The Canyon Vineyard Limited v Central Otago District Council
[2022] NZHC 749
•12 April 2022
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2021-425-89
[2022] NZHC 749
UNDER the Resource Management Act 1991 IN THE MATTER
of an appeal under section 299 of the Resource Management Act 1991
BETWEEN
THE CANYON VINEYARD LIMITED
Appellant
AND
CENTRAL OTAGO DISTRICT COUNCIL
First Respondent
BENDIGO STATION LIMITED
Second Respondent
Hearing: 30 March 2022 Appearances:
L Andersen QC and Ms Gaskill for Appellant P Page and S Peirce for Second Respondent No appearance for First Respondent
Judgment:
12 April 2022
JUDGMENT OF ASSOCIATE JUDGE LESTER
THE CANYON VINEYARD LIMITED v CENTRAL OTAGO DISTRICT COUNCIL [2022] NZHC 749
[12 April 2022]
Introduction
[1] The second respondent, Bendigo Station Limited (BSL), applies to strike out the appellant’s, The Canyon Vineyard Limited (CVL), appeal from a decision of the Environment Court.
[2] BSL says CVL is contractually obliged not to oppose its application for resource consent and: “… thus has not lawfully brought the [a]ppeals”.
The contract relied on
[3] The contract containing the prohibition relied on by BSL is an agreement for sale and purchase of land between Mr and Mrs Perriam (the Perriams) as vendors and Mr Hayden Matthew Johnston (as agent), dated 7 May 2002 (the Agreement).
[4] The Agreement settled on 1 September 2004. Prior to settlement, the title to the land subject to the Agreement had been transferred by the Perriams to a company they controlled called “Bendigo Station Developments Limited” (BSDL), which was incorporated on 28 March 2003.
[5] On 30 January 2003, Mr Johnston incorporated the appellant, CVL, and it took title on settlement date. The applicant, BSL, which is another company of the Perriams, was not incorporated until 12 December 2007.
[6]The Agreement contained the following special condition:
Clause 39.0 Future Development of Vendor
39.1(a) In consideration of the terms of this agreement the purchaser and the said Hayden Matthew Johnston (jointly and severally) covenant and agree personally and whether or not they are also the owners occupiers or controllers of the lands the subject of purchase hereunder or by right of first refusal, that they will not take any step or action to interfere with any development of the Bendigo lands whether adjoining, proximate or otherwise situated which the owners at any time and from time to time may wish to undertake or promote provided any such development is subject to and in conformity with the provisions of the Resource Management Act 1991 or any covenant for such consideration not to lodge any objection, submission or commence
any process or application to Court to interfere with, restrict, delay or otherwise prevent the owners from carrying out any such development. In the event of a breach of this Clause the said purchaser and Hayden Matthew Johnston shall be liable for all the costs, expenses, losses (including the cost of lost opportunity) which result to the owners and those associated with such development plans. The owners shall not be obliged to consult or advise the purchaser and the said Hayden Matthew Johnston of any such plans except as may be required by any Resource Consent process.
(b)The purchaser and the said Hayden Matthew Johnston agree to execute any deed of covenant required by the vendor or their successors in title to perpetuate and bind their transferees to the provisions of this clause 37.0 to the owners of the Bendigo lands.
(c)This Clause shall bind the executors and administrators and lawful assigns of both the vendor and the purchaser and of the said Hayden Matthew Johnston.
(d)“Bendigo Lands” means any of the present lands commonly known as “Bendigo Station” regardless of whether owned by J.C and H.L. Perriam or by Bendigo Station Limited or otherwise.
[7] The Perriams, through various entities and in their own right, retained substantial land holdings following the subdivision which allowed settlement of the Agreement to occur in September 2004.
[8] In 2019, BSL applied for a resource consent to further subdivide land it says is within the definition of “Bendigo Lands” in cl 39(1)(d) above. The land subject to that resource consent application is owned by BSDL. Mr Johnston, or CVL, filed a submission with the Central Otago District Council (the Council) opposing the application and I will refer later to which of them lodged the opposition.
[9] The Council granted a consent. CVL appealed part of the consent to the Environment Court which subsequently rejected the appeal. CVL has appealed further to this Court and it is that appeal which is subject to BSL’s strike out application.
[10] BSL did not rely on cl 39 of the Agreement before the Council or in the Environment Court. Mr Page, lead counsel for BSL, submitted the Council was not in a position to enforce the contractual provision now relied on and he further submitted, nor was the Environment Court in such a position. In any event, BSL applies to strike out the appeal in reliance on cl 39.1 of the Agreement notwithstanding that BSL, CVL and BSDL were not in existence at the time of the Agreement.
Strike out principles
[11] I leave to one side an issue raised by Mr Andersen QC, counsel for the appellant, The Canyon Vineyard Ltd, as to whether strike out is available in relation to an appeal. Assuming without deciding that strike out is available, and adapting the language of Couch v Attorney General to the present situation, the appeal must be clearly untenable before it will be struck out. It must be:1
… inappropriate to strike out [an appeal] summarily unless the court can be certain that it cannot succeed. The [appeal] must be ‘so certainly or clearly bad’ that it should be precluded from going forward.
(footnotes omitted)
[12]It is clear the jurisdiction is to be exercised sparingly and only in clear cases.
The evidence
[13] CVL filed an affidavit aimed at demonstrating that the land, subject to the present appeal, is Bendigo Lands as defined in cl 39.1(d) of the Agreement. CVL produced the Agreement and explained the nature of BSL’s application for consent and the objection taken against the application and the Environment Court appeal. Mr Andersen confirmed it is not disputed the land, subject to the present appeal, is Bendigo Land for the purposes of cl 39 of the Agreement.
[14] There is no evidence as to how CVL came to be registered proprietor of the land on 1 September 2004, or the circumstances of settlement. No doubt that is due to the significant passage of time since settlement (20 years ago).
[15] It will be appreciated at this point that the entity with the benefit of cl 39 of the Agreement is BSDL, the owner of the land subject to the challenged resource consents. It was submitted for BSL that, as it applied for the consents on behalf of the land owner, it should be seen as the agent of BSDL in that regard and therefore entitled to assert, for the benefit of its principal, BSDL, its rights under cl 39.1 of the Agreement. Again, I assume that is the case without deciding that issue as, in my view, this
1 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 729 at [33].
application turns on the more fundamental issue of whether CVL is contractually bound by cl 39 of the Agreement.
Is CVL bound by the Agreement?
[16] The purchaser in the 2002 Agreement is named as “Hayden Matthew Johnston (as agent)”. BSL submits that BSDL and CVL: “… are the contracting parties because they are the parties that performed the Agreement.”
[17] I do not accept that submission is a correct statement of the law and in any event it raises factual questions not answered in the evidence. That BSDL transferred the land to CVL does not make it or CVL parties to the Agreement. The vendors, the Perriams, chose to have BSDL take title and the Perriams had BSDL transfer the land subject to the Agreement to CVL to satisfy the Perriams’ obligations to provide title on settlement. The vendors as named in the Agreement were obliged to provide clear title – they did so and how they did so was a matter for them.
[18] Nor does CVL taking title without more make it a party to the Agreement. CVL taking title is explicable by it being nominated by Mr Johnston to do so. As a mere nominee, CVL did not become a party to the Agreement.2
[19] For completion, I record there is no evidence of a novation whereby BSDL and CVL agreed to be bound by the Agreement. That leaves only the agency route open to make CVL bound by the Agreement.
A pre-incorporation contract?
[20] BSL submits that, as Mr Johnston contracted as agent, he must have been acting on behalf of a principal. It is submitted, as CVL took title, it is safe to conclude that CVL was the principal. Of course, CVL did not exist at the time of the Agreement. Under the common law, an agent cannot bind to a contract a party that does not exist at the time the contract was made. Nor was the common law prepared to permit
2 Lambly v Silk Pemberton Ltd [1976] 2 NZLR 427 (CA).
a person who did not exist at the time the contract was made, to subsequently ratify a contract.3
[21] Section 182 of the Companies Act 1993 (the Act), permits a company not in existence at the time the contract was made, to ratify a pre-incorporation contract. In order for s 182 of the Act to apply, the contract must meet the definition of pre-incorporation contract in s 182(1) which provides:
(1)In this section and in sections 183 to 185, the term pre-incorporation contract means -
(a)a contract purporting to be made by a company before its incorporation; or
(b)a contract made by a person on behalf of a company before and in contemplation of its incorporation.
[22] It is clear the Agreement here does not fall within s 182(1)(a), that is, a contract purporting to be made by a company before its incorporation. There is no mention in the Agreement to the purchase being by a company, only a reference to Mr Johnston being an agent.
[23] Does this Agreement then fall within s 182(1)(b) of the Act? I am satisfied it does not. What is required to satisfy s 182(1)(b) was discussed by Panckhurst J in Taylor v Todd.4 The case is discussed in Company and Securities Law in New Zealand.5 The authors note that the Judge when considering the evidence in Taylor noted that the initial purpose of the incorporation of the entity that took title was not in fact for it to take title to the property in question, but to purchase other farm land which did not eventuate:6
Further, at the time that the agreement was entered into in 1999, no decision had been made as to the purchasing entity and the defendant wanted to keep his options open. A decision to use Dycom was only made some 3½ years after the initial contract had been entered into. Panckhurst J formed the view that for a company to gain the benefits of a pre-incorporation contract, it must be made on behalf of that company, in full contemplation of the company’s
3 Morrisons Company Law: Pre-incorporation contracts (online ed, Lexisnexis) at [4.4], citing
Kelner v Baxter (1866) LR 2CP174.
4 Taylor v Todd [2004] 3 NZLR 76 (HC).
5 John Farrar and Susan Watson (eds) Company and Securities Law in New Zealand 92nd ed, Brookers Ltd, Wellington, 2013) at 35.
6 Company and Securities Law in New Zealand.
incorporation. This indicated to him that a specific or ascertainable company must have been in mind when the pre-incorporation contract is entered into.
(my emphasis) (footnotes omitted)
[24] Panckurst J rejected the submission that, provided in a general sense a company was in contemplation, its identity did not matter. The situation in Taylor v Todd where it was held there was not a pre-incorporation contract was, if anything, stronger than here. In Taylor v Todd, the agreement on its face contemplated ratification by one or more companies and/or one or more trusts to be formed.
[25] Here, the reference is simply to Mr Johnston as agent. Whether his principal existed or not, and whether it was, or intended to be, a trust, company, joint venture or otherwise, is simply unknown. I conclude therefore that the applicant is not able to demonstrate that the Agreement in this case was a pre-incorporation contract. It follows CVL is not contractually bound on that basis, that is, it is not the principal for whom Mr Johnston was acting as agent, as neither the common law or s 182 of the Act are available to conclude that Mr Johnston was acting as agent for CVL.
BSL’s alternative argument
[26] BSL submits, regardless of any uncertainty as to the purchaser’s entity, cl 39.1 of the Agreement applies jointly and severally to both the purchaser and Mr Johnston in his personal capacity. It submits the clause was drafted in this way anticipating Mr Johnston would set up a nominee entity to complete the purchase after the Agreement was signed. It submits Mr Johnston and/or CVL have taken steps contrary to cl 39 of the Agreement.
[27] The structure of the clause, referring to both the purchaser and Mr Johnston, indicates it was expected the purchaser could be a different entity to Mr Johnston. However, that the Agreement provided for that possibility does not take the appellant any further, given the absence of any evidence as to who the purchaser was intended to be.
[28] I note here that it was not suggested this was a case where the corporate veil should be lifted. In order for that submission to succeed, it would have to be shown that Mr Johnston, being under an existing obligation, liability, or restriction, deliberately sought to evade that restriction by interposing a company under his control between him and the other contracting party.7
[29] It is here that I come back to the issue of whether the original submission to the Council in opposition to BSL’s application was by Mr Johnston personally or on behalf of CVL. The decision of the Council refers to the submission being made by Mr Johnston. When the submission is examined, that is understandable. The submission, which is unsigned, begins: “I oppose in part the proposed application …”. It then says: “I am the owner of Lot 9 and 18 …”. Mr Johnston then says the two Lots were purchased off the appellant back in 2002. The owner of the two Lots is CVL.
[30] BSL’s submission is that, on its face, the original submission was by Mr Johnston in breach of his obligation under cl 39 of the Agreement. Therefore, the argument goes, the original submission was “unlawful” which renders the subsequent appeal to the Environment Court a nullity. On that basis, it is said there is nothing to appeal to this Court and therefore this appeal should be struck out.
[31] I do not accept that submission. The Environment Court accepted CVL’s appeal for filing as a valid appeal and the appeal was heard and ultimately dismissed. Whether the appeal was properly before the Environment Court was a matter for that Court which it at least impliedly determined by hearing and determining the appeal. The time for a challenge to the validity of the appeal was when CVL lodged its appeal in the Environment Court.
[32] As to cl 39.1(b) of the Agreement, such does not take the appellant any further. Whether cl 39.1(b) applies to CVL begs the question of whether it is the purchaser.
7 See Prest v Petrodel Resources [2013] NZSC 34 applied in X v Company A [2014] NZHC 2126 at [98].
[33] CVL is not a successor in title to Mr Johnston, as Mr Johnston never had title. Nor is CVL a transferee of Mr Johnston as, again, Mr Johnston did not have title. Counsel did not develop a submission that the reference to “transferee” in this clause could be equated with nominee.8
[34] BSL submits that it: “continues to enjoy the right to require the appellant to enter into a deed of covenant in accordance with cl 39.1…”. Again, that begs the question of whether CVL is the purchaser and this submission does not take the appellant any further.
[35] These findings are sufficient to deal with the application to strike out. At the end of the day, the circumstances in which CVL came to take title are simply unexplained. Similarly, the circumstances in which Mr Johnston contracted as agent are also unexplained. Nearly 20 years has passed since the Agreement. It is not surprising that there is no evidence as to whether there were any discussion at the time of the Agreement as to what the reference “as agent” was understood by the parties to mean. Had there been a disagreement in respect of those factual matters, such would make the matter unsuitable for a strike out just as the absence of evidence does.
[36] Mr Page submitted the beginning and the end of the inquiry should be that Mr Johnston contracted as agent and, as CVL took title, it should be treated as the contracting party and the Court should only come to a contrary view if CVL proved it was a nominee only. That submission, however, is not an answer to the requirements of s 182 of the Act.
[37]Accordingly, the application to strike out is dismissed.
8 While cl 39.1(b) of the Agreement refers to cl 37, it is clear from the context that it should be read as cl 39. Clausen 39 in the Agreement has had its numbering changed in handwriting from cl 37 to cl 39 – a consequential change was not made to cl 39.1(b).
Costs
[38] Costs should follow the event. Costs are reserved as Mr Andersen wanted to apply for increased costs. Submissions to be not more than five pages, to be filed and served within 10 working days of the date of this Judgment. Any reply to be filed and served within a further five working days.
Associate Judge Lester
Solicitors:
Antony Hamel Solicitors, Dunedin (for Appellant) Mactodd Lawyers, Queenstown (for First Respondent)
Gallaway Cook Allan Lawyers, Dunedin (for Second Respondent)
Copy to counsel:
L A Andersen QC, Barrister, Dunedin (for Appellant)
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