Travel Managers Group Limited v 123Kiwi.com Limited (in receivership and in liquidation) (formerly Travel Cafe Limited)
[2015] NZHC 2989
•27 November 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-1073 [2015] NZHC 2989
BETWEEN TRAVEL MANAGERS GROUP
LIMITED Plaintiff
AND
123KIWI.COM LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) (FORMERLY NAMED TRAVEL CAFÉ LIMITED)
First Defendant
GREGORY SOUTHCOMBE Second Defendant
Cont …
Hearing: 14 and 15 July 2015 Appearances:
K W Fulton for the Plaintiff
E J Grove for the DefendantsJudgment:
27 November 2015
JUDGMENT OF WOODHOUSE J
This judgment was delivered by me on 27 November 2015 at 3:00 p.m. pursuant to r 11.5 of the High Court Rules 1985.
Registrar/Deputy Registrar
……………………………………
Solicitors / Counsel:
Mr K W Fulton, Barrister, Auckland
Ms C L Waugh (plaintiff ’s instruction solicitor), Craig Griffin & Lord, Solicitors, AucklandMr E J Grove, Barrister, Chris Patterson Barrister Ltd, Auckland
TRAVEL MANAGERS GROUP LTD v 123KIWI.COM LTD (IN RECEIVERSHIP AND IN LIQUIDATION) [2015] NZHC 2989 [27 November 2015]
Cont …
CHADZARZ LIMITED (formerly named TRAVEL CAFÉ INTERNATIONAL LIMITED)
Third Defendant
TRAVELQUOTE LIMITED Fourth Defendant
TRAVEL CAFÉ LIMITED (FORMERLY NAMED 123KIWI.COM LIMITED)
Fifth Defendant
TRAVEL CAFÉ INTERNATIONAL LIMITED (FORMERLY NAMED CHADZARZ LIMITED)
Sixth Defendant
Introduction
[1] The plaintiff (Travel Managers) is a travel company which, amongst other services, provides services to travel brokers. Travel brokers sell travel products and services directly to the general public. For the purposes of this case a travel broker can be described as a self-employed travel agent who contracts with an umbrella organisation, such as Travel Managers, to implement the travel arrangements for the broker’s clients. The broker uses facilities of, and products available to, the umbrella organisation. This case concerns a broker agreement between Travel Managers and the first defendant as the travel broker.
[2] Travel Managers entered into a broker agreement with the first defendant recorded in a written agreement dated 30 December 2010 (the agreement). The second defendant, Gregory Southcombe, and the third defendant are parties to the agreement as guarantors of all obligations of the first defendant.
[3] On 4 May 2014 Travel Managers cancelled the agreement alleging repudiation by the first defendant. Travel Managers has sued the first to third defendants for damages.
[4] There are further claims against the third to sixth defendants. These do not need to be outlined at this point. The main focus of the case and of this judgment is on the claims against the first to third defendants for damages.
The parties and the broad background
[5] On 1 May 2014 Mr Southcombe swapped the names of four of the five defendant companies. For clarity and simplicity I adopt the approach of counsel and will refer to the defendant companies by the names they had throughout the period of the broker agreement. I will refer to the first defendant as Travel Café. It was the named broker in the agreement. It is now in receivership and in liquidation. The second defendant, Mr Southcombe, is the sole director and shareholder of Travel Café and of the third defendant. I will refer to the third defendant as TCIL, an acronym from its original name, Travel Café International Ltd. The name of the fourth defendant, TravelQuote Ltd (TravelQuote), remains unchanged. Its sole
shareholder and director was John Southcombe, Gregory Southcombe’s father. The fifth defendant, now called Travel Café Ltd, I will refer to as 123Kiwi, a contraction of its former name. The sixth defendant, now called Travel Café International Ltd, I will refer to as Chadzarz, also a contraction of its former name.
[6] The relationship between Mr Southcombe and Travel Managers commenced in or around 2009. At that time the directors and shareholders of Travel Managers were Gregory Southcombe’s father, John Southcombe, Gregory’s brother Michael, Michael’s wife Sarah, and David Wallace.1
[7] On 1 July 2009 TCIL had entered into a broker agreement with Travel Managers. This had been negotiated between John, Michael and Gregory Southcombe. Gregory Southcombe became indebted to Travel Managers. There were also concerns, voiced by Mr Wallace in particular, about a conflict of interest for Michael and John Southcombe, as directors of Travel Managers, negotiating with Gregory Southcombe, a family member. It appears that the agreement between TCIL and Travel Managers was concluded without the knowledge of Mr Wallace.
[8] The debt, and the way in which it arose, which at the least involved unsatisfactory activities not disclosed to the full board of Travel Managers, resulted in strained relationships amongst directors of Travel Managers, and between some of the Travel Managers directors, especially Mr Wallace, and Gregory Southcombe and his businesses. This led to the agreement with which this case is concerned.
[9] As earlier recorded, the agreement was between Travel Managers and Travel Café as the broker, whereas the 2009 agreement was with TCIL as the broker. Mr Southcombe was responsible for introducing Travel Café as the appropriate party to be recorded as the broker with the primary rights and obligations vis-à-vis Travel
Managers.
1 I will in general refer to the second defendant as Mr Southcombe, but use his first name where necessary to avoid confusion.
[10] The agreement recorded a debt owed by Travel Café to Travel Managers of
$115,365.06, to be reduced over time from commissions earned by Travel Café from travel business required to be conducted through Travel Managers. Travel Café committed itself until 31 March 2017 to put all of its travel business through Travel Managers in exchange for commissions on travel sold and a share of override payments. Overrides are payments made by airlines to Travel Managers, calculated by reference to the volume and value of bookings Travel Managers provides for the airline through its broker network. The agreement was signed by Mr Wallace on behalf of Travel Managers, by Mr Southcombe on behalf of Travel Café as broker, and by Mr Southcombe for himself and TCIL as guarantors.
[11] There was a collateral agreement entered into at the same time between Travel Managers and Travel Café. Travel Managers paid $30,000 to Travel Café and Travel Managers was entitled to set the payment off against any moneys owed by Travel Managers to Travel Café.
[12] The agreement was performed on both sides according to its terms for several years. The relationship between the parties began to deteriorate towards the end of
2013. From August 2013 to May 2014 Mr Southcombe, for himself and for Travel Café and TCIL, did a number of things and made a number of statements which resulted in cancellation of the agreement by Travel Managers on 4 May 2014. The detail is recorded below.
The causes of action against Travel Café, Gregory Southcombe and TCIL:
liability
[13] There is one cause of action against Travel Café: a claim for damages – principally lost profits – following cancellation for alleged repudiation. There are two directly related causes of action against Mr Southcombe and TCIL. The first is a claim for the same damages sought from Travel Café on the grounds that Mr Southcombe and TCIL induced Travel Café to breach its contract with Travel Managers. There is an alternative claim against Mr Southcombe and TCIL pursuant to their guarantees.
[14] These three claims give rise to the same two primary issues:
(a) Whether Travel Managers’ cancellation of the contract on 4 May 2014
was justified on the basis that Travel Café had repudiated the contract. (b) Whether Travel Managers is entitled to the damages it claims.
[15] This section deals with the first primary issue. The damages issues are considered under a separate heading. The essential question here is whether Mr Southcombe, for himself and Travel Café and TCIL, made clear that he and his companies were pulling out of the agreement without a contractual right to do so and without Travel Managers’ agreement.
Repudiation principles
[16] Repudiation and cancellation are governed by s 7(2) of the Contractual
Remedies Act 1979:
Subject to this Act, a party to a contract may cancel it if, by words or conduct, another party repudiates the contract by making it clear that he does not intend to perform his obligations under it or, as the case may be, to complete such performance.
[17] The principles of relevance in this case are well established. They can be summarised without need to discuss authorities:2
(a) Repudiation can be by express words or implied from conduct. (b) It is assessed objectively.
(c) The test is to ascertain whether the actions of the party allegedly in default, looking at all of the circumstances, are such as would lead a reasonable person to conclude that that party no longer intends to be
bound by the contract.
2 John Burrows “Performance and Breach” in John Burrows, Jeremy Finn and Stephen Todd (eds)
Law of Contract in New Zealand (4th ed, LexisNexis NZ, Wellington, 2012) 695 at 698-709 and
722-241. E G McKendrick “Discharge by Breach” in H G Beale (ed) Chitty on Contracts (31st
ed, Sweet & Maxwell, London, 2012) vol 1 1693 at 1693-1735.
(d)Because the enquiry is into the intention of the allegedly repudiating party, the plaintiff does not have to prove an existing breach, although proof of an existing breach may be evidence of intention.
(e) The cancelling party must itself be ready and willing to perform the contract.
(f) If there has been repudiation the innocent party is entitled either to accept the repudiation, cancel the contract and sue for any losses, or affirm the contract. If the innocent party affirms the contract it cannot later seek to cancel in reliance on the repudiation that occurred prior to the affirmation.
(g)Affirmation requires a clear and settled choice with full knowledge of the repudiation. A letter requesting compliance may not be affirmation, nor will it be affirmation if the innocent party reserves its position pending further discussion. Ultimately, whether an election to affirm has been effectively exercised is fact dependent.
The alleged repudiatory conduct
[18] I use the expression “repudiatory conduct” to include statements as well as acts and omissions.
[19] In his closing submissions for Travel Managers, Mr Fulton provided a reasonably detailed, chronological summary of the conduct said by Travel Managers to be repudiatory. It is appropriate to adopt this summary, with some modification, in order to record the factual foundation for Travel Managers’ case on repudiation. It also serves to record what amount to my findings of fact. Mr Southcombe in his evidence, and Mr Grove in his submissions, did not contest these facts in any material way and I am satisfied that they are established by the evidence. The defence challenge was to the conclusions Travel Managers sought to draw from these facts, a different matter which I will address in due course.
[20] On 6 August 2013 Mr Southcombe emailed Travel Managers. After some preliminary comment he said:
The point of this email is to advise you, therefore that I am now reconsidering TravelCafe’s future and where best to apply my own energies for the next 3-4 years. If the current terms and dealings with TravelManagers remain as is then, frankly, I am better off focussing my energy and attention elsewhere. …
It’s important that you understand at this juncture that focussing my energy and attention elsewhere would result in a drastic and fairly immediate reduction in the business currently provided by me to TravelManagers.
My preference however would be to renegotiate the terms with TravelManagers and get on with growing the entire TravelCafe business in concert with TravelManagers on a more constructive footing and to our continued mutual advantage for the remaining three and a half years.
I am available to meet with urgency, and suggest this would be the next best step. I’d be happy to outline possible terms then and discuss any aspect of this further.
[21] By December 2013 Mr Southcombe was in discussions with a competitor of Travel Managers – House of Travel – with a view to moving Travel Café’s business to House of Travel. Mr Southcombe had discussions and email communications with the chairman of House of Travel, Christopher Paulsen. On 23 December 2013 he said in an email to Mr Paulsen: “I will be removing myself and TravelCafe from the TravelManagers group as soon as possible – most likely early February or as soon as I can”. David Wallace said in evidence that he heard about Mr Southcombe’s “rendezvous” with House of Travel “through the grapevine”.
[22] On 1 February 2014 Mr Southcombe told Mr Paulsen:
I need some additional advice from the barrister regarding my extraction from TravelManagers and I have a meeting with him on Monday to that end. I should have a clear plan in mind early next week as to how I’ll approach the ‘extraction process’.
[23] In or about March 2015 Mr Southcombe secured a contract for Travel Café with an online airline reservation software provider, Amadeus IT Pacific Pty Ltd
(Amadeus).3 There is an issue as to whether Travel Café, under the agreement, was bound to use Travel Managers’ Amadeus service. Travel Managers’ Amadeus service had in fact been used for all of Travel Café’s broker bookings under the agreement. This was of importance to Travel Managers because Amadeus paid Travel Managers for each booking made through the reservation system. Travel Café claims it was entitled to contract independently with Amadeus, an issue I will come to. As part of the new arrangements between Travel Café and Amadeus implemented by Mr Southcombe, there was an advance payment from Amadeus of
$138,000.
[24] By 10 March 2014 Mr Southcombe had set up what is called an office ID for
Travel Café with Amadeus. Mr Southcombe asked in an email to Amadeus on 10
March whether Travel Café’s consultants (individual travel agents) “could sign in now to the new TravelCafe OID and create bookings”. The response from the Amadeus manager was that the system was not yet ready for use; that could happen once Travel Managers had advised Amadeus “in writing that they will release your bookings to the new Office ID”. The manager’s email concluded: “If you can let me know the House of Travel Office ID I will set up the … agreement so they can issue your tickets.”
[25] On 14 March, payments totalling over $51,000 from a company called GrabOne Ltd (GrabOne), which should have gone to Travel Managers, were diverted by Mr Southcombe into a TCIL account.
[26] On 26 March Mr Southcombe requested a meeting with Travel Managers’ directors. He insisted that the meeting should be without prejudice. This was the first of several without prejudice communications insisted on, or unilaterally implemented in writing by, Mr Southcombe. The confidentiality applying to the first meeting, which took place on 27 March, and to the subsequent communications of a similar nature, was waived by Mr Southcombe during the hearing. Up to that point
Travel Managers had respected the privileged, or confidential nature, of the
3 The formal contract may have been between Amadeus and TCIL. It is unnecessary to draw distinctions, and references to dealings of any of the first to third defendants can be taken to embrace all three. The point is discussed further below in relation to a defence argument that TCIL was the active party.
communications, and that had constrained its pleadings and evidence in material ways. This in turn bears on some defence arguments, as discussed below.
[27] At the meeting on 27 March Mr Southcombe made it clear that he was taking his business to House of Travel. Mr Wallace, in an email to Mr Southcombe of 28
March, recorded “disappointment to learn of your liaison with House of Travel and abandoning your contractual commitments under the Broker Agreement”.
[28] On 28 March, Mr Southcombe reported to Mr Paulsen of House of Travel that he “broke the news” during the 27 March meeting. There was a range of other communications with House of Travel on the same day, involving steps to advance matters with them, including the use of House of Travel bank accounts.
[29] Also on 28 March, Mr Southcombe communicated with Travel Café’s sub- brokers to explain that he was waiting for Michael Southcombe to sell his shares in Travel Managers before “making this move”. He said that the Travel Café business had been “stifled by [Travel Managers] for too long … they just didn’t understand our business and we’re very different to theirs”.
[30] The Travel Managers directors considered that Mr Southcombe’s advice
signalled an intention not to meet Travel Café’s obligations under the agreement. On
28 March:
(a) Travel Managers removed a facility which enabled Travel Café to issue tickets directly, so that tickets had to be issued and approved through the Travel Managers ticket centre.
(b)A stop credit was placed by Travel Managers on the Travel Café account with Go Holidays. Go Holidays is an online travel company which was used by Travel Managers, and through the agreement by Travel Café. As a result of the stop credit any bookings Travel Café brokers wished to make with Go Holidays needed to be authorised by Travel Managers before being processed.
(c) Travel Managers stopped processing Travel Café bookings until cleared funds had been received for payment to suppliers.
[31] On 2 April Travel Managers’ lawyers wrote to Travel Café, TCIL and Mr Southcombe. There is no direct reference to what Mr Southcombe said at the without prejudice meeting on 27 March. But the letter does state that Travel Managers required the other parties to the agreement to perform all of their obligations. There was reference to the defendants’ dealings with House of Travel, which had come to Travel Managers’ notice independently of the meeting on 27
March. There are warnings about breach and reference to the defendants’ exclusive obligations to Travel Managers until 31 March 2017. The guarantors’ obligations were referred to. An auditor was appointed pursuant to a provision in the agreement entitling Travel Managers to appoint an auditor.
[32] On 3 April Mr Grove wrote to the auditor. He stated that he acted for Travel Café and, inferentially, was writing on behalf of that company as the broker under the agreement. There was a challenge to the appointment of the auditor.
[33] On 3 April Travel Managers’ lawyers responded to Mr Grove. They sought clarification as to whether Travel Café “is fully committed to meeting all the contractual obligations to [Travel Managers]”.
[34] On 4 April Mr Grove responded in a letter headed “without prejudice” (now waived). He said that “TCL cannot afford to meet its obligations under the Broker Agreement”, and that a breach would occur unless there was a negotiated exit from the agreement.
[35] Around 8 April Travel Managers’ auditor discovered the payment of
$138,000 by Amadeus to Travel Café (TCIL), and the diversion of the payments from GrabOne.
[36] On 9 April Travel Managers, by letter from its lawyers to Mr Grove, demanded payment of the GrabOne money. The letter records an acknowledgement from Mr Southcombe to the auditor that the money had been diverted from
GrabOne. Travel Managers’ lawyers said: “Your clients had no right to even seek that those funds be paid to you [sic – to Travel Café] and has [sic] failed to account.” There was an express reservation by Travel Managers of “all rights and remedies”. A formal statutory demand, dated 14 April 2014, was issued by Travel Managers to TCIL for the total GrabOne payment that had been diverted, $51,232.81.
[37] On 14 April Travel Managers’ lawyers wrote to Amadeus stating that Travel Café was bound under the agreement to put all travel business through Travel Managers – that Travel Café had exclusivity obligations to Travel Managers.
[38] On 17 April Travel Managers’ lawyers advised that Travel Managers was willing to attend mediation but recorded, again, that Travel Managers reserved all of its rights and remedies. The mediation took place on 28 April. There was no resolution.
[39] On 29 April Mr Southcombe wrote to Travel Café’s sub-brokers on a group email, or a similar group messaging service:
The mediation was yesterday and there’s been no contact from [Travel Managers] since they walked out yesterday afternoon. There’s no chance TravelCafe will stay with TravelManagers – ultimately, one way or another TravelCafe is leaving.
One sub-broker asked for an assurance that “this is actually going to happen”. Mr Southcombe replied that “you can be assured this is going to happen”. A full transcript of these communications, substantially more than I have quoted, was sent by email on 30 April to the Travel Managers directors with a covering note from the sender: “Don’t ask how I got this, but here is the communication from Greg to his brokers. You will see he has no intention of staying with [Travel Managers].”
[40] On 1 May Mr Southcombe swapped the names of the companies (as described in the introduction to this judgment). Mr Southcombe said in evidence that he did this to seek to protect goodwill in the Travel Café name. My inference from this is that, whether the objective could be achieved or not, it was part of the arrangements Mr Southcombe had put in place to move all of the business out of
Travel Managers and into House of Travel. Mr Wallace said he was aware of these name changes.
[41] By 1 May Mr Southcombe had advanced matters on his side to enable bookings to be processed independently of Travel Managers. Mr Wallace said he was also aware of that step.
[42] On 4 May 2014 Travel Managers gave notice to Travel Café, TCIL and Mr Southcombe that Travel Managers, for reasons summarised in the letter, had concluded that Travel Café and the guarantors had breached their obligations under the agreement, had no intention of staying with Travel Managers, and had clearly repudiated the agreement. Travel Managers said that it accepted that repudiation and cancelled the agreement and that proceedings would follow for recovery of damages.
[43] There was no letter, email or other document from, or on behalf of, Travel Café, Mr Southcombe or TCIL, contesting any relevant aspect of the notice of cancellation. Nor was there any notice that Travel Managers itself was in breach. Positive assertions for the defendants were not made until the proceedings were under way with some of these essentially emerging in closing submissions.
Evaluation of the defences
[44] Travel Managers’ case, in its essence, is contained in the chronological factual summary just completed. Because of the way in which the defendants responded to the plaintiff’s case it is most appropriate to consider the defences first before discussing the positive case for Travel Managers. This approach is appropriate because, as earlier noted, there was no material challenge by the defendants to the facts relied on by Travel Managers. I deal with the defences under the following sub-headings.
Mr Southcombe’s dealings with Amadeus from March 2014
[45] Mr Grove submitted that, although not expressly pleaded, it was apparent that Travel Managers relied on Mr Southcombe’s dealings with Amadeus as the alleged repudiatory conduct and the conduct which led to cancellation. The argument from
this was that there was nothing in the agreement which prevented Mr Southcombe’s
dealings with Amadeus.
[46] I do not agree with the defence submissions. In the first place Travel Managers’ case on repudiation is not confined to the dealings with Amadeus. As will be apparent from the factual narrative, it relies on a range of conduct over a number of months, and including unequivocal statements from Mr Southcombe of his intentions down to 29 April – five days before cancellation.
[47] Second, even if Mr Southcombe’s dealings with Amadeus were not in breach of the agreement, that would not mean that these dealings could not be evidence of repudiatory conduct. As a matter of fact, whether or not there was a contractual obligation, all of Travel Café’s business went through Travel Managers’ arrangements with Amadeus as a consequence of which the Amadeus payments went to Travel Managers (with a portion being paid on to Travel Café).
[48] In any event, I am satisfied that Mr Southcombe’s direct dealings with Amadeus were in breach of the agreement. This conclusion arises from consideration of a number of specific provisions in the agreement, which do not need to be reproduced or summarised, and by considering the provisions having regard to the terms of the agreement as a whole and its clear purpose.
[49] The origins of the agreement are important. The origins were briefly outlined in providing the broad factual background. The essential point is that Mr Southcombe had incurred a debt to Travel Managers and, in the particular circumstances, including Mr Southcombe’s own financial circumstances, it was a substantial debt. The agreed means for repayment of this debt to Travel Managers was the agreement. It followed from that objective that all income producing activities arising from the travel brokerage activities of Mr Southcombe, through his chosen corporate vehicles, were required to be put through Travel Managers. The agreement in its terms achieved this. This included use of the Amadeus system by Travel Café, which is what Travel Café did.
[50] There is further evidence supporting the conclusion that Travel Café was bound to put all of its business through Travel Managers’ arrangements with Amadeus. Before the agreement was entered into Travel Café (or TCIL) had direct contractual arrangements with Amadeus. These came to an end when Travel Café became bound to Travel Managers under the agreement. In addition, the written communications between Amadeus and Mr Southcombe clearly record that Amadeus recognised that Travel Café (including TCIL) was bound to Travel Managers. Mr Southcombe was directed to obtain a release from Travel Managers.
[51] It is appropriate to record in the present context, and in respect of further matters to be considered, that on questions of fact to be determined on conflicting evidence for Travel Managers and from Mr Southcombe (the sole defence witness) I am satisfied that the evidence for Travel Managers is to be preferred. It is unnecessary to explain why I come to that conclusion other than to record that, on numbers of points, Mr Southcombe’s evidence was not consistent with other evidence contained in or arising from contemporaneous documents, or with other evidence from Mr Southcombe, or was not plausible when weighed against conflicting oral evidence from a witness for Travel Managers.
Did Travel Managers affirm with knowledge of repudiatory conduct?
[52] Mr Grove’s second main submission was founded on the same incorrect premise of the first submission – that Travel Managers was relying on the dealings with Amadeus as the repudiatory conduct. The second submission was that, if the defendants’ dealings with Amadeus, and receipt of the Amadeus payment, was repudiatory conduct, Travel Managers affirmed the contract with knowledge of that assumed repudiatory conduct. It was submitted that, in consequence, Travel Managers was not entitled to cancel.
[53] This defence falls away for reasons already discussed. Travel Managers’ case does not stand or fall on Mr Southcombe’s dealings with Amadeus. I am also satisfied that this argument cannot succeed for two further reasons. The first is that the defendants did not advance affirmation as a defence in its pleadings and the contention was not at any point adequately put to Travel Managers’ witnesses. The
pleading point, taken by Mr Fulton, is a proper one in this case because, in particular, Mr Fulton in his opening submissions expressly referred to the absence of affirmative defences and recorded that Travel Managers had prepared its case accordingly. What Travel Managers sought to do, in that setting, was to set out its contentions of repudiatory conduct, and its directors’ assessments of that conduct, to seek to justify cancellation.
[54] As to the merit of the affirmation argument, there was no unequivocal indication from Travel Managers, at any relevant time, that it was affirming the contract notwithstanding knowledge of repudiatory conduct. The course of events, and Mr Southcombe’s stated intentions and motives for acting, need to be assessed overall, not at one isolated point in time. In any event, in relation to the point at which Travel Managers became aware of Mr Southcombe’s dealings with Amadeus, Travel Managers’ response was in writing and Travel Managers expressly reserved all of its rights and remedies.
Travel Managers was itself in breach
[55] A third, and further alternative, argument for the defendants was that, even if there was repudiatory conduct by the defendants, Travel Managers was not entitled to cancel because Travel Managers itself was in breach of the contract and had been in breach prior to any alleged repudiatory conduct of the defendants.
[56] This argument cannot succeed for two reasons. The first is that I am not persuaded that Travel Managers was in breach of its obligations to Travel Café, or to Mr Southcombe and TCIL as guarantors. The defendants contend that Travel Managers was in breach by failing to make payments due under the agreement and by taking steps such as those taken on 28 March and earlier noted. Those acts did not disentitle Travel Managers from cancelling if the agreement was repudiated by the defendants. The second reason is the pleading point already noted. As with the affirmation contention, the contention that Travel Managers was itself in breach, and that this meant that Travel Managers could not cancel, was not pleaded as an affirmative defence and it was not adequately put to witnesses for Travel Managers.
No repudiatory conduct of any sort by Travel Café, as opposed to conduct of Mr
Southcombe or TCIL
[57] The defendants sought to rely on evidence that the obligations on Travel Café under the agreement had never been performed by Travel Café, but had been performed by TCIL. The defendants also sought to rely on contentions that there was no repudiatory conduct by Travel Café, as opposed to conduct, whatever its characteristics, of Mr Southcombe and TCIL.
[58] I am satisfied there is nothing in the first contention. It does not bear on the question whether there was repudiation. In addition, as Mr Fulton submitted, performance by TCIL can readily be seen as Travel Café’s performing through an agent.
[59] The second contention also does not provide a defence. On the facts of this case, and in particular given the relationship between Travel Café, TCIL, and Mr Southcombe, the identity of the company or person doing in a direct way the thing or things said by Travel Managers to be repudiatory, does not matter. The question in this case is whether, looking at the circumstances as a whole, it was made sufficiently clear to Travel Managers that the obligations contractually imposed on Travel Café under the agreement were no longer going to be performed, and that was made clear by a defendant capable of producing that result. The evidence earlier summarised makes quite clear that the obligations contractually imposed on Travel Café would not in the future be performed. The evidence this defence is concerned with is in two broad categories – statements of intention, express or implied, by Mr Southcombe, and acts undertaken in a legal sense by TCIL rather than Travel Café. Statements of intention by Mr Southcombe undoubtedly encompassed the intentions of his two companies as well as his own personal intentions. To the extent that the new arrangements Mr Southcombe was seeking to put in place would involve TCIL as the contracting party, this makes no difference to repudiation of the agreement. It is the consequence for the agreement with Travel Managers that is relevant.
Other defences
[60] There were some further defence arguments which I have taken into account but which it is unnecessary to summarise. In large measure they are arguments directed more specifically to the proposition that conduct relied on by Travel Managers, and some of which the defence contend was not pleaded, did not amount to repudiatory conduct. I am satisfied that these and other arguments do not assist the defendants.
Evaluation and conclusion on liability: Travel Managers’ claims against Travel
Café, Mr Southcombe and TCIL
[61] I am satisfied that the agreement was repudiated by Travel Café, that this entitled Travel Managers to cancel if it wished, that at 4 May 2014 Travel Managers was not prevented from cancelling because of a prior affirmation of the contract, and that Travel Managers gave notice of cancellation on 4 May which was effective. The facts leading to the conclusion that there was repudiation also mean that Mr Southcombe and TCIL had repudiated their obligations under the agreement, procured repudiation by Travel Café, and become liable under the guarantee to meet any liability of Travel Café for damages.
[62] On an objective assessment Mr Southcombe’s conduct (which includes words and also includes conduct of Travel Café or TCIL in a strict, legal sense) made clear to Travel Managers that Travel Café, Mr Southcombe and TCIL did not intend to continue to perform their obligations under the agreement. This intention was made clear by some individual actions or statements. Any uncertainty in that regard is removed when all of Mr Southcombe’s conduct is assessed, being the conduct from August 2013 to May 2014.
[63] Mr Southcombe made it clear that broker services were no longer going to be provided through and to Travel Managers. Mr Southcombe was going to take all travel business to House of Travel. A reasonable person in Travel Managers’ position would have been justified in concluding, as Mr Wallace and the other Travel Managers witnesses said they concluded, that the defendants had no intention of performing their obligations; whatever the consequences might be, Mr Southcombe
and his companies were unilaterally pulling out. It is unnecessary to go over the factual narrative to demonstrate why I reach that conclusion. The factual narrative of Mr Southcombe’s actions and statements speaks for itself. This is reinforced by the absence of any protest from Mr Southcombe, for himself or for his companies, in response to the letter from Travel Managers’ solicitors on 4 May.
[64] It is unnecessary to expand to any extent on my reasons for concluding that Mr Southcombe and TCIL are liable. Mr Grove effectively accepted that they would be liable if I concluded that Travel Café was liable. This acknowledgement related to liability under the guarantee, rather than liability for procuring breach of a contract. There was no dispute, and I am satisfied, that Mr Southcombe and TCIL are liable as guarantors for any damage caused to Travel Managers through repudiation of the contract.
[65] There were issues as to the extent of the liability under the guarantee. They related principally to a question whether it was only a guarantee of debt or also a guarantee of performance. I am satisfied that it was a guarantee of performance as well as a guarantee of debt. But in the end that does not matter given my conclusion that the agreement was validly cancelled following repudiation. Any loss caused by Travel Café’s repudiation will have to be met by Mr Southcombe and TCIL, as well as Travel Café, regardless of any obligation to perform imposed on the guarantors.
[66] For the avoidance of doubt, following that brief discussion of liability under the guarantees, I confirm my conclusion, earlier recorded, that Mr Southcombe and TCIL are also liable for procuring Travel Café to breach its contract with Travel Managers, with this liability established by the factual narrative.
The causes of action against Travel Café, Mr Southcombe and TCIL: damages
Introduction
[67] The damages sought by Travel Managers was under three main headings:
(a) There is a claim for loss of profits that would otherwise have been earned for the remaining term of the agreement which expired on 31
March 2017. Travel Café was not entitled to terminate the agreement by notice before that date. The sum sought, after adjustments, is
$566,828 plus GST. This sum is sought from Travel Café, Mr
Southcombe and TCIL.
(b)There is a claim for the balance of the debt under the agreement in a sum of $40,365. This sum also is sought from Travel Café, Mr Southcombe and TCIL. Liability is clearly established and there was no challenge to the quantum of this debt. Travel Managers is entitled to judgment for this sum, plus interest, against the three defendants.
(c) There was a claim against Mr Southcombe and TCIL, but not against Travel Café, for the sum of $138,000 paid by Amadeus. Travel Managers in the end did not pursue this claim.
Claim for loss of profits
[68] There was expert evidence for Travel Managers from Mr Grant Graham. Mr Graham was challenged on a number of points in cross-examination by Mr Grove and I will come to various aspects of this when dealing with submissions for the defence. But there was no challenge to Mr Graham’s evidence from an expert for the defendants.
[69] I am satisfied that Mr Graham’s methodology was appropriate and in substantial measure I agree with his conclusions. His analysis, supported by factual details from Mr Wallace, is persuasive. And his approach is conservative meaning that, on matters where there was possible uncertainty, the benefit of the doubt went to the defendants.
[70] Travel Managers claimed that there was a loss of profits in respect of five categories of revenue. One of these was referred to as “tech fees”. A claim in respect of this item was in the end not pursued. The four remaining revenue items were commissions, what are referred to as “override” payments from airlines, payments from Amadeus, referred to as “segments”, and payments from Go Holidays.
[71] Mr Graham’s approach was to calculate base sums for these four items using Travel Managers’ financial information for the year ended 31 March 2014 when the agreement was still on foot. The sum of the profit for each item provided the base sum for calculating loss of profits in the remaining three years of the agreement through to 31 March 2017. Mr Graham applied a 10% increase in the base sum, year on year, for the three years. The components of this approach, and issues raised by the defence, are noted under sub-headings that follow, commencing with discussion of the four revenue items. The figures referred to in the following discussion, unless otherwise noted, do not include GST.
Profit from commissions
[72] The agreement provided that Travel Managers was entitled to retain 5% of commissions paid to Travel Managers on travel bookings originating from Travel Café business with the balance to go to Travel Café. There was no significant challenge to Mr Graham’s assessment of the base sum earned by Travel Managers –
$39,143.
[73] I accept Mr Graham’s evidence. The base sum is $39,143.
Overrides
[74] Overrides are payments made by airlines once a flight has occurred. There was a reasonable amount of evidence on this topic and a challenge to the share of overrides brought in as the base sum. But in the end there was no material challenge to the figures used by Mr Graham.
[75] Travel Managers had claimed $79,632 as the base sum. Mr Graham recognised that this made no allowance for the share to which Travel Café was entitled and he reduced the base sum for Travel Managers to $23,984. That is 30% of the original figure of $79,632, on the basis that Travel Café was entitled to 70%.
[76] The agreement provided that “payment of overrides will be subject to a negotiated split at an appropriate time each year”. Throughout the period of Travel Café’s performance of the agreement the payment to it by Travel Managers was
70%. Mr Southcombe argued that he may have been able to negotiate a share in excess of the 70%, and there was a suggestion that the override payments should have been divided 95/5, in favour of Travel Café, which is the split specified in the agreement for commissions. Neither point is persuasive. What Mr Southcombe might have sought to negotiate in the future is not relevant. The provision for division of commissions is also irrelevant. The agreement stipulates negotiation. What is more, the clause in which there is express provision for negotiation of the split of overrides is the same clause which provides that Travel Café is to receive the particularised 95% of commissions. In the end Mr Southcombe acknowledged in his evidence that it was reasonable to assume that the split of overrides for the future would be the same as the split that had been agreed in the past.
[77] The appropriate base sum for this item is $23,984.
Segment payments (Amadeus)
[78] This was a claim for lost profits from Travel Café bookings put through Travel Managers’ facility with Amadeus. This was the major component of the claim for lost profits; a base sum of $101,947.
[79] Mr Southcombe did challenge aspects of the calculations and submissions were made by Mr Grove in that regard. I am not persuaded that there was any error by Mr Graham in the base calculation.
[80] The major argument for the defendants was that Travel Managers had no entitlement under the agreement to receive any segment payments from Amadeus. This argument, directed here to damages, was the same as the first argument directed to liability – the contention that the defendants were free to contract independently with Amadeus. I reject that argument for the reasons already recorded. There is a further, although related, reason when considering this issue in relation to damages. The evidence establishes that, until the defendants repudiated the agreement, Travel Managers was getting the benefit of the revenue from Amadeus arising from Travel Café business. These damages are now being assessed to determine what Travel Managers would have received if the defendants had not repudiated the contract. What Travel Managers was receiving before repudiation is undoubtedly the best
evidence for an assessment of what it would have received for the remainder of the agreement.
[81] The base sum for the loss of the Amadeus segment payments is $101,947.
Go Holidays
[82] Mr Graham’s base sum included $9,552 as profit Travel Managers would have received from Go Holidays. One issue in that regard was whether a percentage would have gone to Travel Café. To avoid an issue on a relatively small sum (although this was the base sum rather than the amount for the full period) Travel Managers reduced its claim to 30% and therefore allowing a split of 70/30 in favour of Travel Café. As with the Amadeus split, the defendants contended that Travel Café would have been entitled to 95%, not 70%, consistently with Travel Café’s share of commissions. For reasons similar to those applying to the split of override payments I am satisfied that the 70/30 split is appropriate for this item.
[83] There was a further issue raised in defence as to whether Travel Managers would in fact have received any incentive payments from Go Holidays. Travel Managers’ claim to this item is established on the evidence.
[84] The base sum is $2,865.
Adjustment of the base figure
[85] The total base figure – the sum of Travel Managers’ profit share for the four items – is $167,939. Increasing this sum at 10% each year for the three remaining years of the agreement, to 31 March 2017, produces a total loss of profits claim of
$611,464. This includes loss of profits for the year from 1 April 2014 to 31 March
2015, but Travel Managers cancelled on 4 May 2015. I consider it is appropriate to deduct 1/12th of the loss of profits figure for the year to 31 March 2015, and notwithstanding the fact that Mr Graham’s conservative approach may have benefited the defendants in other respects. This and other adjustments are recorded below.
[86] The defendants challenged the year on year increment of 10%. I am satisfied that it is justified on two distinct grounds. The first is contractual. Under the agreement Travel Café was required to meet “the Performance criteria”. This is defined in the agreement as follows:
Performance criteria means a 20% growth in the gross sales (excluding
GST) of the Business in the first year from the date of this Agreement and
10% (excluding GST) growth in the gross sales (excluding GST) in the following 6 years:
[87] “The following 6 years” covers the remainder of the term of the agreement
during which Travel Café had no contractual right to terminate on notice.
[88] Mr Southcombe sought to argue, in respect of this provision, that it only required a total increase of 10% over the six year period. As a matter of interpretation I do not agree. The concluding words mean “in each of the following
6 years”.
[89] Any residual uncertainty in that regard is removed by the following considerations. The first is the requirement of growth of 20% in a single year, being the first year. If Mr Southcombe was right, the contractual obligation in respect of annual growth after the first year would be under 2% per annum. Without considering other evidence, it would seem close to implausible that the parties, including Mr Southcombe and his companies, would have agreed on less than 2% per annum having agreed on 20% for the first year. In any event, it is established in the evidence that, during the negotiations, Mr Southcombe confirmed that part of the arrangement was that Travel Café was expected to grow by 10% each year.
[90] This conclusion is sufficient in my judgment to assess the loss of profits with the 10% per annum increment. However, the question was considered carefully by Mr Graham independently of the contractual provision. He explains in adequate and persuasive detail why he considers that 10% growth was achievable. He said that his approach was conservative and explained why he regarded it as conservative. I accept his evidence and therefore accept that 10% year on year was reasonably achievable, quite apart from the contractual obligation to achieve it.
[91] Mr Grove submitted that Travel Managers did not suffer any loss of profit. This submission was founded on evidence from financial statements that Travel Managers’ gross revenue increased from 2013 to 2015 in an uninterrupted and essentially linear fashion. It was submitted from this that no loss flowed from the removal of Travel Café’s broker business.
[92] I am unpersuaded by this argument. It would require assessment had there been evidence suggesting that, if Travel Managers had continued to get all of Travel Café’s business, Travel Managers could not have obtained profits from Travel Café’s business as well as increasing its revenue from other business as it did. This is not indicated by the evidence. The evidence is contrary to the defence argument, and in particular evidence from Mr Wallace, and Mr Graham’s expert evidence, as to the nature of Travel Managers’ business and its capacity to expand – referred to as the “bolt-on” model.
[93] A further argument for the defendants was that Travel Managers had effectively mitigated part of the loss, as calculated by Mr Graham, because five sub- brokers who had been contracted to Travel Café joined Travel Managers following cancellation of the agreement. Travel Managers had signed up twenty additional brokers following cancellation of the agreement, including the five who had been with Travel Café.
[94] It was for the defendants to prove that the employment of the five brokers did reduce the loss that Travel Managers would otherwise have suffered, and this included proof of the quantum of that loss. However, the defence case was rather general in its nature. It was, in its essence, that the fact that these five brokers had formerly been with Travel Café, and therefore would have been producing profit for Travel Managers through Travel Café, meant that Travel Managers was getting the same profit directly from the work of the brokers. That argument falls short of establishing that the loss was in fact less than it would have been. The evidence from Mr Wallace and Mr Graham, which was not subject to any material challenge, referred to Travel Managers’ “bolt-on” business model. They argued that Travel Managers had a capacity to add new brokers whether or not it continued with Travel Café. And Mr Wallace’s evidence was that it would have added new brokers
whether or not the contract with Travel Café continued. There was also evidence from Mr Wallace that the five former Travel Café sub-brokers were under strict instructions not to contact former customers, but he acknowledged that some former customers may have gravitated to those brokers once they were contracted directly to Travel Managers.
[95] I am satisfied that there should be a reduction in the loss of profit sum because of the direct employment of these five brokers. The “bolt-on” capacity of Travel Managers can be accepted both as a reasonable theoretical proposition and as one put into practice to a reasonable extent. This capacity is demonstrated by the increase in revenues earlier referred to. However, it is reasonably likely that these five brokers would not have been available to contract directly with Travel Managers if the Travel Café contract had continued. At a theoretical level it may be said that Travel Managers could have found five other competent travel agents who had no connection with Travel Café, but markets are not infinite.
[96] Mr Wallace provided evidence that the total relevant sum attributable to the five brokers was $98,253. Travel Managers’ share of this, projected over the full term to 31 March 2017, would be $33,388. I am not persuaded that the full sum should be deducted from the loss otherwise recoverable because of an absence of evidence that all of this would otherwise have been generated through a continuing contract with Travel Café. There needs to be an allowance for new business obtained by those brokers through Travel Managers’ connections. Assessment of a figure at this point cannot be anything other than a broadly assessed deduction which I fix at $16,500; that is to say, just under half. One-third of this is to be applied to each of the three years.
[97] Travel Managers acknowledged that a further sum was to be deducted from the profits figure. This is $44,636 for overrides subsequently recovered, in the financial year ending 31 March 2015.
Loss of profits overall
[98] The end result on the figures discussed is as follows:
Loss of profits base sums as determined:
· Profit from commissions 39,143 · Overrides 23,984 · Segment payments 101,947 · Go Holidays 2,865 $167,939
Year 1 (ending 31.3.15):
· Base sum: 167,939 · Plus 10% adjustment: 16,793 184,732 · Less 1/12th (cancellation 4.5.15): (15,394) · Less deduction for 5 brokers (@ 1/3 of $16,500): (5,500) · Less allowance for overrides recovered: (44,636) $119,202
Year 2 (ending 31.3.16):
· Base sum from year one: 184,732 · Plus 10% adjustment: 18,473 203,205 · Less deduction for 5 brokers (@ 1/3 of $16,500): (5,500) $197,705
Year 3 (ending 31.3.17):
· Base sum from year two: 203,205 · Plus 10% adjustment 20,320 223,525 · Less deduction for 5 brokers (@ 1/3 of $16,500): (5,500) $218,025 Total lossof profits:
534,932
Plus GST: 80,240 $615,172
[99] The judgment sum is to include GST, producing a total of $615,172.
[100] Travel Managers is entitled to interest pursuant to the Judicature Act 1908 on the portions of the lost profits that would have been earned by now. A broad brush approach is to allow interest as follows from the dates recorded down to the date of judgment. This assumes recovery of profit on an even basis throughout the financial year and, for year 1, spreads the overrides recovery of $4,636 over the full year. I am satisfied this does not produce an unfair result.
(a) From 1 August 2014, on $39,734, being one-third of the assessed profit to 31 March 2015.
(b)From 1 December 2014, on $39,734, being one-third of the assessed profit to 31 March 2015.
(c) From 1 April 2015, on $39,734, being one-third of the assessed profit to 31 March 2015.
(d)From 1 July 2015, on $49,426, being one-quarter of the assessed profit to 31 March 2016.
(e) From 1 October 2015, on $49,426, being one-quarter of the assessed profit to 31 March 2016.
The Travel Quote System: claim against the third, fourth and fifth defendants
[101] There is a claim against TCIL, the fourth defendant TravelQuote, and the fifth defendant 123Kiwi. This relates to software known as the Travel Quote System (the system). Travel Managers claims that, under the agreement, Travel Café granted Travel Managers security over the system. Mr Southcombe variously claimed that the system is owned by TravelQuote and TCIL. Licence fees were paid for use of the system and it was unclear to Travel Managers whether fees were being paid to TCIL, TravelQuote or 123Kiwi. Travel Managers has sought relief against these three defendants to protect its claimed security interest granted by Travel Café.
[102] The system is defined in the agreement as “a proprietary software system including any operating manuals owned by the Broker and used for travel marketing and online travel products” (emphasis added). The defendants in the end claimed that the system was owned at all times by TCIL. There were suggestions that ownership had been transferred to Travel Quote, but under cross-examination Mr Southcombe admitted ownership had not been transferred.
[103] Clause 24 of the agreement provided for security from Travel Café to Travel
Managers under the Personal Property Securities Act 1999 “over “all property” of
the Broker as that term is used in clause 4(c) of the Memorandum of General Terms and Conditions (in the form of Auckland District Law Society form Ref 6302)”. On default by Travel Café under the agreement each security interest created in favour of Travel Managers became immediately enforceable.
[104] The defendants accepted that, if the system had been owned by Travel Café, it came within the meaning of “property” as used in clause 4(c) of the Auckland District Law Society form. Travel Managers had registered its security interest so it became enforceable over the system if it had been owned by Travel Café. The question is whether Travel Café owned the software when the agreement was made.
[105] There is the unequivocal statement in the agreement that Travel Café owned the system. Mr Southcombe argued that this was simply a drafting error, and that he simply did not notice it. I do not accept Mr Southcombe’s evidence. My reasons follow.
[106] Mr Southcombe, during negotiation of the agreement, suggested to John and Michael Southcombe amendments to the express terms dealing with the system. It is unlikely that Mr Southcombe would then have missed an error as fundamental as the owner of the system.
[107] There was a BDO valuation of TCIL in 30 August 2012. BDO expressly excluded the system from the valuation because it “will be retained by Travel Café Ltd”. Mr Southcombe did not correct BDO to say that the system was owned by TCIL. In evidence he said he did not consider it to be important. My conclusion is that he did not correct the statement because it was accurate.
[108] Travel Managers had pleaded that Mr Southcombe claimed that the system was owned by TravelQuote, but that TravelQuote could not have acquired any rights before 21 November 2011, well after the agreement was made, because that was the date of incorporation of TravelQuote. Travel Managers further pleaded that it had not consented to transfer of the system to TravelQuote. The defence pleading, again effectively from Mr Southcombe, was as follows (substituting abbreviations for names that I have used):
Travel Managers at all material times knew the system was owned by TCIL and knew of and agreed to (on TravelQuote’s incorporation) TCIL’s transfer of the system to TravelQuote. In particular through the knowledge of the plaintiff and TravelQuote’s common director, John Southcombe.
[109] In evidence, as earlier indicated, Mr Southcombe admitted that the system had not been transferred to TravelQuote. This acknowledgement, in the face of the express nature of the pleading, leads me to a conclusion that Mr Southcombe’s evidence on ownership of the system is not credible evidence. And this was not simply a case of a casual approach to what is meant by transfer of ownership. The cross-examination of Mr Southcombe made clear that he fully understood what it meant, what was required to effect a transfer of ownership, and inferentially what the pleading in the statement of defence was clearly intended to convey.
[110] There was some other evidence from Mr Southcombe on the question of ownership, and here directed to his ultimate position that the system was owned by TCIL. None of that persuades me that the clear statement in the agreement, signed by and on behalf of TCIL and Mr Southcombe, as well as Travel Café, that the system was owned by Travel Café, is anything other than accurate assurance of ownership. And it is a record of ownership binding on the three parties to the agreement, TCIL and Mr Southcombe, as well as Travel Café.
[111] Travel Managers sought a declaration that the third, fourth and fifth defendants hold any rights or interests in the system subject to Travel Managers’ rights under the security interest granted by Travel Café. Travel Managers are entitled to a declaration to that effect (although it may not be needed in respect of the fifth defendant). I also grant leave to Travel Managers to apply for a declaration in modified or different terms adequately to reflect the conclusions I have reached on ownership and, more particularly, on the fact that the system is subject to Travel Managers’ security.
[112] Travel Managers also sought an order that the third, fourth and fifth defendants deliver up to the receivers of Travel Café any electronic copies of the system, any instruction manuals for the system, or related documents, and copies of all licence agreements for the use of the system. Travel Managers are entitled to an order to that effect.
[113] An order is also sought that all licence fees received from 5 May 2014, by the third, fourth or fifth defendants, be accounted for to Travel Managers. Travel Managers are also entitled to an order to that effect.
Claim against fifth and sixth defendants: changes of company name
[114] The words “Travel Café” are now part of the names of the fifth and sixth defendants. These are two of the four name changes effected by Mr Southcombe on
1 May 2014. Travel Managers claim that the trade name “Travel Café” is part of Travel Managers’ security interest under the agreement. Travel Managers seek orders that the fifth and sixth defendants remove the words “Travel Café” from their names, an injunction restraining them from using the words in any advertising, correspondence, contract, or dealings of any sort, an order requiring them to account for any profits derived by trading under the name, and other relief.
[115] There is value in the name, as the defendants acknowledged. In his closing submissions Mr Fulton submitted that, because the realisation of value in a practical way could depend to an extent on the outcome of the other claims, followed by negotiations, which would have to include the receiver of Travel Café (that is to say, the first defendant), the appropriate course would be, in effect, to defer judgment on these claims and reserve leave to apply further. I am satisfied that that course is appropriate.
[116] Accordingly, judgment on the claim against the fifth and sixth defendants, pleaded at paragraphs 94 to 99 of the amended statement of claim, is reserved. If the matter is resolved by agreement, or some other course of action, the plaintiff is to file and serve a notice of discontinuance or a memorandum with proposals for final disposition. If it is a memorandum the relevant defendants are to file and serve a memorandum in response within a further two weeks. The plaintiff also has leave to apply, by memorandum, for judgment to be delivered, but that application must be made no later than 29 January 2016.
[117] If none of the preceding steps have been taken by 26 February 2016 the case officer should arrange a telephone conference on the first convenient date after that date.
Result
[118] There is judgment for the plaintiff against the first, second and third defendants for loss of profits in a sum of $615,172, inclusive of GST, together with interest as specified at [100].
[119] There is judgment for the plaintiff against the first, second and third defendants for the debt of $40,365 together with interest on that sum pursuant to the Judicature Act 1908 from 5 May 2014 down to the date of judgment.
[120] There are declarations and orders in the terms set out at [111]-[113].
[121] Judgment on the claim against the fifth and sixth defendants is reserved on the terms and subject to the directions recorded at [116] and [117].
[122] The plaintiff is entitled to costs. Unless the plaintiff considers that it is entitled to costs on a different basis, in which event a memorandum is to be filed and served, the costs are to be on a 2B basis with reasonable disbursements. If any issues arise as to the quantification of costs on a 2B basis this is to be referred to the Registrar for decision. If the plaintiff seeks costs on an alternative basis a memorandum in that regard is to be filed and served by 18 December 2015, and any memorandum in reply for the defendants is to be filed and served by 29 January
2016.
Woodhouse J
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