McAlister v Lai - [2018] NZCA 141

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA271/2017
[2018] NZCA 141

BETWEEN	GREGORY JOHN NEALE MCALISTER Appellant
AND	JEFFREY KENG YEW LAI First Respondent ANDERSON CREAGH LAI LIMITED Second Respondent

Hearing:	8 February 2018
Court:	Winkelmann, Asher and Gilbert JJ
Counsel:	R J Hollyman and T F Cleary for Appellant A C Challis and M A Cavanaugh for First and Second Respondents
Judgment:	7 May 2018 at 3 pm

JUDGMENT OF THE COURT

AThe appeal is allowed.
BThe case is remitted back to the High Court to calculate the quantum of damages owed by the first and second respondents to the appellant.
CThe first and second respondents are jointly and severally liable to pay the appellant one set of costs for a standard appeal on a band A basis and usual disbursements.
D Any costs order made in favour of the first and second respondents in the High Court is set aside. Failing agreement as to costs in the High Court, the issue is remitted to the High Court for determination in the light of this judgment.

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REASONS OF THE COURT

(Given by Asher J)

Introduction

This appeal concerns the point at which a lawyer who is involved in a transaction where the lawyer’s client is misleading the other party can be liable for misleading and deceptive conduct. In this case the lawyer was the first respondent, Mr Jeffrey Lai. He is the director of the company and law firm Anderson Creagh Lai Ltd (ACL), the second respondent. Mr Lai’s clients included a Mr Warren Hurst, now bankrupt, and his companies. The other party to the transaction was the appellant, Mr Gregory McAlister. The transaction was a loan advance of $200,000 from Mr McAlister to Mr Hurst’s interests.

Key facts

In 2012 Mr Hurst had become interested in purchasing all the shares in a telecommunications company, Orcon Ltd (Orcon). The shares in Orcon were owned by Kordia New Zealand Ltd (Kordia). The purpose of Mr McAlister’s loan of $200,000 to Mr Hurst and his companies was to help him finance the purchase of those shares (the Orcon Purchase).
The full details of the Orcon Purchase are complex and are set out in the judgment of Fogarty J appealed from.[1] The purchase price of the shares was $38 million. Mr Hurst had managed to negotiate a $22 million loan from ASB Bank Ltd (ASB) as the prime source of finance for the purchase. Kordia was prepared to provide a $10 million loan as vendor financing. That left Mr Hurst $6 million short. He became involved in what was described by Mr Hollyman, counsel for Mr McAlister, as a desperate scramble to find sufficient funds.
[1]McAlister v Lai [2017] NZHC 791 at [1]–[10].
Mr Hurst identified that consumer premises equipment (CPE) such as routers and modems owned by Orcon could be monetised to create funding for the Orcon Purchase. Kordia agreed to purchase the CPE for $3.25 million and lease that equipment back…

Grounds of appeal

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

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

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

Consideration

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

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

Continue reading McAlister v Lai

Details

AGLC: McAlister v Lai [2018] NZCA 141
Case: [2018] NZCA 141
Decision Date: 7 May 2018 at 3 pm

CaseChat Overview and Summary

The Court of Appeal of New Zealand heard an appeal brought by Mr Gregory McAlister against Mr Jeffrey Lai, who is the director of Anderson Creagh Lai Limited (ACL). Mr Lai was accused of misleading and deceptive conduct in relation to a loan transaction that took place in 2013. The Court of Appeal allowed the appeal and ordered that the case be remitted to the High Court to calculate the quantum of damages owed by Mr Lai and ACL to Mr McAlister.

The key legal issue was whether Mr Lai breached s 9 of the Fair Trading Act 1986 (FTA) by his own conduct or whether he was a party to the breach of s 9 by Mr Hurst. The Court of Appeal found that Mr Lai breached s 9 by his own conduct, as he calculated the value of the convertible note on the basis of an equity of $8.5 million, which was incorrect. The Court of Appeal also found that Mr Lai's conduct was misleading and deceptive, as he represented the accuracy of the equity figure to Mr McAlister. The Court of Appeal concluded that Mr Lai's conduct amounted to a breach of s 9 of the FTA.

The Court of Appeal also found that Mr McAlister was entitled to recover $200,000 from Mr Lai and ACL, less any payments received in deduction of that amount. The Court of Appeal remitted the case back to the High Court for the calculation of the quantum of damages owed by Mr Lai and ACL to Mr McAlister. The Court of Appeal also set aside any costs order made in favour of Mr Lai and ACL in the High Court and ordered that the first and second respondents were jointly and severally liable to pay the appellant one set of costs for a standard appeal on a band A basis and usual disbursements.

Orders