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Hughes v Fea

Hughes v Fea

Case [2016] NZHC 3043 14 December 2016

Breach of Contract

Unjust Enrichment

Equitable Estoppel

Restitutio in Integrum

Conversion

Commercial Law

Property Law

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IN THE HIGH COURT OF NEW ZEALAND

INVERCARGILL REGISTRY

CIV-2016-425-13

[2016] NZHC 3043

UNDER The District Courts Act 1947

IN THE MATTER OF

an appeal pursuant to section 72 of that Act

BETWEEN

JOHN STANLEY HUGHES AND IRMA AINSLIE HUGHES

Appellants

AND

DUNCAN VARNAM FEA AND PETER HEENAN

Respondents

Hearing: 23 August 2016

Appearances:

C S Withnall QC and C J G Lucas for Appellants D M Lester and J N P Young for Respondents

Judgment:

14 December 2016

INTERIM JUDGMENT OF NICHOLAS DAVIDSON J

Background

[1] The background to this appeal lies in the commercial bulb growing business in Southland.

[2] Mr and Mrs Hughes were long established bulb growers at Tapanui where they grew tulip, daffodil and other varieties. They wanted to exit the business and structured an arrangement whereby Global Bulbs Ltd (Global) leased the bulb stock owned by them.

HUGHES v FEA & HEENAN [2016] NZHC 3043 [14 December 2016]

[3] They retained ownership of the bulbs leased to Global, and their replacements, so that stock equivalent to the bulbs leased at the commencement of the lease would revert to them at the end of the five year term.

[4] Global was not successful. It did not pay Mr and Mrs Hughes under the lease. It went into liquidation, and the defendants were appointed receivers. They wrongly denied the appellants ownership of some of the bulb stocks on hand, and sold or otherwise disposed of them, or did not harvest them.

[5] There were some litigation excursions before the appellants’ claim to damages for conversion by the receivers came before Judge MacAskill whose judgment was delivered on 17 December 2015.1 That judgment is under appeal to this Court.

[6] The receivers first took the view that Mr and Mrs Hughes lost any interest they held in the bulb stocks as they failed to register such interest under the Personal Property Securities Act 1999 (PPSA).

[7] Mr and Mrs Hughes challenged that in the District Court. By judgment delivered on 30 May 2013, Judge Callaghan found in favour of the receivers and Mr and Mrs Hughes took their case on appeal before Lang J in this Court.2

[8] Lang J concluded that to establish the existence of a security interest in terms of s 17(1)(a) of the PPSA, the receivers had to prove that the transaction gave Mr and Mrs Hughes an interest in personal property and in substance that interest secured an obligation.

[9] The lease referred to different forms of personal property, beginning with the bulbs first leased to Global and particularised in the lease, then the bulbs acquired to replace those bulbs sold by Global in the ordinary course of business, and the proceeds of sale of such bulbs where there was no such replacement. In essence, Global was to maintain bulb stock equivalent to the bulbs originally leased. No exactitude could be brought to this but the broad intent was quite clear.

1 Hughes v Fea DC Invercargill CIV-2010-025-348,…

Grounds of appeal

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

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

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

Consideration

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

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

Continue reading Hughes v Fea

Details

AGLC: Hughes v Fea [2016] NZHC 3043
Case: [2016] NZHC 3043
Decision Date: 14 December 2016

CaseChat Overview and Summary

The case of Hughes v Fea concerns a dispute between Mr and Mrs Hughes and receivers appointed following the liquidation of Global Bulbs Ltd, a company involved in the commercial bulb growing business. The Hughes, long-established bulb growers, had leased their bulb stock to Global, retaining ownership of the bulbs and their replacements, which were to revert to them at the end of the lease term. Global failed to pay under the lease and went into liquidation, leading to the appointment of receivers who wrongly denied the Hughes' ownership of some bulb stocks and sold or otherwise disposed of them. The Hughes brought a claim for damages for conversion against the receivers, alleging they had unlawfully interfered with their goods. The receivers argued that the Hughes had failed to register their interest under the Personal Property Securities Act 1999 (PPSA), which they contended disentitled them to damages. The District Court initially ruled against the Hughes, but this decision was overturned on appeal to the High Court. The appeal before the High Court focused on the damages payable for the bulbs converted by the receivers.

The legal issues in the case centred on the proper measure of damages for the tort of conversion, given the unique circumstances of the bulb market. The Hughes argued that they should be compensated for the loss of the full market value of the bulbs at the date of conversion, while the receivers contended that the forced sale price achieved by them should be the measure of damages. The key question was whether the Hughes had proved the loss they claimed, given the idiosyncrasies of the bulb market and the limited evidence of sales at the time of conversion.

The High Court, in its judgment, concluded that the forced sale price achieved by the receivers did not accurately reflect the value of the bulbs in a non-existent market. The court held that the measure of damages for conversion should compensate the Hughes for the loss they actually suffered, not merely the forced sale price. The court found that the Hughes had not proved the loss they claimed to the requisite standard, as there was insufficient evidence to establish the value of the bulbs in a notional market. The court also highlighted the importance of considering the costs and contingencies that the Hughes would have incurred in realising the value of the bulbs.

The outcome of the case was that the Hughes were entitled to damages for the conversion of their bulbs, but the exact amount remained to be determined. The court proposed a further hearing to clarify the specific bulbs sold by the receivers and the proceeds from those sales, to ensure the Hughes received just compensation for their loss. The court emphasised the need for a flexible approach to damages in conversion, tailored to the unique circumstances of the case, and recognised the importance of compensating the Hughes for the true loss suffered due to the wrongful act of the receivers.

Costs were reserved, and the court proposed a teleconference to discuss whether the parties could reach an agreement on the sale price of the bulbs sold by the receivers, aiming for a swift and economic conclusion to the case.

Orders