Premier Events Group Limited v Beattie
[2012] NZHC 3250
•4 December 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2010-404-003178 [2012] NZHC 3250
BETWEEN PREMIER EVENTS GROUP LIMITED Plaintiff
ANDMALCOLM JAMES BEATTIE First Defendant
ANDANTHONY JOSEPH REGAN Second Defendant
ANDCT NZ LIMITED (PREVIOUSLY KNOWN AS CARTAN GLOBAL LIMITED)
Third Defendant
ANDPARNELL PARTNERS GROUP LIMITED Fourth Defendant
ANDSPORTS HOSPITALITY MANAGEMENT LIMITED Fifth Defendant
Contd.../...
Hearing: 15 November 2012
Counsel: M Pascariu for the Plaintiff
I M Gault and G B Dunphy for the Eighth Defendant
No Appearance for any other party
Judgment: 4 December 2012
[RESERVED] JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie
On 4 December 2012 at 12.30 pm
Pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
PREMIER EVENTS GROUP LIMITED V BEATTIE & ORS HC AK CIV 2010-404-003178 [4 December 2012]
ANDPARNELL PARTNERS GROUP (NZ) LIMITED
Sixth Defendant
ANDCARTAN GLOBAL LLP Seventh Defendant
ANDCARTAN TOURS INC Eighth Defendant
ANDSPORTSMARK MANAGEMENT GROUP LIMITED
Ninth Defendant
Distribution:
M Pascariu: [email protected]
I Gault: [email protected]
Z Kennedy: [email protected]J Eichelbaum: [email protected]
Introduction
[1] The plaintiff, Premier Events Group Limited (“PEG”), seeks an order setting aside an appearance protesting jurisdiction filed by the eighth defendant, Cartan Tours Inc (“Cartan Tours”).
[2] On 27 May 2010, PEG issued substantive proceedings against two of its former directors, Messrs Beattie and Regan, and against various corporate interests that they have established. Then, in March 2011, PEG filed an application seeking to join Cartan Tours and the ninth defendant, Sportsmark Management Group Limited (“Sportsmark”), to the proceedings. That application was treated as an application for directions under r 7.9, and on 24 June 2011, I held that PEG was entitled to serve the proceedings on Cartan Tours and Sportsmark without the leave
of the Court under r 6.27(h)(i) of the High Court Rules.1 The first to seventh
defendants appealed to the Court of Appeal. It held that I had correctly focussed on the overall test required by the relevant part of r 6.27 and that my decision that Cartan Tours and Sportsmark could be served without leave should stand.2
[3] Cartan Tours and Sportsmark were served, and both filed appearances under protest. PEG then applied to set aside those protests. PEG has advised that it will be filing a notice of discontinuance in respect of Sportsmark, although insofar as I am aware, this has not yet been attended to. Cartan Tours continues to protest the jurisdiction. It is incorporated in Delaware in the United States of America, and its principal place of business is in Manhattan Beach, California. It argues that PEG does not have a good arguable case that its claims fall within r 6.27 of the High Court Rules, and further, that there is no serious question to be tried on the merits as between it and PEG.
[4] There was no appearance for any of the other defendants. Mr Eichelbaum, for the first to seventh defendants, indicated through Mr Gault, appearing for
Cartan Tours, that his clients did not wish to take a part in the hearing. He did offer
1 Premier Events Group Ltd v Beattie & Ors HC Auckland CIV 2010-404-003178, 24 June 2011.
2 Beattie & Ors v Premier Events Group Ltd [2012] NZCA 257 at [42]–[43].
to attend if required by the Court. I am grateful to Mr Eichelbaum for that offer, but in the event, I did not require to hear from him.
Background
[5] PEG was incorporated in June 2003. PEG asserts that it established itself as a specialist provider of travel and hospitality services for major sporting events worldwide. It says that it had an impressive corporate client base, and that its clients included Australia Post, Deutsche Bank, Toyota, BHP Billiton and Telstra. It acknowledges that 2009 was a difficult trading year for it, but says that the financial outlook for the years 2010 through to 2012 was positive, as it would be able to capitalise on the opportunities presented by the 2010 FIFA World Cup, the 2010
Commonwealth Games, the 2011 Rugby World Cup and the 2012 London Olympic
Games.
[6] PEG asserts that it had completed preparatory work, and established the infrastructure, for the delivery of travel and hospitality packages for the Rugby World Cup and the London Olympic Games. It says that it had incurred significant setup costs in so doing, but that it had entered into contracts in relation to the Rugby World Cup and the London Olympic Games with a number of its corporate clients. Relevant to the present application, it says that it had secured contracts with the New Zealand Olympic Committee and Australia Post in relation to the London Olympic Games.
[7] PEG had only limited access to tickets and vehicle access passes to the London Olympic Games and it therefore decided to try and pursue a joint venture with Cartan Tours.
[8] Cartan Tours was founded in 1899. It has been involved with both the Summer and the Winter Olympic Games on a number of occasions. It served as the official United States ticket agent for the 1994 Winter Olympic Games in Lillehammer, Norway, the 1998 Winter Olympic Games in Nagano, Japan, the
2000 Summer Olympic Games in Sydney, Australia, and the 2004 Summer Olympic
Games in Athens, Greece. It also served as the official ticket agent as the authorised
travel company for 32 national Olympic committees for the 2008 Olympic Games in Beijing, China, and it was the authorised ticket reseller and official travel company for many countries for the London 2012 Olympic Games. It had been appointed by the United States Olympic Committee to be responsible for the equitable distribution of all events tickets allocated to the American public, and to provide comprehensive travel and hospitality packages to public spectators, corporate visitors and sponsors of the games.
[9] PEG, through one of its directors, Mr Gill, contacted a Mr Elmore of Cartan Tours in mid-2009 to ask whether it would be interested in forming a joint venture for the purpose of collaborating in the procurement of tickets and event access passes, and in the marketing of hospitality programmes, for the London Olympic Games. Mr Elmore is the Chairman of the Board of Cartan Tours, and the company’s sole shareholder.
[10] The proposed joint venture was going to require initial funding of US $500,000. PEG and Cartan Tours discussed a 60/40 ownership split, with Cartan Tours being the majority owner. Funding for the new venture was to be provided on the same percentage as the ownership interests. PEG’s commitment was therefore US $200,000.
[11] PEG was not then able to provide those funds itself. However, Mr Gill says that it had the support of another corporate entity associated with him, Bourne Street Investments Limited. Bourne Street Investments Limited was apparently prepared to fund the joint venture. As I understand it, Mr Gill submitted a proposed shareholder’s agreement between Cartan Tours and Bourne Street Investments Limited to Mr Elmore. However, Mr Elmore says that the substitution of Bourne Street Investments Limited was not approved by, nor discussed with, Cartan Tours.
[12] Mr Elmore met with Mr Gill on 19 and 20 October 2009. He provided Mr Gill with copies of Cartan Tours’ and his own personal financial statements, and he requested the same information for PEG and for Mr Gill. According to Mr Elmore, Mr Gill failed to provide the requested financial statements. Mr Gill says that they were provided. Mr Elmore also says that Mr Gill pressed him to
provide US $60,000 towards the proposed joint venture, and further, that Mr Gill requested that PEG’s initial US $40,000 contribution should be used to pay for expenses PEG had allegedly incurred in attending meetings with Cartan Tours in the United States.
[13] Minutes of the meeting suggest that the US $40,000 payment was made by Bourne Street Investments Limited — not PEG. Whether Mr Elmore was aware of this at the time is unclear.
[14] Mr Elmore says that he considered that Mr Gill’s failure to provide the financial statements, his failure to fund the proposed joint venture operations, and his actions in pressing Cartan Tours via Mr Elmore for money, gave him cause for concern. He also says there were various clauses in the proposed shareholders’ agreement that Cartan Tours did not like. Mr Elmore says that he therefore decided that Cartan Tours would not enter into the proposed joint venture agreement, and that he would not “do business with Mr Gill”.
[15] On 23 October 2009, Mr Regan handed in his resignation as Chief Operating Officer of PEG. He continued to work for PEG in the short term to try and ensure an orderly transition. However, on 17 March 2010, he resigned as a director, and his involvement with PEG ceased entirely as from 31 March 2010. Mr Beattie resigned as PEG’s Managing Director on 24 December 2009 and as an employee on
20 January 2010, effective as from 5 March 2010. PEG’s project manager, a
Mrs Panapa, also terminated her employment with PEG at the beginning of April
2010.
[16] Mr Gill advised Mr Elmore of Mr Regan’s and Mr Beattie’s resignations by
email sent on 7 February 2010. The email contained the following:
Dave I don’t know how or where you[r] thinking is at regarding the Olympics and we would like to continue to work with you and the team and I guess we will find out more when we talk, we will have to look at what we can or can’t do with the above developments.
In a related email to a Mr Bodini at JAC Travel in the United Kingdom, Mr Gill stated that neither Cartan Tours nor PEG were able to commit to “any contracting at
this point”. He went on to say that it was unlikely that PEG would have an Olympic programme. He noted as follows:
Mario, we can only apologise that we can’t go forward at present as much as we would like to, but without Malcolm [Beattie] or a suitable replacement and the Cartan position not being clear we simply can’t.
[17] It is common ground that Cartan Tours and PEG did not enter into a joint venture agreement. PEG however asserts that it was “in advanced negotiations” with Cartan Tours. Mr Elmore denies this.
[18] According to Mr Elmore, after Messrs Beattie and Regan left PEG in early
2010, Mr Elmore had discussions with them regarding a possible joint venture between Cartan Tours and a company in which they would have an ownership interest. He met with Messrs Beattie and Regan in Vancouver in February 2010.
[19] It is noteworthy that in February 2010, both Messrs Beattie and Regan were still working for PEG. It seems from an email sent by Mr Beattie to Mr Elmore dated 11 March 2010, that various matters relevant to the matters at issue in these proceedings were discussed at the meeting in Vancouver. In the email, Mr Beattie updated Mr Elmore on what he and Mr Regan had been doing since the Vancouver meeting. He reported the following:
(a) that he and Mr Regan had established a new company in
New Zealand;
(b) that he and Mr Regan had terminated their employment with PEG;
(c) that there was a possibility of a restraint on him, but that he and Mr Regan were firm in their belief that there would be none, or that any restraints would only apply in New Zealand;
(d) that Ms Panapa was to be “their” Operations Director, and that she
was finishing at PEG on 31 March 2011, along with Mr Regan;
(e) that he and Mr Regan were finalising forecasts for their new company;
(f) that PEG’s contract with the New Zealand Olympic Committee had been terminated;
(g)that he had met with the Secretary-General and Commercial Director of the committee and that they had Board approval to sign with Cartan. They wanted to meet with Cartan in New Zealand.
(h)that “as agreed in Vancouver”, he and Mr Regan would set realistic and somewhat conservative targets for client acquisition. Identified clients included Deutsche Bank, BHP Billiton, Australia Post, Toyota and Telstra;
(i)that forecasts as to ticketing would enable the recovery of the face value of tickets with margins that would recover all fees/commissions paid by Cartan to the National Olympic Committees for their rights;
(j)that he was to meet with Mr Williams (Cartan Tours’ Vice President) in London and he had other meetings in place, including with Deutsche Bank and with Accor’s Olympic Accommodation Director.
[20] Mr Elmore says that at the time, Messrs Beattie and Regan assured him that they were in the process of resolving their differences with Mr Gill. He refers to an email Mr Regan sent to him on 21 February 2010, telling him that his departure from PEG had been amicable and professional. Mr Regan also told Mr Elmore in the email that he had no restraint of trade provision in his employment contract, and that Mr Beattie had no restraint of trade provision on non-New Zealand and Australian domiciled clients. Mr Regan also stated in the email that it was unlikely that PEG would be able to continue with its Olympic hospitality programme, and that the company was likely to close down altogether.
[21] Also in February 2010, some of PEG’s major clients terminated their
contracts with PEG. Relevantly:
(a) On 15 February, Australia Post suspended the agreement it had with PEG in relation to the London Olympic Games and instructed PEG to transfer all funds held in relation to that programme to a firm of accountants;
(b)At the end of February 2010, the New Zealand Olympic Committee gave oral notice terminating its agreement with PEG.
[22] In March 2010, Messrs Beattie and Regan incorporated a company in New Zealand that was initially known as Cartan Global Limited. That company is the third defendant in the proceedings.
[23] Sometime in the first half of 2010, a draft joint venture agreement was prepared between Sportsmark , Cartan Tours, and an unnamed entity that was to be owned by Messrs Regan and Gill. While there is nothing to suggest that it was signed, PEG asserts that Cartan Tours and an entity associated with Messrs Beattie and Regan entered into a business arrangement relating to the provision of travel, ticket and hospitality packages for the London Olympic Games, and that this involved a revenue sharing formula whereby earnings generated from the London Olympic programme would be retained by Mr Beattie’s and Mr Regan’s company, then known as Cartan Global Limited, and its partners outside New Zealand. According to Mr Elmore, Cartan Tours did not agree to the terms of the draft joint venture agreement, did not sign it, and did not agree that they would sign it. He goes further and says that neither he, nor Cartan Tours, nor any company he owns or in which he has an interest, has ever entered into any business venture or any other type of relationship with Mr Regan or Mr Beattie, or any company in which they have an ownership interest, “which involves joint ownership of a business entity”.
[24] Following the termination of the contract between Australia Post and PEG, the funds that Australia Post had paid to PEG were transferred in accordance with Australia Post’s instructions to a firm of accountants. On PEG’s account:
(a) On 23 February 2010, Mr Beattie reported to Australia Post that the funds, which he described as “the golden egg”, were in his accountant’s trust account;
(b)On 14 April 2010, the third defendant, Cartan Global Limited, entered into a new hospitality package and services agreement in relation to the 2012 London Olympic Games, on terms virtually identical to the agreement which PEG had with Australia Post.
(c) On 15 April 2010, the funds were transferred to the account of the third defendant.
PEG also says that the agreement between the third defendant and Australia Post was subsequently assigned to the seventh defendant, Cartan Global LLP — a limited liability partnership with its registered office in London — thereby removing any profit generated under the agreement outside the jurisdiction.
[25] Mr Elmore says that Cartan Tours has not entered into any contract with
Australia Post. There is nothing that I am aware of to contradict this assertion.
[26] Mr Elmore says that the only former client of PEG with whom Cartan Tours has contracted is the New Zealand Olympic Committee. He notes that the New Zealand Olympic Committee terminated its contract with PEG in February
2010. He states that Cartan Tours had no discussions with the New Zealand Olympic Committee regarding its relationship with PEG, and that it did not take any steps to induce the New Zealand Olympic Committee to terminate its contract with PEG. Rather, he says that after the contract between PEG and the New Zealand Olympic Committee was terminated, a representative of the New Zealand Olympic Committee contacted Cartan Tours and asked it to serve as this country’s ticketing agent. Mr Elmore notes that Cartan Tours was performing a similar function for some 40 other countries, and suggests that it was under no obligation to cease business activities because of the dispute between PEG and its former officers. Further, he says that when Cartan Tours entered into the agreement with the New Zealand Olympic Committee on 15 July 2010, Cartan Tours had been led to
believe that the dispute as between PEG and Messrs Beattie and Regan was in the process of being resolved.
[27] Mr Elmore says that Cartan Tours had no employees in New Zealand, and that therefore, it was proposed to enter into a three-party agreement between the New Zealand Olympic Committee, the seventh defendant Cartan Global LLP, and Cartan Tours, so that the contract could be properly serviced. He acknowledges that an agreement to this effect was prepared, but states that it was never signed or entered into by the parties. He says that after the draft agreement was prepared, Cartan Tours was advised by the New Zealand Olympic Committee that Harvey World Travel Service was its travel agent, and that Cartan Global could not serve as a sub-agent in that regard. He says that thereafter, Cartan Tours and the New Zealand Olympic Committee entered into a general ticket and travel services agreement dated 15 July 2010, which is strictly between Cartan Tours and the New Zealand Olympic Committee. He says that neither Messrs Beattie nor Regan, nor any company in which they have an interest, received any compensation as a result of Cartan Tours entering into this agreement; nor did they receive any compensation as a consequence of Cartan Tours’ performance of the agreement. Specifically, he states that Cartan Global LLP has not received any compensation under the Cartan Tours/New Zealand Olympic Committee agreement.
[28] Mr Elmore does acknowledge that there were other business transactions involving Cartan Tours and Messrs Beattie and Regan that did result in commission being paid to them. Those transactions are not, however, relevant for present purposes.
[29] PEG conducted an informal audit of its business shortly after Messrs Beattie and Regan departed. According to PEG, that audit revealed that many hardcopy files were missing, and further forensic analysis established that there was no significant relevant information on the work computers previously used by Messrs Beattie and Regan and Mrs Panapa, and that a number of files had been deleted.
[30] Accordingly, on 27 May 2010, PEG issued the substantive proceedings against Messrs Beattie and Regan. It also applied for ex-parte for search orders.
Again, according to PEG, the search orders revealed that Messrs Beattie and Regan had taken some 15,000 pages of hardcopy documents from PEG, and copied most of PEG’s electronic records. The documents included copies of the contracts between PEG and Australia Post and PEG and the New Zealand Olympic Committee, and all financial projections and associated documentation prepared by Mr Regan for PEG in respect of the London Olympics programme.
[31] In its statement of claim dated 7 March 2011, PEG asserts:
(a) That Messrs Beattie and Regan breached fiduciary obligations owed by them as directors, by negotiating directly with its clients, securing the termination of their existing contractual arrangements with PEG, and establishing substitute contractual arrangements for their own benefit, or for the benefit of their companies. It also alleges that Messrs Beattie and Regan negotiated with Cartan Tours, and with Sportsmark, to ensure that the joint venture agreement it was negotiating was not progressed further, and to put in place substitute contractual arrangements for the London Olympic programme for their own benefit or for the benefit of their corporate entities;
(b)That the first defendant, Mr Beattie, has breached a restraint of trade provision contained in an agreement for the sale and purchase of his shares to PEG;
(c) That the third, fourth, fifth, sixth and seventh defendants have misused the confidential information referred to above, to secure for themselves contractual arrangements and/or negotiations pertaining to the Rugby World Cup and the London Olympic programmes, either for their own benefit or for the benefit of a joint venture agreement they have with Cartan Tours;
(d)That the third to seventh defendants, Cartan Tours and Sportsmark have knowingly received its property. It says that at all material times, the Rugby World Cup and London Olympics programmes and
the benefit thereof, were its property, and that Messrs Beattie and Regan in breach of their fiduciary obligations, procured the transfer of those programmes and the benefit of the same to the third to eighth defendants. It alleges that at all material times, those defendants knew that the programmes were its property, and that they knowingly received and retained the programmes and the benefit thereof, and concealed from it their design to appropriate its clients and businesses and programmes for their own benefit. It is alleged that the third defendant, Cartan Tours and Sportsmark received the benefit of the programmes and business opportunities, and that they received the net profit arising from the sale as constructive trustees for the plaintiff. PEG seeks an account of profits, and/or an order for the payment of the sum of $11,921,703; and
(e) That all defendants were parties to an unlawful means conspiracy. It is alleged that all were parties to a common design, namely to take steps to appropriate its clients and businesses, including its Rugby World Cup and London Olympic programmes for their own benefit, and that that common design was to be carried out by unlawful means, including breach of fiduciary duty by Messrs Beattie and Regan, breach of restraint of trade provision by Mr Beattie, misuse of confidential information by the first to seventh defendants, and knowing receipt by all corporate defendants. It seeks an account of profits, and/or an order for payment in the sum of $13,982,727.
PEG’s Application
[32] PEG’s application to set aside Cartan Tours’ appearance under protest to jurisdiction is made under r 5.49(5) of the High Court Rules. Rule 5.49(7) provides that to the extent that an application under the rule relates to service of process outside New Zealand, it must be determined under r 6.29.
[33] Rule 6.29 calls for a two-stage inquiry.
[34] The first stage requires the Court to dismiss the proceeding unless the party effecting service establishes under r 6.29(1)(a)(i) that there is a good arguable case that the claim falls wholly within one or more of the paragraphs of r 6.27. This part of the inquiry is a gateway or threshold which must be established before moving to consider the stage 2 issues.3 It is a largely factual question to be assessed on the basis of the pleadings and the affidavit or other evidence before the Court. It may be necessary however to consider questions of law, or mixed questions of law and fact.4
Separate consideration is required for each cause of action. At this threshold stage of the inquiry, the question whether a particular cause of action falls within r 6.27 depends on which (if any) of the circumstances set out in that rule applies.5 What is required is a good arguable case. This does not relate to the merits of the case, but rather, to whether the claim falls within one or more of the circumstances under r 6.27 in which service overseas may be effected without leave.6 The good arguable case test does not require the plaintiff to establish a prima facie case. This recognises that disputed questions of fact cannot be readily resolved on affidavit evidence. On the other hand, there must be a sufficiently plausible foundation established that the claim falls within one or more of the headings in r 6.27(2). The Court should not engage in speculation.7
[35] If the party effecting service satisfies the first stage of the test, it must then go on to establish that the Court should assume jurisdiction by reason of the matter set out in r 6.28(5)(b) to (d). Namely:
(b) where there is a serious issue to be tried on the merits;
(c) whether New Zealand is the appropriate forum for the trial;
(d)any other relevant circumstances supporting an assumption of jurisdiction.
3 Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd [2010] NZCA 502; [2011] 1 NZLR 754 at
[32].
4 Ibid, at [33].
5 Ibid, at [71].
6 Ibid, at [33].
In determining whether there is a serious question to be tried, the Court must be satisfied that there is a serious legal issue to be tried and that there is a sufficiently strong factual basis to support the legal right asserted.8 The Court must determine whether, at the end of the day, there remains a substantial question of law or fact or both arising on the facts disclosed by the affidavits, which the plaintiff bona fide desires to try.9
[36] It is important to appreciate that the Court does not lightly exercise it discretion to assume jurisdiction over foreign parties.10 The ultimate issue is whether there are sufficient grounds for the Court properly to assume jurisdiction.11
Analysis
Stage One — Good Arguable Case under r 6.27?
[37] PEG pleads two causes of action against Cartan Tours: (a) knowing receipt; and
(b) an unlawful means conspiracy.
[38] The first is an equitable claim, alleging a constructive trust. The second is a claim based in tort.
[39] Mr Pascariu on PEG’s behalf argued that there is good arguable case that each of its claims against Cartan Tours falls wholly within one or more of the following paragraphs in r 6.27, namely:
(a) that the damage was sustained by PEG in New Zealand —
r 6.27(2)(a)(ii);
8 Ibid, at [35].
9 Ibid, at [41].
10 Ibid, at [27]–[28].
(b) that Cartan Tours is a necessary or proper party to the proceeding —
r 6.27(2)(h)(i);
(c) that Cartan Tours is liable as a trustee for knowing receipt for acts committed within New Zealand — r 6.27(2)(l).
[40] As noted, I have previously held that PEG was entitled to serve the proceeding on Cartan Tours under r 6.27(2)(h)(i).12 I considered that r 6.27(2)(a)(ii) applied to one cause of action, the tort of unlawful means conspiracy. I found that on the materials then before me, nothing had been done within New Zealand and that r 6.27(2)(l) did not apply to the knowing receipt claim. I confined my conclusion that service out of New Zealand was permitted without leave to r 6.27(2)(h)(i).
[41] Both Mr Pascariu and Mr Gault put it to me that I now have considerably more information than was available to me when I made my earlier decision. Both submitted that I should consider the matter afresh.
[42] I agree with counsel. Cartan Tours and Sportsmark were always entitled to protest the jurisdiction of the Court. I acknowledged that in my earlier ruling. So did the Court of Appeal. Both took that step and Cartan Tours’ protest remains before the Court. PEG has sought to set aside that protest. This is a separate interlocutory application, which requires fresh consideration on the materials now before the Court. I now have considerably more information available to me than was available in June 2011. I have the Court of Appeal’s judgment. I also have the benefit of affidavits that have been filed by Mr Elmore on behalf of Cartan Tours and by a Mr Skubic on behalf of Sportsmark. I also have an affidavit in reply filed by Mr Gill.
[43] I deal first with the cause of action alleging knowing receipt.
[44] Rule 6.27(2)(a)(ii) cannot apply to this cause of action. The subclause applies only when a claim is made in tort, and a claim alleging knowing receipt is
not made in tort.
12 Premier Events Group Ltd v Beattie & Ors, above n 1 at [74].
[45] Rule 6.27(2)(l) is potentially applicable, if Cartan Tours’ alleged liability arises out of acts committed within the jurisdiction. There is evidence that some acts were committed within the jurisdiction:
(a) Mr Beattie sent the email to Mr Elmore on 11 March 2010, advising that the New Zealand Olympic Committee would like to meet with Cartan Tours in New Zealand, and sign an agreement at that meeting;
(b)There is an email from a Mr Terry Daly of the New Zealand Olympic Committee sent to Mr Regan on 9 July 2010. It seems that a copy of the agreement between Cartan Tours and the New Zealand Olympic Committee was attached to the email. Mr Daly confirmed that “we are good to go”, and he asked how Mr Regan wants to treat the “side letter” between Mr Regan and Mr Beattie and the New Zealand Olympic Committee. Mr Daly indicated that he would prefer to sign this side letter before “Don” comes out. As already noted, it seems that Don was a Mr Don Williams. He was the Vice President of Cartan Tours;
(c) The agreement between Cartan Tours and the New Zealand Olympic Committee was dated 15 July 2010, shortly after this email was sent. It seems that Mr Williams came out to New Zealand to sign it.
(d) The agreement is governed by the laws of New Zealand.
(e) There was a meeting held in Auckland on 2 March 2011. Mr Daly from the New Zealand Olympic Committee attended. So did Messrs Beattie and Regan on behalf of the third defendant, and Mr Williams, on behalf of Cartan Tours. The notes of the meeting record that Harvey World Travel and United Travel were to offer Cartan Tours’ Olympic Games travel programme, and that the New Zealand Olympic Committee would promote Cartan Tours and their services to interested persons. Harvey World Travel and United Travel were to accept ticket requests and pass them onto Cartan Global Limited for
processing. There was a reference to bookings being passed onto Cartan Global Limited, and to direct travel programme bookings being processed in the Cartan office in New Zealand and then transmitted to “Cartan Manhattan Beach”. It appears to have been agreed that deposits for travel programmes would be held in a Cartan Global Limited bank account, and then transmitted to Cartan’s sterling account on a schedule determined by Mr Regan and “Dinesh”. Dinesh was a Mr Dinesh Mehta, who was a controller with Cartan Tours.
(f) Payments were made to Accor Hotels to secure accommodation at the
Olympic Games. Those payments were made on 1 April 2011.
£150,000 was paid from Cartan Tours’ account. The balance —
£116,239 — was paid by Mr Regan, from New Zealand. On 27 April
2011, Mr Mehta sent an email to Mr Regan asking him whether the payment sent to Accor was part of “our projected profit distribution”. Mr Elmore was copied into that email. Mr Regan replied on the same day. He confirmed that the payment should be coded as “intercompany” on the basis that the total profit distribution was a “moving target”. Again, Mr Elmore was copied into that email.
(g)On 9 May 2011, a further $200,000 was transferred from Cartan Global Limited’s account with Westpac, St John’s Branch, Auckland, to Cartan Tours. It is not clear what this payment related to.
[46] There is nothing to suggest that Cartan Tours did anything in New Zealand in relation to Australia Post. However, the above material suggests that various acts were committed within the jurisdiction in relation to the New Zealand Olympic Committee. There is, in my view, evidence of sufficient acts committed within this country to engage r 6.27(2)(l).
[47] Further, r 6.27(h)(i) in my view, also applies to the knowing receipt claim. For present purposes, there is no argument but that the proceedings have been
“properly brought” against the first to seventh defendants. Moreover, for present purposes, there is no suggestion that there is not a real question between PEG and the first to seventh defendants that the Court ought to try. In my judgment, Cartan Tours is a necessary and proper party to the proceedings. Had Cartan Tours been within jurisdiction, it would have been properly sued along with the other defendants within jurisdiction. Its contract with the New Zealand Olympic Committee is a New Zealand document, entered into, it seems, in this country. While I acknowledge that there are a number of conflicting assertions in the affidavits that have been filed, I cannot resolve those conflicts in the context of the present application. However, having perused the various documents which have been produced, I remain of the view that Cartan Tours is a necessary and proper party to the proceedings. On the available materials, it seems to me that, at least insofar as the New Zealand Olympic Committee is concerned, Cartan Tours is linked with the allegations made by PEG against Messrs Beattie and Regan and their various corporate entities. The extent and nature of Cartan Tours’ involvement is not clear. Its involvement may be innocent, but it is tolerably clear that it was involved in some way.
[48] I now turn to the cause of action alleging the tort of unlawful means conspiracy.
[49] As I noted in my earlier judgment, if PEG can make out its allegations, it seems to me that the resulting damage or loss, either in whole or in part, must have been sustained in New Zealand. It follows that PEG was entitled to serve the proceedings on Cartan Tours under r 6.27(2)(a)(ii).
[50] Prima facie, r 6.27(2)(l) does not apply to the cause of action for unlawful means conspiracy. PEG is alleging that it has suffered loss and/or damages of
$13,982,727, and it is seeking either judgment in that sum, or an account of the profits earned by the defendants as a consequence of their unlawful conduct. While the meaning of the word “restitution” in r 6.27(2)(l) is not entirely clear, it seems to me that a claim for damages is not a claim for restitution. Moreover, the way in which the matter is pleaded suggests that the account of profit sought is not restitution, but rather, a means of fixing the damages sought.
[51] It does however seem to me that r 6.27(2)(h)(i) is engaged. For the reasons I have identified above, in my view, the evidence available at this stage suggests that Cartan Tours is linked with the allegations made against the first to seventh defendants, in particular insofar as the New Zealand Olympic Committee is concerned. Cartan Tours is, in my judgment, a necessary or proper party to the proceedings. The proceedings have been properly brought against the first to seventh defendants, and there is a real issue between PEG and those defendants that the Court ought to try.
[52] Accordingly, I am satisfied in terms of r 6.29(1)(a)(i) that there is a good arguable case that PEG’s claims against Cartan Tours falls wholly within one or more of the paragraphs of r 6.27 that I have identified. I now go on to consider r 6.29(1)(a)(ii).
Stage 2 — Serious question to be tried on the merits?
[53] Again, I consider each claim separately.
[54] To establish a constructive trust claim on the basis of knowing receipt, PEG
will have to show:13
(a) a disposal of its assets in breach of fiduciary duty;
(b)the beneficial receipt by Cartan Tours of assets which are traceable as representing its assets; and
(c) knowledge on the part of Cartan Tours that the assets it received are traceable to a breach of fiduciary duty.
It has been held that dishonesty is not an essential ingredient of a claim for knowing receipt, and that the test for knowledge in such a claim is simply whether the
13 El-Ajou v Dollar Land Holdings Plc & Anor [1994] 2 All ER 685 (CA) at 700 per Hoffman LJ.
defendants’ knowledge makes it unconscionable for him to retain the benefit of the
receipt.14
[55] For the purposes of the following discussion, it is assumed that PEG will be able to show a disposal of its assets by Messrs Beattie and Regan in breach of fiduciary duty. I emphasise that that issue has not been determined. The issue was not contested by Cartan Tours in the context of the present application. Rather, it asserted that PEG cannot show that there is a serious question to be tried in relation to both receipt by Cartan Tours of traceable assets, and knowledge of any breach.
[56] In my judgment, there is a serious question to be tried on the merits as between PEG and Cartan Tours in relation to both the beneficial receipt by Cartan Tours of assets which are traceable as representing PEG’s assets, and of knowledge on behalf of Cartan Tours that the assets it received were traceable to a breach of fiduciary duty by Messrs Beattie and Regan.
[57] The materials before me to date suggest as follows:
(a) In November 2009, PEG and Cartan Tours were negotiating the establishment of a joint venture for the procurement and marketing of travel, ticket and hospitality packages for the London Olympic Games;
(b)In the course of those negotiations, PEG disclosed commercially sensitive information relating to its proposed London Olympic programmes;
(c) Cartan Tours did not tell PEG outright that the negotiations were going no further and that it did not want to proceed;
(d) Cartan Tours met with Messrs Beattie and Regan in Vancouver in
February 2010. Messrs Beattie and Regan were still employed by
PEG at the time. Mr Regan was a director of the company.
14 Bank of Credit and Commerce International (Overseas) Ltd (in liq) & Anor v Akindele [2000] 4
All ER 221 (CA).
Mr Beattie had resigned as a director shortly before the meeting. Cartan Tours knew of their involvement in PEG. As noted above, the email sent by Mr Beattie to Mr Elmore updating events after the meeting, suggests that there were reasonably detailed discussions in relation to PEG’s client base, its business assets, and Messrs Beattie and Regan’s intentions in relation to those assets;
(e) Shortly after Messrs Beattie and Regan left PEG, Cartan Tours entered into negotiations with them in relation to a proposed joint venture agreement, and further, concluded an agreement with the New Zealand Olympic Committee. The agreement with the New Zealand Olympic Committee makes provision for Cartan Tours to sell individual and group tickets, travel services, and packages for persons travelling to the Olympic Games. Cartan Tours was to be paid by the traveller and it agreed to pay the New Zealand Olympic Committee a commission;
(f) Mr Elmore’s asserts that the discussions between Cartan Tours and Messrs Beattie and Regan were premised on the understanding that PEG was no longer going forward with its Olympic programme. He also says that he understood that any dispute between PEG and Messrs Beattie and Regan was being resolved. However, prima facie, the timing is not fully consistent with these explanations. Further, it is clear that the possibility of a restraint of trade binding Messrs Beattie and Regan was discussed, and that Mr Elmore was aware of the issue;
(g) The use of the name “Cartan” by Messrs Beattie and Regan is curious.
Mr Elmore asserts that their use of the name was unauthorised. There are however a number of documents that suggest that that was not the case, at least initially. By way of example, there is an email from Mr Regan to Mr Williams dated 4 March 2011, where Mr Regan stated that he and Mr Williams had discussed matters, and that Cartan, (the timing would suggest that this was a reference to the third defendant), would be operating out of the London office “seamlessly”
under the Cartan brand, and that signage would use the Cartan logo. He asserts Cartan Global had set up the office in London, and that it would operate under the Cartan brand name. By way of further example, other entities, such as Prestige Ticketing Limited, which company had been appointed by the London organising committee of the Olympic Games to sell tickets, sent an email to Mr Beattie, in which it was confirmed that Prestige Ticketing Limited were delighted to be able to move forward in a working relationship with Cartan Tours and Cartan Global. The author of the email asked Messrs Beattie and Regan to confirm the corporate details for the Cartan Tours entity in the United Kingdom and suggested changes to documentation. It is noteworthy that that email was sent to Mr Elmore, and to other persons who were seemingly involved with Cartan Tours. There are also references in various documents to Cartan Tours and its “sister company” Cartan Global. Mr Regan was sending out invoices to Australia Post under the logo “Cartan Tours” in May and June 2011. The documentation suggests that various people within Cartan Tours were aware of the use of the Cartan name by Messrs Beattie and Regan, and there is no documentation that I am aware of suggesting that any issue was taken in this regard.
[58] I note Mr Elmore’s assertion that neither he, nor Cartan Tours, nor any company that he owns, or has any interest in, entered into a joint venture or any other type of business relationship with PEG, Messrs Beattie and Regan, or any company in which they have an ownership interest, “which involved joint ownership of a business entity”. This assertion in some respects poses more questions than it answers. The knowing receipt cause of action could succeed, notwithstanding that Cartan Tours did not enter into a joint venture involving joint ownership of a business entity.
[59] I am satisfied that there is a serious legal issue to be tried as between PEG and Cartan Tours in relation to the knowing receipt claim, and that there is a sufficiently strong factual case to support the legal right asserted.
[60] I now turn to the second cause of action — an unlawful means conspiracy.
[61] An unlawful means conspiracy occurs when a combination of persons acts in concert so as to intentionally injure the plaintiff in his trade or other legitimate interests by an act which is independently unlawful. Conspirators who resort to unlawful means to attain their purpose are liable in tort if actual injury is caused to the plaintiff, notwithstanding that their predominant purpose is to further their own legitimate interests.15 Conspirators who resort to unlawful means to attain their purpose are liable in tort, if actual injury is caused to the plaintiff, notwithstanding that their predominant purpose was to further their own legitimate interests.16
[62] Again, both parties assumed for the purpose of the argument before me that PEG would be able to show that Messrs Beattie and Regan intentionally injured PEG in its trade or other legitimate interests. Again, this issue is far from determined. For the purpose of the argument before me, Cartan Tours argued that PEG will be unable to show that it was a part of any conspiracy, or that it was involved in any independently unlawful act.
[63] Mr Gault argued that Cartan Tours has never entered into any agreement or business relationship with any of them, the first to seventh defendants, and that any business discussions between Cartan Tours and Messrs Beattie and Regan were premised on the understanding that PEG was no longer going forward with its Olympic programme, and that any dispute had been or would soon be resolved. He argued that as a consequence, Cartan Tours did not have any intention to injure PEG, and was unaware of any intention to injure PEG on the part of the first to seventh defendants. Further, he argued that Cartan Tours did not act unlawfully because it did not knowingly receive assets from PEG.
[64] I do not accept these submissions. In my view, the evidence that I have summarised above, in particular of the meeting held in Vancouver in February 2010, suggests that some sort of agreement or understanding was reached between
Messrs Beattie, Regan and Cartan Tours. It appears to have been contemplated that
15 SSC & B: Lintas New Zealand Limited v Murphy [1986] 2 NZLR 436 (HC) at 461 citing Ware and De Freville Ltd v Motor Trade Association [1921] 3 KB 40 (CA).
16 Crofter Hand Woven Harris Tweed Co Ltd v Veitch [1942] AC 435 at 441.
Messrs Beattie and Regan would establish a new company, that that company would seek to acquire PEG’s clients and business opportunities, and that Cartan Tours would become a party in some way to the business opportunities that would be created. What involvement or knowledge Mr Elmore and Cartan Tours had, or should have had, is a matter which can be explored at trial. For much the same reasons as I have identified above in relation to the knowing receipt cause of action and in relation to the first stage of the inquiry, I am satisfied that there is a serious question to be tried as between PEG and Cartan Tours in relation to the unlawful means conspiracy cause of action, and that there is a sufficiently strong factual basis to support the legal right asserted.
Other Matters
[65] Mr Gault did not suggest that New Zealand is not the appropriate forum for the trial. Indeed, he expressly stated that he was not advancing any submissions in that regard.
[66] I am nevertheless required to consider this issue. I am satisfied that New Zealand is the appropriate forum. There are no other proceedings between PEG and Cartan Tours afoot in the United States, or elsewhere. Seven of the eight defendants are within jurisdiction. It is important that all allegations against all defendants should be aired in the same hearing. The proceeding in this country has been ongoing for some time. As between PEG and the first to seventh defendants, it is well advanced. There is nothing to suggest there will be any unfair advantage to Cartan Tours if the proceedings are heard in this country. Obviously, its witnesses will have to attend in New Zealand, but that is not an insuperable difficulty.
[67] I am not aware of any other relevant circumstances relied on by the parties that might support an assumption of jurisdiction.
Summary
[68] Having considered the materials before the Court, I am satisfied that PEG, as the party who has effected service on Cartan Tours outside the jurisdiction, has
established that it has a good arguable case that its claims against Cartan Tours fall within r 6.27, and that the Court should assume jurisdiction by reason of the matters set out in r 6.28(5)(b) to (d).
[69] The application is granted, and Cartan Tours’ protest to jurisdiction is set
aside.
[70] PEG is entitled to its reasonable costs and disbursements. Costs are to be calculated on a 2B basis. If the parties cannot agree on the quantification of costs, the matter is to be referred to me by way of memoranda. Any memorandum for PEG is to be filed within 10 working days of the date of this judgment. Any memorandum from Cartan Tours is to be filed within a further five working days. I will then deal with the dispute on the papers, unless I require the assistance of counsel. Disbursements are to be fixed by the Registrar in the event of dispute.
[71] The Registrar is directed to convene a telephone conference with counsel, including Mr Eichelbaum on behalf of the first to seventh defendants, so that the
ongoing progress of this litigation can be reviewed.
Wylie J
2
0