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)
21.025