Waharoa Land Holdings Limited v Waharoa Industrial Park Limited
[2023] NZHC 819
•18 April 2023
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2021-419-107
[2023] NZHC 819
IN THE MATTER of a claim for declaratory relief BETWEEN
WAHAROA LAND HOLDINGS LIMITED
Plaintiff
AND
WAHAROA INDUSTRIAL PARK LIMITED
First Defendant
Hearing: 20 and 21 March 2023 Appearances:
H Thompson for the Plaintiff
C T Gudsell KC and J Gilby-Todd for First Defendant
Judgment:
18 April 2023
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Tuesday, 18 April 2023 at 3:30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:McMahon Butterworth Thompson, Auckland Bell & Graham, Matamata
Counsel: C T Gudsell QC, Hamilton
WAHAROA LAND HOLDINGS LIMITED v WAHAROA INDUSTRIAL PARK LIMITED [2023] NZHC 819
[18 April 2023]
[1] In this proceeding, the purchaser of a small section of industrial land in Waharoa seeks declarations about works the vendor agreed to undertake on the land within six months of settlement of the purchase.
Background
[2] On 28 May 2007, the first defendant, Waharoa Industrial Park Limited (WIPL) and Biodiesel Oils (NZ) Limited (Biodiesel) entered into a written agreement (the agreement) for the sale and purchase of approximately 2.64 hectares of land at Factory Road, Waharoa (the property). The property was part of a larger property owned by WIPL. The agreement was conditional on WIPL obtaining resource consent to subdivide its property. Resource consent was granted on 14 November 2007, but new titles were not issued until 15 August 2016.
[3] On 23 September 2016, Biodiesel and WIPL agreed to vary the agreement as follows (the variation):
The vendor will replace the soil/landfill he used to create a bunded1 area on the property to hold molasses. The replacement soil/landfill will be rolled and compacted to engineers certification. This work is to be completed within six months from today’s date. 23/9/2016
A sum of $30,000 will be held in escrow until the above work has been completed.
Vendor to remove chip rubber2 from site before six month period.
[4] The plaintiff, Waharoa Land Holdings Limited (WLHL), was incorporated on 29 September 2016. Under a deed of nomination dated 3 October 2016, Biodiesel nominated WLHL to complete the purchase and take title to the property on settlement. In terms of the deed of nomination, Biodiesel assigned the benefit of the agreement and all of Biodiesel’s rights and interests arising from the agreement to WLHL.
1 A bunded wall is an embankment or secondary enclosure to guard against accidental fluid spills within. WIPL had stored a large flexible bladder tank containing a livestock feed, condensed distillers syrup, within the bunded area.
2 After sale in 2007 and before settlement in 2016, WIPL had stored a pile of shredded tyres on the property.
[5] In a letter dated 3 October 2016, WIPL’s solicitors gave undertakings to WLHL on instructions from WIPL (the stakeholder letter). The stakeholder letter provided as follows:
We undertake to hold the sum of $30,000.00 (Retention) from the settlement funds in our trust account in accordance with the agreement between our respective clients made on site on 23 September 2016, pending:
1.The Vendor replacing the soil/fill used to create the bunded area on the property in accordance with accepted engineering practice and the Vendor providing a certificate from a suitably qualified engineer that the replacement soil/fill has been correctly rolled and compacted on or before 23 March 2017 (Replacement Works).
If the Replacement Works have not been completed within the required time frame, then the Purchaser will be entitled to have the Retention together with any interest earned (Retention Monies) released to it, and shall apply the Retention Monies to the cost of completing the Replacement Works.
2.The Vendor removing the rubber chip to the reasonable satisfaction of the Purchaser on or before 23 March 2017 (Removal Works).
If the Removal Works have not been completed on or before 23 March 2017, then the Purchaser will be entitled to apply the Retention Monies to the cost of completing the Removal Works.
Any balance of the Retention Monies remaining after the Purchaser completes either or both of the Replacement Works or the Removal Works shall be paid to the Vendor. If the Retention Monies are insufficient to meet the costs of the Replacement Works and/or the Removal Works, this balance shall be a liquidated sum which the Purchaser may claim from the Vendor.
[6] Pursuant to the deed of nomination dated 3 October 2016, WLHL settled the purchase of the property on the same date and became the registered proprietor of the property.
[7] Neither the replacement works nor the removal works were completed by 23 March 2017, as required by the variation and the stakeholder letter. On 31 March 2017, the solicitors for WLHL wrote to the solicitors for WIPL stating that their client would now complete the replacement works and the removal works. The solicitors for WLHL also asked that the $30,000 retention monies be paid to them in order to apply to the cost of completing the works. WLHL did not, however, complete the works nor did WIPL pay the retention monies to WLHL.
[8] Instead, almost a year later — in March 2018 — WIPL completed the work itself. A local contractor, J Swap Contractors Limited, was employed to push the rubber chip using a bulldozer from where it had been piled in a sandpit on the property to an adjoining property owned by WIPL. A WIPL employee then used a 21 tonne Kolbelco digger to tidy up the area after the bulldozer had pushed the rubber chip off the property.
[9] After the rubber chip had been removed, the WIPL employee broke one of the bunds of the pit to allow the water which had been held in there to drain out. After removing the bladder, the employee put the fill that had been used to make the bunds back into the pit. He then completed the job by spreading the topsoil that had been placed in piles around the pit. The employee was not asked to obtain an engineer’s certificate relating to the rolling and compaction of the soil/fill. The employee said he was satisfied, however, that in using the 21 tonne digger, the soil/fill that was returned to the pit was heavily compacted due to the weight of the digger and how he did the work. As he was pulling the bunded sides into the pit and spreading the fill he was travelling back and forth with the digger across the pit compacting the fill. The WIPL site manager and his son also used a five tonne roller to drive back and forth across the fill as the employee was filling it in.
[10] Then, after approximately a further three years — on 26 February 2021 — the solicitors for WLHL wrote to the solicitors for WIPL noting that although WIPL claimed to have completed the replacement works, an engineer’s certificate confirming that the replacement soil/fill had been correctly rolled and compacted had not been received. There was therefore no objective evidence of completion of the replacement works.
[11] Similarly, although WIPL claimed to have completed the removal works, WIPL had not been able to demonstrate that the work was complete to the reasonable satisfaction of WLHL. The solicitor for WLHL stated that WLHL was considering its next steps, which included potentially carrying out the replacement works and removal works itself and claiming a refund of the $30,000 retention monies and any additional costs incurred by it.
[12] WLHL then obtained a report dated 6 April 2021 from a civil technician employed by Civil Engineering Services (1994) Limited (CES). It recorded WLHL’s instructions to determine the extent of filling and the suitability of the fill placed on site. Six boreholes were bored throughout the site, but none were in the former bunded area or that part of the property from which the chip rubber had been removed. In addition, four test pits were excavated. Again, none were in that part of the property from which the chip rubber had been removed. Three test pits were, however, in the former bunded area — two on the edges and one in the middle.
[13] One of the test pits from the edge of the former bunded area recorded topsoil for 0.1 metres, then fill of light brown silt down to the natural ground of 1.1 metres. Some electrical fence wire tape was found at 1.0 metres. Examination continued with an augur down to 2.1 metres. From 1.1 metres to 2.1 metres, silt is recorded, initially light orange-brown and brown-tan, then light grey. The slit is described as sandy and friable.
[14] The test pit from the middle of the former bunded area records silt from ground level to the natural ground at 2.2 metres. Initially that slit is orange-brown, sandy and dry, then dense sandy, and finally light tan-grey, sandy and friable. Small rubber fragments are found at 0.8 metres in the dense sandy silt. Further rubber fragments from old truck tyres are recorded at 1.7 metres.
[15] The report says nothing about rolling and compaction of the former bunded area in respect of which an engineer’s certificate was required in terms of the variation and stakeholder letter. The report concludes:
The report describes the site conditions encountered during investigations and findings are presented for the reader to draw their own conclusions and investigate further as considered necessary.
[16] On 30 April 2021, after receipt of the report from CES, the solicitors for WIPL wrote to the solicitors for WLHL as follows:
1.The soil/fill used to create the bunded area on the property was used to fill the pond area and was rolled and compacted by the heavy machinery undertaking the work. An engineer certificate for [t]his work is not available.
2.The rubber chip that had been placed on the property was moved to an adjoining property owned by the Vendor. The chip that has been identified in the test pits would be minimal and would have been in the fill soil.
[17] Because an engineer’s certificate was not available, in breach of the variation and stakeholder letter, the solicitors arranged for payment of the $30,000 retention monies to WLHL on 30 April 2021.
Pleadings
[18] There were two defendants and four causes of action in the latest iteration of the statement of claim, dated 16 September 2022. However, the second defendant, Spark New Zealand Trading Limited, settled the claim against it shortly before trial and a notice of discontinuance was filed on 16 March 2023. The second to fourth causes of action were also resolved as between the plaintiff and the first defendant except as to costs. The trial was therefore limited to the plaintiff’s claim on the first cause of action, which alleged breach of contract.
[19] WLHL alleges that in breach of the terms of the variation and stakeholder letter, the first defendant did not:
(a)Replace the soil/fill used to create the bunded area on the property in accordance with accepted engineering practice.
(b)Provide a certificate from a suitably qualified engineer that the replacement soil/fill had been correctly rolled and compacted on or before 23 March 2017, or at all.
(c)Remove the rubber chip to the reasonable satisfaction of the plaintiff on or before 23 March 2017, or at all.
[20] WIPL admits that it did not provide a certificate from a suitably qualified engineer that the replacement soil/fill had been correctly rolled and compacted on or before 23 March 2017, but otherwise denies (a) and (c).
[21]The relief sought by WLHL includes:
(a)Declarations that:
(i)the stakeholder letter has contractual effect between the plaintiff and the first defendant, according to its terms;
(ii)the first defendant has not carried out the replacement works or the removal works in accordance with the terms of the stakeholder letter; and
(iii)to the extent that the retention monies may be insufficient to complete the replacement works and/or the removal works, the first defendant is obliged to pay to the plaintiff an amount equal to the difference between the amount of the retention monies and the total actual cost of the replacement works and the removal works.
(b)Special damages of $5,784.22, being the cost of the investigation carried out in the report prepared by CES and 50 per cent of the cost of the survey conducted by CES.
(c)General damages for breach of contract.
(d)Costs.
[22]In turn, WIPL pleads a number of affirmative equitable defences:
(a)WLHL has waived any entitlement to seek relief against WIPL.
(b)WLHL is estopped from seeking relief against WIPL.
(c)WLHL has acquiesced in any breach of obligations owed by WIPL.
(d)WLHL’s delay in bringing the causes of action is unreasonable and the consequences of that delay render the granting of relief unjust.
Declarations
[23] Counsel for WIPL notes that WLHL does not place reliance upon the Declaratory Judgments Act 1908 and as such the declarations sought must be considered in terms of the Court’s inherent jurisdiction. On the other hand, counsel for WLHL submits that the principles to be applied are the same whether proceedings are issued under the Declaratory Judgments Act or under the Court’s inherent jurisdiction.
[24]Whatever approach is adopted, I respectfully agree with Hammond J in
Kung v Country Section NZ Indian Association Inc where he stated:3
… the broad question being whether justice requires a declaration. A wide range of factors will then be relevant: whether a plaintiff has a sufficient interest in the proceedings; whether an issue was now moot; and the practical utility of issuing a declaration. And I can see no reason why the so-called traditional equitable defences, or at least the ideas which underlie them, are not also apposite to declarations.
[25] I also acknowledge the Court’s reluctance to grant a declaration in respect of a hypothetical state of facts,4 or where a declaration would serve no useful purpose.5
Discussion
[26] WLHL seeks three declarations. As WIPL admits the stakeholder letter has contractual effect according to its terms, WLHL accepts that the first declaration is “redundant”.
[27] However, WLHL contends that the second declaration is certainly not redundant. It submits that a declaration in the terms sought has clear utility and would have the effect of resolving a remaining issue in this proceeding. I am of the opinion, however, that the terms sought are too general to either resolve the issue or have any utility. Three different breaches of the variation and stakeholder letter are alleged yet the declaration sought does not separate them out. In that regard, WIPL admits that it did not provide a certificate from a suitability qualified engineer that the replacement
3 Kung v Country Section NZ Indian Association Inc [1996] 1 NZLR 663 (HC) at 666.
4 Gazley v Attorney-General (1995) 8 PRNZ 313 (CA).
5 Turner v Pickering [1976] 1 NZLR 129 (SC).
soil/fill had been correctly rolled and compacted on or before 23 March 2017, or at all, but denies that it did not replace the soil/fill used to create the bunded area on the property in accordance with accepted engineering practice. WIPL also denies that it did not remove the rubber chip to the reasonable satisfaction of WLHL on or before 23 March 2017, or at all.
[28] Here, I have regard to the burden of proof to establish the facts to support a declaration that WIPL did not replace the soil/fill in accordance with accepted engineering practice or did not remove the rubber chip to the reasonable satisfaction of WLHL. The reference to accepted engineering practice only applied to the former bunded area and not the entirety of the property. It is also accepted that the rubber chip referred to was a pile of shredded car tyres, placed on part of the property between 2012 and 2018 as evidenced by aerial photographs from Google Earth.
[29] WLHL called the civil technician who authored the report dated 6 April 2021 to establish that WIPL did not replace the soil/fill in the bunded area in accordance with accepted engineering practice and did not remove the rubber chip to the reasonable satisfaction of WLHL. His evidence did not, however, establish either proposition. In cross-examination, the technician acknowledged that he did not reach any conclusion with respect to compaction in the bunded area. Although he did some shear vane tests,6 he did not log them. He also did not do any Scala penetrometer tests,7 “or anything”. He said he was not looking for compaction but was looking for rubbish. His report invited readers to draw their own conclusion as to site contamination.
[30] In his evidence, the technician noted that “the site looked okay”. He further said:
Q. And did it look like that … from what you were able to detect at least that the shredded tyres that had been on the property in question were now off it?
A. Yes.
6 A shear vane test is a method of measuring the undrained shear strength of a cohesive soil.
7 A Scala penetrometer, or hand cone penetrometer, is used to determine the penetration resistance of a soil.
Q.And you didn’t do an examination of whether there remained shredded tyres in the area encircled?
A. No.
Q. As far as you were concerned it appeared they had been moved?
A.Well I didn’t even know that there was a big shredded tyre pile there until I’d started writing the report after I’d done the work.
[31] The civil technician who was “looking for rubbish” obviously saw no sign of the pile of shredded tyres which had been removed three years earlier, in March 2018. In those circumstances, WLHL has failed to establish that it was reasonable not to be satisfied that the rubber chip had been removed.
[32] There is therefore no utility in the second declaration sought where WIPL has acknowledged a term of the stakeholder agreement was not carried out with consequential effect, that is, payment of the retention monies. The second declaration is therefore refused.
[33] As to third declaration sought, WLHL submits that it would have utility because it would foreclose any future argument about the meaning and consequences of the stakeholder letter. However, WLHL has not incurred any costs for the replacement or removal works despite having received the $30,000 retention monies two years ago because of the failure on the part of WIPL to provide an engineer’s certificate relating to the rolling and compaction of the former bunded area. The extent of any work required is completely unknown. If work is required to further roll and compact the former bunded area five years after it was first done, then it is unclear whether the retention monies will be sufficient to meet any such costs. If it is sufficient, WLHL is required to refund the unused portion of the retention monies to WIPL. If it is not sufficient, then WLHL can claim the difference from WIPL as a liquidated sum.
[34] The stakeholder letter is clear. There is no ambiguity or need for a declaration about its terms. Further, the declaration sought relates to a hypothetical situation (“to the extent that”) on which Courts are understandably reluctant to provide declarations. Counsel for WIPL submits that the third declaration should also not be granted as it would arguably allow WLHL to circumvent the statutory limitation period of six years
for breach of contract. WIPL breached the contract on 23 March 2017, just over six years ago, when it failed to complete the replacement and removal works and provide an engineer’s certificate. Counsel submits it would be entirely improper for WLHL to have a declaration of indefinite effect that it could enforce if and when it chooses to do so.
[35] Without necessarily accepting that a declaration would circumvent the statutory limitation period for breach of contract, I am satisfied that the third declaration should also be refused because it relates to a hypothetical situation and has not been shown to be of any utility.
[36] Having refused the primary relief sought of declarations, it is not appropriate for either special or general damages for breach of contract to be awarded. Until such time as WLHL has established the retention monies are insufficient to meet the legitimate and reasonable costs of remedial work, the costs incurred by WLHL are covered by the retention monies. General damages are also inappropriate when WLHL has not established any breach other than a failure to obtain an engineer’s certificate.
Result
[37] WLHL’s claim against WIPL for declarations as to breaches of contract is dismissed.
[38]No damages are payable.
Woolford J
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