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High Court of New Zealand Decisions |
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2004-404-1113
BETWEEN BROWNSONS HOLDINGS (1999)
LIMITED
First Plaintiff
AND BROWNSONS JEWELLERS
ONEHUNGA (1998) LIMITED
Second Plaintiff
AND MUMBAI MASALA LIMITED
Third Plaintiff
AND THE PLAZA PAKURANGA LIMITED
First Defendant
AND WESTFIELD (NZ) LIMITED
Second Defendant
AND WESTCITY SHOPPING CENTRE
LIMITED
Third Defendant
Hearing: 29 May 2006
Appearances: J Katz QC and M Dew for Plaintiffs
C Toogood QC and D Welsh for Defendants
Judgment: 30 May 2006 at 4:45 p.m.
JUDGMENT
OF SIMON FRANCE J
(admissibility of evidence)
This judgment was delivered by Justice Simon France
on 30 May 2006 at 4:45 p.m. pursuant
to r540(4) of the High Court Rules 1985.
Solicitors / Counsel:
Mr
J Katz QC, Barrister, PO Box 1900, Auckland (E-mail: johnkatz@catscan.co.nz )
Mr C Toogood QC, Barrister, PO Box 4420, Auckland (E-mail:
kit@toogood.co.nz )
Mr G Christie, Simpson Grierson, Solictors, Private Bag 92518, Auckland (E-mail:
graeme.christie@simpsongrierson.co.
)
Ms S Golian, Golian Legal, Solicitors, PO Box 24324, Royal Oak, Auckland (E-mail:
shobhna@golian.co.nz )
BROWNSONS HOLDINGS (1999)
LIMITED AND ORS V THE PLAZA PAKURANGA LIMITED AND
ORS HC AK CIV 2004-404-1113 30 May 2006
[1] Brownsons owned a strata title
for one of 14 units in the Galleria attached to
the Pakuranga Mall. They ran a jewellery store from it. Westfield owned the other
13 units and wished to acquire the fourteenth to enable them to redevelop the site.
Negotiat ions ensued over a lengthy period of
about 12 months. Eventually an
agreement was reached, and a written agreement signed. The agreement involved
sale of the
unit, a new lease for the Brownsons jewellery shop in the redeveloped
Galleria complex, and an arrangement concerning leases for
Indian curry shops in
various Westfield Centres.
[2] The dispute in this case is about what the agreement means in relation
to the
Indian curry shop arrangement. The broad issues are what Westfield sites were
included in the arrangement, and on what terms
the shop sites were to be offered.
Specific issues arising under this include the meaning in the agreement of the terms
"future redeveloped
or developed Westfield/St Lukes Shopping Centres",
"exclusively", and "on market related terms and conditions".
[3] Westfield
objects to much of the content of the brief of evidence of Mr Garry
Raniga, the only witness of fact for the plaintiff. Mr Raniga
is a principal of the
plaint iffs and did all the negotiating for them. The objections are broadly ones of
relevance, and of admissibility
based on what extrinsic evidence is admissible to
prove the meaning of a contract.
[4] On the latter issue it is important to
note that Mr Toogood QC accepts there is
an ambiguity in relation to the meaning of "future redeveloped or developed", the
point
of dispute being whether "developed" means "future developed" or "existing".
The law on extrinsic evidence
[5] Counsel differed
on the extent to which extrinsic material was admissible.
Mr Toogood relies on Potter v Potter [2003] 3 NZLR 145 (CA) as having brought
the law back to what might be termed a strict approach to admissibility. He
emphasises the language
of Fisher J in that judgment where His Honour talks of
"stringent requirements". In Mr Toogood's submission, the law is that there
must
first be an ambiguity. If there is, evidence is admissible only if it proves mutually
known relevant facts. Such evidence
cannot include subjective intentions, and will
rarely include pre-contract negotiations.
[6] Mr Katz QC submits that this is
too narrow a reading of Potter. The factors
ment ioned by Fisher J were the ones relevant to that case but were not an exhaustive
list. He submits the classic statement of the law remains that of Lord Wilberforce in
Prenn v Simmonds [1971] 3 All ER 237, 241F:
... evidence of negotiations, or of the parties' intentions, and a fortiori of Dr
Simmonds's intentions, ought
not to be received, and evidence should be
restricted to evidence of the factual background known to the parties at or
befor e the date of the contract, including evidence of the 'genesis' and
objectively the 'aim' of the transaction.
[7]
Other authorities on which he relied include Bank of Credit and Commerce
International SA v Ali [2001] UKHL 8; [2001] 1 All ER 961 and Kirin-Amgen Inc v Hoechst Marion
Roussel Ltd [2004] UKHL 46; [2005] 1 All ER 667. A more recent case of some interest is Proforce
Recruit Ltd v The Rugby Group Ltd [2006] EWCA Civ 69. Proforce was appealing
the striking out of its breach of contract claim. At issue was the meaning of
"preferred supplier
status" in the contract. The High Court had ruled inadmissible
evidence of the pre-contract negotiations. The appellant argued that
the evidence
showed that an agreed meaning had been ascribed to the expression by the parties
during the negotiations.
[8] The
appeal was allowed. Mummery LJ noted that the expression "preferred
supplier status" was not one which had an ordinary and natural
meaning, and that the
agreement did not define it nor generally aid in its interpretation. Mummery LJ
referred to a recent article
by Lord Nicholls My Kingdom For A Horse: The Meaning
Of Words (2005) 121 LQR 577, where His Lordship expressed the view that the rule
against admissibility of pre-contract negotiations is too rigid.
They should be
admissible if they shed light on the meaning that the parties intended to convey by
the words they used (at 583):
This would not be a departure from the objective approach. Rather, this
would enable the notional reasonable person
to be more fully informed of
the background context.
[9] In Proforce the Court took the view that the negotiations
were capable of
establishing there was a common understanding between the parties as to what the
term embraced.
[10] Further
recitation of authority is not required. The starting point is that the
parties have used an expression "future redeveloped or developed"
that is capable in
itself of bearing different meanings (i.e. depending on whether the adjective "future"
governs both words or just
the first). Further, Westfield manages redeveloped sites,
and sites that are to be redeveloped; it also builds new sites. There are
therefore
factual alternatives which the words might be describing. The description is pivotal
and accepted to be ambiguous.
[11]
In the circumstances of this case I consider the law to be reasonably settled.
Its application may be difficult, and some may
contend it is flawed law, but it is not a
hard rule to state. As a starting point, it is recognised that context and purpose are
relevant to the interpretation of words. This reality applies as much to contracts as to
other situations. Generally, therefore,
to use the Prenn expression, the relevant
factual background as known to the parties before the date of the contract may be
proved.
Particular rules apply to two categories of evidence. First, the subjective
intent ions of a party are inadmissible. Second,
pre-contract negotiations are
generally inadmissible except to the extent they establish a mutually known fact. He
advocates for
a more flexible approach, Lord Nicholls accepted these two
proposit ions to be the current law.
[12] In assessing whether evidence
falls within the admissible factual matrix, it is
undoubtedly possible to be more or less liberal, and that is no doubt where
differences
arise. I consider it helpful to bear in mind the observations of
McGechan J which were cited with approval by the Court of Appeal
in Potter (para
[36]). His Honour noted that whilst reference to surrounding circumstances is
helpful where words give rise to
ambiguity, the task is interpretation, not
reconstruction.
[13] The present ruling is being given after the plaintiffs' opening.
Briefs have
now been prepared for the defendants which respond to the objected material.
Accordingly, I turn to the objections
with a reasonably conservative approach in
terms of ruling out evidence at this point. I do not overlook Mr Toogood's point that
some of the material, if it remains admissible, will prolong cross-examination of the
plaint iff, and expand defence evidence. However,
unless I can say it is plainly
inadmissible at this point I intend to allow the evidence to be called. If evidence that
is led proves
to be superfluous, and to have unnecessarily prolonged matters, that is
something properly to be considered on costs.
Mr Raniga's
brief
(a) Paragraphs 23-35
[14] This section is headed "Brownsons discussions with Westfield". It begins by
describing
how contact was made between Brownsons and Westfield. The initial
discussio ns over price for the shop in the Galleria are detailed,
as are resumed
negotiat ions after a lull. The section concludes by saying that representatives of
Westfield suggested that Brownsons
could consider Indian curry outlets as an option.
[15] The background to this case is that Brownsons were jewellers who owned
a
jewellery shop in a mall. As a result of the agreement in dispute, the jewellers ended
up with an arrangement involving Indian
curry outlets in some or all of Westfield's
malls. This appears, on its face, a somewhat unexpected outcome. I am not
prepared at this point to say evidence
as to how that came about is irrelevant or
otherwise inadmissible. Further, the correct meaning of the expression in dispute
significant
ly affects the width of the arrangement between the parties in that it
dictates what Westfield sites are involved. It would
be premature to say it is
irrelevant to know the general views that each party expressed about the value to
them of reaching an agreement.
[16] Within these paragraphs there is material that is superfluous, but I do not see
it as the Court's job to engage in a detailed
editing exercise. Paragraphs 23-35 are
admissible.
(b) Paragraphs 36-55
[17] This section is headed "The Indian Curry Outlet
Discussions". It begins with
informat ion that Mr Raniga says he was given about the earnings of an existing curry
shop. It then
discusses the specific offer of a lease of a particular shop made to Mr
Raniga by Westfield, but later leased out to a different
curry shop operator. The
brief then moves back to specifics of the negotiation for the sale of the shop, and
includes an allegation
as to a common understanding on the expression "fair market
rental", a term not actually used in the agreement.
[18] The overwhelming
impression I have of these paragraphs is that they are not
relevant to anything in issue. I see no particular prejudice in much of
it. However,
given the usual exclusion of pre-contract negotiations, there must in my view be
something that tends to establish a
relevant mutually known background fact before
such evidence should be admitted.
[19] Paragraph 47 was conceded by Mr Katz to
be questionable. The paragraph
explains why Mr Raniga dropped his asking price. The concession that this was
questionable was rightly
made. However, many of the other paragraphs are no
different; they may be expressed differently but underlying them is simply Mr
Raniga saying what he thought or why he did what he did.
[20] In relation to these paragraphs:
a) paragraph 36
this may be led as it provides information about profit
figures provided by Westfield and known to both;
b) paragraphs 37-40 these concern a specific offer to lease a particular
shop. No claim is made in relation
to it. Nothing came of it. They
are irrelevant and inadmissible;
c) paragraph 41 admissible given
misrepresentation cause of action
(see para [29] below), and possibly on the meaning of "market
condit
ions";
d) paragraphs 42-48 inadmissible pre-contract negotiations that do not
establish any relevant
common knowledge;
e) paragraphs 49-55 largely descriptive of correspondence in the
commo n bundle.
May be led. I reject the defendants' suggestion that
evidence that "greenfield sites" were never discussed is inadmissible.
(c) Paragraphs 56-58
[21] These concern the discussions surrounding the five Westfield sites that are
specifically mentioned
in the agreement. The fact that some sites were specifically
listed in the agreement may be a factor that assists in determining
the meaning of the
general expression "future redeveloped or developed". Generally the evidence
assists with the mutual
understanding of the parties as to the status of certain
Westfield sites. These paragraphs are admissible.
(d) Paragraphs 59-60
[22] These concern the term "market related terms and conditions" as used in the
agreement. It is a term that needs interpretation.
The parties disagree over whether
it is ambiguous. Mr Raniga alleges a common understanding was reached as to its
meaning. This must
be admissible evidence at this point. Whether there is any need
to refer to extrinsic material on this term is a matter for later
determination.
(e) Paragraphs 61-64
[23] Paragraphs 63 and 64 seem unnecessary but do not merit a specific ruling at
this point excluding them.
[24]
Paragraphs 61 and 62 blend information (e.g. a new company was established
to operate the curry business) with explanation of Mr
Raniga's motivation. Mr Katz
accepted that the second part of paragraph 62 was inadmissible. I rule that all of
paragraphs 61 and
62 are inadmissible, but for the first two lines of paragraph 62 up
to an including "... a new start up".
(f) Paragraphs 65-69
[25] Paragraphs 65-69 in essence detail Mr Raniga's subjective feelings about the
negotiat ion process. They do not go to what
the agreement means, but to how he felt
about the process. These paragraphs stand out in that they introduce a personal
aspect to
the evidence not otherwise present. They both describe Mr Raniga's
feelings of what he describes as pressure, and ascribe comments
and actions to the
negotiators for Westfield. I raised with Mr Katz the relevance of this. There is no
claim of undue influence or
the like. Mr Katz said the evidence was important and
its purpose would become clear. I am prepared to allow the evidence to be led.
The
relevance, and the need to have introduced it, will be carefully assessed later. It is
likely to have costs implications if it
proves immaterial.
(g) Paragraphs 72-74
[26] It is agreed the third sentence of paragraph 72 is to be deleted. Otherwise
the
paragraphs can be led.
(h) Paragraphs 75-79
[27] No objection is taken to paragraphs 75, 76 and 78. It is said paragraphs
77
and 79 are comment and submission rather than evidence. I agree as regards
paragraph 77, which is inadmissible. Paragraph
79 is more marginal but ultimately
masks a submission as to the meaning of a letter, and then contains an assertion that
the alleged
meaning was mutually understood. It is inadmissible to prove the
meaning of the agreement.
Summary of rulings
[28]
The following paragraphs are inadmissible:
a) 37-40;
b) 42-48;
c) 61 and 62 (but for
the first two lines of paragraph 62 up to and
including "... a new start up";
d) 72 (third sentence);
e) 77 and 79.
Misrepresentation
[29] There is a pleading alleging Brownsons was induced into entering the
agreement
for sale and purchase by misrepresentations. The pleading cross-
references the reader back to earlier paragraphs of
the pleading which allege that
certain things were commonly intended and understood. No specific statements are
ident ified or attributed
to anyone. With the one exception noted in para [20] above, I
do not consider this pleading alters the assessment of relevance.
Amended defendants' briefs
[30] The defendants' admissibility application was to be dealt with prior to trial.
However, the
assigned Judge had to stand aside from the proceeding, and so the
matter was not dealt with. The defendants' briefs originally did
not respond to the
challenged passages, but now do so given the alteration in timing. In the
circumstances Mr Katz,
while not accepting the approach taken, accepts it is difficult
to oppose leave being given to file amended briefs. He accepts he
is not embarrassed
in his preparation by the changes. These briefs may require further alteration as a
result of this ruling. Mr
Katz specifically reserves the right to object to specific parts
of the briefs; it is the question of leave he does not particularly
resist.
[31] Leave to file amended briefs is given.
_____________________________________
Simo n France J
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