Herd v Haines
| Jurisdiction | New Zealand |
| Judge | Courtney J |
| Judgment Date | 07 September 2020 |
| Neutral Citation | [2020] NZCA 396 |
| Court | Court of Appeal |
| Docket Number | CA137/2019 |
| Date | 07 September 2020 |
[2020] NZCA 396
Kós P, French and Courtney JJ
CA137/2019
IN THE COURT OF APPEAL OF NEW ZEALAND
I TE KŌTI PĪRA O AOTEAROA
Contract — appeal against a High Court decision which held a contract for the sale and purchase of a vessel was valid — the consideration was case and the transfer of land — the contract was subject to Vanuatu law — The Law of Property Act 1925 (UK) applied — definition of “upon”
J W Maassen for Appellants
N S Gedye QC for Respondents
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A The appeal is dismissed.
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B Mr Haines is entitled to costs for a standard appeal on a band A basis plus usual disbursements.
(Given by Courtney J)
The appellant, Robert Herd, agreed to buy the game fishing vessel, “It's Time”, from the respondents, Rodney Haines and Kathleen Norman. 1 The vessel was registered in Vanuatu and the contract was subject to Vanuatu law. The agreed consideration was AUD$400,000 cash plus the transfer of land in Vanuatu with a value of AUD$400,000. 2 Settlement was to occur on 19 May 2013. 3
Mr Herd took possession of the vessel in April 2012, though the contract provided that title would not pass until the consideration had been paid. The other appellant, Rhumba Holdings Ltd (RHL), (controlled by Mr Herd) provided security for the transaction in the form of a registrable mortgage over land in Vanuatu referred to as Lot 58. 4
Mr Herd failed to tender either the cash or any transfer of land on the settlement date. It is common ground that Mr Herd did not have the necessary cash at that time. On 26 August 2013 Mr Haines issued a notice of default requiring Mr Herd to rectify his default within 30 days. Mr Herd failed to tender either the cash or land transfers. Mr Haines repossessed the vessel, took it to New Zealand and sold it at a loss. He also incurred other costs associated with the repossession of the vessel.
In an action by Mr Haines and Ms Norman to recover their losses, Lang J rejected Mr Herd's arguments that the contract was void for uncertainty and unenforceable for lack of adequate identification of the land to be transferred. He rejected the argument that Mr Herd's obligation to tender the consideration did not arise because of Mr Haines' own failure to identify the land he wanted or to tender the documents required to complete settlement. He held that the contract was valid, that Mr Herd had the right to select the land to be transferred as part of the consideration and that he was required to tender both the cash and the land transfers on the settlement date. 5 Failure to meet those obligations entitled Mr Haines to issue the default notice.
Mr Herd and RHL appeal. The grounds of appeal can be summarised as being that the Judge wrongly:
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(a) interpreted the contract as complete notwithstanding the lack of agreement between the parties as to the land to be transferred;
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(b) held that the contract satisfied s 40 of the Law of Property Act 1925 (UK);
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(c) interpreted the contract as requiring Mr Herd to tender both the cash and the land transfers regardless of whether Mr Haines had engaged in the process of identifying that land and regardless of whether Mr Haines himself had tendered the documents required of him at settlement;
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(d) held that the contract was valid notwithstanding the Vanuatu Stamp Duties Act;
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(e) interpreted the contract as permitting Mr Haines to bring proceedings against Mr Herd before exercising his right to sell Lot 58.
Clause 2.1(b) provided for the form of consideration that was ultimately required:
[T]he payment of the sum of AUD$400,000 in cash to Haines and any interest that is due at the time of settlement and the transfer to Haines or his nominee of AUD$400,000 worth of land (as per Vanuatu registered bank panel mortgage valuer valuation) with the preferred Land being Palikula Beachfront or waterfront property
Clause 11, which Mr Herd says provides the process for identifying the land to be transferred, provided that:
Each party shall, from time to time at its own cost and expense, make, do and execute and cause to be made, done and executed all such acts, things, agreements, deeds, instruments, assurances and other documents as may be necessary, desirable or reasonably required by another party to perfect or give effect to the transactions or agreements contemplated or contained in this Deed.
In the High Court Mr Herd argued that the contract did not contain all the terms essential to the bargain because it did not identify the land to be transferred as part of the consideration. There would be no binding agreement until that had been done and, since the land to be transferred was never agreed on, Mr Herd was not under any obligation either to pay the cash or tender transfers of land. As noted, the Judge held that the contract was valid without the land being specifically identified; it was for Mr Herd to select the land to be transferred.
Mr Herd still maintains that the land had to be identified for the contract to be valid and says that the Judge was wrong to interpret the contract as giving Mr Herd the right to nominate the land that would be transferred on settlement. However, he avoids characterising the issue as whether a binding contract had been formed; he says that, properly interpreted, the contract contemplated that the parties would agree on the land to be transferred and provided for a process by which the land could be identified, namely cl 11. 6 It is only if this interpretation is rejected that Mr Herd relies, as a fall-back position, on the argument that the contract is void for uncertainty.
Professor Corrin, the Director of Comparative Law in the Centre for Public, International and Comparative Law at the University of Queensland, gave evidence about the law of contract in Vanuatu. The Judge accepted Professor Corrin's evidence that: 7
The common law principles of contract law in Vanuatu are founded on the common law of England. Although the Vanuatu Court of Appeal has held that the Vanuatu Courts may draw “on the wisdom and jurisprudence from a whole range of common law countries in search for precedent appropriate to Vanuatu conditions”, in practice the Courts normally look to the English common law in this area.
As under English common law an agreement may be unenforceable if its terms are uncertain, that is vague or ambiguous. …
The Judge accepted that the English common law principles relating to the interpretation of commercial contracts were those explained by the United Kingdom Supreme Court in Secret Hotels2 Ltd v Revenue and Customs Commissioners 8 and Arnold v Britton. 9 The Judge specifically identified the following factors as relevant to this case:
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(1) Contracts are to be interpreted in a manner that accords with commercial common sense, though not in a manner that undervalues the importance of the language used in the document. 10
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(2) Common sense cannot be invoked retrospectively. 11
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(3) The Court should be slow to reject the natural meaning of the provision as correct simply because it seems to have been an imprudent term for one party to have agreed 12
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(4) In taking account of the surrounding circumstances only those circumstances that existed at the time the contract was made and were known or reasonably available to both parties can be taken into account.
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(5) Parol evidence is not admissible to vary or interpret a written contract.
In relating these principles to the case before him Lang J emphasised that the fact a contractual arrangement turns out badly for one party does not justify departing from the natural meaning of the language used. He commented that “[t]he purpose of interpretation is to identify what the parties have agreed, not what the court thinks the parties should have agreed”. 13 No issue is taken with the Judge's summary of the relevant principles.
In addition to the relevant common law, United Kingdom legislation in force on 30 July 1980 also comprises part of Vanuatu law. 14
Mr Maassen, for Mr Herd, argues that there were “gaps” in the provision for consideration that were plain and that the circumstances in which the contract was entered into meant that the contract should be interpreted as the parties intending to reach agreement on the land to be transferred. He says that cl 11 provided the mechanism for reaching that agreement.
We do not find any error by the Judge in his interpretation of the contract and do not consider that clause 11 alters the outcome. We start with the question whether, on a plain and ordinary meaning of the text, the contract is complete without the identification of specific land. We agree with the Judge that, on a literal reading of cl 2.1(b) the only requirement was that the land transferred to Mr Haines would be worth AUD$400,000 by reference to a valuation by a Vanuatu registered bank panel valuer. The statement of Mr Haines' preference for Palikula Beachfront or waterfront property was not couched in terms of requirement, but only of desire. Given that the property to be transferred belonged to Mr Herd, the natural meaning of the clause is that Mr Herd would select the land and Mr Haines had to accept the transfers tendered if the land satisfied the description as to value. We do not accept Mr Maassen's submission that the “nomination privilege” is not...
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