Ipsofactoj.com: International Cases [2005] Part 5 Case 2 [PC]


THE PRIVY COUNCIL

(from the Court of Appeal, New Zealand)

Coram

New Zealand Meat Board

- vs -

Paramount Export Ltd

LORD NICHOLLS OF BIRKENHEAD

LORD HOFFMANN

LORD HUTTON

LORD SCOTT OF FOSCOTE

LORD WALKER OF GESTINGTHORPE

26 JULY 2004


Judgment

Lord Hoffmann

(delivered the majority judgment of the Board)

  1. This appeal arises out of an action brought by Paramount Export Ltd (“Paramount”) and Ronnick Commodities (NZ) Ltd (“Ronnick”), two companies which carried on business exporting meat and are now in insolvent liquidation, against the New Zealand Meat Board (“the Meat Board”) and the New Zealand Meat Industry Association Incorporated (“the MIA”). The companies claim that the Meat Board and the MIA are responsible for their failure and are liable in damages on grounds of negligence, equitable estoppel and breach of contract.

  2. The Meat Board is a statutory authority, set up originally under the Meat Export Control Act 1921, with wide powers to control the meat export industry. The MIA is an incorporated voluntary association representing meat processors, exporters and marketers with the objects of advancing the interests of the meat export industry.

    REGULATION OF MEAT EXPORTS

  3. During most of the last century the meat export industry was heavily regulated by the Meat Board. Under section 9A of the Act, it was an offence to carry on business exporting meat without a meat exporters’ licence granted by the Meat Board. The licences could be granted subject to conditions and the Meat Board had other statutory powers which enabled it to keep a tight grip. In the late 1980s the government decided to expose the industry to the forces of the market. It underwent considerable deregulation in the expectation of eliminating inefficient producers and enabling the remainder to compete more effectively overseas. But a stumbling block in the way of this process was the insistence of importing countries like the European Union on the regulation of access to their domestic markets. In 1980 New Zealand entered into a voluntary restraint agreement with the EU by which New Zealand agreed to ensure that the total annual quantity of sheep meat exported to the EU would not exceed a certain figure; originally 245,500 metric tonnes but reduced to 205,000 on renegotiation in 1989. The mechanism for enforcing this limit was that the EU granted import licences only on production of export certificates issued by the Meat Board, which was designated by the New Zealand government as the competent authority for this purpose. Export certificates, commonly called “quota”, authorising specific quantities of exports to the EU, must be distinguished from the export licence under the Act, without which a company could not export meat at all.

  4. Until 1988, the demand for quota from meat exporters did not exceed the limit imposed by the voluntary restraint agreement. But the reduction on renegotiation in 1989 and an increase in the attraction of EU prices meant that demand for quota outran supply and the Meat Board had to devise a rationing mechanism. It was therefore to some extent driven back into the kind of regulation of the industry from which it had been trying to escape. The scheme first adopted was a simple scaling down based upon each exporter’s share of the total volume of New Zealand sheepmeat killed in that year. This has been called the status quo system.

  5. The status quo system was in some respects unsatisfactory. It was crude because it depended simply upon volume without regard to the quality of the meat. It encouraged increases in volume simply for the purpose of obtaining more quota, which resulted in exporters bidding unrealistic prices for sheep. As everything depended upon volume during the year, exporters concentrated upon working their plant as hard as possible and neglected market development. Deregulation also meant that there was no co-ordination of exports, which resulted in the oversupply of some markets and sales at prices which brought allegations of dumping from importing countries including the EU. Exporters’ profit margins were dangerously reduced.

  6. In 1991 there was a crisis in which banks were refusing to fund the industry unless there was structural reform. The government did not wish to return to complete state regulation which insulated the industry from market forces. The solution adopted was that the Meat Board should exercise its statutory powers to compel the industry to adopt a system of self-regulation which could promote fair and orderly development. In effect, it required the industry to form itself into an export cartel which could regulate exports so as to maximise profits consistently with New Zealand’s agreements with importing countries. The Meat Board made it clear that exporters who refused to join the scheme would not be allocated the export certificates which gave them their share of quota.

    THE MEAT PLANNING COUNCIL

  7. The scheme was carried into effect by an agreement dated 22 November 1991 and made between the Meat Board, the MIA and all the meat exporting companies (“the Meat Companies”) which elected to join the scheme. The mechanics of signing were that each Meat Company was sent a separate copy to sign in which it was referred to as “the company” and the other meat companies were called “other Meat Companies that execute an agreement on the same terms as this agreement”. But the intention, expressly stated in clause 11.5, was that all the signed agreements should be treated as a single contract and therefore, in setting out the relevant terms of the agreement, their Lordships will for convenience refer to them all as “the Meat Companies”.

  8. The agreement recited a decision to set up a Meat Planning Council (“the Council”) and said that the agreement was intended to establish the Council and record its objectives and powers. Recital E said:

    It is the intention of the parties that this agreement should operate to promote fair and equitable relationships between the Meat Companies in respect of their various activities relating to the export marketing of New Zealand meat, and to preserve the ability of all of the parties to this agreement to trade efficiently and profitably in the export of New Zealand meat within the boundaries set by considerations of public interest and the provisions of this Act.

  9. The Council was described in clause 2.1 as “a committee representing the [Meat Board], the MIA and the Meat Companies”. It was to consist of 4 members nominated by the Meat Board and 7 nominated by the MIA, each of whom was to be the Chief Executive of a Meat Company. Decisions could be taken only by a 75% majority of votes capable of being cast, of which half were to be distributed among the Meat Board members present and half among the MIA members present. The agreement did not provide for the removal of any member by his or her nominating body or contain any provision requiring a member to vote in accordance with the wishes of that body. In practice, an MIA-appointed member would occasionally dissent from the views of his MIA colleagues.

  10. The objects and powers of the Council were set out in wide and general terms in clause 3.1 and more specifically in clause 3.2. They included the consideration of “export market plans”, the establishment and operation of a franchise system, and (paragraph (f) of clause 3.2) “to make recommendations from time to time to the [Meat Board] as to the exercise of its relevant powers under the Act”.

  11. Clause 6 dealt with the export franchise system. It was to operate in such market regions as the Council should determine and, in such regions, no meat company could operate without a franchise from the Council. This could impose conditions, including the provision of a performance bond and any breach of a condition of a franchise could lead to its revocation.

  12. The MIA had been encouraging exporters to join “groups” which could formulate market plans and clause 7 of the agreement required any exporter not already a member of a group to join one and provided that the Council should approve the market plans. These would deal with such matters as price guidelines and the appropriate volumes to be sold into a given market.

  13. Clause 8 made specific provision for certain sheepmeat markets, additional to the contents of the market plans to be adopted for those markets. The first was the United Kingdom. Clause 8.2.1 limited the amounts of the performance bonds which could be required for sales into that market and clause 8.2.5 concerned the allocation of quota:

    The Council shall request the [Meat Board] to allocate and adjust the [the quota] for the United Kingdom Market Region from time to time, on the basis of the anticipated sales of each Meat Company, but revised from time to time on the basis of actual sales.

  14. The second specific market was “Continental Europe” – the rest of the EU. Clause 8.3.2 dealt with quota:

    The Council shall request the [Meat Board] to allocate [quota] for the European Community from time to time, and to adjust [quota] allocations from time to time, on the basis of figures which the MIA advises from time to time represent each Meat Company’s share of the total national mutton, lamb and goat meat kills for the season (as revised from time to time), and the Council will monitor each Group’s marketing performance in relation to those allocations and amended suggested [quota] allocations if it considers that to be appropriate.

  15. The rest of clause 8 dealt with North America, the Middle East and other markets.

  16. Clause 10.1 provided that the initial term of the agreement should be five years, subject to extension. Clause 11 contained certain general provisions:

    11.1

    All powers given the Council by this agreement shall, to as great a degree as is practicable, be exercised by the Council in consultation with those Meat Companies that are affected by the relevant exercise of the Council’s powers. However, failure by the Council to consult with any one or more Meat Companies shall not invalidate any action taken by the Council pursuant to this agreement, or prevent any such action or decision from being binding on any Meat Company.

    11.2

    (a)

    The provisions of this agreement may be amended from time to time if the Council determines, after consultation with the [Meat Board], the MIA .... and all Meat Companies that have signed an agreement in the same form as this agreement, that amendment is desirable. If so amended, the amendment shall be binding on all Meat Companies that hold export licences at that time ....

  17. Paragraph (b) of clause 11.2 then laid down a detailed procedure by which the Council was to consult the Meat Board, the MIA and the Meat Companies on any proposed amendment. The remaining general clauses dealt with the enforceability of the agreement:

    11.5

    This agreement shall be deemed to give rise to a contract between the [Meat Board], the MIA .... and all .... Meat Companies .... and, subject to the provisions of clause 11.8 of this Agreement, be enforceable by any of them against the others and generally in the same manner as if all such Meat Companies had executed the same document ....

    11.7

    For the purposes of the Contracts (Privity) Act this agreement shall be enforceable by the Council and its members, notwithstanding that they may not be parties to this agreement, and shall be similarly enforceable by all Meat Companies ....

    11.8

    Notwithstanding the provisions of clause 11 of this agreement the parties agree that nothing contained in this agreement shall give rise to a right between the companies who are parties to this agreement or any other agreement on the same terms as this agreement to claim, sue for or recover, any costs, losses, damages, compensation or any other moneys arising out of any breach or alleged breach of this agreement.

    11.9

    This agreement shall not be enforceable against the [Meat Board] if or to the extent that to so enforce it would involve any restriction on the exercise of any of the [Meat Board’s] powers under the Act, it being recognised that the [Meat Board] shall at all times be at liberty to exercise its powers under the Act freely and to the same extent as if it had not been a party to this agreement.

  18. Finally, clause 11.13 provided for the arbitration of any disputes.

    RELATIONS BETWEEN THE MEAT BOARD AND THE COUNCIL

  19. By section 12 of the Act, the Meat Board had power to direct that no contract for the carriage of meat for export should be made except in conformity with conditions to be approved by the Meat Board. It also had power under section 14 to give such directions as it thought proper for the handling, pooling, storage, sale and shipment of meat. On 7 October 1991 the Meat Board issued a circular to all meat export licence holders directing under section 14 that meat for export to which the agreement establishing the Council applied should be handled, pooled, stored, sold and so forth

    only by the parties to, and in accordance with the agreement, or in accordance with such other direction as shall from time to time be given by the Board.

  20. The Meat Board also gave a similar direction under section 12 for contracts of carriage. It is clear from these directions that the Meat Board retained the power to give directions which were not in accordance with them.

    PARAMOUNT AND RONNICK

  21. Paramount carried on business as a meat producer and Ronnick carried on business as its export marketing agent. It was Ronnick which held the licence to be a meat exporter under the Act but Mr. Ronald Russell was sole shareholder and managing director of both companies. Until quite late in this litigation, no one attempted to distinguish between them.

  22. Mr. Russell’s involvement in the meat export business was first, through Ronnick, in exporting horsemeat produced by other people and then, through Paramount, in producing first horsemeat and then beef. At the time of the agreement setting up the Council in 1991, he was contemplating moving into the production and export of sheepmeat to the EU but had not yet done so. He was unenthusiastic about the Council but signed the agreement in November 1991, saying that he only did so under duress. In 1992 Paramount bought a plant at Piriaka which was used to produce both horsemeat and sheepmeat. Mr. Russell decided to concentrate on sheepmeat for export to the EU. The plant was out of commission for some time while improvements were made. In 1994 it produced a relatively small quantity of export sheepmeat, exported to non-EU destinations because the plant had not yet been approved by the EU inspectors. This happened on 26 October 1994.

    CHANGES IN THE QUOTA ALLOCATION SYSTEM

  23. By that time, the Council had been in existence for three years. It had at first continued to recommend allocations of quota to the Meat Board in accordance with the old status quo system and the Meat Board had issued EU export certificates accordingly. But there had been a good deal of discussion about changing the system. In 1993 the Council suggested the adoption of a system of tradeable rights, by which meat companies could buy and sell the right to quota. But this encountered great opposition and was dropped. In December 1993 a modest change was made: allocation of quota was to be based on “qualifying export graded” production rather than total volume. But in December 1994, soon after Paramount’s sheepmeat production had come on stream and it was in a position to export to the EU, a substantial change was made. The Council announced that in future, allocation of quota would be based on past rather than current production. For the 1995 calendar year, it would be based on the share of production in the 1993-94 production season, (which ran from 3 October 1993 to 1 October 1994). For the 1996 calendar year, it would be based on an average of production in the 1993-94 and 1994-1995 production seasons. From the 1997 quota year onwards, it would be based on a rolling average of production in the three previous production seasons. To deal with new entrants who had no previous production and other exporters disadvantaged by the change, 3% of quota was to be reserved for distribution by an independent tribunal, chaired by Sir Gordon Bisson, a retired judge of the Court of Appeal.

  24. Mr. Russell, whose companies had produced very little export meat in the 1993-1994 season, protested vigorously at the adoption of the new system but to no avail. He was told that he could apply for consideration by the independent tribunal. And for the year 1995, the tribunal did allot him enough to make up his total quota to more or less what it would have been if the old status quo system had continued. But in 1996 the tribunal had to share the reserved 3% among more applicants and Mr. Russell received far less than he was expecting. Encouraged by what had happened in the previous year, he had increased the rate of production. Then he found that he had no market for the additional meat. As a result, both companies swiftly collapsed.

    THE PLEADINGS

  25. Paramount and Ronnick commenced proceedings against the Meat Board and the MIA, alleging four causes of action. The first was that the Meat Board had been negligent. It could have foreseen that the companies would be damaged if they were not allocated enough quota and was negligent in failing to establish a system of allocation that was fair to the plaintiffs or in failing to ensure that the Council had sufficient regard to their special position. The statement of claim also alleged that the chairman of the Meat Board had given assurances to Mr. Russell on the telephone which it was negligent of the Meat Board not to take into account.

  26. The second cause of action was negligence on the part of the MIA. They also could have foreseen damage to the companies if the system of quota allocation was not fair and were negligent in failing to ensure that the system was fair or that the Council had proper regard to the position of the plaintiffs.

  27. The third cause of action was equitable estoppel. The statement of claim alleged various representations and said that the Meat Board and the MIA were aware that the plaintiffs had acted in reliance on the status quo system.

  28. Finally, the plaintiffs alleged breach of contract. Here it is necessary to set out exactly what was said (in the further amended statement of claim, dated 12 February 2001):

    115.

    Pursuant to clause 8.3.2 of the .... agreement:

    115.1

    the [Council] were required to procure the granting of EC quota by [the Meat Board] to the plaintiffs on the basis of figures which the MIA advised represented the plaintiffs’ share of the total national mutton, lamb and goat kill for the season in question;

    115.2

    the MIA were required to so advise that share; and

    115.3

    the [Meat Board] were required to allocate EC quota accordingly.

    116.

    It was an express or alternatively implied term of the .... agreement that the defendants would exercise their contractual rights and duties relating to the allocation of EC quota so that quota would be allocated on a fair and equitable basis between the meat companies who were parties to the agreement in accordance with Recital E.

    117.

    In breach of the terms referred to in paragraphs 115 and 116 above:

    117.1

    the defendants did not perform their contractual functions so that the plaintiffs were allocated EC quota for the 1995/1996 season in accordance with the plaintiffs’ share of the total national mutton, lamb and goat meat kill for that season and on a basis that was fair and equitable as between the meat companies;

    117.2

    the MIA did not advise of the plaintiff’s share of the total national mutton, lamb and goat meat kill for the 1995/1996 and 1996/1997 seasons for the purpose of EC quota being allocated on that basis;

    117.3

    the [Council] did not request the [Meat Board] to grant EC quota for the 1995/1996 and 1996/1997 seasons in accordance with the plaintiffs’ share of the total national mutton, lamb and goat meat kill for that season; and

    117.4

    the [Meat Board] did not grant EC quota on that basis.

  29. The defences of both the Meat Board and the MIA were for the most part unilluminating documents. They consisted almost entirely of formal traverses of the allegations in the statement of claim. For example, paragraph 28 of the statement of claim did no more than set out the terms of clause 8.3.2 of the agreement. To this the MIA pleaded that it had “no or insufficient knowledge of and therefore denied the allegation”. This is an abuse of the purpose of pleadings and, as will appear, caused a good deal of trouble at the trial and afterwards. In the case of paragraphs 115-117 of the statement of claim the Meat Board, in additional to a general traverse, relied specifically upon clause 11.9:

    If the [Meat Board] did breach the .... agreement as alleged in paragraph 117 (which is denied) it did so in the exercise of its powers under the Act.

  30. Heron J found for the plaintiffs on all four causes of action and awarded damages in the sum of $2,150,400 plus whatever was the deficiency on liquidation (in respect of which he made an interim award of $3,188,901) plus the costs of the receiverships and liquidations. The Court of Appeal reversed his findings on negligence and equitable estoppel but upheld the award of damages on the ground of breach of contract.

    BREACH OF CONDUCT

  31. In the Court of Appeal[a], the Meat Board and the MIA tried for the first time to take the point that Paramount had never been a party to the agreement in which it was suing. The Court rightly rejected this argument. Paramount and Ronnick had always been regarded as a single entity and if the point had been raised at the trial, the plaintiffs could have adduced evidence to prove that Ronnick acted as agent for Paramount or that the Meat Board and MIA were estopped from denying this.

  32. The question, however, is whether the Meat Board and the MIA were liable to either company for breach of contract. There are only two ways in which they could have been. The first is for breach of obligations which the agreement expressly or impliedly imposed upon them as individual corporations. The other is by way of vicarious liability for breaches of contract by the Council.

  33. Vicarious liability is suggested in paragraph 26 of the statement of claim, where it is alleged that “the [Council] was a body acting under the control and direction of the [Meat Board] and the MIA”. This was accepted by the Court of Appeal (paragraph 62):

    cl 8.3.2 of the agreement .... required the [MIA], through the Council, to request the Board to allocate EU quota on the basis of current production.

  34. Clause 8.3.2 does not require the MIA to request the Meat Board to do anything. It places that obligation upon the Council. So this reasoning must depend upon an assumption that the MIA controlled the Council and was responsible for its acts. But the only basis for this allegation is that the Meat Board and MIA nominees had equal voting power and that decisions could be taken only by a 75% majority, that is to say, with the concurrence of at least some of the nominees of both bodies.

  35. This does not in their Lordships’ opinion show joint, let alone several, control and direction of the Council. There is nothing to show that the members of the Council exercised their votes as delegates of their appointing bodies and there is evidence of an occasional dissent which is inconsistent with block delegation. The members of the Meat Board were chosen to represent the public interest, sometimes from fields outside the meat industry, and the same was true of the Council members appointed by the Meat Board. The MIA members, on the other hand, represented an industry which was far from monolithic and within which different views were held. Their Lordships consider that members of the Council were expected to use their own judgment as to the public interest, the interests of the industry and their own sectors of that industry. The Meat Board did not need to control the Council because it had its statutory powers in reserve. And the MIA, even if its appointees had been delegates, would have been unable to do so.

  36. Their Lordships therefore turn to consider whether the agreement imposes obligations directly upon the Meat Board or the MIA. The allegation in paragraph 115.1 of the statement of claim is that by clause 8.3.2 the Council was “required to procure the granting of EC quota” by the Meat Board in accordance with the status quo system. The clause actually says that the Council must “request” the Meat Board to make such an allocation, which does not mean the same as “procure”, but the Council is not a party to the proceedings and, for the moment, the point may be allowed to pass. In 115.2 it was alleged that the MIA was obliged to advise the Meat Board of the relevant quantities. The evidence showed that the Meat Board did so. Finally, in paragraph 115.3 it is alleged that the Meat Board was required to allocate EC quota accordingly.

  37. Their Lordships can see no foundation for this last allegation. First, there is nothing in clause 8.3.2 which expressly imposes any obligation on the Meat Board. Secondly, the use of the word “request” in describing the obligation of the Council implies that it will then be a matter for the Meat Board to decide whether to comply with the request or not. Thirdly, the allocation of quota by the Meat Board is an exercise of statutory power and clause 11.9 says that the Meat Board is to be at liberty to exercise its powers under the Act as “freely and to the same extent as if it had not been party to the agreement”. The Meat Board had made it clear in giving its statutory directions on 7 October 1991 that it reserved the right to depart from the terms of the agreement. Fourthly, the power to amend the agreement is vested by clause 11.2 in the Council. The Meat Board and MIA had a right to be consulted but no more. It would be remarkable for the Meat Board and MIA to be liable for breaches of terms which had been inserted by amendment into the contract and to which they had no power to object.

  38. As for the MIA, its only obligation under clause 8.3.2 was to notify quantities. This it did. Apart from vicarious liability, there is no other basis for finding that the MIA was in breach of the agreement.

  39. Mr. Cooke, in his excellent submissions on behalf of the respondents, said that if neither the Meat Board nor the MIA could be sued for the failure of the Council to make a request in accordance with clause 8.3.2, it would be unenforceable. But their Lordships do not think that this is right. Although the Council was created by contract, it was set up as a public self-regulatory body with power to regulate the meat export industry. Its acts were open to judicial review. If it failed to comply with its obligations under clause 8.3.2, it could have been required as a matter of public law to do so. This would be the natural way of controlling the acts of a public body. Alternatively, there could be private law remedies by way of injunction against the Council. But the contract does not impose private law duties upon the Meat Board or MIA to ensure that the Council acts within its powers, nor does it give either of them the power to do so. Their Lordships therefore see no reason to imply such duties when they are not expressed in the contract itself.

  40. Their Lordships are therefore firmly of the view that the allegations of breach of contract must fail. The only obstacle in the way of giving effect to this conclusion is the unfortunate manner in which the litigation has been conducted by the Meat Board. The pleadings, although not very informative, made it clear to the plaintiffs that they had the burden of proving a contractual obligation and drew particular attention to clause 11.9. It follows that the arguments which their Lordships consider to be an answer to the contractual claim were open to the Meat Board and the MIA. Furthermore, the burden was upon the plaintiffs to adduce any evidence of surrounding circumstances which might advance the argument that although clause 8.3.2 imposed no express obligation upon the Meat Board and a mere administrative obligation upon the MIA, both bodies should be liable for the acts of the Council.

  41. Attention was distracted from these questions during the course of the trial by the Meat Board’s discovery of documents which appeared to show that as far back as December 1993 clause 8.3.2 had been amended to confer upon the Council the widest discretion:

    The Council shall request the [Meat Board] to allocate [quota] from time to time on the basis decided by the Council after due consultation with [Council] signatories ....

  42. No attempt was made to amend the pleadings to raise this point. The defence was left as a bare traverse of the existence of any clause 8.3.2. But the Meat Board called some desultory evidence to prove that the amendment had been made. The plaintiffs countered with an argument, mainly in reliance on recital E, that even if the clause had been amended to confer a discretion upon the Council, it was subject to an overriding requirement that the system of allocation should be fair to all meat producers. The plaintiffs claimed that the system adopted in 1994 was not fair to them. In this way, the focus of inquiry on this part of the case appears to have been the nature of the Council’s duties under clause 8.3.2 and little if any attention was paid to the question of whether the Meat Board or MIA could be contractually liable for the Council’s failure to perform those duties. (It is fair to say that so much attention was paid at the trial to the alleged representations on which Mr. Russell claimed to have relied and the general surrounding circumstances that the contractual claim may not have been in the forefront of the parties’ minds.) The closing submissions of the Meat Board before Heron J dealt with the question of whether 8.3.2 was validly amended and with the alleged implied term restricting the discretion it appeared to confer on the Council, but said nothing about whether the Meat Board could be liable in contract at all.

  43. Heron J found as a fact that the procedure for amendment laid down by clause 11.2 had not been followed. The Court of Appeal upheld this finding of fact, thereby creating concurrent findings with which the Board will not interfere. Their Lordships also agree with the Court of Appeal that the proviso in clause 11.1 by which the absence of consultation is not to invalidate any action taken by the Meat Board had no application to amendments under clause 11.2. It follows that clause 8.3.2 was not validly amended.

  44. But the question of whether the Meat Board was in principle liable under the unamended clause 8.3.2 was not raised before the Court of Appeal. More than that, Keith J noted that the Meat Board acknowledged that, if clause 8.3.2 had not been amended, it had been in breach of its terms. Mr. Carruthers QC, who appeared for the Meat Board, said that he did not make this concession but there is no trace of any contrary argument advanced to the Court of Appeal and it therefore seems to their Lordships that the Court of Appeal was entitled to treat the point as uncontested.

  45. In these circumstances the question is whether the Meat Board should be allowed to withdraw the concession. Mr. Cooke says that this would be unjust. The case was fought on the assumption that if the Council had made a request for quota allocation in breach of clause 8.3.2, the Meat Board would be liable for complying with it. If it had been known that this was in issue, the plaintiffs could have adduced evidence of surrounding circumstances to show that the agreement should be construed as having this meaning.

  46. Their Lordships consider that the plaintiffs cannot complain of being misled about the evidence they would need to adduce at the trial. On the pleadings, the whole question of contractual liability and the construction of the agreement was in issue. It would have been open to the Meat Board, without any amendment of the pleadings, to put before Heron J the argument upon which it now relies. In any case, the surrounding circumstances were exhaustively explored at the trial and their Lordships are unable to imagine what facts could be unearthed which would lead to the conclusion that the Meat Board was assuming a contractual liability for the way it exercised its statutory power to allocate quota. Mr. Cooke did not suggest any. The position in relation to this point is therefore quite different from the point about the separate identities of Ronnick and Paramount.

  47. It therefore appears to their Lordships that despite the fact that the true construction of the contract was not argued before the judge, the plaintiffs could not have complained of prejudice if the point had been taken before the Court of Appeal. It was a question of law on which no further evidence could have been called. The position is the same before their Lordships’ Board. It is no doubt very disappointing for the plaintiffs, having succeeded in the courts below, to lose on a new point in the final court. On the other hand, it would be a miscarriage of justice if the Meat Board were required to pay some $7m out of public funds when it had no legal liability to do so, merely on account of the way its advisers had conducted the litigation. Mr. Cooke referred their Lordships to a recent observation of Lord Bingham of Cornhill in Grobbelaar v News Group Newspapers Ltd [2002] 1 WLR 3024, 3034, para 21:

    Only rarely and with extreme caution will the House permit counsel to withdraw from a concession which has formed the basis of argument and judgment in the Court of Appeal.

  48. That is a sound policy and in deciding to allow the concession to be withdrawn, their Lordships hope they have displayed the same caution as the House did in Grobbelaar's case. If there were any possibility that the outcome could have been affected if the point had been taken earlier, that would of course have been an entirely different matter. But their Lordships consider that in this case the plaintiffs can be adequately compensated by a suitable order for costs.

  49. As for the MIA, it never conceded any contractual liability except for the administrative duty of notifying quantities. That duty it performed. The Court of Appeal held it liable on the ground that it had a duty to ensure that the Council complied with clause 8.3.2 but, as their Lordships have already indicated, they respectfully disagree. The MIA had neither the power nor the duty to procure action by the Council.

    NEGLIGENCE

  50. The case in negligence against the Meat Board is put on the basis that it owed a duty to the plaintiffs, whom it could foresee might otherwise suffer harm, to allocate quotas only in accordance with requests from the Council which complied with clause 8.3.2 in its unamended form. Their Lordships agree with the Court of Appeal that there was no such duty. The Meat Board was exercising a statutory discretion and was entitled by virtue of the contract to do so as if it had not been a party to the agreement. Clause 8.3.2 is therefore of no assistance to the plaintiffs in founding an action for negligence. Nor do their Lordships think that the Meat Board owed the plaintiffs a more general duty of care. If the Meat Board’s allocations had been so unfair as to be unreasonable, they would no doubt have been open to judicial review. But their Lordships do not consider that there was a parallel private law liability in tort and in any case, the degree of support for the 1994 system in the industry does not suggest that the adoption of that system by the Meat Board could be called unreasonable.

    ESTOPPEL

  51. Their Lordships also agree with the Court of Appeal that the case on promissory estoppel failed on the facts. Such an estoppel requires an unambiguous representation and the findings of fact by Heron J appear carefully to avoid any such finding. There was a conflict of evidence about what Mr. Russell had been told by various officers of the Meat Board and the Council: the judge dealt with the matter (in paragraph 129) by saying:

    .... without making any particular findings of credibility, it seems to me that it is very likely that there were assurances given in telling Mr. Russell not to squeal before he was hurt and that the system would take care of him.

  52. The Court of Appeal said (at paragraph 104) that this generality did not advance the matter. Their Lordships agree.

    CONCLUSION

  53. Their Lordships will humbly advise Her Majesty that the appeal should be allowed and the action dismissed. They invite submissions from the parties in writing on the appropriate order for costs.

    Lord Nicholls of Birkenhead & Lord Walker of Gestingthorpe

    (dissenting)

  54. We have the misfortune to have reached a different conclusion on these appeals so far as the New Zealand Meat Board is concerned. The plaintiffs assert three causes of action against the Meat Board: negligence, estoppel and breach of contract. We agree that, for the reasons given by the Court of Appeal, the claims in negligence and estoppel are not well-founded. As to breach of contract, the plaintiffs’ claim is that when they entered into the MPC agreement in 1991 along with other meat companies, they became contractually entitled to a quota based on their proportionate share of the national kill for the current season. That was the effect of clause 8.3.2 of the agreement. They claim that the Meat Board was in breach of contract in not allotting them this quota in 1995. Contrary to the contentions of the Meat Board, clause 8.3.2 was not validly amended in December 1993 so as to substitute for the plaintiffs’ original entitlement a provision enabling the Meat Planning Council itself to decide from time to time on what basis requests for quota allocations should be made to the Meat Board.

  55. Both the trial judge and the Court of Appeal held that clause 8.3.2 was not effectually amended. On this issue there are, on the crucial point, concurrent findings of fact. On the basis of these findings the disputed quota allocation made by the Meat Board in 1995 was not made in accordance with the formula set out in clause 8.3.2 of the MPC agreement. Hence the key question: did clause 8.3.2 oblige the Meat Board to make allocations as provided in that clause?

  56. In their pleadings the plaintiffs alleged that, pursuant to clause 8.3.2, the Meat Board was required to allocate EC quota according to the formula set out in this clause: see paragraph 115.3 of the statement of claim. Clause 8.3.2 does not, in terms, impose any such obligation on the Meat Board. So the question is whether such an obligation is properly to be implied. The plaintiffs opened their case to Heron J explicitly on this basis. The plaintiffs submitted that clause 8.3.2 constituted an obligation, implied from the language of the clause, that the Meat Board would continue to allocate EC quota in accordance with the “status quo” formula described in that clause. The meat companies were forced by the Meat Board to enter into the MPC agreement, and it would be incongruous if the Meat Board could unilaterally depart from the quota allocation method envisaged by the agreement.

  57. Such an implied obligation on the Meat Board would be limited in its practical scope in at least two respects: clause 8.3.2 was itself capable of amendment, and clause 8.3.2 was subject to clause 11.9. Neither of these limitations is relevant in the present case. As already noted, clause 8.3.2 was not amended. Clause 11.9 provided that the MPC agreement was not to give rise to enforceable obligations against the Meat Board which would restrict the Meat Board in the exercise of its statutory powers. But in making the allocation of which the plaintiffs complain the Meat Board purported to give effect to clause 8.3.2, in its purportedly amended form, not to depart from the terms of clause 8.3.2 in exercise of the power reserved to it by clause 11.9. The Meat Board abandoned a positive defence to the contrary effect pleaded in paragraphs 119 -121 of its statement of defence.

  58. An implied term of the character alleged by the plaintiffs called for a thorough examination of the business context of the agreement. The plaintiffs’ case depended on their showing that, having regard to the business background, it was implicit in clause 8.3.2 that (barring some special reason prompting the Meat Board to have resort to the freedom reserved by clause 11.9) the Meat Board would allocate quota in accordance with the formula agreed by the industry as set out in the MPC agreement. Although not explicit, it was implicit that the Meat Board would make allocations as requested by the Meat Planning Council pursuant to clause 8.3.2.

  59. As matters turned out, this aspect of the business context of the MPC agreement seems not to have pursued in depth at the trial. This is not altogether surprising, because at the trial the Meat Board did not dispute the existence of this implied contractual obligation. In the synopsis of its closing submissions at the trial the Meat Board submitted that the plaintiffs’ reliance on the unamended clause 8.3.2 was misplaced because the clause had been amended. The Meat Board did not contend that clause 8.3.2 in its original form gave rise to no legal obligation to allocate quotas as requested by the Meat Planning Council.

  60. The Meat Board adopted a similar approach in its written submissions on its appeal to the Court of Appeal. The existence of the contractual obligation asserted by the plaintiffs was not included on the Meat Board’s list of the issues raised by its appeal. Consistently with this the Court of Appeal recorded in its judgment, at paragraph 32:

    If however the original cl 8.3.2 remained unamended, the Board acknowledges that it is in breach of the terms of cl 8.3.2. (Questions of causation and measurement of damages would remain.)

  61. The proceedings subsequently came back to the Court of Appeal on three occasions. On one of these occasions, concerning the release of funds lodged as security for costs, the strength of the Meat Board’s grounds of appeal to the Privy Council was a relevant issue. The Meat Board made no mention that in recording this acknowledgement the Court of Appeal had acted under a misunderstanding.

  62. We have to say that we find this quite extraordinary if, as their Lordships were told by counsel, the Meat Board had made no acknowledgement to the Court of Appeal in the form noted by that court. The sole point on which the Court of Appeal found liability established against the Meat Board was breach of contract in not making allocations in conformity with the original clause 8.3.2. It was on this very point that the Court of Appeal recorded the Meat Board’s acknowledgement of liability, subject to two issues relating to damages. In these circumstances, if the Court of Appeal had wrongly recorded the extent of the Meat Board’s acknowledgement of liability we would have expected that, as night follows day, when the strength of the Meat Board’s appeal to the Privy Council was in issue the Meat Board would inevitably have mentioned this misunderstanding to the court. The Meat Board could have, at best, a much reduced prospect of disturbing the conclusion of the Court of Appeal on liability so long as this acknowledgement of liability stood.

  63. It is against this background that the Meat Board’s raising of this issue for the first time in its written case to their Lordships’ Board has to be considered. The applicable legal principle is well established. In Ahamath v Sariffa Umma [1931] AC 799, 803, Lord Blanesburgh said:

    It must be only under very exceptional circumstances that an issue dropped in the intermediate Court of Appeal and for that reason not dealt with or referred to by that court can be revived before this Board.

  64. To the same effect Lord Bingham of Cornhill said in Grobbelaar v News Group Newspapers Ltd, [2002] 1 WLR 3024, 3034, para 21 that “only rarely, and with extreme caution” will the House of Lords permit counsel to withdraw from a concession which has formed the basis of argument and judgment in the Court of Appeal.

  65. In the present case the Meat Board is seeking to go further. The Meat Board is seeking to resile from the basis on which this case proceeded in both courts below. So the Meat Board has to face the additional hurdle of persuading their Lordships’ Board “beyond doubt” that it has before it “all the facts bearing upon the new contention as completely as would have been the case if the controversy had arisen at the trial”. This must be established beyond doubt because, where a point was not taken which might have been taken at the trial, it would be “wrong .... to run any risk of doing injustice” to the other party: see Lord Herschell in The Tasmania (1890) 15 App Cas 223, 225, 230.

  66. In our view the Meat Board has put forward no good reason why the present case should be treated as an exceptional case such as would justify its being permitted to resile from its conduct of the case in the courts below. The point was raised squarely by the plaintiffs and, twice over, the Meat Board chose not to contest the point. No satisfactory explanation of this has been forthcoming. Additionally, we are concerned that the course adopted by the Meat Board may have affected the plaintiffs’ conduct of their case at the trial. Whether a term should be implied as alleged by the plaintiffs is ultimately a question of law. But, as already mentioned, the background facts and the parties’ appraisal of the practical significance of these facts are matters of potential importance in a case such as this. Had the existence of a legal obligation on the part of the Meat Board been a matter of dispute, it is possible that further relevant material might have been adduced or elicited in evidence at the trial. We are certainly not satisfied on this point “beyond doubt”, to echo Lord Herschell’s phrase.

  67. We believe that to permit the Meat Board to take this point for the first time on appeal to the Privy Council would be to run the risk of doing injustice to the plaintiffs. To permit the Meat Board to take this point now would inevitably mean the plaintiffs will feel, in our view justifiably, that they have not been treated fairly in this litigation. The Meat Board, on the other hand, can have no cause for complaint. The course which fairness and justice require in these circumstances seems clear. On a different point the Meat Board sought to change tack in the Court of Appeal. The Court of Appeal, rightly, declined to permit this: see paragraph 130 of its judgment. Their Lordships’ Board should take the same course on this further new point.

  68. Because ours is a minority view, which will have no legal effect on the outcome of this appeal, we will not set out our reasons for rejecting other points taken by the Meat Board on the appeal. These relate principally to the alleged amendment of clause 8.3.2 and remoteness of damage. Suffice to say, on these other points we would dismiss the Meat Board’s appeal.

  69. As to the appeal by Meat Industry Association of New Zealand, we agree this should be allowed. In their pleadings the plaintiffs did not allege that the Association was obliged to procure the Meat Planning Council to act in any particular way. The pleaded obligation on the Association under clause 8.3.2 was to advise the Council of the plaintiffs’ share of the national kill for the season in question. The Association did not breach that obligation. Nor was the Association in breach of the plaintiffs’ additional pleaded term based on recital E to the MPC agreement. We agree with the Court of Appeal that the agreement cannot be read as requiring allocation on a fair, equitable and pro rata (current) basis: see paragraphs 64 to 80.


Cases

Grobbelaar v News Group Newspapers Ltd [2002] 1 WLR 3024

Ahamath v Sariffa Umma [1931] AC 799

The Tasmania (1890) 15 App Cas 223

Legislations

Meat Export Control Act 1921: s.9a, s.12

Representations

Mr. Carruthers QC, who appeared for the appellant.

Mr. Cooke for the respondent.

Notes:-

[a] See New Zealand Meat Board v Paramount Export Ltd @ IpsofactoJ.com: International Cases [2003] Part 10 Case 15 [NZCA]


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