The Malthouse Limited v Rangatira Limited
[2017] NZHC 2070
•31 August 2017
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2017-485-191 [2017] NZHC 2070
BETWEEN THE MALTHOUSE LIMITED
Plaintiff
AND
RANGATIRA LIMITED Defendant
Hearing: 6 July 2017 Appearances:
H McIntosh and H Macfarlane for the plaintiff
S Gollin and J Standage for the defendantJudgment:
31 August 2017
JUDGMENT OF ASSOCIATE JUDGE SMITH
Contents
Introduction ............................................................................................................. [1] Relevant provisions of the Investment Agreement ............................................. [14] The share subscription provisions....................................................................... [14] The share purchase provisions ............................................................................ [17] Clause 9............................................................................................................... [19] Evidence on the application ................................................................................. [22] The issue to be decided ......................................................................................... [51] Legal principles applicable to plaintiff ’s summary judgment applications .... [52] Counsel’s submissions........................................................................................... [58] Malthouse ............................................................................................................ [58] Rangatira ............................................................................................................ [67] Discussion and conclusions................................................................................... [79] The approach to interpretation generally ........................................................... [79] Application of that approach in this case............................................................ [85]
Result .................................................................................................................... [116]
THE MALTHOUSE LIMITED v RANGATIRA LIMITED [2017] NZHC 2070 [30 August 2017]
Introduction
[1] The plaintiff (Malthouse) and the defendant (Rangatira) were formerly shareholders in a beer brewing company, Tuatara Brewing Company Ltd (Tuatara).
[2] Prior to 17 June 2013, there were eight shareholders in Tuatara, being Malthouse, Vasta Brewing Co Ltd, Mr T Collings, Mr F McInnes, Mr A Hart, Mr J Wells, Mr M Dellabarca, and Mr C Mallon. I refer to the shareholders before
17 June 2013 in this judgment collectively as “the vendors”.
[3] On 17 June 2013, the vendors entered into an Investment Agreement with Rangatira (the Investment Agreement) under which Rangatira agreed to acquire certain shares in Tuatara, and to subscribe for additional shares in Tuatara. The result of the share acquisition and the subscription for the new capital was that Rangatira acquired 35 per cent of the issued shares in Tuatara.
[4] The Investment Agreement contained provisions which would require Rangatira to pay to the vendors and to Tuatara additional sums (the “Contingent Purchase Price” and the “Contingent Subscription Price”1 — collectively the “Contingent Payments”) if either of two “trigger” events occurred.
[5] I am only directly concerned in this judgment with one of the trigger events. It was described in the Investment Agreement as an “Exit event”. “Exit” was defined in the Investment Agreement as meaning “the sale of all (or substantially all) of the assets of [Tuatara] or the shares of [Tuatara]”, and the Contingent Payments were to become immediately due and payable “if an Exit event occurs which actually or by implication values [the business of Tuatara] or [Tuatara] at greater than
$12,000,000.2
[6] There is a dispute between the vendors and Rangatira as to whether an Exit event has occurred. In January 2017, Rangatira and the vendors entered into
negotiations for the sale of all of the shares in Tuatara to DB Breweries Ltd (DB), at
1 The Contingent Purchase Price was $777,788.18 (plus GST if any), and the
Contingent Subscription Price was $222,230.94 (plus GST if any).
2 Investment Agreement, cl 9.8.
a price which would exceed $12,000,000. Rangatira was of the view that selling at the price under consideration would not constitute an Exit event, because it believed that the Exit event provisions were subject to a “sunset provision” under which any “Exit event” had to occur by 31 December 2015 (or such other date as might be agreed in writing between Rangatira and the vendors) — the “Contingent Sunset Date”.
[7] The vendors took the view that the Contingent Sunset Date did not apply to the Exit event “trigger”, and that any sale of all of the shares in Tuatara at a price which exceeded $12,000,000 would result in the Contingent Payments being immediately due and payable.
[8] The vendors and Rangatira both considered that the proposed sale to DB would be a good one, and that it should go ahead. To enable that to occur while the dispute over the Contingent Payments was litigated, Rangatira, the vendors and Tuatara entered into two related amending deeds, both dated 20 January 2017. Under the first of these two deeds, the parties to the Investment Agreement agreed that Tuatara’s rights, interests and obligations in respect of the Investment Agreement would terminate on the sale to DB. By that means, Tuatara itself would be taken out of the Contingent Payments issue altogether.
[9] Under the second deed, Rangatira and the vendors agreed to vary the Investment Agreement in a number of respects, the net effect of which was that if Rangatira was held liable for the Contingent Payments it would pay the vendors the total sum of $920,828.66.
[10] The sale to DB was duly completed at a price in excess of $12,000,000, and the present proceeding has been issued on the vendors’ behalf to recover the
$920,282.66 from Rangatira (Malthouse sues as representative for the vendors).
[11] Because the vendors consider that Rangatira has no defence to the claim, they have applied for summary judgment on it.
[12] Rangatira has filed a notice of opposition and affidavits in opposition.
[13] I now give judgment on the application for summary judgment.
Relevant provisions of the Investment Agreement
The share subscription provisions
[14] Clause 3 of the Investment Agreement dealt with Rangatira’s obligation to subscribe for the new shares to be issued by Tuatara. An “Initial Subscription Price” payable for the new shares was to be paid on the Completion Date.3
[15] In addition to the Initial Subscription Price, Clause 3.5 of the Investment Agreement provided that Rangatira would pay to Tuatara the Contingent Subscription Price “upon the EBITDA Hurdle being met as agreed or determined in accordance with cl 9 and within the timeframe specified in cl 9.1”. The “EBITDA Hurdle” would be met when Tuatara’s EBITDA4 “for any consecutive 12 calendar
month period exceed[ed], in aggregate for that period, $2,000,000”.5
[16] The issue price for the new shares was the Initial Subscription Price plus the Contingent Subscription Price (if payable) — together the “Total Subscription Price”.6
The share purchase provisions
[17] Rangatira was to pay each vendor its proportionate entitlement to the “Initial Purchase Price” for its shares, on completion. Clause 4.5 of the Investment Agreement then provided for payment to the vendors of the Contingent Purchase Price “upon the EBITDA Hurdle being met as agreed or determined in accordance with cl 9 and the timeframe specified in cl 9.1”.
[18] The purchase price for the shares (the “Total Purchase Price”) was the sum of
the Initial Purchase Price and the Contingent Purchase Price (if payable).7
3 Investment Agreement, cl 3.3.
4 Clause 1.1: “earnings before interest and income taxes, depreciation, and amortization”.
5 Clause 1.1.
6 Clause 1.1.
7 Clause 1.1.
Clause 9
[19] Clause 9 of the Investment Agreement set out the circumstances in which the
Contingent Payments would become payable. It materially provided:
9.1 EBITDA Hurdle: The:
9.1.1 Contingent Subscription Price shall be payable to [Tuatara]
in immediately available funds; and
9.1.2Contingent Purchase Price shall be payable to the vendors in immediately available funds,
within seven (7) days of [Tuatara], [Rangatira] and the [vendors’] Representatives agreeing, or it being determined pursuant to this clause 9, that [Tuatara] has met the EBITDA Hurdle, provided that the EBITDA Hurdle is met on or before the Contingent Sunset Date. For clarity, it is acknowledged that determination of whether the EBITDA Hurdle has been met need not necessarily occur prior to the Contingent Sunset Date.
9.2 Determination: [Tuatara], [the vendors’] Representatives, and [Rangatira] (the Determining Parties) shall determine whether or not [Tuatara] has achieved the EBITDA Hurdle pursuant to clause
9.4 or, if applicable, clause 9.6.
…
9.7 Protection of Parties: Each Party agrees that from the Completion Date to the Contingent Sunset Date (or earlier agreement or determination of the EBITDA Hurdle being met):
9.7.1 it will act in good faith and in the best interests of [Tuatara] in respect of the Contingent Payments and will not take any action with the intent of reducing the EBITDA (or any other relevant inputs) of [Tuatara] for the purpose of reducing the Contingent Payments;
9.7.2 it will use all reasonable endeavours to promote [Tuatara’s
business];
9.7.3it will not take any steps with the intention of manipulating the application or circumventing the terms of this clause 9 to reduce the EBITDA and that it will comply with the spirit as well as the letter of these provisions of this clause 9; and
9.7.4unless otherwise agreed (which may include dealing with how the departure will be treated for the purposes of determining the EBITDA Hurdle), it will not unreasonably depart from the assumptions underlying the Business Plan in relation to the territorial scope or nature of [Tuatara’s business] or in a manner inconsistent with this clause 9.7.
9.8Exit event: If an Exit event occurs which actually or by implication values [Tuarara’s business] or [Tuatara] at greater than $12,000,000, then the Contingent Payments shall become immediately due and payable.
[20] The expression “Contingent Sunset Date” used in cl 9.1 was defined in cl 1.1 of the Investment Agreement as follows:
Contingent Sunset Date means 31 December 2015 or such other date agreed in writing by [Rangatira] and [the vendors’] Representatives.
[21] Clause 10 of the Investment Agreement provided:
10. Anti-dilution
Anti-dilute: If prior to the Contingent Sunset Date [Tuatara] issues any Shares or other securities (except any rights issue in which [Rangatira] is offered the right to participate on a pro-rata basis) at a price which is less than $45.91 per Share (after taking into account any share split, share buy back, share consolidation or similar) (Lower Price) then [Rangatira] shall be issued, at no cost, that number of additional Shares as is necessary to ensure that, after the issue of those additional shares, [Rangatira] holds the same number of Shares that would have been issued to it if, when the Subscription Shares were originally issued, it had paid, or been credited with, the same aggregate amount of subscription money but those Subscription Shares had been issued at the Lower Price per Share.
Evidence on the application
[22] The principal evidence in support of the application was provided by
Mr Sean Murrie, a director and shareholder of Malthouse. Until 31 January 2017
Mr Murrie was also a director of Tuatara.
[23] Mr Murrie described Tuatara as a craft beer brewing company based in the Kapiti region. It had begun business initially as a backyard hobby-brewing operation, but by 2010 its directors realised that it would need significant capital investment to develop its operations. They began to look for an investor, and eventually decided to bring in Rangatira.
[24] Mr Murrie stated that the reason for including the “contingent top-up consideration” (ie the Contingent Payments) in the Investment Agreement was that neither Rangatira nor the vendors knew exactly what Tuatara’s potential was.
Rangatira didn’t want to overpay on its investment, and the vendors didn’t want to
undersell the business.
[25] Mr Murrie provided with his affidavit a bundle of documents, including a number of drafts of the Investment Agreement (with changes tracked). Apart from the documents attached to his affidavit, he deposed to his belief that there was no more factual information available about the provenance, evolution or intended operation of cl 9.8 of the Investment Agreement. He also stated that he had inquired of Tuatara’s lawyers whether there might be any possibly relevant documents having a bearing on the interpretation question, and they had responded no. In particular, a search of the files of the solicitors then handling the matter had revealed no file notes or memoranda of any kind on the issue.
[26] Mr Murrie noted the following “basic facts” about clause 9.8 of the
Investment Agreement.
(a) There was no term sheet of any kind entered into by the parties prior to negotiating the Investment Agreement, and instead they went straight into drafting.
...
(c) The first draft was prepared by Tuatara and the Vendors, by their then lawyers, Duncan Cotterill; and sent to Rangatira’s lawyers, then Simmonds Stewart.
(d) The first form of what became clause 9.8 was in that first draft, as clause 8.8 ….
(e) [The notion] of an Exit event potentially triggering the payment of further consideration by Rangatira, was therefore included in the Investment Agreement by Tuatara and the Vendors.
(f) As can be seen from the documents:
(i) Rangatira’s lawyers in their first edits to the draft Investment Agreement made some minor changes to [what was then] clause 8.8, including consequently renumbering it as clause
9.8 … but nothing to change its overall effect. The edits were concerned only with ensuring that the true value of the
relevant Exit transaction was $12m.
(ii) Those initial edits to clause 9.8 made by Rangatira’s lawyers
were then accepted by the Vendors.
(iii) After that, there was no further negotiation over, or editing of, the clause at all.
(g) … no other documents were exchanged between Rangatira and any of the parties to the Investment Agreement around that time that made any direct or indirect reference to the wording of clause 9.8 and/or could shed any light on the correct interpretation of that clause in the context of this dispute.
[27] Mr Murrie confirmed that all of the shares in Tuatara were purchased by DB
on 31 January 2017.
[28] Affidavits in opposition were provided by Mr Ian Frame, and by Mr Christopher Bradshaw. Mr Frame held the position of Chief Executive of Rangatira at the time it acquired its 35% shareholding in Tuatara, and Mr Bradshaw was Rangatira’s Chief Financial Officer.
[29] Mr Frame’s evidence was that he was approached by Mr Bordignon, a solicitor acting for Tuatara, in about September 2012, regarding the possibility of investing in Tuatara. On 8 October 2012 he emailed a non-binding indicative offer to Mr Murrie. His recollection is that he was told that a higher share price had been offered by another party.
[30] No further discussions between Mr Murrie or Mr Bordignon and Mr Frame occurred for some time, although Mr Bordignon told Mr Frame (when on occasion they would run into each other) that discussions were still going on with the other party.
[31] Mr Bordignon came back to Rangatira about six months after the initial approach, to see if Rangatira was still interested in investing (it appears that the deal with the other prospective investor had fallen through).
[32] Mr Frame’s evidence about the 2013 negotiations with Tuatara that followed, is that he took more of a strategic overview of the proposed investment, while Mr Bradshaw was involved in negotiating how the detailed financial structure would work (including the contingent payment provisions). Mr Frame did not attend all
meetings with Mr Murrie and Mr Bordignon, but he says that Mr Bradshaw kept him abreast of the discussions, including how the Contingent Payments would work.
[33] Mr Frame recalled that it was difficult for the parties to agree on the value of the shares to be purchased by Rangatira. It was for that reason it was agreed that the price would be structured so that there would be an initial purchase price paid, and then top-up payments to Tuatara and the vendors if EBITDA of $2,000,000 was achieved by 31 December 2015. At the time of the negotiations Tuatara was expanding rapidly, and it was expected to meet the EBITDA Hurdle by the end of the financial year in March 2014 or shortly thereafter.
[34] Mr Frame said that it was obvious that Mr Murrie was concerned that Rangatira might try to take advantage of a quick sale of shares to another buyer before the EBITDA Hurdle could be met, thus depriving the vendors of the opportunity to obtain the additional payments. According to Mr Frame, that was a concern frequently referred to by Mr Murrie during the negotiations.
[35] Mr Frame asserted that cl 9.8 was inserted in the Investment Agreement to deal with that issue ie to protect the vendors, during the immediate short term, from the risk that Rangatira might sell its shares before 31 December 2015, thereby avoiding the obligation to pay the Contingent Payments.
[36] Mr Frame said that he was not concerned with the inclusion of clause 9.8. Making a quick sale was not Rangatira’s intention in making the investment — it was looking to make long term returns.
[37] Mr Frame stated that it was never contemplated that the obligation in cl 9.8 would continue indefinitely, without an end date. The Contingent Payments were designed to ensure that the vendors obtained a fair price as at 2013, when they sold their shares to Rangatira. He asserted that a contingent liability which could be outstanding for an indefinite period would not have been acceptable to Rangatira.
[38] Mr Bradshaw’s affidavit confirmed much of what Mr Frame had to say about the early negotiations with Mr Murrie and Mr Bordignon. On the matter of the
Contingent Payments, Mr Bradshaw said that there was uncertainty regarding the value of Tuatara, and for that reason Rangatira and the vendors agreed to structure the consideration so that an initial purchase price and subscription price would be paid up front, with the possibility of additional payments (the Contingent Payments) being made if either of the two contingencies occurred (EBITDA Hurdle being met by 31 December 2015, or Exit event occurring under cl 9.8).
[39] Mr Bradshaw confirmed that all parties thought that Tuatara would achieve the $2,000,000 EBITDA in about a year, but Rangatira wanted to ensure that this target was in fact achieved before any additional payments were made.
[40] Mr Bradshaw received the first draft of the Investment Agreement from Mr Bordignon by email on 27 March 2013. It included cl 8.8 which eventually became cl 9.8. Mr Bordignon had made a drafting note beside the clause stating “not anticipated but inserted for completeness”.
[41] Mr Bradshaw confirmed that there had been a number of meetings before that with Mr Bordignon and Mr Murrie, at which they had explained the vendors’ concern that Rangatira might sell to another buyer before the EBITDA Hurdle had been achieved, thereby avoiding the obligation to pay the Contingent Payments. He confirmed Mr Frame’s view that cl 9.8 was included in the Investment Agreement to deal with that concern. As he put it, cl 9.8 was “inserted for completeness and was never expected to be used”.
[42] Mr Murrie and Mr Bordignon both provided affidavits in reply.
[43] Mr Murrie first recorded his understanding that evidence of the initial negotiations leading up to the first draft of the Investment Agreement was “generically inadmissible in a dispute like this”. His reply evidence was accordingly given in case the court should find that evidence of that sort is admissible.
[44] Mr Murrie confirmed that there were lengthy negotiations over the concept, timing and mechanics of the Contingent Payments and the operation of the EBITDA Hurdle. He thought that at some point he would also have raised the possibility of a
full sell out of Tuatara in the future. As he put it, that was always going to be a potential event somewhere on Tuatara’s horizon, and it was primarily why Rangatira was investing in Tuatara. However the possibility was not discussed in any detail or at length at all, and was never actively negotiated. Mr Murrie said he did not recall ever saying to Rangatira’s representatives that either the vendors or he were concerned about Rangatira trying to sell its shares within the EBITDA Hurdle period.
[45] Mr Murrie said that the vendors were concerned about obtaining the full value of the stake sold to Rangatira if Tuatara was ever sold for the value the vendors believed it had. The vendors fully expected to obtain the Contingent Payments by meeting the EBITDA Hurdle, so for that reason the cl 9.8 situation was not expected to arise. But in Mr Murrie’s view the vendors had no reason to limit cl 9.8 to the EBITDA timeframe period.
[46] Mr Murrie deposed to his belief that he never discussed cl 8.8/9.8, as to either form or content, with anyone at Rangatira.
[47] Mr Murrie confirmed that there are no historical documents in the vendors’ or
Tuatara’s possession that refer to cl 9.8 or its subject matter in any way.
[48] Mr Bordignon stated that at the time the Investment Agreement was negotiated he was a partner at Duncan Cotterill. He generally confirmed the evidence of Mr Frame and Mr Bradshaw as to his role, and the initial introduction of Rangatira to the vendors. He confirmed that he was personally involved in some of the commercial negotiations that followed.
[49] Mr Bordignon said that he could not recall any discussions with Rangatira representatives at which the possibility of a future sell-out of Tuatara was mentioned. His first recollection of a sell-out possibility having to be provided for in the draft Investment Agreement was that he received instructions from Mr Murrie to that effect after the commercial negotiations had ended.
[50] Finally Mr Bordignon confirmed that he was the author of the drafting note on cl 8.8 in the first draft of the Investment Agreement. His evidence is that he inserted that note to convey only the expectation that, because the Tuatara shareholders had no actual sell-out plans or offers in the wings at that time, and the EBITDA Hurdle was fully expected to be met by the Contingent Sunset Date, the clause was likely to become redundant. He denied that his drafting note was a reference to “somehow importing the Contingent Sunset Date”, or to any concern of the vendors about Rangatira possibly selling its shares within the EBITDA Hurdle timeframe. He stated that he was never involved in any such discussions, if they ever occurred.
The issue to be decided
[51] It is common ground that the EBITDA Hurdle was not met by the Contingent Sunset Date. The only issue to be decided is whether Malthouse has shown that Rangatira has no reasonably arguable defence to the vendors’ claim that an Exit event (as defined in cl 9.8 of the Investment Agreement) has occurred.
Legal principles applicable to plaintiff ’s summary judgment applications
[52] Rule 12.2(1) of the High Court Rules provides:
The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[53] The proper approach to be taken to such applications was considered by the
Court of Appeal in Krukziener v Hanover Finance Ltd, where the Court said:8
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11
PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng
8 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].
Mee Young v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[54] The Supreme Court has held fairly recently that the fact that the Court may be required to determine questions of law (including issues of contractual interpretation) does not preclude summary judgment. In Zurich Australian Insurance Ltd v Cognition Education Ltd, the Court said:9
[36] … in other situations falling within the broad test (that is, the “no arguable defence” test applied on summary judgment), there will be what can properly be described as “disputes” even though they are ultimately capable of being determined by a summary process.
[37] To explain, it has been well established in New Zealand since Pemberton v Chappell that a court can properly determine questions of law on a summary judgment application, and that this includes issues of contractual interpretation. The Court of Appeal has accepted that such a determination may be made even though the question of law is difficult and requires argument (including reference to authority). In International Ore & Fertilizer Corp v East Coast Fertiliser Co Ltd, a case under the old bill writ procedure, Cooke P, by analogy with the summary judgment procedure which had just been introduced in New Zealand, said that where the facts were adequately ascertained and the Court could be confident that the point at issue turned on pure questions of law or interpretation, it should be prepared “to determine, on adequate argument, even difficult legal questions”. Similarly, in Jowada Holdings Ltd v Cullen Investments Ltd, Mc Grath J, delivering the judgment of the Court of Appeal, said that a court should be prepared to grant summary judgment “even if legal arguments must be ruled on to reach the decision”.
[55] In some cases the Court may consider that further investigation of the factual matrix is necessary, and in those cases summary judgment will be refused.10 And if there are credible arguments that the plaintiff’s preferred interpretation of a written agreement flouts business common sense, or is commercially absurd, it will normally be inappropriate to grant summary judgment.11
[56] In All Metals Trading Co Ltd v Wright, I noted:12
9 Zurich Australian Insurance Ltd v Cognition Education Ltd [2014] NZSC 188, [2015] 1 NZLR
383 (footnotes omitted).
10 See for example Trustees Executors Ltd v QBE Insurance (International) Ltd [2010] NZCA 608 and Commercial Metals Ltd v Wright [2015] NZCA 450.
11 E&E Developments Ltd v Housing New Zealand Ltd [2012] NZCA 7 at [21].
12 All Metals Trading Co Ltd v Wright [2014] NZHC 2136 at [29] (footnotes omitted).
[29] Sometimes disputes over the interpretation of written contracts will be unsuitable for summary judgment. An example of such a case is the Court of Appeal decision in E&E Development Ltd v Housing New Zealand Ltd & Anor, where the Court of Appeal determined that a dispute over the wording of a provision in a lease was unsuitable for determination on a summary judgment application. The Court of Appeal noted that the background evidence was “sparse”, and that further evidence at trial might affect the Court’s tentative conclusion on the interpretation issue.
[57] My decision in All Metals was upheld by the Court of Appeal in Commercial Metals Ltd v Wright,13 where the Court said that it was not satisfied that the interpretation of the relevant clause was sufficiently beyond dispute that Mr Wright could have no defence to the claim. The Court considered that there were matters of context that would benefit from the hearing of evidence.14
Counsel’s submissions
Malthouse
[58] Mr McIntosh, counsel for Malthouse, submits that summary judgment should be entered, because the sole issue in the proceeding is one of contractual interpretation, on which no further evidence can assist, and the interpretation advanced by Malthouse is clearly the correct one.
[59] Clause 9 is not limited by the Contingent Sunset Date, by its terms or title.15
The Contingent Sunset Date expressly and specifically applies only to cls 9.1 and
9.7. There is no reference in cl 9.8 to any other part of cl 9.
[60] Clause 9.8 is only concerned with the occurrence (or not) of an “Exit event”, and there is no reference to the Contingent Sunset Date in the cl 1.1 definition of “Exit”. These are the only clauses that use the term “Exit”.
[61] The meaning of the words in cl 9.8 is plain, and if that is accepted, liability cannot be disputed. There is no ambiguity and the words do not import any technical or specialist meanings. The clause and the Investment Agreement as a whole operate
13 Above n 10.
14 At [13].
15 However Mr McIntosh acknowledged at the hearing that cl 1.2.2. of the Investment Agreement says that “section, clause and other headings are for convenience only and will not affect the interpretation of this Agreement”.
perfectly well on their plain meanings, and there is no indication from the objective background that something has gone wrong with the express words.
[62] Furthermore, there is no express or necessary nexus between the EBITDA Hurdle and an Exit event. Mr McIntosh notes by way of contrast that cl 10, the anti- dilution clause, does refer to the Contingent Sunset Date. The logical inference to be drawn from the inclusion of the Contingent Sunset Date expressly in cls 9.1, 9.7 and
10, but not in either cl 9.8 or in the definition of “Exit”, when that could easily have done, is that the parties did not intend that an Exit event would be subject to the Contingent Sunset Date time limitation.
[63] Mr McIntosh submits that even if resort is had to contextual material, the plain meaning remains the correct interpretation. Malthouse’s interpretation does not produce a commercially absurd result, or one that these parties would not have mutually intended. He submits there is nothing particularly remarkable about Rangatira having to pay the Contingent Payments on a greater-than-$12,000,000 sale after the (arbitrary) 18 months period negotiated for the EBITDA Hurdle, because:
(a) the vendors had no reason to limit a clause providing for immediate payment of the Contingent Payments on a sale of all of Tuatara’s assets or issued shares by restricting the operation of the clause to a sale occurring before the Contingent Sunset Date;
(b)Rangatira was an experienced and well-resourced private equity investor;
(c) the cl 9.8 obligation concerned only the residual part of the original investment consideration, which on Rangatira’s case it would have been happy to pay within 18 months;
(d)if Rangatira is obliged to make the Contingent Payments it will have had the use of the money, interest-free and without any inflation adjustment, in the interim; and
(e) Rangatira would still make a profit on its investment in the event of a post-Contingent Sunset Date sale of all of Tuatara for a sum in excess of $12,000,000.
[64] Mr McIntosh submits that Rangatira accepted cl 9.8, and it is not the Court’s role to re-evaluate or re-write the bargain to achieve any sort of “better” commercial result.16
[65] Mr McIntosh submits that there is no factual or contextual “vacuum”, or lack of relevant information, about cl 9.8 or the Investment Agreement as a whole, such as might warrant allowing the case to proceed to trial. There was no term sheet entered into prior to the negotiations or the drafting of the Investment Agreement, and the notion of an Exit event potentially triggering the Contingency Payments obligation was accepted in the evolution from the draft versions of the Investment Agreement to the final version. There are no other documents that would shed light on the meaning of cl 9.8, and almost all of Rangatira’s evidence constitutes subjective assertions which are irrelevant and/or inadmissible.
[66] Finally, Mr McIntosh submits that there is no scope for an implied term, and no other remedies (for example, estoppels by convention or representation, or rectification) are reasonably arguable for Rangatira.
Rangatira
[67] Mr Gollin submits that the contractual context and purpose is important in this case, as it informs the meaning of cl 9.8. Rangatira has a good arguable case that cl 9.8 was not intended to apply after the Contingent Sunset Date.
[68] Mr Gollin submits there are a number of clear indications that the Contingent Sunset Date was intended to apply to the whole of cl 9, including 9.8. The placement of cl 9.8 within cl 9 is a primary indication - cl 9.8 and the EBITDA
Hurdle are deliberately located together. Also, the obligation to pay the Contingent
16 Referring to Yoshimoto v Canterbury Golf International Ltd [2002] UKPC 40, [2004] 1 NZLR 1 at [18].
Subscription Price in cl 3.5 links the Contingent Sunset Date to the whole of cl 9.17
Clause 4.5, providing for payment of the Contingent Purchase Price, is also expressly linked to the entirety of cl 9.18
[69] The use of the word “Contingent” in “Contingent Payments” and “Contingent
Sunset Date” also suggests that the terms are directly linked.
[70] Mr Gollin further submits that the word “immediately” in cl 9.8 contemplates payment prior to the date when the Contingent Payments would otherwise be due (ie before the Contingent Sunset Date if the EBITDA Hurdle is satisfied).
[71] Mr Gollin submits that an express reference to the Contingent Sunset Date was not necessary in cl 9.8, because of its location within cl 9. The combined effect of cls 3.5, 4.5 and 9.1 effectively applies the relevant time limit to cl 9.8.
[72] In contrast, cl 10 did not relate to Contingent Payments, and so required an express reference to the Contingent Sunset Date. Clause 9.7, in governing the behaviour of the parties, also required an express reference to the Contingent Sunset Date time limit.
[73] Mr Gollin submits that there is also “close financial equivalence” between the two trigger events for the Contingent Payments. First, the total value of Tuatara as agreed between the parties as at 2013, if the EBITDA Hurdle was met within the Contingent Sunset Period, would have been approximately $11.57 million. That is close to the $12,000,000 which would have been payable if an Exit event had occurred. Mr Gollin submits that this financial equivalence makes sense if the Contingent Sunset Date was intended to apply to both “trigger” events.
[74] On the purpose of cl 9, Mr Gollin submits that the clause was included to deal with uncertainty regarding the value of the shares as at the date of the
transaction, and to ensure that:
17 Refer [15] of this judgment.
18 Refer [17] of this judgment.
(a) if Tuatara performed well in the short term (ie met the EBITDA Hurdle before the Contingent Sunset Date) the vendors would receive a top-up in price; and
(b)for cl 9.8 in particular, if a sale “triggering” the operation of cl 9.8 occurred before the Contingent Sunset Date, and before the EBITDA Hurdle had been met, the obligation to pay the Contingent Payments would not be avoided.
[75] The overall purpose was clearly to ensure that Tuatara and the vendors would receive fair value for the shares as at 2013, when Rangatira purchased the shares, informed by the actual performance achieved by Tuatara in a short agreed period after the Investment Agreement was made.
[76] If cl 9.8 had no end date as contended by the vendors, Rangatira would be liable to make the Contingent Payments at any point in time when an Exit event occurred. Mr Gollin submits that would not make commercial sense, as the aim of the Contingent Payments was to ensure a fair price was paid for the shares as at
2013.
[77] Mr Gollin also relies on Mr Bordignon’s drafting note, which stated in respect of the draft cl 8.8 “not anticipated but inserted for completeness”. If the clause were anticipated to operate without an end date, this would be a surprising comment to make.
[78] Mr Gollin submits that the case is not suitable for summary judgment. Further evidence at trial is required. The affidavits of Mr Bradshaw and Mr Frame demonstrate the parties’ understanding about the purpose of cl 9.8, and the fact that Mr Murrie and Mr Bordignon dispute their evidence does not convert the affidavits of Mr Frame and Mr Bradshaw into inadmissible subjective evidence. There are issues of credibility which can only be resolved at trial, and viva voce evidence and discovery are both likely to shed light on which interpretation should be preferred. The interpretation exercise may be further assisted by evidence at trial of the typical use of clauses such as cl 9.8 in similar investment agreements. There is at the least
an arguable case that the obligation to make the Contingent Payments has not been triggered.
Discussion and conclusions
The approach to interpretation generally
[79] The correct approach to the interpretation of written commercial contracts has been discussed by the Supreme Court on a number of occasions. In Firm P1 Ltd v Zurich Australian Insurance Ltd, Arnold J, delivering the joint judgment of McGrath, Glazebrook and Arnold JJ, said:19
[60] … It is sufficient to say that the proper approach is an objective one, the aim being to ascertain “the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.20 This objective meaning is taken to be that which the parties intended.21 While there is no conceptual limit on what can be regarded as “background”,22 it has to be background that a reasonable person would regard as relevant. Accordingly the context provided by the contract as a whole and any relevant background informs meaning.
[61] The requirement that the reasonable person have all the background knowledge known or reasonably available to the parties is a reflection of the fact that contractual language, like all language, must be interpreted within its overall context, broadly viewed. Contextual interpretation of contracts has a significant history in New Zealand, although for many years it was restricted to situations of ambiguity.23 More recently, however it has been confirmed that a purposive or contextual interpretation is not dependent on there being an ambiguity in the contractual language.24
…
[63] While context is a necessary element of the interpretive process and the focus is on interpreting the document rather than particular words, the text remains centrally important. If the language at issue, construed in the
19 Firm P1 Ltd v Zurich Australian Insurance Ltd t/a Zurich New Zealand [2014] NZSC 147, [2015] 1 NZLR 432, at [60], [61] and [63].
20 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL)
at 912 per Lord Hoffmann. See also Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101 at [14] per Lord Hoffmann.
21 Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988 at [16]
per Lord Hoffmann delivering the judgment of the Privy Council.
22 Subject to the exception in relation to evidence of pre-contract negotiations: …
23 See Blakely and Anderson v De Lambert [1959] NZLR 356 (SC & CA) at 367 per FB Adams J (in the Supreme Court) and at 387 per Cleary J (delivering the judgment of the Court of Appeal); and Eastmond v Bowis [1962] NZLR 954 (SC) at 958–959 per Richmond J. See also Benjamin Developments Ltd v Robt Jones (Pacific) Ltd [1994] 3 NZLR 189 (CA) at 196 per Casey J.
24 See Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [4] per
Blanchard J, at [23] per Tipping J, at [64] per McGrath J and [151] per Gault J.
context of the contract as a whole, has an ordinary and natural meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant. But the wider context may point to some interpretation other than the most obvious one and may also assist in determining the meaning intended in cases of ambiguity or uncertainty.
[80] And in Vector Gas Ltd v Bay of Plenty Energy Ltd, Tipping J said:25
[29] There is no problem with objective evidence directed to the context, factual or linguistic, in which the negotiations were taking place. That kind of evidence can properly inform an objective approach to meaning. Whereas evidence of the subjective content of negotiations is inadmissible on account of its irrelevance, evidence of facts, circumstances and conduct attending the negotiations is admissible if it is capable of shedding objective light on meaning. It is often said in contract interpretation cases that evidence of surrounding circumstances is admissible. Circumstances which surround the making of the contract can operate both before and after its formation. In either case irrelevance should be the touchstone for the exclusion of evidence…
[31] The key point is that extrinsic evidence is admissible if it tends to establish a fact or circumstance capable of demonstrating objectively what meaning both or all parties intended their words to bear. Extrinsic evidence is also admissible if it tends to establish an estoppel or an agreement as to meaning.
[81] Asher J applied the judgment of Tipping J in Vector Gas, in I-Health Ltd v iSoft NZ Ltd, in determining, on a preliminary issue before trial, a question of the validity of a limitation provision in a sale contract between the parties.26 Both parties had called evidence, and the defendant in particular relied on the factual matrix.
[82] His Honour first set out what he considered to be the “plain and unambiguous meaning” of the relevant clause, before noting that the language used is not the only source of the intended meaning — a meaning that may appear on its face to be plain and unambiguous may not be the meaning that a reasonable person aware of all the relevant circumstances would consider the parties intended those words to mean. If the plain meaning would lead to a result that flouted common sense a court will look again to see if another meaning on an objective interpretation of the background was
intended.27
25 Vector Gas, above n 24.
26 I-Health Ltd v Isoft Ltd HC Auckland CIV-2006-404-7881, 8 September 2010.
[83] Asher J took the view that he should have regard to relevant background facts that could be extracted from the negotiations — in the case before him, draft agreements, or draft clauses of an agreement — provided they were “capable of shedding objective light on the meaning of the agreement or clause ultimately agreed, and thus have a tendency to prove or disprove something that is of
consequence to the determination of a proceeding.”28
[84] His Honour summarised the relevance of the positions adopted by the parties in the negotiations as follows:29
a) Exchanges in negotiations which construed objectively tend to establish background facts known to both parties are relevant;
b) Exchanges between the parties in negotiations which, construed objectively, cast light on meaning are relevant;
c) Material created by one party that relates to negotiations but is not communicated and relates to the subjective understanding and beliefs of that party is irrelevant.
Application of that approach in this case
[85] Mr McIntosh submits that, on its face, the language of cl 9.8 is plain and unambiguous. There is no time limitation in the clause itself, and cl 9.1, which did refer to the Contingent Sunset Date, was concerned only with the Contingent Payments becoming due and payable because the EBITDA Hurdle had been met. If Rangatira was required to make the Contingent Payments some years after the Contingent Sunset Date, the vendors and Tuatara would have had the benefit of not having to pay interest on the amount of the Contingent Payments until they were actually required to make them.
[86] Mr Gollin submits that cl 9.8 must be read in the context of the Investment Agreement as a whole, and in particular with cls 3.5 and 4.5 (relating respectively to payment of the Contingent Subscription Price and payment of the Contingent Purchase Price).
[87] For convenience, I set out these two clauses in full. Clause 3.5 provided:
28 At [42].
Contingent Subscription Price: [Rangatira] shall … pay to [Tuatara] the Contingent Subscription Price upon the EBITDA Hurdle being met as agreed or determined in accordance with clause 9 and within the timeframe specified in clause 9.1.
[88] Clause 4.5 provided:
Contingent Purchase Price: [Rangatira] shall … pay each Vendor its proportionate entitlement to the Contingent Purchase Price upon the EBITDA Hurdle being met as agreed or determined in accordance with clause 9 and the timeframe specified in clause 9.1.
[89] Mr Gollin’s argument, as I apprehend it, is that the last words of these clauses “and within the timeframe specified in clause 9.1” (cl 3.5), and “in accordance with clause 9 of the timeframe specified in clause 9.1” (cl 4.5), were intended to apply not just to the EBITDA Hurdle being met, but also to Rangatira’s overall obligation to pay the Contingent Payments (whether that obligation arose because the EBITDA Hurdle had been met, or because an Exit event had occurred).
[90] On the face of it, that might be considered a strained interpretation of cls 3.5 and 4.5. The cl 9.1 “timeframe”, referenced in both cls 3.5 and 4.5, seems on its face to be concerned only with meeting the EBITDA Hurdle, not with the occurrence of an Exit event.
[91] But if Malthouse is correct in its interpretation it does seem rather odd that cls 3.5 and 4.5, being the principal provisions dealing with when Rangatira would be required to make the Contingent Payments, makes no mention of that obligation arising on the occurrence of an Exit event under cl 9.8.
[92] There are two other things which I think could be considered rather odd about the Investment Agreement if Malthouse’s interpretation were correct. First, I accept Mr Gollin’s submission that, for well-advised commercial parties such as these, leaving Rangatira with a contingent liability to Tuatara and the vendors which might not crystallize for many years is a little hard to understand. I can understand the rationale for the EBITDA Hurdle — the parties wanted to provide for a practical check on the share subscription and purchase prices which had been agreed in 2013. If Tuatara’s performance within a relatively short timeframe after that date showed that its value was probably higher than the value reflected by the Initial Purchase
Price and the Initial Subscription Price, an upwards adjustment in the subscription and purchase prices was to be made to reflect that reality. But what commercial rationale could there have been for requiring Rangatira to make the Contingent Payments (possibly) years in the future, when the price at which all of the business or shares of Tuatara was sold might have said nothing about the appropriateness of the subscription and purchase prices the parties agreed upon in 2013? Why would the Contingent Payments be payable in, say, 15 years’ time, when Rangatira might have quit its Tuatara shareholding and the achievement of a sale of Tuatara (business or shares) at a figure over $12m might have been entirely attributable to the efforts or capital contributed by a new investor?
[93] The second area where I think some odd results could follow if Malthouse’s interpretation is correct, is cl 10 of the Investment Agreement. This is the “anti- dilution” provision, which essentially provided that if before the Contingent Sunset Date Tuatara were to issue new shares at a price less than $45.91 per share, “top-up shares” would be issued to Rangatira, on the basis of the same aggregate subscription money paid by it, but as if the price at which it was required to subscribe had been the lower price at which Tuatara issued the new shares.
[94] The $45.91 per share referred to in cl 10 appears to have been the price per share Rangatira would pay if the Contingent Subscription Price were included. So, if Tuatara made a new share issue after the date of the Investment Agreement (and before the Contingent Sunset Date) at, say, $35 per share, Rangatira would be entitled to call for the “top-up” shares, at least if it had paid the Contingent Subscription Price. But how would this work if the EBITDA Hurdle had not been met by the Contingent Sunset Date (and Rangatira had not then paid the Contingent Subscription Price), but Rangatira remained liable to pay the Contingent Payments (including the Contingent Subscription Price) if an Exit event occurred after the Contingent Sunset Date? Would Rangatira then be entitled to call for the “top-up” shares, on the basis that it had (then) paid an aggregate subscription price of $45.91 per share for the Tuatara shares?
[95] The answer is not clear from the wording of cl 10, but I think Rangatira would have been even less likely to have agreed to an open–ended commitment to
pay the Contingent Payments, possibly not long after the Contingent Sunset Date, without some allowance for any dilution effect caused by a new share issue made before the Contingent Sunset Date. And it seems equally improbable that the vendors would have agreed to an open–ended obligation on Tuatara to issue “top– up” shares at some possibly distant future time, when the issue of the top–up shares would then dilute the value of their own shareholding by some unknown amount. I think the more likely commercial intention for both parties would have been that both contingencies (payment of Contingent Payments and issue of any top–up shares under cl 10) would occur, if they occurred at all, within a relatively short time frame, namely by the Contingent Sunset Date.
[96] I think those matters do raise a serious question as to whether experienced commercial parties such as these could have intended the result for which Malthouse now contends. The question is whether the plain language of the Investment Agreement, read with the admissible “background” evidence, compels the conclusion that an Exit event could occur at any time, including after the Contingent Sunset Date.
[97] I think it is reasonably arguable for Rangatira that it does not.
[98] Looking at the language of the Investment Agreement, I note first that cl 9.7 of the Investment Agreement, while primarily concerned with the parties’ mutual obligations to act in good faith in respect of the EBITDA Hurdle determination, refers generally to acting in good faith (and in the best interests of Tuatara) “in respect of the Contingent Payments”. The wording refers to the Contingent Payments generally, but the obligation to act in good faith (and in the best interests of Tuatara) does not extend beyond the Contingent Sunset Date. If the Contingent Payments might become payable at some time after the Contingent Sunset Date (ie if an Exit event occurred after that date), why would the parties’ obligations to act in good faith cease as at the Contingent Sunset Date?
[99] The next point relates to the placement of cl 9.8 within cl 9, and the use of the word “immediately” in the expression “then the Contingent Payments shall become immediately due and payable”, in cl 9.8. Mr Gollin submits that this is an indicator
that the operation of cl 9.8 was intended to be subject to the Contingent Sunset Date. On this reading, the words “then” and “immediately” in cl 9.8 were intended to signal that cl 9.8 would operate as a proviso to, or qualification on, the timeframe set out in cl 9.1, in the sense that if an Exit event occurred before the parties had finished working through the EBITDA Hurdle process, they would not be required to complete that process — the Contingent Payments would be payable immediately.
[100] In my view that interpretation is reasonably arguable for Rangatira. I think it is reasonably open on the wording of cl 9.8, and it goes some distance towards explaining the absence of any reference to a cl 9.8 Exit event in cls 3.5 and 4.5 of the Investment Agreement: “the timeframe specified in clause 9.1” was arguably itself subject to a cl 9.8 qualification, or proviso, which might have the effect of bringing forward the date for making the Contingent Payments.
[101] The foregoing interpretation is arguably also consistent with the view, which I think is reasonably arguable for Rangatira, that a cl 9.8 Exit event was intended to be a kind of “proxy” for, or deemed financial equivalent of, the meeting of the EBITDA Hurdle before the Contingent Sunset Date. On the subscription and purchase prices Rangatira would have to pay if the EBITDA Hurdle was met, all of the shares in Tuatara would have been worth approximately $11.57 million, which is roughly approximate to the $12 million sale figure which would have triggered Rangatira’s obligation to pay the Contingent Payments under cl 9.8. The EBITDA Hurdle figure of $2 million, read with the $12 million overall sale figure in cl 9.8, might be read as implying that the parties considered that an approximate value of Tuatara could be reached using an EBITDA multiplier of six. There is no evidence that any such multiplier was discussed, but if there was intended to be any relationship at all between the EBITDA Hurdle figure of $2 million and the cl 9.8
Exit event figure of $12 million, it is I think unlikely that that relationship (annual performance to overall company value) would have been expected to remain the same over an indefinite period. For example, the rates of return required by investors could be expected to change over time, and an EBITDA multiplier of six might no longer produce a rough market value for Tuatara.
[102] I conclude on a reading of the Investment Agreement, then, that Malthouse has not shown that Rangatira has no arguable defence.
[103] Is there anything in the factual matrix, or background circumstances known to both parties, which suggests that Rangatira’s arguments have no reasonable prospect of success at trial? I do not think so.
[104] Mr Frame and Mr Bradshaw’s evidence was that Tuatara and the vendors were concerned in the negotiations about the possibility of Rangatira selling its shares early, to avoid having to pay the Contingent Payments if the EBITDA Hurdle was met by the Contingent Sunset Date. That evidence is disputed by Mr Murrie and Mr Bordignon. Mr Murrie said that he did not recall ever saying in the negotiations that either he or the vendors were concerned about Rangatira trying to sell its shares within the EBITDA Hurdle period. Mr Bordignon could not recall any discussions with the Rangatira people at which he was present when the possibility of a future sell-out of Tuatara was mentioned.
[105] Whether or not this evidence is admissible, and it seems to me that it is no more than evidence of the parties’ subjective intentions (and is therefore inadmissible30), the concern which Messrs Frame and Bradshaw say was the impetus for the inclusion of cl 9.8 would not have been met by the introduction of cl 9.8 and the “Exit” definition. Clause 9.8 would only be triggered if all of the shares or business of Tuatara was sold.
[106] A sale of its shares by Rangatira alone would not have triggered cl 9.8, and for that reason I do not believe cl 9.8 was inserted for the precise reason put forward by Mr Frame and Mr Bradshaw in their affidavits. But I do not think the fact that Mr Frame and Mr Bradshaw may have been wrong in their evidence in this respect says anything at all on the crucial question of whether cl 9.8 was intended to apply after the Contingent Sunset Date.
[107] The only matter which appears to have been understood between the parties is that the EBITDA Hurdle was considered likely to be met. But I do not think it is
30 Vector Gas, above n 24 at [27]–[31] per Tipping J and I-Health, above n 26 at [41(c)].
possible to draw from that mutual expectation any conclusion that the parties may have intended that cl 9.8 would continue to apply after the Contingent Sunset Date.
[108] There was nothing in the evidence to suggest that there may have been some commercial rationale for keeping the Contingent Payments obligation open indefinitely, and there appears to have been no discussion about cl 9.8 and the definition of “Exit”. All there is is Mr Bordignon’s drafting note which accompanied the first draft of the Investment Agreement — “not anticipated but inserted for completeness.”
[109] Mr Bordignon says that the use of the expression “not anticipated” simply meant that Tuatara and the vendors thought that the EBITDA Hurdle would be met, and that there would be no need for the parties to have recourse to cl 9.8. I think the evidence from the parties on the purpose of the drafting note is inadmissible, as it merely provides subjective evidence about why cl 9.8 was included. But the drafting note was apparently accepted without comment by Rangatira and its advisers, and I think the note itself is admissible as being part of a document passing between the parties which is arguably relevant to the interpretation issue.
[110] The words “not anticipated” in the drafting note are arguably more apt to describe a future event which is not considered likely to occur, rather than to address the issue of why that future event is not expected to occur (in this case because, on Malthouse’s argument, the EBITDA Hurdle was expected to be met before any Exit event occurred). If the note is read as referring to a future event which was considered not likely to occur, that future event could only have been an Exit event.
[111] I accept Rangatira’s submission that the parties arguably would not have considered an Exit event unlikely to occur at some stage in Tuatara’s future. It was, after all, a successful and growing craft brewer, and if it maintained that commercial trajectory it could reasonably have been expected to become an attractive acquisition target for major players in the New Zealand beer market. In those circumstances I think it is arguable for Rangatira that Mr Bordignon’s “not anticipated …” note could reasonably have been read and understood by an objective observer (being someone with knowledge of Tuatara’s performance to date and the New Zealand
beer market generally) as referring to the reasonably near future, and not indefinitely into the future. And the only available “definition” of “the reasonably near future” for that purpose would be before the Contingent Sunset Date.
[112] In the view to which I have come, there is no need to consider Mr McIntosh’s submission that there will be no further relevant information which would warrant allowing the case to proceed to trial. I have found Rangatira’s defence to be reasonably arguable on the evidence which is now before the Court.
[113] It may be that further discovery or evidence will shed light on which interpretation should be preferred, particularly on the question of whether one side or the other’s preferred interpretation is or is not consonant with business common sense,31 but I do not see this as a case where the parties used language which they could not have intended, making it necessary to have recourse to external evidence to deal with a situation where “something has gone wrong” with the wording of the Investment Agreement. I think the wording of the Investment Agreement itself, and particularly the words “then … immediately” in cl 9.8, are arguably capable of
bearing the meaning that cl 9.8 was only intended to further limit the timeframe in cl
9.1 (in the particular circumstances referred to in cl 9.8). I think it is arguable for
Rangatira that that is what the parties must be taken to have intended.
[114] For the foregoing reasons I am not satisfied that Malthouse has shown that
Rangatira has no arguable defence to this claim.
Result
[115] The application for summary judgment is refused.
[116] In accordance with usual practice,32 costs on the application are reserved.
Associate Judge Smith
31 E&E Developments Ltd v Housing New Zealand Ltd, above n 11.
32 NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA); McGechan on Procedure (online looseleaf ed, Brookers) at [HR12.12.08(1)].
Solicitors:
Avid Legal, Wellington for the plaintiff
Minter Ellison Rudd Watts, Auckland for the defendant
7
0