Gibson v Curtis HC Wellington CIV 2007-485-907

[2010] NZHC 845

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2007-485-907

BETWEEN  RODNEY MARK GIBSON First Plaintiff

ANDHABODE IP LIMITED Second Plaintiff

ANDRICHARD JOHN CURTIS Defendant

CIV 2008-485-2735

AND BETWEEN            RICHARD JOHN CURTIS First Plaintiff

ANDCURTIS HOLDINGS LIMITED Second Plaintiff

ANDRODNEY MARK GIBSON First Defendant

ANDHABODE IP LIMITED Second Defendant

Hearing:         8-19 February 2010

Counsel:         R C Laurensen and C LaHatte for Curtis and Curtis Holdings

D D Vincent and M Freeman for Gibson and Habode IP Judgment:   18 May 2010

JUDGMENT OF SIMON FRANCE J

RODNEY MARK GIBSON AND ANOR V RICHARD JOHN CURTIS HC WN CIV 2007-485-907  18 May

2010

Table of Contents

Paragraph No.

Introduction  [1]

Part One – Claims by Mr Curtis

The facts  [13] A.      The early days  [14] B.       Mr Curtis comes on board  [21] C.       2004 – a false start  [27] D.      2004 – the context in which the business  [31]

structure is established

E.The business structure  [43] (a)      How it came about  [43] (b)      The New Zealand structure  [46] (c)      The international structure  [53]

F.       The development of the Habode and early  [64]

difficulties for Habode NZ

G.       The collapse of Habode NZ  [82] Plaintiff’s case           [98] Decision  [113] Other topics           [144] A.  The events leading to collapse of Habode NZ  [144] B. Future profitability  [150] C. Ihouz   [154] D.           Other evidence  [160] Conclusion on the claim by Mr Curtis  [162]

Part Two – Claims by Mr Gibson  [166] The claims  [166] Decision  [170] Conclusion on Mr Gibson’s claim  [179]

Costs  [181]

Introduction

[1]      This case concerns a plan to manufacture and market a container house called an Habode.  Its unique feature was that the walls and sides of the container were part of the house – folding out and down, like a butterfly.  The house was built in, and as part of, a standard shipping container, a feature which had significant attractions for delivery to remote locations.

[2]      The inventor is Mr Gibson.  He or companies owned by him have at all times owned all the intellectual property (IP) attaching to the concept.

[3]      The plaintiff is Mr Curtis; he came into the project as an investor, and to provide business expertise.

[4]      The plan as it emerged was to build the Habodes in China.  The first market to be developed would be New Zealand.  Once that was established, and the product perfected, it was anticipated the project would go international.

[5]      To give effect to the New Zealand enterprise, a company was formed and all development and production costs were channelled through it.   Costs greatly exceeded initial projections; cash flow became a problem and amidst considerable acrimony the New Zealand company collapsed.

[6]      Mr Gibson, as owner of the IP, established a new New Zealand company and attracted considerable fresh investment.   That new company has still not proved successful.

[7]      Mr Gibson also established an Australian operation.  It attracted large scale investment from an Australian company – about US$5m.  Whilst a large portion of that money went into the company, a significant sum went directly to Gibson interests.

[8]      The primary case involves a claim by Mr Curtis to a share of Mr Gibson’s profit from the Australian enterprise.  The essential claim is that there was a personal joint venture between the two men.   It was said to operate independently of the various corporate structures that were established.  This joint venture is the source of Mr Curtis’ claim to a remedy.

[9]      Initially in the pleadings, and in opening the case, the claim was that this joint venture relationship gave rise to fiduciary obligations which Mr Gibson breached. Because of that breach it was submitted that Mr Gibson should be held to account for the Australian profits he made, and for projected but not yet realised New Zealand profits.

[10]     In  closing  submissions  the  position  was  modified  in  that  it  was  now submitted  that  it  need  not  be  shown  that  Mr Gibson  breached  fiduciary  duties. Rather the joint venture owned assets independent of the corporate structures; the primary asset it owned was “the Habode project” which Mr Gibson subsequently sold part of to the Australian company.  It is said Mr Curtis is entitled to his share of that joint asset.

[11]     The second proceeding is brought by Mr Gibson.  He says that, upon breakup of the New Zealand venture, Mr Curtis converted the only Habode to have reached New Zealand shores.  He did so by selling it to an Australian company and diverting the money to the failed New Zealand company.  The Habode did not belong to the company, it is said, but to Mr Gibson, and Mr Curtis is personally liable as a joint tortfeasor.

[12]     Finally it is said that Mr Curtis makes claim to having on-going rights to develop and market Habodes.  Mr Gibson says he does not and wants the Court to say so.

Part One – Claims by Mr Curtis

The facts

[13]     In describing the facts I will resolve at the relevant points any factual issues of significance.  There are two main witnesses – Messrs Curtis and Gibson.  I state for the record that I did not form any general credibility and reliability preference between them.  Rather disputes of significance will be resolved on an issue by issue basis having regard to the documentation, and my general sense of the case and how each of the men approached matters.

A.      The early days

[14]     Mr Gibson and Mr Curtis knew each other.   Mr Gibson is a designer and partner in a design firm, Gibson Rusden.  Mr Curtis over several years used that firm for some of his work.  The two men are in disagreement as to the extent to which their relationship was one of friendship.  Mr Curtis considers he was both friend and business mentor.  The dispute is of no moment.

[15]     The men also disagree over whether Mr Curtis was the one who suggested Mr Gibson build the house within a container.  Again I see no need to resolve that. What is clear is that by the middle of 2003 Mr Gibson had his concept.  He wanted to get going with development and offered involvement to Mr Curtis who declined because of other commitments at the time.

[16]     Mr Gibson instead entered into an accord with a neighbour Mr Mark Fowler, and  Mr Fowler’s  brother-in-law,  a  Mr Chris  Morrison.     Mr Gibson  drafted  a memorandum of understanding which was designed to set out their original roles.  It was unsigned, but Mr Gibson says it is reflective of the group’s plans.1    The plan was to develop the project under Habode Limited and then manufacture, market and sell  through  an  associated  company.    It  was  intended  to  enter  into  a  further

memorandum of understanding at that point.

1           Neither of the other founding members testified.

[17]     A company called Habode Limited was formed.  The shareholding was:

Gibson	55%	(through his company UGroup Holdings)
Morrison	35%	(through his company CMB Brands)
Fowler	10%	(in own name)

[18]      Mr Morrison’s role was primarily as investor/funder.  He had ready access to start up funding, to the potential availability of tax losses, and to time.   The memorandum described him as the business builder.   Mr Fowler was called the strategy facilitator.

[19]     Mr Morrison   knew   a   Hawkes   Bay  based   engineering  firm,   and   had warehouse  space  available  in  the  Hawkes  Bay.    Accordingly  through  him  the Hawkes Bay firm was approached to build the prototype.

[20]     The venture was not successful.  I have little information about progress, but by November things were not happy.  The Hawkes Bay company was pressing for money, the Habode company was underfunded, and Mr Morrison was in financial difficulty.  His company, CMB Brands, folded.  A call was made for it to pay up its shares, and it was unable.

B.       Mr Curtis comes on board

[21]     Around November, as Mr Morrison’s position failed, it seems Mr Curtis was again approached.   He obviously did some due diligence because there is correspondence on 6 November from him to KPMG, describing the Habode and asking for tax guidance on depreciation.

[22]     Mr Morrison resigned as director on 1 December.   At a Board meeting on

3 December  Mr Curtis  joined  Messrs  Gibson  and  Fowler.    He was  appointed  a director.  The manner of his involvement was discussed and he was welcomed “as a founder stakeholder of the HABODE Limited business”.

[23]     It was agreed that Mr Curtis would both take over Mr Morrison’s shares (from CMB Brands Limited) and receive an allocation of Mr Gibson’s shares so that the shareholding would become 45–45–10.  It was also agreed that all shareholders would complete payment of their paid-up capital by the end of December 2004 (i.e. one year hence).  That was a requirement of $10,000 per 10% share.  It was also agreed that a new Memorandum of Understanding would be drafted.

[24]     At the meeting it was agreed that Mr Gibson would retain ownership of all the IP, and in return for being paid 5% of FOB cost of every Habode constructed, Mr Gibson would give Habode Limited the right to manufacture, market, distribute and sub-license the Habode concept in perpetuity.

[25]     On 12 December 2003 shares transfer forms were completed:

•400 shares from Habode Limited (which had taken over control of Mr Morrison’s  shares)  to  a  Curtis  entity  known  as  the  Sitcur Investment Trust;

•         50 shares from UGroup Holdings Limited to the Sitcur Investment

Trust.

[26]     At this point it is appropriate to observe, in terms of the overall case, three points:

a)       first,  Mr Curtis  came  into  an  existing  plan  which  had  already committed itself to a corporate structure.  Mr Curtis’ entry was via a trust he controlled and effected by buying shares in an existing company, and by becoming a director;

b)second, Mr Fowler was present as a participant from the outset and remained a 10% shareholder for all the relevant time;

c)       third,  the  plan  initially  was  for  Habode  Limited  to  develop  the building, and then for another associated company to market it.   At

the December Board meeting the talk was of varying this plan in that

Mr Gibson would licence Habode Limited to do everything. C.         2004 – a false start

[27]     Early  in  2004  Mr Gibson  introduced  the  Board  members  to  a  Mr Gary Morgan who had business interests in China.  The outcome of that meeting was that companies  associated  with  Mr Morgan  agreed  to  develop  and  manufacture  the prototype in China.  For present purposes the Chinese company can be called Renhe. Much effort and money was expended on this development.

[28]     The project was, however, unsuccessful.   An original quote of $55,000 per unit blew out to $74,000 per unit.   By the last quarter of 2004 a prototype was effectively  completed,  but  the  dispute  with  Renhe  was  escalating.    Renhe  was refusing to release the unit unless commitments and firm orders were placed for more units.  It would not disclose what the exact costings of those units would be. Renhe was claiming that its level of input into the development of the prototype merited it having a share in the IP.

[29]     The New Zealand participants were not accepting of this.  Disputes and legal threats were made.   Eventually, in terms of the Habode construction project, the decision was made to abandon Renhe and early in 2005, development of a prototype started again with someone else.  The Renhe dispute wound on, but sometime in the future was settled.

[30]     The upshot in terms of the project was effectively the loss of a year, and probably of $100,000 or more.   However, obviously because a unit was virtually complete  before  the  Renhe  development  collapsed,  Mr Gibson’s  knowledge  had increased in terms of how to bring his concept to fruition.

D.      2004 – the context in which the business structure is established

[31]     In this and the next section I deal with the various corporate entities that were established,  and  the  overall  business  structure  that  was  put  in  place.    It  is  an important topic, since it is the presence of this business structure, involving planned international sales, that really underpins Mr Curtis’ claim of an overarching joint venture  between  him  and  Mr Gibson  that  was  to  embrace  all  international development, and which entitles him to a share of the Australian success.

[32]     Given this centrality, it is surprising that there is so little direct evidence about how the two men came to agree upon the structure.  There is no evidence of meetings between the two men at which the plan was agreed.  Further, the position of Mr Fowler, who after all had a 10% share from the outset, was also largely ignored.

[33]     The plan itself was on two fronts.  First there was a business plan for what was  to  become  Habode  NZ  Ltd.    Habode NZ  was  to  market  the  Habode  in New Zealand.   As far as I can tell, Mr Fowler drafted the descriptive part of this plan.  It is clear that KPMG were engaged to do the financial aspect.

[34]     Second, throughout 2004, a structure for global sales was put in place.  This structure involved only Messrs Gibson and Curtis.  Mr Fowler seemed to be shut out of it.  Oddly, however, a draft licensing arrangement between Mr Gibson as owner of the IP and a to be incorporated Habode company as intended international distributor was  tabled  at  a  Habode NZ  Board  meeting,  and  Mr Fowler  was  the  main commentator on and critic of the document.

[35]     Despite the absence of direct evidence of any discussions and meetings, I have formed a clear view about how the international structure came about and what drove it.  Mr Gibson was unwavering in his determination to maintain ownership and control of all the intellectual property.   He would yield it up only by licensing another Habode entity which had itself been set up specifically to manufacture, market and sell on his terms, and for a fee.  It is clear that Mr Gibson was alert to threats, whether real or imaginary, to his IP ownership.  I suspect some of his later

actions were driven by concerns that others, particularly Mr Curtis, were trying to get a share of it.

[36]     The central role at this early planning stage was played by Mr Gibson, as opposed  to  Mr Gibson  and  Mr Curtis  together.    Several  events  illustrate  that Mr Gibson was the person calling the shots, and that he was motivated by a wish to protect  his  intellectual  property.    Sometime  in  March  Mr Gibson  approached  a Wellington  lawyer,  Mr Geoff Thompson.    I am  unsure  why he  particularly was approached, although he is a cousin of Mr Curtis and that may be the explanation. He was obviously the right person in that Mr Thompson had expertise in setting up international business structures with a view to tax implications.  The twin aim of the international Habode structures was to keep the IP with Mr Gibson, and otherwise to ensure that income on international sales was not subject to New Zealand tax.  The detail of the structures was all sourced in Mr Thompson.

[37]     Mr Thompson  became  active  in  early April.    On  1 April,  he  wrote  to  a Chinese colleague enquiring about how to protect the intellectual property in China. He describes Mr Gibson (personally) as the client, and says of him:

He already has some links with firms that are trading in China, but the request to us is to protect his intellectual property.

[38]     Then,   on   2 April 2004   Mr Thompson   wrote   to   Mr Gibson.      The correspondence  was  by  way  of  an  initial  letter  confirming  Mr Thompson’s instructions.   Significantly, it began by identifying that Mr Thompson’s principal task was the protection of Mr Gibson’s intellectual property.  The letter noted that this would require a comprehensive master licence agreement between Habode IP (the company that was to own Mr Gibson’s intellectual property) and Habode.

[39]     Next Mr Thompson prepared a draft of a master licence agreement.  He sent a first draft to Mr Thompson in May.  In the covering email he observed that:

Despite your interest in Habode Limited which is to be the distributor, we think it is vital in your own personal interests to have a very commercial agreement between the two entities …

[40]     Consistent  with  my  view  that  Mr Gibson   alone  was  responsible   for establishing the corporate structures, in his evidence Mr Curtis described Mr Gibson around this time as “setting about building a Habode commercial structure”.   It is important not to visit such observations with more significance than they merit, but in the context of the other events I have mentioned, it is I consider an accurate encapsulation of the situation.  What was happening was driven by Mr Gibson.

[41]     I finally observe that on 12 May Mr Thompson emailed Mr Gibson attaching:

... phase 1 of the international advice which you can show to Rick … I think it is important that Rick is introduced to the company structure concepts at an early date.

[42]     This is yet another indication that it was Mr Gibson who was the initial person responsible for setting up the structures.  He owned the IP, and therefore saw himself as the controller.  He plainly intended to bring Mr Curtis on board with the future international sales, and did so for a while.   The payment arrangements for Mr Thompson were that Habode IP (i.e. Mr Gibson) paid for all the licensing and other  arrangements,  and  Mr Gibson  and  Mr Curtis  jointly  shared  the  cost  of establishing  the  international  structures  that  would  give  effect  to  the  licence conveyed by Habode IP.

E.       The business structure

(a)      How it came about

[43]    Concerning the overall structure, there are several documents, letters, or statements in evidence which set out versions of the intended structure.   Despite variances,  the  essential  structure  contemplated  by  Mr Gibson  and  his  lawyer Mr Thompson, and adopted by Mr Curtis, is not really in dispute:

Habode IP               –      would own all the intellectual property.  It was to be    owned    and    controlled    completely    by Mr Gibson

Habode NZ             –      would be licensed by Habode IP to market, sell and distribute in New Zealand

Habode Holdings     –      would be licensed by Habode IP to promote the sale, manufacture and use of the Habode worldwide,  with  the  exclusion  of  New Zealand and South Pacific.

[44]     Mr Thompson’s description of the relationship was in these terms:

Habode Holdings Limited – to be the first stage of the internationalisation of Habode – has name registration in place.   Formation of the 49%/49%/2% company should  be  done when  Rod  gets  back.    It  can be  formed  with UGroup/Sitcur/GWFT at this point.   It will have the international master licence from Rod’s IP entity and this right after testing the market will be transferred onto Habode International Limited for a capital gain.   Habode International Limited will be owned by the Jersey holding company.

[45]     In   terms   of   Mr Gibson’s   position   within   the   scheme,   on   24 May

Mr Thompson wrote to Mr Gibson:

It is important to keep entirely separate, your personal proprietorship of the intellectual property and the trading business you share with Rick (and to a much  lesser  extent,  with  Mark).    (The  emphasis  given  to  entirely  is Mr Thompson’s.)

(b)      The New Zealand structure

[46]     The New Zealand structure was relatively straight forward.  Habode Limited, the original company set up by Gibson, Morrison and Fowler, was renamed Habode (NZ) Ltd.  This was done on 27 July 2004.

[47]     The  key  document  was  a  licensing  agreement  between  Habode IP  and Habode (NZ) Ltd.  This agreement had been tabled by Mr Gibson at a board meeting on   1 June 2004.      The   minutes   record   disgruntlement   from   Mr Fowler   who

considered Mr Gibson had again changed the proposal.   The focus of his concern was that in addition to a 5% fee, Mr Gibson was also suggesting that the initial licence fee payable by Habode NZ would include a one-off payment to Habode IP which was the equivalent of the retail value of two Habode buildings.   After discussion at the 1 June meeting, the directors agreed to reflect on the matter.

[48]     Eventually on 10 June 2004 Messrs Curtis and Fowler signed the licence agreement on behalf of Habode (NZ) Ltd.  Mr Gibson, who obviously had a conflict, was not present and did involve himself in the decision.

[49]     The agreement was for five years, with one right of renewal.  Habode IP was to set the recommended retail price which was to include a margin for the licensee (Habode (NZ) Ltd).  The agreement imposed minimum purchase obligations on the licensee which were 20 in the first year, and thereafter 120, 240, 360 and 540 units per year respectively.

[50]     There was the additional one-off initial licence fee to be paid to the licensor, together with an obligation to purchase one Habode from the licensor.  The initial licence fee was to be paid this way:

License Fee

In lieu of paying a cash sum, that would be no less than the retail price of 2 (two) HABODE buildings, applicable at the time, for the TERRITORY, the LICENSEE shall be responsible for all costs of construction, production and shipping to New Zealand of the first two HABODE buildings to a standard that matches the requirements of HABODE IP Limited.

[51]     This  was  to  prove  a  crucial  term  of  the  contract,  and  one  which  was disastrous for Habode (NZ) Ltd.  It required Habode (NZ) Ltd to meet the costs of “construction, production and shipping to New Zealand” of the first two Habodes. No monetary cap was put on this commitment which was, in effect, a commitment to translate the concept into the finished product.   It was to prove a great deal more expensive than the nominal retail cost of two Habodes.

[52]     The licensing agreement allowed for sub-licensing.   What Habode NZ did was divide the country into regions, for which it then sold sub-licensing agreements. Several would be sold at quite significant sums.

(c)      The international structure

[53]     The international structure involved a complex web of companies established in Jersey and Malta.   The detail is irrelevant to the case.   Some of the overseas companies were established, but not all of them.   The shareholding of these companies, once one strips away overseas nominee and holding companies, was in the  name  of  bodies,  often  trusts,  controlled  by  Messrs  Gibson  and  Curtis respectively.

[54]     Of crucial importance to these proceedings is the status of the international licensing agreement.   A draft had been drawn up, at Mr Gibson’s instruction, by Mr Thompson.  Under the plan devised by Mr Thompson, the recipient of the licence was to be Habode Holdings Ltd.  That company was incorporated on 28 June 2004. Entities controlled by Messrs Gibson and Curtis each took 48% of the shares, with a nominee company controlled by Mr Thompson holding the other 2% in a tiebreaker

capacity. 2

[55]     There appear to have been various iterations of the international licence that was drafted by Mr Thompson.  No one can now recall how or why they came about. Mr Gibson tabled the first draft of the agreement at a board meeting on 1 June 2004. Present were he, Mr Curtis and Mr Fowler.   The minutes record it was Mr Fowler who picked out a number of clauses requiring review and further discussion.  The specific clauses in issue were noted in the minutes.   The meeting concluded “the Directors agreed to review these specific clauses and discuss at the next meeting.”

2After a period of time, the licensing rights would be on-sold for a profit by Habode Holdings to another Habode company which was to be wholly owned by one of the Jersey entities that were  established.    It  was  by  this  means that  the  international project would  begin  its separation from New Zealand tax residency.

[56]     I note at this point a matter touched on earlier.  Mr Fowler commented on the draft agreement as if he had a role.  I have been given no explanation as to how this fitted with the concurrent actions of Messrs Curtis and Gibson in setting up the various international bodies to channel their activities through, nor what Mr Fowler knew or understood of this.  It would appear at this stage he thought he was to have an  involvement  that  the  others  did  not.    Much  later,  on  14 September 2004, Mr Thompson,  when  sending  Mr Gibson  another  draft,  commented  that  he  had deliberately not mentioned the international planning in any documentation which went to Mr Fowler, and it was over to Messrs Gibson and Curtis to mention it to Mr Fowler if they wanted.

[57]     Returning  to  the  master  licence,  whilst  Mr Thompson  prepared  those amended versions, it is not clear from the evidence what prompted the changes.  It is clear, however, that the agreement never went back to the Board and was never further discussed or signed.

[58]     It is convenient at this point to complete the history of dealings involving Habode Holdings Ltd.   The company was incorporated in Hong Kong and a bank account  opened  with  an  initial  $1,000  deposit.    That  account  was  never  used. Further, as noted, the company never signed a licensing agreement with Habode IP. There were, however, some other matters done in Habode Holding’s name.

[59]     It is to be recalled that the first attempt at completing a prototype in China was done in association with a company called Renhe.   At one point during that process,   a   manufacturing   agreement   was   entered   into   between   Renhe   and Habode Holdings Limited.   This agreement was intended to be the agreement that would govern future manufacturing once the prototype was complete.  The prototype itself was not covered by the agreement, and because the relationship collapsed, this manufacturing agreement never came into effect.  It is clear that Habode Holdings had been named as the Habode contracting party because Mr Thompson said it should be.  This instruction was obviously in anticipation of the international model Mr Thompson was setting up.

[60]   In 2005, following the collapse of the Renhe arrangement, a different arrangement was established with a different Chinese group.  The front company for the Chinese Group was South Pacific Container Corporation Ltd.  In response to an order for three units, South Pacific issued an invoice addressed to Habode Holdings. It is odd that South Pacific did this because the order it related to had been placed by Mr Gibson on Habode IP letterhead.  Further, he had written at the time of the order:

I  have  issued  this  order  from  Habode IP.     Your  contracts  and  the manufacturing  agreement  will  also  be  with  Habode IP  Limited  until  I complete the sub-licensing agreements with Habode Holdings.  As Rick is still away he was unable to sign various documents so as not to hold things up I have taken this on myself as the ultimate decision maker and owner of the HABODE intellectual property.

[61]     Continuing  on  with  the  summary  of  events  involving  Habode  Holdings, around the time of the collapse of the Renhe project, an event occurred on which Mr Curtis places considerable reliance as being indicative of the joint venture.   It came to Habode’s attention that Renhe was marketing a product very similar to an Habode.  Also, a person based in New Zealand appeared to be involved.  Mr Gibson was overseas and he authorised Mr Curtis to act on his behalf to deal with breaches of Habode IP copyright.  A well known patent attorney firm was instructed, and it in turn  instructed  a  local  Queen’s  Counsel.    The  significance  of  this,  apart  from Mr Curtis’ involvement, was that the various correspondence all referred to the file as Habode Holdings Ltd.  I can only assume this was because of the manufacturing agreement entered into between Renhe and Habode Holdings, but any breach of copyright was clearly a breach of something owned by Habode IP.

[62]     It  was  earlier  mentioned  that  Mr Gibson  was  very  protective  of  his intellectual property ownership.   An event occurred during discussions with the lawyers that is probably an example of the type of thing that kept Mr Gibson on edge.   Recalling Mr Curtis was the person liaising for Habode over the alleged copyright breach, when the Queen’s Counsel wrote initially to his instructing solicitors, he observed “as I understand it, Mr Gibson and Mr Curtis jointly own Habode IP Ltd.”

[63]     Generally it can be observed Mr Curtis was at times careless in the way he described his position, and about what letterheads he used in communicating.   He

seems  to  have  regularly  written  on  incorrect  letterhead,  and  at  times  describes himself as a managing director (when not one) or a director (when not one).   I mention this to observe that in this case one accordingly needs to be cautious about reading too much into how a third party has addressed correspondence.

F.       The development of the Habode and early difficulties for Habode NZ

[64]     As noted, following the failure of the Renhe project, a new arrangement was established with a different Chinese group.   It proceeded better than the Renhe enterprise,  although it proved expensive to translate the concept into a finished building.  Eventually only one Habode was to reach New Zealand shores.

[65]     The evidence on these events is considerable, and at this point I do not see a lot of it as particularly relevant.   It can be observed that the new project began in early  2005  and  ultimately  foundered,  as  far  as  Habode NZ  was  concerned,  in March 2006.  The one Habode that was delivered arrived in November 2005.

[66]     The collapse in 2006 appears on the face to have been quite speedy, with relationships  deteriorating  rapidly  between  Christmas 2005  and  early  March. However, as is often the case, there were issues leading up to it.  In this section I try to capture them in general form.

[67]     There  had  been  a  gap  in  Board  meetings  between  September 2004  and February 2005.  Most of this intervening period was dominated by the demise of the Renhe project.  However, prior to the board meeting in February 2005, Mr Gibson wrote to the other directors raising issues that were to mirror the concerns that arose

13 months later.  The matters Mr Gibson raised included:

a)        he was taking the next few days off to consider his position;

b)concerning the global position he did not care if only 10 Habodes were produced in 2005, he was in no hurry;

c)       he was happy to continue to fund the first one on his own, but it would not be by way of funds into Habode NZ;

d)he had “thought about your suggestion and unfortunately IP is not up for negotiation”;

e)       there  were obviously competing agendas  and  he (Mr Gibson) was offended that Mr Curtis could suggest that the existing agreement be renegotiated;

f)        issues arising from the Habode IP/Habode NZ agreement that needed discussion included how Habode NZ was going to meet its obligations to  Mr Gibson,  termination  of  Mr Gibson’s  employment,  and  an intimation that Mr Gibson might resign if it looked like the company could become insolvent.

[68]     At the subsequent Board meeting, Mr Curtis led a discussion of funding.  At that point his company, Curtis Holdings, had lent Habode NZ $160,000.   Further, whilst the shares of Messrs Fowler and Curtis were fully paid up ($10,000 and

$45,000 respectively) Mr Gibson was still to pay up $33,500 in capital.  It was noted that Mr Gibson was owed $50,000 in unpaid project management fees through to November 2004.  Mr Curtis indicated he would advance further funding but wanted better security before doing so.  It was estimated a further $200,000 was needed to land the first two Habodes in New Zealand.

[69]     Each  director  agreed  to  think  about  commercial  strategies  to  provide

“commercial and fair security” to any loan providers.

[70]     The Board met again nine days later, but the sole topic seems to have been targeting the sale of regional licenses.  There is no record of further discussion of the finances.

[71]     Before progressing the narrative it is convenient to comment on this funding issue.   Mr Curtis, through Curtis Holdings Ltd, had advanced $160,000 on fully commercial terms (15% p.a. interest), and including compound interest where any

was outstanding, and penalty rates.  In late June 2005 the sale of regional licences brought  in  $418,000.     Consequent  upon  the  company  receiving  that  money, Mr Curtis withdrew funds in repayment of the loan he had advanced.  So after that point his funding was only his paid up share capital, and whatever other unpaid effort he had contributed, and possibly some bills which he had paid directly.

[72]     Despite significant further sums coming in throughout July and August from further licence sales, in November and December Mr Curtis needed to advance a new loan of $150,000, on the same terms as earlier.  This held matters financially up to Christmas, but by early 2006 more money was needed.   Mr Curtis would not advance more money unless the shareholding arrangements were changed, and at that point the crisis deepened.

[73]     Returning to the narrative, it can be observed that throughout much of 2005

Mr Gibson was in China working on the prototype.  His correspondence throughout the year indicates a viewpoint that he was working hard, and suggests a feeling on his part that the effort involved was unappreciated; there was also an increasing frustration with funding delays.  Mr Curtis was primarily based in New Zealand.  His activities here included promoting regional licence sales, and responding to expressions of interest both domestically and internationally.  He was also arranging the  work  that  would  be  needed  to  be  done  once  the  prototype  arrived  in New Zealand.   It was hoped to work with BRANZ to get a generic sign-off on building code compliance that would greatly assist with building consent issues with individual councils.

[74]     Illustrative of the issues that appear in the correspondence throughout the year is this email from Mr Gibson to Mr Fowler in June 2005:

Good day Mark.  Hope your trip up to the USA went well.

Have been thinking about something you have mentioned on a number of occasions and thought that I make things clear.  I will be doing the same to Rick when he is back from Fiji.

HABODE (NZ) Limited has the exclusive rights to Market and Sell HABODE’s in New Zealand.  As documented in board meetings HABODE (NZ) is short on cash and all the stake holders especially Rick was not prepared to disproportionally put more funds at risk with only the same rate of return to all the other stake holders.

What has been missed by both you and Rick is that I continue “FULLTIME PLUS”  ensuring  that  HABODE  (NZ)  can  deliver  a  finished  product  to market ASAP.

I have funded all progress on this project this year.  Rick has contributed no funds  to  the  continued  development  of  H3  or  the  first  prototype.    The pressure to make sure that this unit lands here sooner rather later is on my good word and personal guarantee of payment to our suppliers in China as the license upfront payments are still yet to be sighted.

So you don’t get miss lead the International License Rights in Countries other than New Zealand still remain with HABODE IP Limited and will do so until I receive a financial offer that is attractive for me to grant such licenses.  It could be that I just license country by country as I have with NZ or even as small as state by state in the USA.

Don’t get your hopes up that your 10% of NZ will see you retire with an International cash flow.  The success NZ will be very profitable in its own right.  I have been offered significant sums for other countries but have told them to wait until I get a fix on the real value of such.  It’s likely to be in the millions.

Have a good trip

Cheers

R

[75]     In response to this, Mr Fowler accused Mr Gibson of systematically reducing the value of his minority interest.   He was unhappy he was limited to 10% of New Zealand  and  regarded  it  as  a  breach  of  good  faith  and  unethical  business practices.    He  resigned  but  appears  to  have  then  reconsidered  at  Mr Gibson’s suggestion.

[76]     Eventually, despite these relationship and funding issues, the first Habode arrived in New Zealand in November 2005.  Once here, it needed considerable work to meet building code standards.  One of the regional licensees was brought on board to  assist  with  getting  the Habode up  to  New Zealand  building standards.    This person, Mr Frost, wrote on 16 November setting out what was needed.   The many items were a combination of missing parts, travel damage and poor construction that would not meet standards.  The high point for this Habode was that it was used in

early 2006 during the visit to Wellington of the Round the World Yacht race.  It was positioned prominently on the wharf, where it served as race headquarters.  It then remained on the wharf for a further short period as a show home.

[77]     Whilst  this  was  happening  in  New Zealand,  in  the  last  part  of  2005

Mr Gibson was in China trying to finalise the production of two more units.  He was anxious for payments to be made to ensure there were no delays, and to avoid him having to spend Christmas in China.   In correspondence, Mr Gibson detailed the money required to complete the next two units, the costs for new dies, and what would be required to build the 12 units needed to meet the contractual obligations to the  regional  licensees.    (An  Habode  unit  was  included  within  the  price  of  the regional licence fee.)

[78]     There  was  a  particular  testiness  to  the  correspondence  from  Mr Gibson around this time, especially about funding delays.   It was responded to in kind by Mr Curtis.   At one point Mr Curtis commented how he had already lost $100,000 once (the Renhe project) and how he would take precautions before doing so again. This Curtis email provoked a further Gibson response where he made the point that as regards the $100,000 loss, it was a case of “we” not “you” who lost it, and that the whole thing was a joint venture.

[79]     Mr Curtis in his email had also noted that the whole of the $600,000 paid in by the regional licensees had been spent.  This reflects that at the same time pressure was starting to come from the licensees who had paid their deposits and not received their Habodes.

[80]     On 19 December Mr Gibson again emailed, indicating progress in China. Two further units were booked to travel in the New Year and he hoped a third may be ready to be sent at the same time.  Everything was paid in China except for the furniture for the units, and some power pieces.  The issue, however, was where to get further funding to press on with more units.  Thirty percent deposits were needed for each unit, as well as money for the furniture.   The upcoming Chinese New Year would represent a four week halt on any work so unless deposits were paid now, the

next seven units would not be built before the Chinese New Year and the delays would be significant.

[81]     A further email sent on 24 December by Mr Gibson is a convenient end point to this section.   Mr Gibson was obviously very annoyed.   Delays meant he would now spend Christmas Day in transit.   He considered his credibility had suffered because of the funding situation and clearly he thought Mr Curtis was responsible. He observed that had Mr Curtis told him of funding difficulties earlier, he could have taken steps to himself inject sufficient immediate cash.

G.      The collapse of Habode NZ

[82]     The convenient starting point to recount the collapse of Habode NZ is the Board  meeting  of  10 January 2006,  which  of  course  took  place  against  the background of the December correspondence I have already referred to.   Various funding matters were discussed:

a)       Mr Gibson offered to buy the landed Habode for $75,000.  This was accepted;

b)Outstanding NZ invoices totalled $75,000.  More money was needed and  Mr Curtis  was  authorised  to  seek  investors.    In  the  interim Mr Curtis would transfer US$12,000 as a deposit on four further units.

[83]     The next Board meeting was 30 January – 1 February.  Between this and the earlier 10 January meeting Mr Gibson had again been to China, and at the meeting he first provided an update on production.   Cash flow was then discussed.   The estimates were of an immediate need for $80,000 plus an additional $250,000 to complete and deliver six more units.  Mr Curtis said he would advance the money but only under additional terms and conditions.   These were that Mr Curtis could increase his shareholding by taking some from each of Messrs Gibson and Fowler. This increased shareholding would enable Mr Curtis to attract a cornerstone investor. If this was agreed to, Mr Curtis would continue to fund in the interim to allow the next six units to proceed.

[84]     The Board meeting spanned two days.   On the evening of the first  day Mr Gibson had formally communicated to the other two indicating concerns about Habode NZ’s solvency and saying he would not commit to any further debt until satisfied  this  was  resolved.    A  fuller  email  said  he  had  taken  advice,  and  that Habode NZ needed to advise creditors of short term difficulties.   It was partly in response to this communication from Mr Gibson that Mr Curtis developed the new funding arrangements.

[85]     13 February was the next meeting.  At that meeting agreement was reached and the directors shook hands on it.  The terms of the agreement were that:

a)       Mr Curtis  to  buy 20,000  shares  from  Mr Gibson,  and  5,000  from Mr Fowler.  That would leave Mr Gibson with 25%, Mr Fowler 5%, and Mr Curtis 70%;

b)Mr Curtis  would  sell  some  of  his  increased  shareholding  to  an investor.  Profit on the resale would be split 50/50 between Mr Curtis and the other two;

c)        Mr Curtis would buy the Wellington regional licence;

d)       Mr Gibson would buy the existing Habode for $75,000;

e)        Habode IP would extend the licence agreement with Habode NZ to

30 years;

f)        in the interim Mr Curtis would provide loan funding for six more units.

[86]     On 14 February Mr Gibson emailed the other two confirming his agreement so as to allow Mr Curtis to invest funds.  He said he would provide a more detailed agreement.

[87]     On  18 February  Mr Gibson  emailed  Mr Fowler  expressing  frustration  at having agreed to the deal so close to the project turning profitable.  He indicated he was going to draft a non-negotiable counter offer.

[88]     On  20 February  Mr Gibson  sent  Mr Fowler  a  draft  deed  containing  the counter offer, and later that day said Mr Fowler could send it on to Mr Curtis.  The covering email from Mr Gibson was very critical of Mr Curtis.

[89]     The Deed of Arrangement drafted by Mr Gibson differed in several respects from that which had been earlier agreed on 13 February.  Profit on any share sales within the first five years was to go to the shareholders in proportion to previous shareholding.  Thus a profit of $100 would be split 45/45/10.  The revised licensing agreement from Habode IP to Habode NZ would be for 20 years with a 10 year renewal.  Curtis Holdings was to guarantee Habode NZ to whatever level needed to meet its obligations to Habode IP under its licensing agreement.

[90]     Also added was a new production manager contract between Habode NZ and UGroup,   Mr Gibson’s   company.      Effectively   UGroup   would   contract   out Mr Gibson’s services to Habode NZ.

[91]     Mr Fowler, as requested, sent the proposed agreement on to Mr Curtis.  At the same time he suggested to Mr Gibson that under these new arrangements, it would be fair if Mr Curtis did not have to pay for the Gibson/Fowler shares until he had actually on-sold them.

[92]     At a Board meeting of 1 March, the revised Gibson Deed was agreed to, but with  some  adjustments  to  reflect  some  of  the  earlier  meeting.     The  main re-adjustments were to include a clean slate clause saying that the new agreement superseded  previous  ones,  and  a  return  to  a  30 year  licence  agreement  for Habode NZ without payment of any additional fee.

[93]     Mr Fowler made the agreed changes and sent the document to Mr Curtis. However, rather than sign, on 3 March 2006 Mr Curtis wrote to Mr Gibson, stating that he wished to proceed solely on the basis of what had been originally agreed at

the handshake meeting of 13 February.  In his view an agreement had been reached and should be implemented.  He requested confirmation from Mr Gibson within five days of unconditional acceptance to the 13 February arrangement.

[94]     On 6 March Mr Gibson communicated his responses.  These had the effect of terminating the project with his two business partners:

a)       he resigned as director of Habode NZ.  He noted that the Board was dysfunctional, that Mr Curtis had opened a separate account without approval,  that  in  his  view  the  company  was  insolvent  because Mr Curtis had not funded it as he had committed to, and that the company was in breach of its agreement with Habode IP;

b)he  communicated  that  he  considered  the  1 March  minutes  to  be inaccurate;

c)       wearing his IP hat, he cancelled (on 7 March) the licence agreement between  Habode IP  and  Habode NZ,  starting  that  this  was  done because Habode NZ was in breach of the minimum purchase criteria, and because it was insolvent.

[95]     Later on, UGroup and Gibson Rusden made demand for money owing to them by Habode NZ.  This demand had the eventual result that Habode NZ went into liquidation.

[96]     In terms of the factual narrative just set out, major topics not yet addressed are the aftermath, and some dealings that had occurred over the past year regarding Australian interest in the project.  The aftermath not yet covered includes Mr Gibson forming  and  licensing  a  new  company  to  do  that  which  Habode NZ  had.    He received significant funding from a new investor who was one of the people who had already  bought  a  regional  license.    Later,  Mr Gibson  also  licensed  Habodes  in Australia for large sums of money.

[97]     Despite  not  yet  having  covered  these  matters,  I  have  concluded  it  is preferable to stop here and address the primary contention of Mr Curtis.

Plaintiff’s case

[98]     The  plaintiff’s  case  is  that  there  was  a  personal  joint  venture  between Mr Gibson and Mr Curtis concerning the Habode product.  The joint venture was to do these things:

a)        fund, develop and physically produce the Habode;

b)        protect the intellectual property of the concept;

c)        develop the marketability of the product;

d)       develop the international marketing and distribution of the product. [99]       In  Mr Laurenson’s  submission,  a  joint  venture  exists  when  there  is  an

arrangement or  understanding between  two or  more  parties  that  they will  work towards a common objective.  If that understanding is progressed to the point where each is depending on the other to make progress on the common objective, then the position arises that equity imposes duties on the parties.  A relationship of trust and confidence arises.  Every party is required to act in the interests of all the parties to the common enterprise, and is entitled to loyalty to the joint cause.

[100]   As noted, originally the case was framed as alleging that Mr Gibson breached those duties by the manner in which he acted when Habode NZ got into difficulty, and when on behalf of Habode IP he cancelled Habode NZ’s licence.  Based, as is all of  this  submission,  on  the  Supreme  Court  decision  in  Chirnside  v  Fay  [2006] NZSC 68, [2007] 1 NZLR 433, it is said that the remedy for these breaches is profit stripping through account. Mr Gibson subsequently received large sums of money through licensing sales to Australia and must account to Mr Curtis for them.

[101]   The shifted focus on closing comes from a particular aspect of Tipping J’s judgment in Chirnside.  There his Honour had noted that a joint venture of this sort can be terminated.   The plaintiff accepted that this happened on 8 March 2006, in fact by a communication from Mr Curtis to Mr Gibson in response to the Gibson

decisions already outlined.  On termination, Tipping J states that any assets, tangible and intangible held by or on behalf of the joint venture will usually be held on trust for the joint venture members.   It will be necessary to then divide them, in a way similar to that which is done on dissolution of a partnership.  Once the arrangement has become contractual, termination will usually be governed by the terms of the contract, but in the absence of a contract dealing with it, equity will fill the deficit. Mr Laurenson sought to apply this passage to these facts.

[102]   Mr Laurenson  submits  that  the  product  that  was  sold  by  Mr Gibson  in Australia was an asset of the joint venture.  Mr Curtis is accordingly entitled to his share of those sales which were for approximately US$5 million.  Proper accounting should be ordered so that the Court can assess what Mr Curtis is entitled to.

[103]   Obviously key to this submission is the existence of a joint venture so I turn to the arguments made in support.  I consider it important, though, to emphasise first what is claimed – a joint venture personal to Mr Gibson and Mr Curtis that sat above the  commercial  and  contractual  arrangements  entered  into,  and  which  in  effect owned “the Habode project”.   Recalling that there was from the outset a plan to market Habodes internationally, what is being claimed is that at some point after Mr Curtis became involved there was a new overarching joint venture between just these two men.

[104]   The first aspect on which the plaintiff relies to establish the existence of such a joint venture are the various actions done by Mr Curtis from when he joined in December 2003 to when it ended in March 2006.  It is said these actions were central to the enterprise and illustrate that Mr Curtis was an equal partner.  The particular events noted are first that Mr Curtis and Mr Gibson travelled together to China in early 2005.  It is then noted that Mr Curtis not only provided the funding3, but also was  key  in  obtaining  sales  of  the  regional  licences.     He  was  involved  in

3Although not crucial to the decision, I observe I consider Mr Curtis’ claims of “providing the funding” to be much overstated.  Putting to one side unpaid contributions by all involved, in terms of direct cash there was an initial loan of $160,000, which was repaid in full, including all interest.   Mr Curtis organised this repayment as soon as the company’s cash reserves increased due to the payment of the regional licence fees.  There was then a later advance of

$150,000 but again it was a commercial loan.  Aside from that, Mr Curtis paid up his shares as did the others.  No doubt he also incurred other costs, but I do not see that he funded the project. The greatest cash contributors were in fact the regional licence fees.

correspondence  with  the  Chinese  company  manufacturing  the  units,  and  had  a central  role  in  discussion  with  BRANZ  about  certification  in  New Zealand. Generally a lot of correspondence was addressed to “Rod and Rick”.

[105]   It is said that throughout the two and a quarter years, there are numerous examples of labels being used by those involved which also highlight the mutual dependency of the arrangements.  At times Mr Gibson refers to he and Mr Curtis as partners (four times), and once to there being a joint venture.  The draft agreements that emerged during the last attempts in February 2006 to achieve new funding arrangements likewise expressly recognised mutual roles and efforts.

[106]   It is also submitted to be significant that Mr Curtis assisted in addressing perceived breaches of the intellectual property.   Both in relation to Renhe, and in relation to another New Zealand breach, Mr Curtis was authorised by Mr Gibson to instruct and liaise with solicitors.   This is said to show that their relationship was more than the position reflected in the corporate structures.

[107]   A second specific aspect relied upon by Mr Curtis is what happened when a West Australian company expressed interest in Habode.   The original inquiry was directed to Mr Gibson.   However, it was passed on by him to Mr Curtis who then responded.  It was around that time that Habode Australia (Pty) Ltd was created.  A letter was written by Mr Curtis (there is a dispute as to whether Mr Gibson knew of it in advance and approved it) where Mr Curtis describes himself as a director of Habode Australia (Pty) Ltd.   This involvement is submitted to illustrate that there was in place, regardless of the formal licensing not yet being complete, an arrangement whereby the two men would join in the international business and they were working together towards that.  Also illustrative of this is said to be the work done by Mr Thompson to set up international corporate structures for both of them.

[108]   Because of my later conclusions it is convenient to address this point now. There are inconsistencies in relation to the timing of the incorporation of Habode Australia (Pty) Ltd which I am unable to resolve or draw firm conclusions from.  It is true that the timing seems significant in that it roughly coincides with an inquiry from Western Australia.  However, Mr Curtis is not a shareholder in the company set

up, and at no stage was a director.   What happened is much more consistent with Mr Gibson’s oft stated view that the international situation was still at large and within his control.  However, inconsistent with this, on 2 December 2005 Mr Curtis writes a letter on Habode Australia (Pty) letterhead, and signed it as a director.  The latter was untrue, but it is interesting he has access to that letterhead, and plainly he therefore knew of Habode Australia’s existence.  He must also have known he was not a shareholder or director.  It is this letter of 2 December concerning which there is a dispute as to whether Mr Gibson approved it before it went out, or even knew of it.  I am unsure on the answer to that, but would be surprised if Mr Gibson agreed to it being written as it was.   The whole topic is riddled with inconsistencies, but whatever their explanation I do not see these events as advancing the plaintiff’s claim for the existence of a joint venture as claimed.  Overall they are, in my view, more consistent with Mr Gibson’s approach to the issue.

[109]   Mr Laurenson  also  points  to  the  various  steps  taken,  and  the  formal agreements signed by the parties, without getting independent legal advice.  This is said to highlight the degree of trust and dependency that existed between the men.

[110]   The  plaintiff  also  relies  on  the  evidence  of  Mr Thompson  who  said  he regarded the Habode project as a joint venture.  The plaintiff emphasises that Habode Holdings was formed with the two men as joint shareholders, and it entered into an agreement  with  Renhe.     It  is  submitted  it  placed  orders  with  South  Pacific Containers.   These events, plus Mr Curtis’ general involvement, plus his specific involvement  with  IP  breaches  and  the  West  Australian  proposal  to  licence  the product there, show that the international business was part of the joint venture.

[111]   Overall the case is that there was a joint venture that can be called the Habode project.   Some of the steps were formalised by the creation of companies and  the  entering into  of licensing agreements.    Some of  the  steps  were  not  so formalised, but nevertheless existed and were acted on by the partners to the joint venture.  The Habode project was to bring Mr Gibson’s design into reality, to market it in New Zealand, to use that activity as a vehicle to perfect the concept, and then together to launch it internationally.

[112]   The joint venture assets as at termination are claimed to be:

a)        the  value  underlying  the  Habode  unit  to  the  stage  it  had  been developed;

b)        the value of another unit (Ihouz, yet to be discussed);

c)        the value of the potential business in New Zealand and internationally.

The $5 million gained from the Australian sale is an asset because it directly flowed from the initial West Australian inquiries.

Decision

[113]   I do not separately address the submissions advanced for Mr Gibson.  They are reflected in my decision and aspects will be highlighted as necessary.

[114]   This case is obviously quite different factually from Chirnside.  In that case the two men were involved, together and only them, from the outset.  They had plans to develop a specific site; they visited it together.   They signed a conditional agreement to purchase the site, with Mr Chirnside listed as purchaser, as “a trustee for a company”.   Each of the men worked on finding large scale tenants for the building that would be developed.  Eventually Harvey Norman became committed as a tenant but by then Mr Chirnside no longer wished to work with Mr Fay.  Instead, since he was purchaser on record of the property, he brought in other investors and shut Mr Fay out.

[115]   It is to be noted that in Chirnside both the trial Court and the Court of Appeal considered there was a joint venture, and in the Supreme Court this was not challenged.  That Court noted that the absence of a formal written agreement could not detract from the mutual commitments that clearly existed.  There was never any written agreement between the parties in Chirnside.  It was just a relatively simple oral arrangement to buy a section, find a tenant, and develop a building with that tenant in mind.

[116]   The current case is obviously more mixed in nature, since there were to be, and indeed were, formal arrangements entered into that manifested the relationship. In particular there was a company formed and the three participants in the scheme became directors of that company.  By forming a company the participants accepted the  duties  and  responsibilities  of  the  companies  legislation.    They accepted  the company  was  the  vehicle  through  which  they  were  to  advance  their  plan. Importantly a formal licensing agreement was signed between that company and the owner of the Habode intellectual property.  That agreement dictated the relationship between Mr Gibson as owner of the intellectual property, and the three partners in the plan to develop it.  However, it is equally clear that Habode NZ did not represent the whole of the grand plan; if it all worked out there was more to come.  Hence it is a mixed situation of the formal, and the inchoate.

[117]   Mr Vincent placed considerable weight on another Supreme Court decision decided after Chirnside, namely Amaltal Corporation Ltd v Maruha Corporation [2007] NZSC 40, [2007] 3 NZLR 192. There two fishing companies incorporated a third company to conduct their joint fishing activities. Eventually there was deceitful conduct by one of the parties. A claim was brought for breach of fiduciary obligations, but it failed. The Supreme Court ruled that where the parties chose a corporate structure, it was unlikely that their relationship as a whole would be fiduciary in nature. The Court observed:

[19]     ...  These  were  commercial  companies  who  had  elected  not  to continue as partners and, instead, to frame their relationship by internal and external rules applicable to a company, supplemented by a contract between them  in  their  capacity  as  shareholders.    There  is  no  warrant  then  for imposing upon them generally obligations not found in the company’s own constitution, in companies legislation or in the terms of the contract.   As partners they would have owed fiduciary duties to one another, but their relationship no longer took that unincorporated form.  They had deliberately substituted  the  Companies  Act  regime  for  that  of  the  Partnership  Act. Mr Miles helpfully provided the Court with a table which compared the provisions of the partnership agreement and the shareholders’ “joint venture agreement”, but it merely demonstrated the great differences between the two structures, which perusal of the documentation itself confirms.

[20]      The characterisation of a commercial arrangement as a joint venture can be unhelpful as a guide to whether the parties owe each other fiduciary obligations.   In our view, when commercial parties elect to use an incorporated vehicle for a venture that can only loosely be called a joint venture, it is unlikely that their relationship as a whole will be fiduciary in nature. To that extent we agree with the Court of Appeal.

[21]      We respectfully differ from that Court, however, when it comes to the accounting and tax functions of the relationship.  It is well-settled that, even in a commercial relationship of a generally non-fiduciary kind, there may  be  aspects  which  engage  fiduciary  obligations  of  loyalty.    That  is because in the nature of that particular aspect of the relationship one party is entitled to rely upon the other, not just for adherence to contractual arrangements between them, but also for loyal performance of some function which the latter has either agreed to perform for the other or for both or has, perhaps less formally, even by conduct, assumed. (My emphasis.)

[118]   Amaltal is helpful to the Gibson interests to the extent that it emphasises the importance formal steps such as incorporation can have.   This was equally emphasised by Tipping J, for example, in Chirnside where his Honour noted that once a written contract is entered into, it will normally dictate the incidents of the relationship and govern the termination of the relationship.  Equally, however, as the italicised  passage  shows,  adoption  of  a  formal  structure  for  one  part  of  the relationship does not rule out the imposition of fiduciary obligations in relation to other parts.  As is usually the case, it depends on the particular facts.

[119]   In my view this case does not easily fit with any other.  Clearly there was a general plan which people worked towards.  The plan was to involve formal steps along the way.  The establishment of Habode NZ and the signing by it of a licensing agreement were major steps in implementing the plan, and in thereby governing the nature of the relationship between those involved.   However, the work done by Mr Thompson shows Habode NZ was not the complete plan.  More was anticipated. Habode Holdings was a manifestation of what more was intended, although the fact that its shareholding lacked Mr Fowler was a change.   A licensing agreement was clearly also part of the plan. That is what never happened.

[120]   Against that rather mixed bag of complete and incomplete structures, one has to assess the specific claim now contended for.  I summarise that as being:

a)       there  was  an  arrangement  or  agreement  specific to  Mr Curtis  and

Mr Gibson whereby together they would develop the Habode project;

b)this arrangement would be implemented by developing the concept into an actual building, marketing it in New Zealand whereby together they would develop the Habode project;

c)       this arrangement would also be implemented by then launching the Habode concept internationally, again through a licensing agreement from Habode IP.

[121]   If that claim is established, then the next part of the plaintiff’s case is to show that:

a)        on  termination  of this  agreement,  the two  men  jointly owned  the

Habode project.  It was an asset of the joint venture;

b)what Mr Gibson sold about two years later in Australia was a part of that asset to which Mr Curtis was therefore entitled.

[122]   In my view the claim fails at the earlier two steps.  I have identified them as two steps because I have found it assists analysis, but there is a large measure of overlap and it could be framed differently.  There are two main reasons why I do not accept that there was a personal joint venture between these two men which gave rise to  separate  fiduciary  obligations,  or  which  acquired  assets  other  than  as  was suggested by the formal structures.

[123]   First,  the  essential  structure  was  in  place  before  Mr Curtis  joined.    The original members had a plan, and they had set up a company to implement the plan. One of those three roles, undertaken by Mr Morrison, was the role Mr Curtis then took over.  It is to be noted that Mr Curtis, himself using a trust vehicle, joined the existing plan by means of taking over a shareholding in a company.

[124] The plaintiff’s claim must be that Messrs Curtis and Gibson, sometime subsequent to him joining, formed a separate overarching arrangement.   But there was no direct evidence of this happening, no suggestion of a meeting or meetings, and the claimed separate arrangement seems to be the same one that the original members always had.

[125]   This leads to consideration of the position of Mr Fowler.   He was a 10% shareholder in Habode NZ.   He was a member of the plan from the outset.   He clearly thought he had a role in the international plan, as his correspondence sent at

the time of realising he was being shut out indicates.  No one called Mr Fowler to testify, and I decline to speculate what was happening in regards to him and why.

[126]   The claim by Mr Curtis really amounts to this.  First that there was a plan by three – Gibson, Morrison, Fowler.  Then the three changed – to Gibson, Curtis and Fowler.  Then the three became two.  The new plan of the two was the same, but the international part of it no longer involved Mr Fowler.  There is material that supports this  analysis  in  that  Mr Fowler  was  shut  out  of  any  of  the  work  done  by Mr Thompson, but that is the only supporting evidence.  At the same time there is correspondence from Mr Gibson, just one example of which is the email cited at [74],  which  suggests  that  as  far  as  Mr Gibson  was  concerned  the  international licensing was  still  at  large.    The plaintiff  has  led  no  direct  evidence  as  to  the establishing of this new joint venture, and seeks to have me infer it from the Thompson  work  and  the  various  things  Mr Curtis  did.    I  do  not  consider  that evidence to be sufficient.

[127]   The  second  key  point  is  that  it  was  always  accepted  by  everyone  that Mr Gibson would own and control the IP.  The group’s participation in the Habode project was always only to be through licensing arrangements.  The separate roles were  repeatedly  emphasised  by  Mr Gibson,  and  by  Mr Thompson  as  solicitor throughout 2004.  It would be wholly inconsistent with this recognised and agreed structure to suggest that there was a separate joint venture between Mr Curtis and Mr Gibson which had somehow acquired ownership of the project as a whole such that Mr Curtis is entitled to his share, as owner, of the fees paid by an Australian company to acquire a license.  It is in my view not a credible proposition.

[128]   The separate status of Mr Gibson as sole owner of the Habode concept was constantly  emphasised   and  the  licensing  agreement  between  Habode IP   and Habode NZ is an example.  Mr Gibson, as Habode IP, is authorised by the agreement to set the retail prices for the units, it is he who must approve sub-licenses, and it is he who is guaranteed minimum purchases by Habode NZ.  The international licence would have been another example.

[129]   If things  had  worked  out,  Habode Holdings  would  have  had  a  licensing agreement that enabled it to control and profit from Habode sales internationally.  It looks as if Messrs Curtis and Gibson intended to shut Mr Fowler out of that.  They were the sole joint shareholders.4     The claim of a joint venture, and the claimed ownership by the joint venture of the Habode project, is an attempt to create the situation that would have existed had Habode Holdings obtained the licensing rights.

[130]   Whatever plans Messrs Curtis and Gibson made, there is nothing in the case that leads me to conclude it was an arrangement that had the effect of conferring on the two men, outside a formal licensing agreement, joint ownership of the international Habode project.   The evidence points the other way, namely that the plan  conferred  no  rights  until  formalised  by  creating  a  company  or  signing  a licensing agreement.

[131]   The evidence on which the plaintiff relies for the drawing of inferences has a considerable caveat.  It needs to be remembered that the two men, and Mr Fowler, were shareholders in, and directors of, Habode NZ.  That company had assumed the development obligations.  It had also sold, for considerable sums of money, regional marketing rights.  The vast bulk of activity undertaken by the participants is at least as equally referable to this circumstance, than to the idea of a separate joint venture.

[132]   I  place  Mr Curtis’  involvement  in  pursuing  copyright  breaches  in  that category.   Mr Fowler was in China on Habode NZ’s behalf, and domestic issues arose.    Although  strictly  the  concern  of  Habode IP,  Habode NZ  was  obviously affected by breaches in New Zealand of the copyright.   Asking Mr Curtis to liaise with the lawyers does  not seem to speak particularly towards the claimed joint venture.

[133]   The  best  evidence  for  a  joint  venture  is  Mr Curtis’  role  in  handling international inquiries.  That is conduct plainly referable to the wider plan, as indeed is Mr Thompson’s work in establishing overseas holding companies for both of them.  The exclusion of Mr Fowler is also indicative of some separate planning.

4In saying that I deliberately put to one side as irrelevant Mr Thompson’s 2% shareholding as an independent tiebreaker.

[134]   As noted, although this latter material hints at some separate arrangement between the two, it has not led me to the point of concluding there was a separate joint venture.  A joint venture would have to be inferred because there is no direct evidence.   It is a claim hindered by the reality that otherwise all the arrangements were effected by formal steps – forming companies and entering agreements – and by the fact that most of the evidence is equally referable to the existing formal arrangements and obligations.

[135]   Whatever the extent of the relationship between Messrs Curtis and Gibson, I am firm in the view it can only be said they had a common plan in the sense that the relationship did not own the international marketing rights of Habode or in any sense acquire that which it was planned to give to Habode Holdings by the signing of a formal licensing arrangement.

[136]   The proposition that there existed a separate joint venture between Mr Curtis and Mr Gibson to market Habodes internationally was not proven, but it was not a fanciful suggestion.  There was some evidence to support it.  That being so, in case I am wrong in my conclusion, it is appropriate to consider the point initially advanced, still pleaded, but not pursued in closing : did Mr Gibson breach a fiduciary duty to Mr Curtis as regard the plan to confer an international licence on Habode Holdings?

[137]   In  this  regard  Mr Vincent  argued  that,  even  if  there  was  found  to  be  a separate venture, there could be no separate fiduciary duties.  In his submission any joint venture became subsumed in the corporate entity Habode Holdings.  Thereafter the Companies Act was the sole source of duties.  This argument seeks to equate the present case with Amaltal discussed earlier.  I would have agreed if, at the same time as Habode Holdings was created, the other steps were also done to complete the transfer of the plan to a formal corporate structure.  This would have required the licensing agreement to be also finalised.   Failing that, and assuming a prior joint venture existed, I do not consider one could rule out the imposition of fiduciary duties in relation to completing the plan.  In other words, as regards empowering the corporate structure by licensing it, it seems to me there could be recognised to be fiduciary obligations between the two men.

[138]   Although it seems to me that it can be argued that fiduciary duties existed (if there was a joint venture), I do not consider any criticism can be made of Mr Gibson in relation to the failure of Habode Holdings to acquire a licence.  At Habode IP’s expense, he instructed the solicitor to draft a licensing agreement.   He tabled the draft at a Habode meeting for discussion.   Finalisation was deferred by mutual agreement.  There is no evidence Mr Gibson stalled any further consideration, nor that Mr Curtis asked for it to come back on the agenda.  The reality is that it just had not been done at the time the joint venture ended, but there was no breach of fiduciary duty in that regard up until then.

[139]   Before concluding on these issues, and relevant to the fiduciary duties topic, I wish to touch on one other aspect of the evidence.  Both parties made suggestions that the other had, throughout 2005 and early 2006, been engaged in dealings and discussions behind the other’s back as regards the international market.  I record that I was far from satisfied either party came anywhere near establishing that point.

[140]   In reaching that conclusion as regards Mr Gibson, I did have regard to the fact that after the collapse in March 2006 he was able to set up new structures and partners very quickly in New Zealand, and relatively quickly in Australia.  However, I do not consider those events to be evidence of any prior breach of fiduciary duty.

[141] Likewise, I record for completeness and fairness that there were some communications between Mr Curtis and overseas people which implied that he had been involved in discussions of Habode sales that were not disclosed to the claimed joint  venture.     I  did  not  find  Mr Curtis’  explanation  of  the  correspondence particularly satisfactory in that to be correct it would mean that people had written to him, and expressed themselves to him, in an odd way.  However I did not form an unfavourable view of the credibility of either party and accordingly accept that there was just some unexplained oddity in how people wrote to Mr Curtis.

[142]   To conclude therefore on this aspect:

a)       I do not accept there was a separate joint venture between Mr Curtis and Mr Gibson;

b)I  accept  there  is  some  evidence  that  there  was  one  as  regards international sales, but due primarily to the absence of direct evidence about its establishment, and because most of the evidence is more referable to the existing Habode NZ arrangements, I have not found myself satisfied to the appropriate standard as to its existence;

c)       if such a separate arrangement existed, it definitely did not include or acquire ownership of the Habode project as the plaintiff contends. The joint venture’s right and capacity to market internationally would only ever have been acquired by means of an international licensing agreement conferred on Habode Holdings;

d)if such a separate arrangement existed, I do not consider that the failure of the joint venture to acquire an international license was the responsibility of Mr Gibson in the sense that I do not consider he was in breach of any fiduciary duty to Mr Curtis in this respect.

[143]   These conclusions have the effect of rejecting Mr Curtis’ claim but there are other topics that arose on which it is appropriate to make comment.

Other topics

A.      The events leading to collapse of Habode NZ

[144]   The  original  claim,  as  I  understand  it,  was  that  Mr Gibson’s  actions  in March 2006 as regards Habode NZ were a device by him to get rid of the original arrangement and allow him to set up with a new group.  It was forcefully observed that as a consequence of what happened, Habode NZ contributed more than a million

dollars to the development of the Habode which Mr Gibson received the benefit of, whilst his fellow shareholders received nothing.

[145]   Consideration  of  this  submission  must  begin  with  recording  the  reasons Mr Gibson gave for his actions.   When he resigned as a director of Habode NZ Mr Gibson said the Board was dysfunctional (undoubtedly true by then) and that the company was insolvent.  When on behalf of Habode IP he terminated the license, he referred to the insolvency of Habode NZ, and to breaches by Habode NZ of its obligations to make purchase orders.   The latter was plainly a nonsense since no Habode useable in New Zealand had been produced so there was no capacity on the part of Habode IP to meet any orders placed by Habode NZ.

[146]   The legitimacy of Mr Gibson’s other reason turns on whether Habode NZ was indeed insolvent.  On this there was competing evidence from financial experts. The  issue,  however,  is  really resolved  by what  one  concludes  about  Mr Curtis’ position regarding funding.   Both experts accept that the company would not be insolvent if there was an arrangement in place whereby Mr Curtis was agreeing to underwrite existing and future debts by providing funds to meet them as they arose.

[147]   In my view Mr Gibson’s assessment of the situation was undoubtedly correct. By the  start  of  2006  Mr Curtis  was  unwilling to  invest  more  money without  a restructuring that allowed him to acquire a much larger shareholding, and then to on-sell that shareholding at a profit.  Originally Mr Gibson agreed to this.  Then he repented of his agreement and proposed a different arrangement.   Mr Curtis then agreed to the different arrangement with some modifications, but then he repented of his agreement and insisted on returning to the original new arrangements which Mr Gibson no longer accepted.

[148]   At  the  time  Mr Gibson  acted,  there  was  plainly  no  commitment  from Mr Curtis to carry on funding.5   Indeed he would not do so without the restructuring which  Mr Gibson  would  not  agree  to.    Therefore  the  company  simply  had  no capacity to meet its debts.  It would have been quite wrong to carry on and acquire

5As I observed earlier, I consider the plaintiff overstates the significance of his funding up to that point.

more debt.  Either new funding arrangements had to be put in place, or the company should not be trading.

[149]   As for the collapse in March 2006, the evidence did not lead me to place the blame on any one party as regards the failure to reach a new funding arrangement.  It is true that Mr Gibson initially agreed to a restructuring package and then changed his mind, but so too then did Mr Curtis.   The proposed restructuring was quite a significant change, and Mr Curtis was clearly looking after his own interests as well as the company’s.   I am not being critical here; just observing that his proposals could have been done, as Mr Gibson suggested, without Mr Curtis making a profit. He was wanting to use the situation to obtain a bigger stake, and use it for an immediate profit.  Mr Gibson was reluctant to sell off his share when he could see, he thought, the light at the end of the tunnel.   Each advanced a tenable option.   I therefore do not consider Mr Gibson can be held responsible.

B.       Future profitability

[150]   Evidence  led  on  behalf  of  Mr Curtis  suggested  that  the  New Zealand operation could have made substantial profits.   This was notwithstanding that the new  company that  Mr Gibson  and  others  had established  had  not  done  so,  and notwithstanding that there were still not marketable Habodes in New Zealand which were compliant with the Code and had BRANZ approval.   The plaintiff’s profit projections drew heavily on the original KPMG forecasts done in 2004.  Mr Curtis’ expert was asked to project the value of the lost opportunity for sales of Habode in New Zealand, assuming a wrongful repudiation of the joint venture.  His projections, before any adjustment by the Court to reflect the probability of the opportunity being realised, were conservatively $951,000 and optimistically $6.52 million.

[151]   The expert for Mr Gibson was very critical of this.  He emphasised the reality that it was still an unsuccessful project.  He noted that one still did not know what the cost of a unit would be, nor the retail price.  The information was too incomplete to support profit projections.  The defence expert was given access to and reviewed the performance of the new company.   Overall he concluded there was simply no

basis on which one could project anything other than the continuation of losses already being made.

[152]   The detail of this evidence is not crucial given my findings.  However, I note for  the  record  I  much  preferred  the  evidence  led  on  behalf  of  Mr Gibson.    I considered the plaintiff’s claim wholly unrealistic, and as giving insufficient regard to the evidence of what actually had happened.  It is clear that the Habodes have had success  in  Australia,  but  there  a  different  very  large  construction  company  is involved as partner.   Also it is apparent that some of the same difficulties were encountered  in  Australia  and  renegotiation  had  to  occur  which  allowed  the Australian company to take over control of production.  Further, the mining situation and the need for quick cheap accommodation for miners provided an excellent sales opportunity.   The evidence left me far from satisfied that the Australian situation could provide any insight into possible New Zealand profitability.

[153]   One must deal with realities and as regards New Zealand, more than five years after it started, nothing has happened.  It is accordingly apparent that had any adjustment been needed from the Court to reflect the probability of the profits being realised, there would have been a dramatic adjustment downwards.   I regard the probabilities of profit as very low.

C.       Ihouz

[154]   Mr Gibson has designed a second container house, called an Ihouz.   It has been marketed in Australia by the same construction company developing and marketing Habodes.  It is more successful than the Habode.

[155]   The plaintiff’s claim included any profits from Ihouz.   This seemed to be based on two propositions – that the Ihouz was sufficiently similar to the Habode to be regarded as part of the Habode project, or that Mr Gibson must have worked on it, and designed it, on Habode time, and therefore it was an Habode asset.

[156]   Concerning the first of these propositions there was simply no evidence.  The apparent basic difference is described by Mr Gibson as being that the Habode opens

like a butterfly whereas the Ihouz is designed more like a matchbox with one inside the other.   It is a cheaper product and has seemingly done well in West Australia where accommodation for mine workers is needed.

[157]   Mr Curtis gave his opinion that the Habode and the Ihouz are the same but that was not a sufficient basis to establish that this different product is conceptually the same as the Habode.  In my view there needed to be formal expert opinion on why the Ihouz was sufficiently the same to be regarded as part of the Habode project. In its absence, I would have excluded Ihouz from any remedy.  The significance of this is that the West Australian licence fee included acquiring the marketing and distribution rights for the Ihouz.

[158]   As for the idea that Mr Gibson designed it on Habode time, there was no real effort to establish what was Habode time.  It became apparent through the hearing that some fees were paid by Habode NZ both to Mr Curtis and Mr Gibson, or instead to their corporate personalities, for their time.  However, this evidence emerged by chance at various times.  There is no suggestion that Mr Gibson was an employee of Habode NZ.   I did not see any evidence that would establish that Habode NZ had some claim on any other design done by Mr Gibson over this period.

[159]   The last point enables me to comment on another aspect of the case.  In my view there was insufficient attention given to the corporate entities, and to who or what had the right to bring proceedings.   There was, for example, an alternative claim by Mr Curtis for lost capital, but the money “he” advanced was in fact lent by companies  some  of  which  were  not  parties  to  the  proceedings.     Likewise, Habode NZ  is  not  a  party;  it  is  in  liquidation  and  the  Official Assignee  would obviously have to approve any proceedings.   The payments to Mr Gibson for his time were made by Habode NZ, and any claim to work done by Mr Gibson during that period must belong to Habode NZ. There is no right in Mr Curtis to it.

D.      Other evidence

[160]   There was much evidence that this judgment has not traversed.   I have not found it helpful or even relevant.   Witnesses were called to give their opinion on

Mr Gibson as a businessman.  They were mainly people who had bought the regional licences and who, somewhat oddly it seemed to me given the plaintiff’s case, 6 were called  to  explain  all  the  problems  they  had  experienced  post  March 2006  with Habodes.  They explained how they felt let down or betrayed.  It was not clear to me at the time, nor to Mr Vincent who made the point during the case, what relevance it had, and I remain of that view.

[161]   The  evidence  about  the  Australian  sales  of  Habode  licensing  rights  was plainly relevant.  I have not traversed it because on my view of matters there is no basis on which Mr Curtis is entitled to a share.  It is clear that the money that went to Mr Gibson personally, whether through Habode IP or otherwise, was much less than originally thought but was still substantial.   There would have had to be careful analysis of this, and an adjustment to take out any contribution Ihouz made to the figures paid.

Conclusion on the claim by Mr Curtis

[162]   I have not been satisfied that there was a separate joint venture.  If there was, I do not consider there is any real case at all to say the joint venture owned the Habode project such as to entitle Mr Curtis to a share of post termination profits.  If there was a joint venture giving rise to some fiduciary duties over and above the formal structures, then it could only be as regards international sales.  In that regard I do not consider that there was any breach of fiduciary duty by Mr Gibson in relation to the fact that Habode Holdings never received a licence from Habode IP.

[163]   On other matters I consider that Habode NZ was insolvent in March 2006.  I do not attach particular responsibility to either party for the collapse.   Habode NZ had agreed to responsibilities that were vastly more costly that it had anticipated and a funding crisis was inevitable.   Each party’s approach to that crisis was equally driven by commercial self interest.

6I say somewhat oddly because it was hardly evidence which supported a claim for lost profits.

[164]   Had calculations of loss been relevant, I preferred by a considerable margin the expert evidence called for Mr Gibson.  I regard any claim for lost New Zealand profits as fanciful.  I would have excluded from the exercise any profit attributable to the Ihouz concept.

[165]   The plaintiff’s claim fails in its entirety.

Part Two – Claims by Mr Gibson

The claims

[166]   There are two claims by Mr Gibson.  The first is a claim for declaration about the rights of Mr Curtis and Habode Holdings in relation to Habode and Ihouz units. By  the  end  of  the  hearing  Mr Curtis  claimed  no  on-going  rights  for  Habode Holdings.  I have dismissed his personal claim.

[167]   I do not consider it appropriate to make formal declarations.  The judgment makes it clear that I am of the view that Habode Holdings never acquired any rights as regards Habodes.  I have held that Mr Curtis, as an alleged joint venture partner of Mr Gibson, did not acquire any on-going rights as regards either Habode or Ihouz units.

[168]   The second claim concerns ownership of the one Habode unit that landed in New Zealand.     The  unit  was  sold  by  Mr Curtis,  with  the  assistance  of  the Official Assignee, to Australian purchasers.  Mr Gibson also assisted in the sale in that, once it was shipped to Australia, he sent across some parts to complete the building to the Australian buyer’s satisfaction.  That in turn saw the Australian buyer complete  the  purchase,  with  the  funds  then  being  credited  to  Habode NZ  in liquidation.

[169]   Mr Gibson  asserts  first  that  the  unit  belonged  to  Habode IP  and  not  to Habode NZ.  If unsuccessful in this Mr Gibson argues that he had a right to purchase the  Habode.    He  had  an  agreement  with  the  other  directors  of  Habode NZ  to

purchase the unit, and had paid a deposit.  Either way, he claims the value of the sale from Mr Gibson personally on the basis that he is a joint tortfeasor with Habode NZ. It is argued that a director can be liable in his personal capacity.

Decision

[170]   Obviously the claims are mutually inconsistent.  It is convenient first to clear away the  ownership  point.    Habode  IP  claims  ownership  on  the  basis  that  the licensing arrangement was that Habode NZ would pay for the cost of producing and landing the first two units, but not that it would own them.   Whilst that is so, the agreement is silent as to who was to own these two units.

[171]   It is clear that throughout all of 2005 and 2006 the parties regarded the Habode as being owned by Habode NZ.  Mr Gibson on several occasions asserted his willingness to buy it from Habode NZ.  A price of $75,000 was agreed.  I do not consider it sustainable to now argue that the unit was in fact Habode IP’s.

[172]   Mr Vincent  relied  on  provisions  in  the  licence  agreement  that  deal  with customer orders, and drew from them the proposition that the licensor remains the legal owner.  Whilst that analysis is correct, I do not consider that those provisions apply to the prototype.  It was built under different arrangements, namely Schedule 2 to the licence agreement.

[173]   All the parties to the agreement regarded the unit as belonging to Habode NZ and I consider that to be as arguable a proposition as any other.  At a cost of more than one million dollars, it was a very expensive Habode for Habode NZ to acquire. Mr Gibson’s claim to it has not impressed me – my lack of enthusiasm for the claim is not diminished by the fact that a rather tortuous process is then adopted to try and make Mr Curtis personally liable for his actions in seeking to gain back some funds for Habode NZ and its creditors.  I conclude Habode IP has not established it owned the Habode unit.

[174]   Alternatively Mr Gibson claims he has suffered a loss because he paid a

$14,000 deposit and was therefore a purchaser entitled to possession.  The claim to

paying a deposit is supported by two book entries totalling $14,220 which are said to be the deposit although they are not labelled that way.  Mr Curtis disputed this, and an   allegation   of   fraud   seemed   to   be   being   made   against   Mr Gibson’s book-keeper/long time administrator as regards her evidence that the entries were a deposit.  This witness produced a cheque stub for one of the payments which said “Habode Advance”.  It was incorrectly dated, which may have led to suspicions, but was confirmed by her to be part of the deposit.  No challenge was put to this witness when she testified, and I accordingly accept that the amounts were paid as a deposit.

[175]   That does not end matters because although a deposit was paid, an issue still arises as to who was the purchaser?  It is clear that Mr Gibson, at the meeting and in correspondence, said he would buy it but in what capacity?  In my view references in various  Board  minutes  to  Mr Gibson  saying  he  would  purchase  it  mean  little. Throughout the events underlying these proceedings, both Mr Curtis and Mr Gibson often acted in what seemed their personal capacities only for the formal things, such as payments, contracts and shareholding, to then be done through a wide array of different corporate or trust entities.

[176]   As regards purchasing the Habode, there are two clear written statements by Mr Gibson that UGroup, not a party to these proceedings, was to be the purchaser. The statements are found in letters he wrote on 31 January 2006, and 7 March 2006. In the first he talks of “UGroup completing the purchase” and in the second, he says that the one matter  remaining to resolve is “UGroup’s purchase of the Habode building”.

[177]   These letters are the best evidence of the entity on behalf of whom deposits were  paid.    Accordingly  Mr Gibson  was  not  a  purchaser  entitled  to  possession because he was not the purchaser.

[178]   In regards to Mr Gibson’s claim I therefore conclude the unit was owned by Habode NZ.   I further reject Mr Gibson’s claim to personally being a purchaser entitled to possession.  The claim therefore fails, and it is not necessary to consider the plaintiff’s arguments as to whether Mr Curtis might be personally liable for selling the unit on behalf of Habode NZ.

Conclusion on Mr Gibson’s claim

[179]   There is no need for formal declarations but Mr Gibson has succeeded in establishing, as regards both Mr Curtis and Habode Holdings Ltd, that neither has any interest in, nor claim to produce market or sell, Habodes.

[180]   Mr Gibson has not established a claim as regards the sale of the Habode unit owned by Habode NZ, and facilitated by Mr Curtis as director.

Costs

[181]   The parties can file memoranda if needed.   On the basis of information known to me, I see no reason why costs should not follow the event in the normal way, and at the agreed scale.   To assist the parties I would tentatively assign, in relation to Mr Gibson’s failed claim, 20% as representing the reduction appropriate

to the costs otherwise payable to him.

Simon France J

Solicitors:

C LaHatte, Mike Garnham, Barristers & Solicitors, PO Box 10 240, Lower Hutt email:  chri[email protected]

D D Vincent, Thomas Dewar Sziranyi Letts, PO Box 31 240, Lower Hutt

email:  [email protected]