International New Zealand Trading Limited v Wood

[2014] NZHC 136

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV2013-404-004456 [2014] NZHC 136

BETWEEN  INTERNATIONAL NEW ZEALAND TRADING LIMITED

Plaintiff

ANDLEYDA WOOD First Defendant

FRESH FRUIT TRADING LIMITED Second Defendant

Hearing:                   12 February 2014

Appearances:           J A R Cox for plaintiff

S J Christmas for first defendant

Judgment:                13 February 2014

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 13 February 2014 at 11am, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

Blomkamp Cox Solicitors, Takapuna, Auckland

Lawler & Co Ltd, Meadowbank, Auckland

INTERNATIONAL NEW ZEALAND TRADING LIMITED v WOOD [2014] NZHC 136 [13 February 2014]

[1]      This proceeding concerns an agreement for the supply of bananas grown in the Philippines.  The defendants have contact with growers in the Philippines, and procured the supply to the plaintiff (International Trading), who intended to sell them in Iraq.

[2]      The shipments were inspected on arrival in Iraq and found not to be of the required quality.  An expert reported to International Trading that they suffered from disease.   International Trading has sued both defendants for breach of contract, breach of the Fair Trading Act 1986, breach of the Sale of Goods Act 1908 and for fraud.

[3]      The first defendant (Mrs Wood), a director and shareholder of the second defendant (Fresh Fruit Trading), has applied for summary judgment against International Trading, contending that International Trading cannot establish that she is a party to the supply agreement or otherwise personally liable.

[4]      For the reasons I will now give, I find that the central question as to whether the Mrs Wood is a party to the supply agreement cannot be determined summarily, but will have to be determined at trial.

Background

[5]      Mrs Wood  is  from  the  Philippines,  but  has  lived  in  New  Zealand  for a number of years.  Her family owns a banana farm in the Philippines.  In 2012 Mrs Wood and her husband incorporated Fresh Fruit Trading for the purpose of pursuing a business procuring bananas in the Philippines for export. Although both Mrs Wood and her husband are directors, Mrs Wood took the major operational role in the business, and uses the title of managing director.   Fresh Fruit Trading set up a website to market its business.

[6]      International Trading is an importer and exporter of goods based in New

Zealand.  It identified a potential market for bananas in Iraq.

[7]      In  May  2012  Mr Ahmed  Raad Ali,  a  director  of  International  Trading, contacted the defendants, through Fresh Fruit Trading’s website, about supplying bananas for export to Iraq.   A sample shipment was arranged which proved satisfactory.

[8]      In May 2012 Mr Ali and Mrs Wood signed a written agreement for supply (24 August 2012), based on the sample shipment and specifications as to quality set out in the agreement.

[9]      Mrs Wood went to the Philippines and sourced bananas for supply in terms of the agreement.  They were shipped from the Philippines to Iraq, but on arrival were found to be of poor quality and not merchantable.

The claim

[10]     International  Trading  commenced  this  proceeding  on  11  October  2013 alleging that both Mrs Wood and Fresh Fruit Trading are liable under eight causes of action:

(a)       a failure to supply bananas of the agreed quality, in breach of contract

(the first cause of action);

(b)misleading and deceptive conduct in the form of representations as to the quality of bananas to be supplied in breach of the Fair Trading Act

1986 (the second and third causes of action, being separate claims under s 9 and s 10 of that Act);

(c)      supply of bananas that did not correspond to description, that were not reasonably fit for purpose (resale and consumption in Iraq), were not of merchantable quality, and did not comply with trade quality or fitness, all in breach of the Sale of Goods Act 1908 (the fourth to seventh causes of action, brought under separate provisions of that Act); and

(d)deliberately and fraudulently supplying sample bananas that differed substantially from the bananas subsequently supplied, with a view to inducing International Trading to enter into the supply agreement.

[11]     The defendants admit that Fresh Fruit Trading entered into an agreement for supply, and that bananas were supplied pursuant to that agreement, but say that all bananas were satisfactory when shipped.   They deny liability under all causes of action.  They also counter-claim for the unpaid balance of bananas already supplied, and for International Trading’s failure to continue to order bananas, allegedly in breach of the supply agreement.

The application for summary judgment

[12]     At the same time as filing the defence and counter-claim, Mrs Wood applied for summary judgment.   The essential ground is that International Trading cannot establish that she is personally liable.  She says that at all times she was acting as director and representative of Fresh Fruit Trading.  In particular, she says that on the evidence before the Court:

(a)       she is not a party to the supply agreement; and

(b)any representations as to the quality of the bananas were made as a representative of Fresh Fruit Trading.

[13]     She relies on  the fact that  International Trading (acting through  Mr Ali) initially made contact with Fresh Fruit Trading through its website, and contends that the agreement, read as a whole, makes it clear that the contracting parties were International Trading and Fresh Fruit Trading only.   She says that this position is supported by the fact that in all her correspondence she is shown as “Managing Director, Fresh Fruit Trading Ltd”.

[14]     International Trading opposes the application on the grounds that Mrs Wood has not shown that its causes of action cannot succeed.  In particular, it relies on the description of the parties in the supply agreement, where Mrs Wood is specifically

named, and the evidence of Mr Ali that her name was added specifically at his request   “to   guarantee”   performance   of   obligations   under   the   agreement. International Trading accepts that Mrs Wood disputes Mr Ali’s evidence, but says that this dispute cannot be resolved summarily.

[15]     The critical issue that the differing contentions raise is whether Mrs Wood has shown that International Trading Ltd’s contention that she is a party to the supply agreement cannot succeed.  If so, she must also satisfy the Court that International Trading cannot establish an arguable case that she has personal liability for representations made as to the quality of the bananas, and that there is no arguable basis for contending that she deliberately misled International Trading as to the quality of the bananas to be supplied.

Applicable legal principles

[16]     Mrs Wood brings her application under r 12.2(2) of the High Court Rules:

(2)       The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff's statement of claim can succeed.

[17]     The  principles  that  the  Court  applies  when  determining  a  defendant’s application for summary judgment are to be found in the decision of the Court of Appeal in Westpac Banking Corporation v M M Kembla New Zealand Ltd.1   For the purposes of the present application, the following principles are relevant:

(a)      The  defendant,  applying  for  summary  judgment,  has  the  onus  of proving on the balance of probabilities that the plaintiff cannot succeed.

(b)Summary judgment will be inappropriate whether there are disputed issues of material facts, or where material facts need to be ascertained

by the Court and cannot be confidently concluded from affidavits, or

1      Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298; (2000) 14

PRNZ 631, particularly at [58] – [64].

where ultimate determination requires  a judgment which can only properly be arrived at after a full hearing of the evidence.

Is it arguable that Mrs Wood is a party to the supply agreement?

[18]     The starting point for assessing this central issue is the written agreement of

24 August 2012.  Before examining its terms, it is important to set out the genesis of the written document.  Mrs Wood says in her evidence in support of her application that with the exception of the description of the parties, the agreement was prepared by Fresh Fruit Trading’s accountant, based on information that she (Mrs Wood) supplied.   It is common ground that Mrs Wood then added the description of the parties to the first page of the agreement.

[19]     The agreement is a seven page document.  The first page is printed on Fresh Fruit  Trading’s  letterhead,  and  is  headed  “BANANA SALE AND  PURCHASE AGREEMENT”.   That first page contains a description of the parties, some background in the form of recitals, and then the operative clause:

1.SELLER shall sell exclusively to BUYER, and BUYER shall buy, all the export grade Cavendish bananas produced from the farms of the GROWERS which satisfy the quality specifications of BUYER as set forth in Annexes A-1 Supply Agreement.

[20]     The next five pages of the agreement are headed “ANNEXEURE [sic] A-1

Supply Agreement”.  This annexure sets out the quantities, prices and specifications for the two classes of bananas to be supplied, payment terms, the parties’ responsibilities, the term of the agreement and an arbitration clause.   The seventh page  is  headed  “ANNEXURE-B-1    CLAIMS  PROCEDURE”  and  at  the  foot provides for signature by “International Trading NZ Ltd (Ahmed Ali)” and “Fresh Fruit Trading Ltd (Leyda Wood)”.

[21]     The  opening  words  of  the  agreement,  containing  the  description  of  the parties, are central to the determination of this application:

This agreement is made and executed on the date and place hereinafter written by and between:

Leyda Wood, New Zealand, of legal [sic] and residing at 129/A Reeves Road, Pakuranga Auckland hereinafter referred to as FRESH FRUIT TRADING LIMITED a Limited Liability company duly organised under the law of New Zealand, with business address 129/A Reeves Road, Pakuranga, Auckland New Zealand, represented by its Managing Director Leyda Wood hereinafter referred to as “SELLER”; of Banana.

And

INTERNATIONAL NEW ZEALAND TRADING LIMITED, a corporation duly organised under the laws of New Zealand, with business address at 5, Sheldon  Place,  Burswood Auckland,  represented  by its  Manager Ahmed Raad Ali hereinafter referred as “BUYER”

[22]     Counsel for International Trading submitted that its primary contention is that Mrs Wood, whose name first appears, is the person identified as the seller, and the reference to Fresh Fruit Trading was no more than an alter-ego for her, for the purposes of drafting.  He submitted, in the alternative, that it is at least arguable, on this wording, that Mrs Wood is a party to the agreement.

[23]     Counsel pointed to Mr Ali’s evidence:2

Before  we  signed  the  contract, Ms Wood  confirmed  herself  as  personal guarantor.  This is why her name and the company name was placed in the contract.

[24]     Counsel noted that Mrs Wood had inserted this description, and argued that the inclusion of the curious phrase “of legal” was meant to refer to her legal capacity, indicating her personal liability.  He submitted that these were lay people completing the agreement, and Mr Ali’s evidence could be taken as indicating that Mrs Wood was to be a party, whether it was technically as a principal or as guarantor.

[25]     Counsel for Mrs Wood accepted that Mrs Wood appeared to have been named as a party, but says that this was merely a consequence of her naivety in drafting, and that when the description of “SELLER” was read as a whole it was clear that Fresh Fruit Trading was  the party and  Mrs Wood was merely being identified as  the representative of the company.   She relied on the opening words of annexure A1,

under the heading “Supply Agreement”:

2      Paragraph 14, affidavit affirmed 9 September 2013.

FRESH FRUIT TRADING LTD A company duly organized and existing under the New Zealand laws with office address at 129A Reeves Road, Pakuranga, Auckland, New Zealand, herein represented by Leyda Wood, Managing Director, herein referred to as SELLER.

Counsel also relied on the fact that all payments were to be made to Fresh Fruit Trading’s account and to the signature provision which indicated that Mrs Wood was signing for Fresh Fruit Trading rather than on her personal account.

[26]     The description of the seller regrettably is unhappily drafted.  The placement of Mrs Wood’s name at the start of the paragraph can be contrasted with the description of “BUYER”, where International Trading’s name appears first and the phrase “represented by its Manager Ahmed Raad Ali” follows.   Counsel for Mrs Wood’s submission that this was simply a matter of naivety in drafting has some support in the rest of the agreement, but the other terms do not dispel the ambiguity present  in  the  description  of  seller.    There  is  further  support  for  International Trading’s case in the fact that Mrs Wood inserted this description herself (so that it must be construed contra preferentum) and following discussions (although there is dispute over this) before the agreement was signed.

[27]     Mrs Wood says in evidence that she had no discussion with Mr Ali about being  a  party  or  guarantor.    I  am  unable  to  resolve  the  dispute  on  that  point. However, the submission of counsel for Mrs Wood that the true position lies in the reference to International Trading as the seller at the start of annexure 1, and the lack of separate signature for Mrs Wood in her personal capacity, does not have the same force when one takes into account that those parts of the agreement were drafted ahead of time, as distinct from the description of parties being added at the point of signature.

[28]     Mrs Wood has not been able to give a persuasive explanation for her name being inserted at the start of the description of seller.  Whether the parties intended that she was to be added as  a party (as Mr Ali contends, applying a layman’s meaning when he referred to “guarantor”) is a matter for trial, as is the dispute between the parties as to whether this occurred.  I do not find the way that Mrs Wood

signed off her correspondence (as managing director of Fresh Fruit Trading) assists me on the fundamental point of construction of the agreement.

Other causes of action

[29]     I  find  that  Mrs  Wood  has  not  discharged  her  onus  of  showing  that International Trading’s  contention that she was a party to  the supply agreement cannot succeed.  On that basis the claim for summary judgment must be dismissed.

[30]    In light of my finding on the contract point, and having regard to the requirement for Mrs Wood to show that none of the causes of action can succeed, I do not need to spend any time on the other causes of action.  I merely comment that the finding I have just made leaves open the claims under the Sale of Goods Act, and may well have a bearing on the claims that she assumed personal liability for the representations underlying the Fair Trading Act claims.   However, I will address briefly the claim of fraud.

[31]     I am not persuaded that there is a tenable cause of action in fraud, based on the evidence before the Court.  This cause of action is lacking in proper particulars. At the very least I would expect there to be a pleading of direct involvement in the supply and, of greater significance, knowledge on Mrs Wood’s part of the inferior quality of the bananas.

[32]     Counsel for International Trading acknowledged that the claim is currently lacking particulars.  He sought to support the cause of action on the basis of evidence of the expert who inspected the shipment in Iraq that the bananas were diseased, and that this disease pre-dated the shipment.  This is “drawing a very long bow” on the basis of the assessor’s report, but significantly does not establish a case for Mrs Wood’s knowledge. There was no direct evidence as to when the disease would have been apparent, and no evidence that either defendant was sufficiently aware of it to allow an inference of knowledge to be drawn.

[33]     I would have ordered summary judgment on that cause of action if permitted by the rules to do so.

Decision

[34]     Mrs Wood’s application for summary judgment is dismissed.

[35]     Counsel are agreed that costs should be reserved pending determination of the substantive dispute.3

[36]     The Registrar is to allocate a case management conference as soon as time is available.   Memoranda are to be filed no later than two working days beforehand addressing:

(a)       Any amendment of pleadings as a consequence of this decision. (b)   Directions sought in relation to discovery.

(c)       A timetable for all interlocutory steps.

(d)      Time required for trial, and proposals for pre-trial directions.

Associate Judge Abbott

3      NZI Bank Ltd v Philpott [1990] 2 NZLR 403; (1990) 3 PRNZ 695.