Crafar v Safe Business Solutions Limited - [2022] NZHC 624

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE

CIV-2021-443-063

[2022] NZHC 624

BETWEEN
MARTIN JAMES CRAFAR

Appellant

AND

SAFE BUSINESS SOLUTIONS LIMITED

Respondent

Hearing: 24 March 2022

Appearances:

A C Beck for Appellant

S Hughes QC for Respondent

Judgment:

30 March 2022

JUDGMENT OF GENDALL J

This judgment was delivered by me on 30 March 2022 Pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date

CRAFAR v SAFE BUSINESS SOLUTIONS LIMITED [2022] NZHC 624 [30 March 2022]

Introduction and background

[1] In 2020 the respondent, Safe Business Solutions Limited (the Company) had three shareholders, being the appellant Martin James Crafar (Mr Crafar), Charlaine Grace Barnfather (Ms Barnfather) and Robert Charles Thomson (Mr Thomson).

[2]All three were employees of the company.

[3] Differences arose between them and it was agreed that Mr Crafar would resign as an employee of the Company and he would sell his shares to the other shareholders. This was at a price $165,000, and he was also to receive a transfer of a company vehicle valued at something over $12,600.

[4] To record settlement and resolution of the dispute a written Settlement Agreement was entered into on 12 June 2020.

[5]Such agreement contained a restraint of trade clause whereby at para 8.1:

“The Vendor (Mr Crafar) agrees that for a period of two years from the settlement date he will cease to be a Shareholder of the Company and within a radius of 100 kilometres of the city of New Plymouth (he) will not:

(a) Engage directly or indirectly in any other directly competing business (either on their own account, or as a director or shareholder of any organisation that operates in the same or a substantially similar industry as the company) in competition with the Company; or

(b) Directly or indirectly solicit, canvass … the clients or customers or contractors away from the Company; or

(c) Directly or indirectly assist financially any other business … in competition with the Company.”

[6] Three days later on 15 June 2020, Mr Crafar’s wife registered a company in New Plymouth under the name Hash Services Limited (HASH) of which she is the sole shareholder and director. Mrs Crafar is by occupation a travel agent. Mr Crafar has been employed by HASH since his resignation from the Company working as HASH’s General Manager. HASH it is alleged offers services identical to those offered by the Company.

[7] The Company now brings this proceeding against Mr Crafar, alleging that he has breached the restraint of trade agreement given as an essential part of the sale of his shares in the Company. At trial, the Company says it will argue:

(a)that HASH is a device to avoid the Settlement Agreement;

(b)that Mr Crafar is a de facto director of HASH;

(c)that Thomas Cloke (Mr Cloke) — whose involvement I will discuss shortly — is an agent for Mr Crafar; and

(d)that Mr Cloke effectively on behalf of Mr Crafer…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] NZHC 624
Decision Date: 30 March 2022

CaseChat Overview and Summary

In the High Court of New Zealand, Crafar v Safe Business Solutions Limited was a case where Martin James Crafar, an appellant, was appealing against the decision of the District Court regarding discovery orders made in a proceeding against him. Safe Business Solutions Limited, the respondent, brought the proceeding against Crafar for alleged breach of a restraint of trade agreement. The agreement was part of the sale of Crafar's shares in the company. The District Court had ordered Crafar to provide particular discovery of certain documents, which he opposed on the basis that he had already provided sufficient documents. The High Court was required to determine whether the District Court erred in ordering particular discovery.

The court held that the District Court did not make any errors in ordering particular discovery. The court found that there were grounds for believing that relevant documents existed and that the Company had shown enough to suggest that Mr Cloke was an agent of Crafar, and that Crafar was in breach of the restraint of trade agreement. The court also found that the documents sought were within Crafar's control, as he was likely to have an enforceable right to access them. The court held that the Company had done enough to show valid grounds for a general belief that Crafar was in breach of the restraint of trade agreement.

The appeal was dismissed, and costs were awarded to the Company against Crafar on a category 2B basis together with reasonable disbursements.

Orders