Ellis v Red Eagle Corporation Ltd - [2009] NZCA 320

IN THE COURT OF APPEAL OF NEW ZEALAND
CA713/2008
[2008] NZCA 320
BETWEENRICHARD JOHN OTLEY ELLIS

Appellant

ANDRED EAGLE CORPORATION LIMITED

Respondent

Hearing:18 May 2009

Court:Baragwanath, Hugh Williams and Winkelmann JJ
Counsel:P J Dale for the Appellant

L Hertzog for Respondent

Judgment:24 July 2009 at 2.30pm

JUDGMENT OF THE COURT

ATHE APPEAL IS ALLOWED AND THE HIGH COURT JUDGMENT IN FAVOUR OF RED EAGLE AND AGAINST MR ELLIS IS SET ASIDE.
BRed Eagle must pay Mr Ellis’ costs on a standard band A basis, together with the usual disbursements.
CThe appeal is remitted to the High Court for the fixing of costs in that Court.

____________________________________________________________________
REASONS OF THE COURT
(Given by Hugh Williams J)
INTRODUCTION
[1]       On 1 August 2005 the respondent, Red Eagle Corporation Limited, lent $250,000 to a Ms Black. She defaulted. Red Eagle obtained judgment against her and bankrupted her but no part of the loan has been recovered.
[2]       In 2008 Red Eagle sued Ms Black’s former business partner, the appellant Mr Ellis, under s 9 of the Fair Trading Act 1986. Red Eagle claimed it was induced to enter into the loan to Ms Black because of representations made by Mr Ellis to Red Eagle’s director, a Mr Falkenstein, in an email exchange on 29 and 30 July 2005. The amount sought was the amount of the judgment against Ms Black, $274,582 (being the $250,000 plus interest) together with continuing interest at $1,199 p.w. from 10 November 2006. There was a second cause of action brought in negligent mis-statement on the basis of the same representations. A third cause of action based in deceit was not pursued in the High Court.
[3]       In a reserved judgment delivered on 30 July 2008, Dobson J found for Red Eagle on the Fair Trading Act cause of action but dismissed that based on negligent mis-statement. The Judge held half the sum claimed was recoverable by Red Eagle on the basis that Mr Falkenstein was equally responsible with Mr Ellis for the loss.
[4]       Judgment was accordingly entered for Red Eagle against Mr Ellis for $125,000 plus interest under the Judicature Act 1908 from the date the proceedings were commenced, plus costs.
[5]       Mr Ellis has now appealed to this Court on the basis the Judge erred in law and fact in finding for Red Eagle.
Facts
[6]       Messrs Ellis and Falkenstein have known each other for over 30 years. Throughout that time, they have both been involved in various businesses, investments and share trading.
[7]       From about 2002, Mr Ellis was one of a number of investment advisors who submitted proposals to Mr Falkenstein. Mr Falkenstein accepted none of Mr Ellis’s recommendations.
[8]       Mr Falkenstein met Ms Black in about 2002. She, too, was involved in investment banking. When she ceased business with her then partner, Mr Falkenstein introduced her to Mr Ellis. They went into business together as investment bankers and project managers under the name Ellis Black Limited.
[9]       One of the investment…

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.

Continue reading Ellis v Red Eagle Corporation Ltd

Details

AGLC: Ellis v Red Eagle Corporation Ltd [2009] NZCA 320
Case: [2009] NZCA 320
Decision Date: 24 July 2009

CaseChat Overview and Summary

Ellis v Red Eagle Corporation Ltd is an appeal from a decision of the High Court in favour of Red Eagle Corporation Limited, awarding it $125,000 plus interest and costs against Mr Richard John Otley Ellis. Red Eagle had sued Mr Ellis under s 9 of the Fair Trading Act 1986, claiming that it was induced to enter into a loan to Ms Black because of representations made by Mr Ellis to Red Eagle’s director, Mr Falkenstein, in an email exchange on 29 and 30 July 2005. Mr Ellis appealed the decision, arguing that the High Court erred in law and fact in finding for Red Eagle. The Court of Appeal found in favour of Mr Ellis, setting aside the High Court judgment and ordering Red Eagle to pay Mr Ellis’ costs on a standard band A basis together with usual disbursements. The appeal was remitted to the High Court for the fixing of costs in that Court.

The central issue before the Court of Appeal was whether Mr Ellis was liable under s 9 of the Fair Trading Act 1986 for making misleading representations to Mr Falkenstein. The Court of Appeal found that Mr Ellis was not liable because the misleading information was provided by Ms Black and not Mr Ellis, and Mr Falkenstein was not reasonable in relying on the information provided by Ms Black. The Court of Appeal found that Mr Falkenstein was an experienced investor who should have exercised caution when considering the loan request. The Court of Appeal also found that Mr Ellis’ emails contained puffery and did not indicate that he had checked the accuracy of the information provided by Ms Black. Therefore, Mr Ellis was not liable for the misleading representations made by Ms Black.

In allowing the appeal, the Court of Appeal held that the High Court erred in finding that Mr Ellis was liable for the misleading representations made by Ms Black. The Court of Appeal found that Mr Falkenstein was misled by Ms Black’s persuasive, but ultimately erroneous, provision of her financial position. The Court of Appeal also found that it was not reasonable for Mr Falkenstein to have been misled by Mr Ellis’ emails, which contained puffery and did not indicate that he had checked the accuracy of the information provided by Ms Black. The Court of Appeal held that Mr Ellis was not liable for the misleading representations made by Ms Black and set aside the High Court judgment in favour of Red Eagle.

Orders