Lynn v A C Fryer & Sons Limited
[2013] NZHC 2942
•7 November 2013
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2011-488-000516 [2013] NZHC 2942
BETWEEN MURRAY RICHARD LYNN First Plaintiff
LYNN BROTHERS FARMING LIMITED
Second Plaintiff
ANDA C FRYER & SONS LIMITED First Defendant
ROBERT DENNIS FRYER Second Defendant
PETER WILD Third Defendant
Hearing: 16-18 September 2013
Appearances: G N E Bradford and I Werry for Plaintiffs
B D Quarrie for Defendants
Judgment: 7 November 2013
JUDGMENT OF COURTNEY J
This judgment was delivered by Justice Courtney on 7 November 2013 at 4.30 pm
t to R 11.5 of the High Court Rules.
Registrar / Deputy Registrar
Date……………………….
LYNN & OR v A C FRYER & SONS LTD [2013] NZHC 2942 [7 November 2013]
Introduction
[1] In April 2009 Lynn Brothers Farming Ltd (LBF)1 purchased an 82 hectare block of mostly scrub-covered land in Ahipara, Northland for $620,000. The vendor was A C Fryer & Sons Ltd (ACF)2 whose director is Mr Robert Fryer3. LBF’s director, Murray Lynn4 negotiated the purchase and LBF was the nominated purchaser under the sale and purchase agreement.
[2] From May 2009, LBF began developing the land, which included spraying with insecticide to clear the scrub. In February 2010 a letter came from the Northland Regional Council (NRC) advising that the land was a nationally significant wetland and that clearing vegetation contravened the regional water and soil plan for Northland. It was only then that LBF discovered that the land is designated a significant natural area (SNA) in Department of Conservation (DOC) ecological maps. It cannot be cleared or developed without resource consent and such consent would be very difficult to obtain.
[3] This discovery came as a surprise; during the negotiations Mr Lynn had obtained confirmation from the vendor’s agents that the land was suitable for clearing and development. Mr Lynn claims that he signed the sale and purchase agreement in reliance on these representations and on representations made by a
surveyor, Peter Wild,5 who had prepared the sub-divisional scheme plan that was
attached to the sale and purchase agreement.
[4] Mr Lynn and LBF have sued ACF for misrepresentation under the Contractual Remedies Act 1979 (CRA) and for breach of the Fair Trading Act 1986 (FTA). They have sued Mr Fryer personally for breach of the FTA. They have also
sued Mr Wild for negligent misstatement.6
1 The second plaintiff.
2 The first defendant.
3 The second defendant.
4 The first plaintiff.
5 The third defendant.
6 Although the pleading is expressed to be a cause of action in negligence it is evident that the true nature of the complaint is negligent misstatement.
[5] It is accepted that Mr Lynn has not suffered any loss. He cannot, therefore, succeed on any of the causes of action. However, LBF, as Mr Lynn’s nominee, is entitled to sue.7 The claimed loss for all causes of action is the difference between the purchase price and the true value of the land at the time of the purchase, together with wasted costs associated with the work on the land. The plaintiffs also claimed interest at commercial rates as special damages but at trial indicated that interest under the Judicature Act 1908 would be sought.
[6] At the beginning of the trial I was advised that a third cause of action against ACF for breach of warranty relating to access onto the property was not defended. By consent I entered judgment against LBF on that cause of action for $6,852.85 with costs reserved.
The alleged misrepresentations and the issues arising
[7] The causes of action against ACF and Mr Fryer rest on:
(a) An information brochure prepared by real estate agent, Gary Steed. It is accepted that Mr Steed prepared the brochure on behalf of ACF on the basis of information given to him by Mr Fryer. There is adispute over what the brochure conveyed;
(b) An oral statement by Mr Steed to Mr Lynn at a meeting on 15 October
2008 to the effect that the land could be developed. It is accepted that Mr Steed made this statement and that he did so on the basis of information given to him by Mr Fryer.
(c) An oral statement by Mr Steed to Mr Lynn and his son, Toby, during a meeting sometime between 15 October and 20 November 2008 to the effect that the land could be developed. There is no dispute that this representation was made.
(d) A letter written by ACF’s solicitors to LBF’s solicitor on 26
November 2008. The letter does not contain any overt statement
7 Laidlaw v Parsonage [2009] NZSC 98, [2010] 1 NZLR 286.
regarding the development of land but is said to have implied that there was no impediment to developing the land.
(e) A notation on the sub-divisional scheme plan.
[8] The notation on the scheme plan also forms the basis of the cause of action against Mr Wild in his personal capacity.
[9] The following issues arise in both the CRA and FTA claims:
(a) Did Mr Fryer (and therefore ACF) know that clearing the land would require resource consent?
(b) Did the statements sued on constitute misrepresentations? (c) In addition, on the FTA claim:
(i) Was Mr Fryer in trade?
(ii)Was Mr Fryer personally responsible for representations made on behalf of ACF?
(iii)Was ACF’s and Mr Fryer’s conduct objectively misleading and deceptive?
(iv) Did their conduct mislead the plaintiffs and result in loss? (d) On the CRA claim:
(i) Were there misrepresentations of fact?
(ii)Was Mr Lynn induced into entering into the contract as a result of the misrepresentations?
[10] Different issues arise in relation to Mr Wild, namely:
(a) Did he represent, by the notation on the scheme plan, that there was no impediment to developing the land?
(b)If so, were the circumstances such that he is to be taken to have assumed responsibility for exercising care in making that representation?
(c) Did he fail to exercise reasonable care in making the representation?
Mr Fryer’s knowledge about developing the land
ACF decides to subdivide the land
[11] The 82 hectares that LBF bought was subdivided from a larger block that ACF owned. When ACF bought the original block in 1971 the land was still showing the effects of a burn-off on nearby land that had spread. The fire had burnt off the topsoil, leaving depressions that filled with rainwater and spreading gorse over the property. With considerable effort, Mr Fryer and his father worked to clear and drain about a third of the block so as to produce an economic farming block of
53 hectares. They worked at clearing the other 82 acres more slowly by slashing and mulching. Mr Fryer found it difficult to keep this work up after his father’s death in
1998. Eventually his son took over farming the cleared portion of the land but was not interested in tackling the rest of the block.
[12] In mid-2008 Mr Fryer decided to subdivide the 82 hectares off and sell it. He went to see Mr Wild. There is a significant difference between Mr Fryer and Mr Wild as to what advice Mr Wild gave on this occasion. On Mr Fryer’s account Mr Wild told him that before making the application he, Mr Fryer, should make enquiries with NRC, DOC and the Far North District Council (FNDC) as to whether there would be any difficulties in subdividing the land. Mr Fryer asked Mr Wild to organise a meeting, which he did.
[13] Mr Wild denies this. He says that he simply prepared the necessary application for resource consent to subdivide but that he did talk to Mr Fryer some weeks later about problems with the subdivision. Mr Wild’s account is consistent
with contemporaneous emails. I also found Mr Fryer very confused when he was giving his evidence and, on some important issues, he gave evidence that was inconsistent. As a result, I accept Mr Wild’s evidence that there was no conversation about problems when Mr Fryer first consulted Mr Wild and that Mr Fryer has confused a conversation that they had later.
Mr Wild prepares the scheme plan
[14] The application for resource consent to subdivide that Mr Wild prepared took the form of a report (not put in evidence) and a scheme plan. I am satisfied that the scheme plan was prepared around June or July 2008 by someone in Mr Wild’s office and under his direction. The evidence was that the Council received the application by mid-July 2008.
[15] The scheme plan showed the proposed new boundary forming Lots 1 and 2. Lot 1 comprised 53.4 hectares and was the cleared block that Mr Fryer’s son was farming. There is a notation on Lot 1 “flat land and grass”. Lot 2 comprised 82 hectares and was the mainly scrub-covered block that was to be sold. There is a notation on Lot 2 “flat land (broken scrub to be grassed)”. Mr Wild explained that these notations were added to indicate to the Council what was intended for the land.
[16] Mr Wild made a mistake when he prepared the scheme plan. He missed the fact that the land forming Lot 2 was shown on DOC ecological plans as being a SNA. He knew that land designated as a SNA could not be developed without a resource consent for that purpose. It is unlikely that he would have noted the scheme plan as he did if he had realised that the land was a SNA.
[17] After the plan was lodged with the Council Mr Wild was copied into an email between DOC and a NRC planner which said:
Regarding the proposal by Fryer … we point out that much of proposed Lot
2 and some of proposed Lot 1 are within the Tagonge wetland habitat
NO4/018 identified in the Department’s Aupouri ecological district protectednatural area programme report, pages 178-180.
We note that the application refers to an intention to clear proposed Lot 2 for pasture. On the face of it this would require resource consent under the Far North District Plan because of the identified habitat on the line.
Whilst that is not a bar to the proposed subdivision we strongly suggest that the applicant is advised that indigenous vegetation clearance on the property will require resource consent.
(emphasis added)
[18] Mr Wild realised at this point that he had overlooked the SNA designation on ACF’s land. He said in evidence that he telephoned Mr Fryer to discuss this. Mr Fryer said that this did not happen. However, as discussed, Mr Fryer did recall being told by Mr Wild at some stage that he would need to talk to the NRC, FNDC and DOC about whether there was any problem subdividing the land. I find that this is the conversation at which that advice was given. Mr Wild’s recollection is right and Mr Fryer is confused about the timing and nature of the conversation he had with Mr Wild.
[19] One reason I can be satisfied of this is that a few days after he received the email from DOC Mr Wild replied, referring to having been in touch with his client, then providing a quite detailed history of the land and concluding that:
My client is firmly convinced that this is not the ecological area of the significance that would warrant a resource consent to continue farming for the simple reason it has been roughly farmed for the last 30 years. I would suggest that as it is on the DOC ecological maps that a site visit by DOC with my client may be in order to resolve the issue.
[20] Mr Wild could not have obtained the material needed to write this email without talking to Mr Fryer and it is unlikely that he would have referred to having been in contact with Mr Fryer if that had not happened.
[21] DOC responded to Mr Wild’s email, agreeing to a site visit. Mr Wild left it to DOC to arrange the meeting and did nothing further. In August 2008 Mr Wild received advice from the FNDC granting the application for resource consent to subdivide. The advice made no reference to the need for resource consent to clear vegetation. Mr Wild recalled the suggestion in DOC’s email to the NRC planner that the client should be told that clearing the land would require resource consent. As the resource consent was silent on that point, Mr Wild assumed that the meeting had
occurred and that DOC had been satisfied that the land did not need to be treated as a SNA after all. Otherwise he would have expected to see specific advice either on the resource consent or separately to the contrary. He did not call the Council to clarify the point.
[22] Mr Wild rang Mr Fryer to advise that the resource consent to subdivide had been obtained and was told that Mr Fryer would not require the final survey to be undertaken until after Christmas 2008. Mr Wild then gave a copy of the resource consent to Mr Fryer’s lawyers, Patterson Law, whose offices were in the same building and thought no more about it.
Mr Fryer meets with DOC and NRC
[23] In fact, contrary to Mr Wild’s assumption, there had not been any meeting with DOC before the resource consent to subdivide was granted. The meeting did not take place until 12 September 2008. Representatives of NRC and DOC came and inspected the land with Mr Fryer and talked at some length with him. Those who attended included Lisa Forester, a bio-diversity specialist with NRC, and Wendy Holland, a community technical adviser with DOC. There appears not to have been anyone from FNDC present.
[24] Ms Forester said, and Mr Fryer agreed, that at the beginning of the meeting and before the group had inspected the land, she told him that the land to be subdivided was a significant wetland, that it could not be drained or cleared without resource consent and that the chances of getting consent were not good. But Mr Fryer maintained that after they had walked over the land and he had explained the work that he and his father had done on the land Ms Forester changed her mind. On his recollection Ms Forester accepted that the land in its then current state was no longer a wetland although it could revert to a wetland. Mr Fryer said that, as a result, he did not think that Lot 2 was subject to the limitations imposed by the SNA designation and, therefore, the earlier advice about the restrictions on the land did not apply.
[25] Mr Fryer’s view is captured in the following exchange between him and
LBF’s counsel, Mr Bradford, in cross-examination:
Q: And then on the 12th of September somebody from the Northland Regional Council, Lisa Forester, told you there were problems developing or clearing the land didn’t she?
A: That’s right, she did.
Q: Did you go back to Mr Wild and tell him that?
A: After that initial discussion with Ms Forester, at the end of the meeting she changed her opinion. She was the one that agreed that I should not be deprived of my retirement fund that I’d worked on for
37 years but they should still [have] option of retaining the property by buying, process of buying it through the Nature Heritage Trust.
That is the agreement that in my mind that we shook on, that is the agreement that we came to. And that she had mutually agreed that –
she had admitted when we actually went down on the place that it
wasn’t a wetland as she had envisaged it.
[26] The idea that Ms Forester had changed her mind about the significance of the land as a wetland, once she walked over it, had not been put in cross-examination. Ms Forester was recalled so that it could be addressed. She was adamant that she had not changed her mind. Her recollection is that at the end of the visit all of those present, including Mr Fryer, discussed a proposal by which DOC might buy the land with funding from Nature Heritage Fund. Ms Forester’s recollection is shown in the following re-examination:
Q: … Mr Fryer said “Well if you’re going to maintain that Ms Forester’s claim that up at the house not knowing anything about the property yes we’d been told that but when we went down she um reconsidered that. She admitted that she had not been aware of much of the drainage and so much development put into it. She admitted that. She said to me that nullified so – sorry so to me that nullified her first statement” up at the house, okay. They are my words “up at the house”, what do you say to that?
A: I say absolutely no way. I would never have said a thing like that.
My job wouldn’t be worth it quite frankly.
[27] Ms Forester made notes of that meeting which she later transcribed into an electronic log on 30 September 2008. That log is entirely consistent with Ms Forester’s recollection of the meeting. In addition, Ms Forester emailed DOC in November 2008 in similar terms. There would have been no reason for her to do that had she truly changed her view about the nature and significance of the land.
[28] I am satisfied that Ms Forester did not change her mind after she walked over the property and that she gave no indication to Mr Fryer that she had. I accept that Mr Fryer genuinely believed that the amount of drainage and clearing work that he and his father had done on the land over many years justified the land being allowed to be farmed. However, I am satisfied that nothing Ms Forester said could have led him to conclude that the land was not a significant wetland or that future development would not require resource consent.
[29] Mr Fryer also said in his evidence that he had not been specifically told that he could not develop the property and therefore believed that there was no impediment to doing so. This seems to have been a reference to the resource consent; he said in re-examination that he believed that he had obtained resource consent which allowed him to sell the land for development. I cannot accept that he did think this. The resource consent was for subdivision only. It was not related at all to the use of the land. More importantly, Mr Fryer had received the resource consent in August 2009, some weeks before the meeting with DOC and NRC. Even if he had made an assumption about use from the resource consent application, Ms Forester’s advice would have made the position clear.
[30] The proposal that Ms Forester described, under which the NRC would support a DOC application to Nature Heritage Fund to assist with the purchase of the land, was prepared by Ms Holland. It is dated October 2008 and contains the following comment:
The proposed acquisition is part of what is locally known as Tangonge Wetlands or Lake Tangonge. The Fryer family have named their farm “Dismal Bog” and if this proposal is successful it is Bob Fryer’s wish to have the reserve named after his father Bert Fryer. The remaining habitat at Tangonge Wetlands is a very small reminder of a vast wetland eco system that once occurred in this area. It is crucial that all important wetland habitats are protected now and for future generations.
[31] Ms Holland sent a copy of her proposal to Mr Fryer under cover of a letter
28 October 2008.
[32] Finally, Mr Fryer said that he had shown Ms Holland’s proposal to Mr Steed
and that Mr Steed had agreed that it did not say that the land could not be developed.
It was never put to Mr Steed that he had seen the letter from Ms Holland to Nature Heritage Fund, only that there had been discussions with DOC about buying it but they had never come up with the money. Further, I am satisfied that if Mr Steed had seen the proposal he would not have thought that it meant that there was no impediment to development. The whole tenor of the proposal is that the land (in its then current state) was rare and valuable wetland that was to be preserved.
[33] On the basis of the evidence overall I am satisfied that in 2009 Mr Fryer knew that there would be difficulties in clearing and developing the land. In particular, I am satisfied that he knew that clearing the land would require resource consent.
Were the statements sued on misrepresentations?
The information memorandum
[34] On 27 September 2008 Mr Fryer listed the property for sale with Gary Steed of Ray White in Kaitaia. Mr Steed said that during the course of listing the property he spoke with Mr Fryer more than once. He visited the property and Mr Fryer explained to him how it could be developed. He told Mr Steed the scrub could be cleared and the property grassed and developed. Mr Steed was not challenged on this evidence.
[35] It was put to Mr Steed in cross-examination that Mr Fryer told him he had had a discussion with the Nature Heritage Fund about a price of $1.2m. Mr Steed did not recall being told about the Nature Heritage Fund. He said that Mr Fryer talked about DOC, saying that DOC was going to make an offer but had not come up with the money. Given that Ms Holland’s application to Nature Heritage Fund had only been completed on 28 October 2008, this would have been a rather disingenuous view of things.
[36] In cross-examination Mr Fryer agreed that he had told Mr Steed that it would not take much work to grass the entire block. There is a suggestion in his evidence
that he believed that he had this discussion with Mr Steed before the meeting with
DOC and NRC because he said:
At that stage I never even knew [the Nature Heritage Fund application] was going to be presented. I’d been working that block for 37 years, no-one had ever told me I couldn’t work it, no-one told me I could not sell it and that is what I told Mr Steed because no-one had told me I couldn’t do it. Then when we arranged the Nature Heritage meeting and I told Mr Steed I could not accept any offers that he brought unless – until it had been cleared, until I’d made sure that the Nature Heritage Trust had, had first option to buy …
[37] This was not right; as I have already discussed, the meeting had already taken place by the time Mr Fryer listed the property for sale. When Mr Fryer first spoke to Mr Steed about selling, he already knew that as far as the NRC and DOC were concerned, he could not develop the land without resource consent.
[38] On the basis of what Mr Fryer told him Mr Steed prepared an information sheet that stated:
Develop a dream.
Flat land, good winter country. One quarter grass, one quarter crushed scrub, one quarter re-growth, one quarter older scrub and gorse. With some work you can watch its capacity grow along with its value. $1 million plus GST.
[39] It is alleged that the statements in this brochure conveyed that the land could be fully developed and, in particular, that the three-quarters of the land currently in scrub could be cleared so as to develop the land and increase its capacity. Mr Quarrie, for ACF, focused on the reference to “dream”, arguing that the statements were puffery and did not constitute an actual representation as to the nature of the land. I do not accept that this is so.
[40] The statements that follow the “develop a dream” tagline are very specific and convey that if the purchaser was to put some work into the land he or she could improve its capacity. The brochure clearly conveys that the only impediment to increased capacity was the existence of the scrub, which could be cleared. In fact, the real impediment was the land’s status as a SNA. I find that the information brochure did misrepresent the position.
Mr Steed’s statements to Mr Lynn on 15 October 2008
[41] Soon after listing the property Mr Steed contacted Mr Lynn. At Mr Lynn’s request he had been keeping an eye out for a property that would be suitable for Mr Lynn’s sons to farm. The property that Mr Lynn had in mind would be in the upper part of Northland, flat, rundown, covered in scrub and capable of being cleared and developed. The intention was that the land would be cleared, planted with maize and eventually grassed for grazing.
[42] Mr Steed referred Mr Lynn to the advertisement that I have described. It seemed to be what Mr Lynn was looking for and he went with Mr Steed to look at the property on 15 October 2008. He explained his development plan to Mr Steed and Mr Steed told him that the property was capable of being developed in that way. Mr Steed’s evidence about that meeting was consistent with what Mr Lynn said. I find the misrepresentation alleged proven.
Mr Steed’s statements to Mr Lynn and Toby Lynn
[43] On another occasion, Mr Lynn brought his son, Toby, to see the property with Mr Steed. The date of that meeting was not clear. There was no evidence as to the date of this visit but Mr Steed said that it occurred prior to the offer being made i.e. before 20 November 2008. Toby Lynn described standing on the small area of Lot 2 that had been grassed and Mr Steed saying something to the effect that the rest of the block could look like that. He also recalled being shown a plan that had the words “flat land (broken scrub to be grassed)” written on it. This, of course, must have been the scheme plan. There was no challenge to that evidence and I find the misrepresentation alleged to have been made on that day proven.
The sale and purchase agreement and attached scheme plan
[44] Mr Lynn wanted to make an offer of $620,000 (GST exclusive). Mr Steed gave evidence that before he prepared a sale and purchase agreement he went to see Mr Wild. His reason was that he did not want to waste time preparing an agreement if the land could not be cleared. He explained to Mr Wild that the prospective
purchaser wanted to clear the block for maize production and Mr Wild told him the block could be cleared. He did not mention it being a wetland or being subject to any development restrictions.
[45] Mr Wild denies that this conversation took place. However, this is not an issue that I need to decide because it has no causative significance. Mr Steed was Mr Fryer’s agent, not Mr Lynn’s agent. No further representations were made as a result of the reported meeting with Mr Wild that would have altered the representations Mr Steed had already made.
[46] Mr Steed prepared a sale and purchase agreement. He attached the scheme plan that Mr Wild had prepared. The scheme plan itself is relied on as a separate representation that the property could be developed. Mr Wild gave evidence that the words on the scheme plan were meant only to let the Council know what was intended once the subdivisional consent was obtained. He did not intend the words to be relied on. However, he agreed that he had given Mr Steed a copy of the scheme plan, knowing that Mr Steed was the agent acting for Mr Fryer to find a purchaser for the land. I consider that the plan did convey that there was no impediment to Lot 2 being cleared and that the scheme plan was a representation to that effect that Mr Wild knew would be used by a prospective purchaser.
The letter from ACF’s solicitors
[47] At Mr Lynn’s request special condition 16 was included:
This agreement is subject to the purchaser satisfying himself that he can proceed to develop the property in a manner satisfactory to his requirements. The purchaser will notify the vendor with this satisfaction prior to 30
January 2009.
[48] Mr Lynn signed the sale and purchase agreement on 20 November 2008. Six
days later Mr Fryer’s solicitors wrote to Mr Lynn’s solicitors. They said:
You will note that consideration has been given to the partly operative District Plan and there are no conditions associated with that. Prior to the resource consent application, our client had consultation with the Department of Conservation, Natural Heritage and Northland Regional Council who provided reports to the Far North District Council prior to the resource consent application being granted.
Accordingly will you please confirm that the information now provided is sufficient for clause 16 to be declared satisfied.
[49] It is said that this letter represented that there was no impediment to the land being developed. The purpose of the letter is plainly to seek confirmation that special condition 16 had been satisfied and the contract was therefore unconditional. The references to the absence of conditions on the resource consent and to DOC, Natural Heritage and NRC are to be read in that light. The resource consent application was limited to subdivisional consent and did not involve any aspect of the use of the land. However, the reference to consultation with DOC, Natural Heritage and NRC and the linking of those issues with condition 16 conveyed that the resource consent being referred to had some relevance to use.
[50] It is unfortunate that the legal executive from Patterson Law who wrote the letter was not called to give evidence. However, I conclude that, on the face of it, the letter does represent that there was no impediment to the use of the land that might prevent condition 16 being satisfied.
Was there a meeting with Mr Wild on 20 January 2009?
[51] The letter from Patterson Law concluded by saying:
We further understand that in the event that your client has any further questions or concerns relating to this, the surveyors have invited him to call and discuss the matter with them.
[52] Mr Wild denied talking to Patterson Law and denied conveying any invitation for the purchaser to contact him. Since no-one from Patterson Law gave evidence it is impossible to say where the understanding of such an invitation came from. But Mr Lynn and Mr Steed both say that as a result of the letter, they went to see Mr Wild.
[53] Mr Steed recalls a discussion at his office on 20 January 2009 about declaring the agreement unconditional. He suggested to Mr Lynn that they go and see Mr Wild, which they did. Their purpose was to confirm that there was no difficulty in developing the land. Both witnesses described walking the short distance along the street to Mr Wild’s office. Mr Lynn’s evidence was:
Mr Wild was at his desk where he normally was. Um, I spoke about, um, my boys being excited about getting their teeth into farming at last and we just wanted to clarify whether the, you know, where there was any problems. Um, Mr Wild picked up the scheme plan, held it up in front of Gary Steed and I. I can clearly remember him putting his finger underneath the grassed, um, scrub area to be grassed. He was actually quite dismissive really said sort of “well come on, we’ve been over this, here it is, see you later”.
[54] Mr Steed recalled explaining to Mr Wild that they had come to make sure Mr Lynn could develop the land and asked that he talk to Mr Lynn about it. At that point Mr Lynn and Mr Wild talked. Mr Steed stood off to one side. He did not hear exactly what was being said and was not paying particular attention but he recalls Mr Wild taking out the scheme plan, showing it to Mr Lynn and pointing to the words on the plan.
[55] The last piece of evidence in relation to this meeting was an entry in
Mr Lynn’s diary which read:
Gary, me, to Peter Wild. Re: clause 16.
Mark Saxton [the Ray White franchisee] says he’s the one to ask.
Confirmed able to develop to grass.
[56] There were six numbered entries in the diary for Tuesday 20 January 2009. The third referred to “Gary … Fryer clause”. Mr Lynn said he would have made that either the night before or on that morning as part of a list of jobs to do, a reminder that he had arranged to meet Mr Steed. The entry I have set out was the fifth. Mr Lynn said that the first three lines of the entry would have been made prior to the meeting and the last line afterwards. It was put to Mr Lynn that he had not written the note on or around 20 January 2009 but some significant time later. He denied that.
[57] Mr Wild was adamant that the meeting described by Mr Steed and Mr Lynn on 20 January 2009 did not occur. He produced his time records for that day, which do not refer to a visit by Mr Steed or Mr Lynn. It was clear from both his and Mr Lynn’s evidence that the two knew each other through previous work that
Mr Wild’s firm had done for Mr Lynn. So Mr Wild said that he would have remembered such a meeting.
[58] There is no basis on which to conclude that Mr Lynn’s diary entry was a fabrication. It falls in the middle of a series of entries. Further, Mr Steed’s and Mr Lynn’s account of the meeting being prompted by an invitation to talk to Mr Wild is consistent with the letter from Patterson Law. The overwhelming weight of the evidence is in favour of the meeting having occurred and of Mr Wild having shown Mr Lynn the scheme plan in answer to the question whether the property could be developed. I find that Mr Wild did, through his proffering of the scheme plan, represent that the Lot 2 could be developed without difficutly.
The Fair Trading Act causes of action against ACF and Mr Fryer
Were ACF and Mr Fryer in trade?
[59] The prerequisite that a party liable for misleading and deceptive conduct be
“in trade” is satisfied in relation to ACF. That is not disputed.
[60] Whether Mr Fryer himself was in trade turns on his conduct. A director or senior manager of a company that is in trade may be personally liable for his own misleading and deceptive conduct when acting on behalf of another legal entity.8
Mr Fryer acted throughout as a director of ACF and, in fact, was the only officer of ACF who had any involvement in the sale. It is clear that he was the alter ego of ACF and regarded the decisions to be made about Lot 2 as ones for him alone. He even referred several times to Lot 2 as his retirement fund. For these reasons I am satisfied that Mr Fryer was in trade when he was acting in his capacity as ACF’s director on the sale of the land to LBF. If Mr Fryer did act in a misleading and deceptive way, he is personally liable for that conduct. It follows that if, and to the extent that, Mr Fryer acted in a misleading and deceptive manner, so too did ACF.
Was ACF’s and Mr Fryer’s conduct misleading and deceptive?
[61] The plaintiffs must show that ACF and Mr Fryer acted in a way that was, objectively, deceptive or misleading. This is an objective enquiry that depends on the context and the nature of those likely to be affected.9
[62] I have already found that Mr Fryer knew that the land was a significant wetland that could not be developed without resource consent. But he told Mr Steed that it could be developed without difficulty. He did so in the context of instructing Mr Steed to find a buyer for the land. He knew or must have known that Mr Steed would pass that information on to any prospective purchaser. He knew that it would be a significant issue for any purchaser. In these circumstances, I am satisfied that Mr Fryer did act in a misleading and deceptive way when he instructed Mr Stead.
Loss resulting from the misleading and deceptive conduct
[63] It was agreed that the actual value of the land was less than what LBF paid for it because of the constraints on its development. Mr Lynn’s evidence was clear that LBF would not have purchased the property had he known of the correct position and instead purchased in the belief that it could be developed. LBF is entitled to the difference between the actual value and the amount paid.
[64] There was no challenge to the valuation produced by LBF showing that at the date LBF agreed to buy the property it was worth $264,000 compared with the purchase price of $620,000.10 LBF is entitled to the difference of $356,000. In addition, LBF is entitled to recover the wasted expenditure of $27,670.80 outlaid on the efforts to clear the land. The evidence as to this expenditure was not challenged.
Liability under Contractual Remedies Act 1979
Did LBF rely on the misrepresentations in purchasing the property?
[65] LBF must show that the misrepresentations induced Mr Lynn to enter into the contract to purchase the land. Section 6(1)(a) of the Contractual Remedies Act 1979
provides that:
9 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 (SC) at [28].
(1) If a party to a contract has been induced to enter into it by misrepresentation, whether innocent or fraudulent, made to or by or on behalf of another party to that contract –
(a) He shall be entitled to damages from that other party in the same manner and to the same extent as if the representation were a term of the contract that has been broken; …
[66] Mr Quarrie submitted that none of the representations induced entry into the contract because there was no reliance on the representations. He argued that because by requiring condition 16 to be inserted into the sale and purchase agreement Mr Lynn had taken it upon himself to make the necessary enquiries and satisfy himself that the land was suitable for development. Mr Quarrie submitted that, in the absence of a specific warranty (as was the case, for example, in Singh v
Rutherford)11 it was the purchaser who was responsible for satisfying himself as to
whether the property could be developed in a manner that suited his requirements. I
do not accept that submission.
[67] Clause 16 was inserted for the benefit of the purchaser only. It could have been waived by the purchaser without any enquiry being made. It was open to the purchaser to have chosen to rely solely on the representations. The purchaser did not, by reserving the right to make further enquiries, take on the obligation to do so and certainly did not release the vendor from liability for any misrepresentations made. I respectfully agree with Wylie J’s observation in Singh that a party with the benefit of a warranty may well not focus due diligence on the warranted matter or may only undertake limited due diligence. Since a representation relied on in entering the contract assumes the status of the term of the contract I do not see any valid distinction between cases involving a specific warranty.
[68] I have found that representations were made to the effect that there was no impediment to clearing and developing the land and that the representations were false in that the land was subject to a SNA designation by DOC, as a result of which it could not be developed without a resource consent and that the prospect of obtaining a resource consent was remote. I am satisfied, too, that these misrepresentations induced Mr Lynn to enter into the sale and purchase agreement
for the benefit of either himself or his nominee. LBF, as the nominee that ultimately settled the purchase, assumes the benefit of Mr Lynn’s rights of action.12
Damages
[69] Although the measure of damages in contract is not the same as the measure of damages under the FTA, in the present case there is no difference. The damages are those identified earlier.
Cause of action against Mr Wild in negligent misstatement
[70] LBF asserts that at the meeting on 20 January 2009 Mr Wild, by reference to the sub-divisional scheme plan, represented to Mr Lynn that Lot 2 could be developed. I have accepted this allegation. It is said that Mr Wild owed a duty of care to Mr Lynn when he made the representation and that Mr Lynn was induced, at least in part, to declare the contract unconditional by Mr Wild’s representation.
[71] Whether Mr Wild should be liable to LBF for the misleading statement on the scheme plan depends on whether, in the circumstances, he can be taken to have assumed a responsibility to Mr Lynn for Mr Lynn’s subsequent reliance on the plan. The basis for liability for negligent misstatement was described by Tipping J in
Attorney-General v Carter:13
[24] If the defendant has, or is deemed to have, assumed responsibility to the plaintiff to be careful in what is said or written, thereby creating proximity, it will usually, subject to policy considerations, be fair, just and reasonable to hold the defendant liable for want of care …
[25] The concept of reliance has involved in determining whether there has, in the particular case, been an assumption of responsibility, whether actual or deemed …
[26] In most cases … there will be no voluntary assumption of responsibility. The law will, however, deem the defendant to have assumed responsibility and find proximity accordingly if, when making the statement in question, the defendant foresees or ought to foresee that the plaintiff will reasonably place reliance on what is said. Whether it is reasonable for the plaintiff to place reliance on what the defendant says will depend on the purpose for which the statement is made and the purpose for which the
12 Contracts (Privity) Act 1982, s 4.
plaintiff relies on it. If a statement is made for a particular purpose, it will not usually be reasonable for the plaintiff to rely on it for another purpose …
[27] Hence, before the law of torts will impose on the author of a statement a duty to take care the plaintiff must show that it is appropriate, on the foregoing basis to hold that the author has or must be taken to have assumed responsibility to the plaintiff to take reasonable care in making the statement. If that is shown, the necessary proximity will have been established, leading to a prima facie duty of care …
[72] In North Shore City Council v Body Corporate 207624 Harrison J cited these passages and added that:14
[71] … the discrete tort of negligent misstatement requires proof both of actual reliance and of its reasonableness. The latter is designed to limit the scope of a potential liability, consistent with the underlying policy touchstone of what is fair, just and reasonable. This limitation – introduced through the mechanism of foreseeability – emerged as a dominant feature in Caparo.15 The purpose for which the impugned statement was prepared controls the reasonableness of reliance. And direct dealing between the parties or their representatives is normally required to satisfy the separate proximity component of actual reliance if a court is to find a special relationship of the type justifying liability on one party to another for want of care in making a statement. Then the maker may be said to have assumed a responsibility to the recipient for the statements accuracy, truth or reliability.
[73] It is evident from my factual findings regarding the meeting on 20 January
2009 that Mr Lynn and Mr Steed made it perfectly clear to Mr Wild why they were enquiring of him regarding the potential for developing Lot 2 and that Mr Wild could have been under no illusion as to the fact that he was being relied on in terms of Mr Lynn’s decision to declare the contract unconditional. I consider that Mr Wild can be taken to have assumed responsibility for exercising reasonable care in responding to Mr Lynn’s enquiry.
[74] However, I am not satisfied that Mr Wild was negligent. It is true that Mr Wild was negligent when he prepared the scheme plan. It should never have had the notation on it regarding Lot 2 being grassed. But Mr Wild gave an explanation as to why he had not amended the scheme plan following the granting of the
subdivisional consent and why he had not thought it necessary to make any further
14 North Shore City Council v Body Corporate 207624 [2011] NZCA 164, [2011] 2 NZLR 744 reversed by Body Corporate 207624 v North Shore City Council [2012] NZSC 83, [2013] 2
NZLR 297 but this statement of the law was not disturbed.
15 Caparo Industries PLC v Dickman [1990] 2 AC 605 (HL) at 623-624.
enquiries or say anything about the email exchange that he had with DOC prior to the resource consent for subdivision being given.
[75] No expert evidence was called to assist me with whether Mr Wild’s assumptions were those of a reasonably competent surveyor. I am therefore unable to reach any conclusion about the reasonableness of Mr Wild’s assumption that the lack of any cautionary note on the resource consent indicated that the Council had resolved its concerns about the land being cleared. That means I cannot be satisfied that Mr Wild fell below the standard of care of a reasonably competent surveyor and in the circumstances the cause of action against him must fail.
Summary and result
[76] I have found that:
(a) Mr Fryer (and therefore ACF) knew at the time the various representations were made, that the land could not be cleared without resource consent;
(b)The representations made on behalf of ACF by Mr Steed and Mr Wild were false;
(c) In relation to the FTA causes of action:
(i)Mr Fryer was in trade in relation to this transaction and is personally liable for his conduct;
(ii)The misrepresentations were misleading and deceptive and induced Mr Lynn to enter into the contract and resulted in loss to LBF;
(d) In relation to the causes of action against ACF under the CRA, Mr
Lynn was induced to enter into the contract by the misrepresentations.
(e) The cause of action against Mr Wild in negligent misstatement fails.
Although I am satisfied that Mr Wild did make the representation sued on and assumed responsibility for exercising reasonable care in making the representation, the evidence falls short of showing that he was negligent;
(f) LBF’s losses are the difference between the purchase price and the
true value of the land at the time, which is $356,000 together with
$27,670.80 in wasted expenditure.
[77] There is judgment for LBF against each of Mr Fryer and ACF in the sum of
$383,670.80. This figure will attract interest at the rate of 5 per cent from the date of settlement. This date was not apparent in the evidence and I leave it to counsel to confer and agree on the correct date.
[78] I record again the entry of judgment by consent on the third cause of action for $6,852.95.
[79] Parties may address the issue of costs by memoranda. These are to be filed on behalf of the plaintiff and third defendant by 22 November 2013 and by the first
and second defendant and the plaintiffs by 6 December 2013.
P Courtney J
2
3
0