The High Court in Pure Elite Holdings Limited v Bodco Limited  NZHC 2191 considered the enforceability of an agreement to agree in relation to the capitalisation of an infant milk formula plant.
Danpac (NZ) Limited was a company that had been formed with the intention of building an infant milk formula plant. Pure Elite Holdings Limited (PEH) was interested in acquiring such a plant. To this end, the parties (amongst others) entered into 'heads of agreement', indicating an intention to collaborate, particularly regarding the capitalisation of Danpac. Though some steps were taken in accordance with the heads of agreement, the relationship ultimately fell through, and no funding was provided by PEH.
The Court found that heads of agreement indicated that the parties intended to create a binding legal relationship. However, there were matters that had been left to further agreement that went to the heart of the bargain: the relative capital contributions, the timing of those contributions, and what the relevant shareholdings would be. The purported contract provided no objective means of agreement, and there were no machinery or reference points from which the Court could ascertain the scope of the obligations the parties intended to assume. This meant that, at least to the extent of the capitalisation of Danpac, the purported contract was no more than an 'aspirational declaration of mutual intent'. It did not give rise to an enforceable agreement.
Despite this, the Court held that the parties had, in a broad sense, entered into a joint venture by working towards a common end. However, this did not in itself give rise to a fiduciary relationship, and there was nothing that indicated that the parties were entitled to repose or did repose trust and confidence in each other. In capitalising Danpac, each party was entitled to consider its own interests. This was confirmed by the fact that the purported contract entitled each party to get its own legal and tax advice.
See the Court's decision here.