NEW ZEALAND’S BLUFF OYSTER COMPANY (2013) LTD v MAASS MUSSELS & OYSTERS LTD [2022] NZHC 3475

NEW ZEALAND'S BLUFF OYSTER COMPANY (2013) LTD v MAASS MUSSELS & OYSTERS LTD[2022] NZHC 3475 [16 December 2022]IN THE HIGH COURT OF NEW ZEALANDINVERCARGILL REGISTRYI TE KŌTI MATUA O AOTEAROAWAIHŌPAI ROHECIV-2022-425-000001[2022] NZHC 3475BETWEEN NEW ZEALAND'S BLUFF OYSTERCOMPANY (2013) LIMITEDAppellantAND MAASS MUSSELS & OYSTERSLIMITEDRespondentHearing: 31 May 2022Appearances: B J Marten and T W R Lynskey for the AppellantR G R Eagles for the RespondentJudgment: 16 December 2022JUDGMENT OF NATION JIntroduction[1] The respondent (MMO) had a coastal permit allowing it to engage in musseland oyster farming activities in an area in Big Glory Bay, Stewart Island/Rakiura (themarine farm) until 1 January 2025. In 2014 and 2015, the appellant (NZBO) enteredinto a contractual arrangement with MMO through which NZBO would be able tocarry on oyster farming at the marine farm potentially with rights of renewal until2034.[2] NZBO had to pay rent for the use of the marine farm of only $1 plus GST peryear but had to provide the spat from which oysters would grow for MMO alongsideNZBO's own oyster farming operation.[3] In 2015 and 2016, the relationship between the parties became difficult. InNovember 2016, they varied their contractual arrangements through a Heads ofAgreement (the HoA). As a result, NZBO had to begin paying a commercial rent forthe marine farm but no longer had to provide spat and farm oysters for the benefit ofMMO. NZBO had to pay $280,000 plus GST over seven years, payable quarterly ininstalments of $10,000 plus GST. The first payment was due on 1 February 2017. Inthe HoA, this obligation was described as "additional rent".[4] In May 2017, the oyster parasite Bonamia ostreae was detected in Big GloryBay. From 1 June 2017, the Ministry for Primary Industries (MPI) took steps whicheffectively prohibited oyster farming at Stewart Island and required the removal anddisposal of all the oysters and associated equipment.[5] Judge Tuohy in the District Court held the contractual arrangements betweenthe parties had been brought to an end by frustration but said NZBO's obligation topay $280,000 could be severed from the rest of the contractual arrangements.1 NZBOwere liable to MMO for the instalments of "additional rent" then due. NZBO appealedthe Judge's decision that the provisions could be severed from the contractualarrangements and that NZBO was liable for the outstanding payments.Factual background[6] The factual background is comprehensively but succinctly set out in theDistrict Court judgment. Given the issues on appeal, it is not necessary for me to setout that background in full.[7] MMO was a family company owned by Mr and Mrs Maass-Barrett. Thecompany began mussel farming in Big Glory Bay in 1995. In 2003, it started farmingflat (Bluff) oysters.[8] NZBO was also a family company with four shareholders, Rodney, Darryl,Dee and Carol Clark. Rodney (Mr Clark) was NZBO's general manager. His wife,Dee Clark (Mrs Clark), was also a director of the business. NZBO had a marine farm1 Maass Mussels and Oysters Ltd v New Zealand's Bluff Oyster Company (2013) Ltd [2021] NZDC22543.in Bluff Harbour and a land-based facility at Bluff where oyster spat were grown fromlarvae in a hatchery/nursery.[9] In November 2014, the parties entered into a Deed of Licence by which MMOremained the sole holder of both the marine farm permit and the coastal permitrequired to undertaken marine farming on the marine farm. The licence granted toNZBO the exclusive right to farm the species permitted by the permits subject only toa right for MMO to farm its own stock. The licence also entitled NZBO to exclusiveuse of MMO's equipment as listed, subject only to MMO's right to also use that gear.NZBO had to pay the licence fee payable by MMO to MPI but otherwise only had topay a peppercorn rental for the licence. With rights of renewal, the licence couldcontinue until the final expiry date of 31 July 2034.[10] MMO relinquished its right to sell the marine farm, associated permits and gearuntil 31 July 2019. After that, if it wished to sell the farm, NZBO had an option topurchase at a value to be calculated by a valuer based on the parties' proceeds of salefor their businesses. In the event of MMO having the right to sell to a third party,NZBO would have a right of first refusal.[11] The licence thus gave NZBO the right to farm the species covered by thepermits while allowing MMO to continue farming its existing stock of oysters.[12] The parties entered into a management agreement in early 2015 (theManagement Agreement) built on the same foundation. That agreement recorded thatthe two parties intended to create an operational process where they would worktogether to use the marine farm for their mutual benefit. Their intention was for NZBOto breed oysters and transfer spat to the marine farm and grow them to marketablesizes. MMO was also to buy spat from NZBO and NZBO would raise the spat intooysters. The agreement recorded the specific rights and obligations of the parties asto NZBO's use of MMO's gear, and a specific arrangement for NZBO to rear 250,000oyster spat to harvest for MMO annually for the first two years and, after that, up to500,000 oysters annually.[13] MMO was required to pay NZBO a management fee of $75,000 plus GST perannum for the first two years. After that, no management fee was payable but NZBOhad a continuing obligation to rear oysters for MMO. Clause 9 of the ManagementAgreement recorded this was in recognition of NZBO being able to obtain an incomefrom the use of the marine farm for production of its own oysters while only paying apeppercorn rental.[14] Consistent with the management agreement, MMO purchased spat fromNZBO for 250,000 fish2 for each of the first two years, 2014 and 2015. It paid $10,000in 2016 as a first instalment for 500,000 fish. MMO also made two payments of$75,000 each for the management fees due in 2014 and 2015.[15] Potentially, these arrangements would be for the mutual benefit of both parties.The Maass-Barretts could reduce their involvement in the marine farm managementand work. MMO's marine farm was in deep, clean water where oysters could be raisedand sold directly after harvest without having to go through the cleaning or depuratingprocess which was required of oysters in NZBO's Bluff Harbour oyster farm.[16] For the relationship to work, the people involved had to cooperate with andtrust each other. Mr and Mrs Maass-Barrett lived on Stewart Island and wereproviding infrastructure and gear that was being used on the marine farm. Mr Maass-Barrett had considerable experience in managing a marine farm and his evidencewould indicate he had clear views as to how things should be done.[17] Rodney Clark rejected a number of criticisms and resented what he thoughtwas Mr Maass-Barrett's unwillingness to accept any responsibility for things that hadgone wrong. There was a serious deterioration in the relationship after March 2016.Mr Maass-Barrett had been involved in a process where growing oysters in the cageswere split so that some could be put in another cage to allow the oysters more room togrow. Mr Maass-Barrett decided that a considerable proportion of the oysters, whichshould have been growing for MMO from spat they had purchased from NZBO, weremissing. NZBO considered that any such loss had resulted from an accident that hadoccurred when Mr Maass-Barrett had been involved in a process by which growing2 "Fish" is defined in the HoA as meaning mussels, oyster spat and oysters.oysters in cages were cleaned. NZBO claimed that small oysters had been smashedand killed in what was referred to as the dipping incident.[18] As the Judge aptly summarised:[20] In the months following various emails were exchanged and meetingsheld between the parties which failed to resolve their differences. Personalrelationships reached the point where it was obvious that the close workingrelationship envisaged by the Licence and Management Agreement was nolonger practicable.[19] An agreement was reached after a meeting in Queenstown on 13 October 2016.The parties initially met face-to-face but the evidence was that agreement was reachedthrough their respective lawyers with those lawyers communicating separately withtheir respective clients.[20] The agreement reached was ultimately recorded in the HoA. It was dated 11November 2016 and was signed by the four directors of NZBO and Mr Maass-Barrettas director of MMO.[21] As the Judge recorded, the most important provisions of the HoA were:3• the parties agreed to vary the Licence in the manner set out in the HoA andcancel the Management Agreement. A New Licence was to be signedincorporating the changes.• the rent under the Licence was increased for the nine months commencing1 November 2016 to $50,000 plus GST per annum; then to $75,000 plusGST per annum for the following year after which rent would be reviewedto a market rent but with a floor of $180,000 per annum, all rent payablemonthly in arrears• for seven years commencing on 1 February 2017, NZBO would pay'additional rent to MMO, in consideration of the provisions of clause 4 of(the) agreement' at the rate of $40,000 plus GST per annum payablequarterly with the first payment on 1 February 2017• under cl 4, all of MMO's fish on MMO's lines/strings (i.e. its 'old stock'under the Licence) were declared the property of MMO. All other fish onthe farm, specifically including 'fish sold by NZBO to MMO under theManagement Agreement' were declared to be the property of NZBO.MMO had the right to harvest its fish on or before 30 June 2017 but anyfish not harvested by that date would become the property of NZBO.3 Maass Mussels and Oysters Ltd v New Zealand's Bluff Oyster Company (2013) Ltd, above n 1, at[22].• The option to purchase in cl 11 of the Licence (referred to in the HoA asthe option 'in the nature of [a] first refusal') was cancelled. The right ofrefusal in cl 12 of the Licence continued in force but if not exercised, anysale to a third party would be subject to the Licence as varied by the HoA.• NZBO would continue to have the use of MMO's plant, equipment andother infrastructure (except certain specified items) during the term of theNew Licence (with no obligation to insure) following which it would bereturned to MMO's possession 'fair wear and tear excepted'. The barge,however, would be purchased by NZBO for $150,000 plus GST withsettlement on 30 June 2017. The whole price was to be advanced by MMOon a loan secured against the vessel. Prior to that the barge could be usedby both parties but was to be insured by NZBO. MMO was to retain'ownership' (probably 'possession' was also intended) of its fizz boat andsome other specified items of equipment.• It was specifically provided that MMO would have no right to enter MF365except for the purposes of harvesting its stock as provided or inspectionbut Jim Barrett was specifically prohibited from carrying out anyinspection.• A New Licence was to be entered into by 18 November 2016 at the latestwhich incorporated the terms of the HoA, with details to be determined bythe lawyers or failing agreement by arbitration.[22] A draft new licence and documentation required by the HoA were drafted byNZBO's lawyers and sent to MMO's lawyers on 3 February 2017 but initial approvalof the documents by MMO's lawyers was quickly withdrawn. Both parties treated theHoA as binding on them. NZBO paid the rent and instalments of "additional rent"referred to in the HoA. MMO was preparing to harvest its existing stock before 30June 2017 as it was permitted to do under the HoA.[23] In May 2017, the oyster parasite Bonamia ostreae was detected in Big GloryBay. In accordance with MPI requirements, between 26 June and 10 July 2017, NZBOremoved all its oysters (including those being reared for MMO) and associatedmaterials from Big Glory Bay as part of an MPI-controlled operation. These werethen disposed of by MPI. MMO's old oyster stock growing on lines was removed byanother company, Sanford, and disposed of. It has not been possible for NZBO tocarry out oyster farming of any sort at either Bluff or Stewart Island since June 2017,nor has it been possible for MMO to do this although it did begin to farm mussels atthe marine farm from about November 2017.Relevant pleading[24] In a statement of claim of 23 October 2019, MMO claimed interest on overduepayments in accordance with the parties' original deed of licence on amounts due fromNZBO to MMO, referred to as "additional rent" in the HoA for the period from 1February 2017 to 1 October 2019.[25] In a statement of defence of 17 December 2019, NZBO relied on the full textof the HoA and said the object of the HoA was to facilitate ongoing oyster farming byNZBO at the marine farm. It pleaded it stopped paying rent after July 2017 due to thefrustration of the contract and denied any ongoing payments or sums were owed toMMO. It made a number of specific allegations as to the defence of frustration ofcontract.[26] In a reply to the affirmative statement of defence dated 15 May 2020, MMOdenied the defence of frustration was available to NZBO and, in connection with that,pleaded:4. The additional rent was the sum of $280,000.00 plus GST for which theDefendant was obliged to reimburse the Plaintiff in buying back all fish(oysters) which the Plaintiff had purchased through the managementagreement together with cost to the Plaintiff with having the Defendantgrow the oysters to harvest size (the management fee).5. As at this time the Defendant was short of funds and did not and couldnot pay in a lump sum the moneys due being described as AdditionalRent, negotiation between the parties led to an agreement to pay in [sic]back in 28 instalments of $10,000.00 plus GST over seven years.[27] In an amended statement of claim of 30 October 2020, MMO referred toNZBO's obligation under the Management Agreement to rear 250,000 oyster spatannually to harvest in the first two years of the agreement and for up to 500,000 insubsequent years, and for MMO to pay $75,000 plus GST per year to MMO. Itreferred to cl 2.1(b) in the HoA, providing for rent to be paid under the licence from 1August 2017 to 31 July 2018, and cl 2.3 which referred to "additional rent". It pleaded:The expression "Additional Rent" was an expression adopted by all partiesand agreed to by the Plaintiff's accountants, Malloch McClean, CharteredAccountants, Invercargill. It comprised a total sum payable of $280,000.00made up as follows:a) $50,000.00 for spat returned to, but not paid for by the Defendant, in 2014b) $50,000.00 for spat returned to, but not paid for by the Defendant, in 2015c) $10,000.00 for spat returned, but not paid for by the Defendant, in 2016d) $150,000.00 for previously agreed upon management fees for 2014 and2015, not paid for by the Defendante) $10,000.00 for work which the Plaintiff had undertaken but for which hehad not been reimbursedf) $10,000.00 as a contribution by the Defendant to legal fees of the Plaintiff[28] MMO also maintained its claim for interest on overdue payments at the rate of12 per cent per annum and made 13 miscellaneous claims for around $18,000 plusGST.[29] In a statement of defence to the amended statement of claim of 12 November2020, NZBO denied the specific allegations as to what "additional rent" referred to.NZBO said the term "additional rent" meant "additional rent" and said it relied on theHoA in its entirety.Judgment in the District Court[30] The Judge set out the background to the dispute.[31] The Judge, with reference to authority, summarised what was required to provewhen a contract had been frustrated. He concluded that:[52] The need to remedy injustice to the parties is the ultimate measure inassessing frustration. I consider that it would not be just to hold the parties toall their contractual obligations in the circumstances which arose here.[32] The Judge then referred to MMO's claim for "additional rent" up to the date ofthe hearing. He said MMO had relied on s 68 of the Contract and Commercial LawAct 2017 (the Act). He said:4The section requires the Court, in appropriate circumstances, to sever part ofa contract which has been frustrated and treat it as a separate contract whichhas not been frustrated.4 At [55].[33] He said the crucial issue was whether s 68(1)(b)(ii) of the Act applied andwhether the part of the contract which contains the obligation to pay "additional rent"had been wholly performed apart from that obligation.5 He referred to evidence fromMMO that the $280,000, although called "additional rent", was to reimburse MMOfor amounts paid to NZBO to rear oysters.6 He said NZBO's case was that "additionalrent" meant nothing more than an extra amount of rent, being a periodic payment forthe continuing right to occupy the marine farm and use MMO's gear. He referred toMr Clark's evidence that he had never seen a document headed "MMO/NZBORestructure", which Mrs Maass-Barrett said had been produced at the meeting whichresulted in the HoA, until a few days before the hearing. Mr Clark's evidence that, asfar as NZBO was concerned, the payment was agreed to simply as something whichhad to be paid in order to achieve its objective of removing MMO and Mr Maass-Barrett from any future involvement in farming at the marine farm, leaving NZBOwith full control of the area.7[34] The Judge said it was not possible on the evidence to reach a conclusion thatthere was any mutual understanding of the reason for the additional rent clause.8 Hesaid it was neither necessary nor possible to go behind the wording of the HoA itself.He said the sum in question was "additional rent" but more significantly was payable"in consideration of the provisions of clause 4 of this agreement".[35] The Judge said the background and circumstances surrounding the making ofthe HoA included the fact that, as well as having paid NZBO $110,000 for the spatNZBO was rearing for MMO, MMO had also paid management fees totalling$150,000 to NZBO for the two preceding years for rearing oysters to their current size.The Judge concluded that an objective reader of the HoA, aware of the backgroundand circumstances surrounding its making, would conclude that the reference in theadditional rent clause to cl 4 was a reference to cl 4.1 (and not the other subclauses)under which ownership of the fish being reared for MMO by NZBO passed to NZBO.9The Judge said it followed from this that the payment for "additional rent" in cl 2.35 At [56].6 At [57].7 At [59].8 At [60].9 At [62].was not a payment for rental in the usual sense of the word, that is for the right tooccupy and use the marine farm for the following seven years. Rather, theconsideration for the payment was that stated in cl 2.3 itself, for ownership of all thefish on the marine farm owned by MMO except MMO's stock being grown on stringsand lines.10[36] The Judge said there was a textual indication that the periodic payments for"additional rent" were not for rent in the true sense in that they were not simply addedinto the amounts payable for rent under cl 2.1.11 They were payable at differentintervals and were not subject to the rent review provisions. The Judge accepted therewas an explanation for the use of the term "additional rent" in the evidence of Mr andMrs Maass-Barrett that it was to avoid an anticipated taxation problem.12 Heconsidered the evidence from Mr and Mrs Maass-Barrett as to this was admissible interms of the Supreme Court judgment in Bathurst Resources Ltd v L&M CoalHoldings Ltd.13[37] The Judge said the evidence confirmed the term "additional rent" wasintroduced into the clause for a reason unrelated to the nature of the payments.14 Hesaid there was no reason for a reasonable person, having all the background knowledgeavailable to the parties, to conclude that the consideration for the payments under theadditional rent clause was anything other than that stated in it.[38] The Judge found the ownership of the fish in cl 4.1 passed to NZBO when theHoA was executed based on the wording of the clause,smirk the additional rentpayments starting on 1 February 2017 and NZBO's subsequent conduct.15 On thatbasis, he concluded the additional rent clause and cl 4.1 could be severed from thefrustrated contractual arrangements and, except for the completion of payment, hadbeen wholly performed.16 He held that NZBO was liable for the payments due under10 At [63].11 At [64].12 At [65].13 Bathurst Resources Ltd v L&M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696.14 Maass Mussels and Oysters Ltd v New Zealand's Bluff Oyster Company, above n 1, at [72].15 At [73].16 At [74].the additional rent clause up to the date of hearing, being $195,000, and interest of 12per cent per annum.17[39] The Judge then dealt with the various miscellaneous claims. There is no appealfrom that part of his judgment.Submissions for NZBO[40] NZBO did not challenge the Judge's finding that the HoA was frustrated. Itchallenged the finding that the additional rent clause was severable from the rest ofthe HoA under s 68 of the Act.[41] NZBO submitted the HoA must be interpreted in accordance with the approachexplained by the Supreme Court in Firm PI 1 Ltd v Zurich Australian Insurance Ltd.18It submitted that interpreting the section, in light of the purpose and context of thelegislation, s 68 was not intended to provide a discretionary catch-all tool forseparating out parts of contracts on the basis this would be "fair" or "just" to keepthem on foot following a frustrating event. The Court must be satisfied the relevantprovisions could "properly be severed" on an objective interpretation of theagreement. NZBO contended that, for part of the contract to be severable in terms ofs 68(1), the balance of the frustrated contract would have to be a coherent standalonecontract that remained enforceable. They sought support for that approach in the NewZealand Court of Appeal's 2020 judgment in Montgomerie v Montgomerie.19 Theyreferred to the circumstances in the English case of Pioneer Shipping Ltd v BTPTioxide Ltd as illustrating how parts of a contract were severable because they wereconcerned with circumstances independent of those dealt with in the balance of thecontract.20[42] NZBO submitted the Judge erred in holding the "additional rent" was not"rent" because of the clear wording of the clause. NZBO submitted that the HoAestablished a forward-looking obligation on NZBO to pay MMO additional rent. It17 At [75]−[76].18 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at[60]−[63].19 Montgomerie v Montgomerie [2020] NZCA 3, [2020] NZCCLR 16.20 Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 724 (HL).was styled as rent and located within the rent clause. It submitted the additional rentbrought the total amount of rent payable in the first few years under the HoA closer tothe market level. It was to be at least $180,000 per annum from 1 August 2018onwards. Additional rent of $40,000 per annum was to be paid until 31 January 2023.It submitted it never saw MMO's document quantifying what the $280,000represented, so there was no objective basis to accept MMO's argument that thepayment was backwards-looking compensation.[43] NZBO submitted the obligation to pay "additional rent" was in considerationof the provisions of cl 4. It submitted cl 4.1 confirmed that MMO would be retainingits own fish and growing equipment but NZBO would be retaining oysters sold byNZBO to MMO under their previous agreements. NZBO submitted cl 4.2 stated thatMMO will harvest all its fish by 30 June 2017 or else forfeit the remainder to NZBO.[44] It was submitted the additional rent clause and cl 4 were inextricably linkedwith the broader HoA, which reflected an agreement between the parties to move fromthe failed Management Agreement to NZBO having exclusive possession of themarine farm.[45] Looking to the wider commercial context of the HoA, the payment ofadditional rent made objective sense only in the context of NZBO being prepared topay a significant sum to get vacant possession of the marine farm. Consistent withthat, Dee Clark, one of NZBO's directors, had said the $40,000 represented what theyhad to pay for Mr Maass-Barrett "not to be involved on the farm or in our business".It would not make commercial sense for NZBO to pay $280,000 for the fish grownfrom spat purchased by MMO because MMO paid NZBO $110,000 for that spat.[46] NZBO contended the Judge's conclusion appeared to have been reached on thebasis it would be fairer given the overall background of the parties' relationship andthe HoA but, in adopting that approach, he had failed to adequately consider how theHoA was to be interpreted for the severability provisions in s 68 to apply.[47] Alternatively, NZBO argued, if an agreement represented by cls 2.3 and 4 wereseparated out, that agreement had not been wholly performed by MMO as required bys 68(1)(b)(ii) of the Act. NZBO accepted, for this argument to be advanced, the Courthas to find that the reference to cl 4 in cl 2.3 meant "cl 4" and not "cl 4.1" as theDistrict Court Judge held.[48] NZBO submitted cl 4 contained the following benefits and burdens:(a) NZBO obtained ownership of all fish on the marine farm that were not onMMO's lines/strings;(b) MMO was entitled to harvest its own fish on or before 30 June 2017,failing which any fish not harvested would be deemed to be NZBO'sproperty;(c) MMO was entitled exclusively to use the barge to harvest its fish, but onlyon the weekends;(d) NZBO was entitled to have a representative present during MMO'sharvest;(e) EEC (another marine farming company) would harvest the mussels on themarine farm owned by MMO;(f) both parties would have access to the barge through a secure lockbox; and(g) NZBO was to keep the barge insured.[49] NZBO submitted that, for the severed agreement to be wholly performed,MMO would have had to harvest all its own fish on or before 30 June 2017 or to haveagreed to forfeit them to NZBO. NZBO would then have obtained vacant possessionof the marine farm. Neither happened because of the arrival of Bonamia ostreae.Submissions for MMO[50] MMO submitted the District Court Judge had correctly interpreted what"additional rent" referred to in the HoA and had correctly applied s 68 of the Act.[51] MMO pointed out there was very little, if any, case law where the Court had toconsider how s 68 was to be applied or whether there could be severance in terms ofthe predecessor provision in s 4 of the Frustrated Contracts Act 1944.[52] MMO referred to evidence as to how the term "additional rent" came to beused in the HoA. It also referred to the evidence of Mr and Mrs Maass-Barrett thatthe payment for additional rent was a payment on account of a previously agreed debtto settle old claims and grievances rather than a payment connected to futureobligations and entitlements. It covered management fees and what MMO originallypaid for the spat, which NZBO would acquire under the HoA.[53] MMO also submitted it was inconceivable for NZBO not to have known whatclaims and grievances the $280,000 covered.[54] It could not be said that the only way in which there could be objectivecommercial sense for the further payment of $280,000 was for it to have been in returnfor obtaining vacant possession of the marine farm. MMO contended cl 4 did notprovide for this. The HoA limited MMO's involvement to three of the 26 lines on themarine farm for seven or so months until harvesting of the oysters was complete butthere was nothing in cl 4 requiring MMO to provide vacant possession of the farm.There was no reference in cl 4 to Mr Maass-Barrett having to leave the farm or haveno involvement with it.[55] To the extent the HoA did give NZBO the right to operate the marine farm tothe exclusion of MMO, this was through other clauses in the HoA, not the othersubclauses of cl 4. For example, cl 7.2 provided MMO would have no right to be onthe area, except for the right of inspection and the right to harvest its oysters providedfor in the licence.[56] NZBO submitted the Judge's conclusions were evidence-based and it wasreasonable for him to find that, except for the completion of payment, all the factualevents to which it related had occurred before the frustrating event which ended thecontract.Relevant law[57] Relevantly, subpt 4 of the Act provides:Money paid or payable61 Money paid may be recovered and money payable ceases to bepayable(1) All money paid to a party (A) under the contract before the time ofdischarge is recoverable from A as money received by A for the use ofthe party who paid it.(2) All money payable to a party under the contract before the time ofdischarge ceases to be payable.68 Court must treat performed part of contract that can be properlysevered as separate contract(1) This section applies if—(a) the court considers that a part of a contract to which this subpartapplies can properly be severed from the remainder of the contract;and(b) that part of the contract was—(i) wholly performed before the time of discharge; or(ii) wholly performed before the time of discharge except for thepayment, in respect of that part of the contract, of money that isor can be ascertained under the contract.(2) The court must treat—(a) the part of the contract described in subsection (1) as if it—(i) were a separate contract; and(ii) had not been frustrated; and(b) sections 60 to 66 as applying only to the remainder of the contract.[58] Section 68 replaced s 4 of the Frustrated Contracts Act. The newer Act applieddespite the HoA predating the Act.2121 Contract and Commercial Law Act 2017, sch 1, cl 5.[59] In Carr v Gallaway Cook Allan, the Supreme Court was concerned withseverability when deciding whether an arbitration agreement was valid.22 It includeda clause which permitted the parties to appeal to questions of law and fact under theArbitration Act 1996, sch 2, cl 5. This clause permits appeals against arbitral awards,but only on questions of law. The relevant clause was thus unlawful.[60] The Supreme Court was unanimous as to the approach to be taken toseverability.23 This was summarised by McGrath J:[62] The overall approach to severability that emerges from these decisionsis one that is founded on core contractual principles. The significance ofseverance of an invalid contractual provision is evaluated in the course ofexamination of what the parties are to be taken to have agreed in the wordsthey used. This is an issue of construction of the contract. It is likely to bepermissible to sever an invalid promise which is subsidiary to the mainpurpose of the contract, but severance may not destroy the main purpose andsubstance of what has been agreed.24 Severance cannot be permitted to alterthe nature of a contract. [61] The Court also said the approach:25 does not reduce severability to a question of whether the parties would haveentered into the agreement had the relevant words been severed. The approachis one way of establishing whether applying the doctrine of severance wouldleave the subject matter of the contract and the primary obligations of theparties unchanged [62] They said the first stage of enquiry into severability was that referred to in thePrivy Council judgment in Carney v Herbert.26 In commenting on what the PrivyCouncil said as to the difficulty with questions of severability, McGrath J said thestatements of the Privy Council "highlights the necessity for the courts whenaddressing severability to exercise judgment, with regard to the circumstances ofparticular cases".2722 Carr v Gallaway Cook Allan [2014] NZSC 75, [2014] 1 NZLR 792.23 At [90] per Arnold J.24 MP Furmston, GC Cheshire and CH Stuart Cheshire, Fifoot and Furmston's Law of Contract (16thed, Oxford University Press, Oxford, 2012) at 530, citing Goodinson v Goodinson [1954] 2 QB118 (CA).25 At [66].26 Carney v Herbert [1985] AC 301 (PC).27 At [53].[63] Here, the issue as to severance arose in considering frustration and the Act, butthere is no reason for the approach to be different because of that.[64] In Montgomerie v Montgomerie, the Court of Appeal referred to the statementin Burrows, Finn and Todd on the Law of Contract in New Zealand:28 frustration operates in an all-or-nothing fashion. If the contract is notfrustrated it remains on foot, and both parties remain liable for its non-performance. If it is frustrated it falls completely and neither party cancontinue with performance. Generally, there is no such thing as selectivefrustration whereby individual terms are severed: the contract stands or fallsas a whole.But, the Court acknowledged that the authors noted there were certain exceptions tothis at common law. The Court of Appeal said these were:29 where a contract contains severable parts, each of which provides for oneparty's performance and the other party's corresponding payment for thatperformance, it may be possible for one of those stand-alone parts to befrustrated although the balance of the contract remains valid and enforceable.[65] The Court of Appeal said s 68(1) and (2) of the Act appeared to limit theoperation of that common law principle to cases where a severable part has beenperformed before the frustrating event occurs.[66] As to contract interpretation principles, Arnold J, in Firm PI 1 Ltd v ZurichAustralian Insurance Ltd, for the majority of the Supreme Court, said:30[60] Given the issues in the case, it is not necessary that we discuss theapproach to contractual interpretation in any detail. It is sufficient to say thatthe proper approach is an objective one, the aim being to ascertain "themeaning which the document would convey to a reasonable person having allthe background knowledge which would reasonably have been available tothe parties in the situation in which they were at the time of the contract". Thisobjective meaning is taken to be that which the parties intended. While thereis no conceptual limit on what can be regarded as "background", it has to bebackground that a reasonable person would regard as relevant. Accordingly,the context provided by the contract as a whole and any relevant backgroundinforms meaning.28 Montgomerie v Montgomerie, above n 19, at [35] citing Jeremy Finn, Stephen Todd and MatthewBarber (eds) Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis,Wellington, 2018) at 810 (footnote omitted).29 Montgomerie v Montgomerie, above n 19 at [36] (footnotes omitted).30 Firm PI 1 Ltd v Zurich Australian Insurance Ltd, above n 18.[61] The requirement that the reasonable person have all the backgroundknowledge known or reasonably available to the parties is a reflection of thefact that contractual language, like all language, must be interpreted within itsoverall context, broadly viewed. Contextual interpretation of contracts has asignificant history in New Zealand, although for many years it was restrictedto situations of ambiguity. More recently, however, it has been confirmed thata purposive or contextual interpretation is not dependent on there being anambiguity in the contractual language.(footnotes omitted)[67] In Bathurst Resources v L&M Coal Holdings Ltd, the Supreme Court said:31The approach to be taken to contractual interpretation is governed by the lawof contract, but it is the law of evidence that ensures the trial court's inquiryfocusses only on evidence that will materially assist in applying that test.[68] The Supreme Court also said:32Applying s 7 [of the Evidence Act 2006] in the context of contractualinterpretation, evidence is prima facie admissible if it has a tendency to proveor disprove anything of consequence to determining the meaning thecontractual document would convey to a reasonable person having all thebackground knowledge reasonably available to the parties in the situation inwhich they were at the time of the contract.[69] In discussing how that test would be applied, the Supreme Court said oralevidence to be given at a hearing as to a party's subjective intent or understanding ofthe contract would:33 not be admissible if that was not communicated to the other party prior tocontract formation. An undeclared understanding or intention as to themeaning of a contract is not evidence that would have been available to thenotional reasonable person having all of the information reasonably availableto the parties at the time. It is not therefore relevant to the task of contractualinterpretation.[70] The Supreme Court also discussed the relevance of evidence of conduct orstatements during negotiations that tended to prove a party's subjective intent as towhat the contract should mean. The Court referred to the statements in the four31 Bathurst Resources Ltd v L&M Coal Holdings Ltd, above n 13, at [55].32 At [62] (footnote omitted).33 At [68].different judgments in Vector Gas, noting that courts had tended to follow Tipping J'sapproach.34 They referred to Tipping J's conclusion that:35 extrinsic evidence is admissible if it tends to establish a fact orcircumstance capable of demonstrating objectively what meaning both or allparties intended their words to bear.[71] In Bathurst, the Court said:36The issue for a judge is whether evidence of prior negotiations tends to proveanything relevant to the notional reasonable person. Evidence of the contentof prior negotiations will be inadmissible to the extent that it proves only aparty's subjective intention or belief as to the meaning of the words, or whattheir undeclared negotiating stance was at the time.[72] And later:37However, if evidence shows what a party intended the words to mean, and thatthis was communicated, it may tend to show a common mutual understandingas to the meaning of the contract. Logically, the party who claims to havecommunicated their intention would have to be able to point to something –even if just silence (in circumstances where a reply might be expected) – onthe part of the other party to bring that intention into the realm of mutualunderstanding. Such an understanding is relevant to the objective search formeaning.[73] The Supreme Court also said the approach to the admissibility of subsequentconduct should be the same as the approach to the admissibility of prior negotiations:38Applying the provisions of the Evidence Act, the court must ask itself whetherthe subsequent conduct tends to prove anything relevant to the objectiveapproach to interpretation. Subsequent conduct need not necessarily bemutual, but non-mutual conduct is more likely to be relevant to a claim ofestoppel. Further, in assessing the relevance of subsequent conduct, it mustnot be forgotten that the court is interpreting the contract as at the time it wasmade.34 At [70]−[74] citing Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR444.35 At [71], citing Vector Gas, above n 34, at [31].36 At [75] (footnote omitted).37 At [76].38 At [89] (footnote omitted).Analysis[74] The Judge was correct in deciding use of the term "additional rent" did notrefer to the usual meaning of that term, being a payment for the right to occupy themarine farm over the seven years those payments were to be made.[75] Details of the agreement as to rent in the normal sense of the word were set outin cls 2.1 and 2.2 of the HoA. Clause 2.1 prescribed the rent payable per annum plusGST for the period from 1 November 2016 to 31 July 2017, and then from 1 August2017 to 31 July 2018. It specified that, from 1 August 2018, rent would be determinedunder the rent review provisions set out in cl 2.2. Clause 2.1(d) said rent would bepayable calendar-monthly in arrears with the first such payment being on 1 December2016. There were then the rent review provisions in cl 2.2 of the HoA with details asto the process to be followed and for the determination of any dispute. Clause 2.2(f)stated that no determination of rent pursuant to that clause, and thus for the periodfrom 1 August 2018, would operate to reduce the rent payable by NZBO to below$180,000 plus GST per annum.[76] Clause 2.3 of the HoA stated:2.3 For seven years, commencing on 1 February 2017, NZBO will payadditional rent to MMO, in consideration of the provisions of clause 4 ofthis agreement. That rent will be $40,000 plus GST per annum payablequarterly as to $10,000.00 plus GST, with the first such payment on 1February 2017.[77] There was also no error in the Judge referring to evidence he had heard as beingconsistent with that interpretation. He referred to the explanation from Mr and MrsMaass-Barrett that the term "additional rent" was used to avoid an anticipated taxationproblem where both parties would have to reconcile the payments with earlier years'accounts. As referred to earlier, he considered their evidence as to this was admissiblein terms of the Supreme Court judgment in Bathurst Resources Ltd v L&M CoalHoldings Ltd.3939 Bathurst Resources Ltd v L&M Coal Holdings Ltd, above n 13.[78] Mrs Clark had not been present during the negotiations but had signed theHoA. It was of some relevance and consistent with the evidence from Mr and MrsMaass-Barrett that, in her initial brief of evidence of 17 August 2021, Mrs Clark said"[t]he term 'additional rent' and the amount were selected and put forward by MMOfor inclusion in the agreement, and accepted by NZBO".[79] Under cross-examination, Mr Clark said the proposal for the use of the words"additional rent" had been put forward during the settlement discussions by the lawyerfor MMO and "we [NZBO] didn't care what it was called".[80] Mr Clark said, from his perspective, the payment was an incentive for MrMaass-Barrett to leave the farm and a way of resolving all the issues they were dealingwith. That evidence was consistent with his understanding at the time the HoA wasentered into that the payment of $280,000 was not for the payment of rent in the normalsense.[81] In his evidence as briefed, Mr Maass-Barrett said the upshot of the meetingwas: reconfigured agreements, a Heads of Agreement providing [MMO] with amarket monthly rental, cancellation of the oyster spat purchasing and growingagreement, and a buy back of all of that stock by NZBO plus reimbursementof the management fees. The latter effectively became the "additional rent",which [MMO] are now claiming from NZBO.[82] Mr Maass-Barrett said: "additional rent" was really a misnomer but constituted reimbursement forexpenses and management fees which had been incurred previously.[83] Mr Maass-Barrett explained the $280,000 was broken up into payments of:(a) $100,000 for two years of oyster spat MMO purchased from NZBO andpaid them to raise, which MMO contended never existed or went missing;(b) $10,000 was a reimbursement for the amount MMO paid NZBO for thepurchase and raising of oyster spat for the third year of the parties'arrangement;(c) $150,000 for management fees;(d) $10,000 for work Mr Maass-Barrett did for NZBO; and(e) $10,000 for legal fees.[84] Mr Clark said the oysters MMO were claiming payment for (as referred to inpara [83](a)) were missing because of some fault on MMO's part. The dispute as tothat was acknowledged in correspondence between MMO's then barrister and NZBO'sthen solicitors in September 2016 before the settlement negotiations.[85] There was some evidence that, during the negotiations, a document headed"MMO/NZBO Restructure" was prepared. There may have been notes made by MMOon that document consistent with what Mr and Mrs Maass-Barrett understood the$280,000 was for, as they discussed in their evidence. The notes made were not inevidence. There was no evidence from either of them that their contemplatedcomponents of the $280,000 had been conveyed to NZBO representatives or theirlawyer during the settlement discussion.[86] Mr Clark had been involved in the settlement negotiations for NZBO. It washis evidence that he had not seen the MMO/NZBO restructure document during thenegotiations. He said he saw it for the first time only a few days before the hearing inthe District Court. Mrs Clark had been overseas at the time of the settlementdiscussions. She first learnt of the payment of $280,000 on seeing the HoA.[87] Clause 4 of the HoA stated:4. Fish4.1 All of the fish (MMO's Fish) on MMO's lines/strings are the property ofMMO. All other fish on the Area are the property of NZBO. Thisincludes all the fish in or on the trays known as the modules and the fishsold by NZBO to MMO under the Management Agreement (and any suchfish are deemed to be the property of NZBO).4.2 MMO is entitled to harvest MMO's Fish:(a) On or before 30 June 2017, any fish not harvested by that date willbe deemed to be the property of NZBO;(b) MMO will use its own staff for the harvest. The harvesting shall bedone on weekends and MMO shall have the use of the barge onweekends to the exclusion of NZBO;(c) The parties acknowledge acknowledges [sic] that they shall enter thediscussions in good faith to ensure that MMO can complete theharvesting of MMO's Fish by 30 June 2017 and NZBO is notadversely affected in managing the area;(d) During the harvest, a representative of NZBO (at NZBO's cost andrisk, provided MMO complies with New Zealand Law in theoperation of the vessel) may be on the vessel used by MMOprovided the representative is not Rodney or Darryl Clark;(e) EEC will harvest the mussels owned by MMO. MMO will instructEEC to liaise with NZBI to effect the harvest. In the event EEC isunable or unwilling to harvest the mussels then MMO shall at itsown cost and using its own equipment.(f) The keys to the barge shall be left on the barge in a secure lock boxto enable both parties to have ready access to the barge as and whenneeded and also to comply with insurance provisions.4.3 Each party when using the barge will provide their own fuel.4.4 NZBO will keep the barge insured, as required in the Agreement. MMOand NZBO respectively shall be liable for any insurance excess fordamage to the barge while in use by the party causing the damage.Implementation of this agreement shall be deferred and access by NZBOto the barge and the Area shall be deferred until certified evidence of theinsurance policy and payment of the premium is provided by NZBO toMMO.4.5 MMO and NZBO will at all times use the barge in accordance with andwill not breach any provisions of Fisheries and Maritime Law and theHealthy [sic] and Safety at Work Act 2015.4.6 MMO and NZBO will not do or omit anything whereby any policy ofinsurance in respect of the barge or any of the equipment on the bargemay be invalidated or become void or voidable.[88] The parties agreed that, through cl 4.1, all oysters that had previously beengrowing on the marine farm for MMO, other than those fish on MMO's lines or strings,were to be the property of NZBO. Nor was there any issue that the oysters on MMO'slines or strings had to be harvested before 30 June 2017 and any not harvested by thatdate would then be deemed to be the property of NZBO.[89] Apart from saying the payments in cl 2.3 were in consideration of theprovisions of cl 4, the HoA did not say precisely what the payments were for.[90] The Judge had to determine what the payment of $280,000 referred to in cl 2.3was for. In the end, the Judge had no regard to evidence from Mr and Mrs Maass-Barrett as to what was comprised in the $280,000 they sought in the negotiations.There was no error in the Judge finding that the Maass-Barretts had not communicatedwhat the $280,000 was for during the negotiations. Accordingly, consistent with thejudgment of the Supreme Court in Bathurst Resources, it was not relevant to theinterpretation of the contract.40[91] There was no error in the Judge's conclusion that it was neither necessary norpossible to go behind the wording of the HoA itself to determine what the parties hadagreed to with cl 2.3 of the HoA.[92] The evidence indicated the parties had differing reasons for the overallsettlement reached through the HoA. Important to Mr and Mrs Maass-Barrett was thatthey were recovering costs they incurred with the failed Management Agreement.Important to NZBO was the fact that, with the HoA, they would be free to use themarine farm without what they regarded as undesirable interference from Mr Maass-Barrett. The terms of the HoA were not however to be interpreted in accordance withthe subjective motivation of the two parties when their motivations were not mutualor consistent. The Judge had to decide what the parties had agreed to with referenceto the text of the HoA. In their submissions for the parties, counsel did not suggestotherwise.[93] The Judge concluded that, where cl 2.3 refers to the payment of $280,000 beingin consideration for the provisions of cl 4, cl 4 was a reference to only cl 4.1 whereownership of MMO's oysters being reared by NZBO was to pass to NZBO. He saidthe other subclauses of cl 4 were not logically related to cl 2.3 because they were aboutMMO needing to harvest its oysters on or before 30 June 2017 and the terms for theparties using the barge.[94] The Judge made no error in this regard.40 Bathurst Resources Ltd v L&M Coal Holdings Ltd, above n 13.[95] NZBO received a number of benefits or rights under the HoA. The agreementprovided for the licence to continue with rent for their use of the licence, and thus themarine farm, on the terms set out in cl 2 of the HoA. Clause 3.1 of the HoA providedNZBO would retain its right of first refusal under cl 12 of the licence, but its option topurchase under cl 11 would be deleted. NZBO agreed to purchase the barge for$150,000 plus GST with the benefit of a loan on terms as set out in cl 6 under theheading "Barge". Under cl 7, the management agreement, by which NZBO had tomanage the marine farm in conjunction with protecting MMO's interest in its oysterson the farm, was cancelled and MMO's right to be on the marine farm was severelylimited. There were further specific provisions in cl 7.5 protecting NZBO from MMOinterference in the marine farm.[96] Clause 2.3 however only stated the payment of the $280,000 was inconsideration of cl 4. Clause 4 was headed "Fish".[97] I do not consider it was essential to the Judge's decision that cl 4, as referredto in cl 2.3, should be limited to refer to cl 4.1. The crucial benefit or considerationNZBO was obtaining under cl 4 was its acquisition of all fish belonging to MMO noton MMO's lines/strings. MMO's right to retain ownership of its fish on lines andstrings was conditional on MMO harvesting those fish on or before 30 June 2017 withagreement as to when and how that harvesting could take place. The payment requiredof NZBO of $280,000 was not in consideration of NZBO benefiting from those clausesin cl 4 concerning interim use of the barge or the way and time within which MMOhad to harvest its fish. Consistent with that, payment of the first $10,000 plus GST onaccount of the $40,000 plus GST payable per annum was to be made on 1 February2017, before the 30 June 2017 deadline for MMO to harvest its fish.[98] It was not suggested for NZBO that allowing for payment of the $280,000 tobe made over seven years was indicative of the payment being made in return forNZBO's almost exclusive use of the marine farm in future years, nor could it havebeen. As to that, there was evidence from Mr Maass-Barrett that the payments werestructured in that way because both parties understood at the time that NZBO did nothave the ability to pay $280,000 promptly in one lump sum. Consistent with thatunderstanding, MMO had agreed it would advance the $150,000 plus GST whichNZBO had to pay for the barge with monthly payments beginning 1 December 2018.In his evidence, Mr Clark referred to MMO's agreement to payments being made overseven years as "a gift".[99] The Judge thus decided that, through cl 2.3 with its reference to cl 4, NZBOhad agreed it would pay $280,000 over seven years for MMO's oysters that were noton MMO's lines.[100] In applying s 68, the Judge then had to decide if the part of the contract towhich that agreement applied could properly be severed from the remainder of thecontract.[101] This is the crucial issue on this appeal.[102] NZBO submitted the part of the HoA that provided for that agreement couldnot properly be severed because NZBO would never have entered into that agreementwithout having the benefit of certain other parts of the agreement, particularly thoseparts that ensured it would have sole access to the marine farm. NZBO submitted,without the benefits of their future exclusive use of the farm, there would have beenno commercial basis for them to buy the MMO fish.[103] It was NZBO's submission that there was nothing in the relevant documents,or the evidence before the District Court, that could properly displace the clearmeaning of the words that were used.[104] The relevant law as to severability is summarised above at [59]−[65].Severance cannot be used to alter the nature of a contract.[105] On my assessment of the HoA, the central purpose of the HoA was to sever theprevious management agreement between the parties, and to permit NZBO to have thealmost exclusive use of the marine farm in return for payment of a market rental incontrast to a peppercorn rental. Ancillary to that purpose was that, pursuant to cls 2.3and 4, NZBO would acquire the oysters which had previously been the property ofMMO.[106] NZBO submitted it would not have agreed to pay $280,000 in considerationfor oysters which it previously owned without the wider bargain in play. Whether theparts of the contract concerned with NZBO's acquisition of MMO's oysters can besevered is not however to be determined by NZBO's subjective intention. Thedetermination as to severability must be based on the construction of the contract. Onsuch a construction, the agreement with regard to purchase of the oysters was ancillaryto the main purpose of the HoA. That main purpose could remain intact with thoseparts of the HoA concerning the purchase of oysters severed from the balance of theHoA.[107] Accordingly, I consider the Judge was right to proceed on the basis theagreement, in cls 2.3 and 4 of the HoA for NZBO to acquire MMO fish for $280,000,was severable from the balance of the contract, thus establishing the first threshold forseverance referred to in s 68(1)(a).[108] Next, for there to be relief in respect of severed parts of the HoA, the Judgehad to find that part of the contract was:41(a) wholly performed before the time of discharge; or(b) wholly performed before the time of discharge except for the payment, inrespect of that part of the contract, of money that is or can be ascertainedunder the contract.[109] For reasons referred to by the Judge, he found that property, and therefore risk,in those fish passed to NZBO on the making of the HoA, that is 16 November 2016.As the Judge referred to, consistent with that, NZBO made the quarterly payments dueunder cl 2.3 on 1 February and 1 May 2017. Consistent with that, after MPI requiredthe removal and destruction of all oysters from the marine farm, NZBO submittedclaims for compensation to MPI as to the oysters they had acquired from MMO.[110] This was a situation where MMO had transferred property in its fish to NZBOand NZBO had possession of the fish on the marine farm. The only part of the41 Contract and Commercial Law Act, s 68(1)(b).agreement for the purchase of the fish which had not been performed when the contractwas frustrated was NZBO's payment of the whole of the $280,000. The balance thendue could be readily ascertained.[111] Accordingly, as the Judge said, pursuant to s 68(2) of the Act, the Court had totreat that part of the HoA concerned with NZBO's acquisition of MMO fish as aseparate contract which had not been frustrated. NZBO were therefore liable to MMOfor that portion of the $280,000 that remained unpaid at the date of judgment. TheJudge ordered NZBO to pay $195,000 for the additional rent payments.[112] In submissions, NZBO claimed the Judge's award had failed to take accountof a $10,000 payment made in October 2021, due date 1 August 2017, for the"additional rent" for the period of May 2017 to July 2017.[113] In her brief of evidence of 21 September 2021, Mrs Maass-Barrett saidpayments for additional rent of $11,500 had been made on 1 February 2017 and 1 May2017. Mrs Clark's evidence of 17 August 2021 was that NZBO had paid monthly rentfor the marine farm for February, March, April, May and June 2017 and made a finalpayment of rent in October 2017. She said the October payment was to represent themoney due for July 2017 because NZBO was still removing stock during that month.[114] In a supplementary brief of evidence dated 12 October 2021, Mrs Clark saidNZBO mistakenly did not pay MMO rent for July 2017 as the payment in October2017 was actually for rent for June 2017. NZBO made a $16,291 payment in October2021 for rent in July 2017 and an "additional rent" payment for the period betweenMay 2017 and July 2017.[115] MMO had sought judgment for unpaid "additional rent" for the period to thedate of judgment. Taking into account the extra payment made in October 2021, therewere 17 outstanding payments of additional rent plus GST. That amounted to$195,500. There was accordingly no error in the Judge's calculations.Interest[116] In their amended statement of claim of 30 October 2020, MMO claimedinterest at the rate of 12 per cent for both unpaid rent and unpaid additional rent upuntil 31 October 2020.[117] The Judge gave judgment for interest at 12 per cent on unpaid additional rental.He said counsel for MMO should file a memorandum calculating the interest to thedate of judgment.[118] In its notice of appeal, NZBO said there was an error in the Judge applying thedefault interest rate of 12 per cent because that was an interest rate to apply under theparties' licence agreement and was not applicable to part of the HoA if the Judgetreated part of the HoA as a severable contract.[119] NZBO submitted the interest rate of 12 per cent was drawn from cl 6.1 of the2014 deed of licence. That interest rate attached to any default by the licensee to makepayments due under the licence. These were either rent or licence fees.[120] NZBO submitted, with the Judge's construction of the HoA, the term"additional rent" did not refer to rent in the ordinary sense. It was therefore logicallyinconsistent to apply the default interest rate for non-payment of rent to anyoutstanding sum due for "additional rent".[121] MMO submitted that no new deed of licence had been completed after the HoAso the original deed of licence remained in effect. Clause 6.1 of the original deed oflicence provided "[i]f the Licensee fails to pay any payment due to the Owner underthis licence on due date the Licensee will pay interest on the amount in arrears at therate of 12% per annum". MMO argued that, because of this, the interest rate had beencorrectly applied by the Judge.Analysis as to interest issue[122] The Judge's award of interest was not for interest on ordinary rent due underthe deed of licence.[123] The "additional rent" was not an amount due under the licence. It was anamount due under the HoA and was not for the use of the licence. It was for the fishNZBO were acquiring under the lease.[124] MMO were thus entitled to judgment for interest under the Interest on MoneyClaims Act 2016 for additional rental only for such time as rental was outstanding, asfrom the time proceedings were first filed on 23 October 2019 to the date of judgment.[125] NZBO's appeal as to the judgment for interest on overdue additional rental at12 per cent is thus allowed. As to that, the judgment is quashed. Counsel should usetheir best endeavours to file a joint memorandum as to the amount for which judgmentshould be given for interest. Such a memorandum must be filed by 27 January 2023.If the amount due has not been agreed, a memorandum as to the amount MMO claimsfor interest and how that is calculated is to be filed by 3 February 2023. Amemorandum in reply for NZBO is to be filed by 17 February 2023. The amount duefor interest will be determined on the papers.Costs[126] MMO has been the more successful party on this appeal. It is entitled to costson a 2B basis. If these are not agreed, a memorandum as to costs is to be filed forMMO by 3 February 2023. A memorandum in reply from NZBO is to be filed by 17February 2023. Any memorandum in reply for MMO is to be filed by 3 March 2023.The memoranda are to be no longer than four pages. Any costs issue will bedetermined on the papers.Solicitors:Izard Weston Lawyers, WellingtonEagles, Eagles and Redpath, Invercargill.