Law lords find for Paterson in Clearwater Resort land row

By Chris Hutching

Friday 19th July 2002

Howard Paterson

South Island businessman Howard Paterson has won a Privy Council appeal in a $1 million dispute with the original developer of the land that has been developed as Clearwater Resort and is now worth well more than $150 million on the outskirts of Christchurch.

A legal source said the case was significant because it upheld the sanctity of contracts and would be a deterrent against people seeking to re-litigate agreements.

The contract was subject to chance events. It was struck in March 1996 between Mr Paterson and Hideo Yoshimoto, who owned the 160ha of farmland.

The contract fixed the price for the shares in Mr Yoshimoto's land-owning company, New Zealand Plan International, at $4.3 million with $1 million of this amount to be paid only when Mr Paterson's company, Canterbury Golf International, obtained all necessary consents for the development within 12 months. The parties later disagreed about what constituted final consent.

The dispute went to the High Court where Justice Graham Panckhurst found in favour of Mr Paterson but the Court of Appeal later overturned his ruling. Mr Paterson finally took the matter to the Privy Council.

The Privy Council agreed with Justice Panckhurst's earlier comments that the provision to obtain consents within 12 months was a "recipe for disaster" and it put Mr Yoshimoto in the hands of Canterbury Golf International and local authority planners.

Nevertheless, the law lords upheld the strict letter of the contract and overturned the Court of Appeal decision in favour of Mr Yoshimoto.

"In their lordships' opinion, what the Court of Appeal has done is construe 'obtains' as meaning 'is very likely to obtain'. They agree with [Justice] Panckhurst that this is not what the contract says," the Privy Council Judicial Committee ruled.

The arguments hinged on what constituted final and necessary consents. According to Mr Paterson's counsel the sticking point was the time taken to finalise the desired access to the development over a paper road, which eventually required removal of a house that had been built in the wrong place.

There were two other planning obstacles that were subject to hearings at the time the contract was signed and they took several months to complete - four months over the 12-month period in the contract.

Mr Yoshimoto did not claim Mr Paterson purposely delayed proceedings. But his counsel argued that obtaining consent to use the paper road was not one of the "necessary" consents in mind (or under application) when the contract was signed. His lawyers maintained that the "true construction" of the deal had been satisfied within the 12 months.

The Privy Council law lords again agreed with Justice Panckhurst's earlier judgment that the access was more than a matter of mere detail and was commercially important and specifically mentioned in the definition of the development. As for the argument that success was a foregone conclusion, the test was not whether the obtaining of consents was assured but rather that they were actually obtained, the law lords said.

"It is not for the courts to substitute a different criterion on the ground that it would satisfy the commercial objective equally well or better," the Privy Council ruling concluded.

Evidence produced during the court cases reveals that the land was agreed to be worth $7500/ha justifying a sum of $2 million for the shares and if the consents were obtained it would fetch a premium of another $1.4 million.

Mr Yoshimoto will be required to pay costs associated with the Court of Appeal and the Privy Council.

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