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Junior Farms Limited v Cavendish Real Estate Limited (in liquidation) and ors [2006] NZCA 66 (12 April 2006)

Last Updated: 21 April 2006

IN THE COURT OF APPEAL OF NEW ZEALAND

CA218/04
CA258/04

BETWEEN JUNIOR FARMS LIMITED
Appellant

AND CAVENDISH REAL ESTATE LIMITED (IN LIQUIDATION)
First Respondent

AND BRUCE MURRAY STENNING
Second Respondent

AND YOLLAND GUBB & CO
Third Respondent

AND HAMPTON SECURITIES LIMITED (IN LIQUIDATION)
Fourth Respondent

AND ACCENT MANAGEMENT LIMITED
Fifth Respondent

Hearing: 22 September 2005

Court: Hammond, Chambers and Baragwanath JJ

Counsel: S P Bryers and B J Humphrey for Appellant
M J Koppens and P K M Moses for Fifth Respondent
No appearance for Fourth Respondent

Judgment: 12 April 2006

JUDGMENT OF THE COURT

A. The appeal is allowed, in part, in the following respects:

(1) The fourth respondent must pay to the appellant interest on the judgment sum of $138,850 at 11% pa from 15 December 1998 down to 31 July 2002; and at 7.5% from 1 August 2002 down to 15 September 2004;
(2) With respect to costs in the High Court, the fourth and fifth respondents are jointly and severally liable for the appellant’s costs from commencement of the proceeding down to the date of the liquidation of the fourth respondent (9 July 2004) on a 2B basis, together with reasonable disbursements incurred in that period relating to the proceeding against the fourth respondent. These costs are to include a preparation allowance of 14 days. In the event of dispute, the quantum of costs and reasonable disbursements are to be fixed by the registrar of the High Court at Auckland. This order is in substitution for order 1 made in the High Court on 19 November 2004.

B. In all other respects, the appeal and the cross appeal are dismissed.

C. In this Court, the fifth respondent must pay to the appellant costs of $5,000 and usual disbursements. We certify for second counsel.

REASONS
(Given by Hammond J)

Table of Contents

Para No
Introduction [1]
The appeals and cross appeals
(i) The appeal with regard to the liability judgment [5]
(ii) The appeal with regard to the costs judgment [5]
(iii) The cross appeals [6]
The circumstances out of which these appeals arise [9]
Liability
(i) Introduction [49]
(ii) The relevant contract terms [50]
(iii) What did the letter mean? [60]
(iv) What are the consequences of the agreement as so construed [67]
(v) Conclusion : liability [69]
Quantum [71]
Pre-judgment interest [86]
Costs in the High Court [91]
Conclusion [109]
Costs on the appeal [110]

Introduction

[1] This case arose out of certain conveyancing transactions in South Auckland. Essentially, it involves the ascertainment of the terms of the relevant agreements for sale and purchase. Given the nature of the case, and the number of parties involved in the proceeding, a number of costs issues have also arisen.
[2] We have before us two appeals against judgments of Heath J in the High Court at Auckland in this proceeding (CP240-SD99) delivered on 15 September 2004 and 19 November 2004.
[3] We will refer to the judgment of 15 September 2004 as the "liability judgment". It held that:

(a) the appellant, Junior Farms, was entitled to judgment against the fourth respondent, Hampton Securities Ltd (In Liquidation) (Hampton), for $138,850;
(b) Junior Farms was not entitled to pre-judgment interest;
(c) the claims of Junior Farms against the first respondent, Cavendish Real Estate Ltd (Cavendish), the second respondent, Mr Bruce Murray Stenning, and the third respondent, Yolland Gubb & Co (Yolland Gubb) were dismissed.

[4] We will refer to the judgment of 19 November 2004 as the "costs judgment". It held that:

(a) Junior Farms was entitled to costs and disbursements against Hampton of $30,460;
(b) Junior Farms was entitled to costs, disbursements and witnesses’ expenses against the fifth respondent, Accent Management Ltd (Accent), of $42,086.85;
(c) Mr Stenning was entitled to costs against Junior Farms of $58,165;
(d) Yolland Gubb was entitled to costs, disbursements and witnesses’ expenses against Junior Farms of $122,552.11.

The appeals and cross appeals

[5] The appeals are advanced on the following bases:

(i) The appeal with regard to the liability judgment

(a) Junior Farms contends that the amount awarded to it against Hampton was erroneously calculated by Heath J, and should have been $288,550. It says that, when calculating the amount of the compensation that Junior Farms was entitled to recover from Hampton, Heath J overlooked the fact that the purchase price paid by Hampton to Junior Farms included not only a sum paid for the land, but also a sum of approximately $150,000 for livestock, appliances and chattels. In the result, the award was approximately $150,000 less than it ought to have been.
(b) Junior Farms maintains there was no justification for Heath J to decline to award it any pre-judgment interest. The compensation that the Judge held Junior Farms to be entitled to receive should have been paid by Hampton in 1998, so that for a six year period from 1998 to the date of the judgment in 2004, Hampton had the use of Junior Farms’ money.

(ii) The appeal with regard to the costs judgment

(a) Junior Farms says that the costs awards made by Heath J were unjust and inconsistent. Full costs were awarded to the successful defendants, but Junior Farms recovered less than 50 percent of its entitlement under the rules against the unsuccessful defendants.
(b) In particular, the Judge’s decision to award costs against Hampton only up to 9 July 2004 (that being the date on which Hampton went into liquidation), and costs against Accent for the trial only (and then only for 50 percent of the trial), has given rise to Junior Farms failing to recover costs for trial preparation and for 50 percent of the trial. It is said this unjustifiably reduced Junior Farms’ claim for costs against Hampton/Accent by more than 50 percent.
(c) Junior Farms says the Judge was wrong to decline to order that the unsuccessful defendants - Hampton and Accent - should pay the whole or part of the costs of the successful defendants because:

 It was reasonable and proper for Junior Farms, in the circumstances of the case, to join Mr Stenning and Yolland Gubb as parties;
 The justice of the case required Hampton/Accent to pay or contribute to the costs of the successful defendants;
 There were no reasons to disqualify the plaintiff from seeking contribution or indemnity from the unsuccessful defendants in respect of the costs of the successful defendants.

(iii) The cross appeals

[6] Accent (for itself and Hampton) has cross-appealed against any liability assessed against Hampton; and against the costs order made against Accent.
[7] The cross appeal as to liability turns substantially on the effect of a letter prepared by the parties themselves, and an estoppel argument.
[8] There is also a cross appeal against some aspects of the costs decisions.

The circumstances out of which these appeals arise

[9] This proceeding involved claims against multiple parties. The proceeding occupied 14 days of High Court hearing time, with a consequential volume of evidence. Along with the direct claims, there was a collateral claim against a firm of Auckland solicitors alleging negligence in the way that firm conducted itself in relation to the relevant conveyancing transactions.
[10] Junior Farms’ concern on the appeal is with quantum, and what it regards as the unjust costs position arising on the proceedings. However, by the cross appeal, Accent has thrown open the liability question again, as well as raising costs issues. That makes it necessary to outline, with as much brevity as can be mustered in the circumstances, the convoluted nature of the transactions which gave rise to the various claims.
[11] In 1994 Junior Farms owned land ("the land") on the northern side of Ormiston Road, East Tamaki, Auckland. The land was approximately 35.6122 hectares in area. We say approximately because both certificates of title comprising the land were limited as to parcels. Further, the boundary of the land was in part a riverbank and it was considered unlikely that the riverbank was still exactly on the course it was when the certificates of title were issued. The land was zoned rural. The Otara Stream flows through the northern part of the land.
[12] In 1990 the local authority, Manukau City Council, zoned 20 hectares (or approximately 50 acres) of the land fronting on to Ormiston Road as Industrial 1. That is a light industrial zoning.
[13] The remaining portion of the land at the rear of the land (as one looks from Ormiston Road) was designated for a flood protection scheme which the Manukau City Council wanted to develop in relation to the Otara Stream.
[14] Mr Stenning was the principal of Cavendish. He knew Mr Plumley, the principal of Junior Farms. These men had some prior dealings dating back to the early 1970s.
[15] Mr Stenning contacted Mr Plumley in July of 1994 and indicated that he had a prospective purchaser for the whole of Junior Farms’ land. There was undoubtedly a meeting between the men, although there was a distinct dispute at trial as to what was then said. On any view it was clear that there was a discussion of the terms of a possible sale of the land.
[16] Mr Stenning gave evidence that Cavendish was engaged as Junior Farms’ agent for the purpose of effecting the sale of the property to the "Verrisimo Group". This was a group of companies including Accent, Hampton, and Lexington Resources Limited (Lexington).
[17] The prospective purchasers had themselves entered into discussions with "Foodlands", the Australian parent of Farmers/Deka Ltd (a New Zealand company). Underlying these discussions was the notion that the Ormiston Road property might be suitable for a distribution and support centre that Farmers/Deka Ltd wished to develop.
[18] A conditional agreement for sale and purchase was prepared in August 1994, recording the sale of just over 37 hectares of land. Accent "or nominee" was noted as the purchaser. The contract was conditional upon Accent approving the contract before 11 November 1994.
[19] There was a dispute at trial as to the substance of the negotiations that followed the signing of this agreement, but it is common ground that two new agreements were then entered into.
[20] By the first, Junior Farms was to transfer the land to Hampton for $2,681,000. Then, once the subdivision had been effected and the floodplain land had been put on its own title, the floodplain land was to be transferred back to Junior Farms. Junior Farms was then to negotiate the sale of that land to Manukau City Council. The purchase price for the first transaction reflected the value of the land with which Hampton would eventually end up, namely the total area less the floodplain land. For that reason, the second agreement provided for only a nominal consideration.
[21] On 10 October 1994, two agreements for sale and purchase of land, mirroring those of the Lexington agreements, were entered into between Lexington and Farmers/Deka Limited. Farmers/Deka Limited was prepared to pay Lexington $4 million for the "industrial" land. Heath J considered it was quite clear that Farmers/Deka Limited knew of the arrangements between Lexington and Junior Farms, because of the nature of the buy-back agreement. But neither Mr Stenning nor Mr Plumley knew of the existence of these agreements at that time.
[22] Around the end of October 1994, Mr Stenning told Mr Plumley that the purchaser of the land wanted to make a new offer, beneficial to Junior Farms in that it was now an unconditional cash deal, to be settled by 15 December 1994. Mr Plumley signed these agreements on behalf of Junior Farms without taking legal advice. The purchaser on these agreements was Hampton.
[23] The first agreement was dated 9 November 1994. Under this agreement, Junior Farms was obliged to the requisite areas of land in CT755/164 and CT766/11 in consideration of a sum of $2,679,000 on settlement (which was to occur on or before 15 December 1994).
[24] The second agreement, dated the following day, was due for settlement "on or before 1 June 1999 at the absolute unfettered option" of Junior Farms. Upon settlement, Junior Farms was obliged to pay Hampton the sum of $100, and Hampton was to convey to Junior Farms the appropriate parcel of land. The precise boundaries of that area were not known. The reason the price dropped by $2,000 is that that had been the deposit paid under the earlier agreement referred to at [20].
[25] The amount of land being sold under the 9 November agreement was unknown but as best could then be judged was 35.6122 hectares.
[26] It was Junior Farms’ case at trial that the intention of these agreements was that the 50 acres zoned Industrial 1 would be sold to Hampton, on the basis that Hampton would then carry out a subdivision of the land, and thereafter return all land in excess of 50 acres to Junior Farms.
[27] Hampton’s case, on the other hand, was that the intention was to subdivide off the flood protection area only, once the boundaries had been established, and return that portion of the land to Junior Farms.
[28] Heath J took the view, on the evidence before him, that the following chain of events was contemplated. First, Hampton would purchase "the whole of the land specified in the first November 1994 agreement and pay to Junior Farms the sum of $2,679,000." A subdivision of the land would then occur, forming two lots, "one comprising the area edged green on the plan attached to the second November 1994 agreement and the other being the bounds of the land acquired by Hampton". As a result of this subdivision, separate certificates of title would be issued, and Junior Farms would be in a position to settle the purchase of "the land edged green in the second November 1994 agreement", by paying $100 to Hampton.
[29] The Judge was also satisfied that "both Hampton and Junior Farms anticipated, when the November 1994 agreements were signed, that the land edged green on the plan attached to the second November 1994 agreement was land required for flood protection purposes by the Council". The Judge found as a fact that "approximately 50 acres of the land to be transferred to Hampton under the first November 1994 agreement was land zoned for industrial purposes by the Council. As a matter of arithmetic, that meant the floodplain land was estimated to be about 38 acres".
[30] The nub of the problem created by these agreements was described by Heath J in the following terms:

[22] While the second agreement referred to an area of "14 Ha a little more or less", Mr Plumley asserts that the parties’ intention was for 50 acres to be retained by Hampton (the industrial land) with the remaining 38 acres being re-acquired by Junior Farms for sale to the Council. It is common ground that 14 hectares is equivalent to about 35 acres.
[23] The final boundary of the land to be re-conveyed depended upon the precise area of land the Council was prepared to acquire for flood protection purposes. In turn, that question depended upon a number of factors that the Council had to weigh: eg the type of flooding that might be expected, the amount of money it had available to purchase the land and the price at which the vendor was prepared to sell the land to it.
[24] At the time of the November 1994 transactions it must have been plain that the Council might decide to acquire more or less land than the 14 hectares (or 35 acres) mentioned in the buy-back agreement; or, indeed, more or less land than the area of 38 acres to which Mr Plumley refers.
[25] The fact that the parties were unable (in November/December 1994) to determine where the boundary might finally lie meant that the November 1994 agreements were silent on which party was entitled to take the benefit of any land that the Council elected not to acquire.

[31] At some time after these agreements were executed, but before 11 November 1994, Hampton’s in-house solicitor, following discussions with Mr Stenning, prepared a letter that recorded what the Judge found to be "additional contractual terms on a subject on which the two November agreements were silent".
[32] This letter (which we will call the "Hampton" letter) said:

Junior Farms Ltd ("JFL") to Hampton Securities Ltd ("HSL")
Further to conversations with Mr. Bruce Stenning of Cavendish Real Estate we confirm the following:

1. The final purchase price for the land in the agreement between JFL and HSL ("Agreement") will be calculated at $12.50 per metre. It is understood that there is approximately 50 acres.
2. Upon the Manukau City Council finalising the area of the flood plain it wishes to purchase, the boundaries and land size of the land subject to the Agreement may be defined. The final purchase price for the land can then be calculated in accordance with the formula detailed in paragraph 1 above.
3. The price for the dairy cows will be set as per clauses 15.1 and 15.2 of the Agreement.

It is understood that JFL and HSL will settle the Agreement for the consideration mentioned in the Agreement and any adjustments required will be made as pertinent information comes to hand.

[33] This letter was signed by Mr Verrisimo on behalf of Hampton, and counter-signed by Junior Farms.
[34] Junior Farms argued that the effect of this letter was to provide it with an option: either 38 acres could be demanded back pursuant to what was contended to be the actual agreement reached or, in the event that the area representing the difference between the 38 acres and the floodplain area could not be sold, it could require Hampton to buy it under the terms of the letter.
[35] Junior Farms’ case therefore rested on what the Judge described as "the proposition that while the second November 1994 agreement refers expressly to 14 hectares ‘a little more or less’ the parties actually intended that area to comprise 38 acres and that the contract should be rectified accordingly. The alternative contention is that there remained, as a matter of contract as between Junior Farms and Hampton, a right to require re-conveyance of the 14 hectares mentioned in the agreement or for compensation to be sought under the terms of the [Hampton] letter."
[36] The construction of the November agreements, and the relevance of the Hampton letter were the central issues at trial.
[37] Settlement was completed on 15 December 1994. The requisite monies were paid over, and the land was transferred to Hampton.
[38] Hampton duly settled the agreement for sale and purchase it had made with Carters. A caveat protecting Junior Farms’ interests under the buy-back agreement was registered following this transfer.
[39] Mr Plumley’s solicitor, a Mr Gubb, was aware that this transaction was to take place, but Mr Plumley was not.
[40] After these settlements had taken place, negotiations between Junior Farms and the local authority relating to the floodplain land commenced. During these negotiations it became apparent that there was an issue as to whether the November 1994 agreements accurately reflected Mr Plumley’s understanding of the buy-back agreement.
[41] On 26 June 1998 Carters advised that new titles had been issued, and that the transfer of lots 2 and 3 back to Hampton could take place. Junior Farms was asked to withdraw its caveat against lot 1.
[42] On 7 July 1998 Mr Plumley met with Mr Gubb and a barrister instructed for the local authority. At that meeting it became clear that only 13.0695 hectares were to be reconveyed to Junior Farms. This was less than Mr Plumley had expected.
[43] Junior Farms then took the position that it had sold only 50 acres of land, and that compensation should be paid for any land retained over that figure. Hampton denied that any compensation was payable, and Carters took the position that its obligation was limited to transferring the flood protection land back to Hampton.
[44] There was then litigation in the High Court relating to the caveat, but in January 1999 the reconveyance of land was effected on the terms proposed in June of 1998. This was without prejudice to Junior Farms’ claim in respect of land in excess of 50 acres.
[45] In the event, Junior Farms elected to sue every person who was connected in some way with these transactions. The proceeding was brought against Cavendish, the law firm of Yolland Gubb, Hampton, Carters, the Manukau City Council, and Penney Patel, a law firm with which Mr Roussell, Junior Farms’ one-time legal advisor, had a loose association.
[46] Various causes of action were pleaded, including negligence and breach of retainer against Junior Farms’ former legal advisors.
[47] Carters successfully applied for the claim against that firm to be struck out. A settlement was reached with the City Council and Penney Patel before trial, but the causes of action against all remaining defendants proceeded to trial.
[48] Prior to the commencement of the trial, both Cavendish and Hampton were placed in liquidation. Leave was granted for the proceeding to continue, notwithstanding this event. Accent, one of Hampton’s shareholders, was granted intervenor status in the proceedings. In effect, Accent defended the proceeding on Hampton’s behalf.

Liability

(i) Introduction

[49] The liability issues before us can conveniently be grouped under three heads:
 what were the relevant contractual terms between the parties; in particular, was the Hampton letter part of the contract terms?
 what is the proper construction to be put on those terms?
 what are the consequences which flow from the contract, as so construed?

(ii) The relevant contract terms

[50] There is no doubt as to the existence of, and the terms contained in, the two November agreements. They are in writing and duly executed, as indeed they had to be for the purposes of the Contracts Enforcement Act 1956.
[51] The issue here is simply whether the Hampton letter is part of the agreed contractual terms. In the result, and somewhat grudgingly before us, Mr Koppens conceded that must be so. We could therefore pass directly to the next issue. But the dispute over this issue illustrates what has been a constant difficulty in this case: the endeavours by both parties to put a gloss of their own on the formula they had both agreed to.
[52] The Judge found that, while the boundaries of the area to be bought back were unknown and incapable of definition, it was "clear that the parties had agreed that the land to be re-conveyed was situated within Certificate of Title 755/164 in the area indicatively edged green on the plan attached to the agreement. That area lay to the far north of the property being sold; not contiguous to Ormiston Road".
[53] Since the Hampton letter is so central to the Judge’s findings, it is appropriate to reproduce the Judge’s discussion on this point, in full:

[131] Although the agreement for sale and purchase purported to give Junior Farms an "absolute unfettered option" to settle on or before 1 June 1999 a practical difficulty stood in the way of those words being interpreted widely. Before that land could be re-conveyed to Junior Farms it had to be the subject of a separate Certificate of Title. That separate title would issue upon completion and deposit of a subdivision plan. As Junior Farms expected that Hampton would have title to the whole land, as from 15 December 1994, the parties must have intended that Hampton bear the cost of completing the subdivision. Nevertheless, there was nothing explicit in either agreement on that topic.
[132] I am satisfied from the evidence that around the time the Hampton agreements were prepared Mr Plumley raised an issue about the consequence of the floodplain area being more or less than anticipated when the parties signed their agreements. Of course, Mr Plumley’s evidence is that he was thinking in terms of a floodplain area of about 38 acres whereas the second November agreement referred to an area of 14 hectares, about 35 acres.
[133] Mr Plumley gave evidence that, about the time the two November agreements were signed he raised with Mr Stenning the fact that the agreements did not make it clear he was only selling 50 acres of land and getting back 38 acres. Mr Stenning’s response to that evidence was that he had received a telephone message to call Mr Plumley late at night and that Mr Plumley had expressed "a concern for selling the floodplain and a no man’s land and not being able to sell it to anyone". To that extent the evidence is compatible; the distinction being whether Mr Plumley actually referred to the specific areas of land in terms of acres.
[134] Leaving that issue to one side, it is clear that Mr Plumley was concerned about the consequence of the land to be acquired by the Council for floodplain purposes being more or less than that estimated in the second November 1994 agreement. Mr Stenning said he recalled going straight from home to Mr Verissimo’s office, explaining Mr Plumley’s concern about the 50 acres, the floodplain land and "no man’s land with no road frontage". Mr Stenning says that, after he had explained the position to Mr Verissimo, Mr Verissimo called his lawyer (Mr Brown) who then wrote the (undated) letter. Ultimately the letter was signed both by Hampton and Junior Farms.
[135] The operative part of the Hampton letter stated:
...

1. The final purchase price for the land in the agreement between JFL and HSL "Agreement" will be calculated at $12.50 per [square] metre. It is understood that there is approximately 50 acres.
2. Upon the Manukau City Council finalising the area of the flood plain it wishes to purchase, the boundaries and land size of the land subject to the Agreement may be defined. The final purchase price for the land can then be calculated in accordance with the formula detailed in paragraph 1 above.
3. The price for the dairy cows will be set as per clauses 15.1 and 15.2 of the Agreement.

It is understood that JFL and HSL will settle the Agreement for the consideration mentioned in the Agreement and any adjustments required will be made as pertinent information comes to hand.

[54] Having set out the operative part of the Hampton letter, the Judge then continued:

[136] The letter contains two essential elements:

[a] An acknowledgement that, although the contract stipulated the transfer of 37.231 ha (about 92 acres) only 50 acres was expected to be sold.
[b] The final price to be paid was to be adjusted by a calculation based on $12.50 per square metre, at that time the going rate for industrial land.

[55] Significantly, the Judge then indicated that both parties were now endeavouring (to use a colloquial term) to put their own "spin" on this letter. As he said, Hampton was endeavouring to assert that the letter really meant nothing - that it was an unenforceable document, which was only some sort of gratuitous letter of comfort. On the other hand, Mr Plumley was now seeking to say that the letter applied only to minor changes to the boundaries. This was an endeavour to preserve Junior Farms’ suggestion that it was entitled to land, rather than compensation.
[56] The Judge, rightly, would have none of this. As he saw it, it was common ground that there was a problem with the agreement in that the land to be acquired by the Council for floodplain purposes might be more or less than that which had been estimated in the 9 November 1994 agreement. For better or worse, the parties had endeavoured to solve that problem, and they did so by what was actually provided in the letter of 11 November.
[57] The Judge said:

[140] Given the circumstances in which the letter was signed (which from the fax header on the copy produced and relevant oral evidence I find to be 11 November 1994) I have no doubt that both Junior Farms and Hampton intended, at the time, to record their agreement on the method by which the final purchase price would be fixed – something for which the relevant agreements did not expressly provide. In my view the undated letter was intended to provide a basis on which the final purchase price for the land would be fixed.
[141] In so holding it is unnecessary to decide whether the letter had the effect of a variation of the existing contract or should be regarded as a record made by the parties of an agreement they failed to document in the original contract. Since Antons Trawling Co Ltd v Smith [2003] 2 NZLR 23 (CA) nothing turns on the distinction.

[58] The Judge then said, by way of conclusion:

For those reasons, I hold that the undated letter had the effect of varying or supplementing the terms agreed between the parties by providing a formula to resolve an issue left uncertain by the November 1994 agreements ([146]).

[59] The Judge was plainly correct in that view, and as we have indicated, before us, Mr Koppens felt constrained to agree that although it had been contended that the letter was not intended to form part of what he called the "primary contract between the parties", such an argument could not now stand. Neither was there any cross appeal against the Judge’s finding that the letter was part of the relevant contractual terms.

(iii) What did the letter mean?

[60] It is not necessary, in this case, to revisit the vexed question of how the meaning of a contractual term or terms are to be approached. The law sets out to give effect to what Lord Steyn has described as the reasonable expectations of honest people ("Contract Law: Fulfilling the Reasonable Expectations of Honest Men" (1997) 113 LQR 433). The consequence is, as Lord Nicholls of Birkenhead has recently suggested, "The question posed by the law when interpreting a contract is thus : what would a reasonable person in the position of the parties understand was the meaning the words were intended to convey?" ("My Kingdom for a Horse : the Meaning of Words" (2005) 121 LQR 577 at 579).
[61] As Heath J said, it is extremely difficult to see how Junior Farms could contend that land was to be returned in specie in face of the precise letter signed by it.
[62] Mr Koppens contended that either the agreement was for a sale of a net area of 50 acres, giving Hampton an obligation to transfer back 38 acres; or, Hampton was to transfer back only the floodplain area and to pay Junior Farms an additional $12.50 per square metre for anything over 50 acres (the collateral letter option). He submitted that Junior Farms could not have it both ways.
[63] In the somewhat murky circumstances of this case, it was entirely appropriate for the Judge to proceed as he did, in holding that the Hampton letter as executed by the parties suggested a perfectly rational solution to a known problem which could arise under the November agreement; and that the plain meaning of the document was entirely consistent with the "commercial imperatives", as the Judge called them, faced by the parties. It would have been unfair for Junior Farms to be left with a shortfall in land; it did make sense for compensation to be assessed by reference to a calculation based on the purchase price for industrial, rather than floodplain, land; and uncertainty would have been created between the parties without that sort of solution.
[64] We cannot say that the Judge was plainly wrong, as to the view he took of the construction of the contract terms, indeed, we think he was correct.
[65] Given this conclusion, it is not necessary for us to address various other arguments which were advanced in the course of this case. A claim for rectification of the agreement was made at trial, but was rejected by the trial Judge, and not pursued further before us. A claim under the Contractual Mistakes Act 1977 met the same fate. Mr Koppens raised an estoppel argument which was not at all easy to follow, but which in any event foundered at the outset. This was because, once the Hampton letter was accepted as being a contractual term, what he was endeavouring to set up was plainly contradicted by the terms of the letter itself.
[66] In the end, the argument for Accent was nothing more nor less than an argument that the letter did not say what it plainly did say. To put it even more simply, this is a case in which both parties are bound by the terms of the letter to which they expressly assented. Neither party can now say it really meant something else.

(iv) What are the consequences of the agreement as so construed

[67] Having reached the view that he did of the contractual documents, the Judge said:

... Junior Farms was entitled to insist on conveyance to it of an area of land comprising 14 hectares in the area edged green on the indicative plan. If less land were to be transferred because the Council acquired less than expected, Junior Farms was entitled to seek compensation from Hampton on the basis specified in the undated letter ([147]).

[68] We agree that it followed inexorably that, to again employ the language of the Judge:

[204] Having held that Hampton had a contrctual [sic] obligation to re-convey 14 hectares of floodplain land to Junior Farms, subject to the final price adjustment set out in the undated letter signed by both parties, Junior Farms is entitled to judgment against Hampton for the value of the land for which Hampton has not compensated it.
[205] In my judgment, as between itself and Hampton, Junior Farms is entitled to damages for the value of the land for which Hampton has not compensated it. This should be calculated on the basis that the land is worth $12.50 per square metre, as per the undated letter between Hampton and Junior Farms.
[206] The total amount of land sold to Hampton was 88 acres. Hampton re-conveyed to Junior Farms 13.0695 hectares. This means that Hampton, in effect, purchased off Junior Farms 22.5428 hectares. At $12.50 per square metre less the $2,679,000 paid by Hampton, the amount Hampton have to reimburse Junior Farms is $138,850. Judgment is entered for this amount.

(v) Conclusion : liability

[69] By way of summary on the liability issues, the Judge was correct as to his findings on the terms of the agreement; the construction to be put upon those terms; and the consequences which flowed therefrom.
[70] The next question is whether the compensation to be paid did not go far enough. We now turn to that issue.

Quantum

[71] Junior Farms’ concern here can be shortly put. The Judge’s calculation of the purchase price was made on the basis that it was for "the land", resulting in a figure of $138,850 calculated as we have noted (see the judgment, [206] at [68], above).
[72] Mr Bryers, for the appellant, submitted that the Judge overlooked the evidence as to how the purchase price of $2,679,000 had been calculated. He argued before us that the price was not just for "the land", but also included an amount for livestock and plant, which has not been accounted for.
[73] Clause 15 of the relevant agreement provided:

15. Going concern
The purchase price of $2,679,000 (two million six hundred and seventy-nine thousand dollars) is for the land and buildings and is inclusive of the house chattels included in this agreement and inclusive of the following plant and livestock as listed in the schedule herein:
15.1
Farm buildings including barns, cowshed and milking plant.
Livestock - 140 Friesan [sic] Dairy Cows plus heifer replacements.
15.2
A physical tally of the livestock shall be given and taken by the vendor and the purchaser or their delegated representatives either on or prior to possession date - such date to be mutually agreed between the parties. Any unders or overs in any of the stock categories will be adjusted at an agreed value.

[74] Mr Bryers’ argument went like this. Mr Plumley, who gave evidence on this aspect of the case for Junior Farms, said that the purchase price was based on 50 acres at $12.50/m² (a little over $50,000 an acre), plus 140 cows at $1,000 per head, plus two tractors and some chattels. He said that this was not an after-the-event suggestion was confirmed by Mr Plumley’s letter to Manukau City Council on 10 November. Mr Stenning had confirmed that the purchaser was buying 50 acres of industrial land, plus the stock, and there was a small balance for some chattels and buildings. And perhaps most importantly of all, Hampton itself wrote to the IRD on 14 December 1994 confirming that the agreement should be stamped on the basis that the price included 140 dairy cows at $1,000.
[75] It followed from this evidence, Mr Bryers said, that the purchase price was made up as follows:

(a) 50 acres (20.2343 ha) x $12.50m²= $2,529,287
(b) 140 cows at $1,000 each = $ 140,000
(c) Allowance for plant and chattels $ 9,713
(d) Total price $2,679,000

[76] Mr Bryers said it followed that the Judge had made an error of calculation: the amount paid by Hampton for the land under the agreement was $2,592,287, not $2,679,000, as the Judge assumed. Using the methodology the Judge employed in his judgment, he said the correct calculation is:

22.5428 x $12.50 = $2,817,850
Less price paid for land = $2,529,287
Difference = $ 288,563

[77] If the argument is correct it follows that a judgment sum of $288,563 should be substituted for the sum of $138,850 awarded by the Judge.
[78] The argument, initially, has some attraction because the evidence Mr Bryers pointed to may be seen as being consistent with a "separate" (and unaccounted for) figure, as it were, for the livestock. Indeed, at the hearing we were initially attracted to the argument which was run. On further reflection however, we think the argument is not sound.
[79] Mr Bryers’ argument suffers from several difficulties. First, there is no evidence that there was an allowance for plant and chattels of $9,713.00. Secondly, there is no evidence that Mr Verissimo was ever thinking in acres. Thirdly, and most importantly, it cannot have been the parties’ intention that, if the area being transferred ended up being exactly as anticipated from looking at the titles and calculating the floodplain area, Mr Verissimo would end up paying an extra $140,000, which is the effect of Mr Bryers’ argument. The Hampton letter was surely intended to be neutral if the exact land area turned out to be as anticipated.
[80] It seems to us that the relevant calculations are as follows:

1. The September agreement had a net purchase price of $2,681,000. That price was nominated by Mr Verissimo and accepted by Mr Plumley. There was no discussion between them as to how the price was made up. That price covered the net area of the land, livestock, and some chattels. The only variation possible to that price was if the number of cows was other than 140. It would then be adjusted up or down, depending on the variation in number of cows, at a value to be agreed.
2. It is possible to work out how in all likelihood Mr Verissimo picked on a figure of $2,681,000: it was what he believed the net area of the land to be that he would be acquiring, calculated at $12.50 a square metre, and rounded to the nearest $1,000. It seems clear on the evidence, however, that Mr Plumley never knew how Mr Verissimo had calculated the price. It also seems clear that Mr Plumley never did that same calculation when he decided to accept it.
3. Concern was later expressed that the net area of land might not equate with the parties’ expectations. So what Mr Verissimo suggested was that the ultimate figure would be the actual net area x $12.50. If the actual net area (following accurate surveying and cutting off of the floodplain area) equalled the area Mr Verissimo had previously calculated he would be getting, namely 21.4522 hectares, then there would not need to be any adjustment of the price. That area x $12.50 equalled $2,681,000 (to the nearest $1,000). If, however, he ended up getting more land than that, then he would pay for the balance at $12.50 a square metre; if he got less, then Junior Farms would have to make a refund.
4. Clause 3 of the Hampton letter was designed to show that the agreement as varied still provided for the possibility of variation if cow numbers varied from 140.

[81] The conclusion that the Judge’s figure was correct can be reached by another route. What matters is what the parties agreed. As we have already noted in this judgment, what they therefore thought and did is of no moment on this issue. In other words, it is an error to proceed, at least in this case, on the basis of the subsequent conduct of the parties (which was in any event somewhat equivocal). What has to be looked at is their agreed expectations, in the sense we set out in [60].
[82] The relevant documents here are clause 15 of the agreement ([73] above), and the Hampton letter ([32] above). The two documents have to be read together. The figure of $2,679,000 in clause 15 was, on it face, for a global figure (ie, for both land and livestock). What the Hampton letter did was to provide for adjustments for "unders and overs" for both land and livestock.
[83] The argument for the appellants begins and ends at that point. Livestock were not "left out of the account", as it were, from the transaction; that livestock was always part of the initial global sum. The endeavour to set up another figure, on the basis of later events - particularly the correspondence with the IRD - is incorrect. The fact that some portion of the price had subsequently to be allocated to livestock is a consequence of the taxation law, and is not what the parties reduced to the terms of their written transaction.
[84] Even if Mr Plumley (and his agent) genuinely held the view that livestock was an "extra" sum, to again revert to the views expressed by their Lordships in [60] above, it is how the reasonable person in the position of the parties would see things that matters. On that test, the Hampton letter was dealing with a perfectly obvious problem: unders and overs in respect of land and livestock. The position here therefore is precisely the same as the dispute over the land; Mr Plumley cannot subsequently seek to superimpose as it were, some other figure over their recorded arrangement.
[85] We are unanimous that this head of appeal cannot succeed. It is dismissed.

Pre-judgment interest

[86] By its statement of claim, Junior Farms claimed interest on whatever sum was due to it. No challenge to that claim was made at trial, but the Judge declined to award pre-judgment interest at all.
[87] The only reason for that ruling appears at [207] of the Judge’s decision. He said:

When the total outcome of the transaction is taken into account (from Junior Farms perspective) I am satisfied that there is no need for compensation for it being out of its money meantime.

[88] Mr Bryers said that the effect of the ruling is that Junior Farms gets no compensation for the time it has been out of its money, which we have confirmed in a sum of $138,850. Conversely, Hampton/Accent has received a windfall through having had the use of that money, interest free, for a period of over six years.
[89] The principles relating to pre-judgment interest are well established in New Zealand (see Day v Mead [1987] 2 NZLR 443 at 463). We see no reason why they should not obtain here. In short, Junior Farms should be compensated for the loss of use of the money to which it was rightfully entitled.
[90] Accordingly, Hampton Securities Limited (In Liquidation) must pay to Junior Farms interest on $138,850.00 at 11 percent per annum from 15 December 1998 down to 31 July 2002, and at 7.5% from 1 August 2002 down to 15 September 2004. Those were the maximum sums permissible at those dates under s 87 of the Judicature Act 1908. We take this course because the late settlement rate in the agreement was 12%; by analogy we should be generous in this instance.

Costs in the High Court

[91] Mr Bryers submitted that the overall costs awards made by Heath J were unjust and inconsistent. Excluding for the moment disbursements and witness’ expenses, Junior Farms was awarded costs of $39,740 in total against the unsuccessful defendants, Hampton and Accent ($27,415 and $12,325 respectively), but it was required to pay costs of the successful defendants of $58,165 (Stenning), and $104,517.50 (Yolland Gubb), a total of $162,742.50.
[92] The essential reasons for the discrepancy between the costs awarded to Junior Farms against Hampton/Accent and the costs award against Junior Farms in favour of the successful defendants were Heath J’s rulings that:
 Hampton was liable for costs only up to 9 July 2004 (the date of liquidation) and that Accent was only liable for trial costs, and then for only 50 percent of those costs;
 Junior Farms had to pay the full costs of the successful defendants, and Yolland Gubb was entitled to an uplift on costs, as a result of a Calderbank letter.
[93] Junior Farms does not challenge the second of these rulings. The effect of the Calderbank letter ruling was to increase the costs awarded to Yolland Gubb by $16,747.50.
[94] Mr Bryers submitted however that the Judge was wrong to limit Accent’s liability to 50 percent of trial costs. He responsibly acknowledged the reluctance of an appellate court to interfere with costs awards (see Glaister v Amalgamated Dairies Limited [2004] 2 NZLR 606 (CA)). However he said that, in some respects, in this case the Judge had made errors of principle or was plainly wrong.
[95] The Judge had mixed reasons for limiting Accent’s liability to 50 percent of trial costs. First, he thought Accent ought not to be liable for costs incurred prior to the date on which it sought and obtained leave to intervene. Secondly, it appears that, as a matter of assessment, he thought that most of the evidence at the hearing "was devoted to Junior Farms’ claims against Yolland Gubb" (which, in the result, failed).
[96] The practical effect of eliminating the 9 July 2004 to 9 August 2004 period from the costs awarded to Junior Farms, was that Junior Farms received no costs for trial preparation which, in terms of the High Court Rules, Mr Bryers said amounted to $38,425. The effect of reducing the costs award against Accent to 50 percent of the trial period was to reduce the costs claim by a further $8,700 (being six days at $1,450 per day). All in all, the Judge’s rulings reduced Junior Farms’ entitlement to costs by a total of $47,125.
[97] Mr Bryers’ fundamental submissions were that Accent should be liable for costs for Junior Farms’ trial preparation (indeed he said that Accent should be liable for full trial costs), and that the Judge erred in limiting the costs to 50 percent of the trial costs, because Junior Farms was required to pay the full trial costs of both successful defendants.
[98] Junior Farms also sought orders requiring Hampton/Accent to indemnify it in respect of any costs it was required to pay to Mr Stenning and Yolland Gubb. This raised the issue of whether a "Bullock order" (see Bullock v London General Omnibus Co [1907] 1 KB 264) or a "Sanderson order" (see Sanderson v Blyth Theatre Co [1903] 2 QB 533) ought to be made. In that respect Heath J referred to the decision of this Court in Lane Group Limited v D I & L Paterson Limited [2000] 1 NZLR 129, and on the basis of the reasoning of the majority in that case (Henry and Tipping JJ), concluded that neither Hampton nor Accent ought to contribute to the costs that Junior Farms was liable to pay in respect of the other defendants.
[99] Accent supported the Judge’s views. It also argued that the proposition that there should be full preparation costs was in reality an application for non-party costs. Counsel said that merely because that party was granted leave to intervene on the morning of trial should not thereby have made the intervenor retrospectively liable as a non-party.
[100] Accent also cross-appealed against the quantum of costs awarded, and submitted that the Registrar, in fixing disbursements, wrongly debited all of the disbursements against Accent for the whole trial. Disbursements, it is said, should have been proportionate to what was utilised for the hearing time.
[101] As Mr Bryers rightly recognised from the outset, these sort of disputes are not fertile ground for appellate intervention. It has to be shown that there was a distinct error of principle, or that the Judge was plainly wrong, before this Court will intervene.
[102] We consider the Judge did err in principle with respect to the limitation of trial costs awarded to Junior Farms as against Accent.
[103] On the facts, Accent owned and controlled Hampton and had allowed Hampton to be placed in liquidation; Accent intervened to defend Hampton’s case for its own benefit (so that distributions would not be challenged by the liquidators); and Accent was granted leave to intervene on the express basis that there would not be any prejudice to Junior Farms.
[104] As to the law, the Judge would have been assisted by the decision of the Judicial Committee of the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No. 2) [2005] 1 NZLR 145 which was delivered on 21 July 2004 (although it was not reported until some time later). That authority was not apparently referred to His Honour; indeed it was not included in the submissions made by counsel to this Court. The Judicial Committee, which comprised Lord Nicholls of Birkenhead, Lord Hutton, Lord Roger of Earlsferry, Lord Brown of Eaton-under-Heywood and Elias CJ, held that justice requires that a non-party which not merely funds, but substantially also controls or at least stands to benefit from litigation, should pay the successful parties’ costs if the litigation failed. And generally speaking, a non-party which promotes and funds litigation by an insolvent company for its own financial benefit, should be liable for costs if the litigation fails.
[105] That authority therefore affords very distinct support for the argument which Mr Bryers put to this Court.
[106] With respect to the period down to the date of liquidation (9 July 2004) Accent and Hampton will be jointly and severally liable for costs on a 2B basis. They will also be jointly and severally liable for reasonable disbursements in that period relating to the proceeding against Hampton. Thos disbursements are to be fixed by the registrar in the event of dispute. The costs will also include item 8 (preparation). The preparation allowance should be 14 days.
[107] The trial itself took 14 days. Heath J considered that the claim against Hampton occupied approximately half the time. He therefore thought that, so far as trial is concerned, Junior Farms should recover from Hampton/Accent seven days’ trial time. Since preparation is calculated on a "twice trial" basis, that means the allowance for preparation should be 7 x 2 equals 14 days. We see no reason to depart from Heath J’s assessment as the trial judge that approximately half the time was spent on this matter and the other half on matters which Junior Farms lost on. For the period after 9 July 2004, we do not think there should be any change to what Heath J ordered.
[108] As to the issue of indemnification of Junior Farms’ liability for costs from Hampton and Accent, no error of principle has been demonstrated. The Judge’s rulings in this respect were essentially discretionary. The Judge was particularly well placed, having sat through this convoluted proceeding, as well as having been involved in the procedural wrangling prior to the trial, to assess the justice of this situation. In broad terms, Junior Farms sued a number of parties. In the end it succeeded only against Hampton/Accent. The Judge was persuaded that neither Hampton nor Accent ought to contribute to the costs that Junior Farms was obliged to pay to Yolland Gubb or Mr Stenning, as a result of those claims failing. As Heath J said, "The factual allegations made against both Yolland Gubb and Mr Stenning were not proved in evidence." It is sufficient to dispose of this appeal point to say that it has not been shown that the Judge was plainly wrong.

Conclusion

[109] In the result, by way of short summary:
1. The claim by Junior Farms for an increased sum on account of livestock is dismissed.
2. Junior Farms is however entitled to pre-judgment interest in the sums set out in this judgment.
3. Trial costs are awarded against Hampton/Accent in the sums indicated in this judgment.
4. All other appeal and cross-appeal points are dismissed, including the claim to "indemnification" by Junior Farms from Hampton/Accent against the costs in the proceedings against Mr Stenning and Yolland Gubb.

Costs on the appeal

[110] In this Court, Junior Farms has been partially successful. It will have costs of $5,000, together with usual disbursements, against the fifth respondent. We certify for second counsel.

Solicitors:
Martelli McKegg Wells & Cormack, Auckland for Appellant
Bell Gully, Auckland for First and Fourth Respondents
Whaley & Garnett, Auckland for Second Respondent
McElroys, Auckland for Third Respondent
Wynyard Wood, Auckland for Fifth Respondent

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URL: http://www.nzlii.org/nz/cases/NZCA/2006/66.html

[1]	This case arose out of certain conveyancing transactions in South Auckland. Essentially, it involves the ascertainment of the terms of the relevant agreements for sale and purchase. Given the nature of the case, and the number of parties involved in the proceeding, a number of costs issues have also arisen.
[2]	We have before us two appeals against judgments of Heath J in the High Court at Auckland in this proceeding (CP240-SD99) delivered on 15 September 2004 and 19 November 2004.
[3]	We will refer to the judgment of 15 September 2004 as the "liability judgment". It held that:

	It was reasonable and proper for Junior Farms, in the circumstances of the case, to join Mr Stenning and Yolland Gubb as parties;
	The justice of the case required Hampton/Accent to pay or contribute to the costs of the successful defendants;
	There were no reasons to disqualify the plaintiff from seeking contribution or indemnity from the unsuccessful defendants in respect of the costs of the successful defendants.

[6]	Accent (for itself and Hampton) has cross-appealed against any liability assessed against Hampton; and against the costs order made against Accent.
[7]	The cross appeal as to liability turns substantially on the effect of a letter prepared by the parties themselves, and an estoppel argument.
[8]	There is also a cross appeal against some aspects of the costs decisions.

[9]	This proceeding involved claims against multiple parties. The proceeding occupied 14 days of High Court hearing time, with a consequential volume of evidence. Along with the direct claims, there was a collateral claim against a firm of Auckland solicitors alleging negligence in the way that firm conducted itself in relation to the relevant conveyancing transactions.
[10]	Junior Farms’ concern on the appeal is with quantum, and what it regards as the unjust costs position arising on the proceedings. However, by the cross appeal, Accent has thrown open the liability question again, as well as raising costs issues. That makes it necessary to outline, with as much brevity as can be mustered in the circumstances, the convoluted nature of the transactions which gave rise to the various claims.
[11]	In 1994 Junior Farms owned land ("the land") on the northern side of Ormiston Road, East Tamaki, Auckland. The land was approximately 35.6122 hectares in area. We say approximately because both certificates of title comprising the land were limited as to parcels. Further, the boundary of the land was in part a riverbank and it was considered unlikely that the riverbank was still exactly on the course it was when the certificates of title were issued. The land was zoned rural. The Otara Stream flows through the northern part of the land.
[12]	In 1990 the local authority, Manukau City Council, zoned 20 hectares (or approximately 50 acres) of the land fronting on to Ormiston Road as Industrial 1. That is a light industrial zoning.
[13]	The remaining portion of the land at the rear of the land (as one looks from Ormiston Road) was designated for a flood protection scheme which the Manukau City Council wanted to develop in relation to the Otara Stream.
[14]	Mr Stenning was the principal of Cavendish. He knew Mr Plumley, the principal of Junior Farms. These men had some prior dealings dating back to the early 1970s.
[15]	Mr Stenning contacted Mr Plumley in July of 1994 and indicated that he had a prospective purchaser for the whole of Junior Farms’ land. There was undoubtedly a meeting between the men, although there was a distinct dispute at trial as to what was then said. On any view it was clear that there was a discussion of the terms of a possible sale of the land.
[16]	Mr Stenning gave evidence that Cavendish was engaged as Junior Farms’ agent for the purpose of effecting the sale of the property to the "Verrisimo Group". This was a group of companies including Accent, Hampton, and Lexington Resources Limited (Lexington).
[17]	The prospective purchasers had themselves entered into discussions with "Foodlands", the Australian parent of Farmers/Deka Ltd (a New Zealand company). Underlying these discussions was the notion that the Ormiston Road property might be suitable for a distribution and support centre that Farmers/Deka Ltd wished to develop.
[18]	A conditional agreement for sale and purchase was prepared in August 1994, recording the sale of just over 37 hectares of land. Accent "or nominee" was noted as the purchaser. The contract was conditional upon Accent approving the contract before 11 November 1994.
[19]	There was a dispute at trial as to the substance of the negotiations that followed the signing of this agreement, but it is common ground that two new agreements were then entered into.
[20]	By the first, Junior Farms was to transfer the land to Hampton for $2,681,000. Then, once the subdivision had been effected and the floodplain land had been put on its own title, the floodplain land was to be transferred back to Junior Farms. Junior Farms was then to negotiate the sale of that land to Manukau City Council. The purchase price for the first transaction reflected the value of the land with which Hampton would eventually end up, namely the total area less the floodplain land. For that reason, the second agreement provided for only a nominal consideration.
[21]	On 10 October 1994, two agreements for sale and purchase of land, mirroring those of the Lexington agreements, were entered into between Lexington and Farmers/Deka Limited. Farmers/Deka Limited was prepared to pay Lexington $4 million for the "industrial" land. Heath J considered it was quite clear that Farmers/Deka Limited knew of the arrangements between Lexington and Junior Farms, because of the nature of the buy-back agreement. But neither Mr Stenning nor Mr Plumley knew of the existence of these agreements at that time.
[22]	Around the end of October 1994, Mr Stenning told Mr Plumley that the purchaser of the land wanted to make a new offer, beneficial to Junior Farms in that it was now an unconditional cash deal, to be settled by 15 December 1994. Mr Plumley signed these agreements on behalf of Junior Farms without taking legal advice. The purchaser on these agreements was Hampton.
[23]	The first agreement was dated 9 November 1994. Under this agreement, Junior Farms was obliged to the requisite areas of land in CT755/164 and CT766/11 in consideration of a sum of $2,679,000 on settlement (which was to occur on or before 15 December 1994).
[24]	The second agreement, dated the following day, was due for settlement "on or before 1 June 1999 at the absolute unfettered option" of Junior Farms. Upon settlement, Junior Farms was obliged to pay Hampton the sum of $100, and Hampton was to convey to Junior Farms the appropriate parcel of land. The precise boundaries of that area were not known. The reason the price dropped by $2,000 is that that had been the deposit paid under the earlier agreement referred to at [20].
[25]	The amount of land being sold under the 9 November agreement was unknown but as best could then be judged was 35.6122 hectares.
[26]	It was Junior Farms’ case at trial that the intention of these agreements was that the 50 acres zoned Industrial 1 would be sold to Hampton, on the basis that Hampton would then carry out a subdivision of the land, and thereafter return all land in excess of 50 acres to Junior Farms.
[27]	Hampton’s case, on the other hand, was that the intention was to subdivide off the flood protection area only, once the boundaries had been established, and return that portion of the land to Junior Farms.
[28]	Heath J took the view, on the evidence before him, that the following chain of events was contemplated. First, Hampton would purchase "the whole of the land specified in the first November 1994 agreement and pay to Junior Farms the sum of $2,679,000." A subdivision of the land would then occur, forming two lots, "one comprising the area edged green on the plan attached to the second November 1994 agreement and the other being the bounds of the land acquired by Hampton". As a result of this subdivision, separate certificates of title would be issued, and Junior Farms would be in a position to settle the purchase of "the land edged green in the second November 1994 agreement", by paying $100 to Hampton.
[29]	The Judge was also satisfied that "both Hampton and Junior Farms anticipated, when the November 1994 agreements were signed, that the land edged green on the plan attached to the second November 1994 agreement was land required for flood protection purposes by the Council". The Judge found as a fact that "approximately 50 acres of the land to be transferred to Hampton under the first November 1994 agreement was land zoned for industrial purposes by the Council. As a matter of arithmetic, that meant the floodplain land was estimated to be about 38 acres".
[30]	The nub of the problem created by these agreements was described by Heath J in the following terms:

[31]	At some time after these agreements were executed, but before 11 November 1994, Hampton’s in-house solicitor, following discussions with Mr Stenning, prepared a letter that recorded what the Judge found to be "additional contractual terms on a subject on which the two November agreements were silent".
[32]	This letter (which we will call the "Hampton" letter) said:

1.	The final purchase price for the land in the agreement between JFL and HSL ("Agreement") will be calculated at $12.50 per metre. It is understood that there is approximately 50 acres.
2.	Upon the Manukau City Council finalising the area of the flood plain it wishes to purchase, the boundaries and land size of the land subject to the Agreement may be defined. The final purchase price for the land can then be calculated in accordance with the formula detailed in paragraph 1 above.
3.	The price for the dairy cows will be set as per clauses 15.1 and 15.2 of the Agreement.

[33]	This letter was signed by Mr Verrisimo on behalf of Hampton, and counter-signed by Junior Farms.
[34]	Junior Farms argued that the effect of this letter was to provide it with an option: either 38 acres could be demanded back pursuant to what was contended to be the actual agreement reached or, in the event that the area representing the difference between the 38 acres and the floodplain area could not be sold, it could require Hampton to buy it under the terms of the letter.
[35]	Junior Farms’ case therefore rested on what the Judge described as "the proposition that while the second November 1994 agreement refers expressly to 14 hectares ‘a little more or less’ the parties actually intended that area to comprise 38 acres and that the contract should be rectified accordingly. The alternative contention is that there remained, as a matter of contract as between Junior Farms and Hampton, a right to require re-conveyance of the 14 hectares mentioned in the agreement or for compensation to be sought under the terms of the [Hampton] letter."
[36]	The construction of the November agreements, and the relevance of the Hampton letter were the central issues at trial.
[37]	Settlement was completed on 15 December 1994. The requisite monies were paid over, and the land was transferred to Hampton.
[38]	Hampton duly settled the agreement for sale and purchase it had made with Carters. A caveat protecting Junior Farms’ interests under the buy-back agreement was registered following this transfer.
[39]	Mr Plumley’s solicitor, a Mr Gubb, was aware that this transaction was to take place, but Mr Plumley was not.
[40]	After these settlements had taken place, negotiations between Junior Farms and the local authority relating to the floodplain land commenced. During these negotiations it became apparent that there was an issue as to whether the November 1994 agreements accurately reflected Mr Plumley’s understanding of the buy-back agreement.
[41]	On 26 June 1998 Carters advised that new titles had been issued, and that the transfer of lots 2 and 3 back to Hampton could take place. Junior Farms was asked to withdraw its caveat against lot 1.
[42]	On 7 July 1998 Mr Plumley met with Mr Gubb and a barrister instructed for the local authority. At that meeting it became clear that only 13.0695 hectares were to be reconveyed to Junior Farms. This was less than Mr Plumley had expected.
[43]	Junior Farms then took the position that it had sold only 50 acres of land, and that compensation should be paid for any land retained over that figure. Hampton denied that any compensation was payable, and Carters took the position that its obligation was limited to transferring the flood protection land back to Hampton.
[44]	There was then litigation in the High Court relating to the caveat, but in January 1999 the reconveyance of land was effected on the terms proposed in June of 1998. This was without prejudice to Junior Farms’ claim in respect of land in excess of 50 acres.
[45]	In the event, Junior Farms elected to sue every person who was connected in some way with these transactions. The proceeding was brought against Cavendish, the law firm of Yolland Gubb, Hampton, Carters, the Manukau City Council, and Penney Patel, a law firm with which Mr Roussell, Junior Farms’ one-time legal advisor, had a loose association.
[46]	Various causes of action were pleaded, including negligence and breach of retainer against Junior Farms’ former legal advisors.
[47]	Carters successfully applied for the claim against that firm to be struck out. A settlement was reached with the City Council and Penney Patel before trial, but the causes of action against all remaining defendants proceeded to trial.
[48]	Prior to the commencement of the trial, both Cavendish and Hampton were placed in liquidation. Leave was granted for the proceeding to continue, notwithstanding this event. Accent, one of Hampton’s shareholders, was granted intervenor status in the proceedings. In effect, Accent defended the proceeding on Hampton’s behalf.

[49]	The liability issues before us can conveniently be grouped under three heads:
	what were the relevant contractual terms between the parties; in particular, was the Hampton letter part of the contract terms?
	what is the proper construction to be put on those terms?
	what are the consequences which flow from the contract, as so construed?

[50]	There is no doubt as to the existence of, and the terms contained in, the two November agreements. They are in writing and duly executed, as indeed they had to be for the purposes of the Contracts Enforcement Act 1956.
[51]	The issue here is simply whether the Hampton letter is part of the agreed contractual terms. In the result, and somewhat grudgingly before us, Mr Koppens conceded that must be so. We could therefore pass directly to the next issue. But the dispute over this issue illustrates what has been a constant difficulty in this case: the endeavours by both parties to put a gloss of their own on the formula they had both agreed to.
[52]	The Judge found that, while the boundaries of the area to be bought back were unknown and incapable of definition, it was "clear that the parties had agreed that the land to be re-conveyed was situated within Certificate of Title 755/164 in the area indicatively edged green on the plan attached to the agreement. That area lay to the far north of the property being sold; not contiguous to Ormiston Road".
[53]	Since the Hampton letter is so central to the Judge’s findings, it is appropriate to reproduce the Judge’s discussion on this point, in full:

[55]	Significantly, the Judge then indicated that both parties were now endeavouring (to use a colloquial term) to put their own "spin" on this letter. As he said, Hampton was endeavouring to assert that the letter really meant nothing - that it was an unenforceable document, which was only some sort of gratuitous letter of comfort. On the other hand, Mr Plumley was now seeking to say that the letter applied only to minor changes to the boundaries. This was an endeavour to preserve Junior Farms’ suggestion that it was entitled to land, rather than compensation.
[56]	The Judge, rightly, would have none of this. As he saw it, it was common ground that there was a problem with the agreement in that the land to be acquired by the Council for floodplain purposes might be more or less than that which had been estimated in the 9 November 1994 agreement. For better or worse, the parties had endeavoured to solve that problem, and they did so by what was actually provided in the letter of 11 November.
[57]	The Judge said:

[60]	It is not necessary, in this case, to revisit the vexed question of how the meaning of a contractual term or terms are to be approached. The law sets out to give effect to what Lord Steyn has described as the reasonable expectations of honest people ("Contract Law: Fulfilling the Reasonable Expectations of Honest Men" (1997) 113 LQR 433). The consequence is, as Lord Nicholls of Birkenhead has recently suggested, "The question posed by the law when interpreting a contract is thus : what would a reasonable person in the position of the parties understand was the meaning the words were intended to convey?" ("My Kingdom for a Horse : the Meaning of Words" (2005) 121 LQR 577 at 579).
[61]	As Heath J said, it is extremely difficult to see how Junior Farms could contend that land was to be returned in specie in face of the precise letter signed by it.
[62]	Mr Koppens contended that either the agreement was for a sale of a net area of 50 acres, giving Hampton an obligation to transfer back 38 acres; or, Hampton was to transfer back only the floodplain area and to pay Junior Farms an additional $12.50 per square metre for anything over 50 acres (the collateral letter option). He submitted that Junior Farms could not have it both ways.
[63]	In the somewhat murky circumstances of this case, it was entirely appropriate for the Judge to proceed as he did, in holding that the Hampton letter as executed by the parties suggested a perfectly rational solution to a known problem which could arise under the November agreement; and that the plain meaning of the document was entirely consistent with the "commercial imperatives", as the Judge called them, faced by the parties. It would have been unfair for Junior Farms to be left with a shortfall in land; it did make sense for compensation to be assessed by reference to a calculation based on the purchase price for industrial, rather than floodplain, land; and uncertainty would have been created between the parties without that sort of solution.
[64]	We cannot say that the Judge was plainly wrong, as to the view he took of the construction of the contract terms, indeed, we think he was correct.
[65]	Given this conclusion, it is not necessary for us to address various other arguments which were advanced in the course of this case. A claim for rectification of the agreement was made at trial, but was rejected by the trial Judge, and not pursued further before us. A claim under the Contractual Mistakes Act 1977 met the same fate. Mr Koppens raised an estoppel argument which was not at all easy to follow, but which in any event foundered at the outset. This was because, once the Hampton letter was accepted as being a contractual term, what he was endeavouring to set up was plainly contradicted by the terms of the letter itself.
[66]	In the end, the argument for Accent was nothing more nor less than an argument that the letter did not say what it plainly did say. To put it even more simply, this is a case in which both parties are bound by the terms of the letter to which they expressly assented. Neither party can now say it really meant something else.

[69]	By way of summary on the liability issues, the Judge was correct as to his findings on the terms of the agreement; the construction to be put upon those terms; and the consequences which flowed therefrom.
[70]	The next question is whether the compensation to be paid did not go far enough. We now turn to that issue.

[71]	Junior Farms’ concern here can be shortly put. The Judge’s calculation of the purchase price was made on the basis that it was for "the land", resulting in a figure of $138,850 calculated as we have noted (see the judgment, [206] at [68], above).
[72]	Mr Bryers, for the appellant, submitted that the Judge overlooked the evidence as to how the purchase price of $2,679,000 had been calculated. He argued before us that the price was not just for "the land", but also included an amount for livestock and plant, which has not been accounted for.
[73]	Clause 15 of the relevant agreement provided:

[77]	If the argument is correct it follows that a judgment sum of $288,563 should be substituted for the sum of $138,850 awarded by the Judge.
[78]	The argument, initially, has some attraction because the evidence Mr Bryers pointed to may be seen as being consistent with a "separate" (and unaccounted for) figure, as it were, for the livestock. Indeed, at the hearing we were initially attracted to the argument which was run. On further reflection however, we think the argument is not sound.
[79]	Mr Bryers’ argument suffers from several difficulties. First, there is no evidence that there was an allowance for plant and chattels of $9,713.00. Secondly, there is no evidence that Mr Verissimo was ever thinking in acres. Thirdly, and most importantly, it cannot have been the parties’ intention that, if the area being transferred ended up being exactly as anticipated from looking at the titles and calculating the floodplain area, Mr Verissimo would end up paying an extra $140,000, which is the effect of Mr Bryers’ argument. The Hampton letter was surely intended to be neutral if the exact land area turned out to be as anticipated.
[80]	It seems to us that the relevant calculations are as follows:

[81]	The conclusion that the Judge’s figure was correct can be reached by another route. What matters is what the parties agreed. As we have already noted in this judgment, what they therefore thought and did is of no moment on this issue. In other words, it is an error to proceed, at least in this case, on the basis of the subsequent conduct of the parties (which was in any event somewhat equivocal). What has to be looked at is their agreed expectations, in the sense we set out in [60].
[82]	The relevant documents here are clause 15 of the agreement ([73] above), and the Hampton letter ([32] above). The two documents have to be read together. The figure of $2,679,000 in clause 15 was, on it face, for a global figure (ie, for both land and livestock). What the Hampton letter did was to provide for adjustments for "unders and overs" for both land and livestock.
[83]	The argument for the appellants begins and ends at that point. Livestock were not "left out of the account", as it were, from the transaction; that livestock was always part of the initial global sum. The endeavour to set up another figure, on the basis of later events - particularly the correspondence with the IRD - is incorrect. The fact that some portion of the price had subsequently to be allocated to livestock is a consequence of the taxation law, and is not what the parties reduced to the terms of their written transaction.
[84]	Even if Mr Plumley (and his agent) genuinely held the view that livestock was an "extra" sum, to again revert to the views expressed by their Lordships in [60] above, it is how the reasonable person in the position of the parties would see things that matters. On that test, the Hampton letter was dealing with a perfectly obvious problem: unders and overs in respect of land and livestock. The position here therefore is precisely the same as the dispute over the land; Mr Plumley cannot subsequently seek to superimpose as it were, some other figure over their recorded arrangement.
[85]	We are unanimous that this head of appeal cannot succeed. It is dismissed.

[86]	By its statement of claim, Junior Farms claimed interest on whatever sum was due to it. No challenge to that claim was made at trial, but the Judge declined to award pre-judgment interest at all.
[87]	The only reason for that ruling appears at [207] of the Judge’s decision. He said:

[88]	Mr Bryers said that the effect of the ruling is that Junior Farms gets no compensation for the time it has been out of its money, which we have confirmed in a sum of $138,850. Conversely, Hampton/Accent has received a windfall through having had the use of that money, interest free, for a period of over six years.
[89]	The principles relating to pre-judgment interest are well established in New Zealand (see Day v Mead [1987] 2 NZLR 443 at 463). We see no reason why they should not obtain here. In short, Junior Farms should be compensated for the loss of use of the money to which it was rightfully entitled.
[90]	Accordingly, Hampton Securities Limited (In Liquidation) must pay to Junior Farms interest on $138,850.00 at 11 percent per annum from 15 December 1998 down to 31 July 2002, and at 7.5% from 1 August 2002 down to 15 September 2004. Those were the maximum sums permissible at those dates under s 87 of the Judicature Act 1908. We take this course because the late settlement rate in the agreement was 12%; by analogy we should be generous in this instance.

[91]	Mr Bryers submitted that the overall costs awards made by Heath J were unjust and inconsistent. Excluding for the moment disbursements and witness’ expenses, Junior Farms was awarded costs of $39,740 in total against the unsuccessful defendants, Hampton and Accent ($27,415 and $12,325 respectively), but it was required to pay costs of the successful defendants of $58,165 (Stenning), and $104,517.50 (Yolland Gubb), a total of $162,742.50.
[92]	The essential reasons for the discrepancy between the costs awarded to Junior Farms against Hampton/Accent and the costs award against Junior Farms in favour of the successful defendants were Heath J’s rulings that:
	Hampton was liable for costs only up to 9 July 2004 (the date of liquidation) and that Accent was only liable for trial costs, and then for only 50 percent of those costs;
	Junior Farms had to pay the full costs of the successful defendants, and Yolland Gubb was entitled to an uplift on costs, as a result of a Calderbank letter.
[93]	Junior Farms does not challenge the second of these rulings. The effect of the Calderbank letter ruling was to increase the costs awarded to Yolland Gubb by $16,747.50.
[94]	Mr Bryers submitted however that the Judge was wrong to limit Accent’s liability to 50 percent of trial costs. He responsibly acknowledged the reluctance of an appellate court to interfere with costs awards (see Glaister v Amalgamated Dairies Limited [2004] 2 NZLR 606 (CA)). However he said that, in some respects, in this case the Judge had made errors of principle or was plainly wrong.
[95]	The Judge had mixed reasons for limiting Accent’s liability to 50 percent of trial costs. First, he thought Accent ought not to be liable for costs incurred prior to the date on which it sought and obtained leave to intervene. Secondly, it appears that, as a matter of assessment, he thought that most of the evidence at the hearing "was devoted to Junior Farms’ claims against Yolland Gubb" (which, in the result, failed).
[96]	The practical effect of eliminating the 9 July 2004 to 9 August 2004 period from the costs awarded to Junior Farms, was that Junior Farms received no costs for trial preparation which, in terms of the High Court Rules, Mr Bryers said amounted to $38,425. The effect of reducing the costs award against Accent to 50 percent of the trial period was to reduce the costs claim by a further $8,700 (being six days at $1,450 per day). All in all, the Judge’s rulings reduced Junior Farms’ entitlement to costs by a total of $47,125.
[97]	Mr Bryers’ fundamental submissions were that Accent should be liable for costs for Junior Farms’ trial preparation (indeed he said that Accent should be liable for full trial costs), and that the Judge erred in limiting the costs to 50 percent of the trial costs, because Junior Farms was required to pay the full trial costs of both successful defendants.
[98]	Junior Farms also sought orders requiring Hampton/Accent to indemnify it in respect of any costs it was required to pay to Mr Stenning and Yolland Gubb. This raised the issue of whether a "Bullock order" (see Bullock v London General Omnibus Co [1907] 1 KB 264) or a "Sanderson order" (see Sanderson v Blyth Theatre Co [1903] 2 QB 533) ought to be made. In that respect Heath J referred to the decision of this Court in Lane Group Limited v D I & L Paterson Limited [2000] 1 NZLR 129, and on the basis of the reasoning of the majority in that case (Henry and Tipping JJ), concluded that neither Hampton nor Accent ought to contribute to the costs that Junior Farms was liable to pay in respect of the other defendants.
[99]	Accent supported the Judge’s views. It also argued that the proposition that there should be full preparation costs was in reality an application for non-party costs. Counsel said that merely because that party was granted leave to intervene on the morning of trial should not thereby have made the intervenor retrospectively liable as a non-party.
[100]	Accent also cross-appealed against the quantum of costs awarded, and submitted that the Registrar, in fixing disbursements, wrongly debited all of the disbursements against Accent for the whole trial. Disbursements, it is said, should have been proportionate to what was utilised for the hearing time.
[101]	As Mr Bryers rightly recognised from the outset, these sort of disputes are not fertile ground for appellate intervention. It has to be shown that there was a distinct error of principle, or that the Judge was plainly wrong, before this Court will intervene.
[102]	We consider the Judge did err in principle with respect to the limitation of trial costs awarded to Junior Farms as against Accent.
[103]	On the facts, Accent owned and controlled Hampton and had allowed Hampton to be placed in liquidation; Accent intervened to defend Hampton’s case for its own benefit (so that distributions would not be challenged by the liquidators); and Accent was granted leave to intervene on the express basis that there would not be any prejudice to Junior Farms.
[104]	As to the law, the Judge would have been assisted by the decision of the Judicial Committee of the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No. 2) [2005] 1 NZLR 145 which was delivered on 21 July 2004 (although it was not reported until some time later). That authority was not apparently referred to His Honour; indeed it was not included in the submissions made by counsel to this Court. The Judicial Committee, which comprised Lord Nicholls of Birkenhead, Lord Hutton, Lord Roger of Earlsferry, Lord Brown of Eaton-under-Heywood and Elias CJ, held that justice requires that a non-party which not merely funds, but substantially also controls or at least stands to benefit from litigation, should pay the successful parties’ costs if the litigation failed. And generally speaking, a non-party which promotes and funds litigation by an insolvent company for its own financial benefit, should be liable for costs if the litigation fails.
[105]	That authority therefore affords very distinct support for the argument which Mr Bryers put to this Court.
[106]	With respect to the period down to the date of liquidation (9 July 2004) Accent and Hampton will be jointly and severally liable for costs on a 2B basis. They will also be jointly and severally liable for reasonable disbursements in that period relating to the proceeding against Hampton. Thos disbursements are to be fixed by the registrar in the event of dispute. The costs will also include item 8 (preparation). The preparation allowance should be 14 days.
[107]	The trial itself took 14 days. Heath J considered that the claim against Hampton occupied approximately half the time. He therefore thought that, so far as trial is concerned, Junior Farms should recover from Hampton/Accent seven days’ trial time. Since preparation is calculated on a "twice trial" basis, that means the allowance for preparation should be 7 x 2 equals 14 days. We see no reason to depart from Heath J’s assessment as the trial judge that approximately half the time was spent on this matter and the other half on matters which Junior Farms lost on. For the period after 9 July 2004, we do not think there should be any change to what Heath J ordered.
[108]	As to the issue of indemnification of Junior Farms’ liability for costs from Hampton and Accent, no error of principle has been demonstrated. The Judge’s rulings in this respect were essentially discretionary. The Judge was particularly well placed, having sat through this convoluted proceeding, as well as having been involved in the procedural wrangling prior to the trial, to assess the justice of this situation. In broad terms, Junior Farms sued a number of parties. In the end it succeeded only against Hampton/Accent. The Judge was persuaded that neither Hampton nor Accent ought to contribute to the costs that Junior Farms was obliged to pay to Yolland Gubb or Mr Stenning, as a result of those claims failing. As Heath J said, "The factual allegations made against both Yolland Gubb and Mr Stenning were not proved in evidence." It is sufficient to dispose of this appeal point to say that it has not been shown that the Judge was plainly wrong.

[109]	In the result, by way of short summary:
1.	The claim by Junior Farms for an increased sum on account of livestock is dismissed.
2.	Junior Farms is however entitled to pre-judgment interest in the sums set out in this judgment.
3.	Trial costs are awarded against Hampton/Accent in the sums indicated in this judgment.
4.	All other appeal and cross-appeal points are dismissed, including the claim to "indemnification" by Junior Farms from Hampton/Accent against the costs in the proceedings against Mr Stenning and Yolland Gubb.