BISCUIT CREEK FOREST LIMITED v SIMON FREDERICK VALLANCE & ANOR [2021] NZCA 577 [1 November 2021]

BISCUIT CREEK FOREST LIMITED v SIMON FREDERICK VALLANCE & ANOR [2021] NZCA 577[1 November 2021]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA233/2021[2021] NZCA 577BETWEEN BISCUIT CREEK FOREST LIMITEDAppellantAND SIMON FREDERICK VALLANCE ANDROSA VALLANCERespondentsHearing: 28 September 2021Court: Miller, Brown and Collins JJCounsel: W A McCartney for AppellantM G Colson QC and M C McCarthy for RespondentsJudgment: 1 November 2021 at 11.00 amJUDGMENT OF THE COURTA The appeal is dismissed.B The cross-appeal is dismissed.C Costs are reserved.____________________________________________________________________REASONS OF THE COURT(Given by Miller J)[1] This appeal concerns a very short agreement for sale of a right to a 44.7 per centshare in proceeds of logs felled under a registered forestry right. The right is describedas "the Owner's share" and the agreement as "the OS Agreement". The principalquestion is whether the Owner's share was owned by the respondents, Simon and RosaVallance, in their personal capacity or by their family trust, the Vallance WinkeleerTrust. The Trust owned the land on which the plantation stood and Simon and Rosanumbered two of the three trustees.[2] The appellant, Biscuit Creek Forest Ltd, is a company controlled byAndrew Vallance, an accountant and neighbouring farmer. Andrew is a cousin ofSimon Vallance and a former friend.[3] If, as the trial judge found, the Owner's share was owned by the Trust, it isagreed that the parties entered the agreement under the influence of a commonmistake.1 In that case we must answer a second question: whether Simon and Rosaought to be excused liability or required to pay compensation.[4] The dispute has commercial substance. Simon and Rosa were not registeredfor GST but the Trust was. It is common ground that had the Trust been the vendor,the agreed sale price would have been plus GST. It was instead specified asGST-inclusive because the parties believed Simon and Rosa need not account for GST.The difference was $174,913.04.[5] There is a further question, relevant to compensation: whether the transactionwould have proceeded at all but for the mistake. Biscuit Creek acted in what it nowaccepts was Andrew's mistaken belief that it could claim a GST input credit without amatching obligation to the vendors. It obtained finance on the basis that the GST creditwould be used to repay part of the debt.Narrative facts[6] We are indebted to Mallon J for her thorough recounting of the facts. She hadto traverse a number of issues which are not now controversial. Reference should bemade to her judgment for a fuller account.[7] For our purposes the narrative begins in 1993. At that time Simon and Rosaowned Te Kanuka Station, a Wairarapa farm. They decided to create a forestry right1 Biscuit Creek Forest Ltd v Vallance [2021] NZHC 640 [Judgment under appeal].over approximately 200 ha of the property and sell the right to the Te Kanuka StationPartnership. The Partnership, established by deed, comprised investors, three of whom(Phillip Guscott, Richard Birch and John Gold) were appointed custodian trustees.Simon was appointed manager. Simon and Rosa were not among the originalpartners, but sometime between 1 August 1993 (when the Partnership commenced)and 2000 the Trust acquired one of the 25 shares in the Partnership capital.[8] The forestry right was registered against the title to the farm under amemorandum of transfer executed on 30 September 1994.2 The transfer conferred onthe Partnership rights for a 30-year term to enter the land to plant, maintain and harvesta plantation of trees. The Partnership undertook to exercise these rights without unduedelay. Pinus radiata were planted in 1992, 1993 and 1994, with the Partnership payingor reimbursing the costs involved. The trees would mature between 2017 and 2022.[9] The memorandum of transfer also conferred a suite of rights on the "Owner",defined as Simon and Rosa together with their successors in title. One of those rightswas the Owner's share of "gross stumpage value", meaning the price received for allsales of forest produce less the actual costs of logging and cartage to the nearest exportport or established utilisation centre. The transfer provided that when cutting andfelling commenced the Partnership would "[p]ay to the Owner the Owner's shareof the calculated gross stumpage" at the end of every quarter, and it defined the"Owner's share" as 44.7 per cent of the calculated gross stumpage. It is the right to ashare of calculated gross stumpage, rather than a share of the forestry right itself, thatis the subject of this proceeding. The forestry right ran with the land; the Owner'sshare, which the parties now agree was a chose in action rather than a species offorestry right in itself, did not.[10] In January 2000 Simon and Rosa transferred the farm to the Trust. The thirdtrustee is Timothy Bunny. The transaction, which we will call "the 2000 Agreement",was effected under an ADLS agreement for sale and purchase which recited the legaldescription, specifying that the land was sold "together with and subject to" variouseasements and encumbrances, including "B.418877.1 Transfer granting forestry2 Pursuant to the Forestry Rights Registration Act 1983.right". The agreement provided that "the vendor sells and the purchaser purchases"the property so described. The purchase price was $1,234,095, which was apportionedbetween "land and buildings" and "plant equipment and motor vehicles". No valuewas expressly assigned to the forestry interests. Simon's and Rosa's lawyer at thetime, John Gold, advised that the transaction had been put through as the sale of agoing concern and was therefore zero-rated for GST purposes. Mallon J found thatthis agreement incorporated the forestry right, with its associated benefits and burdens;that is to say, the agreement was effective to transfer the Owner's share from Simonand Rosa to the Trust.3[11] In 2003 Andrew sought to purchase Te Kanuka Station and the forestry interest.Unsuccessful negotiations, to which we must return, included the preparation of draftcontracts by Andrew's lawyer at the time. Some of these documents treated the Trustas owner of the land and Simon and Rosa as (inaccurately) "owner of a 44.7% sharein the Forestry Right". The agreements contemplated that the land and the share ofthe "forestry right" would be sold together or not at all. There is evidence that Andrewwas concerned about GST at the time; he inquired of a tax adviser whether asecond-hand goods credit could be claimed on a forestry right and was given tounderstood that it could. Presumably for that reason, it evidently was important to himto characterise the Owner's share as a forestry right. Not until the appeal in this Courtdid he accept that it was not a forestry right at all but a chose in action and a servicerather than a good for GST purposes. This was an important error. It does much toexplain this regrettable litigation.[12] By 2016 Simon and Rosa wanted to retire, which meant selling the land andtheir forestry interests. They inquired in early April whether Andrew was interested.He was. On 7 April they met at the farm. Simon had prepared notes under which hehad calculated a price of $5,883,360, comprising $4,476,000 for the land andhomestead, $1,341,000 being 44.7 per cent of gross stumpage of $3 million over the200 ha of trees, and $66,360 for the Partnership share. These figures were agreed,though there was a disagreement among the witnesses about exactly how the price wasreached.3 Judgment under appeal, above n 1, at [121].[13] It is common ground that liability for GST was discussed. Andrew's evidencewas that he asked Simon and Rosa whether they were registered for GST; this matteredto him because if they were registered the price for the Owner's share would be plusGST, but if they were not the price would include GST. He still believed he couldclaim a second-hand goods GST credit. Simon and Rosa understood that the Trustowned the forestry interests as well as the land, and they told him so. However,Andrew stated that they would definitely remember if the Owner's share had beentransferred to the Trust because they would have paid a significant amount of tax onthe sale. He had checked the draft 2003 contracts and it appeared to him that nothinghad changed since then. They were persuaded that he must be correct.[14] Andrew had his solicitor prepare two agreements, one for the sale and purchaseof the land ("the Land Agreement") and the other the OS Agreement. The 1/25thPartnership share was left to one side. There was a difference at trial about why, Simonsaying that it was left for later because it was worth a smaller amount and Andrew thathe did not want to buy it at all. When we inquired why he did not want it, we weregiven to understand that the reason had to do with tax.[15] The two agreements were not interdependent; that is, each was not conditionalon the other being completed.[16] The OS Agreement provided that Simon and Rosa were the vendors of "all theestate and interest of the vendors in the Forestry Right No. B418877.1 registered overCertificate of Title WN57B/755 ("Forestry Right"), being a 44.7% share in theForestry Right (including the capital and assets and future profit)". Mallon J acceptedthat this confused language was intended to refer to the Owner's share only and notthe Partnership share.4 It may have been written in that way because, as we haveexplained, the input credit depended on the Owner's share being a forestry right whichwould be deemed a second-hand good for GST purposes. The purchase price was$1,341,000, GST-inclusive.[17] Simon and Rosa signed the OS Agreement, relying on Andrew's opinion thatthey rather than the Trust owned the Owner's share. They did not take legal advice at4 Judgment under appeal, above n 1, at [135].that time. We must return to the question of responsibility for the parties' mistake.The Land Agreement was signed some time later, when Mr Bunny was available.[18] Both agreements were subject to finance, to be confirmed by 8 July 2016 (inthe case of the OS Agreement) and 11 July 2016 (in the case of the Land Agreement),and to settle on 31 January 2017. Andrew was unable to secure finance.He nonetheless confirmed the OS Agreement on 8 July 2016. He sought to renegotiatethe Land Agreement and sought an extension of a due diligence clause, but wasrefused. The trustees remained willing to sell to him, but they were losing confidencein his ability to secure finance. At a meeting on 12 July 2016, Simon told him that thefarm and forestry interests would be placed on the market after August unless a dealwas concluded.[19] Shortly after the 12 July meeting Simon took advice from his solicitor,Brett Gould, who told him that the Trust owned the Owner's share. This came as ashock to Simon, who felt Andrew had misled him. Mr Gould advised Andrew'ssolicitor, Debbie van Zyl, that the vendor was now the Trust and so the price for theOwner's share had to be plus GST. Andrew ignored her request for instructions.He did not assert that the Trust was unable to sell the Owner's share because theOS Agreement was still on foot. He chose instead to keep his own counsel and pursuenegotiations to buy the land as well as the Owner's share. He continued his efforts toobtain finance and he attempted to have the Partnership agree to a pre-harvest sale ofthe plantation, which would have generated funds to assist the land purchase.[20] In September the Trust took steps to market the land and forestry interests.Three offers were received when tenders closed on 14 December 2016. One was fromAndrew and Biscuit Creek and another from John McFadzean. The latter was for theland only, excluding the forestry interests. It was accepted on 11 January 2017, atwhich time Andrew was still pursuing his attempts to raise finance for both purchases.[21] In his offer Andrew also sought to buy the land only, but his offer included aterm to the effect that the parties acknowledged the OS Agreement was still live. Therefollowed an exchange of correspondence, commenced by Ms van Zyl on 20 December2016, in which Mr Gould took the point that the Owner's share was held by the Trustand maintained that the OS Agreement was accordingly invalid. He appears to haveheld this view because the forestry right ran with the land, which the Trust undoubtedlyowned. Ms van Zyl maintained that Simon and Rosa were the owners, and even ifthey were not they had agreed to sell the Owner's share and must procure the Trust totransfer it to Andrew.[22] Andrew sought to settle the OS Agreement on 31 January 2017, tendering abank cheque, which Mr Gould rejected. We return later to the way he financed thetender of settlement. Ms van Zyl also tendered documents under which the Partnershipwould agree to a variation of the memorandum of transfer, substituting Biscuit Creekas owner for purposes of the Owner's share and including it as another owner forpurposes of covenants which protected or went to the value of the Owner's share.5These documents are relied on by Simon and Rosa to advance an argument, rejectedby Mallon J,6 that the OS Agreement was uncertain for want of essential terms andhence unenforceable.[23] In anticipation of settlement of the land sale in May 2017, the Trust enterednegotiations with Mr McFadzean to ensure continued access to the plantation.The Trust agreed to pay his nominee as purchaser, Band of Brothers Ltd, $47,250 plusGST per annum.[24] Later the same year the Partnership sold the Forestry Right for $3,600,000 onthe open market. The purchase was zero-rated for GST and the purchaser agreed topay the rental to Band of Brothers. After accounting for the rental obligation and thecosts of sale the Trust was paid $1,443,378.20 as its 44.7 per cent share of the proceeds.Andrew accepts the sale price for the forestry right but maintains that the rentalobligation ought to be excluded when calculating compensation on an expectationmeasure. He maintains that had he acquired the Owner's share he would not haveagreed to pay rent to Band of Brothers, which in his view assumed in return noobligations additional to those already in the registered memorandum of transfer.5 These covenants included obligations to render the plantation productive, not to mortgage theforestry right, to arrange insurance, to permit access and to confer as to the time of harvesting.6 Judgment under appeal, above n 1, at [195].Who owned the Owner's share at April 2016?[25] Mallon J examined the forestry right in detail, concluding that the Owner'sshare was not a separate forestry right in itself, as Andrew contended, but a benefitassociated with the forestry right, as Simon and Rosa contended.7 She concluded thatits legal classification did not matter; what mattered was that it would pass with theland unless expressly severed:8 categorising the Owner's Share as a "forestry right" does not alter whetherit can be severed from the forestry right created. It can be, but it must be doneexpressly. Otherwise the land will be subject to the forestry right on the termsthat it has been granted. In this case the land was subject to a forestry rightthat provided for "the Owner's Share". The more relevant question thanwhether the Owner's Share is a forestry right in and of itself, is who is the"Owner" referred to in the Memorandum of Transfer [26] This conclusion was not in dispute before us, and for that reason we need notreview the Judge's analysis of the forestry right or the legislation. Mr McCartney, forBiscuit Creek, accepted that "Owner" was defined in the memorandum of transfer toinclude successors in title, that is, the Trust. He accepted that the entire forestry right,including the Owner's share, would pass to a successor in title unless the Owner'sshare was expressly severed. The land was transferred to the Trust under the 2000Agreement. So the question is whether there was an express agreement, written ororal, to sever the Owner's share and leave it with Simon and Rosa.[27] In our opinion the Judge correctly concluded that the 2000 Agreement includedthe vendor's interest in the forestry right, including the Owner's share. Mallon Jreasoned that this conclusion followed from transfer of the land, in the absence of anyagreement excluding the Owner's share.9 We prefer the view that the 2000 Agreementexpressly incorporated the rights and obligations of the Owner under the forestry right.It did so because the legal description was not merely descriptive of the property as itstood. As noted at [10] above, under the 2000 Agreement the parties bought and sold"the above described property", which included the "transfer granting forestry right".There is no reason to suppose that this language incorporated only the burdens of theOwner under the transfer and not the benefits. (The Partnership share, by contrast,7 Judgment under appeal, above n 1, at [111]–[113].8 At [113].9 At [121]–[122].was not an interest conferred on the Owner under the transfer; it was conferred underthe Partnership deed and was an interest in the forestry right itself, as a member of thePartnership.)[28] Andrew's argument that there was an agreement severing the Owner's sharerested on three points: the 2000 Agreement did not expressly deal with the forestryinterest by assigning a value to it as part of the purchase price, it was never recordedas an asset in the Trust's financial statements, and there is evidence of subsequentconduct, in the form of the 2003 and 2016 negotiations, showing that Simon and Rosaretained the Owner's share.[29] As to the first of these points, we agree with Mallon J that there was no needto expressly provide for the consideration for the Owner's share.10 The considerationbreakdown appears to have involved deducting from the gross price specified sumsfor plant and equipment and motor vehicles, to arrive at consideration for land andbuildings. The land was subject to the forestry right, and so incorporated in theconsideration for land and buildings.[30] As to the second point, Mallon J heard evidence from an accountant who actedfor the Trust between 2007 and 2016. His opinion was that the valuer should haveassigned a value to the "forestry rights" for inclusion in the 2000 Agreement.The Judge regarded this evidence as no more than an opinion as to best practice, andhence unpersuasive when it came to the question whether the Owner's share wasacquired by the Trust as part of the bundle of rights and obligations it assumed underthe 2000 Agreement.11 We agree. We observe that the Partnership share, which onthe evidence was owned by the Trust, did not appear in the accounts either.[31] As to the third point, we accept, following Bathurst Resources Ltd v L & MCoal Holdings Ltd, that evidence of subsequent conduct is admissible to interpret acontract, where it proves something relevant to the contract's objective meaning.1210 Judgment under appeal, above n 1, at [122].11 At [128].12 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85 at [89].The Supreme Court suggested that seldom is evidence of subsequent conduct relevantand hence admissible.13[32] No objection having been taken, we proceed on the basis, without deciding,that the evidence of subsequent conduct is admissible. Mr McCartney focused hisargument on the 2003 negotiations, as mentioned above. He characterised them asevidence of considered joint conduct, informed on both sides by legal advice.However, Mallon J found the evidence unpersuasive. She found that it is not clearfrom the documentation whether Mr Gold, who died before the 2016 negotiations,approved any of the versions of the draft agreements.14 The evidence establishesrather that Andrew's solicitor and the real estate agent acting for the vendors wereinvolved in the draft agreements.15 As Mr Colson remarked in argument, the draftagreements were full of infelicities, perhaps because the parties were never close toreaching agreement on price. They wrongly described the interest as a 44.7 per centinterest in the forestry right, and wrongly recorded that Simon and Rosa, rather thanthe Trust, were selling the farm. The agreement for sale of the Owner's share was ona standard ADLS form for real estate, although it was a chose in action, and not land,that was being sold.[33] The Judge's findings were as follows:[126] All of this is far short of evidence that Mr Gold approved the draftagreements for signature if a price was eventually agreed. And none of it isevidence that Simon and Rosa approved any of the drafts, or were aware thatthey were recorded in the drafts as the vendor for the sale of the Owner'sShare, or had taken specific advice about this. Further, Mr Murray's [the realestate agent's] diary notes confirm that the parties were never close to agreeinga price. His entry for 21 November 2003 recorded that Simon's "bottom lineis $4.1M" and he was "[n]ot prepared to sell without including the forestryrights". I acknowledge Mr Murray said in evidence that he believed hisinstructions that there were to be two vendors came from Simon and Rosa.But the documentation just discussed does not bear this out.[127] What it does show is that Mr Murray and Andrew were aware that thedrafts were prepared on the basis that Simon and Rosa were the vendors of theOwner's Share. As noted earlier, it is apparent that Andrew was alreadyconsidering the GST advantage to him if Simon and Rosa were the owners ofthe Owner's Share. Andrew made handwritten notes about this and receivedadvice from [Andrew's GST adviser] on 29 October 2003 that he would be13 At [90].14 Judgment under appeal, above n 1, at [123].15 At [124].able to claim a second hands good credit. He accepted in evidence he wasaware of this advantage in 2003.(Footnote omitted.)We are not persuaded that the Judge was wrong. On the contrary, we agree with herthat the 2003 negotiations are not probative of Andrew's claim that ownership still laywith Simon and Rosa. What they do confirm is that it mattered to him that they werethe owners.[34] There is also a question whether the transfer of the Owner's share from Simonand Rosa to the Trust would have attracted liability for tax. Andrew is an experiencedaccountant, and we have explained that it was because he believed the sale would betaxable that he was convinced they retained ownership. If he were correct about thetax liability, the failure to account for tax could be evidence that the Owner's sharewas never sold. Mr McCartney took this point in argument before us. However, theevidence about tax liability is very unsatisfactory. No witness explained it. When weinquired we were told from the bar that the tax he had in mind was income tax,presumably on a deemed harvest of the tree crop, but there is no evidence to show thatit was in fact payable in the circumstances, still less to exclude the possibility that theobligation to pay it was overlooked in what was treated as a going concern sale.[35] Turning to the 2016 negotiations, Mr McCartney argued that the evidencewarrants an inference that Simon and Rosa realised Andrew was right in his opinionthat they retained the Owner's share because they would remember paying tax hadthey sold it. He saw it as a point in Andrew's favour that Simon and Rosa were "easilypersuaded". In our view, that confirms rather that they placed their trust in him as anaccountant and as a friend and family member. It is of some moment that they knewand approved of his proposal to on-sell part of the land to other family members. Theysigned the OS Agreement without taking legal advice. Their evidence was that he toldthem that lawyers were an unnecessary expense. Andrew denied saying this and theJudge did not make an express finding about it, but she did find that Andrew persuadedthem they must have been wrong in their belief that the Trust owned the forestryinterests, including the Owner's share.16 Having been persuaded, they told their16 Judgment under appeal, above n 1, at [149].solicitor, Mr Gould, that they owned it, and it was not until he checked the forestryright that he realised the Owner's share must have been transferred to the Trust alongwith the land. Thereafter, through their solicitor they insisted that the Trust was theowner. In short, the 2016 negotiations are not evidence that Simon and Rosa retainedthe Owner's share at that time. Rather, the negotiations are evidence that Andrewpersuaded them that they did.[36] Mr McCartney also argued that what actually led to the dispute was a valuation,received on 19 December 2016, which indicated that the plantation was worth morethan the value on which the OS Agreement was based. This submission should be putin context. It prays in aid the December 2016 valuation to establish the meaning ofthe 2000 Agreement for sale and purchase of the farm; alternatively, to establish theexistence of an unwritten contract at that time to sever the Owner's share from theland. The point of the submission, as we understand it, is that the coincidence of theDecember valuation and Mr Gould's claim the next day that the OS Agreement wasineffective shows that Simon and Rosa knew all along that they, rather than the Trust,owned the Owner's share.[37] We reiterate that subsequent conduct is not ordinarily probative, and henceadmissible, to interpret a contract; and especially so where the conduct occurs after adispute has arisen.17 Seldom does such evidence amount to much, especially where itgoes to a party's state of mind. This example proves the point. The objective or agreedevidence does not support Andrew's argument. If anything it is rather to the contrary.It establishes that Simon and Rosa told Andrew in April 2016 that the Trust was theowner and accepted his opinion that they must be wrong about that. There is no reasonto doubt that they sincerely believed the mistake invalidated the OS Agreement. Whenthey became aware of the mistake in July 2016, Andrew was told immediately butignored his solicitor's requests for instructions. He then allowed the Trust to marketthe Owner's share along with the land, hoping that he could secure finance and buyboth by agreement. Not until he submitted his tender in December 2016 did hedisclose his position that the OS Agreement remained on foot. That stance, rather thanthe coincidence of timing of the new valuation, is the far more likely explanation for17 Bathurst Resources Ltd v L & M Coal Holdings Ltd, above n 12, at [90].Mr Gould advising Ms van Zyl that the OS Agreement was invalid. There is no reasonto doubt he would have said the same thing in September had Andrew disclosed hisposition then instead of remaining silent. The evidence also suggests that thevaluation, which was about 17.5 per cent higher than the value on which theOS Agreement price was calculated, came as no surprise to the trustees.[38] In our opinion Mallon J was correct to find that the Trust owned the Owner'sshare as at 2016.Mistake[39] Having reached that conclusion, we turn to the consequences of the parties'common mistake. They agree for purposes of the Contract and Commercial Law Act2017 that the same mistake influenced them both to enter into the OS Agreement, andfurther that the mistake resulted, at the time of the agreement, in a substantiallyunequal exchange of values for a benefit or obligation that was, in all thecircumstances, disproportionate to the consideration.18 This is to say that they agreethe Court has jurisdiction to grant relief under s 28, which provides relevantly that:28 Nature of relief(1) If, under sections 24 to 26, the court has power to grant relief, thecourt may make any order that it thinks just.(2) In particular, but without limiting subsection (1), the court may do 1or more of the following things:(a) declare the contract to be valid and subsisting in whole or inpart or for any particular purpose:(b) cancel the contract:(c) grant relief by way of variation of the contract:(d) grant relief by way of restitution or compensation.(5) An order may be made on the terms and conditions that the courtthinks fit.18 Contract and Commercial Law Act 2017, s 24.[40] Mallon J accepted that the parties' mistake was a mistake as to a state of affairsrather than a mistake of law.19 It had its genesis in the 2003 negotiations, in whichAndrew seems to have had formed the view that Simon and Rosa still held the Owner'sshare. She found that he was interested in that question because he believed theOwner's share was a forestry right and as such could be treated as second-hand goodsfor GST purposes, meaning he could secure an input credit.20[41] The Judge expressly accepted Simon's evidence that Andrew persuaded him in2016 that he was wrong in his belief that the Trust owned the Owner's share.21 Shealso found, and it is not now in dispute, that but for the mistake the price would havebeen plus GST. That she found, mattered to both parties. The GST input credit wouldhave been a substantial discount on the purchase price for Andrew, for whom financingthe purchase of the farm was always going to be "challenging".22[42] Section 27 of the Act provides that the extent to which the party seeking reliefcaused the mistake is one of the considerations that must be taken into account indeciding whether to grant relief under s 28. Addressing that question, Mallon Jrecorded Andrew's submission that relief should be denied to Simon and Rosa:[155] Andrew also submits that relief should be declined as a matter ofdiscretion. This is because the Court is required to take into account the extentto which a party seeking relief has caused the mistake in deciding whether togrant relief. He says that Simon and Rosa caused the mistake because theydid not document the transfer of the Owner's Share, they did not record theOwner's Share in the Trust's financial accounts, and they represented toAndrew and [Biscuit Creek] in the 2003 negotiations that they, not the Trust,owned the Owner's Share.(Footnote omitted.)[43] The Judge rejected that submission and found that Andrew more directlycaused the mistake:[156] I do not accept this submission. It was not necessary to document thetransfer of the Owner's Share because the Trust was the "Owner" under cl 6of the Memorandum of Transfer to which the land was subject once it becamethe owner of the land. How the Trust accounted for tax on that sale was of no19 Judgment under appeal, above n 12, at [147].20 At [148].21 At [149].22 At [150].relevance to Andrew other than that he erroneously considered it meant theTrust did not have the benefit of the Owner's Share. However, whether theTrust did or did not have that benefit was a legal question about which he tookno advice when negotiating with Simon in 2016. Simon did not representanything to [Biscuit Creek] in 2003. The purchaser in the draft agreementswas Andrew "or nominee". Nor is there evidence that Simon represented toAndrew in 2003 that he and Rosa had retained the Owner's Share. Asdiscussed above, the evidence is that Andrew's own lawyer, Mr Ogilvie, wasinvolved throughout in the various drafts.[157] In my view it was Andrew who more directly caused the mistake.Simon had thought the Trust owned the Owner's Share but Andrew persuadedthem otherwise. Both of them should have sought legal advice about this in2016 before they entered into the OS Agreement. Neither did. Had it beennecessary to grant relief for a mistake (and it is not because I have found thatthere was no obligation under the OS Agreement requiring performance) theappropriate relief would be an order declaring that the OS Agreement was ofno effect from the date it was entered into.(Footnote omitted.)[44] It will be seen that Mallon J decided relief was not necessary because theOS Agreement did not oblige Simon and Rosa to deliver up what they did not own.She reasoned that the OS Agreement contained no warranty as to title and noobligation to procure the Owner's share if it turned out that the Trust held it.23 We donot find it necessary to decide that issue. We approach the appeal on the basis that, asMr McCartney argued, a person may contract to sell something to which they do nothave title at the time of the contract and may be liable in damages fornon-performance.[45] It does not appear that the jurisdiction to grant relief under s 28 has beendiscussed in any previous case, but because we did not hear argument on it we willsay only what is strictly necessary for decision in this case. The Act states that it is arevision Act and is not intended to change existing law, except as expressly provided.24Schedule 2 specifies the changes that are intended. It does not include any relevantchange to what is now s 28. The language is not identical to the Contractual MistakesAct 1977; it no longer speaks of a "discretion" to grant relief. But the court may stillmake any order that it thinks just.23 At [140]–[141].24 Contract and Commercial Law Act, s 4.[46] The jurisdiction is broad and flexible. We accept that on appeal, this Courtshould substitute its own view if satisfied that the trial judge was wrong — that is tosay, appellate jurisdiction should not be exercised on May v May principles25 — butthe appellant bears the persuasive burden of showing that she was.[47] We are not persuaded. The relief that Mallon J would have granted had she notconcluded the Agreement did not require Simon and Rosa to obtain the Owner's sharewas a declaration that the OS Agreement was ineffective from inception.26 We preferthe view that cancellation under s 28(2)(b) is the appropriate remedy, but the effect isthe same. The parties are restored to the legal position they were in before theOS Agreement was entered. That is an appropriate response in a case where but forthe mistake a substantially different bargain, or none, would have been struck.[48] We do not accept Mr McCartney's submission that the need to protect thegeneral security of contractual relationships, which must guide the exercise ofjurisdiction,27 requires that Simon and Rosa be held in some degree to their mistakenbargain. We agree with the Judge that Andrew more directly caused the mistake.Simon and Rosa could have avoided the mistake had they taken legal advice beforeexecuting the contract, and we accept that may be taken into account when attributingresponsibility. But they acted as they did because they trusted Andrew. We decline tohold that against them in the circumstances.[49] That brings us to a further reason why cancellation is the appropriate remedy.We doubt the OS Agreement would have been entered at all, or if entered that it wouldhave been completed, in circumstances where Andrew could not lawfully claim a GSTinput credit in the absence of a matching obligation to the vendor. As explained above,there is now no doubt that he was not entitled to the second-hand good exemption onwhich he relied, for the Owner's share was not a second-hand good for GST purposes.25 May v May (1982) 1 NZFLR 165 at 169–170. It follows that we disagree with the comments inDavid Blacktop and others (ed) Gault on Commercial Law (online ed, Thomson Reuters) at[CCL28.01].26 Judgment under appeal, above n 1, at [157].27 Contract and Commercial Law Act, s 21(2)(b).[50] As the Judge found, raising finance would have been challenging for Andrew.28He spent many months attempting to do so, without success. Mr McCartney arguedthat that was because he was trying to buy the farm as well as the Owner's share, butwe do not see how that explains his persistent and plainly serious problems; had hebought the farm he would have had the land available as security.[51] The evidence is that in January 2017 Andrew financed the entire purchase pricefor the Owner's share at short notice in the expectation that he would obtain the GSTinput credit and could then realise the Owner's share when the Partnership sold theplantation (as he knew it planned to do). That is recorded in an email of 30 January2017 to his bankers explaining what he now had to support a "bridging loan". Otherinvestors would pay $1,108,560 into his solicitor's trust account. Not all of that moneywould be available on settlement. The bank would advance the entire purchase priceless the amount of investors' money available on settlement. It would be repaid in partwhen the other investors' money came through, following which the GST refundwould be "used to repay debt". It will be seen that Andrew's nominee, Biscuit Creek,was contributing nothing to the purchase, except the GST refund. We cannot knowwhether the transaction would have proceeded but for the mistake; that would dependon the willingness of the bank to advance the purchase price without the GST refundand also on whether the investors were willing and able to finance the purchase in theabsence of any contribution from Biscuit Creek. Their stance would presumablydepend on the difference between the effective purchase price and what they wouldgain when the plantation was sold by the Partnership. As to these matters there is noevidence.[52] We debated with counsel who bears the onus on this issue. Mr McCartneyargued that while the pleadings asserted that the finance clause was for the benefit ofboth parties, Biscuit Creek's ability to raise finance was not squarely put in issue; thatbeing so, no legal or evidential burden of proof fell on the plaintiff.29 We observe thatthis is not a case in which a purchaser is justifying cancellation for failure to obtainfinance. Biscuit Creek sought expectation losses, which were denied in the statementof defence, and it bore the onus of showing that those losses were incurred.28 Judgment under appeal, above n 1, at [150].29 Strack v Grey [2019] NZCA 432, (2019) 20 NZCPR 408 at [63]–[67].The question whether it was entitled to a GST input credit was in issue at trial. On theview we take of the case, we need not decide whether the transaction would have beencompleted, though we doubt it for the reasons just given.Compensation[53] It is not necessary to examine the claim for compensation. Specifically, weneed not consider whether the transaction would have been completed but for themistake, as just mentioned, or whether Biscuit Creek would have assumed anobligation to pay rent to Band of Brothers. The latter proposition would seem todepend on whether, as Mr Colson suggested, the agreement of Band of Brothers to thesale of the forestry right was required under a non-assignment clause in the registeredmemorandum of transfer.Outcome[54] The appeal is dismissed.Other matters[55] Simon and Rosa cross-appealed, arguing that if they owned the Owner's sharethen the OS Agreement did not contain all the essential terms, and that it terminatedon 8 July 2016 as the purchaser had not in fact arranged finance by that date. On theview we take of the case, the cross-appeal is redundant and we do not need to decideit. It is formally dismissed.[56] Counsel asked us to reserve costs, signalling that they might wish to be heard.We reserve costs accordingly, but we indicate that we would ordinarily award costs toSimon and Rosa, as the successful party, for a standard appeal on a band A basis, withprovision for second counsel, and with usual disbursements. We would make nodeduction for the cross-appeal. Judgment may be sealed accordingly if counsel do notwish to be heard. If they do wish to be heard, they should advise the Registrar withinseven days of this judgment.Solicitors:Carson Fox Legal, Auckland for AppellantThomas Dewar Sziranyi Letts, Lower Hutt for Respondents