Apark Limited v Nero Noctis Private Wealth Pty Limited
[2013] NZHC 468
•11 March 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV2011-404-006981 [2013] NZHC 468
BETWEEN APARK LIMITED Plaintiff
ANDNERO NOCTIS PRIVATE WEALTH PTY LIMITED
First Defendant
ANDGRANT THOMAS Second Defendant
Hearing: 10 July 2012
Counsel: M Kan for plaintiff
K Harkess for defendants
Judgment: 11 March 2013
JUDGMENT OF ASSOCIATE JUDGE ABBOTT
This judgment was delivered by me on 11 March 2013 at 5pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors:
D Wang, G W Lawyers, PO Box 15799, New Lynn 0640
K Harkess, McElroys, PO Box 835, Auckland 1140
Counsel:
M Kan, PO Box 105228, Auckland 1143
APARK LIMITED V NERO NOCTIS PRIVATE WEALTH PTY LIMITED HC AK CIV 2011-404-006981 [11
March 2013]
[1] The plaintiff, Apark Ltd, is a New Zealand registered company that acts as the trustee of Apark Trust, a trust that trades in property.
[2] The first defendant is the trustee of a unit trust that operates from an office in Adelaide, South Australia, and carries on business as a mortgage and finance broking company (under the trading name Adelaide Finance Agency). The second defendant is a director of the first defendant, and is also employed by the unit trust as a finance broker.
[3] The plaintiff used the services of the defendants when seeking to raise finance to complete property transactions in New Zealand. It claims that it invested approximately $4.5 million upgrading properties that it had agreed to purchase and agreed to vary the agreements (including payment of additional deposits), before settling the purchases, in reliance on oral and written representations, statements and promises made by the defendants that overseas funds would be available in time to settle the purchases. The plaintiff says that it lost the full amount of its investment when the vendor was placed into receivership, and the receiver cancelled the agreements. It contends that the defendants are liable to it under several causes of action.
[4] The defendants have filed a protest to the jurisdiction of the Court, and have applied to dismiss the proceeding, on the grounds that they reside in Adelaide, that the claims pleaded do not come within any of the categories that can be commenced against them without leave, and that the Court should not exercise its discretion to assume jurisdiction as New Zealand is not the appropriate forum for determination of these claims.
[5] The plaintiff opposes the defendants’ application, and cross-applies for dismissal of their notice of appearance in protest to jurisdiction. It contends that the claims do come within the categories of claims that can be served outside New Zealand without leave, but says that if any claims cannot be brought without leave, and the Court does not exercise its discretion to permit them to proceed, it should be
entitled to amend its claim so as to proceed only with claims that can proceed without the need for leave.
Change of name
[6] At the time of commencing this proceeding, the plaintiff named the first defendant as “the Trustee of the AFA Unit Trust trading in the name of Adelaide Finance Agency”. At the hearing, counsel for the plaintiff sought leave to amend the name of the defendant to Nero Noctis Private Wealth Pty Ltd. That application was not opposed. An order was made, accordingly, in the hearing. However, for ease of reference when referring to the name of the first defendant in this judgment I will use the description AFA.
Background
[7] It is necessary to give a brief account of the background to, and history of, the
parties’ relationship as context for the parties’ contentions.
[8] Between 18 August and 2 September 2009 the plaintiff agreed to buy three properties at Karapiro, in the North Island of New Zealand, from Tony Tay Group Ltd and related entities (TTG). The properties were, at that point, part of what was known as the Karapiro Resort project. At that time TTG was in financial difficulty, facing a mortgagee sale of the properties. The director of TTG (Mr Tay) was a personal friend of the director of the plaintiff, Mr Shu. The parties agreed on a combined price for the three properties of $13 million. The agreements were subject to finance being obtained by 26 August 2008, with settlement due on 22 September
2008.
[9] The finance condition was not satisfied. Nevertheless, Mr Tay asked Mr Shu to have the plaintiff declare the agreement unconditional, apparently to avoid a mortgagee sale. On 4 September 2008, after further negotiations, the parties agreed to vary the terms of the agreements by reducing the purchase price to $11 million. At the same time the plaintiff entered into an agreement to purchase two more properties at Maungataroto for a further $3 million. The plaintiff agreed to make all
agreements unconditional, and paid a deposit of $100,000. The purchase price was payable partly in cash and partly by goods referred to as Drapac products.
[10] The plaintiff claims that up to 30 April 2009 it spent a provable $2,500,000 (exclusive of GST) upgrading the properties (with a view to operating them eventually as a health resort). It has identified specific expenditure of $1,250,000 (exclusive of GST) after 19 December 2008.
[11] The plaintiff was unable to obtain finance in New Zealand to allow it to settle the purchases on 22 September 2008. It started looking overseas, and engaged two Australian agents, CreditAble Pty Ltd and Matrix Mortgage, to assist. CreditAble approached the first defendant in mid November 2008 and enlisted its services. From that point until 18 December 2008, the first defendant acted as intermediary between the plaintiff’s agents and J W Capital Corporation Pty Ltd (JWCL), the (local) agent of several financial institutions, including a Spanish bank, Banco Santander.
[12] On 18 December 2008 Matrix Mortgage told the second defendant that Mr Shu wished to deal directly with the first defendant. Mr Shu made contact with the second defendant the following day, and from that time most if not all communications were direct between them.
[13] Initially the defendants tried to facilitate a loan from Santander. Santander issued a conditional approval letter, but later withdrew it when a local bank (CBA) through which the loan was to be made could not meet regulatory requirements. In March 2009, the defendants started work on securing finance (again through JWCC) from another overseas lender, UBI Assets Sdn Bhd (UBI). A conditional loan offer was obtained from UBI but did not proceed because security properties did not reach required valuation. UBI then suggested (on 30 April 2009) that finance could be provided under a complicated transaction involving additional forms of security including an insurance bond. After taking professional advice, the plaintiff instructed the defendants to pursue that prospect.
[14] The settlement date for the transaction was extended on several occasions, but no firm offer of finance was ever made. Throughout this period the defendants relayed information about the financier’s requirements, and encouraged the plaintiff to keep pursuing the finance. On 29 September 2010 TTG was put into receivership, following which the receiver cancelled all agreements.
[15] The plaintiff served this proceeding on the defendants in Adelaide, without seeking leave of the Court. The defendants filed a notice protesting jurisdiction and brought their application to dismiss.
Contentions underlying the plaintiff ’s claims
[16] The plaintiff contends that from that time the second defendant made statements to it, both orally and in writing, representing and promising that finance would be available within a short period of time, and that it acted in reliance on those statements:
(a) On 2 March 2009 the plaintiff and TTG entered into a further agreement under which the plaintiff covenanted to settle all purchases on or before 30 March 2009, to pay TTG a further non-refundable deposit of $50,000 on or before 4 March 2009, and to transfer to TTG ownership of Drapac products having an alleged value slightly in excess of $4.5 million as a further non-refundable deposit. The plaintiff also agreed to pay penalty interest of $3,987 per day from 6
March 2009 until the date of settlement, in a lump sum at time of settlement. The plaintiff says it paid the cash deposit and transferred Drapac products to a value of $1,250,000 (exclusive of GST).
(b)On 16 October 2009 the plaintiff and TTG entered into yet another agreement (which the plaintiff describes as the master agreement) under which the agreements on all properties were made interdependent, the settlement date was changed to 27 November
2009, and all agreements were to come to an end if settlement did not occur by that date. In that latter event, TTG agreed to provide the
plaintiff with 5000 vouchers for the Karapiro resort, with a face value of $100 (i.e. to a face value of $500,000).
(c) Finance was not available to allow the plaintiff to settle on or before
27 November 2009. On that date the second defendant sent an email to Mr Shu with a letter from UBI to the plaintiff in which UBI explained the delay, confirmed that loan documentation was being prepared, and sought a written acknowledgement from both the plaintiff and TTG that they remained committed to settlement of the properties within a workable timeframe. The letter stated that it was not to be construed as an offer as to finance until loan documents were issued. The plaintiff and TTG provided that acknowledgement by signing and returning the UBI letter, after amending it to provide that they were committed for a further 58 working days from 16 October
2009.
[17] There was no further formal extension of the settlement date, but the plaintiff and TTG kept the agreements alive until the TTG went into receivership, and the receiver cancelled them.
[18] The plaintiff says that as a result of the cancellation of the agreements by the receiver it has lost a total of $4,462,500 comprising the cash deposits ($150,000) together with the stock (the Drapac products) provided as further deposit under the varied agreements to a value of $1,250,000 plus GST ($1,437,500), and the
$2,500,000 plus GST ($2,875,000) invested in upgrading the Karapiro properties. It says that $2,925,000 of this was incurred after it began dealing directly with the defendants, and in reliance on the defendants’ representations and promises that finance would be available “within a short period”.
[19] The plaintiff contends that at various times it had options open to it to recover all or a substantial part of its investment (because of the personal relationship between Mr Shu and Mr Tay and because the main purpose of entering into the
transactions had been to help Mr Tay through his financial crises),1 but did not take
1 One option advanced was jointly to sell the properties to a third party; another was to have the
up those options, relying on the defendants’ representations and promises, and lost
the opportunity to renegotiate or to get finance elsewhere.
[20] On or about 9 December 2009 the plaintiff and first defendant entered into an agreement setting out terms for their relationship. One of those terms was that if the first defendant failed to obtain a loan offer which enabled the plaintiff to settle all properties by the settlement date (four weeks from receipt of further information requested by the financier), the first defendant would refund the plaintiff AUD$64,292. The plaintiff says that the further information was provided, so that the first defendant was under this obligation from January 2010.
The alleged representations
[21] Because three of the four causes of action that the plaintiff wishes to pursue rely on the alleged representations, statements and promises of the defendants, a brief summary of the allegations about them, and how the plaintiff says it was affected by them, is needed.
[22] The plaintiff says that the representations were both oral and written. The pleading does not distinguish between them, but in his affidavit Mr Shu contends that the oral representations, statements and promises were more certain than the written statements that overseas funds were available within a short time.2 The plaintiff pleads that they were made in telephone conversations or messages, and were made continuously from 19 December 2008 until 29 September 2010. This allegation is contained in several paragraphs of the statement of claim, dealing with the representations in successive periods:
(a) In paragraph 14 of the statement of claim, the plaintiff alleges that in the period from 22 December 2008 to 30 March 2009 the second
defendant:
Maungataroto properties (allegedly having a market value of $4 million) transferred to it in consideration for the total sum invested by the plaintiff (allegedly $4,462,500).
2 Paragraph 37.
...for many time [sic] gave oral or written representations, statements and promises through telephone conversation, messages, and emails with Mr Shu confirming that a final letter of approval by overseas financial organisations was available within a short time, normally within a couple of days.
(b)This allegation is repeated3 for periods leading up to and immediately following the master agreement of 16 October 2009, and following the last date of settlement formally agreed (21 January 2010). The plaintiff also pleads a slightly different allegation in respect of two periods following 27 November 2009 (leading up to and then subsequent to the agreement of 9 December 2009 as to the terms of
engagement of the defendants):4
...Mr Thomas still continuously confirmed through telephone conversation, messages, and emails that the final settlement was approaching shortly.5
[23] No particulars are pleaded of the oral allegations, either as to the date they are alleged to have been made, or as to words used. In an affidavit in support of the plaintiff’s opposition, Mr Shu repeats the allegations, again without providing any detail of them.
[24] The plaintiff has pleaded particulars of the written representations by referring to specific email correspondence from the second defendant to Mr Shu, with correspondence attached from the agents or financial institutions with whom the defendants were dealing.6 The pleaded emails and attached correspondence are before the Court as exhibits to the affidavits filed, together with some additional email correspondence, so that the precise terms of the statements comprising the
alleged written representations are available.
3 Paragraphs 23, 29 and 36.
4 Paragraphs 32 and 35 of the statement of claim.
5 The word shortly is omitted from the pleading in paragraph 35, but that is not material.
6 Paragraph 14 of the statement of claim details email correspondence up to 30 March 2009 (references to 2011 are clearly typographical errors), and further email correspondence on 30 April
2009, 5 August 2009, 28 September 2009, 27 November 2009 and 9 December 2009 is pleaded in paragraphs 22, 24, 27, 31 and 34 respectively.
[25] As well as the representations I have mentioned, the plaintiff also pleads7 that from 30 April 2009 to 29 September 2010 the second defendant continued to make representations “that the overseas funds were available”,8 and that Mr Shu was dissuaded by the second defendant from looking at other solutions.9
[26] Mr Shu has referred to both the pleaded documents and to correspondence from himself to the second defendant in his affidavit in support of the plaintiff’s opposition, but this evidence does not add anything significant to the written terms of the defendants’ email correspondence or the attachments to it.
[27] The plaintiff pleads that it relied on these unspecified oral representations and the particularised written representations:
(a) to invest money in upgrading the facilities of the Karapiro resort;10
(b) to enter into the variation agreement on 2 March 2009;11
(c) to enter into the master agreement on 16 October 2009;12 and
(d)to sign and return a copy of UBI’s letter of 26 November 2009 confirming that it was committed to settlement of the agreements.13
[28] The plaintiff then pleads that as a result of the representations it lost any chances to negotiate with TTG to find mutually acceptable solutions, or to get
finance from other institutions.14
7 Paragraph 20 of the statement of claim.
8 Paragraph 22 of the statement of claim, referring to an email on 30 April 2009.
9 Paragraph 22 of the statement of claim.10 Paragraph 15.
11 Paragraph 16.12 Paragraph 28.
13 This is not expressly pleaded but may be inferred from paragraphs 32 to 34 of the statement of claim.
14 Paragraph 20 of the statement of claim relying on the pleading of events subsequent to 30 April
2009 as particulars.
Legal principles
[29] The Court does not lightly exercise its discretion to assume jurisdiction over foreign parties:15
The jurisdiction of domestic courts is essentially territorial in nature. Where the legislature permits service of proceedings in overseas jurisdictions, it is an exception to the principle of territoriality. A body of private international law has established the general principles upon which a domestic court may assume jurisdiction over foreign parties. Nevertheless ... the Court does not lightly exercise its discretion to assume jurisdiction over foreign parties. This principle was adopted as long ago as 1885 in Société Générale de Paris v Dreyfus Bros16 and has been followed in numerous cases since including the decision of this Court in Kuwait Asia Bank v National Mutual Life Nominees Ltd (No 2).17
The principle has been recently confirmed by the Supreme Court in Poynter v Commerce Commission.18
[30] Counsel were agreed on the principles that the Court must take into account when considering a protest to jurisdiction by parties served overseas without leave:19 the Court must dismiss the proceeding unless the party effecting service can establish that20
(a) it has a good arguable case that its claim falls wholly within one or more of the circumstances in r 6.27; and
(b)the Court should assume jurisdiction by reason of the matters set out in r 6.28(5)(b) to (d),
or alternatively that21
(a) if the party had applied for leave under r 6.28, leave would have been granted, and
15 Wing Hung Printing Company Ltd v Saito Offshore Pty Ltd [2010] NZCA 502, [2011] 1 NZLR 754 [Wing Hu] at [27] and [28].
16 Société Générale de Paris v Dreyfus Bros (1885) 29 CH D 239 at 243.
17 Kuwait Asia Bank v National Mutual Life Nominees Ltd (No 2) [1989] 2 NZLR 50 (CA).
18 Poynter v Commerce Commission [2010] NZSC 38, [2010] 3 NZLR 300 at [43].
19 Refer r 6.29 of High Court Rules.
20 R 6.29(1)(a).21 R 6.29(1)(b).
(b)the failure to apply for leave should be excused in the interests of justice.
[31] The party effecting service must satisfy the Court as to the matters set out in r
6.28(5)(b) – (d) regardless of whether it claims an entitlement to serve without leave or that if it had applied leave would have been granted. Those matters are:
(b) there is a serious issue to be tried on the merits; and
(c) New Zealand is the appropriate forum for the trial; and
(d) any other relevant circumstances support an assumption of jurisdiction.
[32] When considering a case advanced under 6.27(1)(a), the Court does not attempt to assess the merits of the case, but merely whether the claim falls within one or more of the circumstances in r 6.27. This is largely a factual question to be assessed on the basis of the pleadings and the evidence before the Court. It may, however, require consideration of questions of law, or of mixed law and fact such as
whether a contract was made in New Zealand.22 A conclusion as to an arguable case
may substantially answer whether there is a serious issue to be tried (in the second stage of the inquiry).23
[33] When addressing whether there is a serious issue to be tried on the merits (in the second stage of the inquiry, under r 6.27(1)(b)), the Court must be satisfied that there is a serious legal issue to be tried and a sufficiently strong factual basis to support the legal right asserted.24 In making that assessment, and where the principal documentary evidence appears to be available, the Court is not required to accept uncritically vague or improbable assertions of a good arguable case that contradicts that evidence.25
[34] In determining applications in a case involving multiple causes of action, the fact that a cause of action falls outside r 6.27 does not mean that the entire
proceeding must be dismissed, as the party effecting service can endeavour to
22 Wing Hung, above n 15 at [33].
23 Wing Hung at [34].
24 Wing Hung at [37].25 Stone v Newman (2002) 16 PRNZ 77 (CA) at [25].
establish a case under r 6.29(1)(b) for the Court to exercise its discretion to assume jurisdiction, or that the protest to jurisdiction can be dismissed on terms requiring the plaintiff to file an amended statement of claim that excludes an offending cause of action.26
[35] When considering the alternative approach under r 6.29(1)(b) of making a case for leave, the party doing so must show a real or substantial connection with New Zealand27 as well as the other factors for assuming jurisdiction in r 6.28(5)(b) – (d).28
The pleaded causes of action
[36] The plaintiff has pleaded five causes of action arising out of the alleged oral and written statements and promises made by the defendants to it (through its director, Mr Shu):
(a) A claim of misleading and deceptive conduct in breach of s 9 of the
Fair Trading Act 1986.
(b) A claim of negligent misstatement at common law.
(c) A claim (stated to be of estoppel) that the defendants by the continuing statements and promises have encouraged a belief or expectation as to availability of the overseas finance which the plaintiff has relied upon to its detriment: this is the claim which the plaintiff seeks to amend to one of promissory estoppel so as to seek recovery of the expenditure incurred in reliance on the statements and promises.
(d)A claim of deceit (that the statements were clearly untrue, and were made without an honest belief as to their truth and to induce the
26 Wing Hung, above n 15, at [5] and [64] – [69].
27 R 6.28(5)(a).
28 This element is not required in a case under r 6.29(1)(a), presumably because it is established when a party meets one of the circumstances in r 6.27(2) for serving without leave.
plaintiff to act on them): the plaintiff is no longer advancing this claim.
(e) A claim that the defendants are in breach of the agreement of 9
December 2009 by failing to pay the agreed sum of AUD$64,292 when the loan finance was not available by the agreed date.
The application
(a) The defendants’ case
[37] The defendants say that the proceeding should be dismissed because the plaintiff has not established that it has an arguable case that each of the causes of action comes within one or more of the categories specified in r 6.27(2), or that there is a serious issue to be tried on the merits on each of these causes of action (contending that there is an insufficient factual basis for the allegations in relation to the representations or for the claims in estoppel or the abandoned claim for deceit). The defendants also contend that even if it is arguable that a cause of action comes within one of the categories in r 6.27(2), a New Zealand Court is not the appropriate
forum for the dispute as the contract for services was formed in Australia29 and was
performed outside of New Zealand (by procuring loan finance from an overseas source).
[38] As to the possible alternative basis, the defendants say that the plaintiff has not established that leave would have been granted (if sought) or that the interests of justice require that the failure to apply for leave be excused. As well as saying that the plaintiff has not shown a sufficient factual basis for its allegations, the defendants say that there is no real and substantial connection with New Zealand.
(b) The plaintiff ’s response
[39] The plaintiff contends that it has a good arguable case for its claim under the
Fair Trading Act, for negligent misstatement, and for breach of contract. It has
29 Relying on Entores v Miles Far East Corporation [1955] 2 All ER 493 (CA).
elected not to pursue the cause of action in deceit (due to the resources required to collect the necessary evidence and taking into account background information disclosed by the second defendant) and that the cause of action for estoppel is more appropriately advanced as a claim for promissory estoppel. It seeks an opportunity to file an amended statement of claim to reflect these changes (in accordance with r
5.49(8) of the High Court Rules).
[40] The plaintiff further says that the evidence before the Court is sufficient to show a serious issue to be tried on the merits of the surviving causes of action, and that New Zealand is the most suitable forum, as it has the most real and substantial connection to the matters in dispute (contending that the dispute is New Zealand centred).
[41] The plaintiff submits that the defendants’ protest should be dismissed either on the ground that leave to serve in Australia was not required, or on the ground that leave would have been granted if sought and it is in the interests of justice that the proceeding be brought in New Zealand.
(c) The questions for determination
[42] The questions to be decided on this application are:
(a) Is there an arguable case that leave to serve overseas was not required for the surviving claims of breach of the Fair Trading Act, negligent misstatement, promissory estoppel (assuming amendment of the existing claim of estoppel) and breach of contract;
(b)Should the Court assume jurisdiction having regard to the merits of the causes of action and the appropriate forum for the dispute;
(c) In respect of causes of action which require leave to serve out of New Zealand, would leave would have been granted (had it been sought) and should the plaintiff’s failure to apply be excused in the interests of justice.
Is there a good arguable case that the claims come within r 6.27(2)
(a) Breach of Fair Trading Act
[43] A claim for breach of the Fair Trading Act can be served out of New Zealand without leave30 where:
(i) any act or omission to which the claim relates was done or occurred in New Zealand; or
(ii) any loss or damage to which the claim relates was sustained in New
Zealand; or
(iii) the enactment applies expressly or by implication to an act or omission that was done or occurred outside New Zealand in the circumstances alleged; or
(iv) the enactment expressly confers jurisdiction on the court over persons outside New Zealand....
[44] Section 9 of the Fair Trading Act prohibits a person, acting in trade, from engaging in misleading or deceptive conduct. The plaintiff says that the conduct in this case is the representations as to availability of finance (the provision of that finance being the service for which the defendants were engaged). It says that the representations were made to it in New Zealand because that is where the oral and written communications were received. It says that the loss or damage was sustained in New Zealand. It also says that the Act expressly applies to this conduct by virtue
of s 3 of the Fair Trading Act 1986.31
[45] The defendants accept that the Fair Trading Act applies to parties to the extent that their misleading conduct occurs in New Zealand.32 However, they say that there is no good arguable case that the acts in this case were done in New Zealand or that the loss or damage was sustained in New Zealand and that the other
provisions of r 6.27(2)(j) clearly do not apply.
30 R 6.27(2)(j).
31 Relying on Commerce Commission v Koppers Arch Wood Protection (NZ) Ltd [2007] 2 NZLR 805 at [76], and Commerce Commission v Discount Premium Holidays Ltd HC Auckland CIV-2007-404-
6451, 16 November 2007, Cooper J at [14] – [16].
32 Wing Hung, above n 15, at [104].
[46] In Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd the Court of Appeal found that a representation in an email sent by an overseas person to a New Zealand resident in New Zealand was an act done in New Zealand (for the purpose of establishing a good arguable case under r 6.27(2)(j)): 33
[106] We agree with the Judge that Saito established a good arguable case that this cause of action falls within r 6.27(2)(j) (claims under an enactment) on the basis that an act or omission to which the claim relates was done or occurred in New Zealand. The representation alleged was communicated by emails sent to and received by a New Zealand resident in New Zealand by Mr Kurdin with Mr Lau’s knowledge. The representation related directly to the supply of services in New Zealand to a New Zealand-based company. The representation alleged was acted on in New Zealand when Saito agreed to terminate the existing licence and gave up its rights to the existing IT system. This is said to result in loss or damage occurring in New Zealand.
[47] Counsel for the defendants sought to distinguish Wing Hung on the basis that the defendants protesting jurisdiction were parties to a joint venture that operated partly in New Zealand and had its headquarters in New Zealand, they were providing services to the joint venture company in New Zealand, and the representations related directly to those services. She submitted that was to be contrasted with the present case where the defendants were approached by the plaintiff ’s Australian agent, the alleged representations were made by the defendants in Australia, and the services were being undertaken in Australia (albeit for a New Zealand-based client) and the representations related to those services.
[48] I am not persuaded that this is a valid basis for distinguishing Wing Hung where, as with the present case, the representations are alleged to have been made in telephone conversations with, or email correspondence sent to and received by, a New Zealand resident in New Zealand. In this case the service to which the representations related was the provision of finance for a transaction in New Zealand. Even if the majority of the defendants’ acts were carried out in Australia, part of the service was communicating with the New Zealand client. I consider that it is arguable that there was an act to which the claim relates done in New Zealand so
as to entitle the plaintiff to serve this claim without leave.
33 Wing Hung, above n 15, at [106].
[49] There is support for this view in the decision of this Court in Commerce Commission v Discount Premium Holidays Ltd34 where the Court followed Australian cases on claims under Australia’s Trade Practices Act that found that representations made by persons outside Australia to persons in Australia by telephone and facsimile were made in Australia where they were received, and held that telephone calls to persons in New Zealand placed by marketers located in
Melbourne could be considered breaches of the Fair Trading Act occurring in New
Zealand.
[50] Additionally, the consequences of the representation are alleged to be loss or damage which clearly has been suffered in New Zealand. I find that that is also sufficient to constitute a good arguable case for the purpose of service without leave.
[51] I do not accept the plaintiff’s argument that the case also falls under r
8.7(2)(j)(iii) and (iv). Section 3 of the Fair Trading Act extends the application of the Act to conduct outside New Zealand
...by any person resident or carrying on business in New Zealand to the extent that such conduct relates to the supply of goods or services...within New Zealand.
The defendants are not resident or carrying on business in New Zealand.
[52] This leaves the second stage of the inquiry under r 6.26(1)(a). I will deal with that after addressing the arguable case under r 6.29(1)(a) for the other causes of action.
(b) Negligent misstatement
[53] The claim for negligent misstatement is a claim in tort. Such claims can be served without leave in the following circumstances:35
(a) when a claim is made in tort and—
34 Commerce Commission v Discount Premium Holidays Ltd, above n 31, at [16].
35 R 6.27(2)(a).
(i) any act or omission in respect of which damage was sustained was done or occurred in New Zealand; or
(ii) the damage was sustained in New Zealand.
[54] The plaintiff contends that this claim was properly served (without leave) because the representations constituted a negligent misstatement36 made in communications received and acted upon in New Zealand,37 and because the damage was sustained in New Zealand.
[55] The defendants argued that the plaintiff has not satisfied either requirement of the rule, relying on their submissions in respect of the Fair Trading Act claim that the alleged acts occurred in Australia.
[56] I find that there is a good arguable case that the plaintiff did not require leave, both on the basis that the tort is committed in New Zealand where a negligent misrepresentation is made by a person in a foreign country by email or telephone to a person in New Zealand,38 and that the suffering of damage (being part of the cause of action) in New Zealand is sufficient.39
(c) Promissory estoppel
[57] The plaintiff contends that a claim for promissory estoppel can be served out of New Zealand without leave as it is a claim in respect of its contract with the defendants:40
when a contract sought to be enforced or rescinded, dissolved, annulled, cancelled, otherwise affected or interpreted in any proceeding, or for the breach of which damages or other relief is demanded in the proceeding—
(i) was made or entered into in New Zealand; or
36 Information or advice given to a known recipient for a specific purpose known to the maker, and relied upon by the maker: Scott Group Ltd v MacFarlane [1978] 1 NZLR 553 (CA).
37 Fitzroy Engineering Ltd v Basic HC Wellington CP258/95, 14 May 1996.
38 Dicey and Morris on the Conflict of Laws (14th ed) at p389; Fitzroy Engineering Ltd v Basic at 8 (citing the passage from Dicey and Morris in an earlier (12th) edition.
39 Longbeach Holdings Ltd v Bhanabhai & Co Ltd [1994] 2 NZLR 28 (CA), applied in Biddulph v
Wyeth Australia Pty Ltd [1994] 3 NZLR 49 (HC) and Fitzroy Engineering Ltd v Basic.
40 R 6.27(2)(a).
(ii) was made by or through an agent trading or residing within New Zealand; or
(iii) was to be wholly or in part performed in New Zealand; or
(iv) was by its terms or by implication to be governed by New Zealand law.
[58] I do not accept that a claim brought to recover expenses incurred in reliance on a promise about availability of finance is a claim affecting a contract with the defendants, or for its breach or other relief in respect of it (a claim for promissory estoppel is predicated upon a contract not coming into existence). I find that the plaintiff does not have an arguable case for service of this claim without leave.
(d) Breach of contract
[59] This claim is for breach of the contract that the plaintiff and the first defendant signed as at 9 December 2009. A claim for breach of contract can be served without leave:41
when there has been a breach in New Zealand of any contract, wherever made.
[60] The defendants contend that any breach occurred in Australia: in the event that finance was not obtained the defendants were required to make a payment in Australian dollars. The plaintiff says that both performance and breach of the contract was to be in New Zealand, either by procuring finance for the plaintiff’s use in New Zealand or by refunding money to it in New Zealand.
[61] The breached alleged is the failure to make the agreed refund. I do not regard the currency in which the obligation is expressed as determinative of the place of payment. It is at least arguable that the place where the plaintiff resides or has its principal place of business is New Zealand is the place of payment.42 and therefore where the contract has been breached. I find that the plaintiff has an arguable case
for service of this claim without leave.
41 R 6.27(2)(c).
42 Auckland Receivers Ltd v Diners Club [1985] 2 NZLR 652 (CA).
If there is an arguable case, should the Court assume jurisdiction?
[62] I will address first whether there is a serious issue on the merits of the Fair Trading Act claim (which will apply in large part to the other causes of action relying on representations) and then any different considerations affecting the other causes of action.
[63] I accept the submission of counsel for the defendants that this stage requires the Court to assess whether there is a credible factual basis for the claim of misleading and deceptive conduct. This requires evidence of conduct which, examined objectively, is capable of being deceptive or misleading in the circumstances of the case, including the characteristics of the person said to be affected. Conduct which may be misleading to an unsophisticated person may be less likely on an objective assessment to be misleading to a sophisticated business person. Once breach of s 9 has been established the Court must also look at whether the claimant was actually misled or deceived by the conduct, and in this inquiry the Court can take into account whether carelessness on the part of the claimant was the
sole or an operative cause of the loss.43
[64] There is no plausible basis in the evidence for a claim under the Fair Trading Act in respect of oral representations. The plaintiff has made the vague claim that they were more certain than the written representations, but has not otherwise challenged the defendants’ evidence that telephone conversations generally were recorded in following email correspondence or the frequent reference in the emails produced in evidence to preceding conversations. As a party to the conversations Mr Shu has knowledge of their content but has provided no evidence of the content beyond his vague assertion. It is a reasonable inference that if the second defendant said something that went beyond the written statements Mr Shu would have given evidence of it in this application (the second defendant expressly denies saying anything other than is recorded in the defendants’ emails). I find that there is no
evidence that any oral representations went further than the written representations.
43 Red Eagle Corporation Ltd v Ellis [2010] 2 NZLR 492 at [27] - [30].
[65] As could be expected in a drawn-out, and obviously difficult process, there was a significant amount of email correspondence between the parties as to progress in obtaining loan offers and what was needed to secure a firm offer. The plaintiff has both pleaded and produced in evidence many emails from the defendants over the period from December 2008 to January 2010 reporting progress and advising the plaintiff of requirements of the financiers.
[66] Counsel for the defendants accepted that in several emails the defendants made the statement that a firm offer would be forthcoming within a short period of time, which proved to be wrong, but submitted that this was insufficient to found a claim of misleading or deceptive conduct capable of misleading a reasonable person standing in the shoes of Mr Shu:
(a) The defendants were clearly passing on, information received from the financier, without giving that information their imprimateur;
(b) This would have been apparent to an experienced businessman such as Mr Shu; and
(c) A reasonable businessman in Mr Shu’s circumstances would not have been misled by the emails to believe that finance was available unconditionally, or was being promised by the defendants;
(d) Even if the emails could be construed as a promise that finance would be available, the non-fulfilment of a promise alone is not sufficient to characterise the promise as misleading or deceptive.44
[67] Counsel also submitted that any representations in the emails were not an effective cause of the plaintiff’s loss, because that loss was a consequence of the plaintiff having entered into unconditional agreements before any representations
were made.
44 Brookers, Commentary to The Fair Trading Act, FT9.26(1).
[68] Counsel for the plaintiff argued that there was sufficient evidence in the emails to establish a serious issue over a representation that finance would be available prior to the agreements of 2 March 2009 and 16 October 2009, and prior to the acknowledgment that the parties were still committed to the transactions signed after 27 November 2009. He argued that it was a matter for trial whether the statements constituted a representation that finance had been approved. He relied in particular on the following statements (or omissions) by the defendants:
(a) In an email on 19 February 2009:
...The letter states as discussed last night the [sic] Banco Santander have fully approved the loan. The only term & condition is with the CBA on the valuation of property which should not be an issue... Please show the letter to your Vendors to prove the deal is going ahead & alleviate any of the pressure they are applying to you over funding... Please let the Vendors know that the deal will settle in March...
(b) In an email on 28 September 2009:
This (see below) has been sent through from UBI Asset Zurich last Friday
25/9/09 as discussed. We have been advised that the final figure is around the US$15M. Please finalise your negotiations with Tony Tay regarding the new sales agreement & legal case...
(c) The failure of the defendants to respond to the plaintiff’s statement to “Based on your guaranteed funding offer the Agreements have been finalised as attached” when returning the 16 October 2009 agreement to the defendants, and the defendants’ later advice (1 December 2009) that the ”deal has everything ready to go with the exception of one further Lawyers call to clarify the Maungaturo [sic] transaction...”.
[69] It is unquestionable that the plaintiff knew that the defendants were acting as intermediaries, and that in most of the emails the defendants were clearly relaying information from the financiers (or their agent JWCC) – with a copy of correspondence from the financier being attached in many cases and particularly when an offer had been made or information was being sought from the plaintiff.
Any offers conveyed were either headed as conditional or were expressly made subject to conditions (whether as to valuation of securities or as to due diligence requirements, including in September 2009 the requirement for confirmation that the plaintiff and TGG remained committed to the transactions). On an objective view of the emails an experienced businessman (such as Mr Shu) would not have been misled into believing that there was an unconditional offer of finance.
[70] I do not consider the examples mentioned by counsel for the plaintiff to be inconsistent with this view:
(a) Santander’s offer was stated to be a conditional offer, and a reasonable person standing in the shoes of the plaintiff could not have read the defendants’ statement that the loan will settle in March as a statement that the conditions expressed in the conditional offer no longer needed to be met. I accept that the defendants did not state explicitly that the offer was still conditional, but that ought to have been apparent to the plaintiff. I note that the plaintiff did not check with the defendants before entering into the variation agreement on 2 March 2009. It has to be remembered also that the agreements were unconditional at that point. It seems more likely that that fact, rather than the defendants’ statement, was the motivating factor for the variation.
(b)The terms of the defendants’ email of 28 September 2009, and the attached letter from UBI, expressly state that the letter was not an unconditional offer. Again, the additional comment that the plaintiff will get the loan if it concludes the agreement again would not be taken by an experienced businessman to mean that the terms of the letter could be ignored. Again, there is no suggestion that the plaintiff queried the status of the loan offer at this time.
(c) Whilst the defendants did not take up Mr Shu’s comment about
guaranteed funds directly, the point is answered by an email on 28
October 2009, in which the second defendant says:
Hi Quan
This is the email (below) I have received from Matt at UBI Asset.
Please inform Tony’s Lawyer & Ross your Lawyer, that the Funder will be calling prior to November 4th to confirm the sales agreement between Tay & Yourself.
Once this is confirmed the funding documents will be issued
& we will meet to sign the documents, sign over the titles &
give you your cheque.
I believe this will take place in Melbourne & I am waiting on confirmation of this.
Cheers
Grant
(d)The correspondence following 27 November 2009 is clearly predicated on unmet requests for the plaintiff to complete matters of due diligence and again cannot reasonably be construed as a representation that a firm offer of finance was available.
(e) I also take into account that as at 9 December 2009 the plaintiff was contemplating the possibility that finance would not be available (evidenced by the agreement for a refund in the event that finance was not obtained).
[71] I do not accept that the statements in the emails can be read objectively, in the context of this case, as a representation that a firm offer of finance existed as at the date of the emails (which is the basis on which counsel for the plaintiff put its case in the hearing). However, to the extent that it might still be contended that they were a representation or promise as to what might eventuate, there is no pleading or evidence to show that at the time the statements were made the statements lacked an adequate foundation. A representation as to future conduct is not misleading just
because it does not come to pass.45
45 Brookers Commentary, above n 44; Albany Timber Distributors Ltd v Tan HC Auckland CIV-2006-
404- 1336, 11 May 2007.
[72] It is also doubtful whether any representation was an effective cause of any loss. The plaintiff had approximately 9 months after recognising the possibility that finance might not be available in which to renegotiate with TTG or obtain finance elsewhere.
[73] In those circumstances I find that the plaintiff does not have a serious issue to be tried under the Fair Trading Act for the purpose of r 6.29(2)(a) or (b).
[74] As the same reasoning applies to the representations or promises on which the claims for negligent misstatement and promissory estoppel are advanced, I make the same finding that the plaintiff has not established that there is a serious issue to be tried on those causes of action.
[75] I accept that there is a serious issue to be tried on the cause of action for breach of the agreement of 9 December 2009. The agreement is explicit that the defendants are to refund an agreed sum of money in the event that the loan finance is not obtained within a set date. There is no question that it was not obtained by that date.
[76] This finding on lack of a serious issue, in my view, is sufficient to determine application in respect of the claims for breach of the Fair Trading Act and negligent misstatement, but I must still address the other factors in r 6.28(5) in relation to the claim for breach of contract.
[77] The defendants accepted in their submissions that if there was an arguable case for service of this claim without leave, there is a serious issue to be tried on this claim. I am uncertain, however, whether this concession was restricted to the serious issue, or was intended to include the other elements of r 6.28(5) so I will address them briefly.
[78] The principles of forum conveniens were stated authoritatively (albeit in
relation to the Court’s inherent jurisdiction to stay) by the House of Lords in Spiliada
Maritime Corporation v Cansulex Ltd46and have been adopted and followed in New
46 Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460.
Zealand.47 The essence of those principles is that the party raising the point must establish that there is some other available forum, having competent jurisdiction, which is more appropriate. The Court will have regard to matters of connection such as relative convenience and expense (particularly in relation to witnesses), the governing law, and the places where the parties reside and carry on business. No one factor is necessarily determinative. All relevant factors will be taken into account.
[79] Counsel both made submissions which addressed the overall contract of services rather than the agreement of 9 December 2009 on which this cause of action is based. As I have formed the view that the lack of a serious issue determines the representation claims I will just add that the factors are reasonably evenly balanced as to whether the courts of Australia or New Zealand provide the more appropriate forum for those claims. The applicable legal principles are unlikely to differ significantly between the jurisdictions. The central evidence is in written form. To the extent that it is necessary to go behind the correspondence there could be further witnesses (other than the parties) from Australia or further afield. Against that, there could be need for evidence from further witnesses in New Zealand as to the steps taken in reliance on the representations. I regard these factors overall as neutral, so that the serious issue point is determinative.
[80] Turning to the claim for breach of contract, it may be a moot point as to whether it was formed in New Zealand or Australia, and also as to the governing law. However, I regard those matters as neutral given that the law of contract in both countries has the same common law base, and the courts of both countries apply similar principles. The claim is very straight-forward, and will require little evidence. Such evidence as is needed will come from witnesses in each country. If oral evidence is necessary, it can be given with similar ease in either country. However, the obligation in question is the payment of money. I have already
referred to Auckland Receivers Ltd v Diners Club.48 That case is authority for the
proposition that where place of payment is not specified in the contract, the general rule is that place of payment (and therefore the alleged breach in this case) is where
47 See Oilseed Products (NZ) Ltd v H E Burton Ltd (1987) 1 PRNZ 313, and recently Wing Hung, above n 15.
48 Above n 42.
the creditor resides or has its principal place of business. The Court also held that currency of payment was neutral. I am not persuaded that the Courts of Australia are the more appropriate forum.
[81] Weighing the factors, I consider that this Court should assume jurisdiction.
If leave was required, would it have been granted and should the failure to apply be excused?
[82] On the above findings, the only claim that needs to be considered under this head is the intended claim for promissory estoppel. I accept that there is a real and sufficient connection to New Zealand for this claim (by reason of the alleged representation being received and because any expenditure incurred in reliance upon them having occurred in New Zealand). However, for the reasons I have given in relation to the argument under r 6.29(1)(a), I find that leave would not have been given.
Decision
[83] I make the following findings:
(a) The plaintiff has a good arguable case for serving its claims for breach of the Fair Trading Act 1986, negligent misstatement and breach of contract, but it is required to obtain leave for any claim for promissory estoppel.
(b)The Court should not assume jurisdiction on the claims for breach of the Fair Trading Act or for negligent misstatement as there is not a serious issue that the alleged representations can amount to misleading or deceptive conduct or a negligent misstatement, and there are no other factors which require the Court to assume jurisdiction on those causes of action.
(c) The Court would not have given leave to serve the intended claim for promissory estoppel outside New Zealand, so there is no need to allow the plaintiff opportunity to amend its current cause of action for estoppel.
(d)Weighing the various factors, the Court should exercise its discretion and assume jurisdiction in relation to the claim for breach of contract.
[84] The defendants’ application to dismiss the claims for breach of the fair Trading Act 1986, negligent misstatement, deceit and estoppel is granted. Its application to dismiss the claim for breach of contract is dismissed.
[85] The plaintiff’s cross-application to dismiss the defendants’ notice of appearance to protest the jurisdiction of the Court to hear the claim for breach of contract is granted.
[86] Counsel did not make specific submissions on the incidence or level of costs, nor seek leave to address the Court following this decision. The defendants have succeeded on the most substantive aspects of the application. I consider that they should be entitled to costs on the application on a scale 2B basis. There may also be cost considerations flowing from the dismissal of all but the claim for breach of contract, although I note that the defendants have not filed a statement of defence. I reserve costs to the extent that the defendants consider that they have a claim for
more than the costs on the application.
Associate Judge Abbott
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