Waihopai Valley Vineyard Ltd v Savvy Vineyards 3550 Ltd
[2014] NZHC 1708
•22 July 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-1177 [2014] NZHC 1708
BETWEEN WAIHOPAI VALLEY VINEYARD LTD
Plaintiff
AND
SAVVY VINEYARDS 3550 LTD First Defendant
CONSTELLATION BRANDS NEW ZEALAND LTD
Second Defendant
GIESEN WINES LTD Third Defendant
TREASURY WINE ESTATES (MATUA) LTD
Fourth Defendant
TREASURY WINE ESTATES (NZ) LTD Fifth Defendant
Hearing: 14 and 15 July 2014 Counsel:
CL Bryant for First Defendant (Applicant) IC Bassett for Plaintiff (Respondent)
Judgment:
22 July 2014
JUDGMENT OF BREWER J
This judgment was delivered by me on 22 July 2014 at 4:00 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Solicitors: Hesketh Henry (Auckland) for First Defendant (Applicant) Botting Legal Ltd (Auckland) for Plaintiff (Respondent)
WAIHOPAI VALLEY VINEYARD LTD v SAVVY VINEYARDS 3550 LTD [2014] NZHC 1708 [22 July 2014]
Introduction
[1] This judgment determines an application for interim injunction brought by the first defendant (Savvy).
[2] The plaintiff (Waihopai) sues Savvy under various headings arising from contractual relationships.
[3] Waihopai owns a vineyard. In happier times, Savvy managed the vineyard pursuant to a Vineyard Management Agreement (VMA). It bought the grapes produced by the vineyard pursuant to an Agreement for the Supply of Grapes (ASG).1
[4] On 3 June 2014, Waihopai purported to cancel its contracts with Savvy, having already issued these proceedings.2
[5] Savvy now seeks interlocutory orders:
1.restraining [Waihopai] from acting on the purported notice of termination dated 3 June [2014] of the Vineyard Management and Grape Supply Agreements between [Waihopai] and [Savvy] dated
11 October 2006;
2.requiring [Waihopai] to allow [Savvy] access to the vineyards to carry out its obligations under the Vineyard Management Agreements;
3.requiring [Waihopai] to pay the vineyard management fees as they fall due;
The law
[6] The law relating to granting an interlocutory injunction is well settled. Its purpose is to protect applicants against injury by violation of their rights for which they could not be adequately compensated in damages recoverable in the action if
the case were resolved in their favour at the trial. An applicant’s need for such
1 The vineyard is divided into two blocks. VMAs and ASGs were entered into for each block.
For the purposes of this judgment, the agreements in each category are identical. For simplicity, I will refer to them in the singular.
2 The operative amended statement of claim is dated 4 June 2014. The operative amended statement of defence is dated 5 June 2014, it contains a counterclaim.
protection must be weighed against a respondent’s need to be protected against injury resulting from being prevented from exercising legal rights for which the respondent could not be adequately compensated under the applicant’s undertaking in damages if the case were resolved in the respondent’s favour at the trial. The Court must weigh one need against another and determine where the balance of
convenience lies.3
[7] A two-stage approach is required. I must decide whether there is a serious question to be tried in the proceeding and, if there is, where the balance of convenience lies. Within the latter examination will be a focus on the adequacy of damages as a remedy available to the applicant.
[8] Finally, the decision whether to grant an interim injunction must (of course)
be taken in the context of the overall justice of the case.4
Background
[9] The genesis of the dispute between the parties is the bumper grape harvest of
2014.
[10] The ASG requires Savvy to buy “the Grapes”5 for a purchase price which is assessed according to a formula. Relevant provisions relating to price are:
4.2The market average price per tonne shall in each case be the Marlborough average price per tonne for each variety of the Grapes for the current vintage as published in the New Zealand Grape and Wine Industry Statistical Annual (or any replacement publication). The Purchase Price shall be calculated based on the tonnes harvested or the target cropping level outlined in clause 12.1, whichever is the lesser.
…
4.5If the target cropping levels outlined in clause 12.1 are exceeded by up to 40%, the Buyer will purchase and receive the entire crop of Grapes at the price calculated using the price per tonne outlined in clause 4.1 and the target cropping level outlined in clause 12.1.
3 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 408, per Lord Diplock.
4 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA).
5 The term is defined in 1.1 of the ASG: “Grapes” means the entire crop of grapes grown by the
Grower at the Vineyard during the Term of this Agreement.
4.6 If the target cropping levels outlined in clause 13.1 are exceeded by
40% or more, the Grower will still offer them to the Buyer for purchase on a first refusal basis at a price to be negotiated in good
faith by the Buyer and the Grower. If the Grower and the Buyer are
not able to agree on a price within 14 days, the Grower may offer the
Grapes for sale to a third party.
4.7The Buyer will weigh the Grapes using an appropriate, accurate industrial standard weigh-bridge commonly used for weighing Grapes and provide the Grower with a written weigh-bridge record of the tonnes of Grapes of each variety harvested from the Vineyard. The weigh-bridge record shall be prepared by the Buyer and shall be available for inspection by the Grower. The price of the Grapes shall be assessed based on the tonnes of fruit of each variety as set out in the written weigh-bridge record.
[11] On first reading, these clauses mean that if the annual harvest equals the cl 12.1 target cropping level then Savvy pays the relevant Marlborough average price per tonne for the Grapes. If the annual harvest exceeds the cl 12.1 target cropping level by up to 40 percent then the price of the Grapes to Savvy does not change. I infer that this margin is where Savvy can make its profit.
[12] It is cl 4.6 that is the focus of difficulty. Does it mean that if the cl 12.1 target cropping level is exceeded by 40 percent or more then the entire crop of grapes must be negotiated for by Savvy on a first refusal basis? If so, is the cl 12.1 target cropping level as specified in that provision, or can it be altered?
[13] In answering these questions, the proper construction of cl 4.6 is necessary. The reference in the clause to “clause 13.1” is clearly a typographical error. But, is the intended reference to cl 12.1 (as Waihopai contends) or to 12.3 (as Savvy contends)?
[14] Clause 12 adds to the difficulties. Clause 12.1 is a series of tables which sets out target cropping levels per grape variety for the first five vintages.
[15] Clauses 12.2 and 12.3 provide:
12.2Cropping level estimates will be carried out by the Grower at various key stages of the Grape season as required by the Buyer. If the cropping level estimates are higher than the target, the Grower will carry out the required additional crop level control as specified in
clause 9.3 above if this is requested (and only if requested) by the
Buyer.
12.3The Grower (or the Grower’s Vineyard Manager) and the Buyer will discuss with a view to reaching agreement on the target bunches per vine to achieve the target cropping levels outlined in the agreement (or any higher target cropping level required by the Buyer). The Buyer shall make the final decision on the target number of bunches per vine. The Grower undertakes it will use its best endeavours including the methods of pruning, bud rubbing, shoot thinning, bunch thinning to obtain the target bunches per vine required by the Buyer.
[16] It can be seen from these last two clauses that the Buyer (Savvy) has effective control of the crop. Under cl 12.3, the Buyer (Savvy) has the final decision on the target number of bunches per vine. Therefore, if the typographical error “13.1” in cl 4.6 should have been “12.3” then the 40 percent margin could have a higher base from which to start the calculation than the target cropping level set out in cl 12.1.
[17] On Monday, 24 June 2013, Mr Peter Vegar, for Savvy, sent an email to Mr John Annis who was employed by Savvy for the purposes of the VMA. The email quoted cl 12.3 of the ASG and detailed, by variety of grape, the target bunches per vine and a higher target cropping level. Mr Annis was instructed to incorporate the new targets into the Annual Vineyard Management Plan for the 2013/2014 season and he was told to “ensure that pruning is carried out in line with this requirement”. The new target cropping level was considerably higher than that set out in cl 12.1. For example, for sauvignon blanc grapes the level went from nine tonnes per hectare to 15 tonnes per hectare.
[18] Savvy did not advise Waihopai of this change.
[19] The grapes were harvested and sold to winemakers by Savvy. Overall, the cl 12.1 target cropping level was exceeded by 75 percent. The harvest was completed on 18 April 2014.
[20] Following the harvest, the parties began to dance around the issues of the quantity of grapes which had been harvested and the price which should be paid for them. Waihopai wanted the weigh-bridge record. It contended that cl 4.7 entitled it to the record. Savvy refused to provide a written copy of the weigh-bridge record,
maintaining it was concerned that Waihopai might use the record for purposes which would breach commercial confidentiality. Savvy submits that it was at all times prepared to allow Waihopai to inspect the weigh-bridge record.
[21] At the same time, Savvy wanted Waihopai to issue an invoice for the grapes using the cl 12.1 target cropping level. Waihopai was aware that there had been a good harvest and was suspicious.
[22] By letter dated 14 May 2014,6 Ms Bryant, on behalf of Savvy, wrote to Waihopai’s lawyers in continuation of a chain of correspondence. In the letter, Ms Bryant said:
9.Savvy has accepted the Grapes for the 2014 harvest. The cropping level does not exceed 40% of the target agreed by the Manager and Buyer. Savvy confirms that the target cropping level under clause
12.1 has been met and requested that invoices be issued accordingly.
10.There is accordingly no need for WVVL to inspect the weigh-bridge records for this year’s harvest. Those records are not required, as suggested in your email of 13 May, for the purposes of clauses 7 to
8. That said, Savvy has agreed to make the records available for inspection. Clause 4.7 does not include a right to a copy of the
records. We agree with you that the confidentiality requirement
under clause 22 means that the information contained in the records must be kept confidential to Savvy and WVVL.
11. We note that WVVL was notified, and has been aware for some time, that 2014 would be an exceptionally large harvest. Additional thinning was required to keep the bunches to the cropping level required by the Buyer, and this was notified to, and paid for by, WVVL. Bunch weights are regularly assessed and monitored throughout the growing season and prior to harvest. Had WVVL wished to raise this argument under clause 4.6 prior to harvest, it had ample opportunity to do so.
[23] The first paragraph quoted above should be read in the context that Waihopai had not been told that “the target agreed by the Manager and Buyer” had been increased. That is to say, Savvy, wearing one hat, had told Savvy, wearing its other hat, to increase the target levels.
[24] By letter dated 16 May 2014, Mr Bradley Botting, a director of Waihopai’s
lawyers, addressed the first quoted paragraph:7
6 Common bundle of documents, vol 4, at 1007.
7 At 1010.
We refer to the second and third sentences of numbered paragraph 9 of your letter to us dated 14 May 2014. With regard to the third sentence of numbered paragraph 9 of your letter, we understand that Savvy is requesting an invoice from WVVL on the basis of the target crop levels as stipulated in clause 12.1 of the Supply Agreements (namely, 9.0 tonnes per hectare for sauvignon blanc and pinot gris; 6.0 tonnes per hectare for pinot noir)? Please advise whether our understanding of Savvy’s position is correct.
[25] Ms Bryant replied to Mr Botting by email sent on 19 May 2014 at 10:35 am.8
Ms Bryant said:
I confirm Savvy requests an invoice on the basis of the levels stipulated in clause 12.1 of the Grape Supply Agreements (9.0 Tonnes per hectare for sauvignon blanc; 9.0 Tonnes per hectare for pinot gris; 6.0 tonnes per hectare for pinot noir) for the blocks/hectares as outlined below.
[26] Waihopai issued proceedings later that day.
Waihopai’s claims
[27] I quote from Mr Bassett’s submissions:9
3.Overall context: The overall context is that Savvy as manager and as a fiduciary in breach of its equitable obligations refused to disclose/withheld information. Savvy as buyer was complicit in that breach of fiduciary duty. Savvy as manager and as buyer have (sic) failed to account for proceeds of sale belonging to Waihopai. In that overall context (irrespective of the question of validity of cancellation) the balance of convenience and overall justice favours Waihopai and weighs against the granting of equitable relief of an injunction.
[28] The situation, then, is that Waihopai believes that Savvy made use of its positions as vineyard manager and as grapes buyer to mislead or deceive Waihopai for commercial advantage. Waihopai’s position is that Savvy has tried to obtain a windfall of about $1 million by secretly increasing the crop target levels and then relying on an untenable construction of the agreements to justify paying no more than the cl 12.1 target price. In doing so, it has breached its obligations both as a fiduciary and as a contracting party.
[29] Additionally, Waihopai argues that the ASG is at an end because Savvy failed to give due notice of its renewal.
8 At 1017.
9 Submissions on behalf of the plaintiff in reply to the first defendant’s submissions re an interim
injunction, dated 11 July 2014.
Savvy’s response
[30] Savvy’s response is that it had good reason for not telling Waihopai about the increased crop target levels. Waihopai was at that time in receivership and Savvy was concerned that the receivers might use the information to Savvy’s commercial disadvantage. Waihopai points out that even if this were a justifiable reason, Waihopai was out of receivership later in the month in which the increased target levels were set.
[31] Savvy’s main argument is that its interpretation of the agreements is the proper one and so it has done nothing wrong. It has not breached the agreements.
[32] There are associated factual and legal arguments. Savvy contends:
(a) That Waihopai has failed to comply with the disputes and termination provisions of the agreements. It had no right to cancel the agreements.
(b)If Waihopai wanted to rely upon its interpretation of cl 4.6 then it should have done so prior to the harvest being completed.
(c) Waihopai knew that high yields were likely, knew that Savvy was on- selling the grapes to wineries and, because it did not take action until after the harvest and the consequent sale of the grapes by Savvy, Waihopai is estopped.
(d)The ASG provides for the buying and selling of grapes; no fiduciary duty arises.
(e) The VMA does not create a fiduciary relationship. Rights and obligations are clearly delineated. In any event, Waihopai’s factual basis (deliberate withholding of information) for the alleged breach is disputed.
(f) As a matter of fact, the notice to renew required by the ASG was given.
[33] Waihopai answers:
(a) Savvy breached the ASG and VMA in ways that gave Waihopai rights to cancel the agreements. Waihopai has cancelled the agreements accordingly. The renewal of the ASG has not been given, in any event.
(b)It is impossible for cl 4.6 rights to be exercised until the harvest is complete. Waihopai was prevented from exercising its cl 4.6 rights because Savvy wrongly refused to produce the weigh-bridge records and refused to negotiate in good faith.
(c) There is no estoppel arising in these circumstances. In any event, Savvy should not have agreed on-sale to wineries on a broader basis than it had rights under the agreements. Further, Waihopai does not seek to invalidate the on-sales to the wineries, but rather to obtain the proceeds of the on-sales. As between Waihopai and Savvy, Savvy had no right to sell the grapes and so the sale proceeds are held by Savvy and the wineries on constructive trust for Waihopai.
Serious question to be tried
[34] The onus is on Savvy to satisfy me on the balance of probabilities that there is a serious question to be tried. Savvy points to the issues I have mentioned in [31]- [33]. Ms Bryant, in argument, referred me to the passages in the affidavits which she submits are relevant. In effect, her overall submission is that there are important issues of fact to be resolved, issues of construction of the agreements and the inter- relationship between them, and issues of law which arise from the matrix of facts and agreements – and which can only be resolved once the matrix has been defined.
[35] Mr Bassett for Waihopai made a significant effort to persuade me that
Waihopai’s position is manifestly correct. He took me through a careful analysis of
the agreements and the factual background. Likewise, he made considered submissions on the law. In effect, he invited me to act as a Judge determining an application for summary judgment. However, that is not my role.
[36] In deciding whether there is a serious question to be tried, a Judge does not decide the merits of the case. The Judge’s task is to inquire whether the applicant’s case is frivolous or vexatious, or otherwise without real prospect of success. This is a threshold issue in an application for interlocutory relief which will turn on the exercise of a discretion. The discretion relates to the balance of convenience in the overall interests of justice.
[37] The role of the Court in assessing whether there is a serious question to be tried is, of course, the issue in American Cyanamid. There are two passages in Lord Diplock’s judgment which I will quote because, in my view, they are definitive of this point:10
In those cases where the legal rights of the parties depend upon facts that are in dispute between them, the evidence available to the Court at the hearing of the application for an interlocutory injunction is incomplete. It is given on affidavit and has not been tested by oral cross-examination. The purpose sought to be achieved by giving to the Court discretion to grant such injunctions would be stultified if the discretion were clogged by a technical rule forbidding its exercise if upon that incomplete untested evidence the Court evaluated the chances of the plaintiff’s ultimate success in the action at
50 percent or less, but permitting its exercise if the Court evaluated his chances at more than 50 percent.
...
It is no part of the Court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial. One of the reasons for the introduction of the practice of requiring an undertaking as to damages on the grant of an interlocutory injunction was that “it aided the Court in doing that which was its great object, viz abstaining from expressing any opinion upon the merits of the case until the hearing” (Wakefield v Duke of Buccleuch ((1865) 12 LT
628 at 629)). So unless the material available to the Court at the hearing of the application for an interlocutory injunction fails to disclose that the
plaintiff has any real prospect of succeeding in his claim for a permanent
injunction at the trial, the Court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought.
10 American Cyanamid, above n 3, at 406-407.
[38] In this case, I am satisfied that there are serious questions to be tried:
(a) There is dispute over the correct interpretation of the agreements. The agreements are, in relevant respects, drafted ambiguously. There are arguments for and against the competing views on how the price cap should be applied. For myself, I tend to Mr Bassett’s view but there is a complex interplay between the rights of the buyer as opposed to the grower and the position of the vineyard manager as intermediary.
(b)The agreements do contain termination provisions. Whether or not Waihopai was entitled to cancel the agreements and not use these provisions depends on the resolution of competing arguments about breaches of fiduciary duties and the proper construction of the agreements.
(c) There is an issue over how cl 4.6 should operate if Waihopai’s view of the contract is upheld. Waihopai’s position that cl 4.6 rights cannot be invoked until after harvest is backed by an affidavit from an industry expert. This is an issue which will need to be tested in cross- examination.
(d)The argument about breach of fiduciary duty might well require credibility decisions to be made surrounding the correspondence between the lawyers which I quoted above.
(e) The estoppel argument might depend, in part, upon what the parties did, what they knew and what they were motivated by. This would require the hearing of evidence.
(f) Whether or not the ASG was renewed is a matter of fact where credibility is in issue.
Balance of convenience
[39] I characterise the orders sought by Savvy as being in the nature of mandatory interim orders. It is unusual for such orders to be granted. Further, insofar as the VMA is concerned, I am being asked to reinstate a contract which is, if not exactly, akin to a contract for personal services.
[40] The factual situation is that Savvy is no longer in control of the vineyard. Waihopai has denied Savvy access to the vineyard and has employed others to carry out the management of it. I am told that winter pruning will, and must, commence shortly. This operation will determine the number of bunches of grapes which should come into being. The orders sought would open the gates to the vineyard, put Savvy back into possession of Waihopai’s assets (which I am told are worth approximately $11 million) and entrust them to Savvy’s ongoing care.
[41] The law, as I read it, establishes a rather higher threshold for granting such injunctions than would normally be the case. Essentially, much depends on the perceived strength of the applicant’s case as well as the nature of the ongoing contact between the parties which would be required.
[42] The Courts are much more reluctant to grant mandatory interim injunctions which force a party to do a particular act or thing rather than simply requiring them to refrain from doing something.
[43] The law is summarised well in McGechan on Procedure:11
A mandatory injunction ought to be granted on an interlocutory application only in special circumstances, and then only in clear cases either where the Court thinks that the matter ought to be decided immediately or where the injunction is directed at a simple and summary act, which could be easily remedied or where the defendant has attempted to steal a march on the plaintiff. Moreover, before granting a mandatory interlocutory injunction the Court has to feel a high degree of assurance that at the trial it would appear that the injunction had rightly been granted, that being a different and higher standard than is required for a prohibitory injunction: Locabail International Finance Ltd v Agroexport [1986] 1 All ER 901 (CA).
Eichelbaum CJ summarised the position in Soft-Tech International Pty Limited v Ball (1990) 3 PRNZ 683 (HC) at 684: “Mandatory injunctions are relatively uncommon, interim mandatory injunctions are rare indeed, and interim mandatory injunctions having the effect of a final order and involving the payment of a sum of money which normally would be described as a debt, in my experience are completely novel.”
[44] Savvy’s argument is that the VMA is not really an agreement for personal services. It is a commercial agreement among three agreements (including the ASG) by which the vineyard was developed and by which it is managed and its production sold. The VMA is very detailed, and contains provision for independent expertise to resolve management disagreements, so that the parties would not be yoked together in a continuing hostile relationship.12
[45] Savvy points to Thomas Borthwick & Sons (Australasia) Ltd v South Otago Freezing Co Ltd13 as an example of an injunction being granted which had the practical effect of compelling the performance of a service contract. In that case, the Court granted an injunction restraining the defendant from acting in breach of a clause requiring it to purchase, stock, and supply meat carcasses to the plaintiff exporter for a 20 year period.
[46] I agree that the case is a useful one. It discusses the extent of jurisdiction and the principles to be applied authoritatively. But it is factually distinct from this case:
(a) The respondent was held to be in breach of its contract. The issue was whether a permanent injunction was a proper remedy.
(b)The Court of Appeal held that damages was not an appropriate remedy.
(c) The nature of the contract (at heart a contract for the sale of goods)
did not, in the Court’s view, require a high level of personal co- operation.
12 A main reason for the Courts’ reluctance to give mandatory injunctions to compel specific performance is that it can require a Court to engage in continual supervision because of the lack of commercial amity between the parties: Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1 (HL), per Lord Hoffman at 15-16.
13 Thomas Borthwick & Sons (Australasia) Ltd v South Otago Freezing Co Ltd [1978] 1 NZLR 538 (CA).
[47] Here, interim relief is sought. The merits have not been determined and the issue of remedy is at large. But that does not really matter. The Court has the jurisdiction to act on an interim basis and the question now is whether, on the balance of convenience and in the interests of justice, it should.
[48] The real point of difference with the Thomas Borthwick case is that here there is more than just long-term agreement to supply goods subject to conditions. That is the ASG. There was no equivalent to the VMA in the Thomas Borthwick case. If there were, then the Court of Appeal would have had to consider an additional agreement which put the appellant’s main commercial asset, its freezing works, in the possession and management of the respondent for the purpose of giving greatest commercial effect to the supply of goods contract.
[49] Savvy submits that the VMA and the ASG are intertwined and that re- entering and taking control of the vineyard is necessary to ensure the grapes meet the quality and yields required under the GSA. That is not as radical an interim measure as it otherwise might be because its rights under the agreement create an interest in
the land (a profit à prendre).14
[50] This is an interesting point, but not one I will place much weight on. The clauses “entitle [Savvy] to register a land covenant or a memorandum of encumbrance against the title to the Vineyard protecting [Savvy’s] rights” pursuant to the agreements. I am not sure how the VMA can do that, but perhaps the ASG can (the right to take the grapes). The reason I do not place much weight on the clauses is that they plainly were not intended to create interests in the land which went beyond the contractual rights with which I am concerned. I agree with Mr Bassett that their intent is to provide a mechanism of notice to prospective purchasers of the vineyard of Savvy’s rights under the agreements.
[51] Damages will not, Savvy submits be a sufficient remedy:
(a) The VMA not only provides fees, the vineyard is an important part of
Savvy’s vineyard management business.
(b)Loss of control of the vineyard means loss of control over the quality and yields of the grapes.
(c) Savvy has already contracted to sell the 2015 harvest.
(d) Waihopai might lack the ability to pay an award of damages.
[52] In sum, Savvy contends that if the injunctions are granted there is no detriment to Waihopai and great benefit to Savvy. Both states will arise from the continuation of the competent management of the vineyard leading to an optimal harvest.
[53] Waihopai’s submissions are largely the reverse of Savvy’s:
(a) The undesirability of forcing Waihopai back into agreements which require ongoing trust, confidence and co-operation.
(b) The unfairness of forcing Waihopai to entrust Savvy with its
$11 million investment asset.
(c) The unfairness of making Savvy the bailee of the grapes.
[54] Further, Waihopai submits that Savvy’s undertaking as to damages is
worthless. Mr and Mrs Vegar, the owners of Savvy, are insolvent.15
Decision
[55] I have a clear view that the balance of convenience favours Waihopai:
(a) The vineyard belongs to Waihopai. It is worth a great deal of money, but its worth as an investment depends upon the optimal production of grapes. Savvy is no longer in possession of the vineyard and Waihopai has made alternative arrangements for its proper management.
(b) There is hostility between the parties. These are not large companies.
They are commercial vehicles for Mr Chen, on the one hand, and Mr and Mrs Vegar, on the other. It would be extraordinary for the Court to force Mr Chen to hand his company’s key asset over to the possession and management of people he believes tried to cheat him. I accept that the agreements are detailed and that, objectively, co- operation could make the situation work. But, I do not see this as a situation where objective co-operation is likely.
(c) I am not satisfied that Savvy’s case is so strong that at trial it would be more likely than not that the injunctions – if given – would be seen as the correct course of action.
(d)The agreements are distinct legal documents. They are interrelated, but could equally be in the hands of different entities. Looking at them separately, a breach of the VMA by Waihopai would certainly be compensatable by damages. Savvy obtains management fees under the VMA and its profit margin and consequential losses are easily calculated.
(e) The ASG is, as Ms Bryant submitted, a bit more complex. But, grapes will be grown at the vineyard this year and harvested next year. If Savvy succeeds then it will be entitled to buy the grapes according to the adjudicated interpretation of the ASG. If Savvy is dissatisfied with the production of the grapes, in quantity or quality, or both, then it will have to enunciate that dissatisfaction and, through usual
methods, prove its loss.16
(f) It is true that Waihopai has previously been in receivership. But that is not the case now and I have no reason to suppose that the imperative to manage the vineyard on a good commercial basis will
not drive Waihopai to do so. On the other hand, Mr Bassett is correct
16 There is time between now and the harvest for this case to go to trial. The parties are well down the preparation track and urgency can be requested.
when he submits that there is no evidence that Savvy would be able to make good on its undertaking as to damages. Mr and Mrs Vegar, the people behind Savvy, are insolvent. Importantly, they have not produced any assurance that Savvy would be in a position to meet an award of damages.
[56] I have considered this matter against the overall interests of justice. I have given weight both to Mr Bassett’s submission on the unfairness of forcing renewed commercial propinquity and to Ms Bryant’s detailed submissions on how such a relationship might be made to work. However, not only does the law make such orders rare in a situation such as this, I cannot help but conclude that Savvy is the creator of the situation. Whatever the adjudicated outcome might be, Savvy did change the crop target levels without advising Waihopai and then tried to get invoices from Waihopai based on the original cl 12.1 target levels.
Conclusion
[57] Savvy’s application is declined. Waihopai is entitled to costs on a 2B basis.
These may be set by the Registrar.
[58] The interim order I made suppressing publication of the quantities of grapes in this case, the prices paid for them and any profits from their sale is now made permanent. However, this does not apply to publication of this judgment. Its contents are not suppressed. My order, of course, applies only to this proceeding. It will be up to the Judge who hears the substantive proceeding to make any further
suppression orders which may be necessary.
Brewer J
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