Winton Stock Feed Limited v Southern Farms NZ Limited [2025] NZHC 692 (28 March 2025)

Winton Stock Feed Limited v Southern Farms NZ Limited [2025] NZHC 692 (28 March 2025) Home | Databases | WorldLII | Search | Feedback High Court of New Zealand Decisions You are here: NZLII >> Databases >> High Court of New Zealand Decisions >> 2025 >> [2025] NZHC 692 Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Help Winton Stock Feed Limited v Southern Farms NZ Limited [2025] NZHC 692 (28 March 2025) Last Updated: 17 April 2025 IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE CIV-2024-425-28 [2025] NZHC 692 BETWEEN WINTON STOCK FEED LIMITED Plaintiff AND SOUTHERN FARMS NZ LIMITED Defendant Hearing: 10 March 2025 Appearances: D M Jackson for Plaintiff T J Shiels KC and S N McKenzie for Defendant Judgment: 28 March 2025 JUDGMENT OF ASSOCIATE JUDGE LESTER WINTON STOCK FEED LIMITED v SOUTHERN FARMS NZ LIMITED [2025] NZHC 692 [28 March 2025] [1] Winton Stock Feed Limited (Winton) is a feed supplier operating throughout New Zealand but predominantly in the Otago Southland area. [2] Winton supplies dairy farms with feed blends to order. The blend can comprise multiple ingredients such as palm kernel extract (PKE), soya hulls, salt and minerals et cetera. [3] As well as sourcing feed ingredients throughout New Zealand, Winton imports product utilising the port at Bluff for off-loading feed “shipside” which it freights or stores for sale or for future blending. [4] Southern Farms NZ Limited (Southern) owns two farm properties, Edendale and the Narrows, but it is part of a wider farming group associated with its director, Mr Haas. As will be explained below, at the relevant time a Mr Hand was also a director of Southern. [5] The price of feed can vary dramatically so large purchasers of feed such as dairy farmers contract tonnage supply contracts with Winton on a season-to-season basis at fixed prices. Essentially, this is a form of hedging. Winton then ensures it has contracts in place to purchase sufficient supply to meet those future contracts for each season. [6] Southern essentially operated as a clearing house for the feed required by the wider Haas farming interests. Accordingly, the bulk orders that Southern placed with Winton were for more tonnage than it needed meaning Southern and its associated interests could, during the season, order feed as required against that bulk order. Winton invoiced Southern for all deliveries to its farm and to other Haas properties but delivered the feed to the appropriate properties as directed by Southern. How Southern accounted for those deliveries within the wider Haas group was a matter for it and not relevant to this proceeding. [7] All of Winton’s dealings were with Mr Hand. Mr Hand, as I have said, was a director during the relevant time and as such there can be no issue about his authority to contract on behalf of Southern. [8] The dairy season is May to June. Winton alleges that between 30 May 2022 and 23 June 2022 it entered into six contracts with Southern for the supply of palm kernel, maize, soy bran hulls and what is referred to as WSF. [9] At this stage, it is only necessary to mention the quantities of palm kernel. The first contract was dated 30 May 2022 for 1,000 tonnes of palm kernel at $468 per tonne plus GST. The second contract was dated 7 June 2022, for 2,000 tonnes of palm kernel at $415 per tonne plus GST. That price difference indicates the price volatility in this industry. [10] Southern does not deny it contracted with Winton but, as I will explain below, an important issue between the parties is whether Winton’s contract terms printed on the back of its form are part of the contract. [11] Between 30 September and 11 November 2022, Winton invoiced Southern for stock feed sent to its Edendale farm, those invoices totalling $81,687.90. Between 4 October 2022 and 15 November 2022 Winton invoiced Southern a further $114,004.97 for feed sent to the Narrows. These invoices have not been paid, totalling $195,692.87. In its first cause of action, Winton seeks summary judgment for that sum plus interest pursuant to the terms of the supply agreement. [12] Winton’s second cause of action, for which summary judgment is also sought, is more problematic. As I will discuss, the relationship between the parties fell apart, it seems prompted by issues between Mr Haas and Mr Hand but in any event, in an email dated 17 November 2022, Mr Haas made it clear to Winton that Southern would not be making any further payments for feed (the above invoices being unpaid) and that all feed orders were stopped. That left Winton having, as I understand it, committed to acquire feed to meet the orders placed by Southern for the 2022/2023 season described in the contracts at [8] above. [13] As I will develop below, I have no doubt that Southern was in breach of the feed supply contracts it had with Winton by virtue of its 17 November 2022 email. Winton says that cl 2 of the terms and conditions printed on the back of the contract is triggered, which provides: If the purchaser is or is likely to be in default on the fulfilment of this Feed Contract, the buyer must immediately notify [Winton] in writing. [Winton] will work in good faith with the purchaser to resolve any significant surpluses in the contracted tonnage. [Winton] may at its sole discretion elect to: (a) extend the contracted period and charge “carries” (the cost of interest and storage) at the rate of $6 per tonne per month or such other rate as agreed in the Contract; or (b) extend the contracted period and renew the pricing to fair market value; or (c) cancel this Contract and charge the buyer for all costs incurred by the supplier as a result of the purchaser’s default including liquidated damages of an amount equal to the undelivered contract quantity multiplied by the difference between the contract price and the fair market value. (d) Any remaining Contracted Tonnage undelivered will be invoiced at the contract rate at the end of the contract term. This product will be available for delivery following the end of the contracted period. [Winton] will use its best endeavours to make the balance available on demand but will not guarantee supply. [14] Winton’s second cause of action relies on cl 2(d). As it elected not to cancel its contracts with Southern, Winton pleads this clause entitles it to hold and does hold Southern to the bargains it made. The value of the undelivered feed under the season contracts is $1,930,234.72 plus GST ($2,219,769.93). Winton says it is ready, willing and able to meet its supply agreements (albeit on a best endeavours basis) and seeks to hold Southern to its contract. Mr Shiels KC, counsel for Southern, disputes there is evidence that Winton is ready, willing and able to supply the balance of the feed. Under cl 2(d) of the contract, Winton says it cannot guarantee supply but nonetheless seeks to be paid upfront against supply at some indefinite time in the future. Summary judgment principles [15] Not surprisingly, these were not in dispute. The onus rests with Winton to satisfy this Court that Southern has no defence to its claims. The Court is entitled to take a robust approach to a summary judgment application.1 [16] The Court is entitled, indeed should, take a commercial approach to commercial disputes. While the ultimate onus always remains on the plaintiff to show there is no defence, the quality of a defendant’s response to the plaintiff’s evidence will obviously factor in the Court’s assessment of whether the plaintiff has met its onus. Issues [17] Mr Shiels identifies the two main issues to be resolved, first, whether the contract terms and conditions, that is those printed on the reverse of the Winton’s contracts, apply to these particular contracts and second, if so, the effect of cl 2(d) of those terms and conditions. [18] Mr Shiels objects to a number of aspects of Winton’s evidence in respect of the mechanics of contracting between Winton and Southern on the grounds of hearsay. That objection needs to be put in the context of what Mr Haas says about the contracting arrangements. [19] Mr Haas, while accepting there were contracts between Southern and Winton, says there is no evidence that Southern ever received a copy of the terms and conditions now relied on by Winton, let alone that Southern agreed to those terms. Mr Haas says it is unclear how those terms were provided to Southern and says he has not been provided with any of the original contracts or details as to where and when they were signed. [20] Mr Haas’ evidence is significant for what it does not say. It does not say that there are in fact no copies of the agreements relied on by Winton within Southern’s records — he says there is no evidence from Winton that Southern received a copy. 1 Bilbie Dymock Corp Ltd v Patel [1987] NZCA 193; (1987) 1 PRNZ 84 CA. Mr Haas says Southern was not provided with originals, not that Southern does not have a copy. Mr Haas does not dispute some of the agreements were signed by Mr Hand. Nor does Mr Haas suggest that the terms and conditions said by Winton to be printed on the back of its contract form are not in fact those printed on the reverse of the form or, that Winton had used other standard terms in the past when dealing with Southern. [21] I note here that where a party relies on terms and conditions printed on the back of a contract, an original document showing that the terms printed on the reverse should be provided, not copies of two separate sheets of paper. [22] Two of the contracts relied on by Winton are signed by Mr Hand. Another contract, that is for the 1,000 tonnes of palm kernel and a contract for 300 tonnes of maize, were confirmed by text. Winton’s dry feed contract form provides on its face: This Contract is only valid if signed and returned on the day of offer. Email or Text Message Acceptance will constitute a binding Contract. [23] Accordingly, while the statement of claim pleads six contracts, there is in evidence only five contracts being: (a) a contract form dated 7 June 2022 for 2,000 tonnes of PKE (unsigned); (b) a contract form dated 23 June 2022 for 400 tonnes of maize (signed); (c) a contract form dated 23 June 2022 for 500 tonnes of soya hulls (signed); (d) the text message for 1,000 tonnes of palm kernel dated 30 May 2022; and (e) the same text message for 300 tonnes of maize, dated 30 May 2022. [24] As I will explain below, ultimately whether all six contracts have been put in evidence does not make a difference to the conclusion I reach in respect of this hearing. [25] Winton and Southern had been trading together for some years. Winton’s evidence is that the same terms and conditions applied throughout that period. Mr Shiels realistically accepted that such prior trading was powerful evidence the terms and conditions Winton now relied on were incorporated into the contracts in issue in this proceeding. Mr Shiels again realistically accepted the contract does refer to there being terms on its reverse side and no other terms have been proposed or suggested by Southern, despite that history of trading. [26] I do not accept there is no admissible evidence that the terms were agreed to. Mr Hand has signed a number of contracts, including at least two that are subject to this proceeding. A director of Southern having signed the contracts means Southern was aware of and agreed to those terms. [27] Mr Shiels’ criticisms that Winton’s original affidavit, or at least its affidavit in reply, should have addressed both that the printed terms are on the back of the form and the process by which Southern agreed to them rather than late in reply evidence are well founded. Winton sought to address this issue by filing a late affidavit in reply outside the directed timeframe. [28] Mr Jackson, counsel for Winton, submitted that when reply evidence is being timetabled, nonetheless r 12.11 of the High Court Rules 2016 (the Rules) permitted a further reply from Winton right up to the day before the hearing. I do not accept this. However, I give leave for that late affidavit to be admitted. Its purpose is to address what were technical but correct challenges to the admissibility of evidence. There is no prejudice to Southern. Had there been a real contest on the evidence as to what terms were on the reverse of Winton’s contract the position may be different. However, Mr Haas’ evidence is not to that effect. [29] The commercial reality is that Mr Hand, as director of Southern, signed at least two of Winton’s contracts. There is no suggestion that the terms and conditions proffered by Winton as being those on the back of its form are not the correct terms. There is evidence of both the front and the rear of the contract being sent to Mr Hand earlier in 2022 by email. The contract provides that by signing, the buyer acknowledges acceptance of the terms and conditions attached. [30] I am satisfied that Winton has established that its terms and conditions applied to the supply contracts pleaded between it and Southern and that Southern does not have a reasonably arguable defence on this issue. The side agreement — Winton purchases PKE through Southern (the PKE contract) [31] It is common ground that Winton used Southern’s ability to negotiate a competitive per tonne farmer rate for PKE with a third party supplier, Agrifeeds Ltd (Agrifeeds) to purchase PKE. Agrifeeds is a competitor of Winton and so Winton could not negotiate that rate directly. The arrangement was oral and struck between Winton and Mr Hand of Southern. [32] Southern committed to buy 5,000 tonnes of PKE at $414 per tonne from Agrifeeds which Winton would store and sell at $1.00 per tonne mark-up to the Haas network. Winton paid Agrifeeds direct for the PKE and uplifted it from the port. [33] Of the 5,000 tonnes, 3,000 tonnes in total would be sold to Southern pursuant to the supply contract noted at [8]. [34] It will be recalled that of the feed being supplied by Winton under the contracts, which are the subject of this proceeding, there were 3,000 tonnes of PKE. This PKE was purchased through Southern’s Agrifeeds’ account being Winton storing the PKE feed until it was needed. [35] As I understand the arrangement, there were benefits to both parties in that Winton could access the advantageous rates available to Southern perhaps as a result of the larger scale orders and Southern benefitted from Winton storing and supplying PKE to Southern at only $1.00 per tonne mark-up to cover administration costs. [36] The evidence is that the arrangement was financially neutral to Southern, that is, its exposure to Agrifeeds on the orders placed in its name for PKE was met by Winton. [37] In October 2022, it seems that a falling out occurred between Mr Haas and Mr Hand. Southern’s accountants circulated a letter advising Mr Hand no longer had authority to contract on behalf of Southern, that letter being received by Winton on 21 October 2022. Mr Haas was concerned by the informality of the PKE/Agrifeeds’ arrangement and the possibility that if Winton did not honour the arrangement, Southern would be left exposed to completing the large order for PKE placed in its name. [38] Mr Haas’ concerns about the PKE contract are a feature of his email of 17 November 2022 referred to at [12], where he gave notice that he was cutting off payments for feed and was stopping all orders. [39] I can see no valid basis for Mr Haas taking that stance. The arrangement in respect of PKE, while informal, had been honoured in the past and there was no breach by Winton of any of its obligations under either the PKE contract or the feed supply contracts at the time of Mr Haas’ 17 November 2022 email. Southern’s accountants on 25 October 2022 had informed Mr Haas by email that the PKE contract “... had no impact on the P&L of any of the [Haas] farms...”. [40] I need not detail the attempts to resolve matters. Ultimately, on 6 December 2022, Winton’s then solicitors wrote to Southern calling on Southern to permit Winton to uplift PKE and advising that unless access was restored within seven days, Winton would cancel the PKE contract. [41] On 15 December 2022, Winton’s solicitors wrote to Southern’s solicitors cancelling the contract on the basis of Southern’s repudiation, as outlined in the letter of 6 December, including the failure to supply. [42] I find that Winton was entitled to cancel the PKE contract. The evidence is clear that there was an oral agreement regarding how the parties dealt with PKE during the 2022/2023 dairy season. Southern, through Mr Haas, refused to continue PKE supply in part, because of Mr Haas’ dissatisfaction over the feed supply agreements made by Mr Hand earlier in 2022, being the contracts subject to the first cause of action and, in part, because of his concerns of Southern’s exposure on the PKE contract. [43] Mr Haas had no legitimate basis to breach the PKE contract and his actions were a repudiation. Winton called for Southern to restore the agreement and it did not do so. I find the cancellation was valid. [44] Any loss Southern has suffered as a result of it having to complete the PKE order with Agrifeeds because the price of PKE fell from that which Winton agreed to pay, was caused by Southern’s own default. [45] Ms McKenzie who presented the submissions for Southern on this point, submitted there is disagreement as to which party had failed to pay an invoice first. This submission was raised because with Southern refusing to pay Winton for the invoices, which are the subject of this proceeding, Winton did not pay its last PKE invoice which related to product it collected between 1 November 2022 to 18 November 2022, being when its ability to collect came to an end. Winton’s ability to uplift PKE was cancelled by Mr Haas in his 17 November 2022 email noted at [12] above. However, Winton’s November 2022 invoices for PKE would not have fallen due until the month following they were issued by Southern and in any event, even if there was a breach by Winton in not paying the PKE invoices, Southern took no steps to cancel the PKE contract in reliance on that alleged breach. [46] There was, however, an unequivocal breach by Southern as described, which it did not cure when called upon to do so. Pulling the threads together First cause of action [47] It will be seen from the immediately preceding discussion that Winton owes Southern for its November 2022 PKE purchases. It is common ground that the debt is unpaid and is otherwise due and payable. It totals $205,684.77. [48] Equally, in terms of Winton’s first cause of action, the only ground of opposition raised in the notice of opposition is Southern’s ability to set-off the PKE debt. Winton acknowledges it owes Southern for the PKE debt. The total amount due to Winton under its first cause of action is $195,692.87. That leaves Winton owing Southern $9,991.90 subject to the issue of interest. Interest [49] Winton is entitled to interest at one per cent per month on overdue accounts pursuant to its terms of trade. Because Winton’s terms have been used over an extended period, even if not signed, they apply by course of conduct to the dealings between the parties. While the sixth contract pleaded by Winton does not seem to be produced, Southern does not dispute that any feed supplied pursuant to that agreement was under a contract between the parties and must be paid for — there is no suggestion from Southern that different terms applied to the different orders. [50] Equally, if Southern had sued for its unpaid PKE invoice, it would be entitled to interest on that unpaid debt pursuant to the Interest on Money Claims Act 2016; Southern has a set-off for that interest. [51] Counsel are to calculate the respective interest claims to arrive at a net balance owing between them in respect of these two debts — interest is to run from when the respective invoices were payable. While Southern has not filed a counterclaim seeking judgment as to the unpaid PKE invoices by raising that debt as a set-off, the intention is each claim should cancel out the other. I find that Southern is entitled to set-off against the unpaid Winton invoices. the PKE invoices unpaid by Southern as set out at [48] and [48] above together with interest as above. Second cause of action [52] An innocent party faced with a breach of contract is not obliged to cancel the contract — they can hold the defaulting party to their agreement.2 2 See Contract and Commercial Law Act 2017, ss 36 and 37. [53] Mr Jackson submits in effect this option is reflected in cls 2(c) and 2(d) noted at [13] which, in his submission, were separate alternatives open to Winton to chose from should Southern breach the supply agreement. Mr Jackson submits that as Winton did not cancel the agreement, it is entitled to hold Southern to its commitment to purchase and may, relying on cl 2(d), raise an invoice at the end of the seas for the value of the undelivered feed. [54] Mr Shiels submitted the words that appear at the start of the clause “... may at its sole discretion elect to:” mean Winton is exercising a contractual discretion that is a subjective contractual power governed by the so-called default rule that requires such powers to be exercised on a reasonable basis.3 [55] In electing whether to cancel a contract or not for breach, Winton is not exercising a contractual power or discretion created by the contract. A party electing whether to cancel or not, is not subject to an obligation to make that election on objectively reasonable grounds. Clause 2(c) may be intended to address the issue of remoteness and causation of damage by entitling Winton to recover; “all costs incurred ... as a result of the purchaser default”, but cl 2(c) ultimately records the election any party has when faced with an entitlement to cancel. Clause 2(c) may also be intended to extend the ability to cancel to situations where it is likely the purchaser will be in default, that is, addressing the threshold for anticipatory breach.4 [56] I am not convinced that cl 2(d) has the meaning asserted by Winton. Winton would have it that cl 2(d) is one of the options that is open to it in the event “the purchaser is or is likely to be in default on the fulfilment of this Feed Contract”. However, that is the very situation where the purchaser is likely to be unable to pay for the next month’s delivery, let alone all remaining feed at the end of the season. Yet Winton says in those circumstances cl 2(d) was intended to give it the ability to require at the remainder of the season, payment for all feed undelivered at that time which it was then only obliged to deliver on a best endeavours basis. 3 Woolley v Fonterra Co-op Group Ltd [2023] NZCA 266 at [103]. See s 36(1) of the Contract and Commercial Law Act which permits an innocent party to cancel if the other party makes it clear they do not intend to perform their obligations under the contract. [57] Clause 2(d) contemplates that the undelivered feed may reduce between the purchaser’s breach, that is, when the purchaser is likely to be in default of fulfilment of the contract, and the end of the contract term when Winton is entitled to invoice for “any remaining contracted tonnage undelivered”. The reference to “remaining” to me, means the feed still on hand from the date of default to the end of the contract term. Otherwise, the word is redundant as the clause would simply read; “any contracted tonnage undelivered...”. This suggests Winton could sell the feed on hand at the time of default through to the end of the season to arrive at the “remaining” undelivered contracted tonnage. [58] Further, the reference to the ability to invoice for “undelivered” feed carries with it the connotation that the contracted tonnage is still held by Winton. Yet the remaining words of the clause say Winton cannot guarantee supply. [59] The further complicating factor here is that Winton was going to source the PKE it was to supply to Southern through the PKE contract. However, Southern cut off Winton’s ability to service PKE under the Agrifeeds contract. Absent Winton having bought in PKE from another source, it did not have tonnage “undelivered” on hand at the end of the contract. [60] Winton may say this places too much emphasis on the term “undelivered” but the fact Winton could not source the PKE through Agrifeeds raises the question of why it kept the contract alive. There is no evidence that Winton committed to source PKE from third parties to meet its contract with Southern. The relationship between Winton and Southern had broken down with Southern making allegations of fraud against Winton. [61] There are situations where if the innocent party has no legitimate reason not to accept the defaulting party’s repudiation, that the innocent party may be declined the ability to recover damages that have arisen only because they “embarked upon a course of conduct which costs money, served no useful purpose and was, as they knew, unwanted by the respondent”.5 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington 2022) at [21.2.4(c)]. [62] The rule that an innocent party has no obligation to mitigate their damages before there has been a breach for which the innocent party has cancelled was discussed in White & Carter (Councils) Ltd v McGregor.6 The Court said the rule might not apply if the plaintiff “has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages”.7 Burrows Finn and Todd note that qualification on the sale seems to have been accepted as correct by the English Court of Appeal. [63] Of the $1,930,234.72 plus GST claimed under cl 2(d), $1,085,465 relates to the unsupplied PKE, that is, 56 per cent of the total claimed. Yet, Winton was to sell PKE to Southern at a $1 premium per tonne — it was to be financially neutral to the parties save for the $1 administration fee. Winton wanting to hold Southern to the contract must mean it can source PKE for less than it had committed to reimburse Southern for under the PKE contract. This means Winton is arguably keeping its feed supply contract alive with Southern to make a profit on the PKE part of the contract which it would not have made if the contract had gone ahead. Decision [64] I am not persuaded that I have enough knowledge of the circumstances to conclude what cl 2(d) of the contract was intended by the parties to mean. This also appears to be arguably a situation where Winton kept the contract alive for no other legitimate reason other than to claim damages against Southern. [65] That said, I am satisfied that Southern breached its obligation to take the contracted feed when Mr Haas made it clear that he would not be taking further deliveries or paying the outstanding invoices. [66] Accordingly, I enter summary judgment for liability against Southern Farms NZ Ltd for breach of the supply contracts pleaded at paragraphs [2]—[6] of the statement of claim, but leave open the question of remedy. 6 White and Carter (Councils) Ltd v McGregor [1961] UKHL 5; [1962] AC 413. 7 Stephen Todd and Matthew Barber, above n 5, at [21.2.4(c)]. Costs [67] If costs cannot be agreed, memoranda may be filed (of not more than five pages) within 10 working days. Associate Judge Lester Solicitors: Cuningham Taylor, Christchurch (for Plaintiff) PRLaw, Invercargill (for Defendant) Copy to counsel: D Jackson, Barrister, Christchurch (for Plaintiff) T J Shiels KC, Invercargill (for Defendant) NZLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.nzlii.org/nz/cases/NZHC/2025/692.html