Ipsofactoj.com: International Cases [2001] Part 8 Case 11 [NZCA]


COURT OF APPEAL, NEW ZEALAND

Coram

Nomoi Holdings Ltd

- vs -

Elders Pastoral Holdings Ltd

GAULT J

KEITH J

McGRATH J

17 JULY 2001


Judgment

Gault J

  1. I have read in draft the judgment prepared by Keith J. For the reasons he gives I agree that the appeal should be dismissed.

  2. This brief separate judgment makes some supplementary points. It is prompted primarily, however, by the apparent concern of counsel that the Court exhibits some impatience when presented with arguments seeking to overturn findings of fact made by trial judges.

  3. It is impossible to define with any precision all the circumstances in which it will be appropriate for an appellate court to review findings of fact. Attempts to formulate general propositions have been numerous and often unsatisfactory as is demonstrated in the instructive judgment of Kirby J in State Rail Authority of New South Wales v Earthline Construction Pty Ltd (in Liq) (1999) 160 ALR 588, 608. That judgment presents an interesting comparison with the separate judgment of Thomas J in Rae v International Insurance Brokers Ltd [1998] 3 NZLR 190, 198.

  4. Appeals to this Court are by way of rehearing: Rule 18 Court of Appeal (Civil) Rules 1997. Accordingly, the Court has the obligation to come to its own conclusion, in appropriate cases with the admission of further evidence. Plainly appeals on questions of fact may be brought: see Hamilton v Papakura District Council [2000] 1 NZLR 265, 268. But that does not mean that an appeal is simply an opportunity for a second run at the trial.

  5. Generally the advantages enjoyed by trial judges who see and hear witnesses will be recognised and their findings of primary fact based on the assessment of the evidence given before them accepted. One has only to sit on appeals to be conscious of the difficulties in making findings of fact and credibility from written transcripts of evidence. But that does not mean it cannot be demonstrated in particular circumstances that such a finding is wrong, e.g. as inconsistent with other incontrovertible evidence. Similarly, where all evidence is in written form, or where the real issue is in the area of inferences from established facts, an appellate court has less need to defer to the views of a trial judge.

  6. But this is not a case calling for any detailed review of the appellate function. It was apparent at the beginning of the oral hearing that the court would be required to review the Judge’s factual findings. The manner in which the Judge approached his findings, by resolving the conflict between the evidence of the principal witnesses by "logic and reason", and the extensive written submissions filed on behalf of the appellant, made that abundantly clear. We expected that the oral argument would be directed to the Judge’s findings of fact. We heard that argument, I trust without exhibiting impatience in relation to the process.

  7. Counsel for the appellant approached the argument by pointing to the Judge’s comment that he reached the conclusions he did with respect to the credibility of the competing accounts of the witnesses on the "cumulative effect of a number of considerations". It was submitted that if any one of those considerations were undermined, the whole structure would collapse because there could be no assurance that the Judge would have found in the remainder sufficient support for his conclusions. While superficially attractive, this does not avoid the assessment of whether the Judge likely would have reached the same conclusion, which is commonly part of appellate deliberation.

  8. In the present case, I am content to proceed directly to my own assessment of the evidence and the inferences to be drawn from it.

  9. The task with which the appellant was confronted from the outset was to persuade the court that Mr Fava, on behalf of his company Nomoi, reached an enforceable contract with Mr Church of Elders. It was not sufficient for him to show he understood there was an agreement or arrangement. He needed to establish a legally binding agreement, supported by consideration, under which Nomoi, though not bound to purchase, was entitled to have Elders sell the property to it after having received tenders but before accepting any one of them.

  10. The appellants' first difficulty was with consideration for the option to purchase. This was said to be provided by Nomoi undertaking not to participate in the tender. However, this was not claimed to have been expressed as part of the arrangement – it was alleged to be implied. But implied into what? It seems somewhat question-begging to contend, in an effort to establish the existence of a contract, that the consideration for it is an implied term. Certainly it could hardly be said that Nomoi refraining from tendering was necessary to give the alleged arrangement business efficacy.

  11. The next difficulty was in overcoming the absence of any sufficient note or memorandum evidencing the contract either to satisfy the Contracts Enforcement Act or to verify the oral contentions. Mr Fava acknowledged in evidence that he was aware of the requirement but thought it was not applicable in the circumstances. He said further he was asked by Mr Church not to record the matter in writing; a matter on which the Judge expressed doubt but, if true, might support a conclusion that Mr Church did not see the arrangement as legally binding. The claimed "part performance", of refraining from tendering, is entirely equivocal since Mr Fava was in no position to meet the requirements of the tender documents at the time.

  12. The next difficulty is in elevating the alleged arrangement to an agreement intended by the parties to create legal relations. In this respect much weight was placed on an earlier arrangement Mr Fava had with the ANZ Bank and under which he purchased an adjacent property after tenders had closed. But it does not follow that, if the bank had declined to sell, that arrangement could have been enforced.

  13. The points strongly made for the appellant: that Elders could have seen advantage in having an offer from Mr Fava after tenders closed and when he was in a position to make one; that Elders might also have preferred not to have a written record of such an arrangement in case prospective tenderers came to know of it; that the arrangement might provide Elders with an added ground for resisting any suggestion that the best price was not obtained, all are as equally consistent with a non-binding arrangement by which a late offer from Nomoi would be entertained as with a binding contract to sell to Nomoi if such an offer were made. Accordingly, these factors, pressed as having not been considered by the Judge, do not carry the appellants’ case any further on the contract cause of action.

  14. The alleged contract on which Nomoi sued was said to have been completed in the course of a discussion between Mr Church and Mr Fava on 9 November 1999, save for one point reserved by Mr Church and said to have been confirmed in a telephone discussion on 15 November. I am not greatly assisted by what was said to have taken place thereafter, though I agree that the evidence of Mr Fava’s conduct after the tenders closed does impact on the credibility of his evidence about the critical discussion.

  15. I have reviewed the evidence given by Mr Fava of the discussion he said he had with Mr Church on 14 December in light of what he claimed had been arranged between them prior to that. I can well understand that the Judge should find in this account further erosion of Mr Fava’s credibility. In expressing that view I rely not on the statements said to have been made then about the availability to Nomoi of funds, but rather to the general account which is of a conversation strained indeed if the same parties had earlier concluded the contract alleged.

  16. I too draw inferences from the absence of any written record of the alleged contract. It suggests to me that any arrangement discussed was for something less than a contract to sell the land. Also, like the Judge, I see no advantage to Elders in contracting to sell rather than merely indicating a willingness to entertain an offer should one be made. Further, I consider that it was open to the Judge to draw an inference adverse to Mr Fava from the absence of any claim in contract, and evidence consistent with it, until late in the course of the proceeding.

  17. The written submissions for the appellant offered extensive alternative interpretations of parts of the evidence. I have considered them but they do not lead me to the view that the interpretations adopted by the Judge were untenable. Nor have they persuaded me that, on an overall assessment, the evidence of Mr Fava should be preferred to that of Mr Church to the point of establishing a binding contract as claimed.

  18. This was a case in which the Judge was presented with conflicting oral evidence and considerable documentary material. His task was to assimilate that and made factual findings. It is unrealistic to expect that views formed after the hearing in the course of making those findings should be invalidated because the parties were not given opportunity to comment on them. They presented their evidence. The Judge made findings on that evidence. I do not accept that amounted to developing a theory of the case on which the appellant should have been given a chance to comment. I see no natural justice issue in that.

  19. I am content to adopt the views of the Judge and the other members of the Court on the remaining issues.

    Keith J

    (delivered a judgment in which McGrath J joined)

    THE PROCEEDINGS

  20. The main issue in this appeal is whether the respondents were bound by contract or estoppel to allow the appellants to participate in the process for the sale of certain land. The arguments addressed to this Court were essentially about the factual findings made by the High Court. The appellants also contended that there was a breach of natural justice in that the Judge developed a theory of the case that was not put to the plaintiffs and their witnesses and had not been the subject of submissions.

  21. The first appellant (Nomoi) and the second appellants (the second mortgagees) appeal against the dismissal by Chambers J of their claims that the respondents (referred to collectively as Elders), who had agreed, as first mortgagees, to sell certain land in a mortgagee sale, were in breach of their contract with the appellants, were in breach of a representation about the sale they had made and were in breach of their duties to the second mortgagees. It followed that their claims for an injunction and damages failed.

  22. Since the High Court judgment was delivered, the land has been transferred to the successful tenderer, Eldamos Investments Limited (Eldamos). That transfer is not challenged in this appeal. Accordingly, Eldamos is no longer involved in the proceedings.

  23. The land in question is one of three related commercial properties on the Whangaparoa Peninsula. At the time of the litigation, in early 2000, the land was owned by Matam Investments (Matam), of which Mr Philip Fava was director and principal shareholder. Matam had bought the land in 1998 for $1.65million. It was its only asset.

  24. Elders held a first mortgage over the land. Matam, which went into liquidation in 1999, defaulted and Elders took the necessary steps for a mortgagee sale, by tender. Elders agreed with a potential tenderer to a one day extension of the tender date, to noon of 14 December 1999, and on the following day they accepted a tender from Eldamos of $1.8million.

  25. The appellants claimed to be furious when they found out about the sale – Mr Fava (on behalf of Nomoi, a company which he had formed on 10 November to purchase the land) and Mr Dustin on behalf of the second mortgagees. Mr Fava contended that he had an arrangement with Elders that they would not accept any tender before giving him the opportunity to buy the land. The second mortgagees asserted that they had an understanding with Elders that they were to be consulted before any sale was effected. (The price of $1.8million would not be sufficient to cover the debt owed to them.) The alleged agreement or agreements or estoppels arose from conversations between Mr Church for Elders and Mr Fava for Nomoi and between Mr Church and Mr Dustin for the second mortgagees.

  26. The High Court litigation began on 6 January 2000 with a request for an ex parte interim injunction, which was granted on terms, to prevent Elders from settling with Eldamos. Interim arrangements were made between the parties to postpone the settlement, and at the initiative of the Executive Judge in Auckland and Chambers J (who had dealt with the original request), the substantive hearing began on 6 March. After a four day hearing, Chambers J gave judgment for Elders on 29 March. Settlement of the sale to Eldamos was due on 31 March and it was entitled to cancel the sale if an injunction were then in place preventing completion. Chambers J refused to extend the injunction pending the appeal and, as indicated, the sale has since been completed.

    THE HIGH COURT JUDGMENT

    The alleged contract and other causes of action

  27. After mentioning the procedural history of the case, the Judge set out the terms of the alleged contract or contracts, which were entirely oral. The contract was said to have been made by Mr Fava on behalf of Nomoi, Mr Dustin on behalf of the second mortgagees, and Mr Church on behalf of Elders. As between Nomoi and Elders, it was said to have been concluded on 15 November 1999 in a three minute telephone call between Mr Fava and Mr Church following an earlier face to face meeting on 9 November. The second mortgagees were alleged to have become party to that contract during a meeting between Mr Dustin and Mr Church which probably took place in the week beginning 22 November. The Judge noted the difficulty of the two arrangements being linked into a single contract. He then set out the alleged terms as pleaded in the amended statement of claim (adding the numbers to facilitate understanding):

    [a]

    Express term 1

    ‘Following the closing of tenders for the purchase of the property, but before the scheduled closing date for acceptance of any tender, the plaintiffs would be given the opportunity to submit an offer or offers to purchase the property.’

    [b]

    Express term 2

    ‘The defendants would accept an offer by the first plaintiff to purchase the property for $2m plus GST or for such greater amount as exceeded the highest tender and would sell the property to the first plaintiff accordingly.’

    [c]

    Express term 3

    ‘The first plaintiff’s offer referred to in [express term 2] was to be unconditional, on the same terms as the form of contract prescribed under the tender process, or on terms no less favourable to the vendor, and the defendants were entitled to be satisfied on reasonable grounds as to the first plaintiff’s ability to complete the purchase in accordance with the terms of the offer submitted.’

    I should point out [added Chambers J] that the plaintiffs accepted that the words ‘on the same terms as the form of contract prescribed under the tender process, or on terms no less favourable to the vendor’ were not said. But they claimed that that part of express term 3 was implicit in something that was said, namely the understanding that Mr Fava had to ‘[top] all other tenders’. The plaintiffs further conceded that the words ‘on reasonable grounds’ were not said. That part of express term 3 was, the plaintiffs said, implicit.

    [d]

    Implied term 1

    ‘The plaintiffs would not participate in the tender process.’

    [e]

    Implied term 2

    ‘The first plaintiff would cooperate with and provide reasonable assistance to the defendants and their agents in the marketing of the property for tender.’

    [f]

    Implied term 3

    ‘The second plaintiffs would not exercise the power of sale under their second mortgage, whether by selling to the first plaintiff, or otherwise.’

    [g]

    Implied term 4

    ‘The first plaintiff would not negotiate and/or conclude a purchase of the property from the second defendant.’

    [h]

    Implied term 5

    ‘The defendants would conduct the tender process strictly in accordance with its terms.’

    [i]

    Implied term 6

    ‘The defendants would not accept any tender prior to 5pm on 20 December 1999 unless they had first complied with the obligations detailed in [express terms 1 to 3].’

    We might note at this point that the alleged consideration for the oral contract or contracts was to be found only in implied terms, particularly that the plaintiffs would not tender.

  28. The plaintiffs alleged that Elders breached express term 1 by failing to give them an opportunity to submit an offer before Elders accepted any tender. (Under the tender documents Elders had until 20 December to accept any tender.) Had they been given the opportunity, Nomoi, they alleged, was in a position to offer $2million plus GST on the terms fixed in the tender documents. They further alleged that Elders breached implied term 6 by accepting Eldamos’ tender without giving the plaintiffs the opportunity to submit their offer or offers.

  29. Elders denied that any agreement was entered into with Nomoi or with the second mortgagees, still less on the terms alleged. Further, as Nomoi accepted, the alleged agreement was one to which the Contracts Enforcement Act 1956 would apply. The plaintiffs’ answer relied on the equitable doctrine of part performance.

  30. The cause of action based on estoppel was to the effect that Mr Church had represented to the plaintiffs that the property would be sold either to Nomoi or to the second mortgagees, and that they relied on that representation. Elders, in breach of that representation and expectation, had instead sold the land to Eldamos.

  31. The third cause of action, relating to the exercise by Elders of the mortgagees’ power of sale, was brought by the second mortgagees alone and alleged that Elders, as first mortgagees, owed them the duty to act in good faith and to take reasonable care to obtain a proper price for the property. Elders admitted that they owed those duties but rejected the claim that they were in breach. In particular, they rejected the proposition that there was a commitment by Nomoi to submit an unconditional offer to purchase the property for $2million. Had there been, then Elders would have been happy to accept that offer, provided they could be reasonably certain that Nomoi would perform.

  32. The Judge next turned to the facts which he reviewed in careful detail. Because of the way the appeal has been argued, we set out the Judge’s discussion of the facts and his findings at some length.

    The Fava / Church discussions

  33. Mr Fava and Mr Church had a face to face meeting on 9 November and a three minute telephone conversation on 15 November. The first was the more important but Mr Fava did not allege that agreement between Nomoi and Elders was reached at that meeting. Even on Mr Fava’s account, at least one matter was to be checked by Mr Church with Elder’s solicitors : it was whether a mortgagee after the closing of tenders was entitled to sell the property to a party who had not tendered.

  34. The accounts given by Mr Fava and Mr Church about what was said on the two occasions were, said the Judge, very different. Mr Fava gave his account on four occasions: in an affidavit of 6 January 2000, an affidavit (his third) of 14 February 2000, a statement prepared just before trial, and his oral evidence in court. Mr Church’s evidence was contained in an affidavit sworn on 26 January 2000, an affidavit sworn on 22 February 2000 and his oral evidence. The Judge continued that it was not possible to give a definitive version of Mr Fava’s evidence because it varied over time. He then said this:

    [23]

    .... But the version Mr Fava would urge is in summary as follows. In the main, it is taken from his statement. Mr Fava said that at the meeting on 9 November he told Mr Church that his interests would be ready and waiting to buy the property after the closing of the tenders. He said that his interests would then be making an unconditional offer to purchase at the figure of $2million. The offer he would then make would be on the same terms as applied to those entering the tendering process. He said that Mr Church had indicated that that would be ‘fine’ provided that Mr Fava’s interests were able to perform.

    [24]

    Mr Fava said that he had said to Mr Church that it was critically important to him that Elders not sell the property to anybody else during the tender process or immediately after that process without giving him and his interests the opportunity to advance an unconditional offer to purchase. He also said that he had said that it was very important to him and his interests to have some assurance that Elders would accept the proposal which his interests were going to make. He said that in response Mr Church confirmed that Elders would not sell the property to anybody else until his interests had had the opportunity, after the closing of tenders, to advance the unconditional offer which Mr Fava had described.

    [25]

    According to Mr Fava, the only element of uncertainty at the end of the discussion on 9 November was that Mr Church wanted to satisfy himself that a mortgagee, after the closing of tenders, was entitled to sell the property to a party who had not tendered. According to Mr Fava, Mr Church was going to confirm the position in that regard with Elders’ solicitors. According to Mr Fava, that element of uncertainty was resolved in his telephone discussion with Mr Church on 15 November. In that conversation, Mr Church indicated that he had satisfied himself that Elders was entitled to sell the property to Mr Fava’s new company after the close of tenders. According to Mr Fava, Mr Church told him that he and his interests were not to participate in the tender process.

    [26]

    Mr Church’s account was significantly different. He said that at the meeting on 9 November he told Mr Fava that if he or his interests wished to reacquire the property they would need to tender like anyone else and that Mr Fava agreed with that. There was never any agreement that Elders was bound to consult with him prior to accepting a tender. There was never any commitment on Elders’ part to granting Mr Fava or his interests what was effectively an option to purchase.

    [27]

    The two accounts could scarcely be more different. Neither Mr Fava nor Mr Church was seriously undermined under cross-examination. Each appeared as a credible witness. In these circumstances, the judicial trier of fact must apply logic and reason in order to determine what was probably said. After analysing all the evidence, I have concluded that Mr Church’s account of these two conversations is to be preferred to Mr Fava’s. No one reason has driven me to that conclusion. Rather, it is the cumulative effect of a number of considerations.

  35. As will appear, Mr Farmer QC for the appellants gave particular attention in the argument before us to the Judge’s reference in that last paragraph to "logic and reason". He contended that since the Judge had not, on counsel’s view, made a ruling on credibility, this Court was in as good as position as the trial Judge to make its own determination of the facts. Later we indicate why we do not accept that premise and why in any event we agree with the Judge’s determination on the facts. We might note at this point however the carefully qualified way in which the Judge expresses his credibility finding : the witnesses "appeared" as credible witnesses, not being "seriously undermined under cross-examination". He immediately says that he does prefer Mr Church’s account to Mr Fava’s.

  36. The Judge then went on to set out the "number of considerations" which led to this conclusion. First, he thought it significant that there was not a jot in writing confirmatory of the alleged agreement. While Mr Fava could have reached an erroneous view about the application of the Contracts Enforcement Act, the Judge nonetheless thought it was significant that there was nothing in writing to substantiate Mr Fava’s account. The next point was related.

    [29]

    .... In his statement read at trial, Mr Fava, for the first time, gave the following evidence relating to the 15 November discussion:

    I suggested to Mr Church that I write to him to record our agreement. He told me that Elders would prefer that I not do so. I respected that wish.

    [30]

    I asked Mr Fava whether Mr Church had given a reason as to why he did not want Mr Fava to write to him recording the agreement. Mr Fava said that Mr Church had not given a reason. I then asked Mr Fava whether he had asked Mr Church for a reason. Mr Fava said he had not. Mr Church’s evidence on this topic was unequivocal. The following exchange took place during cross-examination:

    And [Mr Fava’s] evidence also is that he suggested to you at the end of that discussion that he’d write to you confirming what he understood as the agreement, [what he had] agreed with you, and you told him not to. Do you recall that or not? I can say unequivocally that Mr Fava made no such statement and that no such matter was even discussed in any conversation.

    [31]

    I do not accept Mr Fava’s account on this aspect of the case. If an agreement had been made, I can think of no reason why Elders would not want it recorded. It is clear that Mr Church was a conscientious file-note maker. Is it really likely that he would specifically have asked not to have an agreement recorded if an agreement had been reached? I also find it hard to believe that had he said that, he would not have given a reason. What is even more unbelievable is that Mr Fava would not have asked him why he did not want it recorded. Mr Fava would surely have smelled a rat if Mr Church had said that ‘Elders would prefer’ him not to write recording the agreement. That evidence of Mr Fava’s simply does not ring true. If he has not told the truth on that aspect of the evidence, then it increases the likelihood that he has not told the truth or has been mistaken on other aspects of his evidence relating to these two conversations.

  37. The Judge then returned to one part of Mr Fava’s evidence referred to in the Judge’s para [24] quoted in para [34] above:

    [32]

    .... That was a critical piece of evidence because it was the only evidence in chief confirming Elders’ agreement not to sell the pub land to anybody else during the tender process or immediately after that process without giving Mr Fava the opportunity to advance an unconditional offer to purchase. This was, of course, a fundamental part of Mr Fava’s alleged agreement. The significant thing, however, it is that that part of the account did not appear in any of Mr Fava’s three affidavits. The first time it appeared was in the statement prepared after the interlocutory injunction hearing and handed in on day 1 of the trial. It was put to Mr Fava in cross-examination that this evidence was new. Mr Fava accepted that it was the first time he had said this. His explanation as to why it did not appear in affidavit 1 is that that affidavit was prepared ‘in great haste’. When taxed then as to why it did not appear in his affidavit 3, his only response was that the affidavit was ‘one of reply’.

  38. While the Judge accepted that the application for an interlocutory judgment may have been prepared in some haste, the first affidavit filed at that time was a substantial document and Mr Fava’s account of what happened at the meeting with Mr Church was very detailed; and the even lengthier third affidavit which was obviously prepared with care, and which contained a long discussion of the 9 November meeting said nothing on this point. "The fact that these assertions were not made until Mr Fava’s third account of the meeting must cast some doubt on them."

  39. The Judge then records that, while Mr Church, later on 9 November, did write to Elders’ solicitors giving them instructions to undertake a mortgagee sale by tender, that letter did not seek advice on the question which, according to Mr Fava, Mr Church had said he was going confirm with Elders’ solicitors, namely whether a mortgagee, after the closing of tenders, was entitled to sell the property to a person who had not tendered. Elders’ solicitor similarly did not refer in his evidence to that matter. The solicitor went further and said that at no time did Mr Church or any other person within Elders mention to him the name, Nomoi Holdings Limited, nor at any stage had there been any reference at all to a proposal whereby Mr Fava through any entity was to buy the land.

  40. The Judge concluded his discussion of this particular matter by saying that he preferred the evidence of Mr Church to that of Mr Fava:

    It is quite clear from the evidence that Elders was taking legal advice every step of the way, particularly because Mr Church had not previously undertaken a mortgagee sale by tender. I have no doubt that had Mr Church said that he wanted to satisfy himself that a mortgagee was entitled to sell the property to a person who had not tendered, he would have sought that advice from Elders’ solicitors. It seems clear beyond doubt that he did not do so. I accept Mr Church’s evidence that a discussion along these lines simply did not occur.

  41. The Judge next turned to "other aspects of Mr Fava’s evidence which were not satisfactory". He began with Mr Fava’s account of the telephone conversation between him and Mr Church on the afternoon of 14 December, that is the day on which Eldamos had submitted its tender. Mr Church denied virtually all of what Mr Fava said was discussed. The Judge’s first point was that the Telecom account produced by Mr Church showed that the call had taken a total time of four minutes thirty seconds. It was simply not possible that in that time everything said in the relevant paragraph of Mr Fava’s affidavit could have been said. From a sheer time point of view Mr Church’s account of the conversation, which was consistent with a call of that length, seemed more likely.

  42. Moving to the substance, the Judge found "many unsatisfactory features" of Mr Fava’s account. One concerned the source of the funding to buy the land. In his initial affidavit Mr Fava said that the source of the money for the purchase of the site was to come from funds held by Churchill’s receivers (Churchill being one of his companies which had been wound up). He made no reference whatever to anticipated loan finance from any other financier, including in particular Dorchester Finance Limited. Dorchester did feature, by contrast, in his supplementary evidence in chief prepared at the beginning of the substantive hearing. For the Judge,

    [i]t does not matter for present purposes which version is correct. The significance in an assessment of competing credibility (such as I am currently undertaking) lies in the variation of accounts.

  43. A second feature of Mr Fava’s account which the Judge saw as unusual concerned Mr Fava’s reported wish to see Mr Church immediately but Mr Church was unable to do that because he had to go to Hamilton the next morning (that is on 15 December). According to Mr Fava, Mr Church suggested that they could meet when he got back to Auckland about midday and Mr Fava then said that he asked if anything could happen with the property in the meantime to which Mr Church replied no because he was the person looking after it. That was an odd thing, said the Judge, for Mr Fava to have asked Mr Church. If there was an agreement, as Mr Fava alleges, then nothing could happen to the property in the meantime because Elders were duty bound to give Nomoi an opportunity to submit its offer and, further, were bound to accept the offer, providing it was in terms of the option alleged by Mr Fava.

  44. Also inconsistent with the alleged agreement was Mr Fava’s report that Mr Church had asked him "to refresh his memory as to why [Mr Fava’s] making an unconditional offer" had not been done through the tender process. That would seem an unusual comment if an agreement of the kind alleged by Mr Fava had been formed just a month before. It was of the essence of that agreement that Mr Fava and his interests were "not to participate in the tender process". Indeed, according to Mr Fava, it was Mr Church who stipulated that and who was "very definite in this regard". The Judge asked these rhetorical questions:

    If that evidence of Mr Fava’s is true, then how possibly could Mr Church have required him to refresh his memory as to why Mr Fava had not participated in the tender process? And why, when Mr Fava gave his reasons in response to Mr Church’s request, does he not say something to the effect, "Well, that was something you insisted on as part of our agreement?"

    Mr Fava next reported that his answer to Mr Church’s request was that they had agreed at their earlier meeting on 9 November that if Mr Fava did not get back to him by 12 November it would best for his new company not to participate in the tender process, but rather "deal with Elders after tenders had closed to effectively redeem the position of Matam". The suggestion, comments the Judge, that the new company would simply "deal with Elders after tenders had closed" is significantly different from the alleged option to purchase at $2million.

  45. For the Judge what was perhaps most significant about Mr Fava’s account in his first affidavit of the 14 December conversation is what it does not contain. Tenders had closed by this time, a fact that Mr Fava knew. There was only one question which Mr Fava needed to ask: "what is the top bid?" He would have to ask that because, in terms of his alleged agreement, he had agreed to pay either $2million or such higher sum as was needed to better the top tender received. Surely, comments the Judge, Mr Fava would have been on tenterhooks to know whether $2million was going to be enough, yet nowhere in his detailed account of the telephone call is there any reference to him asking that question.

  46. The Judge concluded this part of his judgment in this way:

    I simply cannot accept Mr Fava’s account of the 14 December conversation and I prefer Mr Church’s account of it. I find that Mr Church did ask Mr Fava to outline his proposal on the telephone or alternatively to fax a copy of the proposal to him so that he could consider it. I also find that Mr Fava then told Mr Church that he was unable to fax it to him because ‘the proposal was very complicated and he needed to explain it to [him]’. I further find that Mr Church asked Mr Fava whether the proposal he intended to make was unconditional or conditional and that Mr Fava replied that it was conditional. All of that seems entirely consistent with what are undisputed facts.

  47. He then set out three "undisputed facts":

    1. Mr Fava did not put his proposal to Mr Church notwithstanding the fact that it is common ground that Mr Church asked for a proposition to be put;

    2. Mr Church was holding at the time of the phone call an unconditional tender from Eldamos for $1.8million and the Judge believed Mr Church when he said that he did ask Mr Fava whether the offer was similarly going to be unconditional; and

    3. Mr Fava would have had to respond by saying that at that stage his offer was conditional because at that time Mr Fava, by his own admission, did not have the funding tied up. It will be seen that the appellants disagree with that final point about funding.

  48. The next passage of the judgment considers what happened on 15 December when according to Mr Fava he telephoned Mr Church at about 1.45pm. Among the points that the Judge takes out of Mr Fava’s account was his lack of protest on being told that he "was too late". It was very significant that "even on Mr Fava’s account of this telephone conversation there was no protest of any kind about Elders’ acceptance of one of the tenders". Even after this telephone conversation there was no complaint by Mr Fava to Mr Church either orally or in writing. The first Mr Church knew that Mr Fava alleged any wrongdoing on his part was when he received the proceedings on 7 January 2000 and, even then, there was no allegation that Elders had breached an agreement made between Mr Church and Mr Fava. The lack of any sort of protest is common to both Mr Fava’s account of the 15 December telephone conversation and Mr Church’s account. For the Judge, that was the most significant feature of the conversation. Where the accounts differed, he preferred Mr Church’s account.

  49. The Judge found further support for his conclusions about whether an agreement had been reached between Mr Fava and Mr Church from Mr Fava’s account of his conversation with a real estate broker employed by Elders’ real estate agent in the sale. Mr Fava, on his account, had to ask that broker what price had been achieved. That was significant to the Judge since it confirmed that Mr Fava had not sought that information in either of his telephone calls with Mr Church on 14 or 15 December, notwithstanding that, on the agreement he alleged, Mr Church would have been duty bound to tell him, because Nomoi’s offer was linked to the highest tender received. Further, even on Mr Fava’s account, he made no complaint to the agent about Elder’s action in accepting the tender.

  50. Mr Church’s file note of the 9 November meeting was also consistent with the account he gave both in his affidavits and under cross-examination. "That consistency is a fact which I can take into account and do take into account in determining credibility." The Judge, in addition, took into account the fact that no agreement was alleged in the original statement of claim, which was based solely on estoppel.

  51. Finally, the Judge looked at the overall likelihood of Mr Fava’s version as opposed to Mr Church’s.

    [68]

    .... There is no suggestion that Mr Church had a particular buyer in mind for the pub land. His principal aim was to get the debt to Elders repaid. Probably too he wanted the best possible price so that the second mortgagees would also be repaid and so that there could be no criticism of him for selling at an under-value. The agreement, as alleged by Mr Fava, simply makes no sense from Elders’ point of view. The whole point of a tender process from a vendor’s point of view is to push up the purchase price through offerors not knowing what other offerors are offering. Under Mr Fava’s agreement, Elders would be giving up that significant advantage because provided tenders reached $2million, Mr Fava would be able to get the pub land by offering just $1 more. From Elders’ point of view, it was much better to encourage Mr Fava to take part in the tender process where he would not know what his opponents were offering. The agreement would have prevented any sort of Dutch auction following the close of tenders. I can see no advantage to Elders from the alleged agreement. If there was no advantage, then that makes it more unlikely that there was such an agreement, given that Mr Church is clearly an intelligent man and an experienced businessman.

    [69]

    Further, Mr Fava’s claim that it was implicit in his arrangement with Elders that he would not participate in the tender process and that he would not negotiate with the second mortgagees and that the second mortgagees would not exercise their power of sale makes no sense at all. Why would Elders not want Mr Fava to participate in the tender process? What did Elders have to fear if the second mortgagees exercised their power of sale? All Elders wanted to do was get back the money it was owed. If the second mortgagees exercised their power of sale, Elders would have first call on the purchase price. In many ways, I suspect Mr Church would have been delighted had the second mortgagees sold the property because it would have removed from Elders any risk of being sued for failing to obtain a proper price. There was simply no commercial advantage to Elders from an agreement of the kind alleged by Mr Fava. That is a factor I have taken into account in determining the probabilities as to what was said on 9 and 15 November.

    [70]

    For all the above reasons, I have concluded that on the balance of probabilities Mr Church’s account of what was said on 9 and 15 November is to be preferred to Mr Fava’s. That does not mean that Mr Church’s account is necessarily right in every particular. It may well be that he has remembered some things wrongly. But on the essential points his version is clearly to be preferred.

    The Dustin / Church discussions

  52. Chambers J considered next what was said between Mr Dustin and Mr Church. Their difference in recollection was not nearly as pronounced as the difference in recollection between Mr Fava and Mr Church. It was common ground that Mr Dustin and Mr Church discussed Elder’s plans for a sale by tender, and that Mr Dustin advised Mr Church that he and his co-mortgagee were worried about losing the money under the second mortgage. It was also common ground that Mr Dustin asked whether Elders would consider selling their mortgage to him and Mr Tracey (his co-mortgagee) and that Mr Church replied that Elders would consider an offer from them to purchase its mortgage. Mr Church’s evidence was that he said that any such offer would need to be received quickly and, while Mr Dustin did not recall that comment, he was prepared to accept that it could have been made.

  53. The area of disagreement between Mr Dustin’s account and Mr Church’s concerned the existence of an agreement and its terms. In his first affidavit Mr Dustin said that out of the discussion on 19 November came an understanding between him, as a representative of the second mortgagees, and Mr Church that before Elders signed any contract to sell the property they would first offer it to the second mortgagees. That would occur by them buying the property personally or by way of some new corporate entity of Mr Fava’s buying the property with an arrangement with the second mortgagees over their mortgage. It was unclear to the Judge, from that passage in his evidence, just what it was that Mr Dustin recalled himself saying and Mr Church saying, or what Mr Dustin understood. By the time of his statement for the trial, Mr Dustin’s account had changed significantly. He was no longer making any reference to buying out the mortgage. Now he was talking about Elders agreeing not to sell the land

    without giving us the ability to acquire the property by buying it at a price above their highest offer

    The Judge preferred Mr Church’s recollection of this part of the conversation of Mr Dustin. The Judge considered that insofar as there was a variation between what Mr Dustin said in his affidavit and what he said in his statement given at trial, the earlier version was more likely to be accurate. That is that the discussion was concerned with the possibility of Elders being bought out of their first mortgage. That accords with Mr Church’s recollection. It also reflects all that had to be achieved from the second mortgagees’ viewpoint. They were at all times content to leave in their mortgage. They had much confidence in Mr Fava, a confidence which it was clear that Mr Church did not share.

  54. The Judge found that the assurance that Mr Dustin got was that Mr Church was willing to consider the sale of Elders’ mortgage. It was highly unlikely that Mr Church would have given the assurance to which Mr Dustin referred in his statement at trial. The Judge’s reasoning was that

    it would have been foolish in the extreme for Mr Church to agree that after tenders closed, Elders would not sell the property until the second mortgagees had been given an unspecified length of time, presumably a reasonable time, to find someone able to buy. It would have been clear to Mr Church that Mr Dustin was unlikely to be in the position to buy the land .... Mr Church knew nothing about Mr Tracey other than .... that Mr Tracey was unwell. He would, with some justification, have rated the chances of Mr Dustin being able to come up with a better buyer than Colliers [Elders’ real estate agent] as remote.

  55. The Judge also took into account that Mr Dustin, like Mr Fava, made no protest of any kind when he discovered that Elders had sold the property to a third party. As with his conversations with Mr Fava, Mr Church’s file note had proved consistent with the account of his meeting which he gave both in his affidavits and under cross-examination. That consistency, said the Judge, was a factor which he could and did take into account in determining credibility.

    The legal consequences

  56. On the legal consequences of the factual findings he had made, the Judge mentioned again the problem of finding a single contract, as alleged by the plaintiffs, in circumstances where Mr Fava considered he had an agreement with Elders even before Mr Dustin’s meeting with Mr Church and in circumstances where there was no evidence that Nomoi ever agreed to the second mortgagees becoming party to that earlier agreement. In the end, however, he did not have to resolve the legal conundrums because on the findings he had made there was no agreement between Mr Fava and Mr Church, or between Mr Dustin and Mr Church, let alone some overall agreement in which Nomoi, the second mortgagees and Elders were parties. He accordingly rejected express terms 1 to 3 of the alleged agreement set out in paragraph [27] above. He explained his conclusion in these words:

    [83]

    .... So far as express term 1 is concerned, I note that that is not the term for which Mr Fava contended. He did not agree that the second mortgagees could submit an offer after the closing of tenders. That right on his evidence was restricted to him and his interests. I also note that so far as the second mortgagees are concerned, while Mr Dustin did assert in his statement an entitlement to submit an offer following the closing of tenders, he said nothing about the time for such offer being restricted to the period up to ‘the scheduled closing date for acceptance of any tender’. There is no evidence that Mr Dustin knew about the closing date.

    [84]

    Having rejected the express terms, I need say little about the implied terms because obviously they fall away. I simply add that I would have had considerable difficulty in accepting that many of the terms alleged could be implied even if I had found the express terms proved.

  57. Accordingly, the first cause of action based on contract failed. It followed that the Judge did not have to go on and consider the other grounds on which Elders alleged that the contract claim must fail.

  58. The cause of action based on estoppel relied on the allegation that Mr Church had represented to the plaintiffs "that the property would be sold over to Nomoi or to the second mortgagees". The Judge said that it was clear from the previous section of his judgment that the plaintiffs had not established that Mr Church made any such representation. Mr Church could not give an assurance that the property would be sold either to Nomoi or the second mortgagees. After all, even on Mr Fava and Mr Dustin’s accounts, neither Nomoi nor the second mortgagees were under any obligation to make an offer. It was ridiculous to suggest that Mr Church had made the representation alleged. The second cause of action failed.

  59. The third cause of action, based on breach of duty by Elders to the second mortgagees, also failed. The complaint made was that Elders failed to obtain a proper price given that Nomoi was prepared to offer unconditionally $2million for the land. That "commitment" is dependent upon the Judge being willing to accept Mr Fava’s account of the 14 December conversation with Mr Church. For the reasons he had given he had not accepted that account and instead had preferred Mr Church’s. He had not accepted that Nomoi had committed itself submitting to an unconditional offer to purchase the property for $2million and on terms otherwise identical to those contained in the tender documentation:

    [90]

    .... On the contrary, I have found that Mr Fava’s indication was that the offer would be conditional, that the figure of $2million was not mentioned, and that, by implication, the offer would not be on terms identical to those contained in the tender documentation. I infer that from Mr Fava’s statement, as relayed by Mr Church, that the proposal was ‘very complicated and that he needed to explain it to [Mr Church]’. That would indicate that the proposal was not in terms of the tender documentation because the only thing tenderers had to fill in on the tender documentation was price. All other terms were fixed.

  60. The Judge said there was no commitment of the kind alleged. Mr Church, he concluded, was fully justified in not waiting around to see what Mr Fava might come up with. Mr Church, on 14 December, was holding a tender from a company which had the backing of one of New Zealand’s largest and most successful public companies, a tender which had been received after extensive marketing. That offer was to be compared with a possible offer of an uncertain kind from Mr Fava who had chosen not to take part in the tender process and whose company had defaulted on its mortgage, leading to the mortgage sale in the first place. Mr Fava, as Matam’s guarantor, had not paid a cent towards remedying the default and others of his companies had collapsed. Even at that late hour he was still talking about proposals so complicated that they could not be divulged over the telephone. In the Judge’s view, Mr Church was entitled to be sceptical whether Mr Fava would come up with something better.

  61. The Judge did consider what might have happened had Mr Church held off accepting the Eldamos offer until after he had seen Mr Fava on 15 December. As the Judge says, this was mere speculation but he did not consider that Mr Fava would have been able to put "an unconditional offer .... on terms .... identical to those contained in the tender documentation". He did not have his loan finance arranged at that time. All he had had was the first meeting with a Dorchester representative and no evidence from anyone at Dorchester was called. While Mr Fava accepted that under the alleged agreement he had to comply with the terms of the tender documentation, there was no evidence that he had done anything at all about complying with the terms about financing the purchase as at 15 December. He certainly never gave Mr Church a statement which was in compliance with this term, and no such statement, even in draft, was discovered. The Judge considered that he could safely conclude that Mr Fava intended going to the meeting on 15 December without such a statement.

  62. While the Judge had some concern about Elders’ conduct as at 15 December (for instance in not obtaining any valuation before accepting the Eldamos offer and in not attempting to force up that offer) such allegations were not made and it would be unfair on Elders to consider them. The third of cause of action had to fail.

    AN APPEAL AGAINST FINDINGS OF FACT

  63. As already indicated, we have summarised the judgment and quoted from it at greater length than is usual because the appeal is against the Judge’s factual findings and several particular aspects of the reasoning that lead to them.

  64. The central question throughout is whether or not an oral agreement or perhaps two separate but complementary oral agreements were entered into, first, between Mr Church on behalf of Elders and Mr Fava on behalf of Nomoi, and, second, between Mr Church and Mr Dustin on behalf of the second mortgagees. The answer depends on an evaluation of the conflicting accounts given by the witnesses in their evidence, and especially those of Mr Church and Mr Fava.

  65. A central submission made by the appellants is that because of certain "features of the case, the conduct of the trial and the approach taken by the trial Judge", this Court should fully review the evidence and the findings of fact made by the Judge. Particular emphasis was placed on the Judge’s resort to "logic and reason to determine what was probably said" because "neither Mr Fava nor Mr Church was seriously undermined under cross-examination. Each appeared as a credible witness." (para [27] quoted in para [34] above). The appellants then proceeded to attack the Judge’s conclusion that Mr Church’s account was to be preferred by criticising the considerations the cumulative effect of which had driven him to that conclusion. Those considerations, summarised earlier, began with the absence of any written confirmation of the alleged agreement (para [36] above). The attack was also put on natural justice grounds, in particular that the Judge developed a theory of the case which had not been put to Mr Fava in cross-examination and had not been the subject of submissions. The claimed elements of the Judge’s "theory" were the absence of writing; the lack of any reason for Elders not to have the agreement in writing; that the agreements made no sense from Elders’ point of view; that there was no reason for Elders not to want Nomoi to participate in the tender process; and that the Dustin agreement conferred no benefit on Elders and could have significantly disadvantaged them.

  66. As we have already said, the Judge’s statement about credibility needs to be read carefully in context, and not only of the particular paragraph in which it appears but also of the following detailed discussion of the evidence. The expressions "seriously", "appeared" and "after analysing all the evidence" are all significant : the Judge is not saying that he is not going to make findings about whose account he is to prefer, on the basis of seeing the two witnesses give their evidence. On the contrary, in the last part of the paragraph he states his conclusion that he does prefer Mr Church’s account and then he proceeds to give his reasons. Those reasons are elaborated in detail in the course of the judgment. In those reasons he makes findings not just of fact but also of credibility. It is perhaps worth remarking that the word "credibility" covers reliability as well as truthfulness. In this case the Judge is attempting to discover what happened. On that basis the intentions of the witnesses are not significant; see the discussion in Law Commission Evidence Law – Character and Credibility (NZLC PP 27, 1997) ch 4.

  67. The Judge discussed the Fava – Church evidence over 42 paragraphs and, as we have seen, concludes that "for all the above reasons" Mr Church’s evidence was to be preferred. "[O]n the essential points his version is clearly to be preferred." (para [70] quoted in para [51] above) On the way to that general conclusion he said (when reaching a conclusion on possible funding sources issues and rejecting one of Mr Fava’s accounts) that "the significance in an assessment of competing credibility (such as I am currently undertaking) lies in the variation of accounts" (para [46] above); and on the difference between Mr Fava and Mr Church about whether on 14 December Mr Church asked if Mr Fava’s offer was going to be unconditional he stated "I disbelieve Mr Fava when he says that Mr Church did not ask it" (see para [47] above). Among other instances of findings that indicate the Judge relied on impressions made by Mr Fava and Mr Church in the witness box are the following:

    • Mr Church was clearly an intelligent man and an experienced businessman and was clearly not a fool.

    • Mr Fava had been "taxed" about the introduction of new evidence about the alleged agreement with Elders into his supplementary brief; having examined Mr Fava’s explanation, the Judge considered that the fact that the assertions were not made until his third account of this meeting must cast doubt on them (para [33] quoted in para [37] above).

    • Mr Fava was an astute businessman well able to look after himself, an assessment stated immediately after Mr Fava’s "most significant" failure to protest when told on 15 December that Elders had accepted a tender (para [48] above).

  68. It appears to us that the Judge took full advantage of hearing and seeing the witnesses in a case which turned essentially and in large measure on oral evidence. The principal, if limited, documentary evidence also largely confirmed and supported the evidence given by Mr Church – "a conscientious file note maker".

  69. There is nothing special about this appeal against factual findings. It falls clearly within the standard category of cases involving clashes of oral evidence such as Rae v International Insurance Brokers (Nelson-Marlborough) Ltd [1998] 3 NZLR 190; see also McCullagh v Wallis [1963] NZLR 956, 959; Powell v Streatham Manor Nursing Home [1935] AC 243, 267 (Lord Wright) and Attorney-General of Hong Kong v Wong Muk Ping [1987] AC 501, 510.

  70. Can it be said that the conclusion reached by Chambers J about which account of the various conversations to accept was not open on the evidence in that there was no evidence to support it or that he was plainly wrong in the conclusion reached (Rae at 197)? We do not think so. There is ample evidence supporting the conclusion he reached and indeed indicating that it was correct. That can be demonstrated by taking Mr Fava’s evidence at face value. In our view, even that evidence does not support the alleged agreement (or agreements).

    THE "CONTRACT", ON MR. FAVA'S EVIDENCE

  71. The principal alleged terms of the agreement were as follows, reverting to the listing in para [27] above:

    1. Between the closing of the tenders and before the scheduled closing date for acceptance the plaintiffs would be given the opportunity to submit an offer or offers to purchase the property.

    2. The defendants would accept an offer for $2m plus GST or for such greater amount as exceeded the highest tender.

    3. The first plaintiff’s offer was to be unconditional, on the same terms as prescribed in the tender document or on no less favourable terms; the defendants were entitled to be satisfied on reasonable grounds about the first plaintiff’s ability to complete on those terms.

    And (i) (an implied term) the defendants would not accept any tender before the closing time for accepting tenders unless they had first complied with the terms a-c above.

  72. The first term highlights the problem, not resolved before us either, of one contract or two. At the very least, as Chambers J said, Mr Fava’s accounts were in terms of Nomoi alone having the option. The second mortgagees did not have a part in any alleged agreement or agreements.

  73. More significantly, to turn to term b, Mr Fava did not at the critical time, that is in his discussion with Mr Fava on the afternoon of 14 December (nor on 15 December), ask what the highest tender was. On his alleged contract, he of course had to know that figure if he was to make the unconditional offer in accordance with terms b and c. Equally significantly, by that critical time he did not have ready an unconditional offer which conformed with the tender requirements or was at least as favourable; he had no document to present to Elders, on the basis of which they could be satisfied that he would be able to complete the transaction. It is agreed that Mr Church did ask Mr Fava that he put a proposition.

  74. Also highly significant on Mr Fava’s own evidence is his failure to make any protest about his being closed out of the transaction when, in the course of the phone call on 15 December, Mr Church told him that he was "too late", or indeed at any later time until the proceedings began about three weeks later. Also relevant is the failure of the plaintiffs to plead the alleged agreement until the final stages of the proceedings.

  75. While Mr Fava might have thought he had an arrangement with Elders it does not follow of course from his subjective belief that he did have a contract, nor, in terms of the other cause of action, that Elders had made the representation which he alleged.

  76. 76. In addition to reviewing the evidence directly related to the alleged agreement or agreements, Mr Farmer also pressed on us evidence, first, about a similar arrangement to that alleged here that Mr Fava considered he had reached with the ANZ Bank concerning a related commercial property, second, about a telephone conversation between Mr Fava and Mr Church on 10 December and, third, about Mr Fava’s financial position, especially on 14 and 15 December. We now consider that evidence.

    OTHER EVIDENTIARY ISSUES

    The alleged related agreement between Mr Fava and the ANZ Bank

  77. The argument based on this alleged transaction was that another property owned by a Fava company was taken to a mortgagee sale by the ANZ Bank and was bought by Nomoi by an agreement similar to that which he alleged existed in the present case.

  78. The property was one of three of a set, including the land in issue in this case, in the Whangaparaoa township in which Mr Fava had interests. Mr Fava was planning their joint development. According to Mr Fava, the ANZ as mortgagee reserved its right to sell outside the tender process - a facility which his company was able to use. While Mr Fava may well have understood his relationship with Elders as the same as that which he had with the ANZ Bank, we are unable to see the ANZ relationship as relevant in the present context. First, the exact nature of the ANZ transaction was not before us and, secondly, this transaction with the third party could not affect the objective assessment of the facts relating to the agreement alleged with Elders in this case. To repeat, Mr Fava’s subjective understanding cannot affect that assessment.

    The telephone conversation between Mr Fava and Mr Church on 10 December

  79. The evidence about this conversation given by Mr Fava, with the support of Mr Dustin who was in his office at the time it took place, was invoked to support the proposition that Mr Fava confirmed his intention to make an unconditional offer of $2 million. The conversation occurred three days before tenders closed. Mr Farmer pointed out that the Judge did not refer to this evidence. Once again the accounts given by Mr Fava and Mr Church about that conversation are in direct conflict, with Mr Church saying that he reiterated to Mr Fava that if he needed or wanted to reacquire the property he would have to tender like any other party; Mr Fava had stated that he was not able to do so since he had not yet received the funds from another transaction. We need not resolve that conflict because of the Judge’s clear findings, which we have found to be unshaken, that Mr Fava did not make an unconditional offer in terms of the tender documents at the critical time, a few days later. He did not even ask Mr Church to tell him what the best tender was – a figure which, on Mr Fava’s theory of the agreement, he would have had to better. This argument does not help the appeal.

    Mr Fava’s financial position, especially on 14 and 15 December

  80. Mr Farmer took us through various passages in the evidence to demonstrate Mr Fava’s "resurrection from his difficulties". The evidence related to the Nomoi purchase by way of the ANZ mortgagee sale (para [77] above) of one of the Whangaparaoa properties and a sale by a Fava company of its half share in the third property. The result was that "by 14 December at latest Fava was no longer at risk, contrary to the Judge’s view and he was certainly in a position where he could make an unconditional offer to purchase the pub land and was highly motivated to do so". The Judge’s view was that Mr Fava on 14 December would have had to respond by saying that his offer was conditional because he did not have the funding tied up. Given "his precarious financial state as at 14 December", he was most unlikely to have advised that the proposal would be unconditional. The evidence to which we were taken does appear to give force to the criticism made of the view expressed by the Judge. But even if that view were shown to be wrong that would have no consequence for the Judge’s findings based on the exchanges between Mr Fava and Mr Church. Those findings which, to repeat, we have found to be unshaken, were that Mr Fava did not make the unconditional offer required by the tender documents at a figure exceeding the best tender which had been made within the (extended) tender period. Again, the fact that Mr Fava may have thought for good reason that he was in a position (because of the release of certain funds by the receivers of another of his companies) to complete the deal he thought he had with Elders cannot help establish that deal. This ground too does not assist the appellants.

    THE JUDGE'S "THEORY OF THE CASE" WAS NOT PUT TO THE PLAINTIFFS OR THEIR COUNSEL

  81. As noted at the outset, in addition to challenging factual findings made by the Judge, the appellants also contend that he developed a theory of the case which he did not put to them, their witnesses or their counsel. Before we consider the criticisms, we note that were they established they would not put in doubt the critical findings based on extensive evidence and an objective assessment of the exchanges between Mr Fava, Mr Dustin and Mr Church that the alleged agreement, agreements and representations did not exist.

    There was no reason why Elders would not want the agreement recorded

  82. The Judge’s view to that effect (para [31] set out in para [36] above) was criticised in part by reference to the (equivocal) diary note which Mr Fava made : that, it was said, was a written record of the alleged agreement. We do not understand the Judge as being concerned with a unilateral record. Rather he was addressing the lack of a record accepted by parties to the agreement of the kind contemplated by the Contacts Enforcement Act. To turn to the main issue under this head, it is possible that there may have been some advantage to Elders in not having the agreement in writing – for instance in terms of its dealing with other possible purchasers. But it is difficult to identify that advantage. We have the Judge’s clear preference, having observed Mr Fava and Mr Church, for Mr Church’s evidence that he did not say that Elders did not want the agreement to be in writing (paras [29]-[31]). Further there is force in his point that Mr Fava did not seek an explanation. Nor was Mr Church cross-examined on why Elders would not want the agreement in writing.

    The alleged agreement made no sense from Elders’ point of view and there was no reason for Elders not to want Nomoi to participate in the tender process

  83. The relevant part of the judgment is set out in para [51] above (paras [68]-[69]). Again, Elders might have seen some value in having some backup, especially given its understanding that Mr Fava was not in a position to participate in the tender. But a mere indication by them that an offer would be entertained after the tender period was over (with the potential advantages that would have) would be a long way from providing a basis for establishing a contract or representation of the kind that was pleaded here.

    The alleged Dustin agreement conferred no benefit on Elders and could not have significantly benefited it

  84. This challenged view of the Judge is summarised in para [54] above. The appellants say that a reasonable time limit would have had to be accepted, with the assurance expiring no later than the last day on which tenders could be accepted, and that Mr Dustin and Mr Tracey were obviously in a position where they could intervene, sell or facilitate the sale of the property and thereby undermine or subvert the Elders’ tender process. Even were all that so – and no evidence is submitted in support of that to controvert the Judge’s findings about the likelihood of any significant action by the second mortgagees – again that ability of the second mortgagees does not by itself establish a contract or undertaking of the kind pleaded. This argument too does not help the appellants.

  85. To conclude under this heading, we see no strength in the contention that the Judge developed "theories" and then made findings to support them. The so called "theories" were findings on the facts that he made in determining that the agreement, the agreements or representation alleged by the plaintiffs did not exist.

    THE ALLEGED BREACH OF REPRESENTATION

  86. It follows from the conclusion relating to the alleged contract or contracts that the terms of the alleged representation are also not made out. The plaintiffs did not establish that Mr Church represented to them that the property would be sold either to Nomoi or to the second mortgagees.

    THE ALLEGED BREACH BY ELDERS OF THEIR DUTY OWED TO THE SECOND MORTGAGEES

  87. This cause of action was based on an alleged commitment by Nomoi to submit an unconditional offer to purchase the property for $2 million and on terms otherwise identical to those contained in the tender documentation. That commitment has not been established. It follows that the appeal in respect of the rejection of this cause of action also fails.

    CONCLUSION

  88. We have reviewed in detail the appellants’ grounds as elaborated in argument before us. We have not found that they have put in doubt in any significant way the central factual findings made by the Judge. We would indeed go further. On our review of the evidence and particularly for the reasons given under the heading, The "contract", on Mr Fava’s evidence, we reach the same conclusion as did Chambers J.

  89. We would also add that the respondents’ argument based on the Contracts Enforcement Act appears to be a strong one. Can it really be said that the failure by Mr Fava to make a tender or by the second mortgagees not to exercise their powers of sale (alleged terms) are part performance? See New Hart Builders Ltd v Brindley [1975] 1 All ER 1007, 1012-1013 on an unexercised option.

    RESULT

  90. Accordingly the appeal is dismissed. The respondents are entitled to $5,000 costs and to their reasonable disbursements, including the travel and accommodation expenses of two counsel to be fixed by the Registrar if the parties cannot agree.


Cases

State Rail Authority of New South Wales v Earthline Construction Pty Ltd (in Liq) (1999) 160; Rae v International Insurance Brokers Ltd [1998] 3 NZLR 190; Hamilton v Papakura District Council [2000] 1 NZLR 265; McCullagh v Wallis [1963] NZLR 956; Powell v Streatham Manor Nursing Home [1935] AC 243; Attorney-General of Hong Kong v Wong Muk Ping [1987] AC 501; New Hart Builders Ltd v Brindley [1975] 1 All ER 1007

Legislations

Court of Appeal (Civil) Rules 1997, R. 18

Authors and other references

Law Commission Evidence Law; Character and Credibility (NZLC PP 27, 1997) ch 4

Representations

J A Farmer QC and G Hurd, K M Yee for the Appellants (instructed by Murdoch Hall & Co, Auckland)
P R Heath QC and G H J Brant for the Respondents (instructed by Stace Hammond Grace & Partners, Hamilton)


all rights reserved