Sullivan v Wellsford Properties Ltd - [2017] NZHC 3047

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI TERENGA PARĀOA ROHE

CIV-2016-488-35 [2017] NZHC 3047

BETWEEN
PETER ANTHONY SULLIVAN

First Plaintiff

PORT ALBERT INVESTMENTS LIMITED

Second Plaintiff

AND

WELLSFORD PROPERTIES LIMITED First Defendant

GARRY EDWARD HANNAM Second Defendant

SUMPTER BAUGHEN CHARTERED ACCOUNTANTS LIMITED (Discontinued)

Third Defendant

Hearing: 16 - 26 October 2017

Appearances:

P Dale and A Steel for the Plaintiffs
J Golightly and D Reeves for the Defendants

Judgment:

8 December 2017

JUDGMENT OF GORDON J

This judgment was delivered by me
on 8 December 2017 at 4.30 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date:

Solicitors: Stafford Klaassen, Epsom, Auckland

SULLIVAN v WELLSFORD PROPERTIES LTD [2017] NZHC 3047 [8 December 2017]

Marsden Woods Inskip Smith, Whangarei
McElroys, Auckland

Counsel P J Dale, Auckland

Introduction

[1] On 23 June 2014 the first plaintiff, Peter Sullivan, entered into a conditional agreement for sale and purchase (SPA) to buy a commercial property at 95-97 Rodney Street, Wellsford comprising a service station, a food court and other retail premises (the property) from the first defendant, Wellsford Properties Limited (WPL). The SPA contained a due diligence clause.

[2] The purchaser in the SPA was expressed to be “Peter Sullivan or nominee”. On 11 July 2014 the second plaintiff, Port Albert Investments Limited (PAIL), was incorporated. PAIL was formally nominated as the purchaser by deed on 25 August
2014 and took title to the property on settlement the following day.

[3] Prior to the signing of the SPA, the operator of the service station, Number 8

Caltex,1 raised issues regarding operating expenses (OPEX) for its tenancy. The issues were raised in two emails dated 27 and 30 May 2014 sent by Peter Hardy, the Chief Financial Officer of Number 8 Caltex, to Kerry Foon, an employee of the third defendant, Sumpter Baughen Chartered Accountants Limited. Sumpter Baughen were WPL’s accountants. The second of those emails was copied to the second defendant, Garry Hannam, the sole director and a shareholder of WPL.

[4] Mr Hardy’s emails were not disclosed during the due diligence process. Instead, the emails came to light after settlement when Mr Hardy advised one of the shareholders of PAIL that there was an issue in relation to the OPEX allocated to Number 8 Caltex’s tenancy.

[5] Mr Sullivan and PAIL say that the defendants should have disclosed
Mr Hardy’s emails. They further say that, had the emails been disclosed, PAIL would not have proceeded with the purchase at the agreed price.

1 In this judgment I refer to the operator of the service station at the property during 2014 as Number
8 Caltex. Various name changes are referred to at [22] to [23] below.

[6] PAIL and Number 8 Caltex ultimately reached a settlement as to the amount of OPEX to be paid annually by Number 8 Caltex to PAIL. That sum is less than the sum previously allocated to Number 8 Caltex by WPL. PAIL says that because…

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: [2017] NZHC 3047
Decision Date: 8 December 2017

CaseChat Overview and Summary

This was a commercial property sale dispute. The plaintiffs, Peter Sullivan and Port Albert Investments Limited (PAIL), sought damages for the defendants' alleged failure to disclose emails sent in May 2014 by the operator of the service station (Number 8 Caltex) to the defendant's accountants. The plaintiffs claimed that had the defendants disclosed the emails, they would not have declared the sale agreement unconditional and would not have proceeded with the transaction. The defendants denied any obligation to disclose the emails and denied liability in any event. The court found in favour of the defendants on all claims. The court held that the defendants were not under a contractual obligation to disclose the emails. It also held that the plaintiffs could not establish any misrepresentation, whether by silence or otherwise, or misleading or deceptive conduct.

Orders