The statement as to carrying capacity was a misrepresentation
[16]
THE FAIR TRADING ACT CLAIM
The parties’ positions
[26]
Did the Judge err in finding that cl 27.3 broke the chain of causation?
The Judge’s finding on causation
[32]
The ground of appeal
[36]
Discussion
[41]
What was Shabor’s loss?
The Judge’s indication
[58]
Quantum of loss
[62]
Contributory conduct
[68]
THE MISREPRESENTATION CLAIM
The issues
[84]
Did cl 27.3 preclude inquiry into reliance on the misrepresentation?
[86]
Was it fair and reasonable for cl 27.3 to be conclusive between the parties?
Section 50 of the CCLA
[91]
The Judge’s conclusion
[97]
Was there error by the Judge?
[100]
The subject matter and value of the transaction and the nature of the parties
[101]
Mr Graham’s conduct and Mr Sharp’s and Mr Borland’s lack of care
[108]
Was Mr Graham’s conduct fraudulent?
[112]
The contractual context, including the failure to insert a due diligence clause
[119]
Effect of cl 27.3
[126]
The Judge’s conclusion was correct
[127]
RESULT
[132]
Introduction
In 2014 Robert Graham advertised his sheep and beef farm for sale by tender.[1] The advertisement stated that the farm “comfortably winters 7,500 plus stock units with capacity for more”. The closing date for tenders was 10 April 2014. Mr Sharp and Mr Borland saw the advertisement. They inspected the farm and thought it would be suitable for deer farming. They submitted a tender of $5,250,110, which was calculated on the basis of the Stock Unit figure in the advertisement. Shabor Ltd (which was incorporated a few weeks later) was the nominated purchaser.
[1]The vendors were actually Robert Graham and Pine Ridge Trustee Company Ltd, of which Mr Graham was a shareholder. For convenience the High Court Judge referred to them collectively as Mr Graham and we do likewise.
The tender was accepted. Clause 27.3 of the sale and purchase agreement contained a “no-reliance clause” which provided that:
The Purchaser shall be deemed…
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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AGLC
Shabor Ltd v Graham [2021] NZCA 448
Case
[2021] NZCA 448
Decision Date
CaseChat Overview and Summary
Shabor Limited, the purchaser of a sheep and beef farm, brought proceedings against Robert Graham, the vendor, for misrepresentation and breach of the Fair Trading Act 1986 (FTA). The farm was advertised as capable of wintering 7,500 plus stock units. However, Shabor discovered that the farm could only carry 4,500 to 5,000 stock units over winter. Shabor brought proceedings against Mr Graham for misrepresentation and breach of the FTA. Both claims failed in the High Court. The High Court held that clause 27.3 of the sale and purchase agreement, a “no-reliance clause”, precluded Shabor from relying on the capacity representation and broke the chain of causation for the purposes of the FTA claim. Shabor appeals. The issues on appeal are:(a)In respect of the FTA cause of action:(i)Did clause 27.3 break the chain of causation between Mr Graham’s conduct and Shabor’s loss?(ii)If not, what is the correct quantum of damages under the FTA cause of action?(iii)Was the Judge correct to reduce damages by 40 per cent on account of Shabor’s own conduct?(b)On the misrepresentation cause of action:(i)Did clause 27.3 preclude inquiry into reliance on the capacity representation?(ii)If so, was it fair and reasonable for clause 27.3 to be conclusive between the parties?(iii)If it is not fair and reasonable for clause 27.3 to be conclusive, was the Judge correct to disallow estimated labour costs for fencing and therefore reduce the quantum of damages by $106,122? Clause 27.3 did not break the causal connection between the misrepresentation and Shabor’s loss. The quantum of Shabor’s loss is $530,000, being the difference between the price paid and the actual value of the farm in 2014. There should be a 30 per cent reduction for contributory conduct by Shabor in failing to protect its own interests by requiring a due diligence clause in the agreement. The grounds of appeal on the misrepresentation cause of action are not made out. The Judge was right to find that, on a proper interpretation, clause 27.3 precludes inquiry into reliance on the capacity representation and that it is fair and reasonable for clause 27.3 to be conclusive between the parties. The appeal is therefore allowed in part. Judgment is entered for Shabor on the Fair Trading Act cause of action for $371,000 together with interest at 5 per cent from 3 June 2014. The costs judgment is set aside and the matter remitted to the High Court for reconsideration of costs. Shabor is entitled to costs in this Court for a standard appeal on a band A basis, with usual disbursements and certification for second counsel.