CARRINGTON RESORT JADE LP / AND THEO VAN DEN BRINK /

[2022] NZHC 2104

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2022-404-000262

CIV 2022-404-000330

[2022] NZHC 2104

BETWEEN

CARRINGTON RESORT JADE LP

Applicant/Plaintiff

AND

THEO VAN DEN BRINK

Respondent/Defendant

Hearing:	4 July 2022
Appearances:	J J K Spring & R Hastie for the Applicant/Plaintiff
Judgment:	23 August 2022

JUDGMENT OF TAHANA J

This judgment was delivered by me on 23 August 2022 at 4.00pm Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors/Counsel:

Minter Ellison Rudd Watts, Auckland Pidgeon Judd, Auckland

B Gustafson, Barrister, Auckland

CARRINGTON RESORT JADE LP v VAN DEN BRINK [2022] NZHC 2104 [23 August 2022]

Introduction

[1]    The plaintiff, Carrington Resort Jade LP (Carrington) seeks judgment by way of formal proof for its claims against the defendant, Mr van den Brink. The parties had been working together to establish a coffee plantation in Northland. Carrington had purchased equipment and advanced funds to Mr van den Brink to establish operations on a leased property. When Carrington became concerned as to progress, it notified Mr Van den Brink that it wished to move the operations to Carrington’s property. In response, Mr van den Brink said he no longer wished to be involved. He would not allow Carrington to collect equipment from his property until he had been paid for the work he had undertaken.

[2]    Carrington obtained an injunction preventing Mr van den Brink from removing the equipment and orders freezing his bank account. Judgment has been issued on a formal proof basis for conversion of the equipment and funds. The Court has ordered Mr van den Brink to return the equipment and funds to Carrington.

[3]    I now need to determine whether judgment should be entered for Carrington’s remaining claims that Mr van den Brink has breached his fiduciary obligations to Carrington, breached s 9 of the Fair Trading Act 1986 (the Fair Trading Act) and engaged in negligent misstatement. While Mr van den Brink has filed a notice of opposition and affidavits, he has not filed a statement of defence.

[4]The issues I need to determine are:

(a)Did the parties engage in a way that established a joint venture so that Mr van den Brink owed fiduciary obligations to Carrington?

(b)Did Mr van den Brink breach his fiduciary obligations to Carrington?

(c)Did Mr van den Brink make misrepresentations as to his experience and expertise, the potential financial returns of the venture and the availability of land for the plantation?

(d)If misrepresentations were made, did Carrington rely on Mr van den Brink’s misrepresentations when advancing funds to Mr van den Brink and purchasing equipment for the project?

Background

Negotiation period – June to September 2021

[5]    In June 2021, Mr Tan, the Chief Executive Officer of Carrington was introduced to Mr van den Brink. The parties discussed establishing a coffee plantation in Northland which would involve germinating green coffee beans to produce seedlings for planting.

[6]    The negotiations continued until a memorandum of understanding (MOU) was agreed in September 2021. During those negotiations, Mr van den Brink provided Mr Tan with financial projections based on planting from 80 to 400 hectares. The financial projections forecast negative net cash flow for years one to three and positive net cashflow of $6,644,735 from year four to $34,843,817 in year 11.

[7]    Mr van den Brink obtained and provided quotations to Carrington for equipment required to establish the operations. Mr van den Brink also requested that Carrington advance $25,000 to enable him to start building the infrastructure and commence germinating coffee beans. Mr van den Brink indicated that he would need more funds once the agreement was signed off.

[8]    Carrington says that Mr van den Brink told it that he had access to land to be leased from Far North Holdings Limited (FNHL). On 25 August 2021, Mr van den Brink sent Carrington a copy of a draft heads of agreement between him and FNHL. The document was unsigned and included provisions that:

(a)the lease would commence on 1 July 2021;

(b)Mr van den Brink had extensive experience and knowledge in the coffee industry and the growing of coffee beans and wished to set up a coffee plantation in Northland;

(c)The heads of agreement included a map  with areas to be leased to   Mr van den Brink as follows:

(i)area A for one year from 1 July 2021 at $1 per annum plus outgoings;

(ii)area B for two years from 1 July 2021 at $10,000 per annum for year 1 and $20,000 per annum for year two. Area B could be extended by FNHL to include area C at no additional rental.

(d)The areas by hectare in the draft heads of agreement were blank.

Memorandum of understanding – 10 September 2021

[9]    The parties signed the MOU on 10 September 2021. The terms of the MOU included that:

(a)The parties would act in good faith to explore a commercial agreement to further the purpose, which was to plant and grow coffee trees in Northland, including on land provided by Carrington (cl 2.1(a));

(b)If an agreement was not agreed by 30 November 2021, the obligations set out in the MOU would end with no party having any claim against any other party (cl 3.1);

(c)The MOU was not intended to be legally binding but to be a “sincere reflection” of the parties intentions (other than the obligations to act in good faith, to deal exclusively to 31 October 2021 and the status of the MOU);

(d)The key terms if the joint venture was to proceed, were:

(i)Shareholdings would be Carrington 60%, Mr van den Brink 35% and Mr Brown 5% (cl 2.2(b));

(ii)The contributions of each party would be (cl 2.2(c)):

(1)   Mr van den Brink to provide seeds and propagate up to 1,000,000 coffee plants such that they are ready for planting by 31 August 2022 October 2021 [sic], with those seeds and seedlings being contributed to the joint venture;

(2)   Carrington to provide initial capital and operating expenses; and

(3)   Mr Brown to provide consulting, networking and engineering services to the joint venture;

(iii)The joint venture would manage its own business and not pay a management fee to any party unless agreed by Mr van den Brink and Carrington;

(iv)Mr van den Brink would assign the lease agreements and the joint venture would take a licence of up to 100 hectares of land initially, with potential to plant more at Carrington’s farm; and

(v)Mr van den Brink would contract his services to the joint venture for not less than minimum of 40 hours per week at a rate to be agreed.

After signing the MOU – September 2021 to February 2022

[10]   Despite the terms of the MOU which foreshadowed a formal agreement before proceeding with the joint venture, the parties continued to progress the establishment of the coffee plantation.

[11]Mr van den Brink continued to request funding from Mr Tan:

(a)on 20 September 2021, he emailed Mr Tan requesting capital to enable him to pay expenses including salaries of $200,000 per annum for

himself, $40,000 per annum for Mr Brown and $60,000 to $70,000 per annum for Mr Atkinson and his partner. He requested Mr Tan pay invoices from suppliers (Norwood and Primehart) and asked for an advance of $25,000 for materials, contractors and more green coffee beans;

(b)on 6 October, he followed up on the $25,000 advance; and

(c)on 11 January 2022, he again asked for more money for materials and to pay Mr Atkinson.

[12]   Carrington advanced $80,000 to Mr van den Brink’s personal bank account between October and December 2021. In response to the 11 January 2022 request, Mr Tan said no further funds would be advanced without receipts. He also indicated that Mr van den Brink needed to arrange for the equipment to be taken to Carrington’s property.

[13]   Carrington also purchased equipment costing close to $700,000 and delivered the equipment to Mr van den Brink.

[14]   On 7 February 2022, Mr van den Brink emailed Mr Tan expressing concern as he did not agree to moving operations. He indicated that he did not intend to continue with the coffee plantation at Carrington until a “binding joint venture document” was established and arrears in funding were “normalised.”

[15]   On 9 February 2022 Mr Tan responded, disputing the allegations made by  Mr van den Brink and indicating he would visit Mr van den Brink.

[16]   When Mr Tan and his staff went to meet with Mr van den Brink he prevented them from accessing the site and subsequently trespassed them.

[17]   On 8 March 2022, Carrington filed a without notice application against Mr van den Brink seeking an injunction, freezing and ancillary orders. All except one of the orders sought have since been granted.

[18]   On 15 March 2022, Carrington filed a statement of claim. Mr van den Brink has not filed a statement of defence and Carrington now applies for formal proof of its claims.

[19]   After the hearing of the formal proof application, the Court received an affidavit of Mr van den Brink dated 1 July 2022 and received by the High Court, Auckland Registry on 13 July 2022. Counsel for Carrington submit that it should not be admitted and if it is, no weight should be attributed to the affidavit given the delay.

[20]   I consider that in the interests of justice, given the affidavit is relevant and Carrington has had an opportunity to make submissions on it, the affidavit is admissible and should be considered for the purposes of determining the formal proof hearing.

Formal proof

[21]   Rule 15.9 of the High Court Rules 2016 (HCR) provides for judgment by way of formal proof if the defendant does not file a statement of defence. I must be satisfied that Carrington’s evidence establishes each cause of action on which it relies.1

[22]   Duffy J has held that “the level at which a Judge is required to satisfy herself regarding the plaintiff’s evidence is much the same as it would be if the proceeding had gone to trial.”2 I therefore consider whether the evidence filed proves each of the causes of action.

[23]Carrington alleges four causes of action, as follows:

(a)breach of Mr van den Brink’s fiduciary obligations owed to Carrington;

(b)conversion. This cause of action has been determined and orders made for the recovery of the equipment and funds;

(c)breach of s 9 of the Fair Trading Act; and

1      High Court Rules 2016, r 15.9(4).

2      Ferreira v Stockinger [2015] NZHC 2916, at [35].

(d)negligent misstatement.

[24]   I consider each of the causes of action above (except conversion, which has already been determined).

First cause of action – breach of fiduciary obligations

[25]   Carrington alleges that from at least September 2021 it was in a fiduciary relationship with Mr van den Brink and the parties owed obligations at law and in equity to each other.

Did Mr van den Brink owe fiduciary obligations to Carrington?

[26]   By 10 September 2021, the parties had signed the MOU. The MOU indicates an intention to negotiate an agreement before the joint venture was established. At that time, Carrington was under no obligation to provide funding and Mr van den Brink was under no obligation to progress the establishment of the coffee plantation.

[27]   Despite the terms of the MOU, Mr van den Brink requested funding and Carrington advanced $80,000 and purchased equipment of significant value to enable the building of infrastructure for the plantation. Do these circumstances therefore give rise to obligations on the parties despite no agreement having been concluded under the MOU?

[28]   The Supreme Court has held that a fiduciary relationship is likely to exist in a joint venture context despite the parties having not yet agreed a contract:3

The essence of a joint venture which is not yet contractual is that it is an arrangement or understanding between two or more parties that they will work together towards achieving a common objective. It is fallacious to think that there can be no joint venture unless and until all the necessary details have been contractually agreed. A joint venture will come into being once the parties have proceeded to the point where, pursuant to their arrangement or understanding, they are depending on each other to make progress towards the common objective. Each party is then proceeding on the basis that he or she is acting in the interests of all or both parties involved in the arrangement or understanding. A relationship of trust and confidence thereby arises; each party is entitled to expect from the others loyalty to the joint cause, loose as

3      Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433, at [91].

the  formalities  of  the  joint  venture  may still be…    Neither of them was thereafter entitled to act solely in his own interests.

[29]   In this case, I am satisfied that once Carrington had advanced funds and provided equipment, there was an understanding that those funds and equipment would be used to progress the coffee plantation. At that point, Carrington was relying on Mr van den Brink to use the funds to progress the joint venture. Mr van den Brink was also acting as though the joint venture was operative.

[30]   I accept therefore, in line with Chirnside v Fay that a fiduciary relationship existed between the parties as from the time that Carrington advanced funds or provided equipment.

Did Mr van den Brink breach his fiduciary obligations to Carrington?

[31]   Carrington allege that Mr van den Brink breached his fiduciary obligations to Carrington by:

(a)failing    to    deal    in    good    faith    with    Carrington    by    making misrepresentations;

(b)failing to perform his obligations in furtherance of the joint venture; and

(c)failing to account for funds provided by Carrington.

[32]   I consider the alleged misrepresentations below under the Fair Trading Act cause of action.

[33]   I turn to the allegation that Mr van den Brink failed to perform his obligations to further the joint venture.

[34]   Carrington says that by walking away and leaving it to absorb the full costs of the joint venture Mr van den Brink failed to perform his fiduciary obligations. The email of Mr van den Brink to Mr Tan dated 7 February 2022 notified Mr Tan that he

no longer wished to proceed with the joint venture until a joint venture document was established and arrears in funding were paid.

[35]   Withdrawal from a joint venture was considered in Chirnside v Fay and it was accepted that because there is no contract between the parties, each will be free to withdraw, on giving the other notice to that effect. While duties of loyalty will come to an end confidentiality obligations will remain and any assets held on behalf of the joint venture will still usually be held on trust for the joint venturers. The joint venturers must act equitably towards each other in the steps necessary to bring the affairs of the joint venture to a conclusion. The further the joint venture has progressed, the more complex the obligations.4

[36]   It was therefore open to Mr van den Brink to terminate the joint venture. He was however, still required to act equitably in bringing the joint venture to an end. In this case, Mr van den Brink denied Carrington access to the equipment and did not provide a full account of how the $80,000 had been spent other than receipts for approximately $27,000.

[37]   Mr van den Brink has since provided bank statements to the Court which show that the funds were deposited into his account and subsequently spent on a range of things. While some funds appear to have been used for the joint venture, other funds appear not to have been.

[38]   In these circumstances, while I accept that Mr van den Brink was entitled to terminate the joint venture, I am satisfied that the evidence establishes that he breached his fiduciary obligations in refusing to allow Carrington to collect the equipment and in failing to account for all of the funds. Once Mr van den Brink had indicated his intention to withdraw, he should have acted in good faith to meet with Carrington to work through how the joint venture would be ended. He should not have refused to allow Carrington to collect the equipment or refused to provide a full breakdown of how the funds had been spent.

4      Chirnside v Fay, above n 3, at [92].

[39]   In these circumstances, Mr van den Brink has breached his fiduciary obligations to Carrington.

Third cause of action – breach of s 9 of the Fair Trading Act 1986

[40]Section 9 of the Fair Trading Act states:

No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

[41]   I accept that Mr van den Brink was engaging in trade given the negotiations and conduct that gave rise to a joint venture.

[42]Carrington says that Mr van den Brink made the following representations:

(a)he had significant experience growing coffee trees overseas;

(b)he was an expert in growing coffee trees and was able to provide specialist advice and labour to the plaintiff to establish a coffee tree farming venture;

(c)such a venture in Northland was a lucrative opportunity for Carrington;

(d)he had access, as the holder of a lease, to 80 hectares of land at a site at Ngawha, suitable to grow coffee trees;

(e)he was able to source high quality and suitable coffee seeds; and

(f)he was readily able to germinate coffee seeds.

Representation as to overseas experience

[43]   Mr Tan deposes that Mr van den Brink represented that he had significant experience in growing coffee trees overseas, including in New Caledonia. Mr van den Brink’s representation is a statement of past fact. To show that it was a misrepresentation Carrington must establish that Mr van den Brink did not have significant overseas experience growing coffee trees.

[44]   Carrington says the lack of overseas experience is evident because Mr van den Brink was unable to germinate the coffee seeds or to complete any of the infrastructure required for the plantation.

[45]   There is no evidence that Mr van den Brink had not worked in New Caledonia or had no experience working overseas growing coffee treas. Mr van den Brink says he had worked in New Caledonia and had considered opportunities in Tonga. While I accept that Mr van den Brink had difficulties germinating coffee seeds, this on its own does not establish that he did not have overseas experience. More evidence is required to establish the falseness of this representation. Given that coffee is not ordinarily grown in New Zealand, it does not automatically follow that Mr van den Brink had not grown coffee in other countries with a different climate and with established coffee plantations.

[46]   For the reasons above, the evidence does not establish that the representation as to Mr van den Brink’s overseas experience was untrue.

Representation as to expertise – specialist advice and sourcing and germinating coffee seeds

[47]   I consider the representations set out at [42](b)(e) and (f) together as they all relate to representations as to Mr van den Brink’s expertise.

[48]The evidence indicates that:

(a)Mr van den Brink told Mr Tan during negotiations that he had expertise in growing coffee;

(b)The draft heads of agreement for the lease also includes a statement that Mr van den Brink “has extensive experience and knowledge in the coffee industry and the growing of coffee beans;”

(c)Mr van den Brink told Mr Tan that he had 600,000 beans at Ngawha and other new beans would be arriving. He requested funding so that he could advance the germination of the seeds;

(d)Mr van den Brink in an email dated 20 September 2021 advised Carrington of the heavy machinery necessary to build the infrastructure for the plantation; and

(e)Mr van den Brink told Mr Tan he could construct the infrastructure required including growing houses for the coffee trees.

[49]   The Court has considered that a representation as to expertise is an expression of an opinion rather than a statement of a fact. In this regard, in Santa Barbara Homes Ltd v Cozzolino noted that:5

[62] No submissions were directed against the  arbitrator's  finding  that Santa Barbara's representation that it had the required skill and expertise to properly manage the project was misleading and deceptive. But I have considerable difficulty with that finding. The misrepresentation seems to me to be an expression of opinion rather than a statement of fact. It was no more than an expression of belief that it was capable of doing the job which, in the circumstances it faced, turned out to be misplaced. Subsequent events do not establish the statement to have been false at the time it was made. Indeed, such evidence as is referred to in the award suggests that, based on the satisfactory completion of projects in the past, it was an opinion which Santa Barbara was entitled to hold.

[50]   A person may be liable for an expression of an opinion that subsequently proves to be incorrect only where they do not honestly hold the opinion at the time it was expressed or if there was no reasonable basis for it.6 That is because an expression of opinion implies two representations of fact – that the opinion was honestly held and that there is a reasonable basis for the opinion.

[51]   In Premium Real Estate v Stevens, the Court of Appeal considered the circumstances in which an expression of opinion can constitute misleading conduct.7 The Court adopted the orthodox view (that the opinion must be honestly held and reasonably based) and rejected the wider view that an expression of opinion may be misleading regardless of whether it was honestly held or reasonably based. The Court explained its reasoning for this:8

5      Santa Barbara Homes Ltd v Cozzolino HC Auckland CIV-2002-404-2577, 12 May 2004.

6      Premium Real Estate Ltd v Stevens [2008] NZCA 82; [2009] 1 NZLR 148, at [51].

7 At [50].

8 At [54].

A person may, in trade, express an opinion that is honestly held and reasonably based at the time it is expressed or relied upon but which subsequent events show to be wrong. In this respect, an expression of opinion may be unlike a misrepresentation of fact, which will be capable of being shown to be wrong at the time it is made. It is difficult to see why an honestly held, reasonably based opinion should be actionable under s 9 simply because it is not borne out by subsequent events. The person expressing the opinion may have done all that could sensibly be done to reach an informed view but would still be liable, even if the subsequent events or circumstances were unforeseeable.

[52]   The Court of Appeal applied this reasoning again in David v TFAC Ltd9 and considered that whether the defendant had reasonable grounds for their opinion must be assessed at the time they expressed the opinion.10

[53]   The key issue therefore is whether Mr van den Brink had a reasonable basis for making the representations at the time they were made. Carrington asks the Court to infer that Mr van den Brink must not have had a reasonable basis for his representations because of what eventuated.

[54]   I accept that the conduct of Mr van den Brink indicates that he did not have a reasonable basis for representing that he was an expert and was able to source and germinate coffee beans. On his own evidence, Mr van den Brink says that in July 2021 he had available and due to be delivered 70 kg of green coffee beans for germination. Mr van den Brink says green beans are not the ideal as germination percentages decline rapidly after one month of harvesting and COVID-19 had restricted the sourcing of coffee cherries from New Caledonia. There is no evidence that Mr van den Brink explained this significant risk to Carrington. This risk was clearly known to Mr van den Brink but there is no evidence that it was communicated to Carrington.

[55]   Mr van den Brink’s evidence is that he planted 75,000 coffee beans and none germinated. He says that he provided the beans to other seedling suppliers and none had success in germinating the imported green coffee beans. The only success Mr van den Brink had was from coffee cherries sourced from a plant growing in a contact’s kitchen.

9      David v TFAC Ltd [2009] NZCA 44.

10 At [47].

[56]   I therefore accept that the evidence establishes that Mr van den Brink did not have a reasonable basis for making representations that he was able to source quality coffee beans for germination. Despite making representations as to his ability to procure and germinate green coffee beans, Mr van den Brink was aware of the risks of germinating green coffee beans and did not share those risks with Carrington. At that time, Mr van den Brink was fully aware that Carrington was relying on his expertise – the MOU foreshadowed that he would receive equity in the joint venture for providing seeds and propagating coffee plants.

[57]    In terms of building infrastructure for the plantation, Mr van den Brink’s evidence is that he needed funding to pay staff and buy all the materials required. He says the equipment was not delivered until December so that he had to hire equipment and do the work himself. He says COVID-19 and the lockdowns impacted the laying of concrete pads and the building of infrastructure. In these circumstances, it is not possible to determine whether the failure to complete the infrastructure is due to    Mr van den Brink’s lack of expertise or due to the other factors to which he refers. Therefore, I am not persuaded that Mr van den Brink’s representation of his expertise in establishing the necessary infrastructure was false.

[58]   I now need to determine whether Carrington relied on the representations as to Mr van den Brink’s expertise in procuring and germinating coffee seeds (and if it was reasonable to do so) when advancing funds and providing equipment to Mr van den Brink.

[59]   The MOU refers to Mr van den Brink providing seeds and propagating coffee plants. Carrington’s role was to provide capital and Mr van den Brink himself accepts that he was to provide the expertise. Mr van den Brink continually asked for funding and knew that Carrington had no coffee expertise and was relying on him.

[60]   It was therefore reasonable for Carrington to rely on Mr van den Brink’s representations in deciding to advance the funds and pay for equipment.

Representation that a coffee venture in Northland was a lucrative opportunity

[61]   This representation is a statement as to a future fact so as with a statement of opinion, it must be established that there was no reasonable basis for making the representation or that it was not honestly held.

[62]   Mr Tan has provided “financial statements” he received from Mr van den Brink showing the potential returns for a coffee plantation with 80 hectares being planted each year for the period from 2021 to 2032. That document shows a negative net cashflow in 2021 of -$906,000 to a positive net cashflow of $34,843,817 in 2032.

[63]   The evidence is that very few coffee beans were able to be germinated. Again, Carrington relies solely on the failure of the venture as proof that the financial projections were false. The financial projections, however, relate to a significantly larger scale operation than was established. The financial statements are also unclear as to the underlying assumptions for “raw materials” – ie, whether the raw materials were green beans or fresh cherries such that disclaimers should have been included as to the risks of germination.

[64]   To establish that the financial projections were untrue or misleading, further evidence is required as to the nature of the market and the reasonableness of the projections.

[65]   I therefore do not consider that the evidence establishes that this representation was false or misleading.

Representation that Mr van den Brink had access to 80 hectares of land at a site in Ngawha.

[66]   Mr Tan says that prior to signing the MOU, Mr van den Brink said he had access to the Ngawha land. Mr Tan therefore understood that the land was secure and could be used for the venture. Mr Tan then says that in January 2022 he met with the Chief Executive Officer of FNHL who said that he had asked Mr van den Brink to produce evidence of progress before FNHL would secure the lease as there were other parties interested in the Ngawha land. Mr van den Brink said he discovered Mr van

den Brink had not leased the land and was only occupying area A referred to in the heads of agreement. Mr Tan relies on this as evidence that what Mr van den Brink had told him was untrue.

[67]   Any representation must be considered against the heads of agreement that was provided to Mr Tan on 25 August 2021. That document was unsigned, and the hectares were left blank. This was known to Mr Tan on 25 August 2021 and there is no evidence that further representations were made after that date such that it would be reasonable for Carrington to consider the heads of agreement had been signed and the Ngawha land secured.

[68]   I therefore do not consider that this representation was false given Mr Tan received the unsigned document so knew there was no final lease in place when he advanced funds and equipment.

Overall conclusion - representations

[69]   For the reasons above, I consider that Mr van den Brink acted in breach of s 9 of the Fair Trading Act by making representations that he was expert in growing coffee trees and was able to source high quality coffee seeds and germinate those seeds. The same conduct also supports a finding that Mr van den Brink did not act in good faith in making these representations. Such conduct was in breach of his fiduciary obligation to act in good faith towards Carrington.

[70]   I do not consider that the representations regarding his overseas experience, the potential financial returns of a large scale coffee plantation and access to the Ngawha land give rise to a cause of action under s 9 of the Fair Trading Act or breach of Mr van den Brink’s fiduciary obligations.

Fourth cause of action – negligent misstatement

[71]   Carrington relies on the evidence relevant to the Fair Trading Act cause of action in support of its claim that Mr van den Brink was negligent by making the representations. Given my conclusions above, I only consider those representations

regarding Mr van den Brink’s expertise in growing coffee trees and sourcing and germinating coffee seeds.

[72]   The pre-requisite for a claim for negligent misstatement is that there is the necessary relationship between the maker of the statement (“the adviser”) and the recipient who acts in reliance upon it (“the advisee”). Liability will arise where:11

(a)the advice is required for a purpose which is made known to the adviser at the time when the advice is given;

(b)the adviser knows that the advice will be used by the advisee for that purpose;

(c)it is known that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent inquiry; and

(d)the advice is so acted upon by the advisee to its detriment.

[73]   Mr van den Brink acknowledges that he had the expertise to germinate coffee seeds and says that Carrington was to provide the funding and required equipment. He was therefore aware that Carrington required his expertise to establish the coffee plantation and would advance funds and buy equipment for that purpose.

[74]    Mr van den Brink also requested funding and equipment from Carrington despite the terms of the MOU. He did not wait until a joint venture agreement was signed so was aware that Carrington was advancing funds without further inquiry and before a formal agreement was signed.

[75]   Carrington did act on Mr van den Brink’s advice and responded to his requests by advancing $80,000 and buying equipment valued at close to $700,000.

[76] Given my conclusion at [69] above and the findings that Mr van den Brink was aware that Carrington would rely on his advice without further inquiry and then did so

11     Caparo Industries plc v Dickman [1990] 2 AC 605 at 638.

when advancing funds and providing equipment, I am satisfied that this cause of action is made out.

Loss

[77]   At this stage, Carrington is unable to quantify its loss until it recovers the equipment and accounts for the $80,000 advanced to Mr van den Brink. I therefore consider it appropriate that the issue of loss be considered separately, and I order accordingly under r 10.15(a) of the HCR.

Remaining order

[78]   In its original application for an injunction, freezing and ancillary orders Carrington sought an order requiring Mr van den Brink to co-operate with the applicant and its representatives to deliver the assets into Carrington’s possession as soon as practicable.

[79]   Since the application was filed, the Court has issued an order requiring Mr van den Brink deliver up the assets and funds to Carrington. The order sought is therefore no longer necessary.

Result

[80]For the reasons set out above, I find that Mr van den Brink has:

(a)breached his fiduciary duties to Carrington;

(b)breached s 9 of the Fair Trading Act; and

(c)engaged in negligent misstatement.

[81]   Judgment on each of the above causes of action is entered against Mr van den Brink.

[82]   Determination on a formal proof basis of the loss suffered by Carrington arising from the findings in [80] above is adjourned and leave is granted to Carrington

to file any further evidence and submissions on loss by no later than 15 October 2022. A date and time can then be allocated for a hearing on that issue.

[83]Costs are awarded against Mr van den Brink on a category 2B basis.

Tahana J