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First NZ Properties Limited v Millar

First NZ Properties Limited v Millar

Case [2024] NZHC 1225 16 May 2024

Breach of Contract

Unconscionable Conduct

Corporate Law & Governance

Contract Law

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IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2020-442-62

[2024] NZHC 1225

UNDER the Companies Act 1993

IN THE MATTER OF

breaches of director’s duties and breaches of contract

BETWEEN

FIRST NZ PROPERTIES LIMITED

Plaintiff

AND

MICHAEL JOHN MILLAR

First Defendant

INVESTMENT SERVICES LIMITED
Second Defendant

PAUL JOHN MEPHAN

Third Defendant

CONTINUED…

Hearing: 1–5, 8–9 and 12 May 2023

Counsel:

B M Nathan, N Laing and E V Kittelty for the Plaintiffs M J Radich and S A Wadworth for the First and Second Defendants

R J B Fowler KC for the Third Defendant in CIV-2020-442-62/63

Judgment:

16 May 2024

JUDGMENT OF GWYN J

Solicitors:
Duncan Cotterill, Nelson Radich Law, Blenheim

FIRST NZ PROPERTIES LIMITED v MILLAR [2024] NZHC 1225 [16 May 2024]

CIV-2020-442-63

BETWEEN

SPRINGS ROAD PROPERTY LIMITED
Plaintiff

AND

MICHAEL JOHN MILLAR

First Defendant

INVESTMENT SERVICES LIMITED
Second Defendant

PAUL JOHN MEPHAN

Third Defendant

CIV-2020-442-64

BETWEEN

SUPERSTORE PROPERTIES LIMITED
Plaintiff

AND

MICHAEL JOHN MILLAR

First Defendant

INVESTMENT SERVICES LIMITED

Second Defendant

TABLE OF CONTENTS

Introduction [1]

Background [6]

The property companies [6]

First NZ Properties Ltd [6]

Springs Road Property Ltd [11]

Superstore Properties Ltd [14]

Investment Services Ltd [17]

Property management services [22]

Breakdown of relationship between property companies and ISL [27]

Witnesses

[31]

Overview of First NZ’s claims

[38]

First NZ Management Agreement [39]

Preliminary interpretation questions

[49]

What were ISL’s obligations and entitlements under the First NZ Management

Agreement? [50]

Discussion [59]

When did the First NZ Management Agreement come to an end? [72]

Discussion [86]

First NZ’s claims

[109]

Disclosed property management fee [110]

“Excess” property management fees [118]

Directing payments to Gravtec and Terra Firma [131]

Gravtec [132]

Terra Firma [135]

Gain fees [145]

Kilmore Street [156]

Symonds Street [162]

Causes of action pleaded by First NZ

[164]

Claims against ISL [165]

Breach of contract [167]

Discussion [170]

Negligence [189]

Discussion [194]

Claims against Mr Millar and Mr Mephan [213]

Requirements of a fiduciary [232]

Statutory provisions [236]

Mr Millar [238]

Section 131 [262]

Section 137 [269]

Mr Mephan [279]
Claim in relation to Barnes’ fraud [290]

Knowing receipt [291]

Discussion [298]

Unjust enrichment [304]

Superstore Properties Ltd [314]

Superstore claims [314]

Superstore Management Agreement [316]

Discussion [331]

Springs Road Property Ltd [347]

Springs Road Management Agreement [348]

Discussion [367]

Notices to Avoid [389]

Counterclaims [392]

Repudiation [393]

ISL’s submissions [396]
Plaintiffs’ submissions [398]

Discussion [417]

Affirmative defences [421]

Indemnity and limitation of liability – ISL [421]

Deeds of indemnity – Mr Millar and Mr Mephan [434]

Estoppel [443]

Quantum meruit [447]

Remedies [451]

First NZ [452]

Superstore [453]

Springs Road [454]

Delay [457]

Introduction

[1] This is a consolidated claim, brought by each of three related companies which own various commercial properties which they lease to third parties (property companies). The claims are against Investment Services Ltd (ISL), which operates as a commercial property and investment manager; Michael Millar, who is a former director of the plaintiff companies and a director of ISL;…

Grounds of appeal

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

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

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

Consideration

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

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

Continue reading First NZ Properties Limited v Millar

Details

AGLC: First NZ Properties Limited v Millar [2024] NZHC 1225
Case: [2024] NZHC 1225
Decision Date: 16 May 2024

CaseChat Overview and Summary

First NZ Properties Limited, along with its subsidiaries Springs Road Property Limited and Superstore Properties Limited, initiated consolidated proceedings against Investment Services Limited (ISL), Michael Millar, and Paul Mephan. The plaintiffs alleged breaches of fiduciary and statutory duties, breach of contract, negligence, unjust enrichment, and knowing receipt by ISL, Millar, and Mephan. The claims stemmed from alleged unauthorised fees and payments taken from the plaintiffs by ISL between 2006 and 2020. The defendants raised counterclaims and affirmative defences, including repudiation by the plaintiffs, estoppel, indemnity, and limitation of liability provisions.

The court found that ISL's obligations under the First NZ Management Agreement were limited to the 6.50 per cent management fee, which covered both investment and property management. The court rejected the defendants' argument that ISL could claim an additional amount for property management services. The First NZ Management Agreement came to an end upon the sale of the last of the First NZ Properties in 2004, and a new agreement was formed in November 2004. This new agreement did not entitle ISL to claim gain fees on the sale of subsequently acquired properties.

The court found that ISL breached its contract with First NZ by charging excess property management fees, directing payments to third-party property managers Gravtec and Terra Firma, and claiming gain fees on the sale of Kilmore Street and Symonds Street properties. ISL was also found to have breached its duty of care by failing to exercise reasonable skill and care in performing its management obligations. The plaintiffs were awarded damages for the uncontracted for expenditure, which included excess property management fees, payments to Gravtec and Terra Firma, and gain fees. Millar and Mephan were found to have breached their fiduciary duties to the plaintiffs by directing payments that were not in the plaintiffs' best interests.

The court rejected the defendants' affirmative defences, including indemnity and limitation of liability provisions, and estoppel. The court ordered damages against Millar, Mephan, and ISL, with the plaintiffs entitled to 2B costs on their successful claims. The court noted the delay in delivering the judgment and expressed regret for the same.

Orders