Fenswick International Limited v GR International Limited

[2014] NZHC 1119

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-5051 [2014] NZHC 1119

BETWEEN

FENSWICK INTERNATIONAL

LIMITED First Plaintiff

AM LIMITED Second Plaintiff

MURRAY CHARLES PARSONS Third Plaintiff

AND

GR INTERNATIONAL LIMITED First Defendant

NOEL PATRICK BRADEN Second Defendant

GRAEME REID JENKINS Third Defendant

GALBRAITHS LAWYERS Fourth Defendant

Hearing:	30 September, 1, 2, 3, 4 October 2013
Appearances:	E St John, P W Smith and G P Muller for Plaintiffs J M Airey and A L King for First, Second and Third Defendants
Judgment:	26 May 2014

JUDGMENT OF COOPER J

This judgment was delivered by Justice Cooper on

26 May 2014 at 11.30 a.m., pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

FENSWICK INTERNATIONAL LIMITED v GR INTERNATIONAL LIMITED [2014] NZHC 1119 [26 May

2014]

Solicitors:

Smith and Partners, Auckland

Inder Lynch, Manukau
DAC Beachcroft New Zealand, Auckland

Counsel:

E St John, Auckland

Table of Contents

Introduction ..........................................................................................................[1]

Background...........................................................................................................[9]

242 Flat Bush School Road................................................................................. [20

The facts ...............................................................................................................[20]

The causes of action .............................................................................................[62]

423 Ormiston Road ............................................................................................[81] The facts ...............................................................................................................[81] The causes of action ...........................................................................................[141] Result .................................................................................................................[152]

Introduction

[1]      This judgment concerns disputes between the parties about dealings in land in South Auckland on the fringe of the urban area.   There are claims of breach of fiduciary duty, breach of agency and knowing receipt of trust property.

[2]      The  third  plaintiff,  Mr  Parsons,  is  a  retired  businessman.     He  is  a New Zealand citizen, now resident in Auckland.  Between 1992 and 2009 he lived in the Republic of Vanuatu.   He is the sole director and sole owner of the shares in Fenswick International Ltd (FIL), the first plaintiff.

[3]      The second plaintiff, AM  Limited (AML) is a limited liability company, incorporated  under  Vanuatu’s  International  Companies Act  1992.    It  carries  on business in New Zealand as well as in Vanuatu.  Its shares are owned by Garde Ltd, which is also incorporated in Vanuatu.  Garde Ltd’s shares in AML are held pursuant to a declaration of trust for the benefit of Mr Parsons.

[4]      Mr Parsons built up a successful brewery business in Vanuatu, which he eventually sold for a substantial sum of money.  He said in evidence that this was a result of hard work:  he worked 100 hours a week, for more than 20 years.

[5]      At all material times the first defendant, GR International Ltd (GRIL), was a limited liability company incorporated in New Zealand.   The second defendant, Mr Braden, is a director and shareholder of GRIL.  Mr Braden is a real estate agent of long experience, and also describes himself as an investment advisor, business

advisor and management consultant.   The plaintiffs say that at all material times

Mr Braden acted as their agent, representing their interests in New Zealand.

[6]      Mr Braden accepts that from time to time he acted as Mr Parsons’ duly authorised agent in New Zealand to assist him to manage his New Zealand property interests.   Mr Braden claims that when so acting, he did so in accordance with Mr Parsons’ instructions and in accordance with authority granted by Mr Parsons to act for Mr Parsons personally, and for FIL and AML.

[7]      Mr Jenkins was also a director and shareholder of GRIL and in fact it was he who funded the company, and there was evidence that Mr Braden’s shares were in fact owned in trust for Mr Jenkins.   Having lived in the Flat Bush area of South Auckland for about  30  years and owned  four properties there,  he had acquired knowledge of the local property market. At relevant times, he lived at 218 Flat Bush School Road, a property that had been acquired by GRIL in 2004.

[8]      The fourth defendant is a firm of solicitors against whom claims initially pleaded have been abandoned.   The claim against the fourth defendant was abandoned.

Background

[9]      Mr Braden and Mr Jenkins were close friends, who first met in the early

1990s. At an early stage Mr Braden began to assist Mr Jenkins with his business and property affairs.  GRIL was formed in 1999, as a vehicle through which Mr Jenkins could undertake business activities, in particular investing in real estate.  Although both Mr Braden and Mr Jenkins were directors and shareholders, Mr Braden’s shares were held in trust for Mr Jenkins.  Mr Braden said that was the position from the outset, although this was not formally recognised until he signed a declaration of trust on 28 November 2008.  The declaration, signed by Mr Braden on the advice of Brookfields, acknowledged that he held the shares in trust for Mr Jenkins and had done so “from the date of subscription”.

[10]     According to Mr Jenkins, he first met Mr Parsons in late 2007, having been introduced by a mutual friend.  They shared an interest in classic cars and became

close friends.   According to Mr Jenkins, they travelled all over New Zealand and also to Australia looking at cars.  Mr Parsons had a particular interest in Ford motor vehicles and wished to acquire a collection of them. Mr Parsons confirmed that their relationship blossomed, starting with his purchase from Mr Jenkins of a rare Ford Cosworth motor vehicle in 2008.   Mr Jenkins himself was interested in cars and described himself as more than happy to accompany Mr Parsons on excursions during which they would inspect, and Mr Parsons would sometimes buy, Fords of various  models.    On  occasions,  Mr  Parsons  bought  cars  from  Mr Jenkins  and Mr Jenkins also purchased cars from Mr Parsons.

[11]     Mr Parsons said that Mr Jenkins told him he was an experienced businessman in relation to property matters, including buying and selling investment properties and subdividing properties for sale.   He said that at relevant times,  Mr Jenkins advised him on the purchase of property and motor vehicles, and he would not hesitate to accept his advice and recommendations.  Mr Jenkins claimed that this was an overstatement.   He had not carried out subdivisions.  Any advice that he gave Mr Parsons was in the context of their friendship and he did not consider himself as a formal advisor in any sense.

[12]     Nevertheless, Mr Parsons said that he came to regard Mr Jenkins as “friend, confidant and advisor”.  He said that after he sold his business in Vanuatu he would visit Mr Jenkins at his Flat Bush Road home.  Apart from a mutual interest in cars, Mr  Jenkins  was  interested  in  boats  and  farming  and  other  matters  in  which Mr Parsons  had  an  interest.     He  regarded  them  as  “mates”  and  he  enjoyed Mr Jenkins’ company.  My impression having seen both Mr Parsons and Mr Jenkins giving evidence is that Mr Parsons may well have regarded Mr Jenkins as having expertise which he himself lacked, at a time when he was interested in buying cars and investing in property in New Zealand.  There is no suggestion in the evidence that Mr Jenkins expected to be remunerated in any way for advice that he gave to Mr Parsons, and I accept Mr Jenkins’ evidence that any advice he gave Mr Parsons about car purchases was limited to expressing his opinion about the car.  Insofar as property is concerned, Mr Jenkins said, and I accept, that the only properties that he discussed with Mr Parsons were those that Mr Parsons was purchasing from him or GRIL.

[13]     Mr Braden first met Mr Parsons in September 2008.  Mr Parsons was then living at a property at 21 Griggs Road, owned by Mr Jenkins.  Mr Jenkins wished to sell  the  property  and  advised  Mr  Braden  that  Mr  Parsons  was  interested  in purchasing the property together with several motor vehicles owned by Mr Jenkins. Mr Jenkins introduced Mr Braden to Mr Parsons on or about 11 September 2008. According to Mr Braden he was introduced as not only the current occupant of the house at 21 Griggs Road, but also as Mr Jenkins’ business partner.

[14]     Mr Braden prepared the agreement for sale and purchase under which the property was sold in October 2008 to Mr Parsons (or nominee) for $1,350,000. Contemporaneously, he prepared a bill of sale in respect of three motor vehicles that Mr Parsons was to acquire from Mr Jenkins:  a 1936 Ford V8, a 2002 Porsche GT2 and a 1999 Mercedes Benz S500.  Mr Parsons nominated FIL to be the purchaser. According to Mr Parsons he did not know that Mr Braden was a shareholder in GRIL or that they had a “business association in a company”.

[15]     Mr Parsons said that Mr Jenkins told him that Mr Braden was good with money, although he did  not have much of his own.   Mr Jenkins told him that Mr Braden  also  acted  as  a  property  manager.    In  discussions,  Mr  Parsons  told Mr Braden that he was looking to invest in property in New Zealand, but because at that time he was still often overseas, he wanted someone to assist him in the day to day management of his New Zealand properties and investments.  Mr Parsons asked Mr Braden whether he would be willing to assist him to look after his affairs, and Mr Braden agreed to do so.  It was not an exclusive arrangement:  Mr Braden was involved in a variety of activities and it was understood that he would continue in those roles.

[16]     As the relationship developed, Mr Braden continued to manage 21 Griggs Road, where he remained in occupation as a tenant.  Mr Parsons gave him signing authority on the plaintiffs’ bank accounts.

[17]     Mr Braden had a letterhead designed for FIL and AML and used it from time to time, signing the letters as the “Agent General”.   Later, Mr Braden formed a company called Tuska International Ltd (TIL) and Mr Parsons and he were directors

of that company.   He also advised Mr Parsons about a range of matters including property transactions, development opportunities and tax related issues, although much of the advice given related to the particular transactions which are the subject of this proceeding.

[18]     Notwithstanding  the  close  relationship  that  Mr  Jenkins  enjoyed  with Mr Braden, I am satisfied that Mr Braden did not advise Mr Parsons that he was also involved in GRIL.  Mr Parsons was however aware that Mr Jenkins and Mr Braden were business associates.

[19]     The issues in contention arise out of the dealings between the parties in relation  to  two  properties,  respectively  at  242  Flat  Bush  School  Road  and

423 Ormiston Road.  In the discussion that follows I address the disputes in relation to each of these properties in turn.

242 Flat Bush School Road

The facts

[20]     The land at 242 Flat Bush School Road lies to the east of the land owned by

GRIL and occupied by Mr Jenkins at 218 Flat Bush School Road.

[21]     Number 218 was purchased by Mr Jenkins in February 2004, and comprised a little over 4 hectares in area.   It is one of a number of similar sized “life-style blocks” in the Flat Bush area, and Mr Jenkins said he anticipated that with pressure for urban expansion it was likely the area would be more closely subdivided in the reasonably near future.

[22]     Number 242 was also slightly in excess of four hectares.  Mr Jenkins said he thought that if he could acquire that property then combining the two might enhance development opportunities in the future.   Having discussed that possibility with Mr Braden, he decided that if the property ever came up for sale in the future, then its purchase should be seriously considered.

[23]    In May 2008 he became aware that the owner of number 242, Bhima Developments Ltd, had been placed in liquidation.  The land was then placed on the market  by  the  mortgagee,  the  New  Zealand  Guardian  Trust  Company  Ltd. Mr Jenkins made enquiries of the land agent handling its sale, a Mr Mountford of Bayleys Real Estate.  Mr Mountford indicated that the mortgagee had been hoping to receive a sale price in excess of $3,000,000 (inclusive of GST) but there had not been  much interest  in  the property at  that  price.    Consequently,  Mr  Mountford thought an offer of $2,700,000 (inclusive of GST) might be favourably considered. Mr  Jenkins  thought  that  if  he  could  obtain  the  land  at  that  price  there  was  a reasonable possibility that he might be able to on-sell it at a profit in the reasonably short term.  On the other hand, it would have been a good long term prospect for combining with the existing land holding of GRIL for future development.

[24]     Following a discussion  with  Mr Braden  he decided to  make an  offer to purchase the property and his offer of $2,400,000 plus GST was accepted.   An agreement for sale and purchase was signed (bearing the date 25 November 2008)1 under which the purchaser was “Graeme Reid Jenkins or nominee”.  It provided for the payment of a 10 per cent deposit on acceptance, and of the balance of the purchase price on 12 December 2008.

[25]     In the brief that he provided prior to the trial and read as his evidence in chief, Mr Jenkins said that shortly after he signed the agreement he was contacted by Mr  Mountford  who  explained  that  he  had  been  approached  by  some  “Chinese buyers” who were interested in purchasing the property.  Mr Mountford told him that they had been interested in the property for some time but thought that it would have sold for a higher price than Mr Jenkins paid to acquire it.   Having learned of the price for which it had in fact sold, their interest in the property had been renewed.  In these circumstances, Mr Jenkins said that Mr Mountford enquired as to whether or not he would be interested in on-selling the land to the Chinese buyers, who were

prepared to pay $3,100,000 (inclusive of GST).

1      Mr Airey invited me to infer that the agreement would in fact have been executed by Mr Jenkins on 24 November, as discussed below.

[26]     Mr Jenkins had seen a valuation by Seagar and Partners, dated 25 June 2007 which had valued the property as at that date at $5,165,000 (exclusive of GST). According to Mr Jenkins, while he thought that the value had probably reduced since that valuation was made, he felt sure that it was worth significantly more than he had paid for it.  Mr Braden had a similar view.  Consequently, Mr Jenkins decided that he would “look at the option” of on-selling the land.

[27]     Mr Jenkins said he recalled that Mr Parsons had previously expressed an interest in purchasing property in the area and he said he liked the idea of having him as a neighbour.  He therefore telephoned Mr Parsons, who was in Vanuatu, explained that he had purchased the next door property and was looking at on-selling it.  He explained to him that if he was interested he would need to make a decision quickly because there was another purchaser interested.  Further, he told Mr Parsons that he was prepared to sell the land to him for $3,100,000 (inclusive of GST), the same price  which  he  understood  the  Chinese  buyers  were  willing  to  pay.    He  said Mr Parsons asked him what he thought of the land, to which Mr Jenkins responded that he thought it was a good property.  According to Mr Jenkins, Mr Parsons then agreed “in principle” that he would purchase the land from him at the purchase price of $3,100,000 (inclusive of GST).

[28]     It will be noted from Mr Jenkins’ account that he did not say that he had told Mr Parsons the price for which he had acquired the property.  The proposal that he put to Mr Parsons in fact would enable him to make a net profit of just under

$400,000 on the two transactions.

[29]     Mr Parsons gave a different account of what transpired.  According to him, Mr Jenkins telephoned him in Vanuatu in late November 2008, telling him that he was at an auction for the sale of the property, saying “the place next door is up for auction”.  Mr Jenkins told him that he could buy it for $3,100,000, which would be a “great  deal”, but he would have to  make up  his  mind in five minutes because Mr Jenkins was at the auction.   Mr Parsons said that he asked about the property, which Mr Jenkins knew about because it was next door.  After a brief discussion he said words to the effect of “okay — I’m in”.  According to Mr Parsons, Mr Jenkins made  no  mention  of  the  fact  that  he  had  already  bought  the  property  from

New Zealand Guardian Trust.   Further, as Mr Parsons later discovered, there had been no auction.

[30]     Mr Parsons said that he would not have agreed to pay Mr Jenkins a $400,000 profit and that if Mr Jenkins had told him that he already owned the land, his first question would have been how much had he paid for it.  Further, he would not have accepted the need to make a quick decision.

[31]     Both Mr Parsons and Mr Jenkins were extensively cross-examined on their evidence about this transaction.  In order to put their evidence in proper context, it is necessary to examine the documentary record of what in fact took place.

[32]     The agreement for sale and purchase signed by Mr Jenkins and naming him or nominee as the purchaser, was dated 25 November 2008.  However, the evidence included  a  photocopy  of  a  cheque  signed  by  Mr  Jenkins  for  Bayleys,  dated

24 November 2008, for the required $240,000 deposit.   Mr Airey submitted that I could infer from this that the agreement would have been executed on 24 November, on the basis that there would be no logical reason for the deposit to be paid prior to Mr Jenkins’ offer being accepted by the vendor.   However, the cheque could have been handed to Mr Mountford or some other Bayleys’ agent on the basis that it would  be  held  pending  acceptance  of  the  offer  and  I do  not  consider  that  the evidence justifies a finding that the date on the agreement was wrong.   I accept however that it is possible that Mr Jenkins signed the agreement on 24 November, the vendor signing on the following day.

[33]     The evidence must be seen in the context of telephone records that were

produced which showed that there was a telephone call of nine minutes’ duration at

1.52 pm on 24 November 2008 between Mr Jenkins and Mr Parsons.   It was eventually common ground that this was the occasion on which Mr Jenkins proposed to Mr Parsons the idea that the latter should buy the property.   This means that Mr Jenkins  spoke  to  Mr  Parsons  about  him  purchasing  the  property  before  the contract  with  the  New  Zealand  Guardian  Trust  was  executed  (based  on  the

25 November execution date) although it may have been after he had signed the contract as the purchaser.

[34]     Either way, I consider there is a difficulty with Mr Jenkins’ account.  If as he claimed he spoke to Mr Parsons after signing the agreement, and after the approach from Mr Mountford in which the latter told him about the Chinese buyers, the information about the Chinese parties must have been known to Mr Mountford at a time before the New Zealand Guardian Trust was bound to the agreement with Mr Jenkins.    As  the  vendor’s  agent  Mr  Mountford  would  surely  have  told  his principal about this better offer.  In short, the timing of the phone call to Mr Parsons does not fit with the suggestion that it took place “shortly after” the Mountford discussion about the Chinese, because Mr Jenkins has consistently maintained the latter was after the agreement was signed.  Mr St John put it to Mr Jenkins that he must have made a mistake about the sequence of events, and that he must have contacted Mr Parsons prior to signing the agreement with the New Zealand Guardian Trust.  Mr Jenkins then suggested that he would have signed the agreement before the vendor, but if that is so, it seems odd that Mr Mountford, as the vendor’s agent, would not have been alerting the vendor to the potential for a better deal than that on offer from Mr Jenkins.

[35]     Pressed by Mr St John, Mr Jenkins conceded that he could not remember particular  dates  and  raised  the  possibility  that  there  could  have  been  other discussions with Mr Parsons, but that evidence was vague and unconvincing.  His evidence in chief was that he told Mr Parsons about the Chinese who were willing to pay $3,100,000 and that was after he had signed the agreement, so any other discussion with Mr Parsons about the purchase cannot have occurred before the nine minute  conversation  on  24  November.    I  note  further  that,  in  cross-examining Mr Parsons, Mr Airey put it to him that Mr Jenkins’ evidence would be that the

24 November  discussion  was  the  first  in  which  there  had  been  mention  of  the possibility  of  Mr  Parsons  purchasing  the  land.    But  Mr Jenkins  said  in  cross- examination that he was really reliant on Mr Braden for the dates on which events had occurred.

[36]     Mr Braden’s evidence in chief on this and other matters was drafted in a way which  suggested  very  close  collaboration  between  Mr  Jenkins  and  him.    The language used in each was very similar, sometimes exactly the same.  For example, Mr Jenkins said that:

Mr Mountford indicated that ...  an offer of around $2.7 million ($2.4 million plus GST) might be favourably considered.

[37]     Mr Braden’s evidence was:

Mr Jenkins reported that...he [Mr Mountford] thought an offer of around

$2.7 million ($2.4 million plus GST) might be favourably considered.

[38]     Similarly, after recalling that the agreement dated was 25 November was concluded with the New Zealand Guardian Trust, Mr Braden was able to say that:

Shortly after the agreement to purchase 242 FBSR was signed, Mr Jenkins advised me that he had been contacted by Mr Mountford, who had indicated that  he had been  approached  by some  “Chinese buyers”  who  were still interested in purchasing 242 FBSR. ... Mr Mountford had apparently asked whether  or  not  we  would  be  interested  in  selling  the  property  for  $3.1 million (inclusive of GST).

[39]     This can be compared with Mr Jenkins on the same subject:

Shortly after I signed the agreement to purchase 242 FBSR, I was contacted by Mr Mountford, the agent who had been handling the sale on behalf of the mortgagee.  Mr Mountford explained that he had been approached by some “Chinese  buyers” who  were  still  interested  in  purchasing 242  FBSR.  ... Mr Mountford enquired as to whether or not I would be interested in on- selling 242 FBSR and indicated that these buyers were prepared to pay $3.1 million (inclusive of GST).

[40]     The similarity of the wording indicates that the authorship is the same, and reduces the confidence that can be afforded the evidence in chief of each witness. However, on the issue of the date of execution of the agreement, Mr Braden’s evidence does not take matters any further than Mr Jenkins could, and I am left unable to reconcile the defendants’ evidence that the approach by Mr Mountford both preceded the discussion with Mr Parsons on 24 November and followed the execution of the agreement.

[41]     It   may  be   that   some   of  these   issues   could   have  been   resolved   if Mr Mountford  had  been  called  to  give  evidence,  but  he  was  not.     In  the circumstances I am not prepared to accept that Mr Jenkins told Mr Parsons on

24 November that there were Chinese buyers prepared to pay $3,100,000 for the property, something that Mr Parsons was adamant had not occurred.   Nor am I prepared to accept Mr Jenkins’ evidence that Mr Mountford told him there were

Chinese buyers prepared to pay $3,100,000 for the property before his discussion

with Mr Parsons.  I reject Mr Jenkins’ evidence on these matters.

[42]     It is clear, however, that Mr Jenkins must have told Mr Parsons that he could acquire the land for $3,100,000.  It is also clear that he must have said something to Mr Parsons about the need to act quickly, because later the same day (24 November) Mr Parsons arranged for the transfer of $3,100,000 from Vanuatu to the ANZ Bank in Auckland.  He asked the bank, by an e-mail sent at 5.24 pm New Zealand time, to advise Mr Braden that the money had been sent.

[43]     About an hour earlier, Mr Braden sent Mr Parsons an email which, amongst other things, referred to the property at 242 Flat Bush School Road in the following terms:

The property next to Graeme appears to have moved into the hands of the receivers.  I have asked for details of the debt [loosely quoted in the order of

$3 million].  I have asked for the valuation that was done late last year in

support of any purchase price.  The price was originally quoted as Plus GST based on the ownership by Bihima developments, this would involve a sum of $NZ375,000 [based on a purchase of $3 million] if the IRD have a prior claim then the GST will probably become payable on the purchase price.  If this is the case then we need to ensure we can recover it.  I have discussed with Graeme the possibility of using his company GRI International as an agent as it has a tax loss to be carried forward and could provide us with a simple way of managing the GST question.   He is quite happy for that to happen.   I will update on this once the status is clear on the two other companies [Fenswick and AM Ltd].

[44]     Interestingly, while that communication appears to have been written against the possibility that Mr Parsons will acquire the property, it makes no mention of the fact that Mr Jenkins had already decided to purchase the property.  Mr Braden refers to discussing with “Graeme” the possibility of using GRIL as an agent and advises Mr Parsons that Mr Jenkins is “quite happy” for that to happen.

[45]     This was at best disingenuous, if, as Mr Jenkins claimed in evidence, he had already had a discussion with Mr Braden about on-selling the property to Mr Parsons before the telephone discussion with Mr Parsons in Vanuatu.

[46]     Given  that  Mr  Jenkins  was  intending  to  purchase  the  property  either

personally or through GRIL, and given his and Mr Braden’s view that the purchase

price Mr Jenkins had been able to negotiate with the New Zealand Guardian Trust was a bargain, there was in fact absolutely no need for urgency in respect of any decision required of Mr Parsons as to whether he would be interested in purchasing it.  However, there was a very pronounced advantage for Mr Jenkins in Mr Parsons agreeing to fund the purchase.   That is clear from events which transpired on the settlement of the purchase from the New Zealand Guardian Trust.

[47]     That settlement occurred contemporaneously with the transfer of the land from GRIL to AML.  Both transactions were settled on 28 November 2008, and it is plain that the money that had been transferred by Mr Parsons from Vanuatu was available to be used and was used to settle the transaction by which GRIL purchased the land from the New Zealand Guardian Trust.   At the end of both transactions, GRIL was left with $639,876.95 which, allowing for the return of the $240,000 deposit paid by Mr Jenkins, meant that it had made a profit of $399,876.95 from the transaction.

[48]     The defendants placed great emphasis on the fact that Mr Parsons had in the meantime signed an agreement for sale and purchase in which he was nominated as a purchaser and Mr Jenkins personally, later amended to refer to GRIL, was shown as the  vendor.     This  agreement  was  prepared  by  Mr Braden,  at  the  request  of Mr Jenkins.  As has been agreed, it showed that the purchase price was $3,100,000. The defendants say that it must have been obvious to Mr Parsons that the property had been acquired by Mr Jenkins or GRIL when he saw the agreement.   In that respect, Mr Parsons said in cross-examination that he had not read the agreement before he signed it.  He regarded himself as having “done the deal with Graeme” and said:

I’ve bought my property, I’ve done the deal with my friend, okay, the legal process follows.   I’m a bushman, I’m not reading lawyers’ specific words and contractual arrangements.

[49]     That  answer was  consistent  with  the overall  impression  that  I gained  of Mr Parsons in the witness box.  Although he had evidently been successful with the brewery business in Vanuatu, he did not present as a sophisticated businessman, and did not appear familiar with the formalities required in respect of agreements for sale and purchase of land.  However, even putting such considerations on one side, the

fact that he signed the agreement which ultimately showed that the purchase was to be from GRIL, is not inconsistent with his evidence that Mr Jenkins told him he was at an auction and needed an urgent response as to whether or not Mr Parsons wished to buy the land.  Mr Parsons may well have assumed, had he considered the position at the time, that Mr Jenkins had simply used his own name as a practical expedient in purchasing the property on Mr Parson’s behalf, given Mr Parsons’ absence overseas. He had after all quickly dispatched the necessary funds for the purchase following the discussion with Mr Jenkins on 24 November.

[50]     I reach the same conclusion in respect of evidence given by Mr Braden that he explained to Mr Parsons on 26 November that the transaction would involve a purchase from Mr Jenkins or GRIL.

[51]     I also consider it likely, as Mr Parsons claimed in evidence, that if Mr Jenkins had told him in the telephone discussion that he had already purchased or agreed to purchase the property, Mr Parsons would have inquired as to the purchase price he paid for it.  The alternative proposition is that Mr Parsons, knowing that Mr Jenkins had just acquired the property, would not make the very natural inquiry as to what it had cost.  Mr Jenkins did not suggest that he had made such an inquiry.  This seems implausible.

[52]     The  absence  of  any  such  inquiry  fits  with  Mr  Parsons’  evidence  that Mr Jenkins told him that he was at an auction and that urgency was required.  It is consistent  too  with  Mr  Jenkins  telling him  that  the land  could  be acquired  for

$3,100,000:  there was no need for further inquiry.  It is also consistent with the fact that that very day Mr Parsons arranged for the funds necessary to purchase the property  to  be  transferred  from  Vanuatu  to  New  Zealand,  and  arranged  for Mr Braden to be advised that had been attended to.

[53]     Mr Airey pointed to the fact that Mr Jenkins personally paid the $240,000 deposit, and suggested that would have been forfeited in the event that Mr Parsons, as his alleged  principal,  did not subsequently enter into a written agreement to purchase the property or ratify the agreement that Mr Jenkins had signed.   He suggested this would have been a completely unnecessary risk in light of the fact that

Mr Jenkins could have asked Mr Parsons to pay the deposit himself or to arrange for Mr Braden to do so on his behalf if Mr Parsons was the intended purchaser at the time.  However, on the view I take, Mr Jenkins could not have asked Mr Parsons to pay a deposit of $240,000 without risking alerting Mr Parsons to the fact that the purchase price he was paying was a good deal lower than $3,100,000.

[54]     As  far  as  the  deposit  is  concerned,  all  that  was  really  at  risk  was  that Mr Jenkins himself would have to complete the purchase of a property, which he understood he was able to acquire at a bargain price.  On the other hand, I conclude that he wanted to avail himself of the opportunity he saw to make a substantial profit by facilitating the purchase of the property by Mr Parsons for $3,100,000.

[55]     Mr Airey also relied on a concession made by Mr Parsons in the following exchange during cross-examination:

Q.        Well, Mr Jenkins’ evidence will be that he made it clear to you that time was short as other buyers were interested but that he made it equally clear to you that it was entirely your decision whether or not to purchase the property and it made no difference to him either way whether you did.

A.       Yes, I made the decision.  I said, “Yep, I’m in,” under his guidance

and his recommendation. Yes, I agree that I bought it.

Q.        I realise you bought it but do you agree that Mr Jenkins told you it was entirely your decision whether or not to purchase the property and it made no difference to him, Mr Jenkins, whether you did or not?  Do you accept that he told you that?

A.        Yes, I, I accept that but I’m also saying that I bought it under the same conditions.   I said, “Yes, I’m in.   The Chinese buyers are irrelevant.

[56]     I do not consider the concession that Mr Jenkins said it did not matter to him whether or not Mr Parsons bought the property is significant.  The important fact is that Mr Parson agreed to proceed, and forwarded the funds necessary to pay the purchase price that Mr Jenkins told him about the same day.  I consider that from the point when Mr Parsons said that he would proceed with the purchase Mr Jenkins had effectively agreed to facilitate that process.

[57]     The original parties to the relevant agreement for sale and purchase were

Mr Jenkins and Mr Parsons or nominee.  By an e-mailed letter dated 27 November

2008, Brookfields, acting for Mr Jenkins wrote to Mr Parsons’ solicitors Fisher

Lamberg stating:

The agreement was concluded showing the vendor as Graham (sic) Reid Jenkins.  In fact Mr Jenkins, who holds a contract to purchase the property to be settled contemporaneously with the sale to your client, has nominated G R International Limited as the purchaser.

The  letter  also  sought  advice  as  to  whether  Mr  Parsons  intended  to  make  a nomination and continued:

Our client is purchasing the property by mortgagee sale from the first mortgagee.   Bell Gully, who act for the first mortgagee are preparing the transfer and will be submitting it to us this morning for approval. As soon as the transfer is received we will forward a copy to you.

The transfers will need to be lodged for registration simultaneously.

[58]     The letter made no mention of the price at which GRIL was to acquire the land from the New Zealand Guardian Trust as the mortgagee.  It did however attach a copy of the June 2007 valuation prepared by Seagar & Partners stating the value to be $5,165,000, exclusive of GST.

[59]     The same valuation was referred to by Mr Braden in an e-mail he sent to

Mr Parsons the following day, in which he said:

I have to hand a full valuation for the property at 242 Flatbush School Road, it was prepared by Seagar & Partners who are a very well respected practise and generally regarded as being conservative in their appraisals of property. The valuation confirms as follows:

a.An estimate of worth conducted in June 2007 is some $NZ 5,165,000.   Even allowing for some softness in the market since that time the valuation must still be in the order of at least $NZ4.7 Mill.

b. Mindful of the rezoning in Jan 2011 they have estimated the value at $NZ 7,555,425.   On a discounted cash flow basis at 8% the estimated 6 year value is still some $NZ 4,761,202 in todays dollar value.

All in all the values appear sound.

[60]     When  he  sent  that  email,  Mr  Braden  knew  from  his  discussions  with Mr Jenkins that the latter had been able to secure the land for $2,400,000 plus GST (if any), but  he made no  mention  of that  to Mr Parsons.   The conclusion  that Mr Jenkins and Mr Braden deliberately omitted to tell Mr Parsons about the price paid by GRIL is inevitable.  Instead, Mr Braden was reassuring him about the value of the land on the basis of a valuation some 17 months old.  The declaration of trust by which Mr Braden acknowledged he held the shares in GRIL in trust was also made on 28 November:   I infer that with GRIL about to make a significant profit Mr Jenkins did not want there to be any doubt about entitlement to it.

[61]     Having considered the relevant evidence, I am satisfied on the balance of probabilities that Mr Parsons’s account of what transpired in the 24 November discussion is correct.  I accept his evidence, and reject that of Mr Jenkins.  I find that on 24 November Mr Jenkins telephoned Mr Parsons in Vanuatu, dishonestly told him that he was at an auction and that Mr Parsons could buy the property for $3,100,000, but that he would have to make up his mind quickly.  He told Mr Parsons that it was a good deal at that price and Mr Parsons agreed  that he would buy it.   Given Mr Parsons’ absence overseas, the purchase was to be completed by Mr Jenkins on his behalf and Mr Parsons forwarded to New Zealand the necessary funds for that to occur.  He gave instructions for Mr Braden to be advised that the money had been sent, and while solicitors acted for him and AML to complete the purchase from GRIL, they were not asked to inquire about, or told, the price paid for the land by GRIL.

The causes of action

[62]     The transfer that was eventually registered was from GRIL to AML.  There are two causes of action in this part of the claim.  Both are advanced by Mr Parsons personally, and allege respectively breach of fiduciary duty and breach of agency.  In both causes of action relief is sought against Mr Jenkins;  in respect of the second cause of action the claim is also advanced against GRIL.

[63]     Although there are two causes of action, the breach of fiduciary duty claim alleges that the duties were owed because Mr Parsons and Mr Jenkins were friends

and confidants, and because Mr Jenkins was Mr Parsons’ agent for the purposes of the acquisition of the land.   I doubt that, without the agency, the nature of their relationship was, of itself, such as would attract fiduciary duties.

[64]     However, it was on the breach of agency claim that Mr St John focused in his closing address.  He submitted that if I made factual findings such as those I have made above then it followed that both Mr Jenkins and GRIL were agents.  On this point he referred to Dal Pont’s Law of Agency,2 where it is noted that an agency can arise where someone agreees to render a service to another:3

Although it is fair to say that historically the concept of agency arose out of a person creating legal relations for another – as in the narrowest definition of agency cited above – the legal concept of agency is no longer circumscribed by such notions.  The broadest of the foregoing definitions highlights that an agent need not expose the principal to legal liability to attract the nomenclature “agent”, but need only be engaged by the principal to perform an act or acts – that is, render a service to the principal.

[65]     Mr Airey relied on the definition of agency given in GHL Fridman The Law of Agency4 in which the following definition of “agency” was tentatively suggested:

Agency is the relationship that exists between two persons when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principal’s legal position in respect of strangers to the relationship by the making of contracts or the disposition of property.

[66]     It might be thought that that definition connotes a relationship in which the agent has the ability to bind the principal in dealings with third parties.  However, even on that approach I am satisfied that Mr Parsons intended that there be such an agency.  The fact that Mr Jenkins, for his own purposes, did not refer to the agency in his dealings with New Zealand Guardian Trust does not affect the true nature of the relationship between him and Mr Parsons.  There is no requirement for an agent to  disclose the fact  of  the agency or name the principal  in  dealings  with  third

parties.5

2      GE Dal Pont Law of Agency (2nd ed, LexisNexis Butterworths, New South Wales, 2008).

3      At 1.3.

4      GHL Fridman The Law of Agency (7th ed, Butterworths London 1996) at p 11.

5      Peter Watts and FMB Reynolds Bowstead & Reynolds on Agency (19th ed, Sweet & Maxwell, London, 2010) at 1-003.

[67]     In Erickson v Carr Jordan CJ said:6

An agent is a person who has authority to act on behalf of a principal, either generally or in respect of some particular act or matter.  Agency may exist between two persons connected only by the fact that one has appointed the other to act as his agent either gratuitously or for reward.

[68]     Mr St John submitted that Mr Jenkins was the agent of Mr Parsons for the purposes of the acquisition of the property, in accordance with the approach in that passage.   Further GRIL was involved as the party that actually acquired the land from the New Zealand Guardian Trust, and then sold it to AML.  The two directors of GRIL were Mr Jenkins and Mr Braden.  Both were aware of the position and the fact that Mr Parsons was unaware of the price for which Mr Jenkins had agreed to purchase the property and which GRIL ultimately paid.

[69]     In Zhong v Wang the Court of Appeal held that “there is no doubt that the relationship of agent and principal gives rise to a fiduciary obligation”.7   The Court adopted what was said by Mason J in Hospital Products Ltd v United States Surgical Corporation:8

The   accepted   fiduciary   relationships   are   sometimes   referred   to   as relationships of trust and confidence or confidential relations (cf Boardman v Phipps ([1967] 2 AC 46 at 127; …]) viz trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions “for”, “on behalf of”, and “in the interests of” signify that the fiduciary acts in a “representative” character in the exercise of his responsibility.…

[70]     Consistently with that, it is observed in Dal Pont,9  that the nature of an agency relationship attracts the two principal fiduciary duties:  the duty to avoid a

conflict between an agent’s own interests, and those of the principal;  and the duty to

6      Erickson v Carr (1945) 46 SR (NSW) 9 at 12.

7      Zhong v Wang CA282/05, 5 September 2006 at [93].

8      Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96-97.

9      The Law of Agency, above n 3, at 1.9.

avoid profiting from the position as agent.  While such duties may be modified by consent or acquiescence the consent must be fully informed.

[71]     Mr St John submitted that the fiduciary duties of Mr Jenkins and GRIL were breached when they effectively preferred their own interests to those of Mr Parsons and made an unauthorised secret profit from their position as fiduciaries.  He relied on two cases, Regier v Campbell-Stuart10 and Cook v Evatt (No.2).11

[72]     These cases are illustrations, on their own facts, of the duties that agents are required to discharge to their principals.  In Regier, the plaintiff’s son requested the defendant, whom he knew socially and who had experience as a dealer in real property, to find the plaintiff a house in London.   The defendant found a suitable house, funded its purchase by his own brother-in-law then purportedly purchased it for himself.  The plaintiff was shown the house and agreed to buy it.  The defendant represented that he had acquired it for more than twice the value he had in fact paid and after some negotiation with the plaintiff agreed to sell it to her for a profit of

£500.  Farwell J held that the various transactions were a contrivance for the purpose of enabling the defendant to obtain a handsome profit as a result of his dealing with the house.  He held that the defendant ought to have passed on the information as to the value of the property to the plaintiff and given her an opportunity of buying the house  from  the  original  vendors,  and  that  his  position  as  the  agent  necessarily

precluded him from entering into a contract to buy the house himself.12   If, however,

he was proposing to re-sell it to the plaintiff, he was bound to give her the “fullest possible information” both as to the true price which he had paid to the vendors for it and the profit he would make.

[73]     The Judge said:13

… it is the duty of every agent to act honestly and faithfully towards his principal, and, if he conceals most material facts from his principal and by means of a fraud obtains an advantage for himself by purporting to sell or by selling property which is his own, then the duty which lies upon him is not put an end to by such a contract, and he remains liable to account for any

10     Regier v Campbell-Stuart [1939] 1 Ch 766 (HC).

11     Cook v Evatt (No.2) [1992] 1 NZLR 676 (HC).

12     Regier, above n 10, at 769.

secret profit which he has made as the result of the transactions between himself and the principal.

[74]     In  Cook  v  Evatt  (No.2)  the  plaintiff  had  approached  the  defendants  for financial advice and the defendants recommended an investment in property.  The defendant showed the plaintiff a property which they had purchased, and she agreed to purchase two units in a three-unit development, unaware of the defendants’ interests.   Fisher J found that the defendants had acquired the property with the intention that two of the three flats would be re-sold to the plaintiff.  In doing so they had made use of knowledge gained from their fiduciary relationship with the plaintiff

as to her needs and resources.  Fisher J said:14

When the plaintiff agreed to purchase two of the flats on 28 November 1983 the defendants owed her fiduciary obligations.  They had to avoid conflict between those obligations and their personal interests.   They had to make full disclosure of any matters within their knowledge which might influence her decision to purchase.

[75]     Some members of the FMS Group (the defendants) had a personal interest in the transaction.   The plaintiff was not told of this.   Nor was  she told  that the defendants had purchased the property for substantially less only six days previously. Plainly there was a breach of the disclosure rule.

[76]     The facts of this case are different, but the same principle ought to be applied. I  consider  that  Mr Jenkins  and  subsequently  GRIL  had  a  duty  to  disclose  to Mr Parsons the price for which the property was acquired from the New Zealand Guardian Trust.  That was not done.  On the contrary, as I have found, Mr Jenkins implied  that  he  would  purchase  the  property  on  Mr Parson’s  behalf  at  a  GST inclusive value almost $400,000 greater than the price at which the property was to be acquired from the New Zealand Guardian Trust.

[77]     It is clear in the circumstances that Mr Parsons would not have agreed to pay

$3,100,000, essentially funding the purchase of the property by GRIL and paying an immediate  profit  of  $400,000,  had  he  been  aware  of  the  circumstances,  and  it follows that the plaintiffs’ claim under this cause of action should succeed.

[78]     The relief sought is judgment for the sum of $400,000 plus interest.   The opening words of the prayer for relief were amended at the hearing (without demur by the defendants) to replace a reference to the “second” plaintiff with a reference to the “third”.  It seems that the same alteration should have been made to paragraph 28 of the claim and I propose to do that of my own motion as that is clearly what was intended.  By memoranda filed after the hearing, dated 5 and 10 March respectively, the plaintiffs and  the defendants  also agreed that paragraph 27  of the amended statement of claim should have referred to the first and third defendants.

[79]     With  those  changes  made,  the  pleading  alleges  that  the  third  plaintiff, Mr Parsons “suffered loss and/or damages in the sum of $400,000, or alternatively that Mr Jenkins unlawfully profited at the expense of [AML]”.  Notwithstanding that wording, Mr St John made it plain that the relief sought is in fact an account of profits equal to that made by the first and third defendants.  Mr Airey accepted that that was the appropriate form of relief if I reached the conclusions that I have earlier set out.

[80]     There will be judgment against the first and third defendants accordingly save that, on the facts, the judgment sum should be $399,877.

423 Ormiston Road

The facts

[81]     The land at 423 Ormiston Road lies to the north of the land occupied by Mr Jenkins at 218 Flat Bush School Road.  It was originally 5.809 hectares in area, and legally described as Lot 4 DP 54823.   For about half its length, the southern boundary of 423 Ormiston Road was shared with the northern boundary of 218 Flat Bush School Road.

[82]     A stream ran though the land from east to west.  In circumstances that will be explained, that stream became the boundary of a subdivision that was designed to facilitate  issue  of  a  separate  title  for  the  northern  portion  of  property,  and  the inclusion of the southern portion within the same title as 218 Flat Bush School Road. After the subdivision, the northern portion of the property contained 2.5573 hectares,

and was legally described as Lot 2 DP 421622, in the new title NA 482726.  The balance of the land, 3.2525 hectares, was included with 218 Flat Bush School Road in Lot 1 DP 421622 (contained in the new title in NA 482725).  Lot 1 then comprised

7.1828 hectares.  These new titles were issued on 24 July 2009, a date after most of the events with which this part of the judgment is concerned.  However, describing how the land was ultimately divided is useful context for the explanation of the disputed issues that follows.

[83]     Mr Jenkins explained in evidence that the northern part of 423 Ormiston Road, which became Lot 2, had been developed by the erection of a dwelling.  He said the area to the south of the stream, later included in Lot 1, was low lying and subject to flooding, and of limited commercial value.  There was no evidence to the contrary.  Over the years it had been used by trail bikers, disturbing the tranquility that he enjoyed on his property.  In late 2008 he became aware that the property was on the market.  After an unsuccessful auction, it was being offered for sale by tender by the mortgagee.  He thought that if he could acquire the property he would be able to prevent the use of the lower portion for trail biking, but also (a secondary consideration) that there would be added value in securing a contiguous landholding of about 10 hectares running between Ormiston and Flat Bush School Roads.  He decided to investigate the purchase and formed the idea of a subdivision that would give him control of the southern portion while offering the opportunity to on-sell the northern portion in a separate title.

[84]     He decided to inquire of Mr Parsons whether he would be interested in acquiring the northern portion of the land.  Mr Parsons had already acquired 242 Flat Bush School Road, and that raised the possibility that there might be an even bigger property available for development if both of them pooled their resources.   In December  2008,  Mr  Parsons  and  Mr  Jenkins  inspected  the  land  together,  on  a number of occasions. According to Mr Parsons, Mr Jenkins told him that the land had subdivision potential and they discussed the potential for jointly investing in it, and  other possibilities  for the joint  development  of the combined  land holding. Mr Jenkins said that he made it plain that he wanted to retain the southern part of

423 Ormiston Road in his ownership, and that only the northern portion would be available for him to purchase.   He accepted that they discussed the possibility of

some form of joint project, but that was for the future, at least three or five years away.

[85]     Mr Jenkins said that as a result of their discussions it was apparent that Mr Parsons was interested in acquiring the northern portion of 423 Ormiston Road. He referred to a meeting which he said took place on 15 January 2009, attended by Mr Parsons, Mr Braden and him.  At that meeting, a general concept was agreed that GRIL would purchase 423 Ormiston Road from ASB (the mortgagee), the land would then be on-sold to Mr Parsons and a boundary adjustment would then be undertaken at GRIL’s cost.  The outcome would be that Mr Parsons would end up owning the northern potion, and the southern area  would be amalgamated with GRIL’s existing property at 218 Flat Bush School Road.  Mr Braden’s evidence was to the same effect.  The fact and date of the meeting, and what was discussed at it was not disputed by Mr Parsons in his evidence in chief.   In cross-examination, Mr Parsons confirmed that was the concept agreed at that meeting.

[86]     After  Mr  Braden  had  made  enquiries  about  the  ability  to  adjust  the boundaries as proposed, Mr Jenkins decided to proceed.  Following discussions, the vendor’s   agent   presented   an   agreement   (the  ASB   agreement)   under   which Mr Jenkins or his nominee agreed to buy the land for $1,190,000 plus GST (if any). The agreement was executed on 21 January 2009, became unconditional the same day and Mr Jenkins paid the deposit of $190,000 on 22 January.   Settlement was completed on 12 February, with GRIL being the nominated purchaser.

[87]     Meantime, Mr Braden had drawn up an agreement between Mr Jenkins as vendor and Mr Parsons as purchaser.  The agreement was undated, but Mr Braden said that it was signed on the same day as the ASB agreement.  Mr Parsons originally asserted  that  he  had  not  signed  the  agreement,  something  that  Mr Jenkins  and Mr Braden refuted, the former on the basis that he was present when Mr Parsons signed it.   Mr Parsons eventually accepted, before the trial, that he did sign the agreement, but his initial denial inevitably weakens the force of his evidence about the  events  that  followed.     In  the  circumstances,  I  have  no  reason  to  doubt Mr Braden’s evidence about the agreement’s date.  For reasons that will emerge the parties referred to this as the First Agreement, and I will do the same.  It is common

ground that the parties did not seek legal advice relation to its terms before entering into the agreement.

[88]     Under the First Agreement the purchase price that Mr Parsons agreed to pay for 423 Ormiston Road was $2,200,000, with a deposit of $220,000.  The settlement date was 4 February 2009.  The agreement was in the standard form approved by the Real Estate Institute of New Zealand and the Auckland District Law Society.  There was a special condition drafted by Mr Braden. That condition read as follows:

15.0     The Purchaser and Vendor have agreed that the Vendor will apply to the   Manukau   City   Council   for   a   boundary   realignment   for   his adjourning[sic] property situate, 218 Flatbush School Road, to incorporate all that designated flood plain land, previously forming part of the land contained in the certificate of title for this property situate 423 Ormiston Road,  beyond  the  natural  creek  line  on  the  Southern  boundary  of  the property being the subject of this sale and Purchase agreement.  The Vendor will indemnify the Purchase against all costs and charges incurred in this exercise.  Should the Vendor be unable to complete the proposed boundary realignment, the Purchaser agrees he will pay to the Vendor an additional sum of $850,000 [Eight hundred and Fifty thousand dollars] plus GST in consideration of acquiring all of the property hereinbefore described.  Such monies will become due and payable seven (7) days from the date on which the Vendor is advised of any objection or constraint to the completion of the proposed boundary change.

[89]   Two points are clear.   First, although the purchase price stated on the agreement’s first page was $2,200,000, if the proposed boundary adjustment could not proceed, then Mr Parsons was obliged to pay another $850,000 for the land. Secondly, the purpose of the boundary adjustment was to sever off the flood plain land and include it in the vendor’s property at 218 Flat Bush School Road. Although not precisely defined (and there was no suggestion that it had at this stage been surveyed), the land to be included in the 218 Flat Bush School Road title was described as “beyond the natural creek line on the Southern boundary of the property being the subject of this sale and Purchase agreement.”  Although the drafting is not elegant, I consider the intent is clear enough and the effect of the clause was to require Mr Parsons to pay the further consideration of $850,000 if for any reason the vendor was unable to complete the proposed boundary adjustment.

[90]     Mr Parsons implied in his evidence that he considered that the purchase price of $2,200,000 applied to the whole of the land, stated to be 5.8097 hectares on the

first page of the agreement.  He said that he “remained confused” about the special condition, and that it was only now that he realised that the purpose of the additional payment of $850,000 was, as he put it, to enable GRIL to, in effect, amalgamate the low lying portion of the property with its land to the south “without paying anything for it.”  However the clause was in the agreement that he signed, and the agreement is consistent with the terms of the discussion that the parties had had in relation to the boundary adjustment proposal.  The reference to paying an additional amount of

$850,000 in the event that the proposal was unable to proceed was not difficult to follow.  If he was to acquire the whole of the land the total consideration would be

$3,050,000.   I find that he must have known that at the time, whatever he now claims.  One possible explanation for him being “confused” as he said in evidence is that he simply could not remember the deal that he made:  that would be consistent with his denial, prior to the trial, that he executed the First Agreement.

[91]     I observe parenthetically that there is no doubt that the ASB agreement and the  First  Agreement,   seen  together,  represented  good  commercial   deals  for Mr Jenkins  and  GRIL.    Land  acquired  for $1,900,000  would  be on-sold,  if  the boundary adjustment did not proceed, for a significant profit, whether or not the boundary adjustment proceeded.  On the other hand, Mr Jenkins assumed the costs of proceeding with the boundary adjustment, he had identified the opportunity, negotiated  an  agreement  on  favourable  terms  with  the ASB,  bound  himself  to proceed and paid the deposit.

[92]      Further, there is no suggestion in this part of the case that Mr Jenkins and/or GRIL were  acting  as  agents  for  Mr Parsons  (or  the  other  plaintiffs)  when  they entered into the ASB agreement, and the facts would not justify such a conclusion.15

Nor is there any evidence that Mr Parsons discussed the price provided for in the First Agreement with Mr Jenkins or Mr Braden, that he sought advice in relation to it from either of them, or that they made any representation or gave any advice in

relation to it.

15     This may be contrasted with the situation that applied in respect of Mr Jenkins’ purchase of 242

Flat Bush School Road.

[93]     It appears that, after executing the First Agreement, Mr Parsons had a change of heart.  He said that after returning to Vanuatu he had further telephone discussions with Mr Jenkins and told him that he did not want to go ahead with the deal.  He thought that Mr Jenkins sounded disappointed but he did not push it, and that as far as he, Mr Parsons, was concerned, the deal was at an end.

[94]     There was a dispute in the evidence as to when that discussion took place. According to Mr Jenkins the call took place on 28 January.  In his brief of evidence served prior to the trial, Mr Parsons gave no date for the conversation.   In giving evidence in chief at the trial he was prompted by Mr St John’s questions to give a date of 30 January, based on his telephone records.  However, in cross-examination he apparently accepted the proposition that the call did take place on 28 January, notwithstanding the absence of a record verifying that in the telephone records. There was  a discussion  at  a later stage in  the  cross-examination  as  to  whether Mr Parsons had, earlier, accepted that the call was on 28 January, and Mr St John said that he would pursue that issue in re-examination.

[95]     He  did  so  by referring  Mr Parsons  extensively  to  the  telephone  records. There was then the following exchange in which Mr St John, rather transparently sought  to  get  Mr  Parsons  to  revert  to  the  position  that  the  call  took  place  on

30 January:

Q.        So having refreshed your memory in that respect that the call you made to Mr Jenkins or the telephone records show the call to Mr Jenkins was on the 30th, I want to remind you that what you, of what you said to my learned friend yesterday which was that you agreed that you had a discussion with Mr Jenkins on the 28th  in relation to these Ormiston Road issues.   So having refreshed your memory, what is your answer?

A.       Made the call on the 28th. Q.       Thank you.

[96]     Mr Airey suggested that one explanation for the discrepancy in the telephone records might be that Mr Parsons had made the call from a telephone other than those of which the records were before the Court.  Mr St John objected to that on the basis that that proposition had not been put to Mr Parsons.  However, there was no need for Mr Airey to do so, given the fact that Mr Parsons, despite having been led

by counsel to say the call occurred on 30 January, came down in the end in favour of the call having occurred on 28 January.  Mr St John submitted that this was clearly a mistake but in the end I have seen no reason not to accept Mr Jenkins’ evidence on this point.  I note also that, in this respect, his evidence also coincides with the fact that there was a call (which lasted 16 minutes) from Mr Braden to Mr Parsons on

29 January  which  I  will  discuss  below.    That  call  was  shown  in  Mr  Braden’s

telephone records.

[97]     Mr Jenkins said that he was stunned when Mr Parsons told him he did not want to proceed.  He did not agree that the deal was at an end, and was in a difficult position because he knew that he had to proceed with the purchase form ASB and had not made any alternative arrangements for financing on the basis that he had the deal with Mr Parsons.  Mr Jenkins telephoned Mr Braden, and they agreed that they would “take stock” over the next day or so, hopeful that Mr Parsons would realise the implications of having signed the First Agreement and change his mind.

[98]     According  to  Mr  Jenkins  that  in  fact  is  what  occurred,  Mr Parsons telephoning him the following day to say he had changed his mind and wanted to proceed, but on the basis that he wanted to pay the purchase price in two instalments, half at once and the other half later.  Mr Jenkins said that Mr Parsons also asked him whether he could return to Mr Jenkins two motor cars that had previously been purchased  by Mr Parsons.    Mr Jenkins  said  he told  Mr Parsons  that  he  thought something along those lines could be worked out, that he would discuss the position with Mr Braden and ask him to make contact to work out the details.

[99]     Mr Jenkins realised that, if the arrangements were to be changed to allow for split payments of the purchase price he would not have enough funds to complete the purchase form ASB.  Having discussed the position, he and Mr Braden decided to ask Mr Parsons whether he would be prepared to provide some bridging finance to fund the purchase from ASB, until alternative arrangements could be made.

[100]   Mr Braden  confirmed  that  Mr Jenkins  had  told  him  on  28  January  of Mr Parson’s change of mind, but had made contact the following day to refer to Mr Parson’s wish to discuss options for a partial settlement.  Mr Braden claimed that

he then telephoned Mr Parsons in Vanuatu and  spoke to him for approximately

16 minutes on 29 January.   He also made a note of their discussion.   In cross- examination, Mr Parsons appeared at one stage to accept to accept that Mr Braden’s note had not been concocted, but he nevertheless maintained his denials of the main aspects of the discussion recounted by Mr Braden in evidence.

[101]   Mr Braden said that in the discussion Mr Parsons told him that he could not pay the full purchase price for 423 Ormiston Road at that time, but he did wish to proceed paying half the purchase price initially and the balance at a later date. Mr Braden says that he raised with him whether or not he would be willing to assist by providing a bridging loan for Mr Jenkins because of the imminent need to settle with the ASB.  He said Mr Parsons agreed with that in principle, although the exact amount bridging finance was not known at that stage.

[102]   After the discussion, Mr Braden worked out that if Mr Parsons paid half the purchase price payable under the First Agreement Mr Jenkins would need about

$700,000 to complete the settlement with ASB.  His calculations were recorded in a spread sheet which was produced in evidence and dated 29 January 2009.  He says that Mr Parsons subsequently confirmed that he would be willing to assist by paying approximately that amount and Mr Braden said that he had placed a tick and written “okay” on the spread sheet following that discussion.

[103]   He  had  also  discussed  with  Mr  Parsons  the  return  of  motor  vehicles  to Mr Jenkins.    Their  discussion  on  29  January  2009  concluded  on  the  basis  that Mr Braden would forward Mr Parsons a statement setting out the various options and cash payments that would be required under each.  He said he did this by facsimile dated 30 January 2009, a copy of which was produced in evidence.   The letter referred  to  “Option  1”  and  “Option  2”.    Option  1  involved  paying  half  of  the purchase  price  of  $2,200,000  plus  GST,  which  required  a  cash  payment  of

$1,482,500.   Option 2, which contemplated return of two motor vehicles with a credit of $230,000 would require a cash payment of $1,252,500.

[104]   At that point Mr Braden also wrote to Galbraiths, solicitors acting for him and Mr Jenkins, attaching a copy of the ASB agreement noting that settlement would

take place on or about 12 February 2009 and advising that the property would be registered in the name of GRIL.   He made no mention of  the First Agreement because  he  thought  it  clear  at  that  stage  that  settlement  of  the  on-sale  of

423 Ormiston Road to Mr Parsons would not be completed by the time that the settlement was required under the ASB agreement.  The letter to Galbraiths however did note that Mr Jenkins and Mr Braden both owned GRIL, and planned to have Mr Parsons join them “in a development venture” on the property which might result in provision of funds from Mr Parsons prior to the settlement.  If not, GRIL would settle in full.  His letter ended with the following paragraph:

We would like your advice as to how to acknowledge the input by Murray when it happens, we had been thinking along the lines of a Deed of Acknowledgement?

[105]   According to Mr Braden, Mr Taylor a principal of Galbraiths, spoke to him by telephone on 30 January and indicated that Mr Parsons’ involvement could either be dealt with by way of an acknowledgement of debt or a mortgage being registered over the title to 423 Ormiston Road.   Mr Braden said he conveyed that advice to Mr Parsons but that Mr Parsons told him he did not require any security for his contribution on the basis that he would be completing the purchase of 423 Ormiston Road “within a short time anyway and it was therefore unnecessary”.

[106]   Mr Braden said that Mr Parsons did not immediately advise him which of Options 1 or 2 he wished to pursue.  However, on 3 February 2009 Mr Parsons sent to the ANZ Bank in Vanuatu a facsimile in which he requested that the sum of

$2,662,500 be transferred to FIL’s St Heliers’ account.  Mr Braden claimed that that amount must have comprised the amount required in respect of 423 Ormiston Road if Option 2 were pursued, namely $1,252,500, a bridging loan of $700,000 and the approximate  amount  required  to  complete  a  purchase  which  Mr  Parsons  then intended to make of land in Whangamata (a further $700,000).

[107]   In fact, in addition to the Whangamata land, Mr Parsons was also intending at this time to purchase land at 84 Jervois Road for which an amount of approximately

$1,170,000 was required, a figure which was included in his spread sheet calculation dated 29 January 2009 opposite the word “Jervois”.  On 3 February 2009 Mr Parsons wrote again to the ANZ Bank in which he said:

Further  to  our  discussions  please  add  1,170,000  nzd  to  the  fenswick  tt payment

Total 3,822,500.00

CAN YOU PLEASE TT TO: FENSWICK INTERNATIONAL LTD ANZ ST HELIERS

AUCKLAND NZ

ACCOUNT No. [Omitted] AMOUNT:  2,652,500.00

[108]   I note that consistent with Mr Braden’s evidence the sum of $1,720,000 was subsequently  transferred  from  FIL’s  account  to  Galbraiths’ trust  account  with  a narration that makes it plain the sum was for settlement of the Jervois Road transaction.   Consequently, of the money transferred from the ANZ in Vanuatu to FIL’s ANZ St Heliers’ account in early February 2009, the sum of $2,652,500 could have been referable to the transaction in relation to 423 Ormiston Road as claimed by Mr Braden, and no other plausible explanation for the sums transferred has been proffered.

[109]   Mr Braden referred in addition to what he described as a “Daily Action Log” which consisted of notes initially typewritten but subsequently in his handwriting. One of the typewritten notes is of a discussion with Mr Parsons which he said occurred on 4 February 2009, in which Mr Parsons had confirmed that he wished to proceed with Option 2. The note read:

Set up options to settle 423 Oremiston[sic] Liaise GJ and MP – Opt 2 MP

[110]   In addition, Mr Braden referred to some handwritten notes on a sheet dated

5 February  2009,  which  on  the  face  of  it  referred  to  the  transfer  of  funds  of

$3,822,485,  the  settlement  of  the  Jervois  Road  purchase  for  $1,175,000  (this included $5,000 for “exp” – I infer expenses), Option 2 with a tick beside it and the figures 1,252,000 under the heading “423”, and the additional notation “Whangamata? $700+.”

[111]   Mr Braden said that the figure of $3,822,485 corresponded with the amount

that Mr Parsons had requested be transferred from the ANZ Bank in Vanuatu to FIL’s

ANZ St Heliers’ account except for a difference of $15, which he understood could be explained as the fee charged by the ANZ for processing the payment received from overseas.   FIL’s bank statement showed that this sum had been received and credited to the ANZ St Heliers’ account of FIL on 5 February 2009.

[112]   In his evidence-in-chief Mr Parsons simply said that he had told Mr Jenkins by 30 January 2009 that he did not want to purchase the property.   He made no mention of any change of mind.  He accepted that Mr Braden had e-mailed him on

30 January 2009 with reference to Option 1 and Option 2 but made no reference to any discussion that he had had with either Mr Jenkins or Mr Braden which could have resulted in Mr Braden’s facsimile being sent to him.

[113]   Mr  Parsons  was  challenged  on  his  evidence  in  cross-examination  by Mr Airey.    He  would  not  accept  that  he  had  told  Mr  Jenkins,  in  a  telephone discussion on 29 January 2009, that he had changed his mind and raised the possibility of paying half the purchase price initially and the balance later, as well as raising  the  possibility  of  returning  cars  as  part  of  the  arrangement.    However, Mr Parson’s answers were not straightforward, and I was left with the impression that he was unwilling to respond to Mr Airey’s questions in a frank way. As I understood his evidence, the only concession that he was prepared to make was that he had had discussions about the return of the two cars to Mr Jenkins.  However, if the latter was all that occurred, the fact that he arranged transfers of funds from Vanuatu in the appropriate amounts to proceed with what Mr Braden described as Option 2 goes unexplained.

[114]   In his evidence in chief Mr Parsons had suggested that he did not understand the way in which Mr Braden had calculated the sum of $3,822,500 that he arranged to be transferred, and referred to two other transactions that he said were occurring “at this time”, namely the purchase of land at Whangamata and “Enterprise Drive”. However, I infer that Mr Parsons must have known that the amount required to purchase  the  Whangamata  land  then  being  considered  was  in  the  vicinity  of

$700,000,  and  the  Enterprise  Drive  purchase  had  been  completed  well  before Mr Braden’s  facsimile  of  30  January  2009.    In  cross-examination,  Mr  Parsons accepted  that  his  suggestion  that  the  sums  he  arranged  to  be  transferred  on

3 February  could  have  included  an  amount  referable  to  the  Enterprise  Drive transaction was a mistake.

[115]   Some  of  the  documents  on  which  Mr  Braden  relied  were,  of  course, documents  generated  in  his  own  hand,  but  the  contents  of  those  documents  is entirely consistent  with  the actions  that  Mr Parsons  himself  took,  including his correspondence with the ANZ Bank.  The sums transferred by Mr Parsons reflect the content  of  the  notes  that  Mr  Braden  claimed  he  made  at  the  time.    It  is  also significant that Mr Braden sent Mr Parsons a facsimile outlining the two options and it was following that that the funds were transferred.  One thing that Mr Parsons did accept in cross-examination is that he never advised either Mr Jenkins or Mr Braden that he would proceed with neither Option 1 nor Option 2.

[116]   In addition, Mr Parsons could offer no explanation for the transfer of funds from Vanuatu other than the fact that Mr Braden had asked him to do it.  There was the following exchange in evidence:

Q.       …You must have known at the time you transferred $3.8 million to

Fenswick’s account what the purpose of the funds was.

A.        I  have  one  reference  on  the  Jervois  Road  so  I  have  a  partial knowledge of the allocation of funds.   So we have a Jervois Road letter in writing, we have a GST request, that’s two requests on one day, and then we have the explanations of the Whangamata, which is a four months settlement away, four months’ time we’re going to settle that, we have a Jervois Road settlement three weeks away, and we have the balance.

Q.        What I’m suggesting to you, Mr Parsons, is that even though you may not recall the relevant detail now at the time you made that transfer you must have known what the funds, the purpose of the funds being transferred was.

A.       No, the word “must have” is not correct.   I didn’t know.   I was

relying on Noel Braden to, to do the affairs and I took his word.

Q.        Well, the only other conclusion, Mr Parsons, is that you were happy to transfer $3.8 million to this account that Mr Braden could operate simply because he asked you to and without knowing what the funds were required for.

A.       That’s  correct.    I  wasn’t  happy.    That’s  why  we  altered  the

agreement.

Q.        So are you saying that you would have transferred $3.8 million simply because Mr Braden asked you to and you didn’t know, need to know what it was for?

A.       I may have needed to know but I accepted Noel’s workings.  I didn’t

challenge his calculations.

[117]   This is unconvincing, given the circumstance that the amount of money was transferred was entirely consistent with Mr Parsons having elected to proceed with the Option 2 arrangement as it had been discussed with Mr Braden.   It is also significant that the two vehicles that had been discussed for return to Mr Jenkins were in fact returned, and payment was never sought.  Mr Parsons accepted in cross- examination he had never sought to be paid for the cars, asserting his view that it was up to Mr Jenkins to repay him $230,000, although he had never demanded it. Nor was payment for the cars subject to a claim advanced in the present proceeding. Once again this is unconvincing, and further supports the conclusion that he had decided to proceed with Option 2.

[118]   I reject Mr St John’s submission that the sums involved did not “marry’:  the figures in fact corresponded sufficiently closely with Option 2 to establish the connection to it.   Nor is it plausible to suggest, as Mr St John claimed that the transfer of funds was  simply an  example of the fact  that  Mr Parsons  used the St Heliers account as a repository for the receipt of large sums of money, even when nothing was happening.  The coincidence of the amounts and the timing make this a very unlikely explanation for the transfer.

[119]   Another  issue  raised  by  Mr St John  in  his  closing  submissions  was  the suggestion  that  it  was  in  fact  impossible to perform  both  the First  and  Second Agreements.    That  submission  was  based  on  the  fact  that  the  agreements  had different vendors and purchasers, identified different titles and contained different wording at Special Condition 15.  While I accept that the agreements were different in these respects, I consider that the changes simply reflected the time that had elapsed between each agreement.

[120]   By the time the Second Agreement was executed the parties had made their nominations and it was their intention that GRIL should be stipulated as the vendor

and AML as the purchaser to replace respectively Mr Jenkins and Mr Parsons.  The different title reference (and land area reference) is easily explicable on the basis that by the time of the second agreement a new unique identifier had been issued for the

2.55 hectares (Lot 2) which it had previously only been possible to describe by reference to its location in Special Condition 15.0 of the First Agreement.   That explains also the different wording of Special Condition 15.0 in the Second Agreement.   It can be noted also that at the time of the First Agreement it was recorded that the vendor would apply to the Council for a boundary realignment;  by the time of the Second Agreement that application had been made.

[121]   Consequently, I reject the contention that it was not possible to perform both contracts.  Another issue raised concerned the fact that a tax invoice was only issued in respect of the sums paid to settle the Second Agreement whereas no invoice was issued in respect of the First Agreement.  Mr St John submitted this was significant and showed that the defendants had accepted that the First Agreement would not proceed.  Mr Braden said that the failure to issue a tax invoice was an oversight and that the situation was the subject of ongoing discussion with the Inland Revenue Department.  The details of that discussion were not provided and Mr St John in the circumstances invited the Court to be sceptical about it.

[122]   Whether the failure to issue a tax invoice in respect of the sum payable under the First Agreement was or was not an oversight is not an issue that I have to resolve. It may be that the defendants had another purpose in failing to issue the tax invoice. However, I do not consider that issue is overly important having regard to the other events to which I have referred.

[123]   Overall I prefer the evidence of Mr Jenkins and Mr Braden on these issues.  I find  on  the  balance  of  probabilities  that  Mr Parsons  did  have  the  telephone discussions referred to by Mr Jenkins and Mr Braden, and that in those discussions he raised the possibility of making a half payment of the purchase price with the balance to be paid at a later date. When he transferred the funds from Vanuatu it was to proceed with Option 2 as it had been described to him by Mr Braden.  That was the option which included the return of two motor vehicles with a credit of $230,000. In these circumstances I also find that Mr Jenkins never agreed not to enforce the

First Agreement, and record that I was given no convincing reason why he would have done so.

[124]   Mr Braden claimed that, consistently with what he thought Mr Parsons had decided to do, on 10 February Mr Braden arranged for the sum of $1,955,000 to be transferred to Galbraiths’ trust account.  This represented one half of the purchase price for the land under the First Agreement;  $1,237,500, adjusted for the return of the two motor vehicles, bridging loan finance in the sum of $702,000, and an additional amount of $500, which Mr Braden said was “to cover any miscellaneous items”.  Mr Parsons said that this occurred without his authority.  However, I find that this was in accordance with his decision to proceed with Option 2.

[125]   Settlement   of   the   ASB   agreement   occurred   on   12   February,   when

423 Ormiston  Road  was  purchased  by  GRIL.    By not  proceeding  with  another transaction that he was considering Mr Jenkins was able to fund the repayment to Mr Parsons of the sum of $702,000 that had been used as bridging finance for GRIL’s of the land.  This occurred on 16 February.  It was after that that the two cars were returned to Mr Jenkins, for which Mr Parsons never sought payment.

[126]   According  to  Mr  Braden  there  was  a  meeting  between  Mr  Parsons, Mr Jenkins and him on 20 March.  Mr Jenkins, as in most things, was dependent on Mr Braden’s memory of what transpired at that meeting.  According to the latter, there was discussion at the meeting about Mr Parson completing the balance of the purchase of 423 Ormiston Road.  Mr Braden said it was agreed that the issue would be “parked” to be revisited once Mr Parsons had sold the Enterprise Drive property.

[127]   Then, on 6 May 2009, Mr Parsons sent Mr Braden an email in which he asked “If Graeme still wants to sell down his share of Ormiston how much would it be?” and referred to various funding options on which he was evidently seeking Mr Braden’s advice.  Mr Parsons claimed in his evidence in chief that his reference to Mr Jenkins’s share was a reference to what became Lot 2, the northern portion of the 423 Ormiston Road land comprising (after survey) 2.5573 hectares.

[128]   Mr Braden replied later that day giving a figure of $1,260,000 and explaining how this had been calculated, including a half share of the costs of repairs and improvements that had been undertaken on the property since its purchase by GRIL (replacement of carpet in the dwelling, guttering repairs and provision of a new driveway).  He explained that he had taken one half of the original purchase price, deducted the amount already paid by Mr Parsons of $1,237,500 (this included the allowance of $230,000 for the returned motor vehicles) and added Mr Parsons’ share of the cost for the works carried out, to arrive at the figure of $1,260,000 mentioned in his emailed reply of 6 May.

[129]   Mr Braden said that he had kept Mr Parsons advised about the works carried out on the 423 Ormiston Road property in regular telephone calls and was able to corroborate  his  evidence  about  that  by  reference  to  a  fees  statement  sent  to Mr Parsons on 31 March 2009 which did in fact make reference to arrangements he had made for the works carried out to that point.   I accept that evidence.   It is consistent with the defendants’ case that the First Agreement remained on foot.

[130]   I refer next to evidence that Mr Parsons himself was treating the agreement as still on foot.   On Wednesday 20 May 2009 he sent an e-mail to his accountant, Mr Parker.  In it, he listed a number of properties which he owned, referring to the Enterprise Drive property in Henderson, land at Griggs Road, Whitford, the residential property at Jervois Road, the Flat Bush School Road property and land in Whangamata.  The e-mail also made mention of the Ormiston Road land which he described as “half share with nice house and acreage”.  Towards the end of the e- mail he wrote:

Not getting a great cash flow return from any of the investments.  However, the dream is that they will develop into goods[sic] assets at the time of rezoning.

[131]   Mr Parsons accepted in evidence that all of the properties referred to in the e- mail (apart from Ormiston Road) were current assets.  However, it is plain that as at

20 May 2009 he also considered that Ormiston Road was in the category of a current asset, as to one-half share.   Once again,  I consider this is consistent (and only consistent) with the fact that the First Agreement remained on foot.

[132]   It was common ground that Mr Parsons agreed to proceed with a purchase in June 2009, but there was disagreement as to what he had agreed to purchase. According to Mr Parsons he agreed to buy 2.55 hectares of the Ormiston Road property for $1,120,000 (plus GST, if any).  In other words, he maintained that the transaction comprised in the First Agreement was never completed, and there was a new  agreement,  referred  to  in  evidence  as  the  Second Agreement,  whereby  he purchased what became Lot 2 DP 421622.

[133]   According to Mr Jenkins and Mr Braden, however, the Second Agreement (which, like the First Agreement was undated) documented what had become the second phase of the transaction originally provided for in the First Agreement.  In other words it provided for the purchase by Mr Parsons of Lot 2 for the sum of an additional $1,120,000 plus GST to the amount that Mr Parsons had already paid, having transferred in February the money necessary to fund half the purchase price under the First Agreement.  Mr Braden drafted the Second Agreement, and said that he had  not  sought  legal  advice before  doing  so.    He said  that  another way of documenting the transaction would have been to draft it as a variation of the First Agreement, in which the total purchase price of $2,200,000 remained the same, record that part of the purchase price had been changed and show that the vendor was now GRIL, rather than Mr Jenkins.  It would also have been necessary in fact to alter  the  name  of  the  purchaser,  because  this  was  shown  as  AML:  the  First Agreement stated that the purchaser was Mr Parsons or nominee.

[134]   Both parties are able to derive some support for their respective positions from the terms of the Second Agreement.  Consistent with what Mr Parsons says he agreed,  the  front  page  of  the  agreement  described  the  land  being  purchased  as

423 Ormiston Road, Flat Bush, said that it was 2.55 hectares in area “subject to final survey”,  and  gave  the  legal  description  as  “#  2  DP 421622,  with  the  “unique identifier or CT” reference given as 482726.

[135]   However, the agreement also included a clause 15.0 in the following terms:

15.0The  Purchaser  and  the Vendor  have  agreed  that  the Vendor  has applied to the Manukau City Council for a boundary realignment that will see a portion of land forming part of the 423 Ormiston Road title vested in the tile[sic] of 218 Flatbush School Road, that will

incorporate all that designated floor plain land contained in the original title.

The parties refer to and agree the future boundary of the respective properties will follow the line traced on the attached survey plan prepared  by  Fraser  Thomas  Limited  acting  as  Surveyors  and Planners in this matter, file reference 88561/AR.

The  Vendor  will  indemnify  the  Purchaser  against  all  costs  and charges  incurred in this  exercise including the registering of the amended titles.

[136]   This clause makes plain what is implicit from the area of 2.55 hectares given on the front page, that the land being acquired was to exclude the part of the land that  was  to  be  included  with  the  218  Flat  Bush  School  Road  land  once  the subdivision was complete.   Under the First Agreement, if the subdivision was not completed, Mr Parsons would have been obliged to pay a total of $3,050,000 for the whole of the land in its un-subdivided state, but only $2,200,000 for Lot 2 with the southern portion of 3.2525 hectares subdivided off.  He now claims he thought he was acquiring the same land for $1,120,000, Mr Jenkins having accepted that the First Agreement should not proceed.

[137]   Putting it in those bald terms Mr Parson’s proposition seems most unlikely to me.   I can think of no explanation, and none is apparent on the evidence, why Mr Jenkins would agree to such a radical alteration to the price of the same land, accept in fact that it should be halved, given there was only a period of about four months between the two agreements.  It would be contrary to commercial common sense, and on the view I formed of him, contrary to his keen awareness of where his own best commercial interests lay.   I cannot accept, either, that Mr Parsons could really have thought he was securing such a dramatic improvement in the price he had to pay, apparently without even needing to negotiate for that outcome.

[138]   It would have been much more sensible to document what was taking place as a variation to the First Agreement, but as noted the parties did not take legal advice before signing it.  Given my earlier findings that Mr Jenkins had not agreed to the cancellation of the First Agreement and that Mr Parsons had agreed to proceed with Option 2, both agreements need to be construed and applied together.  On that basis, I consider that the purchase price stipulated in the Second Agreement must be

seen as the balance of the amount necessary to complete the purchase of the land, being a sum incremental to the initial payment made by Mr Parsons.  I consider that is what the parties must have intended.

[139]   The effect of that approach is effectively to hold the parties to the agreement they recorded in the First Agreement, subject to fact that, in accordance with Option

2, the purchase price was paid in two instalments.   That outcome seems to me to accord with common sense, and with the proper construction of the two agreements, given the context in which they were executed.

[140]   I record that the subdivision was completed and new titles were issued for

423 Ormiston Road and 218 Flat Bush School Road on 24 July 2009.  The Second

Agreement was formally settled on 10 August 2009.

The causes of action

[141]   The plaintiffs advanced various causes of action in this part of the claim.  The findings and conclusions already expressed mean that none of them can succeed. The following paragraphs briefly explain why that is so.

[142]   The first cause of action alleged that Mr Braden acted at all material times as FIL’s agent, and that he breached his obligations as such by arranging for the transfer of  the  funds  necessary  for  the  purchase  of  423  Ormiston  Road.    I accept  that Mr Braden was FIL’s agent for this purpose, but I do not accept that he breached his obligations.  For the reasons I have set out, I consider that the transfer of funds was in accordance with what Mr Parsons wanted to occur at the relevant times.

[143]   The  next  cause  of  action  alleges  that  Mr  Braden  was  in  a  position  of confidence and trust, and had a fiduciary duty to FIL which he breached.   The breaches were particularised as allowing unauthorised funds to be used by GRIL for the purchase of 423 Ormiston Road;  advancing an unauthorised loan to GRIL, as a fifty percent shareholder of GRIL;  failing to ensure that the unauthorised loan was not utilised for his personal gain or so as to deprive FIL of the use of the funds;  and failing to ensure that the unauthorised loan was returned and/or dealt with in such a

way as to ensure that FIL had sufficient security for the advancement of the unauthorised loan.

[144] In accordance with the findings I have already made, there was no “unauthorised loan”.  Money was initially lent for the purpose of bridging finance but returned as I have held above.  Otherwise, the money that was used to purchase

423 Ormiston Road was used in accordance with Mr Parsons’ wishes.  The findings I have already made also mean that the money was not used for personal gain.  The land  was  purchased  in  accordance  with  Mr  Parsons’ wishes  and  he,  of  course, controlled FIL.

[145]   A  further  cause  of  action  is  advanced  against  GRIL,  Mr  Braden  and Mr Jenkins.   It is alleged that both Mr Braden and Mr Jenkins acted as agents for GRIL, which had received the funds used to purchase the property knowing they had been acquired unlawfully.  It is further claimed in this cause of action that Mr Braden and Mr Jenkins assisted GRIL in acquiring the funds knowing the transaction was unlawful.  This cause of action must also fail having regard to the findings already made.

[146]   Another cause of action alleges that the first, second and third defendants were in a position of confidence and trust to FIL which they breached, for the same reasons that underpin the other causes of action.  Added is a further claim that the defendants did not ensure that “appropriate securities and documentation were in place to protect or secure FIL’s interest as a “lender/financier funding the purchase of the Ormiston property by [GRIL]”.  These claims also cannot succeed having regard to the findings already made.

[147]   An alternative cause of action is then pleaded alleging that Mr Braden and Mr Jenkins “caused AML to pay for Lot 2 Ormiston Road the sum of $2.2 million plus GST”, which had earlier been acquired by GRIL and  Mr Jenkins for $1.9 million plus  GST.    It  is then alleged  that  at  all  material  times Mr Braden  and Mr Jenkins owed a duty to the plaintiffs to act in their best interests, not to act in a position of conflict and not to profit at their expense.  It is alleged that Mr Braden and Mr Jenkins breached these duties by:

(a)       failing to disclose their interest in GRIL;

(b)failing to disclose that the “second plaintiff” (AML) had bought the whole of the land at 423 Ormiston Road for less than the sale price of Lot 2;16   and

(c)      Carrying out the purpose of the transaction which was to benefit the defendants at the expense of the first plaintiff.

[148]   I do not accept the proposition that Mr Braden and Mr Jenkins “caused AML to pay $2,200,000 for Lot 2 Ormiston Road.”  That was something that Mr Parsons decided should occur when he signed the First Agreement.  There was no evidence that there was any misrepresentation as to the land’s value at the time, although Mr Parsons  did  complain  that  he  later,  in  April  2011,  sold  the  land  for  the

considerably  lesser  sum  of  $1,320,000  plus  GST  (if  any).17      While  GRIL had

purchased 423 Ormiston Road for $1,900,000, that was at a mortgagee sale.  There was no valuation evidence such as might justify a conclusion that the sum paid by Mr Parsons/AML for what became Lot 2 (the bulk of the flat and valuable land) was a significant overvalue at the time the First Agreement was executed.  There is no evidence that Mr Parsons was persuaded to enter into the transaction, that he sought advice from Mr Jenkins or Mr Braden about it or inquired about the price paid to ASB.   Certainly they discussed the purchase, but there is no allegation of misrepresentation or anything of that kind.

[149]   Nor do I accept that Mr Jenkins had a duty to act in the plaintiffs’ best

interests.  There is no proper basis for the contention in the case of the dealings with

423 Ormiston Road.  As to Mr Braden, it seems that the allegation is that he owed a fiduciary duty as Mr Parson’s agent.  However, on the evidence I could not conclude that he did anything that breached any duty in relation to the Ormiston Road transaction.    Once  again,  the  findings  I  have  made  are  that  he  took  steps  to

implement Mr Parsons’ intentions with respect to the purchase of the Ormiston Road

16     I assume in the plaintiffs’ favour that the pleading has incorrectly referred to the “second plaintiff” (AML) when the reference was intended to be to the first defendant (GRIL).

17     He conceded in cross-examination that his decision to accept that price was influenced by his view that he had only paid the price stated in the Second Agreement to acquire it.

property.  Mr St John submitted that he had a duty not to make an undisclosed profit, but there is no evidence that he did.

[150]   As to GRIL, Mr Parsons was well aware at the relevant times that it was a company owned by Mr Jenkins.  Mr Braden had specifically told Mr Parsons that GRIL was  Mr  Jenkins’ company  when  discussing  the  Flat  Bush  School  Road arrangements, in his email of 24 November 2008.  Further, it was from GRIL that AML had earlier acquired 242 Flat Bush School Road.  In addition, at the 15 January

2009 meeting Mr Jenkins had referred to GRIL purchasing the land from the ASB as the mortgagee.  I accept, as I have earlier found, that he did not know of Mr Braden’s interest in that company, but as has been seen, Mr Braden had made a declaration of trust on 28 November 2008 acknowledging that he held shares in GRIL in trust for Mr Jenkins.   In the circumstances I do not consider anything should flow from Mr Braden’s failure to disclose his trustee interest in GRIL.

[151]   These  conclusions  mean  that  the  allegations  advanced  in  respect  of  the

Ormiston Road transactions cannot succeed.

Result

[152]   For the reasons I have given, there will be judgment for Mr Parsons against the first and third defendants on the third cause of action in the sum of $399,877, together with interest calculated in accordance with the Judicature Act 1908.

[153]   There will be judgment for the defendants on the other causes of action.

[154]   I reserve questions of costs.  If there is an issue about costs that cannot be agreed I will receive memoranda from the plaintiffs within 15 working days, and from  the  defendants  within  10  days  of  receipt  by  them  of  the  plaintiffs’ memorandum.