AAM Ltd v Exotica Enterprise Ltd - [2019] NZHC 1482

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-2850

[2019] NZHC 1482

BETWEEN
AAM LIMITED

First Plaintiff

MUMTAJ YUNUS AGARBATTIWALA
Second Plaintiff

AND

EXOTICA ENTERPRISE LIMITED

First Defendant

DARIUS KARANI
Second Defendant

MANUKA MASTERS LIMITED

Third Defendant

Hearing:
29 April, 1-3 May & 10 May 2019

(further submissions received 24 May and 7 June 2019)

Appearances:

F Pereira for First Plaintiff Second Plaintiff in person L Ponniah for Defendant

Judgment:

28 June 2019

JUDGMENT OF LANG J

This judgment was delivered by me on 28 June 2019 at 3.30 pm.

Registrar/Deputy Registrar Date……………

AAM LTD v EXOTICA ENTERPRISE LTD [2019] NZHC 1482 [28 June 2019]

Contents
The claims............................................................................................................. [4]
Approach.............................................................................................................. [6]

A The Plaintiffs’ claims................................................................................. [10]

First cause of action: pre-contractual misrepresentations by Mr Karani [10]

The scope and nature of the business to be sold [11]

The meeting on 22 August 2015  [15]
Due diligence  [23]
The events of 28 August 2015  [26]
30 August – 2 September 2015  [33]

The scope and nature of products sold by Exotica [46]

UMF certified products  [47]
Koura Bay wine  [51]
Endorsement by Simon Gault  [53]

Assignment of distribution rights and continuity of supply [55]

Exclusive distribution rights of premium brands  [56]
Love Manuka Lozenges  [62]
Sale of unlicensed products  [65]

Non-Performance of contract (Restraint of trade) [69]

Promise to introduce buyers  [71]
Net profit of $171,000  [78]
Restraint of trade  [83]

The scope and value of the tangible assets of the business [89]

Second cause of action: breach of turnover warranty................................. [100] Did AAM affirm the agreement for the sale and purchase of the business? . [101] Did the breach of the turnover warranty entitle AAM to cancel the agreement?
........................................................................................................................... [108]
Was the turnover warranty an essential term of the agreement? [109] Did breach of the term substantially reduce the benefit of the contract for the purchaser? [120]

What damages should be awarded for breach of the turnover warranty? [123]

Third cause of action: breach of s 9 of the FTA.......................................... [140]

The Exotica website [141]

Fourth cause of action: failure to deliver product........................................ [145]

Invoice 589  [146]
Invoice 609  [149]
The balance of $11,619.60  [151]

Fifth cause of action: failure to pay for goods taken on consignment [155]

Kauri table tops - $10,000 [156]

The remaining claims  [160]
Invoice 555 - $6,480  [161]
Invoice 556 - $1,040  [165]
Invoices 557, 558, 561, 567 and 575 - $975.82  [168]
Invoice 559 - $79  [169]
Invoice 562 - $516  [171]
Invoice 563 - $532  [174]
Invoice 564 and 565 - $163  [176]
Invoices 566 and 572 - $9360  [177]
Invoice 574 - $815.40  [181]
Invoice 576 - $1,586  [182]

Invoice 577 - $1,772 [185]

Summary [186]

BThe counterclaim..................................................................................... [187]

Summary.......................................................................................................... [194]

Interest.............................................................................................................. [196]

Costs.................................................................................................................. [200]

[1] Mr Darius Karani is the shareholder and director of the first defendant, Exotica Enterprise Limited (Exotica). Exotica manufactures and distributes novelty food and beverage products including honey-based beverages and wines.

[2] In early September…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] NZHC 1482
Decision Date: 28 June 2019

CaseChat Overview and Summary

In AAM Ltd v Exotica Enterprise Ltd the plaintiffs sought to recover losses they said they had suffered as a result of the conduct of the defendant and Mr Karani. The plaintiffs had purchased Exotica’s retail business in September 2015 but they said the purchase had proved to be a disaster. They brought five causes of action against the defendants, including claims based on fraudulent misrepresentation, breach of contract, failure to deliver goods and failure to pay for goods taken on consignment. Exotica filed a counterclaim against AAM for the balance of the purchase price, and for goods supplied to AAM but not paid for. The court found that the plaintiffs had failed to establish their claims in full or in part. It found that Exotica had breached a turnover warranty in the agreement for the sale of the business, but that AAM had affirmed the agreement for sale and purchase of the business by continuing to operate the business for approximately two years and nine months after it had become aware of the breach. It followed that AAM was not entitled to cancel the contract. The court also found Exotica was liable to pay AAM $25,000 in damages for breach of the turnover warranty. Exotica was liable to pay interest on that sum. AAM was also entitled to interest on two sums for which judgment was entered under the fourth and fifth causes of action. Exotica was entitled to interest on the balance owing for goods supplied to AAM but not paid for.

Orders