HRC Auckland Ltd v Viaduct Quay Holdings Ltd
[2016] NZHC 3065
•15 December 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-2860 [2016] NZHC 3065
BETWEEN HRC AUCKLAND LTD
Plaintiff
AND
VIADUCT QUAY HOLDINGS LTD First Defendant
PHILIP PURNELL ANDREWS Second Defendant
Hearing: 21 November 2016 Appearances:
Mr C Withall QC and Mr Revel for Plaintiff
Mr N Campbell QC and S D Williams for defendantsJudgment:
15 December 2016
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
15.12.16 at 3.30 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
HRC AUCKLAND LTD v VIADUCT QUAY HOLDINGS LTD & ANOR [2016] NZHC 3065 [15 December
2016]
[1] The defendants in this case, Viaduct Quay Holdings Ltd (“VQHL”) and Mr Phillip Andrews,1 seek summary judgment against the plaintiff, HRC Auckland Ltd (“HRC”) and alternatively seek orders striking out the statement of claim.
Background
[2] The brief background is that the plaintiff wished to open a Hard Rock Cafe in the Viaduct Harbour area at Auckland. It says in its statement of claim that it was a franchisee of Hard Rock International Ltd (“HRIL”), which is the international franchisor for Hard Rock Cafe.
[3] The plaintiff alleges that by an agreement executed in July 2013 VQHL, which is the lessee of certain premises in the Viaduct Harbour area, agreed to sublease an area to the plaintiff for the purposes of operating a Hard Rock Cafe business. The sublease was to be for a period of 10 years, with rights of renewal of
10 years and five years thereafter.
[4] The claim which the plaintiff makes is essentially that the first defendant breached the contractual arrangements with the result that the plaintiff did not obtain the sublease that it had contracted for. The plaintiff alleges that it is a franchisee under a franchise agreement with Hard Rock International Ltd. It says that it entered into an agreement to sub-lease premises from the first defendant for the purpose of operating a franchised Hard Rock Café. The plaintiff alleges that because of the breach of contract by the first defendant, the plaintiff suffered loss of approximately $40 million, which it claims as damages from the first defendant. The plaintiff’s alleged loss represents net profits that it would have earned from operating a franchised Hard Rock Café from the premises until 2039, which was the term of the proposed sublease.
[5] In a second cause of action the plaintiff claims the same amount for breach of s 14 of the Fair Trading Act 1986 (including from the second defendant, one of the first defendant’s directors). The plaintiff says that the first defendant required the
consent of its head lessor to any sub-lease to the plaintiff. The plaintiff alleges that,
1 Mr Andrews is a director of the first defendant.
in breach of s 14, the second defendant and the first defendant) represented to it that such consent was a mere formality and a “rubber stamping exercise”.
[6] The first defendant held its interest in the premises pursuant to a lease entered
into in 1997 with Viaduct Harbour Holdings Limited (“VHHL”) as head lessor.
[7] A number of documents were executed in the course of the transaction between the plaintiff and the first defendant, with the first one being described as the “Agreed Commercial Terms between HRC Auckland Ltd and Viaduct Quay Holdings Limited” (“Agreed Commercial Terms”). This document contained the following important statement:
These commercial terms are conditional upon various items included in the draft form of lease being negotiated by the parties as amendments to the draft Deed of Lease to the satisfaction of both parties. Further subject to the Lessee providing a statement of position for Richard Bethune to the reasonable satisfaction of the Lessor.
[8] The Agreed Commercial Terms described the premises; required Mr Bethune, who was a director of the plaintiff, to give a personal guarantee; and summarised the term of the proposed lease. Further conditions included in the document were that the agreement was conditional upon “Lessor Board Approval”.2 The Agreed Commercial Terms were signed by Mr Bethune, the director of the plaintiff, and by Mr Andrews, a director of the first defendant.
[9] In August 2013 the parties entered into another agreement titled “Agreement to Lease Retail Premises”. This document contains the same terms as the earlier document but with greater detail. It also included a personal guarantee from Mr Bethune. The parties agreed that:
The Landlord, the Tenant and the Guarantor agree to execute a formal Deed of Lease of the premises… using the Landlords [sic] standard form of lease, amended in accordance with the provisions of this Agreement and per the provisions of the agreed draft lease.
2 That is, the approval of the board of the first defendant.
[10] The Agreement was conditional upon, amongst other things, “Lessor Board Approval 5 working days after Agreement to lease has been executed by both parties”.
[11] The next document that was executed was the Deed of Lease. The Deed of
Lease contained the following provision:
VIADUCT HARBOUR HOLDINGS LIMITED as Head Lessor hereby consents to this sublease, but without prejudice to the Head Lessor’s rights, remedies and powers under the Head Lease[.]
[12] This was the first reference to the head lessor’s consent in any of the
documents between the parties.
Defendants’ application for summary judgment and strike-out
[13] The defendants raised a number of points in support of their application for summary judgment and strike-out. I propose to deal first with the defendants’ submission that the plaintiff has no claim against the defendants because it never entered into any franchise agreement with HRIL, since this submission is relevant to both the plaintiff’s causes of action. I will then consider the defendants’ substantive objections to the two causes of action in contract and under the Fair Trading Act
1986 (“FTA”). Finally, I will consider the defendants’ strike-out application.
Summary judgment and strike out principles
[14] The basis upon which I propose to approach the defendants’ application for summary judgment is to apply the principles which were stated in the case of Jones v Attorney General.3
[15] Mr Campbell made the following submission in relation to the strike-out application:
11. VQHL contends that neither of HRC’s causes of action is reasonably arguable, so that the pleading should be struck out under r 15.1(a). In addition, VQHL contends that the pleading is so deficient that it is
3 Jones v Attorney-General [2004] 1 NZLR 433 (PC) at [5], citing Westpac Banking Corp v M M
likely to cause prejudice or delay and should be struck out under r
15.1(b).
12. The principles governing strike out applications under r 15.1(a) are:
12.1The Court may strike out all or part of a pleading if it discloses no reasonably arguable cause of action or case appropriate to the nature of the pleading.
12.2Pleaded facts are assumed to be true unless speculative or without foundation.
12.3Jurisdiction to strike out a pleading is not precluded by the need to decide difficult questions of law.
12.4When determining whether a claim should be struck out the Court is able to consider not only the basis on which the claim is presently pleaded but also any other basis on which the claim might be pleaded.
[16] There was no dispute that the statement of principles included in the above submission is correct.4
Summary judgment: standing to sue under franchise agreement
[17] The proceedings commenced with the plaintiff claiming that it had a franchise agreement with HRIL of Orlando, Florida. However, in the notice of application for summary judgment orders, the defendants say:
(vii) The plaintiff has no claim against the defendant in that it never entered into the franchise agreement with Hard Rock International Limited pleaded at paragraph 4 of the statement of claim and the pleaded allegation that it did is without foundation.
[18] The identity of the franchisee which would have carried on the business, had a lease been delivered, is important because it is necessary for there to be a linkage between the party seeking the sublease and the party who is alleged to have suffered loss as a result.
[19] The plaintiff in communications with the defendants has subsequently indicated that the franchise arrangement took a different form from that which was stated in the statement of claim. A different company is now alleged to be the
franchisor. This is a company which is apparently incorporated in the Channel
4 See Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267–268, endorsed by the Supreme Court in
Islands (“Hard Rock CI”). Further, the franchisee is alleged to be a different company, Hard Rock New Zealand Ltd (“HRNZL”), rather than the plaintiff. I understand it is contended for the plaintiff that Mr Bethune, who is the director of the plaintiff, also has a controlling interest in HRNZL and that there is little doubt that it is open to Mr Bethune and/or HRNZL to bring into effect a contractual franchise between the plaintiff and Hard Rock CI. It is implicit in the arguments which the plaintiff puts forward that it will be able to establish a chain of authority between Hard Rock CI and the plaintiff.
[20] In his evidence Mr Bethune said that the arrangement with HRIL was that he personally held territory rights to the franchise in New Zealand and that a formal franchise agreement would only have been entered into as the final step in the process, after the relevant premises had been secured either by lease or purchase. Because the lease never eventuated, there was no formal franchise agreement but nonetheless Mr Bethune stated that he has a territorial entitlement to operate Hard Rock Cafe businesses in New Zealand and that he would have been able to procure a franchise for the plaintiff. Further, the plaintiff has produced a letter from HRIL which confirms that the plaintiff is the approved and appointed franchisee to operate a Hard Rock Cafe franchise in the Auckland, New Zealand region.
[21] Mr Campbell QC for the defendants pointed out that there was no evidence at all of these arrangements and no explanation was given as to what the chain of contractual connections was between the various parties. In response to the assertion that it was just a matter of the plaintiff amending its statement of claim, Mr Campbell submitted that the defendants were entitled to proceed with their application for summary judgment and strike-out on the basis that the pleadings actually set out the case for the plaintiff.
[22] While I do not criticise Mr Campbell for taking these points, I consider that the Court should take a reasonably broad approach to the question of whether the plaintiff is able to raise questions of fact that would defeat the application for summary judgment in regard to this cause of action. Even though there are some omissions in the evidential chain which the plaintiff relies on in that regard, I consider that the interests of justice would be served by having regard to the letter to
which I have referred above which was disclosed in initial discovery. By one means or another, I am satisfied that the plaintiff was always going to be the entity that would acquire the lease and would carry on the franchise and that Mr Bethune as the controlling director of the relevant entities had the means to put such an arrangement into effect.
Summary judgment: first cause of action
[23] In his submissions in support of summary judgment in regard to the first cause of action, Mr Campbell asserted that the plaintiff’s claim disclosed no reasonable cause of action and could not succeed.
[24] I consider that this point can be disposed of with relative ease. The crucial point, as noted by Mr Campbell, is that the Agreement to Lease was conditional upon the first defendant’s board approval. In a section headed “Conditions”, the Agreement lists:
a)Lessor Board Approval 5 working days after Agreement to lease has been executed by both parties[.]
[25] It is clear from the surrounding context that the reference to the “Lessor Board” is a reference to the board of the first defendant. Indeed, Mr Bethune confirmed as much in his affidavit, where he stated:
I drafted the Document, and the terminology I used to describe the parties was “lessor” (first defendant) and “lessee” (plaintiff.) The clause regarding approval requires the approval of the “Lessor Board” – Viaduct Quay – within 5 working days of execution by both parties – not Viaduct Harbour. The next clause (2) required the approval of “Lessee Franchisor” 5 days after execution by the “Lessor Board” – again Viaduct Quay.
[26] This provision is in its nature a condition precedent because it relates to the coming into effect of a binding contract, rather than prescribing matters such as performance after an admittedly enforceable contract has come into effect. The effect of such a provision needs to be briefly considered. I accept the following statement of the law in this area which is taken from The Law of Contract in New
Zealand as correct:5
5 Burrows, Finn and Todd Law of Contract in New Zealand (5th ed, LexisNexis, Wellington,
2016) at 722.
What is important in these cases is that at common law failure of the condition precedent is not a ground for cancellation in the true sense; the innocent party can refuse to perform his or her part simply because his or her obligation has never arisen, and there has been no call to perform it.
[27] The plaintiff as the party seeking to enforce the Agreement to Lease has the burden of establishing that the requirement which constitutes the condition precedent has actually occurred. As Mr Campbell pointed out, the plaintiff has not pleaded that such approval was granted and therefore the affidavit verifying the contents of the statement of claim does not assist it to prove this part of the claim.
[28] Mr Andrews, who as I have already said is a director of the first defendant, deposed that the board had not approved the agreement “as at 13 February 2014”. In the context in which that deposition was given, I take the view that it can be read as amounting to a deposition that, not only was the Agreement not approved by that date, but it never has been. But in any event, the plaintiff does not dispute that any board approval had to be forthcoming by 13 February 2014.
[29] In his affidavit in opposition, Mr Bethune contradicts quite a number of paragraphs in Mr Andrews’ affidavit but he does not directly respond to this allegation. It is to be assumed that he has knowledge of the facts to which he has deposed.
[30] Not only is he not contradicted by Mr Bethune but the plaintiff does not set out any evidence which would suggest that Mr Andrews’ evidence might be wrong. His evidence is not inherently improbable.
[31] The plaintiff drew attention to the fact that Mr Andrews signed the Agreement to Lease and invoiced Mr Bethune for the deposit. This was seen as being relevant to the question of whether the Agreement to Lease had come into effect. I understand that the argument is that if there was a requirement for approval by the first defendant’s board, then inferentially, the deposit would not have been invoiced unless that had actually occurred. These circumstances do not in my view influence the interpretation of the Agreement to Lease, nor do they amount to evidence of a waiver of the requirement for board approval. In fact the deposit appears to have been payable “upon execution of the lease” by both parties. That
can only be a reference to the execution of the Agreement to Lease, which contained the requirement for board approval.
[32] It is not a question of imposing an onus of proof on the plaintiff at this point in the proceedings to establish that its version of events is correct rather than that put forward by Mr Andrews. However, the evidence that Mr Andrews has given possesses the distinct advantage that it comes from someone who must have known about the internal deliberations of the first defendant because he was a director. It is difficult to see how Mr Bethune could have obtained information about the same subject as an outsider to the company.
[33] The conclusion that I reach is that based upon the evidence before the Court at the present time the plaintiff cannot succeed on its claim in contract, as the board of the first defendant never approved the sublease and accordingly, no binding agreement ever came into effect. In light of my conclusion on this point, it is unnecessary to consider the plaintiff ’s further submission that the Agreement to Lease included an implied term to the effect that the defendant undertook an unconditional obligation to obtain the consent of the head lessor to the sublease. However, that further submission is relevant to the cause of action under the FTA, which I consider next.
Summary judgment: second cause of action
[34] As an alternative to the claim in contract, HRC claims under the FTA that the first defendant through Mr Andrews made misrepresentations to the effect that it was able to procure the formal consent of the head lessor, VHHL, to the subleasing of the premises; that such consent was a mere formality and would not cause any difficulties or impede the sublease to the plaintiff as obtaining such consent was merely a “rubber stamping exercise”.
[35] The key submission from the defendants is as follows:
25.HRC’s claim is not reasonably arguable, for two independent reasons. First, the alleged representation could not have reasonably misled a person in HRC’s situation to enter into the Agreement. That is because:
25.1 Mr Bethune’s evidence is that he has substantial assets and
22 years’ experience in various businesses.
25.2HRC pleads that Mr Andrews told Mr Bethune during negotiations that VHHL’s consent to the proposed sub-lease was required.
25.3 Mr Bethune’s evidence acknowledges that he was told that
VHHL’s consent to the proposed sub-lease was required.
25.4The Agreement required the parties to enter into a Deed of Lease in VQHL’s standard form, which required VHHL’s written consent to the proposed sub-lease. If HRC believed that VHHL’s consent was a “rubber-stamping” exercise, why did it agree to this term?
[36] The first question which the Court has to determine is whether it has been demonstrated that the plaintiff’s cause of action cannot succeed.6
[37] There is an anterior question in this case which is whether the alleged conduct actually occurred. That is to say, can the Court conclude that the statements that Mr Andrews is alleged to have made were in fact made? I consider that that issue cannot be resolved against the plaintiff in the summary judgment context and I will go on to consider the other parts of the test. My reason for taking that approach is that the evidence of Mr Bethune in this regard is not subject to the same criticisms that might be levelled at the evidence that he gave concerning the question of whether the board of the first defendant had approved the transaction.
[38] The matters which are in issue in the circumstances of this case relating to the FTA claim were described by the Court of Appeal in AMP Finance NZ Limited v Heaven.7 Namely, the Court will have to consider whether:
(a) The statement was capable of being misleading; and
(b) The plaintiff was in fact misled by the relevant conduct; and
(c) It was in all the circumstances reasonable for the plaintiff to have been misled.
6 High Court Rules 2016, r 12.2.
7 AMP Finance NZ Limited v Heaven (1998) 6 NZBLC 102,414 (CA).
[39] In deciding this last question the Court must consider whether a reasonable person in the shoes of the person who is misled and possessing their knowledge, actual and implied, would have been misled.
[40] The first issue to consider is whether the conduct was capable of being misleading. In my view it was so capable. It seems likely that a head lessor in the position of VHHL would view it as a prudent precaution to make enquiries about the proposed sublessee and the uses for which it proposed to occupy the leased premises. Enquiries could be envisaged into the financial standing of the sublessee, whether there was security available for the performance of its obligations under the sub- lease and other matters. Assuming that the head lessor in this case was minded to make such enquiries, which seems likely, it would be misleading for someone in the position of Mr Andrews to state in advance of those enquiries being made that the provision of consent was a formality.
[41] The next question concerns whether the plaintiff was in fact misled by the relevant conduct. Mr Bethune says that he was. Whether that is so or not is difficult to resolve on a summary judgment application. Mr Bethune may be disbelieved on a number of grounds including that it would have been quite unreasonable for him to have taken the representation at face value. I will consider next, therefore, the reasonableness or otherwise of the proposition that Mr Bethune was in fact misled.
[42] Mr Bethune had signed the Deed of Lease, on the face of which it was obvious that it was to be endorsed with the consent of VHHL. There is no question that he must have appreciated as well from that factor that such consent was going to be required. It would seem to be unlikely that he would have believed that such consent was a mere formality. A reasonable person with Mr Bethune’s experience in business would have appreciated that the question of whether consent was likely to be forthcoming from the head lessor would only be determined after the head lessor had made a number of enquiries and obtained information from the proposed sublessee and perhaps from other sources. This was not a case where representations were made by a person who was a director or employee of the head lessor and who might therefore be supposed to have familiarity with the sublessee and the type of
business operation that it carried on. Therefore enquiries would have had to be made and a reasonable person would have understood that.
[43] However, there is another element to the evidence which must be considered.
[44] If the defendants are able to demonstrate that at the point where Mr Andrews allegedly made his representation, Mr Bethune had no basis for believing that consent was going to be forthcoming, apart from taking what Mr Andrews said at face value, then it might have been unreasonable for Mr Bethune to have formed a belief that what Mr Andrews said was correct and to rely upon it.
[45] There is to be set against those arguments, the consideration that Mr Bethune said that Mr Andrews told him that there was an affiliation or linkage between the first defendant and VHHL. But the defendants have not established that Mr Andrews described the alleged affiliation or linkage in terms which would have conveyed to Mr Bethune that it was insufficiently close and direct so that Mr Bethune could assume that Mr Andrews might have sufficient knowledge about VHHL to enable him to be reasonably confident that consent would be granted.
[46] There are a number of dimensions, therefore, to the FTA cause of action. In summary, there are question marks about whether the representation was ever in fact made, whether Mr Bethune relied upon it and, if he did, whether he was acting reasonably when he did so. But I am unable to agree that the cause of action cannot succeed. It may not succeed. It may even be unlikely that it will succeed but that does not take matters far enough.
[47] The short point is that I do not consider that this is an appropriate case where summary judgment could be entered against the plaintiff on the application of defendants in relation to the FTA cause of action. In coming to that conclusion, the Court is not of course expressing any view on the likelihood that at trial Mr Bethune will be believed in this regard.
Quantum of loss
[48] Another key issue in relation to the second cause of action was that the defendants questioned how the plaintiff could justify the quantum of loss which was claimed. Mr Campbell submitted that the form of the damages claim was based upon an entitlement to expectation-type losses. The criticisms that he made have been accepted on the part of the plaintiff by Mr Withnall who said that what is now intended is to amend the second cause of action as it is pleaded and substitute a tort- type claim for damages.
Strike-out application
[49] The defendants have also applied to strike out the statement of claim in regard to which the following matters were raised.
Plaintiff ’s standing to sue under a franchise agreement
[50] One of the grounds put forward by the defendants in support of their strike- out application concerned the plaintiff’s alleged status as a franchisee of HRIL.
[51] I have dealt with these contentions earlier in the judgment when I considered the possibility that Mr Bethune as the controlling party of the New Zealand Hard Rock Cafe entities had it in his power to procure the nomination of the plaintiff as a franchisee of HRIL. The evidence that Mr Bethune has given is plausible. If the defendants do not accept that evidence, then it is not possible for the issue to be resolved on a strike-out application.
[52] I accept that the plaintiff should have dealt with the issue as to which company was to be the franchisee with greater care before it filed proceedings. However, given that this is a defect which is relatively easily cured by an amendment to the pleadings and possible addition of a further party, it does not in my view justify the draconian step of the pleadings being struck out in their totality.
No reasonably arguable cause of action: contractual claim
[53] The first part of the statement of claim is concerned with the first cause of action against VQHL only. It is essentially a breach of contract claim. This part of the claim is set out in paras 3 to 19 of the statement of claim. The key allegation is at para 10 where the plaintiff alleges that the first defendant failed to deliver the leased premises to the plaintiff. That allegation of course engages the contentions by the defendants that the first defendant did not enter into an unconditional agreement to deliver the leased premises to the plaintiff. I consider that the pleading makes its meaning sufficiently clear and that what is disclosed by the pleading is an arguable cause of action.
[54] Therefore no strike-out order should be made in regard to it.
[55] Because the plaintiff will inevitably have to file an amended statement of claim, even if only to set out the essential facts which establish the status of the plaintiff as the franchisee of HRIL, it may be that there will be a cause for the Court to further examine this part of the claim. However so long as the essential elements identifying the cause of action as one for breach of contract are present, there should be no room for complaints that the statement of claim does not state an arguable cause of action
[56] Whether or not there has been a breach of contract depends upon what the first defendant was obliged to do pursuant to the contract. That in turn raises questions about contractual interpretation. The position which the defendant takes may or may not turn out to be vindicated by the ultimate Court judgment. But for present purposes I conclude that the first cause of action as it is pleaded is sufficiently compliant with the High Court Rules 2016 to survive any attempt to strike it out.
[57] I should also add that the issues between the parties will potentially be further clarified when the plaintiff files its answer to the first defendant’s statement of defence in relation to the first cause of action. If concerns still remain, it is open to the defendants to seek a conference at which the parties would be required to discuss the issues, which would then be settled by consent or by court order.
No reasonably arguable cause of action: FTA claim
[58] In addition to the point regarding the franchise arrangements, the defendants put forward additional arguments as to why there was no reasonably arguable cause of action under the FTA. For example in his submissions Mr Campbell submitted that:
25.1 Mr Bethune’s evidence is that he has substantial assets and 22 years’
experience in various businesses.
[59] In the same vein, submission 25.4 deals with questions of fact as well. That part of the submissions states as follows:
25.4The Agreement required the parties to enter into a Deed of Lease in VQHL’s standard form, which required VHHL’s written consent to the proposed sub-lease. If HRC believed that VHHL’s consent was a “rubber-stamping” exercise, why did it agree to this term?
[60] I do not, with respect, consider that this is the type of issue that is apt to be included in a strike-out application. The correct approach on such an application is to regard the facts which are pleaded as being correct.
[61] For the same reasons as I concluded that it was not open to the defendants to obtain orders for summary judgment, I conclude that the FTA claim is reasonably arguable.
Pleading likely to cause prejudice, embarrassment or delay in proceeding
[62] The defendants submit that the plaintiff’s second cause of action is so deficient in terms of the requirements of r 5.26 that it is likely to cause prejudice or delay, and should therefore be struck out in whole or in part under r 15.1(b). Mr Campbell made the following submissions:
13.Examples of pleadings that fall within r 15.1(b) include unintelligible pleadings, prolix pleadings, excessive pleading of matters of evidence, and pleading of irrelevant material. There is an interrelationship with the requirement in r 5.26 that a statement of claim show the nature of the plaintiff’s claim. In CIR v Chesterfields Preschools Ltd the Court of Appeal held that a statement of claim must:
13.1 be accurate, clear and intelligible;
13.2give sufficient particulars to enable the defendant to be fairly informed of the case to be met;
13.3separately state each cause of action and set out the elements of each cause of action; and
13.4 plead relief clearly in respect of each cause of action.
[63] The defendants assert that the pleading fails to clearly identify to the defendants the alleged misrepresentation. The point is made that in para 22 of the statement of claim, the particulars which are set out in some cases refer to a different misrepresentation from that which is stated at the commencement of para 22 and which constitutes the main statement of the alleged misrepresentation.
[64] I agree that there is a divergence between the statement in the commencing part of para 22 and the supporting particulars particularly at subparas (b), (d) and in other particular parts of the paragraph.
[65] I shall deal with each of the particulars in para 22 and make orders relating to those together with brief reasons. I further agree with the criticisms which are made of the pleading in subparas (c) and (h), which do not seem to involve particulars of the misrepresentation which is made in para 22. Some of the other components of para 22, as well, would appear to be pleadings of evidence rather than of particulars of the representations.
(a) Particular (c): This particular contains a statement of evidence which has no relevance to the principal representation stated in para 22. It is to be struck out.
(b)Particular (d): This particular contains a statement which is a different representation from that contained in para 22 and it cannot therefore be viewed as a particular of that representation. It is possible that the plaintiff could amend the statement of claim so that it includes the representation set out in particular (d) so that it is pleaded as a further alternative representation which the plaintiff sues on. In the meantime it should be struck out.
(c) Particulars (e) and (f): This “particular” sets out material unrelated to the principal statement pleaded in para 22 and is to be struck out as well.
(d) Particulars (g) and (h): This is irrelevant to the representation in para
22 and is to be struck out.
(e) Particulars (i) and (j): This is a pleading of evidence and not particulars and will be struck out.
(f) Particular (k): This statement relates to VQHL signing the Deed of Lease and is not related to representations about the question of whether the head lessor had consented to the sublease. It will be struck out.
(g)Particular (l): This paragraph does not relate to the representation claimed in para 22 and will therefore be struck out.
(h)Particulars (m)–(t): This particular contains evidence unrelated to the representation in para 22 and will be struck out.
Summary
[66] On the application for summary judgment on the first cause of action, I have concluded that the cause of action for breach of contract for failure to deliver a sublease would not have survived, had it been the only cause of action. However summary judgment can only be entered where none of the causes of action in the statement of claim can succeed.
[67] In the summary judgment application with regard to the FTA cause of action, I have concluded that judgment ought not to be entered for the defendants on the ground that there is no franchise agreement with HRIL. I accept that it is open to the plaintiff to establish that because Mr Bethune holds territorial rights, he could have procured the issue of a franchise if the plaintiff had been able to obtain a sublease of suitable premises. Because the sublease was not approved, the franchise did not
proceed. This is however no bar to a claim for damages under the FTA. Further, while the measure of damages under the FTA claim has not been correctly stated, it would be open to the plaintiff if successful on the FTA claim to formulate its claim in such a way that there would be some qualifying heads of damage that it could attempt to prove.
[68] I have also determined that while there are areas of controversy, particularly about the reasonableness of Mr Bethune relying on the misrepresentation that Mr Andrews allegedly made, it cannot be said that the claim cannot succeed. So far as the reasonableness question is concerned the view has been expressed earlier in this judgment that what was or was not reasonable for Mr Bethune to conclude about the reliability of Mr Andrews’ statements very much depends on the context. There may have been grounds for concluding that Mr Andrews had information available to him about this particular case or about the way in which VHHL conducted approval processes in general, such that it was reasonable for Mr Bethune to judge that Mr Andrews’ representation was to be taken at face value.
[69] For those reasons I have concluded that judgment ought not to be entered on the FTA claim. That conclusion in turn means that summary judgment cannot be entered for the defendants in respect of the first cause of action, the contract claim.
[70] Further, I have concluded that the FTA claim ought not to be struck out on the ground that the pleading does not disclose a reasonably arguable cause of action. It is not a legal impossibility that the plaintiff may be able to establish that it did in fact suffer loss because of the failure to obtain a franchise because of the non-approval of the lease. It is also possible that the plaintiff could establish some admissible losses arising from the alleged misrepresentation, although those losses would be substantially different from the expectation-based damages that are presently sought in the statement of claim.
[71] I have concluded that a number of the particulars given in support of the principal allegation in para 22 of the statement of claim ought to be struck out. Some of these purported particulars are not particulars at all but allegations of different representations. Some of the particulars contain evidence which seems to
have little to do with the principal allegations in para 22. Some of the particulars relate to dates after the date when all of the three contractual documents had been signed and therefore cannot be relied upon as being misrepresentations which cause the loss which the plaintiff claims stemmed from entering into the contract because of the misrepresentations.
Result
[72] The defendants’ application for orders of summary judgment is dismissed.
The application for orders striking out is granted in part.
Costs
[73] The parties should confer on the question of costs and if they are unable to agree they are to file additional memoranda not exceeding five pages on each side
within 15 working days.
J.P. Doogue
Associate Judge
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