Watson v Whitehead [2014] NZHC 2992 (27 November 2014)

	Home \| Databases \| WorldLII \| Search \| Feedback High Court of New Zealand Decisions

BETWEEN	DENIS ERIC WATSON and MERYL JOY WATSON (as trustees of the Salem Charitable Trust) First Plaintiffs WATSON & SON LIMITED Second Plaintiff
AND	JOHN EDWARD WHITEHEAD and ROSALEEN MARIE WHITEHEAD and EDWARD IVAN WHITEHEAD (as trustees of the J and R Whitehead Trust) First Defendants SHILOH CHARITABLE TRUST Second Defendant

Hearing:	18-22, 25-29 August and 22 October 2014
Appearances:	K P Sullivan for the First and Second Plaintiffs M C Black for the First and Second Defendants
_Judgment:	_{27 November 2014}

Paragraph Introduction ..............................................................................................................[1] The Factual Background .........................................................................................[7] Manuka honey...................................................................................................[8]

Mr Watson/Mr Whitehead............................................................................... [11] Shiloh and JRWT – the 2008 agreement ........................................................[18] Salem and JRWT – the 2009 agreement .........................................................[21] The key agreements.........................................................................................[25] The arrangements unravel ..............................................................................[31]

The Pleadings..........................................................................................................[46] The defendants’ counterclaim .........................................................................[48] The plaintiffs’ defence to the counterclaims ...................................................[52] The plaintiffs’ second amended statement of claim ........................................[56] The defendants’ statement of defence .............................................................[64] General ...........................................................................................................[65]

Analysis ...................................................................................................................[66] (i) The Agreements ..............................................................................................[67] Are the agreements properly signed? .............................................................[67]

Who owned the honey – what did the agreements provide? ...........................[75] Was the hive purchase price payable under the first to fourth agreements .......... to be offset by the supply of 2011 honey owned by Salem? ..........................[101]

Do the October 2010 and November 2011 agreements record the bargain ......... made between the parties?............................................................................[104] The Fair Trading Act ....................................................................................[107] Misrepresentation .........................................................................................[129] Estoppel ........................................................................................................[132] Rectification ..................................................................................................[137] The purchase price of the honey ...................................................................[142] The purchase price of the hives ....................................................................[145] Are the key agreements “interdependent”? ..................................................[150]

(ii) JRWT’s claims pursuant to the agreement for the sale and purchase of ............... honey and for additional honey supplied ......................................................[158]

(iii) Shiloh’s claims pursuant to the deed of arrangement and the third, first ............. and fourth agreements...................................................................................[190]

(iv) JRWT’s claims pursuant to the second agreement for the hire of hives ....... [211] (v) Any additional claims available to JRWT? ...................................................[214] (vi) Salem/WSL’s claims pursuant to the second agreement for the hire of................ hives ..............................................................................................................[217]

(vii) Salem’s/WSL’s claims pursuant to the deed of arrangement and the first,........... third and fourth agreements ..........................................................................[238] Summary ...............................................................................................................[268]

[1] These proceedings arise out of a series of agreements entered into between two beekeepers. The key protagonist for the plaintiffs is Mr Denis Watson. He is a trustee of the first plaintiff, the Salem Charitable Trust (“Salem”), and a shareholder in and the managing director of the second plaintiff, Watson & Son Limited (“WSL”). The key protagonist for the defendants is Mr John Whitehead. He is a trustee of the first defendant, the J & R Whitehead Trust (“JRWT”), and until February 2010, he was a trustee of the second defendant, the Shiloh Charitable Trust (“Shiloh”).

[3] Initially, the plaintiffs sued only JRWT and then on a limited basis. They alleged that they were entitled to rely on an agreement for the hire of hives dated

29 November 2011 (which I deal with below), and that pursuant to this agreement, they had a right of first refusal to purchase all non-medical-grade manuka honey produced from 2,300 beehives which they had leased to JRWT. They asserted that JRWT had refused to sell the honey to them and had sought to impose unreasonable and non-commercial terms (including a demand for full payment of the purchase price before the honey was able to be uplifted). They asserted that they had the full purchase price ($1,140,000) available in cleared funds and that they would pay it without any deduction or set-off contemporaneously with the supply of the honey. They sought an injunction to prevent JRWT from selling the manuka honey to any other party and a declaration that they had exercised the right of first refusal to purchase the honey from JRWT.

[4] The matter was called before Heath J on 25 June 2013. Counsel then filed a joint memorandum. Inter alia, JRWT agreed not to sell the honey the subject of the claim pending further hearing. When the matter was next called before Brewer J on

11 July 2013, the Court was advised that the sale of the honey to WSL was shortly to occur, and that it was anticipated that the required payment would be made through the respective solicitors’ trust accounts that morning.

[5] While this dispute did settle, in the process, JRWT filed a statement of defence to the plaintiffs’ claim together with a counterclaim in which judgment was sought for:

(a) $690,694.04 together with interest at the rate of 18 percent for monies said to be owing for the supply of honey pursuant to various agreements entered into between 30 October 2011 and 1 December

(b) $495,912.75 together with interest at the rate of five percent for honey supplied between 4 April 2012 and 30 August 2012.

JRWT applied for summary judgment against the plaintiffs on their counterclaim. Timetable directions were put in place to bring this application on for hearing. Ultimately, however, JRWT did not proceed with it. Rather, the matter proceeded to a full hearing.

[6] In response to the counterclaim, two amended statements of claim have been filed by the plaintiffs, the first on 24 July 2013, and the second on 17 April 2014. The first amended statement of claim joined Shiloh to the proceedings, but the scope of the proceedings remained relatively narrow. Only two causes of action were then asserted – breach of contract and breach of the Sale of Goods Act 1908. The second amended statement of claim is a much more extensive pleading. The defendants have filed statements of defence to both amended statements of claim, and they have amended their counterclaim. They have also claimed a set off in the event that they are found to owe money to the plaintiffs. I deal with the pleadings in more detail below.

[7] The various agreements at issue in these proceedings involve the sale and supply of honey – primarily manuka honey, the sale and purchase of the hives from which the honey was harvested and the sites on which those hives were placed, and the hire of those hives and sites.

[8] As the name suggests, manuka honey is produced by bees which have access to wild manuka bush. It is only produced in New Zealand. It has long been considered to have antibacterial qualities and, according to Mr Watson, these were scientifically proven in 2000. As at 2009, the market for manuka honey was growing. However, there were not many suppliers of high-quality manuka honey.

[9] Manuka honey is harvested in late spring/summer. The weather can have a significant impact on production from season to season. Another key component to good manuka honey production is the availability of good hive sites in close proximity to manuka bush. Beekeepers seek to place hives on mono-floral sites that are capable of producing high quality honey. Due to land use changes, the majority of manuka sites now tend to be located in relatively remote areas. Beekeepers have to negotiate agreements with the land owners so that they can site their hives on their land. In 2009, agreements were often relatively informal, although the location of sites was required to be registered with a governmental entity – AgriQuality.

[10] The antibacterial and anti-inflammatory characteristics found in manuka honey come from a naturally occurring organic compound called methylglyoxal (MGO). At the times in issue in these proceedings, the characteristics of manuka honey were measured by reference not to its MGO levels, but rather by reference to its non-peroxide activity (NPA) levels. Any manuka honey with an NPA level greater than 15 was considered to have a relatively high level of antibacterial and anti- inflammatory benefits. It could reach higher levels, for example, 20+. The level of bioactivity in the honey determined its value, and the returns which could be generated from its sale.

[11] Mr Watson is an experienced beekeeper and honey trader based in Masterton. He and his company, WSL, deal primarily in manuka honey and Mr Watson has been at the forefront in the development of the New Zealand bee and honey industry generally. He, through WSL, has significant beekeeping operations around the North Island including in Northland. As at 2009, WSL had approximately 5,000

hives. The business has expanded markedly in recent years and WSL now has approximately 16,000 hives. In its most recent financial year, WSL sold approximately $35 million of honey, mainly to overseas buyers.

[12] Mr Watson and Mr Whitehead knew each other. Mr Watson had previously employed, through another entity, two of Mr Whitehead’s brothers, who are also beekeepers.

[13] Mr Whitehead is an experienced beekeeper. He is based in Kerikeri and he has been involved in the honey industry in the Northland area for over 10 years. He and his wife run their business through JRWT. It is a trading trust and it carries on business as a honey producer and supplier. Mr Whitehead and his wife have a strong social conscience and they wanted to advance monies to various charitable causes. In July 2006, they settled Shiloh. It was incorporated as a trust board under the provisions of the Charitable Trusts Act 1957. Mr and Mrs Whitehead and a Mr Ellis were the initial trustees. In June 2009, Mr and Mrs Whitehead appointed their solicitor, Mr Hockly, and an associate in his firm, a Mr Evans, as trustees. Mr and Mrs Whitehead and Mr Ellis retired as trustees as from February 2010.

[14] Both Mr Watson and Mr Whitehead gave evidence before me. I regret that I did not find either of them to be a particularly credible witness. Mr Watson struck me as an “ideas man”, who paid little attention to detail. Mr Whitehead struck me as being the more astute businessman, but he was a difficult witness. He was inflexible in his views and unwilling to accept even the most obvious proposition unless it could be backed up by documentation. Further, he took almost every opportunity open to him to discredit Mr Watson.

[15] As the evidence unfolded, it became clear to me that the relationship between Mr Watson and Mr Whitehead had deteriorated significantly. Both were keen to and did take any point they thought might advantage their respective cases. Put bluntly, both had lost whatever objectivity they may initially have had in relation to the matters in dispute in this case.

[16] As a result of my reservations about the evidence given by both Mr Watson and Mr Whitehead, I have focussed my attention primarily on the agreements which

were entered into, on other contemporaneous documents, and on the evidence of less partisan witnesses.

[17] Before discussing the agreements in issue, I outline the background agreements involving first Shiloh and JRWT, and then Salem and JRWT. They set the scene for the agreements which followed.

[18] The Whiteheads wanted to create a regular source of income for Shiloh. To this end, in May 2008, JRWT and Shiloh entered into an agreement whereby Shiloh purchased 3,000 beehives from JRWT for $3.9 million (plus GST). This equated to a purchase price of $1,300 (plus GST) per hive. Ownership of the hives passed to Shiloh on 1 June 2008. No monies changed hands however. Rather, JRWT advanced the purchase price to Shiloh, and it entered into a deed of acknowledgement of debt. The deed recorded that the purchase price was to be repaid over a term of 25 years, and that no interest would be payable. At the same time, Shiloh entered into an agreement whereby it leased the hives back to JRWT for five years, with various rights of renewal thereafter. The rental payable was $200 per hive per year.

[19] There were tax advantages to both JRWT and Shiloh from these arrangements, and when Shiloh sought to claim a GST refund in respect of the purchase of the hives, the Inland Revenue Department refused to accept that the arrangements were bona fide. The IRD’s primary concern related to the purchase price attributed by the parties to the hives. It considered that it was excessive. By mid-October 2009, the IRD was taking the view that the agreements were a tax avoidance arrangement under s BG1 of the Income Tax Act 2007. It was threatening to impose shortfall penalties on the transactions, which would have had significant financial consequences for both Shiloh and JRWT.

[20] In late 2009, Mr Whitehead approached Mr Watson and told him about the difficulties he was facing with the IRD. Mr Whitehead was keen to find someone who would purchase hives from him at a price which would assist in justifying to the

IRD the price which JRWT and Shiloh had put on the 3,000 hives sold/purchased between them in 2008.

[21] Mr Watson was prepared to assist, and, in the event, Salem and JRWT entered into an agreement for the sale and purchase of an additional 500 hives owned by JRWT, at a purchase price of $1,350 per hive. The agreement is dated 30 November

2009. It was not signed by one of the trustees of JRWT, a Mr Edward Whitehead. None of the parties, however, sought to make a point of this. All treated the agreement as being binding as between Salem and JRWT. In the agreement, a hive was defined to mean a two-box beehive, and the definition extended to include “the livestock” contained in the hives and the rights to the sites on which the hives were placed. There was a schedule to the agreement listing those sites. Possession of the hives was given on 1 November 2009 but settlement was not due until 10 March

2010. Risk passed to Salem on the possession date. The agreement recorded that any honey which had not been removed from the hives prior to the date of the agreement – 30 November 2009 – belonged to Salem as the purchaser. The honey was to be harvested and extracted by JRWT. If the honey was sold, it was to be sold by JRWT as agent for Salem, and the sale proceeds were to be applied towards the amount payable by Salem to JRWT for the hives. Salem agreed to pay a fee of $100 (plus GST) to JRWT for each hive from which JRWT extracted honey.

[22] This agreement proceeded satisfactorily from both Salem’s and JRWT’s perspectives. JRWT harvested and extracted the honey on Salem’s behalf, and it then sold it to WSL. WSL paid for the honey. The monies received by JRWT from the sale of the honey were credited by it against the purchase price for the hives payable by Salem. Salem paid JRWT the management/harvesting fee.

[23] The value of the honey supplied was, however, only sufficient to cover 400 hives, rather than the 500 the subject of the agreement for sale and purchase. The parties resolved this potential difficulty amicably. The agreement for sale and purchase was varied by JRWT taking back 100 hives and site placements. A credit note was issued by JRWT. The end result was that Salem acquired 400 hives and the accompanying sites.

[24] WSL was keen to build up its own supply of hives in the Masterton area, and in the event, Salem decided to remove the hives from the sites in Northland which it had acquired. In August/September 2012, the hives were transported down to Masterton for use in WSL’s beekeeping operations in that area.

[25] Buoyed by the relative success of the initial 2009 agreement, Messrs Watson and Whitehead decided to enter into a series of further agreements. This time, they involved Shiloh and the 3,000 hives JRWT had sold to Shiloh in 2008.

[26] Negotiations commenced in early 2010 and on 11 October 2010, Shiloh and Salem entered into four separate agreements for, in total, 3,000 hives.¹They were referred to by the parties as the first, second, third and fourth agreements. I adopt the same terminology and summarise each briefly.

Shiloh agreed to sell, and Salem to buy, 400 hives, at a price of $1,350 per hive – a total purchase price of $540,000 (plus GST). The hives were defined to mean three-box beehives, together with the livestock in the hives and the rights to the sites on which they were placed. Possession date was 15 October 2010, and as from that date, risk passed to Salem and it had the right to lease the hives and sites to JRWT. Settlement date was 1 March 2011. The agreement recorded that, prior to 11 October 2010, Shiloh had the right to remove any honey from the hives. It then went on to provide (cl 4.1) as follows:

Any honey not removed from the hives prior to that date shall belong to the purchaser or party leasing the hives.

¹In their pleadings, the plaintiffs asserted that there was an agreement entered into on 2 August

2010 in relation to sale/purchase of 750 hives. The defendants accepted that there were negotiations in this regard, but denied that any agreement was concluded. I agree with the defendants. Mr Watson’s evidence was that, by mid-August 2010, there had been significant discussions about “a more substantial arrangement”. A draft agreement was prepared. A copy was produced in evidence. There was no evidence suggesting that it was ever signed. Rather, the evidence suggested that the draft was part of the ongoing negotiations and that they culminated in the various agreements which were signed on 11 October 2010.

Prior to settlement date, hives and sites will be leased to JRWT from 15 October 2010 to March 2011. Any lease or honey in lieu of rental received by the purchaser for hives and sites will be paid to vendor immediately towards the [purchase price].

The second agreement related to 700 hives and the total purchase price was $945,000 (plus GST). Possession date was again

The third agreement related to 900 hives, and the total purchase price was $1,215,000 (plus GST). Possession date was also 15 October

The fourth agreement related to 1,000 hives, at a total purchase price of $1,350,000 (plus GST). Possession date was also 15 October 2010, and settlement date was 5 October 2011.

Except as noted the second, third and fourth agreements were in the same terms as the first agreement.

[27] On the same day – 11 October 2011 – Salem and JRWT entered into an agreement for the hire of the 3,000 hives which Salem was purchasing from Shiloh and the 400 hive sites which Salem had already purchased from JRWT (“first agreement for the hire of hives”). The agreement commenced on 15 October 2010. It was for a term of five months through until March 2011. Rental for the hire of the hives over that period was $917,000 (plus GST). It was payable in cash, or “in the equivalent value of honey”. JRWT was responsible for maintaining the hives and taking care of the livestock contained in them over the term of the agreement.

[28] The second agreement was settled. On 31 March 2011, Gaze Burt, acting for Shiloh and JRWT, transferred $1,086,750 to Salem’s and WSL’s solicitor. This was the rental payable pursuant to the first agreement for the hire of hives as well as an additional sum owing to Salem/WSL for some honey boxes and trays.²On the same day, Salem’s solicitors paid $1,086,750 to Shiloh’s solicitors to settle the purchase of the 700 hives ($945,000 plus GST of $141,750). A few months later, Salem uplifted

[29] Salem failed to settle the first, third and fourth agreements. A meeting was held at the offices of Gaze Burt (Shiloh’s and JRWT’s solicitors) on 5 October 2011 to address this issue. This was followed by a series of negotiations between the parties' respective advisors, and ultimately, a series of further agreements, all dated

This deed was between Shiloh and Salem. It recorded in its recitals the detail of the first, second, third and fourth agreements. It noted that Salem had paid the purchase price under the second agreement, and that it had taken title to the hives the subject of that agreement, but went on to record that it had not paid the monies due under the first, third and fourth agreements. It recorded that the parties had agreed that it was in their mutual interests to negotiate a satisfactory arrangement to settle the expectations of each party under the first, third and fourth agreements, and it set out how those remaining

²In the second amended statement of claim, the plaintiffs asserted that WSL, instead of paying JRWT for honey supplied, made payments of equivalent sums to Salem who paid the purchase price of the hives to Shiloh. It was alleged that JRWT paid to WSL the sum of $1,086,750 for honey extracted from WSL’s hives. These assertions were not borne out by the evidence or the contemporaneous documentation. Rather, the evidence established that WSL paid JRWT approximately $1.7 million for honey supplied between 15 October 2010 and 31 March 2011. There was no evidence to suggest that it made any payments to Salem. Invoices and statements were prepared which recorded that JRWT paid $1,086,750 to Salem for rental due and for the supply of honey boxes and plastic trays by WSL. There was a separate agreement signed by Mr and Mrs Watson in regard to the honey boxes and plastic trays. WSL did not have a proprietary interest in the hives the subject of the second agreement. They were purchased by Salem.

2011, and to then pay further instalments of $150,000 each on the twentieth days of December 2011, January, February, March, April, May and June 2012, with a final payment of $147,250 on 25 July

2012. Title to the hives the subject of the third agreement was then to pass to Salem. The deed went on to provide that if Salem settled the third agreement, the parties were to settle the first and fourth agreements. The total amount owing under those agreements was

$2,173,500 (inclusive of GST). The sum of $600,000 was to be paid by Salem on 30 July 2012 (the settlement date) and $1,573,500 was to be paid by way of a loan back from Shiloh to Salem and an exchange of funds between the respective solicitors. The terms of the loan were set out in some detail. Security for the loan was to be by way of “a specific security agreement” over the 1,400 hives the subject of the first and fourth agreements. In consideration of Shiloh granting Salem further time to settle the purchase of the hives, Salem agreed to pay Shiloh interest on the outstanding sale price under the first, third and fourth agreements, at the rate of four percent, with interest calculated on a daily basis. It was also recorded that Salem could assign its rights under the deed.

Salem assigned its rights and obligations under the deed of arrangement to WSL. WSL covenanted with Salem to meet Salem’s obligations under the deed of arrangement, and to indemnify Salem against any liabilities that Salem might incur as a result of WSL’s default. WSL also covenanted with Shiloh to make all payments required under the deed of arrangement. In consideration of Shiloh consenting to the assignment, Salem guaranteed to Shiloh the “due and punctual future payments” to be made under the deed of arrangement by WSL.

Salem and JRWT entered into an agreement for the hire of the 2,300 hives being purchased pursuant to the first, third and fourth agreements. The agreement recorded that Salem either owned the hives, or had a possessory interest in them. The term “hives” was defined to include the sites on which they were positioned and “may include all sites” previously owned by JRWT or Shiloh that had been purchased by Salem. Salem let and JRWT hired the hives as defined. The lease commenced on 1 April 2011, and was for an initial term of one year and four months. Rental was calculated at $300 per hive per annum, and the annual rental was $690,000 (plus GST). Rental was payable at the rate of $57,500 per month in arrears, as follows:

(i) Rental for the months of January 2012 to July 2012 was to be paid on the last day of each month for that month;

(ii) Rental for the months April 2011 to December 2011 was to be paid on 30 July 2012 (that is, in one lump sum);

(iii) If the lease was renewed, then rent from thereon was to be paid monthly in arrears on the last day of each month.

In consideration of the rent being paid at the end of the term, JRWT agreed to pay Salem interest on the rent on a monthly basis from the end of each monthly period to 30 July 2012. The interest rate was six percent per annum, calculated on a daily basis. JRWT had the right to renew the lease for five further terms, each of one year, commencing on 1 August 2012. Rental was to be reviewed annually by agreement. The parties expressly agreed that the hives were in good and acceptable condition, that the livestock was in good health, and to the siting of each hive. It was recorded in the agreement that all honey produced from the hives was the property of JRWT as the lessee. The agreement also went on to provide that Salem would purchase annually from JRWT up to 50 tonnes of medical-grade manuka honey, and JRWT granted to Salem a right of first refusal to purchase all non-

medical-grade manuka honey from the hives. The agreement recorded that JRWT acknowledged that Salem’s rights to grant the lease were subject to the prior rights of Shiloh.

By deed of assignment dated 29 November 2011, Salem transferred its rights and obligations under the second agreement for the hire of hives to WSL, with the consent of JRWT. The terms of the assignment were the same as those which are noted in (b) above.

JRWT and WSL entered into an agreement for the sale and purchase of honey. It was recorded that JRWT had delivered to WSL various supplies of honey pursuant to certain numbered invoices. It was also recorded that WSL wished to purchase further shipments of manuka honey from JRWT. It was agreed that the total sum due once all of the honey was delivered would be $1,980,610. WSL was required to test the honey at its cost, and to be satisfied that the honey met all of its requirements before it was transported from JRWT’s warehouse. It was recorded that the act of transporting the honey would “deem [WSL] to have accepted the honey”. A payment regime was put in place. WSL had to pay $173,691.82 on execution of the agreement,

$173,691.82 on 5 December 2011, $70,000 on 10 January 2012, and then nine consecutive payments of $173,691.82 on the twentieth day of each month, commencing on 20 January 2012. It was recorded that if there was any default by WSL, then WSL was to pay JRWT interest on any overdue sum at the rate of 18 percent per annum, calculated daily from the due date until the date of actual payment. WSL was also to pay JRWT’s costs of enforcing payment of the debt, including its solicitor/client costs. It was recorded that JRWT had entered into the agreement with WSL at the request of Mr Watson, and that he personally guaranteed WSL’s obligations under the agreement.

[30] It is these key November 2011 agreements which are at the heart of these proceedings.

[31] Initially, all went well. JRWT supplied honey to WSL and WSL paid for honey supplied. As at 13 October 2011, WSL had paid all outstanding amounts owing in respect of honey supplied, and its account with JRWT had a nil balance. Substantial supplies of honey were made thereafter. As at 31 October 2011, WSL owed approximately $1.4 million to JRWT. As I discuss shortly, WSL made various payments in reduction of that amount, as required by the agreement for the sale and purchase of honey. JRWT continued to supply honey, and the amount owing by WSL to JRWT fluctuated, ranging from a high of approximately $1,630,000 as at

[32] Under the second agreement for the hire of hives, JRWT paid rental to Salem/WSL for the months of January, February, March and April 2012 by or before the dates fixed for payment. There was, however, a delay in the payment of rental for the months of May, June and July 2012. Rental for those months was not paid until the end of July 2012. The lump sum payment of $595,125 (GST inclusive) due for the months April to December 2011 was due for payment on 30 July 2012. It was not paid by JRWT.

[33] Salem/WSL paid to Shiloh $812,500 as required by the deed of arrangement to meet its cash commitment in respect of the third agreement, although some of the payments were made late. The balance of the purchase price required to complete the third agreement came from the rental payments made by JRWT to Salem/WSL. However, Salem/WSL failed to pay the $600,000 which was due to be paid on

30 July 2012 in respect of the first and fourth agreements, and neither Salem nor WSL entered into the loan documentation with Shiloh in respect of the balance of the purchase price ($1,573,500).

[34] Once matters came to a head in late July/early August 2012, there were numerous discussions between Mr and Mrs Watson, Ms Mitchell, (an accountant and

WSL’s chief financial officer), and Mr Whitehead, regarding the supply of honey and monies owing between the various entities. JRWT owed a significant amount to the IRD for GST. It was looking to secure cash. Mr Whitehead spoke to Ms Mitchell and told her that he needed to generate cash as quickly as possible. Mr Watson was not prepared to allow WSL to pay any more to JRWT until he could be sure that Shiloh would release the 900 hives Salem/WSL had purchased under the third agreement. Various proposals were discussed, but little progress was made.

[35] On 29 August 2012, a letter was signed by Mrs Watson and Mr Whitehead recording a partial agreement which had been reached. WSL agreed to pay JRWT

23 tonnes of honey. WSL was to immediately on-sell that honey. It anticipated receiving payment for the honey in the week of 21 September 2012, and agreed that at that point, it would pay a further $100,000 to JRWT to reduce the amount owing.

[36] On 31 August 2012, JRWT sent WSL a statement, advising that the total amount then outstanding for honey was $1,562,405.54.

[37] On 5 December 2012, WSL’s and Salem’s solicitor, Mr Bale, wrote to JRWT’s and Shiloh’s solicitor, Mr Hockly. Mr Bale recorded that rental was in arrears under the second agreement for the hire of hives, and that the total amount required to bring the rental up to date as at December 2012 was $925,750 (GST inclusive). He also recorded his instructions that no notice of intention to renew the second agreement for the hire of hives had been received. He asserted that JRWT was in default. He recorded that Shiloh/JRWT was holding onto the 900 hives purchased by Salem/WSL and refusing to release them. He also expressed concern that the sites, which were part of the sale and purchase agreements, were not legally controlled by Shiloh, and that Shiloh had failed to provide evidence of its right to the same. It was acknowledged that WSL owed money for honey supplied by JRWT, but Mr Bale recorded that WSL was reluctant to pay any more money for honey supplied until JRWT paid the outstanding rental owing. It was also recorded that WSL considered that JRWT had had the benefit of harvesting honey from the 900 hives that were owned by WSL, and that a conservative estimate of the market value of that honey was $675,000. WSL gave notice that the agreement for the hire of hives

had come to an end. Notice was also given that unless Shiloh provided evidence that the sites sold pursuant to the second and third agreements were, in fact, legally owned or controlled by it, Salem would be making demand on Shiloh for repayment of part of the purchase price, and, if necessary, suing Shiloh for breach of contract. Concern was expressed that JRWT had sold non-medical grade manuka honey to parties other than WSL, in breach of WSL’s first option over that honey.

[38] Mr Hockly replied on 19 December 2012. He advised that JRWT was exercising its right to renew the hire agreement for a further one-year period. It was proposed that rental should reduce to $150 per hive. It was acknowledged that JRWT had not made the rental payments. It was noted that JRWT would like to pay the rental owing prior to Christmas, and it was proposed that the transactions set out in the deed of arrangement should still proceed. It was denied that the second agreement for the hire of hives had come to an end, and it was asserted that the rental had not been paid by JRWT, because WSL had failed to pay for honey supplied to it.

[39] On 7 January 2013, Mr Bale replied. He repeated his assertion that the amount outstanding in respect of hive rental was $925,750 as at the end of December

2012. He asserted that JRWT’s attempt to renew the second agreement for the hire of hives could not succeed, and repeated that notice had been given and that the agreement would not be renewed. He also asserted that there was no right of set off between the various agreements.

[40] There was further without prejudice correspondence. Copies were produced. Although the defendants waived privilege, the plaintiffs did not do so. I do not refer to it and I have not taken it into account in determining this matter.

[41] In late-March 2013, Shiloh demanded from JRWT payment of the rent payable under the second agreement for the hire of hives. It sent an invoice to JRWT in that regard dated 22 March 2013. The total amount of the invoice (GST inclusive) was $966,000. The invoice was paid by JRWT in two payments – the first payment of $644,000 was made on 22 March 2013 and the balance of $322,000 on 9 April

[42] On 28 March 2013, Mr Whitehead wrote to Mr Watson advising that JRWT no longer wished to lease any hives from WSL, and asking WSL to uplift the 900 hives which Salem had purchased pursuant to the third agreement. He also offered to pay the rental due on the 900 hives to WSL up to 31 March 2013. On 4 April 2013, Mr Whitehead wrote again to Mr Watson advising that, from 1 April 2013, JRWT would charge a rate of $25 per hive per month for management of the 900 hives until they were picked up. He again requested an invoice for the rental due for the 900 hives until 31 March 2013, and he requested payment of the outstanding debt owing in respect of the supply of honey.

[43] On 11 April 2013, Mr Hockly wrote to Mr Bale. He recorded that Salem/WSL had failed to settle the first and fourth agreements and advised that Shiloh was cancelling the same without prejudice to any claim for interest or damages. On the following day, 12 April 2013, Mr Hockly, as a trustee of Shiloh, wrote to Mr and Mrs Whitehead, as trustees of JRWT, asking JRWT to pay rental for the remaining 1,400 hives the subject of the first and fourth agreements, at the rate of

2013, Mr Bale wrote to Mr Hockly in that regard. On 25 May 2013, JRWT sent WSL an invoice for $32,257.50, for the management of the hives from 1 April 2013 to 9 May 2013. On the same day, Mr Whitehead wrote to Mr Watson proposing that the parties agree a time for WSL to pick up the 900 hives. He suggested that WSL’s beekeeper based in Northland might be able to take over the management of the 900 hives and sites. On 15 April 2013, Mr Watson replied. He sought to clarify arrangements for the pickup of the hives. In the event, the 900 hives were uplifted by WSL in mid-May 2013. I deal with these matters in greater detail later in this interim judgment.

[46] The pleadings are prolix and difficult to follow. They nevertheless define the issues in dispute, and they help to give some focus to the shifting sands of the

plaintiffs’ case, to the overly long and unstructured evidence, particularly from Messrs Watson and Whitehead, and to the wide-ranging, and particularly for the plaintiffs’, diffuse submissions of counsel.

[48] The defendants rely upon the deed of arrangement. They assert that the plaintiffs failed to meet their obligations under that deed, and in particular, that they failed to pay the instalment of $600,000 due for the hives the subject of the first and fourth agreements on 30 July 2012. They also assert that the plaintiffs failed to pay outstanding instalments and interest, or to provide the required security agreement. They assert that $897,250 is owing pursuant to the deed. They also seek damages for breach of the first and fourth agreements, and outstanding interest. Alternatively, they seek an accounting of such amount as is due under the deed of arrangement, and under any other related agreements, under Part 16 of the High Court Rules.

[49] In addition, the defendants say that the plaintiffs breached the second agreement for the hire of hives by cancelling it, and that they were thereby deprived of their entitlement to derive honey from the hives and sites. They seek an inquiry into the amounts due as a consequence of the plaintiffs’ alleged breach.

[50] Finally, the defendants claim monies said to be due under the agreement for the sale and purchase of honey and for subsequent sales. The principal claimed under the agreement is $690,694.04, together with accrued interest at the rate of

$495,912.75. They claim interest on this sum at the rate of five percent pursuant to the Judicature Act 1908. In both cases, they seek solicitor and client costs.

[51] Damages and costs are sought not only against the plaintiffs, but also against Mr Watson personally. The defendants say that Mr Watson gave a personal guarantee of WSL’s performance under the agreement for sale and purchase of honey, and further, that Mr Watson covenanted with JRWT to make all payments and

observe the terms and conditions of the second agreement for the hire of hives in the deed of assignment which was entered into.

[52] The plaintiffs say that they met their obligations under the deed of arrangement. They admit that they did not pay the instalment of $600,000 due on

30 July 2012, but say that this was due to the defendants refusing to offset those monies against the rental due and owing by JRWT on the same day. They deny that they failed to pay loan instalments and say that the loan was not put in place. They deny that there are any other amounts due and owing to the defendants under the deed of arrangement or the first and fourth agreements.

[54] In relation to the agreement for the sale and purchase of honey, they admit they received honey from the defendants, but assert that the honey supplied was not of an acceptable quality for the price paid. They say that if there are any monies owing to the defendants, they are entitled to set off against those sums any monies owing to them.

[56] The plaintiffs plead the background to the various key agreements, and then refer specifically to the first to fourth agreements. They assert that over the period from August 2010 to April 2011, JRWT produced honey from the hives owned by Salem and supplied it to WSL. They say that WSL, instead of paying JRWT for the honey supplied, made payment of equivalent sums to Salem which, in turn, paid Shiloh for the hives.

[57] They then refer to various attempts they say were made to renegotiate the agreements thereafter. The key November 2011 agreements are set out, and it is asserted that all were entered into contemporaneously. It is claimed that the deed of arrangement and the second agreement for the hire of hives are related, because it

was an express and/or implied term of the agreements that the monies received by WSL from the second agreement for the hire of hives would fund the purchase of the hives under the deed of arrangement.

[58] The agreement for sale and purchase of honey is detailed. It is asserted that the purchase price for honey detailed in the agreement was “at least $5 higher than the market rate at the time for manuka honey of that NPA rating and assuming it was of good quality”.

[59] The deed of arrangement is then referred to. It is asserted that the price of

$1,350 (plus GST) per hive was “at least $1,000 plus GST more than the value of the beehive being sold”.

[60] The plaintiffs then refer to the second agreement for the hire of hives. They summarise its terms and acknowledge that the honey produced from the hives was to be the property of JRWT as the lessee. Curiously, given the correspondence I have noted above at [37], they also assert that the second agreement for the hire of hives was renewed in or about July 2012.

[61] Various breaches of the key agreements by JRWT/Shiloh are pleaded. The plaintiffs allege that:

(a) JRWT/Shiloh did not have agreements in place with landowners for the sites on which the hives were placed;

(b) WSL paid the defendants “a sum of $2,000,000 (plus GST) more than the value of the hives, before allowing for the sums repaid by JRWT through rental or the value of honey”;

(c) JRWT failed to pay rental owing under the second agreement for the hire of hives, and that the following amounts are outstanding:

(iii) $483,000 for 1,400 hives for the period 1 July 2012–July 2013. (d) Shiloh refused to deliver up the 900 hives the subject of the third

agreement when requested to do so by WSL and JRWT wrongfully used those hives and took honey from them in December 2012 and January 2013;

(e) When the 900 hives were finally delivered to WSL, at least 20 percent were no longer able to be used, as their condition was poor and they did not have queen bees in them;

(g) The defendants wrongfully repudiated the second agreement for the hire of hives by failing to pay rental and then by purporting to cancel the agreement and/or by refusing to renew it;

(h) Settlement of the purchase of the hives pursuant to the first to fourth agreements was contingent, expressly or impliedly, on JRWT continuing to pay rental on the 2,300 hives, or on such hives as remained in its possession, so that the $600,000 payment due in July 2012 pursuant to the deed of arrangement and the loan repayments could be offset against the hive rental;

(i) JRWT paid Shiloh the sum of approximately $900,000 when this sum was owed to WSL;

(i) breached the deed of arrangement and the first to fourth agreements by failing to reimburse WSL for the hive purchase payments through delivering to WSL the equivalent value in honey and/or by paying hive rental, by failing to have in place hive agreements for the sites, by failing to provide WSL with information about the sites, by failing to provide rights associated with the sites that could be assigned to WSL, by failing to deliver up the 900 hives under the third agreement on settlement, by failing to allow a set off between the honey supplied and the hive purchases, and by wrongly repudiating the deed of arrangement.

(ii) breached the second agreement for the hire of hives by failing to pay rental, by failing to deliver up the 900 hives, by failing to deliver up honey or an equivalent value of honey extracted from the hives to offset the purchase price of the hives, and by failing to deliver up the honey or an equivalent value of honey extracted from the 900 hives between November 2011 and February 2012, by seeking to charge WSL a management fee for the hives which wrongly remained in JRWT’s possession after the 2012 honey season, by seeking to reduce the hive rental payable, by wrongly repudiating the second agreement for hire, and by wrongly assigning the rights under the agreement to Shiloh and making payment of the rental owing to WSL to Shiloh.

It is alleged that the defendants’ conduct was misleading or deceptive. The allegations referred to above in [62(a)] are repeated. It is also alleged that the defendants made false or misleading representations, namely that the purchase price of all of the hives would be offset by the supply of honey or rental paid, that the honey supplied was of a quality that was fit for export, that the manuka honey was worth the price being charged, and that the sites on which the hives were situated were valuable.

The same representations as are noted above in regard to the breach of the Fair Trading Act are repeated. In addition, it is alleged that the defendants represented that there was independent, reliable valuation evidence to support a value of $1,350 (plus GST) for the hives and sites being sold. It is alleged that this representation was not true.

It is alleged that the defendants, through their trustees, and their legal and tax advisors, created a belief or expectation that the representations they were making were true, including, inter alia, that the purchase price for all of the hives would be offset by the supply of honey or rental paid, that the honey supplied was of a quality that was fit for export, that the manuka honey was worth the price being

charged, that the sites on which the hives were situated were valuable, and that there was independent, reliable valuation evidence to support a valuation of $1,350 (plus GST) for the hives and sites being sold. Reliance is alleged as is detriment.

It is alleged that both the defendants and the plaintiffs had a common and continuing intention that the supply of honey by JRWT and/or the payment of rental for the hives would offset the purchase price of the hives payable by the plaintiffs. It is alleged that the common intention existed in November 2011 when the agreements were entered into, that it continued, and that the agreements are inconsistent with it.

(a) $1,035,000 under the deed of arrangement. This sum is claimed, because it is asserted that the plaintiffs paid $1,350 (plus GST) for each of the 900 hives the subject of the third agreement, when each hive was worth only $350 (plus GST);

(b) $72,450 based on the allegation that 20 percent of the 900 hives delivered were not able to be used and were worthless;³

(c) $1,607,125 which it is alleged remains unpaid by JRWT for rental said to be owing under the second agreement for the hire of hives;

(d) $690,000 representing the value of the manuka honey produced from the 900 hives the subject of the third agreement over the 2012/2013 season which the plaintiffs say belonged to them but which they did

³It is alleged that 20 percent of the 900 hives were worthless, that the value per hive was $350, and that the loss was therefore $63,000 + GST of $9,450 – a total of $72,450. In his brief of evidence, Mr Watson claimed $243,000 (plus GST) for this alleged breach. No amendment to the pleadings was signalled or made.

[64] The defendants deny the key allegations. They assert that the plaintiffs were independent commercial parties, knowledgeable and experienced in the honey and hive industries, and that the agreements were negotiated on an arm’s-length basis. They say that the plaintiffs were in a position to make their own informed assessment of the respective values and benefits of the transactions they chose to enter into. They deny any express assurance that the purchase price for the hives was to be offset against the value of the honey extracted from the hives and supplied by JRWT. They say that the formal documentation negotiated and entered into between the parties comprised the various agreements and deeds signed by them, and that those documents set out their legal rights and obligations. They say that there were no oral assurances or implied obligations or representations that circumvented or prevailed over the express terms and conditions detailed in the formal agreements. They say that the first to fourth agreements signed in October 2010 were superseded by the deed of arrangement and the second agreement for the hire of hives. They assert that the plaintiffs failed to make payments due under the deed of arrangement, thereby breaching the deed. They allege that the plaintiffs owe substantial monies to Shiloh and also to JRWT. They say that the plaintiffs cancelled the second agreement for the hire of hives on 5 December 2012, and that they cancelled the deed of arrangement, reserving their right to claim against the plaintiffs for its breach. They also say that the plaintiffs owe substantial sums of money to them for honey supplied, and they dispute any entitlement by the plaintiffs to “intermingle or cross relate” amounts due in regard to honey sales and amounts said to be owing under the other agreements.

[65] I was advised by Mr Sullivan in his opening for the plaintiffs that allegations relating to the quality of the honey supplied by JRWT were no longer being pursued. However, I was also told that the plaintiffs did not resile from their assertion that they paid too much for the honey supplied by JRWT given its quality.

[66] First, it is necessary to consider the first to fourth agreements and the key November 2011 agreements and determine what they provide for in terms of honey ownership. It is then necessary to consider if the agreements apply in their terms or whether any of the causes of action raised by the plaintiffs in their second amended statement of claim affect them. I will also consider the plaintiffs’ contention that they have paid too much for the honey and hives supplied. Finally, I consider whether the agreements have been breached and the consequences which follow.

[67] Although no evidence was adduced in this regard, after I enquired, I was advised by Mr Sullivan that, at all relevant times, the trustees of Salem were Mr and Mrs Watson, and their son-in-law, a Mr Jonathan Scarlett. I was also told that Mr Scarlett used to work for WSL, that he resigned and that he went to live in the United States in late March 2010. He did not, however, resign as a trustee of Salem until

15 January 2012, sometime after each of the agreements was signed. [68] Regarding execution, I note as follows:

Mr Scarlett was recorded in the intitulement to those agreements as a trustee. He did not sign the documents. They were signed only by Mr and Mrs Watson.

Further, one of the trustees of JRWT was a Mr Edward Whitehead. He was John Whitehead’s father. He did not sign this agreement either, although he did initial each page.

(c) The deed of arrangement recorded that Mr and Mrs Watson were the trustees of Salem. It would seem from the information given to me by counsel that the deed was wrong in this regard. Both Mr and Mrs

Watson signed. Mr Scarlett did not do so and there was no provision on the deed for his signature.

(d) The same applies to the deed of assignment of the deed of arrangement, the second agreement for the hire of hives and the deed of assignment of the second agreement for the hire of hives.

[69] Normally, trustees must act unanimously, unless the trust instrument provides otherwise.⁴A copy of Salem’s trust deed was not produced in evidence and I do not know what it provides.

[70] The rule that normally, trustees must act unanimously does not apply to charitable trusts.⁵Despite its name, Salem was not a charitable trust.

[71] If only two of three trustees have entered into a contract to purchase assets, that contract cannot be enforced against the trust estate, because two out of three trustees have no power to bind cestuis que trust.⁶In such circumstances, a trustee can be personally liable on contracts into which he or she enters, unless personal liability is excluded by express stipulation.⁷

[72] The only agreements with potentially relevant express stipulations are the first and second agreements for the hire of hives. Both provided that the signatories had entered into the agreements as trustees of Salem and JRWT respectively, and that their liability was limited to the assets of the trusts. It was recorded that liability was not to be deemed personal. None of the other agreements had an equivalent provision. It would follow that Mr and Mrs Watson are personally liable for the obligations that they assumed in Salem’s name under those other agreements.

[73] However, neither the plaintiffs nor the defendants put these matters in issue. Both accepted in their respective pleadings that the various agreements bound them.

_{Indeed, both claimed to rely on the agreements in their terms. This may
be because}

⁶Luke, above n 4, at 125–126; Naylor v Goodall [1877] 47 LJ Ch 53 (Ch); Re Flower and Metropolitan Board of Works (1884) 27 Ch D 592 (Ch); Turner v Turner [1984] Ch 100 (Ch); Rodney Aero Club Inc v Moore [1998] 2 NZLR 192 (HC) at 195.

the benefit of and obligations under the key November 2011 agreements were assigned to WSL.

[74] I do note that there is no difficulty with the agreement for sale and purchase of honey. The parties to that agreement were JRWT and WSL. That document was correctly executed.

[75] Mr Sullivan maintained that Salem owned the 2011 honey produced from the hives the subject of the first to fourth agreements. This was not clearly pleaded. It became however a major plank of the plaintiffs’ argument and a number of the propositions advanced on their behalf hinged on it.⁸It was denied by Mr Black for the defendants.

[76] Clause 4.1 in each of the first to fourth agreements provided that any honey not removed from the hives prior to the date of the agreements belonged to the purchaser or the party leasing the hives. Clause 4.2 provided that the hives and sites were to be leased by Salem to JRWT, and that “any lease or honey in lieu of rental” received by Salem would be paid to Shiloh on account of the purchase price of the hives. Clause 6.3 provided that, as security for the purchase price, Salem agreed to enter into a charge over all the hives and all honey in them at any time under the Personal Property Securities Act 1999.

[77] I do not consider that cl 4.1 assists in determining who owned the honey. The clause made it clear that Shiloh had no right to any honey not removed prior to the date of the agreements. The clause left it open to Salem to reach agreement with JRWT on the ownership of the honey. This was understandable. The vendor of the hives was Shiloh. It was selling them to Salem. Once Shiloh had agreed to relinquish ownership of the honey, and once it had given possession of the hives to Salem, it was not for it to dictate who owned the honey.

[78] The use of the words “any lease or honey in lieu of rental” in cl 4.2 is curious.

_{It is not clear what the word “lease” means. The parties
assumed that it meant rental}

⁸For example, the damages calculation undertaken by Mr Vance on the plaintiffs’ behalf.

received in cash. I consider that they are right in this regard. In contrast, the words “honey in lieu of rental” did not contemplate a cash payment. The words envisaged that rather than pay rental for leasing the hives and sites, JRWT could tender honey to Salem in lieu of rental. It would not have been able to tender honey in lieu of rental if it belonged to Salem. This suggests that it was intended that the honey should belong to JRWT.

[79] Mr Black for the defendants argued that cl 6.3 confirmed that Salem did not own the honey. I do not accept that argument. If Salem did not own the honey, and was not in possession of it, how could it agree to charge it?

[80] In short, there are conflicting arguments which can be advanced in regard to ownership based solely on the wording in the first to fourth agreements.

[81] It is trite law that interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all of the background knowledge which would reasonably have been available to the parties in the situation in which they were in at the time of the contract.⁹

[82] I start by considering the parties’ prior negotiations. Evidence of such negotiations is admissible in interpreting the agreements, but only insofar as it establishes the objective background to them.¹⁰

[83] Here, the prior negotiations took place against the background of JRWT’s and Shiloh’s difficulties with the IRD.¹¹There was no dispute about this. Nor was there any real dispute that Mr Watson was prepared to enter into the agreements to try and help Shiloh and JRWT out. This does not suggest, however, that the agreements were a “tax dodge”. Indeed, Mr Watson was quite clear that this was not the case and

_{that there was a very real commercial benefit to Salem/WSL from the
agreements.}¹²

⁹Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896 (HL) at 912–913; Boat Park Ltd v Hutchison [1999] 2 NZLR 74 (CA); Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] NZLR 444 at [11], [62] and [127].

¹⁰Vector Gas Ltd v Bay of Plenty Energy Ltd, above n 9, at [13] per Blanchard J; [19] and [22] per

Tipping J; and see Gault J, who agreed with Blanchard J in relation to matters of principle at

[84] Mr Watson also gave evidence of his subjective understanding and intentions in relation to the content and meaning of the agreements,¹³it is clear that such evidence is not admissible in interpreting the first to fourth agreements. It does not assist in establishing the objective background.

[85] The negotiations culminated in the 30 November 2009 agreement between Salem and JRWT. It expressly recorded that any honey not removed from the hives prior to the date of the agreement belonged to Salem as the purchaser. It went on to provide that any honey from the hives was only to be extracted by the vendor, JRWT, and that if it was sold, it was to be sold by JRWT as agent for Salem. The sale proceeds were to be applied towards the amount payable to purchase the hives. JRWT was to be paid a fee of $100 (plus GST) for each hive for extracting the honey.

[86] I am not persuaded that the negotiations or the prior 2009 agreement assist in interpreting the first to fourth agreements. First, the provisions contained in the 2009 agreement were not reproduced in the first to fourth agreements. Secondly, the 2009 agreement was between JRWT and Salem. The first to fourth agreements were between Shiloh and Salem. A direct setoff was not available between those entities. Necessarily, the structure of the later agreements was different.

[88] The first to fourth agreements were part of a number of agreements entered into between the parties. The agreements were related and, in my judgment, it is permissible to look to the other agreements and in particular the first agreement for the hire of hives, to assist in interpreting the first to fourth agreements.

[89] The first agreement for the hire of hives did not expressly state that the honey belonged to either Salem as lessor or JRWT as lessee. Rather, it recorded that Salem was leasing the hives, including the livestock and the rights to the sites for the placement of the hives. It went on to note that JRWT as beekeeper was desirous of hiring the hives for the purpose of conducting its business as a beekeeper. Clause 3.2

_{provided for rental to be payable either in cash, or in the equivalent
value of honey.}

This clause reflected cl 4.2 in the first to fourth agreements. It compels the conclusion that the honey belonged to JRWT. Unless it owned the honey it could not tender it to Salem to satisfy its rental obligations.

– it unambiguously provided that all honey produced from the 2,300 hives the subject of that agreement belonged to JRWT as the lessee. JRWT granted WSL the right of first refusal to purchase all non medical grade manuka honey from the hives.

(b) The agreement for sale and purchase of the honey proceeded on the basis that JRWT owned the honey, that it had or would supply the honey to WSL, and that WSL was obliged to pay for it.

[91] The key 2011 agreements were the subject of extensive negotiations between the parties’ respective advisors. Mr Hockly acted on behalf of JRWT and Shiloh, and Mr Bale, and another solicitor, a Ms Calvert, acted on behalf of Salem and WSL. Mr Bale and Ms Calvert in turn were assisted by Ms Mitchell. Draft agreements were exchanged and commented on. The documents which were eventually signed only came into existence after protracted negotiations. The provisions contained in the November 2011 agreements noted above are inconsistent with Mr Watson’s argument that WSL owned the honey produced from the hives in the 2011 season. Had a change to the first to fourth agreements as significant as that which would follow from accepting the plaintiffs’ arguments been intended, it would surely have been noted by someone. There is no evidence to suggest that the issue was ever raised.

[92] Furthermore, the honey ownership arrangements contended for by the plaintiffs make no commercial sense. If the 2011 honey belonged to Salem, why would JRWT have agreed to pay rental to Salem under the first agreement for the hire of the hives? In contrast to the position in 2009, there was no arrangement entered into in October 2010 whereby JRWT was to be paid a management fee for extracting the honey from the hives. To suggest that JRWT would pay the rental and

meet the costs involved in maintaining the hives and extracting the honey, but not own the honey which had to be sold to meet the overheads, is a nonsense.

[93] The objective conduct of the parties post the first to fourth agreements is also helpful. The Supreme Court has made it clear that such evidence is admissible in construing a contract; the focus must again be on objective conduct, rather than expressions of subjective intention or understanding. If the Court can be confident from their subsequent conduct what the parties intended the words they have used in their contract to mean, and the words are capable of bearing that meaning, it would

[94] First, the second agreement was not settled through the provision of honey. Rather, the monies Salem used to settle the purchase of the hives from Shiloh came from the rental paid to it by JRWT for the lease of the hives. Mr Watson acknowledged in evidence that Salem did not receive the honey from the hives, and there is nothing to suggest that Mr Watson, Salem or WSL made any protest at the time. Mr Watson endeavoured to explain the position as follows:

...you know, I should have been awake to it and I wasn’t, I don’t get everything right, but the reality is the honey from that 700 hives should also have been credited to us and I missed it. But the hives were paid for by the rental so I guess I was pretty relaxed at that time.

[95] Secondly, the third agreement was not settled through the provision of honey either. Salem paid $812,500 by instalments towards the purchase price. The balance of the purchase price came from the rental payments made by JRWT. Again, there is nothing to suggest that Mr Watson, Salem or WSL protested at the time.

2011, approximately $2.2 million was invoiced by JRWT to WSL in respect of honey supplied. The amounts invoiced were paid without dispute. Between November

2011 and the end of October 2012, an additional $2.27 million was invoiced to WSL

_{by JRWT for honey supplied. Again, payments were made and there was no
demure}

¹⁴Vector Gas Ltd v Bay of Plenty Energy Ltd, above n 9, at [30]–[31]; Gibbons Holdings Ltd v

by WSL. Some of the honey WSL paid for was 2011 honey. It was only in the second amended statement of claim, that WSL suggested for the first time, and even then obliquely, that it had paid for honey it already owned and been denied an offset it now says should have been available to it. The assertion was only really advanced by Mr Watson in the evidence he gave at the hearing.¹⁵

[97] Fourthly, and notwithstanding that that neither Mrs Watson, who was responsible for WSL’s day to day finances, nor Ms Mitchell, as WSL’s chief financial officer, could confirm the position, I have no doubt but that WSL was claiming GST refunds from the Inland Revenue Department in respect of the honey it was purchasing from JRWT. As Mr Watson made clear, GST recoveries were an important factor for WSL if it was to meet the various obligations due and owing by it. WSL would not have been able to claim GST refunds in respect of the honey if it already owned it.

[98] Fifthly, when matters eventually came to a head, Mr Bale wrote to Mr Hockly. As I have already noted in [37], Mr Bale accepted that money was owed by WSL to JRWT for the honey JRWT had supplied to WSL. There was no assertion that Salem or WSL owned the 2011 honey.

[99] Finally, the position advanced by Mr Watson at trial on behalf of the plaintiffs was inconsistent with the stance taken earlier in the history of this proceeding, and with a number of other assertions made by the plaintiffs. For example, the injunction proceedings referred to in [3] and [4] proceeded on the implicit assumption that JRWT owned all of the honey. The assertions in the pleadings that JRWT supplied honey of inferior quality (now abandoned), or that WSL paid at least $5 more per kilogram of honey than it was worth, are inconsistent with any claim that the 2011 honey belonged to Salem throughout.

[100] In my judgment, it is clear that the honey harvested in the 2011 season did not belong to Salem, both from the various agreements which the parties signed looked

¹⁵When he gave evidence, Mr Watson seemed rather uncertain as to the scope of the argument. At times, he appeared to suggest that all of the honey harvested from the hives the subject of the first to fourth agreements belonged to Salem, whereas Mr Sullivan, no doubt aware of the unequivocal provisions in the second agreement for the hire of hives, was careful to limit his submissions to the 2011 honey.

at in their totality, and from their subsequent conduct. I agree with the defendants that the plaintiffs’ position maintained at trial is contrary to, and inconsistent with, their trading relationship with Shiloh and JRWT, with the various agreements negotiated and signed, and with the parties’ subsequent objective conduct. I find that the 2011 honey taken from the hives the subject of the first to fourth agreements belonged to JRWT.

Was the hive purchase price payable under the first to fourth agreements to be offset by the supply of 2011 honey owned by Salem?

[101] The conclusion I have reached in relation to the ownership of the honey deals with this key assertion made by the plaintiffs as well. If the honey did not belong to Salem, Salem could not offset it against the purchase price of the hives it was purchasing. Rather, WSL was required to pay JRWT for honey supplied, and Salem was required to pay Shiloh for the hives that it had contracted to purchase. Mr Watson attempted to explain this away in his evidence. He said:

I realise that the agreements do not properly record that the 2011 honey which was produced from our hives (under JRWT’s management) was to be offset against the purchase price. This was the arrangement in place at the time and I accept it is unusual that the agreements did not spell it out...

I do not accept this evidence. In my judgment, it was not the arrangement put in place at the time.

[102] In any event, it is not clear how the offset contended for by the plaintiffs could have worked. Shiloh was the vendor of the hives. Salem had agreed to purchase the hives. Shiloh had, pursuant to the first to fourth agreements, relinquished any claim to ownership of the honey. JRWT was a separate legal entity and it agreed to hire the hives from Salem and to pay Salem the rental due in cash, or to give Salem honey extracted from the hives in lieu of a cash payment. The agreements envisaged that Salem would pay to Shiloh any rental monies it received from JRWT, or transfer to Shiloh any honey it received from JRWT in lieu of a cash payment. This was not an offset between Shiloh as vendor and Salem as purchaser. The offset argument raised by the plaintiffs ignores the fact that Shiloh and JRWT were separate trusts, each with its own rights and obligations pursuant to the agreements. It also ignores the fact that the honey was supplied by JRWT to WSL.

WSL and Salem were also separate legal entities. WSL could not claim “ownership” of the honey unless and until it paid JRWT for it. I reject the plaintiffs’ “offset” argument.

[103] I now turn to consider whether or not the agreements record the bargain between the parties.

Do the October 2010 and November 2011 agreements record the bargain made between the parties?

[104] The agreements are in writing. The first to fourth agreements were prepared by Shiloh’s and JRWT’s solicitor. Although Mr Watson was cautioned by his senior staff about the wisdom of signing the documents, he did so without taking legal advice. The deed of arrangement and the other key agreements dated 29 November

2011 were the subject of lengthy negotiations between the parties’ legal and accounting advisors. All parties entered into them with the benefit of independent professional advice. All documents appear on their face to be formal contracts. They contain all the necessary and essential terms relevant to the sale/purchase/lease of the hives and the sale and purchase of the honey. I agree with and adopt the observations of Fisher J in Newmans Tours Ltd v Ranier Investments Ltd:¹⁶

If the written document appears on its face to be a comprehensive record of an agreement, that in itself will be strong evidence that it was intended to be exhaustive. The more the suggested oral term is in disharmony with the wording of the written document, the more difficult it will be to persuade the Court that it was intended to survive the written document. But if, from whatever source, the Court is satisfied as to the parties’ real agreement, it will give effect to that agreement regardless of the form in which it may have been expressed.

¹⁶Newmans Tours Ltd v Ranier Investments Ltd [1992] 2 NZLR 68 (HC) at 81; and see, Burrows, Finn & Todd, Law of Contracts in New Zealand, (4th ed, Lexis Nexis, Wellington, 2012), at [6.2.1] at 188.

[105] The plaintiffs seek to explain the first to fourth agreements and the key 2011 agreements through Mr Watson. Parole evidence is not normally admissible to add to, vary or contradict the terms contained in written agreements,¹⁷and the parties’ declarations of their subjective intent, are generally irrelevant in interpreting their agreements.¹⁸However, what is said in negotiations can be admitted for purposes other than to discover what the parties intended their words to mean. Such material can be adduced to show that the written agreement misstates the actual agreement between the parties. It can also be admitted if it shows misrepresentations by one party, or that the parties agreed to additional terms, thus showing that the written agreement is not the whole agreement. It can also be admitted to establish an estoppel.¹⁹

[106] Given the pleadings, I have considered Mr Watson’s various assertions for the purpose of considering various of the causes of action advanced in the second amended statement of claim.

[107] As noted above, pursuant to the Fair Trading Act, the plaintiffs allege that the defendants have engaged in misleading or deceptive conduct and made false or misleading representations. They rely on both ss 9 and 13 of the Act.

[108] Where breach of s 9 of the Fair Trading Act is alleged, there are three questions to be considered:

(b) Was the person directed by the conduct in fact misled? (c) Was it reasonable to be misled?²⁰

¹⁸Investors Compensation Scheme Ltd v West Bromwich Building Society, above n 9; Boat Park

_{Ltd v Hutchinson, above n 9; Vector Gas Ltd v Bay of Plenty
Energy Ltd, above n 10.}

¹⁹_{See, Law of Contracts in New Zealand, above n 16,
at [16.2.2(g)] at 200.}

[109] The plaintiffs did not plead which subparagraph(s) contained in s 13 they rely on. Nor, despite my invitation, was this issue clarified in the submissions advanced. If the plaintiffs are relying on an assertion that the honey was of a particular quality, I repeat that Mr Sullivan abandoned any argument in regard to the quality of the honey.

[110] As I understand it, the plaintiffs are asserting that the defendants represented to them that there would be an offset available, because the plaintiffs would own the honey – in effect that the arrangements put in place in the 2009 agreement between JRWT and Salem would be replicated in later agreements. They also say that the defendants represented that the rental payments to be made by JRWT would be offset against the purchase price. They seem to assert that it was represented to them that both offsets would meet all monies they were required to pay for the hives being purchased and that they would get the hives “for free”.

[111] In my judgment, there is a fundamental difficulty from the plaintiffs’ perspective with any assertion based on either s 9 or s 13 because Mr Watson did not give any detailed evidence as to what misleading or deceptive conduct the plaintiffs say the defendants indulged in or what false or misleading representations the plaintiffs say were made by the defendants. When I asked Mr Sullivan in the course of his closing submissions to refer me to the relevant evidence, he was unable to do so in any comprehensive way. I have nevertheless endeavoured to identify the available evidence.

[112] I consider first Mr Watson’s evidence in relation to the negotiations leading to the first to fourth agreements.

[113] In his evidence-in-chief, Mr Watson said that in late 2009 he discussed the sale/purchase of 3,000 hives with Mr Whitehead. He stated as follows:

The thrust of the discussion was that [Mr Whitehead] wanted a formal agreement drawn up by his lawyer whereby we would buy the 3,000 hives that he had sold to Shiloh for more than $1,300 per hive and that this purchase price would be entirely off-set against honey that was being supplied and by lease payments back from JRWT.

The whole arrangement was structured to offset the purchase price against the 2011 honey stocks and the rental. The honey produced from the 3,000 hives after October 10 2010 was owned by Salem. We could lease the hives but we still owned the honey. The hire agreement confirmed that JRWT would lease all 3,000 hives but would pay the rental in one lump sum. JRWT would not get to keep the honey produced from the hives.

In referring to cl 4.1 in the first to fourth agreements,²¹he said that the agreements were to —

Mr Watson said that it was his understanding that the honey from the hives belonged to Salem, and that he was persuaded to enter into the key November 2011 agreements by Mr Whitehead and by Mr Hockly.

[114] This evidence was, in my view, all very broad and non specific. It was more about Mr Watson’s understanding than the conduct of or representations made by or on behalf of the defendants.

[115] Contemporaneous documents confirm that there were discussions about the sale/purchase of the 3,000 hives in early-2010 between Mr Whitehead and Mr Watson. I refer to the following:

(a) An exchange of emails between Mr Watson and a WSL employee, Mr Roberts, which related primarily to the sale and purchase of honey, but went on to refer to “heads of agreement” between Shiloh and Salem as at 15 March 2010. The heads of agreement were said to include:

(b) A draft agreement for the sale and purchase of 3,000 hives was sent by Mr Watson to his wife on 12 April 2010. It recorded that any honey not removed from the hives prior to the date of the agreement was to belong to the purchaser, Salem. Mr Watson said that this document was prepared by Mr Hockly. Mr Hockly denied that he drafted it. I accept Mr Hockly’s evidence. The draft is riddled with simple spelling mistakes and inconsistencies. It does not seem likely that it was drafted by an experienced commercial lawyer like Mr Hockly. Further, the name of Mr Hockly’s firm – Gaze Burt – was removed from the cover page. This suggests that it did not come from Mr Hockly. It seems more likely that the draft was cobbled together by a layman – probably based on an earlier agreement which Mr Hockly had prepared. Ultimately, no one accepted responsibility for drafting the document. There is nothing to tie the defendants or Mr Whitehead to it.

(c) A file note prepared by Mr Hockly dated 16 April 2010. It recorded that Mr Hockly met with Mr Whitehead on 15 April 2010, and that Mr Whitehead reported that:

He has done a deal with Watson for the sale of 3,000 of Shiloh’s hives for $1,320 per hive in situation. This is plus GST... Watson does not take the hives until the 10^thof November 2010.

[116] The email sent by Mr Watson to Mr Roberts, referred to in [115(a)] above, and the later email Mr Watson sent to Mrs Watson, referred to in [115(b)] above, do not advance matters for the plaintiffs. Neither can be attributed to the defendants or to Mr Whitehead. It is only the file note prepared by Mr Hockly of his discussion with Mr Whitehead which assists in determining what Mr Whitehead said, at least to Mr Hockly. There are similarities between the information recorded in the file note and the email Mr Watson sent to Mr Roberts, but there is nothing in the file note referring to the ownership of the honey, to the claimed offset of honey against the

purchase price for the hives, or to the agreements for the sale and purchase of the

(a) There was no evidence of misleading or deceptive conduct or of a clear and unequivocal false or misleading representation made by Mr Whitehead or by anyone else on behalf of the defendants that Salem would own the honey, or that Salem could offset it against the purchase price of the hives.

(b) If the plaintiffs are saying that Mr Whitehead represented that the purchase price of the hives could be offset by rental payments made by JRWT, there was no false representation. The second agreement was settled utilising the rental payments made by JRWT. The third agreement was partially settled by utilising the rental payments made.

(c) If the plaintiffs are asserting that the purchase price was to be entirely offset by rental payments, then Salem’s conduct in relation to completion of the third agreement denies this. It paid $812,500 in cash to Shiloh to complete that settlement without argument. It is only the balance which was met by the rental payments.

[118] In my view, Mr Watson has done no more than give his subjective view of what he now thinks the first to fourth agreements should have provided. He did not explain how he came to the understanding he now professes, or suggest that any misunderstanding he may have been under was brought about as a result of misleading or deceptive conduct indulged in, or false representations made by, the defendants or by Mr Whitehead in particular.

29 November 2011. He said that WSL was to offset the purchase monies for the 900 hives being purchased under the third agreement against honey that was to be supplied by JRWT. He said:

Looking back over the documents there is no reference at all to the fundamental term in which the purchase price for the 900 hives was to be off-set by the honey extracted...

I must say that this issue is one of many I was dealing with during that period. My staff handled the finalisation of the agreements because I had a mountain of other work at the time...

I had no reason to doubt that the set-off would be honoured and that the streamlining of payments in the deed of arrangement and the new hire agreement simply presented a more commercial approach for IRD.

There is nothing in this evidence to suggest any deceptive conduct or false or misleading representation by or on behalf of the defendants. Mr Watson has simply given evidence of what he thought the agreements did provide and what he now wishes the agreements had provided.

[120] Mr Watson did suggest that he was persuaded to enter into the deed of arrangement and the other agreements dated 29 November 2011 by representations which he said were made to him at the meeting held on 5 October 2011.

[121] The meeting was held at Mr Hockly’s offices. The persons present were Mr Hockly, Mr Whitehead, Mr Watson, and a Mr Martin. Mr Martin is a specialist tax barrister who had been retained by Shiloh’s and JRWT’s solicitors to assist in the dispute with the Inland Revenue Department. He was not present for the whole of the meeting.

[122] Mr Watson told me that, at the meeting, Mr Whitehead and Mr Hockly were keen to push ahead with the sale and purchase of the 900 hives the subject of the third agreement. He also told me that issues concerning the IRD were discussed, and that Mr Martin was keen to ensure that the parties put in place comprehensive agreements with timeframes for payment. He said:

I was assured that the new agreement was simply to record clearer timeframes around the payment for the hives and how it was to be off-set. The fundamental basis for our agreement was not to change, being the hive purchase price would be off-set by the supply of honey or the leasing of the hives.

He said that he was assured that Salem was to lease all of the hives to JRWT, and that the rental payments would cover the progressive payments due for the purchase of the hives. He also said:

Even more reassuring was that the purchase price could also be covered by the honey produced off those hives.

[123] Mr Hockly and Mr Whitehead had a very different recollection of the meeting. They considered that the reason the meeting was called was to address the fact that payments due by Salem under the first, third and fourth agreements were in arrears. From their perspective, the next honey season was fast approaching, and arrangements needed to be worked out over the hives. I was told that Mr Watson was asked how much cash he was willing to inject into the transaction to complete the purchase of the 2,300 hives outstanding, and that he stated that he would pay a further $1.2 million, by three payments, the first from GST refunds from the IRD, with a further payment in November 2011, and the balance in December 2011. I was also told that Mr Watson said that he would be able to get significant money up front from selling JRWT’s honey. Mr Hockly recollected that Mr Watson was confident that Mr Whitehead could provide quality honey, and that it was important for WSL to secure a good supply of honey for its growing markets. He said that Mr Watson appreciated that he had to make payments by instalments over and above the rental received from the hives and sites, and that a cash input from Salem/WSL was required. Mr Hockly said that while he was concerned about Mr Watson’s ability to pay for the hives, Mr Watson assured him that he would be able to pay $1.2 million plus GST by way of instalment payments. He said that Mr Watson stated that he had significant domestic and overseas sales that would cover the payments required.

[124] Mr Martin recalled that Mr Watson indicated, when pressed by Mr Hockly, that Salem or WSL could and would make additional payments of principal and interest on a more structured basis in respect of the agreements that were then outstanding. He said that Mr Watson committed to getting Salem’s outstanding

payments “back on track”, and commented that the commitments made by Mr Watson seemed genuine to him at the time. He did not recall any discussion about honey supply or offsets, and denied that he made any representations or gave any assurances to Mr Watson in regard to these matters.

[125] In cross-examination, Mr Black pushed Mr Watson in an endeavour to find out what was said at the meeting. The following exchange took place:

Q. ...my question again though is, so we’re clear for the record, was there specific discussions by you emphasising the importance of setting off the honey debt for the honey that had been supplied and invoiced by the Whiteheads at that meeting? If you're not sure say so, if you're sure you say so.

A. Well I'm sure we had discussion on it, I'm not sure if I could recall the exact nature of that discussion today, but we certainly had discussion on it, yes.

A. Well the form of that discussion was how the previous arrangements had worked and there was no argument how they had worked. So if you go back to how this started, there was absolutely no argument that we got honey, from the hives which we sold and paid for the hives, there's no argument over that. This is about changing that arrangement and you're saying I didn’t have any discussion on it, well sorry, I don’t recall the detail of that discussion but I certainly had discussion on it.

Q. And if it was such an important thing, as it has been to your case, surely you would have emphasised that at the meeting?

A. This meeting was all about setting up a new deed of arrangement for the IRD, and as you correctly pointed out there were numerous people involved in it including my legal people and my accountant. Now they thrashed out this new deed of arrangement, that's what the meeting was about, changing the old deed of arrangement to a new one.

As can be seen, Mr Watson was again non specific. There is no detail of any misleading conduct or false representations.

[126] Both Mr Hockly and Mr Martin were impressive witnesses. They are both professional legal advisors and I do not consider that either of them had any reason to

misrepresent the position. Mr Martin was independent of the parties. While Mr Hockly was a trustee of Shiloh and JRWT’s solicitor, I did not consider that he was partisan in giving his evidence. Rather, he struck me as being an honest and frank witness. As will be seen below, not all of the evidence he gave assisted Shiloh or JRWT.

[127] I am not persuaded that any representations were made by either Mr Hockly, or Mr Martin, to the effect that the purchase price of the hives would be fully offset by the supply of honey and/or by rental to be paid. Nor do I find that there was any other relevant representation made by Mr Martin or Mr Hockly to Mr Watson at the meeting. Nor is it likely that any representation was made by Mr Whitehead at the meeting. If a representation had been made by Mr Whitehead at the meeting, then either Mr Hockly or Mr Martin would have remembered it, and neither gave any evidence in this regard. Furthermore, any such representation would have been inconsistent with other matters the evidence established were discussed at the meeting.

[128] I find that there was no misleading or deceptive conduct, nor any false or misleading representations. I do not consider that the defendants (or Mr Whitehead on their behalf) breached the Fair Trading Act. In my judgment, the allegations made by the plaintiffs are nothing more than an ex post facto rationalisation put forward by Salem and WSL through Mr Watson in an endeavour to avoid their contractual obligations. I adopt the observations cited by the Court of Appeal in Janus Nominees

Limited.²²Section 9 of the Fair Trading Act (and by extension, s 13) is not to be

turned into a general warranty by a vendor of the expectations of the purchaser; the

Act is not designed to provide a guarantee to purchasers who fail to look after their own interests.

²²Janus Nominees Ltd v Fairhall, above n 20, at [41] and [58], citing Elias J in Des Forges v

Wright [1996] 2 NZLR 758 (HC) at 764; see also, Premium Real Estate Ltd v Stevens [2009] 1

[129] The observations and findings I have made in relation to the alleged breach of the Fair Trading Act are equally applicable to the cause of action alleging misrepresentation. I will not repeat myself.

[130] The plaintiffs also allege that the defendants represented that there was independent, reliable valuation evidence to support the consideration of $1,350 (plus GST) agreed for each of the hives and the site on which it was situated.

[131] There was a valuation. The defendants had obtained a valuation from their accountant, a Mr Pool. The valuation was as at 15 May 2008. It set out the methodology used by Mr Pool, and the assumptions he made, and recorded that, in his view, the appropriate market value for each hive, its livestock and its site placement, was $1,300 (exclusive of GST). There was some dispute on the evidence as to whether or not a copy of that valuation was made available to Mr Watson, although it is clear that he was aware of it. Either way, there was no misrepresentation. The valuation set out Mr Pool’s view. Further, there was other evidence suggesting that Mr Pool’s view was not totally unrealistic. I deal with this

[132] The law relating to estoppel in the contractual context is discussed by Burrows, Finn and Todd in their seminal text on the Law of Contract in New Zealand. They note that at common law, an estoppel was created only by a statement of past or present fact, and that if such a statement was made which was untrue, or which misled a person who relied on it to his or her detriment, the maker of the statement could be estopped from denying the truth of the statement. They note that in equity, the doctrine went further, and could sometimes be applied to stop

[133] Notwithstanding its obvious utility, the limits of the doctrine of estoppel are clear.

[134] First, there must be clear words or conduct by one party which create a belief or expectation in the other.²⁵For the reasons I have set out above in discussing the cause of action based on the Fair Trading Act, I have found that there were no clear words or conduct by the defendants, or by Mr Whitehead on their behalf, that the purchase price for the hives would be fully offset by the supply of honey and/or rental paid.

[135] Secondly, the party to whom the representation or promise was made must have relied on it to such an extent that it would be inequitable, or unconscionable, to allow the promisor or to go back on his or her word. Here, on the evidence, there was no reliance by the plaintiffs. The highest that Mr Watson can put it is that he was misled at the meeting held on 5 October 2011. The agreements which the plaintiffs say the defendants should be estopped from relying on were not entered into until 29 November 2011. They were negotiated and thoroughly vetted by the plaintiffs’ legal and financial advisors before they were entered into. Mr Watson was aware of the significance of the documents. He said that, at the meeting, he got a sense that:

because of the more formal nature of the contracts and the involvement in inland revenue that I would need to get the agreements checked over.

In my judgment, the plaintiffs took and relied on advice from their legal and financial advisors. They did not rely on whatever was said at the meeting. Even if there were clear words and conduct (which I do not accept), the same were overtaken by the written agreements which were subsequently entered into.

[136] Finally in this regard, I note that it has been held in New Zealand that the doctrine of promissory estoppel cannot be applied to reduce a debt which has already fallen due for payment.²⁶Although this proposition was advanced by Mr Black as a matter of law, I do not need to address it further, because, in my judgment, estoppel

²⁶Homeguard Products (NZ) Ltd v Kiwi Packaging Ltd [1981] 2 NZLR 322 (HC) at 333 (HC).

[137] The plaintiffs also pleaded rectification. They alleged that they and the defendants had a common and continuing intention that the supply of honey by JRWT and/or the payment of rental for the hives was to offset the purchase price of the hives payable by them.

[138] The principles governing rectification are discussed in Swainland Buildings

Limited v Freehold Properties.²⁷A party seeking rectification must show that:

(a) the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter and the agreement sought to be rectified;

[139] For the reasons I have already set out, in my view, the plaintiffs have failed to establish that there was a common continuing intention in respect of the ownership and supply of honey, the sufficiency of the rental to be paid, or the claimed “offset”. There was simply no evidence, let alone any “convincing evidence”,²⁸that all parties had a common intention in the terms alleged by the plaintiffs, or that the agreements executed do not accurately record the parties’ contractual bargain. The burden was

_{clearly on the plaintiffs in this regard,}²⁹_{and
they have failed to discharge that
burden.}

²⁸Which some of the authorities suggest is necessary in such cases – see, for example, Thomas

Bates & Son Ltd v Wyndham’s (Lingerie) Ltd [1980] EWCA Civ 3; [1981] 1 All ER 1077 (CA) at 1090; adopted in Barber v Barber HC Palmerston North A10/83, 29 March 1985; Westlands Savings Bank v Hancock, above n 27, at 26–27.

[140] Further, the evidence, particularly in relation to the key November 2011 agreements, is that their terms were negotiated by the parties’ legal advisors. That is fatal to any claim for rectification.³⁰

[141] It is noteworthy that, following execution of the key agreements, neither party acted in a manner inconsistent with their terms but consistent with the alleged common intention. Rather, they acted in a manner which was consistent with the written agreements. In my view, the agreements in their terms represent what the parties agreed, and there was no mistake made when they were executed.

[142] The plaintiffs allege that the honey supplied pursuant to the agreement for sale and purchase of honey was not of an acceptable quality for the price paid. They plead that the purchase price for honey set out in the agreement was “at least $5 higher than the market rate at the time for manuka honey of that NPA rating and assuming it was of good quality”. They assert that they have a claim to damages in respect of overpayments for honey supplied, in the sum of $2,300,000.

[143] This argument can be readily dealt with. As is noted in Burrows, Finn and Todd, it has been well settled for over 300 years that the courts do not inquire into the adequacy of consideration.³¹Judges do not seek to measure the comparative value of a defendant’s promise and the act or promise given by the plaintiff in exchange for it. Nor will they denounce an agreement merely because it seems to be unbalanced or unfair. The parties are presumed to be capable of appreciating their own interests, and of reaching their own bargain.³²

[144] Here, and as I have noted, both Messrs Watson and Whitehead were experienced players in the honey industry. For a number of years, they bought and

_{sold honey between them. They always struck their own bargains. Mr
Watson, his}

³¹Burrows, Finn & Todd, above n 16, at 120; and see Cheshire & Fifoot, Law of Contract (9th

³²See, for example, Thomas v Thomas [1842] EngR 260; (1842) 2 QB 851 (QB); Re Murphy [1933] NZLR 83 (SC); Leyland Motors Ltd v Pilcher [1932] NZLR 449 (SC); Williams v Beech [1945] NZLR 298 (SC); Veitch v Sinclair [1975] 1 NZLR 264 (SC); Airways Corp of New Zealand Ltd v Geyserland Airways Ltd [1996] 1 NZLR 166 (HC).

wife, or employees of WSL attended at JRWT’s premises and tested the honey before it was supplied. The prices for the honey supplied were negotiated and recorded in various agreements for sale and purchase of honey. The parties complied with those agreements. The 2011 agreement for the sale and purchase of honey was drawn up, along with the various other key agreements, against this background and with the benefit of legal and financial advice. Once the agreement came into force, WSL paid the agreed price without protest. The Court cannot reopen the agreement for the sale and purchase of honey, or seek to adjust the purchase price agreed between the parties. The plaintiffs’ argument in this regard must fail.

[145] The plaintiffs in their pleadings referred to the deed of arrangement. They asserted that the hive price of $1,350 (plus GST) per hive “was at least $1,000 (plus GST) more than the value of the beehive being sold”. They said that they paid the defendants “a sum of $2 million (plus GST) more than the value of the hives, before allowing for the sums repaid by JRWT through rental or the value of honey”. The sum of $1,035,000 is claimed for breach of the deed of arrangement in this regard.

[146] For exactly the same reasons as I have set out above in relation to the purchase price of the honey, these arguments must fail.

(a) Mr Watson gave evidence that he was involved through a joint venture with a company based in the United States which sold hives at a transfer price of $1,000.

(b) There was the valuation prepared by Mr Pool which I have referred to above.³³It suggested that the appropriate market value for each hive, its livestock and its site placement was $1,300. That valuation was as

(c) A Mr Lane, who is a forensic accountant, was retained in July 2011 to review the reasonableness of the value placed on the first agreement for the hire of hives. He wrote a letter to Mr Martin in that regard. In the course of his valuation, Mr Lane expressed the view that the value of each hive which had been placed on an appropriate site consisted of four components:

$350. He considered that the cost of prospecting was $760 per site, which sum would fall to be divided by the number of hives located on each site. The cost of establishing the site was estimated to be $325, once again split between the number of hives on the site.

(d) Mr Lane’s report was peer reviewed by a Mr John Hagan, who is also a forensic accountant. He prepared a letter for the Inland Revenue Department dated 13 March 2012. He concluded that Mr Lane’s valuation of the first agreement for the hire of hives was supportable.

(e) Evidence was given before me by a Mr Gross. He is a director of a property infrastructure and valuation company based in Hawkes Bay. He had been retained by the plaintiffs. He gave evidence that the value, on a per hive basis, depending upon the term of the site agreement in place, would vary from $425 for a one-year site agreement, to $1,250 for a 10-year site agreement. He also gave evidence of comparable sales of hives. He was aware of one sale at

$1,330 per hive. When I questioned him about this sale, he told me that it was of hives located on the east coast of the southern part of the

North Island. It was Mr Watson’s evidence that Northland was a premium area for manuka honey production. Mr Gross accepted, in answering questions from me, that if there was a likelihood of increased production, hives in Northland would be worth “slightly more” than hives on the east coast of the southern part of the North Island.

[148] Mr Watson in his evidence accepted that even at a price of $1,350 per hive, there was a commercial benefit for Salem and WSL. He said as follows:

The request came from John that I entered into these arrangements, he made it clear and that's why I'm, you know, it’s one of those things that at the time he had made it clear to me that he needed to justify, yes, the value of those hives for his charity, so that is what got me involved, now, you know, um, I'm a bit of a sucker for those causes, it’s a fact, people that know me will probably testify to that. So John’s plea to me for help in terms of this arrangement was certainly part of it, now that is not to say there was not a commercial benefit to me, I'm not saying this was all about me being generous, because it wasn’t.

He denied that the price of the hives was inflated. He considered that the hives were worth the sum attributed to them, because each site was valuable – he suggested

He did not accept that the prices were inflated to mislead the IRD. Similarly, in an earlier affidavit in these proceedings, sworn on 6 September 2013, Mr Watson confirmed that the arrangement made “commercial sense” to him and when he was formally interviewed by a representative of the Charities Commission in September

Denis confirmed that his dealings with JRWT or his associated entities were done based on the economics of the whole package under consideration. Sacrifices on one deal, was made up by gains in other deals within the package. Although they were paying $1350 per hive they had in one case the advantage of selling off the honey produced from the hives and in another the right of buy medical grade honey at only $50 per kilo. Watsons have since bought more than their share of 50 tonnes of medical grade honey at that rate. Rough estimates are that they have purchased at least $5 to 6 M worth of medical grade honey.

[149] In summary, it is not open to me as a matter of law to reopen the parties’

agreement. Nor on the evidence, did the plaintiffs persuade me that the price of

$1,350 per hive which Salem agreed to pay through Mr Watson was disproportionate, or totally “out of kilter” with values achieved or attributed to hives in similar sales. The plaintiffs’ argument seemed to me to be simply an attempt to recast the facts with the benefit of hindsight. This argument by the plaintiffs also fails.

2011 agreements were “interdependent”. Mr Black argued that all of the key agreements were interdependent. Mr Sullivan argued that the agreements were interdependent, with the exception of the agreement for the sale and purchase of honey. Neither counsel articulated what they meant by “interdependent”, although I note that Mr Black submitted not only that they were interdependent, but also that each had to be applied in its terms.

[151] In my view, interpretation of each of the key agreements suggests that they were related – but not interdependent in the sense of each being dependent on the other if the overall transaction was to be completed. There are a number of indications that this was what was intended:

(b) None of the agreements were conditional on one or more of the others being performed.

(c) The subject matter of each of the agreements was different. (d) Not all of the agreements were between the same parties.

[152] I accept that there was a degree of correlation between the payment dates and the amounts required to be paid under some of the agreements. It seems that the intention was to have cross payments that would provide funds either in whole or in part to assist in completing the various transactions. However, the payments required were not conditional on monies being received via one of the other agreements. Given this, in my view, the better way to look at it is to consider each of the key agreements as being a separate agreement, but to treat them all as being inter-

[153] I do not accept Mr Sullivan’s argument that the agreement for the sale and purchase of honey stood apart from the other key agreements. From WSL’s perspective, the overall purpose of the various agreements was to ensure a ready supply of good quality manuka honey; for JRWT, it wanted a ready and committed purchaser for the manuka honey it could produce. The agreement for the sale and purchase of honey was put into place because of difficulties in the supplier/purchaser relationship. Far from being a separate stand-alone agreement, it seems to me that the agreement for sale and purchase of the honey was critical to both WSL and JRWT. There is no justification for treating it apart from the other key agreements.

[154] The plaintiffs pleaded that settlement of the purchase of the hives pursuant to the first to fourth agreements, and pursuant to the deed of arrangement, was contingent, expressly or impliedly on JRWT continuing to pay rental on the hives. In particular, they asserted that the $600,000 payment due in respect of the first and fourth agreements due on 30 July 2012 pursuant to the deed of arrangement was conditional upon JRWT paying rental pursuant to the second agreement for the hire of the hives.

[155] I reject this argument. There was no express condition to this effect in the first to fourth agreements, or in the deed of arrangement, or in the second agreement for the hire of the hives. Nor do I consider that any term should be implied in this regard. In order to imply a term, it must be reasonable and equitable, it must be necessary to give efficacy to the contract, it must be so obvious that it goes without

_{saying, it must be capable of clear expression, and it must not
contradict any express}

³⁴See the observations in Kiwi Freeholds Queen Street Ltd v Shanti Holdings Ltd [2008] 3 NZLR

term of the contract.³⁵I do not consider that the term contended for by the plaintiffs fulfils these tests. It is not necessary to give business efficacy to the agreements, and it contradicts the express terms of each agreement which created separate, albeit related, obligations.

[156] Similarly, I note that there was no condition in the second agreement for the hire of hives, or in the agreement for the sale and purchase of honey, saying that payment of the rental was conditional on WSL paying for honey supplied to it. I do not accept JRWT’s arguments in this regard either and I decline to imply a term to this end.

[157] I now turn to consider the parties’ claims against each other. I start with the counterclaims, given the course these proceedings have taken, and I first deal with the defendants’ claim for monies owing for honey supplied. This is the defendants’ primary claim.

(ii) JRWT’s claims pursuant to the agreement for the sale and purchase of honey and for additional honey supplied

[158] The defendants’ counterclaim under the agreement for sale and purchase of honey is for a liquidated sum, together with interest at the rate of 18 percent pursuant to the agreement. A claim to a liquidated sum is distinct from a claim for damages for breach of contract. A party claiming a liquidated sum does not need to prove loss. Rather, he or she must prove that the obligation to pay the liquidated sum has accrued. Principles of remoteness, and mitigation of loss, which apply to claims for

[159] As I have noted, the agreement for the sale and purchase of honey was put in place because of difficulties in the supplier/purchaser relationship.

[160] The evidence established that JRWT first started supplying honey to WSL in early-2009. At that stage, Mr Whitehead was holding relatively large supplies of

(International) Ltd – had been rejected over concerns about its quality. Nevertheless, Mr Watson was keen to obtain this honey as well as other honey harvested and extracted by JRWT. Both Mr Watson and Mr Whitehead took the view that the honey which had been rejected could be blended with other better quality honey. Mr Watson told me that he made it clear to Mr Whitehead that any honey supplied had to be tested, and of suitable quality before he would pay for it in full. The evidence established that testing was undertaken by WSL, and Ms Blake, JRWT’s sales/office manager, told me that, in any event, WSL received relatively little of the honey which had earlier been rejected.

[161] In early 2009, Mr Watson generally tested each batch of honey being supplied by JRWT prior to agreeing a price with Mr Whitehead for that batch. In later seasons, Mr Watson agreed in advance to pay a price for either all, or the majority, of Mr Whitehead’s honey. For 2009/2010 honey, Mr Whitehead and Mr Watson agreed to sell/buy manuka honey at $20 per kilogram, manuka honey at $9 per kilogram, and bush honey at $4.75 per kilogram. In 2011, the parties initially agreed a price of

$25 per kilogram for manuka honey, but this was subsequently reduced by agreement to $23.50 per kilogram. In 2012, the price for manuka honey was agreed at $30 per kilogram. There were advantages in these fixed arrangements for both parties. Each season, WSL acquired certainty of supply at a fixed price from a major honey producer with access to good quality manuka sites. JRWT obtained a guaranteed purchaser, at a fixed price for most if not all of the manuka honey it could produce.

[163] WSL was often not able to pay in full for honey supplied. It was dependent on on-selling the honey to various entities, generally offshore. Mr Whitehead told me, and I accept, that Mr Watson often told him that JRWT would be paid once WSL had been paid by its purchasers for any sales that included JRWT honey. I also accept Mr Whitehead’s evidence that either he, his wife or Ms Blake regularly had to remind Mr Watson, or WSL staff, that WSL was in default, and that failure to make payments on due date would incur interest.

(a) In October 2010, Mr Whitehead became concerned about the amount outstanding and owing to JRWT by WSL. Mr Whitehead requested that WSL should provide details of the quantities of JRWT’s honey that it was holding in stock. Mr Roberts responded by email on

1 October 2010, detailing the stocks held by WSL, which were said to be worth $245,113. Mr Whitehead was concerned about the amount of money outstanding and owing to JRWT and he spoke to Mr Watson about it. It was agreed between Mr Whitehead and Mr Watson that WSL would not use any of the manuka honey supplied by JRWT that WSL was holding in stock, without first obtaining Mr Whitehead’s permission. This was confirmed in an email, signed on 6 October

2010 by three of WSL’s employees, a Ms McTavish (WSL’s quality controller), Mr Roberts, and a Mr Baker (WSL’s operations manager). Mr Whitehead sought express confirmation from WSL’s employees, as a means of protecting the honey that JRWT had supplied, and to ensure that it would not be on-sold by WSL without his express agreement. From Mr Whitehead’s perspective, it was a mechanism whereby he could ensure that the proceeds of sale were applied to the outstanding honey debt owed by WSL to JRWT.

(b) On 13 October 2010, Mr Whitehead wrote to Mr Watson advising that he was not in a position to extend any more credit to WSL. At that stage, Mr Whitehead was concerned that WSL might go into receivership or liquidation, and he wished to reduce JRWT’s exposure to WSL as a matter of urgency. He intimated to Mr Watson that JRWT would be picking up all of its honey that was still in WSL’s possession, and bringing it back to its own premises until all issues were resolved.

[165] The parties worked through such difficulties. Over time, a practice developed whereby honey supplied would not be invoiced by JRWT, or paid for by WSL, until a later date. As part of this practice, Ms Blake recorded each consignment of honey as it left JRWT’s premises. So did WSL staff, and, from time to time, WSL and

JRWT sought to reconcile the honey supplied and the amounts owing. Again, by way of example:

(a) In late-October 2010, Mr Roberts for WSL, and Ms Blake for JRWT, substantially agreed the invoices that had been rendered, and the honey supplied which was still to be invoiced by JRWT. There was a very minor difference, but it is of no relevance in the present context.

(b) In November 2011, Ms Blake emailed Ms Mitchell with details of the manuka honey supplied that JRWT was yet to invoice, and providing a breakdown of the batches and the prices per kilogram of the honey. She advised what the total invoice would be, and went on to provide a breakdown of the batches of honey JRWT was planning on sending to WSL, the price of each batch, and the total cost to WSL. Ms Mitchell replied saying that, apart from a minor difference, Ms Blake’s figures agreed with hers.

[166] It is clear from the correspondence which was exchanged at the time that WSL was often required to make instalment payments, in order to get further honey released by JRWT. For example, in an email sent on 14 January 2011, Ms Blake, on behalf of JRWT, agreed to release further honey to WSL, but only provided WSL paid the sum of $221,000 to JRWT forthwith, and a further sum of $110,000 in two separate payments by way of pre-payment for honey to be supplied. A similar email offering to supply honey contingent upon receiving payment was sent by Ms Blake on 3 March 2011.

[167] Notwithstanding the rather haphazard nature of these arrangements, they operated relatively satisfactorily until mid/late-2011. Indeed, as I have already noted, by 13 October 2011, the debt owing by WSL to JRWT for honey supplied had been cleared. Thereafter, the debt began to escalate quickly. Honey was supplied and two invoices were raised by JRWT on 30 October 2011. Two further invoices for honey supplied were raised on 31 October 2011. The details were as follows:

[168] The agreement for the sale and purchase of honey dated 29 November 2011 was entered into against this background. It was signed by both Mr and Mrs Whitehead and by Mr Edward Whitehead as trustees of JRWT, and by Mr Watson as a director of WSL. The agreement recorded that JRWT had delivered to WSL manuka honey, and the drums and pallets, described in invoices 302, 303 and 304. It went on to record that WSL wished to purchase a further quantity of manuka honey, and detailed the honey to be provided. It set out the kilograms of honey involved, the price per kilogram and the batch numbers allocated to the honey by JRWT. It was recorded that the total value of this further honey would be $455,384.50 (plus GST). There was then reference to yet a further quantity of manuka honey to be supplied, and again, the details were set out. The total value for this additional consignment was to be $497,266.50 (plus GST). The document then noted that the total sum due, once all of the honey had been delivered, would be $1,980,610 (GST inclusive), and provided that WSL would pay for all of the honey covered by the agreement as follows:

(a) $173,691.82 on execution of the agreement; (b) $173,691.82 on 5 December 2011;

(d) Nine consecutive payments of $173,691.82 on the twentieth days of each month, the first of such payments being due on 20 January

[169] The two further supplies of manuka honey detailed in the agreement were supplied to WSL by JRWT and invoiced. Invoice 305 (which I have referred to above), issued on 31 October 2011 in relation to the first additional supply referred to in the agreement. Invoice 307 issued on 1 December 2011, in the sum of

[170] There was no dispute by the plaintiffs that all of the honey detailed in invoices 302, 303, 304, 305 and 307 was supplied. The various invoices were put to Ms Mitchell. She accepted that they were consistent with WSL’s records.

[171] Some of the payments detailed in the agreement were made by WSL, albeit that some were made late. The payments made were as follows:

(a) 30 November 2011: $173,691.82; (b) 8 December 2011: $173,691.82; (c) 10 January 2012: $70,000;

(d) 20 January 2012: $174,000; (e) 30 March 2012: $100,000; (f) 3 April 2012: $73,691.82; (g) 20 April 2012: $100,000;

(h) 26 April 2012: $73,891.82; (i) 30 April 2012: $173,691.82; (j) 15 May 2012: $1,150;

[172] Further honey not covered by the agreement for the sale and purchase of honey was supplied to WSL by JRWT. Details are as follows:

(b) 1 May 2012, invoice 332: $274,217.50; (c) 15 May 2012, invoice 334: $273,383.75; (d) 1 June 2012, invoice 341: $71,012.50;

Again, there was no dispute that the honey detailed in these invoices was supplied.

[173] Further monies paid by WSL were attributed by JRWT to these later supplies and invoices. I refer to the following:

(a) 11 May 2012: $107,000; (b) 14 May 2012: $138,000; (c) 13 June 2012: $100,000;

$486,282.68 and invoice 431 for $1,307,394.75. They were paid either in full or in very large part by WSL and they do not form part of the counterclaim.

[175] Mrs Whitehead took me through the various calculations made by JRWT in regard to the monies it says is owing for the supply of honey. She told me that JRWT allocated the payments referred to in [171(a)–(l)] to the amounts outstanding in respect of invoices 302, 303, 304, 305 and 307. This left a balance outstanding of

$690,694.04 (exclusive of interest). The payments noted in [173] were attributed by JRWT to the amounts owing under invoices 329, 332, 334, 341 and 355. Those invoices had their own requirements for payment. Invoice 329 required payment in three equal instalments on 20 April, 20 May and 20 June 2012. Invoice 332 also required payment in three equal instalments, on 20 May, 20 June and 20 July 2012. Invoice 334 required 50 percent to be paid upon transportation of the first consignment on 15 May 2012, and 50 percent upon transportation of the second assignment on 22 May 2012. Invoice 341 was required to be paid before transportation. So was invoice 355. There was no evidence before me as to the dates of transportation. Mrs Whitehead accepted that the date of payment by WSL should be treated as the date of transportation. That is the assumption most favourable to WSL. This leaves outstanding in respect of invoices 329, 332, 334, 341 and 355, the sum of $495,912.75.

[176] I cannot see that WSL has any defence to the claims made against it in regard to honey supplied, and the amounts outstanding for that honey.

[177] The question does arise as to whether or not JRWT was entitled to treat the payments made and noted in [173], as payments in respect of invoices 329, 332, 334,

341 and 355, or whether it was required to allocate the payments to the invoices which had been outstanding the longest.

[178] When a creditor pays money to a bank, there is a presumption that the oldest debt is repaid first. There is a similar presumption in equity, which is applied when

tracing is undertaken. However, there is nothing suggesting that these presumptions are rules of general practice. Indeed, the contrary appears to be the case. Unless a debtor appropriates money to a distinct debt at the time of payment, the right to appropriate vests in the creditor.³⁷Any intention to appropriate by the debtor must be communicated to the creditor, either expressly, or by implication,³⁸although appropriation can be inferred from the nature of the transaction, or where the

[179] Here, there was no evidence suggesting that WSL, when making payments to JRWT, appropriated the payments to any distinct debt(s). The plaintiffs did not suggest that appropriation could be inferred. Therefore, it was open to JRWT to allocate the payments as it saw fit. It exercised that right by appropriating the payments to specific invoices. It was entitled to do so.

[181] Clause 12 of the agreement for sale and purchase of honey provided as follows:

In the event that the Purchaser defaults in payment in any of the sums due on the due date, the Purchaser will pay the Vendor interest on any overdue sum at a rate of 18% per annum calculated daily from the due date until the date of actual payment. The Purchaser will also pay the Vendor any costs on enforcing payment of this debt including solicitor/client costs.

[182] There was no pleading, or submissions made by counsel, that the interest rate was a penalty. Nor was there any evidence suggesting that the interest rate was, at the time, excessive. It follows that interest is payable on the monies outstanding under the agreement for the sale and purchase of honey from the due date at the rate of 18 percent. It is to be calculated daily.

[183] There was no express agreement by the parties requiring the payment of interest on monies owing pursuant to invoices 329, 332, 334, 341 and 355. JRWT

_{did not plead an implied term in this regard, and there is no provision
in the Sale of}

³⁷Cory Brothers & Co Ltd v Owners “Mecca”, Turkish SS [1897] AC 286 (HL); and see Doody v

Goods Act for interest to automatically apply to the sale of goods. However, it did invoke s 87 of the Judicature Act. Relevantly, that section provides as follows:

(1) In any proceedings in the High Court, the Court of Appeal, or the Supreme Court for the recovery of any debt or damages, the court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate, not exceeding the prescribed rate, as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment:

(b) apply in relation to any debt upon which interest is payable as of right, whether by virtue of any agreement, enactment, or rule of law, or otherwise; or

(3) In this section the term the prescribed rate means the rate of 7.5% per annum, or such other rate as may from time to time be prescribed for the purposes of this section by the Governor-General by Order in Council.

[184] The current prescribed interest rate is five percent.³⁹That rate came into effect as from 23 May 2011.

[185] The discretion available to the court under s 87 falls to be exercised as the justice of the case requires.⁴⁰The court may impose a requirement to pay interest when it is appropriate to compensate the creditor for the use of money which should have been paid to it.⁴¹

[186] In the present case, in my view, it is appropriate to exercise the discretion in favour of JRWT, and to order payment of interest at the rate of five percent on the balance outstanding under each invoice 329, 332 and 334⁴², from the date on which

_{payment(s) was due, until the date of this judgment. I have reached
this conclusion}

⁴⁰Wilson & Horton Ltd v Attorney-General [1997] 2 NZLR 153 (CA) at 530; and see Day v Mead

⁴¹McGechan on Procedure (online ed) at [J87.02(1)]; and see Day v Mead, above n 40, at 452–

because JRWT supplied the honey. It was on-sold by WSL, but it failed to pay JRWT for the honey supplied. JRWT has been out of pocket for the monies which should have been paid to it, and it has been denied the use of those funds.

[187] It will be necessary for the parties’ respective financial advisors to calculate the amounts owing to JRWT for honey supplied. They will have to take into account that some of the invoices required payment in instalments. Interest at the applicable rate will run from the date that each instalment payment was due. Interest is not to be compounded.

[188] Finally in this regard, I turn to the issue of whether or not Mr Watson is personally liable. He gave his personal guarantee in the agreement for the sale and purchase of honey. Although it was pleaded by the plaintiffs that he could avoid the guarantee, no arguments were advanced on Mr Watson’s behalf on this issue. Indeed, Mr Sullivan could not offer any argument in this regard when I asked him why liability had been denied. There is no basis obvious to me which would permit Mr Watson to avoid the guarantee he signed. He was in receipt of legal advice at the time. Mr Watson did not, however, guarantee payment of the amounts owing in respect of invoices 329, 332 and 334.

[189] For these reasons, I hold that Mr Watson and WSL are jointly and severally liable for the amounts (including interest) payable to JRWT pursuant to the agreement for sale and purchase of honey dated 29 November 2011. WSL is liable for the monies owing in respect of invoices 329, 332 and 334, together with interest as set out above.

(iii) Shiloh’s claims pursuant to the deed of arrangement and the third, first and fourth agreements

[190] There can be no dispute that the deed of arrangement was breached. WSL as assignee, and Salem as the principal debtor, failed to pay the $600,000 due on

30 July 2012 in respect of the first and fourth agreements. They also failed to enter into the loan documentation in regard to the balance of the purchase price for the hives the subject of those agreements. This had the consequence that the first and

[191] In the counterclaim, Shiloh claimed $897,250 in respect of the breach, being the $600,000 due on 30 July 2012 and an additional $297,250 it said was not paid in respect of two instalments due in respect of the third agreement – one on 20 June

2012 and the other on 25 July 2012 – under the deed of arrangement. It claimed interest, both on the amounts said to be outstanding, and on earlier payments which were paid late. It also sought damages for breach of the first and fourth agreements and the deed of arrangement, or alternatively, an accounting for such amount as should be determined to be due under the first to fourth agreements and the deed of arrangement.

[192] The deed of arrangement required that various payments be made on account of the third agreement on various specified dates. The due date of each payment, the payments required, the date on which each payment was made, and the amount of each payment are as follows:

Due Date	Amount Due	Date Paid	Amount Paid
30 November 2011	$200,000	5 December 2011	$200,000
20 December 2011	$150,000	25 January 2012	$150,000
20 January 2012	$150,000	20 February 2012	$150,000
20 February 2012	$150,000	27 February 2012	$150,000
20 March 2012	$150,000	27 March 2012	$150,000
20 April 2012	$150,000	23 April 2012	$150,000
20 May 2012	$150,000	19 June 2012	$150,000
20 June 2012	$150,000	31 July 2012	$150,000
25 July 2012	$147,250	31 July 2012	$147,250

The defendants in a schedule attached to their counterclaim asserted that $297,250 was outstanding in respect of the last two entries in the above table. The evidence did not bear this out. The forensic accountant called by the defendants, Mr Lane, gave evidence that the final two payments in the table were made on 31 July 2012.

[193] As can be seen, all of the payments were made late. The deed of arrangement (cl 5) provided for interest, at the rate of four percent, with interest to be calculated on a daily basis from 15 September 2011 until 30 May 2012 if there was a default. Interest on any outstanding part of purchase price not paid by 30 May 2012 was payable on the last day of each month, commencing on 30 June 2012.

[194] This liability for interest had already occurred as at the date of cancellation, and it was not affected by the cancellation. It follows that Shiloh must be entitled to recover from Salem/WSL the unpaid interest owing on those amounts which were paid late. Interest will accrue at the rate of four percent on each payment made late, from the due date until the date of payment. The parties’ respective financial advisors will have to calculate the interest payable.

[195] I do not consider that Mr Watson guaranteed the payment of interest under the deed of arrangement. Contrary to Mr Black’s submissions, the deed of arrangement did not so provide. It may be that Mr and Mrs Watson are personally liable because their co-trustee did not sign – see above at [67]–[74]. If the defendants wish to obtain judgment against Mr or Mrs Watson in this regard, they will need to address this issue.

[196] Shiloh also claimed that, under the deed of arrangement, it was due to be paid the sum of $600,000 which fell due on 30 July 2012. It sought judgment in this sum.

Contractual Remedies Act 1979. Relevantly, those subsections provide as follows:

(a) so far as the contract remains unperformed at the time of the cancellation, no party shall be obliged or entitled to perform it further:

(4) Nothing in subsection (3) shall affect the right of a party to recover damages in respect... the repudiation or breach of the contract by another party.

[198] The deed of arrangement remained unperformed as at 11 April 2013 in relation to the first and fourth agreements. Following cancellation, WSL (as assignee) and Salem (as assignor), were no longer obliged to perform it further. Rather, Shiloh acquired the right to recover damages.⁴³There was no action for debt already accrued in respect of the $600,000 due in respect of the first and fourth agreements.⁴⁴To adopt the language of the Court of Appeal in Garratt v Ikeda,⁴⁵there were no unconditionally accrued rights vested in Shiloh in relation to the first and fourth agreements. Rather, any enforcement of the obligation by Salem/WSL to pay the $600,000 was subject to the reciprocal obligation on Shiloh to give title to the hives, and the sites on which they were situated. In my judgment, Shiloh’s right to claim the $600,000 ceased as at the date of cancellation, when the corresponding obligation to give title to the hives, and the sites on which they were situated, also came to an end.⁴⁶Shiloh is not entitled to recover the $600,000 which was supposed to be paid on 30 July 2012. Rather, it has a right to recover damages consequent on the breach by Salem/WSL.

[199] I turn to consider what damages (if any) Shiloh suffered as a result of breach of the first and fourth agreements and the deed of arrangement by Salem/WSL. If Shiloh has suffered damage that is not too remote, it must, so far as money can do so, be restored to the position it would have been in had the breaches of the agreements and the deed not occurred.⁴⁷The measure of damages will be the loss suffered by

⁴⁴Cf Pendergrast v Chapman [1988] 2 NZLR 177 (HC); Brown v Langwoods Photo Stores Ltd

⁴⁷Robinson v Harman [1848] EngR 135; (1848) 1 Ex 850, 154 ER 363, at 855 and 365; Marlborough District

Council v Altimarloch Joint Venture Ltd [2012] NZSC 11, [2012] 2 NZLR 726 at [157].

[200] I am not satisfied on the evidence that Shiloh in fact has suffered any damage.

[201] First, as noted above in [41], it demanded from JRWT payment of the rental payable under the second agreement for the hire of hives. It sent an invoice to JRWT in that regard in the sum of $966,000 on 22 March 2013. It purported to be for:

hive lease under demand that was due according to Agreement for hire of hives dated 29/11/11 for 1400 hives being balance of lease not paid 1/4/11 to

[202] First, Shiloh had no entitlement to the rental for the 1400 hives the subject of the first and fourth agreements as at 22 March 2013.

(a) While Salem had purported to cancel the second agreement for the hire of hives by letter from its solicitor dated 5 December 2012, that cancellation was not accepted by JRWT and it was ineffective. The second agreement for the hire of hives was a lease of personal property, and subject to the provisions of the Property Law Act 2007. There is no evidence that Salem/WSL complied with the provisions of s 245 of the Property Law Act by serving on JRWT a notice of its intention to cancel the agreement.

(b) Although it was denied by Mr Bale in his letter sent on behalf of Salem/WSL on 5 December 2012, it was pleaded by the plaintiffs in their second amended statement of claim that the second agreement for the hire of hives was renewed as from July 2012. Both Mr Watson and Mr Whitehead gave evidence to this effect and I accept their evidence. It follows that the agreement was on foot, until such time as it was validly cancelled.

(c) On 28 March 2013, when Mr Whitehead wrote to Mr Watson advising that JRWT no longer wished to lease any of the hives from WSL, and asking WSL to uplift the 900 hives which Salem had purchased. Mr Whitehead’s letter did not, however, expressly use the word “cancellation”, and as I note below, it was equivocal. It did not, in my view, cancel the second agreement for the hire of hives. Rather, the agreement only came to an end on 11 April 2013 when Shiloh cancelled the first and fourth agreements. It was those agreements which gave Salem/WSL the possessory rights which were accepted by the parties and which permitted the hire of the hives to JRWT.

[203] Secondly, by letter dated 12 April 2013 sent to JRWT, Shiloh claimed that, pursuant to the deed of arrangement, Mr Watson’s rights under the lease of the hives with JRWT for the 1,400 hives the subject of the first and fourth agreements had been assigned to Shiloh with effect as from 1 April 2011. Mr Black relied on this to support Shiloh’s appropriation of the rental from JRWT. The argument advanced does not follow from the documentation. There was nothing in the deed of arrangement to the effect claimed. Clause 12.1 in the second agreement for the hire of hives read as follows:

The lessee acknowledges that the lessor’s rights to grant this lease is subject

That clause, however, did not give Shiloh the right to demand rental as from 1 April

2011. It was simply an acknowledgement by JRWT that Salem’s rights to enter into

the second agreement for the hire of hives were subject to the prior rights of Shiloh.

[204] In my judgment, Shiloh had no entitlement to the sum of $966,000 it received from JRWT in March/April 2013. Any losses Shiloh might be able to claim

⁴⁸This was acknowledged by the defendants in their calculations, and by the forensic accountant retained by them, Mr Lane. However, they assumed that Shiloh was entitled to the rental. In my judgment, that is not the case.

[205] Did Shiloh suffer any other loss? It says that it re-sold the hives the subject of the first and fourth agreements and that they were sold at a loss. They were sold to JRWT for $450 (plus GST) per hive (a total sum of $630,000). Shiloh has sought to recover the difference between the price Salem/WSL agreed to pay – $1,350 per hive – and the sum received from JRWT – $450 – per hive. The difference is

[206] Normally, losses suffered on a resale following a breach of an agreement will be recoverable, but in the present case, I am not persuaded that Shiloh endeavoured to mitigate its loss.

[207] Mr Hockly gave evidence that he asked Mr Whitehead to see if he could locate other parties who would be prepared to purchase the 1,400 hives and sites from Shiloh. In his evidence-in-chief, he told me that he was “introduced” to a couple of potential purchasers in or about April/May 2013, and that he prepared various draft agreements. He said that one of the purchasers indicated an interest in purchasing the hives and sites at $1,200 (plus GST), but with payment deferred over a period. He said that the purchaser was, in the event, unable to find funding, and that matters did not proceed. Further, he said that Shiloh did not wish to become involved in any further long-term settlements, and that, in the end, he could not come to any satisfactory arrangement with any other purchasers. I asked Mr Hockly about this. He resiled in part from his evidence-in-chief. He told me that he did not meet the potential purchasers. Nor did he contact them by telephone, letter or email. Rather, he relied solely on Mr Whitehead. It became clear that Shiloh made no independent attempt to try and find a purchaser for the hives following Salem/ WSL’s breach. The following discussion took place:

A. ...I suppose I took the view that dealing with John Whitehead, is he would most probably have a greater interest in paying a greater price than a lesser price, particularly because that would be part of stock and therefore if he paid more, that would be deductible and then also that would be available to reduce the debt between – a greater chance of reducing the debt between Shiloh and JRWT.

Q. Yes but you appreciate my concern and my concern is we have hives which Shiloh and the [Whitehead] trust have for a period of years, been endeavouring to persuade the Revenue are worth $1350.

Q. They get into a dispute with Mr Watson, they then purport to resell them between themselves, Shiloh and Whitehead, [at] $450 and to recover the balance from Mr Watson. Now that –

Q. – but what I want to know is, what independent attempt Shiloh made to try and maximise the value of those hives to mitigate its loss?

[208] It is clear that Shiloh made no attempt to mitigate its losses at all, and notwithstanding that there was evidence that the hives and sites were worth in the vicinity of $1,200 – $1,350.⁴⁹

[209] The law does not allow a plaintiff to recover damages to compensate for loss which would not have been suffered if he or she had taken reasonable steps to mitigate the loss.⁵⁰On the facts, I do not consider that Shiloh used its best endeavours to sell the hives to other purchasers to mitigate its loss. It failed to take any adequate steps to advertise the hives, or to try and obtain the best price obtainable for the hives in the circumstances. Rather, it sold them to a closely related party at a substantially reduced price. The loss suffered on the resale of the hives was, in my view, avoidable. At the least, it could and should have been (much) less.

Salem/WSL’s breach of the deed of arrangement and the first and fourth agreements.

[211] In the counterclaim, the defendants alleged that Salem/WSL breached the second agreement for the hire of hives by cancelling it, and that they were thereby

deprived of their entitlement to derive honey from the hives and sites. They claim an accounting and inquiry into the amounts due as a consequence of this alleged breach.

[213] First, the plaintiffs did not cancel the second agreement for the hire of hives on 5 December 2012 for the reasons I have set out above at [204]. Secondly, the honey in the hives belonged to, and was harvested by, JRWT. The second agreement for the hire of hives only finally came to an end on 11 April 2013, and by that stage, all 2012/2013 honey had been taken from the hives. The season was over. Thirdly, and most importantly, JRWT breached the second agreement for the hire of hives by failing to pay rental due. It cannot claim expectation losses when its default led, at least in part, to the agreement coming to an end.

[214] As I discuss shortly, JRWT cancelled the second agreement for the hire of hives as from 31 March 2013. Mr Whitehead sent a letter to Mr Watson advising that, as from 1 April 2013, JRWT would be charging WSL $25 per hive per month for looking after the 900 hives the subject of the third agreement, which Salem/WSL had purchased, until they were picked up. The evidence established that the hives were not picked up by Salem/WSL, until mid May 2013. At one point, JRWT forwarded an invoice to WSL for their management fee. It was not paid.

[215] I do not, however, take this issue any further. It was not raised by Shiloh/JRWT in their pleadings. Nor do I consider that it is a consequential loss following on from breach of any of the other agreements.

[216] I now turn to consider the plaintiffs’ various claims against the defendants.

(vi) Salem/WSL’s claims pursuant to the second agreement for the hire of hives

[217] The second agreement for the hire of hives provided for the payment of rental due for the months of April 2011 through to December 2011 to be deferred until

$517,500 plus GST, a total of $595,125. The agreement also provided that in consideration of deferral, interest was payable at the rate of six percent per annum, calculated on a daily basis from the end of each monthly period through to 30 July

[218] The lump sum payment due on 30 July 2012 was not paid by JRWT. Nor was any interest paid. JRWT thereby breached the agreement.

[219] Also, pursuant to the agreement, rental for the months of January 2012 to July


Due Date	Rental Due	Date Paid
29 February 2012	$57,500 + GST	27 February 2012
31 March 2012	$57,500 + GST	27 March 2012
30 April 2012	$57,500 + GST	23 April 2012
31 May 2012	$57,500 + GST	31 July 2012
30 June 2012	$57,500 + GST	31 July 2012
31 July 2012	$57,500 + GST	31 July 2012

As can be seen, the payments due on 31 May 2012 and 30 June 2012 were made late. Interest was payable (cl 3.3) on a monthly basis from the end of each monthly period to 30 July 2012 at the rate of six percent, calculated on a daily basis.

[220] In my view, Salem/WSL were entitled to receive the rental due under the second agreement for the hire of hives, until such time as the agreement was cancelled. They were also entitled to interest on any payments made late through until 30 July 2012. The agreement did not provide for the payment of interest after

30 July 2012. As I have noted above at [183], s 87 of the Judicature Act applies. The maximum prescribed interest rate is five percent. For the same reasons as I have

identified above, I can see no reason why Salem/WSL should not be entitled to interest at the rate of five percent from 30 July 2012, through until the date of judgment.

[221] JRWT argued that payment of the rental was conditional upon WSL paying for honey supplied pursuant to the agreement for the sale and purchase of honey. I have already explained why I consider that the agreements were not interdependent, and noted that there was no provision in the agreements, either express or implied, which made the payment of rental under the agreement for the hire of hives conditional upon payment by WSL of monies owing under the agreement for the sale and purchase of honey – see above at [150]–[157]. I reject JRWT’s argument in this regard.

[222] In my view, JRWT has no defence to Salem’s/WSL’s claim for the rental which was due on 30 July 2012 in the sum of $595,125. Further, it has no defence to the obligation to pay interest at the specified rate of six percent set out in cl 3.3 of the agreement in respect of the payments due in May and June 2012, which were not paid on time. The interest clause did not apply as from 30 July 2012, but JRWT is liable to pay interest on rental outstanding from 30 July 2012 through until the date of judgment at the rate of five percent. Interest is not to be compounded.

Mr Whitehead is that the second agreement for the hire of hives was renewed as from

1 August 2012. Although neither was clear in this regard, it seems that it must have been renewed in respect of the 2,300 hives, 900 of which belonged to Salem/WSL following settlement of the third agreement and 1,400 of which belonged to Shiloh pending settlement of the first and fourth agreements.

[225] There is no evidence that any agreement was reached to reduce the rental. Mr Whitehead was looking to reduce the rental to $150 per hive per year, but there was no evidence to suggest that Mr Watson agreed to this. If the agreement was renewed without first agreeing the rental, it must follow that the existing rental continued at the rate of $57,500 per month, as from 1 August 2012, until either the

[226] The renewal was for a term of one year under the terms of the agreement. It did not run its course, because Shiloh cancelled the first to fourth agreements as from

11 April 2013. As at that date, Salem/WSL lost the possessory right they relied on to lease the 1,400 hives the subject of the first and fourth agreements to JRWT and the second agreement for the hire of hives was frustrated. The lease of the 1,400 hives the subject of the first and fourth agreements then came to an end. Rental for the

1,400 hives for the period from 1 August 2012 to 11 April 2013 will have to be calculated on a per hive and per diem basis by reference to the rate of $57,500 (plus GST) per month for all 2,300 hives. JRWT is liable to pay that sum to Salem/WSL, together with interest at the rate of five percent pursuant to the Judicature Act from the end of each month of the renewed term until the date of judgment. Interest is not to be compounded.

[227] It is a little more difficult to work out when the hire of the remaining 900 hives came to an end. Those hives belonged to Salem/WSL once the third agreement was settled, but they remained in JRWT’s possession and they were included in the renewal. On 27 February 2013, Mr Whitehead sent an email to Mr Watson advising that JRWT no longer “wishe[d] to further lease [the] hives”. He referred specifically to the 900 hives that had been purchased from Shiloh. He recorded that, on Mr Watson’s instructions, he had given 200 of the hives to another individual, and that 700 hives were still being held by JRWT. He said that he would pay the rental for those hives, and for the 200 hives. Rather confusingly, he then discussed the rights of renewal available under the second agreement for the hire of hives and offered to forego those rights of renewal on terms. This latter discussion was inconsistent with any claimed cancellation. I do not consider that the hire agreement for the 900 hives was clearly cancelled as from 27 February 2013. The correspondence is equivocal.

[228] In a further letter dated 28 March 2013, Mr Whitehead recorded that JRWT was happy to pay rental on the 900 hives to WSL up to 31 March 2013, but went on to provide that, thereafter, it no longer wished to lease the hives, and asked

Mr Watson to make his own plans for farming them, or alternatively, arrange for their collection. This was repeated in a letter Mr Whitehead sent to Mr Watson on 4 April

2013. Further, on that day, Mr Whitehead advised Mr Watson that, as from 1 April

2013, JRWT would be charging WSL $25 per hive per month for looking after the hives until they were picked up.

[229] It seems to me that the second agreement for the hire of hives, in respect of the 900 hives, came to an end on 31 March 2013. At that date, s 8(2) of the Contractual Remedies Act had been complied with. JRWT had made its intention to cancel known, both by words and by conduct. It had evinced an unequivocal intention to cancel. JRWT is liable to pay rental to Salem/WSL for the 900 hives from 1 August 2012 to 31 March 2013. Again, rental will have to be calculated on a per hive and per diem basis by reference to the rate of $57,500 (plus GST) per month for all 2,300 hives. Again, JRWT is liable for interest at the prescribed rate of five percent from the end of each month of the renewed term until the date of judgment, for the reasons I have set out above. Interest is not to be compounded.

[230] In its second amended statement of claim, the plaintiffs claimed rental of

$483,000 for the 1,400 hives the subject of the first and fourth agreements for the period 1 July 2012 to July 2013.

[231] There was no proper basis on which they could do so. They had no entitlement to the 1,400 hives as from 11 April 2012, when the first to fourth agreements were cancelled.

[232] There is an assertion in the second amended statement of claim that the defendants repudiated the second agreement for the hire of hives by failing to pay rental, purporting to cancel the agreement, and/or by refusing to renew it.

(a) It was the plaintiffs, through Mr Bale’s letter of 5 December 2012, who first repudiated the agreement for the hire of hives, by asserting that the same was at an end. While that repudiation was not accepted, JRWT did not pay rental. Shiloh later cancelled the agreement in

respect of the 1,400 hives the subject of the first and fourth agreements. The hire agreement could not continue because Salem/WSL breached the first and fourth agreements and the deed of arrangement. There can be no expectation damages in these circumstances.

(b) Similarly, there can be no expectation damages for the refusal to renew. The second agreement for the sale of hives gave JRWT the right of renewal, at a rental to be agreed. Salem/WSL cannot have had any legitimate expectation that the agreement would be renewed. They were taking their chances in that regard.

[234] It is asserted by the plaintiffs that JRWT breached the second agreement for the hire of hives by seeking to charge WSL a management fee for the hives which wrongly remained in JRWT’s possession after the 2012 honey season, and by seeking to reduce the hive rental payable.

(a) As at the end of March, Mr Whitehead made it clear that JRWT no longer wished to hire the 900 hives from Salem/WSL. Salem/WSL did not dispute this cancellation, and they proceeded to uplift the hives in May 2013. JRWT were entitled to seek to charge a management fee for looking after the hives, until such time as they were picked up. There was, in effect, a bailment. I have declined JRWT’s relief in this regard because it was not pleaded or argued.

(b) Nor can the plaintiffs complain because JRWT sought to reduce the rental payable when the second agreement for the hire of hives was renewed. The second agreement for the hire of hives expressly envisaged that that might occur. Salem/WSL could have no legitimate expectation that the rental would remain the same.

[236] Finally, in this regard, there is a claim by the plaintiffs for the sum of

$690,000 said to represent honey which the plaintiffs allege JRWT failed to account to them for, and that was harvested from the 900 hives during the 2012/2013 season.

[237] I simply cannot understand this claim. It is common ground that the second agreement for the hire of hives was renewed, and the plaintiffs have claimed damages by reference to the rental payable for the renewed term. Under the agreement, all honey produced from the hives, during the currency of the agreement, was the property of the lessee – JRWT. That is conceded by the plaintiffs. It must follow that JRWT was not required to deliver up to Salem/WSL the manuka honey produced by the 900 hives during the 2012/2013 season. The agreement was still on foot until it was finally cancelled on 31 March 2013. The claim for $690,000 for honey harvested from the 900 hives fails.

(vii) Salem’s/WSL’s claims pursuant to the deed of arrangement and the first,

[238] The plaintiffs alleged that Shiloh breached the deed of arrangement and the third agreement because it did not have in place agreements with landowners for the sites on which the hives were placed. They said that they purchased those sites, that they are entitled to them, and that they have been denied the sites because Shiloh/JRWT did not have formal agreements in place which could be assigned to them.

[239] It is clear that Salem/WSL were in each agreement purchasing not only the hives, but also the sites on which the hives were situated. The 2009 agreement between JRWT and Salem had a schedule of sites attached to it. The sites were identified by a name, a map reference, and the number of hives on the site – for example, “Graeme’s – PO4 886 861 – 50”. Mr Watson accepted in evidence that he was not unduly concerned about the sites on which the 500 hives the subject of the

2009 agreement were situated. He said that the sites did not bother him, because he got the hives paid for in full.

[240] Similar schedules of sites were supposed to have been attached to each of the first to fourth agreements. A schedule was referred to in the introduction to each of

those documents. However, it seems that no schedules were attached when the agreements were signed.

[241] Mr Watson said in evidence said that there was “a lot of due diligence done” at the time the agreements were signed. When I asked him about this, he told me that while he undertook due diligence, he did not make any inquiry into the sites, notwithstanding that, on his evidence, he was paying $1,000 per site. Mr Watson stated that:

at some stage we may have had a list of sites on which JRWT placed its hives. I don’t recall when this was provided. I do know that we received a schedule from Mr Hockly to send to the IRD in December 2011.

It seems likely that Mr Watson was not concerned about the sites when the first to fourth agreements were signed. He had already entered into the 2009 agreement, and settled that agreement. He had effectively abandoned the sites the subject of that agreement by moving the hives to Masterton. On the evidence, a schedule of sites was provided sometime after the agreements were signed. There was no evidence to suggest that anything further was sought at that stage or that any protest was then made.

[242] The first to fourth agreements did not require that the sites be subject to formal written agreements with landowners. Mr Whitehead gave evidence that there were agreements in place. Some were in writing, although most were informal. The schedule attached to the 2009 agreement and the recognition in the second agreement for the hire of hives that landowners could be paid with honey or money as required, confirmed the relatively informal nature of the agreements which Shiloh/JRWT had in place with landowners.

[243] The second agreement for the hire of hives put obligations on JRWT as lessee. It was required to take responsibility for the registration of each hive site with the relevant authorities, and to maintain a register of hives and sites. It agreed to allow Salem/WSL to inspect the register and the sites from time to time upon reasonable notice. JRWT was also responsible for having in place agreements with landowners of sites, and paying the landowners with honey or money as required.

[244] There was no difficulty with registration. Ms Blake gave evidence that she attended to this. Mr Watson accepted that JRWT attended to registration of the sites with AgriQuality. A register was maintained, and Mr Whitehead gave evidence that he gave Mr Watson the opportunity to inspect the sites, and the register. JRWT complied with the relevant provisions contained in the second agreement for the hire of the hives.

[245] On the evidence, Salem/WSL and Mr Watson were not concerned about the sites at all. As I have already noted, following settlement of the 2009 agreement, WSL uplifted the 400 hives which were transferred pursuant to that agreement, and took them to Masterton. It did the same when the second agreement was settled. The 700 hives the subject of that agreement were taken to Masterton. Similarly, WSL took the 900 hives the subject of the third agreement to Masterton in May 2012. The hives were taken to Masterton notwithstanding that WSL had its own beekeeper based in Northland, who could have taken over the hives in situ, and picked up JRWT’s agreements with the landowners, such as they were, to access the hives.

[246] At the time, Mr Watson was given an express warning by Mr Whitehead that somebody else would, in all probability, move in and take over the sites. Presumably, that has occurred, but there is no evidence that Mr Whitehead or JRWT is responsible for that. Mr Whitehead said, and I accept, that he has not retained any of the sites that were sold to Salem/WSL. I am satisfied from the evidence that Shiloh, through Mr Whitehead, made every reasonable offer to assist Mr Watson to meet with the site owners, and to introduce him as the new owner of the hives. Mr Watson did not take up those offers. He was simply not concerned about or interested at all in the sites, so long as he received the honey harvested from the sites. He allowed the sites to be relinquished or surrendered, and notwithstanding express and repeated requests from Mr Whitehead and from Mr Hockly that Salem/WSL should address the sites, and deal properly with them. Mr Watson failed to respond. No issue was taken in regard to the sites until matters came to a head, and Mr Bale wrote to Mr Hockly on 5 December 2012.

[247] Not only did the various agreements, both in 2010 and 2011 not require that formal written contracts for the sites be in place, they did not require that such agreements as were in place were capable of being formally assigned to Salem/WSL. In my view, the plaintiffs have belatedly sought to read into the first to fourth agreements provisions which are not there.

[248] Accordingly, I do not consider that Shiloh breached the deed of arrangement or the first and third agreements as alleged by the plaintiffs. There were sites, and those sites were in large part secured only by relatively informal agreements. This, however, was not a breach of the deed or the agreements, and in any event, Mr Watson’s overt actions and conduct operated as a waiver of any rights or interest Salem/WSL may have had in the sites.⁵¹The claim the plaintiffs have made for damages for failure to deliver up the sites must fail.

Salem/WSL from Shiloh in mid-May 2012. In their pleadings, the plaintiffs sought

$72,450 in this regard. They claimed that 20 percent of the hives delivered were not able to be used and were worthless.

[251] First, and contrary to the plaintiffs’ assertions, the evidence established that it was Mr Whitehead who was pushing to get Mr Watson to uplift the 900 hives the subject of the third agreement. This was clear from an email dated 26 February

2013. The request was repeated in a letter dated 28 March 2013. Mr Whitehead also sought to head off any suggestion that the hives might be in poor condition. He expressly advised Mr Watson that he was happy for him to come and inspect the hives, and that it would assist by transporting them to a central location for trucking.

[252] By letter dated 12 April 2013, Mr Bale stated that Salem/WSL wished to uplift the 900 hives. He advised that Salem/WSL did wish to inspect the 900 hives to

_{assess their condition and ensure that they were being managed
appropriately.}

[253] In a letter also dated 12 April 2013, Mr Whitehead invited Mr Watson to send up a truck to collect the hives. He noted that the truck should be able to handle 300 hives per load, and he proposed that the hives should be removed at the rate of 300 per week, over the following three weeks. He finished up the letter as follows:

[254] Mr Watson replied on 15 April 2013 to Ms Blake. He told her that he would like to pick up the 900 hives. On 16 April 2013, Ms Blake replied advising that JRWT could progressively bring the hives into a holding area, so that the first pick up could take place on 9 May 2013, and a second pick up on 14 May 2013. She advised Mr Watson that he would need to arrange labour for loading and strapping the hives onto the trucks. On 17 April 2013, Mr Whitehead sent an email to Mr Watson. He asked him whether or not he had managed to organise a truck to collect the hives. He asked whether 9 and 14 May 2013 would suit, and reiterated that inspection of the hives (or the sites) was welcome. He asked Mr Watson to arrange matters direct with him.

[255] On 25 April 2013, Mr Whitehead sent a further letter to Mr Watson. He told him that he was starting to bring the hives into holding sites, but he was still seeking clarification from Mr Watson as to whether or not he had arranged a truck to uplift the hives. He stated as follows:

Denis it is still an option to carry on farming the beehives on the sites you have purchased if you wish. This was your intention and reason for buying the hives and sites. As I have stated in the past, I am only too happy for you to come up and inspect the hives and sites. I suggest that you would want to do this regardless of whether you take the hives away or carry on farming them on their sites.

If you wish to utilise the sites you have purchased with these 900 beehives, we need to discuss the most practical sites for you to take from the site list you signed with the deed of arrangement with Shiloh. Shiloh I understand would [be] happy for me to help in this way if need be.

[256] In a further email sent on 1 May 2013, Mr Whitehead told Mr Watson that he would like him to personally come up and check the hives before they were loaded and noted that that would give the parties a chance to work out together which sites it was best for Mr Watson to take over.

[257] Mr Watson did not reply to any of these emails and letters. He asked Mr Bale to do so on his behalf, and Mr Bale sent a short email to Mr Whitehead on 2 May

[258] Also on 2 May 2013, Mr Bale sent an email to Mr Hockly. He asked whether JRWT was unconditionally offering Mr Watson the opportunity to uplift the 900 hives. He repeated his request for detail of the hive sites, including location, land value, ownership and assignments. He advised that Mr Watson did wish to see the beehives and inspect their condition prior to uplifting them, and asked what arrangements could be made for that to take place.

[259] Mr Hockly replied on 7 May 2013. He advised that the 900 hives and sites had been paid for by Salem/WSL, and that Shiloh was happy to transfer the hives and sites to WSL, without prejudice to its claim for interest pursuant to the deed of arrangement. He reiterated that JRWT had surrendered the second agreement for the hire of hives as at 31 March 2013, and requested that Salem/WSL should forward a tax invoice for rental up until that date. He also recorded that Mr Watson or his employees could inspect the hives after 2.00 pm on Wednesday, 8 May 2013, and suggested that an independent beekeeper experienced with hive condition in Northland at that time of year also be present. He also stated that Mr Whitehead considered that that would be an ideal time for him and Mr Watson to discuss details regarding the sites which had been purchased. He recorded that it would be in both Mr Watson’s and Mr Whitehead’s best interests for them to discuss which sites would become Salem’s/WSL’s property. It was expressly noted that the uplifting of the hives was not dependent on this, however.

[260] A truck was sent to the collection point by WSL on 8 May 2013. Unfortunately, and notwithstanding Mr Bale’s advice to the contrary, Mr Watson decided not to attend and he did not supervise the loading of the hives. Rather, he arranged for WSL’s Northland beekeeper, a Mr Kevin Atkins, to attend and inspect the hives for Salem/WSL. A number of hives were uplifted. The truck was supposed to return on Monday, 13 May 2013 to collect the remaining hives. WSL arranged for a contractor to come onto the site to confirm that the hives were available for uplift,

and in good condition. In the event, the final uplift was delayed. It did not take place until 16 May 2013.

[261] Mr Atkins gave evidence for the plaintiffs. He told me that he attended and inspected the hives at the loading base. He said that the bees in the hives were aggressive, and that the hives were difficult to inspect. He said that there were 400 hives available for checking, and that he checked a number of them. He said that he did not consider the hives to be in excellent condition, and that many of them were not “two brood boxes with good weights”.

[262] The plaintiffs also called evidence from Daniel Watson. He is Mr Watson’s son, and WSL’s head beekeeper. He inspected the 900 hives when they arrived at Masterton. He said that a number of the hives were in very poor condition. He produced a number of photographs that were taken of the hives when he inspected them, and also a video. He estimated that approximately 180 hives (20 percent) were unusable. He told me that Salem/WSL had to replace broken frames in the hives, and repopulate them with bees. He said that one season’s production was lost while the

180 hives in poor condition were cleaned up, repaired, and repopulated. He also said that additional labour was required to get the remaining 720 hives “up to spec”, but that this was accepted by WSL as part of its operational cost.

[263] The defendants called evidence from a Mr Mark Frear in this regard. He was an independent beekeeper based in Northland. He inspected a cross section of the

400 hives, which were initially picked up by Salem/WSL. He said that the hives were two-box hives, and that all had good, if not excellent, weights. He told me that he opened the tops of at least 50 of the hives, and found that bee numbers were healthy.

[264] The defendants also called evidence from a Mr Jaime Brown. He was a beekeeper who worked for Mr Whitehead. He was also involved in the inspection, and he said that the condition of those hives which he inspected was very good. Mr Brown was shown the photographs and video produced by Mr Daniel Watson. It was accepted by Mr Whitehead that the photographs and videos depicted some of the

views. He was surprised to see hives in the condition shown in the photographs. He

[265] I was impressed by Mr Brown’s forthright answers. I preferred his answers to those of Mr David Whitehead (Mr John Whitehead’s brother), who also gave evidence in relation to the photographs. Mr David Whitehead said that the hives depicted in the photographs looked to be in good condition. I do not accept this evidence. I do not discount Mr Frear’s evidence, but I note that he only inspected a limited number of the hives.

[266] On balance, and having considered the evidence in its totality, I accept that approximately 20 percent of the hives – or 180 hives – were in poor condition, that work had to be undertaken on them to get them back into good condition, that the hives had to be repopulated with bees before they could be used, and that a year’s production from the hives was lost.

[267] Unfortunately for the plaintiffs, that is not the way that the claim was pleaded by them. They sought damages on the basis that the hives supplied were worthless, and could not be used at all. There was no direct evidence led before me as to the cost of repairing the hives, or the lost production which resulted. Estimating lost

profits is always a complex task.⁵²I am satisfied that there was real damage and that

the law requires that I do my best to arrive at a figure by way of damages.⁵³

(including interest) payable to JRWT pursuant to the agreement for sale and purchase of honey dated 29 November 2011.

⁵³Walsh v Kerr [1989] 1 NZLR 490 (CA) at 494; Newbrook v Marshall [2001] NZCA 332; [2002] 2 NZLR 606 (CA)

(b) WSL is liable for the monies owing in respect of invoices 329, 332 and 334, together with interest thereon at the rate of five percent. Interest is not to be compounded.

(c) Salem/WSL is liable for interest at the rate of four percent on each of the payments due in respect of the third agreement, from the date fixed in the deed of arrangement for payment, until the date of payment. Interest is not to be compounded.

(d) JRWT is liable to pay interest at the rate of six percent in respect of the payments of rental due under the second agreement for the hire of hives in May and June 2012, from the dates on which the rental was due to be paid, until 30 July 2012, and at the rate of five percent from that date through until the date of judgment. Interest is not to be compounded.

(e) JRWT is liable for rental due under the second agreement for the hire of hives as at 30 July 2012, in the sum of $595,125, together with interest at the rate of five percent from that date through until the date of judgment. Interest is not to be compounded.

(f) JRWT is liable for rental in respect of the 1,400 hives the subject of the first and fourth agreements, from 1 August 2012 until 11 April

2013, such rental to be calculated on a per hive and per diem basis, by reference to the rate of $57,500 (plus GST) per month, in respect of all

2,300 hives, together with interest at the rate of five percent from the end of each month of the renewed term until the date of judgment. Interest is not to be compounded.

(g) JRWT is liable for rental in respect of the 900 hives the subject of the third agreement, from 1 August 2012 to 31 March 2013, such rental to be calculated on a per hive and per diem basis, by reference to the rate of $57,500 (plus GST) per month, in respect of all 2,300 hives, together with interest at the rate of five percent from the end of each

month of the renewed term until the date of judgment. Interest is not to be compounded.

[269] Although both parties called expert forensic accountants, the calculations they respectively made do not align with my findings as to liability. Therefore, I have issued this judgment as an interim judgment, so that the expert accountants can liaise and prepare a final calculation in accordance with my judgment. The hearing, however, is closed and I am not prepared to allow the parties to call further evidence.

[270] I direct the parties, within 20 working days of this interim judgment, to file a joint memorandum, or if there is disagreement, separate memoranda:

(c) detailing such evidence as is available and which may assist me to fix the damages payable by Shiloh in respect of the damage noted in [268(h)].

[271] On receipt of the memorandum/memoranda, I will consider whether judgment can be entered. If there is disagreement, I will direct the Registrar to allocate further hearing time to resolve any outstanding issues.

[272] Once a final judgment has issued, I will invite the parties to file memoranda as to costs. I record that the agreement for sale and purchase of the honey did provide that WSL, and Mr Watson as guarantor, were liable for solicitor and client costs.

High Court of New Zealand Decisions

Watson v Whitehead [2014] NZHC 2992 (27 November 2014)