Alexander v Clegg - [2004] NZCA 36

IN THE COURT OF APPEAL OF NEW ZEALAND
CA168/02
BETWEENEDGAR ALEXANDER

Appellant
ANDGRAHAM CORNELL

Second Appellant
ANDBETTALIFE INTERNATIONAL (NZ) LIMITED

Third Appellant
ANDCOFIE HOLDINGS PTY LIMITED

Fourth Appellant

ANDGRAEME CLEGG

First Respondent
ANDNEW IMAGE INTERNATIONAL LIMITED

Second Respondent

Hearing:26 & 27 May 2003

Coram:Keith J
Anderson J
Glazebrook J
Appearances: J G Miles QC and Z G Kennedy for Appellants

A H Waalkens and J Anderson for Respondents

Judgment:25 March 2004

JUDGMENT OF THE COURT DELIVERED BY ANDERSON J

Nature and circumstances of the appeal
[1]       This appeal and cross appeal against a judgment of the High Court (Salmon J) represent another round in a dispute between competitors in the business of network marketing. Such business involves the distribution of goods through a network of individuals, any of whom may have a subsidiary network, resulting in a complex schematic of distribution traceable from a primary distributor who shares in the profits of sales made by subsidiaries, as do the subordinate heads of networks.
[2]       The background and development of the dispute are discussed in a prior decision of this Court, New World Property Ltd v New Image International Ltd & Anor CA151/01 26 March 2002, and may be put briefly, at this stage.
[3]       Mr Clegg, the first respondent, founded the second respondent in 1984. He remained the sole shareholder. The company manufactures health and so-called “lifestyle” products and distributes by networks. It operates in New Zealand and is the parent company of subsidiaries doing similar business in Australia and some Asian countries. One of the latter, until the end of 1999, was Hong Kong.
[4]       Mr Alexander, who had been involved as a distributor with the Australian company from its inception in 1983, was recruited by Mr Clegg for the New Zealand company in 1988. He became the Chief Executive Officer of the Australian company in 1990 and returned to New Zealand in 1993 as International Vice President. In 1995 he resumed as Chief Executive Officer in the Australian company and so he remained until resigning in September 1998. He left the employment of New Image the following month, saying that he intended to pursue a business venture in the automotive industry.
[5]       Mr Cornell joined New Image in Australia as a distributor in 1993. In April 1995 he entered into a joint venture agreement with New Image, involving the purchase by his nominee company of 26% of New Image’s Hong Kong subsidiary. He became Managing Director of New Image Hong Kong from 1 May 1995 and was appointed Principal Distributor for Hong Kong.
[6]       The Hong Kong Company initially traded profitably but by May 1998 had become insolvent. Negotiations between Mr Clegg and Mr Cornell resulted in an agreement for the former to buy out the latter. Mr Cornell’s executive position with the company ceased from 11 August 1998.
[7]       Both Mr Alexander and Mr Cornell were engaged on terms which included trade restraints and provisions as to confidentiality. The restraints proscribed the recruitment or solicitation of New…

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.

Continue reading Alexander v Clegg

Details

AGLC: Alexander v Clegg [2004] NZCA 36
Case: [2004] NZCA 36
Decision Date: 25 March 2004

CaseChat Overview and Summary

This appeal against a High Court judgment represents another round in a long-standing dispute between competitors in the business of network marketing. The first respondent, Mr Clegg, founded a company that manufactured health and lifestyle products and distributed them through networks. The appellants were recruited by Mr Clegg and became involved in the Australian and New Zealand companies, with Mr Alexander becoming the Chief Executive Officer of the Australian company and Mr Cornell becoming Managing Director of the Hong Kong subsidiary. The appellants left the employment of the company in late 1998 and early 1999 and established a competing business. Mr Clegg responded by sending a circular to distributors warning them of the dangers of joining the appellants' company. The appellants brought proceedings for defamation and injurious falsehood. The High Court found that the defamatory words were protected by qualified privilege and that the claim for injurious falsehood failed because the appellants had not proved malice. The appellants appealed against the judgment, arguing that the circular contained defamatory words that were not protected by qualified privilege and that the claim for injurious falsehood should succeed because the appellants had proved malice. The respondents cross-appealed, arguing that the Judge had erred in excluding certain financial statements from the protection of qualified privilege and in assessing damages. The Court of Appeal found in favour of the respondents on both the appeal and cross-appeal. The Court held that the publication was protected by qualified privilege and that the claim for injurious falsehood failed because the appellants had not proved malice. The Court also found that the Judge had not erred in excluding certain financial statements from the protection of qualified privilege or in assessing damages. The appeal fails and the cross-appeal succeeds. Judgment should be entered in the High Court in favour of the respondents. The respondents are also entitled to costs in this Court in the sum of $12,000 together with usual disbursements as fixed by the Registrar.

Orders