Backhaus v Baker - [2017] NZHC 1507

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-1006 [2017] NZHC 1507

BETWEEN
MARK DANIEL BACKHAUS, LINDA

BACKHAUS, MAX DANIEL BACKHAUS AND ERICA ANNE BACKHAUS

Plaintiffs

AND

CHRISTOPHER BAKER First Defendant

ANDREW DAVID SIMKIN Second Defendant

GRANT THORNTON NEW ZEALAND Third Defendant

Hearing: 23 - 27 May, 30, 31 May and 1 - 3 June 2016

Appearances:

J S Cooper and N W Taefi for Plaintiffs
First Defendant in person
C T Patterson and R A Dellow for Third Defendant

Judgment:

30 June 2017

JUDGMENT OF PETERS J

This judgment was delivered by Justice Peters on 30 June 2017 at 5.30 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date: ...................................

Solicitors: Jones Young, Auckland
JT Law, Wellington

Counsel: J S Cooper, Auckland
N W Taefi, Auckland
C T Patterson, Auckland
R A Dellow, Auckland

Copy for: First Defendant

BACKHAUS v BAKER [2017] NZHC 1507 [30 June 2017]

Introduction

[1] The plaintiffs, Mr Mark Backhaus, his wife Mrs Linda Backhaus, and their two adult children Max and Erica (“Mrs Backhaus”, “Max” and “Erica”), seek to recover
$600,000 in respect of two investments they made between June 2010 and February

2011. I refer to the first of these as the “Trident investment” and the second as the

“Moneylink loan”.

[2] The principal wrongdoer in the events giving rise to this proceeding is Mr John

Munro. Mr Munro is a bankrupt and is believed to be overseas.

[3] The defendants are Mr Christopher Baker, a financial adviser, and Grant Thornton New Zealand Limited (“GTNZ”), a firm of accountants. GTNZ were accountants for Mr Munro, Trident and other entities involved in the events and in due course became Mr Backhaus’s accountants, at least for some types of work.
Mr Munro’s principal contact at GTNZ was a partner then at the firm, Mr Paul

McCormick.

[4] The plaintiffs have resolved their claims against Mr Andrew Simkin, the second defendant, who was also a financial adviser at the material time. Mr Simkin paid $60,000 in full and final settlement of the claim against him, which must be recognised in due course. Mr Simkin was a witness for Mr Baker.

Trident investment

[5] Each of the plaintiffs invested in the Trident investment. Trident Capital Limited Partnership, in liquidation (“Trident”) was a limited partnership registered in June 2010 to investigate the acquisition of a loan book from Kaupthing Singer & Friedlander (“KSF”), a bank. KSF was in administration and Ernst & Young, London (“EY”) its administrators.

[6] Mr Baker introduced Mr Backhaus to the Trident investment in May 2010. The other plaintiffs were introduced to the Trident investment subsequently, with
Mr Baker’s approval.

[7] In due course, the plaintiffs purchased eight units in Trident, two each, at a total cost of $400,000. They each purchased their first unit in two instalments of $25,000, paid in June and August 2010 respectively, and their second by lump sum payments of $50,000 in February 2011.

Moneylink loan

[8] Mr Backhaus is the sole plaintiff in…

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: [2017] NZHC 1507
Decision Date: 30 June 2017

CaseChat Overview and Summary

The plaintiffs, Mr and Mrs Mark Backhaus, and their two adult children, Max and Erica, sought to recover $600,000 in respect of two investments they made between June 2010 and February 2011. The principal wrongdoer in the events giving rise to this proceeding was Mr John Munro. The defendants were Mr Christopher Baker, a financial adviser, and Grant Thornton New Zealand Limited (GTNZ), a firm of accountants. The plaintiffs alleged that each defendant was liable in respect of the Trident investment and Mr Backhaus likewise in respect of the Moneylink loan. The defendants denied any liability and pleaded several affirmative defences. The plaintiffs alleged that each defendant was liable for breach of fiduciary duty, in negligence and for breach of the Fair Trading Act 1986. The plaintiffs also sued Mr Baker under s 56 Securities Act 1978 and GTNZ for breach of contract. On the Moneylink loan, Mr Backhaus pleaded two causes of action against Mr Baker – breach of fiduciary duty and in negligence, and the same four causes of action against GTNZ. The court found that Mr Baker was liable to the plaintiffs in the sum of $400,000, GTNZ was to pay the plaintiffs $100,000 and Mr Backhaus $140,000. The court awarded interest on all claims from the date the proceeding was served. The court reserved leave to apply.

Orders