Corrick v Silich
[2017] NZHC 1630
•14 July 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-001805 [2017] NZHC 1630
BETWEEN DAVID CORRICK
First Plaintiff
STEVEN MITCHELL Second Plaintiff
DAVID PRALONG Third Plaintiff
PAUL STENT Fourth Plaintiff
MATTHEW WILCOCK Fifth Plaintiff
AND
ROBERT SILICH First Defendant
…/contd
Hearing: 26 June 2017 Appearances:
D Zhang for Plaintiffs
D Marriott for First to Fifth Defendants
No appearance for Sixth to Sixteenth DefendantsJudgment:
14 July 2017
JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie
On 14 July 2017 at 4.00pm Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors/counsel: Amicus Law, Auckland
Hollister Jones Lellman, Tauranga/D Marriott, Auckland
CORRICK v SILICH [2017] NZHC 1630 [14 July 2017]
GLENN MCCREADY Third Defendant
FRANK PARKER Fourth Defendant
BRETT EMENY Fifth Defendant
DARRYL MCEVEDY Sixth Defendant
ALISTAIR RUSSELL Seventh Defendant
ALISTAIR SCOTT Eighth Defendant
BRYAN LOCKIE Ninth Defendant
DOUG MOULIN Tenth Defendant
MICHAEL JENKINS Eleventh Defendant
KEN MULGREW Twelfth Defendant
BRIAN STEWART Thirteenth Defendant
BLAIR O’BRIEN
Fourteenth Defendant
DARYL HONE Fifteenth Defendant
ANDREW GORMLIE Sixteenth Defendant
Introduction
[1] All parties to this proceeding are members of a syndicate known as the Trojan
63 syndicate (the “syndicate”). The syndicate members owned an aircraft – a Trojan T28C, serial number 563, registration number ZK-JGS. They resolved to sell the aircraft in November 2014, and the first plaintiff (Mr Corrick), the third defendant (Mr McCready), the fourth defendant (Mr Parker), and the 16th defendant (Mr Gormlie), were appointed as a management group (the “management group”) to oversee the sale.
[2] The plaintiffs allege that the sale proceeded on an “open tender” basis and that they were the successful tenderers. They say that a contract was then concluded between them and other syndicate members. They allege that rather than sell the aircraft to them, syndicate members sold it to the fifth defendant, Mr Emeny. They
allege breach of contract against all defendants,1 breach of fiduciary duty against the
first to fifth defendants, tortious interference with contractual relations against Mr
Emeny, and conversion against the first to fifth defendants.
[3] The first to fifth defendants deny that there was a contract concluded with the plaintiffs, and/or that they owed distinct fiduciary duties specifically to the plaintiffs. Mr Emeny denies that the plaintiffs had a binding contract with syndicate members, and/or that he procured a breach of such contract (if any) as was in place. The first to fifth defendants also deny conversion, asserting that the plaintiffs had no right to possession of the aircraft. As an affirmative defence, the first to fifth defendants allege breach of fiduciary duty by Mr Corrick. They assert that he was conflicted because he was both a tenderer and a member of the management group overseeing the sale.
[4] All other defendants chose not to be represented. The 7th, 8th, 9th, 10th, 11th,
13th, 15th and 16th defendants indicated that they would abide the decision of the
Court. In so far as I am aware, the 6th, 12th and 14th defendants have taken no steps in this proceeding.
1 The plaintiffs were also vendors of the aircraft, yet they do not sue themselves in that capacity.
Nor do their pleadings reduce the damages sought to recognise this.
Background
The aircraft
[5] Trojan T28 aircraft were manufactured by an entity known as North American Aviation. They were produced between 1950 and 1957 as a training aircraft for both the US Air Force and Navy.
[6] There were various models in the Trojan T28 series. The Trojan T28C was a modified version of the earlier B model. It was built for the US Navy. It has a shortened propeller and a tail hook to facilitate carrier operations. It was built in relatively small numbers. There were approximately 266 Trojan T28C models built. It is the rarest model in the Trojan T28 series. Evidence was given that there are only around 50 Trojan T28C’s worldwide in flying condition.
[7] The Trojan T28 was not used in the Vietnam war, and it has never operated with either the New Zealand or Australia military. It is nevertheless regarded as an entry level 1,000 horsepower “war bird”, and there are a number in Australia and two in New Zealand.
The syndicate
[8] The syndicate was formed in July 1990 to purchase the Trojan T28C aircraft at issue in these proceedings from the estate of a Mr John Greenstreet. Two initial syndicate members – Mr Walker and Mr Beaumont – had negotiated to purchase the plane for $250,000. The evidence was that Mr Greenstreet had spent some $400,000 in purchasing, importing and making the aircraft airworthy approximately a year earlier.
[9] Syndicate members entered into an agreement dated 14 July 1990. The agreement recorded, inter alia, that:
(a) Mr Walker and Mr Beaumont would purchase the aircraft using funds subscribed by members as “trustees of and for the use and benefit of the syndicate”;
(b)Mr Walker and Mr Beaumont, as trustees, were to hold all assets of the syndicate. They were to execute any documents relating to such assets, including any transfer, in accordance with the directions of the syndicate or its executive committee;
(c) the syndicate comprised 22 persons, “each owning a joint one twenty second share” in the aircraft and its spare parts, and “each responsible for a one twenty second share of the liabilities of the Syndicate”;
(d)the syndicate was to continue for a minimum term of five years and thereafter from year to year unless earlier determined;
(e) each syndicate member was required to pay $12,500 to enable the purchase to proceed. Each also agreed to make such further payments as the syndicate might from time to time determine;
(f) there was to be an inaugural meeting, annual general meetings thereafter and special general meetings when called;
(g)five persons were to constitute a quorum. All persons present at a meeting had one vote, and proxy voting was not permitted;
(h)an executive committee comprising a chairman, deputy chairman, secretary, treasurer, chief pilot and an engineer was to be appointed at each annual meeting; and
(i)persons elected were to remain in office until the appointment of their successors.
[10] Relevantly, clauses 25 and 26 provided as follows:
25.Upon expiration of the term of the Syndicate or upon the passing of a resolution to that effect by not less than 12 members of the Syndicate at a meeting of the Syndicate called for that purpose the Syndicate shall thereupon be dissolved and all assets of the Syndicate shall be sold and after payment of all liabilities including
the costs of sale and of dissolution the net proceeds shall be divided equally between the members of the Syndicate.
26.Upon dissolution any member or members of the Syndicate may acquire any assets of the Syndicate.
[11] Under the agreement, members had the right to transfer their shares in the syndicate and over the years, a number have done so.
[12] In recent years the syndicate has become increasingly dysfunctional. Many of the original members lost any interest in the syndicate’s activities; the aircraft could not be flown for lengthy periods because it was not properly maintained; many syndicate members did not pay their levies; the syndicate was incurring mounting debts in trying to maintain the aircraft; and there was little active governance of the syndicate. Attempts by several newer syndicate members to invigorate the syndicate achieved little.
[13] There was no direct evidence called explaining what happened to the initial trustees who held the syndicate’s assets. They are not parties to these proceedings. Mr Parker did say in cross-examination that both had died and that they had not been replaced.
[14] Several attempts were made to hold a meeting to address these and other issues, but they were abandoned because insufficient members attended to make up a quorum. There were no formal meetings held for a number of years. The last annual general meeting seems to have been in 2012. It appears that the first defendant, Mr Silich, was then appointed as the chairman of the executive committee. The evidence did not establish who else was then appointed to the executive committee. Mr Parker in cross-examination did say that it was his understanding that there was “no current voted executive”.
[15] One of the syndicate’s creditors was an entity known as Pioneer Restorations. It intended to take steps to collect a debt owing to it, and one of its staff approached one of the syndicate members, Mr Parker, who was also president of the New Zealand Warbirds Association. Mr Parker was able to persuade Pioneer Restorations
to stay any action in relation to the monies owing to it, but only on the understanding that he would use his best endeavours to sort matters out.
[16] To this end Mr Parker prepared an email which was sent out to all syndicate members. The email recorded Mr Parker’s view that the syndicate agreement had not been followed for a number of years. Mr Parker took the view that the agreement was void and that the syndicate was dysfunctional. He noted that there were creditors who were owed money by the syndicate in the total sum of
$62,234.00. He noted that most syndicate members had failed to pay levies struck, and he suggested that the syndicate should be dissolved and the aircraft put out to tender. He also suggested that if existing members wished to purchase the aircraft, they should participate in the tender process, but that a professional aircraft broker should be appointed to handle the sale of the syndicate’s assets.
The Special General Meeting
[17] A notice of meeting was sent out by three members, Mr Parker, Mr Snelson (the second defendant), and Mr Gormlie, calling a special general meeting of the syndicate. It was made clear that the purpose of the meeting was to discuss the dissolution of the syndicate and, if agreed, pass a motion to that effect.
[18] The meeting was held on 16 November 2014. Twelve syndicate members attended. As noted, Mr Silich had earlier been appointed as chairman of the syndicate and he chaired the meeting. The meeting resolved that Mr Snelson should act as secretary. Members present at the meeting first addressed the syndicate’s finances. It was noted that three members were in credit but that the rest were in debit, and that the syndicate had significant debts. Its liabilities were estimated at
$71,534.00. Four motions were put to the meeting:
(a) Mr Corrick and the second plaintiff, Mr Mitchell, moved a motion that the syndicate should be dissolved and that its assets should be sold to a new entity (comprising Mr Corrick, Mr Mitchell and perhaps some others) for the amount of the then current debt. The motion was defeated eight votes to four. However, it was acknowledged in the course of discussions that the syndicate in its then state was
dysfunctional and that a tender process would allow “more transparency for any sale of syndicate assets”.
(b)A motion was then put that the syndicate should be dissolved. This motion was carried with 11 votes in favour and one abstention. A further member was attending by telephone, and he also voted in favour of this motion.2
(c) A further motion was then put that the management group should be appointed to “oversee the sale” of the syndicate’s assets. This motion was carried unanimously.
(d)Finally, a motion was passed, again unanimously, that the management group should advertise the assets for sale with a closing date for offers of 19 December 2014.
[19] There were extensive discussions after the meeting as to how the aircraft could best be sold. These discussions were not formally voted on or minuted.
The sales process
[20] After the meeting there were some relatively discursive emails between the members of the management group. Mr Gormlie (and another person) prepared a draft advertisement. Mr Gormlie circulated it for approval. The draft advertisement stated that the sale would be by “open tender”. There was, however, no detailed discussion about the sales process to be adopted or what an open tender was.
[21] On 21 November 2014, Mr Gormlie sent an email to all syndicate members advising that the management group was organising an “open tender” sale. He attached a copy of the advertisement for the aircraft. It comprised a photo of the aircraft, and gave some brief detail about it. It recorded that the aircraft was “for sale
by open tender”, and that tenders would close at 10am on Friday 19 December 2014.
2 This meant that there were sufficient members of the syndicate voting in favour of the resolution to permit it to be passed – see para 25 of syndicate agreement, above at [10].
[22] No syndicate member queried what was meant by the words “open tender”.
[23] The aircraft was advertised for sale on the Trademe website and on two other websites –Trade-A-Plane in the US, and Classic Wings in New Zealand – using the form of advertisement which Mr Gormlie had sent to syndicate members.
[24] On 16 December 2014:
(a) Mr Corrick and the four other plaintiffs (jointly 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;
(b)Mr Emeny rang Mr Gormlie and asked him if there were any offers on the aircraft. Mr Gormlie told Mr Emeny about the Corrick group’s oral offer;
(c) Mr Emeny sent an email to Mr Gormlie, Mr Snelson and Mr Parker at
1:26 pm, offering $75,000 for the plane. In his email, Mr Emeny recorded his understanding that tenders closed on 16 December 2014;
(d)At 5:44 pm, the Corrick group’s solicitor put in a written offer. The offer was made to the management group on the basis that its members were the authorised agents of the syndicate. The Corrick group offered to purchase the aircraft from the members of the management group for $63,523.00. Various warranties were required from management group members on behalf of the syndicate.
[25] Mr Gormlie sent copies of the Corrick group’s solicitor’s email to other members of the management group on the morning of 17 December 2014. Later that day, Mr Emeny called Mr Gormlie and asked whether his offer had been successful. Mr Gormlie told Mr Emeny that he had made a mistake in his emailed offer of 16
December 2014, that tenders were still open and that they did not close until 19
December 2014. He also suggested to Mr Emeny that he should have a chat with the
Corrick group. He noted that they were all members of the vendor syndicate.
[26] There was then a telephone discussion between Mr Corrick and Mr Emeny. There was some dispute between them as to what was said in the course of this conversation. Given the view I have taken of this matter, that dispute does not need to be resolved. Suffice it to say both accept that Mr Emeny advised Mr Corrick that he did not want to join the Corrick group, and that Mr Corrick did not tell Mr Emeny how much the Corrick group had tendered for the aircraft.
[27] On 17 December 2014, at 9:56 pm, Mr McCready sent an email to Messrs Gormlie, Parker and Corrick making an offer of $80,000 for the aircraft and its associated equipment.
[28] On 18 December 2014, Mr Corrick and Mr McCready discussed their respective tenders by telephone. Mr Corrick offered a place in the Corrick group to Mr McCready. Mr Corrick understood that Mr McCready might be prepared to withdraw his bid but in the event, this did not occur.
[29] Mr Gormlie said that he spoke to Mr Emeny a second time, after Mr McCready had made his bid, and that he told Mr Emeny about Mr McCready’s tender. Mr Emeny denies that this conversation took place. Given the view I have taken in this matter, it is not necessary to resolve this dispute either.
[30] On 19 December 2014, at 8:43 am, the Corrick group, through Mr Corrick, put in a further tender of $85,000 for the aircraft. Again the offer took the form of a written agreement. It was substantially similar to the earlier offer made on 16
December 2014. It named Messrs Parker, Gormlie, McCready and Corrick as the vendors, on the expressed basis that they were the authorised agents of the syndicate. It named the five plaintiffs as the purchasers. The operative provisions recorded that the members of the management group agreed to sell the aircraft to the plaintiff purchasers for the sum of $85,000 on a number of terms:
(a) The purchasers would pay the purchase price by way of a 10 per cent deposit on signing of the offer by the vendors; the balance was to be paid within a further seven working days.
(b)On payment of the balance of the purchase price, the vendors were to execute all documents and take all other steps required 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.
(c) The vendors were required to warrant to the purchasers for themselves and on behalf of other members of the syndicate that the aircraft was the property of the vendors, and that on payment of the balance of the purchase price it would become the property of the purchasers, and would pass to them free and unencumbered.
(d)The vendors were required to satisfy and discharge promptly all third party indebtedness owed by the syndicate, but the purchasers could elect to pay any or all of the third party creditors direct, and then pay the balance of the purchase price, less any third party payments, to the vendors.
(e) The vendors were to warrant to the purchasers that they were authorised to sell the aircraft.
Mr Corrick signed the agreement for himself and as authorised agent for the plaintiffs. He also purported to sign as one of the vendors.
[31] On 19 December 2014, Mr Emeny rang Mr Gormlie to find out how the tender process had gone and whose tender had been successful.
[32] Also on 19 December 2014, at 2:05 pm, Mr Gormlie sent out an email to all syndicate members. The email recorded that the tender period had closed and that there were “three offers on the table”. Copies of each offer were attached to the
email. They were also summarised in the email. It was noted that Mr Emeny’s and Mr McCready’s offers had been made without any specified settlement dates or terms, and that the Corrick group’s offer had been “made as a binding legal document”, with provision for payment of a deposit and the balance of the purchase price. Mr Gormlie asked members to vote on which bid the syndicate should accept. The Corrick group bid was listed as option 3 in the email.
[33] Various syndicate members replied to Mr Gormlie’s email, and on 21
December 2014, at 1:18 pm, Mr Gormlie sent out a further email to all syndicate members. It read as follows:
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.
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 [Gormlie]/Frank [Parker]/David [Corrick]/Glenn [McCready]
[34] Subsequent to this email, two additional syndicate members emailed Mr
Gormlie, confirming they favoured accepting the Corrick group offer.
[35] On 24 December 2014, Mr Corrick sent an email to Mr Snelson and Mr Silich. He copied the email to Mr Gormlie, Mr Parker and Mr McCready. It read as follows:
Hi Chris [Snelson] and Rob [Silich],
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.
….
David [Corrick].
Unfortunately, the document which Mr Corrick attached to his email that he sought to have all members of the management group, together with Mr Silich and Mr Snelson, sign, was not produced by the parties. It seems that it has been lost. Mr Corrick said that it may have been similar to another document which I refer to below at [47(b)].
[36] On 25 December 2014, Mr Silich replied to Mr Corrick. His email read as follows:
Hi David [Corrick]
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 [Snelson] and Glenn [McCready] 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 the 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.
[37] Insofar as I am aware, Mr Corrick did not reply to this email.
[38] On 26 December 2014, Mr Emeny sent an email to Mr Parker, which he copied to Mr Snelson, expressing concern at the tender process which had been followed. He suggested that the tender had been allowed to turn into, what he termed, a “Dutch auction”, where Mr Corrick, in his capacity as a member of the management group, was able to see all other bids and then put in a late second bid to secure the aircraft. Mr Emeny said that he had no problem with the sales process changing from a tender to an auction, but only so long as all parties had equal opportunity to keep bidding. He asserted that he was the only bidder that was not a member of the management group, that he did not get to see the other bids, that he was not advised that the tender process had been changed to an auction process, and that he wanted the opportunity to continue bidding. He made a further bid of
$90,000 for the aircraft.
[39] Mr Emeny followed this email up with a further email to similar effect on 27
December 2014.
[40] There was then some discussion between the members of the management group:
(a) Mr Parker noted that advertisements for the sale of the aircraft referred to the sale proceeding as an open tender, but expressed concern that not all offers were made available to all bidders to enable them to assess their respective positions. He queried whether the Corrick group had “insider information”. He considered that the management group was responsible for realising the best price for the aircraft, consistent with the fairness and good faith to all bidders. He thought that there were two options – either to dismiss Mr Emeny’s latest offer of $90,000 and proceed with the tender from the Corrick group, or re-open the sales process to consider Mr Emeny’s latest offer and any other new offers. He expressed the view that this latter option was the fairest.
(b)Mr Gormlie suggested that it might be appropriate to give members of the Corrick group and Mr Emeny the opportunity to discuss their respective positions with each other, and come up with a resolution if they were able to do so.
[41] Mr Corrick was not interested in discussing matters with Mr Emeny. He considered that the Corrick group’s tender had been accepted.
[42] At or about this stage, Mr Corrick, in his words, “stepped back” from the
management group.
[43] On 30 December 2014, Mr Corrick sent an email to the remaining management group members asserting that the Corrick group’s tender was the highest offer made, and noting that the majority of syndicate members had voted in favour of accepting it. He referred to Mr Gormlie’s email of 21 December 2014 (above at [33]), and asserted that it confirmed acceptance of the Corrick group’s offer to purchase the aircraft. He stated that the management group had “complete authority” to finalise the sale of the aircraft, and then went on to assert as follows:
In order to execute the Agreement and provide payment of a 10% deposit ($8,500) as required under clause one of the Agreement, it is a requirement that all four members of the Management Group sign the Agreement. I have already signed the document, and it now requires the signatures of Frank
Parker, Andrew Gormlie, and Glenn McCready to enable the deposit to be paid into the syndicate bank account and to ensure settlement is finalised. The balance of the purchase price $76,500) will be paid within seven days of the Agreement being signed by all the signatories.
[44] Mr Parker replied on the same day. He briefly summarised the position as he saw it, and recorded that the agreement which Mr Corrick was demanding the management group members sign was “your [Mr Corrick’s] agreement, and that we [the remaining members of the management group] have no duty nor obligation to accept or ratify it.”
[45] Various emails were then circulated as various persons expressed a view one way or the other about the dispute which had developed.
[46] On 2 January 2015, Mr Parker proposed to Mr Gormlie that the tender/auction process be re-opened. Mr Gormlie confirmed that he understood what Mr Parker was proposing, and that he did not dissent from Mr Parker’s proposition.
[47] Mr Gormlie gave evidence that he nevertheless “concluded that we had agreed upon a transaction and had sold the aircraft in good faith to the group led by Mr Corrick”. On 9 January 2015, Mr Gormlie:
(a) At 7:47 am, sent out the following email to all syndicate members:
Hello Everyone,
Post closure, the T28 tender/sale process has been challenged & subsequent legal action raised as a potential solution.
The nominated sales committee of Gormlie, McCready, Parker (less Corrick as an interested party) advise that the syndicate will accept the Corrick Group offer on their behalf.
The nominated sales committee also will not enter into any
legal proceedings in any way or on anyone’s behalf.
Regards
Andrew Gormlie
He said in cross-examination that this email was sent out after a discussion between members of the management group. That was not put to other members of the management group who gave evidence – Mr Parker and Mr Corrick.
(b)At 10:36 am, by email sent to other members of the management group a copy of yet another document which had been prepared by Mr Corrick or his solicitors,3 recording that the members of the management group as vendors acknowledged and agreed that payment of the sum of $85,000 was in full and final settlement for amounts owing in respect of the aircraft, that any claim each of them might have against the syndicate, or any security that each of them might have in the aircraft, was transferred to the purchasers free of
any claims or security interests, and that all debts owed by the syndicate to creditors would be paid in full before the surplus funds were distributed to syndicate members. Mr Gormlie had signed the document. The copy attached to the email had not been signed by anyone else.
[48] Mr McCready replied to the second email on 12 January 2015. He advised that he would not be signing the further document until the dispute had been resolved.
[49] Also on 12 January 2015, Mr Emeny wrote by email to all syndicate members explaining why he was challenging the tender process which had been followed by the management group.
[50] Various members of the syndicate then exchanged emails expressing their views of the dispute. Mr Emeny invited the syndicate to re-open the bidding
process.
3 It was not clear where this document had come from. It seems likely that it was prepared by the
Corrick group’s solicitors.
[51] On 20 January 2015, the Corrick group paid $8,500 into the syndicate’s bank account, notwithstanding that none of the documents that had been sent to the management group, Mr Silich and Mr Snelson, had been signed by all intended to be bound by them.
[52] Thereafter, the parties largely retreated into their respective corners.
[53] On 29 January 2015, Mr McCready sent an email to all syndicate members, advising that he and Mr Parker had had a meeting regarding the sale of the aircraft, that Mr Gormlie had resigned from the management group, and that they had removed Mr Corrick because of his conflict of interest. He noted that the tender process had been challenged, and that it was his and Mr Parker’s view that the only fair process was to hold an auction for interested parties from within the syndicate. He invited all interested parties to bid, and indicated that the auction would remain open for a period of 48 hours.
[54] Mr Emeny had already placed a bid of $90,000. There were no further bids and, 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. These proceedings then ensued.
Analysis
[55] I now proceed to consider the key issues raised by the pleadings. I note that the parties, in the submissions made on their behalf and in the evidence given in Court, attempted to introduce a host of matters which were not pleaded, for example whether Mr Silich was the president of the syndicate, whether the members of the management group were agents of the syndicate able to sell the aircraft on behalf of its members, whether the first to fifth defendants could use syndicate funds to pay for their defence of the proceeding, whether or not the plaintiffs had failed to
mitigate the damages claimed by them,4 and whether the aircraft’s log books
currently held by Mr Corrick should have been made available to Mr Emeny. I have
4 Failure to mitigate is an affirmative defence – Stokes v Insight Legal Trustee Company Ltd
[2014] NZHC 2691 at [12],[19]; Craike v Tilsley [2012] NZHC 565 at [28]. It should be pleaded
- High Court Rules 2016, r 5.48(4). There is good reason for this requirement – see Manukau
Golf Club Inc v Shoye Venture Ltd [2012] NZCA 154, (2012) 21 PRNZ 235 at [22].
not considered these issues except insofar as I am required to do so when dealing with what was pleaded. Hopefully some of them can be resolved consequent on this judgment.
[56] Further, I record that some of the key protagonists were very ready, at times even anxious, to attribute ill will and bad faith to those who disagreed with them. This added nothing to the proceedings.
Was a contract concluded between the plaintiffs and other syndicate members?
[57] Many of the difficulties in this case arise because: (a) the syndicate agreement was ignored, and
(b)the management group did not clearly agree how the sale of the aircraft should be undertaken.
[58] The evidence established that the group did not get together and discuss what they were intending when the plane was advertised for open tender.5 It was clear from the evidence that there was very real confusion about the concept. The
management group did not indicate to other members of the syndicate what they
5 In Richmond Ltd v New Zealand Meat Producers Board HC Wellington CP320/97, 9 December
1997, the Court considered the process adopted by the parties for the sale of shares. The Court noted as follows at 2-3:
“Through its agents Messrs Giffney and Jones, Corporate Advisors and members of the New Zealand Stock Exchange, a scheme was devised to solicit bids or offers for those shares generally from parties in New Zealand and those involved in the meat production industry. That scheme, in truth, involved an auction process whereby interested parties make offers or bids for the shares at a price to be nominated. All concerned are then made aware of the level of price offered and are then invited to consider making further bids in order to better that price. Mr Giffney’s view is that such a process creates what he describes as a “price tension” which would enable the New Zealand Meat Board and Primary Resources to extract a higher price for the shares than might otherwise be the case through some other form of marketing, such as a closed tender. It is said “the most robust price will be that achieved from a competitive market process”. I take that simply to mean that in an auction situation where there is more than one anxious buyer the likelihood of a higher, euphemistically described as “robust”, price for the shares being obtained is enhanced. …”
And at 6:
“… In the end Mr Giffney recommended, and the Board adopted, a procedure by way of open tender which he felt would establish a competitive price to be obtained for the shares through what I have described as an auction process with competitors and pricing “tension” arising as one bidder is played off against the other;”
See also Alpine Choppers Ltd v Minister of Conservation [2008] NZAR 564 (HC) at [10]-[13]
and [76]-[77].
meant by an open tender; they did not agree or put in place a form of tender; they did not require that tenderers could not withdraw tenders made; they did not indicate how tenders would be evaluated; they did not reserve to themselves the right not to accept any tender that might be made.
[59] In the circumstances it is not surprising that the sale of the aircraft has degenerated into a dispute.
[60] In contractual terms, the statement that the aircraft would be sold by “open tender”, contained in the advertisements placed and in the email to syndicate members, was an invitation to treat. It was a call for tenders and the tenders submitted constituted offers.6 Until a tender was accepted, there could be no contract.7
[61] The plaintiffs’ pleadings are precise as to the circumstances in which their offer was made, the fact of their offer, and its acceptance. They refer to the notice given to call the special general meeting, to the special general meeting, to the motions passed at that meeting, and to the listing of the plane for sale by open tender. The various competing tenders are then referred to. The plaintiffs refer to their offer made on 19 December 2014 at 8:43am (see above at [30]). They assert that this offer was accepted on 21 December 2014 at 1:18 pm, when the management group wrote to other members of the syndicate (see above at [33]).
[62] In order to determine whether, in any given case, a contract has been concluded, it is usual to employ the language of offer and acceptance.8 A mechanical analysis in terms of offer and acceptance can, however, be less rewarding than considering whether, viewed as a whole and objectively, the facts and the
correspondence show a concluded agreement.9 Here I will first consider whether
6 Gregory v Rangitikei District Council [1995] 2 NZLR 208 (HC) at 220-222.
7 Cook Islands Shipping Co Ltd v Colson Builders Ltd [1975] 1 NZLR 422 (SC) at 436-437;
Holman Construction Ltd v Delta Timber Co Ltd [1972] NZLR 1081 (SC) at 1082.
8 See Burrows Finn and Todd (eds) Law of Contract in New Zealand (5th ed, Lexis Nexis, Wellington, 2016) at 37, citing Wilmott v Johnson [2003] 1 NZLR 649 (CA) at 656.
9 Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560 (CA) at 563. Cited with approval in Savvy Vineyards 3552 Ltd v Kakara Estate Ltd [2014] NZSC 121, [2015] 1 NZLR 281 at [111]; And see Meates v Attorney-General [1983] NZLR 308 (CA) at 377; and generally, Burrows Finn and Todd, above n 8, at [3.2.1].
there was an offer capable of being accepted by the persons to whom it was made, then whether or not any offer was accepted, and then look at the facts and the correspondence in the round to determine objectively whether or not there was a concluded agreement.
[63] An offer is an expression of willingness to contract, made with the intention that it shall become binding upon the person making it as soon as it is accepted by the person to whom it is made,10 and the first task of a person alleging that a contract exists is to prove the fact of a definite offer which could validly be accepted by the party who allegedly accepted the same.11
[64] The Corrick group put in an offer to purchase the aircraft for $85,000 on 19
December 2014. As Mr Corrick confirmed in cross-examination, and as was obvious from the documentation produced, the offer took the form of a written agreement, which had been prepared by Corrick group’s solicitors. The agreement was clear in its terms, and it set out the basis on which the Corrick group was prepared to purchase the aircraft. The agreement named the four members of the management group as the vendors on the expressed assumption that they were the
authorised agents of the syndicate.12
[65] I do not consider that Messrs Gormlie, Corrick, McCready and Parker were the authorised agents of the syndicate with authority to sell the aircraft:
(a) The members present at the special general meeting held on 6
November 2014 appointed Messrs Gormlie, Corrick, McCready and Parker as a management group to “oversee the sale” of the syndicate’s assets. There was no motion passed vesting the aircraft in them or authorising them to sell it in their own names. Nor was there a motion appointing them as the agents of the syndicate for the purposes of
effecting the sale.13
10 Air Transworld Ltd v Bombardier Inc [2012] 2 All ER (Comm) 60 (QBD) at [75].
11 Burrows Finn and Todd, above n 8, at [3.2.2].
12 Agency was not, however, pleaded by the plaintiffs.
13 Mr Parker gave evidence that it was never intended that the management group had the power to actually sell the aircraft. He took the view that authority to sell the syndicate’s assets was retained by the executive committee on behalf of the members.
(b)Any such agency would have been inconsistent with the syndicate agreement. As I have noted above at [9(a) and (b)], the syndicate’s assets, including the aircraft, were vested in two original members as trustees. The agreement provided that they were to hold all the assets of the syndicate, and that they were to execute any documents relating to such assets, including any transfer, in accordance with the directions of the syndicate or its executive committee.
(c) As I have noted, the evidence suggested that both of the original trustees had died. There was nothing to suggest that replacement trustees had been appointed in either Mr Walker’s or Mr Beaumont’s stead. There was no evidence as to which died first. Under the general law, on the death of one of two trustees, the trust property devolved to the surviving trustee by survivorship, by reason of the
joint estate taken by the trustees.14 When the surviving trustee died,
then, again under general law, the trust property devolved upon his personal representatives.15
(d)There was no evidence that the syndicate or its executive committee directed the last surviving trustee’s personal representatives to execute a transfer of the aircraft and its accessories.
(e) There was little evidence as to the make-up of the executive committee. Under the syndicate agreement (see above at [9](i)), it seems that whoever was appointed at the last annual general meeting continued to hold office until new appointments were made. Mr Silich and Mr Snelson seem to have been ongoing executives but there was no evidence as to who else was on the executive committee. It was supposed to comprise six people. None of the members of the management group seem to have been members of the executive
committee.
14 See Trustee Act 1956, s 43; and see Lynton Tucker and others (eds) Lewin on Trusts (19th ed, Sweet & Maxwell, London, 2015) at [13-001]; John McGhee (ed) Snell’s Equity (33rd ed, Sweet
& Maxwell, London, 2015) at [27-009].
15 Trustee Act, s 23.
[66] A contract can only result from the acceptance of an offer by the person or persons to whom it is made.16 In my judgment, the offer was not capable of being validly accepted by the four members of the management group. All they could do was forward it on to syndicate members. That is what they did on 19 December
2014 at 2:05 pm – see above at [32].
[67] Further, on the evidence, the offer, assuming that it could be validly accepted by the members of the management group, was not in fact accepted by them.
[68] The plaintiffs rely on the email sent by members of the management group to syndicate members on 21 December 2014 at 1:18 pm – above at [33]. I do not consider that, in sending out that email, the members of the management group accepted the offer.
[69] First, the email said to accept the Corrick group’s offer was sent to all syndicate members, and not simply to Mr Corrick and other members of the Corrick group. 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. I note as follows:
(a) The email made it clear that the syndicate had to identify all parties with any financial claim on the syndicate, and warrant that on settlement, it could pass clear and unencumbered title to the aircraft. The email asked all members who owed any money to the syndicate to pay their debts, and asked them to contact either Mr Silich or Mr Corrick if any clarification of monies owed, or of debts in dispute, was required. It was noted that the syndicate needed to provide the Corrick group’s solicitors with a detailed list of creditors and a declaration of any debts or commitments that were held by the
syndicate prior to settlement.
16 McMahon v Gilberd & Co Ltd [1955] NZLR 1206 (SC & CA) at 1216; Boulton v Jones (1857)
157 ER 232 (Exch); Jewel Properties Ltd v Phoenix Management Ltd HC Auckland CP35/02, 1
August 2002 at [66].
(b)Mr Gormlie, who sent out the email, confirmed in cross-examination that the purpose of the email was simply to tell members of the syndicate that there was a majority in favour of accepting the bid from the Corrick group. I refer to the following passage:
Q. But on the 21st of December … you’re saying the sale has been confirmed and yet you still haven’t accept[ed] it, have you?
A. How do you mean it’s confirmed but I haven’t
accepted it?
Q. You still hadn’t signed the agreement, had you? A. No, but –
Q. Neither had any other members of the sales committee.
A. No, that’s correct but perhaps it should’ve been worded, “This confirms the sale – the potential sale of the T28 to David Corrick’s group of shareholders,” but –
Q. And that would’ve more correctly represented what had occurred, wouldn’t it?
A. Well it’s semantics, isn’t it, we had a position that was the highest offer of something that everybody then voted on and had time to request any recourse over, and so I then had to transmit something to everybody to tell them exactly what we’d come up with. That was the job.
Q. So your purpose was simply to tell them that “We’ve got a majority,” saying, “We should go on and accept the $85,000 bid”?
A. That’s correct.
[70] There is a further difficulty for the plaintiffs. The Corrick group’s offer had been made by Mr Corrick, as authorised agent of the group, signing the written agreement comprising the offer and sending it to the members of the management group.
[71] An offer made by signing a memorandum of agreement requires acceptance by signature of the same document.17
[72] The agreement sent to the management group on 19 December 2014 had been signed by Mr Corrick both as agent for the purchasers and as a member of the management group who he (mistakenly) thought were the vendors. Mr Corrick had no authority from the management group to sign as a vendor. He accepted this in cross-examination. Mr Gormlie subsequently signed the agreement on 9 January
2015, notwithstanding that, by this stage, Mr Emeny had expressed his concerns at the process followed and Mr Gormlie had approved Mr Parker’s proposal that bidding should be reopened. Messrs McCready and Parker never signed the document.
[73] The Court of Appeal has observed as follows:18
Every law student knows that no binding contract can arise from offer and acceptance unless the acceptance is absolute, and unless it corresponds with the terms of the offer.
…
A reply constituting the acceptance of an offer must be read with the offer: to bring about a binding contract the offer and the reply accepting must be of and in respect of precisely the same terms. The offeree must unreservedly assent to the exact terms proposed by the offeror.
…
[74] In my judgment these observations are directly in point in this case. The terms of the offer made by the Corrick group on 19 December 2014 were never accepted by all members of the management group as the named vendors.
[75] Support for the view that no contract was concluded as at 21 December 2014 is found in the later attempts made by Mr Corrick to get members of the management group, and at one stage Messrs Silich and Snelson, to sign other
documents.
17 Richards v Hill [1920] NZLR 724 (SC) at 727-728; Mountain Road (No 9) Ltd v Michael Edgley
Corporation Pty Ltd [1999] 1 NZLR 335 (CA) at 337-338.
18 Reporoa Stores Ltd v Treloar [1958] NZLR 177 (CA) at 180 and 187.
(a) By his email dated 24 December 2014 (above at [35]), Mr Corrick sought to get the management group and Messrs Silich and Snelson to sign an additional document. As I have noted, a copy of that document was not made available to the Court, although the evidence suggested that it may have been similar to another document which was made available, which I have summarised above at [47](b). Mr Silich made it clear that he considered that this further document was unacceptable and he refused to sign it – above at [36]. There was nothing to suggest that it was signed by anybody else.
(b)In his email of 30 December 2014, above at [42], Mr Corrick was still endeavouring to persuade the other members of the management group to sign the original 19 December 2014 agreement.
(c) There was yet a further document prepared on or about 9 January
2015, which Mr Corrick sought should be signed by members of the management group but not by Messrs Silich and Snelson – above at [47](b). Mr McCready refused to sign it, above at [48]. There is nothing to suggest it was signed by Mr Parker.
[76] If the Corrick group had a concluded contract, as the plaintiffs allege, as at 21
December 2014 at 1:18 pm, then that was the end of it and nothing more was required. The demands that both the original and further documents be signed suggest that there was no concluded contract as alleged.
[77] Mr Corrick confirmed, when I questioned him about it, that the plaintiffs did not waive the terms of the original 19 December 2014 offer. He was adamant that he and his other purchasers wanted some document giving them clear title. He said that this was “the biggest concern” that he and his fellow purchasers had, and that they wanted to make sure that there were no unsatisfied or undisclosed creditors. He said that this was very important to the plaintiffs, because they did not want to be lumbered with a financial burden that they were unaware of. That is understandable from the plaintiffs’ perspective, but they never got the confirmation they were
seeking, and payment by them was always conditional on obtaining signed warranties in this regard.
[78] Mr Corrick in cross-examination asserted that all that was required was for the management group to get syndicate members to vote on which tender they wanted to accept, and then dispose of the aircraft. He argued that an agreement was concluded when votes were cast.
[79] I do not accept this retrospective analysis. It is inconsistent with the contemporaneous documentation and indeed with Mr Corrick’s own evidence summarised in the penultimate paragraph.
[80] In my judgment, the offer made was not capable of being validly accepted by those to whom it was addressed, and, in any event, it was not accepted by them. There was no concluded contract between the plaintiffs and the defendants.
Breach of fiduciary duty
[81] The plaintiffs allege that the first to fifth defendants breached fiduciary duties owed to them, causing them loss. The pleading then proceeds to give particulars. The particulars advance matters little. As against the first defendant, Mr Silich, it is alleged that, as chairperson of the syndicate and/or a fellow member of the syndicate, he owed the plaintiffs duties of loyalty and good faith, to place their interests above his own, not to profit from the position he held, and/or not to harm the plaintiffs.
[82] There is no particular relating to the second defendant, Mr Snelson.
[83] It is alleged that the third and fourth defendants, as members of the sales committee and/or fellow members of the syndicate, owed the plaintiffs the same duties as are alleged in respect of Mr Silich.
[84] The same pleading is made against Mr Emeny as a member of the syndicate.
[85] The first to fifth defendants deny that they owed any fiduciary duties to the plaintiffs, other than to the extent that any such duties were owed by them to all members of the syndicate.
[86] All parties to the proceedings, as members of the syndicate, were parties to what was effectively a joint venture – namely owning and operating an aircraft. They entered into a syndicate agreement to this end. That does not prevent their relationship being a fiduciary relationship,19 but it was not a joint venture entered into for the purpose of making a profit, and sharing in any profits derived. The common objective was rather to enjoy ownership of a “war bird”.
[87] For the reasons I have set out, I have found that there was no concluded contract between the plaintiffs and other syndicate members. The plaintiffs’ pleadings are predicated on the existence of a contract, and the losses they claim arise from its alleged breach. The background facts pleaded under the heading breaches of fiduciary duties refer to Mr Parker purporting to reopen the sale process, to Mr McCready and Mr Parker refusing to allow the alleged contract between the plaintiffs and the defendants to be performed, to Mr Silich refusing to confirm receipt of the sum of $8,500 paid by Mr Corrick into the syndicate’s bank account on
20 January 2015, to Mr McCready and Mr Parker purporting to remove Mr Corrick and Mr Gormlie from the sales committee, to Mr Parker purporting to appoint himself and Mr Silich trustees for the plane, and to the subsequent actions taken to sell the plane to Mr Emeny. Mr Emeny’s actions in purchasing the plane are then challenged. All that is pleaded are steps or actions taken by each defendant (other than the second defendant, Mr Snelson). There is no pleading indicating how these alleged actions have breached the duties said to be owed.
[88] I am not persuaded that any additional fiduciary duties were owed by the first to fifth defendants to the plaintiffs, or that such duties as the first to fifth defendants owed to the syndicate generally were breached. The plane was ultimately sold to the person prepared to pay the most for it. The process leading to that sale might be open to challenge but it has not been put in issue by the current pleadings. There
was a resulting benefit accruing to all syndicate members. The various events
19 Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433.
occurred against the background of the syndicate agreement, and the fiduciary duties alleged cannot enlarge the scope of the contractual duties owed under that agreement.20 There is nothing to suggest that any of the first to fifth defendants did not act honestly, and in the interests of all syndicate members. The pleading of breach of fiduciary duties must also fail.
[89] The first to fifth defendants allege breach of fiduciary duty by Mr Corrick. They claim that, as a member of the sales committee, he owed a duty to all syndicate members to place their interests above his own, and that he breached that duty by seeking to advance his own position.
[90] Mr Corrick admits that he owed his fellow syndicate members fiduciary duties, but he denies any breach.
[91] In my judgment, Mr Corrick put himself in a situation where his interests and his duties conflicted. He was keen to purchase the aircraft. He allowed himself to be put on the management group, which was entrusted with overseeing the sale. It is clear from the evidence that syndicate members at the special general meeting were aware of Mr Corrick’s conflict when he was appointed to the management group. They had earlier voted against a proposal that he and others would purchase the aircraft for the then outstanding debt owed by the syndicate. The syndicate agreement provided that Mr Corrick or any other member could acquire the syndicate’s assets on a dissolution. Nevertheless, in my judgment it was unwise for Mr Corrick to go on the management group. It put him in a position where he had at least a potential advantage over other tenderers who were not members of the management group. There was evidence suggesting that he tried to undermine Mr Emeny’s bid, by suggesting that it was not in an appropriate form, notwithstanding that the management group had failed to fix any form for tenders. The evidence also established that he spoke to both Mr Emeny and Mr McCready about them becoming members of the Corrick group. Had this eventuated, the effect would have been to remove Messrs McCready and Emeny from the tender process, which would likely have reduced the amount received for the aircraft, to the detriment of all syndicate
members, including the plaintiffs.
20 Clark Boyce v Mouat [1993] 3 NZLR 641 (PC) at 648.
[92] In my view, there was a breach of fiduciary duty by Mr Corrick, but there has been no loss to the syndicate as a result.
Tortious interference with contractual relationships
[93] This pleading is against Mr Emeny only. It is prefaced on the basis the plaintiffs had a concluded contract with the other members of the syndicate. It is alleged that Mr Emeny interfered with that contractual relationship, and procured its breach.
[94] I have found that there was no concluded agreement between the plaintiffs and other members of the syndicate. This cause of action must fail.
Conversion
[95] The plaintiffs allege that the first to fifth defendants converted the aircraft. It is alleged that their actions in “taking, maintaining and possessing” the aircraft are inconsistent with the plaintiffs’ rights.
[96] Again, the claim of conversion is predicated upon the existence of a concluded contract between the plaintiffs and the defendants. I have found that there was no concluded contract.
[97] Further, the claim for conversion must fail on the evidence. Although the cause of action is pleaded against the first to fifth defendants, the only relevant particular is the taking of possession by Mr Emeny on 4 February 2015. There was no evidence advanced that the first to fourth defendants engaged in conduct amounting to “taking, maintaining and possessing” of the aircraft as pleaded. As for Mr Emeny, the evidence was that he was a purchaser for value of the aircraft, that he paid the agreed price for it, and that accordingly he was allowed possession. As I have noted, it may be that criticisms can be made of the process followed, but those matters are not pleaded.
Result
[98] For the reasons I have set out, the plaintiffs have failed in each of the causes of action advanced by them. Their claims are dismissed.
Costs
[99] The first to fifth defendants, having taken an active stance in this matter, are entitled to their reasonable costs and disbursements. I would invite the parties to try and agree costs. If they are unable to do so, I direct as follows:
(a) Any memorandum seeking costs and disbursements is to be filed within 10 working days of the date of this judgment.
(b)Any memorandum in reply is to be filed within a further 10 working days.
(c) Memoranda are not to exceed five pages in length.
[100] I will then deal with the issue of costs on the papers, unless I require the assistance of counsel.
Wylie J
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