Waimea Estates (Nelson) Limited v Marr Holdings Limited
[2012] NZHC 680
•5 April 2012
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
CIV-2012-442-000130 [2012] NZHC 680
BETWEEN WAIMEA ESTATES (NELSON) LIMITED Plaintiff
ANDMARR HOLDINGS LIMITED Defendant
Hearing: 5 April 2012 (by videolink) Counsel: B M Nathan for Plaintiff
A G Stallard for Defendant
Judgment: 5 April 2012
ORAL JUDGMENT OF GENDALL J
[1] I have heard today at short notice, an application filed on behalf of the defendant to rescind or set aside the interlocutory or interim injunction granted by Ronald Young J on 30 March 2012, restraining the defendant from supplying sauvignon blanc grapes from named horticultural blocks in the Nelson area other than to the plaintiff until further order of the Court. The defendant was entitled on
24 hours’ notice to apply to discharge this order and has done so.
[2] In brief summary, the plaintiff’s statement of claim contends that it and the defendant are parties to an agreement under which the defendant is to supply grapes to the plaintiff to be used in the production of wine. Essentially, the grapes that would be supplied are to be harvested from the blocks known as the Fenwick and La Valle Blocks in the Nelson area. The agreement provides that the grapes are the property of the defendant until payment has been made in full by the winery and the
agreement makes certain provisions as to how payments are to be arrived at.
WAIMEA ESTATES (NELSON) LIMITED V MARR HOLDINGS LIMITED HC NEL CIV-2012-442-000130 [5 April 2012]
[3] The statement of claim essentially pleads that the defendant has breached the agreement (or certainly intends to through an anticipatory breach) and paragraph 8 of the statement of claims pleads “the defendant has notified the plaintiff that it does not intend to perform its obligations to supply the grapes to the plaintiff”. The plaintiff’s case is and will be that without the supply of the grapes, which are close to harvest, it would not be able to produce the wine from it, and would suffer considerable loss. The plaintiff accordingly applied for an interlocutory injunction which Ronald Young J granted on the papers.
[4] Today I have heard argument from counsel for both the plaintiff and the defendant, and have considered in detail a lengthy affidavit of Mr J R Marr, on behalf of the defendant company. Much of the argument or submissions related to disputed issues of fact and of law. From the defendant’s point of view it contends that the agreement cannot be enforced because of a number of reasons, including acquiescence or variation, which the plaintiff denies. The defendant contends that it is not obliged to supply grapes from what is known as the La Valle Block because it is not the owner of that block. Or, to put it another way, the order of Ronald Young J was unenforceable because it purports to restrain the defendant from supplying to others grapes from that block. There are a number of other very substantial arguments advanced by Mr Stallard, on behalf of the defendant. It must be said those are contested by Mr Nathan, on behalf of the plaintiff, which only serves to illustrate there is a substantial issue to be determined, after full consideration of all the evidence and submissions.
[5] The material before Ronald Young J indicated that the defendant, through its solicitors on 20 March 2012, contended that the contract was cancelled solely because, it said in terms of cl 3.2:
Either party may end the agreement due to the insolvency of either of the parties.
That advice continues that the defendant is insolvent and would not satisfy the solvency test in relation to transactions contemplated in the Companies Act. So the cancellation at that stage, although it is contended it may well have occurred much earlier, was on the basis of insolvency. I record however that the solicitors went on
to add that it was “for the other matters associated with non-performance by the
plaintiff”.
[6] What then should be the interim outcome where the Court is faced with a situation regarding the supply or non-supply of a perishable crop?
[7] There is no argument that the issues that the Court is required to consider in the granting or otherwise of an interim injunction are:
(1) Is there a serious issue to be determined after full hearing? (2) Where does the balance of convenience lie?
(3) What is required in the overall justice of the case?
[8] In terms of r 7.49 this Court’s discretion to set aside an interim ex parte injunction is unlimited and the matter is determined de novo, but only as it relates to the interim order. But the ex parte order would be set aside if it is wrong and if this Court after hearing argument from both sides, considers it is wrong.
[9] As to whether there is a serious issue to be tried, that is obvious. There are major contests on the facts which no Court can reach any view at all at an interim and interlocutory stage. The test is not necessarily whether there is a prima facie case, but whether there is a serious issue to be tried.
[10] Mandatory interlocutory injunctions, which in effect is what this application is about, are rarely made because it often means that they determine the substantive proceedings and, in truth, require specific performance. An interim injunction can only be granted if the remedy sought in the statement of claim provides a basis for such relief. This statement of claim does in the sense that it is seeking a permanent injunction to restrain the defendant from supplying the crop to parties other than the plaintiff.
[11] Mandatory interlocutory injunctions are rarely made. This is discussed in Soft-Tech International Pty Ltd v Ball.[1] But in the end it will still come back to the circumstances of an individual case. Of course, the injunction granted by Ronald Young J was a restraining injunction, but the reality is that if the grapes are to be marketed at all, with the injunction remaining in force, then they have to be supplied to the plaintiff, although the terms of the order of course do not require it.
[1] Soft-Tech International Pty Ltd v Ball (1990) 3 PRNZ 683 (HC).
[12] The House of Lords in Locabail International Finance Ltd v Agroexport referred to the circumstances in which mandatory injunctions might be granted. There, an injunction was sought to require a defendant to pay money in order to secure the release of a ship. The outcome depended on the facts. But the House of Lords said:[2]
A mandatory injunction ought not to be granted on an interlocutory application in the absence of special circumstances, and then only in clear cases either where the court thought that the matter ought to be decided at once or where the injunction was directed at a simple and summary act which could be easily remedied or where the defendant had attempted to steal a march on the plaintiff.
[2] Locabail International Finance Ltd v Agroexport [1986] 1 All ER 901.
[13] Before a mandatory injunction is granted the Court had to feel a high degree of assurance that at trial it would appear that the injunction had rightly been granted. That is a different and somewhat higher standard than what is required for a prohibitory injunction. So I bear those remarks and principles in mind in determining the outcome of this interim injunction.
[14] Having decided that there is clearly a serious issue to be tried, and no one disputes that, the critical issue here is where does the balance of convenience lie? On the one hand, the defendant says, through Mr Stallard, that it must harvest the grapes and provide them to third parties with whom it has contracted. And it cannot do so whilst the restraining injunction is in place. On the other side of the coin, the plaintiff’s position is that the agreement requires that the defendant provide that part of the harvest to it so it may make the wine, and without the grapes it cannot do so
and will suffer significant loss.
[15] The Court is in a most difficult position given the nature of the dispute and the circumstances which exist, namely disposal of a perishable crop. It should not wither on the vine. In the end the Court can only do its best in assessing where, as Cooke P said in Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd,[3] and which is well known to all counsel, where does the overall justice lie?
[3] Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1988] 1 NZLR 16 (CA).
[16] The plaintiff says it is of concern that the defendant initially claimed cancellation of the contract partly on the basis of its claimed insolvency. The plaintiff says that that insolvency or compromised financial position remains. The defendant’s counsel has confirmed today that if the plaintiff succeeded at trial and obtained damages (if the interim injunction was removed) then the defendant could not pay those.
[17] So I have to weigh up first, if the interim injunction is confirmed, and the plaintiff succeeds at trial and obtains the order that it seeks in the statement of claim, then there is no prejudice or harm arising to the defendant because the plaintiff will have been entitled to that which has been granted.
[18] On the other hand, if the interim order is made and the defendant later is successful at trial then it could obtain an award of damages for any loss accruing to it through having to supply to the plaintiff and having to not been able to supply to other parties to whom it contends it now is obliged.
[19] Viewed from the other side of the coin, namely if the interim order is now not made, and the order of Ronald Young J revoked; first if the plaintiff later succeeds at trial of course the remedy currently sought would be moot, because the grapes would be harvested and elsewhere. But it could claim damages in the alternative. The issue is, whether in those circumstances damages for breach by the defendant would be an adequate remedy and if so that is a factor in determining whether or not to grant an interim injunction. But there is the factor, although not necessarily the only factor, that the defendant says that it could not meet any award of damages.
Secondly, if an order was not made, that is if Ronald Young J’s order is revoked, and
the defendant later succeeds in its contention that the contract had ended and it had no obligation under it, then of course no loss arises to it.
[20] As I have said mandatory injunction would require, in reality, the forced supply. But it would also lead to an ensured payment to the defendant of the proper contract price. There is no suggestion that the plaintiff could not meet any award of damages in respect of which the usual undertaking has been given. The issue is not at this stage the defendant’s liability to pay a contractual sum, but the claimed liability to supply perishable crops said to be essential to the plaintiff’s production and the status quo cannot be preserved because there is a perishable commodity involved. The only issue it seems to me that is now raised and will be contested at the defendant hearing is whether the agreement was cancelled or varied so that the crop need not be provided.
[21] If the defendant is wrong and fails in its defence to the substantive proceedings, and now disposes of that part of the crop elsewhere (and I add that it may not necessarily be its crop grown on its land but under the agreement the obligation is to provide those grapes as defined). I think the overall justice and balance of convenience is tipped by the fact that it could not pay damages to the plaintiff if it failed. Damages would not be an adequate remedy to the plaintiff if it succeeded. But if it fails in the substantive proceedings it is well able to meet damages which are I expect easily quantifiable on the part of the defendant.
[22] Accordingly, in the exercise of the Court’s discretion I am not prepared to revoke or vary the order made by Ronald Young J. However, he recorded that the application was to be called in the Chambers List on 16 April 2012. That is Monday week in Nelson. I do not think that is necessary now that the matter has been further argued. But it is crucial that the substantive case be heard and completed as soon as possible. It may well be that the grapes are then harvested but certainly in terms of the interim order they cannot be supplied to the parties named. So the reality is they may be supplied to the plaintiff. But if not, then the substantive hearing will decide the issue anyway. It would in any event decide whether the actions of the plaintiff in seeking essentially specific performance of its agreement were wrong and it was then required to pay damages to the defendant.
[23] Accordingly, I allocate a fixture in Nelson. The parties should not be required to come to Wellington on Tuesday 24 April 2012, which is the first date when a Judge is available after Easter. A Wellington Judge will travel to Nelson to hear the trial on a one day basis on that day. At this stage the pleadings comprise only the statement of claim and the interlocutory affidavits. The pleadings are to be completed by Friday 13 April 2012 or such later time as the plaintiff’s and defendant’s counsel may agree. The parties are to confer and reach agreement as to the method of hearing. That is whether it be on affidavits and cross-examination or in the usual way for civil proceedings through viva voce evidence.
[24] The interim injunction granted by Ronald Young J shall continue until further order of the Court.
[25] Costs on this application are reserved. Leave is reserved to any party to apply further for further directions as to the ultimate disposal of the proceedings.
J W Gendall J
Solicitors:
Stallard Law Limited, Nelson for Applicant/Defendant
Duncan Cotterill, Nelson for Respondent/Plaintiff
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