Singh v Rutherford [2013] NZHC 1276 (31 May 2013)

Last Updated: 10 June 2013

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-005301 [2013] NZHC 1276

IN THE MATTER OF an appeal against the decision of the

District Court at Manukau

BETWEEN GURPREET SINGH and MEENA SINGH Appellants

AND GLENN DOUGLAS RUTHERFORD and

WENDY KAREN JOLLY Respondents

Hearing: 6 December 2012

[Further Submissions Received on 1 February 2013]

Counsel: D M O'Neill for the Appellants

M R T Colthart for the Respondents

Judgment: 31 May 2013

_{JUDGMENT OF DUFFY J}

This judgment was delivered by Justice Duffy on 31 May 2013 at 3.00 pm, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Counsel: D M O’Neill, Hamilton

_{M R T Colthart, Auckland}

SINGH v RUTHERFORD and ANOR [2013] NZHC 1276 [31 May 2013]

[1] This is the second round in this Court of what has come to be a protracted legal dispute. Mr and Mrs Singh, who were the plaintiffs in the lower Court and the appellants in this Court, brought a claim in contract for breach of warranty. The original amount of their loss came to approximately $213,000, which placed the claim within the original jurisdiction of this Court. They elected to discount the claim to $200,000 in order to bring it in the District Court. Following a defended hearing on 27 and 28 June 2011, on 29 August 2011 Judge Andrée Wiltens gave judgment finding that there had been a breach of warranty but that the Singhs were “disentitled” to make a successful claim for this breach because of their inadequate

performance of due diligence.1 On appeal to this Court, on 9 March 2012 Wylie J

found that the Singhs could rely on the breach of warranty, irrespective of their performance of due diligence, and so the appeal was allowed.2 Because Wylie J did not have sufficient materials before him to make findings “as to causation and/or quantum”, he remitted the matter back to the District Court for it to consider “whether the damages claimed by the Singhs were caused in whole or in part by the breach of warranty and if so, what damages should flow to the Singhs” for this breach.3 After hearing from the parties on the causation/damages issue, on 9 August

2012 Judge Andrée Wiltens found that Singhs had not established that the losses they claimed had in fact been incurred.4 The Judge also found that Mr Singh had “pretty much got what he bargained for ...”.5

[2] The Singhs have returned to this Court to appeal the latest dismissal by the District Court of their claim. The issue for me to determine is whether, in view of the findings of Wylie J and the subsequent hearing in the District Court, it was open to Judge Andrée Wiltens to dismiss the Singhs’ claim for the reasons set out in the judgment of 9 August 2012, and if not, to determine if the Singhs are entitled to the

_{damages that they seek.}

1 Gurpreet and Meena Singh v Glenn Rutherford and Wendy Jolly DC Manukau CIV-2008-055-

_{0042, 29 August 2011 at [54].}

2 _{Singh v Rutherford & Anor [2012] NZHC 380 at [45].}

3 _{At [51].}

4 Gurpreet and Meena Singh v Glenn Rutherford and Wendy Jolly DC Manukau CIV-2008-055-

_{0042, 9 August 2012 at [45].}

5 At [48].

Background

[3] A full account of the factual background of this matter is set out in the judgment of Wylie J at [3]-[7]. In short, the Singhs purchased a kiwifruit and lemon orchard from the respondents. The sale and purchase agreement gave the Singhs a warranty as to the size of the fruit canopy. There was a clear difference between the warranted size as expressed in the sale and purchase agreement and the actual size:

_{Fruit Actual Canopy Size Warranted Canopy Size}

(a) Older kiwifruit plants

(b) Younger kiwifruit plants

_{(c) Lemon trees}

1.1525 canopy hectares

0.7682 canopy hectares

_{1.6 canopy hectares}

1.5 canopy hectares

0.9 canopy hectares

_{2.0 canopy hectares}

[4] The Singhs contend that the difference between the warranted sizes of fruit canopies and the actual sizes has meant that they have not been able to achieve the level of fruit production that they believed they could achieve from this orchard. They claim that over a 10 year period, starting from 2007 when they took possession of the orchard, there has been and will continue to be a loss of profit that in total will amount to the sum of $206,204 (production losses). This sum comprises a loss of

$107,810 for the lemons and a loss of $108,164 for the kiwifruit. They also claimed

$6,713.18 for costs incurred in mitigating their loss, being the steps they took to increase the actual fruit canopies. Because the total loss they claimed exceeded

$200,000, they reduced their claim to this amount to bring themselves within the

District Court’s jurisdiction.

Appellants’ evidence at the defended hearing

[5] The Singhs called a Ms Underwood, who is an expert in horticulture, including financial analysis and industry analysis, to calculate the financial impact of the orchard having a smaller area of production. At the time Ms Underwood gave her evidence, the difference between the actual and warranted sizes of the fruit canopies was still in issue; that is no longer the case and so this aspect of her evidence can now be passed over. She was given estimates from Mr Singh of the

amount of kiwifruit area he had been able to recover and the cost of doing so. She was also provided with production records for kiwifruit from 2004 to 2007 and some historical production figures for the lemon trees. Ms Underwood approached her task by: calculating the missing area of each crop (no longer in dispute); calculating the area to be recovered from the older kiwifruit and the costs of this mitigation; and calculating the quantity and value of production from the missing areas.

[6] Ms Underwood concluded that the Singhs had recovered 0.10 canopy hectares of canopy area for the older kiwifruit vines, which reduced the lost canopy area of these vines to 0.21 canopy hectares. The regained canopy area produced 90 per cent of its expected harvest in 2008 and 100 per cent for 2009; so by 2009, the benefits of the recovered area were being fully enjoyed. Ms Underwood concluded that there was no opportunity to recover the lost canopy areas for the lemon trees and younger kiwifruit vines.

[7] Regarding the calculation of production losses for the lemon trees, Ms Underwood said that because there is little industry data to show typical yields, she considered the most suitable data to use was the actual production data from the orchard. Here, she had production figures from the Singhs showing income earned from the lemon trees for a 24 month period from June 2007 to May 2009, which showed they had sold 37,456 kilograms of lemons per canopy hectare each year. She described these yields as being close to published indicative mature yields for lemons. Based on the actual production figures for this 24 month period, she calculated that the missing canopy hectares of lemon trees would have produced

12,735 kilograms, which she used as the figure to represent the quantity of lemons that were lost due to the fruit canopy size being less than was warranted. Ms Underwood then worked out the average income of $2.09 per kilograms that the Singhs had earned from the lemons over the 24 month period, deducted $1.17 per kilogram to allow for goods and services tax (GST), freight, crate hire, commissions and industry levies to produce a net income of $0.92 per kilograms of lemons. She said that as lemon income was closely guarded, she used informal information available to her to conclude that the figure she had reached was within the range. This led her to conclude that the value of the missing lemons (due to reduced fruit canopy size) was 12,735 kilograms per year at $0.92 per kilogram, which worked

out at $11,716 per year. From this, she deducted a figure to account for growing costs not incurred due to the fruit canopy size being less than warranted; she estimated this to be $935, being 0.34 canopy hectares at $2,750 per canopy hectare. When this figure was deducted from the estimated profit from the missing fruit canopy area, the result was a calculated income from the missing canopy area of

$10,781. Ms Underwood considered that this loss would recur for the expected lifespan of the lemon trees. She described the lemon trees as mature and opined that the lemon trees were in sound condition for their age. Therefore, with continued sound management, she thought that they would be able to continue at mature production levels for somewhere between 10 and 20 years plus. Hence, her calculation of $107,810 damages over a 10 year period.

[8] Regarding the calculation of production losses for the kiwifruit vines, Ms Underwood opined that the quantity of kiwifruit production lost as a result of the missing canopy area would vary over time, due to increase in production as the recovered area of older kiwifruit (the mitigated area) came into production and as the younger kiwifruit reached mature levels of production. She said that for both the older kiwifruit vines and the younger kiwifruit vines, historical yields from the orchard were the best indication of the yield foregone from the missing canopy area.

[9] Regarding the older kiwifruit vines, Ms Underwood used data from the historical yields from the orchard for the 2004 to 2009 kiwifruit harvest. She worked out that the average yield from these harvests was 8,715 class one trays of kiwifruit per canopy hectare. She considered that the range of yields over this period was good, by industry standards. In her calculations she allowed for the impact of the increasing production from the mitigated area, which began to take effect in the 2008 harvest and was fully effective by the 2009 harvest. Working from this average yield, she concluded that the lost production from the missing area of canopy hectares amounted to 2,731 class one trays. She made allowance for the gradual improved production from the mitigated areas. Her estimate was that in 2008 there would be 2,241 missing trays; in 2009 there would be 1,990 missing trays; and from then on, as the full benefit of the mitigation should have taken effect, from 2010 there would be 1,830 missing trays of kiwifruit per canopy hectare. She concluded that this quantity of kiwifruit would be missing each year onwards.

[10] Regarding the younger kiwifruit production, she noted that the young kiwifruit production began in 2008, which harvested at about 10 per cent of mature production levels, and this increased to 21 per cent at mature production in 2009. She then forecast these vines achieving 50 per cent of mature production in 2010; 75 per cent in 2011; and 100 per cent from 2012 onwards. She said this was consistent with expected performance of young vines in the kiwifruit industry, which reached mature production at around eight to nine years old. Her view was that for these young vines, the area of missing canopy was steady, but the quantity of lost production increased as the vines reached maturity. For the years 2008 and 2009, she used the orchard’s actual production for her estimate of losses. From 2010 onwards, she used the average mature production figure of 8,715 class one trays per canopy hectare as the level of mature production (this was the same figure as was used for the older kiwifruit vines). Taking the growing maturity of the vines into account, she estimated the missing production from younger kiwifruit, as a result of the missing canopy hectares, to be as follows: for the year 2007, zero missing trays;

2008, 83 missing trays; 2009, 158 missing trays; 2010, 349 missing trays; 2011, 523 missing trays; 2012, 697 missing trays; 2013 onwards, 697 missing trays.

[11] Ms Underwood referred to documents she had seen from the Singhs detailing income received from the 2007 and 2008 kiwifruit crops, and production details of the 2009 kiwifruit crop, which was harvested in late March 2009. She referred to the way in which kiwifruit income is paid out progressively from harvest until June of the following year, the way in which the fruit is marketed by Zespri International Limited on growers’ behalf, and other vagaries to do with the production and market conditions of kiwifruit. She described the payment system as complicated, with individual growers’ returns varying considerably according to payment of incentives such as for the time of harvest, fruit size and fruit taste. She said that average returns were publicly available for each crop. The Singh orchard had received higher than average revenue, which she attributed to earning high incentives for early harvest of fruit. She concluded that for the 2007 and 2008 harvests, the actual income earned over that period could be used to calculate the loss of earnings from the missing fruit canopy areas. From that income, Ms Underwood deducted 39 cents per tray as an estimated cost of picking, which she had sourced from a MAF Horticultural Monitoring Report. This led her to conclude that the Singhs had received $3.77 per

class one tray for their 2007 crop and $5.01 per class one tray for their 2008 crop. Her opinion was that returns for the 2009 crop were likely to be similar for the 2008 crop. She expected a slightly higher income because the 2009 crop characteristics she surmised would attract higher incentives. She estimated $5.15 per class one tray for the 2009 crop. For the future years after the 2009 crop, she took an average of five years’ historical income and the forecast 2009 crop income, which led her to a value of $4.90 per class one tray for kiwifruit. Adopting those figures, she concluded that the value of the missing trays of kiwifruit would be as follows: for the

2007 harvest, $3.77 actual; 2008, $5.01 actual; 2009, $5.15 forecast; 2010, $4.90 estimate; 2011, $4.90 estimate; 2012, $4.90 estimate; 2013 and onwards, $4.90 estimate. She also made allowance for growing costs not incurred due to the missing canopy area; she estimated these to be in the vicinity of $4,280 per canopy hectare of kiwifruit for the 2008 crop, and $5,695 per canopy hectare for the 2009 and future crops. She did not take the 2007 crop growing costs into account, as the Singhs had taken possession of the orchard after the seasonal growing costs for 2007 had been incurred. She summarised the kiwifruit net losses as follows:

Missing trays of kiwifruit

(Class 1 trays)

Year of harvest

Older kiwifruit

Younger kiwifruit

Total Value of missing trays of kiwifruit ($ per Class 1 tray)

Lost income

Mitigation
Spending

Production
Costs
Saved

Total Net Losses ($)

2007 2,731 0 2,731 $3.77 $10,295 $5,547 0 $15,842

2008 2,241 83 2,324 $5.01 $11,643 $1,284 $10,359

2009 1,990 158 2,148 $5.15 $11,062 $1,652 $ 9,410

2010 1,830 349 2,179 $4.90 $10,677 $1,652 $ 9,025

2011 1,830 523 2,353 $4.90 $11,529 $1,652 $ 9,878

_{2012 1,830 697 2,527 $4.90 $12,382 $1,652 $10,703}

2013 and onward

1,830 697 2,527 $4.90 $12,382 $1,652 $10,730

[12] These calculations led to her summarising the Singhs’ financial losses as

_follows:

Year Lemons

($)

Kiwifruit
($)

Annual total lemons and kiwifruit ($)

Accumulated loss
($)

2007 $ 10,781 $ 15,842 $ 26,623 $ 26,623

2008 $ 10,781 $ 10,359 $ 21,140 $ 47,763

2009 $ 10,781 $ 9,410 $ 20,191 $ 67,954

2010 $ 10,781 $ 9,025 $ 19,806 $ 87,760

2011 $ 10,781 $ 9,878 $ 20,659 $108,419

2012 $ 10,781 $ 10,730 $ 21,511 $129,930

2013 $ 10,781 $ 10,730 $ 21,511 $151,441

2014 $ 10,781 $ 10,730 $ 21,511 $172,952

2015 $ 10,781 $ 10,730 $ 21,511 $194,463

2016 $ 10,781 $ 10,730 $ 21,511 $215,974

Total for 10 years $107,810 $108,164 $215,974 $215,974

[13] Ms Underwood then did an investment analysis in which she opined that the losses from the missing canopy areas incurred since 2007 would continue indefinitely. Ms Underwood said that to estimate a current value of amounts that occur at different times, it was appropriate to use an investment analysis technique in which sums that had occurred in the past were increased because of their deferral to represent the value of the same sum in the present, whereas sums in the future were discounted to get a current value of the future sums, such as future losses from the Singh orchard. In her view, the losses began at the harvest in 2007 and as she was giving her evidence in 2011, she considered the four past years could off-set four of the future years. To give a present value to the future sums, she used the official cash rate set by the Reserve Bank as a discount rate. She noted that in the period from June 2007 to June 2011, the official cash rate had reached both its highest and lowest levels since its inception in March 1999. She took an average of around 4.8 per cent, which she used to discount future losses arising from the orchard having a smaller canopy area than warranted. She discounted the losses from year nine

onwards and added them to the unadjusted sum of the losses over the first 10 years to get an estimate of the amount of losses expressed in 2011 values. This led her to

_{conclude as follows:}

Period of losses

Unadjusted losses

Discount rate used from year 9 onwards

Estimated value of losses discounted to be expressed in
_{2011 values}

10 years to

2016

15 years to

2011

20 years to

2026

25 years to

₂₀₃₁

$215.974 4.8% $206,204

$323,529 4.8% $276,890

$431,084 4.8% $332,805

$538,639 4.8% $377,036

[14] Ms Underwood then made a general comment about the soundness of forecasting yields and prices for lemons and kiwifruit. She said that yields vary considerably between orchards and between seasons; past yields are a guide to future yields; and comparisons to industry figures also help to validate the yield assumptions. She said prices were relatively available for kiwifruit but less so for lemons. However, her opinion was that the yields and prices she had used in her calculations were realistic and she said, if anything, she had tried to be conservative in her approach to the damages issue. She described Mr Singh’s management of the orchard as sound, in her view; production of kiwifruit under his stewardship had increased by more than the contribution of the maturing young vines. She also noted that he had made improvements to the orchard.

Respondents’ evidence at the defended hearing

[15] The respondents called their own experts, who disputed parts of Ms Underwood’s evidence. Their evidence identified alleged failings on her part regarding the assumptions and contingencies to be taken into account when assessing loss of profit for a kiwifruit and lemon orchard.

[16] The respondents’ expert on lemons was a Mr Pyle. He accepted Ms Underwood’s estimates of a crop of 37,456 kilograms of lemons per hectare, with net returns of $0.92 per kilogram as being achievable. However, he was critical

of the cost of production figures that she had used. Ms Underwood had allowed for total growing costs of $2,750 per canopy hectare. She had then calculated that because of the reduced canopy area, the Singhs would have reduced growing costs of

$935. Mr Pyle was critical of Ms Underwood for not identifying the source from which she took the figure of $2,750 per hectare.

[17] Mr Pyle used as his figures those contained in a 2001 publication Growing Citrus in New Zealand. He said the figures were out of date but they were the best available. He estimated as follows: $2,800 for direct growing costs (not including variable picking and freight costs) for eight year old canopy hectares of lemons; variable costs of picking at $0.18 per kilogram and freight at $0.04 per kilogram. Mr Pyle concluded that Ms Underwood made no allowance for harvest costs. His estimate of these costs, worked out at 37,456 x $0.18, came to $6,742 per canopy hectare. When this figure was added to the $2,800 he used to cover direct growing costs, his overall estimate of growing costs per canopy hectare (excluding freight costs) came to $9,542 per canopy hectare, as opposed to Ms Underwood’s

$2,750 for costs of production. This in turn led Mr Pyle to estimate the figure for reduced costs from the reduced canopy size to be $3,244 and not the $935 adopted by Ms Underwood.

[18] Mr Pyle then opined that, although he had used published production costs from 2001 for eight year old trees, the better approach was to use the costs of production for a mature orchard, which would usually be 10 years old. Those costs he considered would be 10 per cent higher because the trees would be bigger. He referred to another publication (The Orchardist) that said costs for citrus orchards had increased by 3.52 per cent per annum over the period between 2004 and 2010. Taking these figures and using the year 2009, Mr Pyle estimated the growing costs not expended owing to the reduced canopy area would be $4,278.

[19] Mr Pyle then referred to an exercise he had done in February 2009 for one of the largest planters of lemon trees. The direct costs of production for mature canopy hectares came to $9,735. The variable costs of harvesting came to $0.265 per kilogram. Using these figures, he calculated that for a crop of 37,456 kilograms per canopy hectare, the harvesting costs would be $9,925. The overall costs, therefore,

would come to $19,661 per canopy hectare. This would mean the figure for growing costs not expended owing to the reduced canopy size would come to $6,685.

[20] Finally, Mr Pyle referred to his own lemon plantings. He said that for 2009, he had budgeted for fixed direct costs for a mature canopy hectare of $6,600. His variable costs of harvesting came to $0.34 per kilogram. Applying those figures to a crop of 37,456 kilograms, he calculated a harvesting cost of $12,735 and an overall cost of $19,335 per canopy hectare. On this basis, the discount for growing costs not expended in 2009 would be $6,574.

[21] The various cross-checked estimates that Mr Pyle produced led him to conclude that Ms Underwood had under-estimated production costs. He considered that her costs of production were based on unknown sources and they appeared to be out of date when compared against the sources of his figures. He considered that she had erred in not including the variable cost of harvesting, which he said was a major cost for all citrus growers that could amount to 50 per cent to 70 per cent of total costs. Mr Pyle suggested that harvest costs could be avoided if the orchard owner did the harvesting himself, but that to harvest 37,456 kilograms of fruit would entail

750 man hours. Mr Pyle thought that not many orchardists would be prepared to work these hours.

[22] The respondents’ other expert was a Mr Muller. Regarding the lemon trees, Mr Muller reached a view that on the measure he applied, the fruiting canopy area of the lemon trees was greater than the canopy area identified by the Singhs’ witness. This may be so, but the absence of any cross-appeal challenging the District Court’s finding on the difference in size between the warranted fruit canopies and the actual fruit canopies means that Mr Muller’s alternative measure of fruit canopy size is now irrelevant.

[23] Mr Muller referred to Ms Underwood’s opinion that the lemon trees had an expected life span of 10 to 20 years. Mr Muller noted that the trees were already mature and “clearly a significant time through their expected life span”. He also noted that for the lemon trees located west of the homestead, the Singhs had interplanted with kiwifruit. This indicated to Mr Muller that the Singhs were

intending to remove those lemon trees to grow kiwifruit. This is because the type of spray used for kiwifruit is damaging to lemons and so over time having the two fruit products so close to each other would not work. Mr Muller identified some of the lemon trees as having borer. All of these factors led him to conclude that the lemon trees would not be producing at their historic level until 2016. Thus, he disputed Ms Underwood’s view that the lemons would continue to produce at mature production levels for 10 to 20 years.

[24] Regarding the kiwifruit, Mr Muller considered that there was still room to increase the size of the area planted in kiwifruit. He opined that for the period from

2010 onwards, where Ms Underwood has simply forecast the lost profit without regard to actual profit made, he considered that Ms Underwood had failed to allow for any contingency that the harvest may be less than the historical levels in any particular season. He then identified what he considered to be significant risks for kiwifruit producers. These were level of winter chilling; Hi-Cane application; hail between bud break and harvest (September to May); wind events; and pollination. He also identified the disease PSA as a new threat. To cover for these contingencies in any forecast of profit, he considered that a contingency factor of between 10 per cent to 20 per cent should be applied. This meant assuming that a harvest would be lost or severely affected once every five to 10 years.

[25] Mr Muller then identified a number of factors that impact on fruit values. These were: the level of forward cover that Zespri has in place; the fruit quality over the selling season; fruit volume; the level of early harvest premiums agreed by the industry; and the actual harvest date. He considered that to accommodate these contingencies, a further contingency factor of between 10 per cent and 20 per cent should be allowed.

[26] Mr Muller was then critical of Ms Underwood’s evidence for adopting a growing costs figure of $5,695.00 per hectare for the 2009 year and onwards. Mr Muller relied on a Zespri produced document which showed growing costs per hectare from $19,000 per hectare for the 2004 to 2005 years and $22,000 per hectare for the 2009 to 2010 years. He opined that the figures that Ms Underwood relied on

did not relate to the information that Zespri had collected from owner-operator growers, management companies and contractors over six years.

District Court judgment of 9 August 2012 on loss

[27] When the proceeding was remitted back to the District Court to determine loss, the Judge appears to have made his findings on this question based on the evidence and submissions that he heard at the hearing on 27 and 28 June 2011. There is nothing in his judgment on quantum, the documents filed in the case on appeal, or the submissions that I heard to suggest that the Judge received further written submissions to assist him in the task of making factual determinations of loss based on evidence that he had heard a year earlier, and in circumstances where his assessment of the points of focus had been found by this Court to be wrong. I find this surprising.

[28] At [34] and [35] of the quantum judgment, the Judge repeated the finding he had made in his first judgment that there had been a breach of the warranty as to the size of the fruit canopies. But earlier at [28] and later at [41] of the quantum judgment, the Judge found that Mr Singh had not testified truthfully when he said that his sole concern in buying the property related to the size of the fruit canopies. The Judge then went on to find that Mr Singh was more concerned with the actual and potential volume of fruit production. These findings led the Judge to conclude at [42] that it was “simplistic and incorrect” to equate the physical size of the orchard or canopy cover with the fruit production achieved and so from there to calculate a differential due to the reduced size of the orchard/fruit canopies:

In those circumstances, to equate the physical size of the orchard or even the canopy coverage area with production achieved, and to mathematically calculate the differential due to the reduced size of the orchard/copy coverage area, appeared to me to be both simplistic and incorrect. That is indeed what Ms Underwood, the expert called for Mr and Mrs Singh has done.

[29] At [43] the Judge listed the other errors that he found with Ms Underwood’s

evidence. He identified seven errors.

[30] First, the Judge was critical of Ms Underwood’s opinion that the lemon trees would continue to produce at optimum levels for a further 10 years, given that they were already thought to be 30 years old and were said to have a productive life of 30 years.

[31] Secondly, the Judge had difficulties with accepting Ms Underwood’s opinion that the impact of Mr Singh grafting gold kiwifruit on a number of young green kiwifruit vines would not influence her loss calculations. The Judge was critical of Ms Underwood for accepting that the production of the grafted vines would take two to three years to regenerate, but nonetheless maintaining that her loss calculations were unaffected by the regeneration period.

[32] Thirdly, Ms Underwood had made her calculations of loss for the lemon trees based on production costs of $2,750 per hectare. The Judge found that when asked, she could not say where that figure had come from. The Judge expressed the view that he found it difficult to attach weight to Ms Underwood’s opinion, when she could not verify one of the base suppositions. The Judge was influenced here by the evidence from the respondents’ witness, Mr Pyle, who the Judge described as having produced an accepted authoritative text, which indicated that the appropriate cost figure could be something in the order of $6,469 per hectare. The Judge did not accept Ms Underwood’s explanation that the difference in part between her costs estimate and those of Mr Pyle was due to her estimate being based on Mr Singh doing part of the work himself, instead of employing others. Here, the Judge said it was obvious that Ms Underwood “did not know what Mr Singh did and what he employed contractors to do”.

[33] Fourthly, the Judge found that Ms Underwood had made no allowance for production risk factors in her calculations.

[34] Fifthly, the Judge was critical of Ms Underwood having used a figure of

$5,695 per hectare for the growing cost for kiwifruit, when Mr Muller, who was another expert called by the respondents, had cited Zespri figures suggesting growing costs should be in the vicinity of $19,000 to $22,000. The Judge records that again Ms Underwood attempted to justify the basis for her calculations by

relying on Mr Singh personally doing some of the work involved. The Judge refused

to accept that “rationalisation”.

[35] Sixthly, the Judge described Ms Underwood as being adamant that the canopy area of kiwifruit at the orchard could not be further increased. The Judge expressed his uncertainty about this aspect of her evidence, as it seemed to him to be a very real possibility that both witnesses could have taken their reference points, not from the boundary of the orchard but from elsewhere.

[36] Finally, counsel for the respondents took Ms Underwood through income returns filed with the Inland Revenue Department (IRD) and compared those figures with her calculations, including drawing to her attention the fact those figures apparently showed that 80 per cent of actual canopy coverage produced a loss of

$35,000. Ms Underwood’s response to this was to explain the apparent anomaly on the basis the figures were produced for IRD purposes and should not be considered for any other purpose. The Judge did not accept this as an explanation for the apparent anomaly.

[37] At [44] the Judge recorded that, in short, he was not convinced that Ms Underwood’s calculations could be safely relied upon as appropriate. He described himself as feeling “unsure about the correctness of a number of fundamental propositions that under-pinned her quantification of the loss suffered by Mr and Mrs Singh”. This led the Judge to find at [45] that the Singhs had not satisfied him on the balance of probabilities that the losses they claimed, as calculated by Ms Underwood, had in fact been incurred. Thus, he dismissed their claim.

[38] The Judge then opined at [46] that given his conclusion that the Singhs had purchased the property based on production of kiwifruit, rather than size of the orchard and fruit canopy size, the result was, in his view, fair in all the circumstances. The Judge then referred to what was, in his view, Mr Singh’s disinterest in lemon trees, which led the Judge to conclude that there was a real likelihood that Mr Singh would remove the lemon trees in the future to allow the kiwifruit vines that he had planted between the rows of the lemon trees to mature. At

[47] the Judge recorded the kiwifruit production figures had increased over time, as measured in trays of grade one fruit picked and supplied; and so the Judge concluded at [48] that Mr Singh pretty much got what he bargained for, despite the shortfall of the canopy areas. The Judge viewed the additional kiwifruit vines that the Singhs had planted as helping them to achieve an increase of fruit production, rather than being an attempt on their part to minimise their loss.

[39] The Judge finally noted at [49] that the “only possible loss appearing evident on the face of the matter, and which did not require evidence to establish [it]” related to the shortfall of the canopy areas. The Judge considered that this was a loss that would only eventuate when Mr and Mrs Singh decided to sell their property. He noted that when they came to sell, they would not be able to warrant the same area for sale as the respondents, “which may mean they are able to command a lesser purchase price”. However, because the Judge could not quantify what that loss might be, if it actually eventuated, he took that matter no further. The outcome was that the Judge found that the claim for the Singhs for losses attributable to the breach of warranty failed.

Discussion

[40] The Singhs argue that the District Court Judge was wrong to conclude that when they purchased the property, they were not concerned about the warranty of the fruit canopies and that fruit production was what concerned them. I accept their submission on this point. I have difficulty understanding why the Judge embarked on an analysis of the evidence that involved him determining the Singhs’ subjective reasons for purchasing the orchard, and allowing those reasons to influence his decision on whether they had suffered loss from the breach of warranty. Whether the Singhs were primarily interested in fruit production from the orchard, both actual and potential, seems to me to be neither here nor there when it comes to determining their claim for breach of warranty. The simple fact is the respondents included a warranty as to size of fruit canopies in the sale and purchase agreement. The actual canopy sizes fell short of the warranted sizes. Once the evidence established that, the Singhs were entitled to sue for breach of warranty. They did not need to satisfy the Court that they had relied on the warranty in order for them to be able to sue on

it. It was a term of the contract; the term was breached and that is the end of the matter.

[41] Given the finding in this Court that the Singhs were entitled to claim for a breach of warranty, the next question for the District Court should have been: has the reduced canopy size caused the Singhs to suffer loss, and if so, what is the sum of money that would adequately compensate them for this loss. Answering those questions would entail the Singhs satisfying the District Court that an orchard with the warranted fruit canopies would have been more profitable than was their orchard, and then providing the Court with a basis for determining the sum of money to compensate them for their loss. Unless it could be shown that there would be no difference in outcome between the actuality and what was promised under the warranty, it would logically follow that the breach of warranty had caused the Singhs some loss.

[42] I would think that an orchard that has a lesser size of fruit canopies than are warranted is, all other things being equal, going to produce less fruit. I have difficulty, therefore, in accepting the Judge’s finding that to equate the physical size of the orchard, or the canopy coverage area with production achieved and to arithmetically calculate a differential due to the reduced size of the orchard/copy coverage area was simplistic and incorrect. Indeed, I note that at [49] the Judge acknowledged that the difference between the actual fruit canopy sizes and the warranted sizes would mean that the Singhs could not warrant the same area on a sale of the orchard as the respondents had done, which might lower the price at which the Singhs could sell the orchard. Thus, the Judge recognised that the reduced canopy size would be likely to cause potential buyers to place a lower value on the orchard than if it had the warranted sizes of fruit canopies, which in turn suggests that the canopies’ sizes are an indicator of the profit to be made from an orchard.

[43] I also note that in making the finding at [42] of the quantum judgment, the Judge prefaced the finding with the words “in those circumstances”. This phrase related back to the Judge’s finding at [41] when he found that that the Singhs were more interested in fruit production from the property, actual and potential, than size of the fruit canopy hectares. I have difficulty seeing how fruit production can be

divorced from canopy size, and so for this reason alone I have difficulty with the

Judge’s reasoning.

[44] However, the criticisms the Judge made of Ms Underwood’s evidence at [43] appear to me to be stand-alone criticisms, and so they are uninfluenced by the erroneous view of her evidence that the Judge expressed earlier in [41] and [42]. In [43] the Judge found that Ms Underwood’s evidence had been undermined by the evidence of the respondents’ experts and by cross-examination by the respondents’ counsel. For reasons that are given later in this judgment, I reached a similar conclusion when it came to the topics the Judge addresses in [43] of his judgment.

[45] I am satisfied from reading the evidence of all the experts that the reduced size of the fruit canopies had caused the Singhs to suffer some loss. The Singhs’ expert has given evidence of the loss that has flowed from the canopy hectares of the lemon trees and kiwifruit vines being less than the warranted sizes. The respondents’ experts have challenged the quantum of loss provided by Ms Underwood, but they do not challenge the thrust of her findings that some loss would flow from the reduced canopy size. It follows that the Judge’s finding that the Singhs have not suffered loss and his subsequent refusal to award any damages are wrong.

[46] The Singhs submitted that if this Court found that the quantum judgment was wrongly decided, then this Court should proceed to make findings on the question of loss. They do not want the matter referred back again to the District Court, and this is understandable. However, the District Court Judge had the benefit of seeing the expert witnesses give evidence. He could question the experts when he needed to clarify for himself aspects of their evidence. He was, therefore, better placed than is this Court is to assess the experts’ evidence. If this was not the second occasion on which this matter has come to this Court on appeal, I would have preferred to send the question of assessment of damages back to the District Court to rehear evidence and submissions from the parties. However, time and cost has already been expended in one hearing in the District Court and two hearings in this Court. And this is in circumstances where the plaintiffs initially attempted to deal with their dispute in a cost-saving way through reducing the claim to the jurisdiction level of the District Court. This together with the request from the plaintiffs that I deal with

the remaining live issues cause me to conclude that I should do so, despite the constraints I will face when it comes to assessing competing expert opinion.

[47] It is most regrettable that this proceeding went to a defended hearing in the District Court without the expert witnesses first conferring. The procedural rules of this Court and the District Court now make specific provision for expert evidence, in part to ensure that the real controversies between the opposing parties’ experts are identified and the reasons for them understood. Rule 1.6 of the District Court Rules refers to specified High Court Rules being applied in the District Court with modifications if necessary. Rule 3.67 of the District Court Rules refers to Court appointed experts and applies the regime for expert evidence that is set out in rr 9.36 to 9.42 of the High Court Rules. Rule 3.68 of the District Court Rules provides for expert evidence generally by making rr 9.43 to 9.46 of the rules of this Court applicable to proceedings in the District Court. Thus, the full regime for expert evidence in this Court’s procedural rules is now available for hearings in the District Court as well.

[48] There should have been a conference of the experts before the defended hearing in the District Court. This is directed under r 9.44 of the High Court Rules either on the application of a party or at the Court’s direction. Directions under r

9.44 include directions that:

(a) The experts are to confer on the issues which they are to address in their respective fields of expertise for this proceeding;

(b) Where there is any overlap between two or more fields of expertise, the experts in each field are to confer with each other;

(c) The experts are to try to reach agreement on matters in issue in the proceeding (these being the matters on which they are to give their expert opinion);

(d) The experts are to prepare and sign a joint witness statement stating the matters on which they agree and the matters on which they do not agree, including the reasons for their disagreement; and

(e) The conference/s is/are to take place and the joint witness statements are to be prepared before the experts give their evidence.

[49] There is no reason for the modern day requirements for expert evidence not being followed. They are there to expedite the resolution of controversies between experts. If these requirements are followed, they can lead to more economical hearings and reduce the possibility of confusion and misunderstanding of the evidence. Had there been a conference directed under r 9.44, the task of determining the damages to be awarded would have been made much easier; especially for this Court on appeal.

[50] The primary basis for assessing damages for breach of contract is by reference to the plaintiff’s loss of bargain.6 In NZ Land Development Co Ltd v Porter,7 Tipping J said: “The result is that an appropriately calculated sum of money must take the place of the promised benefit which the contract breaker has failed to provide”.

[51] There was some evidence for the Singhs that the land area of the orchard precluded the Singhs from increasing the size of the actual fruit canopies to the warranted size. The Judge’s reference at [43](f) to being uncertain about whether Mr Muller had said the canopy area of kiwifruit could be increased, as well as the comment that it was a real possibility that the witnesses for each party had taken their reference points from somewhere other than the property’s boundary might have opened this issue up for further scrutiny. However, the respondents have not cross-appealed on the grounds that the Singhs could and, therefore, should have based their measure of loss on the cost of restoring the orchard to its warranted size. This is not altogether surprising because the respondents did not advance the

_{necessary evidence to support this type of challenge. It does mean, however, that the}

6 JF Burrows and RI Carter Statute Law in New Zealand (4th ed, LexisNexis, Wellington, 2009) at

_823.

7 NZ Land Development Co Ltd v Porter [1992] 2 NZLR 462 (HC) at 466.

issue of whether the lost fruit canopies could have been partially made up in some fashion is no longer relevant.

[52] The Singhs adduced no evidence to support a claim based on diminution in capital value of the orchard as a result of the reduced fruit canopies. This is surprising because as Prichard J recognised in Ware v Johnson (another case of suing for losses related to the sale of a kiwifruit orchard), “in contracts of sale and purchase the measure [of loss] is, prima facie, diminution in value”.8 On this approach, valuers would have provided an opinion on the reduced value of the orchard owing to the reduced fruit canopies. The respondents have not cross- appealed on the grounds that the Singhs should have based their measure of loss on

the diminution in value between the orchard as they bought it and as it was warranted to be.

[53] In the absence of any cross-appeal, I do not propose to consider if the Singhs should have used this or any other measure of loss. I do note that if they had advanced diminution of value as an alternative measure of loss, it would have been helpful. First, because the valuation exercise involved would have been simpler, and therefore less prone to being successfully challenged than the estimate of loss of profits, which here was partly based on an assessment of lost future profits. Secondly, because an opinion on diminution in value would have provided a helpful

yardstick against which to assess the loss of profits claim. In Ware v Johnson,9

Prichard J referred to the evidence of the plaintiffs’ valuer and said:

It was [Mr Middleton’s] opinion that as at April 1980, the sum of $177,000 represented the difference in value between the orchard (undamaged by herbicides) and its value in its actual condition. As at April 1981, he made the difference $203,500. The latter is the figure which the plaintiffs claim should be used if damages are assessed on diminution in value. Mr Middleton ... appreciated - it is really obvious - that an informed prospective purchaser of a damaged orchard will decide how much he should pay in comparison with what he would pay for an undamaged orchard by reckoning the cost of the necessary remedial action, the time which will elapse before the orchard will come into profit and the profit he will not receive in the meantime. Assuming that the notional purchaser has the ability to work out for himself the difference in value attributable to those factors - or, if he cannot do it for himself, if he consults experts - then, at least in theory, the difference in the price he will pay should be the same as loss of

8 _{Ware v Johnson [1984] 2 NZLR 518 (HC) at 542.}

9 At 544.

profits plus cost of remedial action. This fact is often overlooked and is seldom mentioned in textbooks: one reference is Atiyah, The Sale of Goods (3rd ed, 1966) pp 234-235.

On this view, a proper assessment of loss of profits, plus cost of remedial action, if any, should roughly equate with the diminished value to be attributed to the orchard because of the reduced sizes of the fruit canopies. This, in turn, would provide some comfort to the Court that the assessed loss of profit based claim for damages was reliable and reasonable.

[54] The Singhs have chosen to base their damages claim purely on loss of profits, which entails them satisfying the Court that their expert’s estimate of what their profits might have been, had the sizes of the fruit canopies been as warranted, is a reliable and reasonable measure of their loss. Estimating lost profit, especially future loss of profit, is a complex exercise.10 With estimates of future profits, a Court is inevitably faced with expert evidence from opposing sides with each expert opining on the best way to read the future. In the absence of a joint statement of the experts setting out the issues on which they agree and where they do not agree the

reasons for not doing so, the Court is left with the difficult task of having to “do the best it can” to arrive at a figure, if satisfied that there has been some real damage.11

[55] I will deal with the assessment of damages for the lemon trees, and then the kiwifruit vines. But before doing so I want to refer to an error that I consider has permeated all Ms Underwood’s assessments. During cross-examination it was put to her that her analysis was based on theory rather than what she thought might happen in the future. She implicitly agreed with that proposition. Her answer was most revealing. She stated that what she had tried to do was to take the hypothetical area of the canopy size as contracted for and then analyse the financial impact over a period of time of them not having that canopy area. Her view was that there would always be a financial impact but she had taken 10 years as a cut-off point. Then tellingly she admitted that, in her view, it made no difference what the Singhs

_{actually did with the land once they purchased it:}

10 _{See Ware v Johnson, above n 8 at 542.}

11 See Walsh v Kerr [1989] 1 NZLR 490 (CA) at 494 applied in Newbrook v Marshall [2002] 2

NZLR 606 (CA) at 614.

Q. Doesn’t that say to us that your analysis is not based on what actually is going to happen on the orchard but is based only in theory?

A. I guess what I’ve tried to take is what’s the impact of the canopy area that the Singhs understand they are contracted for at the time they purchased it through, and I’ve done that analysis based on 10 years, but my analysis actually shows that it still makes a financial impact well further down the track from that, I’ve just cut it off at 10 years. I guess because when you’re looking at something historical you’re looking at analysis and there’s a period forward when you’re looking at forecasting, and I’ve figured that 10 years is a fair combination of analysis and forecasting and beyond that, all sorts of things can change as they do. I think past the date of the Singhs purchasing that property it’s theirs to do what they like. They could’ve put a pony on there and done what they like.

Q. Yes but they’re asking for the Rutherfords to pay for the potential losses that they have missed out on aren’t they?

A. From not having the canopy area that they understand that they contracted for.

[56] Ms Underwood’s answer suggests to me that she does not understand the basis on which she was to conduct her assessment of loss; either she was poorly instructed by counsel, or she did not follow his instructions. In principle, if the Singhs were not going to use the property as an orchard, there could be no basis for a loss of profit damages assessment based on estimated lost profit over a 10 year period. In such circumstances, their loss should have been assessed on the basis of diminution in value. If the value of the orchard they purchased was less, owing to the reduced fruit canopies, they were entitled to be compensated for the higher price they had paid for the orchard. But the law of damages would not permit them to claim for 10 years of lost profit from the reduced fruit canopy size if it was not run as a commercial orchard, and it was not going to be on-sold as a commercial

orchard: see Marlborough District Council v Altimarloch Joint Venture Ltd:12

In cases of non-substitutability of subject-matter the performance interest is likely to be the one which the damages should reflect. It is also likely that in non-substitutability cases a requirement to pay damages on a performance basis will be a reasonable response to the breach. Of course the plaintiff must have a genuine intention to expend the damages to protect the performance interest. If that is not so, it would hardly be reasonable to award damages according to the performance measure.

12 Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11 at [161].

Ms Underwood’s answer reveals a mindset which causes me to approach her opinion evidence cautiously. This is in addition to other concerns that I have about particular aspects of her evidence, which I am about to deal with.

[57] This is a case where there is evidence that the Singhs had changed the orchard: they had cut some of the green kiwifruit vines and grafted them with gold kiwifruit, and they had interplanted some of the lemon trees with kiwifruit vines, which meant that they could not over time continue to produce both lemons and kiwifruit but would have to choose between one of those crops. Some allowance should have been made for the impact of these changes on the 10 year estimate of profit. However, because Ms Underwood erroneously believed that all she needed to do was estimate on a 10 year time-line, the profit to be made from the orchard with fruit canopies as warranted no allowance for the impact of changes by the Singhs has been built in to her estimate. I consider that her assessments would need to be adjusted to reflect these changes. In this sense, I agree with the Judge’s view that her evidence was simplistic, and so it cannot be entirely relied upon.

Lemon trees

[58] The area of dispute between the experts regarding the lemon trees lies in the estimated life expectancy of the lemon trees and the allowances made for variable costs (harvesting and freight).

[59] Regarding the productive life of the lemon trees, Ms Underwood said they were planted some time in the nineteen eighties. Depending on when during that decade they were planted, this would mean that at the time of the District Court hearing in 2011, they were somewhere between 30 years (if planted in 1981) and 22 years old (if planted in 1989). She described them as “still alive and kicking” and said she thought they had 10 years life in them. Under cross-examination it was suggested to Ms Underwood that lemon trees have a productive life of 30 years and she did not demur. She accepted there might be borer in some trees. There was also the fact that Mr Singh has interplanted kiwifruit vines between some of the lemon trees. Ms Underwood accepted that in the medium term you could not produce

commercially from both plantings when they were in close proximity, as the spray needed for kiwifruit vines was particularly damaging to lemon trees.

[60] The Judge adopted an age of 30 years for the lemon trees and combined that with the evidence of lemon trees having a productive life of 30 years. He rejected Ms Underwood’s opinion that the lemon trees would continue to produce for 10 years. I find this too simplistic, as the evidence of the trees’ age is less certain. If they were planted in the late eighties, they would be less than 30 years old at the time of the District Court hearing and so they could well have close to 10 years life expectancy.

[61] However, I consider that, in combination, there is enough evidence to cause me to find that you cannot reliably conclude the lemon trees will be producing for the 10 year time span Ms Underwood has estimated. First, there is the question of their age. If a midway point in the nineteen eighties is taken as their planting date, they were approximately 26 years old at the time of the hearing. Using 30 years as the usual production span, that would have given them four years more production time. Thirdly, there is their health. The respondents’ expert, Mr Muller, found evidence of borer which would affect their longevity to some degree, even if remedial measures were taken to alleviate the effect of the borer (as Ms Underwood described). Finally, there is the interplanting with kiwifruit which, as Ms Underwood acknowledged, might be acceptable for the medium term but not for longer. This all leads me to conclude that the use of a 10 year timeframe for the loss of profit assessment for the lemon trees is unsafe. It needs to be adjusted to a more conservative timeframe to reflect the potential impact of these contingencies. They were producing well at the time of the hearing in 2011, which was four years after purchase. I consider that a further four years is a more reliable time span for estimating their future production. This would reduce the 10 year time span adopted by Ms Underwood to one of eight years.

[62] Next there is the omission to include variable costs such as harvesting and freight. Ms Underwood admitted her assessment made no allowance for these costs. I preferred the evidence of Mr Pyle on this topic to that of Ms Underwood; his evidence made more sense to me. First, I consider that Ms Underwood’s omission to

include variable costs is an error on her part and it cannot be explained away by her assumption that the Singhs would provide the labour of harvesting themselves. Under cross-examination, she admitted that she did not know that Mr Pyle employed two persons to help with harvesting the lemons. From my reading of her responses under cross-examination, I could see no tenable explanation for why she had not included harvest costs in her assessment. Even if she had assumed the Singhs did all the harvesting, it is hard to see how this assumption could be maintained over the 10 year period that she adopted. I would have thought some allowance for hired labour would be necessary to allow for the occasions when the Singhs might need additional help, or were unable to attend to the picking themselves. Furthermore, Ms Underwood did not address Mr Pyle’s point that given the number of labour hours involved in picking the quantity of lemons being produced, he found it hard to see how the Singhs could get by without hiring fruit pickers. This unchallenged evidence further undermines Ms Underwood’s evidence regarding harvesting of lemons.

[63] Secondly, whilst the sum of $2,750 (which excluded variable costs) was the only production cost that Ms Underwood took into consideration under cross- examination, she could not identify the source from where she had obtained this figure. Her answer in this respect was unsatisfactory:

Q. Where did you get that figure from?

A. I don’t like to say this sort of thing but I can’t exactly remember and I haven’t - I haven’t acknowledged where I got that from so it will have been from something internal, within the office, that’s not in – not in the public domain.

Q. Do you actually remember where you got it from or not? A. Not specifically. No.

Ms Underwood then opined that her figure of $2,750 was close to Mr Pyle’s figure of $2,800 and that the difference between her figures and his was in relation to the variable costs. I have already addressed that aspect of her evidence.

[64] Thirdly, it was clear that Ms Underwood had not had a full opportunity to consider Mr Pyle’s evidence. This is unsatisfactory. Counsel should have sought a brief adjournment to enable Ms Underwood to get to grips with Mr Pyle’s evidence.

[65] I gained the impression from Ms Underwood’s answers to cross-examination questions that at times she was answering off-the-cuff and had not given full consideration to the opinions expressed by the respondents’ experts. On the other hand, Mr Pyle gave detailed evidence which showed he had looked at the costs associated with producing lemons, and those costs had increased over time. His answers appeared to me to have been given more careful thought and attention. I formed a similar view of Mr Muller’s evidence on the lemon trees.

[66] I have the disadvantage of not having seen the witnesses give their evidence, and there is the greater disadvantage here of the experts not having conferred before they gave their evidence. The situation is most unsatisfactory, but as the Singhs want the damages issue determined in this Court, I must do the best I can with the evidence.

[67] Regarding the Singh’s claim for loss of profits from the lemon trees (which is for past and future lost profit), I consider that the inadequacies of its proof, which I have identified, require a cautious approach. In Ware v Johnson, Prichard J said that: “... a considerable degree of caution must be exercised in basing an award of

damages on estimations of loss of future profits”.13

[68] A cautious approach leads me to favour the evidence of Mr Pyle and Mr Muller over that of Ms Underwood. It follows that the damages for loss of profits for the reduced lemon tree canopies should be calculated using an eight year timeframe starting from the date of purchase (2007 to 2015). The experts were all agreed on the weight of the crop per hectare (37,456 kg per hectare) and the net returns of $0.92 per kg per hectare. So I have no difficulty with a loss calculation that uses those figures. However, I do not accept as reliable Ms Underwood’s cost estimate of $2,750 per hectare. I prefer the costs identified by Mr Pyle and I propose

_{to take an average of those costs. He estimated total annual costs per hectare using}

13 Ware v Johnson, above n 8 at 545.

2001 data of $2,800 + $6,742 = $9,542; and the same costs of $19,335 and $19,661 using 2009 data. The average of these costs comes to $16,179. I propose to give some recognition to the contribution of the Singhs’ labour to the variable costs and so will reduce the average that I have arrived at by $4,000. This leaves a total production cost figure of $12,179.

[69] The parties will need to reach agreement on the arithmetical calculation of the loss of profit for an eight year period using production costs of $12,179 and the agreed figures set out above. Leave is reserved to the parties to return to Court on this topic should any issue arise regarding the calculation of this figure.

Kiwifruit

[70] Regarding the loss of profit from the reduced kiwifruit canopies, the respondents’ experts did not challenge Ms Underwood’s estimate of the missing trays that resulted from those missing canopies. However, as with the lemon trees, they considered that she had underestimated the production costs of the kiwifruit and made insufficient allowance for future contingencies that could reduce the historical levels of the harvest.

[71] Under cross-examination, Ms Underwood acknowledged she had made no allowance, as had Mr Muller, for a contingency such as losing a crop one year. She said that to arrive at an estimate of average production, she had taken the historical production from the orchard working six years backwards and from this had estimated its production 10 years forwards. In her view, any contingencies to be allowed for should have been built in to her estimate as that was based on six years of historical production, which would necessarily include the unforeseen events that transpired over that period. This approach entails assuming that the historical production over a six year period will be a good indicator of what can be forecast to occur over a 10 year period. I am not satisfied that such an approach is sound. Ms Underwood’s approach also has the flaw of lack of transparency. Insofar as it might be understood to allow for contingencies, these are not clearly stated. This means no account can be taken of whether sufficient potential risks have been built into the assessment, or whether sufficient allowance has been made for their impact.

I am not satisfied that this is a good approach to take. Instead, I think the better approach is that propounded by Mr Muller, namely to identify potential adverse events and make an express allowance for them occurring over the 10 year timeframe.

[72] I have described the contingencies that Mr Muller thought should be allowed for at [24] and [25] herein. Mr Muller identified two separate groups of contingencies and allowed a discount of between 10 to 20 per cent for each group. I consider that recognising those is sensible and realistic. Again taking a cautious approach, I propose to take the average of the 10 per cent and 20 per cent for each contingency allowance recommended by Mr Muller. By my calculation, the average for each group would be 15 per cent, making a total contingency discount of 30 per cent.

[73] The disparity between Ms Underwood’s and Mr Muller’s estimate of growing costs is significant. She estimated growing costs of $5,695 per hectare from 2009 onwards. She took this figure from the actual costs incurred by the Singhs in 2009. Mr Muller took figures for production costs from information provided by Zespri. These growing costs came out at $19,000 per hectare for the 2004 to 2005 years and

$22,000 per hectare for the 2009 to 2010 years.

[74] Ms Underwood explained the disparity between the experts’ estimates of the growing costs by saying that she had taken into account costs that were additional to the $5,695 per hectare. Here, she was referring to picking costs which she had taken into account when determining the income to be gained from each tray of kiwifruit, whereas the production cost figures of Zespri ($19,000 to $22,000 per hectare) included picking costs. Ms Underwood did not explain why she had not estimated gross income per tray and then separately identified the production costs she had taken into account. To have approached her task this way would have made it easier to compare her evidence with Mr Muller’s, and to see where the real areas of difference lay. In her brief of evidence, Ms Underwood did record that her estimated income per tray of kiwifruit was net income, and included an allowance of 39 cents per tray for picking costs.

[75] Ms Underwood accepted that her estimate of production costs made no allowance for pruning costs. She worked on the basis that the Singhs would do all the pruning over the 10 year time span she allowed for.

[76] The different ways in which the experts have made allowance for picking costs makes it difficult for me now to assess the distance between them on this aspect of their estimates. This is one area where, if they had conferred, they may have reached agreement on where the real differences between them lay. I am not sure how much of the 39 cents per tray picking costs is reflected in the Zespri figures of $19,000 to $22,000 for production costs. Ms Underwood’s evidence was that the costs were similar and, while under cross-examination, she attempted an explanation to support this view:

Q. And that compares with the figure of what $5625 that you have used?

A. It doesn't compare but I can explain that if you like me to. Q. Yes, why doesn't it compare with your figure?

A. The, the labour cost, again, um, where, the figures that I used are from the MAF horticulture monitoring and the reason I used them is two reasons really, one, it’s a public domain document, and secondly, I’ve, um, been involved with it for 20 plus years, and it breaks down the growing costs into far more categories, there’s about 10, 10 or 12 categories of the growing costs, so what, what I did was I took out the ones, um, you know how I talked before about the marginal, the costs, the growing costs so I made an estimate of the growing costs so I’ve excluded the labour which is a big part of the on orchard cost. The picking costs I accompanied for separately, I think I took off 39 cents a tray for the picking costs which would be included in that 22 odd thousand in the Zespri figures. As well as that, having, having been involved in the, um, MAF figures, as, as a contractor I say that, um, Zespri began collecting their figures more recently and since both of them have been around there’s been some dialogue between the two, to compare them and they’re not chalk and cheese, they’re really very similar.

Q. So how is it, I don't understand your last comment. How is it that the figures are so wildly different, in that, if they are really quite similar in your words. They are comparing the same things?

A. Okay, um, I’m terrible at doing maths in my head, but if we talk, um,

8000 trays a hectare because I can only do round numbers sorry, and if I call my 39 cents a tray, 40 cents a tray, picking costs, then I think that’s 3200.

Q. Yes.

A. So that’s the picking costs which I’ve, um, um, taken of, I’ve taken off a different way. The um, labour cost for pruning is, um, in the MAF figures it’s something like eight or $9000 a hectare for the, um, for the pruning and the filling so, I’m now struggling to do that maths in my head, but that’s, if you take the 20, 22 then that’s down, um, if we said it was eight for the pruning costs then there’s the picking, um, there’s some costs that you don’t save like, you’re still trimming all the shelter, and, um, that’s where the, what I call the, all economists call the marginal costs comes in, so that’s, that’s why the costs are different, but it’s pretty much stayed with the same kind of total costs per hectare and taking of that.

Q. Just at, so I understand your answer. You’ve taken out the picking cost, the figure that you, you don’t include any picking costs in the figure that you’ve used of 5600?

A. I’ve allowed for the picking costs in a different way, I haven’t – the Singh’s [sic] don’t pick their own kiwifruit, it’s just about nobody picks their own kiwifruit, I, I haven’t included that as a growing cost, I’ve deducted it off the income so that I can get the per tray, do it a per tray ‘cos the picking costs are incurred per tray, but the growing costs are incurred per hectare, so when I’ve been using the per hectare costs I’ve taken out the picking separately so that I’m not confusing per hectare and per tray costs.

Q. So the Zespri figures include picking costs? A. Yes, that’s my understanding.

Q. And the figure that we are talking about with you of the $5000 per hectare does not include picking costs?

A. No.

Q. But you have included the picking costs when you’re looking at the

– what the orchard gate return figure?

A. I’ve, yeah, I’ve deducted them.

[77] From my understanding of Ms Underwood’s answers, her estimate of picking costs of 39 cents a tray worked out at approximately $3,200 per hectare. She estimated that pruning costs could be in the vicinity of $8,000 to $9,000 per hectare; and so when that was added to her figure of $5,695 per hectare, you came to a figure of $16,895 or $17,895, depending on whether the pruning costs were taken as $8,000 or $9,000. This would bring her assessment of costs closer to the Zespri figures, although still somewhat less than the figure of $22,000 that Zespri considered reflected production costs from 2009 onwards. In addition, the $8,000 to $9,000 component of this figure would represent pruning costs, which she had not allowed for because her understanding was that the Singhs did all the pruning themselves.

[78] I am not satisfied with the entirety of Ms Underwood’s assessment of losses for the reduced kiwifruit canopies. I note that Mr Muller does not dispute Ms Underwood’s assessment of the number of kiwifruit trays to be produced per hectare per annum. Also, he does not dispute the 10 year timeframe of her forecast. I am prepared, therefore, to adopt her assessment when it comes to estimating the number of kiwifruit trays produced per hectare per annum, and the 10 year timeframe for assessing loss of profits. However, that is as far as I am prepared to rely on Ms Underwood’s evidence.

[79] I consider that built into the loss of profits, there needs to be an allowance to cover contingencies of the type identified by Mr Muller, and that should be the figure of 30 per cent I arrived at earlier. I do not find Ms Underwood’s explanation for the production costs, or the way she has gone about presenting the production costs to be satisfactory. She did not dispute the reliability of the Zespri figures and, therefore, I see no reason why the Zespri figures for production costs should not be adopted. However, those figures include pruning costs. Whilst the information available to Ms Underwood may have led her to believe that the Singhs did the pruning themselves, I do not consider that can safely be assumed to be an ongoing event for the duration of the 10 year timeframe. Rather than attempt to make some deduction over a particular time period to represent the contingency of the Singhs having to engage labour, I propose instead to simply use the sum total of the costs identified in Ms Underwood’s cross-examination answer. This means I am assessing the production costs as being $3,200 per hectare (picking costs), $8,000 per hectare (pruning) and $5,695 to cover the other costs that Ms Underwood adopted. That brings the total to $16,895. In this way, the production costs I am spreading over a

10 year timeframe are lower than the Zespri costs, but do contain an allowance for pruning costs, which Ms Underwood had not included at all. Once the production costs are assessed in this way, it becomes necessary to adjust the price per kiwifruit tray to take into account the fact that the price Ms Underwood had given the kiwifruit trays included a deduction of 39 cents per tray to cover picking costs. The total result of these changes will need to be arithmetically calculated by the parties’ experts. Leave is reserved to the parties to return to Court, should they be unable to reach agreement on the arithmetical conclusion.

[80] Regarding the claim of $6,713.18 for costs incurred in mitigating their loss, being the steps the Singhs took to increase the actual fruit canopies, I am satisfied with the evidence to support that claim and consider they are entitled to recover those costs.

[81] The way in which I have had to approach the assessment of the damages the Singhs are entitled to is most unsatisfactory. However, in terms of Walsh v Kerr, given the inadequacies in the expert evidence that I have identified and, therefore, the limited assistance I have obtained, I consider that the way in which I have approached the damages is the best I can do. The other alternatives would have been to dismiss the claim for want of proof of loss, or to remit the case back to the District Court for a further hearing with directions regarding the presentation of the experts’ evidence. As to the former alternative, I consider that since I am satisfied the Singhs have suffered some loss, it would be wrong to dismiss their claim for

want of proof.14 As to the latter alternative, I consider the time and costs involved in

that exercise would be likely to outweigh any improvement in damages that might result from such an outcome. I also consider that to remit the case back to the District Court would be wasteful of judicial time and resources, when looked at in the broader context of the demands litigation in general places on the courts’ services. I have taken a conservative approach to ensure that the damages I award are not to my mind inflated and, therefore, unjustly damaging for the respondents. Whilst that might mean that the Singhs will receive less than they may have done had proof of their loss claim been better presented, I consider that was a matter within their control; they carried the burden of proof; and, therefore, they are responsible for the consequences that flow from the inadequate presentation of their claim for loss.

Result

[82] The plaintiffs are entitled to the sum of $6,713.18 for costs incurred in mitigating their loss.

14 See Newbrook v Marshall, above n 11.

[83] The loss of profit from the reduced size of the lemon tree canopies is to be assessed in terms of the directions given in [68].

[84] The loss of profit for the reduced size of the kiwifruit vine canopies is to be assessed in terms of the directions given in [79].

[85] Leave is reserved to the parties to return to Court for further directions regarding the arithmetical calculation for the damages.

[86] Leave is reserved to the parties to file and serve memoranda as to costs, if agreement on costs cannot be reached. In this regard, the parties should recognise the plaintiffs have enjoyed only a partial measure of success, which is relevant to an award of costs.

Duffy J