Te Tumu Miere Limited (in liquidation) v Zelande Limited
[2019] NZHC 1
•4 January 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2018-404-2883
[2019] NZHC 1
BETWEEN TE TUMU MIERE LIMITED (IN LIQUIDATION)
PlaintiffAND
ZELANDE LIMITED
Defendant
Hearing: 4 January 2019 Appearances:
B J Burt and T J Cooley for the Plaintiff
B D Gustafson and G R Grant for the Defendant
Judgment:
4 January 2019
JUDGMENT OF JAGOSE J
This judgment is delivered by me on 4 January 2019 at 4.45 pm pursuant to r 11.5 of the High Court Rules.
.....................................................
Registrar / Deputy Registrar
Counsel/Solicitors:
James Burt, Barrister, Auckland
Bret Gustafson, Barrister, Auckland Brookfields, Lawyers, Auckland
Rainey Law, Auckland
TE TUMU MIERE LTD v ZELANDE LTD [2019] NZHC 1 [4 January 2019]
[1] By application of 28 December 2018, the liquidators of Te Tumu Miere Limited (“TMM”) sought without notice interim orders against Zelande Limited (“Zelande”), in support of TMM’s claims in detinue and conversion against Zelande.
[2] The claims relate to recovery of beehives Zelande formerly managed for TMM under contract, withheld by Zelande under a contended lien. The interim relief seeks to facilitate a third party’s management of the hives in Zelande’s possession. The interlocutory application was set down for an urgent hearing on notice before me.
Background
[3] Under an agreement dated 22 August 2017 (the “Agreement”), TTM could progressively acquire beehives from Zelande. During their annual productive season, the hives were to be located on Māori land through TTM’s agency. TTM’s sole shareholder is the Māori Trustee. TTM initially acquired 1500 hives from Zelande.
[4] Under the Agreement, Zelande would provide hive management services for the term of the Agreement, expressed to continue until 1 May 2022. Those services included winter relocation of the hives, “in agreed locations with TTM”. At the end of the 2017/18 season, Zelande relocated the hives to rural land in South Auckland, some 400 on open farmland and the balance over a large area in a forest (the “Forest”). Much of Zelande’s own apiary operations are run from the same area in the Forest, using the land under licence from the Forest’s owners.
[5] The parties came to be in dispute over TTM’s obligations to acquire more than the initial 1500 hives. By solicitors’ letter of 27 July 2018, Zelande purported to cancel the Agreement. Zealande took the view its hive management obligations came to an end at 30 September 2018.
[6] A position appears to have been reached by which TTM would thereafter be given possession of the hives. But the logistics of achieving the transfer became complicated by a variety of operational, seasonal, regulatory, and technical issues. Zelande’s apiarist experience and obligations were confronted by TTM’s relatively unsophisticated requirements simply to obtain possession of the hives.
[7] In the result, the hives remained under Zelande’s control, as hives on land over which Zelande has licence to manage beekeeping operations. Without management, the hives lose value and present a significant bio-security threat: if over-crowded, the bees may swarm to unmanaged locations, and risk spreading serious disease. Zelande proposed continued management steps to TTM, without constructive response.
[8] Ultimately, TTM went into voluntary liquidation on 22 November 2018. By letter of that day, the liquidators’ solicitors requested Zelande’s identification of the hives’ locations and assistance in their transfer. The hives, as TTM’s significant asset, were to be sold to meet its debts – predominantly to the Māori Trustee, as the secured creditor. Zelande claimed the hives’ location was confidential, as commercially sensitive to Zelande’s own operations. The liquidators proposed confidentiality undertakings to address such concerns.
[9] In subsequent solicitors’ correspondence, Zelande asserted a claim to ‘salvage costs’ in continuing to manage the hives, and the liquidators agreed to retain such an amount in their trust account, pending determination of any priority over that of the secured creditor, the Māori Trustee. But the liquidators resisted any suggestion Zelande was entitled to retain possession of the hives. On the other hand, Zelande was not prepared to incur unmet costs in transferring the hives. While some accommodations were agreed between the parties to facilitate a regulatory inspection in mid-December 2018, the detail of requirements proposed between the parties for transfer was not.
[10] Ultimately, by letter of 21 December 2018, Zelande proposed it manage the hives to season’s end at 31 March 2019, for a monthly fee of $50,000 (plus GST), reducing to $25,000 (plus GST) for February and March 2019. Thereafter it would provide 1500 ‘live’ hives for collection by 30 April 2018 by purchasers of the hives.
[11] The liquidators instead issued the present proceeding, and seek interim orders requiring Zelande to identify the location of, and to provide any secured access to, each hive; prohibiting Zelande from dealing with the hives in any way; and granting TTM access to the beehives, wherever they may be (including on land owned by third parties), for management in situ by other beekeepers. While opposing the interim relief
sought, Zelande confidentially would identify the location of each hive to the liquidators’ independent beekeeper witness, Robert Lewis Russell,1 who it proposes should additionally be required to audit all TTM hives in Zelande’s possession (at TTM’s expense).
Applicable legal principle
[12] Interim injunction applications are determined on the basis of whether the plaintiff has a serious question for trial, and whether the balance of convenience and overall interests of justice favour granting the injunction.2 On the latter consideration(s), the question is of “the balance of the risk of doing an injustice”: whether refusing the injunction would be harder on a plaintiff who was successful at trial, than granting it would be on the successful defendant.3 This assessment is undertaken by reference to the adequacy of damages, preservation of the status quo, the uncompensable disadvantages to either party, and the relative strengths of their cases.4
[13] To the extent the application seeks a mandatory injunction (requiring the defendant to do things), rather than a prohibitory injunction (requiring the defendant not to do things), such relief is granted more rarely. As Thomas J writes, citing McGechan’s commentary, a mandatory injunction ought to be granted on an interlocutory application:5
… only in special circumstances, and then only in clear cases either where the Court thinks that the matter ought to be decided immediately or where the injunction is directed at a simple and summary act, which could be easily remedied or where the defendant has attempted to steal a march on the plaintiff. Moreover, before granting a mandatory interlocutory injunction the Court has to feel a high degree of assurance that at the trial it would appear that the injunction had rightly been granted, that being a different and higher
1 Mr Russell is an ‘Authorised Person (Level 2)’ for the purposes of the Management Agency’s American Foulbrood National Pest Management Plan, conducted under the auspices of the Biosecurity Act 1993. American Foulbrood is a serious disease, infecting honey bee larvae.
2 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL); and Klissers Farmhouse Bakeries Ltd
[1985] 2 NZLR 129 (CA).
3 Wellington International Airport Ltd v Air New Zealand Ltd HC Wellington CIV-2007-485-1756, 30 July 2008 at [4], citing Cayne v Global Natural Resources Plc [1984] 1 All ER 225 (CA) at 237.
4 Wellington International Airport Ltd v Air New Zealand, above n 3, at [6]-[14].
5 Precast NZ Ltd v Anystep Ltd [2016] NZHC 377 at [44] citing Andrew Beck and others McGechan on Procedure (online ed, Brookers) at [HR7.53.23].
standard than is required for a prohibitory injunction: Locabail International Finance Ltd v Agroexport [1986] 1 All ER 901 (CA).
Discussion
—serious question for trial
[14] There clearly are serious questions for trial, being Zelande’s entitlement to retain possession of the hives in the face of TTM’s request for their return, and the permissible extent of any resistance in doing so.
[15] The essence of both causes is Zelande’s possession be ‘wrongful’: that is, inconsistent with TTM’s right to possession.6 The evidence is clear – given the complexities in transfer, and Zelande’s claims to a lien – its simple possession of the hives alone does not establish the requisite wrongfulness. I cannot resolve those matters on this urgent interlocutory basis. They must await trial.
—the balance of convenience
[16]That takes me to the balance of convenience.
[17] I comprehend Zelande’s opposition very significantly to reflect its understanding of acceptable apiarist conduct. That is commendable, but immaterial. If TTM is entitled to possession, it is not for Zelande to dictate terms. But there is no suggestion TTM seeks immediate possession. And the liquidators’ intention ultimately to sell the hives indicates any loss is adequately compensable by damages. That tends against interim relief.
[18] TTM’s counsel, James Burt, emphasises interim relief is also necessary for the bees’ welfare. He makes the point, as living beings, their welfare is a primary consideration. The one thing everyone agrees is the hives require to be maintained, in both TTM’s direct financial interest and that of the wider apiary industry (which bears the cost of controlling serious honey bee diseases). As the hives’ owner, that obligation
6 Glenmorgan Farm Ltd (in rec and in liq) v New Zealand Bloodstock Leasing Ltd [2012] 1 NZLR 555 (CA) at [26]-[27], applying Kuwait Airways Corporation v Iraqi Airways Co (Nos 4 & 5) [2002] UKHL 19, [2002] 2 AC 883 at [119].
falls on TTM,7 enforced by at least the strict liability offences under s 154N of the Biosecurity Act 1993. The evidence does not specify if TTM is meeting those obligations. I apprehend there is some regulatory control over hive movement, which is a complicating factor for transfer to TTM.
[19] However, the status quo is of Zelande in possession of the hives as an involuntary bailee. In answer to my question of its counsel, Bret Gustafson, Zelande accepts it has obligations to take such care of the hives as is reasonable in all the circumstances.8 In reply, Mr Burt says that is not enough to maximise TTM’s value in the hives. He points to the discrepancy between TTM’s former contractual entitlement to acquire ‘honey-ready hives’ by December, and Zelande’s open offer to provide ‘live hives’ by April (the discrepancy is a seasonal issue). Something less than that – as ‘reasonable care’ may be – is to risk the hives’ survival through winter. But that is to seek, by interim relief, an advance on the status quo, the preservation of which requires no injunction.
[20] Of similar concern is the orders for TTM’s access to third parties’ lands. I am told from the bar the practice is for hives to be located by licence on others’ properties. The Forest licensor has stipulated health and safety criteria for access. Other owners are likely to have similar requirements, reflecting hazards on their properties. Although the orders sought propose access be subject to any such reasonable requirements, the Court should not be engaged in mediating those terms. Otherwise, presumably, the owners would be as amenable to TTM’s licensed access as Zelande’s.
[21] Zelande strongly asserts risk of uncompensable disadvantage if TTM’s managing beekeepers are to have access to the Forest hives, which were ‘wintered’ (and presently remain) in segregated co-location with Zelande’s own hives. It says such necessarily will involve disclosure of its commercially sensitive information and intellectual property relating to its own production of royal jelly. It is New Zealand’s largest producer of royal jelly, from which it anticipates future revenue for the present
7 Biosecurity (National American Foulbrood Pest Management Plan) Order 1998, ss 2(1) (definition of ‘beekeeper’ as “a person who owns beehives”) and 6A(2) (“Overview of obligations of … beekeepers).
8 JJD SA v Avon Tyres Ltd [2000] EWCA Civ J0223-1 at [53]-[54]; Duet Marketing Corp v Spetifor
(1986) 69 BCLR 368, 32 BLR 148 at [31]-[33].
season of some $765,000. It also is one of the largest producers of queen bees, and understands it is the only company artificially inseminating queen bees in mass production, from which it anticipates some $700,000 in future revenue this season. Confidentiality undertakings will not be sufficient to avoid competing beekeepers observing and learning from Zelande’s trade secrets. The risk is such, if access was permitted, Zelande would close down the affected operations, foregoing whatever profit stood to be made from the apprehended revenues. But that is its choice.
[22] Much is made of secrecy said to be endemic in the industry. Kim Kneijber – an experienced beekeeper, and Mr Russell’s ‘Authorised Person (Level 2)’ colleague
– explains:
Royal jelly is a very difficult product to achieve. It is highly competitive amongst industry members to try and achieve production of royal jelly because it is very valuable and sale prices are lucrative. A company's methods and ‘recipe’ for being able to produce royal jelly is something they would want to guard very closely and not disclose to any other beekeepers for fear of being copied.
Even having other beekeepers find out about, let alone access, your sites is something that would be a cause for grave concern for a beekeeper. In the industry, theft of bees, Queen bees, honey and sites is rife. It is a big problem for beekeepers, especially for the commercial operators who have invested a significant amount of time, money and resources into finding sites and perfecting their own ‘recipe’ to enable them to successfully run their business and make their products i.e. honey, bees and royal jelly. Beekeepers go to great lengths to keep their sites and other trade information confidential, often even amongst their own staff as it is commonplace for staff to poach information and set up their own operations in competition or use that information to gain employment or advantages elsewhere.
[23] In reply, Ibrahim Mohammed, whose beekeeping company would provide the management services sought by the liquidators, suggests such concerns are overwrought. He says industry practice is “you do not open other beekeepers’ hives unless you have their permission”. He says any new technique Zelande may have developed for the production and harvest of royal jelly and for breeding of queens “would not be apparent … unless we were to closely inspect the inside of Zelande’s hives, which we have no intention of doing”. And he would give Zelande reasonable notice of any planned visit to site, as well as provide confidentiality undertakings.
[24] Zelande points to a mutual confidentiality provision in the Agreement, including non-disclosure of “information … about the business or activities of [the other]”, observing the contractual entitlement to audit was subject to that requirement. But the Agreement is not otherwise indicative of the strength of sensitivities to which Kim Kneijber refers. And it is arguable, by wintering TTM’s hives in Zelande’s apiary, Zelande took the risk of TTM’s failure to provide sites for honey production (although I note, in those circumstances, Zelande was entitled to use TTM’s hives on its own sites, rather than risk another’s use of them at that site). On the other hand, Zelande’s invidious position – in which TTM’s hives are now actively to be managed alongside its own – has been acquired by default on the Agreement’s breakdown.
[25] On balance, these considerations also tend against interim relief. Given Zelande’s seemingly hard-won position in the apiary industry, I should be astute to avoid any unanticipated impact on industry equilibrium. I am particularly aware the application comes at the behest of the liquidators, whose incentives are distinct from those with industry engagement. All beekeepers’ evidence reinforces the industry’s secretive nature.
[26] On evidence primarily focused on the interim position, I cannot usefully assess the relative strengths of the parties’ substantive cases. Certainly neither would appear to support summary judgment. Such is a neutral consideration.
—overall interests of justice
[27]Standing back, I see nothing justifying the interim relief sought.
[28] Previously TTM was lax in recovering its hives into its possession. Now, pending trial, TTM seeks to maximise the value of its hives in Zelande’s possession. Zelande has proposed terms for such active management, but otherwise has its obligations as bailee. I see nothing unjust in putting TTM to that choice, or such other as may be open to negotiation.
[29] And TTM has an alternative, which is to pay into Court the sum contended to be secured by the lien, and require the hives’ (necessarily progressive and co-ordinated) return. The delay involved in that process means TTM’s value in the
hives may not be as maximised as it would be with active management today, but that is not the function of interim relief either.
[30] These are not the ‘special circumstances’ justifying mandatory interim relief. The only prohibitory interim relief sought is to leave the hives wholly unattended. Neither is justified.
Result
[31]TTM’s application is dismissed.
Costs
[32] In my preliminary view, as the successful party, Zelande is entitled to 2B costs and disbursements. That is because, from what I presently know of it, nothing in the steps taken by Zelande in this averagely complex proceeding required other than a normal amount of time.
[33] If that is not accepted by either party, costs are reserved for determination on short memoranda of no more than five pages – annexing a single-page table setting out any contended allowable steps, time allocation, and daily recovery rate – to be filed and served by:
(a)Zelande within ten working days of the date of this judgment;
(b)TTM within five working days of service of Zelande’s memorandum; and
(c)Zelande strictly in reply within five working days of service of TTM’s memorandum.
Postscript
[34] I concluded my judgment above at 3:00pm today. Mr Burt advised by memorandum of 3:15pm, TTM would pay the amount of Zelande’s claim into Court, if the Court ordered Zelande to deliver the hives to a ‘dump site’ of TTM’s nomination within six weeks of the payment into Court. He proposes the interim orders sought,
adjusted to permit Zelande’s limited dealing with the hives for such delivery, still be made pending such delivery.
[35] I understood the technicalities of transfer to require rather more co-ordination than simply delivery to a site within six weeks. I would not make an order in those terms. It may be TTM and Zelande can commit to a necessary timetable for delivery and pickup, which I would be prepared to order as a condition of payment in.
[36] But payment in, for delivery of the hives within a reasonable timeframe, still does not provide the special circumstances justifying mandatory interim relief. The reality is transfer arrangements take time, with differential impact on hive value depending on when they occur in the apiary season. Interim relief is no more available to maximise TTM’s recovery, simply because it chooses to exercise that transfer now.
[37]I have no reason to revisit my decision.
—Jagose J