The Big Basin Limited v Stockco Limited

[2022] NZHC 1020

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-14

[2022] NZHC 1020

BETWEEN

THE BIG BASIN LIMITED

Plaintiff

AND

STOCKCO LIMITED

Defendant

Hearing:	16 March 2022
Appearances:	P A Cowey and F A Trowbridge for Plaintiff M H L Morrison and J A Zwi for Defendant
Judgment:	13 May 2022
Reissued:	17 May 2022

JUDGMENT OF DUNNINGHAM J

This judgment was delivered by me on 13 May 2022 at 3.30 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

[1]                 On 21 October 2021, an interim arbitral award was issued by the Honourable Nicholas Davidson QC. In substance, it rejected The Big Basin Ltd’s (Big Basin) defence to StockCo Ltd’s (StockCo) claim for payment of the financing costs of bulls acquired by Big Basin.

THE BIG BASIN LIMITED v STOCKCO LIMITED [2022] NZHC 1020 [13 May 2022]

[2]                 Big Basin is unhappy with the outcome of that decision. It seeks leave to appeal under cl 5(1)(c) of the Arbitration Act 1996 on six alleged questions of law arising out of the interim award.

[3]                 StockCo opposes the application. It says none of the grounds raised reached the requisite threshold of being strongly arguable errors of law. Indeed, it says some are not errors of law at all but are challenges to factual findings which cannot be appealed.

[4]                 At issue is whether leave to appeal the interim arbitral award should be granted on any one or more of the errors of law alleged.

The factual background

[5]                 StockCo is a livestock financier which provides finance to farmers pursuant to the terms of its standard Master Livestock Agreement (MLA). As stock lots are delivered to the farm, each transaction is incorporated into the MLA by way of a separate supplementary agreement.

[6]                 The applicant, Big Basin, was a company established by its four directors, Carolyn Menzies, Leonard Bourton, Daniel Thomas, and Kerryn Thomas, to farm livestock financed by StockCo.

[7]                 Each of the four directors signed the MLA on 27 June 2017. At around the same time they also provided personal guarantees for the payment of amounts owing to StockCo under the MLA and supplementary agreements as well as directors’ certificates confirming their authority to execute the MLA and supplementary agreements.

[8] The issue in the arbitration was whether Big Basin was liable for the total cost price paid by StockCo for 787 R2 bulls under the terms of the MLA and Supplementary Agreement 1 (SA(1)), plus applicable finance costs and interest. The 787 R2 bulls had apparently been purchased for Alliance Group by Leonard Bourton in the first half of 2017, and he had already taken possession of them.

[9]                 On 2 June 2017, StockCo purchased 519 of the bulls in Lots 1-15 from Alliance Group. This was before Big Basin was incorporated or had signed any documentation with StockCo.   On 6 July 2017, StockCo purchased the remaining 268 bulls in    Lots 16-24 from Alliance Group.

[10] Big Basin was incorporated on 14 June 2017 and proposed farming the 787 R2 bulls which were financed by StockCo. Documentation was eventually signed by Big Basin, including SA(1),1 which covered all 24 lots making up the 787 R2 bulls. StockCo then loaded the debt for 787 bulls to the account of Big Basin. StockCo paid the supplier, Alliance, the cost price of $1,114,485.79 (including GST) in respect of the 787 R2 bulls, based on Alliance’s invoices addressed to Big Basin (as StockCo’s authorised agent) and which detailed the numbers, stock class, weight and purchase cost of the 787 R2 bulls.

[11] Big Basin defaulted on its obligations under the MLA, and StockCo terminated it on 30 August 2019. In due course, StockCo pursued a contractual liquidated debt claim, in reliance on the terms of the MLA and SA(1), including in respect of the debt owed by Big Basin for the 787 R2 bulls. Big Basin denied liability for the debt relating to the bulls, claiming it did not receive all the bulls. StockCo, however, denied it needed to prove delivery or even ascertainment of the bulls. It was Big Basin’s responsibility under the MLA to locate and take delivery of the bulls, and Big Basin was liable to StockCo under the contract regardless of whether the bulls had been delivered.

[12] The interim arbitral award, which issued on 21 October 2021,2 was a comprehensive document comprising 124 pages of factual findings and analysis of the legal arguments. In the end, the arbitrator agreed with StockCo’s position and held that the parties were bound by the MLA and SA(1). Big Basin was therefore liable to StockCo for the debt and related costs associated with financing the 787 R2 bulls. That debt was to be quantified following further submissions when a final award would issue.

1      Although an issue raised by Big Basin is whether such signing complied with the requirements of the directors’ certificate.

2      Although dated 6 October 2021.

Principle applying to an application for leave to appeal an arbitral award

[13]              Parties to an arbitration do not have  automatic  rights  of  appeal  to  the  High Court. Clause 5(1)(c) of the second schedule of the Arbitration Act 1966 limits appeals to “any question of law arising out of an award … with the leave of the  High Court”. Leave may only be granted where the High Court “considers that, having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of 1 or more of the parties”.3 A question of law is defined in cl 5(10), which says it:

(a)includes an error of law that involves an incorrect interpretation of the applicable law (whether or not the error appears on the record of the decision); but

(b)does not include any question as to whether–

(i)the award or any part of the award was supported by any evidence or any sufficient or substantial evidence; and

(ii)the arbitral Tribunal drew the correct factual inferences from the relevant primary facts.

[14]              If the statutory threshold is met, that is, there is an error of law that could substantially affect the rights of one or more of the parties, there remains a discretion as to whether leave should be granted. In exercising that discretion, Blanchard J in Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd held the primary consideration is the prospective appellant’s ability to show it has “a very strongly arguable case that the arbitral tribunal has erred in law”.4 This is because:5

… our Parliament, like those in the United Kingdom and Australia, has chosen to favour finality, certainty and party autonomy over [wide rights of appeal]. It intended to encourage arbitration as a dispute resolution mechanism. By enacting a statute with the expressed purpose of re-defining and clarifying the limits of judicial review of arbitral awards, Parliament has made clear its intention that parties should be made to accept the arbitral decision where they have chosen to submit their dispute to resolution in such a manner. It plainly intended a strict limitation on the involvement of the Courts where this choice has been made.

…

3      Clause 5(2).

4      Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 (CA) at [54](1).

5      At [52] and [54](1).

The Court should consider in a preliminary way … the strength of the argument that there has been an error of law and the nature of that point. If it is a one-off point, in the sense that it is unlikely to occur again and cannot be seen as having any precedent value, either generally or to the parties on another occasion, then unless there are very strong indications of error leave should rarely be given.

[15]              Other factors which were identified in Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd as being potentially relevant to the Court’s exercise of discretion, and which may have relevance in this case, include:6

(a)the importance of the dispute to the parties so, by way of example, where the dispute has a non-monetary significance to the parties and may be a useful precedent for governing their relationship going forward, it will be easier to obtain leave;

(b)how the question arose before the arbitrator, with leave being more difficult to obtain on a question of law that was at the centre of the arbitration;

(c)the qualifications of the arbitrator, as where (as here) the arbitrator is legally qualified it may be harder to obtain leave, although equally, as Mr Cowey points out, the fact the parties retained a well-qualified arbitrator may signal it was vitally important to the parties that the law be applied correctly;

(d)the amount of money involved, with leave being more readily granted where a substantial amount of money is involved; and

(e)the delay involved in going through the Court system, as where the delay is disproportionate to the size of the dispute, that would weigh against leave being granted.

6 At [54].

The proposed questions of law

[16]              Big Basin seeks to appeal the interim award on the following six questions of law:

Question 1 – Application of bailment principles

Whether the Tribunal erred at [515] in deciding that bailment principles, including delivery, did not apply to the MLA and SA(1).

Question 2 – Implication of terms

Having held, at [507], with respect correctly, that to contract out of bailment principles requires clear language, whether the Tribunal erred at [513] in deciding that the bailment principle of delivery could be contracted out of by an implied term, when:

(a)terms that are implied are not “the clearest expressed terms” required to contract out of bailment principles (Union Transport Finance v British Car Auctions Ltd);7 and

(b)such implied term was not necessary to give business efficacy to the contract.

Question 3 – Findings beyond scope of arbitration

Whether the Tribunal erred in:

(a)having held at [62], with respect correctly, that StockCo’s case was advanced on the basis that liability was not conditional on proof of delivery, and at [65], that it is not for the Tribunal to embark on a further enquiry into delivery, the Tribunal went beyond the submission to arbitration and enquired into the circumstances of delivery; and

7      Union Transport Finance v British Car Auctions Ltd [1978] 2 All ER 385 at 391.

(b)reaching the conclusion at [351] which is untenable given the various inconsistent findings of delivery at, inter alia, [179], [238], [349], [512], [517], and [573].

Question 4 – Interpretation of directors’ certification

Whether the Tribunal erred at [357] in interpreting clauses 2(1)(d) and 13 of the directors’ certification to mean that any single director of Big Basin had authority to bind the company (with the consequence that SA(1) was enforceable).

Question 5 – Implication of contractual terms into dealings

Whether the Tribunal erred at [516] in its alternate finding that if the contractual documents were unenforceable, then “by necessary implication the terms … would have been the same as the contractual document provide” when:

(a)Liability was not advanced on the basis of implied terms. No implied terms were pleaded and the alternate finding was therefore beyond the scope of the submission to arbitration;

(b)The terms of the contractual documents do not meet the test for the necessary implication; and

(c)Terms cannot be implied into non-contractual dealings.

Question 6 – Liability for unascertained goods

Whether the Tribunal erred at [514] and [515] in finding that Big Basin could be liable for unascertained goods.

Questions 1 – 3 – Relevance of bailment principles to StockCo’s claim

[17]              I address Big Basin’s questions of law 1 – 3 together, as they all deal with the application of bailment principles to StockCo’s claim. As Mr Cowey says:

(a)Question 1 asks whether bailment principles, including delivery, apply as a matter of law.

(b)Question 2 concerns whether the test requiring clear language to exclude bailment principles can be met by an implied term, and whether the implied term, in any event, meets the criteria for implication of terms.

(c)Question 3 relates to a process issue. Did the Tribunal depart from the questions submitted to arbitration, when StockCo pleaded that delivery was not an essential element of its cause of action?

[18]              Big Basin’s primary submission is that the MLA and SA(1) are contracts of bailment. They assume that ownership and possession of the livestock will be separated, with livestock which are owned by StockCo being placed in the possession of a farmer. As a consequence, the common law bailment rules apply unless contracted out of in the clearest express terms.

[19]              Big Basin says StockCo acknowledges this is a bailment contract in its amended points of claim where it says:

StockCo’s business includes the purchase, ownership and taking clear title to livestock that is then bailed to its particular farmer/customer pursuant to the terms of StockCo’s Standard Master Livestock Agreement (Stock):

(a)the Master Livestock Agreement creates a facility for particular ‘lots’ of Stock to be bailed to the farmer;

(b)various lots of Stock are incorporated into the facility by way of various supplementary agreements that are entered into between the farmer/customer and StockCo.

[20]              Furthermore, the MLA expressly provides for the separation of ownership and possession in the following clauses:

5.Purchase and Ownership of Stock

5.1Title and property in all Stock will pass to and remain at all times of StockCo.

…

6.Grazing – Management – Inspection

6.1The stock shall be located and grazed on the Land without cost to us.

…

[21]              For the contract of bailment to take effect, Mr Cowey argues the bailor must transfer possession of the thing bailed to the bailee. For example, in Palmer on Bailment, it is stated “in cases where a delivery is attempted, that delivery must be perfected in order for a bailment to take effect”.8 Similarly, in Harding v CIR, Coates J observed:9

The essential element of a bailment is the delivery of possession of the thing bailed. By the transfer of possession from bailor to bailee the latter acquires an interest in the chattel bailed because he then has the right to possess and use it.

[22]              Big Basin asserts it has a strongly arguable case that the essential element of bailment, the transfer of possession, applies to the MLA and SA(1). In that regard, because the contracts relied on are bailment contracts, the common law rules as to bailment apply unless ousted in “the clearest express terms”.10 Here, StockCo cannot prove that possession was transferred to Big Basin nor did it expressly contract out of this requirement, and this affects StockCo’s entitlement to succeed on its claim under the contracts.

[23]              In its submissions on the second alleged error of law, Big Basin says the arbitrator accepted that if the common law rules of bailment are not to apply to a contract of bailment, it requires clear language, but then erred in finding, at [513], that an implied term could override the obligation on StockCo, as bailor, to deliver the stock to Big Basin, as bailee, saying:

It is in my view implicit that the party with the liability for the costs of transport must make sure the stock is delivered correctly in order to perform the obligations to graze or finish stock, and here that liability fell on Big Basin.

8      Norman Palmer, Palmer on Bailment (3rd ed, Sweet and Maxwell, England and Wales, 2009) at 22.

9      Harding v CIR [1977] 1 NZLR 337 (HC) at 341.

10     Union Transport Finance v British Car Auctions Ltd, above n 7, at [391].

In Mr Cowey’s submission, the arbitrator’s view that an implied term would meet the test for excluding the requirement for delivery was erroneous.

[24]              Furthermore, Big Basin says it has a strongly arguable case that the implied term found in [513] was implied in error. It did not meet the established test for implication of a contractual term because it was not necessary to give business efficacy to the contract.11 In any event, StockCo did not plead reliance on implied terms. Its case was the contract made Big Basin liable for delivery.

[25] Big Basin’s third challenge to the arbitrator’s findings on bailment was that he made findings on delivery of the R2 bulls which were beyond the scope of the arbitration. The arbitrator found, at [351], “that at least 720 head were delivered”, although he expresses it differently at other paragraphs. For example, at [349], he says “there were more than 673 R2 bulls delivered out of the 787, probably many more than that”, and, at [350], he stated “it is very likely to have been more than 673 head, somewhere between that number and 760”.

[26]              Big Basin says the Tribunal was in error in making a finding on delivery. On StockCo’s pleaded case, delivery was not an issue in dispute, and the parties had not assembled evidence on it. StockCo’s position that delivery and location of the bulls was not relevant because it was pursuing a liquidated contractual debt claim was reiterated in its submissions to the Tribunal. If StockCo had pleaded that delivery had occurred, then Big Basin would have obtained discovery to confirm what bulls were delivered. It had not done so, as this was not the case Big Basin needed to answer.

[27]              Big Basin also says that, by making findings of delivery, the arbitrator disregarded the fact StockCo carried the onus to prove delivery and effectively reversed the onus onto Big Basin to prove non-delivery. This is important because Big Basin says that if it is right and bailment principles do apply, the arbitrator found, as a matter of fact, that the vast majority of the stock was delivered to Big Basin. If that finding is not challenged, it affects whether leave to appeal should be granted on

11  Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] NZCCLR 17 at [116]; and BP Refinery (Westernport) Proprietary Ltd v Shire of Hasings (Victoria) [1977] UKPC 13.

the bailment questions as, even if it is held delivery was required to be proved, the outcome as between the parties would not be substantially different.

[28]              Big Basin also submits that there were inconsistent findings as to whether the R2 bulls comprising lots 1 – 24 were largely delivered. In paragraphs [179], [238] and

[573] the arbitrator made differently worded findings to the effect that at least 473 of the R2 bulls, but may be close to 519 bulls, were delivered to Killermont Station (where two of the directors lived), by 6 July 2017. There are then the findings made at [349], [350] and [351], which are set out at [25] above. Subsequently, at [512], the arbitrator says “more than 673 were delivered to Killermont. The true delivery to Killermont …. will never be known”, while at [517] he says “I find at least 700 were delivered”. Big Basin submits the inconsistency in these findings highlights that the findings on delivery were beyond the scope of submission to arbitration.

Discussion

[29]   There is a fundamental divergence between StockCo and Big Basin on the relevance of the law of bailment. In that regard, I accept  StockCo’s  position that  Big Basin wrongly assumes StockCo’s claim is an action in bailment, and not a claim for sums owed under a contract. As is said in the text, Palmer on Bailment:12

Claims against bailees are commonly framed in contract and/or tort and may lead to an award of damages calculated without reference to any special principle of bailment. That is also true of claims brought against bailors. But bailment is the relationship sui generis and a bailor may in principle sue the bailee for breach of bailment: either cumulatively or alternatively to a claim in contract or tort, or independently of any such claim, on facts that disclose no liability in either contract or tort.

(footnotes omitted)

I accept StockCo has chosen to pursue a contractual damages claim under the MLA and SA(1), and had no need to prove the elements of a claim founded on bailment.

[30]   Although Big Basin relies on the English case of Union Transport Finance v British Car Auctions to support its argument, I do not think it assists. That was a case where the plaintiff sought to rely on its rights at common law as a bailor, giving it an

12     Palmer, above n 8, at 1742.

immediate right to repossession of the car it owned but had transferred to another party under a hire purchase agreement, to pursue a claim in conversion against the defendant who sold the car.13 The defendant, however, sought to rely on the express terms of the hire purchase contract between the plaintiff and the car purchaser to show the plaintiff was not immediately entitled to possession, and so could not pursue its claim to conversion. That argument was rejected by the Court. The right to immediate possession of the car, which was held by the plaintiff as bailor, was additional to its right to repossess the car under the terms of the hire purchase contract. This case was not synonymous with the present circumstances at all, and indeed, serves to highlight the separate nature of a claim in contract as opposed to a claim relying on the rights as between a bailor and bailee.

[31]   Similarly, the case of Harding v CIR, which is also relied on by Big Basin, does not support its position. The question there was whether a purported bailment was effective for tax purposes.14 It does not demonstrate that contracts which involve an element of bailment cannot be enforced on their own terms without reference to the common law principles of bailment.

[32] Accordingly, as StockCo was not pursuing a claim founded on bailment, nor seeking to avail itself of common law remedies as a bailor, there was no need to consider whether the terms of the MLA expressly precluded bailment obligations. None of the authorities relied on by Big Basin demonstrate the arbitrator erred in rejecting Big Basin’s argument that StockCo needed to prove delivery of the 787 R2 bulls to Big Basin in order to succeed on its contractual debt claim under the MLA and SA(1).

[33]   This is not a strongly arguable error of law. Indeed, I consider the arbitrator was almost certainly correct to find at [515] that the MLA and SA(1) applied, and to reject Big Basin’s argument that bailment principles applied and needed to be proved.

[34]   My view that there is no real merit to the first question of law because it fundamentally misunderstands StockCo’s  claim, effectively determines the response

13     Union Transport Finance v British Car Auctions, above n 7.

14     Harding v CIR, above n 9.

to question two as well. The assertion that contracting out of bailment principles requires clear language and could not be achieved by implication is only relevant if StockCo is relying on its status as bailor to make the claim and has to prove it delivered the bulls to the bailee. However, as I have already explained, it is not. The contract did not require StockCo to ensure delivery, but the arbitrator went further to say it was implicit in the contract that Big Basin was responsible for ensuring delivery of the bulls to Killermont Station. That is not a finding of an implied term but simply reinforces the lack of obligation on StockCo to achieve delivery. A successful challenge to it would not materially affect the outcome.

[35]   Accordingly, the second question does not engage a sufficiently material error of law warranting leave to appeal being granted.

[36]   The third question involves the arbitrator’s findings as to whether the bulls were actually delivered. Big Basin’s challenge to this finding (whatever the exact number) is that it was beyond the scope of the submission to arbitration and, in any event, is untenable, given the inconsistent findings in the interim award as to the exact number which were delivered.

[37]   I discuss the second part of Big Basin’s challenge first, that is, that the arbitrator made “inconsistent findings”. In that regard, I accept, as Stockco submits, that read carefully, in their full context, the findings are consistent with each other. None of the findings are conclusive as to the number which were delivered, but each indicates a minimum number, resulting in a finding that “at least 720” were delivered. I accept that this is a factual finding which is not appealable.

[38]   However, Big Basin also suggests that this issue was “beyond the scope of submission to arbitration”. I do not consider that is correct. The issue did arise in the pleadings because Big Basin’s defence put the matter in issue. It claimed that as the contract involved bailment of the bulls, and possession of stock was not transferred to Big Basin, it had a defence to the claim. For that reason, it was open to the arbitrator to make a finding on the evidence before him as to whether delivery had occurred.

[39]   I also accept that the arbitrator did not say it was not for him to embark on an inquiry into delivery. Rather, he held at [65] that it was not appropriate to embark on an inquiry into obtaining further evidence on this issue during the course of the hearing, particularly when Big Basin had abandoned its earlier interlocutory application for further discovery of documents relating to delivery.

[40]   Accordingly, I accept it was open to the arbitrator to make a finding that at least 720 of the bulls were delivered. This was a factual finding within the scope of the arbitration and leave to appeal on this issue is declined.

Question 4 – Did the Tribunal err in interpreting the directors’ certificate?

[41]   Big Basin argues the arbitrator erred at [357] in finding “any director could bind Big Basin under the directors’ certificate by clause 2.1(d) and clause 13 which by necessary inference mean that each director had authority to bind Big Basin”. If Big Basin is right, it says the SA(1) is unenforceable for want of proper execution.

[42]   Mr Cowey submits the customary authority of a single company director acting alone is limited.15 Here, the directors’ certificate does not give or represent that a single director can bind Big Basin. Clauses 2.1(d) and 13 of the directors’ certificate state that the directors certify:

2.1All resolutions … and all other necessary action required pursuant to the Constitution and relevant legislation in order to:

…

(d)authorise the persons specified in paragraph 13 to:

(i)give any notices and other communications required under or in connection with the Documents and Transactions on behalf of the company; and

(ii)take any other action required under or in connection with Documents and Transactions on behalf of the Company, have been passed and taken.

…

15     Bishop Warden Property Holdings Ltd v Autumn Tree Ltd [2018] NZCA 285, [2018] 3 NZLR 809 at [27].

13.      Authorised signatures

The following are the true signatures of the persons, other than Directors, who have been authorised to give notices and other communications, and take any other action required, under or in connection with the Documents and on behalf of the company.

[43]   Mr Cowey says the directors’ certificate needs to be interpreted according to the ordinary principles of contractual interpretation.16 He notes there were no signatures following cl 13, and there is no language in the certificate that could be construed as meaning a single  company  director  had  authority  to  contract  on  Big Basin’s behalf.

[44]   Mr Cowey says that while StockCo suggests this is a question of fact, or at least partly so, it is a question of law because it involves the construction of a document. In Milk New Zealand (Shanghai) Co Ltd v Miraka Ltd, which dealt with the Court’s  jurisdiction to determine questions of contractual interpretation under    cl 5(1) of the Arbitration Act 1996, the Court said:17

The construction of a document is a question of law. That rule has its origins in trial by jury in medieval times when juries were illiterate and most of the documents which came before a jury were deeds drafted by lawyers …

It does not apply when the intention of the parties, objectively ascertained, has to be gathered partly from documents but also from oral exchanges and conduct. Then the terms of the contract are a question of fact.

[45]   Here, Mr Cowey says the question is clearly one of law. The directors’ certificate is a legal document crafted by StockCo, and its interpretation does not turn on any oral exchanges or conduct. Its interpretation is confined to the meaning to be taken from the words of the directors’ certificate.

Discussion

[46]   I accept, as Mr Morrison acknowledged in written submissions for StockCo, interpretation of a contract is a question of law. The issue for me is whether the

16     As set out in Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432.

17     Milk New Zealand (Shanghai) Co Ltd v Miraka Ltd [2019] NZHC 2713 at [50]–[51], citing Bryson v Three Foot Six [2005] NZSC 34, [2005] 3 NZLR 271 at [20].

arbitrator’s interpretation was strongly arguable to be in error and that, in the exercise of my discretion, leave should be granted to pursue that issue on appeal.

[47]The relevant findings made by the arbitrator were as follows:

[357]In short, I conclude any director could bind Big Basin under the directors’ certificate by clause 2.1(d) and clause 13 which by necessary inference mean that each director had authority to bind Big Basin, unless that authority was qualified by the variation or estoppels as pleaded.

[358]Kerryn said she did not realise that. Although she says that, the documents are submitted the best evidence objectively of what was intended, and by themselves they fly in the face of a variation which would qualify Carolyn Menzies’ authority as alleged. I reject the Big Basin contention that a single director could not transact, and if not, then requirement for all directors to transact makes no commercial sense, and would require express definition.

[48]   What is at issue is whether Big Basin’s contention that if the directors’ certificates are interpreted correctly more than one director was required to sign each supplementary agreement, rather than just Carolyn Menzies, as occurred.

[49]   I do not consider that this issue is strongly arguable. The directors’ certificate, which was signed by all four directors, confirmed that the directors authorised the execution of the documents listed in the schedule. The schedule had only one entry which read:

Master Livestock Agreement and supporting schedules and Supplementary Agreement(s).

[50]   It also said, at 2.1(c), that all resolutions which were required to “authorise the execution of the Documents on behalf of the Company had been passed and taken”. While no non-directors had been given authority to sign the documents under cl 13, it was clearly open to the arbitrator to interpret that clause, alongside cl 2.1, as authorising each director of the company to sign the MLA and SAs.

[51]   The most logical reading of cl 13 is that each director has authority to sign the MLA and SAs, but that no non-director has been given that authority. There would be no point otherwise in inserting the words “other than Directors” in that clause. The only point of the document is to confirm the directors’ authority to sign the document

(given no non-directors are given that authority), and there would be no business efficacy to the document if it did not authorise any director to sign the MLA and SA(1).

[52]   In those circumstances, while arguable, I do not consider Big Basin’s interpretation is strongly arguable.  Furthermore,  as  counsel  for  StockCo  note,  Mr Bourton was held to have also confirmed Big Basin’s agreement to SA(1), so there was compliance with s 181(a)(i) of the Companies Act 1993 in any event.18

[53]   In summary, while I consider question four raises a point of law, it advances a strained interpretation which is not strongly arguable. Furthermore, given the evidence that two directors authorised entry into SA(1) in any event, it would not materially change the outcome.

[54]I decline leave to appeal on this ground.

Question 5 – implication of contractual terms

[55]At [516] the arbitrator stated:

Had my conclusion been different, that MLA and SA(1) are not enforceable then by necessary implication the terms on which more than 673 bulls were delivered to Killermont would have been the same as the contractual documents provide. Big Basin could not sit on its hands as if its possession of this large herd was under some other contractual or common law principle, stipulate a grazing fee, and return some processing receipts, while denying liability for the bulls, at the same time knowing of and accepting the terms of the Facility for many further head of stock, cattle and sheep.

[56]   Big Basin seeks that this alternative finding is overturned, saying it is wrong in law.

[57]   First, StockCo did not advance its case on the basis that StockCo could imply its contractual terms into other dealings with Big Basin.

[58]   Second, Big Basin says terms cannot be implied into dealings in the absence of contractual formalities being complied with. The plaintiff would have to resort to equitable remedies such as quantum meruit in such circumstances. Any suggestion

18     Interim award at [258] and [569].

StockCo purchased lots 1 – 24 on Big Basin’s promises, and should be entitled to equitable relief, is not open to StockCo on its pleadings. Furthermore, Big Basin does not own Killermont Station which received the bulls. A separate company does, and so any cause of action would need to be brought up against Killermont Station, not against Big Basin.

Discussion

[59]   On this issue I accept StockCo’s position that these were, in effect, obiter comments as to what ruling the arbitrator would have made had the MLA and SA(1) not been enforceable. He did, however, find that the MLA and SA(1) were enforceable, and there would be no utility in allowing Big Basin to pursue this claimed error in law.

[60]Accordingly, leave to appeal on this issue is declined.

Question 6 – did the Tribunal err in finding that Big Basin could be liable for unascertained goods?

[61]   The last error of law asserted is that the arbitrator erred in making the following finding:

[514] While Mr Cowey refers to StockCo v Gibson … that is a very different case to the instant.¹⁹ It was not a claim by Stockco against a farmer client but rather a contest between competing securities held by Stockco and bank lenders for a debt owed by Nugen or Nugen Farms Ltd.

[515] As I have found the MLA and SA(1) apply in principle the case for Big Basin of bailment of unascertained goods without contractual reference to such terms is rejected.

(footnote added)

[62]   Mr Cowey says StockCo’s entire claim is predicated on it being the owner and bailor of the bulls which were the subject of lots 1 – 24, as it pleaded in each case that it took title and ownership of the lots and bailed the lots to Big Basin. Mr Cowey says

19     StockCo v Gibson [2012] NZCA 330.

on StockCo’s own case, it could not have been the owner, as the bulls which were the subject of lots 1 – 24 were unascertainable, noting the arbitrator found:20

It was a frustration through the interlocutory process and hearing, that there seemed to be no reliable evidential track of each of the R2 bulls …

[63]   In asserting that the bulls which comprised lots 1 – 24 had to be ascertainable, Mr Cowey relied on Re Goldcorp Exchange Ltd (In Receivership) as the leading case on unascertained goods.21 In that case, Goldcorp became insolvent while in possession of an undifferentiated quantity of gold. Lord Mustill found that title to the gold had not passed to the purchasers, the gold was unascertained, and goods need to be ascertained before property in them passes to the purchaser.

[64]   Mr Cowey also cites Healey v Howlett and Sons, a claim under the Sale of Goods Act for supplying fish which were not of merchantable quality. The claim was rejected on the basis that the fish were not the property of the buyer when they were put on the rail and deteriorated, as the 20 boxes of fish which were intended for the defendant had not been ascertained or differentiated from the balance of the boxes of fish.22

[65]   Lastly, Mr Cowey relies on Gibson v StockCo, where the High Court held bulls that were unascertained could not be subject to Stockco’s security, nor could unascertained bulls be gifted.23 He says if the bulls cannot be ascertained, then StockCo’s pleaded claim for lots 1 – 24 cannot succeed.

Discussion

[66]   To a large extent, this argument is a continuation of Big Basin’s argument that the contract involves a bailment, and the goods which were bailed need to be both identified and possession given to the bailee.

[67]   I have already held that argument misunderstands StockCo’s claim. It is a claim for monies owing under the contracts entered into. In particular, StockCo points

20 At [56].

21     Re Goldcorp Exchange Ltd (In Receivership) [1994] 3 NZLR 385 (PC).

22     Healey v Howlett and Sons (1917) 116 LT 591.

23     Gibson v StockCo HC Auckland CIV-2009-404-3120, 17 December 2010 at [224]–[226].

to various clauses in the MLA, including cl 1.2(e) whereby Big Basin agreed to “[b]e liable to StockCo for the aggregate cost price of all Stock including all Stock subsequently acquired, interest on that amount until it is repaid, and the costs and charges and any other money due under this Agreement”. For the purpose of interpreting that clause, “Stock” was defined in cl 2.3 to mean “all livestock specified in the Schedule and in any supplementary agreement”, the word “Schedule” in turn was defined to mean “the specific details of the Stock … as contained in the Agreement or any Supplementary Agreement or amendment”.

[68]   Furthermore, it was Big Basin’s obligation under the agreement to ensure the stock became StockCo’s property. In particular, StockCo points to cl 3.4 which says Big Basin agreed “that the Stock upon acquisition will be StockCo’s absolute property exclusively and that the same are free and unencumbered” and, under cl 5.2, that Big Basin would “do all things necessary and further warrant that pursuant to the transfers contemplated by this clause, clear title to all of the Stock has been or will be transferred to [StockCo], on and from the settlement date applicable to that Stock, free of any security interest or other encumbrance”. In short, it was Big Basin’s obligation to ensure StockCo obtained title and property in the stock and, as Mr Morrison submits, it is not open to Big Basin to deny liability on the basis that StockCo did not obtain title to the 787 bulls which were described in SA(1).

[69]   I am satisfied that the cases referred to by Big Basin in support of this alleged error of law do not assist its argument. This is not a case where StockCo seeks to claim an interest in the R2 bulls, and so it can be distinguished from Re Goldcorp and Healey v Howlett. I also do not consider the decision in StockCo v Gibson is relevant to this alleged error of law. It involved a dispute between StockCo, as the secured creditor of Nugen Farms Ltd, and certain banks who had a general security agreement in respect of a separate group of companies which had owned the relevant 750 cows. It did not concern a claim by StockCo against its farmer client, Nugen Farms Ltd, and indeed, in that case, there was no dispute that Nugen Farms Ltd was liable to StockCo for the sum paid to it for the 750 cows.

[70] An additional hurdle for Big Basin is that there was no finding that the 787 R2 bulls were not ascertained. Evidence was given by Mr McLean of Alliance as to the

ascertainment in sale of the 787 bulls from the original vendor to Alliance, and he explained that the Alliance invoices to StockCo were populated using that information. SA(1) was also populated with the same information as to the ascertainment details of 787 R2 bulls, and Big Basin acknowledged that Mr Bourton took possession of those bulls. There would be difficulties, in those circumstances, to argue that the bulls were not sufficiently ascertained, even if this was a relevant issue.

[71] In addition, of course, the arbitrator made a factual finding that at least 720 of the 787 R2 bulls were delivered. To that extent, at least, the bulls must have been ascertained and, as Mr Morrison argues, the maximum shortfall of 67 R2 bulls could not be sufficient to show that one of the questions of law could substantially affect Big Basin’s rights.

[72]   Again, I do not consider this is a sufficiently arguable error of law to warrant granting leave to appeal.

Exercise of discretion

[73]   As I have found that none of the alleged errors of law meet the statutory test for the grant of leave, strictly speaking I do not need to consider any other factor which would bear on the exercise of my discretion. However, having regard to the additional factors identified in Gold and Resource Developments (NZ) Ltd, as set out in [15] above, I consider there are other factors which, in addition to the strength of the argument as to an error of law, point against leave being granted.

[74]   In that regard, I note the qualifications of the arbitrator. He is a Queen’s Counsel with significant experience in commercial disputes, as well as being a former High Court Judge. He also has significant experience as an arbitrator and was appointed because of this experience.

[75]   While the importance of the dispute and the amount of money involved might favour the grant of leave to appeal, I accept this is not a dispute which will have precedent value for the parties. It is simply a debt collection claim. While the amount of money involved, being close to $1,600,000, is relatively significant, it is not so significant as to warrant the cost of ongoing litigation when those arguments are not

strong. That factor is reinforced by the fact a factual finding was made that at least 720 bulls were delivered to Big Basin, and so the arguments as to bailment would only apply to a small part of the contractual claim.

[76]   Finally, I accept that the further delay of pursuing a High Court appeal is simply not warranted in the absence of a seriously arguable question of law. The arbitration agreement was entered into more than two years ago. In the absence of a strongly arguable case that there has been an error of law, the significant further delay which would be occasioned by allowing an appeal cannot be justified.

Conclusion

[77]   The statutory threshold for granting leave to appeal is not met, nor has Big Basin demonstrated it can present a strongly arguable case that the interim award contains errors of law. Accordingly, leave to appeal is declined.

[78]   Costs are reserved, but my preliminary view is that the respondent is entitled to 2B costs. If costs cannot be agreed, any application for costs must be made within 20 working days of the date of this decision.

Solicitors:

Parry Field Lawyers Ltd T/A Parry Field, Christchurch Morrison Mallett, Auckland