Goldenlight Enterprises Ltd v Western Bay of Plenty District Council [2016] NZHC 2703 (11 November 2016)

Last Updated: 23 November 2016

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV 2016-470-86 [2016] NZHC 2703

BETWEEN	GOLDENLIGHT ENTERPRISES LTD AND ORS Plaintiffs
AND	WESTERN BAY OF PLENTY DISTRICT COUNCIL AND ORS Defendants

Hearing:	9 November 2016
Counsel:	A S Ross and I Allan for Plaintiffs G Allan for Fifth and Sixth Defendants No appearance by or on behalf of other defendants
Judgment:	11 November 2016

_{JUDGMENT OF HEATH J}

This judgment was delivered by me on 11 November 2016 at 11.00am pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Burley Attwood Law, Tauranga Holland Beckett, Tauranga Counsel:

A S Ross, Auckland

_{G Allan, Wellington}

GOLDENLIGHT ENTERPRISES LTD AND ORS v WESTERN BAY OF PLENTY DISTRICT COUNCIL AND ORS [2016] NZHC 2703 [11 November 2016]

Introduction

[1] Goldenlight Enterprises Ltd (Goldenlight) carries on business as an organic avocado grower, commercial beekeeper and exporter. Its registered office is at 89C Merrick Road, RD 3, Tauranga. That property is owned by the trustees of the Heyoka Trust (the Trust).

[2] Goldenlight and the Trust have rights of user in respect of a right of way (Right of Way D) over contiguous land. Rob Burrell Earthmoving Ltd (the company) was employed by users of Right of Way D in 2012 to undertake remedial work and to construct a roadway in accordance with a preliminary report prepared by a geotechnical adviser. Mr Rob Burrell is a director of the company, and was the person who undertook the work on its behalf.

[3] Goldenlight and the Trust have sued a number of defendants to recover losses arising out of damage to Right of Way D, both before and after the remedial work. The company is alleged to have carried out its work inadequately.

[4] The company is sued in negligence and nuisance. The company is alleged to have breached duties owed to Goldenlight and the Trust both by failing to carry out its work to a proper standard and blocking access over Right of Way D for approximately 18 months. Mr Burrell also is sued in negligence and nuisance, on the basis that he was the person responsible for undertaking the work and blocking the rights of access that Goldenlight and the Trust say they possess. The company is named as the fifth defendant to this proceeding, and Mr Burrell as the sixth.

[5] The statement of claim was filed on 23 May 2016. On 15 August 2016, the solicitors for the company and Mr Burrell,¹ wrote to the solicitors for the plaintiffs on a “without prejudice save as to costs” basis. The letter described the plaintiffs’

_{claims as “hopeless” and put forward a proposal to settle all issues arising in the}

¹ The letter was also written on behalf of another company, RPL Services Ltd, the ninth defendant.

The proceeding has been discontinued against that company. None of the points that I have to decide affect that discontinuance.

proceeding.² By an email forwarded at 9.53am on 19 August 2016, the offer was accepted.³

[6] By accepting the offer, Goldenlight and the Trust accept that their pleaded claims were to be discontinued against the company and Mr Burrell and that those entities would discontinue their counterclaim against them. However, Goldenlight and the Trust subsequently evidenced an intention to issue fresh proceedings, arising out of the same set of facts on which their original causes of action were based. The company and Mr Burrell allege that the agreement reached between them and the plaintiffs forecloses that possibility.

The preliminary question order

[7] The possibility of the issue of new proceedings was raised at a case management conference before Associate Judge Bell on 19 October 2016. As a result of a direction made on that day, a preliminary question was ordered to be tried.⁴ The question is whether, as a result of the correspondence exchanged, the claim against the company and Mr Burrell has been the subject of an accord and satisfaction which prevents further proceedings being issued that arise out of the same set of facts on which the initial proceeding was based.

[8] Sensibly, the parties have agreed to retain the existing pleaded case in an amended statement of claim that was filed on 1 November 2016. By doing so, the parties have enabled the question to be resolved in the course of the present proceeding. That was a responsible and pragmatic approach to take.

The correspondence

[9] On 15 August 2016, the solicitors for the company and Mr Burrell wrote a closely reasoned letter to the solicitors for Goldenlight and the Trust in which they provided a detailed critique of the causes of action against each. The solicitors

_{concluded their letter with a proposal. They wrote:}

² _{See para [9] below.}

³ _{See para [10] below.}

⁴ High Court Rules, r 10.15.

Invitation with withdraw

24. Please note that this is an open offer.

25. Our clients have already been put to the expense of preparing a defence to your clients’ claim. This is despite the fact that the claim is legally hopeless. On any assessment, our clients will be successful if matters proceed to trial, and if so would be entitled to costs. The claim may be such that increased costs would be appropriate. Our clients are also currently considering making an application to strike out the causes of action against them.

26. Nevertheless, our clients would prefer to avoid litigation, and to this end are prepared to accept their losses to date as the cost of doing business, if your client agrees to withdraw the proceedings against both RBEL and Rob, then the counterclaim against your clients will also be withdrawn (with no issue as to costs).

27. This offer is made on the condition that they are not put to any further expense in defending the proceedings. As a result, the offer is open for acceptance until 5pm on Wednesday 24 August 2016 at which point it will automatically lapse. If this offer is not accepted, and our clients succeed in defending the claims against them, this letter will be placed before the Court on an application for increased costs.

28. Finally, in the event that your clients do not accept these offers, our clients intended to apply for security for costs. In order to avoid those proceedings and the cost of the application, we invite you to confirm that you hold sufficient monies on trust to meet a 2B award on the part of all defendants.

[10] After some earlier exchanges (which are agreed to be irrelevant) counsel representing Goldenlight and the Trust responded at 9.53am on 19 August 2016, saying:

I have been instructed to accept the open offer contained in your letter of 15

August 2016.

...

Analysis

[11] The parties agree that:

(a) A binding agreement has been entered into between Goldenlight and the Trust (on the one hand) and the company and Mr Burrell (on the other) to the effect that notices of discontinuance will be filed for both the relevant claims and counterclaims, with no issues as to costs; and

(b) The question is whether the agreement should be interpreted to prevent Goldenlight and the Trust from issuing separate proceedings alleging different causes of action that arise out of the same set of facts that were pleaded in the statement of claim.

[12] As a result of dialogue during the course of argument, the issue was refined to one of interpretation. I must determine the meaning of the agreement by reference to the words used in the letter, having regard to the context in which they were written. The necessary inquiry is into what a reasonable and properly informed third party would consider that the parties intended their words to mean.⁵

[13] The Court stands in the position of that hypothetical third party. In doing so, the Court is taken to be aware of the commercial or other context in which the agreement was formed, and all relevant facts and circumstances known to (and likely operating on) the parties’ minds.⁶

[14] The context in which the letter of 15 August 2016 was sent involved:

(a) The company and Mr Burrell facing involvement in a multi-party legal dispute for a sum which, while not quantified, was likely to be in excess of $2 million (in the case of Goldenlight) and $40,000 (in respect of the Trust).

(b) An assessment by the company’s and Mr Burrell’s solicitors that Goldenlight and the Trust had little prospect of success in the proceeding. Their view of the merits is set out in full in the letter of

15 August 2016.

(c) The company and Mr Burrell wished to extract themselves from the litigation, and avoid incurring further costs in relation to the claims

_{against them.}

5. See Attorney-General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 (PC) at para [16], set out at para [21] below.

⁶ Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] 2 NZLR 444 (SC) at para [19] (Tipping J).

[15] Although both Mr Ross, for Goldenlight and the Trust, and Mr Allan, for the company and Mr Burrell, understandably placed emphasis on different parts of the letter to support their respective positions, I consider that the following points assume most significance:

(a) The company’s and Mr Burrell’s belief that “the claim [was] legally

hopeless”.⁷

(b) The company and Mr Burrell preferred to avoid litigation, and were “prepared to accept their losses [to the date of the letter] as the cost of doing business”, if Goldenlight and the Trust agreed to withdraw their claims against each.⁸

(c) If Goldenlight and the Trust withdrew their claims against the company and Mr Burrell, they would withdraw their counterclaim against Goldenlight and the Trust.⁹

(d) All discontinuances were to be effected with no issue as to costs.¹⁰

(e) The offer was made on the express condition that neither the company nor Mr Burrell were “put to any further expense in defending the proceedings”.¹¹

[16] The letter must also be seen as written against the background of the rules of Court that govern the ability of a party who has discontinued proceedings to file another arising out of the same set of facts. Rule 15.24 of the High Court Rules provides:

15.24 Restriction on subsequent proceedings

A plaintiff who discontinues a proceeding (proceeding A) against a defendant may not commence another proceeding (proceeding B) against the defendant if proceeding B arises out of facts that are the same or

⁷ _{See the letter of 15 August 2016, at para 25, set out at para [9] above.}

⁸ _{See the letter of 15 August 2016, at para 26, set out at para [9] above.}

⁹ _Ibid.

¹⁰ _Ibid.

¹¹ See the letter of 15 August 2016, at para 27, set out at para [9] above.

substantially the same as those relating to proceeding A, unless the plaintiff has paid any costs ordered to be paid to the defendant under rule 15.23 relating to proceeding A.

[17] The commentary, in McGechan on Procedure, in relation to that rule reads:

HR15.24.01 Operation

The operation of the rule is straightforward. The somewhat cumbersome use of “proceeding A” and “proceeding B” is a hangover from the parallel discontinuance and non-suit rules. A non-suiting plaintiff could reconstitute its original proceeding, not so a discontinuing plaintiff.

The key elements of the rule are that proceeding B must: (a) Be against the same defendant.

(b) Arise out of the same or substantially similar facts.

(c) Be in the same Court as proceeding A: Portside Apartments Ltd v

Breakers Gisborne Ltd & Ors HC Napier CIV-2007-441-751, 4

February 2008.

[18] On the interpretation for which Mr Ross contends, both Goldenlight and the Trust (on the one hand) and the company and Mr Burrell (on the other) would discontinue both claim and counterclaim, with no issue as to costs. Nevertheless, Goldenlight and the Trust would be entitled to file fresh proceedings in respect of different causes of action arising out of the same set of facts, without having to pay costs on the discontinued proceeding. Mr Ross accepted that, on the interpretation he advanced, the company and Mr Burrell were entitled to resurrect their counterclaims in response to the new claims.

[19] On the view for which Mr Allan contends, the whole purpose of the offer was to avoid cost in relation to the current proceedings. No other basis for a claim had been signalled at that stage. The parties, he submitted, intended that the agreement would be in full and final settlement of all differences between the parties arising out of the pleaded facts on which Goldenlight and the Trust relied. Mr Allan submitted there was no other commercially realistic explanation for the offer made by the company and Mr Burrell, and that must have been obvious to Goldenlight and the Trust.

[20] Mr Ross countered Mr Allan’s proposition by suggesting that benefits could be achieved by the company and Mr Burrell, if the offer were to be interpreted in the manner for which he contends. For example, he pointed to advantages that could be gained from the company and Mr Burrell extracting themselves from multi-party litigation. He suggested that the cost of defending in a single proceeding brought against them was likely to be less. Although the possibility that they may be joined back into the proceeding by another party remained, Mr Ross submitted that the offer itself was unlikely to have been made unless the solicitors for the company and Mr Burrell had confirmed no such claims would be made.

[21] As the words “full and final settlement” were not used in the letter, I must determine whether that intention can be inferred as a matter of necessary implication. That approach accords with views expressed by Lord Hoffman, delivering the advice of the Privy Council in Attorney-General of Belize v Belize Telecom Ltd.¹² Lord Hoffmann said, in ascertaining the meaning of any instrument:

[16] ... The court has no power to improve upon the instrument which it is called upon to construe, whether it be a contract, a statute or articles of association. It cannot introduce terms to make it fairer or more reasonable. It is concerned only to discover what the instrument means. However, that meaning is not necessarily or always what the authors or parties to the document would have intended. It is the meaning which the instrument would convey to a reasonable person having all the background knowledge which would reasonably be available to the audience to whom the instrument is addressed: see Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896 at 912–913. It is this objective meaning which is conventionally called the intention of the parties, or the intention of Parliament, or the intention of whatever person or body was or is deemed to have been the author of the instrument.

(Emphasis added)

[22] The approach articulated by Lord Hoffmann has subsequently been adopted by our Supreme Court and Court of Appeal, in Dysart Timbers Ltd v Nielsen¹³ and Hickman v Turn and Wave Ltd¹⁴ respectively

_{[23] The approach I follow involves:}

¹² _{Attorney-General of Belize v Belize Telecom Ltd (2009) 1 WLR 1988 (PC) at para [16].}

¹³ _{Dysart Timbers Ltd v Nielsen [2009] NZSC 43; [2009] 3 NZLR 160 (SC).}

¹⁴ Hickman v Turn and Wave Ltd [2011] NZCA 100; [2011] 3 NZLR 318 (SC) at paras [245]–[249].

(a) Ascertaining the meaning that the letter would convey to a reasonable person having all the background knowledge which would reasonably be available to the audience to whom his letter was addressed;¹⁵ and

(b) Assuming that the notional reader would take into account the practical consequences of deciding that the offer means one thing or the other.¹⁶

[24] The agreement is said to constitute an “accord and satisfaction”. That is an expression used to describe an agreement to settle a legal proceeding claim for valuable consideration but for something less than what is sought. Its essence was described by Scrutton LJ, for the Court of Appeal of England and Wales, in British Russian Gazette and Trade Outlook, Ltd v Associated Newspapers, Ltd; Talbot v

Sims.¹⁷ Scrutton LJ said:

... Accord and satisfaction is the purchase of a release from an obligation whether arising under contract or tort by means of any valuable consideration, not being the actual performance of the obligation itself. The accord is the agreement by which the obligation is discharged. The satisfaction is the consideration which makes the agreement operative. ....

[25] Although Scrutton LJ described “accord and satisfaction” as “purchasing” a release from an obligation under tort or contract through valuable consideration, there is no need for that form of acquisition to be used in a particular case. The question is whether, for valuable consideration, an agreement has been reached for an obligation to be discharged. In the present case, the forgiveness of any costs that Goldenlight and the Trust would have been required to pay to the company and Mr Burrell on discontinuance of their claim represents valuable consideration. Mr Ross did not demur on that point. That was a responsible position to take. The consideration makes the agreement operative.

[26] I have no doubt, reading the letter from the solicitors as a whole, that the offer was intended to encompass settlement of the existing proceedings and any

15. Attorney-General of Belize v Belize Telecom Ltd (2009) 1 WLR 1988 (PC) at para 16, set out at para [21] above.

¹⁶ _{Ibid, at para [22].}

¹⁷ British Russian Gazette and Trade Outlook, Ltd v Associated Newspapers, Ltd; Talbot v Sims

[1933] 2 KB 616 (CA) at 643–644. Greer and Slesser LJJ agreed on this point.

future claims that might be brought arising out of the same set of facts. The commercial purpose of the offer was to rid the company and Mr Burrell of a contingent liability to Goldenlight and the Trust for a sum that could have exceeded

$2 million. Their expressed desire to forego any order for costs that might otherwise be payable to them is readily explicable on the basis that all litigation between the parties was to cease.

[27] Viewing the offer¹⁸ in the round and in light of background circumstances known to both parties, I find that the agreement amounted to an accord and satisfaction which may be pleaded as a defence against any new claim of the type foreshadowed that might be brought.

[28] The practical consequence that flows from that finding is that Goldenlight and the Trust are not entitled to bring further claims against the company and Mr Burrell that arise out of the facts on which the original claims were made, whether in the course of the present or any fresh proceeding. If they did so, the claim would be struck out on a plea based on accord and satisfaction. To give effect to the agreement, Goldenlight and the Trust must now each file a notice of discontinuance of their claims, and the company and Mr Burrell must do likewise in respect of their counterclaims. No issue as to costs will arise on either discontinuance.

Costs on the preliminary question

[29] Costs incurred by the company and Mr Burrell on the preliminary question with which I have dealt are separate from those foregone in the agreement reached between the parties. Although I have not heard from counsel on the question of costs, my provisional view is that costs should be awarded against Goldenlight and the Trust on a 2B basis, together with reasonable disbursements, both to be fixed by the Registrar.

[30] If either party wishes to make submissions to the contrary, a memorandum shall be filed and served on or before 30 November 2016. In that event the Registrar

¹⁸ Set out at para [9] above.

shall arrange a telephone conference before me at the earliest possible time so that further directions may be given to enable costs to be resolved as soon as possible.

Result

[31] The preliminary question is answered as follows:

An enforceable agreement has been entered into between Goldenlight and the Trust (on the one hand) and the company and Mr Burrell (on the other) which requires each to file notices of discontinuance in respect of their respective claims and counterclaims, with no order as to costs, and prevents Goldenlight and the Trust from issuing further proceedings against the company and Mr Burrell arising out of the same or substantially the same facts on which their initial claim was based.

_{[32] I thank counsel for their assistance.}

_{P R Heath J}

Delivered at 11.00am on 11 November 2016