Revital Fertilisers was awarded damages by the High Court after alleging a breach of contract by waste and recycling management company Enviro NZ. Photo / George Novak
Revital Fertilisers was awarded damages by the High Court after alleging a breach of contract by waste and recycling management company Enviro NZ. Photo / George Novak
The company that operated Tauranga’s green waste composting facility for more than a decade has been awarded damages of $835,000 for a breach of contract.
Revital originally sought damages exceeding $24 million after negotiations with Enviro broke down in 2021 but reduced its claim to $3.57m following expert advice.
Revital also alleged a breach of fiduciary duty, and misleading and deceptive conduct from Enviro but these allegations did not succeed.
Justice Ian Gault issued his judgment in May after multiple days of hearings in May and July 2023 at the High Court at Auckland.
According to the judgment, Revital purchased an organics processing operation at Te Maunga in 2008 where it operated a green waste facility for Bay of Plenty residents and sold the composted product for more than a decade.
When Tauranga and Western Bay councils announced they were seeking proposals for kerbside collection services in 2019, Revital’s managing director approached Enviro Waste Services proposing they meet “regarding the Tauranga tenders to see if there are things we can do together on this”.
The parties met in November 2019 to discuss collaborating on the councils’ food and green waste processing contracts.
In February 2020, the companies signed a Letter of Intent for the acceptance and processing of food waste and green waste services and, in March, Enviro submitted its tender submission to the councils with itself as head contractor and Revital as a subcontractor, the judgment said.
Enviro won the tender and on November 16 entered into an agreement with Tauranga City Council to take over the Te Maunga site’s lease from March 1, 2021. On November 23, the council notified Revital its lease would terminate on February 28, 2021.
In January and February, the two companies negotiated towards a proposed sublease and subcontracts. Revital found parts of the contracts were not as expected and contained “significant gaps” such as no mention of food waste. Enviro notified Revital it wanted to conduct environmental and safety audits before committing to any formal subcontracts or subleases. No agreement was reached before the lease terminated and Enviro became the head lessee on March 1.
That day, Enviro’s health and safety consultant visited the Te Maunga site. Revital’s site manager was not expecting the visit but allowed it.
The consultant’s report, sent to Enviro on March 3, identified issues such as an outdated health and safety management system and a “reactive” approach to risk management.
The report was emailed to Revital, and Enviro’s in-house legal counsel also wrote requesting the company cease all operations at Te Maunga by close of business that day, citing the “serious breaches of the health and safety laws and requirements” detailed in the report. The letter also stated Revital had until 5pm on March 5 to satisfy Enviro that all health and safety requirements were met, or else “EnviroNZ reserves all its rights to permanently prevent [Revital] access to the site”.
Revital responded the same day saying it did not accept Enviro’s position and would continue operating as normal. On March 4, Revital sent another email, stating its view that “EnviroNZ has adopted this position to undermine our position” concerning negotiations.
Enviro NZ made a successful bid for the Tauranga City and Western Bay of Plenty District kerbside collection services in 2020.
“We consider your approach to be a clear breach of your obligation to be negotiating in good faith,” the email read, according to the judgment. Revital also said it would be engaging its own independent health and safety review, which was later undertaken on March 9.
The next day, Enviro asked Revital to complete a health and safety self-audit form then Enviro would engage an independent consultant. Revital reminded Enviro an independent audit was already under way, but Enviro responded it had not agreed to that.
The Revital-commissioned report stated Revital’s health and safety systems were “robust”. Revital suggested its auditor meet Enviro’s auditor on-site to discuss their respective findings.
Further communication continued between the companies, with Enviro insisting on completion of the self-audit form and Revital continuing to recommend a joint site visit.
On March 29, Enviro withdrew from all negotiations with Revital, citing the health and safety breaches in the March 1 report and Revital’s “failure to demonstrate” it had taken necessary steps to rectify those issues.
Justice Gault investigated whether Enviro had undertaken all reasonable steps to enter into an agreement. He found Enviro kept Revital at a “considerable distance” in negotiating with the councils and delayed negotiations with Revital.
“The lack of information provided to Revital in that period was problematic,” Gault said in his judgment.
Gault concluded “Enviro did not take all reasonable steps required”.
As to Enviro’s health and safety concerns, Gault said they were likely “somewhat overstated given the commercial context”. Because of that, Gault said Revital “overreacted” to Enviro’s suspension in a “confrontational way” – declining to complete the self-audit form and refusing a neutral inspector. That heightened Enviro’s concerns – an “unfortunate combination”, Gault said.
“Indeed, the evidence suggested that Enviro was more concerned at the time about Revital’s confrontational response to [Enviro’s] report than to the health and safety issues themselves,” he said.
Gault said Revital had succeeded in its action for breach of contract and awarded Revital damages of $835,000.
Sonya Bateson is an assistant news director at the Bay of Plenty Times and Rotorua Daily Post with more than a decade of experience reporting in the Bay of Plenty region.
