JUDGMENT OF THE COURT

AThe appeal is allowed and the judgment of the High Court is restored.
BThe appellant is awarded costs of $15,000 in this Court together with its reasonable disbursements to be fixed by the Registrar.
CThe order for costs in the Court of Appeal is reversed. The High Court should fix costs in that Court if that has not already been done.

REASONS
(Given by Blanchard J)
Introduction
[1]       Mr Tony Falkenstein is an experienced businessman and a company director. The appellant, Red Eagle Corporation Limited, is a vehicle through which his family interests make investments. The respondent, Mr Rick Ellis, is an investment banker who has known Mr Falkenstein for many years. In 2005 his business partner, through a company called Ellis Black Ltd, was Ms Annette Black.
[2]       In connection with an Ellis Black project primarily being promoted by Ms Black, Mr Ellis approached Mr Falkenstein seeking a short-term loan. He advised Mr Falkenstein that Ms Black had net property assets in Sydney of approximately $2 million. After Ms Black supplied Mr Falkenstein with a statement of assets and liabilities appearing to confirm details and values of such properties, but without making any further inquiries, Mr Falkenstein caused Red Eagle to make her an unsecured loan of $250,000 for a period of three months at an interest rate of 25 per cent per annum. That loan was to be used, at least in part, to meet expenses connected with the project.
[3]       It transpired that Ms Black was fraudulent. She did not own the properties. No part of the loan moneys was able to be recovered from her. She is now bankrupt.
[4]       Red Eagle sued Mr Ellis claiming that his advice to it, through Mr Falkenstein, was misleading or deceptive conduct, in breach of s 9 of the Fair Trading Act 1986, which reads:
9     Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

Red Eagle sought an order under s 43 of that Act for payment of the amount of its loss plus interest. Section 43 in relevant part reads:
43 Other orders
(1) Where, in any proceedings under this Part of this Act, or on the application of any person, the Court finds that a person, whether or not that person is a party to the proceedings, has suffered, or is likely to suffer, loss or damage by conduct of any other person that constitutes or would constitute—
(a)A contravention of any of the provisions of Parts 1 to 4 of this Act;

...
the Court may (whether or not…

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 Red Eagle Corporation Ltd v Ellis

Details

AGLC: Red Eagle Corporation Ltd v Ellis [2010] NZSC 20
Case: [2010] NZSC 20
Decision Date: 12 March 2010

CaseChat Overview and Summary

Red Eagle Corporation Ltd sought to recover $250,000 loaned to Annette Black, a party to a business venture promoted by Rick Ellis, who was not a party to the loan agreement. Red Eagle sued Mr Ellis claiming his advice to Tony Falkenstein, a director of Red Eagle, was misleading or deceptive conduct, in breach of the Fair Trading Act 1986. Red Eagle sought an order for payment of the amount of its loss plus interest. In the High Court, Dobson J found that Mr Falkenstein had been misled by the advice from Mr Ellis concerning the properties, but, because of Mr Falkenstein’s own carelessness, Red Eagle should be treated as equally responsible for the loss of the principal amount of the loan. The Judge therefore fixed the liability of Mr Ellis at $125,000 with interest. The Court of Appeal allowed Mr Ellis’s appeal and set aside the judgment. Red Eagle sought to have it restored. The Supreme Court held that the Court of Appeal was wrong to reverse the findings of the trial Judge. The representation made by Mr Ellis about Ms Black’s (non-existent) Sydney properties was misleading and deceptive. The Court of Appeal was wrong to differ from Dobson J in concluding that the financial statement was the sole motivator for Mr Falkenstein’s decision to lend. The Court of Appeal was also wrong to have treated Mr Ellis as a conduit. The appeal was allowed and the judgment of the High Court was restored. The appellant was awarded costs of $15,000 in this Court together with its reasonable disbursements to be fixed by the Registrar. The order for costs in the Court of Appeal was reversed. The High Court should fix costs in that Court if that has not already been done.

Orders