Kimble Contracting Limited v Wouldes
[2017] NZHC 3151
•15 December 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2016-404-002121 [2017] NZHC 3151
BETWEEN KIMBLE CONTRACTING LIMITED
Plaintiff
AND
GRAHAM WOULDES First Defendant
ANMAR ALMOMEN Second Defendant
Hearing: 26 October 2017 Appearances:
P F Dalkie for the Plaintiff
No appearance by or on behalf of the DefendantsJudgment:
15 December 2017
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on 15 December 2017 at 11:00 am pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Date:
Solicitors: L M Nicholson, Dyer Whitechurch, Auckland for the Plaintiff
J M Skinner, Skinners Law, Auckland for the First Defendant
Counsel: P Dalkie, Auckland
KIMBLE CONTRACTING LTD v WOULDES & ANOR [2017] NZHC 3151 [15 December 2017]
Introduction
[1] In early 2015, Kimble Contracting Limited (Kimble Contracting) had dealings with Euro Vehicles Limited, a car dealership in Auckland. Euro Vehicles Limited, whose sole director at the time was the first defendant, Graham Wouldes, has since gone into liquidation, as has Kimble Contracting. At the time Kimble Contracting dealt with the second defendant, Anmar Almomen, as an employee of Euro Vehicles Limited. Kimble Contracting says that Mr Almomen engaged in misleading or deceptive conduct in breach of s 9 of the Fair Trading Act 1986 (the Act).
[2] Kimble Contracting subsequently purchased two Mercedes Benz vehicles from Euro Vehicles Limited for $123,000. Those vehicles were not mechanically sound, and were returned to Euro Vehicles Limited for repair. Euro Vehicles Limited neither returned the vehicles repaired nor refunded the purchase price as agreed by Mr Almomen. Kimble Contracting therefore alleges that as a result of Mr Almomen’s misleading and deceptive conduct, it lost $123,000. It seeks an order that Mr Almomen pay damages of $123,000.
[3] Substituted service was effected on Mr Almomen by way of newspaper advertisement on 13 December 2016, but he has taken no steps to defend the proceeding. Kimble Contracting thus proceeds against Mr Almomen by way of formal proof.1
The proceedings thus far
[4] In a statement of claim dated 29 August 2016, Kimble Contracting Limited sought judgment against Mr Wouldes and Mr Almomen for a total sum of $923,000 it says it lost as a result of misleading or deceptive conduct in breach of s 9 of the Act. Kimble Contracting did not say that Mr Wouldes himself contravened s 9, but rather that he was complicit under the accessory liability provisions, s 43(1)(b) and (d). Kimble Contracting says that it was the second defendant, Mr Almomen, who directly engaged in the misleading or deceptive conduct in trade that caused Kimble
Contracting loss.
1 High Court Rules, r 15.9.
[5] In a judgment dated 7 July 2017, Associate Judge Bell struck out the statement of claim against Mr Wouldes because Kimble Contracting did not have a cause of action for payments totalling $800,000 made before it was incorporated and because it had not pleaded adequately or shown a prima facie case for secondary liability under s 43(1)(b) and (d).2
[6] Following Associate Judge Bell’s judgment, Kimble Contracting discontinued its claim against Mr Wouldes. It also applied to seal a default judgment against Mr Almomen, who had taken no steps to defend the proceedings. The application came before Jagose J. He noted that the application for sealing was accompanied by a solicitor’s “certificate of debt” characterising $923,000 as Mr Almomen’s “debt” to the plaintiff. Jagose J pointed out that it was not a debt and that Kimble Contracting must prove its cause of action against Mr Almomen. He stated that the rules were clear – an application for judgment by default for other than a liquidated demand requires the proceedings to be listed for formal proof.3 He directed that the proceeding be listed accordingly. Finally, he also suggested to counsel for Kimble Contracting that he may wish to consider whether the claim against Mr Almomen required amendment for the purposes of formal proof given the grounds for striking-out the claim against the first defendant, which included that the plaintiff could have no cause of action for $800,000 in payments made before it was incorporated.
Application for judgment by way of formal proof
[7] The application for judgment by way of formal proof came before me on
26 October 2017. On the previous day, 25 October 2017, counsel for Kimble Contracting filed an amended statement of claim which included a new clause as follows:
16A. The representations and each of them were made by the second defendant as its manager in the course of the trade or commerce of Euro Vehicles Limited.
[8] He also advised the Court that Kimble Contracting would seek judgment only on the sum of $123,000. Counsel filed an affidavit from the liquidator of Kimble
2 Kimble Contracting Ltd v Wouldes [2017] NZHC 1554.
3 High Court Rules, r 15.9(2).
Contracting who annexed bank statements showing payments of $60,000 on 17 March
2015, $40,000 on 18 March 2015 and $23,000 on 26 March 2015, which together totalled $123,000.
[9] At a formal proof hearing, the plaintiff must file evidence establishing each cause of action relied on to the Judge’s satisfaction.4 The standard to which a Judge
must be satisfied on formal proof “is much the same as it would be if the proceeding had gone to trial”.5
Relevant law
[10] Section 9 of the FTA provides:
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[11] The leading judgement of the Supreme Court in Red Eagle Corp Ltd v Ellis provides that the test for misleading or deceptive conduct is objective. The question to be answered is “whether a reasonable person in the claimant’s situation… would likely have been misled or deceived”.6 Thus, “[i]f the conduct objectively had the capacity to mislead or deceive the hypothetical reasonable person, there has been a breach of s 9”.7 This must be assessed in the circumstances in which the conduct occurred and with respect to the person or persons likely to be affected by it.8
[12] The Court is permitted to make orders for damages under s 43 where a person “has suffered, or is likely to suffer, loss or damage by conduct of another person” that is in contravention of the Act. The section makes it clear that the loss must be caused “by” the misleading or deceptive conduct. In Red Eagle Corp v Ellis the Supreme Court described the approach to causation under s 43 in the following terms: 9
The language of s 43 has been said to require a “common law practical or common-sense concept of causation”. The court must first ask itself whether
4 High Court Rules, r 15.9.
5 Ferreira v Stockinger [2015] NZHC 2916 at [35].
6 Red Eagle Corp v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
7 Red Eagle Corp v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
8 Goldsbro v Walker [1993] 1 NZLR 394 at 401.
9 Red Eagle Corp v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [29], citing Goldsbro v Walker
[1993] 1 NZLR 394 (CA) at 401.
the particular claimant was actually misled or deceived by the defendant’s conduct. It does not follow from the fact that a reasonable person would have been misled or deceived (the capacity of the conduct) that the particular claimant was actually misled or deceived. If the court takes the view, usually by drawing an inference from the evidence as to a whole, that the claimant was indeed misled or deceived, it needs then to ask whether the defendant’s conduct in breach of s 9 was an operating cause of the claimant’s loss or damage. Put another way, was the defendant’s breach the effective cause or an effective cause? Richardson J in [Goldsbro v Walker] spoke of the need for, or as he put it, the sufficiency of, a “clear nexus” between the conduct and the loss or damage. The impugned conduct, in breach of s 9, does not have to be the sole cause, but it must be an effective cause, not merely something which was, in the end, immaterial to the suffering of the loss or damage.
Application
[13] Kimble Contracting alleges misleading conduct in its amended statement of claim dated 25 October 2017 as follows:
5. Between in or around February and March 2015:-
(a) Karnie Smith and/or Mr Hamish Clarke and/or Mr Sam Tolich as representatives and agents for and on behalf of the plaintiff met with the second defendant on behalf of Euro Vehicles Limited, on divers occasions to discuss the purchase of motor vehicles;
(b) during the course of these discussions the second defendant for and on behalf of Euro Vehicles Limited represented:-
(i) it, the first defendant, and he with a Julian Sydney (said to be the accountant for Euro Vehicles Limited) had undertaken successful property developments on the North Shore;
(ii) he was actually a director of Euro Vehicles Limited, although he was not then named or listed as one;
(iii) Euro Vehicles Limited was a successful property developer;
(iv) Euro Vehicles Limited operated a successful and profitable car importing/sales business;
(v) Euro Vehicles Limited dealt significantly in cash when purchasing high end second hand vehicles;
(vi) Euro Vehicles Limited could double any money the plaintiff was prepared to loan or invest in the car business and or the property business being undertaken by Euro Vehicles Limited and the defendant;
(vii) any money invested could be repaid on 14 days notice;
(viii) Euro Vehicles Limited had entered into similar arrangements in the past and its lawyers would draw up the “necessary documents”
(x) Julian Sydney, the first defendant and the second defendant would personally guarantee repayment of any monies loaned or invested in Euro Vehicles Limited; and
(xi) the plaintiff could register security on the PPSR over the vehicles owned by Euro Vehicles Limited.
[14] The sole affidavit relevant to this issue filed on behalf of Kimble Contracting was that of Hamish Clarke sworn on 13 June 2017. He states:
3.In around February 2015 I met with the second defendant at the car yard at Euro Vehicles Limited (in liquidation) along with Mr Karnie Smith and Sam Tolich as representatives of Kimble Contracting Limited. We discussed purchasing motor vehicles for Kimble Contracting Limited a company about to be incorporated. I told the second defendant that anything we bought then would be on behalf of the second defendant. I am sure Karnie Smith and/or Sam Tolich would have said the same thing at various times. During these discussions I mentioned I was then involved in the building industry. The second defendant told me that he was involved in property development with a Julian Sydney and that he was the representative for Euro Vehicles Limited, not only for its business in buying and selling cars, but also for its business of property development.
…
5.In the course of discussions and negotiations with the second defendant to which I was a party, he made the representations set out in the statement of claim in paragraph 5(b)(i). I kept no written record of what he said. However, this was the central part of the deal we struck. He made the representations on more than one occasion and often in any discussion in which a representation of this kind was made included an urgent request to be provided with money so that Euro Vehicles Limited could buy motor vehicles that the second defendant had identified on-line as a good investment.
[15] Mr Clarke refers only to the representation set out in paragraph 5(b)(i) of the amended statement of claim, which is a representation that the first and second defendants with a Julian Sydney and Euro Vehicles Limited had undertaken successful property developments on the North Shore.
[16] Counsel for Kimble Contracting submits that the falsity of this representation is demonstrated by the affidavit of Mr Wouldes, sworn 12 April 2017. In response to the claim in paragraph 5(b)(i) of the statement of claim, Mr Wouldes states:
Paragraph 5(b)(i) -
30Euro has never been involved in property development. Julian and I have been involved in property developments, but not with Alex (Mr Almomen) and not with Euro Vehicles.
[17] Kimble Contracting alleges that “in further or continuing reliance on the representations pleaded… the plaintiff agreed to purchase two Mercedes-Benz vehicles and a vehicle mechanical warranty from Euro Vehicles Limited”. The purchase price for the two vehicles was $113,659 including GST, and the plaintiff paid a further sum of $9,341 for the warranty.
[18] Mr Clarke himself annexes two agreements for the sale and purchase of two Mercedes motor vehicles by Kimble Contracting and Karnie Smith from Euro Vehicles. One of these agreements for sale and purchase is dated 22 March 2015 and refers to two payments – one of $23,000 and a further payment totalling $60,000. There is a second sale and purchase agreement for another Mercedes motor vehicle – dated 22 February 2015 – in the sum of $50,650.
[19] Although Mr Patel, the liquidator of Kimble Contracting, swears in his affidavit that neither car was ever delivered, it appears clear from the evidence that the cars purchased were, in fact, delivered. Mr Clarke in his affidavit says that Kimble Contracting took possession of both cars on 18 March 2015. Counsel accepted that the company received at least one of the vehicles and took possession in it. This is also the position set out in the amended statement of claim dated, which says:
(a) Immediately after taking possession of the E63 it broke down. The second defendant agreed to have the vehicle repaired under the vehicle warranty purchased.
(b) At about the same time there were mechanical difficulties with the
C63.
(c) Both vehicles were returned for repair.
(d) By May 2015 neither vehicle had been repaired and returned despite numerous requests, and Euro Vehicles Limited through the second defendant agreed to refund the purchase price.
(e) Euro Vehicles Limited never refunded the purchase price, and on sold both motor vehicles.
[20] Turning to the legal consequences, the first question is whether the pleaded conduct was objectively deceptive or misleading with respect to the context and the characteristics of the persons said to be affected.
[21] Only limited evidence is provided by the plaintiff to prove the existence of misleading and deceptive conduct. Mr Clarke, on whose affidavit the plaintiff relies, cannot recall the wording of the representation said to have been made by Mr Alomomen, and provides little detail of the context in which it was made. He says that Mr Almomen “made the representations on more than one occasion”, but does not state how often or in which conversations. He states only they were made at the Euro Vehicles Limited car yard, when Mr Almomen was the only employee present.
[22] When pressed on the impact of the alleged statement, counsel for the plaintiff stressed the evidence in Mr Wouldes’ affidavit that demonstrates that any such statement would be false, as “Euro [Vehicles Ltd] has never been involved in property development”. But whether any such statement was objectively false (which I accept) does not demonstrate that the statement amounted to misleading or deceptive conduct.
[23] In the absence of more detail about the statements made by Mr Almomen, whether he engaged in misleading and deceptive conduct is difficult to assess. But Mr Clarke describes himself as a Property and Construction Consultant by trade, and says that he was at the time involved in the building industry. I am sceptical that a person with experience in the property industry would take seriously a bare claim made by a car salesman on a car yard that a company by the name of Euro Vehicles Limited was successfully involved in property development in the North Shore. I consider that a reasonable person in that position would likely have enquired further about the details of the property investments or the nature of the company before accepting the representation. Mr Clarke does not say whether any more detailed discussion occurred.
[24] I am therefore sceptical that the plaintiff has demonstrated on the balance of probabilities that the conduct was objectively misleading or deceptive, but I do not consider it necessary to conclusively determine this point. That is because I am not satisfied that Mr Almomen’s conduct, even if misleading or deceptive, was causative of the loss claimed.
[25] Mr Clarke does not explain how the allegedly false representation that a company and/or individuals had been involved previously in successful property development on the North Shore could constitute misleading or deceptive conduct which was causative of loss which seems to have occurred through delivery of one or more defective motor vehicles or the non-delivery of one or more motor vehicles. On the evidence before me, the purpose of the relevant payments was to obtain two cars which were, it appears, delivered. The plaintiff does not argue that the payments were for property development purposes, nor for investment in Euro Vehicles Limited.
[26] A belief that Euro Vehicles Ltd was involved in successful property development would not appear in any way to cause a person to purchase vehicles from that dealership or to be more certain of their roadworthiness. Nor is there any evidence here that any such belief was the cause of Kimble Contracting’s decision to buy the two faulty Mercedes Benz vehicles.
[27] It is clear Euro Vehicles was involved in the sale and purchase of motor vehicles, but I am not satisfied that any representation about the company or any individuals having undertaken successful property developments on the North Shore is at all causative of any loss suffered by Kimble Contracting in the purchase of motor vehicles from Euro Vehicles. I do not consider that there is any evidence of a clear nexus between the conduct and the loss claimed.
Result
[28] For the reasons stated, I do not consider that the plaintiff has made out its claim. I decline to grant the relief sought in the amended statement of claim.
Woolford J
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