Mistake: Zindia Ltd v. Arapawa Island Partnership

A $2.8 million damages claim for breach of a forestry contract hangs in the balance after Marlborough District Council advised no further resource consent was required for harvesting, advice later reversed.

Logging contractors walked off the job on Arapawa Island in Marlborough Sounds after Council flip-flops over need for resource consent saw an abatement notice issued, lifted and then re-imposed. Question of need for resource consent is now before the Court of Appeal.    

Left fuming was Arapawa Island Forestry Partnership. It planted out pinus radiata in 1986 over land leased on Arapawa Island.  On maturity, Arapawa Partnership sought buyers willing to harvest the trees in a ‘take or pay’ deal.  To avoid leaving good merchantable trees abandoned as slash, buyers were required to pay an agreed price by weight per tree whether barged off the island or not.

The High Court was told Zindia Ltd contracted to harvest the crop.  Companies Office records indicate Zindia has links with investors in India.  The 2016 harvesting contract gave Zindia nearly three years to complete the job.  Time was critical. One year on from required completion date, Arapawa Island’s lease expired; any trees left unharvested would pass back to the land owner.  To market its forest holding as ’harvest ready,’ Arapawa Partnership obtained resource consent for felling operations. Both Zindia and Arapawa Partnerhip agreed to the 2016 contract on the basis that there was a valid consent in existence for harvesting.  Both parties took the precaution of confirming with Marlborough District staff that Arapawa’s existing resource consent could be used by Zindia.  After harvesting was underway, Council reversed its view.

With harvesting brought to a halt and seeking to salvage what it could out of the legal mess, Arapawa Partnership sued Zindia, claiming $2.8 million under the ‘take or pay’ deal for trees left uncut. Associate judge Lester ruled both sides had entered into the contract under a common mistake; a mistaken belief at the time the contract was entered into that Zindia could rely on Arapawa’s existing resource consent.

The Contract and Commercial Law Act gives courts wide powers to adjust terms of contracts entered into under a material mistake. Judge Lester ruled a full hearing is needed to identify what adjustments might be appropriate given Arapawa Partnership’s $2.8 million claim.

Zindia Ltd v. Arapawa Island Forestry Partnership – High Court (27.01.21)

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'Calderbank' Letters: re Estate Hetherington

Arguments over who ‘won’ and who ‘lost’ in estate litigation over a $1.3 million Northland property centred on wording of ‘Calderbank’ letters.  Written offers to settle out of court before trial affect how legal fees are later divvied up if settlement offers are unreasonably spurned.

Keeley Hamilton is one of three children adopted by her late father Desmond Hetherington.  She learnt on her father’s death that a promised one-third share of his 59 hectare rural property at Mangawhai had vanished.  He no longer owned the property.  Prior to his death, it had been transferred to a family trust, now controlled by her brother, Craig.  Keeley is not a beneficiary of the family trust.  She sued.

After a five day High Court hearing in May 2020, Justice Woolford reversed the effect of the family trust transfer.  Work Keeley had done on the property meant her father could not go back on his word.  The Mangawhai property now formed part of the Desmond Hetherington Estate to be inherited according to terms of his 2015 will.  The will states that the property is to be transferred to Keely and her two brothers as ‘tenants in common in equal shares.’  All three are part owners of the entire property.  Having part-ownership was never going to work; Keeley and brother Craig do not get on.  An ongoing family dispute had been simmering over the fact Keely lived rent-free on the Mangawhai property for over ten years, during which time she built a house on the property, later setting up on site businesses as a hairdressing salon, gift shop, garden centre and spiritual centre.

At a subsebquent High Court hearing, Keeley and Craig argued over the legal effect of ‘Calderbank’ letters sent by their respective lawyers prior to trial offering to settle out of court. Successful litigants are penalised for subsequent legal costs incurred if they unreasonably turn down a Calderbank offer before trial, winning their case but not getting as much as was previously offered.

Before trial, Keely offered to settle for a nominated 14 hectares of the land, well short of the 19.6 hectare one third share she was later ruled entitled.  It was reasonable for brother Craig to reject that offer, Justice Woolford ruled.  This 14 hectares was the most commercially valuable part of the property; separating out that land would leave the rest of the bush-clad property virtually inaccessible.

In turn, Craig had offered to carve out eight hectares of land for his sister, with Keeley having to pay survey and legal costs. At first glance, Keeley obtained a better result by going to trial; getting an order she is entitled to one-third of the land with no obligation to pay survey costs.  In normal course of events, she would be entitled to increased compensation for her trial costs.  Justice Woolford ruled no increase was payable.  Arguably she was not better off, he ruled.  Instead of being sole owner of eight hectares, the court ruling left her as one-third part-owner of 59 hectares likely needing to bring further court action to force subdivision of the property.

re Estate Desmond Wayne Hetherington – High Court (24.08.20 & 25.01.21)

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Holiday Pay: MBIE v. Tourism Holdings

For holiday pay calculations in the tourism industry, commission payments are ‘earned’ when the activity is booked, not when the customer pays, the Court of Appeal ruled in a test case over commissions earned by Tourism Holdings’ Kiwi Experience bus drivers.

Holiday pay calculations are notoriously complicated in the tourism industry.  Many staff are part-time casuals.  Work hours are uneven and irregular.  Base pay is often supplemented with commissions generated selling extras added to the basic tourism package.   

The Court of Appeal was told Tourism Holdings’ Kiwi Experience bus tours operated on a ‘hop on/hop off’ basis.  Having booked a bus tour, tourists could stop and restart from various tourist spots en route.  Drivers touted local tourist activities at various venues, taking bookings for the likes of marae visits, hangi, helicopter flights and guided hikes.  Tourists paid only when they turned up at the booked activity.  Later, payments received were reconciled against individual driver’s booking schedule and commission paid to the driver; ten per cent of the payment if it was a Tourism Holdings activity, 25 per cent of the payment if it was a third-party provider.

Kiwi Experience drivers did not work an ‘ordinary week.’ Tourism Holdings disputed Labour Inspectors calculation of driver holiday pay.  They said the alternative Holidays Act formula for non-standard working hours required commissions earned in the weeks prior to a holiday to be included as representative of ‘average weekly earnings’.  Tourism Holdings said this interpretation allowed drivers to manipulate their holiday pay by taking annual leave straight after a long bus tour which generated substantial extra commissions.

Commission payments are a regular part of drivers’ pay, the Court of Appeal ruled.  Payments are ‘earned’ when activities are booked, even if not paid until after subsequent reconciliation, and are to be included in calculation of ‘average weekly earnings.’

Business, Innovation & Employment v. Tourism Holdings Ltd – Court of Appeal (18.01.21)

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