Archive 2006-2007
Maruha Corporation and Anor v Amaltal Corporation Limited [2007] NZSC 40
Julian Miles QC recently appeared in the Supreme Court for the successful appellants in Maruha Corporation v Amaltal Corporation Limited.
The appellants, a large Japanese fishing company, and the respondents, a New Zealand fishing company, had formed a joint venture company for which the respondents were responsible for the accounting and tax returns. However, the respondents inflated the level of certain payments that the appellants were required to pay and described claimable depreciations as not claimable. The respondents kept the overpayments and judgment was entered in the High Court for $6,120,446.
The primary issue on the appeal to the Supreme Court was whether the respondents were also liable for breach of fiduciary duty which had been found in the High Court but overturned in the Court of Appeal. The Court of Appeal had held that an undisclosed tax payment on the recovered depreciation by the respondents when the joint venture company was wound up amounted to a benefit to the appellants and reduced damages accordingly by $1,200,000. The secondary issue was therefore whether there was any benefit given in order to justify the reduction in damages.
Differing from the Court of Appeal, Blanchard J for the Supreme Court accepted Mr Miles' argument that the respondents owed the appellants an obligation of loyalty at least in relation to the accounting and tax functions for which the respondent's personnel were responsible. Citing the Privy Council decision of New Zealand Netherlands Society "Oranje" Inc v Kuys and The Windmill Post Ltd [1973] 2 NZLR 163 at p 166 his Honour noted that in non-fiduciary relationships, some elements of the relationship can still engage fiduciary obligations of loyalty and that one party can rely on the other for loyal performance of a specific function.
In regard to the tax payment benefit, Blanchard J accepted Mr Miles submission that the proper test is found in the Supreme Court of Canada case of Peel (Regional Municipality) v Canada [1992] 3 SCR 762 at 795 which holds that where a defaulting fiduciary seeks an offset against compensation payable for its default the benefit must be an `incontrovertible benefit'. Blanchard J further held, based on Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 (CA) that the onus of proving this is on the defaulting fiduciary - an onus the respondents failed to satisfy.
Two other features of this case are noteworthy. First, in an obiter footnote at para [23], Blanchard J adopts the House of Lord's decision of Standard Chartered Bank v Pakistan National Shipping Corporation [2003] 1 AC 959 which holds that the carelessness of a victim to the intentional tort of deceit does not provide a defence of contributory negligence. Second, conspicuous by its absence is the Supreme Court's own recent decision on joint ventures and fiduciary obligations, Chirnside v Fay [2007] 1 NZLR 433 (SCNZ).
(David Dickinson, Editor, 17/10/07)
Crosshill Farm Limited (‘the applicant’) had succeeded in its application for resource consents at the initial hearing before the Council’s Commissioner and was successful in its opposition to the subsequent appeal from that decision. The applicant was represented throughout by Paul Cavanagh QC.
The central issue was the effects of a subdivision and development proposal on the landscape, and the ability of the proposal to be absorbed into the landscape.
The applicant owned 550 hectares of land near Lake Wanaka and was granted subdivision consent to divide the property into three lots, as well as a range of land use consents for the building of platforms on each lot and the construction of a lodge and a residence. The appellant’s argument was that the proposed development would result in significant adverse visual and amenity effects, and adverse effects on landscape values.
Environment Court Judge Whiting considered four issues, the most important of which was the application of the assessment matters contained in the Partially Operative District Plan to the proposal before the Court.
In regard to the Lodge, the applicant filed an amended landscaping plan to mitigate any adverse effects. In regard to the dwelling, the applicant filed a minute indicating a willingness to lower the residence’s roof by three metres.
In the final analysis, Judge Whiting holds at para [96] and [109] that:
"We are satisfied that the location of the proposed Lodge back from the edge of a shallow basin and small plateau, together with the proposed landscaping, will result in it being unlikely to be visually prominent. There is potential for the landscape to absorb the development. Further, the Lodge would be contained by the natural topography and vegetation (by present and proposed replacement vegetation). It will not, in our view, compromise the existing natural character of the landscape. Nor will it contribute effects of over-domestication to the landscape.
We are satisfied that provided the roofline (disregarding the chimney) is lowered by three metres … then the proposed dwelling complex will not offend the landscape provisions of the partially operative plan. While it would be visible from the lake and some other vantage points, the lowering of the roofline by three metres, together with the other mitigation measures proposed, would enable it to be absorbed sensitively into the landscape."
The application for the resource consent was therefore successful.
(David Dickinson, Editor, 8/10/07)
Paul Cavanagh QC acted for the first and second appellants in this case in which the Environment Court (‘EC’) had to grapple the issue of how to assess the elusive effects of odour discharges.
The second appellants, the Grays, whose property bordered the mushroom factory owned by the applicant, New Zealand Mushrooms Ltd (‘NZ Mushrooms’), and the Waikato Environmental Protection Society Inc appealed against the decision of the Waikato Regional Council and the Matamata Piako District Council. The councils had recently granted a series of resource consents to NZ Mushrooms in respect of its compost production site in Morrinsville. The new consents sought to authorise an expansion in order to allow for up to an additional four compost production bunkers.
The primary issues on appeal were the odour effects of the proposal and the resource management issues arising from them. The production of mushrooms has several stages. One step in the process involves the use of compost containing chicken manure which is kept under cover to avoid wetting. Straw bales are then wet and left to stand. After this, the bales are blended with several ingredients, including the chicken manure, and then moved with front-end loaders into the concrete production bunkers. Once in the bunkers, air is forced through the compost to break the material down which generates temperatures of 70 to 80 degrees centigrade.
The EC maintains at para [34] that the test for whether an odour is objectionable is whether or not an ordinary reasonable person would find the odour offensive or objectionable: Zdrahal v Wellington City Council [1995] NZLR 700. Further, in relation to the neighbours, the EC was required to determine whether chronic odour effects could be offensive or objectionable.
NZ Mushrooms did not dispute that the composting created odours off-site. However, it maintained that the odours were not offensive or objectionable, were rural in nature and only occurred at limited intervals. The appellants disagreed with this assessment.
After canvassing the evidence and the criticisms leveled by NZ Mushrooms, the EC, on a broad view of the evidence, concluded that the site continues to have significant adverse odour effects at a chronic level on the neighbours of the site.
In applying the law, the EC was satisfied that different people react differently to chronic smells over a period of time and that the standard was therefore the effect on an ordinary reasonable person exposed to such smells on a recurring basis in their home. The EC also rejected the applicant’s submission - in regard to whether a chronic order can be offensive or objectionable - that the effects of the odour cannot be viewed cumulatively as they are only temporary in occurrence. The EC maintains at para [166] of the decision that whether a series of individual chronic odour discharges can be cumulative thus increasing their overall effect is a question of fact and that the effects of odour discharges do increase in combination with other preceding odour discharges.
Having made these findings, the EC was required to find a resolution with the bottom line being that the composting facility could not continue to discharge offensive or objectionable odour. At para [189] the EC quotes Mr Cavanagh’s opening submissions in which he reminded the court that the essential issue was whether the odour could be avoided, remedied or mitigated and if not whether the adverse effects were sufficient to cause the Court to exercise its discretion not to grant the consents. In short, the purpose was not to shut the facility down.
In the final analysis, the EC held that that enclosure of the bunker transfer operation is necessary and that NZ Mushrooms has until 31 October 2007 to report back on its progress.
NZ Mushrooms Ltd has subsequently filed a notice of appeal to the High Court.
(David Dickinson, Editor, 3/9/07)
Southbourne Investments Ltd v Greenmount Manufacturing Ltd [2007] NZSC 62
This case relates to an appeal from an order of summary judgment made in the Court of Appeal in relation to an option to purchase land.
Julian Miles QC and Sandra Grant contended on behalf of the appellant that failure to tender a bank cheque with an option was non-compliant with the terms of the option as those terms required delivery of the deposit with the agreement. The respondent had tendered a company cheque only.
In the Supreme Court's judgment, delivered on 3 August 2007, the appeal was allowed on the ground that the tender was non-compliant.
An argument raised by the respondent to the effect that as the appellant did not object to the form of payment promptly, (which was due to the appellant director's father's ill-health) the appellant was deemed to have accepted the company cheque, or estopped from raising the form of payment as an issue, was remitted back to the High Court for determination on the facts.
The essential question on the facts was whether the appellant knew of the form of tender, it being decided by the Supreme Court that the appellant's solicitor (who received the agreement and cheque) did not have authority to accept a form of payment that was non-compliant with the terms of the option unless the authority had been expressly conferred on him.
The key significance for property lawyers is that tendering of anything other than a bank cheque when exercising an option to purchase an interest in land is very risky, and the reinforcement of the principle that a vendor must object to a form of payment promptly on receipt of knowledge of the form of payment in order to avoid the risk that they are deemed to have accepted a non-compliant form of payment, or are estopped from contending that the payment was non-compliant.
(Sandra Grant, Editor, 8/8/07)
Marsden Villas Ltd v Wooding Construction Ltd [2007] 1 NZLR 807
In this case, David Hurd successfully represented Wooding Construction Limited (WCL) in an action brought by Marsden Villas Limited (MVL). WCL and MVL were parties to a construction contract that was signed after the advent of the Construction Contracts Act 2002 but that incorporated NZS 3910:1998, which was formulated before the Act. Three issues fell for determination: whether WCL had issued a valid payment claim; whether MVL had served a payment schedule within time; and whether WCL was entitled to suspend work when payment was not made. In answering the three questions in WCL’s favour, Asher J held: the progress payment provisions of the contract applied, not the default provisions of the Act. Although the contract required payment claims to be made in respect of “work carried out during periods of not less than one month” and the claim in issue was made before the end of the particular calendar month, that was a “technical quibble” that should not invalidate an otherwise compliant payment claim. Secondly, the terms of the contract also applied in relation to the time allowed to MVL to respond to the payment claim. Those terms required a response within 10 working days, as opposed to the 20 working day period set out in the Act. As MVL’s response was not served within 10 working days, it was out of time and MVL was liable to WCL for the amount claimed. Thirdly, WCL was entitled to suspend work when payment was not made within 5 working days of the service of its Notice of Suspension. The fact that a bona fide payment schedule was served out of time but before the expiration of those 5 working days did not alter the situation.
Postscript
David Hurd has since successfully represented WCL in an action against Winslow Properties Limited, again based on the non-provision of a payment schedule within the time specified in the parties’ contract (also NZS3910:1998). Summary judgment was obtained by WCL in the District Court and subsequently upheld on appeal to the High Court. A subsequent application by Winslow for leave to appeal to the Court of Appeal has been refused by the High Court. As well as the issues referred to in the Marsden case above, the High Court on appeal also rejected Winslow’s argument that service of the payment claim which was effected on the Engineer to the contract, was not valid services for the purposes of the Construction Contracts Act.
(Sam Carey, Editor, 11/7/07)
In this recent piece for NZ Lawyer, Stephen Mills QC considers the use of account of profits - a creature of equity - as a deterrent to breach of contract, the underlying issue being the extent to which gain-based remedies are appropriate outside the realm of equitable wrongs.
Starting with the landmark case of Attorney-General v Blake [2001] 1 AC 268, Mills canvasses the issues raised by a range of cases - including the leading New Zealand authorities of Cook v Evatt (No. 2) [1992] 1 NZLR 673, Astra Pharmaceuticals (NZ) Ltd v Pharmaceutical Management Ltd [2001] 1 NZLR 415 (CA), Attorney-General for England and Wales v R [2002] 2 NZLR 91, Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) as well as the Supreme Court decision of Chirnside v Fay [2007] 1 NZLR 433.
(David Dickinson, Editor, 11/7/07)
Gayhurst Properties Ltd v Wong (HC, Auckland, CIV-2004-404-4550, 22 September 2006, Frater J)
Ian Williams successfully appeared for the defendant in Gayhurst Properties Ltd v Wong. The issue in the case was the justification of cancellation based on delay in performance and notice making time of the essence.
The central issue for the Court’s consideration was the parties’ conduct and the lapse of time in relation to the cancellation. Counsel for the plaintiff argued that inasmuch as a giver of notice making time of the essence can remain inactive for a reasonable period after the expiry of the notice without waiving the essentiality of time, a decision must nevertheless be made.
Mr Williams submitted that the defendant had the right to refrain from making an election and that mere inaction, once the right to rescind arises, will not constitute an election. As a result, Frater J was left to determine whether through his behaviour the defendant did anything to affirm the continued existence of the contract or whether such behaviour could be imputed.
Frater J canvassed two authorities on point: Buckland v Farmer and Moody [1978] 3 All ER 929 and Kauri Developments Ltd v Nicholson (1986) 2 NZCPR 352. There was some indication that the defendant had taken steps to affirm and his subsequent inaction could have amounted to waiver. However, in the final analysis, his Honour was satisfied that the plaintiff’s delays had been inordinate and its false assurances had the result of causing uncertainty over the right to cancel and the defendant to be dependent on the plaintiff for accurate information. This explained his delay which in the end secured him no benefit than that for which he had already paid under the contract. The agreement, therefore, was lawfully cancelled as essentiality of time remained in place.
(David Dickinson, Editor, 20/6/07)
More Effective Management of Defamation Cases
In More Effective Management of Defamation Cases [2006] NZ Law Review 525, Stephen Mills QC argues that the reinvigoration of three areas in the law of defamation would improve case management. These are an early determination of defamatory meaning, a more rigorous application of sections 24 - 27 and 35 of the Defamation Act 1992 and the increased use of r418 of the High Court Rules. Importantly, this could be achieved without the need for further reform as these tools are all provided for in our existing substantive and procedural law.
In discussing these three areas the paper touches on a range of interconnected issues in defamation law: comparisons with overseas reform, the early appointment of trial judges, judge alone trials, determination of meaning before the filing of a defence, qualified privilege, retractions, corrections and rights of reply. The paper canvasses and examines several contemporary cases from New Zealand, Australia and the United Kingdom and should be required reading for practitioners, academics and students alike.
(David Dickinson, Editor, 29/5/07)
Julian Miles QC recently appeared for the respondent in Television New Zealand Limited v Haines (CA96/06, 6 September 2006) in which the Court of Appeal upheld the High Court’s decision to grant a judge alone trial in defamation proceedings under s 19A(5) of the Judicarture Act 1908.
Two aspects of the judgment are noteworthy in relation to a judge’s discretion under s 19A(5).
First, the Court of Appeal upheld the High Court’s finding that to split a trial between liability and quantum is unjustified if the sole reason to do so is to retain the involvement of a jury. The Court added however that had the appellant not succeeded on both limbs of s 19A(5) such a finding would be less secure. The Court equally rejected as impractical the idea of splitting the trial in a hybridised manner with the judge deciding questions of law and outlining the relevant facts for the jury’s subsequent consideration.
Second, the Court preferred a narrow interpretation of Rothermere v Times Newspapers Ltd in which Lord Denning ordered a trial by jury despite the overwhelming number of complicated documents it would have to consider. Glazebrook J rejected TVNZ’s submission that Rothmere stood for the proposition that jury trials must be ordered when a defendant’s integrity has been challenged despite the volume and complexity of documents. Rather, the Court maintained that a challenge to integrity is a strong factor in favour of a jury trial but is not determinative. The Court also noted that appellate courts in New Zealand had not whole-heartedly embraced Rothmere in past decisions.
(David Dickinson, Editor, 30/4/07)
Peterson Portable Sawing Systems v Lucas
Clive Elliott acted for the appellants and Julian Miles QC for the respondents before the Supreme Court in Peterson Portable Sawing Systems Ltd (in liq) v Lucas [2006] 3 NZLR 721. The appellants alleged that a particular claim of the respondents’ patent for a portable sawmill was invalid for a lack of novelty and for obviousness. In allowing the appeal, the Supreme Court held that the High Court’s view of the relationship between novelty and obviousness (that the distinction was one of degree rather than of classification) was incorrect and that the two were better treated as clearly distinct concepts. The Supreme Court found that, although the particular claim of the Lucas patent was not anticipated by the appellants’ design, it was anticipated by the “Lewis sawmill”, an American patent published in New Zealand before the priority date of the Lucas patent, and therefore was not novel. The Court also found that the claim in issue was invalid for obviousness and in particular - applying the decision of the House of Lords in Sabaf SpA v MFI Furniture Centres - that the combination of known features performing their known functions does not create a new invention.
(Sam Carey, Editor, 24/4/07)
The Pragmatic Approach to Claim Construction in New Zealand
Following the recent decision of Lucas v Peterson Portable Sawing Systems Ltd [2006] 3 NZLR 721, Julian Miles QC and Jeremy Blum consider claim construction in New Zealand patent law in this paper. Peterson was the first patent case to come before the Supreme Court and it dealt with the issue of claim construction explicitly. Mr Miles and Blum praise the Supreme Court for “[recognising] the benefit of international jurisprudence over New Zealand creativity”. This is to say that the Supreme Court maintained New Zealand’s adherence to the purposive approach to claim construction adopted in the United Kingdom - and by extension the paramount importance of the international nature of patent law - without venturing into a hybridised form of indigenous claim construction as favoured in Australia. The paper discusses several aspects of the decision and the areas of patent law and claim construction confirmed in the decision.
The paper was delivered to the 20th Annual Conference of the Intellectual Property Society of New Zealand and Australia (IPSANZ) held at the Surfers Paradise Marriot Resort in Queensland, Australia, in August 2006.
(David Dickinson, Editor, 13/4/07)
Specific Performance: Sale of Land
In Landco Albany Ltd v Fu Hao Construction Ltd [2006] 2 NZLR 174, the Court of Appeal departed from the conventional view in stating that damages would be an adequate remedy for the breach of a contract for the sale of land, where the plaintiff’s interest was commercial and the purpose of the contract was financial gain. It is likely that this view was influenced by the approach of the Canadian courts and in this paper Stephen Mills examines the Canadian approach. He notes that, beginning with an obiter statement of the Supreme Court in Semelhago v Paramadevan [1996] 2 SCR 415, the Canadian courts have moved away from the traditional view that specific performance is necessarily the primary remedy in cases concerning the breach of a contract for the sale of land, and that damages are necessarily an inadequate remedy, instead drawing a distinction between the sale of land for commercial purposes and for residential purposes. In a further break from tradition, the Canadian courts have imposed upon purchasers an on-going duty to mitigate by establishing that a decision to seek performance rather than damages is, and remains, a reasonable one.
This paper was published at [2006] NZLJ 196.
(Sam Carey, Editor)
Journalists Compelled to be Witnesses - Time for a Re-Evaluation
Following the recent decision of the High Court in R v Patel, Bruce Gray QC considers the compellability of journalists to give evidence and disclose information relating to sources, and asks whether the New Zealand courts are doing enough to protect journalists in such situations. The tension between the confidentiality of a journalist’s researches and the interests of a party to a fair trial is examined. It is suggested that the New Zealand courts tend to regard the right to a fair trial as being greater than the right to free speech, and that this view of a ‘hierarchy of rights’ is out of step with the approach in other jurisdictions with ‘quasi constitutions’, such as Canada and the United Kingdom, and is inconsistent with the New Zealand Bill of Rights Act 1990.
This paper was presented to the Legal Research Foundation Media Law Seminar on 15 June 2006.
(Sam Carey, Editor)
Ilion Technology Corp v Johannink
John Billington QC successfully acted for venture capital/technology company, Ilion Technology Corporation against J, its co-founder and former director. The High Court held that J had breached his fiduciary duty to Ilion by selling shares in the company during a period of capital-raising. It was held that in so doing J had received personal profit from an opportunity that arose directly from his relationship with the plaintiff, in conflict with the duty owed by J to the plaintiff. The Court also found against the second defendant trustees for the knowing receipt of profits obtained in breach of J’s duty. An important feature of the case was the relationship between damages and loss for a breach of equitable obligations.
(Sam Carey, Editor)
Arbitration v Litigation - Comparative Costs Recovery Issues
Stephen Mills considers whether the differing bases for costs awards under the High and District Court Rules and the Arbitration Act 1996 might be a relevant factor in a party’s choice between litigation and arbitration. A review of cases under the current High Court Rules in which information about actual costs was revealed indicated that costs awards ranged between 19% and 100% of actual costs. The situation was put in stark relief by the award in Glaister v Amalgamated Dairies Ltd, in which costs amounting only to one-third of the actual costs of $2.5m were awarded. In arbitrations, where costs awards are at the arbitrator’s discretion, a range of 75% - 85% of actual costs was found not to be unusual, with an acknowledgement that an award of 100% of actual costs was within the arbitrator’s power. The paper concludes that the likelihood of a significantly higher proportionate costs award in arbitration makes costs a relevant consideration in choosing the best method of resolving a dispute.
(Sam Carey, Editor)
Television New Zealand v Gloss Cosmetic Supplies Ltd (In Liq)
Clive Elliott successfully represented TVNZ in what is possibly the longest-running intellectual property case in New Zealand history. TVNZ had initiated proceedings for breach of its trade mark “Gloss” in 1989, and was granted an interim injunction pending trial. The matter did not, however, progress to trial, and in 1997 the defendant successfully applied to have the plaintiff’s claim struck out and an inquiry made into the damages suffered by the defendant as a result of the injunction. The defendant took no action to enforce the order for inquiry until 2003 and the plaintiff applied to have the order struck out on the grounds of prejudice resulting from inordinate and inexcusable delay. Almost 18 years after its beginning the Court granted the plaintiff’s application and put an end to the proceedings.
(Sam Carey, Editor)
Costs Issue
Debate continues to rage between the pro-scale costs Court of Appeal, and the pro-realistic contribution to actual costs in the High Court. In Holdfast NZ Ltd v Selleys Pty Ltd (CA 200/04, 6th December 2005), the Court of Appeal held the latter approach to be “fundamentally wrong”. Chambers J held that a “percentage of actual” approach should not be sanctioned because judges were not qualified to assess reasonableness and the approach must be uniform. Actual costs were $93,103.00, scale costs $15,940.00, or 17%.
Now reported: Holdfast NZ Ltd v Selleys Pty Ltd 17 PRNZ 897.
Subscribers to Brookers Briefcase can also view case here
(Sam Carey, Editor)