Wrightson Limited Mreinz v Clapham HC Masterton CIV 2004 435 85
[2005] NZHC 1311
•24 February 2005
IN THE HIGH COURT OF NEW ZEALAND MASTERTON REGISTRY
CIV 2004 435 85
BETWEEN WRIGHTSON LIMITED MREINZ
Appellant
ANDANIMOA CLAPHAM, ANTHONY JAMES CLAPHAM, CAROLYN RUTH RICHARDS, ANN ELIZABETH SMITH, DOROTHY ANNE PERKINS, SUSAN HAYES FOSTER, MARGARET ANNE MALTHUS TRADING AS CLAPHAM FARM PARTNERSHIP
Respondents
Hearing: 17 and 24 February 2005
(Heard at Wellington)
Appearances: N Levy for the Appellant
P S J Withnall for the Respondents/Cross-appellants Judgment: 24 February 2005
ORAL JUDGMENT OF WILD J
[1] These are an appeal and a cross appeal from a judgment of Judge Butler, given in the District Court at Masterton on 15 December 2003 following a hearing on 4 October that year. Neither party supports the result reached by the Judge, each alleging he erred in various respects, and each contending for a result different from that arrived at by the Judge. The issues are:
a)On the appeal: was the Judge wrong to rectify the agreement between the parties? This broad issue subsumes the seven points taken on appeal.
Wrightson Limited MREINZ V Animoa Clapham, Anthony James Clapham, Carolyn Ruth Richards, Ann Elizabeth Smith, Dorothy Anne Perkins, Susan Hayes Foster, Margaret Anne Malthus Trading As Clapham Farm Partnership HC MAS CIV 2004 435 85 [24 February 2005]
b)On the cross-appeal:
i)Was the Judge wrong to rectify the agreement in the terms he did, namely by altering from 4% to 1.5% plus GST the provision in the agreement that the respondents pay the appellant commission on the sale of livestock and farm plant and produce as opposed simply to striking that provision out?
ii)Did the Judge err in awarding interest to the appellant and costs against the respondents?
Factual background
[2] Having considered competing proposals, and following a telephone conversation on 8 October 2001 between representatives of the parties on 12 October 2001, the respondents signed a written agency agreement with the appellant for sale of the respondents’ farm property. I will refer to the appellant as “Wrightson” and to the respondents as “CFP”. The agency agreement provided for 1½% commission on the sale price of the land and buildings, and 4% on the livestock, implements, farm produce and farm chattels. I will refer simply to “the livestock”. The 1½% accurately reflected the parties’ discussion and agreement on 8 October and represented a significant reduction in the commission structure set out by Wrightson in its 1 October 2001 proposal. The 4% commission on livestock etc. had not been discussed on 8 October. In its 1 October proposal Wrightson had proposed “any livestock … sold in conjunction with the land sale i.e. at valuation or as a going concern, a fee would be negotiated which would include valuation fees.”
[3]The relevant clauses in the agency agreement are:
*15 days
AUCTION/
TENDERAUTHORITYThe Owner hereby instructs the Agent to offer for Auction/Tender the property described herein upon these terms and conditions (which include the attached General Conditions of Contract and Scale of Commission Charges) and the Owner hereby irrevocably appoints the
Agent as SOLE & EXCLUSIVE AGENT for the sale by Auction/Tender of the said property for a period commencing on the date herein and continuing for a period of (deleted) days following* the date of such Auction/Tender and further agrees not to revoke or cancel this authority during that period [and the Owner authorises the Agent to sign a contract of sale subject to a reserve price fixed from time to time]. At the end of that period this agency shall revert to a general agency under the General Agency Authority terms set out below for a further period of twelve months or 21 (twenty one) days after being cancelled in writing by either party.
Signed as owner/s Agent “P J Clark” Dated 12/10/2001
…
SCALE OF COMMISSION CHARGES
…
3. Scale of Charges – scale calculated on the purchase price including the price of any chattels and any dairy company/farm company shares and/or any bonus shares transferred pursuant to such sale, on the basis of firstly, a fee (words deleted and “1.5%” handwritten in in their place in the margin) all fees plus GST. If the property is leasehold, the commission shall be as above plus one third, plus GST. Where the agency includes an Auction Authority, the Owner authorises the Agent to sign a contract of sale subject to a reserve price fixed from time to time, but except in such circumstances no salesperson or Manager of the Agent is permitted to sign any Contract for Sale/Lease of the property. On the sale of livestock, implements, farm produce and farm chattels said by the Agent in conjunction with the property the further commission payable shall be 4% (plus GST) of the price or value of the livestock, implements, farm produce and farm chattels as set out in the appropriate Agreement for Sale and Purchase. The minimum fee payable shall not be less than the sum of $2,500.00 (plus GST).
[4] The handwritten alteration to 15 days in the first of those clauses was made by CFP’s agent, Mr Clark, a senior and experienced legal executive with a Wellington law firm. The handwritten alteration to 1.5% in the second clause had been made by Wrightsons’ representative, Mr Fitzgerald, before he dispatched the agreement by fax to Mr Clark on 12 October.
[5] Having altered and signed, and therefore seemingly read, the Agency agreement, Mr Clark faxed it back to Mr Fitzgerald. There was no discussion between the two men on 12 October or subsequently about commission on livestock.
[6] Wrightson then prepared particulars and conditions of sale for CFP’s farm property. Those conditions gave the purchaser of the land and buildings the election to purchase also the livestock. If the purchaser so elected, the price was to be determined by valuation by a prescribed method and within a set time frame.
[7] CFP’s farm property fetched $2.25 million at auction on 7 December 2001. The purchaser elected to buy CFP’s livestock, which was subsequently valued at
$869,654. Wrightson’s claim in the District Court was for commission at 4% plus GST on that amount.
District Court judgment
[8] The Judge described as “opportunistic” Wrightson’s stance of claiming 4% commission on the sale of the livestock, finding it “would do a substantial injustice to the plaintiff”. He based that on the evidence of Messrs Clark and Fitzgerald, in particular:
a)Both witness’ evidence that on 8 October there had been no discussion between them about commission on the sale of livestock.
b)Mr Clark’s evidence that he had read the agency agreement before signing it “but obviously didn’t read it correctly”. His explanation that his “focus was simply on the discussion I’ve had with Fitzgerald, the instructions I had to sell the land and buildings at an agreed commission of 1.5%.
c)Mr Clark’s acceptance that he had misread the document.
[9] The Judge then summarised CFP’s claim to rectification, noting that it entailed striking out that part of the second clause, which I have set out, with the
result that there would be no contract between the parties as to commission payable on the livestock, and therefore no commission payable. The Judge stated:
[28] I do not think that result would be any more just than the plaintiff’s proposition which I criticised previously as opportunistic.
[10] The Judge then cited a passage from Westland Savings Bank v Hancock [1987] 2 NZLR 21, setting out the requirements for rectification. Applying those criteria the Judge said:
[31] Applying these criteria, I find the common intention of the parties was that the plaintiff would be appointed as the defendants’ agent for the sale of Patitapu’s livestock and plant and equipment in the event that Patitapu’s land and buildings sold at auction. The rate of commission on any such sale was to be negotiated between the parties.
[32] I am prepared to rectify the wording of Clause 3 of the contract by deleting the figure “4%” and substituting therefore “at a rate to be agreed between the owner and the agent” before the words “(plus GST)”.
[11] The Judge then referred to the possibility that Mr Clark was the only person mistaken about the 4% figure. He expressed to being “in some doubt about that because I do not think Mr Fitzgerald turned his mind to any specific (commission) figure during his telephone conversation with Mr Clark on 8 October”. He cited this passage from the judgment of Fisher J in Laurence v Steffert Farms Ltd 23/5/97 HC New Plymouth AP21/96:
… If unconscionability would otherwise result, known unilateral mistakes can provide an exception to the normal rectification requirement that both parties be mistaken.
[12] The Judge then found that it would be unconscionable not to rectify the figure of 4%. He stated:
[34] … Clearly, on the evidence, both parties intended to agree on a commission rate for the sale of (CFP’s) livestock and I find this was the mutual intention of the parties.
[13] With reliance on the Court of Appeal’s judgment in Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433 at para [66], the Judge satisfied himself that the Court could determine a rate of commission which was to be negotiated by the parties but never was. He noted that
Wrightson, in its marketing proposal, had offered an overall commission rate of 2.309% plus GST on the land and buildings, but it subsequently agreed to reduce that to 1.5% plus GST. He found that Wrightson would have made the same concession in respect of the sale of the livestock and the resultant fee would include the valuation fee of $1,500 plus GST and half the umpire’s fee of $750 plus GST. On that basis the Judge gave judgment for Wrightson in the sum of $12,144.16 plus interest from the date of completion of the sale 1 May 2002. He also allowed Wrightson its costs and disbursements as per scale.
Rectification
The opposing arguments
[14] Each party’s submissions, although presented at considerable length, are capable of summary. Wrightson contends:
a)To found rectification, a single common intention must exist right up to the moment the agency agreement was executed.
b)There was no such common intention here. Mr Fitzgerald’s intention for Wrightson was to conclude or fix commission on livestock by having Mr Clark sign the agency agreement. Thereafter, “There was no point in negotiating. We had the authority that was signed accepting the 4%”. Mr Fitzgerald was not challenged on this. It was not put to him that he knew commission on livestock had to be negotiated. Mr Clark’s intention for CFP was uncertain. Mr Clark in evidence said “At no time was any commission on sale of the livestock touched upon”. He deposed that his understanding was that after the agreement had been executed there would be negotiations about the livestock commission rate. He agreed that he was not saying that Wrightson was to be involved in the sale of livestock for nothing.
c)The Judge’s factual finding in paragraph [31] of his judgment was simply not supported by the evidence. The Judge did not reject any evidence on the grounds of reliability or credibility. Accordingly, in terms of the Court of Appeal’s decision in Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190, his findings may be departed from on appeal, and should be.
d)Nor was the parties’ conduct consistent with the common intention found by the Judge. At no stage did either party seek to negotiate commission on the sale of livestock.
e)As CFP did not establish the basis for rectification, the District Court was wrong to order it.
f)The contract as signed by the parties on 12 October stands, and should have been enforced by the District Court.
g)Even if the evidence had supported a common intention, there was no evidence upon which the Judge could have made the finding he did in paragraph [39] of his judgment. In particular, Mr Fitzgerald gave no evidence and was not cross-examined as to what commission rate on livestock Wrightson would have agreed to if Mr Clark had insisted upon agreement before he signed the agency agreement.
h)The Judge’s reliance on Laurence as establishing that, if conscionability would otherwise result known unilateral mistake can provide an exception to the normal rectification requirement that both parties be mistaken, was erroneous. Laurence itself makes it clear that the mistake must be “known”. The Court of Appeal in Tri-Star Customs and Forwarding Ltd v Denning [1999] 1 NZLR 33 confirmed that s5(2)(b) of the Contractual Mistakes Act 1977 is not intended to allow relief via rectification where a unilateral mistake had occurred, but the innocent party had no knowledge of it. Mr Fitzgerald did not know that Mr Clark was mistaken about the 4%.
i)Further, Tri-Star is authority that relief from unilateral mistake is only available if misleading or deceptive conduct is established, i.e. that one party deliberately set out to ensure that the other party did not become aware of the mistake. There is no evidence of such conduct here.
j)Relief via the Contractual Mistakes Act is not available because Mr Clark’s mistake is in the interpretation of the contract (s6(2)(a)).
[15]For CFP Mr Withnall argued:
a)Wrightson would need to upset the Judge’s findings of fact upon which he ordered rectification before it could succeed on this appeal.
b)Rectification is available where the written agreement does not correctly reflect the antecedent agreement because it contained terms not discussed or touched upon in negotiations and upon which there was accordingly no consensus.
c)The context of the parties’ negotiations is that it was agreed the written agreement would reflect the matters that had been discussed, and that any other matters not agreed or discussed remained to be negotiated at some other time.
d)There was ample evidence for the Judge’s paragraph [31] finding:
i)The proposal that livestock commission was to be negotiated.
ii)The lack of any discussion about livestock commission in the 8 October telephone discussion. That discussion was only about commission on land and buildings.
iii)The agreement that Mr Fitzgerald would send to Mr Clark an agreement reflecting what the two had agreed.
e)It is “cute” for Mr Fitzgerald to suggest that “signing the agreement concluded negotiations” on livestock commission. The parties had not opened negotiations, let alone concluded them.
f)Leaving the negotiation of livestock commission until later made sense because it would only arise if CFP’s farm sold at auction and the buyer elected to buy CFP’s livestock in whole or in part.
Decision
[16] Both parties accept that Westland Savings Bank v Hancock accurately states the law as to rectification. I agree with Wrightson’s submission that the Judge’s finding of a single, common, intention at the time the agency agreement was signed on 12 October is not supported by the evidence. I consider Wrightson is correct in contending that the Judge confused the parties’ intention at the time of the discussion on 8 October with their intention at the time the agency agreement was signed on 12 October. It is the latter which is relevant: the intention at the moment the agency agreement was signed. Perhaps significantly, the Judge erroneously recorded the 8 October discussion as having occurred on 12 October, “on the same day and following their conversation”. That is not correct. There was an interval of some four days.
[17] The discussion on 8 October was only about commission on land and buildings. There was no discussion about commission on livestock. Mr Fitzgerald put in, or left in, the agency agreement he subsequently faxed Mr Clark on 12 October a commission rate of 4%. That was Wrightson’s standard rate of commission. The clause was a printed standard form one in Wrightson’s agency agreement. (I note Mr Fitzgerald’s evidence that commission rates in the livestock agency industry average 6% for livestock and 10% for plant.) It was not put to Mr Fitzgerald either that he had left in, or put in, 4% in error, and that he had no intention of inserting that figure, nor was it put to him that he was trying to pull a fast one over CFP.
[18] The onus of establishing the evidentiary basis for rectification was on CFP. It needed to establish that Mr Fitzgerald also intended to send an agreement which reflected the discussion and agreement reached on 8 October, and only that. I have read carefully through Mr Fitzgerald’s evidence in chief and through the notes of evidence recording the cross-examination of Mr Fitzgerald. In the notes of evidence at p9 there is this passage in the cross-examination of Mr Fitzgerald:
Q.That’s your notation there under the heading Scale of Charges where you have put a line through what is the standard form commission rates?
A. That’s right.
Q. And alongside it you’ve put 1.5%?
A. Yes I have.
Q. And you’ve put that there because that’s the agreement you’ve reached in your conversation with Mr Clark?
A. Yes.
Q.And over the page, it doesn’t matter too much, but there are other things on that page which yo have crossed out?
A. Yes.
Q. No doubt I take it to reflect the agreement that you and Mr Clark had reached in your telephone conversation?
A. That’s right.
[19]Then at pp10-11 of the notes there is this question and answer:
Q.Coming now to the 12th of October, in relation to this case, when you forwarded the agency authority to Mr Clark, and you’ve accepted that that was forwarded to him to reflect the agreement you had reached in relation to commission and the rest of it in your conversation …?
A. Yes, I rang Mr Clark on the morning and explained that I was sending only one page of the listing authority to him because of the fact that it’s about a 4 page agreement and at that point we hadn’t completed all the details of the farm description so that was agreed and I forwarded the 1 page authority to Mr Clark on the 12th.
[20] I do not consider that that question fairly reflects Mr Fitzgerald’s evidence in the questions and answers I have set out. Nor can I find anywhere else in Mr Fitzgerald’s evidence the acceptance which that question attributed to him. In
particular, Mr Fitzgerald was not asked as to why he left in the clause providing for 4% commission on livestock.
[21] At pp11-12 of the notes there is further cross-examination, but it is not directed to that issue:
Q. Do you accept that you and Mr Clark had not negotiated on livestock at any point up to and including when you sent the agency authority on 12 October?
A. That’s right.
Q.And when you said that agency authority you crossed out certain things that you had negotiated about?
A. That’s right.
Q. But you didn’t cross out the things in particular in relation to commission on livestock which you had not negotiated about or even discussed?
A. That’s right.
[22] The closest the cross-examination came to putting to Mr Fitzgerald that leaving in 4% was dishonest, or an attempt to put one across CFP, was this:
Q. What I want to suggest to you Mr Fitzgerald is that this claim in this Court today for the commission on the livestock and the plant and animals is your endeavour to recover what you effectively lost because you had to match that rate of 1.5% to as you said keep the job otherwise you would have lost it?
A. No, that is not correct certainly not, we didn’t now at the time of the signing of that authority as to whether we were going to have livestock included in the sale or not, so it was a standard clause in the authority, we had no knowing as to whether we would receive that additional amount, so the 1.5% was on the land and buildings, obviously if we received livestock commission that was an advantage to us obviously, but sometimes it works out as we’ve mentioned earlier.
Q.I just want to get this very clear Mr Fitzgerald, you are denying that at least in part the reason for pursuing this claim for livestock is so that you can make back up through this claim on what you lost because you had to reduce your fee from what even your concession rate to 1.5% to keep this job otherwise it would have gone to a competitor, yes or no?
A.No, we are pursuing the livestock commission because that was what was agreed.
[23] In my view, the evidence established that Mr Fitzgerald’s intention for Wrightson on 12 October was a “4%” intention. Mr Clark’s intention on 12 October for CFP was a “to be negotiated” intention. There was not “a single corresponding intention” on 12 October, the moment of execution of the formal agreement.
[24] I am unsure whether the parties’ subsequent, that is post 12 October, conduct is either a permissible or a reliable indicator of their intention at the point they signed the agreement on 12 October, as Wrightson submits. There remains doubt in New Zealand law as to whether parties’ subsequent conduct is a permissible aid to interpretation of a contract. I refer to Attorney-General v New Zealand Rail Corporation & Dreux Holdings Ltd (1996) 7 TCLR 617 (CA) which was referred to by the Court of Appeal in Verry v Jopp CA91/02 7/4/03 at paragraph [107], in the following terms:
We have referred above to the fact that Courts have been reluctant to have regard to subsequent conduct as an aid to interpreting the meaning of contractual terms. There is some sign that this rule may possibly be rethought e.g. Attorney-General v New Zealand Rail Corporation & Dreux.
[25] Interpretation of a contract and ascertainment of the parties’ intentions are not of course the same thing, but the former is meant to reflect the latter, as objectively assessed. If subsequent conduct is a permissible guide to intentions at the time of the contract then, again, I do not consider that here it points to a single, corresponding intention. Mr Fitzgerald’s evidence is clearly that he thought agreement had been reached on 4%. This is the effect of his evidence as I have set it out above, insofar as it recounts what Mr Fitzgerald thought, or what he intended, after receiving the signed agreement back from Mr Clark. Mr Clark, on the other hand, adhered to a “to be negotiated” intention.
[26] Accordingly, I uphold Wrightson’s submission that the necessary basis for rectification was not made out on the evidence and that the judgment of the District Court accordingly cannot stand.
[27] Although it is unnecessary to say more about rectification, I share the Judge’s view about the unattractiveness of the position contended for before him by CFP. It first accepted that commission on the sale of livestock was to be negotiated. It then
sought rectification of the agreement by striking out the 4% clause and substituting “to be negotiated”. Thirdly, it argued that such an agreement, that is a “livestock commission to be negotiated”, is unenforceable at law, as it is but an agreement to agree: Wellington City Council v Body Corporate [2002] 3 NZLR 486 (CA). Finally it argued that the result was that it was not liable to pay Wrightson any commission on the sale of its livestock by Wrightson for the total sum of $869,654.
[28] In support of CFP’s cross-appeal against the Judge’s attempt to do substantial justice to the parties by allowing commission on livestock at 1.5%, Mr Withnall argued that the livestock commission clause in the agency agreement should simply be struck out. While that would avoid insertion of a clause then submitted to be unenforceable, it would still leave Wrightson with no contractual entitlement to commission on the livestock it sold for CFP. I have difficulty reconciling that submission with the equitable maxim that “he who seeks equity must do equity”.
Contractual Mistakes Act 1977
[29] This was the basis for a counterclaim by CFP in the District Court. It alleged either unilateral mistake by CFP (i.e. by Mr Clark), known to Wrightson (i.e. to Mr Fitzgerald), or common or mutual mistake. Only those types of mistake qualify for the discretionary relief available under s6(1) of the Contractual Mistakes Act. None of those types of mistake was made out on the evidence, at least not as I have analysed it.
[30] I have already rejected the availability to CFP of rectification, but in my view Ms Levy is correct in submitting that the Court of Appeal’s judgment in Tri-Star Customs and Forwarding Ltd v Denning [1999] 1 NZLR 33 closed the door on the possibility of relief by way of rectification for a unilateral mistake of which the innocent party had no knowledge.
Interest
[31] I agree with Mr Withnall’s submission for CFP that interest should run from the date on which Wrightson’s invoice for commission on livestock fell due for payment, in accordance with the usual terms of trade. Mr Withnall advised me in the course of his submissions that the invoice was dated 30 April 2002. Accordingly, interest at 7½% is to run from 20 May 2002, that is the 20th of the month following, to the date of the judgment in the District Court, and thereafter of course it continues to run in accordance with the District Court Rules until the judgment is satisfied.
Result
[32] The appeal is allowed. The judgment of the District Court is varied by substituting a judgment figure of $34,786 plus GST and by substituting 20 May 2002 as the date from which interest is to run. The cross-appeal is dismissed, save as to interest which is varied in the terms I have stipulated.
Costs
[33] CFP is to pay Wrightson’s costs and disbursements in the District Court in accordance with the District Court scale. Those costs are allowed to Wrightson both on its claim and upon CFP’s counterclaim in the District Court. They are to be calculated on the judgment sum as I have varied it, that is upon a judgment of
$34,786 plus GST.
[34] CFP is also to pay Wrightson’s costs in this Court in accordance with the High Court scale on a 2B basis, both upon the appeal and the cross-appeal.
Solicitors:
Logan Blathwayt, Masterton for the Appellant
Mulholland Rickit Law, Wellington for the Respondents/Cross-appellants
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