Banks v Farmer - [2023] NZCA 383

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA531/2021
[2023] NZCA 383

BETWEEN	ADAM DAVID BANKS Appellant
AND	WILLIAM ROBERT FARMER First Respondent SIMON MATHEW GAMBLE Second Respondent CHRISTOPHER JAMES MASSAM Third Respondent DOUGLAS LEROY FREDERICK Fourth Respondent

CA164/2022
BETWEEN	WILLIAM ROBERT FARMER Appellant
AND	ADAM DAVID BANKS First Respondent SIMON MATHEW GAMBLE Second Respondent CHRISTOPHER JAMES MASSAM Third Respondent DOUGLAS LEROY FREDERICK Fourth Respondent

Hearing:	18–19 May 2022
Court:	Cooper P, Gilbert and Katz JJ
Counsel:	J W A Johnson, W L Porter and G D Simms for Mr Banks R J Hollyman KC and A J Steel for Mr Farmer A J Peat for Second to Fourth Respondents
Judgment:	23 August 2023 at 3 pm

JUDGMENT OF THE COURT

A    The application to adduce further evidence in CA531/2021 is granted in part, but only in respect of the liquidator’s updating affidavit.
B    The appeal in CA531/2021 is dismissed.
C    The appellant in CA531/2021 must pay costs to the respondents for a complex appeal on a band A basis and usual disbursements. We certify for second counsel.
DThe appeal in CA164/2022 is dismissed.
EThe appellant in CA164/2022 must pay costs to the first respondent in the sum of $2,500.

____________________________________________________________________

REASONS OF THE COURT

(Given by Gilbert J)

Table of Contents

Introduction  [1]
The claims  [3]
High Court trial  [5]
Substantive judgment  [7]
First cause of action — breach of s 37 of the Securities Act             [8]
           Second cause of action — breach of s 9 of the Fair Trading Act      [9]
           Third cause of action — breach of directors’ duties  [12]
           Fourth cause of action — breach of s 55G of the Securities Act       [18]
Costs judgment  [19]
Grounds of appeal against Substantive judgment  [20]
Grounds of appeal against Costs judgment  [21]
Application to adduce further evidence  [22]
The issues  [27]
Factual background  [29]
           Company formation and key personnel  [31]
           Mako’s network security system  [35]
           Initial commercialisation in New Zealand  [36]
           Expansion into overseas markets  [37]
           Funding from Telecom Rentals  [41]
           Private placement memorandum  [42]
           Introduction to Mr Banks  [43]
           Agreement 1 — 4 February 2011  [44]
           Business development 2011–2013  [48]
           Proposed IPO  [55]
           Agreement 2 — 30 June 2013  [71]
           July to December 2013  [73]
           Restructure of Telecom Rentals’ debt  [88]
           Agreement 3 — 24 April 2014  [91]
           Failure of Sprint deal  [114]
           Financial statements  [118]
Fair Trading Act claims   [120]
Representations prior to Agreement 1  [124]
  Submissions  [130]
  Analysis  [133]
           Representations prior to Agreement 2  [150]
  Submissions  [155]
  Analysis  [159]
           Representations prior to Agreement 3[190]
  Submissions  [207]
  Analysis  [208]
Companies Act claims
           Section 135 — reckless trading
Legal principles  [223]Substantive judgment  [230]
  Submissions  [232]
           Analysis  [240]
           Section 136 — duty in relation to obligations  [256]
Agreement 1  [258]
  Agreement 2  [269]
  Agreement 3  [275]
           Section 138 — reliance on information and advice  [290]
           Section 301 — court’s power to require repayment of money           [301]
Securities Act claims
Relevant provisions  [302]

Substantive judgment
Agreement 1  [307]
Agreement 2  [309]
Agreement…

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 Banks v Farmer

Details

AGLC: Banks v Farmer [2023] NZCA 383
Case: [2023] NZCA 383
Decision Date: 23 August 2023 at 3 pm

CaseChat Overview and Summary

The case of Banks v Farmer involved claims by Mr Banks against several respondents, including Mr Farmer, for losses he incurred after making unsecured advances to Mako Network Holdings Ltd (Mako), a company that developed a network security management system. The trial took place in the High Court over a three-and-a-half-week period, and the Judge dismissed all of Mr Banks' claims. Mr Banks appealed the Substantive judgment and Costs judgment, and Mr Farmer cross-appealed the Costs judgment. The Court of Appeal granted the application to adduce further evidence in part, by allowing an updating affidavit from one of the liquidators of Mako. The appeals were dismissed, and Mr Banks was ordered to pay costs to the respondents. The Court of Appeal found that the Securities Act did not apply to Mr Banks' investments in Mako, as there was no offer of securities to the public. The Court also upheld the Judge's findings that Mr Banks fabricated emails to support his claims. The Court of Appeal considered the Judge's exercise of the costs discretion to be appropriate, given Mr Banks' deceitful misconduct and the complexity of running a case for multiple defendants.

Orders