Te Puke O Tara Incorporated v Auckland Council

[2012] NZHC 1001

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-002557 [2012] NZHC 1001

UNDER  The Judicature Amendment Act 1972

IN THE MATTER OF     an interlocutory application for interim orders and or interim injunction

BETWEEN  TE PUKE O TARA INCORPORATED Plaintiff

ANDAUCKLAND COUNCIL Defendant

Hearing:         11 May 2012

Appearances: S Perese for Plaintiff

J Hilario for Defendant

Judgment:      11 May 2012

ORAL JUDGMENT OF VENNING J

Solicitors:           Teei and Associates, Auckland

Auckland Council Legal Services, Auckland

Copy to:            S Perese, Auckland

TE PUKE O TARA INCORPORATED V AUCKLAND COUNCIL HC AK CIV-2012-404-002557 [11 May

2012]

[1]      The plaintiff incorporated Society had a contract with the defendant Council to provide community services.   The Council has acted to terminate that contract. The plaintiff seeks interim relief prohibiting the Council from carrying into effect the termination.

[2]      Te Puke O Tara Community Centre is owned by the Council and has been managed by the plaintiff since it was built in 1975.  Throughout the first 35 years the Society operated independently under the terms of the standard reserve lease which did not identify any specific activities and required a minimal reporting to Council. In 2010 the Council publicly advertised for proposals to provide for the management operation of the community centre.  The plaintiff was awarded a two year contract with a value of $80,000 per year and has managed the facility since that time.

[3]      Over the last year or so the management committee of the plaintiff developed amendments to its constitution to better reflect its governance requirements for an organisation that was responsible for managing a significant community centre operation.  The proposed amendments have not been ratified by the plaintiff and at a meeting of the Society held on 8 March 2012 a vote of no confidence in the management committee was upheld.

[4]      That matter was referred to a meeting of the Otara Papatoetoe Local Board of the Council on 20 March 2012.  A motion was put that the board consider a report concerning the plaintiff as a matter of urgency.  That motion was carried and then, following consideration, a motion that the local board approved termination of the Council’s contract with the plaintiff for the management of the community centre was also carried at the meeting.

[5]      Following that resolution the Council wrote on 28 March giving notice of cancellation  of the contract.   The letter was  addressed to  the plaintiff  and  was apparently served on Ms Gush on 4 April.   The letter of termination referred to clause 15.1 of the terms and conditions of the contract between the plaintiff and Council. That clauses provides:

Termination with notice

15.1The Council may terminate this agreement at any time by giving 30 days written notice to the Contractor.   At the end of the 30 day period, the agreement will terminate and the Contractor will stop performing the Services.

[6]      Notices under the contract could be sent by fax, or to the plaintiff’s physical

address or its postal address but in any event to the attention of Ms Mary Gush.

[7]      The plaintiff did not accept the Council was entitled to cancel the contract and engaged in correspondence with the Council.  The Council did not accept the representations  made  to  it  by the  plaintiff  or  its  advisers  and  moved  to  retake possession of the community centre on 10 May.

[8]      The plaintiff’s application for interim relief was filed on the same day.  Given the length of time that had passed since notice had been given by the Council, the Court directed the matter come on for an urgent hearing at short notice but on notice to the Council.   The application was served and the parties have presented their submissions to the Court this afternoon.

[9]      I thank both counsel for the very thoughtful and thorough submissions, and in

particular Mr Perese’s submissions put together at short notice.

[10]     There is no statement of claim filed but Mr Perese advises the Court that the plaintiff’s claim will be in contract or possibly, in the alternative, judicial review. The issue for the Court is whether interim relief is available to the plaintiff on either of those proposed causes of action or heads of claim.   In terms of the contractual cause of action the plaintiff takes a number of what might be described as technical points arising out of the service of the notice.  The plaintiff submits that the notice of termination contained in the letter of 28 March is ineffective because, as the notice was deemed to have been served two business days after it was sent, the period of notice was less than the 30 days notice required by the contract.

[11]     Next, the notice was incorrectly addressed in that service of the notice under the contract was required to be served to the plaintiff’s representative Ms Mary Gush, as opposed to direct to the plaintiff.  Next, the notice relied upon a resolution

which was defective.  That appears to be a minor typographical matter.  Mr Perese did not place any weight on that and rightfully so.  It is of no moment.

[12]     Finally, on the contractual point, that the termination notice was an improper and unlawful use of the Council’s contractual right having regard to an earlier letter which had referred to the extension of the contract for a further period of year, that letter being 16 January 2012.

[13]     In relation to those matters there is, as Mr Perese responsibly acknowledged, a strong response that the notice relied on by the Council was in substantial compliance with its requirements under the contract.  While the notice may not have provided the full period of 30 days given service was deemed to have been effected two business days after sending of the letter, the Council confirmed in subsequent correspondence that it was content to extend the period of notice to 4 May, being 30 days after service on Ms Gush on 4 April.

[14]     Next,  although  the  notice  was  addressed  to  the  plaintiff  it  was  served physically on Ms Gush, the person nominated as the contact person for the plaintiff.

[15]     Next, and finally, the notice was not improper in light of the letter of 16

January 2012.  Any extension under or in terms of that letter of 16 January 2012 would have been an extension on the existing terms of contract which incorporated clause 15 and the right to cancel on 30 days notice.

[16]     I am not satisfied that on the contractual argument the plaintiff is able to make out a serious question to be tried.  In any event the short point in relation to that is that even if a serious question was made out damages would be an adequate remedy.  Damages are readily quantifiable, the plaintiff is to receive $80,000 a year for managing the centre.  The Council is obviously in a position to pay any damages that would ultimately be awarded.  The contractual cause of action cannot support the interim relief sought.

[17]     Mr Perese then submitted that the alternative claim relied on principles of judicial review.   He noted that the Council, through the local board, decided to

terminate the contract because there were no members of the plaintiff management committee but the local board must have known that there would be a new election to elect new members of the plaintiff’s management committee in due course, in fact at the meeting that was to be held the very next month.  Despite that knowledge the Council did not at any stage seek to give the plaintiff an opportunity to be heard before making the decision to terminate the contract.   He emphasised that if the plaintiff’s cause of action in contract could not be made out nevertheless it could pursue  a  claim  in  judicial  review  on  the  basis  of  a  breach  of  natural  justice essentially, a lack of fairness in not giving the plaintiff an opportunity to be heard.

[18]     In response the plaintiff relies on the provisions of the contract and says it followed a proper process in terminating the contract and its decision is unimpeachable in that regard.

[19]     The issue of the extent of relief under judicial review principles where there are existing contractual arrangements between the parties has been considered in a number of cases.   Mr Perese referred to some of them.   In particular, in Mercury Energy Ltd v Electricity Corporation of New Zealand[1] the Privy Council noted that a variety of causes of action were pleaded, including four in contract and some in administrative impropriety.   Lord Templeman, delivering the advice of the Privy Council stated:[2]

The causes of action based on breach of statutory duty, abuse of a monopoly position and administrative impropriety are only relevant if the causes of action based on contract are rejected.

[1] Mercury Energy Ltd v Electricity Corporation of New Zealand [1994] 2 NZLR 385.

[2] At 391.

[20]     Mr Perese submitted that  that  was  the position  that  would  apply in  this particular case, namely judicial review would effectively kick in on the basis that the causes of action on contract are rejected.  But as Lord Templeman went on to say:[3]

... If the causes of action based on contract are rejected, the other causes of action will only constitute attempts to obtain, by the  declaration sought, specific performance of a non-existing contract. The exploitation and extension of remedies such as judicial review beyond their proper sphere should not be encouraged.

[3] At 391.

[21]     Mr Perese also referred to the Te Tai Tokerau Mapo Trust v Chief Executive of Ministry  of  Health  –  BC201163109[4]   and  particularly  the  analysis  of  remedies available under judicial review discussed by Woodhouse J in that case.   Again, however, the Judge reminded himself that the contractual relationship between the parties  was  important  in  determining  the  alternative  claims  for  relief  based  on judicial review. At [97] the Judge said:

... Where, as here, the relationship between the parties was created by contract, and the plaintiff‘s complaints are in substance directed to failure to continue with the contract, the first and primary enquiry must be in contractual terms.

[4] Te  Tai  Tokerau Mapo Trust  v  Chief  Executive of  Ministry of  Health  –  BC201163109 HC Whangarei CIV-2010-488-000307, 10 December 2010, 5 August 2011.

[22]     The Judge went on to cite with approval a further passage from the Privy

Council in the Mercury Energy case that:

The Court can only interfere if Mercury alleges and proves that the decision was not  made according to law. The decision which is impugned is the decision to terminate the contractual arrangements.

[23]     And then in the next paragraph the Judge went on to say:[5]

The third reason for my conclusion that this claim needs to be analysed at the outset in contractual terms is that, although the claim is framed as one for judicial review, at least much of its substance is a claim in contract.

[5] At [98].

[24]     Mr Perese also sought to draw support from an observation of Harrison J in the case of Bay of Plenty Electricity Ltd v Vector Gas Ltd – BC200761760 where His Honour said:[6]

I am satisfied that NGC’s decision to terminate the BoPE agreement was not designed to take advantage of price increases resulting from the redetermination. Its decision was designed to minimise its own financial risk, which cannot be characterised as an unlawful or improper use of its contractual right.

[6] Bay of Plenty Electricity Ltd v Vector Gas Ltd – BC200761760 HC Wellington CIV-2004-485-002287, 3 August 2007 at [95].

[25]     In  that  case,  however,  the context  was  again,  of a  contract  between  the parties.

[26]     In the present case consideration of whether the plaintiff could make out a substantive claim for judicial review ultimately must be informed by consideration of the contractual arrangements the parties agreed to.  If the plaintiff cannot satisfy the Court that there can be a real contest between the parties and a reasonable chance of them succeeding in the substantive proceedings then there can be no prospect of interim relief.

[27]     When the actions of the Council are considered against the background of the contract there are difficulties for the plaintiff.  It is apparent on the record that the reason the resolution was passed to terminate the contract was because amendments had  not  been  ratified  and  a  vote  of  no  confidence  had  been  passed  in  the management committee.  It cannot be said, even adopting the wording of Harrison J relied on Mr Perese, that a decision to terminate the contract based on those grounds could be characterised as an unlawful or improper use of the contractual right to terminate.

[28]     I acknowledge Mr Perese’s argument was more based on the right of the plaintiff to be heard and to make representations before the contract was terminated. However, in relation to judicial review principles the focus must be on the process that was followed.  There is no suggestion that the process followed at the meeting leading to the resolution to terminate the contract was itself a flawed process.  The plaintiff is then left with its argument that it should have been given an opportunity to be heard before the contract was terminated or the termination notice was issued. However, again it seems to me that the plaintiff faces the hurdle that the specific contractual provisions deal with the issue.   Apart from clause 15.1, clause 15.2 provides  for  immediate  termination  in  certain  circumstances,  including  if  the plaintiff commits a material breach or if the plaintiff fails to remedy any other breach within 14 days following receipt of written notice from the Council specifying the breach requirement to be remedied.

[29]     The present situation is not one where there was a breach which required notice or time for remedy.   Council determined to terminate the agreement in accordance with clause 15.1.  The only requirement for doing so was that it give 30 days written notice.  The Council was not required to base that termination on any

breach of contract.  As noted the Council appears to have based its termination on the hiatus in the plaintiff.  It cannot be said that that was an unlawful or improper action by the Council and nor can it be said that the Council was required to provide an opportunity for the plaintiff to respond before terminating the contract on that ground.

[30]     For those reasons I have come to the clear view that, while it may well be unfortunate that the relationship between the plaintiff and Council has broken down in the way it has, there is no legal remedy available to the plaintiff which would enable this Court to grant interim relief to it.  On the basis of the information before the Court the application for interim relief must be dismissed.

[31]     I record that counsel have confirmed a discussion and agreement reached that in the event the decision was as above the plaintiff will have three weeks from today

to remove their assets and equipment from the premises.

Venning J