Murray v Morel & Co Ltd CA86/04 - [2005] NZCA 432

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA86/04

BETWEEN PETER JAMES MURRAY First Appellant

AND PETER JOHN LORIMER Second Appellant

AND DALE WILLIAMS RILEY Third Appellant

AND LEADMAN INVESTMENTS LIMITED Fourth Appellant

AND MOUNT AUCKLAND FOREST 1
LIMITED
Fifth Appellant

AND JAMES ALEXANDER DOUGLAS Sixth Appellant

AND AVALON MANAGEMENT LIMITED Seventh Appellant

AND ALAN REVELL AND MARGARET REVELL
Eighth Appellants

AND MOREL AND CO LIMITED First Respondent

AND JENNIFER ANN MOREL Second Respondent

AND TRUSTEES EXECUTORS LIMITED Third Respondent

Hearing: 9 and 10 May 2005

Court: Anderson P, Hammond and Chambers JJ

MURRAY AND ORS V MOREL AND CO LTD AND ORS CA CA86/04 22 December 2005

Counsel: B O'Callahan and A E FitzHerbert for Appellants
P R Jagose and P R McRae for First and Second Respondents
L J Taylor and H S Fitzsimmons for Third Respondent

Judgment: 22 December 2005

JUDGMENT OF THE COURT

A The appeal is allowed in part.

BThe statement of claim is reinstated, save for the first and tenth causes of action, which remain struck out.

CThe costs order made in the High Court is quashed. That court must reassess High Court costs in light of this judgment and the reasons therefor.

DThe appellants are entitled to costs in this court in the sum of $10,000, plus usual disbursements. The liability to pay costs falls on the respondents jointly and severally. In the absence of agreement to the contrary, the first and second respondents must pay 50% and the third
respondent 50%. We certify for second counsel.

REASONS

(Given by Chambers J)

Table of Contents

Para No

Public investment in forestry partnership near Warkworth [1] Causes of action [8] Issues on the appeal [20] Section 37 of the Securities Act [26] Reasonable discoverability – is it now the general limitation test? [43] Section 28 of the Limitation Act [54] Causation [73] Clause 13.14 of the deed of participation [78]

Result [83]
Tailpiece [87]

Public investment in forestry partnership near Warkworth

[1] In 1994, Cameron Hadlow and Yvonne Zuill, who owned a 138 hectare forest near Warkworth, approached Morel & Co Limited, the first respondent, with a view to raising money. A scheme was developed under which the right to harvest the trees would be sold to members of the public, who would buy shares in a forestry partnership. It would be Morels’ task to prepare and register a prospectus and to manage a public float, inviting subscriptions in the partnership. The partnership would take a lease from Mr Hadlow and Ms Zuill, entitling the partners to harvest the trees between 2001 and 2006. The cost of the lease was to be $2.4 million.
$1.3 million was to come from investors; the balance (including all preliminary expenses and commissions payable) would be funded by a bank loan.

[2] Because units in the partnership were to be participatory securities in terms of the Securities Act 1978, that Act’s provisions had to be complied with.…

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.

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Details

Case: [2005] NZCA 432
Decision Date: 22 December 2005

CaseChat Overview and Summary

The case of Murray v Morel & Co Limited CA86/04 involved an appeal against the striking out of claims by investors in a forestry partnership. The investors argued that the allotment of participatory securities in the partnership was invalid, being both a breach of an express provision in the prospectus and in breach of s 37(2) of the Securities Act. The primary issue before the Court was whether the allotment was in breach of s 37(2). The Court found in favour of the appellants on this issue. The second issue was whether all the causes of action were time-barred and should be struck out on that basis. The Court rejected the broad proposition that "reasonable discoverability" now applies to all causes of action. The Court found that the investors were not required to provide evidence at the strike-out stage and that the claims should be allowed to run. The final issue was the effect of clause 13.14 of the deed of participation, which the Court found did not bar the negligence and trust causes of action. The first and tenth causes of action remain struck out, while the second to ninth causes of action are reinstated. The costs order in the High Court is quashed, and the investors are entitled to costs from the respondents on a standard two-day basis.

Orders