Heavyweight Hire Ltd v Forest Management Ltd [2020] NZHC 114 (10 February 2020)

Last Updated: 19 February 2020

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2016-409-000543 [2020] NZHC 114

BETWEEN	HEAVYWEIGHT HIRE LTD Plaintiff
AND	FOREST MANAGEMENT LTD Defendant and Counterclaim Plaintiff

Hearing:	Dealt with on the papers
Counsel:	L A Andersen for Plaintiff HDP van Schreven for Defendant
Judgment:	10 February 2020

JUDGMENT OF GENDALL J

This judgment was delivered by me on at pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

HEAVYWEIGHT HIRE LTD v FOREST MANAGEMENT LTD [2020] NZHC 114 [10 February 2020]

[1] On 5 September 2018 I gave an interim judgment with respect to this proceeding.

[2] There are two matters which have remained outstanding as identified in my 5 September 2018 judgment. These are:

(a) the claim by the plaintiff Heavyweight Hire Limited (HWH) for a further $25,566.34 in relation to what is described in my earlier judgment as the Bluff Structures; and

(b) costs in respect of the proceeding.

[3] I now turn to address these two outstanding matters. In doing so I have carefully considered the following:

(a) submissions from counsel for the plaintiff on these issues dated 29 November 2019;

(b) submissions from counsel for the defendant dated 18 December 2019;

(c) reply submissions from counsel for the plaintiff dated 31 January 2020;

(d) matters contained in my interim judgment of 5 September 2018 and other material filed with respect to this proceeding.

[4] I now give my judgment relating to the two outstanding matters.

A. The claim in relation to the Bluff Structures

[5] The Bluff Structures were noted at para [3] of my interim judgment as “the development cost of certain earthworks and bookends at Bluff Port.” The “bookends” were defined in footnote 2 of that interim judgment as the “large prefabricated metal stays which are designed to hold in place stacks of logs on wharves and other areas.”
[6] Paragraph [3] of the interim judgment noted that under the Joint Venture Agreement between the parties they agreed to share in the development cost of the Bluff Structures. A levy was to be applied to logs using the Bluff Structures in order to repay HWH this development cost which it had solely incurred at the outset.

[7] The parties agree that HWH has been compensated for the value of the Bookends by receiving in June 2015 $15,600 being one-half of its cost in building these Bookends. Counsel for HWH confirms this has been accepted as being reasonable so far as the Bookends are concerned.

[8] Counsel for HWH maintains, however, that the sole issue outstanding relates to compensation HWH claims for the use by the defendant Forest Management Limited (FML) of the Bluff Structures owned by the Joint Venture from the date of its termination, being July 2015, for almost one year up to June 2016 when this use ceased. FML, as I understand it, has claimed there was an agreement that HWH would transfer its share of the Bluff Structures to FML for the payment of $15,600 referred to above in June 2015. This is disputed, however, by HWH and I am satisfied on all the material before the Court that FML has not been able to establish this ownership transfer to FML solely represented the clear arrangement.

[9] What does seem clear to me is that the Bookends and the other earthworks development of the wharf land at Bluff undertaken by HWH were generally acknowledged by the parties to be part of the capital assets of the Joint Venture. As such, I am satisfied that both Joint Venture parties FML and HWH were properly entitled to any return on the Joint Venture assets up to such time as the Joint Venture was terminated and the parties had received a proper pay-out for their respective share entitlement from the remaining Joint Venture assets.

[10] As I understand the position, the Joint Venture was notionally terminated in July 2015. Notwithstanding this, it seems that HWH was not fully compensated for its one-half share in the Joint Venture assets (and in particular the full Bluff Structure development assets) for the next period running from July 2015 to June 2016, when these assets continued to be used by FML and during which time it was FML alone that received certain benefits for that use.
[11] In my view, that is not properly in line with the essence of the Joint Venture Agreement which provided for joint use of and benefit from the venture’s capital assets. The fact that over time HWH may have been repaid the contribution it had made earlier for FML’s one-half share of the Bluff Structure development costs simply represented what was effectively repayment to it of the notional loan it made to its Joint Venture partner FML for HWH’s undertaking of the Bluff Structure works at the outset.

[12] The Bluff Structure works remained throughout an asset of the Joint Venture. On termination of that Joint Venture in July 2015, HWH did not relinquish its interest in those assets. It did not receive a full payment from FML for its one-half share in the Joint Venture. And indeed para [39] of the Joint Venture Agreement which is directed at the “Consequences of Termination” alludes to this conclusion:

Consequences of Termination

39. Termination of the Agreement shall not affect such rights and obligations of the parties as are intended to survive the termination, and such termination shall always be without prejudice to and shall not be deemed a waiver of any claims which any party may have against any other party in respect of any breach or other failure to comply with any term or condition of this Agreement prior to the date of termination.

[13] Accordingly, it must follow that if FML received payments from third parties for the use of the Bluff Structure assets post termination of the Joint Venture, which effectively it did, it must account to HWH for its one-half share. This did not happen. It needs to be rectified now.

[14] As to the quantum of HWH’s claim, this amounts to a one-half share of a notional levy of $51,132.67 JAS m³ of wood that the parties agree passed through the Bluff Structures between July 2015 and June 2016. On this aspect, Mr van Schreven for FML has contended that the $51,132.67 JAS m³ quantity of wood, that passed through the Port between July 2015 and June 2016, was not actually levied by FML with this $1 per JAS m³ charge. FML claims the reason for this was that it contends the Joint Venture partners had each been fully reimbursed their capital cost for the Bluff Structures to which this notional levy related. For the reasons outlined above I have rejected this argument, however.
[15] Nevertheless, Mr van Schreven submitted it would be unfair for HWH here to receive payment for one-half of a levy that he maintains was not in fact charged by FML. He says the inevitable result in this case would be an increase in what he contends is an operational loss incurred by FML relating to this period. Mr van Schreven claims too that this argument, in any event, is in addition to his earlier submission that HWH in fact at this time had no ownership interest in the Bluff Structures.

[16] I do not accept these arguments advanced by Mr van Schreven. As I have outlined above, even though the parties may have purported to terminate the Joint Venture in July 2015, no proper payment was made to HWH for its share in the total Bluff Structure assets at the time. This was in particular relating to the forthcoming period up to June 2016 when they continued to be used, and for which FML itself received all benefit. This is not in accordance with the intentions outlined in the Joint Venture Agreement.

[17] I accept too that, as Mr William Apps has assessed in his affidavit of 14 October 2019 filed in this proceeding, HWH’s entitlement here (being the benefit FML is required to account to it for the use of the Bookends and Bluff Structures development for that almost one year period) amounts to $25,556.34. This represents one-half of the notional levy for this period of $51,132.67.

[18] An order for payment of this amount to HWH is to follow.

Costs

[19] HWH claims that it was successful in these proceedings and therefore it seeks costs totalling $33,903.10, together with disbursements totalling $7,647.56, outlined in Mr Andersen’s submissions dated 29 November 2019.

[20] Here HWH in its Second Amended Statement of Claim outlined total claims against FML of $189,992.06. These claimed amounts are within the jurisdiction of the District Court. A starting point for determining the question of costs here is r 14.13 of the High Court Rules:

14.13 Proceedings within jurisdiction of District Court

Costs ordered to be paid to a successful plaintiff must not exceed the costs and disbursements that the plaintiff would have recovered in the District Court if the proceeding could have been brought there, unless the court otherwise directs.

[21] In McGechan on Procedure¹ the learned authors state:

Reservation of a discretion to the court acknowledges that some proceedings within the current ($350,000) jurisdiction of the District Court are nevertheless properly brought in the High Court. Relevant considerations in deciding whether this is so include the:

(a) Amounts claimed and recovered;

(b) Nature and complexity of the proceeding;

(c) The types of issues, both factual and legal, raised in the pleadings;

(d) Public or other importance of the proceeding, for example, where a professional reputation is at stake;

(e) Attitude of the parties to the proceeding, in particular whether it has been responsible; and

(f) The financial resources of the parties.

[22] Dealing with those matters in turn:

(a) The plaintiff’s Second Amended Statement of Claim, as I have noted, made total claims of $189,992.06 which was within the jurisdiction of the District Court. Less than this amount has been recovered here.

(b) The claims were not complex. They arose essentially from interpretation of the Joint Venture Agreement (and the Term Loan Agreement associated with the sale of the hauler).

(c) The factual and legal issues in the pleadings were not extraordinary.

(d) The proceedings were essentially contractual. They raised no issue of any particularly special importance or novelty.

¹ McGechan on Procedure, Thomson Brookers Looseleaf Ed at HR14.13.01.

(e) I am satisfied neither party took any particularly irresponsible position.

(f) There is nothing untoward in the financial resources of the parties as I understand it.

[23] Although HWH was unsuccessful in its first cause of action in this proceeding, FML nevertheless was ordered to pay $11,909 in reimbursement of costs HWH had paid with respect to third party discovery because of FML’s failure to provide full disclosure of the relevant material. HWH, however, was successful in its claim in respect of the hauler in the sum of $9,419.36.

[24] HWH has also been successful in this judgment with respect to its claim to a share of the notional revenue received for the Bluff Structure assets between July 2015 and June 2016.

[25] FML has been unsuccessful in its counterclaim against HWH.

[26] The amounts received by HWH here are relatively modest. Its total claims were, in any event, something around $190,000 which I repeat was within the jurisdiction of the District Court.

[27] I conclude that this is a matter which should have been brought in the District Court and that costs in this case should be calculated under the District Court Rules.

[28] That said, Mr van Schreven for FML has set out in his 18 December 2019 submissions before me a District Court costs calculation which I am satisfied in all the circumstances here is appropriate. It totals $29,489.50.

[29] Mr Andersen for HWH helpfully has acknowledged that no issue is taken with Mr van Schreven’s calculations, if costs are awarded on the basis of the District Court Rules, which I have decided they should be.

[30] That said, the following rulings and orders are now made:

• (a) Insofar as the first outstanding matter relating to HWH’s claim in relation to the Bluff Structures are concerned, that application succeeds. An order is now made that FML is to pay to HWH $25,556.34 with respect to this claim.

(b) So far as costs in this proceeding are concerned, FML is to pay to HWH costs calculated on the basis of the District Court Rules amounting to
$29,489.50 together with disbursements, as outlined in Mr Andersen’s 29 November 2019 memorandum, totalling $7,647.56. An order to this effect is now made.




...................................................

Gendall J

Solicitors:

Albert Alloo & Sons, Solicitors, Dunedin Clark Boyce, Christchurch

Copy to:

Leonard Andersen, Barrister, Dunedin