Haven Insurance Limited v Lombard
[2017] NZHC 1336
•16 June 2017
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2017-404-487
[2017] NZHC 1336
BETWEEN HAVEN INSURANCE LIMITED
Applicant
AND
HEINRICH LOMBARD
First Respondent
STATUS FINANCIAL LIMITED
Second Respondent
STEPHEN BROWN
Third RespondentALL SMALL JOBS LIMITED
Fourth RespondentJACK MILLER
Fifth RespondentJ MILLER CONSULTING LIMITED
Sixth RespondentDENZEL COETZER
Seventh RespondentYOURWAY LIMITED
Eighth Respondent
Hearing: 16 June 2017 Counsel:
J Lethbridge and G Holm-Hansen for the Plaintiff
M Pascariu for the First, Second, Fifth and Sixth Defendant S Grice for the Third and Fourth Defendants
E Taia for the Seventh and Eighth Defendants
Judgment:
16 June 2017
ORAL JUDGMENT OF GORDON J
Solicitors: Lowndes, Auckland
Minter Ellison Rudd Watt, Auckland Sharp Tudhope, Tauranga
Franklin Law, Auckland
HAVEN INSURANCE LTD v LOMBARD [2017] NZHC 1336 [16 June 2017]
Introduction
[1] On 29 March 2017 I made without notice orders restraining eight respondents from breaching contractual obligations of confidentiality and non-solicitation which were allegedly owed to the plaintiff, Haven Insurance Ltd. I reserved leave to the parties to apply to vary the orders on 48 hours notice.1
[2] The third and fourth respondents, Stephen Brown and All Small Jobs Ltd (ASJ), have now filed an application seeking to vary the orders by rescinding paras (c) and (d), which prohibit the respondents from contacting all present or former clients of Haven and require the respondents to cease all solicitation of all present or former clients of Haven. The basis for the application, in summary, is that neither the third nor the fourth respondent ever signed any contractual agreement with Haven and accordingly those parties cannot be bound by contractual obligations regarding confidentiality and non-solicitation.
[3]Haven opposes the application for variation.
The application for interim relief
[4] The present dispute came before the Court following a without notice application for interim relief filed by Haven on 27 March 2017. As required in such cases, the application was accompanied by a supporting affidavit of Craig Baldwin, who is the sole director of Haven.
[5] Mr Baldwin’s evidence was that Haven operated a financial services firm located in Auckland. He deposed that Haven had approximately 25 advisers throughout the country at any one time, with whom Haven contracted in a contractor relationship.
[6] The parties to the individual adviser agreements were said to be Haven, on one side; and a company associated with the individual advisor, called the “introducer”, on the other. The individual adviser would be named as the guarantor. Each of the respondents, it was said, had entered into an arrangement of this nature. For example,
1 Haven Insurance Ltd v Lombard [2017] NZHC 596.
in one contract the second respondent, Status Financial Ltd, was the introducer and the first respondent, Heinrich Lombard, was the guarantor. Mr Baldwin said this pattern followed through the list of respondents.
[7] Mr Baldwin annexed documentary evidence of the contractual agreements between Haven and the other named respondents, but was unable to provide a signed copy of the agreement with ASJ and Mr Brown. Mr Baldwin described the situation in respect of these parties in his affidavit as follows:2
Haven entered into an Introducer Agreement with All Small Jobs Limited on or around 20 April 2012, with Mr Brown as the guarantor. Mr Brown provided notice of termination to Haven on 25 August 2016. We have not been able to locate a signed copy of Mr Brown’s agreement. I have attached an email which shows that the agreement was couriered to him (page CB40). Copies of Mr Brown’s notice of termination are also attached referencing the agreement (page CB42). Mr Brown also set up a company called Kiwi Insure NZ Ltd 10 days before he provided his notice of termination.
[8] In my decision, I considered whether the evidence of the agreement between Haven and ASJ was sufficient to provide a basis for the orders sought. On the basis of Mr Baldwin’s affidavit I determined that there was sufficient evidence for the purpose of the application to accept that Mr Brown and ASJ had agreed to the terms of the standard agreement.3
[9]I granted orders accordingly.
Affidavit of Stephen Brown
[10] Mr Brown has subsequently filed an affidavit in support of his application to vary the orders. That affidavit sets out further information which undermines the previous evidence of Mr Baldwin and supports Mr Brown’s position that neither he nor ASJ have ever signed an agreement of the sort alleged by Haven.
[11] Mr Brown says that his involvement with Haven commenced when he answered a job advertisement on the website “SEEK”. He met with Geoff Baldwin, who is the brother of Craig Baldwin. During the course of the meeting, Mr Brown
2 Affidavit of Craig William Baldwin dated 24 March 2017 at [31].
3 Haven Insurance Ltd v Lombard, above n 1, at [22].
received an information pack containing a flyer with details of the commission he would be paid and a blank pro forma contract headed “Introducer Agreement”.
[12] Mr Brown says that, following the meeting, he reviewed the content of the Introducer Agreement and found it to be very one-sided. He was concerned about a number of the terms, including the restraint of trade provisions upon which Haven now relies. Mr Brown’s concerns are recorded in handwriting on an otherwise blank copy of the agreement, which was annexed to his affidavit. Mr Brown says he would not have signed an agreement containing such terms. His wife, Janine Brown, was involved as a director of ASJ and confirms that she would never have signed an agreement binding ASJ to those terms.
[13] Mr Brown deposes that he called Geoff Baldwin and said that he was uncomfortable with the contract, but that Geoff Baldwin told him not to worry and that Haven would amend the agreement to reflect Mr Brown’s concerns. Shortly thereafter, Geoff Baldwin sent an email informing Mr Brown that he had couriered a number of documents including an adviser agreement. Mr Brown says that he did not receive this package. He suggests that this circumstance may be due to a series of mail thefts which took place in Queenstown at around that time.4 In any event, however, Mr Brown says that he never received and never signed an agreement.
[14] Notwithstanding the lack of any written agreement, Mr Brown commenced work as an adviser working on Haven’s behalf. Mr Brown says that he assumed the terms of the working relationship would be governed by the promises made in the flyer which Geoff Baldwin had provided at their first meeting and otherwise in accordance with industry practice.
[15] Mr Brown’s evidence is that the relationship with Haven began to deteriorate from around March 2015 onwards. On or about 10 August 2016 Mr Brown decided to terminate his relationship with Haven and to set up his own financial services business with his wife in Tauranga. On 26 August 2016 he sent a letter advising Haven of his decision.
4 The thefts were later discovered and were widely reported in the New Zealand media.
[16] Over the next few months there were a number of acrimonious exchanges between representatives of Haven and Mr Brown. The exchanges relevantly included a letter dated 23 September 2016 addressed to the email address [email protected] by Mr Brown in which Mr Brown wrote:
Despite our repeated requests for a copy of the signed “Agreement” you have failed to provide us with a copy. Instead, you have quoted certain parts that according to our records have no bearing on any “agreement” between our respective companies. For instance:
1.Our records reveal that no formal agreement was entered into between us.
2.At best we must apply general principles as to the performance of the relationship since we came on board on [sic] in 2012.
…
[17] This demonstrates that, contrary to the assertions made by Mr Baldwin, Mr Brown’s claim that there was no written agreement between Haven and ASJ is not a recent invention.
Submissions for the respondents
[18] Ms Grice, who appears on behalf of the third and fourth respondents, submits that the orders are wrong and/or improperly obtained, and should be rescinded, for two reasons. The first reason, in Ms Grice’s submission, is that the plaintiff in its without notice application failed to disclose a material fact, namely that neither Mr Brown nor ASJ had ever signed an agreement with Haven. Ms Grice submits that the language of Mr Baldwin’s affidavit was intended to cause the Court to draw a wrongful inference that there is a signed agreement in place. Ms Grice argues that the duty to make full disclosure of relevant matters is well established, and the plaintiff’s failure to do so means that the orders should be rescinded.
[19] Alternatively, Ms Grice submits, the orders should be rescinded on the basis that the threshold for granting an interim order is not met. In particular, Ms Grice says that there is insufficient evidence of any written agreement between Haven, ASJ and Mr Brown and accordingly, that there is no serious question to be tried. Further, that the balance of convenience and the overall interests of justice favour the respondents.
Submissions for the plaintiff
[20] Ms Lethbridge, who appears on behalf of the plaintiff, does not accept the allegations of non-disclosure that have been levelled against her client. Nor, in her view, does the evidence of Mr Brown disclose any relevant material that should alter the Court’s previous conclusions regarding the propriety of granting interim relief.
[21] Ms Lethbridge further submits that, in fact, Mr Brown’s evidence should weigh in favour of the plaintiffs. She suggests that Mr Brown’s claim that no written agreement exists is a recent invention and should be viewed with scepticism. As I have already noted, that criticism cannot be sustained.
Should the orders be rescinded?
[22] I am satisfied that paras (c) and (d) of the orders should be rescinded on the grounds put forward by the third and fourth respondents.
[23] It is trite law that a party making a without notice application for interim relief is under a duty to make full disclosure.5 That duty extends to all matters relevant to the application, including material that may be unhelpful to the plaintiff’s case. Faithful compliance with that duty is essential because, by definition, an application made without notice deprives the respondents of the right to know and respond to the allegations made against them. Failure to comply with the duty will not necessarily result in the immediate discharge of the without notice orders.6 However, such failure is a relevant factor that the Court may take into account when considering whether to discharge or vary the orders in question.
[24] I am satisfied that the plaintiff in this case has failed to disclose material which is relevant to the without notice orders. There is documentary evidence which clearly demonstrates Mr Brown has previously informed the plaintiff that he did not sign and was not bound by the terms of any written agreement with Haven. That communication was made to Phillip Drew, who was employed by Haven at the
5 Lala v Preliminary Proceedings Committee (1993) 7 PRNZ 101 (HC) at 105; United People’s Organisation (Worldwide) Inc v Rakino Farms Ltd (No 1) [1964] NZLR 737 (SC) at 738.
6 See D B Baverstock Ltd v Haycock [1986] 1 NZLR 342 (HC).
relevant times. Mr Baldwin may have been unaware of that communication at the time it was made. However, a party making a without notice application should undertake careful investigation and preparation before compiling its affidavits in support. Haven should have located and considered the content of its communications with Mr Brown, particularly those which had been exchanged following his resignation, so that any relevant material could be disclosed to the Court. There does not appear to be any excuse, at this stage, for Haven’s failure to do so.
[25] The result is that this Court has issued without notice orders on the basis of misleading evidence. I do not accept that the letter from Franklin Law dated 15 March 2017, which was disclosed, is of the same order as the 23 September 2016 letter. The Franklin Law letter asked for a copy of the contract allegedly signed by Mr Brown on behalf of the company and/or evidence of Mr Brown personally guaranteeing the company’s obligations. Had the true state of affairs been disclosed, I would have declined to make without notice orders against the third and fourth respondents, for the following reasons.
[26] An applicant for interim relief is required to show that there is a serious question to be tried.7 In assessing whether there is a serious question to be tried, it is insufficient for a plaintiff to say that there is a tenable cause of action and a conflict of evidence on the facts.8 Rather, a plaintiff seeking interim relief must adduce sufficiently precise factual material to satisfy the Court that there is a real prospect of succeeding in the substantive claim.9
[27] Had the plaintiff made full disclosure of all relevant facts, I would have come to the view, as I do now, that the evidence for the plaintiff fails to meet the necessary threshold to justify interim relief. Taken at its highest, the documentary evidence shows that Haven believed there was a written agreement including obligations of confidentiality and non-solicitation. That belief however is contradicted by Mr Brown’s affidavit, which sets out a clear and credible account of events. At this stage, there is no sufficient evidential basis to support the claim that Mr Brown and
7 Harvest Bakeries Ltd v Klissers Farmhouse Bakeries Ltd [1985] 2 NZLR 129 (CA).
8 Ansell v New Zealand Insurance Finance Ltd HC Wellington A434/83, 30 November 1983.
9 Re Lord Cable (dec’d) [1976] 3 All ER 417 (Ch) at 431.
ASJ agreed to abide by the stringent confidentiality and non-solicitation clauses set out in the written agreement, upon which the plaintiff now relies. It follows that there is no serious question to be tried.
[28] Ms Lethbridge raised one other point which requires consideration. She submitted that the respondents had delayed in making the present application with the result that the orders in question will now expire in any event within nine days of today’s hearing. I accept that submission. However, the fact remains that, had the plaintiff undertaken adequate investigation and made full disclosure of relevant materials at the time of making its without notice application, the orders in respect of the third and fourth respondents would never have been made. I do not consider the respondents’ delay in making the present application is a sufficient basis for refusing to rescind the orders as sought. In any event, I note that, in fact, the application has taken some time to come before the Court for hearing and the matter of Court scheduling is out of the control of the third and fourth respondents.
[29] For completeness I add that I do not accept the submission on behalf of the plaintiff that the application by the third and fourth respondents was out of time. In my decision of 29 March 2017 I reserved leave to the parties to apply to vary the orders on 48 hours notice. In those circumstances the time limits in r 7.49 do not apply and in any event the Court has a discretion to extend the period.
[30] Finally I note that it was drawn to my attention that affidavits of Craig Baldwin and Geoff Baldwin were affirmed before a solicitor who has acted for the plaintiff in relation to matters the subject of this proceeding. I indicated to counsel for the plaintiff that this was inappropriate. Ms Lethbridge has explained the circumstances that led to this occurring and I accept that there was no fault on the part of counsel. Those affidavits will be resworn.
Conclusion
[31] Paragraphs (c) and (d) of the without notice orders dated 29 March 2017 against the third and fourth respondents are rescinded.
Costs
[32] My inclination is that costs should follow the event and I invite the parties to confer and file a joint memorandum on costs by Monday 26 June 2017. In the event that the parties do not agree, then the third and fourth respondents should file their memorandum by Monday 3 July 2017 and the plaintiff by Monday 10 July 2017. Memoranda should not exceed five pages.
Gordon J
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