Aldrie Holdings Limited v Prout [2014] NZHC 638 (2 April 2014)

Last Updated: 6 June 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2014-404-000099 [2014] NZHC 638

BETWEEN	ALDRIE HOLDINGS LIMITED Plaintiff
AND	` First Defendant
AND	ROGER WAYNE PROUT and SHERRELL ANNE PROUT Second Defendants
AND	ROGER WAYNE PROUT Third Defendant

Hearing:	2 April 2014
Appearances:	N King for the Plaintiff D J Clark for the Defendants
Judgment:	2 April 2014

_{ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN}

ALDRIE HOLDINGS LIMITED v CLOVER BAY PARK LIMITED and PROUT [2014] NZHC 638 [2 April

2014]

The summary judgment application

[1] The plaintiff (AHL) purchased a diary farm at Kaukapakapa (the farm) from the first defendant pursuant to an undated agreement for sale and purchase that was settled on 15 October 2013 (the agreement).

[2] The second defendants are Mr and Mrs Prout as trustees of the Clover Bay Trust which owned the farm equipment and the Fonterra shares which were sold at the same time as the farm.

[3] The third defendant is Mr Prout whom it is pleaded was the agent of the first and second defendants and on whose behalf he made misleading statements.

[4] Summary judgment is applied for on grounds:

(a) That the defendants are liable to AHL on the causes of action and statement of claim; and

(b) Upon the cancellation of the sale of the farm compensation/damages are to be paid by the defendants to AHL; and

(c) The defendants have no defence to the claim because the defendants claimed production of the farm was based upon other land being leased and included claims of returns from more cows than was disclosed to AHL.

(d) That there is no real question to be tried.

[5] The statement of claim is brief. It pleads, inter alia:

(a) Term 30 of the sale and purchase agreement was that AHL would lease 167 cows on the farm (free lease) from the Clover Bay Trust.

(b) Term 29 of the sale and purchase agreement was that the vendor would occupy the main residence and self contained unit at no charge

other than electricity and telephone until the end of the season on 31

May 2014.

(c) The farm was advertised as “200 cows doing 60,000 milk solids (ms)

at best”.

(d) When visiting the farm Ms Laboyrie of AHL said she was told by Mr Prout that the average 10 year production was 50,000 ms and in one year had done 61,000 ms.

(e) AHL did not buy the cows but agreed to lease 167 cows at no cost in consideration of the Prout family retaining possession of the living accommodation.

(f) Based upon the representation that the farm and herd were capable of producing 50,000 ms AHL sought finance to purchase the farm.

(g) That the farm and cows produced on average 50,000 ms per year or were capable of doing so was not added as a term of the agreement.

(h) The farm failed to produce ‘anywhere near’ the claimed 50,000 ms production.

(i) AHL also found farm machinery and equipment in a state of uncleanliness and neglect.

(j) Subsequent farm management reports confirm the first defendant would not have been capable of producing 50,000 ms on average from the size of the herd and condition of the farm as sold to AHL; that the vendors had overstated the “milking platform” of the farm.

[6] As a first cause of action AHL pleads loss suffered due to “the reduced production of the farm” and claims damages for misrepresentation pursuant to s 6

Contractual Remedies Act 1979.

[7] As a second cause of action AHL pleads it is unable to increase production to that which it was stated the farm could produce. AHL wants to cancel the sale and purchase agreement due to misrepresentation of the production capability, per s 7

Contractual Remedies Act.

[8] For a third cause of action AHL pleads suffering of loss due to health and production capability of the herd. Damages are sought against Mr and Mrs Prout as trustees for the Clover Bay Trust in respect of claimed misrepresentations of the health and production capability of the herd, per s 6 of the Contractual Remedies Act.

[9] For a fourth cause of action it is pleaded that the health and capability of the herd was overstated and therefore that the lease of the herd be cancelled per s 7

Contractual Remedies Act 1979.

[10] Under a fifth cause of action it is pleaded that Mr Prout is liable for damages for misleading statements made as agent of the first and second defendants.

[11] Under the heading of ‘Compensation Sought’, AHL claims:

(a) As against all defendants, compensation “for the production stated possible of the farm with the herd and the condition of the plant, equipment and buildings on the farm, being 50,000 milk solids, from the sale to judgment”; and

(b) Cancellation of the sale and lease agreements and refund of the purchase price; or in the alternative

(c) Because production was overstated by at least 20 per cent there should be refunded to the plaintiff 20 per cent of the price of $2,909,478.72 paid for the farm and equipment i.e. $581,895.74.

[12] In addition damages of $200,000 is claimed “for stress and anxiety caused by the defendants’ actions.

[13] In their opposition to the application for summary judgment the defendants deny the making of any misrepresentations or that if any representations were made then such were not misrepresentations for the purposes of the Contractual Remedies Act 1979.

[14] Regarding losses claimed the defendants say: (a) They are denied.

(b) They have not been properly quantified.

(c) They arose from AHL’s failure to take due diligence.

(d) They occurred because of AHL’s inability to understanding farming methodology in the Northland district.

(e) They occurred because of AHL’s failure to allow sufficient time to

assess long term performance.

(f) They occurred because of AHL’s failure to mitigate its losses.

The evidence for AHL

[15] Ms Laboyrie has sworn an affidavit in support of the summary judgment claim. She is the director and shareholder of AHL.

[16] Ms Laboyrie enclosed a copy of an advertisement for the sale of the property.

It refers to “200 cows doing 60,000 ms at best”.

[17] She said she visited their farm with a friend when Mr Prout told her the farm had averaged 10 year production of 50,000 milk solids, and he had done 61,000 one year. Mr Prout is also reported to have stated that he had 200 really good cows and they were for sale also.

[18] Ms Laboyrie says AHL did not buy the cows as it wanted to have its own cows for the next season. She said it was agreed AHL would lease 200 cows at no cost in return for Mr Prout and his family continuing to occupy the house and the self contained flat until the end of the season on 31 May 2014. However, the sale and purchase agreement referred to only 167 cows being leased.

[19] After she had signed and settled the agreement on 15 October 2013 she checked the Fonterra website that same night and saw that “the milk was 29.9 per cent down for the season”.

[20] The following day she accompanied a vet who at her request provided a report dated 6 November 2013 in which it was noted that of the 167 cows assessed,

109 had visible evidence of having broken tails “at some point in the past”, that one had an abnormal bony protuberance on her dorsal nasal plane and that another had only “two functioning quarters”. Other animal defects were also noted.

[21] A few days later on 21 October Ms Laboyrie took her farm advisor across the farm. She said “the grass situation was critical” and there were also issues with the effluent pond overflowing. She said the farm advisor needed to use an excavator to empty a pond so that effluent “would not run down the paddock”.

[22] On 28 October 2013 Ms Laboyrie terminated the employment of a person whom the first defendant had engaged as a farm manager. Her reason was that the employee did not follow the management plan put in place regarding the grass “and deliberately put cows on the other side of the farm where there was even less grass”. She was also concerned that the employee in question had “put a cow being treated with penicillin in the herd (instead of a separate paddock), unmarked, and the only way to tell this penicillin cow was by its cow number”.

[23] Ms Laboyrie also commented that “in the milking shed there was thick

cheese-like material in the plant and the milking shed was very unclean”.

[24] Then in early November Ms Laboyrie “heard” that the defendants had leased a neighbours land. Mr Prout had never mentioned this to her. She concluded “it

now appears a lot of the production on the farm was attributed to this leased land. At no time ever did Roger Prout mention he leased two neighbouring properties for several years”.

[25] Ms Laboyrie says she also discovered that despite assurances that fertiliser had been applied, the land had had no application of fertiliser for four of the previous ten years.

[26] When Ms Laboyrie’s lawyer wrote to the defendants’ lawyer they replied denying the leasing of additional land or of having larger herd numbers than had been claimed.

[27] It is not necessary for the Court to review in length the affidavit evidence offered on behalf of the defendants. That evidence rejects all claims of misrepresentation and challenges the reliability of Ms Laboyrie’s recollections and calculations.

Considerations

[28] The proceeding is unsuitable for determination upon a summary judgment application. It is clear that AHL’s affidavits contain a lot of extraneous information and evidence which does not relate to matters as pleaded.

[29] Upon AHL’s summary judgment application it must satisfy the Court the defendants have no defence to the claims against them; they need to prove there is an absence of any real question to be tried.

[30] Summary judgment is not appropriate where issues of fact require determination and where issues of credibility can only be determined upon hearing witnesses at a trial. A Court should resist the temptation to reach conclusions about facts the parties cannot agree upon, unless the evidence of one party is clearly improbable or it cannot be considered credible.

[31] That is not the case here. It is central to AHL’s case that it purchased because

200 cows could produce 61,000 ms ‘at best’, and because Mr Prout said the farm

was producing 50,000 ms per annum on average. Because of what others have said and also because of a valuer’s report AHL believes production targets were not achievable without the defendants having leased additional land and without milking a greater number of cows. In reply Mr Prout disputes those assumptions and says the statements are provable. Only oral evidence will assist the Court to draw reliable conclusions – assuming that is that AHL can prove those representations were indeed inducements.

Conclusion

[32] There is a real question to be tried. The evidence indicates a tenable defence may be available in relation to all causes of action.

[33] There are factual issues and credibility matters that are inappropriate for determination in the summary judgment process.

Judgment

[34] The application for summary judgment is dismissed.

[35] Often costs are left for determination at the conclusion of a substantive hearing. In this case it is appropriate to fix costs on a 2B basis and order them to be paid to the first defendant. In the manner pleaded and in the form articulated by the

_{summary judgment application, it was always likely the application would fail.}

Associate Judge Christiansen