Food Supplier Pacific Dairy walked away from its promise to finance completion of Dairy Solutionz’ yoghurt culturing plant near Hamilton with funding intended from the placement of long-term standing orders for product. Pacific Dairy exploited Solutionz botched assignment of their joint venture agreement to have the High Court order Dairy Solutionz repay Pacific Dairy’s $US50,000 cash contribution made towards plant construction costs.
The High Court was told Dairy Solutionz (NZ) Ltd and Pacific Dairy Holdings Ltd agreed in 2017 to jointly fund commissioning of Dairy Solutionz’ Rukuhia yoghurt manufacturing plant. Pacific Dairy’s cash contribution of some $US50,000 was an unsecured interest-free debt owed by Dairy Solutionz, payable in 2020. It was intended this debt would be repaid in kind, rather than cash, with Pacific Dairy placing long-term purchase orders for manufactured product. No long-term orders were placed.
Pacific Dairy refused to take Solutionz’ product after a disputed E.coli contamination scare in December 2017. Pacific Dairy was in liquidation seven months later. Come 2020, Pacific Dairy liquidator sued, demanding Dairy Solutionz repay the $US50,000 debt.
Dairy Solutionz was ordered to pay following a fast-track High Court summary judgment application. Dairy Solutionz could not argue Pacific Dairy in turn owed it some two million dollars for failing to purchase product. Dairy Solutionz had previously assigned all rights under the joint commissioning agreement to a related company. Dairy Solutionz no longer had the right to claim damages for non-performance; this right was now held by a related company.
Ironically, Dairy Solutionz assigned its rights after Pacific Dairy went into liquidation assuming incorrectly that this would also get rid of its obligation to pay the promised $US50,000. However, this assignment had the effect of later destroying Solutionz’ rights to raise a counter-claim defence to Dairy Products’ demand for repayment. The assignment worked to assign rights, but not liabilities.
Dairy Solutionz was ordered to pay Dairy Products $69,700: the New Zealand dollar conversion of $US50,000.
Dairy Solutionz (NZ) Ltd v. Pacific Dairy Holdings Ltd – High Court (11.11.21)
22.002