Kwok v Torrance
[2017] NZHC 1510
•3 July 2017
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2015-404-001808
[2017] NZHC 1510
BETWEEN SHING CHUNG (DANIEL) KWOK
First Plaintiff
CASSCO LIMITED
Second PlaintiffAND
SELWYN CLARK TORRANCE
First Defendant
DAVID ALAN KEITH CLARK
Second Defendant
Hearing: 20–23 March 2017 Appearances:
M I S Phillips for the Plaintiffs
S C Torrance (Self-represented First Defendant) in Person D A K Clark (Self-represented Second Defendant) in Person
Judgment:
3 July 2017
JUDGMENT OF EDWARDS J
This judgment was delivered by Justice Edwards on 3 July 2017 at 10.00 am, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Vicki Ammundsen Trust Law Limited, Auckland Carson Fox Legal, Auckland
Copies To: S C Torrance, Lower Hutt
D A K Clark, Lower Hutt
KWOK v TORRANCE [2017] NZHC 1510 [3 July 2017]
Introduction
[1] Mr Kwok, and his company, Cassco Ltd, seek to recover their investment in a failed venture to bottle and sell water from an underground spring.
[2] They claim that Mr Torrance and Mr Clark failed to transfer water rights and intellectual property in breach of an agreement to do so. They also say they were induced to enter into an agreement by misrepresentations made about an offer from another potential investor, and the amount already invested in the project by both defendants.
[3] Mr Torrance and Mr Clark say that there was no contractual obligation to transfer the water rights and intellectual property, and that the representations were true. They also say that Mr Kwok did not pay the full price agreed for his shares in the joint venture company, and acted in an unconscionable way by trying to appropriate the venture for his own company.
[4] The plaintiffs plead three causes of action: breach of contract, misrepresentation under the Contractual Remedies Act 1979, and misleading and deceptive conduct under the Fair Trading Act 1986. The defendants deny each claim and also plead two affirmative defences: set-off and estoppel.
[5] Resolution of the plaintiffs’ claims depends on the answers to the following questions:
(a)Was there a contract?
(b)Was there a breach?
(c)What caused the loss?
(d)Were there misrepresentations?
(e)Did the plaintiffs rely on those misrepresentations?
[6] I consider each of these questions first, and then go on to consider each cause of action in turn, addressing any residual issues in the process.
The key events
[7] The underground spring at the centre of the proposed venture is on a farm owned by Mr Ian Stewart on the West Coast of the South Island.
[8] Alpha Aqua Ltd, a company owned by Mr Torrance and Mr Clark, was party to a lease and licence agreement with Mr Stewart which secured access to the land and the water. Alpha Aqua Ltd also owned intellectual property in the name “Aqua NZ”. Mr Torrance and Mr Clark’s initial idea for the project involved the bottling and marketing of the water under the Aqua NZ brand name.
[9] Mr Kwok learned about the proposed water venture from Mr Cobb, Mr Sanders and Mr Cassin, who were shareholders in Cassco Ltd at that time. The three shareholders were looking to form a joint venture company with Mr Torrance and Mr Clark to develop the water project. They were also looking for investors in Cassco Ltd, and had met with Mr Kwok towards the end of 2011 to discuss this investment, and investment in the water project.
[10] Mr Kwok was in discussions with the Cassco Ltd shareholders about the project throughout 2012. He first met Mr Torrance in September 2012 on Mr Stewart’s farm and expressed an interest in the project after that meeting.
[11] A number of key events occurred in January 2013. On 19 January 2013, Mr Kwok met with Mr Torrance and Mr Clark to discuss the venture. Following this meeting, on 22 January 2013, Mr Torrance sent Mr Kwok an email. Representations made in this email as to the offer from another potential investor, Mr Huang, and investment in the sum of $2.5 million by the defendants, forms the basis of the misrepresentation causes of action.
[12] There was another meeting the following day, on 23 January 2013. Mr Sanders and Mr Cassin attended this meeting also. By this time, Mr Kwok had purchased Mr Cobb’s shares in Cassco Ltd. At this meeting, Mr Sanders prepared a handwritten
agreement which was signed by all the parties present. This document forms the basis of the breach of contract claim and is set out in full at [26] of this judgment.
[13] In brief, the document referred to the establishment of a new company with shares to be held in the stated proportions, and a bottling plant to be established at Mr Kwok’s cost. The new company was to hold the water rights and intellectual property. Mr Kwok agreed to pay the sum of $330,000 to Mr Torrance and Mr Clark for his shares in the new company.
[14] Following the January meeting, the parties to this proceeding took various steps towards realising the water venture. Mr Kwok and Mr Torrance travelled overseas and Mr Kwok purchased a near new bottling machine. Mr Kwok engaged consultants, applied for resource consent, and paid substantial sums to Superspan Ltd for the design and construction of the new bottling plant.
[15] The new company, NZ Aqua Ltd, was incorporated and shares were allocated to both Mr Kwok and Cassco Ltd. Payment of approximately $175,000 of the original
$330,000 agreed was made in three lump sum payments for the shares, and in an email dated 22 March 2013 Mr Kwok indicated that he would pay the balance later.
[16] The parties embarked on negotiations for a new lease and licence, in the name of NZ Aqua Ltd, with Mr Stewart. The previous lease and licence had been terminated by letter from Mr Stewart’s solicitors to Mr Torrance and Mr Clark dated 26 March 2013 which was received on 28 March 2013. Mr Kwok says he did not know about this until October 2013. Mr Torrance says he knew about this much earlier, and it was discussed at a meeting with Mr Stewart and his wife at the farm on 30 March 2013.
[17] Mr Torrance originally spearheaded the efforts to negotiate a new lease and licence. Draft agreements were prepared by Mr Torrance’s solicitor and sent to Mr Kwok for his approval before being forwarded to Mr Stewart’s solicitors. However, in July 2013, Mr Stewart took offence at personal statements allegedly made by Mr Torrance, and refused to have anything more to do with him.
[18] From this point onwards, Mr Kwok took over the negotiations with Mr Stewart. Although there was common ground on many of the terms of the new lease, there was no agreement on what to do in the event the water became contaminated. This was to prove a sticking point in negotiations.
[19] On 16 October 2013, Mr Kwok met with Mr Stewart at his farm. He took two draft heads of agreement with him. The first was with NZ Aqua Ltd, the second was with Mr Kwok personally. Mr Stewart signed the heads of agreement with Mr Kwok personally, but the next day disavowed any agreement, stating it was signed under duress. It was at this time that Mr Kwok says he first discovered that the lease and the licence with Alpha Aqua Ltd had been terminated.
[20] In November 2013, Mr Kwok incorporated two new companies, NZ Spring Holding Ltd and NZ Spring Ltd. His wife was the director and a shareholder of each company. Mr Kwok began to look at alternative sites for the water bottling project. He was introduced to Mr Head, who was also (apparently) a director of Alpha Aqua Ltd. Mr Head had fallen out with Mr Torrance and Mr Clark, and, in March 2014, without Mr Torrance and Mr Clark’s knowledge or agreement, Mr Head arranged for the transfer of the intellectual property held by Alpha Aqua Ltd to NZ Spring Holding Ltd.
[21] The relationship between Mr Kwok on the one hand, and Mr Torrance and Mr Clark on the other, had broken down by this stage. In fact there had been no contact between the men since October 2013. On 17 November 2014, Mr Kwok’s lawyers wrote to Mr Torrance, Mr Clark, Mr Sanders, and Mr Cassin, cancelling the 23 January 2013 agreement.
[22] Proceedings were filed in April 2016. Mr Kwok and Cassco Ltd seek to recover the sum of $228,481.63 being the payments made for the shares, and in relation to the failed investment. In addition, judgment in a sum to be quantified is sought for payments made to Superspan Ltd for the design and construction of the bottling plant. At trial, it was suggested that this sum be fixed at 50 per cent of the
$331,200 spent.
Was there a contract?
[23] The plaintiffs’ first cause of action is for breach of contract. They claim that the handwritten document dated 23 January 2013 and an email dated 22 March 2013 comprises the contract. The pleaded breach is that “by November 2014 no water rights or intellectual property had been transferred to the company by the first and second defendants”. Cancellation is also pleaded, and relief is sought under s 9 of the Contractual Remedies Act 1979.
[24] The defendants do not deny signing the 23 January 2013 document. Nor do they deny receiving the 22 March 2013 email. However, they deny that these documents form a contract by which an obligation to transfer the water rights and intellectual property may be enforced.
[25] The existence of a contract is to be determined by considering whether the parties intended to be immediately bound, and whether there was agreement (or means of achieving agreement) on essential terms. The terms of the document, and the conduct of the parties both before and after the alleged agreement are relevant to this assessment.1
[26]The 23 January 2013 document is set out in full below:
BETWEEN David Alan Keith Clark, Selwyn Lance Torrance, Daniel Kwok, Nino Giuseppe Cassin, Keith Sanders
It is the intent of the parties to bring about an operation to draw water from the well at Kumara and bring about a comprehensive bottling plant on site.
Each of the parties will be involved in some, or all, aspects of this operation.
David Alan Keith Clark and Selwyn Lance Torrance through their ownership of the water rights at Kumara will cooperate with Daniel Kwok who will bring about the installation of an appropriate bottling plant at his cost at the site.
It is agreed that the parties will become shareholders in a company that will hold the water rights, all intellectual property currently held by Torrance and Clark in the following proportions
Torrance and Clark 45%
1 Fletcher Challenge Energy Ltd v Electricity Corporation of NZ Ltd [2002] 2 NZLR 433 (CA) at [53], [54] and [56].
Daniel Kwok 45% Sander and Cassin 10%
This limited liability company is referred to as ‘New Company’
The ‘New Company’ will contract to the ‘Bottling Plant’ receiving sufficient revenue from the ‘New Company’. It will vest 50% of the ‘Bottling Plant’ in the ‘New Company’ upon Daniel Kwok acknowledging that his investment has been repaid. The parties agree to execute such documents and agreements as are necessary to bring such a venture into being
Daniel agrees to pay to Clark/Torrance the sum of $330,000 to secure his 45% share in the ‘New Company’
[signed by the parties to the agreement] 23 January 2013
[27] It is immediately evident from the terms of this document that this is an agreement to enter into a joint venture. That flows from the intention described at the outset of the document, and the subsequent clause where each party pledges to have a role in the water operation.
[28] The core components of the joint venture are described in the agreement. There is to be a new company formed, a bottling plant built, and a contracting relationship established between those two entities. The parties agree to execute such documents and agreements as are necessary to bring that venture into being.
[29] There is an absence of detailed contractual terms stipulating the performance required from each party. The nuts and bolts of how the venture was to be realised is left unspecified. In my view, that suggests that the parties’ ongoing relationship was not to be governed by contract alone. Rather, it was to be shaped by their agreement to work together to realise the joint venture concept. In other words, the ongoing relationship was to be governed by fiduciary, and not contractual, obligations.
[30] That is consistent with the parties’ conduct following the 23 January 2013 meeting. Mr Kwok, in particular, forged ahead with the project without the surety of formal contracts in place. Soon after the January meeting he flew to Hong Kong and Europe and purchased a bottling machine. He made payments towards the construction of a bottling plant, the most significant of which was a deposit of
$124,000 paid to Superspan Ltd in April 2013. He also made payments to Mr Torrance at the latter’s request. The sum of $50,000 was made on 8 March 2013, the sum of approximately $90,800 was made on 22 March 2013, and the sum of $35,000 was paid in June 2013.
[31] Those payments and purchases were made without any contractual assurance that the project was to proceed, that the intellectual property would be transferred, and that the shares in the new company would be transferred.
[32] Furthermore, Mr Kwok did not appear to regard himself as contractually bound to pay for the shares in the new company by any specified date. That is apparent from the 22 March 2013 email (relied on by the plaintiffs as forming part of the contract) sent by Mr Kwok which reads:
Hello Selwyn and Dave:
We will be transferring another 90,818.18 into your account today.
So, all together, we have paid $90,818.18 + $50,000.00 = $140,818.18. Remaining is $333,000.0 - $140,818.18 = $192,181.82
As we agreed, I will be paying the balance at a later time. So, the shareholders currently are
Selwyn and Dave 45% Daniel Kwok 40% Cassco Ltd 15% Please form the company and move the IP into this new company. Thank you
Best regards,
Daniel Kwok
[33] The agreement to pay the balance later, as referred to in this email, is indicative of the informal basis upon which these parties were proceeding. Consistent with that approach, Mr Kwok did not sign, nor respond, when an agreement for the sale and purchase of shares was sent to him by the defendants’ solicitor. He did not negotiate any further. He was asked by Mr Torrance for his reasons for not doing so. Mr Kwok’s answers revealed the true nature of the relationship between them. He said:
I thought, okay, those are things that can be finalised at a later time, so we carry on what we’re doing and also I like, sometimes when I join a new venture I believe in persons, I believe in you [Mr Torrance], so I thought that okay, you have the lease in place, you have all the licence in place, that’s why I pay you all the money.
[34] Against that background, I do not consider the 23 January 2013 agreement imposed a contractual obligation on Mr Torrance and Mr Clark to transfer the rights and property at a stipulated point in time. The express terms of the document do not support such a clause. There is no clause requiring transfer. There is no time for performance, and no means by which performance is to be measured. There is an absence of the mandatory and directive language usually associated with a contractual obligation of that nature.
[35] There is also a problem in identifying who would owe such an obligation, even if one could be implied. That is because Mr Kwok understood that the water rights and intellectual property were held by Alpha Aqua Ltd, and not Mr Torrance and Mr Clark. And, for the reasons already discussed, a contractual obligation would be at odds with the way the parties conducted themselves following the signing of the agreement
[36] The agreement required Mr Torrance and Mr Clark to “cooperate” with Mr Kwok. At a minimum, that meant that Mr Torrance and Mr Clark could not use the intellectual property or the water rights for their own gain. Nor could they agree to go into business with any other party to exploit the water project concept. But exactly what the obligation to cooperate required in terms of positive steps was to be determined by the future shape of the joint venture. And, as explained further in the next section, although the parties may have initially contemplated a transfer of the existing water rights, as the joint venture concept evolved, the parties decided to negotiate a new lease and licence in the name of the new company – transfer was therefore no longer required.
[37] In summary, I consider the 23 January 2013 document is a contract. The purpose was not to set out detailed contractual obligations, but to bind the parties to each other in a joint venture arrangement. There was no contractual obligation to transfer the water rights or intellectual property at a particular point in time. The only
obligation on Mr Torrance and Mr Clark was to cooperate with Mr Kwok, with the exact content of that obligation insofar as the water rights and intellectual property was concerned to be determined by the requirements of the joint venture.
Was there a breach?
[38] As noted above, the pleaded breach of the contract was failure to transfer the water rights and intellectual property. I have found that there was no contractual obligation to transfer, but there was an obligation to cooperate in the context of a joint venture arrangement.
[39] Insofar as the pleaded claim relates to the intellectual property then it cannot succeed. Mr Kwok secured a transfer of that intellectual property from Alpha Aqua Ltd through Mr Head. There can be no breach, and certainly no breach causing loss, arising in those circumstances. The claims of breach therefore focus on the lease and licence.
[40] Mr Kwok’s central complaint at trial was that he did not know that the lease and licence had been cancelled. He was very firm about this in his evidence. Although I found his evidence on this point to be truthful, I nevertheless consider his recollections to be unreliable. I consider it highly likely that he did know that the lease and licence had been terminated, and that this was discussed at the meeting on 30 March 2013. My reasons for reaching that conclusion are as follows:
(a)First, the letter of termination from Mr Stewart’s solicitors had only been received two days prior to the meeting on 30 March 2013. It would have been surprising if termination and rental arrears had not been discussed at that meeting in those circumstances.
(b)Second, a letter from Mr Stewart’s solicitors dated 24 July 2013 addressed to Mr Kwok suggests that termination was in fact discussed at the 30 March 2013 meeting (erroneously referred to as the early April meeting in the letter). That letter suggests that there was agreement that any new lease and licence was to mirror the old one recently terminated.
(c)Third, Mr Kwok was involved in the negotiations for a new lease and licence and took control of those negotiations from July 2013. Knowledge that the lease and licence had been terminated provides some explanation for the new negotiations that followed.
[41] However, whether Mr Kwok knew about termination is largely irrelevant to the resolution of the claim. That is because it is apparent from the evidence that the parties intended, for whatever reason, that there would be a new lease and licence in the name of the new company, and Mr Kwok proceeded on that basis.
[42] The negotiation of a new lease and licence was mentioned as the first item on the agenda notes prepared by Mr Torrance for the meeting with Mr Kwok on 19 January 2013. There is no reason to suggest that this was not discussed with Mr Kwok. Even before the 23 January 2013 meeting therefore, the parties appeared to be contemplating the negotiation of a new lease and licence in the name of their new company.
[43] Furthermore, the solicitors for Mr Torrance and Mr Clark wrote to Mr Kwok on 26 February 2013 stating that the intellectual property would be transferred on receipt of full payment for the shares. There was no reference in that letter to the lease and licence. I infer that was because the parties intended to negotiate a new lease and licence, and transfer was accordingly unnecessary.
[44] Negotiations for the new lease and licence commenced in the months after the January meeting. All parties agree that the discussions at the 30 March 2013 meeting concerned the building of the bottling plant and Mr Stewart’s requirement that it not include any accommodation. It was at least implicit in these discussions that any such agreement would be recorded in a new lease and licence.
[45] Mr Kwok was provided with drafts of the new lease and licence prepared by Mr Torrance’s solicitor. Mr Kwok was therefore well aware of the efforts to negotiate a new agreement. And, when the relationship between Mr Torrance and Mr Stewart broke down, Mr Kwok stepped in as lead negotiator.
[46] Although Mr Kwok now says that the transfer of the old lease and licence was essential to the success of the project, his conduct at the time suggests otherwise. He did not seem overly concerned with the transfer of the old lease and licence – no doubt because he was intent on negotiating new agreements.
[47] To the extent that Mr Kwok showed any concern, it was with transfer of the intellectual property. Mr Kwok requested the intellectual property be transferred on at least two occasions. The first occasion was in his email of 22 March 2013, and the second in an email dated 16 October 2013 addressed to Mr Torrance’s solicitors. Ultimately, Mr Kwok secured the transfer of that intellectual property in March 2014 from Alpha Aqua Ltd through the efforts of Mr Head.
[48] Mr Kwok did not make any similar requests for transfer of the lease and licence. He contended in evidence that when he referred to the “IP” in his email of 22 March 2013 he meant the water rights as well. I do not accept that evidence. A clear distinction between the water rights on one hand (comprising the lease and the licence), and the intellectual property on the other (comprising the trademarks for “Aqua NZ”) was made in the agreement and in the evidence adduced by both parties. Mr Kwok’s request was for the intellectual property only.
[49] Even when Mr Kwok became aware that the old lease and licence had been terminated (arguably in July, but on Mr Kwok’s case in October 2013), he did not take steps to enforce what he now says was a breach of contract. In fact, he did not respond to either letter at all. The reason for that lack of concern was presumably because he always intended to secure a new lease and licence with Mr Stewart, and was actively pursuing those negotiations. In fact, by October 2013, Mr Kwok appeared to have designs on securing a new lease and licence for himself – or at least for companies set up in his wife’s name.
[50] In summary, the obligation required Mr Torrance and Mr Clark to cooperate with Mr Kwok in realising the joint venture concept. Although they may have initially contemplated transfer of the existing lease and licence, that soon changed to the negotiation of a new lease and licence in the new company’s name. Mr Torrance and
Mr Clark cooperated with Mr Kwok to secure that new lease and licence. I do not consider there to be a breach in those circumstances.
What caused the loss?
[51] Even if there was such a breach, I do not consider the plaintiffs could prove that any such breach caused them loss.
[52] The terms of a new lease and licence negotiated with Mr Stewart could not be agreed. That had nothing to do with the old lease and licence being terminated. In fact, the letter from Mr Stewart’s solicitor dated 24 July 2013 suggests that Mr Stewart would have agreed to a new lease and licence on exactly the same terms as the old one. There was no evidence that Mr Kwok had proposed this when negotiations stalled in 2013.
[53] The reason those negotiations stalled was because agreement could not be reached on what was to happen in the event the water became contaminated. It was the failure to agree on the allocation of risk in this eventuality that resulted in the project halting. In answers to questions posed by the Court, Mr Kwok confirmed that this was the cause:
Q.Yes. If you had been able to agree a lease and licence, would we still be here today?
A. No.
Q. No. Okay. Thank you.
A. But we don’t have a new lease.
[54] The loss claimed by Mr Kwok was not caused by the failure to transfer the water rights and intellectual property, but by the failure to agree a new lease and licence with Mr Stewart.
Were there misrepresentations?
[55] The second cause of action claims relief under the Contractual Remedies Act 1979 for misrepresentations made by the defendants. The third cause of action seeks relief for those same misrepresentations under the Fair Trading Act 1986.
[56] The plaintiffs rely on two representations made in the email dated 22 January 2013. The first concerns an offer made by Mr Huang. The relevant part of the email provides:
Moving forward on the project we told you we had a offer on the table from Mr Yuan Cheng Huang from Shanghai China, this is the first offer and still stands today. We have been told that this can be finalised by the end of the week. With Mr Huang buying our shares at One million dollars NZD into the water project so far. He has come back to us and said that he also will invest in the bottle water filling line, and buildings, finish off driveway and any other items to have up and running right away. He would then take the water from the factory FOB and distribute throughout China … Mr Huang has seen the potential in the project and what has been done to date and wants to invest one million dollars NZ in shares.
[57] The second concerns the level of investment made by Mr Torrance and Mr Clark into the water project. That part of the email provides:
David & Selwyn have invested to date two point five million dollars in the project so far.
[58] It was true that Mr Huang had offered to buy shares for $1 million. An email dated 26 September 2012 sent on behalf of Mr Huang records his agreement to pay $1 million for 51 per cent of the business.
[59] But it was not correct to say that the offer “stands today” and “could be finalised by the end of the week”. Mr Torrance had spoken to Mr Cobb about the status of that offer on Saturday, 19 January 2013. Mr Torrance’s own evidence was that Mr Cobb had told him that “he was not sure where Mr Huang’s thoughts were”. Mr Cobb’s evidence was that he did not think it likely that Mr Huang would go ahead with his offer. Mr Torrance severely exaggerated the status of Mr Huang’s offer and in that respect the representation was false.
[60] The representation about the amount of money invested in the project was also clearly exaggerated. Mr Torrance produced some financial documentation in an effort to substantiate the representation made. But it fell far short of showing a $2.5 million investment. I simply do not accept Mr Torrance’s evidence that they had spent this amount of money.
[61]It follows that both misrepresentations were false and misleading.
Did the misrepresentations induce the plaintiffs?
[62] Although I have found that both representations were false, I am not persuaded that either Mr Kwok or Cassco Ltd were induced by them to enter into a contract. My reasons for that finding are as follows.
[63] First, Mr Kwok relied on his own business acumen and enquiries in deciding to go ahead with the project. Mr Kwok had been making those enquiries for nearly a year before the January email was sent. He had received information about the project from Mr Cobb, Mr Sanders and Mr Cassin. He had met on numerous occasions with these men throughout 2012 to discuss the project and had visited the farm to see the site for himself. By the time he received the January email he said he:
… had also done some of my own research on the global water industry and I was aware it presented very good opportunities because of the demand for good clean water from the mountains country like New Zealand with a good image”.
[64] Second, Mr Kwok appeared committed to the project even before the representations were made. On 13 September 2012, he had sent an email to Mr Cobb expressing enthusiasm for the project and a desire to formalise contractual arrangements once he had seen the lease and licence and other agreements in place. The email also refers to efforts already made to identify customers in Asia.
[65] Third, there was no reliance on the representation in fixing the price to be paid for the shares. There is no correlation between the $1 million offer made by Mr Huang for 51 per cent of the shares, and the $330,000 which Mr Kwok agreed to pay for 45 per cent of the shares. In answer to questions from the Court, Mr Kwok said that he had been given the figures, and he just agreed to them.
[66] This evidence suggests that Mr Kwok relied on his own judgment in deciding to proceed with the project, and was not influenced by statements made about the status of Mr Huang’s offer.
[67] In relation to the representation about the amount of money spent on the water project, Mr Kwok’s evidence in chief makes it crystal-clear that he did not believe Mr Torrance’s statements. Mr Kwok said:
Selwyn had told me this a couple of times but I did not think it was likely he had spent $2.5 million after I had visited the site in Kumara. I thought there would be a bottling plant there already for that kind of money.
[68] I find that the misrepresentations did not induce the plaintiffs to enter into the contract.
Disposition of the causes of action
Breach of contract
[69] The plaintiffs plead breach of contract, being the failure to transfer by November 2014, the water rights and intellectual property. They seek relief under the Contractual Remedies Act 1979.
[70] I have found that there was an agreement, but no contractual obligation to transfer the lease and licence. I have also found that there was no breach as the parties agreed to negotiate a new lease and licence in the name of the new company. Finally, I have found that the failure to transfer the lease and licence did not cause loss to the plaintiffs, with such loss being attributed to the failure to secure new water rights.
[71]The first cause of action is dismissed.
Misrepresentation under the Contractual Remedies Act 1979
[72] The plaintiffs plead misrepresentation under s 6 of the Contractual Remedies Act 1979.
[73] I have found that there were misrepresentations made. But I have also found that the plaintiffs did not rely on the representation regarding the status of Mr Huang’s offer. Mr Kwok relied on his own acumen and inquiries in entering into the joint venture agreement and did not believe the representation about the $2.5 million invested. Those findings mean the element of inducement cannot be proved, and the misrepresentation cause of action cannot succeed.2
2 Smith v Chadwick (1882) 20 Ch D 27 at 44–45, recently followed in Western Park Village Ltd v Baho [2014] NZHC 198 at [69]; Penney v Ng [2014] NZHC 1486 at [35].
[74]The second cause of action is dismissed.
Fair Trading Act 1986
[75] The third cause of action is for misleading and deceptive conduct in breach of s 9 of the Fair Trading Act 1986, with relief sought under s 43. This cause of action was amended on the final day of trial so that the misleading and deceptive conduct relied on is the same misrepresentations which found the second cause of action.
[76] In Red Eagle v Ellis,3 the Supreme Court set out a two-stage sequential approach to questions involving ss 9 and 43, which was summarised by the Court of Appeal in Poplawski.4 That approach requires me to consider:
(a)First, whether the claimant has proved breach of s 9, that is, whether a reasonable person in the plaintiffs’ situation would likely have been misled or deceived; and
(b)Second, whether the defendants’ conduct was an effective cause of the complainant’s loss or damage.
[77] The second enquiry involves considering whether the claimant was actually misled or deceived by the conduct, and if so, whether the breach was an operating cause of the claimant’s loss or damage.5
[78] My findings in relation to the other two causes of action dispose of this cause of action also. I consider a reasonable person in Mr Kwok’s shoes is unlikely to have been misled or deceived by either misrepresentation.
[79] But, even if they were, neither of the misrepresentations were causative of any loss. Mr Kwok was not, in fact, misled or deceived by the misrepresentations. Nor were they an operating cause of any loss. Any loss suffered by Mr Kwok was due to
3 Red Eagle v Ellis [2010] NZSC 20, [2010] 2 NZLR 492.
4 Poplawski v Pryde [2013] NZCA 229, (2013) 14 NZPCR at [44]–[45] citing Red Eagle v Ellis, above n 3, at [26]–[29].
5 Poplawski v Pryde [2013] NZHC 2042 at [47] [2013] NZCA 229, (2013) 14 NZPCR at [44]–[45]
citing Red Eagle v Ellis, above n 3, at [29]–[30].
the failure to agree a new lease and licence with Mr Stewart, and not due to any misrepresentations made by Mr Torrance and Mr Clark.
[80]The third cause of action is also dismissed.
Result
[81]The plaintiffs’ three causes of action are dismissed.
[82] The defendants’ are entitled to an award of costs, although only in respect of those steps taken in the proceeding where they were legally represented. If the parties cannot agree on costs, then the defendants may submit a memorandum in support of a claim for costs within 15 working days of receipt of this judgment. The plaintiffs may file a memorandum in response 10 working days thereafter. The determination of costs questions shall be made on the papers.
Edwards J
0
5
1