Recreation Management Services (Wanganui) Ltd v Rangitikei District Council and Marton Aquatic and Leisure Trust

JurisdictionNew Zealand
CourtHigh Court
JudgeRonald Young J
Judgment Date23 Feb 2010
Neutral Citation[2010] NZHC 172
Docket NumberCIV 2009-454-548

[2010] NZHC 172

IN THE HIGH COURT OF NEW ZEALAND

PALMERSTON NORTH REGISTRY

CIV 2009-454-548

Between
Recreation Management Services (Wanganui) Ltd
Appellant
and
Rangitikei District Council and Marton Aquatic and Leisure Trust
Respondent
Counsel:

G J Thwaite for Appellant

P J Reardon for Respondent

Appeal against a District Court decision which held that a management contract for a pool did not provide a unilateral right of renewal — interpretation of the renewal clause — whether the literal meaning of the terms should apply — whether the Council had misrepresented the nature of the renewal clause — whether rectification of the contract should apply.

Held: The literal meaning of the terms in the renewal clause applied. The terms “contract may be extended by mutual agreement” and “any agreement will be approved by the Council” emphasised the fact that the Council needed to agree to any renewal. There was no evidence that the wording of the terms was intended to mean anything other than its literal meaning. R Ltd had not established any common intention to the meaning of the clause therefore the rectification claim failed. The meeting notes had not amended the renewal clause to provide a unilateral right. An objective analysis of the knowledge of the parties at the time the contract was signed meant that both parties knew the clause provided for a renewal by mutual consent. The Council had not misrepresented the nature of the clause. It would have been obvious to R Ltd that in negotiations a Council employee had given his interpretation of the provision and that he had mis-spoken when he indicated that the clause provided a unilateral right of renewal. Upon signing the contract the relevant clause remained unaltered. The representation that R Ltd would have a right of renewal was nothing more than an assertion of the meaning of the particular words;it was an expression of opinion, that was not a representation of a fact or an opinion about a fact. Appeal dismissed.

JUDGMENT OF Ronald Young J

1

In 1997 the Rangitikei District Council decided to “outsource” the management of three swimming pools in their district. They invited tenders to manage and maintain the three pools at Martin, Taihape and Huntervile. A request for tenders was issued. In August 1997 the Council met prospective tenderers and discussed the contract and responded to questions from the tenderers.

2

The plaintiff was the successful tenderer. The parties proceeded on the basis that the initial period of the contract was for three years. However as the end of the three years approached it seems the parties had different views as to what would happen at the end of that period. The Council said the contractual documents provided for an extension of the contract for up to two periods each of 12 months if both parties agreed. The appellant said it had a unilateral right to renew the contract for the two periods of 12 months.

3

Prior to the end of the three years the appellant says it exercised its renewal rights. The Council refused to accept the renewal and being unable to resolve the matter the parties came to the District Court.

4

The appellant sued the Council in the District Court. It claimed:

  • a) rectification, alleging that whatever the words were in the contractual documents the parties had mutually agreed that the appellant had unilateral rights of renewal and that the contract should be rectified to reflect that fact;

  • b) in any event the contract itself provided for unilateral renewal;

  • c) if the contract did not provide for unilateral renewal then the Council induced the appellant to enter into the contract by misrepresenting that the appellant had a unilateral right to renew the contract for the two periods of 12 months.

5

The trial was heard in the District Court in April 2009 and judgment delivered in June 2009. The Judge concluded there was no mutual agreement by the parties different than the provision asserted by the Council and therefore rectification could not be successfully sought. The Judge said there was no misrepresentation by the Council as to past or current facts. Finally the Judge concluded that although there was an inconsistency between the two alleged terms of the contract it was clear that the right of renewal could only be exercised mutually, that is, if both parties agreed. The appellant's action therefore failed.

Grounds of appeal
6

The appellant's case is that the Judge was wrong in each of these conclusions. The appellant says the terms of the contract explicitly gave the appellant only a right of renewal. If it did not then the parties intended to give the appellant a unilateral right of renewal and the contract should be rectified.

7

Finally, if the contract did not give the appellant the right of unilateral renewal then the Council misrepresented to the appellant that it did so. The appellant alleged the Judge also made errors of fact.

Background facts
8

When the Council sent out the invitation to tender the tender documents referred to the standard general conditions of contract NZS 3910:1987. The general conditions themselves were not attached to the tender documents however the Council invited prospective tenderers to be familiar with the general conditions. The first schedule of the general conditions allows the parties to include any “special conditions of contract”. The Council inserted a number of special conditions including cl 9 of the first schedule as follows:

9 TIME FOR COMPLETION

9.3.1 The period to be used for calculating the Due Date for Completion are:

(a) in respect of the Contract Works

Is 31 September 2000 expiring at 24:00 hrs

The contract may be extended by mutual agreement for up to 2 increments of 12 months. Any agreement will be approved by Council.

9

Shortly after the invitation to tender the Council issued a Notice to Tenderers No. 1 (on 20 August 1997). The Notice advised tenderers of the amendments to the contract and the fact that they were contained in the special conditions in the first schedule to the general conditions. These amendments arose from feedback from prospective tenderers identifying problems with the Council's original tender documents. The Council accepted some of the suggested changes, redrafted the provision to reflect the change, and issued the Notice. Further, the Notice also explained some of the conditions in the tender document.

10

The Council then called a meeting of prospective tenderers for 22 August 1997. The notes of the meeting of 22 August were taken by a Ms C Bishop who was described as the Committee Secretary. Apart from Ms Bishop there were two other Council employees present, Ms Taylor described as the “Principal” (for the purposes of the contract) who was the Community Services Manager and Mr A Geerkins, the Roading Engineer for the Council. Mr Maxwell was present for the appellant and there were other representatives of other prospective tenderers.

11

At trial Mr Geerkins and Ms Bishop gave evidence for the Council and Mr Maxwell filed an affidavit for the appellant. Ms Taylor in the meantime had died. The notes of the 22 August meeting record Mr Geerkins first “presented an overview of contract 640” (the description given to the contract for the pools). The next heading of the notes of the meeting is “Contract Discussion”. Immediately below it states:

A briefing of the contents of the Contract took place when the applicants were invited to raise any questions they had. Items that were specifically highlighted were:

12

There are then forty-three separate headings which dealt with the detail of the contract. They vary from financial arrangements to performance criteria, safety and insurance and many others. Most entries are no more than a description of the contractual terms. For example:

Progress Payments

Will be made within 20 working days by cheque to the Contractor.

13

A few of the entries noted there had been discussion between the tenderers and the Council. For example:

Staffing Qualifications

Expectations of upskilling staff was fully discussed. Particular concern was raised regarding the requirement for every pool manager to hold a certificate in pool water treatment in the second year of operation. It was felt that the requirement was unrealistic, there were no guarantees that staff could be retained given the huge cost of training and when the pool was only open 6 months of the year. The suggestion was made for a certified pool water treatment operator to be available rather than in attendance. After further discussion Mr Geerkins agreed to seek advice from Council's Utilities Services Manager.

14

And the notes said:

Term of Contract

Term is for 3 years to 31 September 2000 but provision is allowed for a right of renewal in increments of 12 months for 2 additional years, making a total of five years.

15

After the meeting Ms Taylor sent to prospective tenderers a “Notice to Tenderers No. 2”. Although dated 20 August 1997 given it contained the notes of the meeting of 22 August, the date must be an error. The Notice must have been sent sometime after 22 August. The first page said:

Contract 640: District Swim Centres Management Contract 1997/2000

Notice to Tenderers No. 2

Tenderers are required to acknowledge receipt of this notice in their tender. Attached are:-

Notes from Pre-Tender meeting held on Friday, 22 August.

Updated inventory of equipment.

Current learn to swim activities being provided by Swimming Clubs.

Amended clause re water treatment qualifications.

Pamela Taylor, Principal

16

As to the updated inventory of equipment the reason for its inclusion was self evident. As to the “Current learn to swim activities being provided by Swimming Clubs” this is likely to be related to the heading in the notes of the 22 August meeting “Pool Management – swimming clubs” which said:

Activities...

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