Weta Estate v Savvy Vineyards

• Jurisdiction: New Zealand
• Judge: Gilbert J
• Judgment Date: 18 September 2019
• Neutral Citation: [2019] NZCA 437
• Court: Court of Appeal
• Docket Number: CA281/2018
• Date: 18 September 2019

Between

Weta Estate Limited

First Appellant

and

Tirosh Estate Limited

Second Appellant

and

Savvy Vineyards 4334 Limited

First Respondent

and

Savvy Vineyards 3552 Limited

Second Respondent

[2019] NZCA 437

Court:

Cooper, Clifford and Gilbert JJ

CA281/2018

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Contract — construction of an option to purchase grapes under long-term supply agreements and whether it was validly exercised — whether the first appellant was estopped from advancing its interpretation of the option — issue estoppel — equitable estoppel

Appeal by Weta Estate Ltd (“Weta”) against a High Court (“HC”) decision which held that Savvy Vineyards 4334 Ltd (“Savvy”) was entitled to exercise an option to purchase by notice in May 2013 because Weta had wrongfully repudiated the agreements. Weta and Savvy had entered into vineyard management and grape supply agreements with options to purchase the grape harvests by notice by certain dates. The first date on which the option could be exercised was the “Commencement Date”, which was defined to mean 1 May of the year before the first planned harvest of grapes. Savvy purported to exercise the options by notice in November 2014. Weta responded that the options had lapsed when they were not exercised prior to 1 May 2013. Savvy affirmed the agreements and obtained an interim injunction in the HC by Wylie J restraining Weta from acting on the termination notices. In 2013 proceedings the Court of Appeal (“CA”) allowed Weta's appeal in 2013, finding that the notices given by Weta in December 2010 were effective in bringing the agreements to an end. Savvy said it would have exercised the options in May 2013 had it not been for that judgment. In 2014, the Supreme Court (“HC”) allowed Savvy's appeal and reinstated the HC judgment. It was in that context that Savvy gave notice purporting to exercise the options in November 2014.

The issues were: whether issue estoppel or equitable estoppel applied, whether the December 2010 notices prevented Savvy from exercising the options, whether the CA judgment prevented Savvy from exercising the options on 1 May 2013, whether the CA judgment terminated the agreements so that the options accrued on the next anniversary of the commencement date, 1 May 2015.

The Court held that the interim injunction judgment had not given rise to issue estoppel. No final determination of the correct interpretation of the grape supply agreements was required for the purposes of determining the application for the interim injunction. The Judge's conclusion that there was a serious question to be tried could not found an issue estoppel precluding either party from advancing its respective contentions at the substantive hearing. The issue as to whether there were one or two further rights to exercise the options had not been directly in issue and had not needed to be determined. Weta's failure to appeal the interim injunction judgment coupled with its failure to notify Savvy that it disagreed with the interpretation advanced by Savvy and provisionally supported by Wylie J had not given rise to an equitable estoppel. Weta had not been obliged to appeal the interim injunction. The absence of any appeal could not reasonably be taken as encouraging Savvy to believe that Weta agreed with the Judge's assessment of the merits or his interpretation of the option clause.

The option had to be exercised prospectively for the next three-year period. The option lapsed for all time if no notice of exercise was given prior to the effective option date for the second three-year period, being the third anniversary of the commencement date.

Savvy's decision not to serve the notice was the result of its assessment of the effect of the CA judgment and its belief that the option would again be exercisable on 1 May 2015, not because Weta had prevented such notice being given.

Because of the subsequently reversed CA judgment, Savvy could not, until the judgment was corrected by the SC, compel Weta to supply the grapes or exercise any proprietary rights over them. However, as a matter of law, the CA judgment had not prevented Savvy from giving notice exercising the rights it continued to assert it had under the grape supply agreements, thereby protecting its position in the event its appeal was successful.

The SC judgment overturned the CA judgment and restored the HC judgment which had made a declaration that the grape supply agreements remained in full force and effect. The SC judgment had not amended the grape supply agreements so that the third anniversary of the commencement date shifted from 1 May 2012 (amended by agreement of the parties after the HC judgment to 1 May 2013) to 1 May 2015.

The appeal was allowed. The HC finding that Weta was liable to Savvy and the order directing an inquiry into damages was set aside. The cross-appeal was dismissed.

Counsel:

R E Harrison QC and W D Woodd for Appellants

D P H Jones QC and C L Bryant for Respondents

• A The appeal is allowed.

• B The judgment of the High Court finding the appellants liable to the respondents on the second cause of action in the first amended statement of claim, the corresponding declaration and the order directing an inquiry into damages are set aside.

• C The cross-appeal is dismissed.

• D The respondents are to pay costs to the appellants for a standard appeal on a band A basis and usual disbursements. We certify for second counsel.

• E Costs in the High Court are to be determined in that Court in accordance with this judgment.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Gilbert J)

Table of Contents

Introduction	[1]
Weta's appeal	[6]
Savvy's cross-appeal	[7]
Estoppel	[10]
Dismissal of claim based on 20 December 2010 notices	[11]
Effect of Court of Appeal judgment	[15]
The issues	[17]
Was Weta estopped from advancing its interpretation of the option?	[18]
Pleadings	[19]
High Court judgment	[21]
Issue estoppel
Submissions on appeal	[22]
Analysis	[23]
Equitable estoppel
Submissions on appeal	[28]
Analysis	[29]
What is the correct interpretation of cl 2.2?
High Court judgment	[35]
Submissions	[39]
Analysis	[44]
Did the December 2010 notices prevent Savvy from exercising the options on 1 May 2013?
High Court judgment	[55]
Submissions on appeal	[56]
Analysis	[61]
Did the Court of Appeal judgment prevent Savvy from exercising the options on 1 May 2013?
High Court judgment	[72]
Submissions on appeal	[73]
Analysis	[75]
Were the agreements terminated, inoperative or suspended by the Court of Appeal judgment and reinstated by the Supreme Court such that the options accrued on the next anniversary of the commencement date, 1 May 2015?
High Court judgment	[78]
Submissions on appeal	[79]
Analysis	[80]
Result	[83]

Introduction

1 This appeal concerns the proper construction of an option to purchase grapes under long-term supply agreements and whether it was validly exercised.

2 The appellants each purchased two blocks of land in Marlborough and entered into three interrelated agreements in respect of each one. These agreements provided for the development of the land into vineyards (the project management agreements), the subsequent management of the vineyards (the vineyard management agreements) and conditional agreements for the long-term supply of the grapes produced on the vineyards (the grape supply agreements). The respondents were later novated as the counterparties to the vineyard management and grape supply agreements. For convenience, we will refer to the appellants collectively as “Weta” and the respondents as “Savvy”. Savvy is “the Buyer” and Weta is “the Grower” in the respective grape supply agreements. 1

3 The grape supply agreements conferred an option on Savvy to purchase the entire crop of grapes from each block. If the option was exercised in respect of any block, Savvy was obliged to purchase all grapes from that block for the term of the agreement. The initial term of the agreement expires on the completion of the harvest of the tenth fruit producing vintage. There are two rights of renewal, each for a further 20 fruit producing vintages. The first date on which the option could be exercised was the “Commencement Date”, which was defined to mean 1 May of the year before the first planned harvest of grapes. It is common ground that the commencement date was 1 May 2009. The options were not exercised on that date. The options were again exercisable three years after that, on 1 May 2012. For reasons we will come to, the parties agreed to extend that date to 1 May 2013. Savvy did not exercise the options on that date either. However, it purported to exercise the options for all blocks under all agreements by notice given on 17 November 2014, claiming it had a further option effective on 1 May 2015. Weta responded on 8 December 2014 asserting that the options had lapsed when they were not exercised by notice prior to 1 May 2013.

4 The primary issue on this appeal is whether the options lapsed on 1 May 2013 and therefore whether Savvy's purported exercise of the options on 17 November 2014 was ineffective. This primarily turns on the interpretation of two clauses in the grape supply agreements. It is therefore helpful to set these out now: 2

2. SUPPLY OF GRAPES

2.2 The Grower hereby grants to the Buyer a right of first refusal to purchase the entire crop of Grapes grown on each of the Blocks. Such right of first refusal shall be deemed to be effective on the Commencement Date and to be repeated on each third anniversary of the Commencement Date provided that if the Buyer does not exercise the right of first refusal in respect of any Block...