Bell v Tindall HC Auckland CIV 2010-404-544

[2010] NZHC 1711

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-544

BETWEEN  N M BELL First plaintiff

AND  J K BELL Second plaintiff

AND  S R TINDALL

first defendant

AND  A G LANIGAN

second defendant

Hearing:         2 September 2010

Appearances: Rod Hooker and Ariana Stuart for plaintiffs

Robert Ferguson for first defendant
David Campbell and Reece Leggett for second defendant

Judgment:      15 September 2010

JUDGMENT OF BREWER J

This judgment was delivered by me on 15 September 2010 at 2:00 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

SOLICITORS

Vallant Hooker & Partners (Auckland) for plaintiffs Ferguson Law (Auckland) for first defendant Kensington Swan (Auckland) for second defendant

BELL AND ANOR V TINDALL AND ANOR HC AK CIV-2010-404-544  15 September 2010

Background

[1]      The following description of part of the background to this proceeding is taken from the judgment of Venning J in Bell v The Warehouse Ltd delivered on

24 May 2004:[1]

[1] Bell v The Warehouse Ltd HC Rotorua CIV-2004-470-133, 24 May 2004.

[2]       In 1991 the appellant and his wife Judith were in partnership as Bell Gas Cylinders.   They manufactured and sold LPG gas cylinders.   The respondent   was   interested   in   sourcing   LPG   gas   cylinders   from   a New Zealand   supplier.     At   the  time   it   had   a  policy  to   encourage New Zealand suppliers and manufacturers.  There were discussions between the parties directed at the respondent ordering its LPG gas cylinders from the Bells.   As part of the discussions the respondent was prepared to provide finance for the materials required for production of the cylinders.

[3]       At around the same time as the discussions took place in early 1992 the plaintiff and his wife were looking to incorporate a company Bell Gas Cylinders Limited.

[4]       The discussions between the parties culminated in an agreement on

4 March 1992 which is recorded in two letters.  The first is from Mr Tindall on behalf of the respondent to Mr and Mrs Bell, Bell Gas Cylinders Limited.

The second is headed Bell Gas Cylinders Limited to the respondent.   The

letter is signed by Mr and Mrs Bell.  In the first letter the respondent agreed as follows:

The Warehouse Limited agrees to buy a minimum of 10,000 gas bottles at $43.12 for the 9kg bottle, $37.67 for the 5kg bottle and

$32.00 for the 2.5kg bottle over the next 12 months, and mixed according to demand.

Should the duty concession for gas bottles be removed, therefore imposing duty at 22.5% The Warehouse Limited agrees to buy a minimum of 20,000 bottles over a 12 month period.

In  our  opinion  the  imposition  of  duty  should  now  only  be  a formality.

These new prices start on 1 May 1992.  Interim prices are at $50.50 for 9kg cylinders until then.

The Warehouse Limited will supply or fund the supply of the steel and components necessary for the production of this order of gas bottles, further specifications relating to which are attached.

[5]       The letter from Mr and Mrs Bell to the respondent of the same date,

4 March, stated:

We agree for the consideration that “The Warehouse Limited” has shown us, which includes, financing all components and materials guaranteeing an annual order of 20,000 gas cylinders (10,000 if duty concession applies) to:

Supply The Warehouse Limited at a minimum discount of 25% off our normal wholesale prices – and   agree   not   to   supply   any   other   party   in New Zealand at less than wholesale prices.

This agreement will continue for as many years as The Warehouse Limited supports us, by purchasing their gas cylinders from Bell Gas Cylinders.

[6]      Although  the  letters  referred  to  Bell  Gas  Cylinders  Limited  the company was not incorporated until 30 October 1992.

[2]      The contract evidenced by the 4 March 1992 letters ("the contract") did not prosper.   It was cancelled by The Warehouse Ltd at or around the end of January

1993.  Bell Gas Cylinders Ltd was put into liquidation in August 1994.

[3]      In 1996 the plaintiffs sued The Warehouse Ltd for breach of the contract. They filed the proceeding in the District Court under their own names, claiming that the contract had been with them as a partnership trading as Bell Gas Cylinders.  Due to the bankruptcy of, first, Mr Bell and, later, Mrs Bell and consecutive assignments of rights between them, the plaintiff in that case was eventually named as Mr Bell alone, although clearly it was still a litigation on behalf of both Mr and Mrs Bell.

[4]      The plaintiffs did not succeed in the District Court and appealed to this Court. Again, they did not succeed.  Material findings of fact by Venning J were:

a)       The parties to the contract were Bell Gas Cylinders  Ltd  and The Warehouse Ltd.  The plaintiffs were not parties to the contract, had no rights under the contract and so could not sue on it.[2]

[2] Ibid, at [27].

b)The  contract  was  for  an  initial  period  of  12 months  and  The Warehouse Ltd was entitled to terminate it as of right on its anniversary.[3]   Its cancellation of the contract for cause a month or so

[3] Ibid, at [30]-[31].

before that date was lawful.[4]

[4] Ibid, at [34]-[36].

c)       Any expectation or understanding the plaintiffs or Bell Gas Cylinders Ltd had for an order of 20,000 cylinders vanished after they reached agreement with The Warehouse Ltd not to apply for tariff protection (against imported cylinders).[5]

[5] Ibid, at [32].

d)Bell Gas Cylinders Ltd had no case for damages and the District Court Judge was correct to find that there was insufficient evidence to show that the company had suffered a loss.[6]

[6] Ibid, at [33]-[38].

The Statement of Claim

[5]      On  4 February 2010  the  plaintiffs  commenced  proceedings  in  this  Court against the defendants.  The statement of claim was filed by the plaintiffs and does not seem to have been drafted by a lawyer.   Accordingly, causes of action are difficult to isolate and define.  However, what is evident is that the plaintiffs jointly seek $2,820,000 and individually $1,500,000 each from the defendants jointly and severally for actions alleged to have been taken by them in relation to the contract and to the background events described above.

[6]      The plaintiffs plead that they carried on business as Bell Gas Cylinders and that in that capacity:

3.        The plaintiffs' business agreed  to  manufacture and supply 9  and

4.5kg LPG cylinders to The Warehouse Ltd, the principal director and owner of which is the first defendant, Stephen Robert Tindall.

The agreement included oral terms:

3.1Assuring  the  plaintiffs  and  their  business  of  a  10  year working relationship with The Warehouse Ltd; and

3.2Agreeing with the plaintiffs and the plaintiffs' business that once a 22% tariff was applied to imported LPG cylinders, The Warehouse Ltd would purchase 20,000 LPG cylinders per annum from the plaintiffs.

[7]      The second defendant is introduced in the statement of claim in para [5] as follows:

5.The second defendant is Anthony Lanigan, who was a Company Director at all material times of Babbage Consulting Group Ltd, which  agreed  to  provide  engineering  certification  for  the  gas cylinders the plaintiffs' business manufactured.   The agreement included the term that the plaintiffs' business information was confidential.

[8]      The heart of the statement of claim is at paras [6]-[7]:

6.The  defendants  engaged  in  business  relations  with the  plaintiffs' business and the First and second defendants owed the following duties of care to the plaintiffs.

6.1A  duty  not  to  interfere  with  contractual  relations  of  the plaintiffs and the plaintiffs' businesses.

6.2      A duty not to injure the plaintiffs and the plaintiffs' business.

6.3A duty not to interfere with the agreements between the plaintiffs' business employees.   In particular, not to induce the employees to discuss and disclose to the defendants, the plaintiffs' and the plaintiffs' business commercial relations and financial position.

6.4A duty not to interfere with the economic interests of the plaintiffs and the plaintiffs' business.

6.5A duty not to induce breach of contract between any of the plaintiffs' businesses and their employees and contractors.

7.The defendants jointly and severally breached each of the said duties of care, particulars whereof are:

7.1Mr Glynn Forde of Babbage Consultants Group, who had been employed by the plaintiffs' business as a third party inspector of LPG cylinders that their manufacture met the appropriate standards, in December 1992 met with the first defendant,  Stephen  Tindall,  and  the  second  defendant, Mr Tony   Lanigan   at   Baddleys   Beach   to   discuss   the plaintiffs'  business  relations  and  specifically  to  discuss taking over the plaintiffs' business.

7.2The defendants and Mr Forde at all times knew this was confidential information of the plaintiffs and the plaintiffs' business that had been entrusted to the second defendant as a director of Babbage Consultants Group Ltd.

7.3In December 1992, the plaintiffs' and the plaintiffs' business weekly production of LPG cylinders had been proven to be

more than adequate to supply the annual requirements of

The Warehouse Ltd.

7.4Mr Forde was specifically invited by the second defendant to meet together with the first defendant at Baddleys Beach to discuss taking over the plaintiffs' business.   Any such discussion necessarily involved Mr Forde breaching the obligation of confidentiality owed to the plaintiffs and the plaintiffs' business.

7.5At the meeting the defendants and Mr Forde agreed, with Mr Forde's   expertise   in   engineering   and   the   second defendant's expertise in management, they could do a better job perhaps with or without the plaintiffs.

7.6The  defendants  agreed  with  Mr  Forde  that  they  would explore the taking over of the plaintiffs' business.

7.7That  the  defendants  each  agreed  to  use  their  resources (including Mr Forde's confidential access to the plaintiffs' business) to take over the plaintiffs' business.

7.8Clinton O'Sullivan was the leading hand for the plaintiffs' manufacturing operation and was employed by Bell Gas Cylinders.

7.9Mr  O'Sullivan  -  while  employed  by  the  plaintiffs  -  was driven by Mr Forde from Tauranga to Auckland to meet with  Mr Tindall  in  his  Auckland  offices  to  discuss  the business of the plaintiffs without their consent or knowledge. This meeting occurred on or about the 21st of January 1993.

7.10As a consequence of the meeting with the first defendant, Mr O'Sullivan left the employment of the plaintiffs on the

26th of January 1993 and advised some of the other staff to do the same - which they did.

7.11From that time forward for the ensuing nine months, the first defendant and his employees at The Warehouse Ltd orchestrated the following matters to cause economic loss to the plaintiffs and to place the plaintiffs in such a position whereby they would lose control of their business and the defendants could obtain for themselves the benefit of the plaintiffs' business.

7.11.1 Mr Tindall refused to accept further LPG cylinders manufactured  by  the  plaintiffs  and  their  business until the accounts between The Warehouse Ltd and the plaintiffs' business were reconciled, referring the plaintiffs to Mr John Vickers.

7.11.2 Mr John Vickers, company secretary and accountant of The Warehouse Ltd, refused to reconcile the accounts, saying that the plaintiffs' file was in a box

under his  desk and  he  had  much  more  important things to do.

7.11.3Mr Vickers and Mr Tindall wrongly refused to recognise that GST claimed by The Warehouse Ltd for materials paid by them, should not be charged to the   plaintiffs'   reconciliation   account,   thus   they denied the plaintiffs much needed cashflow.

7.11.4Mr Vickers and Mr Tindall refused to refund the plaintiffs for said GST, in full knowledge that by not doing so would cause economic damage to the plaintiffs and the plaintiffs' business, causing loss of opportunity for the plaintiffs and the plaintiffs' business.

7.11.5 Mr Vickers suggested to the plaintiffs in May 1993 that there may be further orders of cylinders should the  plaintiffs  release  165  cylinders  to  The Warehouse Ltd plus an unsubstantiated amount that included the GST The Warehouse Ltd had claimed from the IRD.

7.11.6 Mr  Vickers incorrectly stated  in  writing that  The Warehouse Ltd had not claimed GST on materials, when they had.

7.11.7 Mr Neil Plummer of The Warehouse Ltd told other distributors of LPG cylinders that there was something wrong with the plaintiffs' cylinders.

7.11.8 Mr Tindall refused to make himself available to the plaintiffs until early August 1993 when the First plaintiff informed him of knowing about Mr Forde's plans, at which point Mr Tindall assured the First plaintiff that his company "certainly would be purchasing more" of the plaintiffs' LPG cylinders, leading to the First plaintiff to sign a lease on the building on behalf of his business - an action that ultimately lead (sic) to the landlord of that building bankrupting the First plaintiff.

7.11.9  The first defendant, contrary to his assurance in para

7.11.8,  did  not  purchase  any  more  gas  cylinders from the plaintiffs or their business.

[9]      In terms of damages, the $2,820,000 is calculated as the profit lost on 20,000 cylinders a year for 10 years.  The claims for $1,500,000 by each plaintiff arise from pleadings that the bankruptcy of each plaintiff was a result of the defendants' conduct as pleaded in para [7] of the statement of claim and is by way of loss of chance to engage in commercial activity.

Application for Strike Out

[10]     On 26 February 2009 the first defendant gave notice of application to strike out the statement of claim.  On 12 March 2009 the second defendant followed suit but added  (in  the  alternative)  an  application  for  summary judgment  against  the plaintiffs.  The grounds for both defendants' applications can be summarised as:

a)        Reliance on the Limitation Act 1950;

b)Issue estoppel arising from the previous litigation which culminated in the judgment of Venning J referred to above; and

c)        No tenable cause of action.

[11]     The  plaintiffs  filed  notices  of  opposition  to  the  first  defendant's  and  the second defendant's notices of application.   All parties have filed affidavits.   The strike out applications were argued before me on 2 September 2010.  The plaintiffs were  represented  by counsel  and  continued  their  opposition  to  both  defendants' applications notwithstanding that they had accepted as true[7]  these paragraphs from an affidavit of the second defendant sworn on 18 March 2010:

[7] Response to affidavit of Anthony Gerard Lanigan of 18 March 2010, dated 7 May 2010 at [2].

4.In the 1980s I was employed by, and was a shareholder in, Babbage Partners Ltd ('Babbage Partners').   In March 1986 I resigned from Babbage Partners and took a position with Fletcher Challenge Ltd ('Fletcher Challenge').  I stayed with Fletcher Challenge until early in 1995.  Subsequently, I have undertaken a number of roles.  My shareholding in Babbage Partners was sold in April 1986.

5.The plaintiffs allege at paragraph 5 of their claim that I was, at the material time (which appears to be 1992/3), a director of Babbage Consulting Group Ltd ('Babbage Consulting').  At paragraph 7.2 of the claim they refer instead to Babbage Consultants Group Ltd - a company  which  has  never  existed.    I  was  never  a  director  of Babbage Consulting.  Indeed, I have had no involvement with that company at all; whether as shareholder, employee or otherwise.

Strike Out principles

[12]     Rule 15.1 of the High Court Rules provides:

The court may strike out all or part of a pleading if it—

(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or

(b)      is likely to cause prejudice or delay; or

(c)      is frivolous or vexatious; or

(d)      is otherwise an abuse of the process of the court.

[13]     Both defendants rely, individually and in combination, on r 15.1(1)(a), (c)

and (d).

[14]     McGechan on Procedure[8] sets out the principles as follows:

[8] McGechan on Procedure, (online looseleaf ed, Brookers) at [HR15.1.02].

The established criteria for striking out [were] summarised by the Court of Appeal in A-G v Prince [1998] 1 NZLR 262 ... and endorsed by the Supreme Court in Couch v A-G [2008] NZSC 45, at para [33], per Elias CJ and Anderson J:

(a)Pleaded facts, whether or not admitted, are assumed to be true.  This does not extend to pleaded allegations which are entirely speculative and without foundation.

(b)       The cause of action for defence must be clearly untenable.  In Couch

Elias CJ and Anderson J, at para [33], said:

"It is inappropriate to strike out a claim summarily unless the Court can be certain that it cannot succeed."

(c)       The jurisdiction is to be exercised sparingly, and only in clear cases.

This reflects the Court's reluctance to terminate a claim or defence short of trial.

(d)The  jurisdiction  is  not  excluded  by  the  need  to  decide  difficult questions of law, requiring extensive argument.

(e)The Court should be particularly slow to strike out a claim in any developing area of the law, perhaps particularly where a duty of care is alleged in a new situation.  In Couch, at para [33], Elias CJ and Anderson J said:

"Particular care is required in areas where the law is confused or developing."

There  is  considerable  authority  that  developments  in  negligence need to be based on proved rather than hypothetical facts.

[15]     Where the pleadings are defective but could be cured by amendment, the Court ought to allow the amendment rather than summarily striking the proceeding out.[9]

[9] Marshall Futures Ltd v Marshall [1992] 1 NZLR 316 (HC) at 323-324.

[16]     The Court is entitled to receive affidavit evidence.   It will not, however, attempt to use the affidavits to resolve genuinely disputed issues of fact, nor would it normally consider evidence inconsistent with the facts pleaded in the statement of claim.[10]

[10] Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.

Limitation Act 1950

[17]     The  events  pleaded  as  giving  rise  to  the  plaintiffs'  claims  took  place (assuming they did)  in  1992  and  1993.    Section 4  of  the  Limitation  Act  1950 provides relevantly:

4Limitation  of  actions  of  contract  and  tort,  and certain  other actions

(1)Except as otherwise provided in this Act ... the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say,—

(a)      Actions founded on simple contract or on tort: ...

[18]     Counsel for all the parties agree that the statement of claim can be read broadly as alleging that the first defendant and the second defendant committed an economic tort or torts (pleaded in para [6] as breaches of "duties of care") by the intentional infliction of economic loss.  The six years' limitation period expired on the face of the statement of claim some time in 1999 (at the latest).

[19]     The plaintiffs, in an affidavit affirmed on 29 July 2010, declared that they did not know of the facts giving rise to their cause of action until 5 February 2004. Therefore, they argued, the action was brought just inside the limitation period.

[20]     The defendants[11] point to factual material which could be seen as challenging the plaintiffs' claims in this regard.  However, they place their primary reliance on the judgment of the Supreme Court in Murray v Morel & Co Ltd.[12]   In that judgment Tipping J in his reasons reviewed the law in New Zealand and concluded:

[11] Affidavit of Stephen Robert Tindall in reply, sworn 23 August 2010.

[12] Murray v Morel & Co Ltd [2007] 3 NZLR 721 (SC).

[69]      In my view the numerous references in the Limitation Act to accrual of a cause of action can only be construed as references to the point of time at which everything has happened entitling the plaintiff to the judgment of the Court on the cause of action asserted.   Save when the Limitation Act itself makes knowledge or reasonable discoverability relevant, the plaintiff’s state of knowledge has no bearing on limitation issues.   Accrual is an occurrence-based, not a knowledge-based, concept.  The Limitation Act as a whole is structured around that fundamental starting point.  The periods of time selected for various purposes must have been chosen on that understanding.   The circumstances of postponement and extension have themselves been similarly framed.

[21]     Counsel  for  the  plaintiffs  accepted  that  this  dictum  is  authoritative  but submitted that s 28 of the Limitation Act 1950 applies:

Postponement of limitation period in case of fraud or mistake

Where,  in  the  case  of  any  action  for  which  a  period  of  limitation  is prescribed by this Act, either—

(a)The action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or

(b)The right of action is concealed by the fraud of any such person as aforesaid; or

(c)       The action is for relief from the consequences of a mistake,—

the  period  of  limitation  shall  not  begin  to  run  until  the  plaintiff  has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it: ...

[22]     Mr Hooker for the plaintiffs submitted that on the pleadings and on the affidavits the plaintiffs have raised the existence of some sort of economic tort (an

area of law which he submitted is developing and so for that reason alone strike out should be viewed with extra caution).  The tort was of the nature of conspiracy by unlawful means and/or breaches of confidence and/or unlawful interference with business relations:[13]

[13] Plaintiffs' Memorandum of Submissions, dated 1 September 2010 at para [13].

There was a meeting and various things were discussed including the plaintiffs' business.  Secrets of the plaintiffs' business were on the pleadings disclosed.   The nature and the extent of the agreement if any and the discussions and the resulting actions taken by the defendants and whether they  were  in  pursuance  of  the  agreement  or  innocently  done  by  any individual rather than collectively is in Counsel's submission a trial issue. Examined in that way the concealment of the agreement (explicit or implicit) (or to act in concert) to cause economic loss would be part of the agreement (or to act in concert) in which case section 28 applies.

[23]     Mr  Hooker  referred  me  to  Inca  Ltd  v  Autoscript  (New Zealand)  Ltd[14]in support of his submission that for the purposes of s 28 "fraud" is wider than criminal fraud and includes equitable fraud.   I accept that Inca is authority for that proposition.[15]

[14] Inca Ltd v Autoscript (New Zealand) Ltd [1979] 2 NZLR 700 (SC).

[15] I note that the case was approved by the Court of Appeal in Official Assignee of Collier vCreighton [1993] 2 NZLR 534 (CA) at 539.

[24]     In Inca Mahon J made an extensive analysis of the cases pertaining to the circumstances in which limitation periods should be postponed or extended. Naturally,  this  was  aimed  at  deriving  a  proper  construction  of  s 28.    Mahon J concluded:[16]

[16] Inca Ltd v Autoscript (New Zealand) Ltd at 711.

It therefore follows, in my opinion, that s 26 of the Limitation Act 1939 (UK),  as  with  its  New Zealand  counterpart,  in  so  far  as  it  codified  the equitable rules extending time limits, uses the word 'fraud' in para (a) as meaning either fraud at common law or equitable fraud, and uses the same word in para (b) in the same sense.  Paragraph (b) covers causes of action other than fraud, and the limitation defence will be barred for the appropriate period either where there is dishonest concealment of the cause of action, equivalent to common law fraud, or where there is non-disclosure occurring in such circumstances as to amount to equitable fraud.   In either case the concealment must be wilful.  The defendant must know all the facts which together constitute the cause of action.

[25]     The factual situation in Inca was that there was a contract for the supply of goods  and  an  express  provision  of  the  contract  was  that  the  price  would  be

discounted to the extent that was usual for the vendor to apply to wholesalers.  The vendor did not do this and the purchaser's discovery of the breach of contract was outside the limitation period.  Mahon J was prepared to imply a term in the contract to the effect that the vendor was obliged to keep the purchaser accurately informed of its wholesale discount rates.   There was, therefore, a special duty of disclosure inherent in the supply contract and because that had not been complied with s 28 applied.

[26]     In this case Mr Hooker submits that a conspiracy, which he says is raised on the pleadings, meant that concealment was inherent and in the context of the case fraudulent within the meaning of s 28.  He does not contend that there was ever a contractual relationship between his clients and either or both of the defendants.  In short, Mr Hooker submits that the plaintiffs' action alleges a fraud-based tort and that even if the tort is not fraud-based it was concealed by fraud.

[27]     Therefore, the inquiry at this stage is whether the pleadings and the affidavits disclose an allegation of tortious conduct sufficient to found an action based on fraud, or disclose an allegation of some other right of action which was concealed by fraud, such that there is an arguable case for an extension or postponement (pursuant to s 28 of the Limitation Act 1950) which would bring the claim back within time.

[28]     The allegations pleaded are that in breach of the duties set out in para [6] of the statement of claim the defendants jointly and severally took the actions particularised in para [7] of the statement of claim.

[29]     The duties that the defendants allegedly had can be said in combined effect to be a duty of neutrality towards the plaintiffs' commercial interests arising out of the defendants' "business relations with the Plaintiffs' business."[17]

[17] Statement of claim, sworn 4 February 2010 at [6].

[30]     The alleged breaches of that duty (in summary) are:

a)        The defendants met with Mr Forde in December 1992 "to discuss the plaintiffs' business relations and specifically to discuss taking over the

plaintiffs' business."  This discussion used confidential information of the plaintiffs.[18]    The meeting resulted in an agreement between the defendants  and  Mr Forde  that  the  defendants  would  "explore  the taking over of the plaintiffs' business."[19]     This agreement included using Mr Forde's "confidential access to the plaintiffs' business."[20]

[18] Ibid, at para [7.1].

[19] Ibid, at para [7.2].

[20] Ibid, at para [7.6].

b)On or about 21 January 1993 the first defendant met with Mr Forde and  an  employee  of  the  plaintiffs,  Mr O'Sullivan,  "to  discuss  the business of the plaintiffs."[21]    Although it is not pleaded as such, this could  be  inferred  to  be  in  furtherance  of the  agreement  allegedly reached in the December 1992 meeting.   In any event, it is further pleaded that as a consequence of this meeting Mr O'Sullivan left the

[21] Ibid, at para [7.7].

employment of the plaintiffs on 26 January 1993, as did some other staff on his advice.[22]

[22] Ibid, at para [7.9].

c)       The first defendant subsequently caused The Warehouse Ltd to take the actions pleaded in para [7.11] of the statement of claim for the purpose of causing the plaintiffs to lose control of their business so that the defendants "could obtain for themselves the benefit of the

plaintiffs' business."[23]

[23] Ibid, at para [7.10].

[31]     I have no doubt that if a person has a legal duty not to interfere with another's business dealings ⎯ to be neutral in respect of them ⎯ and then deliberately and clandestinely breaches that duty intending to cause the other loss for the financial benefit of himself, then that can amount to equitable fraud.[24]

[24] Inca Ltd v Autoscript (New Zealand) Ltd at 708.

[32]     I conclude that the plaintiffs' case, on the face of their pleadings, is that the defendants' conduct amounted to equitable fraud.  But that is not enough to permit

them to claim the extension or postponement provided for by s 28 of the Limitation

Act 1950.

[33]     In my view, I should approach this issue in the manner set out by Tipping J in

Murray v Morel & Co Ltd:

[33]      I consider the proper approach, based essentially on Matai, is that in order  to succeed in  striking out  a  cause  of  action as  statute-barred,  the defendant must satisfy the Court that the plaintiff’s cause of action is so clearly statute-barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process.  If the defendant demonstrates that the plaintiff’s proceeding was commenced after the period allowed for the particular cause of action by the Limitation Act, the defendant will be entitled to an order striking out that cause of action unless the plaintiff shows that there is an arguable case for an extension or postponement which would bring the claim back within time.

[34]      In the end the Judge must assess whether, in such a case, the plaintiff has presented enough by way of pleadings and particulars (and evidence, if the plaintiff elects to produce evidence), to persuade the Court that what might have looked like a claim which was clearly subject to a statute bar is not, after all, to be viewed in that way, because of a fairly arguable claim for extension or postponement.  If the plaintiff demonstrates that to be so, the Court cannot say that the plaintiff’s claim is frivolous, vexatious or an abuse of process.   The plaintiff must, however, produce something by way of pleadings, particulars and, if so advised, evidence, in order to give an air of reality to the contention that the plaintiff is entitled to an extension or postponement which will bring the claim back within time.   A plaintiff cannot, as in this case, simply make an unsupported assertion in submissions that s 28 applies.  A pleading of fraud should, of course, be made only if it is responsible to do so.

[34]     The three torts which appear to be raised by para [6] of the statement of claim and by Mr Hooker's submissions are the common law economic torts of inducing breach of contract, causing loss by unlawful means and conspiracy.

[35]     In The Law of Torts in New Zealand[25]  the point is made that all three torts consist of unlawful interference by the defendant with the economic interests of the plaintiff with resulting loss to the plaintiff.  For the latter two torts, even if there is malice that will not of itself make what is otherwise a lawful act unlawful:[26]

[25] Stephen Todd (ed), The Law of Torts in New Zealand (5th ed, Thomson Reuters, Wellington 2009). 

[26] Ibid, at 603.

The result of the decision in Allen v Flood has been that interference with the trade or business (or employment) of another is at common law lawful,

irrespective of the defendant's motive, unless a breach of an existing contract is procured or there is an element of combination or the interference is effected by performing or procuring an unlawful act.

[36]     Inducing breach of contract: this tort is actionable only by the party to the contract which is not in breach and who suffers damage as a result of the breach. This tort cannot apply to the plaintiffs' situation since the previous litigation held that they were not a party to the contract with The Warehouse Ltd.   It was Bell Gas Cylinders Ltd which manufactured and supplied LPG cylinders to The Warehouse Ltd and in doing so employed Mr O'Sullivan and engaged Mr Forde's employer. The plaintiffs, as shareholders of Bell Gas Cylinders Ltd, cannot claim a separate

interest which gives rise to the cause of action.[27]

[27] Takaro Properties v Rowling [1986] 1 NZLR 22 (HC).

[37]     Intentionally causing loss by unlawful means: the elements of this tort are that the defendant must have intended to cause loss to the plaintiff and, to that end, interfered with the actions of a third party in which the plaintiff had an economic interest, using unlawful means.  Additionally, there must be resulting actual damage

to the plaintiff.[28]

[28] Todd, at 618.

[38]     In this case the plaintiffs allege at para [6] breaches of five "duties", each of which against a suitable factual background might give rise to a right to have a properly pleaded cause of action in this tort considered by a Court.  However, neither para [7] nor the plaintiffs' affidavits provide such a background:

(a)      There is nothing that points to an intention by either defendant to cause loss to the plaintiffs.  The allegation (assuming it to be true) is that the first defendant was interested in taking over the business of Bell Gas Cylinders (Ltd).   The actions pleaded in para [7] of the statement of claim are in furtherance of that interest.

(b)There is no evidence of unlawful means.  Considering a takeover of a company and speaking to a consultant to and an employee of that

company is not unlawful.[29]    Neither is there any indication that the reason for the actions pleaded was to cause harm to the plaintiffs.

[29] OBG Ltd v Allan [2008] 1 AC 1, per Lord Hoffman at [51].

(c)Further, because the plaintiffs had no contract relevant to their claims, their  economic  interests  would  have to  relate to  their  interests  as shareholders in Bell Gas Cylinders Ltd.   But the previous litigation established that Bell Gas Cylinders Ltd suffered no actionable loss and  since  the  plaintiffs  as  shareholders  cannot  be  in  a  different position to Bell Gas Cylinders Ltd in relation to the contract with The Warehouse Ltd, there is no basis for alleging actual damage to themselves.

[39]     It follows that this tort cannot be relied upon by the plaintiffs.

[40]     Conspiracy: this tort requires a combination of two or more persons for either an unlawful purpose or to injure by unlawful means.[30]    The plaintiffs do not raise in their pleadings or in their affidavits any realistic allegation of a relevant combination of two or more persons.  A discussion to explore a business takeover between  an  officer  of  a  company with  a  contract  with  another  company and  a consultant to that company plus an unrelated person (the second defendant) does not begin to raise the tortious combination prerequisite for an action in conspiracy.[31]

[30] Todd, at 629.

[31] See the discussion in Todd at 631-636.

[41]     Additionally, there is no foundation for an unlawful purpose nor unlawful means, still less for an intention to injure.  This tort is not available to the plaintiffs.

[42]     Further, the plaintiffs in their personal capacities never had any contractual relationship with either of the defendants.   It was established in the previous litigation[32] that the contract which arose from the discussions between the plaintiffs and the first defendant was between The Warehouse Ltd and Bell Gas Cylinders Ltd. That  contract  was  lawfully  terminated  by  The  Warehouse  Ltd  close  to  its anniversary.  Therefore, any discussions which took place as pleaded in which the

[32] Bell v The Warehouse Ltd at [27].

first defendant and the second defendant were involved did not produce any results actionable in the hands of the plaintiffs.

[43]     In my view, the plaintiffs have not in their pleadings and affidavits produced anything which gives "an air of reality"[33] to their contention that they are entitled to an extension or postponement which will bring their case back within time.  Their assertions are unsupported and, indeed, against the undisputed factual background.

[33] Murray v Morel & Co Ltd at [34] per Tipping J.

[44]     I therefore hold that s 4 of the Limitation Act 1950 applies and the plaintiffs' statement of claim must be struck out on this ground alone.  However, for the sake of completeness I also consider the defendants' argument of issue estoppel.

Issue Estoppel

[45]     Issue estoppel applies where a judicial decision has been made which was final, on the merits, determined the same question as that raised in the later litigation and the parties to the later litigation were either parties to the earlier litigation or their privies.[34]

[34] KR Handley Spencer Bower, Turner and Handley: Res Judicata (4th ed, LexisNexis, London,

2009) at [1.02], cited in Chean v De Alwis [2010] NZCA 30 at [21].

[46]     In my view, the defendants must also succeed on this head of their strike out applications.

[47]     Venning J held that the plaintiffs were not party to the contract.  Further, that the contract was lawfully terminated and Bell Gas Cylinders Ltd did not suffer any actionable loss as a result of the contract.

[48]     The plaintiffs' statement of claim seeks to re-litigate or circumvent these findings.  They cannot.

[49]   Therefore, the plaintiffs' causes of action (however defined) are clearly untenable.  To advance the claims in a re-pleaded form, the plaintiffs would have to

show on a basis that was not speculative some foundation that in relation to the contract between The Warehouse Ltd and Bell Gas Cylinders Ltd there was some sort of independent obligation owed by the first defendant and/or the second defendant to the plaintiffs personally and that despite there being no loss accruing to Bell Gas Cylinders Ltd there was an actionable loss accruing to them.   There is nothing in the pleadings or the affidavits which disclose any such foundation. Accordingly, I find for the defendants on this ground also and would strike out the statement of claim as the result.

The overall picture

[50]     Because of the way this case has been pleaded by the plaintiffs, and because of its connection with previous litigation, I have struggled to find a theme which unifies the findings I have reached.  Therefore, I return to r 15.1 and (at the risk of repetition) consider whether, taken overall, the plaintiffs' pleading (if necessary, and possible, re-pleaded) discloses a reasonably arguable cause of action or case appropriate to the nature of the pleading.

[51]     In doing so I am mindful that the case law interprets "reasonably arguable" more restrictively than the words would normally suggest.  For a cause of action not to be reasonably arguable it must be clearly untenable.[35]

[35] See para [14](b) above.

[52]     The plaintiffs, in 1992 and 1993, were the shareholders in, and managers of, a company which contracted with The Warehouse Ltd to supply it with LPG cylinders. The contract was for an initial period of a year but the plaintiffs had high hopes that it would be renewed and that for perhaps 10 years they would supply great numbers of the cylinders to The Warehouse Ltd.   Their hopes were made buoyant by their dealings with the first defendant who was also optimistic about the future of this new business relationship.  Unfortunately, for the reasons set out in the judgments of the Courts in the previous litigation, The Warehouse Ltd terminated the contract (lawfully)  shortly  before  its  expiration.     The  plaintiffs'  company  went  into liquidation and the plaintiffs sued The Warehouse Ltd.   During the period of that

litigation first Mr Bell and then Mrs Bell became bankrupt, no doubt as a result of liabilities arising from the failure of their company.  The litigation did not succeed. Mr and Mrs Bell were left with a sense of grievance.

[53]   In 2004, according to their affidavits, the plaintiffs discovered that the discussions which they plead in para [7] of the statement of claim had taken place. In their minds, their losses could now be seen to be the fault of the defendants personally and so, after waiting almost exactly six years, they issued this proceeding.

[54]     There was never any contractual relationship between the defendants and the plaintiffs, nor between the defendants and the plaintiffs' company.   Therefore, the plaintiffs had to identify some legal obligation or duty separate from contract which they could allege had been broken, with such breach being causative of their losses.

[55]     I discern from the statement of claim, and from the other documents they filed in the case, that the plaintiffs had some knowledge that the intentional infliction of economic loss can be a legal wrong which can be actionable.  So they pleaded their case generally on this basis but without identifying which of the common law torts they relied upon.

[56]     The plaintiffs' difficulties in identifying a legal obligation or duty owed to them by the defendants were:

a)       The first defendant was not acting on his own behalf but on behalf of The Warehouse Ltd and that company had its business dealings not with the plaintiffs but with Bell Gas Cylinders Ltd.

b)The second defendant was a stranger to them.   He did not have the relationship with Babbage Consulting Group Ltd as pleaded by them in para [5] of the statement of claim and could not have had entrusted to  him  confidential  information  as  pleaded  in  para [7.2].    It  is  a measure of the strength of the grievance they felt that even when they were compelled to accept these facts as true they nevertheless continued with their claim against the second defendant.

c)        All their losses arose from their ownership of Bell Gas Cylinders Ltd.

Yet the previous litigation had established that The Warehouse Ltd had  done  nothing  wrong  in  its  contractual  dealings  with  their company and that their company had not suffered an actionable loss at its hands.

d)The previous litigation had also established that the plaintiffs were not parties to the contract with The Warehouse Ltd.

e)        There was no non-fanciful basis for pleading an intention by either of the defendants to cause economic harm to the plaintiffs personally.

[57]     In their notice of opposition to the first defendant's application for strike out

(verified by the plaintiffs by affirmation on 29 July 2010) they say:

(g)       The plaintiffs personal loss resulted from the plaintiffs reliance on the first defendants word that he intended to purchase further substantial quantities of LPG cylinders that could only be manufactured using the design approvals and machinery owned by the plaintiffs as Bell Gas Cylinders partnership due to LPG cylinder design approvals not being permitted to be transferable.

(h)       The  plaintiffs  each  suffered  personal  loss  as  a  result  of  the interference with business and economic relations by the defendants personally.

(i)        "But-for" the first plaintiffs actual reliance on the first defendants false assurance on or about August 9th 1993 that he certainly did intend to purchase more of the plaintiffs LPG cylinders the first plaintiff would not have signed a lease on the 13th August 1993 which resulted in his personal bankruptcy; and "but-for" the defendants concealment of their intent to acquire and interfere with the  plaintiffs  business  and  economic  relations,  the  first  plaintiff would  not have  relied and  acted upon the first defendant's  false assurance.

(j)        "But-for" the defendants intent to acquire and to interfere with the plaintiffs business and economic relations and the defendants concealment of the said intent to acquire and to interfere with the plaintiffs business and economic relations; and "but-for" the previously concealed series of events and actions articulated in paragraphs 7.1, 7.2, 7.4, 7.5, 7.6, 7.7, 7.9, 7.10, 7.11, 7.11.1, 7.11.2,

7.11.3,  7.11.4,  7.11.5,  7.11.6,  7.11.7,  7.11.8  and  7.11.9  of  the statement of claim, and specifically the first defendants refusal to

instruct his staff to refund monies wrongly applied to the plaintiffs

reconciliation account causing economic duress, the plaintiffs would have   paid  for  the  steel  for  which  the  second  plaintiff   was

bankrupted, but instead the plaintiffs used what little capital they had to pay rent and other necessary overheads whilst they waited for the promised order from the first defendant, which was not forthcoming.

(k)       "But-for" the first defendant and his staffs repeated refusal to finalise the reconciliation account and "but-for" the first defendants assurances of a 10 year relationship with the plaintiffs, and "but-for" the plaintiffs reliance on the first defendants assurance to have 70-

75% New Zealand made product in his stores by the year 2000, and "but-for" the defendants concealing their interference with the plaintiffs business; the plaintiffs would have acted sooner in relocating their business to less expensive premises and would have avoided bankruptcies.

[58]     However,  all  of  those  allegations  of  loss  relate  to  actions  of  the  first defendant (assuming that he took those actions) which he took in his capacity as an officer of The Warehouse Ltd.  They were apparent to the plaintiffs at the time they occurred and, if actionable, could have been included in the previous litigation.  To now make the alleged losses attributable to a tortious agreement arising from the pleaded discussions to the first of which both defendants were party and to the second of which the first defendant was party is simply untenable.

[59]     Likewise, the claim for $2,820,000, which was based on the pleaded loss of profit of 20,000 cylinders a year for 10 years,[36]  was also untenable.  The previous litigation made clear that there was no such contract between The Warehouse Ltd and the plaintiffs' company and on no basis could the defendants be liable personally to the plaintiffs personally on such a pleading.

[36] Statement of claim, sworn 4 February 2010 at para [13.1].

[60]     On this broad analysis, even (as I have found) if the Limitation Act bar did not apply and the issue estoppel argument were not fatal to the plaintiffs' case, I would still strike it out.  I can find no tenable cause of action in the pleadings, nor discern one pleadable in the factual material put before me.  Neither can I see any causal link between the actions of the defendants as alleged and the losses pleaded by the plaintiffs.  I am certain that if the plaintiffs' case went to trial they could not succeed.

[61]     I have not found it necessary to decide whether r 15.1(1)(c) or (d) apply to this case.  I may have to do so in considering costs.

Conclusion

[62]     I strike out the plaintiffs' statement of claim.

[63]     The defendants are entitled to costs.  Both have applied for indemnity costs but that issue was not addressed in argument before me.  I direct that the defendants file and serve memoranda on their claims for costs by 1 October 2010 and that the plaintiffs file and serve a memorandum in reply by 29 October 2010.   I will then

decide the issue on the papers.

Brewer J