Savvy Vineyards 4334 Ltd and Anor v Weta Estate Ltd and Anor

• Jurisdiction: New Zealand
• Judge: Winkelmann CJ,Glazebrook,O'Regan,Ellen France JJ,Ellen France J,William Young J
• Judgment Date: 22 October 2020
• Neutral Citation: [2020] NZSC 115
• Court: Supreme Court
• Docket Number: SC 114/2019
• Date: 22 October 2020

Between

Savvy Vineyards 4334 Limited

First Appellant

Savvy Vineyards 3552 Limited

Second Appellant

and

Weta Estate Limited

First Respondent

Tirosh Estate Limited

Second Respondent

[2020] NZSC 115

Court:

Winkelmann CJ, William Young, Glazebrook, O'Regan and Ellen France JJ

SC 114/2019

IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI

Contract — appeal against a Court of Appeal decision which held that the appellant had not given valid notice in time to exercise and option to purchase — principles in interpreting commercial contracts — whether earlier litigation between the parties affected their rights under the agreements

Counsel:

D P H Jones QC and C L Bryant for Appellants

R E Harrison QC and W D Woodd for Respondents

• A The appeal is allowed. The judgment of the Court of Appeal is set aside. The respondents are liable to the appellants on the first and second causes of action in the first amended statement of claim.

• B An order directing an inquiry into damages is made in relation to the first cause of action.

• C The declaration and the order directing an inquiry into damages made by the High Court in relation to the second cause of action are restored.

• D The first and second respondents must pay the first and second appellants one set of costs of $25,000 plus usual disbursements.

• E The orders as to costs in the Court of Appeal and the orders as to costs in the High Court as they relate to the High Court's dismissal of the first cause of action are quashed. Costs should be re-determined in those Courts in light of this judgment.

JUDGMENT OF THE COURT

REASONS

	Para No.
Winkelmann CJ, Glazebrook, O'Regan and Ellen France JJ	[1]
William Young J	[97]

Winkelmann CJ, Glazebrook, O'Regan and Ellen France JJ

(Given by Ellen France J)

Table of Contents

	Para No.
Introduction	[1]
Overview of the contractual arrangements	[9]
The interpretation issue	[14]
The grape supply agreements	[15]
The approach in the Courts below to the interpretation issue	[19]
The parties' positions	[23]
Our assessment	[24]
Liability for wrongful repudiation?	[33]
The narrative of events	[36]
The approach in the Courts below to liability for wrongful repudiation	[48]
The parties' positions	[57]
Our assessment	[61]
Amending the grant of leave?	[87]
Result	[94]
Costs	[95]

Introduction

1 In October 2006 and December 2007 the appellants, Savvy Vineyards 4334 Ltd and Savvy Vineyards 3552 Ltd, and the respondents, Weta Estate Ltd and Tirosh Estate Ltd, entered into agreements for the supply of grapes to the appellants from vineyards owned by the respondents (the grape supply agreements). 1

2 The first issue on the appeal concerns the interpretation of the grape supply agreements and, in particular, the meaning of cls 2.2 and 2.4 which deal with Savvy's option to purchase the grapes. To put this issue in context, it is sufficient to note that cl 2.2 provides that the option to purchase is “deemed to be effective on [1 May 2009] and to be repeated on each third anniversary of [that date]” with the proviso that if Savvy “does not exercise” the option “for 2 consecutive periods of 3 years”, the option lapses. Savvy purported to exercise the option by notice of 17 November 2014. Weta refused to supply grapes to Savvy on the basis that Savvy's notice had not been given in time so the option to purchase had lapsed. Whether the notice was given in time turns on whether the option had to be exercised by the three-year point or whether there was another opportunity at the six-year point.

3 The second issue on the appeal is whether Weta is liable to Savvy in damages for its admittedly wrongful repudiation of the grape supply agreements when, by notice of 20 December 2010, Weta said that the grape supply agreements were at an end. The factual background to this issue is quite complex. By way of introduction, it is sufficient to note the following. Savvy successfully brought proceedings seeking declarations that the December 2010 notice was invalid and of no effect. 2 The High Court judgment was overturned on appeal to the Court of Appeal. 3 On appeal to this Court, the judgment in the High Court was restored. 4 This chain of events meant that for a period, after the Court of Appeal's judgment and before the decision of this Court, there was a declaration in place that the grape supply agreements had no legal effect.

4 Against this background, Savvy brought the current proceedings in the High Court seeking, amongst other matters, an inquiry into damages based on Weta's

actions in giving the notice of termination in December 2010 (the wrongful repudiation claim). Savvy also sought declarations concerning the November 2014 notice that the agreements remained on foot and sought damages (this cause of action raised the interpretation issue). Weta counterclaimed seeking declarations that Savvy's notice of 17 November 2014 was invalid and ineffectual and that Savvy's option to purchase had permanently expired or lapsed. Weta also counterclaimed, contingent on the Court accepting Savvy's interpretation of the agreements, seeking rectification. Savvy's defence to the rectification counterclaim was that Weta was estopped from advancing its interpretation of the agreements by an earlier judgment in the proceeding

5 Orders were made by consent that issues of liability would be heard and determined first with claims for damages to be considered, if necessary, at a second stage. The matter accordingly proceeded to a hearing on liability.

6 In the High Court, Gordon J dismissed Savvy's cause of action based on the December 2010 notice but found in favour of Savvy on the cause of action relating to the notice of 17 November 2014. 5 The Judge accepted Savvy's interpretation of the agreements, made a declaration to the effect that Savvy was entitled to purchase the 2016 and subsequent harvests in terms of the grape supply agreements, and ordered an inquiry into damages. Weta's counterclaims were rejected. In particular, Weta's rectification claim, which accorded with the interpretation it now advances, failed. The Judge also rejected Savvy's estoppel defence. Weta appealed to the Court of Appeal and Savvy cross-appealed. The Court of Appeal allowed Weta's appeal. 6 The Court agreed with Weta's interpretation of the agreements. The judgment of the High Court, the declaration and the order directing an inquiry into damages were set aside. Savvy's cross-appeal challenging, amongst other things, the findings in the High Court in relation to the December 2010 notice was dismissed.

7 Savvy was granted leave to appeal to this Court from the decision of the Court of Appeal on the interpretation issue and on the question of the effect on the

parties' legal positions of the two earlier judgments. 7 As we shall discuss, the central issue arising from consideration of the effect of the two earlier judgments is whether Weta is liable for damages for wrongful repudiation. Because it features in the narrative later on, we note that leave to appeal was declined on the question of whether Savvy could claim estoppel by convention. 8

8 Before addressing these questions, it is helpful to provide a brief overview of the parties' contractual arrangements.

Overview of the contractual arrangements

9 The background to the agreements is set out in the Court of Appeal judgment and we adopt that description. 9

10 There were, relevantly, two sets of inter-related agreements in respect of each of the blocks of land owned by Weta. 10 First, there were the agreements providing for the subsequent management of the vineyards which Savvy was to undertake (the vineyard management agreements). Secondly, there were the grape supply agreements. 11 As we shall come to, Savvy was novated as a counterparty to the vineyard management and the grape supply agreements.

11 The present appeal focusses on the grape supply agreements. Under those agreements, Savvy had what is described in cl 2.2 as a “right of first refusal” to buy the grapes. This is more accurately expressed as an option to purchase. 12 If the option was exercised, Savvy was obliged to buy all of the grapes from that block for the term of the agreement. The initial term expires on the completion of the harvest of the tenth “fruit producing vintage”. There are two rights of renewal, each for an additional term of 20 fruit producing vintages.

12 The first date on which the option became effective was the “Commencement Date”. The “Commencement Date”, defined in cl 1.1, means “1 May of the year before the first planned harvest of grapes”. The parties agree that the Commencement Date was 1 May 2009. Notice to exercise the options was not given on or before that date. Notice could again be given three years later. The parties agreed to extend the 1 May 2012 date to 1 May 2013 in light of the earlier pending appeal to the Court of Appeal.

13 Savvy did not give notice to exercise the option on or before 1 May 2013. Rather, as noted, Savvy said it was exercising the option for all blocks under all agreements by its notice of 17 November 2014. Savvy's case was that it had a further option effective on 1 May 2015. Weta did not accept that. Weta responded on 8 December 2014 saying, for the first time, that the options had lapsed when they were not exercised by notice before the May 2013 deadline.

The interpretation issue

14 The interpretation issue arises in relation to Savvy's second cause of action. Savvy pleads that by its letter of 8 December 2014, Weta repudiated the agreements and, by reason of that repudiation, Savvy lost the opportunity to profit from the purchase and on-sale of grapes from the vineyards for the 2016 and subsequent harvests. As the High Court said, this cause of action was pleaded largely as...