MATARIKI LIMITED v BRIAN SYDNEY DEADMAN AND ROBERT WHITELAW LEES [1999] NZCA 172 (2 September 1999)

IN THE court of appeal of new zealand

ca15/99

	between	matariki limited
		Appellant

	and	brian sydney deadman and robert whitelaw lees
		Respondents

Hearing:	19 August 1999
Coram:	Richardson P Gault J Henry J
Appearances:	A R Galbraith QC and J K Maxton for the appellant C T Gudsell for the respondent Mr Deadman
Judgment:	2 September 1999

judgment of the court delivered by henry j

[1] At issue in this appeal is the beneficial ownership of a fishing quota (600 tonnes of jack mackerel) allocated on 1 October 1996 to a fishing permit held by the respondents in partnership.The claim to ownership made by the appellant company (Matariki) was dismissed by Potter J in a judgment delivered following a three day hearing in November 1998.In support of the appeal three separate heads were relied upon as giving rise to the entitlement sought - estoppel, constructive trust, and assignment.As we have reached the conclusion that there will have to be a referral back to the trial Judge for determination of factual issues, the various matters traversed in the course of the hearing can be covered relatively briefly.

[2] A partnership between the respondents Mr Deadman and Mr Lees, known as the Mount Fishmarkets partnership, was formed in 1986.Its business was catching fish, and it held a permit (FIN8630094) now known and referred to as the MFL permit, issued by the Ministry of Agriculture & Fisheries.In 1989 Mount Fishmarkets Ltd (MFL) was incorporated, the shareholders being Mr Deadman, Mrs Deadman, Mr Lees, and his partner Ms Hutchinson.The business of the company was fish processing, and it acquired the assets of the partnership excluding the MFL permit which remained the property of the partnership.

[3] In the early part of 1992 the Western Pacific, a fishing vessel that had supplied MFL with fish to process and market, ceased fishing in New Zealand and left for South America.In order to ensure a continued supply of fish for MFL, Mr Deadman organised and promoted a joint venture to purchase a fishing vessel to replace the Western Pacific.

[4] Consequently Matariki was incorporated in March 1992 as a vehicle for the joint venture to undertake a commercial fishing operation.Under the joint venture agreement Matariki was to be allocated the beneficial ownership of all catch history and catch history benefits accruing to MFL under the MFL fishing permit.In return Matariki would ensure fish supplies for MFL to process. Clause 10 of the joint venture agreement contains the relevant conditions relating to the catch history and catch history benefits:

10.2 MFL/NFL Permits to be Used:MFL and NFL each agree to grant the Company the use and benefit of the MFL Permit and the NFL Permit respectively in so far as such permits authorise the taking of fish by the purse seine method.NFL acknowledge that the use and benefit so granted shall be exclusive to the Company.The said Fishing Permits shall be used by the Company for the fishing activities of Soltai 60 on a pro rata basis with the intention that, where a fish species is authorised to be taken under both the MFL Permit and the NFL Permit, the fish of that species taken by the Soltai 60 shall be taken pursuant to and allocated against the said Fishing Permits equally on a tonnage basis.Where fish species taken by Soltai 60 are authorised to be taken by any Fishing Permit held by the Company then the fish so taken shall be taken pursuant to and allocated against the Company's Fishing Permit.

10.9 Catch History Benefits:MFL and NFL shall each hold on trust for the Company all Catch History Benefits arising wholly or partly by virtue of any Catch History accruing to MFL or NFL as a consequence of fishing activities undertaken pursuant to clause 10.2.MFL and NFL acknowledge that the Company shall be the sole beneficial owner of all such Catch History Benefits.For the avoidance of doubt, Catch History Benefits accrued to MFL or NFL prior to the date of this agreement shall remain theirs respectively except to the extent that such benefits may have accrued to the Company pursuant to any transfer, lease or licence.

[5] The joint venture agreement was executed on 27 July 1992 and included a warranty from MFL that it held the entire benefit of the fishing permit other than that relating to scampi.The parties to the venture were Nga Hukatai Ltd (NHL), Nelson Fisheries Ltd (NFL), Mount Fishmarkets Ltd (MFL), Astro Fishing Company Ltd (AFCL) and Mr P G Reid.Mr Deadman signed the joint venture agreement in his capacity as director of MFL and was appointed managing director of Matariki.

[6] At approximately the same time Mr Lees and Ms Hutchinson entered into an agreement for the sale and purchase of their shareholding in MFL to Tiki Moana Fisheries Ltd (TMFL) and NHL (the purchasers).The agreement for sale and purchase included a condition that all the assets of the partnership described in the second schedule had been acquired by MFL.The intangible assets listed in the second schedule were limited to catch history and catch history benefits in relation to scampi for Quota Management Area One.Following realisation of this limitation, an amended second schedule was drafted and agreed to in correspondence which included as intangible assets "all past and future catch history benefits arising under fishing permit FIN8630094....save for the intangible assets relating to the scampi fishery outside Quota Management Area One".Mr Deadman and his wife as shareholders in MFL executed a deed of warranty in favour of the purchasers, in which they warranted that the assets described in the second schedule had been acquired by MFL from the partnership. This warranty was only in respect of the second schedule in the agreement signed by the parties to it, and not the amendment to it contained in the correspondence.

[7] Just prior to the execution of the joint venture agreement it was discovered that there was no documentary evidence that MFL owned the rights it was intending to hold on trust for Matariki.It was decided among the parties that the agreement would be signed and that the board of directors of Matariki would settle this discrepancy with MFL.

[8] At the request of Mr Jefferies, the solicitor acting for the purchasers and for the joint venture parties, and to `plug the holes' in the joint venture agreement the partnership wrote a letter dated 28 July 1992 to MFL setting out the future use of the fishing permit by MFL.This letter was forwarded by MFL to Mr Jefferies of Simpson Grierson Butler White, the solicitors acting for the purchasers.The effect of this letter is at the heart of this dispute.It reads:

28 July 1992

Mount Fishmarkets Limited

Box 4323

Mount Maunganui South

Dear Sirs

RE:FISHING PERMIT FIN8630094 (THE PERMIT) - R W LEES AND B S DEADMAN

In anticipation of settlement of the sale of R W Lees and E A Hutchinson's 50% shareholding in Mount Fishmarkets Limited ("MFL") to Nga Hukatai Limited and Tiki Moana Fisheries Limited, we write to record matters relating to the future use of the Permit by MFL.

1. Legal title to the Permit is and shall at all times until the same expires, remain the property of the partners of the Deadman/Lees Partnership ("the Partnership").

2. The Permit is due to expire on 30 September 1992 but is capable of being renewed.

3. The Permit grants the Partnership the right to fish for fin fish species, pelagic species and scampi.

4. The Partnership has also been allocated 22.1 tonnes of quota under the Permit relating to trevelli, blue nose, school shark, schnapper, harpuka, ling and tarakihi.

5. The Partnership may be allocated future quota entitlements based on catch history under the Permit.

6. Following settlement of the abovementioned Share Sale Agreement it is the intention of MFL to apply for its own FIN number and its own fishing permit from the Ministry of Agriculture and Fisheries.

7. Following the allocation of the new fishing permit to MFL the Partnership agrees to transfer the species' quota referred to in paragraph 4 above, to MFL's Permit.

8. The Partnership agrees to grant to MFL the use of its "quota held" until 1 October 1992.For the purposes of clarification "quota held" means a combination of quota actually owned by the Partnership plus all quota that the Partnership may have leased.

9. The Partnership also agrees to grant to MFL the use of the Permit for an initial period of five (5) years with any further use to be reviewed at the sole discretion of the Partnership.

10. The partnership acknowledges that MFL is entitled to 100% of all future allocation of quote for finned fish and pelagic species issued under the Permit based on catch history.

11. With regard to Quote Management Area 1 as it applies to the scampi fishery it is also acknowledged that MFL shall have the use of all past, present and future catch history and catch history benefits absolutely, provided that all catch history and catch history benefits outside Quota Management Area 1, being areas 3 to 9 shall remain the property of the Partnership.

We trust this letter of understanding clarifies the future use rights under the Permit and associated matters.

Yours faithfully

B Deadman

Brian Deadman/Robert Lees

[9] The parties to the joint venture other than Mr Reid became the shareholders in Matariki, which proceeded to purchase and operate a fishing vessel known as the Soltai 60.

[10] In November 1993 MFL went into liquidation.The subsequent allocation in October 1996 of jack mackerel quota was based on the catch history relating to the MFL permit.Over the period 28 July 1992 to September 1994 or possibly later, the MFL permit had been used by Matariki, with the concurrence of Mr Deadman.This proceeding then eventuated, and an injunction was issued in May 1996 restraining the partnership from disposing of the quota in question.The injunction was discharged as a result of the judgment now under appeal, and the quota was then immediately sold.

[11] Matariki went to trial on a statement of claim which was not altogether clear as to its cause or causes of action.The joint venture agreement was quoted extensively.It was then pleaded that under the joint venture agreement and the arrangement made between the (respondents) and MFL, Matariki was the beneficial owner of the catch history arising from the use of the MFL permit as from 28 July 1992.It was also alleged that the MFL permit was made available to Matariki in terms of the letter of 28 July, and further that the respondents had agreed to the terms of the joint venture agreement.In his opening submission the then counsel for Matariki appears to have based the claim on the existence of "a remedial constructive trust".Estoppel based on an expectation of beneficial entitlement to jack mackerel quota was also relied upon.

[12] In her judgment, Potter J discussed the contractual relationships among the various parties, and concluded that Matariki was not involved in any agreement between the respondents and MFL.She noted that Matariki did not rely on contract to prove its claim.Turning to the letter of 28 July, the Judge found it unnecessary to decide the meaning which should be attributed to it, because it did not operate to assign to and vest in MFL future quota.

[13] Potter J then rejected the claims based on estoppel and constructive trust.In respect of estoppel she identified the promise in question as being one from the respondents to MFL in relation to a contingent future benefit. In respect of the constructive trust argument, she identified the unconscionable conduct as being the failure of the respondents to honour the agreement with MFL.The conclusion reached was that because the only rights created were rights in personam held by MFL, Matariki could not invoke them. No doubt the way in which these issues were dealt with by the Judge reflected both the pleadings, the course of the trial and the argument addressed on behalf of Matariki.There appears to have been no adequate focus on what are now contended as specific and separate causes of action, or on the identification of the necessary elements and the evidence required to support those elements.Accordingly when in this Court Mr Galbraith elaborated on them, and when in response Mr Gudsell replied, each found it necessary to refer us to the evidence supporting the particular submission being made.The immediate difficulty confronting the Court is that there have been no findings on what are significant questions of fact which required resolution.After careful consideration we do not think this is a case where it would be appropriate for this Court to determine the necessary issues, and neither Mr Galbraith nor Mr Gudsell urged otherwise.

[14] The difficulty with the judgment under appeal is that Matariki's claim seems to have been dismissed because the respondents were not parties to the joint venture agreement, and Matariki was not a party to any agreement contained in the letter of 28 July.The letter was seen as being capable of creating rights and obligations only as between the respondents and MFL. Having had the benefit of more sophisticated argument, we respectfully regard that approach as too narrow.Properly developed, Matariki's claim of estoppel can be seen as based on the principles enunciated in Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387.The essential elements for present purposes would appear to be:first, the creation or encouragement of a belief or expectation in a person to whom a representation is made or to whom it is known the representation will be communicated;second, reasonable chance in the belief or expectation;and third, resulting detriment. Determination of a cause of action so based requires, in the present case, determination of a number of crucial matters.They include the meaning to be attributed to the letter of 28 July, which is to be ascertained not only from an examination of its contents but also from the surrounding circumstances which gave rise to it, including its timing in relation to the execution and settlement of the joint venture agreement.The background contains areas of disputed fact.The existence of some form of collateral agreement involving payment to the respondents is also in dispute.

[15] Further, the questions of reliance, and the reasonableness of any reliance, on the part of Matariki need determination, as does the issue of detriment.

[16] Again in respect of the constructive trust argument a key issue must be the meaning to be attributed to the letter of 28 July - whether it was for example a promise to convey quota to, or constituted a declaration of trust of some identifiable property in favour of, MFL.If the latter be the case, Matariki's rights to property of which MFL is the trustee may not necessarily be defeated by MFL's liquidation.

[17] Similarly the question of assignment requires determination of the true meaning and effect of the letter of 28 July, and may also raise the question of consideration.

[18] For the above reasons, and with a degree of reluctance because of the delay and expense which will result before finality can be reached, we are satisfied that the ends of justice require further consideration by the High Court.The parties may however well see advantages in attempting to resolve outstanding differences, particularly now that the dispute would now seem able to be seen essentially in defined money terms.

[19] The appeal is therefore allowed, the dismissal of the claim for declarations is set aside, and the proceeding remitted to the High Court for determination in the light of this judgment.The conduct of any further hearing, and its content, will be for the trial Judge.In the circumstances no order is made as to costs in this Court.

Solicitors

John Smith, Tauranga, for appellant

Keam & Associates, Tauranga, for respondent Mr Deadman