that the property was carrying 2,500 stock units.
[152] In the way the discussions took place, with those relating the stock units to the numbers of stock actually being carried, it is clear that the subject-matter was the stock units in fact being carried rather than any other modelling or calculation as to the farm’s potential capacity.
[153] Given that, as I have found, the actual stock numbers carried by Mr Duncan on the Hampden farm were greatly overstated, it follows that the stock unit figures extrapolated from the stock numbers will have been similarly overstated.
[154] Mr Glennie provided the calculation of stock units based on his calculation of actual stock numbers. Mr Glennie’s calculations are reflected in Table 3:
Table 3
Animal Stock units Number Total stock units Ewe 1.15 700 805 Hogget 0.8 250 200 Cows 6 69 414 TOTAL 1,419
[155] Mr Shields, for Mr Duncan, slightly differed from Mr Glennie in the stock unit figures he adopted for ewes and hoggets. The application of Mr Shields’ stock unit figures to the actual stock numbers calculated by Mr Glennie can be represented in the following Table 4:
Table 4
Animal Stock units Number Total stock units Ewe 1.2 700 840 Hogget 0.9 250 225 Cows 6 69 414 TOTAL 1,479
[156] Accordingly, whether the stock unit conversion ratios of Mr Glennie or Mr Shields are adopted, the stock units represented by Mr Duncan and his agent greatly exceed the stock units which were being carried at the time of the pre-sale discussions. The represented 2,500 stock units constituted misrepresentations. Both Mr Glennie and Mr Shields provided the Court with alternative stock unit calculations in order to demonstrate, without reference to actual stock carried, their opinions as to the stock unit capacity of the Hampden farm having regard to all its characteristics. I find it unnecessary to analyse that evidence or to determine what stock unit capacity the evidence establishes as a matter of probability. The material misrepresentation related to the stock units the farm was in fact carrying, not some other figure which it was capable or may have been capable of carrying.
Application of 70 tonnes’ superphosphate per year
Significance of the fertiliser representation
[157] Both the website advertisement and the brochure advertisement contained the statement:
Fertiliser:Good fertiliser history. Soil tests available, 1500 tonne lime over 10 years, 70 tonnes super per year
[158] Such was plainly a representation that 70 tonnes of superphosphate had been applied annually to the Hampden farm for some period up to the time of the advertisement.
[159] The significance of this representation as to the application of superphosphate is two-fold. It first provides information on a very significant indicator of likely soil fertility. Secondly, precisely because Mr Duncan had adopted the common route of arriving at an effective hectare figure by reference to the amount of fertiliser spread, it was likely to be viewed as providing support for the wintered stock figures represented in the advertisement.
[261] Mr Shields, on the other hand, in the supplementary evidence he filed late in order to deal with due diligence, opined that a prudent purchaser when conducting due diligence would have included amongst the steps they took the obtaining of as many records as possible, including fertiliser records. He however did not identify the obtaining of a pre-purchase survey as a normal step taken in farm purchases. Rather, he stated that “on occasions the use of paddock maps or fertiliser plan maps can be a useful tool”.
[262] Given the significance of the history of the fertiliser application on the Hampden farm, in the context of the Stalkers’ viewing of the effective hectarage and the stock-carrying capacity of the farm as key factors in their purchase, I find that their not obtaining Mr Duncan’s records of fertiliser application did involve a departure from the standard of behaviour to be expected of ordinary prudent farm purchasers. That is a finding on the facts of this particular case. That said, Mr Duncan has not established there was a similar departure from that standard of behaviour through not obtaining a pre-purchase survey.
[263] The last step in assessing the contributory negligence is to determine to what extent the Stalkers’ actions or inactions contributed to their damage. I find that the contribution was at a very modest level, having regard to the clarity of Mr Duncan’s and Mr Meikle’s representations and the repeated assurances which did not reasonably cause the Stalkers doubt. That said, in assessing a level of contributory negligence I must also have regard to the fact that there is no certainty that the fertiliser records produced by Mr Duncan would reasonably have led the Stalkers to conclude that either the effective hectarage or the stock-carrying capacity of Hampden farm had been incorrectly stated. As this case has demonstrated, it is sometimes feasible for those who have misrepresented matters to proffer detailed explanations as to why there is no misrepresentation at all.
[264] The appropriate assessment of the Stalkers’ contribution is, in my judgement, 10 per cent.
Limitation period
The law
[265] As recognised by both counsel, the limitation period for the Stalkers’ claim is governed by s 14 Limitation Act. The need to apply s 14 of the Act arises by reason of the provisions of s 11.
[266] The Stalkers accept that they commence this proceeding outside the claim’s primary period, being six years after the date of the Act or omission on which their claim is based.29
[267] The Stalkers contend that by reason of s 11(3) of the Act, Mr Duncan does not have a limitation defence because the claim was brought within the claim’s late knowledge period, being three years after the late knowledge date.
[268]Section 14 of the Act defines the “late knowledge date”:
14 Late knowledge date (when claimant has late knowledge) defined
(1)A claim’s late knowledge date is the date (after the close of the start date of the claim’s primary period) on which the claimant gained knowledge (or, if earlier, the date on which the claimant ought reasonably to have gained knowledge) of all of the following facts:
(a)the fact that the act or omission on which the claim is based had occurred:
(b)the fact that the act or omission on which the claim is based was attributable (wholly or in part) to, or involved, the defendant:
(c)if the defendant’s liability or alleged liability is dependent on the claimant suffering damage or loss, the fact that the claimant had suffered damage or loss:
(d)if the defendant’s liability or alleged liability is dependent on the claimant not having consented to the act or omission on which the claim is based, the fact that the claimant did not consent to that act or omission:
(e)if the defendant’s liability or alleged liability is dependent on the act or omission on which the claim is based having been induced by fraud or, as the case may be, by a mistaken belief,
29 Limitation Act 2010, s 11(1).
the fact that the act or omission on which the claim is based is one that was induced by fraud or, as the case may be, by a mistaken belief.
(2)A claimant does not have late knowledge of a claim unless the claimant proves that, at the close of the start date of the claim’s primary period, the claimant neither knew, nor ought reasonably to have known, all of the facts specified in subsection (1)(a) to (e).
(3)The fact that a claimant did not know (or had not gained knowledge), nor ought reasonably to have known (or to have gained knowledge), of a particular fact may be attributable to causes that are or include fraud or a mistake of fact or law (other than a mistake of law as to the effect of this Act).
[269] Accordingly, the Stalkers bear the onus of proving (as summarised by Mr Russell) that they could not reasonably have gained knowledge of the relevant facts prior to the late knowledge date.
[270] Here, where the claim was commenced on 30 October 2018, the Stalkers will defeat the limitation defence if they establish a late knowledge date no earlier than 30 October 2015.
[271] The concept of “gaining knowledge” under s 14(1) of the Act is straightforward. It is equivalent to “finding out” or “discovering”.
[272] The Supreme Court in Commerce Commission v Carter Holt Harvey Ltd considered the then version of the related late knowledge provision in s 43(5) FTA.30 That section permitted an application to be brought more than three years after the date of loss or damage if the loss or damage was “discovered or reasonably to have been discovered” at a later date.
[273] Section 14 Limitation Act imports parallel considerations of reasonable discoverability.
[274] The Supreme Court in Carter Holt Harvey, when considering the FTA provisions, drew the distinction between mere possibilities and near certainties. Tipping J stated:31
30 Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379.
31 At [31].
Time should not start running when past loss is just a mere possibility or something that could well have happened. Nor should the commencement of the three years be deferred until past loss is a near certainty. Likelihood of past loss in the sense that it is more probable than not strikes an appropriate balance between the competing interests in legislation the principal purpose of which is consumer protection.
These observations are equally applicable to the late knowledge provisions in s 14 Limitation Act.
[275] The test is not an abstract test which ignores a plaintiff’s characteristics and situation. Speaking for the majority in Carter Holt Harvey, Tipping J stated: “The Court will then have to consider whether a reasonable person, situated as the applicant was, ought to have known that loss had occurred”. 32
[276] For the Stalkers, Mr Russell submitted that the circumstances which Associate Judge Bell dealt with in Renie Gibson Family Trustee (2016) Ltd v Westpac Banking Corporation are of relevance here.33 The Court in that case had to determine whether a reasonable person in Ms Gibson’s position would have known by a given date that the plaintiff’s losses were caused by the misleading conduct of their bank. Associate Judge Bell stated:34
The test is not what a judge would have known. While I might have some idea what I would have understood, there is no evidence to say what a reasonable dairy farmer with limited understanding or experience of sophisticated financial transactions would have known. It would be dangerous to make glib assumptions as to what Ms Gibson ought to have known. Relevantly Ms Smith cited Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq), where it was found that local government officials with tertiary qualifications in financial management did not understand the nature of SCDOs, sophisticated structured finance instruments in which councils, required to act prudently, had invested. The defendant had sold them as low risk when they were anything but that. Care is required in assessing what ordinary people know about complex financial transactions.
[277] The facts of the Renie Gibson Family Trust case are at some remove from the present case. But I respectfully adopt his Honour’s observations as to the need for careful consideration of a person’s knowledge or deemed knowledge where the subject matter does not lend itself to immediate understanding or straightforward analysis.
32 At [29].
33 Renie Gibson Family Trustee (2016) Ltd v Westpac Banking Corporation [2018] NZHC 974.
34 At [43] (footnotes omitted).
Discussion
[278] I have found that in entering into the contract, the Stalkers believed and reasonably relied upon representations made by Mr Duncan and his agent.
[279] After that time, and before settlement, the Stalkers had some but few dealings with the land. They moved some gear onto the farm but undertook no farming as such.
[280] Mr Parker pointed to the two years of the Bull-der-dash lease (1 March 2012 – 28 February 2014) as the first period in which the Stalkers should reasonably have discovered the truth of Mr Duncan’s overstatements. For this purpose Mr Stalker was cross-examined with a view to demonstrating a higher degree of involvement in the management of Bull-der-dash’s operation of the Hampden farm, through his part-time duties. As I have recorded, the cross-examination was often by reference to how Mr Buchly (of Bull-der-dash) described Mr Stalker’s role.
[281] I do not find on the basis either of Mr Buchly’s evidence or the cross examination of Mr Stalker that any reasonable opportunity arose for Mr Stalker to appreciate that a cause of action (through misrepresentation) had accrued. Mr Stalker’s was a limited role, dealing with such stock as Mr Buchly arranged to be on the land, and such other matters and people (such as fertiliser operators) as came to the farm. Mr Stalker tended to day-to-day tasks which Mr Buchly assigned to him. The person with decision-making responsibility on stock numbers and stock movements was Mr Buchly. He managed Bull-der-dash’s operations, both on the Hampden farm and their other farms. Unsurprisingly Mr Stalker referred to stock “coming and going” all the time making it difficult for him to know what total numbers were involved at any time.
[282] As importantly, when considering the awareness of Mr Duncan’s misrepresentations as to how the farm had performed in his time, Bull-der-dash was running a very different operation, fattening cattle. I heard no evidence as to Bull-der-dash’s total numbers on the Hampden farm either at particular times during 2012–2014 or on average. As Bull-der-dash did not operate the Hampden farm at optimum or close-to-optimum stocking levels, a reasonable opportunity for Mr Stalker to deduce that Mr Duncan’s figures must have been incorrect would not have arisen,
even if Mr Stalker had been close to the figures during that period (which I do not find).
[283] Mr Buchly’s evidence in one important regard reinforced the above conclusions. As a person with some experience of farming and leasing, he undertook his own inspection of the property before entering the Bull-der-dash lease. He found no reason to doubt Mr Duncan’s 285 effective hectare figure (which the Stalkers had adopted in their advertising) whether in the period before taking the lease or in the subsequent two years. With Mr Buchly as the person controlling the stock numbers on the Hampden farm for Bull-der-dash for the two-year period of the lease, his failure to detect any issue over the effective hectarage is a strong pointer to why the Stalkers did not in that period identify the issue. In terms of the formulation of the Tipping J in Carter Holt Harvey, I find that reasonable people, situated as the Stalkers were in that period, would not reasonably have known that a loss had occurred.35
[284] After the Bull-der-dash lease expired on 28 February 2013, the Stalkers provided grazing services to DFP and other businesses until May 2017. The operation was once again of a distinctly different nature to Mr Duncan’s mixed beef and sheep model. The Stalkers ran Hampden farm, in conjunction with the Light House Hills farm, as a beef fattening operation. Later in the period they built up a small (350) mob of sheep, a very modest element of sheep farming compared to Mr Duncan’s represented mob of 1,500 ewes and 600 hoggets. The numbers involved once again saw a parallel with the Bull-der-dash period, when the farm was not being run at an optimal or close to optimal level.
[285] I find in this period also that reasonable people, situated as the Stalkers were, would not reasonably have known that loss had occurred.
[286] From 11 May 2017 the Stalkers were no longer engaged in the farming of the Hampden farm, as their son and daughter-in-law (trading through Bindagin) leased and operated the farm. As 11 May 2017 is less than three years before this proceeding was commenced (on 30 October 2018), an analysis of reasonable discoverability during the Bindagin period is strictly unnecessary. Mr Stalker was not cross-examined
35 Above at [272].
on the basis (unlike in relation to the Bull-der-dash lease period) that the Stalkers had had the opportunity during the Bindagin lease to identify the fact of Mr Duncan’s misrepresentations. While the Stalkers’ son and daughter-in-law were lessees of the farm there is no evidential basis to conclude that the Stalkers had such opportunity.
Conclusion
[287] As this proceeding was commenced on 30 October 2018, the limitation defence fails. The Stalkers have established that they could not reasonably have gained knowledge of the relevant facts prior to the date of the Isbister valuation, namely 31 July 2018.
Damages
The claim
[288] The Stalkers by their amended statement of claim sought an order pursuant to s 35 CCLA that Mr Duncan pay them damages in the sum of “approximately
$623,096”.
[289]That sum had two elements:
(a)$560,000 representing the difference between current market value ($2,290,000) and the farm’s value if it had consisted of 285 hectares being $2,850,000; and
(b)$63,096 representing an alleged loss in lease receivables.
[290] Before the trial commenced, the valuation witnesses upon direction conferred and agreed that the current market value of the Hampden farm is $2,277,500. The Stalkers’ valuer, Mr Harvey, gave evidence identifying the farm’s valuation (if the representations had been correct) as $2,850,000. The loss in relation to farm value sought by the Stalkers at trial was accordingly $572,500.
The law
[291] Section 35 CCLA identifies the damages payable for misrepresentation. They are expectation damages. The injured party is to be put in the position it would have been if the representation had been true.
[292]Section 35(1) CCLA provides:
(1)If a party to a contract (A) has been induced to enter into the contract by a misrepresentation, whether innocent or fraudulent, made to A by or on behalf of another party to that contract (B),—
(a)A is entitled to damages from B in the same manner and to the same extent as if the representation were a term of the contract that has been breached; and
(b)A is not, in the case of a fraudulent misrepresentation, or of an innocent misrepresentation made negligently, entitled to damages from B for deceit or negligence in respect of the misrepresentation.
[293] As summarised by the authors of Burrows, Finn and Todd on the Law of Contract in New Zealand the measure of damages will normally be the difference between the value of the subject-matter as it is and the value as it would have been had the representation been true.36
[294] It is accordingly no answer to a claim for damages under s 35 CCLA that the price paid by the Stalkers as purchasers happened to represent the current market value of the Hampden farm in its actual condition.
[295] While Mr Parker made a submission that there had been no loss because the Stalkers had in fact purchased at market value, such an approach involves a failure to apply the requirements of s 25 CCLA. The submission requires no further discussion.37
36 Finn, Todd and Barber, above n 10, at [11.2.6], citing Brownlie v Shotover Mining Ltd CA181/87, 21 February 1992.
37 See Ellmers v Brown (1990) 1 NZConvC 190,568 (CA), a case involving a misrepresentation as to the annual average application of fertiliser – the Court of Appeal observed that if the respondents had not made a loss in the sense that the farm, even without the fertiliser, was worth what the respondents paid for it, damages for the breach were still recoverable (on the promised benefit basis).
[296] There is, as observed by the authors of Burrows, Finn and Todd on the Law of Contract in New Zealand, a flexibility as to the date at which damages are assessed.38 I adopt as a correct summary of the authorities the observations in that commentary:
While the normal time is the date at which the loss was suffered, namely the date when the representation was acted upon, that date is not immutable. “It is a presumption and not an invariable rule.”39 In at least one case, damages were calculated as at the date of the trial.40
[297] I also respectively adopt the observations of Panckhurst J in Smaill v Buller District Council:41
Second, as a general rule damages are to be assessed as at the date of the loss. But this is not an immutable rule. Rather a pragmatic approach is required if upon analysis of the particular facts of the case it should prove reasonable to assess the loss at some other date up to the date of hearing: McElroy Milne v Commercial Electronics Ltd.42
[298] In New Zealand Land Development Co Ltd v Porter, Tipping J similarly considered “the well-known breach/date rule”, observing that it will often achieve the objective of contractual damages but not always.43 His Honour continued:
While recognising the general rule, it is nevertheless important to bear in mind that in the end the assessment of damages is a question of fact and should not be trammelled by rigid rules. Justice to both sides in the individual case is what is to be aimed for: see the speech of Lord du Parcq in Monarch Steamship Co Ltd v Karlshamns Oljefabriker (A/B) [1949] AC 196, 232-233 adopted by Cooke J in Stirling v Poulgrain [[1980] 2 NZLR 402 (CA)] at p 419.
[299]Tipping J explained the rationale of the general rule:44
The reason for the general breach/date rule is that with a contract for the sale and purchase of a readily marketable commodity the innocent purchaser, following default by the vendor, ought reasonably to go promptly into the market and buy a substitute.
38 Finn, Todd and Barber, above n 10, at [11.2.6].
39 New Zealand Motor Bodies Ltd v Emslie [1985] 2 NZLR 569 at 596; and Bevan Investments Ltd v Blackhall and Struthers (No 2) [1978] 2 NZLR 97.
40 Burns v Jordan HC Napier M86/92, 9 November 1984.
41 Smaill v Buller District Council [1998] 1 NZLR 190 (HC) at 220.
42 McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 (CA).
43 New Zealand Land Development Co Ltd v Porter [1992] 2 NZLR 462 (HC) at 466.
44 At 470.
[300] His Honour referred to the fact that precedents existed for moving the assessment date back from the date of trial to reflect a lack of expedition in the prosecution of a plaintiff’s claim.45
Plaintiffs’ submissions
[301] Mr Russell submitted that this is a case where the breach/date rule will not achieve the objective of contractual damages (compensating the Stalkers for the loss of the value of the promised performance). He referred to the uncontested “as represented” value evidence from the Stalkers’ valuer, Mr Harvey, of $2,850,000. The Stalkers became aware for the first time that they had suffered a loss (of the bargain) when they received the Isbister valuation on 31 July 2018. Through their solicitors, they made prompt demand and, upon rejection of the demand, equally promptly issued this proceeding.
[302] Mr Russell referred to the facts in New Zealand Land Development Co Ltd v Porter where the Court departed from the breach/date rule to recognise that through the period following breach the purchasers had acted reasonably in pursuing the remedy of specific performance.46
[303] Mr Russell referred to the rationale behind the breach/date rule as identified by Tipping J in the Porter case (that an innocent purchaser following default by a vendor ought reasonably to go promptly into the market to buy a substitute). Mr Russell submitted that, just as it was not reasonably possible for the innocent party in the Porter case (because specific performance was being pursued), it was not possible for the Stalkers in this case to do so (because the breach was not reasonably discoverable).
Defendant’s submissions
[304] Mr Parker submitted that the breach/date rule should be applied. By reference to the discussion by the authors of Burrows, Finn and Todd on the Law of Contract in New Zealand, Mr Parker submitted that the Court should depart from the breach/date
45 At 470, referring to Hickey v Bruhns [1977] 2 NZLR 71 (SC); Wroth v Tyler [1974] Ch 30; Souster v Epsom Plumbing Contractors Ltd [1974] 2 NZLR 515 (SC); and Malhotra v Choudhury [1980] 1 Ch 52 (CA).
46 New Zealand Land Development Ltd v Porter, above n 43.
rule only where it is necessary to avoid unfairness to the plaintiffs.47 Mr Parker noted, by reference to the observations of the Supreme Court in Marlborough District Council v Altimarloch Joint Venture Ltd, that the assessment required is in relation to the extent of the loss, the Supreme Court stating:48
… what damages are appropriate is a question of fact. There are no absolute rules in this area, albeit the courts have established prima facie approaches in certain types of case to give general guidance and a measure of predictability. The key purpose when assessing damages is to reflect the extent of the loss actually and reasonably suffered by the plaintiff.
[305] At that point, Mr Parker repeated the submission (which I have rejected) that the Stalkers suffered no loss at the time they purchased the property. Mr Parker continued:
What they seek to be compensated for is the notional loss they would have suffered had they purchased at an overvalue, represented by a sum that they would have paid in 2011 for such a 285 effective hectarage property, which according to Mr Harvey would have been $1,720,000. That price seems be unrealistic if one takes the rateable value of $1,456,000 into consideration, which is not solely predicated on the effective hectares. Mr Barron does not agree.
[306] In relation to the Stalkers’ calculation of the loss they suffered based on the “as represented” value of the Hampden farm, Mr Parker noted that there is no indication that the Stalkers were seeking to purchase a property at that financial level. Rather, in his submission, they had an investment motivation, namely obtaining a return which is better than could be achieved at bank rates. Mr Parker submitted that they have such a gain (through capital gain) over the following eight year period, and that is to be taken into account. Mr Parker submitted that the capital gain on either scenario (purchase of the Hampden property with its actual effective hectares and purchase of a similar property with 285 effective hectares) would have produced a “broadly similar capital gain”. Mr Parker concluded that the Stalkers had made an investment which had “paid off to a dramatic degree”.
[307] He submitted that expectation damages of the level being sought is not warranted when there has been such capital gain, without any initial overpayment, and
47 Finn, Todd and Barber, above n 10, at [11.2.6].
48 Marlborough District Council v Altimarloch Joint Venture Ltd, above n 14, at [156].
where benefit has accrued to the Stalkers from having their property in their possession.
[308] Mr Parker further submitted that the value of the timber sold off the farm by the Stalkers has to be taken into account.
[309] Mr Parker submitted that steps being taken currently by the Stalkers to sell parts of the property (subject to subdivision) must be taken into account at the proposed prices.
[310] Mr Parker further submitted that account ought not to be taken of improvements made by the Stalkers to the property as those were unassociated with matters of effective hectarage but flowed from the Stalkers’ own assessment of the property.
[311] Mr Parker further submitted that it is a factor against the sum claimed by the Stalkers that they would not have operated a 285 effective hectare farm to its full extent.
[312] In an effective duplication of his earlier submissions, Mr Parker submitted that there needs to be taken into account not only the Stalkers’ capital gain but also the better return they have had on their funds, their lease rentals being based on a 6 per cent return as against the 2.5 per cent return they had previously been receiving from their bank.
Discussion
[313] The Court, having found that the Stalkers are entitled to damages, is required by s 35 CCLA to award damages calculated by reference to the value of what they would have received had Mr Duncan’s representations been true. To assess the Stalkers’ damages, I focus first on the value of the Hampden farm.
[314] The subject-matter of the transaction was the Hampden farm. It is a distraction to consider the subject-matter as some more abstracted concept of investment, as invited by Mr Parker. Once the Stalkers made the decision to invest their money in
this capital asset, they are entitled under s 35 to damages for any loss of bargain relating to the capital asset.
[315] I accept the evidence of Mr Harvey as to the value the Hampden farm would have had at the time of sale if Mr Duncan’s representations had been correct. Mr Harvey’s evidence as to valuation of the Hampden farm was logical and coherent. He gave his analysis and his opinion of values based on both the actual state of the farm and the “as represented” state of the farm, first at the time of sale and then approaching the date of trial. For reasons not provided to the Court, Mr Duncan’s valuer, Mr Barron, was instructed to provide opinion evidence only as to the value of the farm in its actual state. To the extent that Mr Harvey’s and Mr Barron’s evidence can be considered alongside one another, namely as to the value of the farm in its actual state, there is a consistency which suggests that Mr Harvey’s sole evidence on the “as represented” value is also likely to be reliable. The fact that the valuers through their joint conferral were able to reach precise valuation agreement on the “actual state” is further reinforcement of the reliance which the Court can confidently place on Mr Harvey’s opinions. That leads me to conclude that the valuation of the Hampden farm at the time of purchase, if as represented, would have been $1,720,000 whereas the value of the farm at the time of the trial, if as represented, would have been $2,850,000.
[316] Mr Parker’s suggestion, in submissions, that Mr Harvey’s “as represented” valuation appears “unrealistic” by reference to the Hampden farm’s rateable valuation is unjustified. Mr Harvey’s valuation evidence was presented as fully detailed and reasoned evidence by a witness called to give evidence. The rating valuation is not admissible evidence of actual value.
[317] I must then determine as a matter of fact what damages are appropriate. What damages will reflect the extent of the loss actually and reasonably suffered by the Stalkers?
[318]I am to aim for justice to both sides on the facts of this case.
[319] The most unusual feature of this case is that the Stalkers had, between the date they confirmed the contract (2 August 2011) and the date they received the Isbister
valuation (31 July 2018), no opportunity to repair the damage they suffered through Mr Duncan’s misrepresentations. As the natural inflation of the property market (to which Mr Parker referred) took place, they were unaware, for instance, of the shortfall in effective hectarage. They could have no appreciation of the need to go to the market if they wished to build the farm to the represented hectarage or to replace it altogether.
[320] The rationale for the general breach/date rule which Tipping J identified in the Porter case simply does not apply to the Stalkers. It cannot be said of them that they ought reasonably have gone promptly into the market to buy a substitute or to otherwise build up the farm by further capital investment.
[321] When they became aware of their cause of action against Mr Duncan they acted with commendable promptness first to make a demand and then to commence this proceeding. Again, as identified by Tipping J in the Porter case, the reasonableness of the plaintiff’s conduct is a material consideration, as are the circumstances in which they find themselves as a result of the defendant’s breach.
[322] On these considerations alone, the overall justice of the case strongly favours the Stalkers.
[323] In a situation in which the Stalkers purchased a farm property and were entitled to benefit from inflationary impacts as long as they remained owners of the property, it is not in point as suggested by Mr Parker to observe (as is true) that they have done better than they would have achieved with money invested at bank rates. Or (as is also true) that theirs has been a capital gain. The key fact is that had Mr Duncan’s representations been correct (being the focus of damages under s 35 CCLA), their capital gain would have been all the more. They have not had that capital gain because Mr Duncan did not transfer the property in its represented state. If damages were assessed at the date of breach, the Court would calculate a sum by way of interest on the sum assessed but it is improbable that such compensation for being kept out of the damages awarded would fully compensate the Stalkers in the way of assessment of damages at the present date will.
[324] I do not find any of the other matters raised by Mr Parker such as the sale of the trees (which have been replaced with new plantings) or the proposed sale of blocks of the farm (if subdivision is approved) to impact on the Stalkers’ right to have damages assessed under s 35 CCLA. The first simply arises as an incident of ownership – the valuers did not suggest that the limited plantings on the farm materially affect its value. The second (possible sale of the farm in subdivided parts) is what it is, namely a possibility. As the Stalkers continue in ownership, without committed sales, it is they who continue to suffer the damage.
[325] I find that the damages to which the Stalkers would have been entitled but for their contributory negligence are $572,500 (as calculated at [290] above). That sum falls to be reduced by 10 per cent ($57,250) on account of contributory negligence (as assessed at [264]) above). I will award damages of $515,250 in relation to farm value.
Interest
[326] The Stalkers in their claim sought interest. Mr Russell did not pursue interest in the event the Court were to adopt (as I have) a present day value for the assessment of damages.
Loss of rental
[327] As a discrete head of damages, the Stalkers sought an award of $63,096 said to represent a loss in lease receivables.
[328] The claim relates to the current Bindagin lease, involving the Stalkers’ son and daughter-in-law.
[329] The claim is calculated by reference to the annual rental for which the farm could be (and was in the case of Bull-der-dash) leased out, namely $80,000 per annum. That rental was based on a rate per effective hectare and stock-carrying capacity. The Stalkers calculate that there should now be a lower rental payable ($58,968 per annum) having regard to the actual state of the farm.
[330] While Mr Stalker stated in his evidence that the amount for which the Stalkers can lease the farm has decreased in that way, the Stalkers adduced no evidence that Bindagin has refused to honour the rental required under its lease or has otherwise made demand for compensation in relation to rental previously paid. While the Stalkers may understandably as a matter of honour wish to redress matters with their son and daughter-in-law in the absence of a formal demand, it is not open to this Court to treat that potential situation as damage which has accrued.
[331]There will be no allowance for such rental issues in the damages to be awarded.
Costs and disbursements
[332]I will reserve the question of costs and disbursements as requested by counsel.
Orders
[333]I order:
(a)The defendant shall pay to the plaintiffs damages in the sum of
$515,250.
(b)The costs and disbursements of the proceeding are reserved.
Osborne J
Solicitors:
Lane Neave, Christchurch
Parker Cowan Lawyers, Queenstown
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