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High Court of New Zealand Decisions |
Last Updated: 2 October 2018
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IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
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CIV-2017-412-86
[2018] NZHC 2339 |
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BETWEEN
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BRENDAN D’ARVILL-JACKSON
Plaintiff/Counterclaimant Defendant
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AND
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LEONARD ALEXANDER JELLEY
Defendant/Counterclaimant
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CIV-2016-412-109
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BETWEEN
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BRENDAN D’ARVILL-JACKSON
Plaintiff
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AND
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LEONARD ALEXANDER JELLEY
First Defendant
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AND
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FAT FLATS LIMITED
Second Defendant
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Hearing:
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31 July 2018 and 1 August 2018
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Appearances:
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T H A Spear for Plaintiff/Counterclaimant Defendant L A Andersen for
Defendant/Counterclaimant
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Judgment:
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10 September 2018
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JUDGMENT OF NICHOLAS DAVIDSON J
D’ARVILL-JACKSON v JELLEY [2018] NZHC 2339 [10 September 2018]
TABLE OF CONTENTS
Mr D’Arvill-Jackson’s evidence [12]
Mr Preece’s evidence [20]
Mr Jelley’s evidence [25]
Mr Boyle’s evidence [47]
C. THE EVIDENTIAL CONTEST [53]
Submissions for Mr D’Arvill-Jackson [58]
Submissions for Mr Jelley [68]
E. DISCUSSION [87]
[1] The plaintiff, Mr D’Arvill-Jackson, is a commercial fisherman and owns fishing quota. The defendant/counterclaimant, Mr Jelley, is a businessman with fishing interests, and a co-owner of the Black Dog Kitchen & Bar (“Black Dog Café”) in Dunedin.
[2] Mr D’Arvill-Jackson’s company, Trawler Fishing Company Limited (“Trawler Fishing”), sold fish to Mr Jelley over several years. In 2013, by an oral agreement, Mr D’Arvill-Jackson sold Mr Jelley a parcel of fishing quota shares, made up as follows:
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$140,000.00
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322,841 shares
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$17,000.00
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100,000 shares
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$102,000.00
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664,335 shares
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$7,800.00
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65,217 shares
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$9,180.00
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205,687 shares
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[3] Payment was made without any record of the other terms which Mr D’Arvill-Jackson says were agreed, and which Mr Jelley denies in their entirety.
[4] The written record, such as it is, reflects the sale of quota for $276,283.60 plus GST. The record was generated by Aotearoa Brokers Limited (“Aotearoa Brokers”), the quota broking business of Mr Dominic Preece, who gave evidence for Mr D’Arvill-Jackson. His evidence included his valuation of the quota provided to Mr Jelley’s bankers, ANZ bank, for $288,090 plus GST.
[5] The sale of quota was completed but a dispute arose between Mr D’Arvill-Jackson and Mr Jelley which gives rise to this litigation. Mr D’Arvill-Jackson pleaded that:
(a) he had the right to purchase each year’s Annual Catch Entitlement (“ACE”) which is derived from the quota parcel, at market rates;
(b) that right was subject to Mr Jelley wanting ACE for his own business, if he acquired a shop or something similar;
(c) if Mr Jelley chose to sell the quota parcel within five years of purchase, then Mr D’Arvill-Jackson had the right to repurchase at the original sale price;
(d) after the five year term, Mr D’Arvill-Jackson had a right of first refusal if Mr Jelley sought to sell the quota parcel.
[6] Mr D’Arvill-Jackson seeks an order for specific performance, that Mr Jelley transfer the blue cod quota to him on payment of the original purchase price. He also
seeks damages for the alleged loss caused by Mr Jelley’s refusal to sell him the ACE for the 2015/16 fishing year as he says was agreed.
[7] Mr Jelley pleads that there were no conditions attached to his purchase of quota whatsoever, but that he did offer Mr D’Arvill-Jackson the ACE for the 2013/14 and 2014/15 fishing years, at market rates, with separate contracts for each year. He says Mr D’Arvill-Jackson did not pay for the ACE as required so he did not offer it to him for the 2015/2016 fishing year. Mr Jelley pleads that he was not bound to sell the ACE to Mr D’Arvill-Jackson as he alleges.
[8] In July 2016, Mr Jelley agreed to sell BCO5 blue cod quota shares to Harbour Fish Limited (“Harbour Fish”), a third party, for $200,000.00 plus GST. That sale has not been completed because Mr D’Arvill-Jackson registered a caveat on the Quota Register against these shares under quota registration number 9793148. Mr Jelley counterclaims that under s 152 Fisheries Act 1996 (“the Act”), Mr D’Arvill-Jackson is liable for any loss or damage suffered by the caveat preventing the settlement of the sale to Harbour Fish.
[9] Harbour Fish has recognised the advantage of having use of the blue cod quota without having to pay for it, and has made a voluntary payment to Mr Jelley of
$20,000.00. That mitigates any loss sustained for the 2016/17 and 2017/18 seasons, but Mr Jelley counterclaims for the $7,600.00 loss he says he has suffered, being the difference between the value of the ACE and the $20,000.00 received.
[10] Mr Jelley says the price agreed for the ACE was $18,000.00 including GST for each of the 2013/14 and 2014/15 fishing seasons, at the rate of $1,500.00 per month. However, Mr D’Arvill-Jackson did not make regular monthly payments and only a total of $15,000.00 for 2013/14, and for the 2014/15 season he failed to make any of the monthly payments. He then paid $16,000.00 after discovering that Mr Jelley had offered the ACE to Harbour Fish for the 2015/16 year. Mr Jelley claims a total of
$5,000.00 for ACE for the 2013/14 and 2014/15 years to make up the $18,000.00 he says was agreed.
B. EVIDENCE
[11] Mr D’Arvill-Jackson gave evidence and called Mr Preece. Mr Jelley gave evidence and called another quota broker, Mr Boyle. The evidence of Ms Timpany, Mr Jelley’s solicitor, was admitted by consent.
Mr D’Arvill-Jackson’s evidence
[12] A striking feature is that Mr D’Arvill-Jackson gave evidence inconsistent with his pleading that a term of the quota sale was his right to repurchase the quota at the original sale price if it was offered for sale within five years, and then a right of first refusal after five years. By supplementary brief, and then in oral evidence, he said that if the parcel was to be sold by Mr Jelley within five years then he had the right of first refusal to purchase it, but not at the original sale price.
[13] He would pay the market price, which would be fixed by the average of three valuations from quota brokers, if not agreed. He said that if Mr Jelley decided to sell the quota within two years, they agreed he would pay the original sale price if the market price was lower than that, this being a form of “underwrite”, an expression used in the hearing. Naturally enough, the difference in his pleaded case, the brief first filed and served, and the evidence given at trial, became the focus of attention at trial.
[14] Mr D’Arvill-Jackson’s brief of evidence says that he heard that Mr Jelley was interested in purchasing quota. He was given the opportunity to buy a parcel of quota and as he was buying other quota, he offered the parcel to Mr Jelley, along with some blue cod quota shares that he held. He says that the terms of sale were those described at para [5] above, and that he contacted Mr Preece of Aotearoa Brokers to “organise the deal”. Mr Preece said that he was willing to buy the quota himself, but he told Mr Preece that Mr Jelley was “a man of his word” and the deal had already been made. He said that he made no profit and the sale was at a “good price” (favourable to Mr Jelley) because of the business they did together.
[15] In his brief Mr D’Arvill-Jackson said Trawler Fishing purchased the ACE for the 2013/14 year from Mr Jelley for approximately $18,000.00, to be paid for under an agreed “pay as you go” arrangement. Fish would be caught and sold and the ACE
paid after that. He said that early in the 2013/14 year, Mr Jelley said he had to pay some bank fees or something similar and wanted instalments made, so he made three separate payments.
[16] In oral evidence, when asked if he had agreed he would take the ACE package for $18,000.00, he replied that he agreed on a “market value”. $18,000.00 was an approximate market value for the first year, but that figure was not set “in rock solid concrete”.
[17] In the 2014/15 year, Mr D’Arvill-Jackson had use of the ACE, and near the end of the year he says Mr Jelley asked him why he had not paid for it. He told Mr Jelley that he was waiting for an invoice. A day or so after that, he gave Mr Jelley a cheque for $16,000.00, which was made out to cash. He says that Mr Jelley confirmed the terms and conditions relating to the quota and the ACE and that he was a “man of his word”, which “counted for everything” or something similar.
[18] When he found the ACE for the 2015/16 year had been sold to Harbour Fish, he met Mr Jelley and he was told he would get it the following year, so he let the matter lie.
[19] When he found out that the quota parcel was put up for tender in the Otago Daily Times, he rang Ms Timpany, Mr Jelley’s solicitor, and was told that he would need to put in a tender, and he did so through his lawyer, Mr O’Neill. He says he was never given the right of first refusal to which he was entitled to, and he feels “the rug was pulled out from underneath [his] feet.”
Mr Preece’s evidence
[20] Mr D’Arvill-Jackson called Mr Preece, whose company Aotearoa Brokers is the largest quota brokerage in New Zealand. He has had business dealings with Trawler Fishing and Mr D’Arvill-Jackson over some years. He did not know Mr Jelley prior to his involvement.
[21] He says Mr D’Arvill-Jackson told him he was going to sell a parcel of quota shares and asked Mr Preece to effect the transaction. Mr Preece told him that he would
buy the shares himself, with a provision for leaseback of the ACE to Mr D’Arvill-Jackson’s company because he was selling at a good price, but Mr D’Arvill-Jackson said that the deal had been struck with Mr Jelley and he would stick with it. He says Mr D’Arvill-Jackson told him he was selling the shares with a right of first refusal if Mr Jelley “ever resold the shares”, with a right to purchase the ACE for five years at market rates.
[22] He made some notes setting out the amounts of quota for sale, and the terms, this being his common practice. He says he spoke to Mr Jelley over the phone three or four times and told him it was a very good deal, and Mr Jelley confirmed what Mr D’Arvill-Jackson had told him “on probably two occasions”.
[23] His handwritten note is headed “Brendan Jackson” and sets out the fish species, at a price totalling $276,283.60 plus GST. Under “Return”, he recorded $16,510.00 per annum. He then made notes with a series of asterisks as follows:
Leaseback option for five years, to Trawler Fish;
Sell within five years – same as purchase price;
ECOS sold under market value;
Trawler Fish to retain contract of ACE etc;
Below that, names are listed under the heading ‘Investors’: “Carl Moon, John Muello, Martin Finnie, Brendan’s mate Len, Kaan’s Catering”.
[24] Mr Preece’s evidence and this handwritten note are said by Mr Spear, counsel for Mr D’Arvill-Jackson, to confirm Mr D’Arvill-Jackson’s evidence. The note does refer to a lease of the ACE back to Trawler Fishing as an “option”, and makes reference to a sale presumably of the quota within five years for the “same as purchase price”. It otherwise on its face appears to make reference to “investors” without explanation, and to “Brendon’s mate Len”, who it seems is Mr Jelley.
Mr Jelley’s evidence
[25] Mr Jelley’s evidence traces the history of his business relationship with Trawler Fishing, which sold fish to his Black Dog Café. He became interested in investing in quota so he let his fish suppliers know, not just Trawler Fishing, but also Harbour Fish and Blue Water.
[26] Mr Jelley says he was approached to invest in Trawler Fishing by Mr D’Arvill-Jackson, which he was told was an investment with returns “better than bank interest”, and a better way of getting into the fishing industry than purchasing quota, but he was not interested. It is hard to see how this was a way of “getting into” the fishing industry, as the arrangement was simply that he would provide funds to Trawler Fishing, but the point did not become clear in evidence. In his oral evidence, Mr D’Arvill-Jackson denied approaching Mr Jelley about investment in his company.
[27] Mr Jelley says he was then approached about his buying a quota parcel, and met Mr D’Arvill-Jackson at his shop in Musselburgh. The parcel included rough skate and red cod which he did not want, although it had flounder which he did want. He told Mr D’Arvill-Jackson that he preferred elephant fish. A few days later he came back with another parcel, with less rough skate and red cod, and one tonne of elephant fish and flat fish. The price was within his budget, so he said he would take it. He says that there was no discussion about his sale of the quota in the future, or the ACE.
[28] Then, three or four days later, Mr D’Arvill-Jackson asked if he was interested in buying four tonnes of Area 5 blue cod quota for which he wanted $42,000.00 plus GST per tonne. Mr Jelley declined and Mr D’Arvill-Jackson reduced the price to
$35,000.00 plus GST per tonne. This was discussed, as was revenue from the ACE, and Mr D’Arvill-Jackson is said to have agreed that if Mr Jelley purchased the blue cod quota, then he would purchase the ACE for all the quota at $18,000.00 for the first year, the market value, and Mr Jelley was happy with that. Mr Jelley would need funds for this additional purchase, so he approached the ANZ bank for finance. He received a letter from Aotearoa Brokers which set out the quota he agreed to purchase, and this was the first he understood that a broker was involved. He rang Mr Preece who gave him the valuation referred to above and finance was approved.
[29] Agreement was thus struck, on Mr Jelley’s evidence, without any further terms as to the ACE or any right of repurchase. However, about a week later Mr D’Arvill-Jackson came to the Black Dog Café in connection with the transfer of the ACE for the 2013/14 year and said, before he signed, that agreement would be conditional on his having the right to buy back the quota within five years for the sale price, and the right to fish the ACE at market rates. Mr Jelley flatly refused these terms and told Mr D’Arvill-Jackson the deal was off because it made no commercial sense, at which point the latter became agitated and aggressive and stormed out.
[30] Within two hours of calling off the deal he was phoned by Mr Preece who said it was normal practice to have a condition whereby the seller can buy back within five years at the original purchase price, as Mr D’Arvill-Jackson had suggested. Mr Jelley would have none of that and said that these now disputed elements were not part of the agreement reached. He did not want to sell the quota back at the same price because he was aware it was rising in value, and that is why he wanted to invest in it. He said he spoke to Mr Preece on one or two occasions.
[31] Either that day or the next, Mr D’Arvill-Jackson came to the Black Dog Café and they agreed that Mr Jelley would purchase the quota outright, free of any conditions, something Mr Jelley says he made “crystal clear”. Mr D’Arvill-Jackson could fish the ACE at an agreed market rate without Mr Jelley being obliged to sell him the ACE. If and when he decided to sell the quota, it would be to Mr D’Arvill-Jackson, provided they could agree on satisfactory terms. Mr Jelley was thinking of opening a fish shop and getting into the fishing “scene”. He knew the benefit of having his own quota, as he had owned a fish shop in Christchurch.
[32] Based on this clear understanding, Mr Jelley says the purchase proceeded and he paid $317,726.14 including GST and costs. He did not understand he was purchasing for less than market value.
[33] Then, after he purchased the quota, he found Mr D’Arvill-Jackson difficult to deal with, aggressive and intimidating, quite different to how he had been in their previous business relationship. The difficulties began when Mr D’Arvill-Jackson did not make a monthly payment for the ACE in October 2013. There were meetings at
his fish shop when he became agitated and aggressive and would stand over Mr Jelley in an intimidating manner. Thus, in 2014 Mr Jelley refused to have any further meetings with him at Musselburgh and insisted he came to the Black Dog Café.
[34] For the 2013/2014, year Mr D’Arvill-Jackson agreed to pay $18,000.00 including GST, with monthly payments of $1,500.00, but he paid only a total of
$15,000.00. Payments were sporadic, of $6,000.00, $5,000.00 and then $4,000.00.
[35] Mr Jelley told Mr D’Arvill-Jackson before the end of the 2013/14 season that he was short in his ACE payments. Mr D’Arvill-Jackson said that he was paying the market rate and he was not prepared to pay the $18,000.00. He thought Mr Jelley should accept $15,000.00. Mr Jelley refused to sell the ACE for the 2014/15 year until Mr D’Arvill-Jackson agreed the price of $18,000.00, paid monthly. Mr Jelley wanted this in writing and Mr D’Arvill-Jackson agreed. Despite this, he did not pay anything for the ACE during the 2014/15 year, despite constant demands. He ignored Mr Jelley’s calls, but on one occasion he got hold of him and said he could not pay for the ACE as he was “short”, because he had bought some Area 3 blue cod. Mr Jelley gave up on Mr D’Arvill-Jackson after a full year without payment.
[36] That was why for the 2015/16 season he approached Harbour Fish, which offered him $18,400.00 inclusive of GST per annum, to which he agreed. Harbour Fish paid him a lump sum which it said was its normal practice. When Mr D’Arvill-Jackson found out about this, he offered $16,000.00 for the year just finished, and said he would pay more for the 2015 year. He had a year’s use of quota without paying for it at the time, so Mr Jelley took the $16,000.00 cheque for the 2014/15 year, and told him that he had struck a deal with Harbour Fish for the 2015/16 year.
[37] Mr D’Arvill-Jackson is said to have again become abusive and agitated and threatened legal action to stop Harbour Fish fishing the ACE. Mr Jelley received a call from Mr Preece who said that if there was a problem in not being paid by Mr D’Arvill-Jackson, he should have contacted him. Mr Jelley’s solicitors were contacted by Mr Spear, Mr D’Arvill-Jackson’s solicitor, who advised that Mr Jelley was obliged to sell the ACE to Mr D’Arvill-Jackson. Because he considered there
was no contractual obligation to provide the ACE, as Mr Jelley understood it, he was not prepared to do so, especially given the history of dealings between them.
[38] He decided to sell the quota in May 2016 and an open tender was advertised. Mr D’Arvill-Jackson tendered $380,400.00 plus GST on 1 July 2016. There was a higher offer of $404,600.00 plus GST. This was advised to Mr D’Arvill-Jackson’s solicitor at 11:28am on 4 July 2016, and he was given the chance to better that, but an immediate response and a deposit was required. That offer was then withdrawn by Mr Jelley by email at 3:36pm after an unsuccessful attempt to get in touch with Mr D’Arvill-Jackson. At 4:14pm an email sent by Mr D’Arvill-Jackson’s solicitors offered the same amount as the successful tenderer, plus $50.00.
[39] Mr Jelley accepted an offer from Harbour Fish for $200,000.00 plus GST for the blue cod quota and from Flat Fats Limited (“Flat Fats”), $269,600.00 plus GST for the balance of the quota. The Flat Fats sale was recorded in the quota register on 1 August 2016. A caveat was placed on the Quota Register on 15 August 2016, before payment by Harbour Fish for the blue cod quota.
[40] Harbour Fish took the position that Mr Jelley was obliged to sell it the blue cod quota, and required the transfer of ACE to it. Mr Jelley said he had no option as he was in breach of his obligation to sell the quota to Harbour Fish and the ACE was transferred.
[41] Mr Jelley said that the result is that he lost income of $18,400.00 per year, and has not had the sale proceeds because the sale has been put on hold. He has had to pay Fish Serve Limited for holding the quota.
[42] In summary, Mr Jelley rebuts Mr D’Arvill-Jackson’s evidence that Mr Jelley approached him to discuss investments, saying that he was approached to invest in Trawler Fishing. He says he did not give Mr D’Arvill-Jackson the right of first refusal if Mr Jelley resold the quota, and it was bought without any terms, other than that he would sell the ACE to him at market value if they could agree on terms, and if he had no other use for it. He says he did not tell Mr Preece he agreed to any terms as to resale of the quota or limiting his use of the ACE.
Ms Timpany’s evidence
[43] Ms Timpany’s brief was admitted in evidence. She was involved in the tendering of the quota in 2016 and acted for Mr Jelley once proceedings were issued by Mr D’Arvill-Jackson. She was involved in 2015 when Mr Jelley was unhappy about Mr D’Arvill-Jackson’s failure to make payments for the ACE in a timely way, and how he conducted himself when they met.
[44] When the ACE was sold to Harbour Fish in 2015, Mr D’Arvill-Jackson rang Ms Timpany. She said she should not speak with him but found it impossible to stop him from putting his position. He said there was a “gentleman’s agreement” that the ACE would be sold to him, but he declined to provide evidence. Ms Timpany interpreted the reference to a “gentleman’s agreement” as something other than a contract.
[45] When Mr Jelley decided to sell the quota and it was tendered through Ms Timpany’s firm in May 2016, Mr D’Arvill-Jackson rang her and asked whether he was required to submit a tender, given the “gentleman’s agreement” that included his right of first refusal. She told him that he was required to submit a tender.
[46] Mr Jelley told Ms Timpany to give him the opportunity to better the highest tender and she contacted Mr O’Neill, Mr D’Arvill-Jackson’s solicitor, by email at 11:28am, and left a telephone message. The email recorded that the highest tender was
$404,600.00 plus GST and Mr D’Arvill-Jackson was invited to better this, with settlement on or before 5 August 2016, but conditional upon there being an immediate 10 per cent deposit of the resubmitted tender price to Albert Alloo & Sons’ trust account. A response was sought by return. There was no response by 3:26pm. Ms Timpany sent an email at that time recording that there had been no response from Mr D’Arvill-Jackson, and that Mr Jelley would no longer accept a further tender, so all negotiations were at an end.
Mr Boyle’s evidence
[47] Mr Donald Boyle, director of Quota Management Systems Limited (“Quota Management”), is experienced in quota transactions, as indeed is Mr Preece. He
manages portfolios of quota for clients, offers ACE by tender, and sells quota shares for clients. He provides market reports on the value of quota shares and ACE. He previously worked at the Ministry of Agriculture and Fisheries (“MAF”), in the Fisheries Division, as the Registrar of Fisheries, processing marine farm applications and liaising with MAF investigators. He was also involved in a quota managing brokering company, New Zealand Quota Managements Systems Limited, which changed its name to Quota Services Limited from 1993 to 1998.
[48] Mr Boyle gave evidence of what he considers the valuation of ACE for the years commencing 2013 to 2017, but accepts the value is debatable. He recognises that market prices may vary for different fish stocks and a number of factors influence those values.
[49] He understood the ACE price of $18,000.00 GST inclusive was agreed for the 2013/14 and 2014/15 years, slightly lower than his market value of between
$18,998.00 and $19,803.00.
[50] Mr Boyle referred to Mr Preece’s evidence and said it is possible that the price achieved for BCO5 could have been higher than the $35 per kilogram which was the price agreed between Mr Jelley and Mr D’Arvill-Jackson. He valued the entire parcel at the time at $306,705.00 GST inclusive, but on the open market that could have been higher, and Mr Jelley paid $317,726.14 GST inclusive.
[51] He said that it is not common practice for a buyer to agree to a right of first refusal to the seller if they resold, and he has not come across this before. If there are special conditions attached to the sale and purchase of quota, the best practice is to record those conditions in an agreement. As a quota broker was involved (Mr Preece), he said he would have expected that to have happened.
[52] He does not think that this was a very good deal for Mr Jelley as Mr Preece said it was. It made no sense to agree to sell back quota at the price paid a number of years earlier. Fishing quota increases in value in most cases. He says a buyback condition if the purchaser wants to sell within five years is not the standard practice,
as most owners selling want to move on. He also says that usually ACE fees are paid up front and the ACE is transferred.
C. THE EVIDENTIAL CONTEST
[53] As mentioned, Mr D’Arvill-Jackson’s pleading and evidence of the agreement changed, as did Mr Preece’s evidence of his understanding of it.
[54] In giving evidence, both Mr D’Arvill-Jackson and Mr Jelley were not hesitant or uncertain so as to raise an issue of credibility in that respect. They were within their own ways emphatic. My conclusion on the evidence rests more on the different versions of the facts given in the written and oral evidence, reflected in the credibility of the key witnesses, when all the evidence is brought to account.
[55] Mr D’Arvill-Jackson has run his case with different versions of events pleaded and given in evidence, including a version of the agreement which he says he advised Mr Preece, and which Mr Preece recorded in handwritten notes. In the end, his position is that the agreement was that if the parcel was sold within five years then he had the right of first refusal and if Mr Jelley sold the parcel of quota within two years, he would pay him the original sale price if the market price was lower. If Mr Jelley wanted to sell the quota within five years, he would pay the market price.
[56] Mr Jelley says the agreement for sale and purchase of quota was without conditions. The ACE would only be offered to Mr D’Arvill-Jackson if that suited Mr Jelley, and appropriate terms could be reached. Mr Jelley says he rejected Mr D’Arvill-Jackson’s attempt to vary the agreement after it had been made, by introducing the alleged buyback term.
D. ISSUES
[57] The primary question is to determine what agreement was reached between the parties. Here, the Court was assisted by careful submissions made by both counsel.
Submissions for Mr D’Arvill-Jackson
[58] Mr Spear says the evidence demonstrates that before 13 September 2013, when Aotearoa Brokers sent a tax invoice to Mr Jelley giving details of the bank account into which the purchase money should be paid, there had been several meetings out of which a binding agreement was reached.
[59] Mr Spear submits that Mr D’Arvill-Jackson is correct that the terms he asserts were agreed and conveyed to Mr Preece whose note, which is in evidence, is consistent with what Mr D’Arvill-Jackson says constituted the agreement. That was “about a week prior” to the payment being made.
[60] Mr Jelley was cross-examined about this file note, which is before the Court on the basis that Mr D’Arvill-Jackson was reporting to Mr Preece on the deal made, which included the right of first refusal and the right to purchase the ACE at market rates. Mr Jelley said the agreement was made on the day that Mr D’Arvill-Jackson wanted him to lease the 2013/14 quota. Mr Jelley told the Court that he believed there was a binding agreement as to the quota and purchase price from that point.
[61] Mr Spear submits that the explanation for why Mr D’Arvill-Jackson’s evidence changed lies in the way he communicated with his solicitors “at a distance”. The “two year arrangement” was not pleaded and not included in his brief of evidence, but this was, as Mr D’Arvill-Jackson said in evidence:
Probably just a fault of mine, probably upset at the time, and yea, probably a bit, you know, unfortunately my lawyer was in Nelson so a lot of it was done over the phone.
[62] Mr D’Arvill-Jackson acknowledged that his position has changed from first saying that he had the right of first refusal after five years at the original sale price, to his having a right of first refusal at market price. The “underwrite” at two years was not part of his pleading or his original evidence. He said he did not raise the right of Mr Jelley to resell at the original price after two years, but says he was not asked about this. He said the assertion he had the right to purchase at the original price after five years was simply a “miscommunication”. Yet he pleaded this, and it is referred to in Mr Preece’s note. It has been put aside by his supplementary evidence and in oral
evidence when he confirmed that he would never have agreed to terms like this. He insisted, however, that the conditions as refined in his supplementary and oral evidence were those agreed. Mr Preece too says that there was a mistake in his note because he did not refer to the underwrite arrangement after two years.
[63] When asked what he meant by a “gentleman’s agreement” and whether it was a “non-binding contract”, he said “no, it’s pretty binding in my view”.
[64] Mr Spear submits that Mr Preece’s handwritten note reflects a “partial recording of the position”, but is wrong as to the true nature of the transaction, now given in evidence. He says that Mr D’Arvill-Jackson’s report to Mr Preece was prior to 13 September and is evidence of the agreement. However, Mr Preece’s evidence is that what he wrote is incorrect and incomplete. Yet it referred to a five year right of purchase at the original purchase price, which is just what was pleaded.
[65] I agree with Mr Spear that it would be irrational for Mr D’Arvill-Jackson to expect the terms he first alleged were part of the agreement. He wanted to protect the ACE for Trawler Fishing, and the right to repurchase meant that the ACE could be controlled. While there was mutual advantage in the agreement, it would have been particularly favourable to Mr Jelley if he wanted to sell after two years because of the underwrite. Mr Spear submits that all this is part of a good faith dealing with Mr Jelley by Mr D’Arvill-Jackson who knew he did not have experience with quota.
[66] Mr Spear also submits that Mr Preece offered to buy the quota himself, but Mr D’Arvill-Jackson’s good faith dealing with Mr Jelley is reflected in the fact that he said he had struck a deal with Mr Jelley and that was that.
[67] There was a difference between Mr Preece’s evidence and that of Mr Jelley as to when they first spoke. Mr Preece says he would not have sent out the invoice without speaking to Mr Jelley, whereas Mr Jelley says that is exactly what happened. He says he spoke to Mr Preece when the dispute arose and Mr D’Arvill-Jackson tried to get him to agree to terms which he would not.
Submissions for Mr Jelley
[68] Mr Andersen submits that the key issue is that of credibility, and that Mr Jelley’s evidence of the terms of the agreement is credible and should be preferred over that of Mr D’Arvill-Jackson. He submits that Mr D’Arvill-Jackson’s account of events has changed so dramatically from his initial pleading that it lacks credibility, and the Court should prefer Mr Jelley’s account. He highlights a number of aspects of the evidence he says support Mr Jelley’s account.
[69] First, he says that there was no financial disadvantage to Mr Jelley in offering a right of first refusal and that is what had been agreed. That simply meant if he wanted to sell, Mr D’Arvill-Jackson would have the chance of buying, but it would be at the highest price available. He says that Mr Preece’s notes are consistent with Mr Jelley’s evidence that Mr D’Arvill-Jackson tried to have the buy-back term agreed at the original sale price. Mr Jelley’s evidence that he said the deal was off at this point is submitted consistent with Mr Preece’s evidence that he was aware of some ‘disagreements’ and that the contract was in trouble.
[70] Mr Jelley’s evidence that the agreement was that he be paid $1,500.00 per month for the ACE is said by Mr D’Arvill-Jackson to be a fabrication, but Mr Anderson submits there is no reason why Mr Jelley would make that up. He submits that Mr D’Arvill-Jackson submitting a tender for the ACE in May 2016 is inconsistent with his maintaining a right of first refusal. I do not accept this as there was clearly an issue at large and submitting a tender was a practical and prudent way of dealing with that issue.
[71] Mr Andersen submits that Mr Preece’s handwritten note does not constitute a record of an agreement reached between Mr D’Arvill-Jackson and Mr Jelley. He says the lack of a date, the reference to “investors”, and the reference to Mr Jelley as “Brendon’s mate Len” all point to it being a “preliminary” document reflecting Mr D’Arvill-Jackson’s intent to sell the quota.
[72] Mr Andersen refers to Mr D’Arvill-Jackson’s willingness to take advantage of Mr Jelley’s lack of knowledge about quota. He refers to the valuations by Mr Preece and Mr Boyle for 2013 as almost identical, so that Mr D’Arvill-Jackson must have
known the $18,000.00 he claimed to be market value was below that once GST is brought to account. I do not accept that because there is room for difference in opinion about the market rate as Mr Boyle conceded.
[73] Mr Andersen says that not paying for the ACE because he was waiting for a GST invoice is an excuse not raised until trial, and Mr Jelley’s evidence is that no GST invoice was ever requested. It does not make sense for someone who knows they have an obligation to pay to say they will not pay until they have a GST invoice, and without there being some record of that position being communicated, as if that was their communicated position, an invoice would have been generated.
[74] Mr D’Arvill-Jackson accepts he told Mr Jelley he would buy the ACE for the 2014 and 2015 years at $18,000.00. Mr Andersen submits he then short-paid him in each of these years without any compulsion. Further, he says that by not advising Mr Jelley that the usual practice was to pay the full purchase price in advance Mr D’Arvill-Jackson was taking advantage of Mr Jelley’s inexperience in this area.
[75] Mr Andersen further points out that while Mr D’Arvill-Jackson in his written brief said he had a meeting about the transfer of the ACE for 2015, in oral evidence he acknowledged that was incorrect and discussion about that occurred after he discovered the ACE had been sold to Harbour Fish. He also backtracked on his contention that that the agreement was on a “pay as you go” basis, saying at trial that payment would be made in three lump sums, throughout the year.
[76] Mr Preece is criticised by Mr Andersen as lacking independence because as a quota broker he should have ensured that the important terms of contract were recorded in writing in some way. His statement to Mr Jelley that he “would get a lot more on the open market” for the quota did not stand against the evidence that the price agreed and paid was not much under market rates and they are imprecise. He says there was a lack of detachment or independence in these discussions. He does not have any documents contemporaneous to the making of the agreement and while he says there may be file notes, he has not looked for them and nothing is before the Court.
[77] Mr Spear in reply says agreement was reached about the sale of the quota sometime after 13 September because Mr Jelley said the agreement was made the day Mr D’Arvill-Jackson wanted him to “sign the 2013/2014 lease of the quota”. He says the binding agreement came after 13 September but that is not what Mr Jelley said.
[78] In questions from the Court, it was put to Mr Spear that there was either a deal struck which Mr D’Arvill-Jackson attempted to change, but which changes were rejected by Mr Jelley, or the deal was struck other than as pleaded by Mr D’Arvill-Jackson, but rather as now belatedly given in evidence.
[79] Mr Spear went on to submit that Mr D’Arvill-Jackson has not been in court before, is a blunt man, and “doesn’t think deeply about issues which to him seem quite a long way away”. He said he dealt with the issue “quickly and not in a thorough manner”, and it was only on the eve of trial that he “seriously breakdowns the words that he has been given”.
[80] Mr Spear acknowledged that the pleading alleged a five year right of purchase at the same price, and made no reference to the two year “underwrite”. It was also put to Mr Spear that the reference to a two year right held by Mr Jelley to sell at the original price was also not in the supplementary brief, nor Mr Preece’s brief.
[81] The evidence of a right of first refusal after the five year anniversary simply fell out of evidence completely. It was not referred to in Mr Preece’s notes. Such a provision without end (no term), Mr Spear submitted, “should be excised from the agreement” rather than such agreement being null and void.
[82] Mr Spear said that Mr Preece’s note was an incomplete record of the deal he understood had been struck and he was asked how it could be any report of an agreement made when it was not the agreement Mr D’Arvill-Jackson asserts was made. Further, there was no reference to the two year underwrite.
[83] Mr Preece claimed to now remember that, but the fact is that the evidence of the agreement which Mr D’Arvill-Jackson puts to the Court does not match Mr Preece’s note. However, the pleading was consistent with the version of the note
that Mr D’Arvill-Jackson asserted at first, but not consistent with the evidence of what actually was agreed.
[84] Mr Spear said it is relevant that Mr Preece said he offered to purchase the quota himself and lease it back to Mr D’Arvill-Jackson for more money, but that was rejected because of the “handshake” deal with Mr Jelley. That, however, assumes that the agreement had been reached, and it certainly had not been reached in terms of the file note so that immediately raises a question of when Mr Preece offered to buy the quota himself.
[85] Mr Spear says Mr Preece is credible and his evidence is that he would not send out an invoice as he did without speaking to Mr Jelley, who he had never spoken with before. Mr Spears says “Someone is telling the truth. Someone is not”.
[86] Mr Spear then said that the orders sought by Mr D’Arvill-Jackson were based on the sale price of the blue cod, but the other quota was under a tender process which was withdrawn. He accepts that Mr D’Arvill-Jackson’s case depends on there being a right of first refusal. Mr Spear said the specific performance order sought is the blue cod quota and because the rest of the quota parcel has been sold and paid for, specific performance would not be ordered so damages are sought in that respect. This has not been evidentially assessed and a further hearing will be needed.
E. DISCUSSION
[87] I have reached the very clear conclusion that Mr Jelley’s version of events is to be preferred, indeed is correct, for the following reasons.
[88] First, I agree with Mr Andersen that Mr Preece’s handwritten note is inconsistent with his position that it records an agreement which he understood had been reached with Mr Jelley. There is no date recorded, and the reference to “investors”, including Mr Jelley is quite inconsistent with a deal having been struck already. This is, I find, a document formulated when Mr D’Arvill-Jackson was considering selling. It included reference to a term which he now accepts was never agreed, but which he may well have liked because it would have been very favourable to him. It made no reference to an agreement having been struck which included an
underwrite after two years. This note I find was not made after agreement was struck, but rather preliminary to any dealing between Mr Jelley and Mr D’Arvill-Jackson. The note would have otherwise referred to Mr Jelley, not as a vague reference to “Brendon’s mate Len”. I conclude this note was made before the agreement with Mr Jelley.
[89] It must be brought to account that Mr D’Arvill-Jackson’s evidence has changed, (as has that of Mr Preece), from asserting a written five-year right of first refusal at the original purchase price, to saying there was a right held by Mr Jelley to sell back at the original purchase price after two years, and a right of refusal after five years at the market rate. This is a radical departure from the pleading and briefed evidence. I do not accept the explanation that he only addressed the facts properly on the eve of trial. It is not just tenable nor acceptable that in legal proceedings the pleading and briefed evidence is so different from the evidence at trial. It contributes to my conclusion that Mr D’Arvill-Jackson is not credible as a witness.
[90] Mr Preece is doing his best to reconstruct what happened several years ago, but I do not accept his evidence that his handwritten reference to “sell within five years
– same as purchase price” was a mistake, and it should have been recorded some other way. That was indeed the term that Mr D’Arvill-Jackson wanted to include when the ACE was discussed, and that is precisely what Mr Jelley says he rejected.
[91] I accept that Mr Jelley was reliant to a degree on Mr D’Arvill-Jackson as to the price of the ACE and how it was to be paid. However, I do not accept Mr Andersen’s submission that Mr D’Arvill-Jackson not advising Mr Jelley that the normal practice was payment of ACE in advance is evidence of Mr D’Arvill-Jackson taking advantage of him. While that may be a common practice, the evidence shows it is not always the case. While Mr D’Arvill-Jackson accepted that Mr Jelley could have sold the ACE on better terms, by being paid upfront, it does not seem to me wrong, given the evidence, that Mr D’Arvill-Jackson should have not struck that deal.
[92] As to the agreement, I find that the transaction unfolded in the way described by Mr Jelley. I accept his evidence that any preliminary discussions included an invitation that he “invest in” in Harbour Fish but he wanted none of that.
[93] The core elements of the agreement as to the quota volume and price are not in contest and they were executed by the sale of the quota that took place. After limited negotiation a price was agreed. That price was more than Mr Jelley was able to pay and he needed bank finance. I find that was the only issue which remained outstanding.
[94] I conclude that Mr Andersen is correct that Mr Preece’s claim that he spoke with Mr Jelley when there were difficulties obtaining finance is not credible, because Mr Jelley said that finance was made available. He gave the quota valuation to the bank and secured funding and this was not challenged, and there was nothing Mr Preece could do if there were difficulties in obtaining finance.
[95] The other elements of the agreement asserted by Mr D’Arvill-Jackson are, I find, not established on the evidence, indeed to the contrary. I reject what he says about them. No doubt it would have been very desirable for him to have the right of first refusal after five years at the original purchase price as he first pleaded, and said in his written evidence. He did not assert that when he gave his evidence, and he corrected his position, but the new evidence of a two year underwrite in favour of Mr Jelley also made little sense.
[96] I conclude that the agreement was simply for the sale and purchase of the quota at the price that was agreed and paid. There were no terms which bound Mr Jelley to offer a right of first refusal. Mr D’Arvill-Jackson sought such a term but it was rejected. There was nothing to preclude the sale by Mr Jelley to any third party and Mr D’Arvill-Jackson has no rights in respect of the sale, and he should not have lodged a caveat against the sale.
[97] I conclude that the agreement for sale and purchase of the quota was as given in evidence by Mr Jelley, and there were no terms and conditions of the kind alleged by Mr D’Arvill-Jackson. I find these alleged terms and conditions were those that he sought to impose after the agreement was reached for sale and purchase of the quota, but that was flatly rejected by Mr Jelley and the quota transaction was only saved when Mr D’Arvill-Jackson backed down and agreed to a straightforward sale and purchase transaction as Mr Jelley said in evidence. Thus, there is no basis for
Mr D’Arvill-Jackson’s claim and the orders for specific performance and the enquiry into damages which he seeks in these proceedings must be dismissed.
[98] Mr Andersen submits that Mr Jelley has suffered loss as a result of his inability to complete the sale of the blue cod quota to Harbour Fish in the sum of $200,000.00 and has thus lost the use of that money, and the value of the ACE for the 2017 and 2018 seasons. He cannot have it both ways.
[99] The ACE for the blue cod has been assessed at $12,000.00 plus GST for each of 2016 and 2017 seasons, $27,600.00 GST inclusive. Harbour Fish has paid
$20,000.00 by way of a voluntary payment, leaving a claim of $7,600.00. Harbour Fish should pay a proper sum for the value of the ACE at market price, but to reflect the fact it has not had to pay for the quota. The $20,000.00 paid may be a fair outcome between Mr Jelley and Harbour Fish. They have the quota at the price agreed and have not had to pay. I do not therefore make an order for the $7,600.00 as claimed being $27,600.00 less the $20,000.00 voluntary payment by Harbour Fish.
[100] The counterclaim for $5,000.00 is based on non-payment of the ACE at the agreed price of $18,000.00. Payments of $15,000.00 and $16,000.00 were made for the 2013 and 2014 years, leaving shortfalls of $3,000.00 and $2,000.00 respectively. On the evidence, I conclude that there was an agreement for payment of $18,000.00 inclusive of GST for the 2013 and 2014 fishing seasons, and there is a shortfall of
$5,000.00.
F. CONCLUSION AND DISPOSITION
[101] I conclude that the defendant, Mr Jelley is entitled to judgment for the sum of
$5,000.00 in respect of the deficit in the agreed ACE price. There is judgment for him on the claim brought by Mr D’Arvill-Jackson, and on the counterclaim he has judgment for $5,000.00. I decline to award interest.
G. COSTS
[102] Costs may be agreed between the parties, but otherwise memoranda should be filed by Mr Andersen within 14 days of receipt of judgment and a reply by Mr Spear
within 14 days of that. I will conclude costs on the papers or convene a teleconference if either party seeks that.
.............................................
Nicholas Davidson J
Spear Law, Nelson
Albert Alloo & Sons, Dunedin
Copy to counsel:
L A Andersen, Barrister, Dunedin
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URL: http://www.nzlii.org/nz/cases/NZHC/2018/2339.html