Corrick v Silich
[2018] NZCA 221
•29 June 2018
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA444/2017 [2018] NZCA 221 |
| BETWEEN | DAVID CORRICK First Appellant STEVEN MITCHELL Second Appellant DAVID PRALONG Third Appellant PAUL STENT Fourth Appellant MATTHEW WILCOCK Fifth Appellant |
| AND | ROBERT SILICH |
| Hearing: | 16 May 2018 |
Court: | Asher, Venning and Mander JJ |
Counsel: | D Zhang and E Tie for First to Fifth Appellants |
Judgment: | 29 June 2018 at 10 am |
JUDGMENT OF THE COURT
AThe appeal against the substantive judgment is dismissed.
BThe appeal against the costs judgment is allowed and the order for increased costs of 50 per cent is set aside. The costs award in the High Court is otherwise unaffected.
CThe appellants are jointly and severally liable to pay the respondents one set of costs for a standard appeal on a band A basis and usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Asher J)
Table of Contents
| Para No | |
| Introduction Was a contract created between the Corrick Group and the Syndicate? The High Court judgment The other claims | [1] [15] [17] |
Introduction
This appeal concerns the perennial question of whether a contract was formed. The appellants and respondents are all syndicate members who owned an aircraft. The appellant group claims that the syndicate agreed to sell the aircraft to them. Other members of the syndicate, the respondents, dispute that proposition. They prevailed in the High Court. In his decision of 14 July 2017 Wylie J held that there was no contract to buy the aircraft and the contract cause of action failed, and as a consequence so did other related causes of action.[1] He dismissed the claims.[2] The appellant group appeals that decision. Only the first to fifth respondents have taken active steps in this proceeding to oppose the appeal.
Background
[1]Corrick v Silich [2017] NZHC 1630 at [80].
[2]At [98].
It is necessary to state the broad background. We will refer to the contractual details later in this judgment.
The aircraft in question was made in the USA and is a Trojan T28C. There are a number in Australia and two in New Zealand. It was produced from 1950 as a single engine training plane, designed for use in the United States Air Force and Navy. In New Zealand it comes under the category of a “war bird”. The aircraft was purchased from an estate by a syndicate formed for that purpose in July 1990. The syndicate consisted of 22 members and was known as the Trojan 63 Syndicate (the Syndicate). A syndicate agreement was entered into on 14 July 1990 (the Syndicate Agreement).
The Syndicate Agreement provided for two trustees to complete the purchase and hold the aircraft on behalf of the Syndicate, in accordance with the directions of an executive committee. There was provision for yearly meetings, one vote per member, a quorum of five, and for voting by majority.
It would seem that over the years the aircraft was used less, debts were incurred and it became more difficult to obtain funding from the members. By the latter half of 2014 there was significant debt. A creditor was proposing to take steps to collect its debt. In this worsening situation a special general meeting of the Syndicate was called. An agenda was distributed to members and the meeting took place on 16 November 2014. Twelve Syndicate members attended. A motion was put that the Syndicate should be dissolved, and that motion was carried by 11 votes in favour with one abstention. A further member who attended by telephone also voted in favour of the motion.
There was also a motion put that a management group should be appointed to oversee the sale of the Syndicate’s assets. This motion was carried. Four Syndicate members, Frank Parker, David Corrick, Glenn McCready and Andrew Gormlie, were to be that management group (the Management Group). They were to advertise the assets for sale with a closing date for offers on 19 December 2014.
The aircraft was duly listed for sale by open tender. Tenders closed at 10 am on Friday 19 December 2014. However, some members of the Syndicate appeared to be under the impression that the date of closure would be 16 December 2014. This led to a flurry of activity on 16 December 2014. Mr Corrick and the other four appellants, Steven Mitchell, David Pralong, Paul Stent and Matthew Wilcock (the Corrick Group), orally offered to purchase the aircraft from the Syndicate for $63,523, being the estimated debt then owing by the Syndicate. This oral offer was made by Mr Corrick to Mr Gormlie. Mr Gormlie had something of a secretarial role on behalf of the Syndicate in the tender process.
Later that day another Syndicate member, the fifth respondent Brett Emeny, rang Mr Gormlie and asked him if there were any offers for the aircraft. Mr Gormlie told Mr Emeny about the Corrick Group’s oral offer. Mr Emeny then sent an email to Mr Gormlie offering $75,000 for the aircraft and associated assets. At 5.44 pm the Corrick Group’s solicitor put in a written offer for $63,523. A formal agreement was attached signed by Mr Corrick, containing various terms.
It was then realised that the intended closing date was in fact 19 December 2014. On Wednesday 17 December 2014 another offer of $80,000 was made by email for the aircraft by another Syndicate member, Mr McCready.
On 19 December 2014 at 8.43 am, the Corrick Group, through Mr Corrick, put in a further offer of $85,000 for the aircraft. This offer took the form of the provision of a written agreement. The terms were substantially similar to the earlier offer. Mr Corrick signed the agreement himself as a member of the Management Group and as authorised agent for the appellants.
Therefore on 19 December 2014 the highest offer received was from the Corrick Group. Over the days that followed there were email exchanges between the Management Group and the Corrick Group and others. These exchanges, which will have to be considered in detail, provide the key to whether a contract was formed, as alleged by the appellants.
In the end the Syndicate did not sell the aircraft to the Corrick Group. Mr Emeny challenged the tender process adopted by the Corrick Group. On 20 January 2015 the Corrick Group paid $8,500 into the Syndicate’s bank account, asserting there was a contract in place. In the meantime Mr Emeny placed a bid for $90,000 for the aircraft. There were no further bids. On 2 February 2015 Mr Emeny paid $90,000 into the Syndicate’s bank account. He took possession of the aircraft on 4 February 2015 and flew it to New Plymouth.
The Corrick Group then issued these proceedings. They originally sought specific performance, but by the time of the High Court hearing were seeking damages only.
The issues
In his decision Wylie J determined the case under the following headings, which can be seen as a statement of the issues:
(a)Was a contract concluded between the plaintiffs and other Syndicate members? Wylie J concluded that no such contract was formed. The Corrick Group offer made on 19 December 2014 was not capable of being validly accepted by those to whom it was addressed and in any event was not accepted by them.[3]
(b)Breach of fiduciary duty. The appellants alleged that the first to fifth respondents breached fiduciary duties owed to them causing them loss. As Wylie J pointed out, the appellants’ pleadings were predicated on the existence of a contract, and the losses they claimed arose from its alleged breach.[4] He was not persuaded that any additional fiduciary duties were owed or that any such duties had been breached. He went on to find that Mr Corrick had in fact been in a conflict of interest position and had breached his fiduciary duty to other Syndicate members by remaining in the Management Group despite his interest as a purchaser, but there was no loss to the Syndicate as a result.[5]
(c)Tortious interference with contractual relationships. This pleading was against Mr Emeny only. Wylie J found that since there was no concluded agreement between the appellants and other members of the Syndicate, this cause of action must fail.[6]
(d)Conversion. Wylie J noted that again this claim of conversion was predicated upon the existence of a concluded agreement. He also found that, in any event, the claim for conversion failed on the evidence.[7]
Was a contract created between the Corrick Group and the Syndicate?
The High Court judgment
[3]At [80].
[4]At [87].
[5]At [91].
[6]At [94].
[7]At [96]–[97].
As we have stated, Wylie J determined that no contract was concluded. He found that the Corrick Group put in an offer to purchase the aircraft for $85,000 on 19 December 2014.[8] It took the form of a written agreement. He noted that the agreement showed the four members of the Management Group as the vendors on the expressed assumption that they were the authorised agents of the Syndicate.[9] He observed that agency was not pleaded by the appellants and did not consider that Messrs Gormlie, Corrick, McCready and Parker were the authorised agents of the Syndicate with authority to sell the aircraft. In his view, all that the four members of the Management Group could do was to forward the offer on to Syndicate members. Therefore, the offer was not capable of being validly accepted by the Management Group.
[8]At [64].
[9]At [64].
The Judge further held that the members of the Management Group did not in fact accept the offer in any event.[10] The Judge analysed the emails that were sent in response to the Corrick Group offer. He noted that an email of the Management Group, which was said to have accepted the offer, was in fact no more than a report by the Management Group to Syndicate members of steps that had to be taken.[11] He also considered that signatures by each member of the Management Group were required on the same document containing the offer as forwarded by the Corrick Group in order to constitute valid acceptance.[12] He found support for that view in later attempts by Mr Corrick to get members of the Management Group to sign other documents.[13] He noted also Mr Corrick’s evidence indicating that he wanted specific acceptance by the Syndicate of the detailed terms of his original offer. He concluded that the offer was not validly accepted.[14]
The emails relating to the offer of the Corrick Group of 19 December 2014
[10]At [67].
[11]At [69].
[12]At [71]–[72].
[13]At [75].
[14]At [80].
Mr Zhang for the appellants submitted, as he appears to have done before Wylie J, that the offer was accepted on or before 21 December 2014, by the email exchanges that took place in the preceding days. We turn to these exchanges, following the written offer by the Corrick Group on 19 December 2014.
The offer of the Corrick Group contained a formal written agreement showing the vendors agreeing to sell and the purchasers agreeing to buy the aircraft for $85,000 on certain terms. These were:
1.The Purchasers shall pay the purchase price by a 10% deposit on signature of this Agreement by the Vendors and by payment of the balance within 7 working days of the date of such signatures.
2.On payment of the balance of the purchase price, the Vendors shall execute all documents and take all other steps to transfer ownership of the Aircraft to the Purchasers, free of any encumbrances and free of any claims by previous members of the Syndicate or by third parties.
3.The Vendors warrant to the Purchasers for themselves and on behalf of the other previous members of the Syndicate that the Aircraft is now and will on payment of the balance of the purchase price in clause 1 above be the property of the Vendors and will on such payment pass to the Purchasers free and unencumbered by any mortgage, lien, charge, lease or other encumbrance.
4.The Vendors will satisfy and discharge promptly all third party indebtedness owed by the previous Syndicate provided however the Purchasers may elect to pay any or all of such third party creditors directly and then pay the balance of the purchase price less such third party payments to the Vendors.
5.The Vendors further warrant to the Purchasers that they are authorised to sell the Aircraft.
The vendors are defined as Messrs Parker, Gormlie, McCready and Corrick “as authorised agents of the Members of the previous Trojan 63 Syndicate”.
On Friday 19 December 2014 at 2.05 pm Mr Gormlie sent out an email to all Syndicate members stating that the closure date had been reached and there were three offers on the table. The amount and source of each offer were set out. The email then stated:
Of these bids, the first two have been made without any settlement date or settlement terms whereas the third has been made as a binding legal document with a 10% deposit paid into a solicitors trust account to be paid on acceptance and the balance to be paid within 7 days of acceptance.
Also — Thanks on behalf of the syndicate members to the bidders.
In order to accept a price — we need a majority vote (by email reply) from the shareholders as to which one we should accept.
Please reply as soon as possible with —
I ACCEPT (1, 2 or 3) & your name.
Thanks
Andrew/Frank/Glenn/David
There were then email responses from 15 members favouring the third and highest offer from the Corrick Group. Following the receipt of those emails, on Sunday 21 December 2014 at 1.18 pm, Mr Gormlie sent out the following email to the Syndicate members:
Hi Everyone
We now have a majority of 15 votes for option (3) — with 7 members so far not voting. (please still vote so these can be recorded either way.)
This then confirms the sale of the T28 to David Corrick’s group of shareholders for $85,000.00.
A deposit of $8,500.00 has been paid into the trust account of Castle Brown, the solicitors acting for David Corrick’s group of shareholders & settlement date will be approximately Wednesday 7th January or prior provided that the syndicate has identified all parties with any financial claim on the syndicate and the syndicate can warrant that on settlement of these debts, that it can pass clear and unencumbered title to the aircraft including its spares and accessories.
Prior to this — all members who owe any sum of money for flying the aircraft are asked to pay their debt immediately.
If any clarification of money owed, or if any debt is in dispute — please contact Rob Silich or David Corrick by email immediately.
Additionally any confirmation of debt advised to the same people will be appreciated.The syndicate needs to provide the purchaser’s solicitor with a detailed list of creditors and a declaration of any debts or commitments that are held by Trojan 63 prior to settlement.
Regards
Andrew/Frank/David/Glenn
Subsequent to this email, three additional members emailed Mr Gormlie confirming that they favoured acceptance of the Corrick Group offer.
Mr Zhang submits that at the latest, when Mr Gormlie sent this email, the Corrick Group offer was accepted and there was a binding contract. While there was no email from the Management Group or Mr Gormlie to the Corrick Group (or to Mr Corrick on behalf of the Corrick Group), Mr Corrick received a copy of Mr Gormlie’s 21 December 2014 email as a Syndicate member.
On 24 December 2014 at 6.28 pm Mr Corrick emailed Chris Snelson and Robert Silich, copying in the other members of the Management Group, as follows:
Hi Chris and Rob,
In order to get a clean transfer, given the present state of the syndicate, we as the new owners need a warranty from the old syndicate as to clear title. As we have an uncertain management status of the now dissolved syndicate, I have prepared the attached discharge for the four of us comprising the aircraft sale committee to sign in addition to you both as the remainder of the old syndicate executive, to sign on behalf of the syndicate members as there is a clear mandate from a significant majority of members. We will also require a tax invoice from the old syndicate.
Please let me have your thoughts.
If I don’t catch up before Christmas, I wish you and your families a very merry Christmas and a happy New Year.
Thanks for your help.
David
The discharge which Mr Corrick referred to in this email was not produced by the parties and appears to have been lost. Wylie J concluded that it was a document recording that:
(a)all the members of the Management Group as vendors acknowledged and agreed that the payment of the purchase price settled any claims each of them might have against the Syndicate or in respect of the aircraft;
(b)transferred the aircraft to the purchasers free of any claims or security interests the aircraft; and
(c)that all the debts of the Syndicate would be paid in full before the surplus funds were distributed to Syndicate members.[15]
[15]At [35].
Mr Silich, who regarded himself as the chairman of the Syndicate, responded on 25 December 2014 at 2.03 pm as follows:
Hi David
Sorry to be a pain but that arrangement won’t be acceptable.
Trojan 63 Syndicate has to pay out the creditors. That process is not the business of your new group. The winding up of Trojan 63 Syndicate is also no concern of your new ownership group. That is my sad duty to perform once the physical assets of the syndicate are responsibly disposed of.
There is no uncertainty about the management status of the present syndicate, which by the way is not yet dissolved. I am the chairman, Chris and Glenn can co-sign cheques in order to facilitate the payment of bills and carry out the winding up of the present syndicate. The transfer of ownership does not have to wait until the bills are paid by us. We can hand over the assets concurrently with your funds being deposited. Remember there are NO secured creditors, and there are no instruments of security lodged against ZK-JGS. All creditors have the right to pursue “Trojan 63 Syndicate” for their accounts, but not your new group, Aerotech, Pioneer and the others all understand that we have to sell the aircraft to provide the ready cash to pay them out and have indicated their acceptance that we do so. The ANZ bank have no security whatsoever against Trojan 63 Syndicate, because Pebo gave them a personal guarantee.
The collective membership have unanimously agreed to accept your offer of $85,000 NZD which gives me confidence that we are following the wishes of a majority of present members. Therefore Glenn, Chris and myself can issue your group a signed invoice/receipt for the funds (we’re not gst registered remember) in exchange for the assets, and the NZCAA Certificate of Airworthiness can be re-registered to your new group of owners. I’m not sure what else is considered to constitute ownership (rather than mere registration), but clearly the present members have agreed that we go ahead with the transfer.
In my view, a simple sale and purchase agreement will suffice, with signatures from both parties, and dated accordingly. I suggest a suitable get-together for the purpose early in the new year?
Regards
Robert Silich
It appears that Mr Corrick did not reply to this email.
Agency
Wylie J concluded that the Management Group were not agents for the Syndicate. We review that finding. We start by considering the Syndicate Agreement, which sets up the ownership structure. The Syndicate members must have owned the aircraft as tenants in common. The Syndicate Agreement provides at cl 11 for a quorum at meetings of five persons and for a majority vote. As we have set out, there were two trustees who were to initially complete the purchase of the aircraft and hold the property in accordance with the directions of the Syndicate or of the executive committee. There was provision for the Syndicate to be dissolved by the passing of a resolution by not less than 12 members, in which event all assets of the Syndicate were to be sold and the net proceeds divided among the members. At the time of the meeting of 16 November 2014 the original trustees had died. No replacements had been appointed. There appears not to have been an operating executive committee.
What is clear is that the Management Group of the four persons stated were voted to be the group to oversee the sale of the assets. The fact that the Management Group were not formally appointed as agents does not seem to us to be important, given the terms of the resolution passed at the meeting on 16 November 2014:
Motion: That a management group consisting of Frank, David, Glenn and Andrew be appointed to oversee the sale of the assets.
We have no doubt that those four persons were to collectively function as the agent of the Syndicate and we are unable to agree with Wylie J’s assessment to the contrary.
We see the name of the group, “Management Group”, and the use of the word “oversee”, as plainly giving the four men the power to sell on behalf of the Syndicate. The motion was passed by a majority of the Syndicate in accordance with the Syndicate Agreement. In terms of the Syndicate Agreement, the Management Group was validly created, and was to function as the Syndicate’s agent. An arrangement of that type was plainly necessary, if a sale was to be effected, and the motion reflects this.
It follows that unlike Wylie J we do not consider that such an agency would be inconsistent with the Syndicate Agreement. Plainly the Syndicate had to have an operating group to effect a sale, and the agents did not need to hold the assets or have any formal transfer to them. All that was required was that they be appointed to the agency role, and that is what the motion did.
Offer and acceptance
Against that background we assess Mr Zhang’s submission for the appellants that the offer was accepted by the agreement of the majority of Syndicate members to the Corrick Group offer, and by Mr Gormlie’s 21 December 2014 email.
We consider that Mr Gormlie’s email of 19 December 2014 at 2.05 pm was not an email to members on behalf of the Corrick Group asking them whether they accept the Corrick Group offer. Rather, it was a letter by Mr Gormlie in his secretarial role as part of the Management Group, communicating the offer to members and asking for their view on that offer. Mr Gormlie said he needed advice from the shareholders “[i]n order to accept a price”. Thus he was seeking advice from members as to which of the three prices would be acceptable to them. Syndicate members then responded.
In our view the emails from members following Mr Gormlie’s 19 December 2014 email voting in favour of the Corrick Group offer could not constitute an acceptance of the offer. They were no more than individuals indicating which offer they would prefer the Syndicate to accept.
The real question is the effect of Mr Gormlie’s email of 21 December 2014 at 1.18 pm. We see that as being an email back to members following their responses, aimed at informing them about the effect of their responses. The email is addressed to “[e]veryone” and informs them of the majority in favour of the Corrick Group offer (“option (3)”), and it states “[t]his then confirms the sale” to the Corrick Group for $85,000.
In this email there was reference to the necessity for the Syndicate to identify all parties with any financial claim on the Syndicate and the need for the Syndicate to warrant that on settlement of “these debts” it could pass clear and unencumbered title. Members were asked to pay their debts immediately and to contact Mr Silich or Mr Corrick about any clarification of money owed or if there was any debt in dispute. In addition, members are asked to confirm their debts so the Syndicate could provide the purchaser’s solicitor with a detailed list of creditors.
Therefore, this email from Mr Gormlie on behalf of the Management Group is a communication of information, and a request for information from the Management Group to all Syndicate members. It is not addressed or directed to Mr Corrick or the Corrick Group as purchasers (save to them individually as Syndicate members) and it cannot be read as an acceptance of the Corrick Group offer. The email is a step towards acceptance by the Management Group on behalf of members, in due course if possible, but no more than that. Plainly the offer from the Corrick Group, being in the form of a written agreement, requires signature. That is what the Management Group is working towards.
Thus we agree with Wylie J’s conclusion that:[16]
The email was no more than a report by the management group to syndicate members of the steps taken to oversee the sale of the aircraft and the position that had then been reached.
[16]At [68].
Wylie J referred to the oral evidence of Mr Gormlie, who stated that the purpose of the email was simply to tell members of the Syndicate that there was a majority in favour of accepting the offer from the Corrick Group. This evidence, and other evidence that we were referred to indicating the subjective views of members of the Corrick Group and Syndicate members, is not of assistance in determining whether a contract was created or not. It is irrelevant. Agreement must be inferred from conduct, and is not a mental state. The facts must be objectively assessed to see whether sufficient agreement has been reached. As was stated in Wilmott v Johnson:[17]
The law of contract is concerned with the conduct of contracting parties inter se, viewed objectively as it would be by an independent third party observer.
[17]Wilmott v Johnson [2003] 1 NZLR 649 (CA) at [35].
The critical point is that, viewed objectively, the email of 21 December 2014 is not an acceptance. It is a communication of information to Syndicate members.
No acceptance in the required form
Where an offer clearly prescribes a form of acceptance a court is unlikely to find an intention to enter into contractual relations when that form of acceptance is never completed.[18] In Richards v Hill it was held that an offer made by signing a memorandum of agreement required acceptance by signature of the same document.[19]
[18]Mountain Road (No 9) Ltd v Michael Edgley Corp Pty Ltd [1999] 1 NZLR 335 (CA) at 338.
[19]Richards v Hill [1920] NZLR 724 (SC).
The agreement put forward by Mr Corrick on 19 December 2014 was quite specific as to the manner in which the offer was to be accepted. It referred to the four members of the Management Group as vendors in the intituling, and made provision for each of them to sign at the signature blocks. Clause One of the agreement provided that the purchase price would only be paid by a 10 per cent deposit “on signature of this agreement by the Vendors” and by a payment of the balance within seven working days “of the date of such signatures”. It required the vendors to provide various warranties. Moreover the conduct of Mr Corrick that followed, which we will traverse shortly, showed that he intended and required this form of acceptance. However the agreement was never signed.
Therefore for this reason also there was no binding agreement.
Later communications
The communications that follow confirm an objective assessment that no contract was reached. Mr Corrick sent the email of 24 December 2014 to Messrs Snelson and Silich pursuing the warranties that he sought as part of a contract, and forwarding a discharge to them.
The response by Mr Silich on 25 December 2014, while recording that the membership had unanimously agreed to accept the offer, stated that “[t]he transfer of ownership does not have to wait until the bills are paid by us”. All creditors would have the right to pursue the Syndicate for their accounts. The cash was required before creditors could be paid out. There was discomfort expressed with the term that clear title should effectively be warranted. Mr Silich stated that in his view a simple sale and purchase agreement would suffice, with signatures from both parties and dated accordingly.
When Mr Silich sent this email, he was rejecting the detailed written terms that Mr Corrick had forwarded. He was rejecting the offer that was constituted by the written agreement, and was proposing a more simple agreement.
In the days that followed 25 December 2014, the Corrick Group and the Management Group drifted further apart. On 26 December 2014 Mr Emeny made an offer for the aircraft of $90,000, and on 27 December 2014 Mr Emeny expressed concerns to the Management Group that the tender process had been unfair. On 29 December 2014 Mr Gormlie expressed uncertainty about the way forward and invited the parties to talk to each other.
On 30 December 2014 Mr Corrick sent an email on behalf of the Corrick Group to the Management Group stating that it was a requirement that all four members of the Management Group sign the agreement to enable the deposit to be paid and to ensure settlement was finalised. He stated that if he did not receive the signatures of all the Management Group members within seven days he would have no alternative but to take legal action. To this Mr Parker on behalf of the Management Group responded taking “umbrage” at the tone of the email and observing that “[t]he agreement you refer to is ‘your’ agreement, we have no duty nor obligation to accept or ratify it”.
On 9 January 2015 Mr Gormlie sent a new document to Messrs Parker and McCready, copying it to Mr Corrick, recording a sale. Mr Gormlie signed it but the other members of the Management Group never did. On 12 January 2015 Mr McCready indicated he would not do so. There was then further correspondence with Mr Emeny which led to the sale of the aircraft to him.
On an objective assessment, the exchanges after 21 December 2014 all confirm that, as at that date, the parties did not regard themselves as contractually bound.
Conclusion
It is our conclusion that, viewed objectively, there was plainly no acceptance by the Management Group of the Corrick Group offer. The conclusion we reach on this is in part for different reasons from those of Wylie J. We do regard the Management Group as agent for the Syndicate, and we do not determine the issue on the basis of a lack of correspondence of terms between the offer and acceptance, although we agree that there was such a lack of an “ad idem” acceptance.[20] We see the key as being that at no stage can any acceptance of the Corrick Group offer be objectively discerned from the communications between the parties.
[20]Corrick v Silich, above 1, at [74].
We agree with Wylie J’s rejection of the submission that all that was required after the Corrick Group offer was for the Management Group to get Syndicate members to vote on which tender they wanted to accept, and then dispose of the aircraft. As Wylie J observed, this is inconsistent with the contemporaneous documentation which shows that a specifically directed acceptance from the Management Group was required by their signing the written agreement in which the offer was made.[21]
[21]At [70] and [72].
We are therefore not able to accept Mr Zhang’s submission that a contract was formed by 21 December 2014 or indeed any other date. The appeal fails in this crucial respect.
The other claims
The cause of action for breach of fiduciary duty against the respondents was rightly rejected in the High Court. Any such fiduciary duty could only be owed by those involved in selling the aircraft to the members of the Syndicate. For the reasons we have set out there is no basis for any criticism of the actions of the Management Group in relation to the members as a whole. No fiduciary duty was owed by the Management Group to the Corrick Group as purchasers. Significantly the actions of the Management Group led to the best price available being obtained by Syndicate members, being the offer from Mr Emeny.
Wylie J found that Mr Corrick was in a conflict of interest situation in relation to the purchase of the aircraft.[22] He was both a member of the Management Group, which had the task of selling the aircraft as agent for the Syndicate, and was also a bidder. Wearing one hat he wanted the highest price; wearing the other hat the lowest price. However we also agree with Wylie J’s conclusion that no loss arose from this, given the way events transpired, with the best possible price being obtained from Mr Emeny. We would also observe that there was nothing particularly sinister about Mr Corrick’s conflict of interest, as it was plain for all Syndicate members to see, and he made no attempt to disguise his twin roles. His position arose from the fact that any purchaser of the aircraft was likely to be a member of the Syndicate. However he made a mistake as a prospective purchaser in agreeing to being a member of the Management Group and in staying on that committee in spite of his interest as a purchaser.
[22]At [91].
Given our finding that there was never any agreement entered into with the Corrick Group, the other causes of action of tortious interference with contractual relationships and conversion must also, as Wylie J found, fail.
Costs appeal
Wylie J sought submissions and issued a separate decision on costs.[23] He awarded costs in favour of the first to fifth respondents on a 2B basis, increased by 50 per cent save for some limited exceptions. That decision, insofar as it orders increased costs, is challenged in this appeal.
[23]Corrick v Silich [2017] NZHC 2033.
Wylie J reached his decision against the background of r 14.6(3) of the High Court Rules 2016 which provides:
(3)The court may order a party to pay increased costs if—
(a)the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
(i) failing to comply with these rules or with a direction of the court; or
(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or
(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
It can be seen that the overarching requirement is that the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in the proceedings. The party claiming increased or indemnity costs carries the onus of persuading the court that their award is justified. The unreasonable conduct must be in relation to the proceeding, that is after and not before it was commenced.[24]
[24]Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160].
Experience teaches us that there are often amendments to pleadings and minor procedural errors in the lead-up to trial. Something beyond the usual type of pleading adjustments and infelicitous drafting of documents and briefs is required before an increase is ordered to the overall trial costs. An “unnecessary” contribution to costs in relation to a step in a proceeding is often better reflected by increased costs in relation to that step rather than the proceeding as a whole.
Wylie J followed the costs assessment procedure referred to in Holdfast NZ Ltd v Selleys Pty Ltd.[25] Having worked out what the appropriate costs would be according to the scale, he turned to the various factors said to warrant an increased award. We will now consider the 11 factors he relied on.[26] It is necessary for us to go through them, because in the end we are of the view that the Corrick Group did not contribute unnecessarily to the time and expense of the proceeding to such an extent that an overall increase was warranted.
[25]Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).
[26]Corrick v Silich, above n 23, at [16].
The first matter relied on by Wylie J was that the claim was poorly pleaded and that the initial claim of specific performance later changed to a damages claim. This can be combined with the second point, which was that the pleadings had to be amended twice, but even then the appellants failed to particularise the damages sought.
We do not consider that the appellants’ conduct in relation to the pleadings was unreasonable or significantly below standard. As the analysis that we have undertaken shows, the case was not straightforward. In our own assessment of liability we have not followed exactly the same path as Wylie J. The case had the unusual features of there being a Syndicate and multiple parties consensually and with full knowledge conducting a sale and purchase transaction from within their own ranks of members. This posed difficult practical issues, and ultimately difficult conceptual issues. We have some sympathy for the appellants’ difficulties in reaching an accurate pleading. There was nothing unusual about a proceeding beginning with a claim for specific performance, and that later changing to a claim for damages only. The damages were, in the end, pleaded in some detail. We do not agree therefore with these criticisms.
The third matter relied on was that the damages ultimately sought were not available:[27]
[T]he damages ultimately sought were untenable. The plaintiffs claimed the costs of sourcing a replacement aeroplane in the United States, disassembling and transporting that plane to Australia, reassembling and inspecting the plane in Australia, disassembling the plane and transporting it to New Zealand, and then reassembling it in this country. There was clearly unnecessary duplication in the damages claimed …
[27]At [16(c)].
Although we have not had detailed submissions on the topic, it is plain that the aircraft is rare and the appellants, having lost the opportunity of buying the aircraft that was the subject of the proceeding, probably would have had to source a replacement aircraft from overseas. We do not attempt to determine that issue, or how damages would be calculated. However it was by no means untenable for the appellants to seek damages on the basis that an aircraft would have to be sourced in the United States and brought to New Zealand, possibly via Australia. We note that the appellants called an expert, Wayne Milburn, who indicated that the aircraft was rare and expensive (AUD $225,000 or more) and that there were considerable expenses associated with buying the aircraft overseas.
We appreciate that the respondents would argue that the sale of the aircraft in New Zealand for $90,000, and the comparative bid from the Corrick Group of $85,000, set the market price which would form the basis for damages. However there would have been a question as to whether there was an available market in New Zealand, and whether the unique nature of the aircraft meant that the extra costs of sourcing an aircraft out of New Zealand would have to be met.
Therefore we do not think that the damages sought were untenable or that this was a proper ground for ordering increased costs.
Fourth, it was suggested that the appellants made no attempt to mitigate their claimed damages by re-opening the bidding process and outbidding Mr Emeny. However failure to mitigate was not pleaded by the respondents, and in our view it would be arguable that there was no failure to mitigate by the Corrick Group, who after all believed that they had a binding contract.
The fifth and sixth points all relate effectively to weaknesses in the claim and how it was pleaded, but we have already set out our views on that matter. We see nothing about the way in which the claim was pleaded that warrants particular criticism.
It was noted in the costs judgment that Mr Corrick owed the other Syndicate members fiduciary duties and he breached those duties. As we have observed, while Mr Corrick was in a conflict of interest position, his conduct appears to have been entirely open throughout and his position was understood by all interested parties. There was nothing in his conduct that warranted particular opprobrium or costs increased above the normal. It is also to be noted that Mr Corrick’s breach of fiduciary duty would have been conduct before the proceeding rather than conduct relating to the proceeding itself. It is also significant that this was the conduct of Mr Corrick only, and not the other appellants who were in the Corrick Group, and not in the Management Group. And yet they would all be liable for the increased costs.
Wylie J considered that it was unreasonable for the appellants to subpoena five respondents for logbooks, given that Mr Corrick had possession of them himself. However we note Mr Zhang’s explanation that the appellants wanted to prove that the first five respondents did not have logbooks and could not legally fly the aircraft and had no indicia of ownership. We do not see this as a major error warranting increased costs.
Finally, the preparation of Mr Corrick’s evidence was criticised as containing irrelevant evidence and opinion evidence, and it was said there was considerable time wasted at trial addressing issues which were not in dispute, for example whether the first respondent Mr Silich was entitled to act as the chair of the Syndicate. Mr Silich’s role does not seem to us to have been entirely irrelevant, given his forwarding of important emails relevant to whether there was offer and acceptance. Mr Silich was the most active and effective person involved in attempting to block the Corrick Group’s purchase apart perhaps from Mr Emeny. He claimed to be entitled to do so because of his role as the chair. We can see why Mr Silich’s position was of interest to the appellants. This was the sort of dispute where the line between relevant evidence and opinion may have been at times hard to discern, and we do not see the errors as particularly unusual or egregious.
Before us the respondents put forward, as an additional factor not referred to in the costs judgment, that the appellants had a foot in both camps as both members of the selling and buying groups. While that may be so, and we accept of course that the respondents have acted entirely reasonably and successfully defending the claims, all the parties were part of the commercially confused sequence of events which led to the stand-off. None of the parties attempted to hide their true interests. While the respondents were undoubtedly entitled to costs, this is not a special factor warranting increased costs.
This analysis confirms our general view that this has been a fairly standard contractual dispute of the type that frequently arises when lay parties in a complex contracting position act without the benefit of legal advice. That the dispute has arisen is not entirely unsurprising, and while the Corrick Group has lost, scale costs were in our view sufficient. Increased costs were not warranted. We therefore allow the costs appeal.
We turn to costs in this Court. The respondents again seek increased costs in this Court. For the reasons set out, we see this as an orthodox civil dispute, and there was no particular action on the part of the unsuccessful appellants warranting increased costs. We will order standard costs.
Result
The appeal against the substantive judgment is dismissed.
The appeal against the costs judgment is allowed and the order for increased costs of 50 per cent is set aside. The costs award in the High Court is otherwise unaffected.
In relation to costs in this Court, the appellants are jointly and severally liable to pay the respondents one set of costs for a standard appeal on a band A basis and usual disbursements.
Solicitors:
Amicus Law, Auckland for First to Fifth Appellants
Hollister Jones Lellman, Tauranga for First to Fifth Respondents
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