The Phone Company Ltd v M2 NZ Ltd
[2016] NZHC 2283
•27 September 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-002903 [2016] NZHC 2283
BETWEEN THE PHONE COMPANY LIMITED
Plaintiff
AND
M2 NZ LIMITED First Defendant
M2 TELECOMMUNICATIONS PTY LIMITED
Second Defendant
Hearing: 5 September 2016 Appearances:
D Grove for the Plaintiff
L L Fraser and R M A Jones for the DefendantsJudgment:
27 September 2016
JUDGMENT OF FITZGERALD J
This judgment was delivered by me on Tuesday, 27 September 2016 at 3.30 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors: Ellis Law, Auckland
Chapman Tripp, Auckland
Counsel: D Grove, Auckland
THE PHONE COMPANY LTD v M2 NZ LTD [2016] NZHC 2283 [27 September 2016]
INTRODUCTION....................................................................................................... [1] FACTUAL BACKGROUND ......................................................................................... [4] Initial relationship between the parties............................................................. [5] Termination Agreement ................................................................................... [10] Dispute concerning Black & White ................................................................. [13] Negotiation of the Variation Agreement .......................................................... [15] Variation Agreement ........................................................................................ [24] Exercise of Option to Discharge ..................................................................... [27] Financial accounts .......................................................................................... [28] TPC’S CLAIM AND M2’S APPLICATION - OVERVIEW .............................................. [31] LEGAL PRINCIPLES ............................................................................................... [35] Strike out ......................................................................................................... [35] Defendant’s summary judgment ...................................................................... [36] ANALYSIS ............................................................................................................. [42] First cause of action........................................................................................ [42] Second, third and fourth causes of action ....................................................... [47] Misrepresentation 9(a) ................................................................................ [48] Paragraph 9(b) misrepresentation – the business is “failing” ..................... [65] Paragraph 9(c) representation ..................................................................... [80] Paragraph 9(d) – M2’s letter dated 30 August 2011.................................... [84] Limitation ........................................................................................................ [96] CONCLUSION ...................................................................................................... [117] RESULT .............................................................................................................. [120] COSTS ................................................................................................................ [123]
Introduction
[1] The parties operate in the telecommunications industry. The essence of the
plaintiff’s (“TPC”) claim is two-fold:
(a) A claim for contractual damages against the defendants (collectively referred to as “M2”) arising from an alleged failure by M2 to pay commission payments said to be due to TPC; and
(b)Damages arising from losses suffered by TPC as a result of alleged misrepresentations made by M2. This aspect of the claim is advanced under both the Contractual Remedies Act 1979 and the Fair Trading Act 1986.
[2] It is fair to say that the claims as presently pleaded are in relatively high level terms. There have already been two rounds of requests for further and better particulars. In respect of significant aspects of its claim, TPC says it can only provide further particulars after discovery.
[3] M2 denies all claims. It applies to strike out the claims, and/or seeks defendant’s summary judgment in relation to them. It says the contractual claim of an alleged failure to pay commissions is barred by a later agreement between the parties, by which TPC gave up all rights to further commission payments. In relation to the misrepresentation claims, M2 says the alleged representations are either demonstrably true or not actionable at law. There is also a limitation defence in respect of the Fair Trading Act claims.
Factual background
[4] The factual background to TPC’s claim is largely undisputed, but given the
issues arising on the current application, is set out in some detail below.
Initial relationship between the parties
[5] M2 is based in Australia, though it is said it has a global reach. In recent years, M2 has merged with an Australian company, Vocus Communications. The
evidence states that this results in M2 being Australia’s fourth largest integrated telecommunications company and New Zealand’s third largest.1 In June 2015, M2 further expanded its reach in New Zealand, by acquiring the CallPlus Group.2
[6] Mr Holmes, the director of TPC, swore an affidavit in support of TPC’s opposition to M2’s application. He deposes that in December 2015, M2 engaged TPC to introduce M2’s telecommunication services to the New Zealand market. This engagement was formalised in a “Heads of Agreement” dated 14 December
2005.
[7] Under these arrangements, TPC introduced M2 to a number of local telecommunication dealers in New Zealand, who in turn were to be responsible for procuring customers of M2’s telecommunication services.
[8] Mr Holmes says that he also facilitated an “MVNO” (which stands for “mobile virtual network operator”) agreement between M2 and Vodafone New Zealand Limited (“Vodafone”). Mr Holmes explains that an MVNO essentially “piggy backs” on an existing mobile phone network (in this case, the Vodafone network) and purchases wholesale air time and resells that air time to its customers. Mr Holmes deposes that the M2/Vodafone MVNO was the first in New Zealand.
[9] It does not appear to be in dispute that, pursuant to the Heads of Agreement, TPC did assist M2 in entering into arrangements with a number of local telecommunications dealers, and that it did help establish a relationship between M2 and Vodafone in relation to mobile services. TPC’s efforts in this regard were reflected in on-going commission arrangements between the parties, to which I now turn.
Termination Agreement
[10] Mr Bowen, for M2, swore an affidavit in support of M2’s application. He
deposes that, by 2006 (i.e. only one year after entry into the Heads of Agreement), M2 had decided to manage its New Zealand supplier and dealer relationships from
1 Affidavit of Vaughan Garfield Bowen sworn 6 July 2016 at [9].
2 Affidavit of Bryan Holmes sworn 25 July 2016 at [43].
Australia, rather than through TPC. The parties accordingly entered into a
“Termination Agreement” on 4 December 2006.
[11] The aspects of the Termination Agreement that are particularly relevant to the current application are as follows:
(a) Pursuant to clause (a), the parties agreed to terminate the earlier agreements between them, effective from the date of the Termination Agreement.
(b) Pursuant to clause (e), the parties agreed that:
TPC is entitled to receive a commission in perpetuity of two percent (2%) of the Net Receipts from all customers contracted to M2, or its related or subsidiary companies, (whether orally or in writing) by the following dealers: (1) Phone and Travel Limited (previously named Rex Distribution Limited), (2) Cytek Communications Ltd (3) Etari Corporation Ltd and (4) The P2P Group Ltd.
(c) Pursuant to clause (f), the parties agreed the following:
TPC is entitled to receive an additional commission in perpetuity equal to one percent (1%) of Net Receipts arising from mobile phone services customers (“end users”) of M2 (or its related or subsidiary companies), including customers of M2 procured by any M2 contractor, dealer or agent in New Zealand when the Vodafone NZ mobile network is used to deliver the mobile services. For the avoidance of doubt, the Net Receipts used to calculate the commission set out in paragraph (e) will not be included in determining the commissions payable in accordance with this paragraph and no commission is payable to TPC in accordance with this paragraph for customers which may be procured via such wholesale arrangements and/or licensing arrangements, as are described below, which M2 may enter into with third parties in New Zealand with respect to mobile services. Wholesale arrangements are distribution models whereby M2 enters into a commercial wholesale arrangement to supply mobile or other services to a party for the purpose of that party on-selling the services to its own customers. Licensing arrangements are licensing models that are materially consistent with Attachment B to this letter of agreement.
(d)Clause (g) provided that the payments to TPC referred to in clauses (e) and (f) included all those from all customers which were contracted either prior to or after the date of the Termination Agreement, and were to be made “indefinitely” for each customer
whilst M2, or its related or subsidiary companies, received “Net
Receipts” in relation to that customer.
(e) Clause (j) required M2 to provide TPC with “prompt written notice” of the expiry or termination of any agreement between a “Dealer” and M2 (a “Dealer” being defined as the specific dealers referred to in clause (e), together with any successors, assignees, transferees or replacements to those dealers).
(f) Clause (l) records M2’s sole on-going obligations to TPC following execution of the Termination Agreement, including the provision of monthly summaries of the commission payments due to TPC under clauses (e) and (f), and the actual payment of those commissions.
(g)Clause (m) gave TPC the right to engage, at TPC’s expense, an independent accountant/auditor to review the accuracy of the commission payments made to TPC in accordance with clauses (e) and (f).
(h) Clause (m) included a definition of “Net Receipts” for the purposes of
clauses (e) and (f) of the Termination Agreement, being:
… all the revenues received directly or indirectly by M2, or its related or subsidiary companies, from customers mentioned in paragraphs (e) and (f) of this document for telecommunications services, exclusive of any applicable taxes, statutory charges, fixed line rental income, any services categorised as a Telecom Smart Phone service and any equipment charges received by M2.
[12] The commissions payable to clauses (e) and (f) of the Termination Agreement effectively mirrored the “work streams” carried out by TPC pursuant to the Heads of Agreement and referred to at paragraph [9] above.
Dispute concerning Black & White
[13] The next relevant event occurred towards the end of 2010, when M2 acquired the assets and business of Black & White Group Limited (“Black & White”), a mobile services provider in New Zealand. The acquisition was announced by M2
through an ASX release dated 3 November 2010. Mr Bowen deposes that TPC had no involvement in that deal (and none is suggested on behalf of TPC).
[14] However, by email to M2 dated 10 February 2011 (by which time it appears that Mr Holmes was aware of the Black & White acquisition), Mr Holmes said that, because (on TPC’s view at least) Black & White was a “related/subsidiary” of M2, TPC was eligible for commissions on revenues generated from mobile sales relating to Black & White. This was said to be on the basis that such revenues fell within clause (f) of the Termination Agreement. Whether or not TPC was entitled to such commissions became a matter of dispute between the parties, a fact of some relevance to M2’s application.
Negotiation of the Variation Agreement
[15] In or around July 2011, the parties commenced discussions about a variation of the Termination Agreement. By the end of July 2011, the parties were negotiating what was effectively a lump sum “buy-out” price payable to TPC in exchange for extinguishing M2’s obligation to pay commissions.
[16] In the evidence is an email dated 27 July 2011 from Mr Holmes to a Mr Johnathan Eele (of M2), in which Mr Holmes set out his proposal for the buy-out price. Mr Holmes recorded that his offer was based on TPC’s previous month’s earnings from M2, projected over a further five years, plus a similar analysis based on one per cent commission on Black & White mobile revenues. Mr Holmes’ email states:
We have estimated this based on ASX announcements relating to combined M2 and Black & White revenues and M2 NZ Limited Companies Office financial statements. I understand this is a contentious issue, but I am of the position it needs to be accounted for in these discussions.
(emphasis added)
[17] The upshot of Mr Holmes’ proposal was a buy-out price of $319,838.00.
[18] Negotiations continued over the ensuing months. By letter dated 30 August
2011, Mr Eele wrote in response to Mr Holmes’ emails of 27 and 28 July 2011.3
Mr Eele set out M2’s response to TPC’s buy-out proposal referred to at paragraph
[16] above. Mr Eele stated that:
We appreciate your willingness to enter into a full and final settlement (“settlement”) in respect of all amounts currently owing, or in future will be owing, to [TPC] set out in the [Termination Agreement].
[19] Given aspects of TPC’s claim are based on the contents of this letter, I set out
the material parts of it in full:
M2 considers that the Requested Sum does not incorporate the material consideration that TPC’s entitlement under the Agreement is wholly determined with reference to end users who acquire a service from M2 which operates over the Vodafone NZ network. As a result, the Requested Sum must be discounted in respect of the following considerations:
(a) M2 NZ Limited’s supply agreement with Vodafone NZ (“Supply Agreement”) is scheduled for expiry in October 2013 and the parties have not determined whether the Supply Agreement will be renewed;
(b) The Supply Agreement contains a variety of grounds upon which either M2 NZ Limited or Vodafone NZ may readily terminate the Supply Agreement prior to expiry, including, but not limited to, where Vodafone NZ changes the terms and conditions of the Supply Agreement. Depending on the ground of termination, the notice period varies from immediate effect to three (3) months.
(c) M2 is presently entitled to procure an alternative network operator as its supplier of mobile services and migrate its end users to that network.
It is apparent that if any of the events set out in paragraphs (a) to (c) above occur (all of which are within the control of M2), the entitlement of TPC to receive any amounts in connection with the Agreement is likely to be diminished, if not ultimately extinguished, well prior to the five (5) year estimate adopted in your Emails.
[20] Returning to the chronology, TPC alleges that, in or around September to October 2011, certain representations were made by Mr Eele to Mr Holmes in the context of the negotiation of the buy-out price. I will return to the alleged representations in more detail below. However, the upshot is that Mr Eele is alleged
to have represented that M2’s business in New Zealand was failing.
3 The 28 July 2011 email is apparently no longer available.
[21] In early October 2011, TPC requested, and M2 granted to TPC, the right to audit M2’s books and records to verify commission payments, in accordance with TPC’s audit right under the Termination Agreement. By letter dated 30 October
2011, M2 advised that the relevant records would be made available to the independent accountant/auditor for inspection at the registered office of M2’s parent company in Melbourne. This venue was suggested given the location of the relevant member of M2’s accounting staff who would be required to assist the independent auditor. Ultimately TPC did not proceed with the audit, considering it too expensive and time consuming.
[22] Meanwhile, the dispute about commissions on Black & White revenues continued. TPC took legal advice on the issue in or around December 2011. McCrimmon Law provided a legal opinion to TPC on 12 December 2011. It appears from the text of the written opinion that this was the second time McCrimmon Law had advised TPC on this issue. TPC waived privilege over that second piece of advice and provided a copy to M2. The opinion recorded that:
M2 is maintaining that the agreement between M2 and [Black & White] fits the licensing model and is therefore TPC is not entitled to commission from the [Black & White] end users.
[23] The McCrimmon Law opinion concluded that commissions on Black & White revenues were payable to TPC under the Termination Agreement. However, the parties did not resolve that dispute prior to entry into the Variation Agreement.
Variation Agreement
[24] The parties entered into the Variation Agreement on 23 April 2012. As its name suggests, the Variation Agreement did not terminate the Termination Agreement, but merely varied it (albeit in some substantive ways).
[25] The essence of the Variation Agreement was to provide both parties with an “Option to Discharge”, able to be exercised on seven business days’ notice. The exercise of the Option to Discharge triggered an obligation on M2 to pay a sum of money to TPC, referred to as the “Discharge Lump Sum” (i.e. the buy-out price the parties had been negotiating). A further consequence of the Option to Discharge
being exercised was that M2’s commission obligations under clauses (e) and (f) of
the Termination Agreement ceased.
[26] The above arrangements were implemented by inserting a new clause (ma) into the Termination Agreement. Relevant aspects of the new clause (recorded in clause 2.2 of the Variation Agreement) are as follows:
(iii) On and from the effective date of the exercise of the Option to Discharge, the following paragraphs of this letter agreement (and to avoid doubt, the rights and obligations contained therein) cease to apply:
(A) paragraph (e) (except to the extent required to provide context to paragraph (b);
(B) paragraphs (f) to (k);
(C) subparagraphs (l)(i) and (ii); and
(D) paragraph (m) (including the definition of Net Receipts).
(iv) To avoid doubt, following the exercise of the Option to Discharge and upon receipt of the Discharge Lump Sum, M2’s obligation to make payment of commission to TPC on the terms of the letter agreement is forever discharged and without a right of reinstatement.
Exercise of Option to Discharge
[27] On 2 July 2012, being one day after the option became exerciseable, TPC exercised the Option to Discharge. There is no dispute that it was properly exercised and that M2 has paid the Discharge Lump Sum (of $228,000) to TPC.
Financial accounts
[28] Exhibited to Mr Bowen’s affidavit are three sets of financial accounts for M2 in New Zealand, for each of the financial years ending (“FYE”) 30 June 2010, 2011 and 2012. M2 places significant reliance on these accounts. M2 says that this material demonstrates that the representations alleged to have been made by M2 to TPC in the lead up to the Variation Agreement were demonstrably true.
[29] I have summarised below the essential elements of the financial accounts on which M2 relies. M2 primarily relies on the change in revenue position between FYE 2010 and 2011, and the consequent “bottom line” income or loss, as the case may be. I have also included the same data in respect of FYE 2012, on which TPC
relies.
2010 2011
2012
Revenue
$4.41m
$3.56m
$4.90m
Profit/Loss before income tax expense
$681K
($358K)
($678K)
Income tax expense
($196K)
$119K
($86K)
Net income/loss for the year
$485K
($240K)
($764K)
[30] As will be apparent from the above, there was a decrease in revenue as between FYE 2010 and 2011. For FYE 2012, revenues were up by some $1.3 million. However, the net loss for that year end had increased further, to $764,174. At least a part of this reflected the payment of the Discharge Lump Sum to TPC. Mr Grove, counsel for TPC, also submitted that there were significant one off expenses for FYE 2012, and in particular increased professional fees of $871,202 (as compared to $550,460 for FYE 2011).
TPC’s claim and M2’s application - overview
[31] These proceeding were commenced by TPC in December 2015. [32] TPC pleads four causes of actions:
(a) The first is entitled “Failing to account”. It appears to be a straightforward breach of contract claim, namely that in breach of the Termination Agreement, M2 has failed to account to TPC correctly for commissions.
(b)The second cause of action is similar to the first cause of action, but is advanced under the Fair Trading Act. TPC alleges that M2
represented that the commissions payable to TPC pursuant to the Termination Agreement were as actually reported and paid by M2 to TPC. The allegation appears to be that this representation was misleading, because more commissions were in fact due and payable under the Termination Agreement.
(c) The third cause of action is entitled “Misrepresentations made leading to the execution of the Variation Agreement”. Although not expressly stated, it appears to be a claim pursuant to s 6 of the Contractual Remedies Act. The essence of the cause of action is that, in reliance on certain misrepresentations by M2 to TPC, TPC entered into the Variation Agreement, exercised the Option to Discharge and thereby suffered loss (being the difference between the commissions actually paid by M2 to TPC, and the commissions that TPC says were properly due and payable under the Termination Agreement).
(d)The fourth cause of action is a mirror of the third cause of action, but is advanced under the Fair Trading Act.
[33] In terms of M2’s application:
(a) M2 seeks to strike out the first cause of action, or have summary judgment entered in its favour, on the basis that the cause of action is not reasonably arguable. This is on the basis that M2’s commission obligations under the Termination Agreement were extinguished by
the Variation Agreement.4
(b)M2 submits that the second and fourth causes of actions have no prospects of success, because:
(i) They are time-barred by s 43A of the Fair Trading Act, as
TPC’s loss from M2’s alleged conduct ought reasonably to
have been discovered by TPC prior to 1 December 2012;
4 There is also a subsidiary point that, to the extent the first cause of action concerns acts before
(ii)The representations allegedly relied on by TPC prior to entry into the Variation Agreement were demonstrably true at the time they were made; and
(iii)To the extent TPC alleges that it was misled by M2 about commissions arising from Black & White revenues, TPC was not capable of being misled, given at all relevant times, TPC knew of M2’s relationship with Black & White and knew that it was not receiving commissions arising from that arrangement.
(c) M2 submits that TPC’s third cause of action has no prospects of success because:
(i)It is also time-barred (though there would obviously be a longer limitation period than under the Fair Trading Act); and
(ii)It is unsustainable, again on the basis that the representations alleged to have been made were demonstrably true when made and/or to the extent the representations relate to Black & White, TPC was aware of all relevant matters regarding Black & White prior to entry into the Variation Agreement.
[34] The limitation point in relation to the third cause of action was not addressed by M2 in either its written or oral submissions. I accordingly do not address it further.
Legal principles
Strike out
[35] The legal principles applying to an application for strike out were not in dispute:5
(a) Pleaded facts, whether or not admitted, are assumed to be true. This does not extend to pleaded allegations which are entirely speculative and without foundation;
(b) The cause of action must be clearly untenable;
(c) The jurisdiction is to be exercised sparingly, and only in clear cases; (d) The jurisdiction is not excluded by the need to decide difficult
questions of law, requiring extensive argument; and
(e) The Court should be particularly slow to strike out a claim in any developing area of the law.
Defendant’s summary judgment
[36] Rule 12.2 provides that the Court may grant summary judgment against a plaintiff “if the defendant satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed”.
[37] Ms Fraser accordingly accepted that, in order to enter summary judgment in
M2’s favour, I would need to find that none of TPC’s causes of action can succeed.
[38] Granting summary judgment to a defendant is, like striking out a claim, a power to be exercised with some caution.
[39] In Westpac Banking Corp v M M Kembla NZ the Court of Appeal stated:6
[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff's claim. That would permit a defendant, perhaps more in possession of the facts than the plaintiff (as is not uncommon where a plaintiff is the victim of deceit), to force on the plaintiff's case prematurely before completion of discovery or other interlocutory steps and before the plaintiff's evidence can reasonably be assembled.
[64] The defendant bears the onus of satisfying the Court that none of the claims can succeed. It is not necessary for the plaintiff to put up evidence at all although, if the defendant supplies evidence which would satisfy the Court that the claim cannot succeed, a plaintiff will usually have to respond with credible evidence of its own. Even then it is perhaps unhelpful to describe the effect as one where an onus is transferred. At the end of the day, the Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment made by the Court on interlocutory application is not one to be arrived at on a fine balance of the available evidence, such as is appropriate at trial.
[40] These comments were approved by the Privy Council on appeal from a New Zealand Court of Appeal decision in Jones v Attorney-General.7 The Privy Council said:8
… But rarely if ever will the procedure be appropriate where the outcome of the action may depend on disputed issues of fact, and reliance on the rule in an inappropriate case may serve to increase both the length and the cost of proceedings.
…
… summary judgment should not be given for the defendant unless he shows on the balance of probabilities that none of the plaintiff's claims can succeed. That is an exacting test, and rightly so since it is a serious thing to stop a plaintiff bringing his claim to trial unless it is quite clearly hopeless.
[41] More recently, the Court of Appeal in Luxottica Retail New Zealand Ltd v Specsavers New Zealand Ltd has suggested that summary judgment will be unusual where breaches of the Fair Trading Act are alleged:9
… Although the threshold issue of whether the material in question is capable of breaching the Fair Trading Act is a question of law for the Judge, it will often be difficult to divorce that question from the issue of whether there has been a breach in fact in all the circumstances. It would be relatively unusual to find that a plaintiff’s claims cannot succeed where issues of judgment are involved and where the evidence is incomplete and has not been tested at trial. …
7 Jones v Attorney-General [2003] UKPC 48, [2004] 1 NZLR 433.
8 At [5] and [10].
9 Luxottica Retail New Zealand Ltd v Specsavers New Zealand Ltd [2012] NZCA 357 at [51].
Analysis
First cause of action
[42] Ms Fraser submits that on its face, the first cause of action cannot succeed given the clear terms of the Variation Agreement including, most relevantly, the extinguishing of M2’s obligations to pay commissions to TPC.
[43] I observe that there may be an argument that the Variation Agreement operated to extinguish M2’s commission obligations from the exercise of the Option to Discharge only. In other words, it did not have the effect of extinguishing obligations that had crystallised to that point in time. That is on the basis that the new clause (ma) of the Termination Agreement records that clauses (e) and (f) of the Termination Agreement cease to apply “on and from the effective date” of the exercise of the option. Sub-paragraph (iv) potentially has wider effect, though it is expressed to be “for the avoidance of doubt”. In the negotiation of the Variation Agreement, correspondence from M2 at least envisaged a “full and final settlement
in respect of all amounts currently owing, or in the future will be owing”.10
[44] All of these matters, and the factual matrix which existed at the time the
Variation Agreement was entered into, would need to be considered at trial.
[45] However, and irrespective of the proper interpretation of the Variation Agreement on this point, the first cause of action could be re-pleaded to make it clear that it is predicated or conditional upon TPC successfully setting aside or varying the Variation Agreement (or relevant parts of it) under the Fair Trading Act. Ms Fraser for M2 accepted that, conceptually at least, if the Variation Agreement were set aside pursuant to the relief provisions in the Fair Trading Act, the Termination Agreement commission obligations would “revive”. In this context, Ms Fraser acknowledged, properly in my view, that if TPC were successful on the fourth cause of action, one consequence could be that TPC would be entitled to a contractual measure of damages for any commissions that ought to have been paid under the Termination Agreement, but were not.
[46] I therefore decline to strike out this cause of action or to enter summary
judgment in M2’s favour.
Second, third and fourth causes of action
[47] These are all representation claims. Each cause of action is based on the representations pleaded at paragraph 9 of the amended statement of claim, and the pleading at paragraph 12 that those representations were false.
Misrepresentation 9(a)
[48] At paragraph 9(a) of the amended statement of claim, TPC pleads that M2 represented to TPC that:
The commissions payable to the plaintiff pursuant to the Termination
Agreement were those reported and paid by the defendants to the plaintiff.
[49] The representation is said to have been made by way of conduct, through provision of the monthly reports provided by M2 to TPC, together with the actual payment of commissions by M2 to TPC.
[50] M2 submits that the pleaded representation was not capable of misleading TPC, as even if there was a failure to pay commissions due under the Termination Agreement, TPC was aware at all relevant times that M2 was not paying those commissions. It submits that the pleaded allegations are in substance limited to commissions arising from Black & White dealerships, and that TPC had actual knowledge (prior to entry into the Variation Agreement) that it was not receiving Black & White commissions.
[51] In support of this submission, Ms Fraser refers to Smith v Chadwick for the proposition that a party is not capable of being misled or induced into action by representations or conduct that the party knows to be false.11
[52] More recently, the learned authors of Law of Contract in New Zealand, citing
Smith v Chadwick, state:12
Knowledge of the untruth of a representation is a complete bar to relief, since the plaintiff cannot assert that he or she has been misled by the statement, even if the misstatement was made fraudulently. … If knowledge of the truth is obtained at any time before the contract is made, the representee cannot rely on the statement as a misrepresentation.
[53] Accordingly, I accept M2’s submission that, to the extent TPC knew that representation pleaded at paragraph 9(a) of the amended statement of claim was untrue, the misrepresentation is not actionable pursuant to either the Fair Trading Act or the Contractual Remedies Act.
[54] As noted, M2 submits that the only pleaded basis for inaccuracy in M2’s commission payments is M2’s alleged failure to pay commissions on Black & White revenues.
[55] The pleaded inaccuracies in the commission payments by TPC are broadly as follows:
(a) At paragraph 12(a) of the amended statement of claim:
(i)an alleged failure to notify in respect of the “appointment of dealerships”;
(ii)the “failure to notify [M2] of the appointment of Black & White”;
(iii)M2’s alleged failure to pay commissions on mobile sales relating to the 15 telephone-based representatives trading as Black & White;
(b) At paragraph 12(c) of the amended statement of claim:
12 John Burrows, Jeremy Finn, Stephen Todd Law of Contract in New Zealand (5th, LexisNexis, Wellington, 2016) at [11.2.4(c)], citing Buxton v Birches Timeshare Resort Ltd [1991] 2 NZLR
641 (CA) at 647 and Closurepac NZ Ltd v WS 2014 Ltd [2015] NZHC 1587 at [108] – [120].
(i)alleged new connections and increased landline/broadband connections per month; and
(ii) between 12 and 15 new dealerships in New Zealand prior to
April 2012; and
(c) At paragraph 12(d) of the amended statement of claim, namely the setting up of a national dealership network throughout New Zealand.
[56] In a response to M2’s request for further and better particulars, TPC states that, prior to discovery, it cannot provide further particulars of any non-Black & White dealerships, except to say, “Darren Laing advised that in conjunction with Troy Elliott they put on about 15 dealerships between July 2011 and July 2012.”
[57] In the same response, TPC says that Mr Holmes had spoken to two dealers in
Wellington, Bruce Armstrong and Darren Laing as well as the Black & White M2
New Zealand Sales Director, Troy Elliott, who told Mr Holmes that connections had dramatically increased, and that one dealer had started in July 2011.
[58] Mr Holmes give evidence, and annexes to his affidavit what are said to be recordings, of a discussion between himself and Mr Laing (who advised he was the Southern Master licensee/dealership holder for M2) to the effect that:
(a) Mr Laing had brought in 15 dealerships throughout New Zealand prior to July 2012; and
(b)up to April 2012, M2 had shown significant growth in sales, of between 1000 to 1800 customers per month and between 500 and 600 landline/broadband connections per month.
[59] In support of M2’s submission that, all of the above matters relate only to
Black & White, Ms Fraser points to the following:
(a) The language used by TPC in its response to the request for further and better particulars is the same or very similar to that pleaded at paragraphs 12(c) and 12(d) of the amended statement of claim;
(b)That Mr Bowen for M2 confirms (at paragraph 24 of his affidavit) that the matters referred to at paragraphs 12(c) and (d) of the amended statement of claim all arise from the Black & White arrangements; and
(c) That Mr Holmes (at paragraphs 50 to 52 of his affidavit) does not contradict Mr Bowen’s evidence.
[60] On this basis, Ms Fraser submits that “all roads lead to Black & White”.
[61] I note Mr Bowen’s evidence referred to above. However, it does not expressly state that there were no dealerships appointed other than Black & White dealerships. For example, in respect of the alleged “national dealership”, Mr Bowen confirms that Mr Laing and Mr Elliot worked with M2 in respect of Black & White’s obligations after M2’s acquisition of the assets of the Black & White Group. But this does not, directly at least, address what the alleged “national dealership” was made up of. It is correct that Mr Holmes has not contradicted Mr Bowen’s evidence, but I am conscious that M2 is in possession of all of the relevant facts and documents. This is a factor which has led the courts to exercise caution on strike out and summary judgment applications prior to discovery.
[62] Accordingly, while it does appear that TPC’s allegations concerning new dealerships and increased/new connections may relate to Black & White only, these are deeply factual matters that I cannot resolve on this application.
[63] However, to the extent the alleged misrepresentation relates to a failure to pay commissions said to be due on Black & White revenues, I am satisfied that any such misrepresentation would not be actionable pursuant to either the Fair Trading Act or the Contractual Remedies Act. This is because TPC knew, prior to entry into the Variation Agreement, that M2 had entered into an arrangement with Black & White
and, importantly, that M2 was not paying TPC commissions in relation to that arrangement.
[64] I am therefore prepared to strike out the pleading at paragraphs 9(a) and 12, and the prayer for relief at A and B, to the extent they allege that TPC was misled, and as a result suffered loss, from the non-payment of commissions on Black & White revenues. A misrepresentation claim based on these matters discloses no reasonably arguable cause of action.
Paragraph 9(b) misrepresentation – the business is “fail ing”
[65] There are four elements to this alleged representation: (a) That M2’s business in New Zealand was failing; (b) There was not enough margin in the model;
(c) That the growth prospects were limited; and
(d)The downward growth trend that had been experienced would continue to the point where it was likely to be totally extinguished.
[66] The representation is said to have been made by Mr Eele to Mr Holmes in a telephone call sometime between 13 September 2011 and 13 October 2011.
[67] There is no affidavit evidence from Mr Eele. Mr Bowen gives (hearsay) evidence that Mr Eele has advised him (i.e. Mr Bowen) that he does not recall the alleged representation.
[68] In his affidavit, Mr Holmes maintains that the statements were made to him. He says further that:
Right up until settlement however Mr Eele had been telling me that the revenues were reducing and I now know that the revenues at that time were actually increasing.
[69] There is therefore a factual foundation for the representation having been made. I proceed on the basis that the representation was made in the terms pleaded.
[70] Ms Fraser in her written submissions submits that each of the four aspects of the representation referred to above is either demonstrably true, or not actionable in any event.
[71] Taking the second point first, Ms Fraser submits that the various aspects of the representation recorded above are “plainly opinions and/or predictions of future events”. I do not agree. For example, the alleged representation at paragraph [65](a) above (that M2’s New Zealand business was failing) is, in my view, a statement of a present or past fact. I agree that the further statements are more akin to opinions or predictions of future events. However, it is uncontroversial that such statements carry with them an implicit representation that the representor is in possession of
sufficient facts at the time the representations are made to justify his or her opinion.13
[72] In addition, and as the learned authors of Laws of Contract in New Zealand
observe:14
Moreover, if the speaker was in a better position to know the facts than the person addressed so the latter relies on the statement, the courts are willing to find that the statement is a representation rather than a statement of opinion. In such a case, the speaker is taken to imply that there are facts which justify the opinion.
[73] M2 was obviously better placed than TPC in having knowledge of M2’s financial performance in the lead up to the Variation Agreement. I accept that TPC had an audit right that it could have exercised. But on the basis of authorities such as Redgrave v Hurd,15 and Nocton v Lord Ashburton,16 (as summarised in Laws of
Contract in New Zealand),17 liability for a misrepresentation cannot be escaped by
pointing to the fact that the representee had the means of verifying the representation.
13 Smith v Land and House Property Corporation (1884) 28 ChD 7 (CA) at 15.
14 Law of Contract in New Zealand, above n 12, at [11.2.1(b)].
15 Redgrave v Hurd (1881) 20 Ch D 1.
16 Nocton v Lord Ashburton [1914] AC 932 (HL) at 962.
17 Law of Contract in New Zealand, above n 12, at [11.2.4(c)].
[74] Mr Bowen also deposes that, when negotiating the Variation Agreement, TPC had access to M2’s publically available financial records. However, Mr Bowen also confirms that the FYE 2011 accounts were publically available from 7 August 2012, and the FYE 2012 accounts were publically available from 6 May 2013. The availability of each set of accounts accordingly post-dates the alleged representations being made (and indeed post-dates the Variation Agreement itself).
[75] M2 further submits that there was a sufficient factual foundation for the statements of opinion and/or predictions as to the future made by Mr Eele:
(a) M2’s revenue had dropped sharply in the 12 months to the end of June
2011; and
(b)M2’s profitability in New Zealand had fallen sharply from FYE 2010 to FYE 2011, and again from FYE 2011 to FYE 2012. M2 acknowledges that, although gross revenue had increased by FYE
2012, M2 nevertheless made a loss (i.e. failed to achieve any profit margin on its revenue).
[76] I am not satisfied that either of the above matters demonstrates, for the purposes of a strike out application or a defendant’s summary judgment, that the representations were demonstrably true. While there was certainly a sharp drop in revenue in the 12 months to FYE 2011, that does not necessarily translate in my view to a business “failing”. Moreover, from the financial records for FYE 2012, there had been an uptick in revenue, although a greater loss incurred by the end of that financial year. Whether these facts support a statement that a business is “failing” will require close consideration.
[77] Nor does the financial information necessarily confirm that growth prospects were limited, which would depend on a range of factual matters in existence at the time the alleged representation was made. This could include matters such as any new contracts/dealerships in the pipeline, contracts for revenue streams that been signed up but revenues not yet generated and so on.
[78] As will be appreciated, all of these matters are intensely factual and cannot be determined on the current application.
[79] Accordingly, I am not satisfied that the alleged representation is either demonstrably true or not actionable at law, to the standard necessary for a strike out application or to grant summary judgment.
Paragraph 9(c) representation
[80] At paragraph 9(c) of the amended statement of claim, TPC pleads that Mr Eele represented that M2’s revenues for the last 12 months had reduced significantly. The representation is alleged to have been made between
13 September 2011 and 13 October 2011. The prior 12 months would therefore cover around September 2010 to September 2011.
[81] TPC alleges that this representation was false given:
(a) there had actually been increasing revenue over this period (as evidenced by the FYE 2012 financial accounts);
(b)during the period leading up to April 2012, there had been significant growth in sales; and
(c) during the same period, M2 had appointed between 12 and 15 new dealerships throughout New Zealand.
[82] The financial accounts do show an increase in revenues to FYE 2012. Some of this revenue growth may have been during the period June 2011 to October 2011 (i.e. from the beginning of FYE 2012 to the time at which the representation is alleged to have been made). Ms Fraser submitted that the increase only came about as a result of Black & White revenues. However, in his affidavit Mr Bowen does not expressly address the “make up” of the increase in revenue over the FYE 2012.
[83] Again, these matters are factual in nature and on the evidence currently available, I am not prepared to strike out this aspect of the pleading or enter summary judgment in M2’s favour.
Paragraph 9(d) – M2 ’s le tt er dated 30 Au gust 20 11
[84] TPC pleads that, by way of its letter dated 30 August 2011, M2 represented that if one of three scenarios referenced in that letter occurred, TPC’s right to receive commissions was likely to be diminished, if not ultimately extinguished.
[85] The three scenarios referred to in the 30 August 2011 letter were, in summary:
(a) That M2’s agreement with Vodafone would expire in October 2013 and the parties had not determined whether it would be renewed;
(b)The Vodafone supply agreement contained a variety of grounds upon which either M2 or Vodafone might readily terminate the agreement prior to expiry; and
(c) M2 was (then) presently entitled to procure an alternative network operator as its supplier of mobile services and migrate its end-users to that network.
[86] Mr Grove confirmed at the hearing that the focus of this aspect of the claim is
Mr Eele’s conclusion in the 30 August 2011 letter, namely:
It is apparent that if any of the events set out in paragraphs (a) to (c) above occur (all of which are within the control of M2), the entitlement of TPC to receive any amounts in connection with the Termination Agreement is likely to be diminished if not ultimately extinguished, well prior to the five (5) year estimate in your emails.
[87] M2 submits that each of the three scenarios referred to in the letter were an accurate representation of the terms of the Vodafone supply agreement, such that the conclusion is also accurate.
[88] I accept that the three scenarios referred to in the letter accurately reflect the terms of the Vodafone agreement.
[89] There is one factual element to the scenarios referred to in the letter, namely that at the time of the letter, M2 and Vodafone had not determined whether the supply agreement would be renewed. Mr Bowen’s evidence is that, at the date of the letter, no decision had been made on renewal. Obviously TPC is not in a position to challenge that evidence, prior to discovery. However, there is no pleading by TPC that this particular aspect of the letter is false in any event. In fact, the pleading at paragraph 12 of the amended statement of claim (as to why the alleged representations are said to be false) does not touch on this aspect of the claim.
[90] In relation to the conclusion set out in the 30 August 2011 letter, M2 submits that that conclusion was also true. I accept that submission. The “gist” of the representation was that, depending on whether any one or more of the scenarios outlined in the letter came into effect, the commission entitlements under the Termination Agreement were likely to diminish or even be extinguished. The commissions due to TPC pursuant to clause (f) of the Termination Agreement only flowed from mobile phone service customers. There is an interpretation issue as to whether this clause is limited to when such services were provided over the Vodafone mobile network, or possibly extends to services provided over another mobile network. Mr Holmes rejects Mr Bowen’s suggestion that the commission
payments were tied to Vodafone.18 He acknowledges however, that he is not aware of
M2 using any other mobile phone services substantially apart from Vodafone and that accordingly, the mobile services income received by M2 came from Vodafone.19
Accordingly, those commissions were plainly at risk of diminishing or being
extinguished all together if M2’s relationship with Vodafone came to an end.
[91] In relation to commissions said to be due pursuant to clause (e) of the
Termination Agreement, all of the named dealers in that clause sold M2’s mobile
telecommunication services over the Vodafone network.
18 Affidavit of Vaughan Garfield Bowen dated 6 July 2016 at paras 34 and 44; Affidavit of Bryan
Holmes dated 25 July 2016 at paras 43 and 69.
19 Affidavit of Bryan Holmes dated 25 July 2016 at para 44.
[92] While it is possible that those dealers might in the future have sold services other than on the Vodafone network, TPC’s own case is that all of those named dealerships had in fact been terminated prior to the exercise of the Option to Discharge. This is evidenced by TPC’s response to M2’s request for further and better particulars of paragraph 12(a) of the amended statement of claim.
[93] TPC does not plead when it says those dealerships were terminated, but it pleads that there was a “failure [by ANZ] to notify” of their termination. M2’s notification obligations ceased as of the exercise of the Option to Discharge. I therefore accept M2’s submission that on TPC’s own case, the dealerships must have terminated prior to TPC exercising the Option to Discharge.
[94] Standing back, I do not consider that the contents of the 30 August 2011 letter give rise to an actionable misrepresentation. The statements are either demonstrably true and/or merely point out incontrovertible consequences that could flow from various scenarios coming into play. Moreover, TPC does not plead any basis upon which the representation is said to be untrue in any event.
[95] Accordingly, I am satisfied that this particular aspect of the pleading demonstrates no reasonably arguable case. I am therefore prepared to strike out paragraph 9(d) of the amended statement of claim.
Limitation
[96] M2 also raises a limitation defence in relation to the second and fourth causes of action. This is based on s 43A of the Fair Trading Act, which provides as follows:
43A Application for order under section 43
A person may apply to a court or a Disputes Tribunal for an order under section 43 at any time within 3 years after the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered.
[97] M2 submits that TPC had actual knowledge of the loss or damage, or the likelihood of loss or damage, or at the very least ought to have reasonably discovered
those matters, prior to 1 December 2012. As TPC’s proceedings were filed on 1
December 2015, the Fair Trading Act claims are time-barred.
[98] In her written submissions, Ms Fraser properly acknowledges that in order to succeed on this aspect of its strike out application or to grant summary judgment, I must be “quite satisfied” that TPC had actual knowledge of or ought to have discovered the loss or damages, or the likelihood of loss or damage.20
[99] The leading decision on the limitation period under the Fair Trading Act is the Supreme Court’s judgment in Commerce Commission v Carter Holt Harvey Ltd.21 In its decision, the majority observed that:
… if there is any doubt about whether the applicant was actually aware of the loss or damage, the inquiry then moves to whether the applicant ought reasonably to have been aware of it. The Court will then have to consider whether a reasonable person, situated as the applicant was, ought to have known that loss had occurred. …
[100] I queried with Ms Fraser what “loss” M2 says TPC actually knew about, or ought to have discovered, before 1 December 2012. Ms Fraser confirmed that the loss is M2’s alleged failure to pay commissions that were otherwise due and payable to TPC under the Termination Agreement.
[101] Ms Fraser also submits that the loss that is actually known, or which ought reasonably to have been discovered, does not need to be the “exact” loss that is then claimed in subsequent proceedings. Rather, it needs only be something more than minimal loss or damage.
[102] I accept that submission. This point was made clear by the majority in
Commerce Commission v Carter Holt Harvey Ltd.22 The Court stated:23
There is one further point which needs to be addressed in relation to the construction of s 43(5). It has already been foreshadowed and relates to the use of the definite article in the phrase “the loss or damage”. We do not consider this usage requires the applicant to have become aware of the actual
20 Referring to Trustees Executors Ltd v Trustees Executors Ltd [2012] NZHC 650 at [35].
21 Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379 at [29]
per Tipping J for the majority.
22 Commerce Commission v Carter Holt Harvey Ltd, above n 21.
23 At [32] - [34].
loss or damage as ultimately established. That would not be consistent with general limitation practice and that degree of specificity cannot have been intended. The question becomes what degree of specificity is signalled by the expression “the loss or damage” in its context.
… The general approach taken to limitation issues suggests that when reasonable discoverability is a feature of the regime, the plaintiff should be aware not only of the facts or circumstances constituting the wrong, but also of the fact that some more than minimal loss or harm has resulted from the commission of the wrong. …
… In the result the expression should be held to mean some more than minimal loss or damage, without the need for any greater specificity as to the nature or amount of that loss or damage. … If an intending applicant knows that some more than minimal loss or damage is likely to have resulted from a probable contravention, it is by no means unreasonable to require them to make all necessary further enquiries and file their application within three years of acquiring that knowledge.
[103] M2 submits that TPC had actual knowledge of the loss or damage it now claims, given that prior to entering into the Variation Agreement and exercising the Option to Discharge, it had actual knowledge that it was not being paid commissions on Black & White revenues. As noted at paragraph [16] above, it is clear that TPC had knowledge of that fact from at least July 2011, when Mr Holmes observed that the Black & White matter was “contentious”.
[104] While, absent discovery (or the exercise of its audit right), TPC did not have actual knowledge of the quantum of commissions it says are due pursuant to the Black & White arrangement, I am satisfied that it had knowledge that there was more than minimal loss or damage. The very fact that the issue was pursued with some vigour by TPC prior to the Variation Agreement is evidence that it considered there was (financial) merit in pursing the point. The evidence also demonstrates that TPC had obtained two formal legal opinions on the issue. In addition, in his email of
27 July 2011 to Mr Eele, Mr Holmes’ proposed buy-out price included the sum of
$100,000 for commissions in relation to Black & White mobile revenues. While that was obviously an estimate, it was stated to reflect Mr Holmes’ then knowledge of the nature and extent of the Black & White arrangement, as gleaned by him from ASX announcements relating to the combined M2 and Black & White revenues and M2’s financial statements for its New Zealand operations. The sum of $100,000 was almost one-third of the total buy-out price being suggested by Mr Holmes. I am
therefore satisfied that TPC had actual knowledge of more than minimal loss or damage from the alleged non-payment of Black & White commissions.
[105] Ms Fraser submits that this provides a complete answer to the second cause of action. I accept that it provides a complete answer to the second cause of action, insofar as it pleads a misrepresentation and consequent loss arising out of a failure to pay commissions from Black & White revenues.
[106] This is also the case in respect of the fourth cause of action, to the extent it relies on an alleged misrepresentation in respect of Black & White commissions (i.e. through the representation pleaded at paragraph 9(a) of the amended statement of claim). For the purposes of the fourth cause of action, TPC knew as early as July
2011 that it was, on its case, suffering loss through non-payment of commissions, at least to the extent the representation relates to Black & White commissions.
[107] In terms of the remaining aspects of the second and fourth causes of action, there is no suggestion by M2 of actual knowledge. Rather, M2’s application relies on:
(a) the fact that M2’s accounts in New Zealand have been available for
longer than three years; and
(b) TPC’s audit right.
[108] In her written and oral submissions, Ms Fraser addressed the audit right only. But even in respect of the financial accounts being available, the FYE 2011 accounts were only publically available as of 7 August 2012, and the FYE 2012 accounts as of
6 May 2013. Given it is the FYE 2012 accounts that show the uptick in revenues, it is those accounts that might have raised a concern in TPC’s mind about the accuracy of the alleged representations in the lead up to the Variation Agreement. But those accounts were not available until 6 May 2013. So even if the mere fact of their publication was sufficient to “start the clock ticking” for the purposes of s 43A, TPC’s proceedings were commenced within three years of that date.
[109] I am not persuaded that, even if the accounts had been available at an earlier point in time, their mere publication would amount to constructive knowledge for the purposes of s 43A. Ms Fraser did not refer to any authorities in support of such a proposition, nor does it seem to me that, absent anything else, TPC ought reasonably to have been awaiting those accounts and studying them closely the moment they were published. Absent any other facts that might have put it onto a train of inquiry, once it had exercised the Option to Discharge and been paid by M2, TPC had no particular reason to be making inquiries at that stage.
[110] That leaves the fact that, prior to entry into the Variation Agreement, TPC had a contractual right to audit M2’s accounts to verify the commission amounts then being paid to it. Does this right mean “TPC ought reasonably to have discovered” the loss (or likelihood of loss) it now seeks to recover?
[111] As the Supreme Court observed in Commerce Commission v Carter Holt Harvey, the test is whether a reasonable person, situated as the applicant was, ought to have known that loss had occurred.
[112] Three preliminary points arise:
(a) TPC’s audit right ceased as of the exercise of the Option to Discharge. (b) Accordingly, to the extent the existence of the right is relevant to
s 43A, I must be satisfied, because TPC had this right prior to its exercise of the Option to Discharge, it ought reasonably to have discovered the loss at that time.
(c) As a result, and in light of the guidance given by the Supreme Court in Commerce Commission v Carter Holt Harvey, I would need to be satisfied that, prior to the exercise of the Option to Discharge, a reasonable person in TPC’s position, and in possession of the audit right, ought to have discovered that the loss it now claims had occurred (or was likely to occur).
[113] I do not consider that the fact that TPC had an audit right but chose not to exercise it is sufficient to commence the limitation period running. It is correct that, in addition to having the audit right, TPC had actual knowledge that it was not being paid Black & White commissions. But no other facts or circumstances have been advanced to suggest that a reasonable person in TPC’s position, prior to entry into the Variation Agreement, ought to have exercised the audit right (and would thereby have discovered any other alleged outstanding commissions).
[114] This issue can be looked at by considering whether it was unreasonable for
TPC not to have exercised the audit right at that time.
[115] Just because a right exists does not mean it is unreasonable not to exercise it. It is true that TPC was in the process of negotiating a “buy out” price to bring M2’s commission obligations to an end. TPC was basing its negotiation of the buy-out price on its view of commissions paid to it to that point, rolled out over a further five years. It could be said that there is a heightened need in such circumstances to ensure the commission payments were correct. But equally, there is no evidence to suggest that TPC ought to have doubted the accuracy of M2’s accounting to that point in time (other than, of course, in relation to the Black & White commissions which was then in dispute).
[116] I am therefore not satisfied that strike out (or summary judgment) is appropriate on the basis of the limitation defence.
Conclusion
[117] Despite Ms Fraser’s thorough and careful submissions, I am not prepared to grant summary judgment to M2 in respect of all of TPC’s causes of action, or to strike out the pleading in its entirety. However, there are aspects of the pleading that fail to disclose a reasonably arguable case for the purposes of r 15.1(1)(a), being those which relate to an alleged failure to pay Black & White commissions.
[118] While other aspects of TPC’s claim are somewhat opaque and the pleading requires some attention, that is not a basis to strike it out or to grant M2 summary judgment.
[119] The outcome of this application will nevertheless, I hope, enable the parties to focus on the remaining matters in dispute and for the proceedings to be dealt with in a more efficient and economical way (for example, by narrowing the scope of discovery).
Result
[120] Accordingly, I order that:
(a) The second cause of action is struck out, to the extent it pleads an alleged misrepresentation in respect of Black & White commissions;
(b)The prayer for relief to the second cause of action is struck out, to the extent it seeks recovery of Black & White commissions (or damages in respect of Black & White commissions);
(c) Paragraphs 9(a) and 12 of the amended statement of claim are struck out, to the extent they allege a misrepresentation in respect of Black & White commissions;
(d) Paragraph 9(d) is struck out;
(e) The prayers for relief to the third and fourth causes of action are struck out, to the extent they seek recovery of Black & White commissions (or damages in respect of Black & White commissions).
[121] TPC is to file an amended statement of claim within 15 working days of the date of this judgment to reflect the above orders. M2 is to file its defence to the amended statement of claim within a further 10 working days.
[122] The Registrar is to allocate a case management conference as soon as time is available after the filing of the statement of defence, at which directions will be given for any further interlocutory steps (including discovery) and consideration will be given to allocating a trial date. The time periods set out in r 7.3(4) apply to the joint memorandum or separate memoranda, as the case may be.
Costs
[123] The parties are encouraged to agree costs. M2 has had a measure of success on its application. To the extent it assists the parties, my provisional (and non binding) view is that M2 should recover its costs (on a 2B basis), but discounted to reflect that it has not been successful on all aspects of its application. I do not see any basis to certify for second counsel.
[124] If the parties cannot agree costs, I will receive memoranda. M2 is to file its memorandum within 10 working days from date of judgment and TPC within a further five working days. The file is to be referred to me and I will then deal with
costs on the papers.
Fitzgerald J
4
3
1