Carrington Resort Jade LP v Van den Brink

[2022] NZHC 3348

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 3348

BETWEEN

CARRINGTON RESORT JADE LP

Applicant/Plaintiff

AND

THEO VAN DEN BRINK

Respondent/Defendant

Hearing:	On the papers
Appearances:	J J K Spring & R Hastie for the Applicant/Plaintiff No appearance for the Respondent/Defendant
Judgment:	13 December 2022

JUDGMENT OF TAHANA J

( Loss )

This judgment was delivered by me on 13 December 2022 at 10.00am Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors/Counsel:

Minter Ellison Rudd Watts, Auckland Pidgeon Judd, Auckland

CARRINGTON RESORT JADE LP v VAN DEN BRINK [2022] NZHC 3348 [13 December 2022]

Introduction

[1]    On 23 August 2022, I granted judgment on a formal proof basis to Carrington Resort Jade LP (Carrington) and found that Mr van den Brink had breached his fiduciary duties to Carrington, contravened s 9 of the Fair Trading Act 1986 (FTA) and engaged in negligent misstatement.1 I adjourned the determination of the loss suffered by Carrington arising from these findings. Leave was granted to Carrington to file any further evidence and submissions, which have now been filed. Mr van den Brink was granted leave to file a response but has not done so.

[2]Carrington claims that it has suffered loss of $491,562.86, comprising:

(a)$80,000.00 being funds advanced to Mr van den Brink for the joint venture;

(b)$32,914.00 being the loss that Carrington says it will suffer when it sells heavy vehicles purchased for the joint venture; and

(c)$378,648.86 being the loss Carrington suffered after selling assets it purchased for the joint venture.

[3]    I now consider whether Carrington has established, on a formal proof basis under r 15.9 of the High Court Rules 2016, that the full amount of the above loss was suffered, or is likely to be suffered, as a result of Mr van den Brink’s breach of his fiduciary duty, contravention of s 9 of the FTA or negligent misstatement.

Analysis

Loss for breach of fiduciary duty

[4]    I previously held that Mr van den Brink had breached his fiduciary duties in refusing to allow Carrington to collect the equipment and in failing to account for all of the funds.2 The findings in relation to contravention of the FTA are also relevant to Mr van den Brink’s breach of his fiduciary obligations.

1      Carrington Resort Jade LP v van den Brink [2022] NZHC 2104.

2 At [38].

[5]    I found that a fiduciary duty existed in the context of the joint venture. The terms of that joint venture were set out in the memorandum of understanding entered into in September 2021(the MOU). The MOU provided that Carrington would hold  a 60 per cent interest, Mr van den Brink a 35 per cent interest and Mr Brown a 5 per cent interest.

[6]    Carrington is claiming the full amount of the advance of $80,000. Carrington submitted that because Mr van den Brink has failed to provide an affidavit which accounts for how the funds were utilised, it is entitled to the full $80,000. This submission however, ignores Mr Tan’s earlier affidavit as to the receipts he received from Mr van den Brink accounting for about $27,000. The loss is therefore no more than $53,000.

[7]I determine that of the $80,000 advanced, Carrington is entitled to recover

$53,000.

Relief under FTA

[8]    Section 43 of the FTA applies where a Court finds that a claimant has suffered, or is likely to suffer,  loss or damage by the defendant’s conduct in contravention of  s 9. An order may then be made directing the defendant to pay the claimant the amount of any loss or damage.3

[9]    When considering whether relief should be granted under s 43 of the FTA, the court must look to see whether it is proved that the claimant has suffered loss or damage “by” the conduct of the defendant.4 If the court finds that the plaintiff has been actually misled or deceived, the question then is whether the conduct in breach of s 9 was an operating or “effective” cause of the claimant’s loss or damage.5 The impugned conduct does not have to be the sole cause, but it must be an effective cause of the loss. The claimant may have been influenced by some other matter. 6

3      Fair Trading Act 1986, s 43(3)(f).

4      Red Eagle Corporation Limited v Ellis [2020] NZSC 20, [2010] 2 NZLR 492, at [29] [Red Eagle].

5 At [29].

6 At [29].

[10]   The claimant’s own conduct in failing to take reasonable care to look after his or her own interests may be another operating cause of the loss. The court should therefore ask whether the claimant’s carelessness, if there were any, should be regarded as the sole or a contributory operative cause of the loss.7

[11]   Even where the claimant’s own carelessness may have contributed to the loss, that does not disqualify the claim for relief:8

The purpose of the legislation is not restricted to the protection of the careful or the astute. Negligence on the part of the victim of a contravention is not a bar to an action under [the Australian equivalent of s 43] unless the conduct of the victim is such as to destroy the causal connection between contravention and loss or damage.

[12]   The Court has a discretion, and the proper exercise of that discretion may lead it to decide that part only of the amount for the loss or damage should be paid by the defendant.9

[13]   In Red Eagle the High Court had found that Mr Falkenstein was neglectful of his own interests in handing over Red Eagle’s cheque without searching titles or making any other rudimentary check on ownership or seeking security from Ms Black. Mr Falkenstein was held to be equally responsible for his losses because of his failure to carry out checks.10 The Supreme Court found that the Court of Appeal was wrong to reverse the findings of the trial judge and allowed the appeal.11

[14]   In my previous judgment I rejected Carrington’s claims that Mr van den Brink had contravened s 9 of the FTA in relation to other representations as to his overseas experience, the venture being lucrative and the existence of a lease.12 On Mr Tan’s own evidence these were other factors that influenced Carrington’s decision to advance funds and purchase equipment. Mr Tan was provided with a copy of the

7 At [30].

8      Wardley Australia Ltd v Western Australia [1992] HCA 55, 175 CLR 514 at 525 per Mason CJ, Dawson, Gaudron and McHugh JJ, speaking of the equivalent Australian section, Trade Practices Act 1974 (Cth), s 82.

9      Red Eagle, above n 4, at [30].

10     Red Eagle Corporation Limited v Ellis HC Auckland CIV-2008-404-187, 20 July 2008, at [42]– [48].

11     Red Eagle, above n 4, at [40].

12     Carrington Resort Jade LP v Van den Brink, above n 1, at [70].

unsigned heads of lease, so he was aware that the lease was not signed and was incomplete. Despite this, Carrington proceeded to advance funds and buy equipment.

[15]   In these circumstances, I am not satisfied that Carrington has proven on a formal proof basis that the full amount of the loss claimed arose by Mr van den Brink’s breach of s 9 of the FTA. Carrington’s own conduct contributed to the loss it has suffered and any award of damage must do justice to the parties by taking into account Carrington’s contribution to that loss.

[16]   Taking all these factors into account and consistent with the decision in Red Eagle, I consider that Carrington, having been misled or deceived as to Mr van den Brink’s expertise Carrington should be treated as responsible for 40 per cent of the loss that ensued by virtue of its own contribution to that loss.

Negligent misstatement

[17]   I do not consider that Carrington is entitled to claim more for this cause of action as claimed under the FTA. The same arguments as set out above in relation to relief under the FTA apply for damages arising from Mr van den Brink’s negligent misstatement. Carrington’s own conduct contributed to its loss so it cannot recover the full amount of the losses claimed.

Result

[18] As set out at [7] above, Mr van den Brink is liable to Carrington for $53,000 of the $80,000 advance. This is greater than if a 40 per cent discount is applied to that amount and Carrington is entitled to this higher amount.

[19]   For the remaining amount claimed of $411,562.86, Mr van den Brink is liable to Carrington for 60 per cent, being $246,937.54.

[20]   Accordingly, I order that the total amount for which Mr van den Brink is liable to Carrington is $299,937.54.

[21]Leave is granted to Carrington to file a memorandum as to costs.

Tahana J